DCIT CC-1(4), KOL, KOLKATA V. RAMESH KUMAR BUBNA, KOLKATA

ITSSA 76/KOL/2024

AI Insights

The case involves an appeal by the revenue against the order of the Commissioner of Income Tax (Appeals)-20, Kolkata, which had allowed the appeal of the respondent, Ramesh Kumar Bubna, and deleted the addition of Rs.87,70,984/- to his income. The addition was initially made by the Assessing Officer following a search and seizure operation under section 132 of the Income Tax Act, which was conducted on the premises associated with the 'AMBICA' group, including the respondent. The operation allegedly uncovered documents indicating that the respondent had taken unsecured loans from shell companies, which were considered non-genuine. The CIT(A) found that the additions made by the Assessing Officer were not supported by any incriminating evidence found during the search and criticized the reliance on retracted statements of entry operators. The Tribunal agreed with the CIT(A)'s decision, emphasizing the lack of specific evidence and the arbitrary nature of the Assessing Officer's conclusions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472663 (ITAT-KOLKATA)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Other Referred Cases: CIT, Rajkot vs. Ayachi Chandrasekhar Narsangi [2014] 42 Taxmann.com 251 (Guj. H.C.), CIT vs. Rohini Builders 256 ITR 360 (Guj. H.C.), Vinamra Daga, ITA No.2320/Kol/2017 dated 16-11-2018, DCIT, Circle-1(2), Kolkata vs. Sunnyrock Estate Developer Pvt. Ltd., ITA No.1630/ Kol/2016 dated 28-11-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Set aside; Corroborative evidences; Income from undisclosed sources; Document seized; Documents seized; TDS; Search and seizure; Accommodation entries; Bogus
• Section: 250; 251; 68

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA Before Shri Sonjoy Sarma, Judicial Member and Shri Sanjay Awasthi, Accountant Member I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 DCIT, CC-1(4), Kolkata ……………………………………………..……Appellant vs. Ramesh Kumar Bubna...........…..….…..….........……........……...…..…..Respondent 38, Camac Street, Kolkata - 700016. [PAN: AEEPB5725P] Appearances by: Shri P. N. Barnwal, CIT-DR, appeared on behalf of the appellant. Shri Amit Agarwal, Advocate, appeared on behalf of the Respondent. Date of concluding the hearing : January 02, 2025 Date of pronouncing the order : January 23, 2025 ORDER Per Sonjoy Sarma, Judicial Member: The present appeal is filed by the revenue against the order dated 19.02.2024 of the Commissioner of Income Tax (Appeals)-20, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. At the outset, the Registry has informed that there is a delay of 75 days in filing the instant appeal. The revenue has submitted an application for condonation of delay citing valid and proper reasons. After considering the averments made in the application, we condone the delay and proceed to adjudicate the appeal on merits. 3. Brief facts of the case are that a search and seizure operation u/s 132 of the Act was conducted on 22.09.2015 in the residential, office and factory premises of ‘AMBICA’ group at Kolkata on which the respondent- assessee was a party. During the search operation, various documents were seized including papers indicating unsecured loans allegedly taken I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 Ramesh Kumar Bubna 2 by the assessee from jamakharchi/paper companies who had no real business activity. These shell companies were alleged to be non-genuine and operated by entry operators who provided accommodation entries. Based on the seized material, the Assessing Officer concluded that loan of Rs.80,00,000/- taken from Lumpex Vincom Pvt. Ltd. was bogus and interest accrued thereon amounting to Rs.7,70,984/- was also treated as unexplained. Consequently, the Assessing Officer added the entire sum of Rs.87,70,984/- to the total income of the assessee u/s 68 of the Act. 4. Aggrieved by the above order, the assessee went in appeal to the ld. CIT(A) where the appeal of the assessee was allowed observing as under: “3.3 Observations and decision: 3.3(a) I have carefully considered the facts of the case and the submissions of the appellant. There is no reference to any incriminating evidences, which may have been found during search to support the additions made by the AO. There is no reference to any seized documents or other adverse evidences found during search. Discussion in the Assessment Order has been made regarding post search enquiries conducted by the Investigation Wing. There is also reference to statements of the entry operators but the statements were retracted immediately after search and further assessee was not provided any opportunity to cross examine the persons whose statements were adversely used against the assessee. In any case even such person had retracted their statements. So, no evidentiary value was left in these statements. 3.3(b) Perusal of the assessment order shows that AO has made general allegations. These are not backed by supporting evidences. AO has not commented on the loan confirmations and other submissions made by the lender. In the current year loans have been taken from two persons but only the loan from Lumpex Vincom Pvt. Ltd. has been held to be bogus. In the assessment order nothing has been mentioned as to why the loan from the other party is genuine and how the facts of Lumpex Vincom Pvt. Ltd. are different from the other party. Further, assessee has pointed out that in A.Y.2014-15 assessee had taken a loan of Rs.5,00,000/- from the same party. However, the loan amount from the same lender in A.Y.2014-15, have been held to be genuine and no additions have been made. There could be no justification for this kind of double standard. Perusal of the assessment order shows that only generalised comments have been made. General allegations have been made for making the addition. There is no reference to any evidences found during search to support these additions. Decision of the AO appears to be arbitrary when he has treated only one lender, out of two, as non-genuine and even for that lender he has not made any addition in the preceding year when assessment I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 Ramesh Kumar Bubna 3 proceedings were being conducted simultaneously for the earlier year as well. Under the circumstances, additions in respect of the loan amount and the interest paid on such loan are not justified. On the other hand, Assessee has furnished all necessary documents to establish the genuineness of the loans and the interest paid on such loans. Interest has been paid after deducting TDS. Loan has been repaid in the subsequent year but AO is silent on this issue. AO has alleged that assessee has brought its own unaccounted income in the guise of unsecured loan. However, this premise fails on repayment of loan. However, A.O. has not said anything on repayment of loan. In the following cases, Hon'ble Courts/ITAT have held that once the department has accepted repayment of loan in subsequent year, no addition can be made in the current year on account of cash credit: (i) CIT, Rajkot vs. Ayachi Chandrasekhar Narsangi [2014] 42 Taxmann.com 251 (Guj. H.C.) ii) CIT vs. Rohini Builders 256 ITR 360 (Guj. H.C.) iii) Hon'ble ITAT 'D' Bench in the case of Vinamra Daga,ITA No.2320/Kol/2017 dated 16-11-2018 iv) Hon'ble ITAT 'A' Bench in the case of DCIT, Circle-1(2), Kolkata vs. Sunnyrock Estate Developer Pvt. Ltd., (ITA No.1630/ Kol/2016 dated 28- 11-2018 Under the circumstances, additions are not justified and A.O. is directed to delete the addition of Rs.87,70,984/-.” 5. Dissatisfied, the revenue has come in appeal before this Tribunal raising multiple grounds but the primary contention is that the ld. CIT(A) erred in deleting the addition of Rs.87,70,984/- without considering the findings of the Assessing Officer as the assessee failed to establish identity, genuineness of the transaction and creditworthiness of the lenders while passing the impugned order. The ld. DR contended that statements of the entry operators and dummy directors were recorded u/s 131 of the Act and the Assessing Officer noted that the entities involved were shell companies engaged in providing accommodation entries. The ld. DR stated that the assessee has not furnished sufficient evidences to rebut the findings of the Assessing Officer and the ld. CIT(A) relied the submissions of the assessee without looking into the facts and therefore, the impugned order is liable to be set aside. I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 Ramesh Kumar Bubna 4 6. On the other hand, the ld. AR stated that in the case of the assessee, the assessee has fully rebutted the findings given by the Assessing Officer and he stated that the lenders were registered Non- Banking Financial Companies (NBFCs) whose primary business was lending loans to the parties and they were active as per Ministry of Corporate Affairs website and Income Tax records. During the assessment proceedings, the assessee has provided loan confirmations, copies of bank statements, PAN details, ITR of lenders and proof of TDS deductions for the interest payments. He further stated that the loans were repaid in subsequent years through banking channels and no cash trail was established by the Assessing Officer while framing the assessment order. He further brought our notice that the Assessing Officer had accepted loans of Rs.5,00,000/- taken from the same lender in assessment year 2014-15 wherein the lender in the said year had held to be genuine and no additions had been made in that respect. The ld. AR also stated that the Assessing Officer while framing the assessment order only relied on the statements of the entry operators recorded u/s 131 of the Act. However, these statements were retracted by searched person immediately after search which is long before the assessment proceedings were made. Moreover, the assessee had not been provided any opportunity for cross-examination of persons whose statements were adversely used against the assessee while framing the assessment order. The ld. AR also brought our attention that there was no reference of any incriminating evidences found during the search to support the addition made by the Assessing Officer. He, therefore, stated that the ld. CIT(A) has rightly allowed the appeal. 7. We, after hearing the rival submissions of the parties and perusing the materials available on record, find that the Assessing Officer relied only on general allegation without presenting any specific or corroborative evidences linked with the loan transaction treating it as I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 Ramesh Kumar Bubna 5 unexplained. We note that no incriminating material or evidence was found during the search operation which substantiated the claim that the loans were bogus. That Assessing Officer had accepted loans of Rs.5,00,000/- taken from the same lender in assessment year 2014-15 but the Assessing Officer treated the loans for the assessment year 2016-17 as not genuine without showing any contrary evidence. We further note that in the current year, loans had been taken from two entities but only the loan from Lumpex Vincom Pvt. Ltd. has been held to be bogus and nothing had been mentioned as to why the loan from the other party was treated as genuine and why the facts in respect of Lumpex Vincom Pvt. Ltd. were different from the other party. We also notice that the assessee has provided all necessary documents such as details of lenders who were registered as NBFCs, details of data as per website of Ministry of Corporate Affairs and Income Tax, loan confirmations, copies of bank statements, PAN details, lenders’ ITRs. We also note that the interest payments were supported by copies of TDS deductions and return filed with the Income Tax department to prove the transaction in order to establish identity and creditworthiness of the loan providers and genuineness of the transaction during the assessment proceedings. We also notice that while passing the order of the ld. CIT(A), the ld. CIT(A) clearly stated that the statements of the entry operators which was relied by the Assessing Officer were retracted immediately after being recorded and in the absence of any cross-objection and supporting documents, the statements had no evidentiary value. We further note that the ld. CIT(A) in his order clearly stated that the alleged loans were repaid in the subsequent years through banking channel which further established the genuineness of the transaction. We find that the ld. CIT(A) in his order has also discussed the financials of the creditors to hold that the creditors had sufficient net worth to give loans to the assessee company. We again note that the ld. CIT(A) has rightly observed that the Assessing Officer’s findings were based on assumption I.T(SS).A. No.76/Kol/2024 Assessment Year: 2016-17 Ramesh Kumar Bubna 6 and lack of evidentiary backing. We, therefore, find that the ld. CIT(A) has correctly deleted the addition of Rs.87,70,984/- u/s 68 of the Act in assessee’s case by passing a well-reasoned order which was supported by facts and law. In view of this, we do not find any reason to interfere with the order of the ld. CIT(A) and there is no merit in the appeal of the revenue and the same is accordingly dismissed. 8. In the result, the appeal of the revenue is dismissed. Kolkata, the 23rd January, 2025. Sd/- Sd/- [Sanjay Awasthi] [Sonjoy Sarma] Accountant Member Judicial Member Dated: 23.01.2025. RS Copy of the order forwarded to: 1. DCIT, CC-1(4), Kolkata 2. Ramesh Kumar Bubna 3. CIT(A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches "