ACIT, CENTRAL CIRCLE-1(1), AHMEDABAD vs. M/S. ASHRITA CONSTRUCTION PVT. LTD., AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member

IT(SS)A No. 248/Ahd/2018 & C.O. No. 28/Ahd/2021 Assessment Year 2013-14

The ACIT, Central M/s Ashrita Circle-1(1), Ahmedabad Construction Pvt. Ltd. Vs 19/21, Narayan Chembur, B/H. Patant Hotel, Ashram Road, Navrangpura, Ahmedabad-380009 PAN: AABCT9663N M/s Ashrita Construction Pvt. Ltd. The ACIT, Central 19/21, Narayan Vs Circle-1(1), Chembur, Ahmedabad B/H. Patant Hotel, Ashram Road, (Respondent) Navrangpura, Ahmedabad-380009 PAN: AABCT9663N (Appellant)

ITA No. 2023/Ahd/2018 Assessment Year 2015-16

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The ACIT, Central M/s Ashrita Circle-1(1), Ahmedabad Construction Pvt. Vs Ltd. (Appellant) 19/21, Narayan Chembur, B/H. Patant Hotel, Ashram Road, Navrangpura, Ahmedabad-380009 PAN: AABCT9663N (Respondent) Appellant by : Shri James Kurian, CIT-DR Respondent by : Shri Tushar Hemani, Sr. Adv. & Shri Parimalsinh B. Parmar, A.R. Date of hearing : 28-09-2022 Date of pronouncement : 09 -11-2022 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

These two appeals are filed by the Revenue as against separate orders dated 09.07.2018 passed by the Commissioner of Income Tax (Appeals)-11, Ahmedabad, as against the assessment order passed under section 143(3) r.w.s. 153C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (A.Y) 2013-14 and assessment order passed u/s. 143(3) of the Act for the Assessment Year 2015-16. The Cross Objection is filed by the assessee is against the Assessment Year 2013-14.

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The assessee maintained regular books of accounts which are duly audited and original return of income were filed. A search action u/s. 132 of the Act was conducted in the case of Venus Group of Ahmedabad on 10.03.2015, various premises were covered u/s. 132/133A of the Act, during the search and various incriminating documents were seized. On the terrace of Crystal Arcade, C.G. Road, Ahmedabad documents related to unaccounted cash transactions of Venus Group were seized. On analysis of documents seized and their co-relation, it was found that unaccounted cash transactions were first recorded on cash vouchers. On the basis of recording made on these cash vouchers, the entries were recorded on the day cash book.

2.1. During the course of search on Vaswani Group, several documents reflecting transaction of Venus Group members with the assessee company has been found. It was noticed from the seized documents that certain documents pertained to the assessee and information contained therein related to the assessee. Therefore satisfaction is recorded by the Assessing Officer on 17.11.2017 as follows: “In view of above facts as mentioned in the Annexure-B, I am satisfied that the above mentioned documents seized from the premises (i) Terrace of Crystal Arcade, Nr. Navrangpura Telephone Exchange, C.G. Road, Ahmedabad and (ii) 901, Sapphire complex, Opp. Ratnam, C.G. Road, Ahmedabad and during the course of search, various documents were seized which relates to and the information contained therein pertains to the assessee. M/s. Ashrita Construction Pvt. Ltd. for A.Y. 2013-14. Since the assessee company being other than the person referred to in section 153A of the Act. I have satisfaction to proceed against the assessee M/s. Ashrita Construction Pvt. Ltd. as per the provisions of Sectioc153C of the Income Tax Act, 1961 as it has bearing on the determination of the total income for the assessment year. Therefore, it is fit case for initiation of proceeding u/s. 153C of the I.T. Act.”

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2.2. After recording the above satisfaction notice u/s. 153C of the Act was issued on 17.11.2017 requiring the assessee to file its return of income within 30 days of receipt of the notice. In response, the assessee filed its return of income on 18.12.2017 declaring total income as Nil. During the assessment proceedings, the assessee was issued notice u/s. 142(1) stating Shri Yashwant Thakkar (director of the assessee company) has issued instruction on SMS through his mobile number 9825072523 to Shri Ashok Vaswani who is a key member of Venus Group for RTGS into bank account of the assessee company. The receipt of cash by Venus Group is matched by equal amount of RTGS from Sunderdeep Builders to the assessee company on same dates. The above transaction between Yashwant Thakkar with Vaswani family and Venus Group through accommodation entries of Rs. 5 Crores and same is treated as unexplained income as per the provisions of Section 68 of the Act and added as the income of the assessee.

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transactions are considered in the hands of one party. These can also be considered in the hands of the party and opposite to these transactions. Keeping in view of these facts, the additional grounds raised by the assessee was dismissed.

3.1. On merits of the case, the assessee contended that it received unsecured loan from M/s. Sunderdeep Builders a Proprietorship concern wherein Mr. Rajesh Vaswani is the sole Proprietor. In regular course of business during the financial year, total loans obtained from M/s. Sunderdeep Builders is amounting to Rs. 35 Crores, upon which interest of Rs. 1,83,79,553/- was paid/credited and appropriate TDS @ 10% was deducted on the same. During this financial year itself, a sum of Rs. 5,34,24,521/- was repaid by the assessee to M/s. Sunderdeep Builders. All these transactions were through normal banking channel. The assessee filed copy of the acknowledgement of Income Tax Return, Tax Audit Report, Copy of the account confirmation and Bank Statement of Sunderdeep Builders for the relevant assessment year. Thus the assessee contended these documents prove the identity of the creditor, genuineness of the transactions and creditworthiness of the creditor have been established beyond doubt. The assessee further contended that the assessee name is not mentioned in the documents seized during the course of search but an initial ‘YT’ is written which is nowhere established that it is the name of the assessee. If it is the case of the department ‘YT’ stand for Yashwant Thakkar and in that case the transactions should be considered in his individual hand and not in the hands of the assessee. Further these documents were not found from the premises of the assessee

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and not “relating to it” and therefore the addition made on this account is liable to be deleted. The Ld. CIT(A) after considering the above submission deleted the addition made by the Assessing Officer as follows: 6.2 Facts of the case with reference to submission of the appellant, assessment order and case laws relied upon by the appellant have been carefully considered. It is a fact that the documents which have been relied upon for making the additions were found from the premises of Venus Group of persons and not from the premises of the appellant. It is also fact that these documents are not in the handwriting of any director/employee of the appellant and these were not signed by anyone on behalf of the appellant by any director/employee. Moreover, no statement was recorded during the course of search about the nature of transactions recorded in these papers. The statements were recorded of the employee/directors of Venus group who stated that this premises & these documents belong to the Venus group of persons. Nowhere name of the appellant was mentioned by anyone. During the post search enquiries, no statement was recorded upon these transactions. Even during the assessment proceedings, no statement was recorded, no enquiry was made to conclude the nature of the transactions & people involved. In such circumstances, additions made by the AO are not found justified, Moreover, these documents contain initial 'YT1 which the AO has concluded as 'Yashvant Tahkkar', who is director of the appellant company Even for a moment, it is considered that 'YT' stands for Yashvant Thakkar, director of the appellant company, who is independently assessed to income tax. He should be held answerable for these transactions and not the appellant company. Further, during the year, the appellant company had taken loan of Rs.35 crore from M/s Sunderdeep Builders. The AO has considered Rs.30 crore as explained from same creditor, whereas only Rs.5 crore has been considered as unexplained^ which is unjustified. The appellant repaid Rs.5.34 crore during the year itself and interest of Rs.1.83 crore was paid credited. The appellant deducted TDS @ 10% of the interest amount. These facts further prove the genuineness of the transactions. As per the chart placed in para 17.3 of the assessment order, transaction of Rs.3 crore on 6.3.2013 and Rs.2 crore on 4.3.2013 have been mentioned, whereas, as per ledger account of M/s Sunderdeep Builders, Rs.2 crore were credited on 4.3.2013 and Rs.1 crore on 6.3.2013. This show that entry of Rs.3 crore on 6.3.2013 does not match with the regular books of accounts, hence, the entries made in these documents are not factually correct and do not match exactly, so as to warrant additions. It is important to mention that at the year end, M/s Sunderdeep Builders had closing balance of Rs.31.40 crore, which was taken to next year. The appellant paid interest upon this balance during next financial year, but the same was considered genuine by the A.O. and no addition was made. Even for the year under consideration, no interest was disallowed upon the so called unexplained loan considered by the

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AO. These show the contradictory stand taken while passing the assessment order. The AO has mentioned statement of few people and director of Venus group in the assessment order while making these additions, but no opportunity to cross examine these people was provided inspite of specific request made by the appellant during the assessment proceedings. I inclined to agree with the argument of the appellant that presumption u/s.292C of the Act is not applicable against the appellant, as these documents were not found from the premises of the appellant. To prove the genuineness of transactions u/s.68 of the Act, identify of the creditor, genuineness of the transactions and creditworthiness of the creditor is required to be proved. The appellant filed confirmation from creditors with PAN and copy of ITR, which prove identity of the creditor beyond doubt. The transactions were through normal banking channels, which prove the genuineness of the transactions. It is further proved by making payment of interest, repayment of part loan during the year and making TDS on interest payment. Creditworthiness is proved from the fact that the appellant filed copy of bank account of the creditor, in which no cash deposit was found immediate prior to transfer money to the appellant, it is further strengthened from the fact that the appellant obtained loan of Rs. 5 crore from M/s Sunderdeep Builders out of which the AO made additions only of Rs.5 crore. These facts clearly established that the appellant has discharged its onus to prove the genuineness of these transactions. The discussion above prove that the additions made by the AO are not justified, hence, deserves to be deleted. Apart from the above mentioned factual position, the appellant's case is further found covered by the following judgments of higher judicial authorities ;- A) Additions u/s.68 cannot be made when amount is received through regular banking channel. i) CIT v/s. Ranchod Jivabhai Nakhawa (2012) 21 Taxman.com 159 (Guj) ii) DCIT v/s. Rohini Builders 256 ITR 360 (Guj) iii) CIT v/s Ridhi Sidhi Corporation by Hon'ble Gujarat High Court in T.A. No.69 of 2018. iv) CIT v/s. Apex Therm Packaging P Ltd (2014) 42 Taxamn.com 473(Guj). B) Non providing opportunity of cross examination i) Andaman Timber v/s, CC Exim CA No.428 of 2006(SC) ii) PCIT v/s, Kanubhai M. Patel (2017) 79 Taxman.com 257 (Guj) iii) C/T v/s. Jndrajit Singh (2013) 215 Taxman 58 (Guj) iv) H.R. Mehta v/s. AC/T 387 ITR 561 (Bom)

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As the facts of the appellant's case are identical to the facts of the above mentioned binding judgments, the additions made by the AO are not found factually & legally justified, hence, these are deleted. This ground of appeal is allowed.

4.1. The Revenue’s appeal in ITA No. 2023/Ahd/2018 for A.Y. 2015-16 raising the following Grounds of Appeal. 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the addition of Rs.6,50,00,000/- made by the AO u/s.68 of the Act. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 3. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.

4.2. The Assessee’s appeal in C.O. No. 28/Ahd/2021 for A.Y. 2013- 14 raising the following Grounds of Appeal: 1. The Ld. A.O. has erred in law and on facts in assuming jurisdiction u/s. 153C of the IT Act, 1961 and thus erred in passing the assessment order. The Ld. CIT(A) has also erred in confirming the jurisdiction of A.O. under section 153C of the IT Act, 1961.

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68 of the Act and the same is liable to be restored. The ld. CIT-DR could not place on record any case laws or any other documents in support of its arguments.

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the assessee company especially when such statement has not confronted to the assessee for appropriate rebuttal. The Ld. Senior Counsel also drawn our attention that the assessee has produced before the Lower Authorities confirmation from the lender M/s. Sunderdeep Builders at Page No. 43 to 46, Bank statement of the assessee with relevant transactions at Page No. 47 to 60 of the Paper Book, Return of Income and Statement of Total Income of Rajesh Vaswani proprietor of M/s. Sunderdeep Builders. At Page No. 61 to 67 of the Paper Book and Tax Audit Report of Rajesh Vaswani at page no. 68 to 84. Thus the Ld. Senior Counsel submitted that all the three ingredients as prescribed u/s. 68 of the Act namely identity of the payer, genuineness of the transaction and creditworthiness of the lender are being proved by the assessee and discharged its initial onus cast upon it.

6.1. It is also settled principle of law that “source of source” is not required to be proved by the assessee and relied upon Jurisdictional High Court Judgment in the case of DCIT vs. Rohini Builders 256 ITR 360 (Guj.), in the case of Murlidhar Lahorimal vs. CIT 280 ITR 512 (Guj.), in the case of CIT vs. Pragati Cooperative Bank Ltd. 278 ITR 170 (Guj.) and in the case of CIT vs. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC).

6.2. The Ld. Senior Counsel also further submitted that the assessee received Rs. 35 Crores from the lender during the year. However the Assessing Officer doubted only Rs. 5 Crores received from the lender and not doubted 30 Crores received from the lender. The A.O. has not appreciated the repayment of Rs. 5.34

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Crores during this assessment year itself and interest of Rs. 1.83 Crores was paid with appropriate TDS made by the assessee. Thus the Assessing Officer has not disallowed interest payment made by the assessee. Thus relying upon Jurisdictional High Court Judgment in the case of CIT vs. Ayachi Chandrashekhar Narsangji reported in [2014] 221 Taxmann.com 146 (Guj.) wherein it was held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit u/s. 68 of the Act.

6.3. The Ld. Senior Counsel also further relied upon the Hon’ble Supreme Court Judgment in the case of Kishinchand Chellaram reported in 125 ITR 713 (SC) and Gujarat High Court judgment in the case of Heirs and Legal Representative of Late Laxmanhai S. Patel vs. CIT reported [2008] 327 ITR 290 (Guj.) wherein it was held that if any material is not confronted to an assessee by the Assessing Officer, it would not constitute as “admissible evidence”. Hence addition made based on such evidence is liable to be deleted.

6.4. The Ld. Counsel also submitted that it is settled law that in the absence of cross examination no addition could have been made based on statements recorded by the department and relied upon Supreme Court judgment in the case of Andaman Timber Industries reported in [2015] 62 Taxmann.com 3 (SC). Thus the Ld. Senior Counsel stated that the Ld. CIT(A) after considering the above facts of the case, deleted the additions which does not require any interference and thereby requested to dismiss the Revenue’s appeal.

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provisions of section 153C namely “various documents were seized which “relates to” and the information contained therein “pertains” to the assessee is not correct in law.

12.1. Even as per the pre-amended provisions of Section 153C, the Assessing Officer has to record satisfaction to the effect that seized material “belongs” or “belongs to” other person. In this case, the A.O. has not put on record that any material seized during the course of search does belong to the assessee. However seized materials related to other third party. Therefore in our considered view, the invocation of proceedings u/s. 153C is against the provisions of law. In this connection, Jurisdictional High Court judgment in the case of Anil Kumar Gopikishan Agrawal (cited supra) and the relevant portion reads as follows: “While it is true that section 153C is also a machinery provision for assessment of income of a person other than the person searched, in the opinion of this court, this is not a case where by virtue of the amendment, there is merely a change in the procedural provisions affecting the assessees who were covered by the unamended provision. By the amendment, a new class of assessees are sought to be brought within the sweep of section 153C, which affects the substantive rights of the assessees and cannot be said to be a mere change in the procedure. Since the amendment expands the scope of section 153C by bringing in an assessee if books of account or documents pertaining to him or containing information relating to him have been seized during the course of search, within the fold of that section, this question assumes significance, In asmuch as in the facts of the present case, as on the date of search, it was only if such material belonged to a person other than the searched person, that the Assessing Officer of the searched person could record such satisfaction and forward the material to the Assessing Officer of such other person. However, subsequent to the date of search, the amendment has been brought into force and based on the amendment, the petitioners who were not included within the ambit of section 153C as on the date of the search, are now sought to be brought within its fold on the ground that the satisfaction note and notice under section 153C have been issued after the amendment came into force. Therefore, this case does not relate to the interpretation of the provisions of any of the sections, but relates to the stage at which the amended section 153C can be made applicable, as to

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whether it relates to the date of search; or the date of recording of satisfaction by the Assessing Officer of the searched person; or the date of recording of satisfaction by the Assessing Officer of the other person; or the date of issuance of notice under section 153C. [Para 19.8] In the facts of the present case, the search was conducted in all the cases on a date prior to 1-6-2015. Therefore, on the date of the search, the Assessing Officer of the person searched could only have recorded satisfaction to the effect that the seized material belongs or belong to the other person. In the present case, the hard disc containing the information relating to the petitioners admittedly did not belong to them, therefore, as on the date of the search, the essential jurisdictional requirement to justify assumption of jurisdiction under section 153C in case of the petitioners, did not exist. It was only on 1-6-2015 when the amended provisions came into force that the Assessing Officer of the searched person could have formed the requisite belief that the books of account or documents seized or requisitioned pertain to or the information contained therein relates to the petitioners. [Para 19.9]”

12.2 Respectfully following the above jurisdictional High Court judgment, the grounds raised by the assessee in the cross objection is allowed and assessment order is hereby quashed.

14.1. During this financial year, the assessee company had taken loan of Rs. 10.5 Crores from M/s. Sunderdeep Builders. The A.O. considered Rs. 4 Crores as explained from same creditor and disallowed Rs. 6.5 Crores as unexplained. The assessee repaid Rs.

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21.5 Crores during the financial year itself and paid interest of Rs. 1.21 Crores after deducting appropriate TDS. The assessee also produced the confirmation letter from the lender, bank statement of the assessee, Income Tax Return and statement of total income of the lender namely M/s. Sunderdeep Builders. Thus the assessee has discharged its initial onus u/s. 68 of the Act. Therefore for the reasons set out in paragraphs 7 and 8 of this order in IT(SS)A No. 248/Ahd/2018, we have no hesitation in deleting the addition made u/s. 68 of the Act for the Assessment Year 2015-16 also. Thus the grounds raised by the Revenue has no merits and the same is rejected.