ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1, BHARUCH vs. SALYA INDIA PRIVATE LIMITED, BHARUCH

आयकर अपील�य अ�धकरण, सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./ITA No.438/SRT/2018 (AY 2010-11) (Hearing in Physical Court) Assistant Commissioner of Salya India Pvt. Ltd. Income Tax, Circle-1, Ayan Apartment, Limda Vs Bharuch, 1st Floor, Hari Falia, AT & P.O Kamboli, Kunj, Income Tax Office, Bharuch PAN No. AALCS 7799 C Above Bank of Baroda Building, Station Road, Bharuch अपीलाथ�/Appellant ��यथ� /Respondent

�नधा�रती क� ओर से /Assessee by Shri Jayant R Bhatt, C.A राज�व क� ओर से /Revenue by Shri Ashok B.Koli, CIT-DR सुनवाई की तारीख/Date of hearing 23.12.2022 उ�घोषणा क� तार�ख/Date of 23.01.2023 pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of learned Commissioner of Income-tax (Appeals)-3, (CITA), Vadodara dated 22.03.2018 for assessment year 2010-11, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) of Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.03.2013. The Revenue has raised the following grounds of appeal:-

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) erred in deleting the addition made by the AO in the assessment order which was due to non- submission of the relevant details and evidences in respect of the sundry creditors of Rs.84,45,85,996/- and unsecured loans of Rs.26,32,52,300/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has allowed the relief of Rs.84,45,85,996/- towards the sundry creditors by observing that during the remand proceedings the assessee has submitted the confirmation, bank statements, ledger accounts etc. ignoring the fact that the creditor neither responded to the notices issued u/s 133(6) nor furnished the confirmation, bank statements, ledger accounts etc., the Ld. CIT(A) relied on the confirmation submitted by the assessee, whose genuineness and authenticity cannot be said to have been established in absence of production of the confirmation documents and evidence by the creditors. 2.1 The assessee has submitted the details of Mr. Inayat Munshi who is claimed to have paid an amount of Rs.41,40,04,000/- to IIFL on behalf of the assessee, M/s Salya India Pvt.Ltd., The assessee has not submitted any evidence to prove that the payment made by Mr. Inayat Munshi is on behalf of the assessee company. The assessee has also not submitted the required documents to prove the genuineness or transaction between Mr. Inayat Munshi and IIFL. In absence of any evidence, this claim made by the assessee companies not tenable. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) has erred in accepting the unsecured loan received from M/s Ridham Jewels Pvt. Ltd. ignoring the fact that the confirmation and other details were not produced

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. by M/s Ridham Jewels in response to notice u/s 133(6). The confirmation, bank statement, ledger accounts etc., were submitted by the assessee itself and not by the lender which is established by the fact that in response to the subsequent notice u/s 133(6) at both new and old addresses, no response was received. 3.1 The Ld. CIT(Appeals) has failed to appreciate the fact that the assessee has paid the amount of Rs.2,90,00,000/- to M/s Ridham Jewels Pvt. Ltd., even before receiving the loan (as to evident from bank statement) which is a deviation from the normal practice of receiving any loan. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(Appeals) has erred in not enhancing the assessment by Rs.77,78,34,057/- by adding the unsecured loan and sundry creditor amounting to Rs.26,32,52,300/- and Rs.84,45,85,996/- respectively to the returned loss of Rs.33,00,04,239/- which the AO had disallowed and determined at Rs. NIL only. 5. The appellant craves to add to, amend or alter the above ground as may be deemed necessary. Relief claimed in appeal. The order of the CIT(A) on the above issue be set aside and that of the order u/s 143(3) passed by the Assessing Officer be restored.” 2. Brief facts of the case as extracted from the order of lower authorities that assessee is a company engaged in the business of trading in share and real estate. The assessee filed its return of income for assessment year under consideration 2010-11 on 29.03.2011 declaring loss of

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. Rs.33.00 crores. The case of assessee was selected for scrutiny. During the assessment, the Assessing Officer noted that in response to notices issued to the assessee, the AR of the assessee attended and furnished necessary detailed as called for. The Assessing Officer noted that assessee has shown sundry creditors of Rs.84.45 crores, the assessee was asked to furnish the detailed whether same has been paid during the year under consideration. The Assessing Officer noted that no details were furnished by assessee. Further, the assessee has shown unsecured loan of Rs.26.32 crores from Ridham Jewels Private Limited. The Assessing Officer also noted that assessee has debited expenses of Rs.59.132 crores. However, no evidence is provided to prove the genuineness of such expenses. The Assessing Officer instead of disallowing either sundry creditors or treating the said loan non- genuine and income of assessee or disallowing the expenses, rejected the books of assessee and disallowed the entire loss. The assessing officer simply recorded that outstanding liability of loan and sundry creditor and expenses is not proved, the books of accounts of assessee

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. was rejected under section 145(3) and passed assessment order under section 143(3) of the Act on 26.03.2013. Aggrieved by the disallowance of loss and other passing remarks in the assessment order, the assessee filed appeal before Ld. CIT(A). Before Ld. CIT(A) the filed its detailed written submission. The assessee submitted that Assessing Officer treated the sundry creditors of Rs.84.45 crores has not genuine in absence of documentary evidence to prove the genuineness of increase of sundry creditors and entire amount of Rs.84.45 crores was in respect of M/s Ridham Jewels Private Limited. The assessee furnished photo copy of ledger of Ridham Jewels Private Limited, along with all contact notes on 07.12.2012 as well as 20.03.2013. the Assessing Officer insisted for original ledger of M/s Ridham Jewels Private Limited, for want of original ledger, the Assessing Officer concluded that no documentary evidence was filed. The assessing officer asked the assessee to file original ledger account form India Infoline limited vide notice dated 22.03.2013. Notice dated 22.03.2013 was received on 23.03.2013. Such ledger statement was received from

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. India Infoline Limited on 26.03.2013, vide confirmation dated 25.03.3013 by that time, the Assessing Officer passed the assessment order. The evidence of all expenses were furnished during the assessment proceedings the expenses were incurred in share trading and F & O activities and on account of delayed payment charges for genuineness of unsecured loan. The assessee submitted that Assessing Officer treated unsecured loan as non- genuine on account of documentary to prove the genuineness of such unsecured loan due to substantial loss in the assessees business. The assessee was not able to repay the loan as well as interest. The lender was insisted to clear the interest before seeking any confirmation during the assessment proceedings. The assessee explained that entire loan was received through account payee cheque and reflected in the bank statement also. The assessee further explained that total amount of sundry creditors was Rs.84.45 crores which was on account of transaction and equity shares of listed companies. The said liability of Rs.84.45 crores was paid off in full by assessee in next financial year, for which

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. scrutiny assessment was completed and was accepted by assessing officer. 3. The assessee further stated that Assessing Officer vide her show cause notice dated 20.03.2013 asked the assessee for ledger conformation and bank statement. The Assessing Officer passed the assessment order on 26.03.2013. The notice of Assessing Officer was received by assessee on 23.03.2013 and assessee was able to procure certificate/ confirmation dated 25.03.2013 from M/s India Infoline Ltd., about the due balance on 31.03.2010. However, certificate / confirmation could be filed before Assessing Officer. The Assessing Officer passed the assessment order. The assessee further explained that from the date of show cause notice dated 20.03.2013, which was received on 23.03.2013, the assessee was having only one working day for filing confirmation before Assessing Officer. The assessee confirmed the loan of Rs.84.45 crores was paid in full in assessment year 2011-12. The assessment was completed in A.Y 2011-12 and Assessing Officer accepted repayment in assessment year 2011-12. Before Ld. CIT(A) the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. assessee filed confirmation letter dated 25.03.2013, ledger of M/s India Infoline Limited, contract note and bills, invoices of Rs. 20,000/-of accurate financial services and ledger account of Nirmal Bang Securities. The assessee contended that there was sufficient cause which prevented the assessee in producing such evidence, which was called upon by Assessing Officer as only one-day time period was allowed. Thus, it is a sufficient cause within the scope of Rule-46 of Income Tax Rules, 1962 for admission of additional evidence. The assessee reiterates that they were unable to file loan confirmation letter during the assessment proceedings as the assessee suffered huge loss and assessee was not able to pay interest. The loan was received from banking channel and complete record was maintained. The assessee furnished copy of creditors’ conformation, copy of Axis Bank statement of M/s Ridham Jewels Private Limited. To substantiate their contention, the assessee relied on various case law. On the rejection of books of account, the assessee stated that Assessing Officer erred in holding that books of account of assessee as not genuine. The

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. Assessing Officer rejected the books of account under section 145(3) of the Act. The Assessing Officer erred in not relying on evidence submitted by assessee vide letters dated 06.12.2012, 03.01.2013 & 19.03.2013 respectively. The Assessing Officer concluded that not a single evidence was produced during the assessment proceedings, which is devoid of facts. Rather the Assessing Officer has not recorded such evidence in the assessment order, which was furnished during the course of assessment proceedings. The Assessing Officer after rejecting the books of account under section145(3) passed the assessment order under section 143(3). The Assessing Officer ought to have passed the assessment order under section 144, if no evidence was filed before him. The Assessing Officer has erred in rejection of books of account without giving any justification, when audited books were furnished and no adverse remark was made. 4. The Ld. CIT(A) forwarded submission of assessee and evidence to Assessing Officer for seeking her remand report. The Assessing Officer furnished her remand report dated 22.03.2016. The contents of remand report of

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. Assessing Officer are recorded in para-5.1 of the order of Ld. CIT(A). In the remand report, the Assessing Officer, with regard to sundry creditors submitted that during the remand proceedings notices under section133(6) of the Act were issued to India Infoline Limited and Ridham Jewels Private Limited for seeking details and nature of transactions with assessee along with confirmation letters, bank statement, copy of return, balance-sheet and profit & loss account. The Assessing Officer reported that India Infoline Limited vide their letter dated 07.08.2015 stated that they are registered broker of assessee and transacted on various exchange platform on behalf of assessee and furnished copy of ledger account in their books of account from the period of 01.04.2009 to 31.03.2011. The India Infoline Ltd., confirmed that outstanding balance of assessee in their books stood as on 31.03.2010 was at Rs. 84.46 crores and on 31.03.2011 and 31.03.2012 it is “Rs.0 & Rs.0” respectively. The Assessing Officer accepted that on perusal of ledger account of opening balance is shown at Rs.84.45 crores on 31.03.2010 as outstanding and as on 31.03.2011, it was reduced to “Nil”. On the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. transaction of loan, the Assessing Officer reported that Ridham Jewels Private Limited informed that a total bridge loan of assessee was at Rs.29.22 crores during the financial year 2009-10 and the assessee was able to pay Rs.2.90 crores during the same financial year and remaining balance of Rs.26.23 crores was outstanding as on 31.03.2011. The bank statement of assessee was also furnished and on perusal of such bank statement, the Assessing Officer reported that an amount of Rs.2.90 crores was paid back on 20.11.2009. Thus, the amount of Rs.26.32 crores was pending in financial year 2009-10 relevant to assessment year 2010-11. The Assessing Officer further reported that return of Yogesh R Sancheti (proprietor M/s Ridham Jewels Private Limited) was enclosed and as per their return of income, sundry debtors are at Rs.11.12 crores and advance recoverable of Rs.32.12 crores. 5. The copy of remand report was forwarded to assessee for its / reply / rejoinder. The assessee filed its rejoinder/ additional submission dated 30.01.2017, the contents of such rejoinder is recorded in para-5.2 of the order of Ld.

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. CIT(A). The assessee in its submission, besides repeating its earlier submission, submitted that from the confirmation furnished by India Infoline Limited directly to the Assessing Officer, which clearly prove the genuineness of sundry creditors transactions in the books of assessee. On the transaction with Ridham Jewels Private Limited, the assessee besides reiterating its earlier submission, submitted that Ridham Jewels Private Limited had filed their confirmation of loan amount and also furnished their bank statement about transaction with assessee. They have also furnished their return of income. Thus, in response to notice under section 133(6) of the Act, the balance confirmation, bank statement, PAN, return of income and balance-sheet were also filed. Thus, the identity, genuineness and creditworthiness of lender is proved. 6. The ld CIT(A) vide his direction/ letter dated 14.03.2017 again asked the assessing officer to obtain balance-sheet of Yogesh R Sancheti, (proprietor of Ridham Jewels Private Limited) for the year ending on 31.03.2010 and to find out if the loan amount of Rs.26.32 crores as shown to the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. “asset side” of the balance-sheet of Yogesh R Sancheti and furnished her remand report. The Assessing Officer again furnished remand reported dated 15.02.2018. The contents of remand report are recorded various sub-paras of para-5.2 of the order of Ld. CIT(A). In the remand report, the Assessing Officer reported that notice under section133(6) of the Act was issued to Ridham Jewels Private Limited on 21.04.2017. In response to notice issued under section 133(6) the reply dated 15.05.2017 was received. In the reply, it was informed that assessee obtained a big total loan of Rs.29.22 crores in financial year 2009-10 and was able to pay Rs.2.90 crores during same financial year and balance Rs.26.32 crores was recoverable. During the financial year, 2010-11, the assessee was able to pay Rs.20 lakh vide entry dated 29.04.2010 but no further documents was filed by lender whether remaining unsecured loan of Rs.26.12 crores was repaid by assessee and whether loan amount is shown to the “asset side” of their balance-sheet. The assessee again in response to the remand report, filed their further

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. rejoinder dated 16.03.2018 repeating the earlier stand taken by assessee. 7. The Ld. CIT(A) after considering the assessment order, various submission of assessee, remand reports dated 22.03.2016 and 07/08/2017 furnished by Assessing Officer and the rejoinder thereto, noted that Assessing Officer passed the assessment order by taking view that genuineness of sundry creditors and unsecured loan are not proved. During the appellate proceedings, the assessee furnished additional evidence to support its sundry creditors and unsecured loan along with profit and loss account. The Ld. CIT(A) held that considering the circumstances of the case, he was satisfied that assessee has sufficient cause for not furnishing such evidence during the assessment proceedings, therefore, keeping in view in the principle of natural justice, the additional evidences was admitted. The Assessing Officer was asked to furnish her comments by way of remand report on the additional evidence filed by the assessee during the appellate proceedings. The Ld. CIT(A) further recorded that Assessing Officer furnished two separate detailed

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. remand reports commenting on various additional evidence that Assessing Officer made her comments on the sundry creditors as well as on the loan amount. The Ld. CIT(A) noted that such observation of Assessing Officer that party has not submitted bank statement, is factually wrong as he failed to mention that party has submitted details of banking transaction with the assessee. In its reply to notice under section 133(6) of the Act, merely party has not furnished bank statement, cannot be denied that transaction happened and the balances were outstanding proved the genuineness of balance outstanding. Therefore, the objection of Assessing Officer that balance could not be verified is not established. On the aspect of unsecured loan, during remand proceedings, the lender replied both the times in response to notice issued under section 133(6) of the Act. The lender furnished required details of loan e.g. confirmation, ledger account, return of income, audited financial statement, bank statement. Though, the Assessing Officer reported contrary that required details were not furnished. The Ld. CIT(A) after considering the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. confirmation audited financial statement, ledger account, return of income of lender and held that the claim of unsecured loan of outstanding cannot be denied and the genuineness of same cannot be doubted. The Ld. CIT(A) held that books of assessee was rejected only on the ground of genuineness of sundry creditors and unsecured loan and expenses were not proved. In the remand report, the Assessing Officer has not doubted the genuineness of such sundry creditors and unsecured loan. The assessee has proved with supporting documents and there is no doubt about the genuineness of such transaction. The Ld. CIT(A) on such observation of Assessing Officer, held that rejection of books of account was not warranted. Thus, when genuineness of sundry creditors and unsecured loan were proved by beyond doubt the Assessing Officer has no occasion to make such addition. Aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 8. We have heard the submissions of Ld. Commissioner of Income-Tax-Departmental Representative (ld. CIT-DR) for the Revenue and ld Authorized Representative (Ld.AR) for

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. the assessee and have gone through the orders of the lower authorities carefully. The Ld. CIT-DR for the Revenue supported the order of Assessing Officer and submits that during the assessment, the assessee failed to prove the genuineness of sundry creditors and transaction of unsecured loan. The Assessing Officer made addition of Rs.84.45 crores on account of sundry creditor and addition of Rs.26.32 crores on account of unsecured loan. The assessee was offered opportunity to explain both the additions, but assessee failed to file confirmation of sundry creditors as well as conformation of lender about unsecured loan and genuineness of such transaction. The Ld. CIT-DR submits that Ld. CIT(A) deleted both the additions and erred in accepting the additional evidence produced by assessee, during the appellate stage. The Ld. CIT-DR for the revenue submits that matter may be remitted back to the file of Assessing Officer for adjudication of issue afresh in accordance with law. 9. On the other hand, Ld. AR for the assessee strongly objected against the submission raised by Ld. CIT-DR for the Revenue. The Ld. AR for the assessee invited our

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. attention by referring the assessment order and would submit that no addition either on account of sundry creditors of Rs.84.45 crores or unsecured loan of Rs.26.32 crores were made by Assessing Officer in the assessment order. The Assessing Officer merely rejected the books of account by making remarks that no documentary evidence either to prove the genuineness of sundry creditors or genuineness of unsecured loan or expenses were filed by assessee. The Assessing Officer merely made her observation for rejecting the books of accounts and disallowed loss of Rs.33.00 Crore. Once no addition was made by Assessing Officer either on account of sundry creditors or on account of unsecured loan, the appeal of the Revenue is not at all maintainable. The Ld. AR for the assessee submits that the Assessing Officer only disallowed the loss by rejecting the books of account but the rejection of books of account was reversed by Ld. CIT(A) in appeal. No grounds of appeal against the setting aside order of rejection of books, is raised by Assessing Officer in the grounds of appeal. The grounds of appeal

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. are drafted in a casual manner. The grounds of appeal are not sustainable. 10. The ld. AR for the assessee submits that Assessing Officer issued show cause notice dated 20.03.2013 to the assessee to provide ledger confirmation of creditors. The notice dated 20.03.2013 was received by assessee only on 23.03.2013. The assessee was able to procure certificate / confirmation from the sundry creditors India Infoline Limited on 25.03.2013 and approached before Assessing Officer next day on 26.03.2013 to file such confirmation, however, the assessee was informed by Assessing Officer that she had already passed assessment order. The Ld. AR for the assessee submits that basically only one-day time was allowed for furnishing the confirmation of creditors. During the appellate stage, the assessee filed detailed written submission and furnished the confirmation of creditors. The assessee also prayed for admission of additional evidence only issue of sundry creditors as well as unsecured loan. The Ld. AR for the assessee reiterated that since no such additions were made by Assessing Officer in the assessment order, such reference of issue

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. was basis for rejecting the books of account. So the assessee was justified in proving the genuineness of sundry creditors as well as unsecured loan. The written submission filed by assessee were forwarded to the Assessing Officer to furnish her remand report. On this direction of Ld. CIT(A) the Assessing Officer furnished remand report dated 22.03.2016 and dated 07.08.2017. In the remand report, the Assessing Officer accepted that India Infoline Limited vide their reply dated 08.05.2017, submitted copy of ledger account, copy of return of income, confirmation and also confirmed that they are registered broker for the assessee who had booked various shares for assessee. They have also confirmed the fact in the next assessment year 2011-12, the entire amount was repaid. On the reference of unsecured loan, the Ld. AR for the assessee submits that during the remand proceedings, the creditor furnished confirmation letter of balance of outstanding, their return of income, ledger account and bank statement. The Ld. CIT(A) after considering the remand report of Assessing Officer held that rejection of books of account was not justified and directed the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. Assessing Officer to delete the addition of disallowance of loss suffered by assessee. The Ld. AR for the assessee further submits that there was no addition under section 68 of the Act or otherwise about sundry creditors or unsecured loan. Therefore, the deletion of such amount is unwarranted, uncalled for and was devoid of merit and such reference was made by Assessing Officer for rejecting the books of account on flimsy ground by taking clue from the assessees affairs, which includes credit balance from India Infoline Limited and loan from Ridham Jewels Private Limited and of expense. The books of account of assessee was duly audited and no reference or whisper about the audited books were made no adverse remarks was made by auditor of assessee. The Assessing Officer has not pointed out any defect in the books of assessee as required under section145(3) of the Act and the order of rejection of books of account is without any merit, and support of applicable law. The Ld. AR for the assessee submits that grounds of appeal framed by Revenue / Assessing Officer should be dismissed firstly as the ground are infructuous. Even otherwise, if considered on

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. merit, the Ld. CIT(A) duly considered the evidence provided by assessee and accepted by Assessing Officer in her remand report. The Assessing Officer was provided complete information by India Infoline Limited during the remand proceeding, which consists of statement of India Infoline Limited, in the books of assessee, statement of assessee and in the books of India Infoline Limited and bank statement of assessee in the books of assessee as well as India Infoline Ltd. and vice versa. 11. The Ld. AR for the assessee submits that entire sundry creditors were repaid in subsequent assessment year. The assessment for subsequent assessment year was completed under section 143(3) on 31.03.2014 and the repayment of sundry creditors was not doubted by Assessing Officer. The ld. AR for the assessee submits that it is settled position under law that if the repayment is not doubted and addition of credit in the books of assessee cannot be made. The Ld. AR for the assessee also filed copy of assessment for the AY 2011-12 dated 21.03.2014 passed under section 143(3) in case of assessee. The Ld. AR for the assessee submits that he has placed on record

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. the remand report dated 22.03.2016 as well as dated 07.08.2017, which were obtained from the record of Ld. CIT(A). 12. In rejoinder, the Ld. CIT-DR for the Revenue submits that the matter may be restored back to the file of Assessing Officer for examining the issues of sundry creditor and unsecured loan, afresh in accordance with law. 13. On the contrary, Ld. AR for the assessee strongly objected on the submission made by Ld. CIT-DR for the Revenue that the case relates to assessment year 2010-11 and the Assessing Officer as well as senior officer of Revenue has not taken any remedial action either section 147 or section 263 for examining such issue. Therefore, the Revenue cannot use the Tribunal as tool and technique for second innings even otherwise when no such addition either on account of sundry creditors or unsecured loan was made by Assessing Officer. Therefore, the Ld. CIT-DR for revenue has no right to improve case of Assessing Officer. The tribunal cannot consider new material or information which came to the notice of assessing officer after passing the assessment order. The appellate

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. procedure is designed to adjudicate matter that were originally framed in the assessment order and new material cannot be considered. The issues were otherwise examined by ld CIT(A) after granting opportunity to the assessing officer and the assessee otherwise has fully discharged its onus on both the issues, on which the assessing officer made passing remarks, without making such additions. The support his various contentions, the ld AR for the assessee relied on the following decisions;  H. K. Pujara Vs ACIT (ITA No. 2034/Mum/2014 dated 09.05.2016, with corrigendum of even date),  Shapoorji Pallanji Vs CIT (44 ITR 891),  Sardari Lal & Co. PCIT (251 ITR 864 (Delhi FB),  DCIT Vs Phoenix Lamps (79 ITR 276 Delhi-Trib),  Orrisa Corporation Vs CIT (159 ITR 78-SC),  Daulatram Rawatmal (87 ITR 349-SC),  Rohini Builders Vs CIT (256 ITR 360 Guj),  Gaurav Triyung Singh Vs CIT (243 ITR 531- Bom),  PCIT Vs Ami Industries India Private Limited (424 ITR 219- Bom),  Sarogi Credit Corporation (103 ITR 334-Pat),  H Hastimal (49 ITR 273 Mad),  S C Ghosal ( 106 ITR 344 Cal),  Bedi & Co Private Limited (144 ITR 352 Kar) and  DCIT Vs Mahalaxmi TMT Private Limited (190 ITD 582- Pune-Trib)

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. 14. We have considered the rival contention of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by the ld AR for the assessee. We find that the assessee while filing return of income declared loss of Rs. 33.00 crore. During the scrutiny assessment the assessing officer rejected the books of account by the assessing officer by making reference of the facts that the assessee has shown sundry credit and unsecured loan and certain expenses. The assessee was asked to prove the genuineness of sundry creditors and unsecured loan and expenses. The assessee failed to prove such claims as no documentary evidences was filed. The assessing officer on the basis of his observation on the above said three issues held that there is no credibility of books of accounts and rejected the same under section 145(3) and disallowed the entire loss of Rs. 33.00 Crore only. No addition was made by assessing officer, except of disallowance of loss claimed at the time of passing assessment order. As recorded above, before ld CIT(A) the assessee filed detailed written submissions and claimed

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. that during the assessment the assessee filed required details. The assessing officer was insisting to file original of the ledger accounts and confirmations of India Infoline limited and creditors. It was also claimed that for filing such evidences/ documents no sufficient time was granted to the assessee. The assessee obtained such confirmation and ledger of creditors and before it could be filed the assessing officer passed the assessment order in haste. The assessee made prayed before ld CIT(A) to admit such evidence under Rule 46, as the assessee was prevented by sufficient cause. The additional evidences of the assessee was accepted by the ld CIT(A) by passing order on admissibility of such evidences. The ld CIT(A) referred all such evidences to the assessing officer for his remand report. The assessing officer initiated remand proceedings and issued notice under section 133(6) to India Infoline Limited as well as to Ridham Jewels. We find that both parties responded to the notices of the assessing officer and furnished requires details. On receipt of such requires details, the assessing officer filed

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. his remand report dated 22.03.2016 and second report dated 07/08/2017. 15. We find that in the remand report dated 2.03.2016, on the issue of sundry creditors, the assessing officer reported that during the remand proceedings notices under section133(6) were issued to India Infoline Limited and Ridham Jewels Private Limited for seeking details and nature of transactions with assessee along with confirmation letters, bank statement, copy of return, balance-sheet and profit & loss account. India Infoline Limited vide their letter dated 07.08.2015 replied that they are registered broker of assessee and transacted on various exchange platform on behalf of assessee and furnished copy of ledger account in their books of account from the period of 01.04.2009 to 31.03.2011. The India Infoline Ltd., confirmed that outstanding balance of assessee in their books stood as on 31.03.2010 was at Rs. 84.46 crores and on 31.03.2011 and 31.03.2012 it is “Rs.0 & Rs.0” respectively. We find that assessing officer noted that on perusal of ledger account of opening balance is shown at Rs.84.45 crores on 31.03.2010 as

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. outstanding and as on 31.03.2011, it was reduced to “Nil”. On the transaction of loan, from Ridham Jewels Private Limited, it was stated by assessing officer that the said creditors informed that a total bridge loan of assessee was at Rs.29.22 crores during the financial year 2009-10 and the assessee was able to pay Rs.2.90 crores during the same financial year and remaining balance of Rs.26.23 crores was outstanding as on 31.03.2011. The creditors also furnished their bank statement, the Assessing Officer reported that an amount of Rs.2.90 crores was paid back on 20.11.2009. Thus, amount of Rs.26.32 crores was pending in financial year 2009-10 relevant to assessment year 2010-11. Return of Yogesh R Sancheti (proprietor M/s Ridham Jewels Private Limited) was also furnished and as per their return of income, sundry debtors are at Rs.11.12 crores and advance recoverable of Rs.32.12 crores. 16. We find that ld CIT(A) again vide his direction dated 14.03.2017 directed the assessing officer to obtain balance-sheet of Yogesh R Sancheti, (proprietor of Ridham Jewels Private Limited) for the year ending on 31.03.2010

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. and to find out if the loan amount of Rs.26.32 crores as shown to the “asset side” of the balance-sheet of Yogesh R Sancheti and furnished her remand report. The Assessing Officer as per the direction of ld CIT(A) again furnished remand reported dated 15.02.2018. In the remand report, the Assessing Officer reported that notice under section133(6) of the Act was issued to Ridham Jewels Private Limited on 21.04.2017. In response to notice issued under section 133(6) the reply dated 15.05.2017 was received. In the reply, it was informed that assessee obtained a loan of Rs.29.22 crores in financial year 2009- 10 and was able to pay Rs.2.90 crores during same financial year and balance Rs.26.32 crores was recoverable. During the financial year, 2010-11, the assessee was able to pay Rs.20 lakhs on 29.04.2010, however, no documents was filed by lender whether remaining unsecured loan of Rs.26.12 crores was repaid by assessee and whether loan amount is shown to the “asset side” of their balance-sheet. We find that the ld CIT(A) after considering confirmations, audited financial statement, ledger account, return of income of lender and

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. held that the claim of unsecured loan of outstanding cannot be denied and the genuineness of same cannot be doubted. The Ld. CIT(A) categorically held that books of assessee was rejected only on the ground of genuineness of sundry creditors and unsecured loan and that expenses were not proved. However, in the remand report, the Assessing Officer has not doubted the genuineness of such sundry creditors and unsecured loan. The ld CIT(A) held that the assessee has proved with supporting documents and there is no doubt about the genuineness of such transaction. We find that ld. CIT(A) on such observation held that rejection of books of account was not warranted. It was also held that when genuineness of sundry creditors and unsecured loan were proved by beyond doubt the Assessing Officer has no occasion to make such addition. 17. Before us, the ld AR for the assessee while making his submissions vehemently argued that the entire sundry credit was repaid in the next financial year, which has been accepted by the assessing officer while passing the assessment order under section 143(3). On perusal of

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. assessment order for subsequent assessment year passed under section 143(3) on 21.03.2014, we find that the assessing officer accepted the re-payment of impugned sundry credit as there is no adverse finding to that extent. 18. The Hon’ble Jurisdictional High Court in CIT Vs Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 25 (Guj) held that where department has accepted repayment of loan in subsequent financial year, no addition was to be made in the current year on account of cash loan. Further, in case of CIT Vs Ranchod Jivabhai Nakhava (2012) 21 taxmann.com 159 (Gujarat), the Hon’ble jurisdictional high court held that where the lenders of the assessee are income tax assessee whose PAN have been disclosed, the assessing officer cannot not ask assessee to further prove genuineness of the transaction without first verifying such facts from income tax returns of lenders. We also find that in the present case, the assessee furnished all such details of the lenders/ depositors. We further find that there is no allegation of assessing officer that any of such lenders/ creditors are part of syndicate of accommodation entry provider. There is no evidence that

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. credit/ advance in the books of assessee was result of some circular transactions. 19. Now again adverting to the primary submissions of ld AR for the assessee that the assessing officer in fact has not made any addition either on account of disallowance of sundry creditors or unsecured loan, in fact such observation was the basis of rejection of books of account. As we have noted that the ld CIT(A) clearly held that the basis of rejection of books of account was not justified. We find that books of account of assessee was duly audited and no reference or whisper about the audited books were made no adverse remarks was made by auditor of assessee. no specific defect was pointed in the books of assessee as required under section145(3) of the Act, thus, such rejection lacks the statutory conditions, which we do not approve. Hence, we do not find any infirmity or illegality in the order passed by ld CIT(A), which we affirms, with our additional observations. Thus, in view of the aforesaid discussions, we do not find any merit in the ground No.1 to 3 of appeal raised by the revenue.

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. 20. Now adverting to the ground No.4 of the appeal, which relates to enhancement of the assessment by Rs. 77.78 Crore. We find that during the hearing, though, no specific submissions were made by ld CIT-DR for the revenue, except for making prayer that the issue of the sundry creditors and loan may be restore to the file of assessing officer. 21. On the other hand, the ld AR for the assessee strongly objected to such submissions of ld CIT-DR for the revenue. The ld AR for the assessee again retreated and submitted that the assessing officer or ld DR for the revenue cannot use the Tribunal as tool and technique for second innings and Ld. DR for revenue has no right to improve case of Assessing Officer. The Tribunal cannot consider new material or information which came to the notice of assessing officer after passing the assessment order. The appellate procedure is designed to adjudicate matter that were originally framed in the assessment order and new material cannot be considered. Such issue was never raised by assessing officer during first appellate stage. The ld AR for the assessee submits that the

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. grounds of appeal raised by the revenue is misconceived and not to be entertained. 22. We have considered the contentions of both the parties and perused the orders of lower authorities carefully. We find that the assessing officer raised the plea in the corresponding ground of appeal for enhancement of assessment. We further find that during the first appellate stage, the ld CIT(A), before adjudication various pleas of the assessee, granted full opportunity to the assessing officer to investigate the facts on various submissions of the assessee and to file his response by way of remand report. The assessing officer filed three remand report and no such plea was raised nor any basis of such enhancement was raised. Moreover, the assessing officer himself accepted the transaction of sundry creditors and accepted the repayment in next assessment year in the assessment order passed under section 143(3). As recorded above the assessee also fully discharged its onus on unsecured loan. It is settled position under law that after passing the assessment order the assessing officer become functus officio and if any material or information

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. comes to his notice subsequently, then he is required to follow the course of action prescribed under Income Tax Act and not otherwise. The assessing officer has neither initiated action under section 154 or 147, if he was of the view that assessment was required to be enhance or reopened, within the time period prescribed under Act. Even otherwise, we find that once, the contention of the assessee was accepted, after receiving remand report from assessing officer, and no such plea was raised by assessing officer, hence, there was no scope left for enhancement. Therefore, we do not find any merit in the ground of appeal raised by the revenue. In the result, the ground No. 4 of appeal raised by the Revenue is dismissed. 23. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 23/01/2023. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद�य/ACCOUNTANT MEMBER] [�याियक सद�य JUDICIAL MEMBER] Surat, Dated: 23/01/2023 Dkp. Out Sourcing Sr.P.S

ITA No.438/SRT/2018 (A.Y 10-11) Salya India Pvt.Ltd. Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat