INCOME TAX OFFICER, JAIPUR vs. POOJA KEDIA, JAIPUIR

4. Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reiterated here in below:

raised. The brief facts of the case are that the appellant had filed the return of income on 15.07.2019 for A.Y 2019-20 declaring total income of Rs. 40,45,600/- The assessment was completed by accepting the ITO vs. Pooja Kedia returned income at Rs. 40,45,600/-. However, on the basis of information received from DDIT Investigation Unit 1(3), Kolkata, the assessment was reopened on account of accommodation entries in the form of bogus unsecured loan, availed by the appellant from two companies viz. M/s. Everstrong Enclave Private Limited & M/s MegapixVintrade Private Limited. On further inquiry during the course of reassessment proceedings, the assessee replied that they had not taken any unsecured loan from the above referred two parties. The assessee stated that on the contrary they had sold equity shares of BPIP Infra Pvt. Ltd. to the above parties. She had sold four lakh shares each at face value of 10. Rs. per share amounting to Rs. 40,00,000/- each to the two parties. Since the shares were sold at face value, she emphasized that there was no premium or discount element involved in the transaction. The assessee submitted the documentary evidences as required in support.

5.1 The Assessing Officer rejected the said submission and noted the following facts in the order dated 12.03.2024: i) In case of the assessee, the information was received from DDIT (Inv.), Unit- 1(3), Kolkata. On perusal of information, it is found that a search & seizure/survey action in the case of Banka Group was conducted on 21.05.2018. Based on the findings gathered and subsequently brought on record, it is found that Shri Mukesh Banka is the key person (controlling person) who looks after day-to-day financial affairs and accommodation entry business of Banka Group. ii) During the course of post search verification of seized/impounded materials, various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All companies were categorically accepted by Shri Mukesh Banka as paper/shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. The admission of Shri Mukesh Banka vide his statement recorded u/s131/132(4) of the Income-tax Act, 1961 on 30.5.2018 and 19.7.2018 that these companies are paper/shell companies, controlled and managed by Shri Mukesh Banka. Following the lead as obtained from the statements of Shri Mukesh Banka and the materials seized during the course of search operation, the bank accounts of the paper/ shell companies, controlled and managed by Shri Mukesh Banka was requisitioned from respective banks and analyzed. On verification of the bank accounts of paper/shell companies of Banka Group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms, from the paper shell companies of Banka Group iii) No Profit accumulation in the company(s) across various financial years.No actual business done by the company (s) being zero turn over reported in various financial years Most of the companies have shown income under the head Other Income which show that these companies have no actual business activities and only getting interest income. The directors of these companies are dummy directors of Shri Mukesh Banka as per the statement of Shri Mukesh Banka recorded u/s 132(4) of the Income tax Act, 1961 on 30.05.2018 and 19.07.2018.These companies were found to be nonexistent as per enquiry made by the department. iv) Further, during the course of analysis and examination of the bank statements of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of paper/shell companies of Shri Mukesh Banka was clearly established and substantiated. v) As per information available with the AO, the assessee Pooja Kedia is one of the beneficiaries and the assessee is involved in the taking accommodation entries amounting to Rs. 80,00, 124/-in the nature of bogus unsecured loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019-20connected with the Everstrong Enclave Private Limited & MegapixVintrade Pvt. Ltd. shell companies of Banka Group; date of transactions 16.05.2018; totaling to Rs.80,00, 124/-. The assessee has routed unaccounted money of Rs. 80.00,124/- in its bank account through these companies which remained unexplained. The AO concluded that the source from which the money has been collected by the assessee is a bogus/non-existent entity. Thus, it goes to prove that the assessee had introduced her own unaccounted money in the form of the unsecured loan. vi) The AO noted that since the companies from which the accommodation entries were taken are found to be bogus, the identity and genuineness, both were not satisfied. Therefore, there is no issue of proving the capacity or creditworthiness. vii) This proved that the appellant had used its unaccounted cash in the guise of unsecured loan (sale of shares) viii) That the reply by the appellant was not found satisfactory as it was based on various case laws.

6. During the course of appellant proceeding, the appellant vide its reply dated 04.07.2024 (as reproduced in the preceding paras) has submitted as below: -

i) That the appellant had made requisite compliance to all the notices issued by the AO with regards to the sale of shares. ii) That the appellant had submitted Audited Statement of Accounts, Bank Statements, Ledger Copy of Accounts and ITR Acknowledgement for the A.Y. 2019-2020, Copy of Invoices of sale of shares of both the companies i.e. M/s. Everstrong Enclave Private Limited and M/s. MegapixVintrade Private Limited. iii) During the appellant proceedings the appellant has filed the following chart showing the financials of the said companies:

The appellant claims that the table above is proof that the companies had sufficient funds to purchase of shares.

ITO vs. Pooja Kedia iv) The Appellant claimed that as per section 68, the assessee is under the obligation to prove the following to avoid application of the deeming provision which has been considered by the Hon'ble Calcutta High Court in CIT vs. Precision Finance Pvt. Ltd. (1994)208 ITR 465 (Cal) which laid down the following criteria: -

1. Identity of his creditors;

2. Capacity of creditors to advance money, and

3. Genuineness of transaction.

The appellant has submitted vide its reply dated: 04.07.2024 the ledger accounts of both the companies, Audited Statement of Accounts, Bank Statements, ITR Acknowledgement and Sale Bills.

The appellant has relied upon the following case laws in support of the contention that returned income cannot be held to be the test of creditworthiness:

(a) ITAT Delhi - Prabhatam Investment P. Ltd. vs. ACIT, New Delhi on17.04.2017 - ITA No.2525/Del/2015

(b) HC Delhi - ITA 71/2015, ITA 72/2015 & ITA 84/2015-CIT-9 Erstwhile CIT-VI vs. Vrindavan Farms P. Ltd. v) The appellant claims that from Master data in record of MCA Website, it is clear that the said company had filed its Balance Sheet in MCA Website and has complied with legal requirements under the companies Act. vi) The appellant claims that from Assessment orders of M/s. Ever Strong Enclave Private Limited and M/s. MegapixVintrade Private Limited, which clearly indicates that they are filing their Income Tax Returns and Assessment were made by the department. vii) The appellant claims that the statements taken during the course of survey/search proceedings from Mr. Mukesh Banka has retracted. Hence no evidentiary value of those statement. viii) The appellant had asked for an opportunity of cross examine the parties which was not given by the AO.

On this issue of cross examination and natural justice the following decisions were relied upon by the appellant a. Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (SC) b. JHR. Mehta v. Asstt. CIT [2016] 72 taxmann.com 110(Bom.).

C. C. Vasantial& Co. v. CIT 11962) 45 ITR 206 (SC)

KishinchandChellaram v. CIT [1980] 4 Taxman 29/125 ITR 713 (SC), CIT v. Ashish International IT Appeal No. 4299 of 2009, dated 22-2-2011] d. CIT v. Ashwani Gupta [2010] 191 Taxman 51/322 ITR 396 (Bom.), State of M.P. v. Chintaman Sadashiva Vaishampayan AIR 1961 SC 1623 ix) On this issue the appellant has raised the legal issue of denial of natural justice to it, since the AO did not grant opportunity to the appellant to explain the credit entries before making the additions. The appellant has relied upon several decisions as mentioned above.

7. Before adjudicating the case on merits, it is imperative to address the legal issue of denial of natural justice raised by the appellant in her submissions, as below.

7.1 At the outset it is seen that the case was reopened on the basis of specific information (as pointed out in the assessment order) that the assessee had taken accommodation entries in the form of bogus unsecured loan amounting to Rs.80,00,124/- during the year. It is seen that the 148 proceedings were initiated on the issue of bogus unsecured loan leading to the issuance of notice u/s 142(1) of the Act dated 23.11.2023 on the issue of unsecured loan. In reply when the assessee brought to light that she had no loan transactions with the alleged bogus entities and on the contrary had sold shares to them, the AO noted the same and finalized the assessment calling the alleged bogus unsecured loans as simply transactions at the end of the order. The appellant has relied on various judgements (reproduced supra in her written submissions) wherein it has been held that the reopening was bad in law since it was merely on the basis of information received without conducting any independent inquiry to establish the correct and true nature of the transactions. Various courts have held on similar

7.2 it is also seen that the show cause notice issued by the AO was not accompanied with material/information/ copies of statements of Shri Mukesh Banka copies of bank statements of paper / shell companies and other relevant information forming the basis of show cause notice. It is against natural justice not to provide all such information to the assessee which have bearing on the assessment. The conclusion arrived at by the AO at Para no 3.8 of the Assessment Order is nonspeaking in as much as the AO has not given any basis as to why the detailed submissions of the Appellant werenot acceptableto him and how various case laws cited by the appellant were not commensurate with the facts of Appellant's case.

7.3 lt is seen that the opportunity for cross examination of Sh. Mukesh Banka nor copy of statements and other documents strongly relied upon by AO were provided to the appellant. The AO has not brought on record anything, except the statement of Shri. Banka to demolish the documents submitted by the assessee. The sole basis for the AO to make additions is statement of Shri Mukesh Banka where he admitted that he is involved in providing bogus entries to various beneficiaries. The staleovent given by Shri Mukesh Banka was retracted by himself by filing affidavits before the income tax authorities. The alleged statement of Sn Mukesh Banka was recorded neither in the presence of the appellant nor their representative, nor was any opportunity afforded to cross- examine. Addition cannot be made uis 68 simply on the basis of statement of third party, when evidences filed by Appellant clearly proves the fact that these transactions were genuine. If AQ intends to rely on the statement of the third party as a witness, then he has to summon such witness, record his statement, offer that witness to the appellant for cross examination, In this regard, it may be noted that it is the AO who is duty bound to provide opportunity of cross examination of the witness, if he relies on the statement of such witness to decide against the appellant, particularly when it is demanded by the Appellant at the Assessment stage.

Ahmedabad bench of ITAT in case of E.l. Dorado case 123 taxmann.com 265 (2021) (A' bad-ITAT) has held:

Where assessee company received share capital amount from several companies and furnished necessary details such as copy of PAN and CIN, MOA/AOA, confirmation of partied, bank extracts etc., so as to prove ITO vs. Pooja Kedia genuineness of its transactions, impugned addition of said amount to assessee's income under section 68 merely on basis of statement of a person who was controlling and managing these companies without providing an opportunity for his cross examination to assessee was unjustified.

"26. The Principles of Natural Justice requires that the Department which seeks to rely on the statement of a witness (Shri Partik R. Shah) has to allow the adverse party (the assessee) an opportunity of cross-examination of such witness. Admittedly, the opportunity for the cross examination of Shri Partik R. Shah was not provided to the assessee despite the request made by it (the assessee) which was sine qua non before making any addition. In this respect the Hon'ble Bombay High court in the case of Addl. CIT v. Miss Lata Mangeshkar(1974) 97 ITR 696(Bom.) held as under "Revenue has got a tendency to make an addition on the basis of entries appearing in the books of a third party or a statement recorded from a third party or loose papers seized from a third party. In all such cases, it is imperative to afford an opportunity to the assessee to cross-examine the said third party."

Similarly in CIT v. Eastern Commercial Enterprises [1994] 210 ITR 103, the Hon'ble Calcutta High court held that "Cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness.

The Hon'ble Supreme Court in case of Kalra Glue Factory v. Sales Tax Tribunal [1987] 167 ITR 498 set aside the order of the Tribunal as well as order in revision of the High Court on the ground that the statements of a partner of another firm upon which the Sales Tax Tribunal relied, had not been tested by cross examinations

The Hon'ble Delhi High Court also in case CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi) held that where addition was sought to be made in reassessment proceedings only on the basis of statement, it was held that it was mandatory for the revenue to produce the proprietor for cross-examination by the assessee on its specific demand in that regard. Therefore, the reopening of assessment based on deposition of the third party was not justified.

ITO vs. Pooja Kedia Not affording opportunity to cross-examine a witness upon whose statement AO sought to rely for making addition is illegality leading to vitiating the assessment.

Hon'ble Apex Court in the case of Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3/52 GST 355 (SC), observed as under- "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority. though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected." From the above judgment it flows that the when statement of witnesses are made the basis made the basis for the addition but without allowing assessee to cross-examine such witnesses, then the illegality creeps in which makes the order nullity, as it amounts to violation of principles of natural justice. Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. [2019] 418 ITR 315 (SC) decided the issue in favour of assessee by holding as under:

*3. However, ongoing through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/ was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating:

"Thus, the entire disallowance in this case is based on third party information gathered oy the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant who has prima facle discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts at the fact of payment through cheques, & VAT Registration of the sellers & their Income Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted."

4. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be

5. In these circumstances, the Review Petitions are dismissed."

ACIT vs. H.K Pujara Builders in (2019) 55 CCH 0504 MUM

'8 It is not in dispute that the entire addition has been made disbelieving the entire documentary evidences submitted by the assessee by placing predominant reliance on the statement recorded from Shri Jagdish Prasad Purohit on 19/10/2011 by Investigation Wing of Income Tax department, Pune in connection with search and seizure operations of Pride Group at Pune. It is not in dispute that M/s. Grafton Merchant Pvt. Ltd., is one of the companies controlled and managed by Shri Jagdish Prasad Purohit. It is found that Shri Jagdish Prasad Purohit had also filed an affidavit retracting the original statement recorded on oath from him u/s. 131 of the Act by the Pune Investigation Wing. Since, this retraction statement was filed after a gap of 29 months from the date of original statement, the Ld. AO in the course of proceedings of the assessee before us decided to ignore the same and proceeded to make the addition based on the original statement recorded from him.

81 ………….Though this statement from Shri Jagdish Prasad Purohit was recorded by the Pune Investigation Wing In connection with the search and seizure proceedings of Pride Group, Pune, the AO, in order to place reliance on the said statement, for the purpose of framing assessments in the case of certain assess005 at Mumbai, should have recorded yet another statement from Shri Jagdish Prasad Purohit to establish the nexus/link, if any, with the assessee. Admittedly, no such statement was recorded by the AR in the impugned proceedings of the assessee Hence, merely placing reliance on a statement recorded from a third party in connection with a search conducted in third party premises and implicating the assessee thereon by looking at all the transactions with jaundiced eyes does not gel well in the eyes of lawit is found from the ledger accounts of M/s. Grafton Merchant Pvt. Ltd., as appearing in the books of the assessee firm for the period upto 31/03/2015 that the assessee had been making frequent repayment of loans to the said party and had also availed loans from time to time from the said party and the entire loan account together with interest thereon [duly subjected to TDS] has been completely squared off on 20/03/2015. The entire transactions ie., the receipt of loans, repayment of loans and payment of interest thereon have been made through regular banking channels from account payee cheques. There is no case of any cash deposits made either at the ITO vs. Pooja Kedia time of receipt of loan in the account of M/s. Grafton Merchant Pvt. Ltd., or in the account of assessee while making repayment of loan or payment of interest Hence, there is no need to suspect the entire gamut of transactions No deficiencies whatsoever were found in the documentary evidences submitted by the assessee before the AO which admittedly included copy of PAN, ITR acknowledgement, audited financial statements, computation of income, confirmation from lender, bank statements evidencing the immediate source of credit of the lender etc. All these documents clearly prove the identity, creditworthiness of the lender and genuineness of the transaction in the peculiar facts of the instant case. Hence, it could be safely concluded that assesseejhad indeed complied with all the three necessary ingredients of Section68 of the Act.

8.3. In view of the aforesaid findings in the peculiar facts and circumstances of the case, we hold that the Ld. CIT(A) had rightly deleted the addition made u/s. 68 of the Act and disallowance of interest on loans, which in our considered opinion, does not call for any interference. Accordingly, the grounds raised by the revenue are dismissed."

M/s. Pabal Housing Private Limited vs. DCIT, 2693 & 2694/Mum/2018 Date of Order-03-05-2019

13 The AO has never disputed these factual aspects. Therefore, once the assessee has discharged its initial burden by filing necessary evidences in order to prove identity, genuineness of transactions and creditworthiness of the parties, then there is no reason for AO to suspect the transactions between the parties only on the ground that the person who gave unsecured loan had admitted in his statement u/s 132(4)"bf the Act that these transactions are accommodation entries, more particularly when the person who gave the statement retracted his statement by filing affidavit. Further, the AO failed to carry out further enquiries in light of evidences gathered during the course of search and survey to establish the fact that in fact these transactions are non-genuine, but merely relied upon the statement of Shri Bhanwarlal Jain to make additions u/s 68 of the Act. Therefore, we are of the considered view that the AO was erred in making additions towards unsecured loan taken from companies controlled and managed by Shri Bhanwarlal Jain u/s 68 of the Act.

7.4 Finally the foundation of the AO's case is the admission of Shri. Mukesh Banka vide his statement recorded on 30.05.2018 and 19.07.2018. It has been submitted by the appellant that Shri. Mukesh Banka had retracted his statement vide two separate affidavits dated 01.06.2018 and 23.07.2018. The said retractions were submitted to the department on 05.09.2019 and were available to the Assessing Officer. The issue of retracted statements has been examined by the Hon'ble Apex Court in the case of Vinod Solanki vs. Union of India wherein the Hon'ble Court laid down the principle that in such cases there has to be independent and cogent evidence to corroborate the statement of that person made earlier. The Hon'ble Bombay High Court followed the same principle in the case of CIT vs Uttamchand Jain. This issue was examined in detail, and on similar facts following the above judgements. Radheshyam Agarwal, Kolkata vs Department of Income Tax/ (Kol) of 2011 A.Y. 2006-07 the facts were that the addition was made on the basis of statement of one Radheshyam Khemka who had retracted from his statement. In their order dated 06-09-2011 Honorable ITAT held thus-

7 ........After perusing the assessment order, we observe that the impugned addition u/s. 68 of the Act of Rs.10 lakhs was made by the A.O. mainly relying on the statement of Shri Khemka recorded on 9/12/2006 u/s. 132(4) of the Act and letter of M/s. Globe Stocks & Securities Ltd. dated 16/1/2007 in which they had claimed to have admitted that the assessee was provided accommodation entries by them in lieu of cash receipt. Except these statements of Sri Khemka and M/s. Globe Stocks & Securities Ltd., no other corroborative or specific evidence could be brought on record by the A.O. to justify the depth of authenticity of such statements and subsequent action thereupon as per law, which were subsequently retracted by those persons by filing Affidavit stating therein that the searching team recorded the statement of Sri Aurn Kr. Khemka, who is also Director of M/s. Globe Stocks & Securities Ltd., by using coercion and threat and further it was due to undue influence, pressure and threat of dire consequences by the searching team that he was compelled to make statements, which were beyond the correct state of affairs. We observe that the Id. C.I.T. (A) not only considered the retracted statement but also considered the evidences filed in support of payments made towards advancing unsecured loan to the assessee in ITO vs. Pooja Kedia response to notice u/s. 133(6) of the Act. We observe from the assessment order that the A.O. did not examine Sri Khemka, Director of the, tender company on his retraction from the earlier statement to establish that the cash was given by the assessee before introduction of the same in the shape of unsecured loan to the assessee. He has also not made any efforts to link the cash received and deposited by Sri Khemka in his bank account to establish that the money was, in fact, came from the coffer of the assessee. Therefore, the money advanced as unsecured loan was the undisclosed money of the assessee, as alleged by the A.O., is not based on any independent evidence gathered prior to or during the course of assessment proceedings. It is also an established position in law that the initial burden to prove that the confession was voluntary in nature would be on the department, which, in our opinion, has not been discharged by Jhe department. The Id. A/R relied on the decision of Hon'ble Apex Court in the case of Vinod Solanki vs. Union of India (supra) and decision of Hon'ble Bombay High Court in the case of CIT vs. Uttamchand Jain (supra) The Hon'ble Bombay High Court in the Case of CIT vs. Uttamchand Jain (supra) following the said decision of Hon'ble Apex Court has 6 held that the retracted confession of a person can be relied upon only if there is independent and cogent evidence to corroborate the statement of that person hade earlier. In the present case, Sri Khemka who is also Director of M/s Globe Stocks & Securities Ltd. not only retracted his statement recorded earlier by filing affidavit but also filed audited accounts, evidence of filing of L.T. return, bank statement, details of cheques and confirmation in support of genuineness of unsecured loan. Therefore, in our considered opinion, the Id. CIT(A) acted judiciously in taking into consideration the retracted statements corroborated by the evidences referred to above

7.1 We further observe that the Id. C.I.T.(A) finding that there was omission on the part of the A.O. to examine Sri Khemka personally and as there was no evidence except the statement of Sri Khemka recorded u/s. 132(4) of the Act and letter of M/s. Globe Stocks & Securities Ltd. filed before the ADIT (Inv.) to justify the addition and the A.O. could not bring on record any evidence to link the alleged cash paid by the assessee and its receipt in the form of unsecured loan.

7.2 In the above background of the case, now let us examine whether addition of Rs.10 lakhs is warranted in the hands of the assessee. Provisions of Sec. 68 of the Act have been judicially considered by several courts of law, as per which an addition u/s. 68 can be made where an assessee fails to prove identity of the creditor, his creditworthiness and genuineness of the transaction. In the present case it was necessary for A.O. to prove that on all 3 ingredients the assessee had failed and, therefore, addition was warranted. Therefore, in such circumstances.

ITO vs. Pooja Kedia the genuineness of the transaction could not be doubted merely on guess, surmise and conjecture, more so when advancing of loan is duly supported by documents including confirmation from the lender company which the department could not controvert by adducing any evidence on record.

7.3 The Hon'ble Gujarat High Court in the case of DCIT vs. Rohini Builders (supra) and Hon'ble Gauhati High Court in the case of Nemichand Kothari vs. CIT (supra) have held that where the loan creditors are identified and they are regularly assessed to tax and have admitted the loan transaction with the assessee, then addition u/s, 68 of the Act is not permissible in the case before us, identity of M/s Globe Stocks & Securities Ltd. is beyond doubt. The genuineness of the transaction recorded in the audited books of accounts of both the parties has not been disputed and the capacity of the loan creditor is also proved beyond doubt. In view of the above facts and circumstances of the case, we do not find any infirmity in the order passed by the Id. C.I.T. (A) deleting the addition of Rs. 10 lakhs made by the A.O. u/s 68 of the Act in the hands of the assessee. The order of Id. C.I.T.(A) is, therefore, upheld and the ground of appeal of the department is dismissed."

Therefore, the statement by itself cannot be solely relied as fool proof evidence. The Hon'ble Jurisdictional ITAT Jaipur in the case of DCIT V/s Saurabh Mittal, has noted as under.

"We further note that the assessee produced copy of affidavit of Shri. Anil Agrawal who has retracted his statement before the Investigation Wing, Kolkata however, without going into controversy of the retraction of the statement we find that the statement cannot be used by the AO without giving an opportunity to cross examination of Shri Anil Agrawal."

7.5in summary, considering the facts of the case in light of the provisions of the Act, as elaborated by various courts as discussed in previous paras, including the Jurisdictional Tribunal, I hereby note that there is clear violation of principles of natural justice on the facts of the present case.

8. With regard to the merits of the case, I find that the appellant had sold equity shares of BPIP Infra Private Limited to M/s. Everstrong Enclave Private Limited and M/s. MegapixVintrade Private Limited. It is evident that each transaction was made through banking channels and the appellant has submitted audited statement of accounts, sale bill, ledger copy Acknowledgement of ITR, Bank Statement. The appellant has also submitted that from the Master data in record ITO vs. Pooja Kedia of MCA Website, both the companies are active and it has been filing its balance sheet in MCA Website and complying with legal requirements under the companies Act. The appellant has also enclosed copy of Assessment orders whereby the department has accepted the accounts of those companies. The transaction is sale of shares and is on face value and there is no component of discount or premium attached.

8.1 Under Section 68 of the Income Tax Act, any sum credited in the books of accounts of a taxpayer that cannot be explained by the taxpayer's income or other sources is deemed to be the taxpayer's income for that year. The burden of proof lies with the taxpayer to prove that the cash credit is genuine and not an undisclosed Income. The appellant has provided identity of both the companies by giving their complete Address, PAN, Copy of Acknowledgement for filing of I.T. Retum for the A.Y. 2019-20, copy of Assessment Orders, Bank Statement and Audited Statement of Accounts and that it had also provided evidences of genuineness of transaction as all the transactions are through Banking Channels and both the companies have categorically confirmed by furnishing supporting documents and evidences. The appellant contented that the genuineness of the transactions cannot be doubted, relying on mere surmises without any material to prove the same as held in the case of Dhakeshwari Cotton Mills Ltd. 26 ITR 775 (SC). I find that the AO has overlooked the net worth of the both companies and relied only on profit. It is seen that besides the purchase of shares these companies had also given loans to other bodies corporate as well and investment to the appellant is not a solitary transaction. The appellant has furnished the financials of both the companies and other details.

8.2 Therefore, it is seen from the above that both companies have sufficient financial capacity to purchase shares. Therefore, the appellant has discharged the onus of proving the identity, creditworthiness and genuineness of the companies.

8.3 The AO has also alluded to huge cash withdrawals from the accounts of these companies but has not brought any supporting in this regard. The additions are based on the statement of Shri Mukesh Banka. The appellant has filed affidavit of Shri Mukesh Banka retracting his earlier statements recorded by the Investigation wing. The appellant filed evidences demonstrating that all the two companies are "Active" on MCA website and were filing regularly income-tax returns. Therefore, such companies can by no stretch of imagination be called paper / shell companies. Hon'ble ITAT Ahmedabad in the case of Adarsh Capital Finstock Ltd

8.4 The provisions of section 68 of the Act deals with the cases, where any sum found credited in the books of account of the assessee in any Financial Year, and the assessee offers no explanation about the nature and source thereof or explanation offered by the assessee is not in the opinion of the AO satisfactory, then the sum so credited may be charged to income tax as the income of the assessee of that previous year. A plain reading of section 68 makes it very clear that in order to fix any credit within the ambit of section 68 of the Act, the AO needs to examine three ingredients i.e, identity, genuineness of transactions and creditworthiness of the parties. If the assessee proves all ingredients provided u/s 68 of the Act, then the onus shifts to the AO to prove otherwise. Once the appellant has filed documents as above in support of the genuineness of loan and identity of creditors the onus shifts on the AO. The AO has not brought on record, except the statement of Sh. Banka to demolish the documents, submitted by the assessee. The sole basis for the AO to make additions is statement of Shri Mukesh Banka where he admitted that he is involved in providing bogus unsecured loans entries to various beneficiaries. The statement given by Shri Mukesh Banka was retracted by himself by filing affidavits before the income tax authorities. Therefore, there is no reason for the AO to go only on the basis of statement of Shri Mukesh Banka so as to treat the share transaction as accommodation entry.

9. Reliance is also placed upon the decision in the case of CIT Vs Sunita Dhadda reported in [2018] 100 taxmann.com 526 (SC). In this case the Hon'ble Supreme Court dismissed SLP against order of High Court holding that where Assessing Officer while making addition on account of 'on money' received by assessee on sale of land to a builder group relied upon statement of director of builder and did not allow assessee to cross examine said director, there being violation of principle of natural justice, impugned addition was to be deleted. In another case of Rajesh Kumar Vs DCIT decided by the Supreme Court reported in [2006] 157 Taxman 168 (SC) it was held that though natural justice does not form part of any Act yet it have to be implemented. This principle was reaffirmed by the Supreme Court in another case Sahara India (Firm) vs CIT Central, reported in2008] 169 Taxman 328 (SC)/[2008] 300 ITR 403 (SC)/[2008]. In this case it was held that the exercise of powers under section 142(2A) cannot happen without an opportunity of hearing to the assessee.

ITO vs. Pooja Kedia 10.In another case PCIT (Central) vs Oriental Power Cables Ltd reported in [2022]143 taxmann.com 371 (SC) The Supreme Court rejected an SLP where the High Court had deleted the addition for absence of cross examination. In this case the Assessing Officer made additions under section 68 solely on basis of information received from Investigation Wing that lenders from whom assessee- company acquired loans were indulged in bogus accommodation entries without giving theassessee any opportunity to cross-examine persons whose statements were recorded during investigation. Thus, the impugned additions made on basis of such investigation and statement which was not privy to assessee were directed to be deleted by the ITAT and affirmed by the High Court and was affirmed by the Apex Court.

11. The Hon'ble ITAT Delhi in the case of KMG International Ltd Vs ACIT in Date of Judgement /Order: 21/07/2023 Related Assessment Year: 2007-08 has held that addition under section 68 towards unsecured loan amount unjustified as identity and creditworthiness of creditors and genuineness of transaction duly proved by way of documentary evidences.

12. The Hon'ble Jurisdictional Rajasthan High Court in the case of Labh Chand Bohra Vs ITO (2010) 189 ΤΑΧΜAN 141 held as under "So far as capacity of the lender is concerned, in our view, on the face of the judgment of Hon'ble Supreme Court, in Daulat Ram's case (supra), and other judgments, capacity of the lender to advance money to the assessee, was not a matter which could be required of the assessee to be established, as that would amount to calling upon him to establish source of the source. In that view of the matter, since this part of the judgment runs contrary to the judgment of the Hon'ble Supreme Court, in Daulat Ram's case (supra), while this Court in a subsequent judgment in Mangilal's case (supra) relying upon Daulat Ram's case(supra), has taken a contrary view, we stand better advised to follow the view, which has been taken in Mangilal's case (supra)."

13. The Hon'ble Supreme Court in the case of CIT Vs Orissa Corporation (P) Ltd.159 ITR 78(SC) held as follows:

"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of theassessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or ITO vs. Pooja Kedia were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, theassessee could not do anything further."

"The creditors have confirmed that they have advanced loan to the assessee. In most of the cases, transactions have been routed through bank account. Therefore, asking source of such deposits will amount to asking source of the source which is not permitted under the law as held by the Hon'ble High Court of Patre in the case of Sarogi Credit Corpn. vs. CIT 1975 CTR (Pat) 1: (1976) 103ITR 344 (Pat) and the decision of the Ahmedabad Bench of the Tribunal in the case of Rohini Builders vis Dy. CIT (2002) 76 TTJ (Ahd) 521: (2001) 117 Taxman25 (Ahd) (Mag). Once it is established that the amount has been invested by a particular person, be he is a family member or close relative then the responsibility of the assessee is over. The assessee cannot ask that person, who advanced the loan, whether money advanced is properly taxed or not."

"In our opinion, in such circumstances, the Assessing officer of the assesses cannot take the burden of assessing the profit and loss account of the creditor when admitted the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into than return of the creditor and brand the same as unworthy of credence

So long It is not established that the return submitted by the creditors has been rejected by its Assessing Officer, the Assessing officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established."

ITO vs. Pooja Kedia 16. The Guwahati High Court in the case of Nemi Chand Kothari Vs CIT [136Taxman 213) observed that the assessee had obtained loans though account payee cheques and ha had also furnished the name & address of the creditor. In light of the aforesaid observations, they further held as follows:

"Once the assessed had established that he had received the said amounts from 'N' and 'P' by way of cheques, the assessee must be taken to have proved that the creditors had the creditworthiness to advance the loans. Thereafter, the burden had shifted to the Assessing Officer to prove the contrary. On failure on the part of the creditors to show that their sub creditors had creditworthiness" to advance the said amounts to the assessee, these amounts as a corollary, could not have been and ought not to have been, under the law, treated as the assessee's income mom the undisclosed sources, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or ware owned by, the assessee."

17.The Hon'ble Jurisdictional Rajasthan High Court in the case of CIT vs Pooja Agrawal in D.B. Income Tax Appeal No. 385/2011 has held that so far as assessee has furnished all the supporting documents in the shape of copy of contract notes regarding purchase and sale of shares, copy of D-mat account etc, the fact of transaction entered into cannot be denied simply on the ground that in his statements appellant denied having made any transactions. Further as payments and receipts were made through account payee cheques and transactions were routed through Kolkata Stock Exchange and there was no evidence that the cash has gone back in appellant's account, it was held by the Court that simply mentioning that findings were on the basis of appraisal report prepared by Investigation wing after considering all the material facts available on record is not sufficient. The Hon'ble Court confirmed the finding of the Tribunal that "The AO has failed to prove through any independent enquiry or relying on some material that the transactions made by the appellant through share P.K. Agrawal were non genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohit."

18.The Hon'ble Jaipur bench of ITAT vide order dated 31.08.2022 in the case of Manohar Lal Chug vs. ITO in has held that:

"6.3. The issue of penny stock and consequent additions made has elaborately dealt with by ITAT Jaipur Bench in the case of Pramod Jain & Others(supra) and relying on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Pooja Agarwal, 160 DTR 0198 (Raj.) deleted the addition by observing as under:

ITO vs. Pooja Kedia "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any 30 Shri Manohar Lal Chugh, Jaipur, cogent material to show that the assessee has brought back his unaccounted income in the shape of long-term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/ merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly, we delete the addition made by the AO on this account. "On further appeal by the department to the Hon'ble Rajasthan High Court, the Hon'ble High Court by referring to the decision of CIT vs. Pooja Agarwal in DB IT Appeal No. 385/2011 dated 11.09.2017 (Raj) (HC) held that no substantial question of law arise in this case. 6.4. Thus in view of the above discussion and taking into consideration various documentary evidences produced by theassessee in support of his claim and further relying upon various decisions of this Tribunal as well as the decision of Hon'ble Jurisdictional High Court including the decision in case of CIT vs. Pooja Agarwal (supra) as well as in case of PCIT vs. Pramod Jain & Others (supra), we allow the claim of exemption under section10(38) of the Act and accordingly delete the addition made by the AO. The order of Id. CIT (A) is set aside."

1. In the case of Shree Barkha Synthetics Ltd. Vs. Asstt CIT, 2006, 55 taxman289, Raj, it has been held as under:

"The principle relating to burden of proof concerning the assessee is that where the matter concerns money receipts by way of share application from investors through banking channel, he has to prove the existence of the person in whose name the share application is received. Once the existence of the investor is proved, it is not further the burden of the assessee to prove whether that person himself has invested the said money or some other person has made investment in the name of that person. The burden then shifts on to the revenue to establish that such investment has come from the assessee itself. [Para 16]

2. Further, the Hon'ble ITTA, Kolkata in the case of Balaji Solutions Limited Vs. Assistant Commissioner of Income Tax Circle-2(1), Kolkata [I.T.A. No.572/KOL/2022] pronounced on February 20, 2023 has held as follows:

“9. Apropos to Ground No. 2 regarding the issue of unexplained cash credit amounting to Rs 25,00,000/- under section 68 of the Act is concerned, we find ITO vs. Pooja Kedia that the assessee took loan from Mis. Ambala Trafin Pvt. Limited. It is not in dispute before us that the aforesaid loan was interest-bearing loan taken through normal banking channel and was repaid back in the same financial year through banking channel and tax at source has been deducted on the interest paid thereon and all the documentary evidence in order to explain alleged credit has been duly placed before the lower authorities. Since no specific discrepancy has been observed by the lower authorities and the said loan being taken and repaid during the year itself and also considering the income of Rs.15. 10 crores offered by the assessee, we do not find any reasonto question the genuineness of the said loan. We, therefore, reverse the finding of the Id. CIT(Appeals) and delete the addition of Rs. 25,00,000/- under section 68 of the Act and allow Ground No. 2 raised by the assessee."

5. Feeling dissatisfied with the above finding of the ld. CIT(A) the revenue preferred the present appeal before this tribunal challenging the finding of the ld. CIT(A) on the ground as reiterated here in above in para 2. making the addition and the ld. CIT(A) has deleted the same. Ld. DR also filed a report of the ld. AO in the matter which reads as under :

Kindly refer to the above mentioned subject. The Report is submitted as under-

5. In the case of the assessee, the information received from DDIT (Inv.), Unit- 1(3). Kolkata, vide letter no. DDIT(Inv.), Unit-1(3), Kolkata/Banka/Information/8071, dateil 26.02.2019. On perusal of information, it is found that a search & seizure/survey action in the case of Banka Group was conducted on 21.05.2018. Based on the findings gathered and subsequently brought on records, it is found that Shri Mukesh Banka is the key person controlling person who looks after day-to-day financial affairs and accommodation entry business of Banka Group. During the course of post search verification of seized/impounded materials, various paper/shell companies controlled and managed by Shri Mukesh Banka were identified. All companies were categorically accepted by Shri Mukesh Banka as paper shell companies controlled and managed by him for the purpose of providing accommodation entries in the nature of bogus unsecured loans or in other forms. Following the lead as obtained from the statements of Shri Mukesh Banka and the materials seized during the course of search operation. the bank accounts of the paper/ shell ccompanies, controlled and managed by Shri Mukesh Banka was requisitioned from respective banks and analyzed. On verification of the bank accounts of paper/shell companies of Banka Group, various beneficiaries have been identified who have obtained accommodation entry in the nature of bogus unsecured loan or in other forms. from the paper shell companies of Banka Group.

6. Further the financial analysis of such paper/shell companies of Banka Group from which such beneficiaries have been identified, has been carried out to ascertain their financial creditworthiness. This led to revelation of various noticeable points like:

1. No profit accumulation in the company(s) across various financial years No actual business done by the company (s) being zero turn over reported in various financial years.

ITO vs. Pooja Kedia 2. Most of the companies have shown income under the head Other Income which show that these companies have no actual business activities and only getting interest income under the head other income' for providing bogus unsecured loan to different beneficiaries.

3. The admission of Shri Mukesh Banka vide his statement recorded u/s 131/132(4) of the Income-tax Act, 1961 on 30.5.2018 and 19.7.2018 that these companies are papershell companies, controlled and managed by Shri Mukesh Banka

4. The directors of these companies are dummy directors of Shri Mukesh Banka as per the statement of Shri Mukesh Banka recorded u/s 132(4) of the Incometax Act, 1961 on 30.5.2018 and 19.7.2018. these companies were found to be none xistent as per enquiry made by the department.

7. Further, during the course of analysis and examination of the bank statements of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of paper/shell companies of Shri Mukesh Banka was clearly established and substantiated. These findings got further authenticated from the statements of Shri Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Banka Group clearly established the fact the withdrawal of unaccounted cash was one of the main features of modus operandi of Banka Group.

8. As per information available with this office it is notice that the assessee Pooja Kedia is a one of the beneficiaries and the assessee is involved in the taking accommodation entries amounting to Rs. 80,00,124/-in the nature of bogus unsecured loan or in other forms during the F. Y. 2018-19 relevant to A. Y. 2019- 20 connected with the Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. shell companies of Banka Group date of transactions 16.05.2018 totaling of Rs. 80,00,124/-. The assessee has routed unaccounted money of Rs. 80,00,124/-in its bank account through these companies which is remained unexplained. During the searches & as per the information received, it is found that various syndicates have arranged accommodation entry in the form of unsecured loans and in other forms. The modus operandi found is that the beneficiaries routed it's on money layering through various bank accounts to these operators and they provided back the money so received to the beneficiaries. These facts were confirmed by the stake holders viz. operators/syndicate members, which were providing accommodation entries in ITO vs. Pooja Kedia statements recorded during action u/s 131/132(4) of the I.T. Act. It has been manifestly accepted by them that they are the conduit for converting untaxed money brought on record by paying no taxes in the garb of unsecured loans through various company having no means of worth and they have very small capital base, which does not commensurate with its business activities. 3.3.6 In the present case, it is proved beyond doubt that, the source from which the money has been collected by the assessee is a bogus/non-existent entity. This has been categorically stated by Sh. Mukesh Banka, owner of the said companies, in his statement on oath u/s 132(4). In their statements, they admitted that they earned commission for facilitating pre-arranged accommodation entries as per the demand of the client. For this they had made various paper/bogus/shell companies which arebeing managed/controlled by them. Thus, it goes to prove that the assessee has introduced his own unaccounted money in the form of the unsecured loan.

9. Further, during the analysis and examination of the bank statements of the shell companies of Bank Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of shell companies of Shri. Mukesh Banka was clearly established and substantiated. These findings got further authenticated from the statements of Sh. Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge withdrawal of cash from the bank accounts of paper/shell companies of Bank Group clearly established the fact the withdrawal of unaccounted cash was one of the main features of modus operandi of Bank Group. These findings got further authenticated from the statements of Sh. Mukesh Banka As the companies from which the accommodation entries were taken are found to be bogus. In the present case, the identity and genuineness, both are not satisfied as the entry provider himself has declared that it is a bogus firm. Therefore, there is no issue of proving the capacity or creditworthiness. In light of the above discussion, the assessee is found to be involved in taking accommodation entries amounting to Rs. 80,00,124/- connected with Everstrong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. which are bogus entities.

11. In response to the show cause noticed, the assessee has provided her response dated 17/02/2024. The assessee has also requested for Video Conference. The assessee reply dated 17/02/2024 is duly considered and analysed. The assessee's request for Video Conference is also accepted and the video Conference is scheduled on 04/03/2024. During the Video conference. the assessee stated that they have transaction with Ever strong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. But the assessee has denied the fact that these entities are shell companies. In his response as well, the assessee is denied the fact that these entities are shell entities. The assessee has provided the submissions which are already provided by the assessee in response to the notices u/s 142(1) of the Income Tax Act, 1961. No new fact is brought by the assessee on records. The assessee has stated that the assessee has sold shares to Ever strong Enclave Private Limited & Megapix Vintrade Pvt. Ltd. And the same are recorded in the books of accounts.

The ld. DR vehemently argued that notice u/s. 148 was issued to the assessee and after affording sufficient opportunity to the assessee notice u/s.148 was issued to the assessee. The ld. DR in support of the contention relied on the decision of our High Court in the case of Chaturbhuj Gattani noted held that “Section 148A mandates Assessing Officer only to supply information before issuing notice under section 148A in prescribed manner and not other material on basis of which it has formed prima facie opinion that income of assessee chargeable to tax has escaped assessment.” The statement retraction was post search but that retraction does not mean what has been said was not true. The statement was retracted much after the search the assessee hide the real transaction by giving it sale transaction. The companies were either closed or shell company and therefore ld. DR supported the order of the assessment.

6. Per contra, ld. AR of the assessee submitted that the ld. CIT(A) has quashed the re-opening and the said finding is not under disputed in the grounds and therefore, the reliance placed on the decision the case of Chaturbhuj Gattani Vs. ITO (supra) will not help the revenue. The ld. AR of the assessee supported the order of the ld. CIT(A) and while doing so also filed the following written submission;

1. The assessee is an individual and regularly filing its Income-tax return.. The assessee filed its original return of Income for the A.Y. 2019-2020 on 15.07.2019 declaring total income of Rs. 40,45,600/-.

2. The Show-cause notice issued by the ld. Assessing officer on 09.03.2023 with the reason recorded as follows:

3. That in response to the notice dated 19.03.2023 issued u/s 148A of the Act, assessee respondent submit the detail reply which is reproduced as under:-

ITO vs. Pooja Kedia 4. The ld. assessing officer without considering the response and request to provide the copies of the statement of Shri Mukesh Banka in response to the notice issued u/s 148A of the Act passed the order u/s 148 A(d) of the Act and initiated the proceeding u/s 148 of the Act.

5. The reassessment proceedings initiated against the assessee suffer from fundamental flaws, both procedural and substantive, rendering the entire process legally unsustainable. At the outset, it is submitted that the reassessment under Section 147 of the Act, requires the Assessing Officer to form a bona fide and independent belief based on tangible material that income chargeable to tax has escaped assessment. This belief must be recorded in the reasons to believe, as stipulated under section 148 of the Act. However, in the present case, it is evident that the ld. Assessing Officer has acted solely on borrowed satisfaction from the investigation wing and failed to exercise independent application of mind, as required under law.

6. The impugned assessment order is fundamentally flawed and unsustainable in law due to two critical and interconnected reasons: (1) deviation from the reasons recorded for reopening the assessment, resulting in an impermissible addition and (2) lack of independent application of mind by the AO

to other issues provided, some addition is made towards the reasons recorded by him. Admittedly, the same is absent in the instant case.

8. The AO’s failure to independently verify the information, coupled with the complete mismatch between the reasons recorded and the final addition, makes the impugned assessment order unsustainable in law. Section 68 of the Income Tax Act, invoked by the AO to justify the addition, cannot be applied arbitrarily without first discharging the burden of proving that the assessee’s evidence is insufficient or unreliable. In the present case, the AO has not discharged this burden. Instead, the addition appears to be based on conjectures and surmises, rather than on substantive evidence.

10. That during the assessment proceeding and appeal proceeding, assessee respondent submits the following documents which is the part of the Paper Book:-

Copy of ITR along with the Computation of Income and Profit and loss 67 73 A/c and Balance Sheet. Copy of the Bank Statement for the year under consideration. 74 84 Copy of Ledger account of M/s. Ever Strong Enclave Private Limited and 85 86 M/s. Megapix Vintrade Private Limited.

Copy of Documents related to M/s. Ever Strong Enclave Private Limited:

� Ledger Copy of your appellant appearing in the books of Ever Strong Enclave Private Limited. 87 87

� Copy of Bank Statement of relevant period highlighting the transaction 88 88

� Copy of ITR Acknowledgement for the A.Y. 2019-20 89 89 � Copy of Audited Statement of Accounts for the Year ended 31.03.2019 along with details of Non-Current Investment 90 101 highlighting the transaction.

� Copy of Invoice of Sale of Shares. 102 102 Copy of Documents related to M/s. Megapix Vintrade Private Limited:

� Ledger Copy of your appellant appearing in the books of Megapix Vintrade Private Limited. 103 103

� Copy of Bank Statement of relevant period highlighting the transaction 104 104

� ITR Acknowledgement for the A.Y. 2019-20 105 105 � Audited Statement of Accounts for the Year ended 31.03.2019 along with details of Non-Current Investment highlighting the 106 118 transaction

� Copy of Invoice of Sale of Shares. 119 119 Copy of Retraction Statement of Shri Mukesh Banka dated 01.06.2018. 120 122 Copy of Retraction Statement of Shri Mukesh Banka dated 23.07.2018. 123 127 Copy of Receipt of Retraction Statements being submitted by said Shri 128 128 Mukesh Banka in the office of DCIT, Central Circle 4(2), Kolkata on 05.09.2019. Copy of Master Data downloaded from MCA Website of M/s. Ever 129 131 Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited.

11. That ld. assessing officer did not consider the documents submit by the assessee and merely on relying upon the statement of Mukesh Banka, made addition u/s 68 of the Act without considering the retraction statement of the Shri Mukesh Banka.

12. That during the appellate proceeding, the Ld. CIT(A), has considered the submission made by the assessee respondent on initiation of assessment proceeding u/s 148 of the Act wherein it was submitted that Page 65 of CIT(A)

13. That ld. CIT(A) after considering the submission and judicial precedent relied by the assessee respondent, held that:-

7.5In summary, considering the facts of the case in light of the provisions of the Act, as elaborated by various courts as discussed in previous paras, including the Jurisdictional Tribunal, I hereby note that there is clear violation of principles of natural justice on the facts of the present case.

14. That department has not challenged the afore-said finding and observation of the ld. CIT(A) which shows that the revenue department admit the illegality of the assessment proceeding.

15. That further ld. CIT(A) after considering the issue on merits of the appeal and after considering the submission and documents submit during the appellate proceeding, the ld. CIT(A) held that:- Page 70 CIT(A)

• Keshav Shroff v. ITO 2024 (7) TMI 1014 dated 28.06.2024 (ITAT Kolkata): Validity of reassessment proceedings - Unexplained cash credit u/s 68 - unsecured loan received from the loan creditor - Loans treated as bogus on the basis of the statement given by one Mukesh Banka - HELD THAT:- As prima facie the appellant has submitted copies of all those documents including the bank statement of the alleged loan provided/accommodation entry provider in support of transaction related to alleged loan claimed by the appellant. But he discarded the same by mere assumption and surmises thereby saying that these documents are mere masks to hide the real nature of the transaction. It is surprising to note that what was the basis of ld. CIT(A) to discard those documents without verification and genuineness of the documents and he doubted the same. We further notice that the ld. CIT(A) has rejected the above documents by saying that finding of the AO was based on strong surrounding circumstances and preponderance of the probability and human conduct. It is important to mention here that above findings cannot be basis of rejection of a document which was filed by the assessee. The documents clearly go to show that the transaction made being a genuine one and we do not find any transaction made by and with any Mukesh Banka. It is also a fact that all transactions made through banking channels. Loan taken was duly repaid by account payee cheque. No transaction was entered with Sh. Mukesh Banka and Banka Group. Genuine loan was taken from M/s. Fast Speed Realcon Pvt. Ltd. and loan confirmation of M/s. Fast Speed Realcon Pvt. Ltd. has also been enclosed in the balance sheet, profit and loss account filed by the assessee. Keeping in view the above facts, the answers come in favour of the assessee that the assessee could be able to disclose the amount and the finding of the AO and the ld. CIT(A) that the assessee could not be able to disclose the source of income of Rs. 15 Lakh is hereby set aside.

ITO vs. Pooja Kedia Validity of reopening of assessment - We find that before issuance of notice u/s 148 of the Act there must be a belief in the mind of the AO that the assessee has escaped assessment of income and there must be some basis for forming such a belief. Mere suspicion cannot be a ground for issuance of notice. In the present case as we have discussed above that there is nothing in the record brought by the AO to establish any connection of the assessee with Mukesh Banka, there is no transaction made by and with Mukesh Banka as the statement of bank account details reveals. Keeping in view the above facts also the case of the assessee is succeeded that issuance of notice is also bad in law. Accordingly, the grounds raised by the assessee are allowed. Assessee appeal allowed. • ITO v. Aashna Developers Pvt. Ltd. 2024 (2) TMI 274 dated 10.01.2024 (ITAT Ahmedabad): Addition of unsecured loan taken from shell/paper companies - assessee company during the year has accepted unsecured loans from certain parties - material collected during the search at third party premises - as alleged by the AO that the parties from whom unsecured loans were accepted by the assessee are paper/shell companies and managed by the entry provider - as argued search materials and statement relied upon by the AO for making addition against the assessee were neither supplied to the assessee - CIT(A) deleted the additions. HELD THAT:- The entire thrust of the AO for treating the unsecured loan as unexplained cash credit was materials collected during the search proceeding from the premises of entry provider and his statement recorded during the search. However, we note that the learned CIT(A) has given categorical finding that the search materials and statement relied upon by the AO for making addition against the assessee were neither supplied to the assessee for rebuttal nor the opportunity of cross examination of Shri Mukesh Banka has been provided. It is settled position of law that not providing the material used against the assessee for rebuttable and opportunity of cross examination of the statement relied upon by the AO will vitiate the validity of the assessment. See Andaman Timber Industries vs. CCE [2015 (10) TMI 442 - SUPREME COURT] Onus to prove - Assessee in support of genuineness of loan have furnished all the necessary documents such as ledger of parties, contra ledger from the parties and confirmation, ITRs, bank statements and annual reports. However, the AO without pointing out any infirmity and application of mind on those documentary evidence, treated the loan amount as unexplained cash credit by relying upon the statement recorded and material collected during the search at third party premises and that too without providing the opportunity of rebuttal and cross examination. Hon’ble Supreme Court in the case of CIT vs. Odeon Builders Pvt Ltd [2019 (8) TMI 1072 - SUPREME COURT] has confirmed the concurrent finding of learned CIT(A), the ITAT and the High court in favour of the assessee.

ITO vs. Pooja Kedia Once the assessee submits primary evidence with regard to identity and credit worthiness of creditor and the genuineness of the transaction the onus shifts on the AO to consider the material provided and make independent inquiry in order to find out genuineness of the evidence or bring material contrary to fact explained by the assessee. The AO cannot reject the primary evidence furnished by the assessee without appreciating the facts available on record or without bringing contrary material to form the belief that primary document or explanation furnished by the assessee is not satisfactory. Undeniably, the assessee during the assessment proceeding in support of genuineness of credit of unsecured loans has furnished ledger of parties, contra ledger from the parties and confirmation, ITRs, bank statements and annual report of parties along with their affidavit. The AO in assessment order has nowhere referred to any independent inquiry of whatsoever made to disprove the primary evidence provided by the assessee and not pointed out any infirmity in those evidence. As such, the AO merely on the basis statement of entry provider which has been retracted subsequently held the unsecured loans as unexplained cash credit. Thus approach taken by the AO is not justified. As such the AO failed to appreciate the facts, evidence provided, and case laws relied upon by the assessee company. Assessee company has taken loan through banking channel and repaid the same in the next year along with interest through banking channel and deducted TDS on the interest. It is also important to note that the interest has been allowed by the AO during the assessment which has direct nexus on the loan in dispute. As such the AO has taken a contrary stand. Thus, the loan amount of cannot be made subject to addition under the provisions of section 68 - Appeal of the Revenue is hereby dismissed. • Narmada Concast Pvt. Ltd. v. DCIT 2024 (5) TMI 950 dated 03.01.2024 (ITAT Ahmedabad): Validity of reassessment proceedings on borrowed satisfaction - allegation of non independent application of mind - As per AO assessee had entered into high value financial transactions facilitating bogus accommodation entries - Addition u/s 68 for unexplained cash credit - AO relied upon investigation report of Banka Group supplied by the Investigation Wing of the Income Tax Department - HELD THAT:- AO has failed to verify the transaction recorded by the Investigation Wing which are double entries made for the same transactions of Rs. 20,00,056/- and Rs. 30,00,056/-. Though the A.O. records the unsecured loan of Rs. 50,00,000/- received by the assessee from M/s. KCPL, however upheld the double entry addition of Rs. 1,00,00,224/ as the undisclosed income of the assessee. A.O. failed to consider the repayment of above loan by the assessee during the assessment year 2018-19 which was not disputed, while framing the assessment order for the assessment year 2018-19 by the very same AO. Thus in our considered view, A.O. has simply accepted the information given by DGIT which is reproduced in the reasons recorded, he has not formulated “his own reason to belief” that any income chargeable to tax has escaped assessment. A.O. ought to have seen the double entry of the loan transactions with bank entry details and then formulated “his own reason to belief” but simply followed the information given by DGIT, which is nothing but “borrowed satisfaction” and is against the provision of Section 147 of the Act. Therefore the same is liable to be quashed. As decided in Varshaben Sanatbhai Patgel [2015 (11) TMI 934 - GUJARAT HIGH COURT] held that in the absence of any details available on record, AO could not initiate assessment proceedings merely on the basis of information supplied by DGIT (Inv.) that assessee had made certain bogus purchases. Thus reopening of assessment itself is bad in law for having not recorded independent “reason to believe” that income has escaped assessment. Decided in favour of assessee.

• Amar Partap Steels Pvt. Ltd. v. ITO dated 03.10.2024 (ITAT Jaipur): Apropos to the ground no. 1 & 2 raised by the assessee the relevant facts as emerges from the record is that in this case, information was received related to assessee which was passed on by office of the Director General of Income tax (investigation, 3rd floor, Scindia House, Ballard Pier, Mumbai vide its office letter No DGIT (Inv)/ Information/PJ2014-15 dated 03.07.2014 and received form the Income tax Officer (Inv)(Hqrs) O/s the Director General of Income Tax (Inv), Rajasthan, Jaipur the assessee has taken the accommodation entries as unsecured loans form the following companies which are managed and controlled by Shri Praveen Kumar Jain Group, Mumbai: SNo. Name of the entry PAN No. Financial Year Amount provider 1 M/s Falak Trading AABCF5837A 2012-13 1,00,00,000/- Co. Pvt 2 M/s Pragati Gems AAFCP5566J 2012-13 50,00,000/- Pvt. Ltd As is known from the statement of Shri Praveen Jain that the assessee is one of the beneficiaries for taking the accommodation entries as unsecured loans from the above companies. As these companies were managed and controlled by Shri Praveen Kumar Jain through his relatives, agents and his accountants as known from the search & seizure operation conducted by Investigation Wing, Income Tax Department, Mumbai in the case of Shri Praveen Kumar Jain Group. Therefore, ld. AO merely based on that information considered these loans as bogus unsecured loans made by the assessee with above companies. Based on this information addition of Rs. 1,50,00,000/- in the hands of the assessee considering that the ITO vs. Pooja Kedia assessee has taken the against accommodation entries from the Praveen Kumar Jain and group concerned managed by him. When the matter carried to ld. CIT(A) who has also confirmed the view of the Assessing Officer and dismissed the appeal of the assessee by holding that ground of appeal raised by the assessee considering the information received based on the detailed statement of Shri Praveen Jain the addition is required to be sustained. Whild holding so ld. CIT(A) relied upon the decision of Sumati Dayal Vs. CIT wherein the apex court held that human probabilities and circumstances to be considered while coming to conclusions in finalizing the assessments and thereby he has confirmed the addition. As is evident from the material placed on record that the assessee has accepted the ICDs from these two companies by account payee cheque. These loans have been repaid by account payee cheque. The relevant details showing the receipt and payment were placed on record. The assessee also placed on record the confirmation and ITR. All these facts are sufficient to prove the identity, genuineness and creditworthiness. The money so received as is evident that was repaid also. All these records so placed on record were not controverted which proves the identity, genuineness and capacity. On the similar set of fact Hon’ble Gujarat High Court in the case of Rohini Builders 256 ITR 306 held that "The genuineness of the transaction is proved by the fact that the payment to the assessee as well as repayment of the loan by the assessee to the depositors is made by account payee cheques and the interest is also paid by the assessee to the creditors by account payee cheques." Moreover, our Jurisdictional High Court in the case of PCIT vs. M/s Esspal International Pvt Ltd. 166 taxmann.com 722 (Rajasthan) wherein our High Court vide order dated 03.09.2024 has held that “ Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the revenue cannot be made the basis for any addition.” Thus, as is evident that except statement of Shri Praveen Jain there was no corroborative evidence was placed on record and therefore, we do not find any reasons to sustain that addition and direct ld. AO to delete the addition of Rs. 1,50,00,000/- made in the hands of the assessee.

7. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:

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S.No. Particular Page No.

From To 1. Copy of Written Submission dated 03.07.2024 filed before Ld. CIT(A). 01 66 2. Copy of ITR along with the Computation of Income and Profit and loss 67 73 A/c and Balance Sheet. 3. Copy of the Bank Statement for the year under consideration. 74 84 4. Copy of Ledger account of M/s. Ever Strong Enclave Private Limited 85 86 and M/s. Megapix Vintrade Private Limited.

5. Copy of Documents related to M/s. Ever Strong Enclave Private Limited: � Ledger Copy of your appellant appearing in the books of Ever 87 87 Strong Enclave Private Limited. � Copy of Bank Statement of relevant period highlighting the 88 88 transaction � Copy of ITR Acknowledgement for the A.Y. 2019-20 89 89 � Copy of Audited Statement of Accounts for the Year ended 90 101 31.03.2019 along with details of Non-Current Investment highlighting the transaction. � Copy of Invoice of Sale of Shares. 102 102

6. Copy of Documents related to M/s. Megapix Vintrade Private Limited: � Ledger Copy of your appellant appearing in the books of Megapix Vintrade Private Limited. 103 103 � Copy of Bank Statement of relevant period highlighting the transaction 104 104 � ITR Acknowledgement for the A.Y. 2019-20 105 105 � Audited Statement of Accounts for the Year ended 31.03.2019 along with details of Non-Current Investment highlighting the 106 118 transaction � Copy of Invoice of Sale of Shares. 119 119 7. Copy of Retraction Statement of Shri Mukesh Banka dated 01.06.2018. 120 122 8. Copy of Retraction Statement of Shri Mukesh Banka dated 23.07.2018. 123 127 9. Copy of Receipt of Retraction Statements being submitted by said Shri 128 128 Mukesh Banka in the office of DCIT, Central Circle 4(2), Kolkata on 05.09.2019. 10. Copy of Master Data downloaded from MCA Website of M/s. Ever 129 131 Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited.

11. Copy of Orders passed u/s 143(1) of the Act for the A.Y. 2019-20 of 133 149 M/s. Ever Strong Enclave Private Limited and M/s. Megapix Vintrade Private Limited. 12 Keshav Shroff v. ITO 150 153 2024 (7) TMI 1014 dated 28.06.2024 (ITAT Kolkata) 13. ITO v. Aashna Developers Pvt. Ltd. 154 159 2024 (2) TMI 274 dated 10.01.2024 (ITAT Ahmedabad) 14. Narmada Concast Pvt. Ltd. v. DCIT 160 164 2024 (5) TMI 950 dated 03.01.2024 (ITAT Ahmedabad)

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S.No. Particular Page No.

From To 1. Copy of Notice dated 09.03.2023 issued u/s 148A(b) of the Act 01 03 2. Copy of reply dated 20.03.2023 in response to notice dated 09.03.2023 04 06 issued u/s 148A(b) of the Act. 3. Copy of reply dated 23.03.2023 in response to notice dated 09.03.2023 07 10 issued u/s 148A(b) of the Act. 4. Copy of order dated 30.03.2023 passed u/s 148A(d) of the Act. 11 20

5. Copy of Notice issued u/s 148 of the Act dated 30.03.2023. 21 21 6. Copy of notice dated 23.11.2023 issued u/s 142(1) of the Act. 22 26

7. Copy of Reply dated 20.01.2024 in response to notice dated 27 32 23.11.2023 issued u/s 142(1) of the Act.

8. Copy of notice dated 25.01.2024 issued u/s 142(1) of the Act. 33 35 9. Copy of Reply dated 27.01.2024 in response to notice dated 36 40 25.01.2024 issued u/s 142(1) of the Act. 10. Copy of Show-cause notice dated 14.02.2024. 41 48 11. Copy of reply to the Show casue notice dated 14.02.2024 filed on 49 63 17.02.2024 12. Multimetals Limited Vs. DCIT in DBCivil write petition no9007/2022 64 76 13. Shri Veer Teja Real Estate and Developes P. Ltd. Vs. ITO and others 77 80 14. PCIT Vs. Sunlight Tour and Travels P. Ltd. 81 88

7. We are of the considered view that authorities have acted de hors the Act and provisions contained under Section 148 of the Act. The authorities have proceeded on wrong footing and have conducted inquiry with regard to sale of land whereas, actually it was purchase of land. The impugned order dated 27.07.2022 passed under Section 148(A)(d) of the Act and the notice under Section 148 of Act dated 27.07.2022 being based on wrong facts cannot be sustained and it is a case where assessee has been harassed by the Income Tax Department, hence, we deem it proper to allow the civil writ petition.

8. Civil Writ Petition is accordingly, allowed. The impugned order dated 27.07.2022 passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act dated 27.07.2022 are set aside and quashed.

He also submitted that both the company was alive and the bills were placed on record. The statement upon which the reliance was made has retracted from his statement and therefore, the same is not binding. Thus, the money received by the company was not unsecured loan but the proceeds of the sales of shares and thereby he relied upon the order of the ld. CIT(A).

9. We have heard the rival contentions and perused the material placed on record. In the present appeal vide ground no 1 & 2 the revenue challenges the finding of the ld. CIT(A) ordering to delete the addition of Rs. 80,00,124/- made on account of unexplained cash credits u/s 68 of the Act. the assessee was involved in taking the accommodation entries amounting to Rs. 80,00,124/- in the nature of bogus unsecured loan or in other forms during the FY 2018-19 relevant to AY 2019-20 connected with the Everstrong Enclave Private Limited and Megapix Vintrade Private Limited, which are proved as shell companies during the Search Proceedings in the case of Banka Group. Ground no. 3 being general does not require our findings.

Apropos to ground no. 1 & 2 since the facts of the case has already been discussed vide para 3 above the same are not repeated. Record reveals that the assessment was reopened in the case of the assessee based the information with the revenue that the assessee was in receipt of an accommodation entries in the form of bogus unsecured loan, availed from two companies viz. M/s. Everstrong Enclave Private Limited & M/s MegapixVintrade Private Limited.

On further inquiry while reassessment proceedings, the assessee replied that they had not taken any unsecured loan from the above referred two parties. The assessee stated that on the contrary they had sold equity shares of BPIP Infra Pvt. Ltd. to the above parties. She had sold four lakh shares each at face value of 10 Rs. per share amounting to Rs. 40,00,000/- emphasized that there was no premium or discount element involved in the transaction. The assessee submitted the documentary evidences as required in support the said sale transaction. So the very basis of re- opening escapement of income falls down and even the transaction so alleged to have been is not accommodation entry but the sales proceeds of the shares and purchase of the same is already reflected in the regular books of the assessee and the same was also not disputed by the revenue.

Be that it may so very allegation of having availed the unsecured loan has not basis. Thus, we note that very basis of re-opening of the case is without recording to any subjective belief as to escapement of income but is assumed be so bogus transaction merely on the information so received is nothing but suspicion and in complete disregard of the facts submitted by the assessee. On the issue ld. AR of the assessee relied upon the decision of our High Court in the case of Shri Veer Teja Real Estate and Developes P. Ltd. Vs. ITO wherein the our Hon’ble High Court has held that “7. We are of the considered view that authorities have acted de hors the Act and provisions contained under section 148 of the Act. The authorities have proceeded on wrong footing and have conducted inquiry with regard to sale of land whereas, actually it was purchase of land. The impugned order under section 148 of the Act dated 27.07.2022 being passed on wrong facts cannot be sustained and it is a case where assessee has been harassed by the Income Tax Department, hence we deem it proper to allow the civil write petition.” The bench also noted that the assessee while proceeding before the lower authorities have made all the compliance of the notices so issued and submitted the details of the sale of shares which were not doubted. That the assessee submitted Audited Statement of Accounts, Bank Statements, Ledger Copy of Accounts and ITR Acknowledgement for the A.Y. 2019-2020, Copy of Invoices of sale of shares of both the companies i.e. M/s. Everstrong Enclave Private Limited and M/s.

MegapixVintrade Private Limited. The assessee also tabulated the details of the transaction [ extracted here in below ] along with the supporting evidence. invoice and payment was made through normal banking channels. As per provision of section 68 of the Act the assessee is under the obligation to prove the following to avoid application of the deeming provision which has been considered by the Hon'ble Calcutta High Court in CIT vs. Precision Finance Pvt. Ltd. (1994)208 ITR 465 (Cal) which laid down the following criteria: -

1. Identity of his creditors; 2. Capacity of creditors to advance money, and 3. Genuineness of transaction.

On that aspect of the matter the assessee submitted vide its reply dated 04.07.2024 the ledger accounts of both the companies, Audited Statement of Accounts, Bank Statements, ITR Acknowledgement and Sale Bills Thus, the onus casted upon the assessee has already been discharged by the assessee. In support of that contention reliance was placed on the decision of ITAT Delhi - Prabhatam Investment P. Ltd. vs. ACIT, New Delhi and Hon’ble High Court of Delhi in ITA 71/2015, ITA 72/2015 & ITA 84/2015-CIT-9 Erstwhile CIT-VI vs. Vrindavan Farms P. Ltd. The assessee also submitted that Master data in record of MCA Website, it is clear that the said company had filed its Balance Sheet in MCA Website and has complied with legal requirements M/s. Ever Strong Enclave Private Limited and M/s. MegapixVintrade Private Limited, which clearly indicates that they are filing their Income Tax Returns and Assessment were made by the department. The assessee also stated that the statements taken during the course of survey/search proceedings from Mr. Mukesh Banka has retracted and therefore, merely based on that no addition can be made. We get support of our view that merely based on the statement which was retracted no addition can be made as held by our own Rajasthan High Court in the case of PCIT Vs. Esspal International P.

Ltd [ 166 taxmann.com 722 (Rajasthan) ] holding that ;

Respectfully following the above binding precedent cited and discussed herein above we do not find any infirmity in the detailed finding given by the ld. CIT(A) and thereby the ground no. 1 & 2 raised by the revenue stands dismissed.

In the result, the appeal of the revenue is dismissed.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/08/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- ITO, Ward-4(1), Jaipur 2. izR;FkhZ@ The Respondent- Pooja Kedia, Jaipur vk;dj vk;qDr@ The ld CIT 3. vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 1321/JP/2024) vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत