ITO 2(2)(1), MUMBAI vs. I.A. & I.C PVT .LTD, MUMBAI

Per Shamim Yahya (AM) :- These are appeals by the Revenue against the order of the learned CIT(A) for the concerned assessment years. Since issues are common and appeals were heard together, these are being disposed of by this common order.

2. Whether on the facts and in the circumstances of the case and in law the Ld CIT(A) was right in stating that, in appeal proceedings the appellant filed a copy of acknowledgement of the original return filed on 21.09.2010 and to allow the business loss without appreciating the fact that assessee did not file the return of Income on its own case for the A.Y 2010-11 in response of notice u/s 153C of IT Act within specified time.

2 M/s. I.A. & I.C. Pvt. Ltd.

Ground No. 1 in A.Y. 2011-12 :

3 M/s. I.A. & I.C. Pvt. Ltd. ii. In his statement he has critically admitted the fact that he is issuing bogus sales bills/accommodation entries from various concerns, and receives commission on giving such bogus entries. iii. He has also admitted that in the process of issuing bogus bills/accommodation entries he issued-three copy of the bills one is retained by him and the two copy are given to the bogus bill taking person/concern. In this connection he has admitted that he retains the third copy of bogus bill issued only up to the time his commission is outstanding with the bogus bill taking party. And once full commission amount is received the copy of the bogus bill retained by him is also destroyed. And finally he does not have any record as to whom he has given entry of bogus bills. iv. Shri Dilip Jayantilal Shah has also admitted that no books of Accounts are maintained by him for the transaction of sales/accommodation entries made from the different concerns discussed by him in his statement. v. The bogus sales/accommodation entries are managed through obtaining pre signed blank cheques from the concerns controlled by him. He has admitted that in some cases he becomes authorized signatory for banks in which the bogus sale proceeds are received. vi. The concerns admitted by Shri Dilip Jayantilal Shah for having issuing bogus bills/accommodation entries are actually not engaged in any real business, and no actual delivery of goods are made and only paper transactions are made through banks. Actually this kind of the transactions are made at one time since insecurity of loss of money always prevails in the mind of person who is taking bogus purchase bill/accommodation entry. This fact becomes glaringly apparent on having a look on the sequence of transaction in the banks. It is noticed that the payment received/credit in the bank account of concern issuing bills, is immediately is debited/paid to some other concerns on the same date. vii. The assessee company was issued show cause notice informing that the concerns from which it has made many purchases are involved in issuing bogus sale bills/accommodation entries , therefore it was requested that the genuineness, identity, creditworthiness and capacity to handle such volume of turnover, and to prove the transactions as genuine and discharge its onus.

The assessee was also informed that, the person from whom he has obtained purchase bills are his witness and onus to prove the transaction as genuine lies upon him. In reply to this the assessee did not file anything bills were issued by the concerns which admittedly have no real business, and have been only engaged in giving bogus bills. However assessee brought on record & evidence to prove the transactions as genuine and neither was able to prove that such concerns from whom it has obtained purchase bills are assessed to tax and are engaged in real business. viii. The silence of the assessee on these issue clearly bring out mens rea and it is the main reason that despite asking several times the important details in connection with income and business he has not furnished. Further he has 4 M/s. I.A. & I.C. Pvt. Ltd. failed to produce the books of accounts even when specifically asked to produce the same. ix. The non production of books of accounts brings out enough evidence and creditability to the facts narrated by Shri Dilip Jayantilal Shah that the sales made by him are bogus and no actual transaction of goods delivery has taken place. x. In view of the above discussions it is established that the assessee has taken large amount of bogus bills from the concerns as mentioned and communicated to him. xi. The payments made to these concerns from the bank accounts found in the process of assessment proceedings are taken to be the payments made for taking the bogus bill of purchase/accommodation entry. And therefore the entire amount of Debits i.e. payments made by the assessee to the bogus bill issuing concerns are treated as bogus expenditure and is added to the income of the assessee.

7. In view of the above facts the books of accounts & accounting results c the assessee has no sanctity & same cannot be relied upon.

8. In the assessment proceedings for the assessment year under consideration there are under mentioned accretion in the balance sheet items & similarly other important transactions However the assessee has failed to prove the identity , genuineness , credit worthiness and capacity of the person from whom the unsecured loans and advances, share application money/share premium have been received. Therefore these amount cannot be accepted as explained and are added to the income of the assessee as unproved and unexplained creditors/accretions.

The details of all such items are placed in Table No- 'D' in subsequent para.

However the assessee had consistently failed to discharge its onus & had failed to explain the sources of its income, details of expenditures & genuineness of sources of funds.

It is apparent from the bank statement and the details and records that the assessee had taken bogus bills of purchase/accommodation entry. These funds are its own funds which have been first paid as bogus purchases shown as purchases & later received back in cash or after routing it over several companies' s account in the disguise of the purchases. Therefore it is held that the same are assessee own funds sources of which have not been explained &

5 M/s. I.A. & I.C. Pvt. Ltd. are not proved as genuine by the assessee. In this the amounts appearing in the Table-D above are treated as unexplained & are to be taken as its income for the assessment year under consideration as income from other sources.

10. During the Assessment year the assessee has shown other income of Rs. 76,235/-. Assessee was asked to furnish the details of the income/ expenditure.

The assessee did not file any details to explain the source of the other income therefore the income is treated as income from other sources and no expanses allowed from the same. Accordingly carried forward of loss claimed by the assessee cannot be allowed.”

5. Against the above order the assessee appealed before learned CIT(A). Before learned CIT(A) the assessee submitted that sums credited in the bank accounts were received from M/s. JIK Industries Ltd. and it represented loan. It submitted copies of ledger of the assessee company in the books of M/s. JIK Industries Ltd. to support the claim. It was also stated that bank account was actually in IDBI bank. Learned CIT(A) asked for the remand from the Assessing Officer. Remand report reproduced by learned CIT(A) read as under :- "3. The assessee is in appeal for A.Y.2011-12 in which an amount of Rs. 41,29,38,3501- added to the total income of the assessee on the ground of transaction with the bogus bills providers taken as unexplained transaction . The Ld.CIT(A) vide letter dated 04.05.2017 asked to the undersigned that the amount added to the total income is equal to the credits in the banks account of the appellant in Axis Bank a/c No. 501102000003681 from M/s. JIK Industries Ltd and also AR claimed that these amounts represents unsecured loans received from its parent company viz. JIK Industries Ltd, which needs to be verified and give comments.

4. On perusal of the case records for the year under consideration it is seen that the assessee has submitted the details of bank account of Axis Bank having no. 501102000003681 vide letter dated 22.02.2013. On going through the bank statement it is seen that only 40,12,62,000/- has been credit by JIK Industries Ltd and Rs. 21,73,000/- credited by the A/c No.002311001617 and the whole amount has been withdrawn next day in four to five trenches mainly by companies like Vertex Multimumbai, Niti Mercantile and Asha Multitrade. It is not explained by the assessee, the nature of business, purpose of withdrawal and the relation of these companies with I.A. & I.C. Pvt Ltd.

6 M/s. I.A. & I.C. Pvt. Ltd.

6. Learned CIT(A) thereafter in a summary manner decided the issue in favour of the assessee, even when there was no whisper of the assessee producing the books of account either before the Assessing Officer or before learned CIT(A). Learned CIT(A) deleted the entire addition. Learned CIT(A) observed as under :- “6.4.1 I have considered the submissions of the appellant. I have also gone through the assessment order. I find that the assessment order is incoherent and contains lot of irrelevant facts. Very large number of sentences in the order are incomplete or otherwise defective which makes it difficult to make out what exactly the contentions of the AO are. 6.4.2 I find that the deposits were received from JIK Industries Ltd which is the flagship company of the group to which the appellant belongs. The amount added by the AO represents receipts in the bank account of the appellant. The appellant claimed that the account no. a/c No.002311001617 mentioned in the report of the AO dated 08.05.2017 also belonged to JIK Industries Ltd. and was maintained with Dena Bank. This claim of the appellant was found to be correct. These receipts are shown as loan in the books of the appellant. I find that in the books of JIK Industries Ltd also, these amounts are treated as loans to the appellant. Further, the AO has made the addition by alleging that the amount represents value of bogus bills. However, these amounts do not represent purchases claimed by the appellant. In fact, the appellant did not claim any purchase during the year. Therefore, the question of bogus bills does not arise in this case. Many of the 'evidences' such as the statement of Dilip Jayantilal Shah relied upon by the AO has no relevance to addition made and the AO has wrongly relied upon those facts while making addition.

6.4.3 In his report dated 08.05.2017, the AO has emphasized the fact that the money deposited in the bank account were immediately withdrawn. These withdrawals have no relevance to the issue under consideration per se.”

7. Against the above order the Revenue is in appeal before us. We have heard both the counsel and perused the records. We find that the Assessing Officer has given a finding and categorically observed that there was no cooperation by the assessee. No books of account were produced. Learned CIT(A) has granted relief to the assessee in a laconic order in a summary manner. He has only accepted the statement of the assessee. There is no mentioned as to whether books of account were produced or not. As a matter of fact, learned Counsel of the assessee contends that all the books and records are destroyed. However, there is no mentioned whatsoever in the order of learned CIT(A). Hence, in our considered opinion learned CIT(A) is totally

7 M/s. I.A. & I.C. Pvt. Ltd. erred in deleting the additions made by the Assessing Officer dehorse any cogent material before him. Admittedly the said order is devoid of any application of mined. In our considered opinion interest of justice will be served if the matter is remitted to the file of learned CIT(A). Learned CIT(A) is directed to pass a speaking order as to why he is deleting the addition. He is also required to give his findings on the books of account.

8. A common issue raised in these appeals that learned CIT(A) erred in directing the Assessing Officer to allow carried forward loss giving fact that assessee failed to furnish return of income within stipulated time period.

9. On the issue of allowance of loss to be carried forward, learned CIT(A) observed as under for A.Y. 2010-11 :-

“Business loss of the appellant as per the return was Rs. 31,38,203/-. Short term capital gain of the appellant as per para 7.4 of this order is Rs. 9,46,680/-. Business loss of Rs. 9,46,680/- is set off against Short Term Capital Loss as per the provisions of section 70 of the Act. Therefore, the unabsorbed business loss is Rs. 22,43,665/-. In the course of the appeal proceedings, the appellant filed a copy of acknowledgement of the original return filed on 21.09.2010. It is not the AO's case that the original return was not filed within the due date. Therefore, I see no reason why the unabsorbed business loss should not be carried forward. I, therefore, direct the AO to allow the loss to be carried forward. 1 also allow the Long Term Capital Loss of Rs. 3,87,82,420/- to be carried forward.”

For A.Y. 2011-12 he directed the Assessing Officer to allow as per law.

10. Against this order the Revenue is in appeal before us. The Revneue’s grievance is that learned CIT(A) erred in allowing carried forward business loss and long term capital loss without appreciating the fact that the assessee did not file return of income for A.Y. 2010-11 within time specified in the notice u/s. 153C of the Act.

10. Submissions of learned Departmental Representative reads as under :-

8 M/s. I.A. & I.C. Pvt. Ltd.

“The provisions of section 153A(l)(a) read as follows:

153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—

(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;

"20. Therefore, the position that emerges from the above-mentioned provision is that once the assessee files a revised return under Section 153A, for all other provisions of the Act, the revised return will be treated as the original return filed under Section 139. On similar lines, the Gujarat High Court in the case of Kirit Dahyabhai Patel v. Asstt. CIT [2015] 280 CTR 216, held that: "In view of specific provision of Rs. 153A of the I.T. Act. the return of income filed in response to notice under s. 153A of the I.T. Act is to be considered as return filed under s. 139 of the Act, as the AO has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under s. 271(l)(c) of the I.T. Act and the penalty is to be levied on the income assessed over and above the income returned under s. 153A, if any."

9 M/s. I.A. & I.C. Pvt. Ltd.

9. However, subsequently, the Hon'ble Calcutta High Court in the case of Shrikant Mohta vs CIT[2018] 95 taxmann.com 224 (Calcutta) vide its judgement dated 25.06.2018 has laid down the following ratio:

"18. The first question of law indicated above is answered thus :

For the purpose of carrying forward the loss in terms of Section 72 read with Section 80 of the Act, in a case where search operations have been conducted under Section 132 of the Act, the time to file the return within the meaning of Section 139(3) of the Act has to be regarded as the reasonable time afforded by the consequent notice under Section 153A (l)(a) of the Act."

11. In the light of the decision of the Hon'ble Calcutta High Court, for the purpose of carrying forward the loss in terms of Section 72 read with Section 80 of the Act it is immaterial whether the original return u/s 139 was filed within the due date or not. What is to be considered is whether the return filed in response to notice u/s 153A has been filed within the time specified in the notice.

10 M/s. I.A. & I.C. Pvt. Ltd.

12. Upon careful consideration we find that the issue is squarely covered by the decision of Hon'ble Calcutta High Court in the case of Srikant Mohta (supra). The Hon'ble High Court expounded that time limit u/s. 139(3) for carry forward of loss is to be regarded as reasonable time u/s. 153A(1)(a) also. Admittedly since the return is filed beyond the time prescribed u/s. 153A(1)(a), the assessee shall not be entitled to carry forward of the loss. Hence, learned CIT(A)’s reference to the filing of original return for allowing the assessee’s claim is not in accordance with Hon'ble High Court explanation as above. No contrary decision has brought to our notice from any of Hon'ble High Courts. The decisions referred by learned Counsel of the assessee are not on the issue relevant here. Hence, following the order of Hon'ble Calcutta High Court as above we set aside the order of learned CIT(A) and decide the issue in favour of the Revenue.