M/S TJR PROPERTIES PVT. LTD.,CHANDIGARH vs. ACIT, CC-2, CHANDIGARH

आदेश/ORDER PER A.D.JAIN, VICE PRESIDENT

ITA No.5/CHD/2023 and ITA No.145/CHD/2023 are

cross appeals filed by the assessee and the Revenue,

ITA 5 &145/CHD/2023 A.Y. 2017-18 2

respectively, against the order dated 15.12.2022 passed by

the ld. CIT(A)-3, Gurgaon pertaining to Assessment Year

2017-18.

ITA 5/CHD/2023

following Grounds of appeal :

ITA 5 &145/CHD/2023 A.Y. 2017-18 3 7. That the learned CIT(A) has wrongly upheld addition of Rs. 10,50,000/- on account of Income deposited in cash by the appellant without any justification. 8. That the learned CIT(A) has wrongly upheld addition of Rs. 14,20,000/- u/s 68 of the Act on surmises and conjectures. 9. That the learned CIT(A) has wrongly upheld disallowance of loss of Rs.50,231/- without discussing the same in the impugned order. 10. That the learned CIT(A) has wrongly upheld disallowance of depreciation on vehicle to the extent of Rs.5,62,672/- without any justification. 11. That the appellant craves leave to add, alter, amend or withdraw any grounds of appeal before the final hearing.

2.1 The following additional Grounds have also been

taken by the Assessee:

stated at the bar that he does not wish to press the

additional grounds. Rejected as not pressed.

conducted on the Assessee company, nor any ‘Panchnama’

was prepared in its name, the provisions of section 153A of

ITA 5 &145/CHD/2023 A.Y. 2017-18 4 the Income Tax Act, 1961 (in short 'the Act') are not

applicable and so, the assessment completed u/s 153A of the

Act is against the provisions of law. This Ground

corresponds to Ground No. (b) raised by the Assessee before

the ld. CIT(A). The Assessing Officer passed the assessment

order dated 30.12.2019 u/s 153A(1)(b) read with

section143(3) of the I.T.Act, making various additions. Before

the ld. CIT(A), the Assessee raised this issue by way of

Ground No. (b).

observed, inter alia, that a letter dated 7.9.2022 had been

sent to the A.O., requiring him to furnish details of the

warrant executed / ‘Panchnama’ prepared,’ on the basis of

which, proceedings u/s 153A of the Act were initiated; that

in response, the A.O. had furnished the copy of the warrant

which was duly executed in the name of the Assessee

on6.2.2018, in respect of the premises situated at SCO 80-

81, 4th Floor, Sector 17-C, Chandigarh; that the said warrant

was found containing the name of the Assessee; that

accordingly, it was found that the warrant of authentication

u/s 132(1) of the Act had been executed in the name of the

ITA 5 &145/CHD/2023 A.Y. 2017-18 5 Assessee; and that, therefore, the A.O. was justified in

initiating assessment proceedings u/s 153A of the Act.

contended that neither any search was conducted on the

Assessee company, nor any ‘Panchnama’ was prepared in its

name; that the Assessee company filed an application under

the RTI Act, bearing Registration No. CCITC/R/E/20/0001

dated 7.1.2020, seeking information with regard to copy of

last warrant, a copy whereof has been placed at Assessee’s

Paper Book (‘ABP’),pages 346-350. It has been contended

that the said application of the Assessee was transferred

(APB 351-352) to the DGIT, ITO office of PCIT (Investigation),

Ludhiana and the DCIT, Central Circle-2, Chandigarh (APB

354-356) and finally to the DCIT, Central Circle-2, Mohali

(APB 357); that none of the Income Tax Authorities provided

the Assessee company with the copy of the said warrant; that

the ACIT, Central Circle-2, Chandigarh vide order (APB 360-

361), dated 5.2.2.020, passed u/s 7(5) of the RTI Act, denied

the Assessee company with a copy of the search warrant.

the Act was completed against the provisions of the law, as

neither any search u/s 132 was conducted on the Assessee

ITA 5 &145/CHD/2023 A.Y. 2017-18 6 company, nor any ‘Panchnama’ was prepared in its name;

that though the Assessee specifically requested the

Assessing Officer to provide it with a copy of the search

warrant in the name of the Assessee company, no such

search warrant was provided to the Assessee company; that

neither the name of the company was mentioned in the

‘Panchnama’; nor a copy of the search warrant was provided

to the Assessee company, despite repeated requests. It has

been contended that the search was conducted at the

residential premises of the Assessee company, namely Shri

Tarloki Nath Singla and Shri Jagdish Rail Gupta in their

individual capacity; that simultaneously, search was also

conducted in the business premises at M/s Kansal Singla

and Associates, Chandigarh, at SCO 80-81, 4th Floor, Sector

17-C, Chandigarh, which is also the registered address of the

Assessee company; that during the search of M/s Kansal

Singla and Associates, regular books of account along

withbank details of the company were found; that one of the

directors of the company, Shri T.N.Singla, who is also a

partner in M/s Kansal Singla and Associates, was present at

the time of search, but his signatures were not taken on the

‘Panchnama’ prepared in the name of M/s Kansal Singla and

ITA 5 &145/CHD/2023 A.Y. 2017-18 7 Associates; that on the request of the Assessee company, the

ld. CIT(A), vide letter dated 7.9.2022, directed the A.O. to

furnish a copy of the search warrant / ‘Panchnama’

prepared,on the basis of which, the assessment u/s 153A

had been completed in the case of the Assessee company;

that the ld CIT(A), in the impugned order, has similarly

mentioned that the “Assessing Officer furnished the copy of

the warrant which was duly executed in the name of the

appellant on 16.2.2018 in respect of the premises situated at

SCO 80-81, 4th Floor, Sector 17-C, Chandigarh. The said

warrant was found containing the name of the appellant”;

that the ld. CIT(A), by simply observing so, agreed with the

action of the Assessing Officer and held that the Assessing

Officer was justified in initiating assessment proceedings u/s

153A of the Act; that the ld. CIT(A) did not provide the

Assessee with the copy of the warrant, nor reproduced the

same in the order; that since none of the Income Tax

Authorities provided the Assessee with the copy of the search

warrant, the Assessee company was suspicious that its name

was not mentioned in the search warrant.

original search warrant from the Department, which was

ITA 5 &145/CHD/2023 A.Y. 2017-18 8 produced. The name of the Assessee company was found

mentioned in the search warrant. It is seen that a copy of

the ‘Panchnama’ has been placed at APB 519-522. At APB

519, at item A, it is mentioned: ‘Warrant in the case: M/s

Kansal Singla and associates’; at item (B), it has been stated

that: ‘Warrant to search (Details and Ownership of place of

search): M/s Kansal Singla and Associates SCO 80-81, 4th

Floor, Sector 21C, Chandigarh. So, the name of the Assessee

Company, is not mentioned in this ‘Panchnama’. Also, this

‘Panchnama’ does not bear the signature of Shri T.N.

Singla,Director of the Assessee Company, who is stated to

have been present at the place of search at the time of the

search.

Department, as contained in the oral arguments addressed

by the ld. CIT (DR) and the written submissions dated

5.6.2023 are that providing of the copy of the warrant is not

a right of the searched persons; that u/s 96 of the CrPC read

with section 76 of the Evidence Act, a certified copy of a

search warrant could be obtained on payment of legal fee.

Reliance has been placed on the decision of the Hon'ble

Delhi High Court in the case of ‘MDLR’, 361 ITR 405

ITA 5 &145/CHD/2023 A.Y. 2017-18 9 (Delhi), wherein, it has been held in para 24, that it will be

salutary and proper that a copy of the search warrant be

furnished to the occupant or the person searched; and that

this would curtail any allegation of interpolation, addition of

names, etc. On the issue as to whether it is necessary to

have the names of the person searched in the ‘Panchnama’,

the ld. DR has sought to place reliance on ‘MDLR’ (supra),

wherein, the Hon'ble Delhi High Court has held that since

the 22 parties whose names were not mentioned, did not

object to the order u/s 153A in the petition u/s 264

pursuant to the assessment order, such objection was not

justified in the writ petition filed; that the assessment order

under section 153A cannot and should not be permitted to

become a matter of writ petition as the First Appellate

Forum; and that the First Appellate Statutory Authority

could deal statutorily with the questions and issues raised in

the writ petition the jurisdiction of the First Appellate

Authority having not been invoked with the appeals preferred

by the writ petitioners.

main person on the search warrant, the ld. CIT (DR) has

contended that there is no reequipment of service of warrant

ITA 5 &145/CHD/2023 A.Y. 2017-18 10 on the main person, who is usually occupied at other

premises, that the search warrant is required to be served on

the witnesses.

been mentioned in the search warrant, which was produced

in the original by the Department before us. Therefore, this

puts this entire controversy at rest and the Assessee’s

objection in this regard is found to be unjustified and it is,

accordingly, rejected, while rejecting Ground No.2.

correspond to Additional Ground Nos. 1, 2 taken by the

Assessee before the ld. CIT(A). The matter pertaining to

Ground Nos. 3 and 4 has been effectively decided by us in

the preceding paragraphs, where we have found that the

search warrant did contain the name of the Assessee

company. Therefore, the grievance of the Assessee by way of

Ground Nos. 3 and 4 also does not contain any merit and,

accordingly, Ground Nos. 3 and 4 are rejected.

based on any incriminating material found during the

search. In this regard, the ld. CIT(A) has held that the

ITA 5 &145/CHD/2023 A.Y. 2017-18 11 Assessing Officer was having jurisdiction to assess the

income of the Assessee on the basis of the material available

at the time of the assessment and he was not to restrict the

additions subject to the incriminating material found during

the search. For holding so, the ld. CIT(A) has placed reliance

on the decision of the Hon'ble Kerala High Court in the case

of “CIT vs. KPUmmer”, (citation not given) in the impugned

order; the decision of the Hon'ble Allahabad High Court in

the case of ‘Rajkumar Arora’, 367 ITR 517 (Allahabad) ; the

decision of the Hon'ble Kerala High Court in the case of ‘EN

Gopakumar vs. CIT’, (2016) 75 taxman.com 215 and the

decision of the Hon'ble Allahabad High Court in the case of

‘CIT vs. Kesarvani Zarda Bhandar’, ITA No.270/2014. The ld.

Counsel for the Assessee, on this issue, has contended that

the A.O. issued notice u/s 153A of the Act on 09.03.2019,

against which, the company filed return and challenged the

initiation of proceedings u/s 153A vide letter dated

03.05.2019 (APB-1); and that the additions made by the

Assessing Officer are not emanating out of the search

proceedings, as no incriminating material or evidence was

found during the course of the alleged search related to the

Assessee company for the year under consideration.

ITA 5 &145/CHD/2023 A.Y. 2017-18 12 Reliance in this regard is placed on the order of the Hon'ble

Apex Court wherein, the SLP filed by the Department in the

cases of ‘Meeta Gutgutia’ 96 taxmann.com 468/257 Taxman

441 (SC) and ‘Kabul Chawla’ were dismissed by the Hon'ble

Apex Court. The relevant portion is re-produced below -

"Recently, Hon'ble ITAT Delhi in Alankar Saphire Developers v. Dy. CIT [2020] 116 taxmann.com 389/184 ITD 847 (Delhi - Trib.) decided the issue that if no incriminating material is found in the search, no addition can be made u/s 153A. During the course of hearing in this case the assessee relied on the decision of Hon'ble Delhi High Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi) and Pr. CIT v. Meeta Gutgutia [2017] 82 taxmann.com 287/248 Taxman 384/395 ITR 526 (Delhi). On the basis of arguments of the parties the Tribunal noted that SLP filed by the Department in the case of Kabul Chawla (Supra) was dismissed by Hon'ble Apex Court for low tax effect and SLP filed before Supreme Court in the case of Meeta Gutgutia (supra) was dismissed by Hon'ble Supreme Court in Pr. CIT v. Meeta Gutgutia [2018] 96 taxmann.com 468/257 Taxman 441 (SC) by observing that "We do not find any merit in this petition". The Department submitted that SLP on the similar issue has been admitted by Hon'ble Apex Court in M/s Apar industries (Citation not provided).

ITA 5 &145/CHD/2023 A.Y. 2017-18 13 The Tribunal however held that once the SLP is not admitted, the decisions given by the High Court in the case of Kabul Chawla and Meeta Gutgutia became final and binding."

therefore, the addition made by the learned assessing officer

cannot be sustained in the present case in the order passed

under section 153A of the Act, in the absence of any

incriminating material found during the course of search

action, where there was no pending assessment which could

be said to have abated on the date of search.

Apex Court in the case of ‘PCIT vs M/s Abhisar Buildwell P.

Ltd.’, CA No. 6580, dated 24.04.2023, wherein, the Hon’ble

court held that “in case no incriminating material is

unearthed during the search, the AO cannot assess or

reassess taking into consideration the other material in

respect of completed assessments/unabated assessments.

Meaning thereby, in respect of completed/unabated

assessments, no addition can be made by the AO in absence

of any incriminating material found during the course of

search under Section 132 or requisition under Section 132A of

the Act, 1961."

ITA 5 &145/CHD/2023 A.Y. 2017-18 14 17. Reliance has further been placed on the judgment of

the Hon'ble High Court of Bombay, in ‘Pr. CIT Vs. Sandeep

Agarwal (HUF)’, dated 09/10/2023 (Bombay), wherein it was

held that - "We dismiss the appeal, holding that the only

issue which arises for determination will have to be answered

against the Revenue and favouring the Assessee given the

decisions of the Hon'ble Supreme Court in ‘Abhisar Buildwell

(P.) Ltd.’, (supra) and ‘U.K. Paints (Overseas)’, (supra). The

clarification issued in both these judgments is, however,

issued in these matters as well in the context of reassessment

proceedings under Sections 147 and 148 of the IT Act.

However, as noted above, all contentions of all parties are

kept open in this context."

wrongly made addition u/s 153A(l)(b) r.w.s. 143(3) of the Act

on the direction of the third party without having any

incriminating material on record, as no incriminating

material/document was unearthed by the Department during

the search proceeding. Hence, assessment u/s 153A(l)(b)

r.w.s. 143(3) of the Income Tax Act, 1961 has been wrongly

made, against the provisions of the law.

ITA 5 &145/CHD/2023 A.Y. 2017-18 15 19. It has been submitted that the Assessing Officer

wrongly made additions in the hands of the company, of all

credit entries in the bank, regarding which, sufficient and

credible information including the source by way of evidence

had been submitted during the assessment proceeding for

discharging its burden and which additions, are not

sustainable in law, as no inquiry has been undertaken by the

Assessing Officer and/or any material brought on record

establishing the amount of bank entries as unexplained,

thereby inviting the application of provisions of the Section

68 of the Act.

on Page 126, has observed that a letter dated 07.09.2022

was sent to the A.O., requiring him to produce a copy of the

search warrant executed / ‘Panchnama’ prepared on the

basis of which proceedings u/s 153A were initiated on the

company. The CIT(A) observed that the AO was justified in

initiating proceedings u/s 153A of the Act, as warrant of

authorization u/s 132(1) was executed in the name of the

company on 16.02.2018 at SCO 80-81, 4th Floor,

Chandigarh.

ITA 5 &145/CHD/2023 A.Y. 2017-18 16 21. It has been submitted that the CIT(A), on pages 127 &

128 of his order, has observed that the Assessee has stated

that the additions made in the order u/s 153A of the Act

cannot be sustained in the absence of any incriminating

material found during the search proceedings; that the

CIT(A) observed that consideration of above ground of

appeal, it had been noted that in terms of the provisions of

section 153A(l)(b), the Assessing Officer was required to

assess/reassess the total income for the year under

consideration; that the CIT(A) observed that it has been held

by the Hon'ble Kerala High Court in the case of ‘CIT vs KP

Ummer’ that when a notice u/s 153A is issued, it enables the

Department to carry out assessment/re-assessment with

respect to 6 immediate prior years and this does not require

any incriminating material recovered during search relating

to those prior years in which there is no time left on the date

of search for an assessment u/s 143 (3); that the CIT(A)

observed that the same view has been up-held by the Hon'ble

Allahabad High Court in the case of ‘Rajkumar Arora’; that

the CIT(A) observed that the Hon’ble Kerala High Court, in

the case of ‘EN Gopakumar vs CIT’, (2016)75 taxman.com

215 and the Hon'ble Allahabad High Court, in the case of

ITA 5 &145/CHD/2023 A.Y. 2017-18 17 ‘CIT vs Kesarwani Zarda Bhandar’, (2016), ITA No.

270/2014, had also held similarly; that the ld. CIT(A)

observed that keeping in view of the provisions of the Act

and the ratios of the decisions mentioned, it was observed

that the Assessing Officer was having jurisdiction to assess

the income of the Assessee on the basis of material available

at the time of assessment and was not to restrict the

additions subject to incriminating material found during the

course of search and that it was in the manner that

Additional Grounds of appeal No. 3 & 5were dismissed by the

ld. CIT(A). It has been contended that in view of the

decisions in ‘Kabul Chawla’ (supra), ‘Meeta Gutgutia’ (supra),

‘Sandeep Agarwal (HUF)’ (supra) and ‘Ahhisar Buildwell’

(supra), Ground No.5 be accepted and the A.O. be held not to

have had jurisdiction to make the additions in the absence of

incriminating material found in the search.

order in this regard, has contended that as correctly stated

by the ld. CIT(A) and not rebutted on behalf of the Assessee,

the search warrant was duly executed in the name of the

Assessee on 6.2.2018 in respect of the premises situated at

SCO 80-81, 4th Floor, Sector 17-C, Chandigarh; that,

ITA 5 &145/CHD/2023 A.Y. 2017-18 18 therefore, the Assessing Officer was well justified in

initiating assessment proceedings u/s 153A of the Act; that

as correctly noted by the ld. CIT(A) in terms of the provisions

of section 153A (1)(b) of the Act, the Assessing Officer was

required to assess / re-assess the total income of the

Assessee for the year under consideration; that as held by

the Hon'ble Kerela High Court in the case of ‘CIT vs. KP

Ummer’ (supra), when a notice u/s 153A of the Act is issued,

it enables the Department to carry out assessment / re-

assessment with respect to the six immediate prior years and

this does not require any incriminating material recovered

during the search relating to those prior years, in which,

there was no time left on the date of search for an

assessment u/s 143(3) of the Act; that the same view has

been taken by the Hon'ble Allahabad High Court in the case

of ‘Raj kumar Arora’, (supra), the Hon'ble Kerela High Court

in the case of ‘EN Gopakumar vs. CIT’, (supra) and the

Hon'ble Allahabad High Court in the case of ‘CIT vs.

Keserwani Zarda Bhandar’, (supra); that the ld. CIT(A) has

correctly held that in view of the provisions of the Act and

the ratios of these decisions, the Assessing Officer was

indeed having jurisdiction to assess the income of the

ITA 5 &145/CHD/2023 A.Y. 2017-18 19 Assessee on the basis of the material available at the time of

the assessment and he was to restrict the additions subject

to incriminating material found during the course of search.

The ld. DR has contended that in this view of the matter,

there being no merit therein, Ground Nos. 3 to 5 may be

rejected.

before us.

conducted on 16.02.2018. The appellant brought to our

notice that no incriminating material was found during the

search and provisions of section 153A were not applicable in

this case. As the search was conducted on 16.02.2018 and

as per Section 153A the assessment for 2017-18 and 2018-

19 were abated and the Assessing Officer was competent to

pass assessment order u/s 153A r.w.s. 143(3) of the Act for

these years. Hence ground Nos. 2, 3, 4 and 5 are hereby

rejected.

made by the AO without considering each credit separately

on merit, while making addition of Rs.3,70,000/-, holding

ITA 5 &145/CHD/2023 A.Y. 2017-18 20

that the purpose and utilization of funds which had not been

explained by the assessee.

entries in bank of Rs. 2,02,23,250/-without considering each

credit separately on merit and on the plea that purpose and

utilization of funds not explained by assessee.

27.1 Documents submitted before AO were also submitted

before the CIT(A) vide reply dated 21.03.2020 (Paper book

page 46, 47, 50-51) :-

addition of Rs. 2,02,23,250/- including Rs. 3,70,000/-

received from Sh. Vashisht Kumar Goyal on the plea that the

assessee company could not explain the purpose and sources

of funds without mentioning deficiency on the part of

assessee to prove the utilization of funds and also without

ITA 5 &145/CHD/2023 A.Y. 2017-18 21 mentioning the documents submitted by the assessee during

the assessment proceedings in the assessment order.

29.1 The ld. CIT(A) made addition of Rs. 3,70,000/-

received from Sh. Vashisht Kumar Goyal alleging that - "In

the absence of any documentary evidence, the same remains

unexplained."

29.2 Documents submitted before CIT(A) vide reply dated

21.03.2020 (page 71, 72 and 77 of CIT(A)’s order)

29.3 Documents submitted before ITAT (Paper book page

45-51) :

29.4 The assessee company contends that the company

received advance of Rs. 3,70,000/- from Sh. Vashisht Kumar

Goyal on 25.05.2016 and 07.11.2016. the appellant company

ITA 5 &145/CHD/2023 A.Y. 2017-18 22 submitted copy of ITRV, copy of bank account statement and

copy of account of Sh. Vashisht Kumar Goyal in the books of

the company before the AO and CIT(A) which were not

considered them while finilazing their orders. Neither the AO

or the CIT(A) asked the appellant company to submit any

other document nor pointed out any discrepancies in the

documents submitted by the appellant company. The AO and

CIT(A) simply ignored the documents submitted by the

appellant to substantiate its claim and made addition of Rs.

3,70,000/- in the hands of the appellant company.

29.5 The appellant company filed written submission

before CIT(A) in 2020, the CIT(A) had more than 2 years to

examine the documents submitted by the assessee company

and ask the assessee to submit any other document, if

required. But neither the CIT(A) nor AO asked the assessee

to submit any other documentary evidence in this regard.

29.6 The ld.CIT(A) has reproduced the entire written

submission of the assessee company in its order, and on

page 71, 72 and 77 of the CIT(A) order, the following facts

were mentioned by the assessee in its submission which

were reproduced by CIT(A) :-

ITA 5 &145/CHD/2023 A.Y. 2017-18 23

Page 71 of CIT(A)’s Order

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) ACCOUNT NO. 25/05/2016 2,50,000/- VASHISHT KUMAR UNSECURED BANK ACCOUNT, ITR, GOYAL (FRIEND OF LOAN RECEIVED LEDGER ACCOUNT DIRECTOR) FROM VASHISHT KUMAR GOYAL

Page 72 of CIT(A)’s Order

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDITWORTHINESS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) ACCOUNT NO. 07/11/2016 1,20,000/- VASHISHT KUMAR UNSECURED BANK ACCOUNT, ITR, GOYAL (FRIEND OF LOAN RECEIVED LEDGER ACCOUNT DIRECTOR) FROM VASHISHT KUMAR GOYAL

Page 77 of CIT(A)’s Order

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDITWORTHINESS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) ACCOUNT NO. 25/05/2016 2,50,000/- VASHISHT KUMAR UNSECURED BANK ACCOUNT, ITR, GOYAL (FRIEND OF LOAN RECEIVED LEDGER ACCOUNT DIRECTOR) FROM VASHISHT KUMAR GOYAL

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, AMOUNT (IN PARTY NAME/ GENUINES AND RS) ACCOUNT NO. CREDITWORTHINESS OF THE PARTY 07/11/2016 1,20,000/- VASHISHT KUMAR UNSECURED LOAN BANK ACCOUNT, GOYAL (FRIEND OF RECEIVED FROM ITR, LEDGER DIRECTOR) VASHISHT KUMAR ACCOUNT GOYAL on 07/11/2016 Total Rs. 3,70,000/-

ITA 5 &145/CHD/2023 A.Y. 2017-18 24 29.7 The above documents were submitted before the

ld.CIT(A) which were neither considered by the ld. CIT(A) nor

discussed by the ld.CIT(A) in his order. The CIT(A) wrongly

confirmed the addition made by AO without carrying out any

verification with regard to the copy of account submitted by

the company and wrongly confirmed the addition of Rs.

3,70,000/- by taking a plea that no documentary evidence

was submitted by the company to establish the

creditworthiness of Sh. Vashisht Kumar Goyal.

29.8 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the

ld.CIT(A) observed that the creditworthiness cannot be

established due to non-submission of documents, the AO and

CIT(A) could have initiated proceedings under Sections

133(6) or 131 of the Act for further investigation. However, it

is noteworthy that neither the AO nor the CIT(A) extended

any such notice to the lender for additional inquiries.

Instead, an addition of Rs. 3,70,000/- was made based on

the directive of a third party. Neither enquiry was made by

CIT(A) / AO before confirming the addition of Rs. 3,70,000/-

nor any documentary evidence were sought from the assessee

company, therefore the assessee company has now submitted

ITA 5 &145/CHD/2023 A.Y. 2017-18 25 copy of computation and confirmation of Sh. Vashisht Kumar

Goyal (Paperbook page 45, 48-49) as additional evidence. The

submission of said documents are neither challenged nor

disputed in the appeal by the department. Hence the

addition of Rs.3,70,000/- as advance received form Sh.

Vashisht Kumar Goyal confirmed by ld.CIT(A) without

considering the documents submitted by the assessee

company should be deleted. Accordingly, ground of appeal

No. 6 is accepted.

made by the Assessing Officer and upheld by ld. CIT(A) on

account of Income deposited in cash by the assessee without

any justification.

31.1 The AO made addition of all the credit entries in bank

of Rs.2,02,23,250/- (which includes cash deposit of

Rs. 10,50,000/- by the company in its bank account) without

considering each credit separately on merit and on the plea

that purpose and utilization of funds not explained by

assessee.

ITA 5 &145/CHD/2023 A.Y. 2017-18 26 31.2 The ld. CIT(A) confirmed the addition of Rs.

10,50,000/- (Page 108-109, point 10 of CIT(A)’s Order) on

account of cash deposit made by the assessee company by

mentioning that - "However, no evidence/details giving the

particulars of person from whom such cash was received,

nature of transaction with them have been furnished.

Therefore, cash source deposits and of Rs. 10,50,000/-remain

unexplained." The assessee company submitted copy of

income account along with copy of cash account, bank

account statement, profit and loss account and copy of hire

charges account in the books of the company for AY 2017-18

before the ld. CIT(A) and AO which were not considered by

any of the authorities before confirming the addition of Rs.

10,50,000/-. No explanation or documentary evidence,

whatsoever was ever asked by ld. CIT(A) or AO either by way

of Show Cause Notice or during the personal hearing, before

confirming the addition.

31.3 It was submitted that the ld. CIT(A) while confirming

the addition made by AO, wrongly mentioned that no

evidence/details giving the particulars of person from whom

such cash was given, nature of transaction with them have

been furnished, without even going through the written

ITA 5 &145/CHD/2023 A.Y. 2017-18 27 submission and documentary evidences submitted by the

assessee company during appellate proceedings. The

assessee company submitted the completed reply before the

ld. CIT(A) in the year 2020, and it took the ld. CIT(A) more

than 2 years to realize that the assessee failed to submit

some of the documentary evidences to substantiate its claim.

Moreover, even after that the ld. CIT(A) did not ask the

assessee to submit any documents, wrongly confirmed the

addition made by AO on the dictate of third party.

31.4 The assessee company has laid emphasis on the fact

that as per bank statement of the company (paperbook Page

18), it is clear that the company has withdrawn

Rs.2,50,000/- on 25.05.2016 and the same were re-deposited

on 30.05.2016, remaining Rs.8,00,000/- was declared as

income of Rs.8,03,250/- by the assessee company (refer P/L

A/c on Paperbook page 4). The assessee company earned

income of Rs. 8,00,000/- from leasing of vehicle of the

company. This fact was explained to the AO during the

assessment proceeding, which the AO completely ignored

while making the said addition. The copy of income account

in the books of the company is available at paperbook page

303, which was also submitted before the AO during

ITA 5 &145/CHD/2023 A.Y. 2017-18 28 assessment proceedings. The AO neither discussed the same

in the assessment order nor considered the copy of account

which was already placed on record, while making the

addition on the dictate of third party ignoring the fact that it

has been duly recorded by the assessee company in the

Profit and Loss account of the company as at 31.03.2017

(Paperbook Page 4). The aforesaid documents submitted by

the assessee were neither challenged nor disputed by the

department in the appeal. Hence, any receipt already shown

as income in the Profit and Loss Account cannot be added

u/s 68 of the Act, without any specific reasons or evidence.

Therefore, the addition of Rs. 10,50,000/- is wrong and

needs to be deleted as it includes an amount Rs. 2,50,000/-

withdrawn and re-deposited by the company and Rs.

8,00,000/- which was already declared by the company as

income in its Profit and Loss Account for AY 2017-18.

Accordingly, Ground No. 7 stands accepted.

68 of the Act. The assessee contended that the company

submitted the cashflow statements, explanation of each debit

and credit entry in the bank account of the assessee

company along with the Balance Sheet, Affidavit,

ITA 5 &145/CHD/2023 A.Y. 2017-18 29 confirmations, bank statements, ITRs, Balance sheets, copy

of accounts etc. but instead of considering each credit entry

separately, the Assessing Officer with a vitiated mind and on

the dictate of third party, made additions of all the credit

entries in the bank account of the assessee company without

considering the nature, source, credibility and genuinity of

each credit transaction received in the bank account of the

assessee company during the year.

32.1 The Assessing Officer after being fully satisfied with

the genuinity of company and sources of credit entries in

bank account, sent a detailed note on the comparison of

assessee company with shell companies and explanation of

the credit entries as mentioned in points above, (deviation

note) to the Deputy Director of Investigation (ADIT), Mohali

on 26.12.2019 vide letter (deviation note) note no. 1733,

dated 24.12.2019, at the fag end of assessment proceedings

being satisfied by the fact that the sources of the

transactions as per evidences/documents submitted and

regular books of accounts of the assessee company stood

explained by leading cogent and reliable evidence. However,

the ADIT(lnvestigation), Mohali acted without any

jurisdiction and without application of mind and rejected the

ITA 5 &145/CHD/2023 A.Y. 2017-18 30 deviation note in less than 12 hours. It is pertinent to

mention that the ADIT (Investigation), Mohali rejected the

deviation note sent with detailed replies and evidences in

less than 12 hours and observed that the assessee company

is a shell company. Thus, the ADIT (lnvestigation), Mohali

exceeded her jurisdiction knowingly and issued dictates

based on Appraisal Report. The ADIT, Investigation, Mohali

vide letter no. 1763 dated 27.12.2019 addressed to the Ld.

Assessing Officer rejected the proposal/deviation note for not

proposing the additions despite the fact that ample evidence

both reliable and cogent had been produced by the assessee

company calling for no addition at all and still proceeded to

dictate the Assessing Officer to make additions by assigning

flimsy reasons as if the ADIT (Investigation) was an

assessing authority; and still further the ADIT(Investigation),

by giving reference to the CBDT instructions bearing No.

FTS/194840/12 dated 20.11.2012, proved beyond a shadow

of doubt that she had exceeded her powers by rejecting the

said deviation note.

32.2 The Assessing Officer acted on the dictate of a third

party and on borrowed satisfaction to declare the assessee

company as a shell company and made addition of all credit

ITA 5 &145/CHD/2023 A.Y. 2017-18 31 entries in the bank account of the assessee company as

undisclosed income u/s 68 of the Income Tax Act, 1961,

without even issuing any Show Cause Notice to the assessee

company for treating it as a shell company. Also, the ld.

Assessing Officer neither issued a Show Cause Notice nor

mentioned a single word about shell company in any of the

questionnaires sent by him on 14.08.2019 (page 21-22 of

paperbook), 07.10.2019 (page 25-28 of paperbook) and

05.12.2019 (page 35-37 of paperbook). The Assessing Officer

erroneously made an addition, disregarding the

comprehensive evidence provided by the assessee to

substantiate its claim regarding the lenders. It is crucial to

note that the company extended funds in submitted details

as identity, sources, bank A/c, etc of each creditor, and

there is no entity, individual or otherwise, that can be

deemed as a sham entity. Furthermore, all the lenders

executed the transfers from their active and operational

bank accounts. Notably, within the same fiscal year, the

assessee company repaid all lenders except Sh. Baldev Singh

and advance received from Dharma Wires Private Limited

was repaid in the subsequent year. The CIT(A) in his order

has mentioned as under :

ITA 5 &145/CHD/2023 A.Y. 2017-18 32

"It was further explained that the AO has used statement of Sh. Jagdish Rai Gupta selectively in parts by drawing wrong inference that M/S TJR was a shell company. It was submitted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs.1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and after paying stamp duty. Further, M/s TJR paid earnest money of Rs.1,50,00,000/- during FY. 2016-17 for purchase of a plot to build flat /apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, M/s TJR was having income generating apparatus and was undertaking business activities and was not a shell company.

9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Rai Gupta are the directors/shareholders of the appellant company. Sh. Sahil Singla is the son, Smt. Kiran Singla is the wife and Smt. Sakshi Singla is Daughter in Law of Sh. TN Singla. After taking into consideration the above facts, it is observed that the AO has held in his order the appellant company to be a shell company as merely existing on papers and not carrying out any business activities. After perusing the findings of the AO recorded in the assessment order and the material available on record, it is noted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs.l,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and paying stamp duty. The same AO has assessed Long Term Capital Gain in the hands of M/s TJR from the said transaction. It is not the case of the AO that the said land was a Benami asset held in the name of M/s TJR. Further, M/s TJR paid earnest money of Rs.1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat/apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, on facts, it is observed that M/s TJR was having income generating apparatus in past and future years and was undertaking business activities. There is no definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference and

ITA 5 &145/CHD/2023 A.Y. 2017-18 33

consequences out of the same as per the provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had credit amounting to Rs 2,02,23,250/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs.2,02,23,250/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisation of such credits The appellant submitted during the appellate proceedings that it had received credits of Rs. 2,02,23,250/- in its bank account maintained with Bank of Maharashtra and furnished documentary evidence in support of identity and creditworthiness of such persons a genuineness of transaction which have been also furnished during the assessment proceedings. The AO was again directed during appellate proceedings vide letter no.295 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of transaction. In the remand report dated 15.07.2022(supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of transactions except by stating that appellant is a shell company and doesn't have any profit generating apparatus. It was further stated that one of the group companies, i. e., M/s Evershine Recreation Pvt Ltd was a shell company from whom the appellant has received credits. However, the AO did not make any further enquiry in respect of credits in the bank account during the remand proceedings and relied upon the facts as discussed in the assessment order.

ITA 5 &145/CHD/2023 A.Y. 2017-18 34

The appellant has discharged its onus as required u/s 68 of the Act. All the above mentioned documents were also furnished before the AO during the assessment proceedings. Although the AO has admitted to have received the said documents during the assessment proceedings yet the same were not taken into account by the AO while making addition. The AO has recorded in his order that the appellant could not explain the purpose and utilisation of such credits. However, the AO failed to take cognisance of the fact that addition u/s 68 of the Act is to be made if the appellant doesn't offer any explanation regarding the source and nature of credits received in the bank account or if the explanation offered is not found satisfactory by the AO. Whereas in this case the appellant has duly furnished its explanation in respect of bank credits received during the year under consideration alongwith necessary documentary evidence. If the AO was not satisfied with the explanation of the AO in respect of source and nature of credits received, he should have recorded such dissatisfaction in the assessment order. However, no adverse finding has been recorded in the assessment order in respect of the documentary evidence furnished by the appellant' in support of bank credits. The submissions and documents furnished by the appellant during the appellate proceedings were also forwarded to the AO for remand report. In the remand report also, the AO has not even discussed the documentary evidence furnished by the appellant in support bank credits let alone pointing out any defect in the same. In view of the above discussion and after making independent perusal of documents furnished by the appellant, it is noted that the assessment order is non speaking, mechanical in nature and has been passed without discussing merits of the documents.

There is no direct or indirect evidence pointed out by the AO before making such additions. Therefore, after considering the merits of the case, analysis of credits as per the above table and strength of documentary evidence, it is observed that there is no justification in such addition made in the hands of the appellant u/s 68 of the Act. Therefore, the addition of Rs. 1,88,03,250/- is hereby deleted."

ITA 5 &145/CHD/2023 A.Y. 2017-18 35 32.3 The assessee contended that the AO did not make any

adverse findings in the remand report and the entire

investigation / proceedings of the AO revolves around stating

the assessee company as shell company on the dictat of third

party. The AO made addition of all the credit entries in the

bank account of the company amounting to Rs.

2,02,23,250/- ignoring all the proofs and documentary

evidences submitted by the assessee during the assessment

proceeding. However, same documents were submitted before

the ld. CIT(A) during the appellate proceedings and the ld.

CIT(A) granted relief of Rs. 1,88,03,250/- to the assessee

after verification of all the documents and confirmed

addition of Rs. 14,20,000/- without asking assessee for any

other evidence or document during appellate proceeding for

three years as no Show Cause Notice was issued or query

was raised by the ld. CIT(A). Accordingly, ground of appeal

No. 8 is accepted.

disallowance of loss of Rs.50,231/- and Ground No.10 is

relating to disallowance of Rs.5,62,672/- upheld by the ld.

CIT(A).

ITA 5 &145/CHD/2023 A.Y. 2017-18 36 35. CIT(A) Observation - Page 106-107 of CIT(A)’s order.

35.1 Ground No. 9 states that the ld. CIT(A) has wrongly

upheld the disallowance of Rs. 50,231/- against the loss

claimed in the return of income. Ground No. 10 states that

disallowance of depreciation on vehicle to the extent of Rs.

5,62,672/- has wrongly been upheld.

35.2 The AO disallowed the depreciation on vehicle to the

extent of Rs. 5,62,672/-without making any discussion in

the assessment order. The CIT(A) too did not make any

discussion in the impugned order while upholding the

disallowance. The assessee company has submitted the

following documents before us, as also furnished before both

the Income Tax authorities: 1. Copy of Computation sheet of M/s TJR Properties Private Limited for A.Y. 2017-18 (Paperbook Page 10-11) 2. Copy of fixed asset schedule (Paperbook Page 6) 3. Copy of RC of car (Paperbook Page 14-15)

35.3 The contention of the assessee has, all through

remained that the car was registered in the name of the

assessee company and was used for business purposes only.

The copy of the Registration Certificate has been filed in

support. The documents placed on record by the assessee

have not been disputed or challenged by the Department.

ITA 5 &145/CHD/2023 A.Y. 2017-18 37 The Id. CIT(A), though, in para 11 of the impugned order,

has observed that the assessee did not furnish any

documentary evidence in support of the loss claimed. It is

seen that as per the Computation of Income (paperbook page

10-11), loss was of Rs. 50,231/-, whereas as per the Profit &

Loss Account (paperbook page 4), the loss was of Rs.

3,92,340/-. The contention of the Id. Counsel for the

assessee has been that the AO wrongly observed that bills

and vouchers and books of account were not produced by the

assessee and that the AO wrongly disallowed the loss at Rs.

50,231/- as per return of income. It has further been

contended that the Id. CIT(A) went wrong in observing that

no documentary evidence was filed, whereas the

aforementioned papers were filed, as also ITR-V of the

assessee company, for assessment year 2017-18 (paperbook

page 9) and Balance Sheet of the assessee company as on

31.03.2017 (paperbook page 3-8) were also filed. This has

not been disputed before us. In the search conducted, at the

business premises of M/s Kansal Singla & Associates,

regular books of account alongwith bank statements of the

assessee company were found, which fact stands duly

mentioned at page 357 of the Appraisal Report (paperbook

ITA 5 &145/CHD/2023 A.Y. 2017-18 38 page 116). Copies of all these books of account were taken

on CD by the Department, as per Panchnama (paperbook

page 276-279). The books of account were examined by the

AO before sending the Deviation Note dated 24.12.2019 to

Investigation Wing. This is evident from the contents of the

AO's letter dated 24.12.2019 (paperbook page 297-299). The

Dictat by the ADIT (Investigation), on which, however, the AO

acted, is available at paperbook page 300-302.

35.4 Further, the books of account were also submitted by

the assessee before the AO during the remand proceedings,

on 16.02.2022, as available at papebook page 52.

made is unsustainable in law and we hold so. Accordingly,

the additions of Rs.50,231/- and Rs.5,62,672/- are deleted,

found to be based on no material, whatsoever and in direct

opposition to the documentary evidence furnished by the

assessee. Accordingly, Ground Nos. 9 and 10 are also

accepted.

indicated.

ITA 5 &145/CHD/2023 A.Y. 2017-18 39

Department Appeal - 146/CHD/2023

assessee's appeal in ITA 5/CHD/2023, for assessment year

2017-18. The following grounds have been raised :

i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs. 1,88,03,250/-credited in bank account of assessee during F.Y. 2016-17 was to be considered as unexplained cash credit u/s 68 of the Act as the assessee did not establish its genuineness during the course of assessment proceedings ? ii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the appeal of the assessee by holding that identity and creditworthiness of the persons from whom such credits were received, were proved, however, genuineness of the transactions was not established as the purpose of such credit was not explained? iii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the appeal of the assessee on the issue of credit entries even when all three limbs of Sec 68 was not proved/ established by the assessee?

is the action of the ld. CIT(A) in deleting the addition of

Rs.1,88,03,250/- credited in the bank account of the

assessee company during the year under consideration.

According to the Department, the ld. CIT(A) erred in not

appreciating the fact that the amount of Rs. 1,88,03,250/-

was to be considered as unexplained cash credit u/s 68 of

the Act, since the assessee did not establish its genuineness

during the assessment proceedings. The Department has

ITA 5 &145/CHD/2023 A.Y. 2017-18 40 contended that the ld. CIT(A) erred in holding that the

identity and credit worthiness of the persons from whom the

credits comprising the amount of Rs.1,88,03,250/- were

received, stood proved, whereas the genuineness of the

transactions had not been established by the assessee, since

the purpose of the credits had not been explained and

thereby all the three limbs of the provisions of Section 68 of

the Act did not stand proved by the assessee.

identification and source of depositor in the deviation report

dated 24-12-2019. The AO sent the deviation note only after

verifying the sources and merits of the documents submitted

by the assessee company. However, on receipt of letter from

DDIT, the AO made addition of the total credits in the bank

account of the company and declared a genuine company as

shell company without issuing any show cause notice. The

complete verification was also done by CITA and found that

ingredients of section 68 were, satisfied and hence the CIT(A)

granted relief of Rs. 2,77,01,650/- to the assessee company.

ITA 5 &145/CHD/2023 A.Y. 2017-18 41

"It was further explained that the AO has used statement of Sh. Jagdish Rai Gupta selectively in parts by drawing wrong inference that M/S TJR was a shell company. It was submitted that M/s TJR Properties was having land which was purchased during F.Y 2007-18 for Rs. 1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and after paying stamp duty. Further, M/s TJR paid earnest money of Rs.1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat /apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, M/s TJR was having income generating apparatus and was undertaking business activities and was not a shell company.

9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Rai Gupta are the directors/shareholders of the appellant company. Sh. Sahil Singla is the son, Smt. Kiran Singla is the wife and Smt. Sakshi Singla is Daughter in Law ofSh. TN Singla .After taking into consideration the above facts, it is observed that the AO has held in his order the appellant company to be a shell company as merely existing on papers and not carrying out any business activities. After perusing the findings of the AO recorded in the assessment order and the material available on record, it is noted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs.1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and paying stamp duty. The same AO has assessed Long Term Capital Gain in the hands of M/s TJR from the said transaction. It is not the case of the AO that the said land was a Benami asset held in the name of M/s TJR. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat/apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, on facts, it is observed that M/s TJR was having income generating apparatus in past and future years and was undertaking business activities. There is no definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference

ITA 5 &145/CHD/2023 A.Y. 2017-18 42

and consequences out of the same as per the provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had cred amounting to Rs 3,22,01,650/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs.3,22,01,650/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisation of such credits The appellant submitted during the appellate proceedings that it had received credits of Rs. 3,22,01,650/- in its bank account maintained with Bank of Maharashtra and furnished documentary evidence in support of identity and creditworthiness of such persons a genuineness of transaction which have been also furnished during the assessment proceedings. The AO was again directed during appellate proceedings vide letter no.295 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of transaction. In the remand report dated 15.07.2022(supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of transactions except by stating that appellant is a shell company and doesn't have any profit generating apparatus. It was further stated that one of the group companies, i. e., M/s Evershine Recreation Pvt Ltd was a shell company from whom the appellant has received credits. However, the AO did not make any further enquiry in respect of credits in the bank account during

ITA 5 &145/CHD/2023 A.Y. 2017-18 43

the remand proceedings and relied upon the facts as discussed in the assessment order.

The appellant has discharged its onus as required u/s 68 of the Act. All the above mentioned documents were also furnished before the AO during the assessment proceedings. Although the AO has admitted to have received the said documents during the assessment proceedings yet the same were not taken into account by the AO while making addition. The AO has recorded in his order that the appellant could not explain the purpose and utilisation of such credits. However, the AO failed to take cognisance of the fact that addition u/s 68 of the Act is to be made if the appellant doesn't offer any explanation regarding the source and nature of credits received in the bank account or if the explanation offered is not found satisfactory by the AO. Whereas in this case the appellant has duly furnished its explanation in respect of bank credits received during the year under consideration alongwith necessary documentary evidence. If the AO was not satisfied with the explanation of the AO in respect of source and nature of credits received, he should have recorded such dissatisfaction in the assessment order. However, no adverse finding has been recorded in the assessment order in respect of the documentary evidence furnished by the appellant in support of bank credits. The submissions and documents furnished by the appellant during the appellate proceedings were also forwarded to the AO for remand report. In the remand report also, the AO has not even discussed the documentary evidence furnished by the appellant in support bank credits let alone pointing out any defect in the same. In view of the above discussion and after making independent perusal of documents furnished by the appellant, it is noted that the assessment order is non speaking, mechanical in nature and has been passed without discussing merits of the documents.

There is no direct or indirect evidence pointed out by the AO before making such additions. Therefore, after considering the merits of the case, analysis of credits as per the above table and strength of documentary evidence, it is observed that there is no justification in such addition made in the hands of

ITA 5 &145/CHD/2023 A.Y. 2017-18 44 the appellant u/s 68 of the Act. Therefore, the addition of Rs. 1,88,03,250/- is hereby deleted."

mentioned that - "The AO was again directed during

appellate proceedings vide letter no. 293 dated 12.08.2021 to

examine such credits on merit in respect of identity and

creditworthiness of such persons and genuineness of such

transaction. In the remand report dated 05.09.2022 (supra),

the AO did not bring on record any adverse findings in

respect of identity and creditworthiness of such persons and

genuineness of such transaction, except by stating that

appellant company is a shell company and does not have any

profit generating apparatus."

adverse findings in the remand report and the entire

investigation / proceedings of the AO revolves around stating

the appellant company as shell company on the dictate of

third party. The AO wrongly made addition of all the credit

entries in the bank account of the company amounting to Rs.

2,02,23,250/- ignoring all the proofs and documentary

evidences submitted by the assessee during the assessment

ITA 5 &145/CHD/2023 A.Y. 2017-18 45 proceeding. However, same documents were submitted before

the CIT(A) during the appellate proceedings and the ld.

CIT(A) granted relief of Rs. 1,88,03,250/- to the assessee

after verification of all the documents.

repel the evidence based stand taken by the assessee, that

the Department has raised the issue that the genuineness of

the transactions had not been established. We, on the basis

of the preceding discussion, find ourselves unable to

subscribe to this view of the Department. Accordingly,

finding no merit therein, all the grounds raised by the

Department are rejected and the appeal filed by the

Department is dismissed.

allowed, as indicated above, the Department’s appeal in ITA-

145/CHD/2023 is dismissed.

Order pronounced on 19.03.2024.

Sd/- Sd/-

(VIKRAM SINGH YADAV) (A.D.JAIN ) ACCOUNTANTMEMBER VICE PRESIDENT

“Poonam

ITA 5 &145/CHD/2023 A.Y. 2017-18 46

आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�/ CIT 4. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, Assistant Registrar