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Facts
The assessee's case was reopened under Section 148 for AY 2011-12 and 2012-13, based on an unsecured loan of Rs. 90,50,301/- from M/s Powmex Sales Pvt. Ltd, which the Assessing Officer treated as an accommodation entry/unexplained cash credit under Section 68. The reopening was triggered by a search on the Kuber Group, but the assessee contended the investigation was flawed due to inquiries at an incorrect address and misinterpretation of a key statement, leading to an alleged violation of natural justice.
Held
The Tribunal held that the assessee successfully discharged its onus under Section 68 by providing necessary documentation proving the identity, creditworthiness, and genuineness of the loan. It noted that the AO had not conducted inquiries at the correct address and that reliance on a specific statement was misconceived. Following judicial precedents for similar Kuber Group cases, the Tribunal deleted the addition made under Section 68, leaving the grounds challenging the validity of reopening open.
Key Issues
Whether the addition of unsecured loan as unexplained cash credit under Section 68 of the Income Tax Act, 1961, was justified, and the validity of the assessment reopening under Sections 147/148 concerning alleged procedural lapses and violation of natural justice.
Sections Cited
68, 147, 148, 131, 132(4), 151
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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI M. BALAGANESH & SHRI ANUBHAV SHARMA
O R D E R PER M. BALAGANESH, A. M.: 1. All these appeals of the Assessee arises out of the orders of the Learned Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as „Ld. CIT(A)], dated 26.11.2013 against the orders passed by ACIT, Central Circle- 30, New Delhi for Assessment Years 2011-12 and 2012-13 respectively.
Identical issues involved in these appeals and hence they are taken up together and disposed of by this common order.
Both the parties mutually agreed that the appeal of the assessee for AY 2011-12 may be taken as lead case and the decision rendered thereon would apply with equal force for AY 2012-13 in view of the identical facts except with variance in figures.
The assessee has raised the following grounds of appeal for AY 2011-12:- & 324/Del/2019 Trident Towers Pvt. Ltd “1. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi New Delhi has erred both on facts and in law in upholding the impugned order passed by the respondent illegally, violating the principles of natural justice, without fair and objective application of mind to the facts of the case and the law applicable and without being guided by the binding decisions of courts and tribunals and hence liable to be set aside and quashed and declared non est in law.
2. On the facts and circumstances of the case, the Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment of the appellant at income of Rs.8,485,507/- as against the income of (Rs.514,493/-) declared by the appellant.
3. On the facts and circumstances of the case, the Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment that could not have been re-opened u/s 147/148 as no valid reasons have been recorded by the Assessing Officer to establish any satisfaction on his part that any income belonging to the appellant has escaped assessment.
4. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO as no incriminating material whatsoever was found/unearthed as a result of search.
5. On the facts and circumstances of the case, the Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO in completion of proceedings u/s 147, of the IT Act, solely on the basis Unverified/ unratified/ unsubstantiated/ unconfirmed statement of Shri Mul Chand Malu.
6. That the Ld. CIT(A) has erred, both on facts and in law, ins sustaining the addition of Rs.9,000,000/- u/s 68 on account of unsecured loan without appreciating the facts of the case.
7. On the facts and circumstances of the case, Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant.
8. On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross-examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A).
9. On facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law, in sustaining the action of AO violating the principle of natural justice by not providing opportunity for cross-examination of persons, whose statements have been relied upon by the AO, in spite of specific request made by the appellant in assessment proceedings as well as before CIT(A).
10. That the provisions of sections 234A, 234B and 234C of the Act are not at all applicable.”
Ground Nos. 1, 4 and 7 raised by the assessee for AY 2011-12 were stated to be not pressed by the ld AR at the time of hearing, for which necessary & 324/Del/2019 Trident Towers Pvt. Ltd endorsement was duly made in our file. Accordingly, the ground Nos. 1, 4 and 7 are hereby dismissed as not pressed.
Ground Nos. 3 and 5 raised by the assessee are challenging the validity of reopening of assessment passed u/s 147 of the Act. Ground Nos. 6, 8 and 9 raised by the assessee are challenging the validity of addition made u/s 68 of the Act on merits.
We have heard the rival submissions and perused the material available on record. The assessee is a company deriving income from dealing in commodities and letting out of properties. The return of income for AY 2011-12 was filed by the assessee on 29.09.2011 declaring loss of Rs. 5,14,493/-. This return was duly processed u/s 143(1) of the Act. A search and seizure operation was carried out u/s 132 of the Act in Kuber Group of companies on 09.10.2014, pursuant to which the case of the assessee was centralized with Central Circle-30, vide order passed u/s 127 of the Act dated 13.10.2016. The assessment of the assessee company was sought to be reopened vide issuance of notice u/s 148 of the Act on 31.03.2017 after recording reasons for reopening thereon. Since, the reopening of assessment is beyond four years from the end of financial year, the reopening was done after getting necessary approval from ld Pr. CIT in terms of section 151 of the Act. The reasons recorded for reopening the assessment are as under:- & 324/Del/2019 Trident Towers Pvt. Ltd & 324/Del/2019 Trident Towers Pvt. Ltd
The assessee is one of the companies belonging to Kuber Group. It is a fact that the assessee had received unsecured loan of Rs. 90 lakhs from M/s. Powmex & 324/Del/2019 Trident Towers Pvt. Ltd Sales Pvt. Ltd during the year under consideration. During the course of search and seizure action, a statement u/s 132(4) of the Act was recorded from Shri Mul Chand Malu who offered to declare undisclosed income of Rs. 150 crores for Kuber Group of companies and their Directors under specific head of accommodation entries/ share premium. The various items for which the disclosure was made by Shri Mul Chand Malu in the subsequent statement recorded u/s 131 of the Act on 02.01.2015 in response to Question No. 8 are as under:-
In the reasons recorded, the ld AO observed that during the post search investigation in the case of Kuber Group of companies, summons were issued u/s 131 of the Act to M/s. Powmex Sales Pvt. Ltd to verify the veracity of the unsecured loan provided by them to assessee company for the sum of Rs. 90 lakhs in AY 2011-12. No compliance to this summon was made. It is pertinent to note that the summons was served in the address of M/s. Powmex Sales Pvt. Ltd at 125/1, Cotton Street, Kolkata-700 007. The assessee when confronted by the ld. AO submitted that the address in which the summons were served on M/s. Powmex Sales Pvt. Ltd is the wrong address and that correct address of M/s. Powmex Sales Pvt. Ltd is 16A, Shakespeare Sarani, New B. K. Market, 5th Floor, Kolkata 700071. Accordingly, it was submitted that the ld AO had sought to enquire at the incorrect address by M/s. Powmex Sales Pvt. Ltd. Further, it was pointed out by the Ld. AR that Commission u/s 131(1)(d) of the Act was issued by Delhi & 324/Del/2019 Trident Towers Pvt. Ltd Investigation Wing to Kolkata Investigation Wing on which Kolkata Investigation Wing vide their report dated 25.11.2016 submitted that whereabouts of M/s. Powmex Sales Pvt. Ltd are not known based on the report of the Income Tax Inspector of Kolkata. This fallacy had happened because of the fact that Kolkata Investigation Wing had sought to examine M/s. Powmex Sales Pvt. Ltd at the wrong address i.e. at 125/1, Cotton Street, Kolkata-700 007 instead of correct address at 16A, Shakespeare Sarani, New B K Market, 5th Floor, Kolkata-71. Accordingly, he argued that any adverse inference drawn on the assessee regarding the loan received from M/s. Powmex Sales Pvt. Ltd would not be justified in the eyes of law.
The ld AR before us submitted that no search proceedings of assessee was pending on 10.11.2016 on the date of issuance of Commission u/s 131(1)(d) to Kolkata Investigation Wing. The ld AR argued that the assessee was never subjected to search and that is why no assessment u/s 153A and 153C of the Act was framed on the assessee for the year under consideration. Merely because of the fact that M/s. Powmex Sales Pvt. Ltd could not be found at the address at 125/1, Cotton Street, Kolkata-7 by the Investigation Wing, Kolkata, it cannot be inferred to treat the loan received from M/s. Powmex Sales Pvt. Ltd as ingenuine in the hands of the assessee company.
The ld AR submitted that the entire reopening was made based on the report given by Kolkata Investigation Wing dated 25.11.2016 pursuant to Commission issued u/s 131(1)(d) of the act. The ld AR argued that as on 10.11.2016 i.e. being the date of issuance of commission u/s 131(1)(d) of the Act, no proceedings against the assessee company were pending. Hence, he argued the very basis of reopening of assessment based on the report of Kolkata Investigation Wing stated supra is faulted and not tenable in the eyes of law.
We find that the assessee on its part to prove the genuineness of the loan received from M/s. Powmex Sales Pvt. Ltd and to prove the creditworthiness of the lender together with their identity, had furnished the following documents before the ld AO:- Page | 7 & 324/Del/2019 Trident Towers Pvt. Ltd a) name and address of the lender; b) income tax return acknowledgement of the relevant year of the lender; c) bank statements of the lender duly reflecting the loan transaction given to the assessee together with the source thereon; d) confirmation from the lender for having granted the loan to the assessee through regular banking channels; e) Master data of lending company downloaded from the website of Ministry of Corporate Affairs to prove that the company is in active category.
We find that the ld AO at para 6.6 of his order states that mere furnishing of bank statements of the lender company would not be sufficient to prove their creditworthiness. We further find that on perusal of para 6.6 of the assessment order, the ld AO had completely proceeded on a misconception that M/s. Powmex Sales Pvt. Ltd had invested in share capital and share premium of the assessee company which is factually incorrect. Factually, M/s. Powmex Sales Pvt. Ltd had only granted unsecured loan of Rs. 90 lakhs to the assessee company during the year under consideration. No enquiries whatsoever were sought to be carried out by the ld AO at the correct address of the M/s. Powmex Sales Pvt. Ltd. The ld AO on the contrary vehemently relied on the Investigation Report of the Kolkata Investigation Wing dated 25.11.2016 where enquiries were purportedly carried out by the Kolkata Investigation Wing at the wrong address of the M/s. Powmex Sales Pvt. Ltd, and proceeded to treat the loan received by the assessee company in the same of Rs. 90 lakhs as unexplained cash credit u/s 68 of the Act. Further, yet another basis for the ld AO to treat the loan received from M/s. Powmex Sales Pvt. Ltd as unexplained cash credit was reliance placed on the statement of one Shri Mul chand Malu recorded by the search team u/s 132(4) on 09.10.2014 and later u/s 131 of the Act on 02.01.2015. It is pertinent to note that in the said statement of Shri Malu, there was absolutely no disclosure of unaccounted income made by him on behalf of Kuber Group of companies and their directors with regard to & 324/Del/2019 Trident Towers Pvt. Ltd unsecured loan received by the parties. This is crystal clear from the disclosure of unaccounted income made by Shri Mul Chand Malu which is tabulated hereinabove. Hence any reliance placed on the statement of Shri Mul Chand Malu in this regard would be grossly misconceived. We have already stated that the enquiries made by the Kolkata Investigation Wing on M/s. Powmex Sales Pvt. Ltd at the wrong address had trigged the reopening proceedings as well as drawing adverse inference with regard to unsecured loan received by the assessee company for the year under consideration. Hence both the reasons of the ld AO to frame the addition in the hands of the assessee, i.e. i) M/s. Powmex Sales Pvt. Ltd could not be found at the address by the Kolkata Investigation Wing; that Directors of M/s. Powmex Sales Pvt. Ltd were not produced by the assessee for examination; and ii) Shri Mul Chand Malu had given statement that Kuber group of companies and their Directors had received accommodation entries from various parties and for that purpose a disclosure of unaccounted income of Rs. 150 crores was made by him, falls flat. Further, we find that this Tribunal had an occasion to consider the veracity of the loan received from M/s. Powmex Sales Pvt. Ltd in the hands of various concerns of Kuber Group of companies and had held that the loan to be genuine:- a) Kuber Khanpan Udyog Pvt. Ltd Vs. ACIT-ITA NO. 580/Del/2019-AY 2011-12- dated 22.10.2019 b) Kuber Food Products India Pvt. Ltd Vs. ACIT, dated 22.10.2019 c) Kuber Khanpan Udyog ITA No. 581 and 582/Del/2019-AY 2012-13 and 2013-14 respectively dated 22.02.2022. d) Vijayshree Food Pvt. Ltd Vs. ACIT ITA No. 587/Del/2019 dated 06.12.2021. & 324/Del/2019 Trident Towers Pvt. Ltd
In view of the aforesaid observations and respectfully following the judicial precedents relied upon hereinabove, we have no hesitation to delete the addition made on account of unsecured loan received by M/s. Powmex Sales Pvt. Ltd u/s 68 of the Act by holding that the assessee had proved all the three ingredients of section 68 of the Act by furnishing the requisite documents before the ld AO and the ld AO had not found anything adverse in those documents and had not resorted to any further enquiry on the lender company at the correct address. Accordingly, the Ground Nos. 6, 8 and 9 raised by the assessee are allowed.
Since, the relief is granted on merits, the various grounds raised by the assessee challenging the validity of reopening of assessment on various facets need not be gone into and they are left open. Accordingly, Ground Nos. 3 and 5 raised by the assessee are left open.
As stated in the earlier part of the order, the decision rendered hereinabove in AY 2011-12 shall apply with equal force in AY 2012-13 also in view of the identical facts except with variance in figures.
In the result, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 05/01/2024.