AMAN EXPORTS INTERNATIONAL,JAIPUR vs. DCIT CIRCLE 1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM+ deys'k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No. 147/JP/2023 fu/kZkj.k o"kZ@Assessment Years : 2012-13 cuke Aman Exports International DCIT, Vs. G-93 Epip Sitapura, Industrial Area Circle-01, Sitapura, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAQFA 6304 F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Manish Tatiwal (CA) jktLo dh vksj ls@ Revenue by : Smt. Runi Pal (Addl. CIT) & Sh. A. S. Nehara (Addl. CIT) lquokbZ dh rkjh[k@ Date of Hearing : 19/07/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 24/08/2023 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 03/03/2023 [here in after (NFAC)] for assessment year 2012-13 which in turn arise from the order dated 20.12.2019 passed under section 143(3)/147 of the Income Tax Act, by the DCIT, Circle-01, Jaipur.

“1. The Assessment order passed by Assessing Officer and confirmed by learned CIT Appeals, National Faceless Assessment Centre is bad in law and void ab initio.

2. The learned Commissioner Appeals National Faceless Assessment Centre has erred in law as well as in facts by confirming addition of Rs. 1500000 being Unsecured Loan treated by learned assessing officer as Purchases made without any reason or basis.

3. The learned Commissioner Appeals National Faceless Assessment Centre has erred in law as well as in the facts by confirming disallowance of Rs. 101505 being pay,ent made to R. K. Jaiswal & Co and travelling expenses u/s 40A(3) without any reason or basis That the appellant craves the right to add, amend or delete or abandon the ground of appeal either before or at the time of hearing of appeal.”

3. Succinctly, the fact as culled out from the records is that the assessee filed its original return of income declaring total income of Rs. 66,19,020/- on 28.09.2012 for the year under consideration. The return was processed u/s 143(1) of the IT. Act, 1961 computing total income of Rs. 66,19,020/- on 26.02.2013. Based on the details/information available with the AO the case was re-opened after recording the reasons in writing and taking necessary approval manually as well as through ITBA portal from the competent authority and accordingly, notice u/s 148 of the IT. Act, 1961 was issued to the assessee on 29.03.2019 and duly served upon the assessee. The assessee firm has mainly earned income from business or profession and other sources during the year under consideration. During the re- assessment proceedings, in response to notice issued u/s 148 of the I.T.

2012-13 and 06.04.2019 at the total income of Rs. 66,19,020/- and requested to provide reasons recorded for issuance of notice u/s 148 on 08/04/2019. On the request of the assessee reasons recorded for issuing notice u/s 148 was provided to the assessee and notice u/s 143(2) of the Income Tax Act, 1961 was issued on 22.05.2019. Meanwhile, a letter was submitted by the assessee dated 06.06.2019 raising the objection against the issuance of notice dated 29.03.2019 u/s 148 of the IT. Act, 1961 in the case. The objection raised by the assessee dated 06.06.2019 with regard to issuance of notice u/s 148 has been disposed off vide this office order dated 07.08.2019. Further notice u/s 142(1) of the Act annexing questionnaire has been issued to the assessee on 07.08.2019 fixing the date for furnishing submission by 13.08.2019. In response, the assessee did not file any reply.

5. Aggrieved from the order of the Assessing Officer, assessee preferred an appeal before the ld. CIT(A)/NFAC. A propose to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below:

“22. After going through the ratio of decisions as referred above, it is noted that the facts of the present case are similar to the facts of the above cases. The appellant has failed to prove genuineness of transaction in respect of unexplained unsecured loans and advances in the shape of accommodation entries. Nothing has been brought on record to justify this transaction. These are not even purchases and for which bills or vouchers were never furnished. Once it is proved that credits have not been explained then, there is no duty upon the AO to point out the source from which the money was received by the assessee. Reliance is put on the decision of the Hon'ble Apex Court in the case of A. Govindarajulju Mudaliaar v. CIT (1958) 34 ITR 807, Commissioner of Income-tax vs Independent Media (P.) Ltd.210 TAXMANN 14(Delhi)(2012).

taken by the appellant. Further reliance is placed upon the decision of Hon'ble Supreme Court in the case of CIT vs Durga Parsad More 82 ITR 540 where it has been held that the apparent must be considered as real until it is shown that there are reasons to believe that apparent is not real. In this case there is no material brought on record by appellant to show that genuineness of transaction and source of share application money with such a high premium. Further reliance is placed upon the decision Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 214 ITR 802 (SC). After going through the ratio of decisions as referred above, facts of the case, element of human probability and surrounding circumstances, it is noted that the appellant has failed to prove creditworthiness and genuineness of transaction in respect of unexplained cash credit. The onus was upon the appellant to explain the source and nature of such sum introduced in the garb of share application money with satisfactory explanation. However, the appellant has not furnished any explanation and did not furnish any supporting evidence for this. Reliance is also placed upon rationale held in the following recent decisions:-

1. Kottex Industries Pvt. Ltd. vs. DCIT 129 taxmann.com 151 (The Hon'ble Gujarat High Court) - Unable to establish that investor companies had carried out any business.

7 Aman Exports International vs. DCIT 2. CIT vs. Midas Golden Distilleries Pvt. Ltd. 130 taxmann.com 206 (The Hon'ble Madras High Court) (2021) share capital routed through companies only on paper without financial capacity not established creditworthiness and genuineness of transaction addition u/s 68 justified.

Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.". Thus, cash payment of expenses on single day exceeded limit of Rs.20,000/-, there was clear violation of the Act and hence, such expenditure was rightly not allowed by the AO. Thus this Ground of the appellant is dismissed.”

S. No. Details of Documents Page No. From To 1 Notice u/s 148 1 2 Notice u/s 142(1) dated 7.8.2019 2 6 3 Notice u/s 142(1) dated 2.11.2019 7 8 4 Notice u/s 142(1) dated 18.12.2019 9 11 5 Copy of Reason Provided 12 14 6 Objection to Re opening 15 27 7 Affidavit of Director Venus Financial Consultants P. Ltd. 28 30 8 Confirmation of Account and connected Bank Statement of Venus 31 34 Finan Con P L 9 Audit Report and Final Accounts Venus Financial Consultants P. Ltd 35 43 10 ITRV Venus Financial Consultants P Ltd. 44 11 Profit/Loss of Nineteen PSU Banks 45 12 Order disposing of Objections 46 51 13 Letter From ACIT Circle-1 for providing copy of records 52 14 Report of Investigation Wing Kolkatta 53 58 15 Letter to provide Approval 59 16 Performance recording reasons 60 64 17 Letter written by DCIT Central Circle-1 to ADIT (Inv.) Kolkatta 65 submission made before the ld. CIT(A) and the same is reproduced for the sake of brevity:

“The facts of the case are that the assessee Firm is engaged in Manufacturing and Export of Garments etc. filed its return declaring total income of Rs. 6619025, thereafter notice u/s 148 has been issued on 29.3.2019 and in response to same return has been filed on 06.4.2019 vide acknowledgment No 462063151060419 which has been assessed at Rs. 82,20,530/- by making addition u/s 68 of Rs 15,00,000/- Lacs as well as Disallowance u/s 40A(3) of Rs. 101505/-. That after receipt of notice the assessee filled its return and also seeked copy of reasons recorded along with copy of approval of competent authority and copy of all the documents, reports and statements etc relied upon to form the reason to believe. That apart from the copy of reasons recorded, no other documents was ever provided, in spite of the fact that the assessee also filled copy of Judgment in the case of Sabh Infrastructure Ltd delivered by Hon’ble Delhi High Court and this fact was also highlighted in the objections raised to the re opening. That the assessee filled its objection to the reopening which were disposed off without discussing each issue in haphazard manner and without appreciating the following evidences which were submitted: 1. Confirmation of Account for Ay 2012-13 & 2015-16, the Ay 2012-13 being the year in which amount was received any Ay 2015-16 being the year in which loan was repaid.

2. Affidavit of One of Director of Company Venus Financial Consultants P Ltd confirming the transactions with firm Aman Exports International

3. Audited Profit & Loss Account and Balance Sheet of Venus Financial Consultants.

4. Copy of Bank Statement of Venus Financial Consultants P Ltd for the relevant period during which loan was received and repaid.

11 Aman Exports International vs. DCIT Reason to believe supplied to the assessee refers to information received from the Dy. Director of IT (Inv.) as also to the statement of DJ recorded under s. 132(4) during the course of the investigation pursuant to the search and seizure carried out at his premises as also the entries in the form of bogus loan/purchase/sale—Neither of the above documents have allegedly been supplied to the assessee—Shorn of all other technical aspects which may have been raised the very fact that the material referred to in the "reasons to believe" was not supplied to the assessee, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law The Hon’ble Delhi High Court in the case of Sabh Infrastructure Ltd. vs. ACIT, W.P.(C) 1357/2016 Sep 25,2017; 398 ITR 0198 (Delhi), has held that where assessee could not be said to have failed to disclose fully and truly all material facts then assumption of jurisdiction under Sections 147 and 148 of the Act was erroneous and notice issued for reassessment should be quashed The Hon’ble Delhi High Court in the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. ITA 692/2016 dated May 26, 2017, (2017) 99CCH 0028 DelHC; 395 ITR 677; 154 DTR 0100 (Del); (2017) 395 ITR 0677 (Delhi)) has held that there is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed, it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment The Hon’ble Delhi High Court in case of Agya Ram vs. CIT ITA No. 290/2004(2016) 386 ITR 0545 (Delhi) dated 01.08.2016 it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record…" It was further emphasized that “mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments The Hon’ble Kolkata ITAT bench ‘SMC’ in Subodh Chandra Das vs. ITO, & 2247/Kol/2019, Mar 4, 2020 has held that reopening is bad in law, where there is non- application of mind by Assessing Officer to information received from investigation wing.

The Hon’ble Delhi ITAT bench ‘SMC’ in Goel was (P) Ltd. vs. ITO, Jan 7, 2020 has held that mere information received from DDIT(Inv) cannot constitute valid reasons for initiating reassessment proceedings in the absence The Hon’ble Delhi High in case of Yum Restaurants Asia Pte. Ltd. vs. Deputy Director Income Tax, W.P.(C) 614/2014, Aug 31, 2017; 397 ITR 0665 (Delhi), has held that where authorities appeared to have concurred with reasons for reopening assessment without applying their mind, reopening of assessment would be invalid Delhi High Court in the case of Signature Hotels (P) Ltd. vs. ITO dated 21.07.2011 [2011] 338 ITR 51 (Del.); 60 DTR 0030 has held that it was apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. Therefore, the proceedings under section 148 were to be quashed The Hon’ble ITAT Agra in case of Deepraj Hospital vs. ITO, 41/Agra/2017, dated 01.06.2018; 65 ITR (Trib) 0663 (Agra) has held that if the reopening is based on information received from the investigation dept, the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void.

Evidences Provided by the assessee totally ignored That during the re-assessment proceedings to prove the genuineness of the loans taken the following documents were submitted. 1. Confirmation of Account for Ay 2012-13 & 2015-16, the Ay 2012-13 being the year in which amount was received any Ay 2015-16 being the year in which loan was repaid.

3. Audited Profit & Loss Account and Balance Sheet of Venus Financial Consultants.

5. Copy of ITRV for Ay 2012-13 But the learned Income Tax officer preferred not to discuss these vital documents and thus has totally ignored the evidences in support of Loan taken by the assessee. Thus shows that decision of assessing officer was biased and predetermined to make these additions which makes the assessment bad in law as not made on the basis of the material on record. That an affidavit from director of the company was also submitted, but learned assessing officer neither called him for cross examination nor issued any notice u/s 133(6) or 131 and without contradicting the affidavit has proceeded to make the additions which is bad in law. For the same we rely on following judicial decisions. If an affidavit is filed by an assessee and he is neither cross-examined on that point nor is he called upon by the department to produce any other documentary evidence, the assessee may assume that the Income tax authorities are satisfied with the affidavit as sufficient proof on that point in question. (L. Sohan Lal Gupta v. CIT (1958) 33 lTR 786 at I 791(All)). This is so because the rejection of an affidavit filed by an assessee is not justified unless the deponent has either been discredited in cross-examination or has failed to produce other supporting evidence when called upon to do so. [Mehta Parikh & Co. v. CIT (1956) 30 ITR 181 (SC), Sri Krishna v. CIT (1983) 142 ITR 618 (All), Dilip Kumar Roy v. CIT (1974) 94 ITR 1 {Bom.). CIT vs. Bedi & Co. Pvt. Ltd. (198) 230 ITR 580 (SC). The affidavits filed cannot be rejected outright without cross examination A finding given by the appellate Tribunal without considering the affidavit concerning a material evidence may not be sustainable at law even though the Tribunal had considered other material on record. This is so because an affidavit is a valid piece of evidence (Hanutram Ram Prasad v. CIT (1978) 114 ITR 19,26 (Gauh). Ground No 2 That the learned Assessing Officer has erred in law as well in facts in making addition of Rs 15 lacs being unsecured loan raised by the assessee and treating the same as purchases made without any reason or basis

14 Aman Exports International vs. DCIT That your attention is drawn to the Para 6 of order which for sake of easy is reproduced hereunder: 6. In view of the above facts and circumstances, it is clearly inferred that the entities to whom funds were transferred through cheques and against which cash were received are the beneficial owners of such transferred fund as Mis Aman Exports International, has been detected on perusal of ICICI bank statements of M/s Venus Financial Consultants Pvt. Ltd. for total transaction amounting to Rs. 15,00,000/- during the year under consideration. In view of the above discussed facts and looking to undisclosed income amounting to Rs. 15,00,000/-, the contention of the assessee that the purchases were made by the assessee to M/s Venus Financial Consultants Pvt. Ltd. whereas the assessee did not furnish any bills/vouchers of the same for establishing its genuineness and correctness of the claim. Thus, it is evident that the amount of accommodation entry amounting to Rs. 15,00,000/- by the assessee is hereby added back to the total income of the assessee u/s 68 of the Act for the year under consideration. That no where assessee have claimed to have made Purchase from Venus Financial Consultants P Ltd, the stand of the assessee has always been that the assessee has taken loan from Venus Financial Consultants P Ltd and in support of the same have filled confirmation of account, affidavit, Copy of Income Tax return his Profit & Loss Account and Balance Sheet etc. That learned assessing officer without providing any cognizant reason have made the addition treating the same as if, the assessee has claimed to have made purchases from the company. The reasons recorded as provided at Para 2 read as under: “An investigation report has been received from the ADIT(Inv.), Unit-3(2), Kolkata that M/s Venus Financial Consultants Pvt. Ltd. is maintaining a current account No. 018705008559 with Kolkata Chowringhee Branch. Alert is trigged under large value non-cash transaction in the current account. Transactions pattern shows credits by RTGS and debits by RTGS. During the period from 01.03.2012 to 16.02.2013 total credit is Rs.13.21 Crores out of which Rs.11.10 Crores by RTGS from different entities like S.M. NiryatP vt.Ltd., RSN Financial Service, Century Vision Pvt. Ltd., HRG Health Care Pvt. Ltd., Amrabathi Investra, Shivhari Distributors Pvt. Ltd., Brahma Tradelinks Pvt. Ltd., Vrinda Engineers Pvt. Ltd. etc. Rs. 97 lacs by clearing, Rs. 40 lacs by CMS transfers and Rs. 45 lacs by transfers mainly from linked accounts. Total debit is Rs. 13.19 crores out of which Rs. 9.96 Crores are remitted through RTGS to different entities like HRG Health care Pvt. Ltd., Emerald Suppliers Pvt. Ltd., Guiness Securities Pvt. Ltd. etc. As per the enhanced due diligence, customer is a petroleum trader. Credit by RTGS is followed by remittance through RTGS. On 25.09.2012 Rs. 1.06 Crores is received through RTGS from Brahman

15 Aman Exports International vs. DCIT Tradelinks Pvt. Ltd. and on same day Rs. 1.06 crores is transferred to Bharat Rasayan where funds are remitted through RTGS. On 06.02.2013 Rs. 80 lacs is received through RTGS from Shivhari Distributors Pvt. Ltd. and on same day Rs. 50 lacs remitted through RTGS to Guiness Securities Pvt. Ltd. & Rs. 30 lacs to Weldon Projects Pvt. Ltd. Similar transactions are there in the account. Unexplained transfers of funds between accounts and usages of account for parking of funds leads to suspicions. During inquiry, it was found that the company had given loan and advances during 01.03.2012 to 31.03.2012, i.e. during FY 2011-12 to the tune of Rs.65,00,000/. Company has also given loans and advances during FY 2012-13 to the tune of Rs. 1073.85 lacs. Further, the company had taken loans and advances during FY 2012-13 to the tune of Rs. 5,50,000/-. Further, it was also observed that Mls Venus Financial Consultants Pvt. Ltd. don’t have creditworthiness to give huge loans to various parties. As per ITR, it is showing income of Rs. 8,068/- and Rs. 10,106/- in the AY 2012-13 & 2013-14. Hence, it is clear that various beneficiary companies have routed their unaccounted income through M/s Venus Financial Consultants Pvt. Ltd. in the form of loans and advances during the FY 2011-12 & 2012-13. Account of M/s Venus Financial Consultants Pvt. Ltd. is used for layering of unaccounted fund in the form of loans. Thus, the account of M/s Venus Financial Consultants Pvt. Ltd. is purely used as the conduit for layering of unaccounted funds. On the basis of the information received, it has been observed that the assessee M/s Aman Exports International having PAN: AAQFA6304F is also one of such beneficiaries and routed its unaccounted cash of Rs. 15,00,000/- through aforesaid entities as unsecured loans and advances.” That mostly in the reasons recorded transactions mentioned pertain to FY 2012-13 and not FY 2011-12 and not all related to the assessee, that the assessee has taken loan during FY 2011-12 and the same has been duly repaid in FY 2014-15 and periodically interest has also been paid to M/s Venus Consultants P Ltd, That the learned assessing Officer has mentioned that the credits by RTGS are followed by Debits by RTGS, that it is prudent business practice that businessman don’t keep their funds ideal, As they do not earn any income or interest in current account, therefore why any businessman will keep his funds idle and what is wrong in the same is beyond our understanding. That the learned assessing officer did not made any enquiry from M/s Venus financial consultants P Ltd himself neither issued any notice u/s 133(6) nor issued any notice u/s 131 only relied upon the Investigation report as if, the Investigation report is “Bhagavd Geeta” and each and every fact mentioned need not be verified, That as per Balance Sheet filled during course of assessment proceedings, it is revealed that the Company M/s Venus Financial Conslutants was having paid Up Share Capital of Rs. 1,13,72,500/- as on 31.3.2012 and free reserves of Rs. 21,41,92,402.26/- Thus having total net worth of Rs. 22,55,64,902.36 Twenty Two Crores Fifty Five Lacs Sixty Four Thousand Nine

16 Aman Exports International vs. DCIT Hundred Two and Paisa Thirty Six only out of which the company has given loan of Rs 15,00,000/- (Fifteen Lacs) which is 0.66% of its Net worth and then also the learned assessing did not find the company’s creditworthiness but than he also did not explained how the creditworthiness of any company can be evaluated. That in the reasons recorded the learned assessing officer has mentioned that the companies net profit was meager Rs. 8,068/- only during Fy 2011-12 on perusal of the Profit & Loss account of the company reveals that though the company has made profit of Rs. 1,35,49,746.66/- One Crore Thirty Five Lacs Forty Nine Thousand Seven Hundred Forty Six and paisa Sixty Six but has incurred loss to the tune of Rs. 1,35,41,678.75 (One Crore Thirty Five Lacs Forty Nine Thousand Six Hundred Seventy Eight and Paisa Seventy Five only in Trading of Shares Futures & Options which we all know is unpredictable and highly risky in nature. That no evidence was ever brought to establish that money have changed hands and with whom and in the reasons recorded as well is in assessment order the addition has been made only on assumptions which are contradictory to the facts of the case. The Hon'ble Calcutta High Court in CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465/[1995] 82 Taxman 31, laid down that an assessee is expected to establish Identity of creditors Capacity of creditors to advance money Genuineness of transaction• The Hon'ble Supreme Court in Kale Khan Mohd. Hanif v. CIT [1963] 50 ITR 1 held that the onus on the assessee has to be understood with reference to the facts of each case. If the prima facie inference on the fact is that assessee's explanation is satisfactory, the onus shifts to the Revenue. The Hon'ble Allahabad High Court in CIT v. Anurag Agarwal [2015] 229 Taxman 532 ruled in favour of assessee. Where in respect of credit entries, the assessee established identity of all creditors by providing PANs and addresses beyond reasonable doubts. The Hon’ble Rajasthan High Court in the case of Commissioner of Income Tax vs. Deen Dayal Choudhary 293 CTR 468 (Raj) have held that Income—Cash credit— Genuineness—Both the appellate authorities, after taking note of the facts and going through the statements of three cash creditors, have come to a definite finding that not only the identity was established but the genuineness and creditworthiness of the creditors were well proved—All the cash creditors have not only placed on record the entire material but have also affirmed in their examination that they had advanced money to the assessee from their own respective bank accounts—Finding by the Tribunal is essentially a finding of fact based on the material on record after

17 Aman Exports International vs. DCIT appreciation of evidence and no substantial question of law can be said to arise out of the order passed by the Tribunal Ground No. 3 That the learned Assessing Officer has erred in law as well in facts in making disallowance of Rs 101505 being the payment made to RK Jaiswal and Co and travelling expenses without any reason or basis. That during the assessment proceedings assessee filled various confirmations and copies of ledger accounts etc., the learned assessing officer added the payment to R K Jaiswal & Co and for travelling expenses without issuing any show cause notice or even asking for any explanation for the same. That facts of the case are that R K Jaiswal & Co had submitted different vouchers on the very same date and the payment were made for these different vouchers, that is the reason not a single payment was made but the same were made in tranches, as these payments relate to three different vouchers and moreover the learned assessing officer was satisfied with the genuineness of transaction therefore no addition can be made for the same, that the assessees had produced copy of ledger accounts of various parties to whom the payments made by the assessees in cash as well as cheque, those payees were identifiable and the assessees also produced letters from the payees to show that the payees have received the money and accounted for the same in their books and the payees had also furnished their Permanent Account Numbers (PAN). Therefore, it is submitted that the genuineness of the transactions can never be doubted more particularly when, mostof the payments effected by the assessees were through banking channel, that is, through cheques or bank drafts. This aspect was not even considered by the Assessing Officer, therefore it is submitted that the genuineness of the transactions is a very relevant factor, which should be taken into consideration. In this regard, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Attar Singh Gurmuk Singh Etc. vs. Income Tax Officer [(1991) 191 ITR 0667]. Further, it is submitted that as held in Attar Singh Gurmuk Singh (supra), Section 40A(3) of the Act must not be read in isolation or to the exclusion of Rule 6DD of the Income Tax Rules, 1962 (hereinafter referred to as “the Rules”) and the Section must be read along with the Rule. Reliance was placed on the decision of the Hon'ble Supreme Court in S.A. Builders Ltd. vs. CIT(A) [(2007) 288 ITR 1 (SC)] to explain as to what is business expediency and that the Assessing Officer cannot put himself in the arm-chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable to explain. Thus, the learned Senior Counsel submitted that a verification needs to be done by the authorities or at least by the Tribunal to examine the genuineness of the plea raised by the assessees

18 Aman Exports International vs. DCIT It is noteworthy to point out that the Hon'ble Supreme Court in the case of Attar Singh Gurmuk Singh (supra), while testing the constitutional validity of Section 40A(3) of the Act, took note of Rule 6DD of the Rules as it stood then, which read as follows:- “In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The Section must be read along with the Rule. If read together, it will be clear that the provi- sions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the Section. It is open to the assessee to furnish to the satisfaction of the assessing officer the circumstances under which the payment in the manner prescribed in Section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an asses- see can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of Section 40A(3) and rule 6DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use blackmoney for business transactions. See: Mudiam Oil Company v. ITO, [1973] 92 ITR 519 A.P. If the payment is made by a crossed cheque drawn on a bank or a crossed bank draft then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute the Court cannot be oblivious of the proliferation of blackmoney which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black-money should not be regarded as curtailing the freedom of trade or business.” The Hon’ble Cochin ITAT in the case of Raja & Co Vs DCIT Central Circle Tirchur IT Appeal No 534 (Cochin) of 2011 have held that “The CBDT circular (referred supra) refers to “a particular high value payment”. The necessity to make payment to a party would arise only after conclusion of a transaction, say a “purchase” and the said deal would culminate into rising of a bill/invoice. Hence the term “high value payment” apparently refers to the concerned bill/invoice in respect of which the payment is required to be made, meaning thereby, the concerned

19 Aman Exports International vs. DCIT bill/invoice should also be of a higher value. However, if the value of bill/invoice itself is less than Rs.20,000/-, it cannot be considered as a high value transaction in the context of sec.40A(3) and hence the payment effected in respect of that kind of bill/invoice cannot be considered as high value payment. Accordingly, in our view, if the purchase is effected from a single person by way of several bills/invoices and if the value of each bill/invoice is less than Rs.20,000/-, then payments made to settle each bill/invoice would not be hit by the provisions of sec. 40A(3), as each bill/invoice has to be considered as a separate contract. The question of splitting up of the payment also does not arise in respect of such type of bills/invoices, as the value of each bill is less than Rs.20,000/-. In view of the above, we are unable to agree with the decision of Ld CIT(A) in holding that the purchases effected through several bills/invoices from a person shall also be hit by the provisions of sec. 40A(3) and accordingly set aside the said view of the tax authorities.” That regarding travelling expenses of Rs 22,505/- also the learned assessing officer never asked any explanation or never issued any show cause notice to make addition for the same. The fact is that Rs 22,505/- were paid to one of the partners as reimbursement of travelling expenses who had incurred the same on various dates and the firm can pay any amount to partner and it is not covered in the ambit of section 40A(3). So the addition made by the learned assessing officer is baseless and is not covered under section 40A(3). Ground No. 4 That the assesse provided all relevant documents confirmations to prove genuineness creditworthiness and identity of creditor hence the addition made treating the same as purchase as bad in law and hence no further addition in respect of other disallowance can be made Had the learned Assessing Officer had not made addition u/s 68 which we have already proved that the same is bad in law, then since the case was re-opened for the reason of unsecured loans only and if no addition is possible for the same no other addition can be made. For this we rely on following judicial decisions. If Assessing officer does not assess income for which reasons were recorded u/s. 147 he cannot assess other income u/s 147. CIT vs. Jet Airways (I) Ltd. (2011) 331 ITR 236 (Bom) It is essential that the items in respect of which the reasons had been recorded are assessed. If the AO accepts that the items for which reasons are recorded have not escaped assessment, it means he had no “reasons to believe that income has escaped assessment” and the issue of the notice becomes invalid. If so, he has no jurisdiction to assess any other income.

20 Aman Exports International vs. DCIT Ranbaxy Laboratories Ltd vs. CIT (2011) 60 DTR 77(Delhi) (High Court) Thus in view of the facts, judicial decisions stated above the additions made deserves to be deleted.”

6.2 The ld. AR of the assessee also filed an affidavit contending that the relevant document regarding the amount disputed is placed on the record in the assessment proceeding. The content of the affidavit is reproduced here in below :

In the matter of Aman Exports International for the Assessment Year 2012-13 I, Manish Tatiwala aged about 52 years, S/o of Late Shri Ghanshyam Tatiwala as Authorized Representative of Aman Exports International do solemnly affirm and state on oath as under: 1) That during the course of Assessment proceedings and Appellate Proceedings we had filled the following documents: i. Affidavit of Director of Venus Financial Consultants P Ltd. ii. Confirmation of account for F.Y 2011-12 and 2014-15 of Venus Financial Consultants P Ltd. iii. Relevant Bank Statement of Venus Financial Consultants P Ltd. for March 2012 & March iv. Audit Report along with annexure of Venus Financial Consultants P Ltd v. Copy of ITR V of Venus Financial Consultants P Ltd. For AY 2012-13 vi. Copy of Nineteen PSU Banks Showing their Net Profit/Net Loss 6.3 The ld. AR of the assessee in addition to the paper so submitted argued that ground no 1 being general no arguments were placed on record. As regards the ground no. 2 raised for addition of R.s 15,00,000 he has submitted that the assessee has borrowed the money by an account payee cheque on 14.03.2012, the assessee has paid the interest on which 10.03.2016 by an account payee cheque. Interest for the intervening period also paid and the TDS has also been deducted on the sum so borrowed by the assessee. The assessee supported this claim by placing on record the bank statement of the M/s. Venus Financial Consultants Private Limited.

(APB-33). Thus, the requirement of section 68 is duly discharged and the addition made by AO and sustained by the ld. CIT(A) is not in accordance with the law. The ld. AR of the assessee also contended that the ld. AO noted that the assessee made purchase which is incorrect appreciation of the facts. As regards the disallowance u/s. 40A(3) he relied upon the written submission filed.

8.1 As regards the ground no. 2 raised by the assessee we note from the submission of the assessee that the assessee has accepted a sum of Rs. 15,00,000/- as unsecured loan from M/s. Venus Financial Consultants Private Limited, whereas in the order of the assessment ld. AO mentioned that the purchases were made by the assessee to M/s. Venus Financial Consultants Private Limited. We also note from the record that the case of the assessee was re-opened based on the information received by the AO from the ADIT, (Inv) Unit 3 (2) Kolkata wherein it is found that various beneficiary companies have routed their unaccounted income by using the bank account of M/s. Venus Financial Consultants Private Limited wherein alert is trigged under large value non cash transaction in the current of that company and the bank account of that company was used as the conduit for layering of unaccounted funds. Since, the assessee has executed a loan transaction with that company named M/s. Venus Financial Consultants Private Limited for the year under consideration the ld. AO based on that the assessee. Apropos to this action the ld. AR of the assessee submitted that it is not in dispute that the assessee has not under taken any transaction with M/s. Venus Financial Consultants Private Limited. The ld. AO contended the assessee has purchased the goods whereas in fact the assessee has accepted the loan. The loan has been accepted by an account payee cheque, supported by copy of the bank account of M/s.

Venus Financial Consultants Private Limited, ITR and Balance Sheet. As there is no discussion to this fact the ld. AR has placed on record the affidavit and the ld. AO through ld. DR did not controvert this fact. The ld. AR of the assessee also submitted the assessee has paid the interest on this loan amount and has also deducted TDS on the interest paid. The amount taken by the assessee is also repaid by an account payee cheque.

Thus, in that case the arguments of the lower authority that the identity and genuineness is not established is incorrect. In fact when the assessee repaid the money the identity is proved and the fact that the assessee paid interest and deducted TDS support the fact that the assessee has accepted the loan from M/s. Venus Financial Consultants Private Limited merely that company is engaged in some specious activity the transaction which is supported by the evidence cannot be overlooked and the merely the act the transaction with the assessee cannot be automatic illegal when the surrounding and circumstantial evidence support the contention of the assessee. Based on the non-controverted evidences placed on record clearly establishing that the assessee has accepted the money by an account payee cheque, paid interest, deducted TDS and the said amount has also been repaid. All this entries are duly accounted in the regular books of both the entity and therefore, considering the evidence placed on record we are of the considered we that the addition of Rs. 15,00,000/- is not warranted in the hands of the assessee and therefore, the same is directed to be deleted. Based on these observations ground no. 2 raised by the assessee is allowed.

8.2 The ground no. 3 raised by the assessee is related to disallowance of cash payment made by the assessee u/s. 40A(3) of the Act for an amount of Rs. 1,01,505/-. On this issue we note from the record that the assessee has paid a sum of Rs. 34,000/- on 06.03.2012 and Rs. 45,000/- on 07.03.2012 to M/s. R. K. Jaiswal & co. The assessee has also debited a sum of Rs. 22,505/- being the reimbursement of travelling expenses paid to violation of provision section 40A(3) of the Act. In an appeal before the ld. CIT(A) the same is also not considered by the ld. CIT(A) by observing that the assessee has paid expenses on single day exceeding the limit of Rs. 20,000/- and the same is in violation of provision of section 40A(3) of the Act and the same was confirmed. Before us the ld. AR of the assessee merely stated that the amount has been disallowed without issue of any show cause notice and payments are related to travelling expenses and the bill does not exceed Rs. 20,000/- each and therefore, the amount is required to be deleted. On this issue the ld. AR of the assessee has not demonstrated before us the contentions so raised by filling any evidence that the same is below Rs. 20,000/- by invoice and in absence of these primary evidence we are not inclined to consider the plea of the assessee without any supporting evidence and thus the ground no. 3 raised by the assessee stands dismissed.

In the result, appeal of the assessee is partly allowed.

Order pronounced in the open court on 24/08/2023.