DEEPAK KUMAR SHAH,RAMGANJMANDI vs. INCOME TAX OFFICER, KOTA

3 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA maintained for any previous year and the appellant offers no explanation about the nature and source thereof or the explanation Coffered by him is not in the opinion of the AQ satisfactory/ the sum so credited may be charged to income tax as income of the appellant of that year. 5.6 Considering the aforesaid facts and the various decisions as cited above, it is clear that the assessee has taken accommodation entry from M/s Bright Corporation which is a bogus concern of Shri Samsun Paul Gohli Indulging in providing accommodation entries Further from the above facts and surrounding circumstances, human conduct, preponderance of probabilities etc. I find that the AQ has clearly established that the impugned transaction is a sharm transaction Le, the motive is not to derive income but is a sham transaction that too by an arrangement and it is a manipulated transaction in collusion With the accommodation entry provider to paint creditworthiness to the transaction. This is in accordance with the ratio laid by the Hon'ble Apex Court in Sumati Dayal Vs Commissioner Of Income-Tax. 214 ITR 801 (SC) that "the apparent must be considered the real until it is shown that there are reasons, to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities." 5.7.a) In this appeal, the primary contention of the appellant is only on the issue of "The copy of evidence not provided or to provide with opportunity to cross examine the evidence in possession" b) In this regard, during the assessment proceedings, the Appellant vide various statutory notices of the Act was asked with specific queries in this regard, in response to which, the appellant has not only made replies, but has also admitted of entering into the alleged transaction. The said portion of the reply of the appellant during the assessment proceedings in response to notice dated 13.11.2019 is being reproduced as under:- "M/s Bright Corporation has transferred a sum of Rs. 17,00,000/- in our bank account through bank RTGS on 13th November 2016 for the purpose of procuring good quality of Dhaniya commodity on their behalf. Due to sharp decrease in market price and non-

4 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA availability of good quality of Dhaniya commodity in the surrounding market the contract for which the said amount was received could not be executed hence the said amount so received was revert back through bank RTGS 1.0. Rs.9,80,000/- on 20th January 2017 and Rs.7,20,000/- on 21st January 2017 in two installments which can be verified from the bank statement of HDFC CC Account (Account No. 07808660000037)". c) Accordingly, I find that the contention raised by the appellant in this regard in not tenable hence rejected. d) In these facts and circumstances, I am constrained to be in agreement with the finding of the Assessing Officer and hold that the appellant is unable to substantiate its claims and is not able to controvert the assessment order. The addition made by the Assessing Officer is therefore confirmed. 5.8 The appellant has not been able to defend the grounds raised

. Hence, grounds raised are rejected.

6. In the result, the appeal is Dismissed.’’ 2.2 During the course of hearing, the ld. AR of the assesee submitted that the Assessee is an Individual and is proprietor of Deepak Kirana Company, Ramganj Mandi, Kota. Return of Income was filed on 28.10.2017 declaring income of Rs.12,00,750/-. The assessee derives income from the business of Commission Agent dealing in Agricultural Commodities. It is noted from the assessment order that there was information from DDIT(Inv.), Ahmedabad, in the case of the assessee that the assessee had received Rs.17,00,000/- on 13.11.2016 from M/s Bright Corporation, Ahmedabad as accommodation entry. In view of this, the case was selected for compulsory scrutiny. From the records, it is noted that the DDIT(Inv.) Ahmedabad, passed an information to the AO

5 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA that Shri Samsun Paul Gohil, partner in Nirav Enterprises had deposited a sum of Rs.5,76,26,000/- in RBL Bank Ltd., Ahmedabad in the account of the firm M/s Nirav Enterprises. During the course of statement recorded u/s 131 of the Act and Shri Samsun Paul Gohil further reported that during the demonization period in all he had deposited Rs.42,00,00,000/- in the bank account of the following concerns :-

1. 1. M/s Nirav Enterprise. 2. M/s Bright Corporation. 3. M/s M.S. Trading Co. 4. Janta Trading Company.

5. Nirav Auto Impex P. Ltd. It is noted that in the account of M/s Bright Corporation, deposit was made of Rs.95,00,000/- that too during the demonization period. It was also admitted by Shri Samsun Paul Gohil that in order to explain the deposits in the bank accounts fake sales of gold were recorded in the books of accounts. It was further gathered that out of the deposit of Rs.95,00,000/- in the account of Bright Corporation a sum of Rs.17,00,000/- were transferred on 13.11.2016 to the account of the assessee through RTGS. It is this amount of Rs.17,00,000/- transferred in the bank account of the assessee on 13.11.2016 by M/s Bright Corporation which is the subject matter in the assessment order. The AO disregarded the explanation of the assessee that the amount of Rs.17,00,000/- was received as trade advance for purchase of Dhaniya and subsequently when the deal did not materialize the same was return on 20.01.2017 and 21.01.2017, and made addition u/s 68 of the IT Act treating the same as unexplained deposit

6 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA being an accommodation entry. The AO completed the assessment on 09.12.2019 determining total income of Rs. 29,00,750/- which included the addition of Rs.17,00,000/- as discussed above. 2.3 Aggrieved with the order of the AO, the assessee went in appeal before the ld CIT(A) who dismissed the appeal of the assessee without considering the reply of the assessee in proper perspective. The ld. AR of the assessee, before the ld. CIT(A) vehemently argued that addition cannot be made in the hands of the assessee on the basis of third party statement i.e. statement of Shri Samsun Paul Gohil without providing the copy of statement to the assessee and allowing opportunity of cross examination of Shri Samsun Paul Gohil. The ld. CIT(A) has not considered the plea of the assessee and confirmed the action of the AO 2.4 Now Aggrieved with the order of the ld. CIT(A) the assessee is in appeal before the Tribunal with the prayer that it is a genuine transaction through banking channel and this amount was remitted in the account of the assessee through RTGS. He further submitted that the lower authorities have erred in making addition in the hands of the assessee as there is no case for treating the amount as accommodation entry and there is no statement of Shri Samsun Pal Gohil that the amount of Rss.17.00 lacs was remitted to the assesee in view of the cash receipts of the assessee. Thus the addition so made of Rs.17.00 lacs in the hands of the assessee needs to be deleted by the lower authorities. 2.5 On the other hand, the ld. DR strongly refuted the submissions of the assessee and relied upon the orders of the lower authorities.

7 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA 2.6 The Bench has heard both the parties and perused the materials available on record. It is noted that in the case of the assessee the DDIT(Inv.) Ahmedabad, passed on information to the AO that Shri Samsun Paul Gohil, partner in Nirav Enterprises, Ahmedabad had deposited a sum of Rs.5,76,26,000/- in RBL Bank Ltd., Ahmedabad in the account of the firm M/s Nirav Enterprises. During the course of statement recorded u/s 131 of the Act, Shri Samsun Paul Gohil further reported that during the demonization period in all he had deposited Rs.42,00,00,000/- in the bank account of the following concerns :-

1. 1. M/s Nirav Enterprise. 2. M/s Bright Corporation. 3. M/s M.S. Trading Co. 4. Janta Trading Company.

5. Nirav Auto Impex P. Ltd. In the account of M/s Bright Corporation deposit was made of Rs.95,00,000/- that too during the demonization period. It was also admitted by Shri Samsun Paul Gohil that in order to explain the deposits in the bank accounts fake sales of gold were recorded in the books of accounts. It was further gathered that out of the deposit of Rs.95,00,000/- in the account of Bright Corporation a sum of Rs.17,00,000/- were transferred on 13.11.2016 to the account of the assessee through RTGS. It is this amount of Rs.17,00,000/- transferred in the bank account of the assessee on 13.11.2016 by M/s Bright Corporation which is the subject matter in the assessment order. During the course of assessment proceedings, the assessee submitted that only issue before the AO Officer was 8 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA of the deposit of Rs.17,00,000/- in the account of the assessee from the account of M/s Bright Corporation on 13.11.2016. The assessee requested the AO to furnish all the material of the basis of which the deposit of Rs.17,00,000/- was treated as accommodation entry. In this regard, it is noted that assessee furnished letter on 02.12.2019 before the AO, copy of which is reproduced below :- Date :- 02/12/2019 To, The Income Tax Officer, Ward 1(3), Kota - Rajasthan Ref: DEEPAK KUMAR SHAH PAN: ADDPK1529N Subject: Reply to Notice u/s 142(1) of the Income Tax Act, 1961 for the Assessment Year 2017-2018.

Dear Sir, In response to your notice dated 30.11.2019 your goodself asked the reasons of receipt of Rs.17,00,000 received from M/s. M/s Bright corporation, Ahmedabad along with documentary evidences. As mentioned in your letter" you did not clarify as to for what reason the said amount was deposited in your account & why not deposited in other person's account." In response to above we informed your goodself that M/s Bright corporation having PAN AAPFB7686Q and assessed by the Income Tax Department, Ahmedabad. M/s Bright corporation has transferred a sum of Rs. 17,00,000 in our bank account through bank RTGS on 13th November 2016 for the purpose of procuring good quality of Dhaniya commodity on their behalf.

9 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA Due to sharp decrease in market price and non-availability of good quality of Dhaniya commodity in the surrounding market the contract for which the said amount was received could not be executed hence the said amount so received was revert back through Bank RTGS i.e. Rs. 9,80,000 on 20th January 2017 and Rs. 7,20,000 on 21st January in two instalments which can be verified from the Bank statement of HDFC CC Account (Account No. 07808660000037). The aforesaid transaction is recorded in the books of accounts and the details of all the transaction as done during the F.Y. 2016-17 has already been submitted before your honour which was verified by your honour. Sir the aforesaid transaction is in normal course business and acceptable as per law. M/s Bright Corporation is identified legal entity having pan AAPFB7686Q is assessed by the Income tax Department, ward 5(3)(3) Ahmedabad. Sir, it is respectfully submitted that making an inference without evidence is not as per law we request you to kindly provide the basis or material which is in your possession which has permit you to draw the conclusion there from that we are crew member in the conspiracy providing accommodation entries. Sir, such type allegations are not true & fair. How one can impose such allegation on the assessee without providing any evidence which are to be used against him. If any material evidence related to assessee is utilized or used against him the assessee should be given an opportunity of being heard to examine and cross examine the other party i.e. M/s Bright Corporation. It is respectfully submitted that identity of a person from whom the amount is received has been proved, the transaction with said party means Bright Corporation took place through Banking channel. As per income tax provision if any discrepancy found it should be taxed in the hands of M/s Bright corporation not in the hands of assessee. Thanks and Regards Deepak Kumar Shah Bazaar no. 01 Ramganjmandi, Kota, 326519

10 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA It is also noted that in the aforesaid letter the assessee specifically requested the AO to provide all the material being used against the assessee and also an opportunity to cross examine M/s Bright Corporation/ Shri Samsun Paul Gohil. However, the AO did not accede to the request of the assessee and completed the assessment. Thus the action of the AO is in violation of the principles of natural justice. The Bench feels that the AO was required to furnish the following to the assess before completion of the assessment :-

A. The grounds and evidence on which the deposit of Rs.17,00,000/- was treated as accommodation entry.

B. Copy of statement of Shri Samsun Paul Gohil should have been supplied to the assessee who is alleged to have admitted the transactions as accommodation entry.

C. Opportunity should have been allowed to cross examine Shri Samsun Paul Gohil. It is noted that it is settled principles of law that material/statement gathered at the back of the assessee cannot be used against the assessee unless the same are tested by cross examination. Thus it is case where principles of equity and justice have not been followed. The assessee was unable to furnish defense in the absence of non-furnishing of the material and statement by the AO. The following case laws are quoted in support :-

11 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA 1. The Apex Court has observed that not allowing cross examination is a serious flaw and makes the order nullity. Andman Timber Ind. Vs. Commission of Central Excise (2015) 281 CTR 211 (SC). “not allowing the assessee to cross examine the witness by the adjudicating authority though the statements of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order nullity in as much as it amounted to violation of principle of natural justice because of which the assessee was adversely affected.

2. COMMISSIONER OF INCOME TAX vs. BIJU PATNAIK HIGH COURT OF ORISSA 190 ITR 0396 Although answers can be recorded either in favour of the Department or against it, ultimately each answer would again become inconclusive on account of the final findings of fact of the Tribunal that ITO has not given reasonable opportunity to the assessee to rebut the statements recorded ex parte under s. 131 of the Act and to furnish explanation to some of the materials. It is true that Tribunal has not given due weight to the relevant and admissible evidence while recording the findings of fact. However, the findings of the Tribunal on such fact are also vulnerable as they may require reconsideration. If answers in respect of each of the questions are indicated in the absence of reasonable opportunity being afforded to the assessee, they would be of academic interest inasmuch as the answers against the assessee would become vulnerable on account of the need to undo the absence or reasonable opportunity. A clear and conclusive finding binding on the parties can be given only after reasonable opportunity is given to the assessee as found by the Tribunal. No answer should be given in advisory jurisdiction which would not finally decide the issue since final finding can be arrived at only after giving reasonable opportunity to the assessee and explanation given by the assessee would have material bearing on the finding. It is necessary that the Assessing Officer gives opportunity to the assessee. Tribunal has not considered the evidence in its proper perspective while rendering the decision in appeal and accordingly, the findings of the Tribunal are vitiated in law. As the final fact- finding forum, the Tribunal has to consider the same again. Since Tribunal has recorded a finding that reasonable opportunity has not been given to the assessee to give rebuttal evidence and explanation, this can effectively be done by the Assessing Officer.

3. PRAKASH CHAND NAHTA vs. COMMISSIONER OF INCOME TAX (HIGH COURT OF MADHYA PRADESH) (2008) 301 ITR 0134 : Assessment—Validity—Opportunity of being heard vis-a-vis statements of third party—Unaccounted silver ornaments and utensils were found and seized during the search at the assessee’s premises—Assessee explained that the said silver items were purchased from one R & Co.—AO made addition to the income of the assessee after recording the statement of M, proprietor of R & Co., behind the back of the assessee—Not justified—AO has heavily relied upon the statement of M and has ignored the subsequent affidavit filed by M which is in variance of his original statement—Since the statement of M was used against the assessee and an affidavit was filed controverting the same, it was obligatory on the part of the AO to allow the prayer of assessee for cross-examination of M—AO having not summoned M under s. 131 in spite of the request of the assessee, evidence of M could not have been used against the assessee—Therefore, the assessment order is vitiated

13 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA of DCI, in the sum of Rs. 11 lacs which included the amount of pronote of Rs. 8,78,358—Legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, is that if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice—Orders of all the three authorities set aside and addition deleted.

From the above, it is felt that there is no accommodation entry in the hands of the assessee. The amount of Rs.17,00,000/- was received on 13.11.2016 through RTGS in the bank account of the assessee maintained with HDFC Bank A/c no. 07808660000037 at Ramganj Mandi – 326519, Kota. Copy of the relevant bank a/c is available on paper book page no. 49-109. The amount was received as a trade advance for purchase of Dhaniya which could not materialized due to poor quality of commodity and rate thereof. In view of this the amount was return back within a short period of two months. The amount was return back on 20.11.2017 and 21.11.2017 as is also reflected in the bank account. The amount

14 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA was return back through RTGS. Thus by no stretch of imagination, the deposit of Rs.17,00,000/- can be termed as accommodation entry. It was a squared up account. In this account, the transactions are through banking channels. The assessee had furnished confirmation of Bright Corporation before the AO during the course of assessment proceedings. M/s. Bright Corporation is assessed by the Income Tax Department ward 5(3), Ahmedabad whose PAN no. is AAPFB7686Q. It is noted that when the amount of Rs. 17,00,000/- has been returned then there does not remain any case for considering the amount as accommodation entry. It is further noted that in the statement Shri Samsun Paul Gohil is reported to have admitted u/s 131 of the Act that he had cash of Rs.5,76,26,000/- which was deposited by him in RBL Bank Ltd., in the name of firm Nirav Enterprises where he was as partner. Further, he also deposed that Rs.42,00,00,000/- were deposited by him in bank accounts of the following firms :-

2. M/s Bright Corporation. 3. M/s M.S. Trading Co. 4. Janta Trading Company. 5. Nirav Auto Impex P. Ltd. It was further admitted by him that he had deposited Rs.95,00,000/- in the bank a/c of the Bright Corporation during the period of demonetization. In the facts and circumstances of the case, the sum of Rs.95,00,000/- deposited in the bank a/c of Bright Corporation requires to be considered in the hands of Shri Samsun

15 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA Paul Gohil. So far as the assessee is concerned, the source of Rs.17,00,000/- is M/s Bright Corporation. The source of deposit in the bank account of Bright Corporation is apparently Shri Samsun Paul Gohil. Thus, so far as the assessee is concerned the source stands proved. The source being already on record with the department, no action was required in the hands of the assessee for treating the deposit of Rs.17,00,000/- as accommodation entry. The entire amount of Rs.5,76,26,000/- / Rs.42,00,00,000/- required to be considered in the hands of Samsun Paul Gohil. The department must have taken action in the hands of Samsun Paul Gohil. Once the amount remitted to the assessee stood already considered for tax purposes in the hands of Shri Samsun Paul Gohil then there was no case for treating the same amount as unexplained in the hands of the assessee and taxing it for the second time. Thus the addition in the hands of the assessee has been made under the wrong perception which deserves to be deleted. The ld. CIT(A) failed to appreciate the facts of the case in correct perspective. The main issue of source of Rs.17,00,000/- being Bright corporation/Samsun Paul Gohil was lost site off and uncalled for attention was centered on the trade deal of Dhaniya. It is noted that the information provided to the AO vide the DDIT wing itself disclosed the source of the deposit in the hands of the assessee, hence the same could not be treated as unexplained u/s 68 of the IT Act. Hence, the Bench draws strength from the following case laws.

‘’1. CIT vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251,69,52,894/- (Guj) :-

17 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA It is noted from the records that in the case of the assessee the amount of Rs.17,00,000/- received on 13.11.2016 stands fully explained. It is a genuine transaction through banking channels. The amount was remitted in the account of the assessee through RTGS. The source of deposit was already known to the department i.e. Shri Samsun Paul Gohil. Thus, the source of deposit also stood fully explained. There was no case for treating the same as unexplained u/s 68. Addition u/s 68 can be made only if the source of amount remains unexplained. In the case of the assessee the source of deposit was already on record with the department. Hence, the AO has wrongly made addition u/s 68. The ld. CIT(A) has also erred in confirming the same. Thus there were no case for treating the amount as accommodation entry. There is no statement of Samsun Paul Gohil that the amount of Rs. 17,00,000/- was remitted to the assessee in view of cash receipts of the assessee. The investigation wing has also not furnished any material to establish that the amount received by the assessee was an accommodation entry. So far as the assessee is concerned, the transaction of receipt of Rs.17,00,000/- and the returned thereof are genuine transactions. Hence, the addition made in the hands of the assessee are totally uncalled for and unlawful. The same was wrongly made by the AO only on the ground that the information was received from the investigation wing. The AO has wrongly acted upon the receipt of information from the investigation wing as a thumb rule, without causing any enquiry at his level. The ld. CIT(A) has also erred in confirming the same. Hence, in view of the above deliberation, facts and 18 DEEPAK KUMAR SHAH VS ITO, WARD – KOTA, KOTA circumstances of the case and decisions relied upon above, the Bench does not concur with the finding of the ld. CIT(A) and thus addition of Rs.17.00 lacs is directed to be deleting by allowing the appeal of the assessee. 3.0 In the result, the appeal of the assessee stands allowed with no orders as to costs. Order pronounced in the open court on 15 /07/2024. Sd/- ¼lanhi xkslkbZ½ (Sandeep Gosain) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 15/07/2024 *Mishra आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Deepak Kumar Shah, Ramganjmandi 2. izR;FkhZ@ The Respondent- The ITO, Ward- Kota, Kota 3. vk;dj vk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 426//P/2024) vkns'kkuqlkj@ By order,

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