Appeal Details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 4846 (ITAT-LUCKNOW)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 5 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Cross Objection
Pronouncement Date
05-04-2022
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2015-2016
Appeal Filed On
21-10-2018
Judgement Text
I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH ‘A’, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA Nos.701, 702, 582 & 703/Lkw/2018 Assessment Years:2013-14 to 16-17 Jt. C.I.T., Special Range, Kanpur. Vs. M/s Afsand Akhtar, Plot No. 2, Scheme-39, Jajmau, Kanpur. PAN:AEMPA0823r (Appellant) (Respondent) C.O.Nos.3, 4, 17 & 5/Lkw/2019 (in ITA Nos.701, 702, 582 & 703/Lkw/2018) Assessment Years:2013-14 to 16-17 M/s Afsand Akhtar, Plot No. 2, Scheme-39, Jajmau, Kanpur. PAN:AEMPA0823r Vs. Jt. C.I.T., Special Range, Kanpur. (Appellant) (Respondent) O R D E R PER BENCH: These appeals have been filed by the Revenue against the separate orders of learned CIT(A) dated 25/09/2018 for assessment year 2013-14 and 2014-15, dated 28/05/2018 for assessment year 2015-16 and dated 27/09/2018 for assessment year 2016-17 respectively. The assessee has Revenue by Smt. Sheela Chopra, CIT (DR) Assessee by Shri Ashish Jaiswal, Advocate Date of hearing 02/03/2022 Date of pronouncement 06/04/2022 I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 2 also filed Cross Objections to the appeals filed by the Revenue. The grounds of appeal taken by the Revenue are reproduced below: I.T.A. No.701/Lkw/2018 “1. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts by deleting the addition of Rs.4,70,50,000/- on account of on account of bogus unsecured loan and Rs.23,52,500/- on account of commission thereon on the basis of a additional document submitted by the assessee during the appellate proceedings. Further, Ld. CIT (A) has not confronted the A.O. on additional documents produced by the assessee. 2. Ld. CIT (A)-III, Kanpur failed to confront the Assessing Officer with the affidavit filed even though the same was nowhere mentioned in the assessment order and is also not part of our records. 3. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts without affording proper opportunity to the Assessing Officer under rule 46A to rebut/counter the same, which renders the order passed contrary to the principles of Audi Alteram Partem. 4. That the order of the Ld. Commissioner of Income Tax (Appeals)-III, Kanpur is erroneous, unjust and bad in law be vacated and the order dated 19.04.2018 passed u/s 148/143(3) of I.T. Act of the Assessing Officer be restored. I.T.A. No.702/Lkw/2018 “1. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts by deleting the addition of Rs.4,56,00,000/- on account of bogus unsecured loan and Rs.22,80,000/- on account of commission thereon on the basis of a additional document submitted by the assessee during the appellate proceedings. 2. Ld. CIT (A)-III, Kanpur failed to confront the Assessing Officer with the affidavit filed even though the same was nowhere I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 3 mentioned in the assessment order and is also not part of our records. 3. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts without affording proper opportunity to the Assessing Officer under rule 46A to rebut/counter the same, which renders the order passed contrary to the principles of Audi Alteram Partem. 4. That the order of the Ld. Commissioner of Income Tax (Appeals)-III, Kanpur is erroneous, unjust and bad in law be vacated and the order dated 19.04.2018 passed u/s 148/143(3) of I.T. Act of the Assessing Officer be restored. I.T.A. No.582/Lkw/2018 1. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts in allowing relief of Rs.87,34,231/- out of commission paid by the assessee on sales pertaining to the previous year without appreciating the fact that as per the section 145 of the Income Tax Act, 1961, commission of export sales is not an allowable expenditure on payment basis as the assessee is regularly following Mercantile system of accounting. 2. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts by deleting the addition of Rs.2,57,00,000/- on account of on account of bogus unsecured loans on the basis of a forged document submitted by the assessee during the appellate proceedings. Further, Ld. CIT (A) has not confronted the A.O. on additional documents produced by the assessee during the appeal proceedings. 3. Ld. CIT (A)-III, Kanpur failed to confront the Assessing Officer with the affidavit filed even though the same was nowhere mentioned in the assessment order and is also not part of our records. 4. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts without affording proper opportunity to the Assessing Officer under rule 46A to rebut/counter the same, which renders the order passed contrary to the principles of Audi Alteram Partem. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 4 5. That the order of the Ld. Commissioner of Income Tax (Appeals)-III, Kanpur is erroneous, unjust and bad in law be vacated and the order dated 12.12.2017 passed u/s 143(3) of IT. Act of the Assessing Officer be resorted. I.T.A. No.703/Lkw/2018 1. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts in allowing relief of Rs.95,38,190/- out of commission paid by the assessee on sales pertaining to the previous year without appreciating the fact that as per the section 145 of the Income Tax Act, 1961, commission of export sales is not an allowable expenditure on payment basis as the assessee is regularly following Mercantile system of accounting. 2. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts by deleting the addition of Rs.12,20,50,000/- on account of on account of bogus unsecured loans on the basis of a forged document submitted by the assessee during the appellate proceedings. Further, Ld. CIT (A) has not confronted the A.O. on additional documents produced by the assessee during the appeal proceedings. 3. Ld. CIT (A)-III, Kanpur failed to confront the Assessing Officer with the affidavit filed even though the same was nowhere mentioned in the assessment order and is also not part of our records. 4. The Ld. Commissioner of Income Tax (Appeals)-III, Kanpur has erred in law and on facts without affording proper opportunity to the Assessing Officer under rule 46A to rebut/counter the same, which renders the order passed contrary to the principles of Audi Alteram Partem. 5. That the order of the Ld. Commissioner of Income Tax (Appeals)-III, Kanpur is erroneous, unjust and bad in law be vacated and the order dated 12.12.2017 passed u/s 143(3) of IT. Act of the Assessing Officer be resorted.” I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 5 2. At the outset, Learned counsel for the assessee submitted that the Cross Objections filed by the assessee are in support of the order of learned CIT(A) therefore, he will not be pressing the same and therefore, the Department may be asked to go ahead with its appeals. Therefore, learned CIT (DR) was asked to proceed with her arguments. 3. The learned CIT, D.R., at the outset, submitted that a survey took place u/s 133A of the Act on 22/09/2017 and statement of the assessee was recorded wherein he surrendered certain amount out of unsecured loans and sundry creditors spread over the years starting from assessment year 2013-14 to assessment year 2018-19. The learned CIT, D.R. in this respect invited our attention to the assessment order for assessment year 2015-16 which is a lead case and where the Assessing Officer has made part of the assessment order, a scanned copy of written statement, recorded u/s 133A of the Act and it was submitted that the assessee himself had admitted that he had arranged the unsecured loans from M/s Cooper Commercial Pvt. Ltd., M/s Silver Agencies Pvt. Ltd. and M/s Wise Financial Advisor Services Pvt. Ltd. after paying equivalent cash to them and after paying a commission for arranging such transactions. The learned CIT, D.R. submitted that since the assessee himself had admitted that these entries were bogus entries and represented assessee’s own money therefore, the action of learned CIT(A) in deleting the same is not justified. It was submitted that learned CIT(A) has wrongly accepted the contention of the assessee that he had retracted from the surrender by filing an affidavit before the authorities. The learned CIT, D.R. submitted that learned CIT(A) has not confronted such affidavit to the Assessing Officer as in fact such affidavit is not part of the assessment proceedings therefore, learned CIT(A) has wrongly relied on such affidavit for retraction and therefore, the order of learned CIT(A) is not as per law as the Assessing Officer has not been given I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 6 opportunity to rebut such affidavit under Rule 46A of the IT Rules. Therefore, it was prayed that the order of learned CIT(A) in this respect be reversed and order of Assessing Officer be upheld. The learned CIT, D.R. further submitted that in view of survey conducted on assessee, assessment proceedings for the years 2015-16 and 2016-17 were completed u/s 143(3) of the Act and assessments for assessment years 2013-14 and 2014-15 were completed u/s 143(3) after reopening u/s 148 of the Act and it was submitted that in all these years such bogus entries were arranged by assessee and which were admitted by assessee and which were rightly added back to the income of the assessee and were wrongly deleted by learned CIT(A). It was further contended that for assessment years 2013- 14, 2014-15 and 2016-17, even the notices issued u/s 133(6) remained uncomplied with and the Income Tax Inspector had reported after visiting the addresses of lenders that no such company existed there and all were bogus companies and therefore, she argued that Assessing Officer had made the additions on the basis of statement of assessee along with findings of Inspector Tax Inspector. 3.1 Learned CIT, D.R. further submitted that the second issue arising in two appeals out of the four appeals is the action of learned CIT(A) by which he has allowed relief to the assessee which the Assessing Officer had disallowed by holding that such commission did not relate to the sales made during the years under consideration. It was submitted that learned CIT(A) has failed to appreciate that the sales on which such commission was paid, did not belong to the years under consideration. It was submitted that since the assessee was maintaining books of account on mercantile basis therefore, as per section 145 of the Act, such expenditure of commission not relatable to the years under consideration, was not allowable and learned I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 7 CIT(A) has wrongly allowed the same and therefore, it was prayed that the order of the Assessing Officer be upheld on this issue also. 4. Learned counsel for the assessee, arguing the appeal for the assessment year 2015-16, submitted that during this year the Assessing Officer first made additions and the assessment years 2013-14 and 2014-15 were reopened u/s 148 of the Act. It was submitted that it is an undisputed fact that during survey proceedings u/s 133A on 22/09/2017, the assessee had made certain surrender in the form of unsecured loans and sundry creditors spread over various years. However, such statement was retracted by filing an affidavit before the authorities and in this respect our attention was invited to paper book pages 101 to 104 where a copy of such affidavit dated 28 th September 2017 was placed. It was submitted that such affidavit only stated that the additions, if any, be confined to the extent of actual undisclosed income because in the regular assessments, most of the unsecured loans and sundry creditors had already been accepted in assessment proceedings u/s 143(3) of the Act. Learned counsel for the assessee submitted that such affidavit was filed before the Assessing Officer which though is not traceable in the records of Assessing Officer and which may have got misplaced for which assessee cannot be held to be responsible. Without prejudice of admitting of not filing the retraction statement through the affidavit, Learned counsel for the assessee submitted that addition on the basis of statement recorded u/s 133A is not binding on the assessee if the assessee during the course of assessment proceedings is able to explain such entries by furnishing complete details and reliance in this respect was placed on the following case laws and CBDT instructions. 1. Jain Trading Co. v. Income Tax Officer, ITA 5935/Mum/2002 dated 30.10.2006 2. Suresh Chand Agarwal v. ACIT, ITA 191/Agra/2013 dated 31/07/2017 I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 8 3. Paul Mathew & Sons vs. CIT, (2003) 263 ITR 101 (Kerala) 4. CIT vs. S. Kadar Khan & Sons, (2013) 352 ITR 480 (SC) 5. CIT vs. S. Kadar Khan & Sons, (2008) 300 ITR 157 (Madras) 6. Commissioner of Income-tax v. Dhingra Metal Works [2010] 328 ITR 384 (Delhi) dated 04-10-2010 7. ACIT vs. Maya Trading Co. ITA No. 31 (AGRA) OF 2012 & C.O. NO. 20 (AGRA) OF 2012 dated OCTOBER 5, 2012 8. Kishan Lal Shiv Chand Rai Vs. CIT reported in 88 ITR 293 9. Abdul Qayuam Vs. CIT reported in 184 ITR 4 10. CBDT Instruction No. 286/2/2003(Inv) It was submitted that the addition solely based upon the statement recorded during survey u/s 133A is not sufficient and assessee is entitled to retract from his offer by furnishing complete details of his income in the course of assessment proceedings. It was submitted that even CBDT Instruction is very much clear on this issue where CBDT has specifically directed the Assessing Officer not to make addition only on the basis of statement and the addition should be made after examining the corroborative evidence. Learned counsel for the assessee submitted that the assessee during the course of assessment proceedings had discharged his part of burden by filing necessary details and even the Assessing Officer had got confirmations from the loan creditors u/s 133(6) of the Act. It was further submitted that statement of Manish Agarwal, whom the Revenue had charged for providing entries to the assessee has denied of having received any commission for providing entries to the assessee and in this respect our attention was invited to pages 259 to 261 of the paper book where a copy of statement of Manish Agarwal was placed. It was submitted that such notice issued u/s 133(6) and their reply received and examination of Mr. Manish Agarwal, were not even confronted to the assessee. The Assessing Officer took these steps on the back of the assessee and finding the same favourable to the assessee, did not discuss it in the assessment order and made the addition solely on the basis of statement recorded I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 9 during survey. Learned counsel for the assessee heavily placed reliance on the order of learned CIT(A) and submitted that learned CIT(A) has allowed relief to the assessee on merits by holding that the assessee has discharged his burden as required by the provisions of section 68 of the Act. It was submitted that learned CIT(A) has held that the Assessing Officer has issued notices u/s 133(6) of the Act to the lender and had obtained their reply directly from the lenders. Learned counsel for the assessee further submitted that learned CIT(A) has categorically held that the assessee has filed all the necessary evidences required for fulfillment of requirements of Section 68 and in this respect our attention was invited to pages 43 to 54 of the paper book relating to assessment year 2015-16 where a copy of reply, filed before the Assessing Officer, was placed. Our attention was also invited to pages 55 to 72 of the same paper book where a copy of confirmation of account of unsecured loans from Silver Agencies Pvt. Ltd. (the loan creditor during that year) along with the copy of annual accounts for financial year 2014-15 and copy of bank account from where the entries of unsecured loans were received by the assessee, was placed. Our attention was also invited to page 76 of the paper book where a copy of notice issued u/s 133(6) to Silver Agencies Pvt. Ltd. was placed and further our attention was invited to pages 78 to 80 of the paper book where a copy of reply, filed by such unsecured loan creditor before the Assessing Officer, was placed. Learned counsel for the assessee submitted that in view of these documents and evidences, the learned CIT(A) had deleted the additions by holding that the assessee had fulfilled his obligation u/s 68 of the Act. Learned counsel for the assessee further invited our attention to an order of learned CIT(A) dated 04/09/2018 for assessment year 2015-16, placed at pages 81 to 91 where on an application filed by the Assessing Officer for rectification in the order passed by learned CIT(A), the learned CIT(A) again reiterated his findings on merits of the deletions and rejected I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 10 the application of the Assessing Officer u/s 154 of the Act. Therefore, it was submitted that learned CIT(A) has passed a reasoned and well speaking order wherein he has allowed relief to the assessee on merits and there is no fresh documents filed before the learned CIT(A) which required him to remit the same to the Assessing Officer as per the provisions of Rule 46A. It was further submitted that the Revenue has not challenged any of the findings of learned CIT(A) which he has given on the merits and the grounds raised by the Department regarding violation of Rule 46A did not arise from the order of learned CIT(A) as no fresh document was filed therefore, it was prayed that the appeal filed by Revenue on this ground be dismissed. 4.1 Now coming to assessment year 2013-14, 2014-15 and 2016-17, it was submitted that the assessments in the years 2013-14 and 2014-15 were completed after reopening u/s 148 whereas the assessment in assessment year 2016-17 was completed u/s 143(3) of the Act and in all these three years similar additions, on the basis of same statement of the assessee, recorded u/s 133A, were made. It was submitted that during these three years the Assessing Officer appointed commission and obtained report from Kolkata and Income Tax Inspector Kolkata issued notices u/s 131 of the Act on the old address of the lender and that too without confrontation to the assessee. It was submitted that the report of the Income Tax Inspector is factually erroneous, vague and unlawful. It was submitted that any inquiry to be conducted by the Income Tax Inspector has to be carried out in accordance with law otherwise it will have no evidentiary value. It was submitted that such procedure, in accordance with law, are in place to safeguard the assessee from any misuse of provision relating to service of notice or reporting non-existence of a particular person on any given address. Learned counsel for the assessee submitted that Hon'ble Supreme I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 11 Court in the case of CIT vs. Ramendra Nath Ghosh 82 ITR 888 has held that the Income Tax Inspector, who was the service officer, claimed to have served the notice by affixing it on the assessee's place of business, but in his report did not mention the names and addresses of the persons who identified the place of business of the assessee's, nor did he mention in his report or in the affidavit filed by him that he personally knew the place of business of the assessee. Hon'ble Supreme Court in this background, on the basis of Rule 17 of Order V of the CPC held that the service of notice was not in accordance with the law. Learned counsel for the assessee in this respect heavily placed reliance on the orders of learned CIT(A) wherein he has elaborately discussed about the manner in which the notices u/s 131 were issued by the commission and after discussing the same has categorically held that such service of notices were not in accordance with law and after having been satisfied that the assessee has discharged his part of onus has allowed relief to the assessee. 4.2 Now coming to other issue of commission, paid to foreign agents for sales made through them, Learned counsel for the assessee submitted that though the assessee is following mercantile system of accounting and is booking sales and purchases on mercantile basis however, as per the agreement entered into by it with the foreign agents, the assessee was required to pay commission only when the sale proceeds got realized and therefore, agents raised the bills in the year in which sale proceeds got realized and therefore, assessee debited the bills in the year during which such bills were raised. It was submitted that the learned CIT(A), after appreciating the factual position has rightly allowed relief to the assessee and has followed the order relating to assessment year 2012-13 and in this respect our attention was invited to pages 223 to 245 of the paper book I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 12 where an order of learned CIT(A) for assessment year 2012-13 was placed. Therefore, it was prayed that this ground also needs to be dismissed. 5. We have heard the rival parties and have gone through the material placed on record. First we take up appeal for assessment year 2015-16. In this year there was only one unsecured loan creditor i.e. M/s Silver Agencies (P) Ltd. from whom unsecured loan of Rs.2,57,00,000/- was received. We find that it is undisputed fact that the assessee, in a statement recorded u/s 133A of the Act on 22/09/2017, admitted of having arranged unsecured loans through the accommodation entry providers viz. M/s Cooper Commercial Pvt. Ltd., M/s Silver Agencies Pvt. Ltd. and M/s Wise Financial Advisor Services Pvt. Ltd. in various years. The Assessing Officer, on the basis of such statement of assessee, made the additions in various years. During the year under consideration the assessee had received unsecured loan from only one creditor i.e. M/s Silverline Agencies (P) Ltd. which the Assessing Officer has added back in this year on the basis of statement of assessee recorded u/s 133A of the Act. While making such additions, the Assessing Officer solely relied on such statement and ignored the various documents and evidences filed by the assessee in discharge of obligations u/s 68 of the Act. The Assessing Officer also ignored his own notice issued to such unsecured loan creditor u/s 133(6) of the Act and also ignored the replies filed by such loan creditor to the notices issued u/s 133(6) of the Act. The Assessing Officer has not raised any objection against such evidences, neither did he find any infirmity in such evidences. The learned CIT(A) has allowed relief to the assessee by relying on the documents and evidences filed by the assessee before the Assessing Officer. He has held that the notice u/s 133(6) of the Act were issued to the unsecured loan creditors and they had furnished their replies and assessee had also filed relevant evidences demonstrating existence of the lenders, I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 13 and capacity of lenders by filing copy of ITRs and copy of balance sheets of the above lender. Such evidences, as furnished before the Assessing Officer, are placed in the respective paper book pages as below: M/s Silver Agencies Pvt. Ltd. Documents details Page No. ---------------------------------------------------------- ------------ 1. Copy of confirmation, copy of ITR, audited 55 to 72 Financial statements, bank statements, Company’s master data 2. Copy of notice u/s 133(6) 76 3. Copy of reply filed by unsecured loan 78-80 creditors before the Assessing Officer 5.1 The only objection raised by the Revenue through its grounds of appeal is that learned CIT(A) has accepted additional evidence without confronting it to the Assessing Officer and has thus violated the provisions of Rule 46A of the Rules. In this respect we find that there is no fresh evidence filed by assessee before learned CIT(A) other than a copy of affidavit dated 28/09/2017 which the assessee had claimed to have filed before the Assessing Officer and which the Revenue has denied of it being on record. We find that before the learned CIT(A) the assessee filed a copy of affidavit dated 28 th September 2017 placed at pages 101 to 104 of the paper book for his claim that the assessee had retracted from his statement within a period of six days. In the affidavit the assessee admitted that on an advice by the officer present at the time of survey, the assessee had surrendered unsecured loans and sundry creditors falling in assessment year 2013-14 to 2018-19. In the affidavit it is also submitted that since the assessee was not well with his health and further he could not verify the actual position from the books of account therefore, such surrender was made without consultation with the factual position and when he verified the I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 14 same within a period of six days, he filed this affidavit wherein he submitted that the additions, if any, should be restricted to unverifiable amounts only. We find that the Revenue has raised a ground that this affidavit was not filed with the Assessing Officer and Learned counsel for the assessee also fairly agreed that though this affidavit was filed with the Assessing Officer but it is not on the record for which the assessee cannot be held liable. We find that through this affidavit, though the assessee has partly retracted from the statement recorded u/s 133A. However, learned CIT(A) has not allowed relief to the assessee on the basis of such affidavit but learned CIT(A) has gone through the merits of the additions and has allowed relief to the assessee by holding that the assessee had discharged his onus u/s 68 of the Act. We further find from the contents of this affidavit that it does not contain any material evidence on which learned CIT(A) had placed reliance while allowing relief to the assessee. Such affidavit does not contain any figure or certificate in support of the fact that the unsecured loans were explainable. Therefore, in our opinion, such affidavit did not constitute additional evidence which required examination by the Assessing Officer. We further find that the addition was made by the Assessing Officer relying solely on the statement recorded during survey u/s 133A and he disregarded all the documentary evidences including the reply to the notice u/s 133(6) by loan creditor and without having any corroborative material to make the addition. The CBDT itself vide Instruction No.286/2/2003(Inv) has directed the Assessing Officers not to make addition only on the basis of statements and has directed that Assessing Officer should make additions, if any, after examination of the corroborated evidences. The learned CIT(A), in his order, has thoroughly discussed this aspect and has also relied on such CBDT Circular and on various judgments to allow relief to the assessee. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 15 5.2 We further find that Assessing Officer had requested for recall of learned CIT(A)’s order on the basis that learned CIT(A) had allowed relief to the assessee on the basis of such affidavit which was not confronted to Assessing Officer and had filed an application u/s 154 of the Act for rectification of the mistake and learned CIT(A) has again reiterated that he has allowed relief to the assessee on merits and has rejected the application filed by the assessee u/s 154 of the Act. For the sake of completeness, such findings of learned CIT(A) have been made part of this order as below: Decision: I have considered the above application of the Assessing Officer and the letter received from P-r. CIT-1, Kanpur, reply filed by the assessee and judicial authorities relied upon by the assessee. It is clear from the above that AO has raised a request for recalling the order passed u/s 250 DT. 28.05.2018 in appeal no. CIT (A)-III/10079/KNP/17-18 before the Pr. CIT-1, Kanpur and not before the undersigned. Pr. CIT- 1, Kanpur in turn has requested this office to give fresh opportunity to AO on admission of additional evidence and requested to review of the impugned order in light of above facts, on following three grounds: i) Assessee has got relief from the CIT (A)-III, Kanpur on the basis of forged document, ii) Ld. CIT (A) failed to confront the Assessing Officer with the affidavit filed? even though the same was nowhere mention in the assessment order and is also not part of our records. ii) Ld. CIT (A) also did not give any opportunity to the undersigned to rebut/ counter the same. Facts of this case are that that appeal was filed against the order u/s. 143(3) of the.I.T. Act, 1961,. for the assessment year 2015-16 passed on 28-12-2017 by the Joint Commissioner of Income Tax, Special Range, Kanpur with the following grounds of appeal. Grounds of Appeal; 1. That the Ld. AO has erred in making disallowance on account of commission paid on export sales of Rs. 87,34,231/-. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 16 2. That the Ld. AO has erred in making ad-hoc disallowance on account of Telephone expenses of Rs. 6,738/-, 3. That the Ld, AO has erred in making ad-hoc disallowance on account of Vehicle running & maintenance along with depreciation of Rs. 3,14,204/-. 4. That the Learned AO has erred in making disallowance on account of unsecured loan of Rs. 2,57,00,000/- 5. That the Ld. AO has erred in making disallowance on account of Commission of Rs, 12,85,000/-. 6. That the Ld. AO has erred in making disallowance on account of Charity & donation of Rs. 36,100/-. 7. That the Ld. AO has erred in making disallowance on account of interest on TDS of Rs. 2,812/- 8. That the Ld. AO has erred in making disallowance on account of land registry expenses of Rs. 4,89,000/-. 9. That the Ld. AO has erred in making additions/disallowances arbitrarily without any basis. 10.That the assessee craves leave to introduce, modify or withdraw any ground of appeal with kind permission of your honour. Ground No. 1 pertains to disallowance of Rs. 87,34,231/- of Commission Paid that was decided in favour of appellant on the basis of decision taken in assessee's own appeal for the A.Y 2012-13 & 2014-15 in appeal number CIT(A)-IKnp/10048/2017-18 dt 05-12- 2017; CIT(A)-I Knp/10271/2016-17 dated 07.12.2017 respectively. Similarly ground No. 2, 3 pertaining to adhoc disallowance of Rs.6,738/- of Telephone expenses; of Rs.3,14,204/- of Vehicle Running & Maintenance was decided against the appellant on the basis of decision taken in assessee's own appeal for the AY 2011-12 and appeal no. CIT (A) - I, Knp/10048/2017-18 for AY 2012-13. This application moved by AO pertains to ground no. 4 & 5 of the impugned order. Ground No. 4 & 5 pertaining to addition of Rs.2,57,00,000/- of Unsecured Loan u/s 68 of IT. Act and Commission of Rs.12,85,000/- paid for arrangement of unsecured loan were decided in favour of the appellant on the basis of appellant's timely retraction from the statement given on oath during survey, on the basis of documents filed during the course of assessment proceeding like copy of ITR, Bank Statement of the loan creditor before AO, and on the basis of the result of the information called from the loan creditors u/s 133(6) by the AO, who confirmed these transactions before AO and finally following the law laid down by the apex court in CIT v. 5, Khader Khan Son (2013) 352 ITR 480 (SC). I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 17 During the course of impugned appellate proceeding, AR had submitted written submissions made during the course of assessment proceeding as well as the copies of evidences produced before AO, as reproduced in the appellate order in relevance to ground no. 4 & 5. Appellant had submitted during the appellate proceedings that the surrender made was retracted on 28.09.2017 by filing affidavits and letters with all the three relevant authorities holding jurisdiction over the appellant. Appellant filed detailed legal and written submissions during the appellate proceedings with regards to additions made by the AO. During the course of appellate proceeding, appellant also submitted the evidence that had been allegedly furnished before the AO in support of Rs. 2,57,00,000/- taken as Unsecured Loan u/s 68 of IT Act, like confirmation of account, copy of ITR, Bank Statement from where amount was remitted to the appellant. It is also a fact that information u/s 133(6) was also called from the depositor by the AO and these transactions were confirmed by the alleged depositors by furnishing same information that was filed by the appellant during assessment proceedings. These facts are still not disturbed by the AO. In the appellate order it was accordingly held that appellant had successfully discharged the initial onus that lay upon him with regards to three ingredients application in section 68 i.e. identity, creditworthiness and genuineness of the transactions. Though now AO is trying to place on record report of DDIT(Inv), Unit-2, Kolkata who submitted its report vide letter dated 17.04.2018 in support of this request. This report was received on 17.04.2018 whereas the impugned assessment order was passed on 28.12.2017. Therefore this report was not a part of the record for the AY 2015-16 while the assessment order was framed and therefore cannot be used to invoke the provisions of S. 154 of IT Act now. This report can be considered only while deciding the appeals for the relevant assessment years. AO is at liberty to file these evidences before the Hon'ble ITAT in the second appeal stage. In view of the above facts, the conclusion of the AO that the finding of my order, pertaining to ground no. 4 & 5 are only based upon the retraction of the surrender made is not correct. The finding of the order is based upon the merit of the case related to filing of documents by appellant in support of shifting the initial onus that lie u/s 68 of IT Act upon him, results of the proceedings u/s 133(6) of IT Act conducted by AO and the law laid down by Hon'ble Apex I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 18 Court in the case of S. Khader Khan Son (Supra) rather based upon retraction from surrender made. It is therefore clear that apart from the retraction statements and affidavits, there are two more factual and legal basis in support of appellant's contention, which led to the decision taken in the impugned order. All these three aspects go to the root of the matter. Now these very three basis cannot be reexamined in light of absence of any new facts coming on record. The fact that appellant did file the copy of retraction affidavit bearing the receiving stamp of the office of DCIT-1, Kanpur is not disputed and is a part of the record before me. This submission was taken to be filed at Bar by the appellant with a certificate that the same was filed before the appropriate authorities. In order to know the veracity of the affidavit the appellant was asked to prove that the affidavit filed is not a forged one. In support of his submission now the Oath Commissioner has further confirmed that this affidavit is not forged. Copy of the confirmation is placed on record. A perusal of the submissions made by the appellant, shows that this affidavit was admittedly executed before the Oath Commissioner. During the appellate proceedings appellant did file a copy of the affidavit with receipt stamp from the office of DCIT-1, Kanpur. Now once there is evidence that is filed during the appellate proceedings, recalling of the appellate order on the charges of fraud, which is not proved, is not possible. Copy of retraction affidavit bearing the "receiving stamp of the office of DCIT-I, Kanpur is accepted as a part of the record as it was taken to be filed at Bar. AO is at liberty to enquire into this aspect for any internal lapses on the part of any official. If this evidence is proved to be not filed in the office of DCIT- 1, Kanpur then the appellant can be subject to further proceedings as per law. If appellant is found to be misrepresenting the facts during the appellate proceedings and found to have taken advantage of the legal proposition related to timely retraction from an incorrect admission made during any legal proceedings then AO shall be at complete liberty to a relief as per the law laid down by Hon'ble Apex Court down in the case of A. V. Papayya Sastry and others v. Government of A.P. and others AIR (2007) SC1546 and (2010) 8 SCC 383 where it was held that - fraud nullifies all and persons who played fraud ought not to be allowed to bear the fruit or benefit thereof. Therefore if the impugned order is found to be obtained by misrepresentation of facts, then it will not be entitled to any relief, interim or final. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 19 In view of these facts it is held that there is no mistake apparent from record as the order has been passed on the basis of all the documents submitted by appellant AR 'At Bar' during appellant proceedings. CIT (A) does not have the power u/s 251 of the Income-tax Act, 1961 to recall the appeal order and review the decision taken on the merits of the case. Lastly AO has not raised any statutory request for recalling the order passed u/s 250 DT 28.05.2018 in appeal no. CIT(A)- III/10079/KNP/17-18 before the undersigned but has requested Pr.CIT-1, Kanpur to raise it before this office and in turn Pr. CIT-1 Kanpur has not requested for recalling the impugned order but only requested to give fresh opportunity to AO on admission of additional evidence and to review of the impugned order. Since, no specific statutory request for invoking S. 154 of IT Act has been made -by AO, who alone can be the aggrieved party before this office and at this stage fresh additional evidence cannot be examined as the appeal proceedings are closed and review of decision taken on the basis of complete analysis of all facts available on record cannot be done as per law, therefore now both these requests are dismissed as there is no proceedings pending in this office related to AY 2015-16. If the Assessing Officer has any grievance then the proper forum is to approach /higher appellate authorities highlighting all these facts along with necessary evidence. It is seen from the records that AO has already moved an appeal on 02.08.2018 before Hon'ble ITAT Lucknow Bench taking all these specific grounds that are taken in this application. This second appeal has been approved by Pr. CIT-1, Kanpur vide letter no. 10/PrCIT-l/Judl./KNP/l 7-18/225 dated 02.08.2018. The matter is now sub-judice before higher appellate authority now. AO is directed to ensure that all the evidence and records are produced before the Hon'ble ITAT who is the final fact finding authority for deciding all the issues raised in this application. With these observations this petition is dismissed.” 5.3 From the order passed by learned CIT(A) in view of rectification application filed by Assessing Officer, we find that learned CIT(A) has affirmed that he has allowed relief to the assessee on the basis of evidences filed before Assessing Officer and for which Revenue has not raised any ground before us and neither Assessing Officer made any adverse I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 20 comments on such evidences. In fact learned CIT(A), on the basis of records of other commissioner, has recorded a finding of fact that such affidavit dated 28/09/2017 was executed indeed. Furthermore, we find that there is no application of assessee for admission of additional evidence under Rule 46A of the I.T. Rules. 6. In view of these facts and circumstances, ground Nos. 2 to 5 in I.T.A. No.582 are dismissed. 7. Now coming to ground No. 1 in assessment year 2015-16 regarding issue of commission, we find that the Assessing Officer has made the disallowance by holding that the sales, on which commission was debited to the profit & loss account, did not relate to the year under consideration. However, the learned CIT(A), on the basis of his order for assessment year 2012-13, allowed relief to the assessee wherein similar disallowance was deleted by him by holding as under: “I have perused the facts of the case, order of the Hon'ble ITAT, contention of AO and submissions made by the appellant. In this case facts are not disputed either by appellant or by AO. Appellant claimed an expenditure of Rs.1,58,73,821/- under the head ‘commission paid on export sales' for procurement of export orders by the foreign agents. It is a fact that the assessee is following mercantile system of accounting. It is admitted that the above mentioned export bills against which commission has been paid to the foreign agents do not pertain to F.Y. 2011-12 i.e. AY 2012-13 under consideration. Export involves against which the commission has been paid, pertains to the period September 2010 till March 2011 and date of payment of commission is from April 2011 till December 2011. In this connection the assessee vide his reply dt. 27.3.2015 had submitted before the AO that some shipments were sailed from the custom port after 31.03.2011 but the 'invoicing of this shipment was done before 31.03.2011 it is happened because of the backlog of the containers at the custom port. As Kanpur is a dry port of customs and the containers are railed out from this dry port to Nhava sheva for I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 21 export. During that period there was a huge backlog of containers at the customs port due to this the export of these containers got delayed. Appellant also submitted that they did not claim the export commission as expense pertaining to these invoice in the last year, a finding not rebutted by AO in his order. Hence it is clear that there is no double benefit being claimed by the appellant in this regard. Regarding the commission paid in the year under consideration for the invoice raised in the month of September and other months of FY 2010-11 appellant submitted that the commission paid to foreign agents has been debited during the year under consideration on the basis of agreement between the appellant and foreign agents. The clause 4 of the agreement between the commission agent and appellant is reproduced as under: "That the second party shall be entitled to payment of commission only on realization of the sale bills and issuance of commission bill." Further, due to some dispute with the agent the commission was not paid in last year, however in the year under consideration the same was paid, as the dispute with the' said party was finally settled. The submission of the assessee was not found acceptable by AO without any reason or evidence brought on record by AO, Secondly, AO further disbelieved that the assessee had dispute with so many commission agents because no evidence regarding dispute has been submitted before him. There can be many forms of disputes between two contracting parties for which there may or may not be documentary evidences available. I have perused the copies of bills raised by the commission agents and- the agreements placed on record by appellant at page no. 11-27 of the paper book. It is seen from the impugned bills and agreements on account of commission that they were raised by commission agent, during the year under consideration, against the export done by appellant earlier. Commission related to those bills was raised subsequently by the commission agents as per the terms of the agreement between the appellant and various commission agents. It is clear from the same that the expenditure on account of commission paid is correctly debited in the profit & loss account on accrual basis as and when these commission bills were raised by foreign agents after the sales were realized by the appellant and not when the export ‘invoice for orders procured by commission agents, was raised by appellant on its buyer. Assessing Officer’s observation - There are I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 22 very few export bills which were raised in March, 2012 and shipments were made after March, 2012 - is factually misplaced in the order). The case does not revolve around the invoices or shipments pertaining to March or later of 2012 but pertains to invoices and shipments made in March 2011. So the very basis of the addition made by AO is factually incorrect. In Shalimar Impex Ltd. V. ITO (1982) 1 TTD 799 (Cal), similar issue came before the bench in which the Hon'ble held that u/s 37(1) of the Income-Tax Act, 1961 business expenditure in the nature of commission to foreign agent under agreement, the assessee was liable to pay them commission on export sales on actual realisation of sale proceeds of goods exported during the year. The finding of the decision is reproduced as under: 5.1 I have carefully considered the facts of the case and the rival submissions. There is no doubt that the assessee is following the mercantile system of accounting and under this system, an expenditure is due as and when the liability to pay accrues and arises irrespective of whether or not the payment in question has been made. The point of time when such liability accrues and arises would normally depend, in the absence of an agreement to the contrary, on when the services in question for which the payment is to be made had been rendered. If, however, there is an agreement which indicates, the point of time when the liability would accrue and arise, the principle of rendering services would not avail. The question as to whether or not liability in question has arisen would in such a case be determined with reference to the terms of the contract between the parties irrespective of whenever the services in question might have been rendered. In the present case there is no doubt that services were rendered during the previous .year and, therefore, If there was nothing in the contract to the contrary, it could be said that the liability for paying the commission had accrued and arisen as soon as the services were rendered by the agent and nothing further remained to be done by him. But clause (6) of the present agreement goes to show that irrespective of time of rendering the services, the commission will be payable to the agent only upon full realization of the sale proceeds of the exported materials. Apparently the implication is that if by chance the sale proceeds do not come in full, the commission would not become payable to the agent even though he had rendered his services and even when he had no role to play in the realisation of the bill made out by the assesses for the exported I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 23 goods. The contention of the learned counsel for the assessee that the liability has accrued and arisen during the previous year and that only payment has been deferred till the full realisation of the sale proceeds of the exported materials, does not appear to me to be correct interpretation of clause (6) of the agreement. The said clause clearly makes the right of the agent to claim commission contingent on the realisation in full of the sale proceeds of the exported materials. This is not merely the condition of the payability but also affects the accrual of the liability. The argument of the learned counsel for the assessee in the present case has the familiar ring of the argument which was advanced before their Lordships of the Supreme Court in the case of F. D. Sassoon & Co. Ltd. v, CIT [1954] 26 ITR 27. There too it was urged that the managing agency commission was relatable to the services rendered as managing agent and, therefore, for the period during which the transferor-managing agent rendered services as managing agent to the managed company, it became entitled to the managing agency commission for the aforementioned period and for the remaining period the transferee-managing agent became entitled to the managing agency commission on the principle of rendering of services respectively by them to the managed company. This argument had in fact been accepted by the Bombay High Court, who adopting the test, of the services rendered by the Sassoons as well as the transferee during the whole of the years, considered the proportions of the service rendered by the Sassoons and the transferee as the managing agents of the companies as decisive of the portions of the managing agency commission earned respectively by each. The parenthood of the income received by the transferee was considered to be the real test, i.e., whoever rendered the services earned the income arising from those services. This argument was, however, negativated by their Lordships of the Supreme Court who said that one had to look not merely at the services rendered but at the fact whether as a result of the said services a right to sue in a court of law for the income resulting from such services had vested in the claimant. The accrual could result only at that point of time when the right to enforce the claim in a court of law had arisen. The relevant observations of their Lordships appearing at page 51 may be extracted here for ready reference as follows: "The word 'earned' even though it does not appear in section 4 of the Act has been very often used in the course of the judgments by learned Judges both in the High Courts as well as I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 24 the Supreme Court. The concept however cannot be divorced from that of income accruing to the assessee. If income has accrued to the assessee it is certainly earned by him in the sense that he has contributed to its production or the parent- hood of the income can be traced to him. But in order that the income can be said to have accrued to or earned by the assessee, it is not only necessary that the assessee must have contributed to its accruing or arising by rendering services or otherwise but he must have created a debt in his favour. A debt must have come into existence and he must have acquired a right to receive the payment. Unless and until his contribution or parenthood is effective in bringing into existence a debt or a right to receive the payment. it cannot be said that any income has accrued to him. The mere expression earned' in the sense of rendering the services, etc., by itself is of no avail." 6. From the aforesaid observations of their Lordships, it is clear that the test for determining as to whether an income has accrued or arisen or whether the corresponding expenditure has been incurred, is not merely the rendering of the services but one has also to find out as to whether the payee had acquired the right to enforce the payment of the said, amount. Till this right crystallise, it would not be possible to say that the expenditure in question has been incurred or that the liability to pay it has accrued and arisen. Vide terms of clause (6) of the agreement referred to above, it is clear that the agent in question could not have asked the assessee to make the payment until full realisation of the sale proceeds of the exported materials had been made and conversely speaking if there is no realisation, no commission would at all be payable. When this is the position, it cannot be said that the liability to pay commission had accrued and arisen during the previous year merely because the agents had rendered services during the previous year. The order of the learned Commissioner (Appeals) appears to be correct and I confirm it. From the above decision, it can be inferred that though mercantile system of accounting is on accrual basis but there is an agreement, which indicates the point of time when the liability would accrue and arise, the principle of rendering* services would not avail. In CIT v. Nagri Mills Co. Ltd. [1958] 33 ITR 681 (Bom.), which reads as under; I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 25 We have often wondered why the IT authorities, in a matter such as this where the deduction is obviously a permissible deduction under the IT Act, raise disputes as to the year in which the deduction should be allowed. The question as to the year in which a deduction is allowable may be material when the rate of tax chargeable on the assessee in two different years is different; but in the case of income of a company, tax is attracted at a uniform rate, and whether the deduction in respect of bonus was granted in the asst. yr. 1952-53 or in the assessment year corresponding to the accounting year 1952, that is in the asst. yr. 1953-54, should be a matter of no consequence to the Department; and one should have thought that the Department would not fritter away its energies in fighting matters of this kind. But, obviously, judging from the references that come up to us every now and then, the Department appears to delight in raising points of this character which do not affect the taxability of the assessee or the tax that the Department is likely to collect from him whether in one year or the other. The aforesaid observations of the Bombay High Court were reiterated by this Court in the case of CIT vs. Shri Ram Pistons & Rings Ltd. [20081 174 Taxman 147, as under : "Finally, we may only mention what has been articulated by the Bombay High Court in Commissioner of Income Tax, Delhi, Ajmer, Rajasthan and Madhya Pradesh v. Nagri Mills Co. Ltd. [1958] 33 ITR 68las follows: In the reference that is before us there is no doubt that the Assessee had incurred the expenditure. The only dispute is regarding the date on which the liability had crystallized. It appears that there was no change in -the rate of tax for the assessment year 1983-84 with which we are concerned. The question, therefore, is only with regard to\ the year of deduction and it is a pity that all of us have to expand so much time and energy only to determine the year of taxability of the amount. In view of the above facts and legal position, addition made by AO is deleted.” I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 26 8. We find that learned CIT(A) has correctly appreciated the factual position. The learned CIT(A) has correctly appreciated the agreement between the assessee and foreign agents wherein vide clause (6) of the agreement, it has been agreed between the parties that irrespective of time of rendering the services, the commission will be payable to the agents only on full realization of sale proceeds. The learned CIT(A) held that by implication of this sub clause, if by chance the sale proceeds do not come in full, the commission would not have become payable to the agents even though the agent had rendered his services and even when he had no role to play in the realisation of the payment for the exported goods. The learned CIT(A) has correctly held that the question as to whether or not liability in question has arisen would in such a case be determined with reference to the terms of the contract between the parties irrespective of whenever the services in question might have been rendered. He held that no doubt when services are rendered during the previous year and if there was nothing in the contract to the contrary, it could be said that the liability for paying the commission has accrued and arisen as soon as the services were rendered by the agent but since there is clause (6) in the agreement by which the commission becomes payable to the agent only when the sales are realized. Therefore, under these circumstances, even in mercantile system the liability to pay commission will arise only in the year in which the sales are realized irrespective of the fact the sales are made in earlier year. These are correct findings, therefore, we do not find any infirmity in the order of CIT(A) in this respect and hence ground No. 1 of Revenue’s appeal is also dismissed. 9. Now coming to assessment year 2013-14, 2014-15 and 2016-17, we find that out of these three years, two years i.e. 2013-14 and 2014-15 were reopened u/s 148 of the Act on the basis of survey carried out on assessee. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 27 In these two years, there is no issue of commission on sales and the only issue involved in these two years, the addition made by the Assessing Officer on the basis of same statement, which has been recorded u/s 133A of the Act. During assessment year 2013-14, the addition has been made to the extent of Rs.4,70,50,000/- by treating the unsecured loan from M/s Wise Financial Advisor Services Pvt. Ltd. as bogus and in assessment year 2014-15, the amount involved is Rs.4,56,00,000/- which is from M/s Silver Agencies Pvt. Ltd. During these years also, the assessee had filed the necessary evidences in support of the genuineness of the receipt of unsecured loans. During assessment year 2013-14, the Assessing Officer, vide notice dated 19/02/2018, placed at pages 46 to 47 of the paper book, required the assessee to explain as to why the amount of unsecured loan, received from M/s Wise Financial Advisor Services Pvt. Ltd. along with 5% expenses incurred for arranging such entry may not be added back to the income of the assessee. The assessee replied to this notice vide letter dated 21/02/2018, a copy of which is placed at page 51 of paper book and submitted that assessee had taken unsecured loan and copy of confirmation of account, ITR, bank statement and audited balance sheet were attached. Such documents in the form of confirmation of account, ITR of the lender along with the audited financial account and copy of bank statement are placed at pages 52 to 76 of the paper book. The copy of assessment order of the unsecured loan creditor for assessment year 2014-15 is placed at pages 79 to 83 of the paper book. The Assessing Officer, during these three years, appointed commission u/s 131 of the Act and obtained his report wherein the Income Tax Inspector submitted that there were no such persons at the addresses and accordingly, the Assessing Officer made the addition. The learned CIT(A) however, has deleted the addition by appreciating the entire factual matrix whereby he held that the report of the Income Tax Inspector was vague and was not obtained in accordance with I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 28 law and further held that the necessary evidences were duly filed before the Assessing Officer. The findings of learned CIT(A) in these three years are similar except difference in the amounts. For the sake of completeness, the findings of learned CIT(A) for assessment year 2013-14 have been made part of this order as below: “I have gone through the facts and the written submission filed along with the details filed enclosed therein. The brief facts of the case are that a survey proceedings u/s 133A of the IT Act, 1961 was conducted in business premises of Mohammad Asfand Akhtar, Prop- M/s Omega International. During the course of survey proceedings in his statement recorded u/s 133A of the I. T. Act, 1961 on 22.09.2017 and subsequently again u/s 131 of the I T Act, 1961 on 26.09.2017, assessee offered amount of Rs. 36,73,00,000/- for tax on account of bogus unsecured loans received by him from three Kolkata based companies namely M/s Cooper Commercial Pvt. Ltd., M/s Silver Agencies Pvt. Ltd. and M/s Wise Financial Advisor Services Pvt. Ltd. through entry accommodation i.e. cash was paid and cheques were received in lieu of commission paid through his CA Mr. Manish Agarwal, The details of bogus unsecured loans received by assessee is given as under- Name of Companies Unsecured loan taken in F.Y. 2012-13 Unsecured loan taken in F.Y. 2013-14 Unsecured loan taken in F.Y. 2014-15 Unsecured loan taken in F.Y. 2015-16 Unsecured loan taken in F.Y. 2016-17 M/s Cooper Commercial Pvt. Ltd. 12,05,00,000 8,18,00,000 M/s Silver Agencies Pvt. Ltd. 4,56,00,000 2,57,00,000 15,50,000 M/s Wise Financial Advisor Services Pvt. Ltd. 4,70,50,000 I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 29 In assessment year under consideration an amount of Rs.4,70,50,000/- arranged through M/s Wise Financial Advisor Services Pvt. Ltd. on a commission of Rs. 23,52,500/- was received as unsecured loan by appellant. However, soon thereafter within a week of date of survey, on 28.09.2017 appellant retracted from the statement given on Oath for the reason that the assessee was not in sound health therefore he could not apply his mind and made the surrender without consulting regular books of account and other relevant records and on advise of the survey team. However as soon as records were examined, assessee realised his mistake and accordingly retracted from his statement by filing an affidavit dated 28.09.2017 before the AO as well as before the higher authorities. This fact of appellant retracting from the surrender by filing affidavits is disputed now by the AO before the Hon'ble ITAT Lucknow Bench in the appellate proceedings for the AY 2015-16. It has also been submitted that Shri Manish Agarwal CA has also denied the averment of the statement recorded during the survey of the assessee vide his own statement recorded by the AO on 11.12.2017. It is seen from the records that during the course of assessment proceeding, appellant furnished before the AO confirmation of copy of account from the lender, their copy of UR, Bank Statement and shifted the initial onus cast upon him u/s 68 of IT Act. On these confirmations filed appellant provided the current and latest address of the lender to the AO whereas AO got the verification done at old addresses in Kolkata by issuing a commission u/s 131(l)(d) to the Kolkata Investigation Wing on 27.02.2018 to submit a report on following points: 1. Identity, genuineness of the transactions and creditworthiness of these compares in aspect of said unsecured loans. 2. Nature of business and modus operendi of the companies from whom assesses had received unsecured loans. DDIT (Inv). Unit-2, Kolkata submitted its report vide letter dated 17.04.2018 stating threin that summons u/s 131 were issued to the above mentioned company but summons were returned unserved by the Postal Department. Further Inspector was also deputed to make enquiry for their existence but no company found at their respective addresses. Inspector submitted that no nameplate or banner or poster in the name of the said concerns was found on 15/34/2018 in the said I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 30 premise No mailbox naming the said concern was found on respective addresses. Inspector submitted that on local enquiry it was revealed that there is no existence of the said concern in the said premise. It is also a fact that the AO had issued a notice earlier u/s 133(6) during the assessment proceedings for AY 2015-16 on the old address of M/s. Silver Agencies Pvt. Ltd. and the said queries were satisfied by the loan creditor by filing its copy of ITR, Bank Statement and confirmation of the transactions before AO. Lastly, AO did not confront the findings of the inquiry report of the DDIT(Inv) unit Kolkata to the appellant and passed the order in undue haste. I have considered the facts and circumstances of the case. In the assessment order, it is seen that the AO, while making these two additions, has relied solely upon the report submitted by DDIT(Inv) Kolkata and upon the statement given by the appellant on 23.09.2017 and during post survey proceedings u/s 131 on 26.09.2017 admitting that the Unsecured Loan from M/s Wise Financial Advisor Services Pvt. Ltd. are bogus and arranged by Shri Manish Agarwal CA for a commission charged. It is also a fact, as evident from the assessment order that the appellant did file copies of return of income of M/s Wise Financial Advisor Services Pvt. Ltd. along with their bank account statements and confirmation of accounts in response to the queries raised by AO. However, AO held in the assessment order that since appellant has not retracted from his statement recorded on oath during survey proceedings and post survey proceedings, the confirmation of unsecured loans and other documents submitted by assessee has no force and same cannot be relied upon for allowing the benefit to appellant of shifting the initial statutory onus that is cast u/s 68 of IT Act on the appellant. Hence it is argued by the appellant that during the period under consideration when the enquiries were being conducted, the lender had shifted its place of business to its new address that was updated on the website of MCA on 30.04.2018 and the enquiries were conducted at the old address in April 2018 only when the business premises of the lender had already shifted. On the basis of this report submitted by Kolkata Investigation Wing, it was held by AO that M/s Wise Financial Advisor Services Pvt. Ltd. is a shell/paper company and does not have any real/ genuine business and M/s Wise Financial Advisor Services Pvt. Ltd. is not in existence and since identity of the loan provider is not established the unsecured loans received by the appellant from M/s Wise Financial Advisor Services Pvt. Ltd. has been I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 31 treated as bogus and both additions were made on the basis of these facts. It is strange to see that when the AO is same and within a span of 4 months from December 2017 till April 2018 if a lender M/s. Silver Agencies Pvt. Ltd. who complied with the notice issued u/s 133(6) for AY 2015-16 before the same AO, changed its address then AO before reaching a different conclusion that the same lender is bogus and non-existent, should have given an opportunity to the appellant to submit the current address of the lender on receiving the report of the DDIT(Inv) Kolkata before making the addition, in light of the positive evidence available on record of the appellant, for AY 2015-16. It is also a fact that that during the course of original assessment proceeding as well as during the re-assessment proceedings, appellant furnished, before the AO complete details as required u/s 68 of IT Act to satisfy the initial statutory requirement for shifting the initial onus that lies upon an assessee, like confirmations along with ITR, PAN, Bank Statement and Balance Sheet of the loan creditors. By filing these evidence it is apparent that the appellant proved identity, genuineness and creditworthiness of the loan creditor. The AO without taking cognizance of the details filed during the current assessment proceedings, and also the evidence that is available on record for AY 2015-16, simply relied on the report of the DDIT (Inv.) and on the Inspector report - both of which were are vague and were not confronted to the appellant - for holding that the loan creditors are not existing and are not genuine. It is not clear from the report of DDIT(Inv) as to why the summons issued could not be served. As per the report received from the DDIT (Inv.), Unit-2, Kolkata the notice sent by post were returned back un- served. No reasons for non-service like - 'Left without address'; 'no such person/left' or 'Left without address' has been communicated to the AO. Comment from Postal department -'No Such Person' - raises many doubts about the genuineness or whereabouts of the person to whom the letter has been sent but comment of 'Left without address' shows that the postal department official found that the person to whom the letter was addressed to, was present on this place but has left without further intimation to the post office about its new address. Therefore a specific response from postal department is essential to understand the evidence being gathered and lack of the specific reason for non-service vitiates the process and lack of valid service does not prove that the Lender is a bogus entity or its identity is not established. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 32 The procedure for service by post is given in section 27 of the General Clauses Act, 1897 which is mentioned as under: "Meaning of service by post": Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression serve or either of the expressions give or send or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post. Requirements for valid service by post as per aforesaid section 27 of the General Clauses Act, 1897 are: i. Proper addressing ii. Prepaying iii. Sending by registered post with acknowledgment due The service of notice is effected when the letter is delivered in the ordinary course by post (with registered AD or through Speed post). The presumption is that the delivery on the assessee has been effected. This is so even if a third person receives the post. The onus of proving otherwise is on the assessee. If the notice comes back with the postal remark "refused", it will still have the effect of a valid service. However, if the assessee denies such refusal on oath, the postman must be examined. But if the notice is returned with the postal remarks "Left", "Not found" or "Not known", then valid service cannot be presumed. It is more than established that the presumption under Section 27 of General Clauses Act is rebuttable. If postal notice is not served to the addressee then the presumption that the usual course of the post was followed through evidence of the postman would not be available, until it is specifically highlights the reasons for the non-service of the notice, why it was returned, what were the remarks of the postman - "door locked", "Left", "No Such Person on this address" or any other reason. In absence of these specific reasons made available to appellant and taking cognizance of the facts against appellant is sheer breach of principles of natural justice. In the present case exact reasons for non-service by postal authorities is not known hence it is held that in such circumstances it cannot be I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 33 said that there was a valid service of notice by DDIT (Inv), Kolkata on the address of the loan creditor. Hence this fact cannot be used to decide the question of the identity of the Loan creditor as held by the AO in his order. Now coming to the Inspector's report that has been relied upon by the AO for making this addition. It is said in the assessment order that "Inspector was also deputed to make enquiry for their existence but no company was found at their respective addresses". AO issued commission to Kolkata Wing giving old addresses and the new addresses i.e. 38/H/l Canal East Road, P.S. Narkeldanga, Kolkata- 700011, were ignored by AO while framing the assessment order. Address of M/s Wise Financial Advisory Services Pvt. Ltd. on which commission u/s 131(1)(d) was issued by AO was 79B, Dilkusha Street, Kolkata- 700017 and the enquiry was conducted by Inspector of DDIT, Kolkata at MCA data address was 7A Bentick Street, Kolkata- 700001 whereas the address of the party at the time of summon/enquiry stood changed to 38/H/1 Canal East Road, P.S. Narkeldanga, Kolkata- 700011. Address of M/s Grandura Agencies Pvt. Ltd. (earlier known as Silver Agencies Pvt. Ltd.) on which commission u/s 131(l)(d) was issued by AO was 2 nd Floor, 53-B, Illiat Road, Kolkata- 700016 and the enquiry was conducted by Inspector of DDIT, Kolkata at MCA data address was 7A Bentick Street, Kolkata-700001 whereas the address of the party at the time of summon/enquiry stood changed to 38/H/1 Canal East Road, P.S. Narkeldanga, Kolkata- 700011 and Address of M/s Cooper Commercial Pvt. Ltd. on which commission u/s 131(l)(d) issued by AO was 10 Damzen Lane, Kolkata- 700073 and the enquiry was conducted by Inspector of DDIT, Kolkata at MCA data address was 71 Metcalfe Street, Kolkata-700013 whereas the address of the party on which confirmation filed before the AO and at the time of summon/enquiry made was 38/H/l Canal East Road, P.S. Narkeldanga, Kolkata- 700011. There is a specified procedure to be followed by an Inspector for serving a summon on the last given address by the assessee when no such person is found at that particular address. There is also a provision of service of notice by affixture, which is not done in this case, as per available documents on record. Service by affixture is resorted to in two circumstances: First, when the assessee or his I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 34 agent refuses to sign the acknowledgement for service or when the serving official, after using all due and reasonable diligence, cannot find the assessee in his residential or business premises within a reasonable time and second, when there is nobody else authorized to receive the notice. In the above circumstances, the Income Tax Inspector can affect the service by affixture on his own initiative without waiting for an order from the AO. The copy of the notice should be affixed on the outer door or on a conspicuous part of the business or residential premises & a panchnama should be drawn in the presence of two witnesses & there identity proof should be taken. A report is to be drawn up by the Income Tax Inspector, on the facts and circumstances of the service by affixture, specifying the date and time of service and the name of the identifier and independent witnesses, if any. It should conclude with an affidavit of the Income Tax Inspector solemnly affirming the facts and particulars of service as reported. The report is to be filed as an endorsement to the original notice after being docketed in the order sheet. The report should be verified by an affidavit. In the absence of such an affidavit the Assessing Officer must examine the Inspector on oath. All these steps are prescribed just to safeguard all assessee from any misuse of these provisions relating to service of a notice or reporting non- existence of a particular person on any given address. Report of the Inspector in the instant case lacks details of the efforts made and specific source and reasons for his observations, his report does not mention the names and addresses of the persons who identified the place of business of the lender's, nor any affidavit is filed by him that he personally knew the place of business of the lender's. In this background, this report filed by the Inspector cannot be relied upon as the valid material for coming to a conclusion that loan creditors are non-existent and for making this addition. In CIT vs. Ramendra Nath Chosh, 82 ITR 888 (SC), the Inspector of Income-tax, who was the service officer, claimed to have served the notice by affixing it on the assessee's place of business, but in his report did not mention the names and addresses of the persons who identified the place of business of the assessee's, nor did he mentioned in his report or in the affidavit filed by him that he personally knew the place of business of the assessee's. In this background, it was held by the Supreme Court, on the basis of Rule 17 of Order V of the CPC that the service of notice was not in accordance with the law. The Supreme Court said that after going into the facts of the case very elaborately and after examining several I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 35 witnesses, had come to be conclusion that the service made was not proper. It is settled principle of law that no addition can be made on the basis of material gathered at the back of assessee and without confronting the same to the assessee. In the instant case the appellant was not allowed any opportunity to rebut the evidence collected at his back as it was never confronted to the appellant during the reassessment proceedings. DDIT (Inv), Unit-2, Kolkata submitted its report on 17.04.2018 and the assessment order was passed on 19.04.2018 in undue haste, without conducting any further investigation. This is entirely in violation of the principles of natural justice and of audi alterem partem. Nobody can be condemned in hearing. Additions made at the back of the assessee without confronting the adverse material collected, if any, to the assessee, much less allowing the assessee any opportunity to rebut it, the addition is not sustainable in the eye of law is a well settled legal proposition requiring no citations. To act on evidence fairly, reasonably and without prejudice is inherent in action of an AO where he has to make an order or direct some action to be taken against any person. For example, section 143(3) of the Income-tax Act, 1961 specifically provides that the officer has to make an order after hearing such evidence as the assessee may produce and such other evidence as the officer may require on specified points, after taking into account all relevant materials which he has gathered. The officer can collect the material behind the back of the assessee, but before he makes use of it, he has to make it available to the assessee with an opportunity to him to show cause as to why he should not proceed to pass an order on the basis of such material? He is bound to confront the assessee with the material. It is only when materials gathered by the AO or by an authorized official are brought on record that they become evidence in the case, and the rules of natural justice can only apply to these materials which the AO has brought on record and which they consider for the purpose of the case. Many persons may be interrogated, many materials may be looked into or considered, much of it may be irrelevant, and the AO ultimately decides what is relevant material, which should be brought on the record. It is only at that stage that the materials become evidence and the assessee has a right to urge that with regard to those materials, which have been brought on the record, his explanation should be taken and those materials should be brought on the record in a manner consistent with the rules of natural justice. I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 36 AO has made the addition solely for the reason that assessee has admitted in his statement given during and after the course of survey that these loan transactions are bogus. Soon thereafter within a week of date of survey, appellant allegedly retracted from the statement given on Oath on 28.09.2017 by filing an affidavit dated 28.09.2017 before the AO as well as the higher authorities by filing the notarised affidavit. Though, this fact is disputed now by the AO and is subjudice before Lucknow Bench ITAT in the appeal proceedings for AY 2015- 16. As evident from record of AY 2015-16, Shri Manish Agarwal Chartered Accountant has also denied these facts pertaining to arrangement of accommodation entries and charging of commission and averment of the statement recorded during the survey of the assessee, vide question no. 5 & 8 of his statement recorded by the AO on 11.12.2017 during the assessment proceedings for AY 2015-16. In view of these facts, I am of the opinion that if the statement of both these persons - appellant and his CA - are now under dispute and are discredited, then there is no other material available on record with the AO, found either during the survey proceedings or gathered during the assessment proceedings on the basis of which it could justify the addition made. Statement recorded u/s 133A or 131 cannot be the sole basis for addition and appellant has heavily relied upon the judgement in the case of CIT v. S. Khader Khan Son (2008) 300 TTR 157 (Mad) that has been upheld by apex court in CIT v. S. Khader Khan Son (2013) 352 ITR 480 (SC). After carefully considering the argument of the Ld. Counsel for the appellant and the judgements in the case of CIT v. S. Khader Khan Son (Supra), I find that facts in the case under consideration are squarely covered by the facts of CIT v. S. Khader Khan Son's (Supra) case. In the case under question the department has not been able to find out any direct or indirect evidence that lead to assumption that loans taken by appellant are bogus. There is no evidence brought on record by AO during or after the survey to prove that M/s Wise Financial Advisor Services Pvt. Ltd. is a shell company and does not have any genuine business and/or the loan transaction with the appellant is bogus. Appellant has furnished copy of their ITRs, Bank Statement and confirmation of account. Against this evidence placed on record no specific finding has been brought on record by the AO to dispute the veracity of documents submitted in respect to the loan taken of the appellant company. It is clear that addition made by AO is based purely on the basis of statement recorded during the survey proceedings that has lost its evidentiary value in light of the law laid down by Hon'ble Apex Court in the case I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 37 of S. Khader Khan Son(Supra) and retraction made by appellant and CA Mr. Manish Agarwal. CBDT on 13/03/2003 vide Instruction No. 2862/2003/IT(Inv) held that while recording the statement in survey operation, no attempt should be made to obtained confession as to tax the undisclosed income. AO should rely upon the evidence and material gathered in the course of survey operation. The object of Survey proceedings under the Income Tax Act, are to unearth unaccounted income, which has escaped tax liability and not to obtain admission or confession from the Assessee. Admission made by a person cannot be used as evidence against himself in absence of corroborative evidence to admission. Admission of Income cannot be said to be conclusive to tax an amount. It is always open for the assessee to retract from the same. Since it is the Income of the Assessee that is being taxed, it is only the Assessee who knows his correct state of Affairs. The Assessing Officer can act upon Confession of Assessee. The same becomes an evidence but it does not partake the role of Proof. The confession is only one element in the consideration of all the facts proved in the case. It can be put into the scale and weighed with the other evidence. To act upon the retracted Confession for taxing an amount, the onus is on the department to prove that the statements made were voluntary and there was no coercion on Assessee. So for the taxation of unexplained loan credit to stick, the onus lies on the AO to disprove the claim of the assessee by establishing that the retraction done though the affidavits filed by the assessee, were false and/or by bringing new material on record to prove that copy of ITR, Bank Statement of the loan creditor do not satisfy the requirements of S. 68 of IT Act and failure to do so would vitiate the addition made on this count. Vinod Solanki vs. UOI Civil Appeal No. 7407 of 2008 arising out of SLP (C) No. 3537of 2008 dated 18th December, 2008 ( UOI (233) ELT 157 (SC)) Held :- The retracted statement must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the court that it may seek to rely thereupon. The initial burden to prove that the confession was voluntary in nature would be on the Department. The burden is on the prosecution to show that the confession is voluntary in nature and not obtained as an outcome of threat, etc. if the same is to be relied upon solely for the purpose I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 38 of securing a conviction. With a view to arrive at a finding as regards the voluntary nature of statement or otherwise of a confession which has since been retracted, the Court must bear in mind the attending circumstances which would include the time of retraction, the nature thereof, the manner in which such retraction has been made and other relevant factors. Law does not say that the accused has to prove that retraction of confession made by him was because of threat, coercion, etc. but the requirement is that it may appear to the court as such. CIT Vs. Uttamchand Jain (Bombay High Court), Income Tax Appeal No 634 of 2009, it was held the retracted confession can be relied only if there is independent and cogent evidence to corroborate the statement. 2009-TIOL-272-HC-DEL-FEMA, ABID MALIK Vs UNION OF INDIA Retracted confession can be a piece of corroborative evidence and not as the sole evidence on the basis which conviction can be ordered. Once confessional statement is retracted, burden is on the prosecution to prove that the statement was voluntary. Further, it is settled law that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction along with the identity of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has discharged the onus cast upon it. In the case of "Prem Castings (P) Ltd. vs. Department Of Income Tax, Income Tax Appellate Tribunal, Delhi Bench T' - New Delhi on 11 September, 2015 in UA No.3401/Del/2011, held: "14. Before proceeding further, let us refresh ourselves as to the principles of burden of proof and whom it lies in the case of share capital which has been introduced into the tilt of the assessee by investors as claimed by the assessee. We would like to look at the concept of burden of proof. Though the Income-tax Officer is not fettered by the technical rules of evidence as known to the civil and criminal law, any issue has to be determined on the basis of proof of facts and production of evidence. When there are two parties to a dispute either the court or legislature has laid down, to whom the burden of proof so that each of the parties should be aware about who has the role assigned to it to prove a particular fact that is the discharge of the burden in order to prove his point or to defend it itself. The burden of proof in any ordinary parlance means the duty of proving a fact affirmative of any issue. Burden of proof under the Indian Evidence Act, 1872 (hereinafter 'the Evidence Act,) can be I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 39 seen from a perusal of sections 101 to 110 of the Evidence Act, 1872. The said sections broadly give the drift of the Rules, which are employed under the Act while settling the disputes between the parties, (i.e. in the Income-tax cases, the assesses and the Department). Section 101 of the Evidence Act states that whoever desires any Court to give judgement as to any legal rights or liability depending upon the existence of facts which he asserts, must prove that those facts exist. In other words, when a person is bound to prove the existence of a fact, the burden of proving it lies on that person. One who asserts affirmative of the issue is burdened with the duty of proving it. Section 110 of the Evidence Act states that when the question is whether any person is the owner of anything of which he has shown to be in possession, the burden of proving that he is not the owner is on the person who affirms that he is not the owner. In other words, if Income-tax Officer finds that the assessee is in possession of valuable items like bullion, jewelry, etc., he must draw a rebuttable presumption that the assessee is the owner thereof unless the burden of proving that he is not the owner thereof is discharged by the assessee. Whether certain sums of money were claimed by the assessee to have been received from certain persons, it was for the assessee to prove by cogent and proper evidence that these were genuine transactions as these facts were within the exclusive knowledge of the assessee and it should be kept in mind that the assessee cannot discharge this burden of merely proving the identity of the share applicant/shareholder, he has to prove all about the transaction, namely, identity, capacity of the shareholder to invest money and genuineness of the transaction. "15. What is burden of proof? As pointed out by Sarkar in his book Indian Evidence Act, the phrase "burden of proof has two distinct and frequently confused meanings. As a matter of law and pleading, the "burden of proof" is in the nature of establishing a case. This burden rests upon the party, whether plaintiff or defendant, who substantially asserts the affirmative of the issue. It is fixed at the beginning of the trial and remains unchanged and, in this respect, reference may be made to section 101 of the Indian Evidence Act (emphasis given by us). In the second sense, the "burden of proof" relates to the region of production of evidence. In this sense, the "burden of proof" is ambulatory and shifting throughout the trial and the scale of evidence may go up and down with different and conflicting items of evidence pressed into service. However, though the distinction between the I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 40 two senses is subtle, it is real. The second sense, which is of a shifting and ambulatory nature, may be called "onus of proof" while the "burden of proof as it is understood in the first sense may be called as such. Though the words "burden" and "onus" have to be understood and have been interpreted as discussed above, they are often loosely used as inter-changeable words. But then, the burden of proof, as explained earlier, remains unchanged under all circumstances (emphasis given by us). On the other hand, the onus of proof or onus probandi is shifting and ambulatory. Burden of proof is fixed by statute or contract or agreement or pleadings. Onus probandi is concerned with the weight of evidence on each side and pertains to the region of production of evidence. In the case of Sumati Dayal vs. CIT, 214 ]TR 801 (SC), the Hon'ble Apex Court has held that, "It is not doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies upon the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proof that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee (See Parimisetti Seetharamamma [1965] 57 ITR 532 at page 536)". But sections 68 and 69 relating to cash credits throw the burden of proof on the assessee because in such a case, there is prima facie evidence against the assessee as to the receipt of money in the books of the assessee. The burden of proving that the cash credit is genuine or that receipt is genuine is on the assessee. "16. Though it may be kept in mind that the initial burden is on the assessee to prove the genuineness of the transaction, but when the assessee furnished the details of the shareholders, addresses, etc., this burden is to be taken as discharged, and then the onus will get shifted to the department. But once the materials are scrutinized and it is found by the AO that documents furnished cast serious doubt about the veracity of the same, then the materials of the scrutiny are to be communicated to the assessee, thereafter the onus shifts from the revenue to the assessee. Then, the assessee has to take appropriate steps for proving his case. Unless, there are sufficient materials after such communication, produced by the assessee, the Income-tax officer can do no further. It should be kept in mind that the transactions which had occurred are things of which assessee is aware of and it has to come clean before the AO. "17. Dealing with share capital their Lordship of the Apex court has held that there cannot be two opinions on the aspect that the pernicious practice of conversion of unaccounted money through the I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 41 masquerade or channel of investment in the share capital of a company must be firmly excoriated by the Revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the Income-tax Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbors' doubts of the legitimacy of any subscription he is empowered, nay duty bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company. " As held in the case of R. B. Mittal v. CIT 246 ITR 283 (AP) in an enquiry u/s 68, the rule of audi alteram partem has to be observed and the assessee must be given a fair and reasonable hearing to discharge the burden cast on him u/s 68 of the Act. Further, it is settled law that in the matter of cash credit, the initial onus lies on the assessee to prove the genuineness of the transaction along with the identity of the lender/investor and his creditworthiness. Having done so, the appellant in the instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new material on record and failure to do so would vitiate the addition made on this count. Reference in this regard can be made the decisions in the case of CIT v. Orissa Corporation Pvt. Ltd. 158 ITR 78 ITA NO.1722/Del/2011 (SC) and CIT v. Rohini Builders 256 ITR 360 (Guj.). It was also held in the case of CIT v. Bedi & Co. P. Ltd. (1998) 230 ITR 580 (SC) that where prima-facie the inference on facts is that the assessee's explanation is probable, the onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere surmises. Further, it was held in Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) that since the satisfaction of the AO is the basis for invocation of the powers u/s I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 42 68, such satisfaction must be derived from relevant factors on the basis of proper inquiry by the AO and such inquiry must be reasonable and Just. According to Section 68 of Income Tax Act 1961, where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source of the same or the explanation offered by him is not satisfactory in the opinion of A.O., the sum so credited may be charged to income tax as the income of the assessee of that previous year. The basic precondition for the Section 68 is that the assessee should file a valid confirmation. Valid confirmation has no specific format but it must contain name, complete address of the lender and PAN of the lender. The confirmation so filed must indicate complete details of transactions (like mode-cash or cheque, with number date of cheque with bank details). The AO have right to demand the copy of bank account of the lender evidencing such transactions and the same needs to be filed. As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that It had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. Thus element of credit worthiness and satisfaction of AO thereafter is subjective and requires more efforts/inquiry on the part of the AO to give a finding in the order that lender is not genuine or is not credit worthy. AO has not dealt with any of the submissions of appellant as to why AO does not believe the confirmations and other documents filed from loan creditors. No further enquiries or cross-examination of the Income Tax Inspector who visited the address of the lender company was done so that full and correct facts could be ascertained as to why the appellant was not traceable at these addresses. DDIT(lnv), Unit-2, Kolkata submitted its report vide letter dated 17.04.2018 and the assessment order was passed on 18.05.2018 in undue haste without confronting the report of the investigation wing to the appellant. AO did not confront the full facts of this specific enquiry of the ITI to the I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 43 appellant that would have enabled appellant to provide further details to the AO but no such efforts were done apparently by the AO and assessment was completed in undue haste. Where the assessee does not furnish the new or current correct addresses, then there is no duty on AO to bring any facts on record to show that conditions required u/s 68 are not satisfied but where appellant does, then AO need to bring more facts on record to show that conditions required u/s 68 are not satisfied. It is therefore held that AO has failed to shift back the onus on appellant as required by law. More so, now it is well settled legally that mere because lender failed to attend in response to summons issued, cannot be a ground to treat the receipt as non-genuine. In this case appellant has proved the identity of all the companies who are having a valid PAN, have an active Status at ROC and Acknowledgement of ITR filed when the assessment under question was being finalized. All these evidences cannot be brushed aside without any further adverse material being placed on record by AO. Genuineness of Transactions undertaken through banking channel through account payee payment modes may be doubted. But the evidence placed on record before AO by the appellant can be treated as full discharge of onus on the part of appellant with regard to the genuineness and creditworthiness as required u/s 68 of the Act. In view of the fact the AO has failed to establish through evidences that either the loan creditor is non- existent or the loan transaction is an accommodation entry taken in lieu of cash paid. Therefore addition made simply on the basis of admission during the survey and on the basis of the general and vague report received from the DDIT (Inv) Kolkata office, without any supporting material found at the time of survey, cannot be sustained. AO has not brought on record any such evidence to prove that admission was voluntary. If AO has any evidence against in the name of M/s Wise Financial Advisor Services Pvt. Ltd., then those evidence must be passed to ire concerned AO of these companies in order to examine the facts given by appellant in the statement recorded so that proper action can be taken in correct hands to protect interest of revenue. In view of the above both the additions made are deleted.” 10. Learned CIT(A), in his detailed order, has clearly held that the assessee had fulfilled his part of onus and had filed all the necessary evidences in support of his claim. We also find that necessary evidences are there in respective paper books as detailed below: I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 44 Assessment year:2013-14 Page No. 1.Copy of ITR of lender 53 (Wise Financial Advisory Services (P) Ltd. 2.Copy of bank account of lender 65 to 67 3.Copy of bank account of assessee 70 to 76 4.Copy of master data of lender 78 5.Copy of assessment order for assessment year 79 to 81 2014-15 of lender Confirmed Copy of Account by lender 52 Copy of audited balance sheet, 54 to 64 profit & loss account with Annexures Assessment year:2014-15 1. Copy of ITR of lender 45 M/s Silver Agencies (P) Ltd. 2. Confirmed copy of account of lender 44 3. Copy of audited accounts 46 to 56 4. Copy of bank account of lender 57-61 5. Copy of master data of lender 63 6. Copy of assessment order of lender 64 & 65 for assessment year 2011-12 Assessment year:2016-17 1. Copy of ITR of lender 44 (Cooper Commercial (P) Ltd.) 2. Confirmed copy of account of lender 42 & 43 3. Copy of audited accounts 45 to 52 4. Copy of bank account of assessee 76 to 99 10.1 The Assessing Officer has not made any adverse comments on such evidences. The only material with the Department is the statement recorded during survey which alone cannot be the basis for making an addition as held by various courts & Tribunals. We are in agreement with learned CIT(A) where he has clearly held that the addition can only be made I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 45 on the basis of statement if that statement is corroborated by other material which in the present case is not there. Further the Assessing Officer in these years has relied on the report of Income Tax Inspector which he obtained from Kolkata. The learned CIT(A) has very elaborately dealt with this aspect and has held the report to be vague and not obtained in accordance with law. The learned CIT(A) has held that the Income Tax Inspector had visited the old address of the lenders and the commission at Kolkata had also issued the notices u/s 131 at the old addresses. The learned CIT(A), in this respect, has also held that the notices were not served in accordance with Rule 17 of Order V of the CPC. He further held that if the Assessing Officer had received adverse report from the commission, he should have given one opportunity to the assessee to rebut the same which he had failed to do. He further held that one of the creditor M/s Silverline Technologies had complied with notice u/s 133(6) for assessment year 2015-16 and Assessing Officer before holding the lender to be non existent in respect of other years should have considered this aspect also. Therefore, in view of these facts and circumstances the learned CIT(A) has rightly held that report of the Inspector was vague and not in accordance with law. 10.2 The learned CIT(A), on the other hand, has clearly held that assessee had discharged his onus and had filed all the necessary evidences. He has further held that such evidences were also filed before Assessing Officer during original assessment proceedings. In these years also the Revenue has not raised any ground on merits of the additions and nor Assessing Officer found anything wrong in the evidences. The Revenue has again raised the grounds that affidavit was an additional evidence which we have already held to be not as an additional evidence and we have already held that learned CIT(A) has not relied on this affidavit while allowing relief to I.T.A. Nos.701, 702, 582 & 703/Lkw/2018 C.O. No.3,4,17 & 5/Lkw/2019 Assessment. Yrs:2013-14 to 2016017 46 the assessee on merits. Therefore, in view of the above facts and circumstances, we do not find any infirmity in the order of learned CIT(A). Accordingly, appeal in I.T.A. No.701 & 702 are dismissed and ground nos. 2 to 5 in I.T.A. No.703 are dismissed. 11. As regards ground no. 1 in I.T.A. No.703 for assessment year 2016- 17, we find that ground No. 1 is similar to ground No. 1 in I.T.A. No.582 which we have already dismissed and therefore, following the same, ground No. 1 in I.T.A. No.703 is also dismissed. Hence appeal in I.T.A. No.703 is also dismissed. 12. In the result, all the appeals of the Revenue are dismissed and the Cross Objections of the assessee are also dismissed being infructuous. (Order pronounced in the open court on 06/04/2022) Sd/. Sd/. ( A. D. JAIN ) ( T. S. KAPOOR ) Vice President Accountant Member Dated:06/04/2022 *Singh Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. The CIT(A) 5. D.R., I.T.A.T., Lucknow
Other Referred Cases
-
Laws Referred To
-
1:1 Consultation on Startup Compliance
₹1
Consultation on Entity Formation
₹0
Master The Pitch-Deck Game
₹0
Startup Valuation Certificate
₹0
Rectification Letter - Application for rectification of mistake under Section 154 of I.T. Act
Mehul₹0
Minimum Alternate Tax (MAT): Comprehensive Overview and Key Changes under Finance Bill, 2026
Team Counselvise - February 06, 2026
Finance Bill, 2026: Key Direct Tax Amendments on Assessments and Appeals
Team Counselvise - February 06, 2026
Finance Bill, 2026: Key GST Reforms that will Reshape Compliance and Cash Flows
Team Counselvise - February 03, 2026