DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-6(3), MUMBAI vs. M/S.CHETAN R. SHAH (HUF), MUMBAI

Revenue by Shri Kumar Padmapani Bora, DR Assessee by Shri. J.P.Bairagra, AR Date of Hearing 28/11/2019 Date of Pronouncement 10/01/2020 आदेश आदेश / O R D E R आदेश आदेश PER G.MANJUNATHA (A.M):

This appeal filed by the revenue is directed against, the order of the Ld. Commissioner of Income Tax (Appeals)–54, Mumbai, dated 28/06/2017 and it pertains to Assessment Year 2013-14

Chetan R.Shah (HUF) to prove that loans have been taken through proper banking channels either in form of cheques or RTGS forms. The Ld. AO after considering relevant submissions of the assesee and also taken note of material gathered during the course of survey u/s 133A coupled with information collected during the course of search in the case of Praveen Kumar Jain and his associates, came to the conclusion that although, the assesee has filed various details including confirmation letters from the person from whom he had taken loan, but, on perusal of details filed by the assesee, including financial statements of the lenders, it was noticed that all those companies are paper companies which does not have enough financial capacity to explain loans given to assessee company. The Ld. AO, further observed that on perusal of returns filed by those companies it was noticed that although, the companies are reporting high turnover, but when it comes to profit, they have declared meagre profit, which does not support the financial strength to explain unsecured loans given to the assessee. Further, all those companies have reported high sundry creditors on the liabilities side of the balance sheet and on the assets side, the major potion has been deployed under the head loans and advances. Further, although they have received interest on loans and advances given to various parties, but total TDS deducted on said interest income has been claimed as refund. Therefore, he came to the conclusion that all those entities are paper companies controlled and operated by Praveen Kumar Jain to give accommodation entries of unsecured loans to various persons. Therefore, he finally came to the conclusion that unsecured loans taken from the companies operated and controlled by the Praveen Kumar Jain are not explained and accordingly, made additions u/s 68 of the I.T.Act, 1961. Similarly, the Chetan R.Shah (HUF) Ld. AO has made additions towards interest paid on said loans amounting to Rs.26,45,096/-, on the ground that when loan borrowed from those parties itself is not proved, consequent interest payment on said loans cannot be accepted as genuine transactions.

Chetan R.Shah (HUF) 6. The Ld.CIT(A) after considering relevant submission of the assessee and also by relied upon various judicial precedents observed that the assessee has discharged initial burden cast upon u/s 68 of the Act, 1961 by filing enormous details, including confirmation letters from the each lender. The assessee has also proved the genuineness of transactions by filing bank statements of the lenders, as well as the assessee to prove that the loans have been taken through proper banking channel. The assessee has filed further evidences in form of TDS certificate issued to the parties to prove that interest has been paid on said loans after deducting necessary TDS applicable as per law. The Ld.CIT(A), further observed that it was not a case of the Ld. AO that the assessee has not proved capacity of the lenders, because the Ld. AO himself in his assessment order accepted the fact that in the bank accounts of the creditor, there is only RTGS/transfer entries, which itself proves that no cash was introduced prior to advancing loans to the assessee. He, further, observed that the Ld. AO has not brought on record any evidence to suggest that the assessee had paid cash to the loan creditors in lieu of loans received from them. It is also admitted fact that the unsecured loans under consideration have been repaid over a period of a time and also, the assessee has paid interest after deducting necessary TDS applicable as per law. Therefore, he came to the conclusion that the assesee has discharged the burden cast upon it, but the Ld. AO has not brought on records any evidence to prove that the loans taken from creditors are non genuine transactions. Accordingly, he has deleted additions made by the Ld. AO towards unsecured loans taken from those parties. Similarly, the Ld.CIT(A) has deleted consequent interest disallowances made by the Ld. AO on the said loans, on the ground that once loans have been accepted as genuine transactions, consequent interest paid on said loans cannot be disallowed. The relevant findings of the Ld.CIT(A) are as under;- 6.4.9 From the assessment order it is observed that the Ld. AO has given a factual he bank accounts of the creditors there is only RTGS/Trf entries which no cash was introduced prior to advancing the loans lo the Ld. AO had not brought on record any evidence suggesting that the appellant had paid cash to the loan creditors in lieu of loans received from Them. It is also admitted fact that the unsecured loans under consideration have been repaid over a period of time and on same the appellant has paid interest and TDS thereupon, as per provisions of the Act, The Ld, AO has relied ion of Hon'ble Supreme Court in the case of Navodaya Castle P ltd and that of 'We Calcutta High Court in the case of Precision p Ltd. However, as the explained by the appellant the facts adjudicated therein were different as compared to the facts of the present case, hence the ratio laid down therein is not applicable in the present case. 6.4.10. In respect of unsecured loon creditor under considerations the appellant has submitted the details/evidences as under. a. M/s Victory Sales P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. b. Jignesh Bhatt HUF- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return "of income of relevant assessment year, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel. c. M/s. P.Saji Textiles Ltd. The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of Form 23AC filed with ROC, copy of relevant pages of bank statement of them and itself to establish that the transactions were carried out through proper banking channel, d. Sagar Girish Bhatt- The appellant has submitted the copy of confirmation^ letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year, copy of relevant pages of bank statement of him and itself to establish that the transactions were carried out through proper banking channel. e. Shirish Bhat hUF-The appellant has submitted the copy of confirmation letter for relevant assessment year copy of Chetan R.Shah (HUF) acknowledgement of return of income of relevant assessment year, copy of relevant pages of bank statement of them and itself establish that the transactions were carried out through proper bonking channel. The various courts have held that if the identity of the creditors proved and the transaction is through cheque and the income tax assessment particulars are provided then it can be held that the assesee has discharged its onus u/s 68 of the act. In view of the details and evidences submitted by the appellant in respect of above referred creditors, I am of the considered opinion that the Ld. AO was not justify in treating the loan received from above referred five creditors as unexplained cash credit u/s 68 of the Act. Hence, the impugned addition of Rs.1,40,00,000/- is deleted. Accordingly Ground NO.2 is allowed. 6.4.11. The appellant has also challenged disallowance of interest expense of Rs.26,45,096/-. The Ld. AO has disallowed the said interest expense in view of his action of treating unsecured loan of Rs.1,40,00,000/- as unexplained credit u/s 68 of the Act. As discussed above, said addition of Rs.1,40,00,000/- has been deleted and hence the consequential disallowance of interest pertaining to the same at Rs.26,45,096/- is also deleted. Accordingly, the ground No. 3 raised in appeal is allowed.”

7. The Ld. DR submitted that the Ld.CIT(A) was erred in deleting additions made by the Ld. AO towards unsecured loans of Rs.1,40,00,000/- taken from companies/associates controlled and operated by Praveen Kumar Jain, who is a entry provider without appreciating the fact that the assesee had admitted during the course of survey proceedings that loans taken from those parties are accommodation entries. The Ld. DR, further submitted that the Ld.CIT(A) has erred in not considering the decision of ITAT, in the case of Pawan Kumar M.Sangvi vs ITO in where the ITAT has discussed the modus operandi of Praveen Kumar Jain, and also held that the loans taken from those companies are accommodation entries. The Ld. DR further submitted that the Ld.CIT(A) has erred in not appreciating the fact brought out by the Ld. AO, in light of evidences collected during the course of survey operations in the case of the assesee and also Chetan R.Shah (HUF) search conducted in the case of Praveen Kumar Jain and his associates before he reaching to the conclusion that transactions between the parties are genuine and the assessee has discharged the onus cast upon him u/s 68 of the I.T.Act, 1961.

Chetan R.Shah (HUF) inference against the assessee, more particularly, when the assesee has discharged its onus by filing necessary evidences.

Chetan R.Shah (HUF) 12. We, further, noted that the assessee has filed enormous details in respect of companies including their PAN details, CIN master data and other details to prove existence of those companies. The assessee also filed details of active status of the company in the website of Ministry of Corporate Affairs. On going through various detailed filed by the assessee, we find that there is no reason for the AO to doubt the genuineness of transactions and creditworthiness of the parties. We further notice that the assessee has filed balance-sheet of all creditors wherein they have huge share capital and reserves and surplus to establish creditworthiness of the parties. We further notice that all companies are having regular business. All these evidences go to prove an undoubted fact that these companies are not paper companies and had recognized business activity. Therefore, we are of the view that the AO was incorrect in treating loans as unexplained cash credit u/s 68 of the Income-tax Act, 1961.

8. We shall in the backdrop of the aforesaid facts deliberate on the observations of the lower authorities. We shall first advert to the statement of Shri Chetan R. Shah, director of the assessee company, which had been heavily relied upon by the A.O for driving home his claim that no genuine loans were raised by the assessee company from the aforementioned lenders. As is discernible from the order of the CIT(A), Shri Chetan R. Shah had during the course of the survey proceedings conducted on the assessee company under Sec.133A, vide his statement dated 25.03.2014, had in his reply to Question no.29 submitted that unsecured loans from parties listed in Table no. 1 and Table no. 2 in the said statements were unsecured loans routed in the books of Marathan Fiscal Pvt. Ltd., Marathan Realty Pvt. Ltd. and Chetan Shah, HUF during the financial years 2011-12, 2012-13 and 2013-14 were in nature of accommodation entries, and had offered the same for tax in the said respective years. As observed by the CIT(A), Shri Chetan R. Shah had in his reply to Question no. 22 wherein he was called upon to furnish the name of the directors, address, PAN and creditworthiness of the lender companies from whom unsecured loans were taken, had submitted, that he was readily not in a position to give the details sought for. Accordingly, we are in agreement with the view taken by the CIT(A) that the aforesaid admission of Shri Chetan R. Shah has to be read along with the fact that he had categorically stated that he was not in a position to furnish the details that were sought by the survey officials in respect of the lender parties. However, we find that the assessee had not offered the aforesaid amount for tax in its return of income and had in the course of the assessment proceedings furnished with the A.O the requisite details supporting the authenticity of the loan transactions viz. copy of confirmations from lenders, copies of the returns of income filed by the lender parties, copies of the annual audited accounts of the lender parties, and also the copies of the bank accounts of the lenders from where the respective loans had been advanced to the assessee company. Also, Shri Chetan R. Shah had vide his letter dated 01.01.2016 submitted during the course of the assessment proceedings that the surrender made during the course of the survey proceedings was being withdrawn by him. In the backdrop of the aforesaid, we shall now deliberate on the evidentiary value of a statement of an assessee recorded during the course of the survey action conducted under Sec.133A, and as to whether the same on a standalone basis can justify addition in the hands of an assessee, or not. A perusal of Sec.133A(3)(iii) of the Act which vests power with an Income Tax Authority to record the statement of any person in the course of survey proceedings, reads as under:

"(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act." Accordingly, it is evident that an Income Tax Authority in the course of the survey proceedings conducted under Sec.133A can record the statement of any person which could be useful or relevant to any proceeding under the Act. However, we find that the phraseology of Sec.133A(3)(iii) is entirely different as in comparison to provisions of Sec.132(4) of the Act, wherein the authorized officer can examine anybody on „Oath‟, and such statement may be used as evidence in any proceedings under the Act. As the statement recorded under Sec.

133A(3)(iii) of the Act is not recorded on oath, therefore, as had consistently been held by various courts the same has no evidentiary value in absence of any corroborative evidence. In sum and substance, the statement recorded under Sec. 133A can be used to corroborate a state of fact, however, the same on a standalone basis cannot justifiably lead to drawing of any inferences. To sum up, a statement recorded under Sec.133A is simply an information which can be used for corroborative purpose for deciding any issue in favour or against the assessee. In fact, we find that the evidentiary value of a statement recorded under Sec. 133A of the Act has been subjected to judicial scrutiny and the Hon‟ble Courts had concluded that the same has no evidentiary value in the absence of any corroborative evidence. Our aforesaid view is fortified by the order of a coordinate bench of the ITAT, Delhi in the case of Mahesh Ohri Vs. ACIT (ITA No.4109 of 2009, dated 08.03.2013) (Del). The Tribunal in its aforesaid order had observed that as the survey officials are not authorized to record the statement on oath, therefore, the statement taken during the course of the survey proceedings is simply an information which can be used for corroborative purpose for deciding any issue in favour or against the assessee. It was observed by the Tribunal as under :

" A par t f r o m t hi s st a t em ent , t he R ev en u e ha s n ot br o u ght an yt hin g on record in support of its conclusion that the assessee has undisclosed income. During the course of survey, the officer could record this statement of a person under sub-section (3) (iii) of section 133A of the Income-tax Act, 1961. This clause authorise the authority to record the statement of any person which may be useful f or or r elev ant t o any pr oce edings un der t he Act . Howev er , the of f icer is not a u t h o r i s e d t o record the statement on oath and hence the statement taken during the course of search has no evidentiary value. It is simply an informationwhich can be used for corroboration purpose for deciding any issue in favour or against the assessee. This issue has come up before the Hon‟ble Kerala High Court i n t h e c a s e o f P a u l M a t h e w s a n d S o n s ( s u p r a ) a n d t h e c o u r t h a s m a d e t h e f ollowing observations (page 108): " S e c t io n 1 3 3 A (3 ) (i i i ) e n a b le s th e a u th o r i ty t o r e c o r d th e s ta te m e n t o f a n y p erson which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income -tax authority only to record a n y statement of any person which may be useful, but does not authorise taking any sworn statement. On the other hand, we find that such a p o w e r t o e x a m in e a p e r s o n o n o a th is s pe c if ic a lly c o n f e r r ed on th e a u th o r is e d o f f ic e r only under section 132(4) of the In come-tax Act in the course of any search or seizur e. Thus, the Income -tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly p rovided whereas section 133A does not empower any Income -tax Officer to e x am in e any pe rs on oath. Thus , in c on trad is tinctio n to th e po wer und er se c tion 133 A, se ction 132 (4 ) o f th e In com e - ta x Ac t enab les the au th or ised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income -tax Act. On the other hand, whatever statement is recorded under section 133A of the Income- tax Act it is not given any evidentiary value obviously for the r e as on tha t the of f ic er is n o t au th or ised to adm in is ter oa th and to take any s wor n s ta tem en t which a lon e has e v iden tiar y va lu e as c on temp la ted u nde r law. Therefore, there is much farce in the argument of learned counsel for the a p p e l l a n t t h a t t h e s t a t e m e n t e l i c i t e d d u r i n g t h e s u r v e y o p e r a t i o n h a s n o evidentiary value and the Income-tax Officer was well aware of this."

9. Similarly, the H‟onble Madras High Court has also concluded that statement recorded during the course of survey has no evidentiary value. The special leave p e t i t i o n ag a i n st t h e d ec i s i o n o f t h e H o n ‟ b l e M a d r a s H i g h C o u r t h a s al s o b e e n d i s m i s s e d b y t h e H o n ‟ b l e S u p r e m e C o u r t on S ept ember 20, 2012. W e h ave exami ned the record and we do not f i n d a n y o t h e r m a t e r i a l c o l l e c t e d b y t h e survey team and used by the Assessing Officer for making the addition of Rs. 2 c r o r e s . T h e c o n t e n t i o n s o f T h e l e a r n e d D e p a r t m e n t a l r e p r e s e n t a t i v e o n t h e strength of the Hon‟ble Karnataka High Court decision is that the Department was prevented by the assessee to conduct further inquiry and, therefore, the assessee c a n n o t t a k e a s o m e r s a u l t s u b s e q u e n t l y . W e d o n o t f i n d any force in the submissions of the learned Departmental representative because the Department is managed by t r ained Rev enue of f icials. They h av e t he knowledge a bo ut t heir authorities while taking statement during the course of survey. The Board has also issued guidelines advising the survey team not to take voluntary disclosure unless incriminating material was collected. In the case of T.P. Indrakumar (supra), the Assessing Officer specifically lay his hands on unexplained gifts, in that situation the assessee had mode voluntary disclosure and filed a revised return. In the present case, the Department failed to collect any material during th e course of survey and the Assessing Officer is simply harping upon the statement of the assessee, e xt r act e d s u pr a. A cc or d ing t o t he a ut h or it at iv e pr on o u nc e me nt of t he H o n‟ b le Supreme Court in the case of S. Khader Khan Son (supra) as well as the Hon‟ble K e r a l a H i g h C o u r t t h i s s t a t e m e n t d o e s n o t c a r r y a n y e v i d e n t i a r y v a l u e a n d , therefore, no addition is sustainable on the strength of this statement. In view of the above discussion, we find force in the first ground of appeal raised by the assessee and delete the addition of Rs. 2 crores." Also, a similar view had been taken by the Hon'ble High Court of Kerala in the case of Paul Mathews & Sons Vs. CIT (2003) 263 ITR 101 (Ker). In the aforesaid case, it was observed by the Hon‟ble High Court that as the statement elicited during the course of the survey operations is not recorded on oath, therefore, the same has no evidentiary value. Further, the Hon'ble Supreme Court in its judgment in the case of CIT Vs. S. Khader Khan Son (2013) 352 ITR 480 (SC), while upholding the view of the Hon‟ble High Court of Madras, had held, that as a statement recorded in the course of the survey proceedings does not carry any evidentiary value, therefore, no addition is sustainable on the strength of the said statement. A similar view had also been taken by the Hon'ble High Court of Delhi in the case of CIT Vs. Dhingra Metal Works (2010) 328 ITR 384 (Del). In the aforementioned case, it was observed by the Hon‟ble High Court that a statement of an assessee to have evidentiary value should have been recorded on oath. It was observed by the High Court that though an admission was an extremely important piece of evidence, it could not be said to be conclusive and it was open to the person who made the admission to show that it was incorrect. In the backdrop of the aforesaid judicial pronouncements, it can safely be concluded that the statement recorded during the course of the survey proceedings has no evidentiary value and the same can only be used for corroborative purposes for deciding an issue in the course of the assessment proceedings. Now in the case before us, we find that the assessee in the course of the assessment proceedings had placed on record sufficient documentary evidence to substantiate the authenticity of the loan transactions viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lenders parties; and (iv) copy of the bank statements of the lenders. Also, as observed by us hereinabove, the assessee while filing the return of income for the year under consideration had not considered the unsecured loans as its income. In fact, Shri Chetan R. Shah, director of the assessee company had vide his letter dated 01.01.2016 that was submitted during the course of the assessment proceedings categorically withdrawn his statement that was recorded during the course of the survey proceedings. In the backdrop of the aforesaid facts, we are of the considered view that now when Shri. Chetan R. Shah, director of the assessee company had withdrawn his statement that was recorded in the course of the survey proceedings, and had in the course of the assessment proceedings placed on record supporting documentary evidence to substantiate the authenticity of the loan transactions under consideration, therefore it was incumbent upon the A.O to conclusively prove on the basis of corroborative material that the assessee had as a matter of fact obtained accommodation entries in the garb of the aforesaid loan transactions and he could not have simply drawn adverse inferences on the basis of the aforesaid statement recorded in the course of the survey proceedings. As observed by us hereinabove, a statement recorded in the course of the survey proceedings can only be used for corroborative purposes for deciding any issue in favour or against the assessee. However, in the case before us, we find that the A.O had simply harped on the admission made by Shri Chetan R. Shah, director of the assessee company in his statement recorded under Sec.133A and had absolutely failed to place on record any documentary evidence which despite withdrawal of the aforesaid statement would have corroborated the facts which were stated by him. In our considered view, as a statement recorded under Sec.133A has no evidentiary value in absence of any corroborative evidence, therefore, the same on a standalone basis could not have justified drawing of adverse inferences as regards the authenticity of the loan transactions, specifically when the assessee had declined to act upon the same and had placed on record supporting documentary evidence to prove the authenticity of the said transactions. In fact, we find that the CBDT in its letter No. F.No.286/2/2003, IT (Inv-II), dated 10.03.2003 had observed that instances have come to its notice that in certain cases the assesses were forced to confess undisclosed income in the course of the search & seizure and survey operations. It was noticed by the Board that as such baseless disclosures would be divorced from the actual facts and would not be backed by any credible evidence, therefore, the assesses at the time of filing their returns of income would retract from the same. Accordingly, the Board taking cognizance of the said ground realities had in its aforesaid circular emphasised that the officials in the course of the search & seizure proceedings and survey operations should focus and concentrate on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed by the assessee before the department, and no attempt should be made to obtain confession as regards the undisclosed income. The said CBDT Circular reads as under:

I nst ances hav e com e t o t he not ice of t he Boar d wher e asses see ‟s hav e claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey o p e r a t i o n s . S u c h confessions, if not based upon credible evidence, ar e later retracted by the concerned assessee‟s while filing returns of income. In these circumstances, conf essions dur ing the cour se of sear ch & seizur e and survey oper at ions do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed bef ore t he Income Tax Depart ment s. Similar ly, while r ecor ding st at ement during the course of search, seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers sh o ul d r e ly u p o n t h e ev i de nc e s/ mat er i a ls gat her e d d ur ing t he c o ur se of search/survey operations or thereafter while framing the relevant assessment orders.

On the basis of our aforesaid observations, we are of a strong conviction that in the case before us, the mere admission of undisclosed income by the assessee in the course of the survey proceedings, which we are afraid is in itself not free from doubts and debate and in fact had been withdrawn, thus could not have been acted upon by the revenue in isolation for drawing of adverse inferences and making exorbitant additions in the hands of the assessee de hors any corroborative material. In sum and substance, we are of a considered view that the heavy reliance placed by the A.O on the retracted statement of Shri Chetan R. Shah, director of the assessee company that was recorded in the course of the survey proceedings conducted on 25.03.2014, in the absence of any corroborative material could not have been acted upon by the revenue for drawing adverse inferences in the hands of the assessee.

Chetan R.Shah (HUF) Jain had retracted from his aforesaid statement by filing an „affidavit‟ alleging that as the search operations had continued at length for 9 days, therefore, it had taken a toll on his mental faculties. Be that as it may, we find that it is not the case of the revenue before us that the aforesaid person had at any stage in his statement recorded during course of the search proceedings ever alleged that he had provided accommodation entries to the assessee company. We shall in the backdrop of the aforesaid facts emerging from the statement of Shri Praveen Kumar Jain recorded under Sec.132(4) of the Act, which thereafter is stated to have been retracted by him, therein deliberate on the evidentiary value of the same insofar the case of the assessee before us is concerned. As observed by us hereinabove, one of the material aspect which had weighed in the mind of the A.O while concluding that the assessee had obtained accommodation entries from the aforementioned companies which were stated to be operated and controlled by Shri Praveen K. Jain, was the statement of the said person recorded under Sec. 132(4) of the Act. As observed by us hereinabove, it has throughout been the claim of the assessee that the aforesaid person had never stated that he had provided accommodation entries to the assessee. Apart therefrom, it was also submitted by the assessee before the A.O that as Shri Praveen Kumar Jain had retracted from his statement that was recorded during the course of the search proceedings, hence no cognizance of the same could thereafter be drawn. In fact, the assessee in order to fortify its claim that it had raised genuine loans from the aforementioned companies had in the course of the assessment proceedings placed on the record of the A.O sufficient documentary evidence to support the same. We have given a thoughtful consideration to the facts of the case in the backdrop of the settled position of law, and before proceeding any further may herein observe that in the case before us the statement of Shri Praveen Kumar Jain, which had thereafter been retracted by him (though not accepted by the revenue) had been heavily relied upon by the A.O for arriving at a conclusion that the assessee had in the garb of unsecured loans raised accommodation entries from the aforementioned 9 parties. In sum and substance, we are confronted with a situation where a statement of a „third party‟ which had been retracted is being acted upon by the revenue for drawing of adverse inferences and characterising the loan transactions under consideration as bogus/sham. On a perusal of sub-section (4) of Sec.132 of the Act, an authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Act. Accordingly, it can safely be gathered that the statement recorded in the course of the search proceedings under Sec.132(4) "may" thereafter be used in evidence in any proceedings under the Act. It is thus abundantly clear that the A.O is vested with a discretion to use a statement recorded under Sec.132(4) as an evidence in the course of any proceedings under the Income Tax Act. In our considered view, the CIT(A) has rightly concluded that the word "may" clearly suggests that the statement recorded under Sec. 132(4) may therein be rebutted subsequently if the assessee is able to prove with documentary evidence that the facts earlier stated were not correct. In fact, we are persuaded to subscribe to the view of the CIT(A) that though a statement recorded under „oath‟ is an important piece of evidence however, addition/disallowance cannot be made solely on the basis of such statement in the absence of any corroborative evidence supporting the same. As a matter of fact, in a case where a statement had been retracted by the assessee, it becomes all the more onerous on the part of the A.O to corroborate the statement recorded in the course of the search proceedings on the basis of supporting evidence. As had been observed by various courts, a statement recorded under Sec.132(4) is treated as a piece of evidence in the proceedings under the Act, as long as the same is not retracted. However, in case the assessee retracts the statement, the evidentiary value of the said statement suffers a serious dent. Accordingly, the mandate envisaged under sub-section (4) of Sec.132 of using the statement as evidence in any proceedings under the Act gets honoured only when there is no other version of the assessee vis-a-vis the said statement. To sum up, a statement recorded under Sec.132(4) has though an evidentiary value, however, the same cannot be ascribed the status of a proven fact. In our considered view, a retracted statement under Sec.132(4) of the Act would require some corroborative material for the A.O to proceed and make additions on the basis of the facts stated in such statements. Now, in the case before us, we are seized with a situation where the revenue has sought to draw adverse inferences in the hands of the assessee by acting upon a statement recorded under Sec.132(4) of a „third party‟, which as observed by us hereinabove in itself is found to have been retracted. We cannot remain oblivious of the fact that now when a statement recorded under Sec.132(4) of the Act, which had thereafter been retracted, (though not accepted by the department) would require some corroborative material for the A.O to make additions on the basis of such statement in the hands of the person whose statement it is, therefore, obviously, a much higher burden would be cast upon the revenue at the time of using such statement for drawing of adverse inferences in the hands of a „third party‟. Admittedly, an admission recorded in a statement under Sec.132(4) is a vital piece of evidence, but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of Pullangode Rubber Product Company Ltd. Vs. State of Kerala 91 ITR 18 (SC). Also, a similar view had been taken by the Hon'ble High Court of Andhra Pradesh in the case of CIT Vs. Naresh K. Aggarwal (2014) 369 ITR 171 (AP). In the said case, it was observed by the Hon‟ble High Court that a statement recorded under sub-section (4) of Sec.132 shall be treated as a piece of evidence in the proceedings under the Act, as long as the said statement is not retracted. Also, a similar view had been taken by the Hon'ble High Court Delhi in the case of CIT Vs. Sunil Aggarwal (2015) 379 ITR 367 (Del). In the aforementioned case, it was observed by the Hon‟ble High Court that a retracted statement under Sec.132(4) of the Act would require some corroborative material for the A.O to proceed to make additions on the basis of such statement. We find that the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala& Anr. (1973) 91 ITR 18 (SC), had observed, that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was observed by the Hon‟ble Apex Court that it was open to the person who made the admission to show that it was incorrect. Relying on the aforesaid judgment of the Hon‟ble Apex Court, we find, that a coordinate bench of the Tribunal viz. ITAT, Mumbai in the case of Tribhuvandas Bhimji Zaveri, & 2251/Mum/2013, dated 04.11.2015, had drawn an analogy and had observed that though an admission made in a statement recorded under Sec.132(4) is an extremely important piece of evidence but it cannot be said that it is conclusive as it is open to the person who made the admission to show that it is incorrect. We further find that the Hon'ble High Court of Gujarat in DCIT (Investigation) Vs. Narendra Garg & Ashok Garg (AOP) (ITA No. 1531 & 1532 of 2007, dated 28.07.2016), had held, that as the assessee had retracted from his statement recorded under Sec.132(4), which though was not accepted by the revenue, therefore, it was incumbent on the part of the A.O to have supported the addition made on the basis of the disclosure made by the assessee in his aforesaid statement on the basis of evidence collected during the course of the search proceedings. It was observed by the Hon‟ble High court that the A.O cannot proceed on presumption under Sec. 132(4) of the Act and there must be something more than bare suspicion to support the assessment or addition. We find that the Hon‟ble High Court in the aforementioned case had observed that even in a case where the retraction of the disclosure made by the assessee in his statement recorded under Sec.132(4) is not accepted by the revenue, even then, the addition/disallowance has to be based by the revenue on the basis of evidence collected during the course of the search proceedings. Accordingly, on the basis of our aforesaid deliberations, we are of the considered view that merely on the basis of admission an assessee cannot be saddled with additions unless and until some corroborative evidence is found in support of such admission.

10. We shall now advert to the facts of the case before us in the backdrop of the aforesaid settled position of law. Admittedly, as observed by us hereinabove, the A.O had drawn adverse inferences in the hands of the assessee on the basis of the statement of Shri Praveen Kumar Jain, that was recorded under Sec. 132(4) of the Act, despite the fact that the said person had thereafter retracted from his aforesaid statement on the basis of an „affidavit‟ filed with the department. We are unable to persuade ourselves to subscribe to the view taken by the A.O that despite absence of any corroborative evidence which would substantiate that the assessee had obtained any accommodation entries in the garb of unsecured loans from the aforementioned 9 companies, it was to be so presumed merely on the basis of the aforesaid standalone statement (which too had been retracted) of the aforementioned person viz. Shri Praveen Kumar Jain. We find that though search proceedings under Sec.132 were conducted in the case of Shri Praveen Kumar Jain, however, there is nothing discernible from the orders of the lower authorities which would reveal that any „material‟ evidencing that the assessee as a beneficiary had obtained accommodation entries from the said person had surfaced or was unearthed during the course of the said proceedings. Also as observed by us hereinabove, there is nothing discernible from the records which would reveal that the aforesaid person had ever alleged that he had provided any accommodation entries to the assessee company. We also cannot remain oblivious of the fact that in the absence of any corroborative evidence the statement of the aforementioned „third party‟ viz. Shri Praveen K. Jain could not be used in isolation for drawing of adverse inferences in the hands of the assessee. Apart therefrom, we find that as is discernible from the assessment order, though the assessee had sought a „cross- examination‟ of Shri Praveen Kumar Jain, whose statement was being heavily relied upon by the A.O for drawing of adverse inferences in its hands, however, the same was not allowed to him. In our considered view, the aforesaid failure on the part of the A.O to allow a cross- examination of the aforementioned party viz. Shri Praveen Kumar Jain is in itself a flagrant violation of the basic tenets of the principle of natural justice. Our aforesaid view is fortified by the judgment of the Hon‟ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise (2015) 281 CTR 241 (SC). In the said case, it was observed by the Hon‟ble Apex Court that not allowing the assessee to cross-examine the witnesses whose statements were made the basis for passing the impugned order by the Adjudicating Authority amounted to a serious flaw, which being for violation of the principles of natural justice rendered the said order as nullity.We find that the CIT(A) while disposing off the objection of the assessee that the A.O had erred in not allowing cross-examination of Shri. Pravin Kumar Jain, had inter alia observed, that now when it was held by him that the A.O without bringing any corroborative material on record was in error in relying on the statement of the aforementioned person, therefore, the assessee was not prejudiced in any manner by the action of the A.O in not affording an opportunity to him in cross- examining the said person. Apart therefrom, we find that the CIT(A) had observed that neither the assessee had in the course of the appellate proceedings requested that the A.O be directed to grant cross-examination of Shri. Praveen Kumar Jain, nor the failure to provide such cross-examination would render the assessment order as void. As the assessee has not assailed before us the aforesaid observations of the CIT(A), therefore, we refrain from adverting to the same. We thus in terms of our aforesaid observations are of the considered view that the CIT(A) had rightly concluded that the reliance placed by the A.O on the statement of Shri Praveen K. Jain, which in the backdrop of the aforesaid retraction is in itself not free from doubts and debates, could not have been summarily acted upon by the A.O in the absence of any corroborative material for drawing of adverse inferences in the hands of the assessee. In fact, we find that there is no whisper in the assessment order as to how and on what basis the A.O had sought to dislodge the authenticity of the aforesaid loan transactions by referring to the statement of Shri Praveen Kumar Jain. Accordingly, on the basis of our aforesaid deliberations we are of the considered view that the CIT(A) had rightly concluded that in the absence of any corroborative material the A.O could not have proceeded with and made additions on the basis of the retracted statement of Shri Praveen Kumar Jain.

11. We shall now advert to the material which had been placed on record by the assessee in the course of the assessment proceedings to substantiate the authenticity of the loan transactions under consideration. Also, we shall deliberate upon the observations of the A.O on the basis of which he had declined to accept his aforesaid claim. As is discernible from the orders of the lower authorities, the assessee in order to drive home its claim that it had raised genuine loans from the aforementioned 9 parties had placed on record supporting documentary evidence viz. (i) confirmations of the lenders; (ii) copies of the returns of income for A.Y. 2013-14 of the lender parties; (iii) copies of the annual audited accounts for A.Y. 2013-14 of the lenders parties; and (iv) copy of the bank statements of the lenders from where the loans were advanced to the assessee company. As a matter of fact, the CIT(A) had specifically referred to the documentary evidence placed on record by the assessee on a party wise basis, as under :

"a. M/s Atharv Business P. Ltd. The appellant has submitted the c o p y of confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of r elev ant assessm ent year , copy of annual audit ed a c c o u n t s o f r e l ev a nt a s s e s s m e n t y e a r , c o p y o f r e l ev an t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. b. M/s Josh Trading P Ltd- The appellant has submitted the copy of confirmation letter for relevant assessment year, copy of acknowledgement of return of income of relevant assessment year , copy of annual audited account s of relevant assessment year, copy of relevant pages of bank statement of them and itself t o establish that the transactions were carried out through proper banking channel. c. M / s C a s p e r E n t e r pr i s e s P . Lt d . T h e ap p e l l a n t h a s s u b m i t t e d t h e c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of relev ant assessment year , copy of annual audited acc o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. d. M/s Olive Overseas P.Ltd. The appellant has submitted the c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of r elev ant assessm ent year , copy of annua l audit ed a c c o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. e. M/s Pragati Gems P Ltd- The appellant has submitted the c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of r elev ant assessm ent year , copy of annua l audit ed a c c o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. f. M/s Sum u kh Co mm er cial P Lt d - The a ppell a nt has su bmit t ed t he copy of confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of r elev ant assessment year , copy of annua l audit ed a c c o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. g. M/s Viraj Mercantile P. Ltd. The appellant has submitted t h e c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of r elev ant assessment year , copy of annua l audit ed a c c o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. h. M/s Lunkad Textile P Ltd- The appellant has submitted the c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of. ret urn of income of relevant assessment year , copy of annual audited ac c o u n t s o f r e l e v a n t assess m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establish that the transactions were carried out through proper banking channel. i. M/s Falak Trading P Ltd- The appellant has submitted the c o p y o f confirmation letter for relevant assessment year, copy of acknowledgement of r et ur n of income of relev ant assessment year , copy of annua l audit ed a c c o u n t s o f r e l e v a n t a s s e s s m e n t y e a r , c o p y o f r e l e v a n t p a g e s o f b a n k statement of them and itself to establi.sh that the transactions were carried out through proper banking channel"

We find that the assessee by placing on record the aforesaid documentary evidence had discharged the primary „onus‟ that was cast upon it to prove the authenticity of the loan transactions entered into with the aforementioned 9 parties under consideration. However, the veracity of the claim of the assessee was not accepted by the A.O on the basis of generalised observation that the financials of the aforementioned concerns/entities revealed that despite high turnover practically no tax was paid by them (in many cases refund was claimed), and there were high amount of sundry creditors, loans and advances, debtors and investments. On the basis of his aforesaid generalized observations, we find that the A.O had drawn adverse inferences as regards the creditworthiness of the aforementioned parties. In our considered view, the aforesaid casual approach adopted by the A.O, without even putting up any effort to refer to the specific financials of the said concerns/entities as was placed on record by the assessee cannot be accepted. In fact, we find that the A.O had failed to put up any effort to dislodge the authenticity of the loan transactions by placing on record any material which could prove to the contrary. As is discernible from the assessment order, the A.O had as a matter of fact dedicated his entire efforts for demonstrating the facts which had emerged in the course of the search proceedings conducted on Shri Praveen Kumar Jain, and also the modus operandi that was adopted by him for providing accommodation entries. We are afraid that the general observations of the A.O that the creditworthiness of the lenders and the genuineness of the transaction are not found to be satisfactory is not backed by any supporting documentary evidence. As observed by us hereinabove, the A.O had failed to rebut the material which was placed on record by the assessee to substantiate the identity and creditworthiness of the lenders, and also the genuineness of the transaction under consideration. In fact, we find that the assessee had been able to substantially prove the authenticity of the loan transactions on the basis of the documentary evidence placed on record by him. As observed by us hereinabove, the A.O had not even sought to verify the authenticity of the aforesaid loan transactions by issuing any notices under Sec.133(6) of the Act. In our considered view, in case the A.O would had any doubts as regards either the identity and creditworthiness of the aforesaid lenders or the genuineness of the loan transactions, then he would have made necessary verifications by either summoning the details in exercise of the powers vested with him under Sec.133(6) or directing the assessee to furnish further documentary evidence. However, we find that the A.O neither carried out any verifications on his own nor directed the assessee to clarify any further aspects pertaining to the authenticity of the loan transactions under consideration. As regards the observation of the A.O that the assessee had not produced the parties, we find, that there is nothing discernible from the records from where it could be gathered that he had ever directed the assessee for doing the needful. In fact, in our considered view, now when the assessee in discharge of the primary „onus‟ that was cast upon it to substantiate the authenticity of the loan transactions had placed on record sufficient documentary evidence which had not been rebutted by the A.O, therefore, merely for the reason that the said lenders had not appeared before him would even otherwise not justify characterising the said loan transactions as bogus/sham. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of Commissioner of Income Tax-8 Vs. M/s Orchid Industries Pvt. Ltd. (2017) 397 ITR 136 (Bom). In the aforesaid case, it was observed by the Hon‟ble High Court that now when the assessee had placed on record documentary evidence to support the genuineness of the transactions under consideration, therefore, only because the creditors had not appeared before the A.O would not justify drawing of adverse inferences as regards the authenticity of the said transactions. As regards the observation of the A.O that a perusal of the bank accounts of the lenders revealed that the same only contained RTGS/TRF entries, we find ourselves to be in agreement with the view taken by the CIT(A) that the said fact in itself proves that no cash was introduced in bank accounts of the said lenders prior to advancing of the loans to the assessee. We are persuaded to subscribe to the view taken by the CIT(A) that the A.O had also not brought on record any evidence which would suggest that the assessee had paid cash to the lenders in lieu of loans received from them. Apart therefrom, we are also of the considered view that the fact that the assessee company had paid interest on the loans raised from the aforementioned parties after deduction of tax at source also substantiates the authenticity of the loan transactions. Also, the fact that the said loans had been repaid by the assessee to the aforementioned lenders fortifies the veracity of the said loan transactions. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of PCIT Vs. M/s Skylark Build (ITA No. 616 of 2016; dt. 24.10.2018). In the aforesaid case, the Hon‟ble High court taking cognizance of the subsequent development of repayment of the loans by the assessee to the lenders, had observed that the said fact proved the authenticity of the loan transactions.

13. We have given a thoughtful consideration and are of the considered view, that the CIT(A) after deliberating at length on the issue under consideration had rightly concluded that as the assessee had discharged the „onus‟ that was cast upon it under Sec.68 of the Act, therefore, the A.O was not justified in treating the loans received from the aforementioned parties as unexplained cash credits under Sec.68 of the Act. We thus not finding any infirmity in the well reasoned order of the CIT(A) to the extent he had deleted the addition of Rs.10,91,50,000/- uphold the same. The Grounds of appeal No. (i) & (ii) raised by the revenue are dismissed.

14. In this case, the Ld.CIT(A) has recorded categorical findings in light of various evidences filed by the assessee, including confirmation letters from the creditors and observed that the assesee has filed necessary details, in respect of each and every loan creditors to establish the fact that transactions between the parties are genuine, which are carried out through proper banking channel. The Ld. CIT(A) has also recorded the fact that the assessee has paid interest on said loans after deducting necessary TDS applicable as per law. He, further, stated that the Ld. AO was never brought on record any evidences to prove that the assesee had paid cash to the loan creditors in lieu of loans received from them. It is also not in dispute that the assesse has repaid said loans in subsequent financial years through proper banking channel. Therefore, we are of the considered view that the Ld.CIT(A) has rightly appreciated the fact that in light of various evidences filed by the assessee before reaching to the conclusion that unsecured loans taken from those parties are genuine transactions, which are supported by the necessary evidences. Therefore, we are of the considered view that there is no error in findings recorded by the Ld.CIT(A) and hence, we are inclined to uphold the findings of the Ld.CIT(A) and direct the Ld. AO to delete additions made towards unsecured loans taken from those parties and consequent additions made towards interest paid on said loans.

Order pronounced in the open court on this 10 /01/2020