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

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

ITA No.3/CHD/2023 and ITA No.144/CHD/2023 are

cross appeals filed by the assessee and the Revenue,

ITA 3 &144/CHD/2023 A.Y. 2014-15 2

respectively, against the order dated 15.12.2022 passed by

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

2014-15.

ITA 3/CHD/2023

following Grounds of appeal :

ITA 3 &144/CHD/2023 A.Y. 2014-15 3

2.1 The following additional Grounds have also been

taken by the Assessee:

ITA 3 &144/CHD/2023 A.Y. 2014-15 4

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

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 5

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

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 6

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

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 7

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

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 8

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

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 9

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

(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

ITA 3 &144/CHD/2023 A.Y. 2014-15 10

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

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 and 3 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 11

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

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. KesarvaniZardaBhandar’, 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,

ITA 3 &144/CHD/2023 A.Y. 2014-15 12

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.

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 ‘MeetaGutgutia’ 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 13

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). 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 AbhisarBuildwell 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 14

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."

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 15

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.

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

ITA 3 &144/CHD/2023 A.Y. 2014-15 16

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.

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)

ITA 3 &144/CHD/2023 A.Y. 2014-15 17

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

‘CIT vs Kesarwani ZardaBhandar’, (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.

ITA 3 &144/CHD/2023 A.Y. 2014-15 18

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,

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 ‘Rajkumar Arora’, (supra), the Hon'ble Kerela High Court

ITA 3 &144/CHD/2023 A.Y. 2014-15 19

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

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

Keserwani ZardaBhandar’, (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

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.

by the Assessing Officer do not emanate from the search

proceedings, as no incriminating material was found,

pertaining to the year under consideration. In this regard, it

is seen that no assessment was pending for the year under

consideration and as such, had not abated on the date of

search. In such a case, as held by the Hon'ble High Court in

the case of ‘Kabul Chawla’, 380 ITR 573 (Del) and as also

ITA 3 &144/CHD/2023 A.Y. 2014-15 20

similarly held in ‘Pr. CIT Vs. Meeta Gutgutia’ 395 ITR 526

(Del), if no incriminating material so found in the search, no

addition can be made u/s 153A. The SLP in the cases of

‘Meeta Gutgutia’ (supra and ‘Kabul Chawla’ (supra),were

dismissed by the Hon'ble Supreme Court, having found no

merit therein. In ‘PCIT vs. M/s Abhisar BuildwellP. Ltd.’,

vide order dated 24.4.2023, the Hon'ble Supreme Court has

held, agreeing with ‘Kabul Chawla’ (supra), that in case no

incriminating material is unearthed during the search, the

Assessing Officer cannot assess or re-assess taking into

consideration the other material in respect of the completed

assessment / unabated assessment; that meaning thereby,

that in respect of completed / unabated assessment, no

addition can be made by the Assessing Officer in the

absence of any incriminating material found during the

course of search u/s 132 of the I.T. Act. Further, as

correctly contended on behalf of the Assessee, ‘Ashisar

Buildwell’ has been followed by the Hon'ble Bombay High

Court in the case of‘Pr. CIT v Sandeep Aggarwal (HUF)’, vide

order dated 9/10/2023, wherein, it has been held that the

clarification issued by the Hon'ble supreme Court in the case

of Abhisar Buildwell’ and ‘U.K. Paints’, has been issued in

ITA 3 &144/CHD/2023 A.Y. 2014-15 21

the context of re-assessment proceedings u/s 147 and 148 of

the Act as well.

the Group Company for A.Y. 2017-18 (ITA No. 33/Chd/2023

and ITA No. 146/Chd/2023) and the case of the Group

Company for A.Y. 2013-14 in ITA No. 739/Chd/2022, vide

our order dated 31.10.2023, that under similar facts and

circumstances, we have held that the Assessing Officer was

initially of the view that no addition was required to be made

and had sent a deviation note, but had made the additions

only on the diktat of a third party, i.e., the ADIT. Similar is

the position here. The additions for the year under

consideration have been made by the Assessing Officer only

on the directions of the third party, without having in his

possession any incriminating material unearthed during the

search proceedings, for the year under consideration, which

is indirect contravention of the afore discussed case laws.

Moreover, the additions wrongly made represented all the

credit entries in the bank account of the Assessee company.

Regarding these credit entries, sufficient credible

documentary information had been furnished by the

Assessee, by way of evidence, during the assessment

ITA 3 &144/CHD/2023 A.Y. 2014-15 22

proceedings, including the source thereof, which cogent

voluminous documentary evidence the Department was been

not able to rebut. The Assessing Officer, rather, having not

been satisfied therewith, had not deemed it necessary to

undertaken any inquiry in this regard. Also, no material was

brought on record to establish that the bank entries were

unexplained entries. This being so, the provisions of section

68 of the Act were wrongly applied.

merit and, accordingly, the same is accepted.

credit entries in the assessee's bank account, amounting to

Rs.3,22,01,650/- without considering each credit separately

on merit and holding that the purpose and utilization of the

funds was not explained by the assessee. Before the ld.

CIT(A), the assessee submitted, vide reply (APB 47-51), dated

21.03.2020, the following documents :

ITA 3 &144/CHD/2023 A.Y. 2014-15 23

wrongly made addition of Rs.3,22,01,650/-, including the

amount of Rs.10 lacs received from Shri S.K.Arora; that

while doing so, the AO did not mention any deficiency on the

assessee's part to prove the utilization of funds; and that the

AO also did not mention the said documents furnished by

the assessee before the AO.

Rs.10 lacs, on perusal of the documents furnished by the

assessee, it was observed that the said amount had been

explained as received on account of loans; that though the

transaction had been found to be routed through the bank

account of Shri S.K.Arora, the main sources of credits

( Rs.98,56,935/-) had not been explained in the hands of

Shri S.K.Arora; that the amount of Rs.98,56,935/- received

in the bank account had been transferred immediately to

various persons, in different amounts; and that merely

submission of bank account would not amount to explaining

the credit worthiness of Shri S.K.Arora, particularly keeping

in view the quantum of the amount given and the level of

income he had shown in the ITR ( Rs.3,62,000).

ITA 3 &144/CHD/2023 A.Y. 2014-15 24

the relevant portions of the assessee's reply/written

submissions dated 21.03.2020, are at pages 73 and 80 of the

CIT(A)’s order, containing the details of the assessee's bank

account and the details of the loans received from Shri

S.K.Arora. It has been contended that in addition to the

documents submitted by the assessee before the AO, the AR

also furnished a copy of the assessment order dated

24.12.2019, in the case of Shri S.K.Arora for assessment

year 2014-15, passed u/s 153A(1)(b) read with Section

143(3) of the Act, passed by the same AO who assessed the

case of the company, by making addition of all the credits in

the bank account of the assessee for the same assessment

year. It was contended that the AO accepted the

creditworthiness of Sh. S.K. Arora in his assessment

proceedings while made addition of the same in the case of

the assessee company. How can same transaction be

unexplained u/s 68 of the Act in one Assessment

proceedings and be genuine and credible in the other

Assessment proceedings for the same year. This clearly

shows that the Learned Assessing officer was not using his

wits, common sense and there was no application of mind by

ITA 3 &144/CHD/2023 A.Y. 2014-15 25

him whatsoever. Further, the following documents, as also

submitted before the ld. CIT(A), have been filed before us :

31.1 The assessee company contends that the company

received advance Rs. 10,00,000/- from Sh. S.K. Arora on

01.06.2013 and the same were returned back on

30.06.2014. The company submitted all the documentary

evidences before the AO as well as before the CIT(A) but

neither authority raised any objection in the documents

submitted by the company during assessment proceeding

and appellate proceedings. The AO ignoring all the

documentary proofs followed the dictate of third party and

made addition Rs. 10,00,000/-received from Sh. S.K. Arora

during the year under consideration while the CIT(A)

confirmed the said addition taking a plea that mere

submission of bank account statement cannot explain the

creditworthiness of lender. It not the bank account

statement that the company submitted to substantiate its

ITA 3 &144/CHD/2023 A.Y. 2014-15 26

claim, the company submitted ITR, copy of affidavit, copy of

account of Sh. SK Arora along with the bank account

statement to prove the creditworthiness of the amount

received. In the affidavit it is clearly mentioned that

company received advance of Rs. 10,00,000/- on

01.06.2013.

31.2 The company has 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. The assessee company had clearly mentioned in

its written submission the list of documents attached as

annexure to substantiate its claim, if somehow, only the

bank statement was available with the CIT(A) then the

CIT(A) could have asked the assessee to furnish all other

documents as mentioned in the written submission. No

such inquiry was made by the CIT(A). Neither the CIT(A)

nor AO asked the appellant to submit any other

documentary evidence with regard to the amount received

or given back to Sh. SK Arora.

31.3 The CIT(A) wrongly confirmed the addition made by

the AO on the plea that the company did not submit any

ITA 3 &144/CHD/2023 A.Y. 2014-15 27

documentary evidence other than the bank statement but on

the other hand the CIT(A) himself is mentioning the list of

documents submitted by the assessee in point 1, page 104 of

his order, thereby contradicting his own statement. The

CIT(A) ought to have raised any query or issued any notice

asking the assessee to submit the same. But no such query

was raised nor any notice was issued to the assessee in this

regard. Additionally, the CIT(A) confirmed the addition of Rs.

10,00,000/- made by the AO for an absurd reason without

giving any findings on the documents which was already

submitted by the assessee company during the assessment

proceeding and remand proceeding.

31.4 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the CIT(A)

observed that the assessee company failed to submit any

documentary evidence other than bank statement, they 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. 10,00,000/- was made based on the directive of a third

party.

ITA 3 &144/CHD/2023 A.Y. 2014-15 28

Sh SK Arora for the same assessment year wherein the

returned income of Shri SK Arora has been accepted by the

AO.

33.1 The ld. DR on the other hand, has placed strong

reliance on the impugned order, contending that it has not

been successfully rebutted, as observed by the ld. CIT(A)

that mere submission of Bank Account Statement does not

amount to explaining the credit worthiness of Shri S.K.Arora,

particularly when the amount given to Shri S.K.Arora is of

Rs.10 lacs, as contrasted with his income shown in the ITR

of Rs. 3,62,000/-.

33.2 It is seen that as available from the assessment order

(supra) dated 24.12.2019, passed in the case of Shri

S.K.Arora in assessment year 2014-15, the credit worthiness

of Shri S.K.Arora has been accepted. On the contrary, in the

case of the assessee, for the same assessment year, the

addition has been made on the basis that the credit

worthiness of Shri S.K.Arora did not stand proved. The AO

in both the cases is the same. The case of the assessee is

that the amount of Rs.10 lacs had been received by the

assessee, as advance on 01.06.2013. The same was returned

ITA 3 &144/CHD/2023 A.Y. 2014-15 29

on 30.06.2014. Apropos the evidence filed by the assessee

before the taxing authorities, no question was raised by

either the AO or the ld. CIT(A) against such documents.

Before the AO, the assessee had filed ITR-V of Shri Surinder

Kumar Arora for the year under consideration, copy of

affidavit of Shri S.K.Arora, Bank Account Statement of Shri

S.K.Arora for the year under consideration and copy of

account of Shri S.K.Arora in the books of the assessee for

assessment year 2014-15 i.e., the year under consideration.

Shri S.K.Arora’s assessment order for assessment year 2014-

15, passed by the same AO and that of the assessee, on

24.12.2019, was also filed before the CIT(A), as has also

been done before us, alongwith the other evidences. Thus,

the addition of Rs.10 lacs was made by the AO by ignoring

the aforesaid documentary evidences filed by the assessee,

which have not been refuted. The ld. CIT(A) has confirmed

the addition by merely stating that submission of bank

account statement by itself cannot explain the credit

worthiness of the lender. This finding of the ld. CIT(A) is

also found to be unsustainable in the face of the

documentary evidences furnished by the assessee before the

ld. CIT(A). It is not only the bank account statement of the

ITA 3 &144/CHD/2023 A.Y. 2014-15 30

lender which has been filed in singularity. Rather, the bank

account statement is accompanied by the ITR of the lender,

his affidavit, and the assessment order in the case of the

lender for the year under consideration by the same AO as

that of the assessee.

33.3 It is seen that as rightly contended on behalf of the

assessee, the AO made the addition just on the dictat of a

third party, whereas initially, he had not proposed any

addition at all. The company has 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. The assessee company had clearly mentioned in its

written submission the list of documents attached as

annexure to substantiate its claim, if somehow, only the

bank statement was available with the CIT(A) then the CIT(A)

could have asked the assessee to furnish all other

documents as mentioned in the written submission. No such

inquiry was made by the CIT(A). Neither the CIT(A) nor AO

asked the appellant submit any other documentary evidence

with regard to the amount received or given back to Sh. SK

Arora.

ITA 3 &144/CHD/2023 A.Y. 2014-15 31

33.4 The CIT(A) wrongly confirmed the addition made by

the AO on the plea that the company did not submit any

documentary evidence other than the bank statement but on

the other hand the CIT(A) himself is mentioning the list of

documents submitted by the assessee in point 1, page 104 of

his order, thereby contradicting his own statement. The

CIT(A) ought to have raised any query or issued any notice

asking the assessee to submit the same. But no such query

was raised nor any notice was issued to the assessee in this

regard. Additionally, the CIT(A) confirmed the addition of Rs.

10,00,000/- made by the AO for an absurd reason without

giving any findings on the documents which was already

submitted by the assessee company during the assessment

proceeding and remand proceeding.

33.5 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the CIT(A)

observed that the assessee company failed to submit any

documentary evidence other than bank statement, they 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 32

Rs. 10,00,000/- was made based on the directive of a third

party.

Shri SK Arora for the same assessment year wherein the

returned income of Shri SK Arora has been accepted by the

AO.

addition of Rs. 10 lacs is deleted.

made by the AO without considering each credit separately

on merit, while making addition of Rs.3,22,01,650/-, holding

that the purpose and utilization of funds which had not been

explained by the assessee.

AO had erred in making addition of Rs.4 lacs from Shri

Rakesh Kumar; that here also, the AO had not mentioned

any deficiency on the part of the assessee to prove the

sources of the funds; that the AO had also not made any

mention of the documents submitted by the assessee during

the assessment proceedings; that the assessee had filed

before the AO, a copy of account of Shri Rakesh Kumar, in

ITA 3 &144/CHD/2023 A.Y. 2014-15 33

the books of the assessee company, for assessment year

2014-15 (copies at APB 58).

the absence of any documentary evidence, the same

remained unexplained.

39.1 Before us, ld. Counsel for the assessee has contended

that the following documents copies whereof have also been

filed before us, were furnished before authorities below :

39.2 It has been contended that the assessee company

contends that the company gave advance of Rs. 4,00,000/-

to Sh. Rakesh Kumar on 28.10.2013 and the same were

received back by the company in the next month only on

09.11.2013. Since, the advance given was received back by

the company within the same year, hence, these were

squared up loans and advances and in support of such

squared up loans and advances the company submitted the

copy of account of the party in the books of the company. No

ITA 3 &144/CHD/2023 A.Y. 2014-15 34

other document was either asked by the AO or by CIT(A) in

their respective proceedings.

39.3 The company has 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 appellant submit any

other documentary evidence in this regard.

39.4 The CIT(A) has reproduced the entire written

submission of the assessee company in its order, and on

page 76 and 80 of the CIT(A) order, the following facts were

mentioned by the assessee in its submission which were

reproduced by CIT(A):-

(page 76 of CIT order)

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY AMOUNT PARTY NAME/ (IN RS) ACCOUNT NO. 09/11/2013 4,01,650/- RAKESH KUMAR ADVANCE GIVEN TO LEDGER ACCOUNT (FRIEND OF RAKESH KUMAR OF RS DIRECTOR) AND 4,00,000 ON 28/10/2013 INCOME DURING RECEIVED BACK ON THE YEAR 09/11/2013. RS 1,650 IS THE INCOME DURING THE YEAR

(Page 80 of CIT order)

ITA 3 &144/CHD/2023 A.Y. 2014-15 35

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINE SS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) ACCOUNT NO. 09/11/2013 4,00,000/- RAKESH KUMAR ADVANCE GIVEN TO LEDGER (FRIEND OF RAKESH KUMAR OF RS ACCOUNT DIRECTOR) AND 4,00,000 ON 28/10/2013 INCOME DURING THE RECEIVED BACK ON YEAR 09/11/2013.

39.5 The CIT(A) has also reproduced the index of the

written submission of the assessee company and on Page 96

of the' CIT(A) order, in point 22, the assessee has mentioned

that the copy of account of Sh. Rakesh Kumar in the books

of the company is attached as annexure at Page 234 of the

paperbook of the assessee company before CIT(A). At three

different pages of the CIT(A) order the CIT(A) is himself

acknowledging the submission of copy of account by the

company while deciding the case the CIT(A) has wrongly

taken the plea that no documentary evidence was submitted

by the company during the appellate proceedings. The above

documents were submitted before the CIT(A) which were

neither considered by the CIT(A) nor discussed by the CIT(A)

in its order. The CIT(A) wrongly confirmed the addition made

by AO without carrying out any verification with regard to

ITA 3 &144/CHD/2023 A.Y. 2014-15 36

the copy of account submitted by the company and wrongly

confirmed the addition of Rs. 4,00,000/- by taking a plea

that no documentary evidence was submitted by the

company to establish the creditworthiness of Sh. Rakesh

Kumar.

39.6 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the CIT(A)

observed that the creditworthiness cannot be established due

to non-submission of documents, they 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.

4,00,000/- was made based on the directive of a third party.

Neither enquiry was made by CIT(A) / AO before confirming

the addition of Rs. 4,00,000/- nor any documentary evidence

were sought from the assessee company, therefore the

assessee company has now submitted copy of computation,

ITR-V and bank account statement of Sh. Rakesh Kumar

(Paperbook page 59-70) as additional evidence along with

confirmation which was submitted before CIT(A) and AO. The

ITA 3 &144/CHD/2023 A.Y. 2014-15 37

submission of said documents are neither challenged nor

disputed in the appeal by the department.

39.7 The ld. DR has, again, placed strong reliance on the

impugned order.

40.1 We find that here also, the addition has been so

confirmed without taking into consideration the documentary

evidence filed by the assessee. It remains undisputed that

these were squared up loans and advances, the company

having given advance of Rs.4 lacs to Shri Rakesh Kumar on

28.10.2013 and the same having been received back through

banking channel, on 09.11.2013, in respect of which, the

assessee has placed on record before the authorities below,

the copy of account of Shri Rakesh Kumar in the books of

the assessee company.

40.2 Further, the CIT(A) has reproduced the entire written

submission of the assessee company in its order, and on

page 76 and 80 of the CIT(A) order, the following facts were

mentioned by the assessee in its submission which were

reproduced by CIT(A):-

(page 76 of CIT order)

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY

ITA 3 &144/CHD/2023 A.Y. 2014-15 38

AMOUNT PARTY NAME/ (IN RS) ACCOUNT NO. 09/11/2013 4,01,650/- RAKESH KUMAR ADVANCE GIVEN TO LEDGER ACCOUNT (FRIEND OF DIRECTOR) RAKESH KUMAR OF RS AND INCOME DURING 4,00,000 ON 28/10/2013 THE YEAR RECEIVED BACK ON 09/11/2013. RS 1,650 IS THE INCOME DURING THE YEAR (Page 80 of CIT order)

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY , GENUINE S AND CREDIT WORTHIN ESS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) | ACCOUNT NO. 09/11/2013 4,00,000/- RAKESH KUMAR ADVANCE GIVEN TO RAKESH LEDGER (FRIEND OF DIRECTOR) KUMAR OF RS 4,00,000 ON ACCOUNT AND INCOME DURING 28/10/2013 RECEIVED BACK ON THE YEAR 09/11/2013.

40.3 The CIT(A) has also reproduced the index of the

written submission of the assessee company and on Page 96

of the' CIT(A) order, in point 22, the assessee has mentioned

that the copy of account of Sh. Rakesh Kumar in the books

of the company is attached as annexure at Page 234 of the

paperbook of the assessee company before CIT(A). At three

different pages of the CIT(A) order the CIT(A) is himself

acknowledging the submission of copy of account by the

company while deciding the case the CIT(A) has wrongly

taken the plea that no documentary evidence was submitted

by the company during the appellate proceedings. The above

ITA 3 &144/CHD/2023 A.Y. 2014-15 39

documents were submitted before the CIT(A) which were

neither considered by the CIT(A) nor discussed by the CIT(A)

in its 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. 4,00,000/- by taking a plea

that no documentary evidence was submitted by the

company to establish the creditworthiness of Sh. Rakesh

Kumar.

40.4 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the CIT(A)

observed that the creditworthiness cannot be established due

to non-submission of documents, they 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.

4,00,000/- was made based on the directive of a third party.

Neither enquiry was made by CIT(A) / AO before confirming

the addition of Rs. 4,00,000/- nor any documentary evidence

were sought from the assessee company, therefore the

assessee company has now submitted copy of computation,

ITA 3 &144/CHD/2023 A.Y. 2014-15 40

ITR-V and bank account statement of Sh. Rakesh Kumar

(Paperbook page 59-70) as additional evidence along with

confirmation which was submitted before CIT(A) and AO. The

submission of said documents are neither challenged nor

disputed in the appeal by the department.

deleted and Ground No.7 is accepted.

Rs.20 lacs received by the assessee from M/s Ajit India.

Here too, the addition was made by the AO, holding that the

purpose and utilization of funds had not been explained by

the assessee.

AO, while wrongly holding that the assessee could not

explain the purpose and sources of the funds, had failed to

mention any deficiency whatsoever on the part of the

assessee, in the face of the documentary evidence filed

before him, in the shape of copy of account of M/s Ajit India

in the books of the assessee company in the year under

consideration and the pay-in-slip of M/s Ajit India, dated

21.03.2014, of Rs.20 lacs; and that in the assessment order,

ITA 3 &144/CHD/2023 A.Y. 2014-15 41

the AO had also not even mentioned the documents so

submitted by the assessee in the assessment proceedings.

CIT(A) held that in the absence of any documentary evidence,

the same remained unexplained.

45.1 Before us, the ld. Counsel for the assessee has

contended that mention of the documents submitted before

the ld. CIT(A) vide reply dated 21.03.2020, stands

reproduced at pages 77-80 of the ld. CIT(A)’s order. Reliance

has been placed on the following documents, as furnished by

the assessee before the authorities below:

45.2 The ld. Counsel for the assessee contended that the

assessee company gave advance of Rs. 20,00,000/- to M/s

Ajit India through RTGS on 25.07.2013 and the same were

received back by the company on 22.03.2014 vide cheque no.

792304. Since, the advance given was received back by the

company within the same year, hence, these were squared up

loans and advances and in support of such squared up loans

ITA 3 &144/CHD/2023 A.Y. 2014-15 42

and advances the company submitted the copy of account of

the party in the books of the company. The appellant

submitted copy of pay-in slip of M/s Ajit India before the

CIT(A) during the appellate proceedings. No other document

was either asked by the AO or by CIT(A) in their respective

proceedings.

45.3 The company has 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 appellant submit any

other documentary evidence in this regard. The CIT(A) has

reproduced the entire written submission of the assessee

company in its order, and on page 77 and 80 of the CIT(A)

order, the following facts were mentioned by the assessee in

its submission which were reproduced by CIT(A):-

Page 77 of CIT order

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINES S OF THE PARTY AMOUNT (IN PARTY

ITA 3 &144/CHD/2023 A.Y. 2014-15 43

RS) NAME/ ACCOUNT NO. 22/03/2014 20,00,000/- AJIT INDIA ADVANCE OF RS 20,00,000 LEDGER GIVEN ON 25/07/2013 AND ACCOUNT RECEIVED BACK ON 22/03/2014

Page 80 of CIT order

DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY AMOUNT (IN PARTY NAME/ RS) ACCOUNT NO. 22/03/2014 20,00,000/- AJIT INDIA ADVANCE OF RS LEDGER 20,00,000 GIVEN ON ACCOUNT 25/07/2013 AND RECEIVED BACK ON 22/03/2014

45.4 The CIT(A) in his order has himself acknowledged the

submission of copy of account by the company while

upholding the addition the CIT(A) has wrongly taken the plea

that no documentary evidence was submitted by the

company during the appellate proceedings. The above

documents were submitted before the CIT(A) which were

neither considered by the CIT(A) nor discussed by the CIT(A)

in its 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. 20,00,000/- by taking a plea

ITA 3 &144/CHD/2023 A.Y. 2014-15 44

that no documentary evidence was submitted by the

company to establish the creditworthiness of M/s Ajit India.

45.5 The AO found the documentary evidence furnished by

the assessee company to be unsatisfactory while the CIT(A)

observed that the creditworthiness cannot be established due

to non-submission of documents, they 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.

20,00,000/- was made based on the directive of a third

party.

45.6 Neither enquiry was made by CIT(A) / AO before

confirming the addition of Rs. 20,00,000/- nor any

documentary evidence were sought from the assessee

company, therefore the assessee company has now submitted

copy of confirmation from M/s Ajit India (Paperbook page 71)

as additional evidence along with copy of account of M/s Ajit

India in the books of the company and copy of pay in slip of

Rs. 20,00,000/- which was submitted before CIT(A) and AO.

The submission of said documents are neither challenged nor

disputed in the appeal by the department. Hence, the

ITA 3 &144/CHD/2023 A.Y. 2014-15 45

addition confirmed by CIT(A) amounting to Rs. 20,00,000/-

on account of amount received back from M/s Ajit India

needs to be deleted.

order in this regard also.

authorities below, copy of account, for assessment year

2014-15 i.e. the year under consideration, of M/s Ajit India

in the books of the assessee. A copy thereof is at APB 72.

The assessee had also filed a copy of pay-in-slip (APB 73-74),

of M/s Ajit India, of Rs.20 lacs, dated 21.03.2014. The

assessee has also filed confirmation of M/s Ajit India (APB

71) before us too. The stand of the assessee in this regard is

that it had given advance of Rs.20 lacs to M/s Ajit India

through RTGS on 25.07.2013 and that this amount was

received back by the assessee on 22.03.2014, vide cheque, in

the same year; that therefore, these were squared up loans

and advances, which were duly supported by the copy of

account of the lender in the books of the assessee company;

that the pay-in-slip also proved the stand of the assessee;

that no other document was asked for by either of the taxing

authorities. This has not been disputed. The loan was a

ITA 3 &144/CHD/2023 A.Y. 2014-15 46

squared up loan. No evidence to the contrary has been

brought on record by either the taxing authorities or the ld.

DR before us. There is not even an iota of evidence on

record to show that either of the taxing authorities had even

as much as put any question to the assessee in this regard.

the assessee before the ld. CIT(A) is also evident from pages

77 and 78 of the order under appeal, where the ld. CIT(A)

has taken note of the submission made by the assessee in

this regard. Moreover, there is no rebuttal by the ld. CIT(A)

to the copy of account filed by the assessee. Therefore, the

ld. CIT(A) confirmed the addition of Rs.20 lacs in utter

oblivion of the documentary evidence produced on record by

the assessee as above and thereby arriving at a wrong

finding that no documentary evidence had been filed by the

assessee.

accepted and the addition of Rs.20 lacs is deleted.

50.1 Ground No.9 questions the confirmation of addition

of Rs.1 lac received by the assessee company from Shri Sahil

Singla. Again, the AO while making the addition, has alleged

ITA 3 &144/CHD/2023 A.Y. 2014-15 47

that the purpose and utilization of the funds could not be

explained by the assessee.

50.2 Vide reply dated 21.03.2020, before the ld. CIT(A),

the assessee, inter-alia, produced on record ITR-V of Shri

Sahil Singla for the year under consideration (copy of APB

77), copy of account of Shri Sahil Singla and Smt. Kiran

Singla in the books of the assessee company for the year

under consideration (APB 80) and bank account statements

of Shri Sahil Singla and Smt. Kiran Singla, for the year

under consideration (APB 81). The ld. CIT(A), while

confirming the addition, observed that there was cash

deposit of Rs.1 lakh in the bank account of Smt. Kiran

Singla and that the source of the same had not been

explained.

50.3 The ld. Counsel for the assessee has contended that

other than the documentary evidence filed, the assessee had

also filed a copy of assessment order dated 24.12.2019, for

assessment year 2014-15, passed u/s 153A(1)(b) read with

Section 143(3) of the Act, in the case of Shri Sahil Singla and

a copy of the assessment order dated 26.12.2019, passed for

assessment year 2014-15, u/s 153A(1)(b) read with Section

143(3) of the Act, in the case of Smt. Kiran Singla, wherein,

ITA 3 &144/CHD/2023 A.Y. 2014-15 48

the Assessing Officer of all the three was the same and he

had made the addition of all the credits in the bank account

of the assessee company whereas he had accepted the credit

worthiness of Shri Sahil Singla and Smt. Kiran Singla, in

their respective assessment proceedings. It has been

submitted that the following documents, filed before us, were

also submitted alongwith reply dated 21.12.2019, before the

ld. CIT(A) :

50.4 It has been contended that the assessee company

received unsecured loan of Rs.1 lakh from Shri Sahil Singla

and Smt. Kiran Singla on 31.08.2013 and they were returned

on 11.04.2017; that although documentary evidences were

filed before both the taxing authorities, neither of them

raised any objection regarding any of these documents; that

ignoring all the documentary evidences, the AO, though he

was initially of the opinion that no addition be made, later

ITA 3 &144/CHD/2023 A.Y. 2014-15 49

on went on to make the additions following dictat of a third

party; that the ld. CIT(A) also illegally confirmed the

addition, overlooking the fact that in the cases of both, Shri

Sahil Singla and Smt. Kiran Singla, these cash deposits

stood accepted by that very AO himself; that the ld. CIT(A)

has erred in observing that the assessee company had failed

to submit any documentary evidences other than the bank

statement.

50.5 The ld. DR has placed strong reliance on the impugned

order.

51.1 Here also we find that it is a case of confirmation of

addition wrongly made. The ld. CIT(A)’s order is a result of

complete misreading and non reading of material

documentary evidence brought on record by the assessee.

51.2 The assessee had submitted evidence in the shape of

ITR-V of Shri Sahil Singla for assessment year 2014-15, a

copy of account of Shri Sahil Singla and Smt. Kiran Singla in

the books of the assessee company, for assessment year

2014-15 and bank account statements Shri Sahil Singla and

Smt. Kiran Singla, for assessment year 2014-15. Copies of

these documents have been filed before us at pages 77,80

ITA 3 &144/CHD/2023 A.Y. 2014-15 50

and 81 of the APS before us also, the assessee company had

filed a copy of the assessment order dated 24.12.2019, by

Shri Sahil single and assessment order dated 26.12.2019, of

Smt. Kiran Singla, for assessment year 2014-15, passed u/s

153A(1)(b) read with Section 143(3) of the Act, passed by the

same AO as who had assessed the case of the assessee

company for the same assessment year. The AO accepted the

credit worthiness of Shri Sahil Singla and Smt. Kiran Singla

in their respective assessment proceedings, while he made

addition of the same in the case of the assessee company.

This course of action, evidently, is impermissible in law. The

same transaction cannot be held to be as unexplained u/s 68

of the Act in one assessment proceedings and it cannot be

held to be genuine and credible in the other related APS for

the same year. From this, it is amply clear that the addition

had been made the AO without any application of mind

whatsoever. The ld. CIT(A), however, erred in failing to take

into consideration this basic aspect of the matter and

confirming the addition, which, from its inception could not

have been made. The contention of the assessee that it had

received an unsecured loan of Rs.1 lac from Shri Sahil Singla

and Smt. Kiran Singla on 31.08.2013 and that it was

ITA 3 &144/CHD/2023 A.Y. 2014-15 51

returned on 11.04.2017, has not been disputed and it stands

proved on record. The assessee company had submitted all

the relevant documentary evidence in this regard before both

the taxing authorities, which did not stand questioned by

either of them. However, even in the face of this unrebutted

documentary evidence, the AO made the addition. The

addition, as observed, was made despite the fact that the AO,

in his Note, had not evinced any inclination to make any

addition whatsoever. However, as correctly contended and

as also stands available from the record, it was on the dictat

of a third party, that the addition was made by the AO, when

such addition is not sustainable in the eye of law. The ld.

CIT(A) wrongly confirmed the addition made on a specious

observation that there was an immediate cash deposit of

Rs.1 lac in the bank account, the source whereof had not

been explained, this, despite the fact that the alleged

immediate cash deposits were accepted by the same AO in

the assessment proceedings of Shri Sahil Singla and Smt.

Kiran Singla. While doing so, the ld. CIT(A) neither rebutted

the documentary evidence brought on record by the

assessee, nor did he ask the assessee the submit any other

documentary evidence concerning the amount received and

ITA 3 &144/CHD/2023 A.Y. 2014-15 52

given back by the assessee to Shri Sahil Singla and Smt.

Kiran Singla. In fact, documents furnished by the assessee

in the evidence were not even commented upon adversely by

the ld. CIT(A). Rather, they were not at all commented upon,

leading to the conclusion that these documents were not at

all looked into by the ld. CIT(A). In the absence of any

rebuttal to such documentary evidence, the ld. CIT(A) erred

in confirming the addition. Whereas the ld. CIT(A) observed

that the assessee company had failed to submit any

documentary evidence other than the bank statements, no

proceedings, either under Section 133(6), or Section 131 of

the Act, were taken out, for making any further investigation

into the matter.

is accepted and the addition of Rs.1 lac is deleted.

53.1 Apropos Ground No.10, amount of Rs.3 lacs received

by the assessee from Shri Triloki Nath Singla, HUF was

added by the AO. The AO made addition of all the credit

entries in the bank, of Rs.3,22,01,650/-, holding that the

purpose and utilization of the funds was not explained by

the assessee. The assessee had submitted the following

ITA 3 &144/CHD/2023 A.Y. 2014-15 53

documents before the AO, which were also filed before the ld.

CIT(A) vide the assessee's reply dated 21.03.2020:

order, the documents submitted by the assessee vide its

reply dated 21.03.2020. The assessee had received an

amount of Rs.3 lacs on 31.08.2013 and that of Rs.75 lacs on

18.09.2013, from Shri Triloki Nath Singla, HUF. The

documents in support, filed by the assessee were the bank

account statement, the ledger account, the confirmation and

the ITR of Shri Triloki Nath Singla, HUF. The ld. CIT(A)

observed that there was immediate cash deposit of Rs.3 lacs

in the bank account of Shri Triloki Nath Singla, HUF and the

source thereof had not been explained; that in respect of the

remaining amount of Rs.75 lacs, on perusal of the

documents furnished by the assessee, it had been observed

that the said amounts had been explained as received as

unsecured loan; that the transaction had been found to have

been routed through the bank account from the sale

proceeds of mutual funds of Rs. 85 lacs, reflected in the

ITA 3 &144/CHD/2023 A.Y. 2014-15 54

computation of income; and that the identity and credit

worthiness also stood established from the ITR details of

Rs.75 lacs. As such, addition of Rs.3 lacs was confirmed by

the ld. CIT(A), holding that the immediate cash deposit of

Rs.3 lacs in the bank account of Smt. Kiran Singla and the

source thereof had not been explained.

53.3 Before us, in the Paper Book, at pages 54 to 57

thereof, the assessee has furnished copies of the documents

furnished before the ld. CIT(A), copy of the assessment order

dated 26.12.2019 passed u/s 153A(1)(b) read with Section

143(3) of the Income Tax Act, in the case of Smt. Kiran

Singla for assessment year 2014-15. It has been contended

that it is evident from the copy of cash book of Shri Triloki

Nath Singla, HUF, that the HUF deposited cash of Rs.3 lacs

on 20.08.2013 and the same was withdrawn on 06.08.2013,

as is available from the bank statement. It has been

submitted that all the documentary evidences were filed

before the AO as well as the ld. CIT(A); that however, neither

authority raised any objection against the documents so

filed; that the AO ignored all the documentary proofs and

followed the dictat of the third party and made addition of

Rs.3 lacs and the ld. CIT(A) wrongly confirmed such

ITA 3 &144/CHD/2023 A.Y. 2014-15 55

addition, holding that there was immediate cash deposit of

Rs.3 lacs in the bank account and that the source thereof

had not been explained; that the assessee had filed an

elaborate written submission before the ld. CIT(A) in 2020;

that the ld. CIT(A) had more than two years to examine the

documents submitted by the assessee, or to ask the assessee

to submit any other document, if so required; that however,

it was not so done and the assessee was never asked to

submit any other documentary evidence.

53.4 The ld. DR, on the other hand, has placed strong

reliance on the impugned order in this regard also.

the material placed on record, we find the grievance of the

assessee to be justified. The documentary evidence furnished

by the assessee in the shape of ITR-5 of Shri Triloki Nath

Singla, HUF for assessment year 2014-15, account of Shri

Triloki Nath Singla, HUF and Shri T.N.Singla in the books of

M/s TJR Properties Pvt. Ltd., for assessment year 2014-15,

account of cash book in the books of Shri Triloki Nath

Singla, HUF, bank account statements of Shri Triloki Nath

Singla, HUF, for assessment year 2014-15 and the

assessment order dated 26.12.2019, passed u/s 153A(1)(b)

ITA 3 &144/CHD/2023 A.Y. 2014-15 56

read with Section 143(3) of the Income Tax Act, in the case

of Smt. Kiran Singla, for assessment year 2014-15, which

were duly explained by the assessee as supporting the stand

taken by the assessee on the amount of Rs.3 lacs, have

nowhere been rebutted by the taxing authorities. The taxing

authorities, however, against all cannons of the principles of

natural justice, have simply brushed aside these voluminous

documentary evidence, without even referring to the same in

their respective orders. It stands established on record that

the amount was returned to the lender by the assessee. The

cash book of the lender shows that the amount was

deposited on 20.08.2013. The bank statement makes it clear

that it was withdrawn on 06.08.2013. This has nowhere

been put to challenge by the ld. CIT(A) and the observation

that there was immediate deposit in cash of Rs.3 lacs and

that the source thereof had not been explained, is not borne

out from anything on record in contrast to the evidence

furnished by the assessee. Further, in case of doubt, the

authorities ought to have raised queries from the assessee,

which was not done. No enquiry was also carried out from

the lender HUF. No proceedings were initiated either u/s

133(6) or 131 of the Act, for further investigation into the

ITA 3 &144/CHD/2023 A.Y. 2014-15 57

matter, if any such investigation was required. As such,

both the authorities were, in fact, satisfied with the

explanation of the assessee and as such, there was no

reason for making the addition or for confirming the same at

the hands of the ld. CIT(A).

addition of Rs.3 lacs is deleted.

addition of Rs.7 lacs on account of income deposited in cash.

The addition of Rs.3,22,01,650/- of all the credit entries in

the bank, as made by the AO included cash deposit of Rs.7

lacs by the assessee company in its bank account, holding

that the purpose and utilization of such funds had also not

been explained by the assessee.

57.1 The ld. CIT(A) confirmed the addition, holding that no

evidence/details giving the particulars of the person from

whom such cash was received, or the nature of the

transaction with them, had been furnished by the assessee,

due to which, the cash deposit of Rs.7 lacs had remained

unexplained.

ITA 3 &144/CHD/2023 A.Y. 2014-15 58

57.2 The ld. Counsel for the assessee has submitted that

the assessee had filed copy of income account alongwith copy

of cash account, bank account statement, profit & loss

account and copy of hire charges account in the books of the

assessee company for assessment year 2014-15, before the

AO as well as the ld. CIT(A), neither of whom had considered

such documentary evidence filed; and that no explanation or

further documentary evidence was ever asked for either by

the AO or by the ld. CIT(A).

57.3 We find that since undisputedly the assessee had

furnished the aforesaid documentary evidence before both

the taxing authorities. The ld. CIT(A) was factually incorrect

in observing that no evidence/details giving the particulars

of the person from whom such cash was received, or the

nature of the transaction with them, had been filed. As in

the case of the other cash deposits discussed herein above,

the assessee company had filed a complete reply before the

ld. CIT(A). The ld. CIT(A) had ample time to examine the

documentation furnished, which was not done. Despite the

assessee having discharged its burden of furnishing

documentary evidence in support of the amount deposited,

neither the AO, nor the CIT(A) on receipt of the documentary

ITA 3 &144/CHD/2023 A.Y. 2014-15 59

evidence put any question to the assessee, or initiated any

enquiry, either u/s 133(6) of the Act, or u/s 131 thereof. It

stands made out that the assessee had earned the income of

Rs.7 lacs from leasing out of vehicle of the company. The

copy of account of hire charges, which had been furnished

before both the taxing authorities, stands filed before us

also. It formed part of the books of account submitted by

the assessee company during the assessment proceedings,

shown as income in the Profit & Loss Account. Neither of

the authorities below have rebutted this documentary

evidence, rendering their respective orders to be orders

passed as a result of misreading and non reading of material

documents brought on record.

57.4 In view of the above, finding force in Ground No.11,

the same is accepted and the addition of Rs.7 lacs is deleted.

Rs.45 lacs by invoking the provisions of Section 68 of the

Income Tax Act, has been brought to challenge. Here,

undisputedly, the assessee company submitted the Cash

Flow Statements, explanation of each debit and credit entry

in the bank account of the assessee company and also filed

the balance sheet, affidavit, confirmations, bank statement,

ITA 3 &144/CHD/2023 A.Y. 2014-15 60

ITRs, balance sheets and copies of accounts, etc. However,

the AO did not consider each credit entry separately, as was

required to be done under the law. He made additions of all

the credit entries in the bank account of the assessee

company without considering the nature, source, credibility

and genuineness of each credit transaction received in the

assessee's bank account during the year under

consideration. Rather, the AO, to start with, was completely

satisfied with the genuineness of the company and the

sources of the credit entries in the bank account. In

pursuance thereof, the AO had sent a detailed note on the

comparison of the assessee company with shell companies

and the explanation of the credit entries. This was done by

way of Deviation Note, addressed to the Deputy Director of

Investigation, Mohali, on 26.12.2019, in the letter No. 1733,

dated 24.12.2019, passed on his satisfaction, which had

been arrived at with regard to the source of the transactions

as per the evidence filed on behalf of the assessee and its

regular books of account, which stood duly explained.

However, the ADIT (Investigation) Mohali, though she was

not authorized to do so and though she did not have any

jurisdiction over the matter, rejected the Deviation Note of

ITA 3 &144/CHD/2023 A.Y. 2014-15 61

the AO in a short time of twelve hours of receipt of the

Deviation Note. While doing so, the ADIT (Investigation)

Mohali observed that the assessee company was a shell

company. Vide letter No.1763 dated 27.12.2019, addressed

to the AO, the ADIT (Investigation) Mohali rejected the

proposal/Deviation Note suggesting that no addition be made

and directed the AO to make additions by assigning flimsy

reasons. It was on the basis of such dictat and that too, of a

third party, that the AO made the additions including the

one in question by way of Ground No.11. Accordingly, all

the credit entries in the bank account of the assessee

company were added as its undisclosed income u/s 68 of the

Income Tax Act. We find that such additions, as rightly

contended on behalf of the assessee, are not at all

sustainable in the eye of the law. Such addition was made

without putting the assessee to show cause thereagainst.

Also, the assessee was wrongly treated as a shell company,

without any query in this regard having been put to the

assessee in the questionnaires issued. The documentary

evidence, as discussed, filed on behalf of the assessee, was

no way taken into consideration by the AO before making the

addition. It has not been disputed that the assessee

ITA 3 &144/CHD/2023 A.Y. 2014-15 62

company furnished full explanation concerning the identity,

sources, bank account, etc., of each of its creditors and on

the basis thereof, no entity could have been treated as a

sham entity.

59.1 The ld. CIT(A), while upholding the addition, has

observed as follows :

"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 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 63

peculiar facts and circumstances to draw such inference 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 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 64 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. 2,77,01,650/- is hereby deleted."

59.2 Thus, the ld. CIT(A) deleted the addition of

Rs.2,77,01,650/- on verification of all the documentary

evidences filed. The addition of Rs.45 lacs was, however,

confirmed, again, without asking the assessee for any doubt

to be cleared, if the ld. CIT(A) had entertained any such

doubt, and without asking the assessee to furnish any other

documents by way of evidence, by way of issuance of any

Show Cause Notice or any query raised.

59.3 The AO had observed, in para 11.1 of the assessment

order, that the assessee had not produced its books of

account for verification during the assessment proceedings.

ITA 3 &144/CHD/2023 A.Y. 2014-15 65

In this regard, the undisputed stand taken by the assessee

remains that the search was conducted at the business

premises of M/s Kansal Singla & Associates, Chandigarh;

that during the search, regular books of account alongwith

bank statements of the assessee company, were found, which

fact also stands mentioned at page 357 of the Appraisal

Report. Copies of all the books of account were taken on CD

by the Department, as per Panchnama of M/s Kansal Singla

& Associates, Chandigarh. The books of account were also

examined by the AO before forwarding his Deviation Note to

the Investigation Wing, even as per the contents of the AO’s

letter dated 24.12.2019, addressed to the ADIT

(Investigation) Mohali. The books of account were also

submitted by the assessee before the AO during the remand

proceedings, on 16.02.2022, as is evident from APB 84. The

AO made the additions merely on the dictat of a third party

i.e., the ADIT (Investigation) Mohali, without going into the

merits, all the documentary evidence submitted. The ld.

CIT(A) relied on the very same documentary evidence and

gave relief of an amount of Rs.2,77,01,650/-. Curiously,

though the addition of Rs.45 lacs was illegally confirmed by

the ld. CIT(A), without considering that since the assessee

ITA 3 &144/CHD/2023 A.Y. 2014-15 66

had discharged its onus of proving the identity and credit

worthiness of its lenders and the genuineness of the

transaction, it was the AO who had failed to discharge the

onus which had thereafter shifted on to him, and who had

also failed to rebut the evidence filed by the assessee.

59.4 Reliance has rightly been placed by the ld. Counsel for

the assessee on the decision of the Hon'ble Delhi High Court

in the case of “Pr. CIT (Central)-I Vs, M/s Adamine

Construction Pvt. Ltd.”, 2018 (2) TMI, 1815 (Delhi), holding,

under similar facts and circumstances, that the AO had gone

into by the report received and had not made the necessary

further enquiries, like any enquiry into the bank accounts,

or the other particulars available with him and rather basing

his entire findings on the report; that this could not be

considered as primary material, and that the assessee

company had discharged the onus cast upon it, by providing

the basic details, which were not suitably enquired into by

the AO. The ld. Counsel for the assessee has contended that

vide order dated 28.09.2018, the Department’s SLP against

the said decision of the Hon'ble Delhi High Court in the case

of “Adamine Construction” (supra), has been dismissed.

ITA 3 &144/CHD/2023 A.Y. 2014-15 67

Before us, the Department has not been able to cite any

decision contrary to “Adamine Construction” (supra).

of Ground No.12 is found to be justified and it is accepted as

such. The addition of Rs.45 lacs is, accordingly, deleted.

disallowance of loss of Rs.2,97,834/-. The AO observed that

the assessee company had shown losses of Rs.2,97,834/- in

its return of income; that since the assessee company had

not undergone any business activity during the year under

consideration and the assessee company had failed to

produce the bills/vouchers of the expenses claimed by it, the

genuineness of the expenses claimed could not be proved;

that further, the assessee company had also failed to

produce its books of account for verification and

examination; that still further, the assessee company had

been found to be a shell company managed and controlled by

Shri Triloki Nath Singla, having no genuine regular business;

and that therefore, the losses claimed of Rs.2,97,834/- were

being disallowed.

ITA 3 &144/CHD/2023 A.Y. 2014-15 68

62.1 Here again, the ld. CIT(A) has observed that the

assessee did not furnish any documentary evidence in

respect of the losses claimed to have been incurred. It was

on this basis that the ld. CIT(A) confirmed the disallowance

of loss of Rs.2,97,834/-.

62.2 The stand of the assessee is that the AO had wrongly

observed that bills and vouchers and books of account had

not been produced by the assessee. It has again been

submitted, and not disputed by the Department, that the

search had been conducted on the business premises of M/s

Kansal Singla & Associates, Chandigarh, wherein, regular

books of account alongwith bank statements of the assessee

company, were found and copies thereof were taken on CD

by the Department, which fact is also evident from the

Panchnama of M/s Kansal Singla & Associates. This being

so, obviously, the AO was incorrect in holding that the

assessee had not produced its books of account, bills and

vouchers for the assessment proceedings. Since the

Department had taken the same on CD, the books of

account, also comprised of the bills and vouchers were

already in the possession of the Department.

ITA 3 &144/CHD/2023 A.Y. 2014-15 69

62.3 Further, the assessee is also correct when it contends

that the books of account were examined by the AO at the

time of sending his Deviation Note to the Investigation Wing.

Further still, even during the remand proceedings, the

assessee had submitted the books of account before the AO,

on 16.02.2022.

Rs.2,97,834/- to be unsustainable and the same is,

accordingly, deleted, while accepting Ground No.13.

64.1 According to Ground No.14, the ld. CIT(A) has erred in

upholding the disallowance of depreciation on vehicle to the

extent of Rs.9,11,484/-

64.2 It is seen that the disallowance of Rs.9,11,484/-,

representing depreciation on vehicle, has been made by the

AO without entering any discussion with regard thereto in

the assessment order. The ld. CIT(A) confirmed the

disallowance, again, without any discussion. The assessee

had filed before the authorities below, the computation sheet

of M/s TJR Properties Pvt. Ltd., for assessment year 2014-

15, the Fixed Assets Schedule and the Registration

Certificate of the car. The stand taken is that the vehicle

ITA 3 &144/CHD/2023 A.Y. 2014-15 70

was registered in the name of the assessee company and it

was used for business purposes only.

64.3 It is seen that the documents furnished by the

assessee in support of its claim have nowhere been rebutted

by either of the authorities below. Particularly, the

Registration Certificate alongwith the other documents filed

has nowhere been rebutted. This being so, the very basis of

the disallowance made is unsustainable in law and we hold

so. Accordingly, the addition of Rs.9,11,484/- is deleted,

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

opposition to the documentary evidence furnished by the

assessee. Accordingly, Ground No.14 is also accepted.

indicated.

ITA 144/CHD/2023

assessee's appeal in ITA 3/CHD/2023, for assessment year

2014-15. 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. 2,77,01,650/-credited in bank account of assessee during F.Y. 2013-14 was to be considered as unexplained cash credit u/s 68 of the Act as the

ITA 3 &144/CHD/2023 A.Y. 2014-15 71 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 6f 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?

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

of Rs.2,77,01,650/- 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.2,77,01,650/-

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

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.2,77,01,650/- 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 72

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

the Act did not stand proved by the assessee.

observed inter-alia that the assessee had explained that the

AO had used the statement of Shri Jagdish Rai Gupta,

selectively, in parts, by drawing a wrong inference that M/s

TJR Properties Pvt. Ltd. was a shell company; that the

assessee had submitted that 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%; that the assessee had submitted that

M/s TJR was having income generating apparatus and was

undertaking business activities and was not a shell

company; that the CIT(A) considered the facts and material

available on record and held that Sh. TN Singla and Sh.

Jagdish Rai Gupta are the directors/shareholders of the

appellant company and Sh. Sahil Singla is the son, Smt.

Kiran Singla is the wife and Smt. Sakshi Singla is Daughter

ITA 3 &144/CHD/2023 A.Y. 2014-15 73

in Law of Sh. TN Singla; that after taking into consideration

these facts, the ld. CIT(A) 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; that after perusing the findings of the AO recorded

in the assessment order and the material available on

record, the ld. CIT(A) 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 CIT(A) further

observed that the same AO had assessed Long Term Capital

Gain in the hands of M/s TJR from the said transaction; that

it was 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, the CIT(A)

observed that M/s TJR was having income generating

apparatus in past and future years and was undertaking

business activities; that there was no definition of shell

company given under the provisions of Income Tax Act, 1961

ITA 3 &144/CHD/2023 A.Y. 2014-15 74

or Companies Act, 1956/2013. The ld. CIT(A) observed that

every case needs to be examined on merits as per the

peculiar facts and circumstances to draw such inference and

consequences out of the same as per the provisions of

Income Tax Act; that 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 was 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 was 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 ld. CIT(A) held that

the AO had not discussed each and cred separately on merits

in the assessment order before drawing the inference that

the credits were unexplained; that 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 75

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; that the assessee 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; that 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 76

remand proceedings and relied upon the facts as discussed

in the assessment order. It was submitted that the assessee

has discharged its onus as required u/s 68 of the Act and all

the above mentioned documents were also furnished before

the AO during the assessment proceedings; that although the

AO had 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. It was submitted

that the AO had 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 was 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. It was submitted that 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

ITA 3 &144/CHD/2023 A.Y. 2014-15 77

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 assessee during the appellate proceedings

were also forwarded to the AO for remand report. In the

remand report also, the AO did not even discussed the

documentary evidence furnished by the appellant in support

of 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 was noted that the assessment order is non

speaking, mechanical in nature and has been passed without

discussing merits of the documents. The ld. CIT(A) held that

there was 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 was

observed that there was no justification in such addition

made in the hands of the appellant u/s 68 of the Act.

Therefore, the addition of Rs. 2,77,01,650/- was deleted by

the ld. CIT(A).

ITA 3 &144/CHD/2023 A.Y. 2014-15 78

69.1 In sum, the ld. CIT(A) held that M/s TJR Properties

Pvt. Ltd. was having income generating apparatus in the

earlier and later years and was undertaking business

activities and that as such, it was not a shell company; that

the source and nature of the credits received were required

to be examined separately in case of each credit by

examining the identity and credit worthiness of the lenders

and the genuineness of the transactions; that this had not

been done by the AO; that the AO had observed that the

assessee had credits amounting to Rs.3,22,01,650/- in its

bank account, the purpose whereof could not be explained by

the assessee and that the assessee had also failed to explain

the utilization of such credits; that the assessee had, during

the assessment proceedings, furnished documentary

evidence in support of the identity and credit worthiness of

its lenders and the genuineness of the transactions; that

such evidence had also been furnished in the first appellate

proceedings; that the AO had again been directed, during the

assessment proceedings, vide letter, to examine such credits

on merits in respect of the identity and credit worthiness of

the persons and the genuineness of the transactions; that in

his Remand Report dated 15.07.2022, the AO had not

ITA 3 &144/CHD/2023 A.Y. 2014-15 79

brought on record, any adverse findings with regard to the

identity and credit worthiness of the lenders or the

genuineness of the transactions, other than saying that the

assessee was a shell company, not having any profit

generating apparatus; that it had been further stated by the

CIT(A) that one of the group companies, i.e., M/s Evershine

Recreation Pvt. Ltd., again, a shell company, had been a

company from whom the assessee had received credits; that

however, the AO had not made any further enquiry in respect

of the credits in the bank account of the assessee even

during the remand proceedings and had merely relied on the

facts as discussed in the assessment order; that the assessee

had discharged its onus u/s 68 of the Act; that the assessee

had furnished all the documents before the AO during the

assessment proceedings; that though the AO had admitted

having received the said documents during the assessment

proceedings, the same had not been taken into consideration

by the AO while making the addition; that the AO failed to

consider that addition u/s 68 of the Act is to be made only if

the assessee does not offer any explanation regarding the

source and nature of the credits received or if the

explanation offered is not found to be satisfactory by the AO;

ITA 3 &144/CHD/2023 A.Y. 2014-15 80

that on the other hand, the assessee, in its case, had

furnished its explanation in respect of the bank credits

received during the year, along with necessary documentary

evidence; that if the AO was not satisfied with the

explanation of the AO in respect of the source and nature of

the credits received, he should have recorded such

dissatisfaction in the assessment order; that however, the

AO had not recorded any adverse finding in the assessment

order in respect of the documentary evidence furnished by

the assessee in respect of the bank credits; that the

submissions and documents furnished by the assessee

during the appellate proceedings had also been forwarded to

the AO for a remand report; that in the remand report also,

the AO had not even discussed the documentary evidence

furnished by the assessee, let alone pointing out any defect

therein; that as such, the assessment order was non-

speaking and mechanical in nature and had been passed

without discussing the merits of the documents; that there

was no direct or indirect defect pointed out by the AO before

making the additions; and that therefore, there was no

justification in such addition made in the hands of the

assessee u/s 68 of the Act. It was on the basis of the above

ITA 3 &144/CHD/2023 A.Y. 2014-15 81

observations that the addition of Rs.2,77,01,650/- was

deleted by the ld. CIT(A).

69.2 Immediately, we do not find any error whatsoever in

the detailed reasoned order passed by the ld. CIT(A) while

deleting the addition of Rs.2,77,01,650/-. Remarkably,

there is no rebuttal before us to the finding of the ld. CIT(A)

that in the remand report, the AO has not even discussed the

documentary evidence furnished by the assessee in support

of the bank credits, much less pointing out any defect in the

same. Again, remarkably, it was the very same documentary

evidence which had been furnished by the assessee before

the AO during the original assessment proceedings also.

That being so, as pointed out somewhere in the preceding

portion of this order, while discussing the assessee's appeal

for the year under consideration, since the documentary

evidence furnished by the assessee before the ld. CIT(A) was

the very same documentary evidence, to the last page

thereof, which was furnished by the assessee in the original

assessment proceedings before the AO, it could not be

termed as an additional evidence, though the assessee, as a

abundant precaution, stated it to be so. Therefore, it was

the very same documentary evidence which the AO again got

ITA 3 &144/CHD/2023 A.Y. 2014-15 82

the opportunity of examining, by way of the remand

proceedings ordered by the ld. CIT(A), however, as in the

assessment order, in the remand report also, the AO did not

make even a mention of the evidence filed by the assessee,

what to talk of discussing the same and rebutting it for

arriving at a conclusion, addition was required to be made.

On the contrary, as discussed, initially the AO was not in

favour of any addition and a Deviation Note had been sent by

him to the ADIT(Investigation). However, though no

jurisdiction was vested in him to do so, the AO illegally

overruled and directed the additions to be made which dictat

of a third party was illegally followed by the AO while

passing the assessment order, even in the face of the

voluminous documentary evidence filed by the assessee, it

was on the basis of which, that the AO had recorded the

dissatisfaction note.

69.3 Other than the above, the Assessing Officer had

wrongly held the assessee company as shell company without

any substance or cogent reason, and the ld. CIT(A) has

rightly declared this company as a genuine company and not

a shell company. The status of the company has already

been decided by us in our order of the company for

ITA 3 &144/CHD/2023 A.Y. 2014-15 83

assessment year 2012-13 and 2013-14 on the same facts,

wherein we have confirmed it as a genuine company and not

as shell company.

69.4 It is despite the above inability of the Department to

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-

144/CHD/2023 is dismissed.

Order pronounced on 02.02.2024.

Sd/- Sd/- (VIKRAM SINGH YADAV) (A.D.JAIN ) ACCOUNTANTMEMBER VICE PRESIDENT “Poonam

ITA 3 &144/CHD/2023 A.Y. 2014-15 84

“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