DEPUTY COMMISSIONER OF INCOME TAX, KOLKATA V. DOLLAR HOLDING PVT. LTD., KOLKATA

ITA 1729/KOL/2024

AI Insights

The case involves appeals by the Revenue against Dollar Holding Pvt. Ltd. concerning the assessment years 2015-16 and 2017-18. The primary issues revolved around the additions made under section 68 of the Income Tax Act for alleged bogus unsecured loans and the disallowances under section 69C for interest on these loans. The Revenue also contested the CIT(A)'s decision to restrict disallowance under section 14A related to expenses incurred to earn exempt income. The Tribunal examined the evidences, including the financial transactions and the responses to notices under sections 133(6) and 131 of the Act, and found the CIT(A)'s decisions to be well-founded and supported by the facts and law.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41073 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Other Referred Cases: Andaman Timber Industries Ltd vs Commissioner of Central Excise, PCIT vs Rashmi Infrastructure Ltd, Brij Resources Pvt Ltd vs ITO, M/s Swarna Kalash Commercial Pvt. Ltd. vs ACIT, M/s Ashtvinayak Sales Pvt. Ltd. vs ACIT, CIT vs Dataware Private Ltd., CIT vs Harjeev Agarwal, Commissioner of Income Tax vs. Sunil Agarwal, CIT vs. Lovely Export Pvt. Ltd., Principal Commissioner of Income Tax vs. Sreeleathers, Principal Commissioner of Income Tax vs. Ambe Tradecorp (P) Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT KUNDU
• Assessee Lawyers: A. K. TULSYAN; FOLLOWING
• Keywords: Set aside; Question of law; Corroborative evidences; Unexplained cash credit; Cost of acquisition; Bogus purchase; Onus to prove; Period of limitation; Retraction; Principle of natural justice; TDS; Search and seizure; Accommodation entries; Block assessment; Source of fund; Earning of tax free income; Time period of passing order; Opportunity of cross examination; Bogus
• Section: 144; 143(3); 195; 64; 132; 68; 131; 22; 133(6); 69C; 13; 14A; 133A; 20

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 1728 & 1729/KOL/2024 (Assessment Years:2015-16 & 2017-18) Dy. Commissioner of Income Tax 110, Shantipally, Aaykar Bhavan, Poorva, Kolkata-700107, West Bengal Vs. Dollar holding Pvt. Ld. 32, OM Tower, 15 th Floor, J.L. Nehru Road, Kolkata-700071, West Bengal (Appellant) (Respondent) PAN No. AADC7708B Assessee by : Shri A.K. Tulsyan, AR Revenue by : Shri Abhijit Kundu, DR Date of hearing: 18.11.2024 Date of pronouncement : 11.02.2025 O R D E R Per Rajesh Kumar, AM: These are appeals preferred by the Revenue against the orders of the Commissioner of Income-tax (Appeals) (hereinafter referred to as the “Ld. CIT(A)”] dated 19.03.2024 & 27.03.2024 for the AYs 2015-16 & 2017-18 respectively. 02. At the outset, we note that there is delay of 88 days in filing the appeal by the Revenue in ITA No. 1728/KOL/2024 & 80 days in ITA No. 1729/KOL/2024 for which the condonation petitions have been moved by the Revenue wherein it has been stated that in order to file the appeals, the files have to go through various stages in the hierarchy for obtaining the approvals and hence, the delay has occurred in filing the appeal. Considering the contents of the Page | 2 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 condonation petition and the arguments of the rival parties, we are quite convinced about the sufficiency and genuineness of the reasons for late filing of the appeals. Accordingly, we condone the delay in filing the appeals by admitting these appeals for adjudication. ITA No. 1729/KOL/2024 03. The Revenue has raised following grounds of appeal:- “1. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 4,49,37,500/- under section 68 of the Act on account of bogus unsecured loans despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 2. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 40,44,375/- under section 69C of the Act on account of interest on bogus unsecured loan despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 3 Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 2,24,687/- under section 69C of the Act on account of commission paid for accommodation entry despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 4. Whether the Ld. CIT(A) has erred in facts and in law by restricting the disallowance of Rs. 18,67,227/- under section 14A of the Act on account of expenses incurred to earn exempt income to Rs. 86,368/- in contravention of CBDT's Circular No. 5/2014 dated 11/02/2014?” 04. Brief facts of the case are that the assessee filed the return of income on 29.09.2015, declaring total loss of ₹10,22,220/-, which was selected for scrutiny under Computer Assisted Scrutiny Selection (CASS). The statutory notices along with questionnaires were duly issued and served upon the assessee. The assessee filed the revised return of income on 05.09.2018, after taking the effect of the merger with M/s Nextgen Commosales Private limited as per NCLT order, declaring total income of ₹1,33,10,320/-. M/s Nextgen Commosales Page | 3 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Private limited merged with the assessee company M/s Simplex Impex Private Limited with effect from 01.04.2016 pursuant to the scheme of Amalgamation sanctioned by the Hon'ble NCLT vide order dated 29.08.2018, which was effective from 01.04.2016 and accordingly, the entire business of assets and liabilities, duties and obligations of the amalgamating company were transferred and vested in the amalgamated company with effect from above date i.e. 01.04.2016. Accordingly, the accounting entries were made in the books of accounts of the assessee at book value. The amalgamating vcompany i.e. M/s Nextgen Commosales Private limited as on the date of merger had investments of Rs. 93,01,00,000/- which were also vested in the assessee company pursuant to the scheme of merger upon finalization of the accounts for the year ended 31.03.2017. One of the reasons for election of scrutiny was large square up loans taken by the assessee company and large increase in unsecured loans given by the assessee company. Accordingly, the ld. AO called for the details and evidences from the assessee along with books of accounts which were duly furnished before the ld. AO and also the details of sale of investments. The ld. AO on examination of bank accounts and details furnished by the assessee observed that assessee has received sale proceeds amounting to ₹18.27 crores from companies which are appearing in the list of shell companies as per departmental data base, the details whereof were extracted by the ld. AO in para 8 of the assessment order. According to the ld. AO, these companies are shell companies and operated by the entry operators whose main source of income was from commission for providing accommodation entries in the form of bogus share capital, sale of shares, bogus capital gain, etc. Accordingly, the assessee was called upon to furnish the details which were furnished by the assessee by submitting that the Page | 4 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 amalgamating company as on the date of merger had investments amounting to ₹93,01,00,000/- which was acquired by the assessee company pursuant to merger. In A.Y. 2017-18, the assessee sold the investments amounting to ₹18,67,227/-. These shares were sold during the year under consideration to ten parties/ corporates. It was also stated that share proceeds of ₹18.27 crores were received in respect of sale of shares sold out of the opening investments. It was further stated that the assessee was vested with this investments from amalgamating company out of which part were sold at a cost of acquisition, thereby earning no profit. It was also submitted that the money was realized through normal banking channel. However ,the ld. AO relying on the statements of certain entry operators namely Shri Dinesh Dhandania, Shri Praveen Agarwal, Shri Akash Agarwal, Shri Dipankar Sarkar, Shri Subrata Banerjee, added the sale proceeds to the income of the assessee as unexplained cash credit in the books of account u/s 68 of the Act. 05. The ld. CIT (A) partly allowed the appeal of the assessee after taking into consideration the replies, submissions and evidences produced by the assessee by observing and holding as under:- “Grounds 1-2 Both these grounds agitate against the action of the AO in making addition of sale proceeds of shares amounting to Rs. 18,27,00,000/- as unexplained cash credit u/s 68 of the Act, and therefore are being adjudicated together. The facts of the case are that the assessee company, M/s Dollar Holdings Pvt Ltd previously known as M/s Simplex Impex Pvt Ltd is a part of the Dollar group. M/s Nextgen Commosales Pvt Ltd (hereinafter referred as “the amalgamating company) merged with the assessee company w.e.f. 01.04.2016 pursuant to the scheme of amalgamation sanctioned by the Hon’ble NCLT vide its Order dated 29.08.2018. As per the notings of the AO, the amalgamating company, during the F.Y: 2016-17 had sold part of its investments against a consideration of Rs. 18,27,00,000/- and transferred the proceeds to the amalgamated company, i.e the assessee company M/s Simplex Page | 5 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Impex Pvt ltd which have been merged in the account of the assessee company upon finalization for the year ended 31st March, 2017. The details of the shares of the amalgamating company i.e., M/s Nextgen Commosales Pvt Ltd which were sold during the relevant assessment year are tabulated below. The appellant has submitted that the said shares were purchased at the same value during the A.Y: 201112. In support of the same, the appellant has adduced the requisite documentary evidences which includes the assessment order u/s 143(3) for A.Y: 2011- 12 in respect of the amalgamating company i.e., M/s Nextgen Commosales Pvt Ltd. The appellant has submitted that as such there has been no profit/loss on such sales and the shares have been sold at par. This is clearly evident from the details of purchase and sales given below: Name of the shares sold Purchase & sales Qty Purchase Value (Rs.) A.Y. of purchase Sales value (Rs.) Overall ComputerPvt Ltd 250 25,00,000 2011-12 25,00,000 Possible Dealtrade Pvt Ltd 950 95,00,000 2011-12 95,00,000 Pratham Commodeal Pvt Ltd 6,600 66,00,000 2011-12 66,00,000 Prince Vintrade Pvt Ltd 2,830 2,83,00,000 2011-12 2,83,00,000 Rose Valley Investment Consultants Pvt Ltd 16,000 1,60,00,000 2011-12 1,60,00,000 Uttam Dealtrade Pvt Ltd 4,700 4,70,00,000 2011-12 4,70,00,000 Pushpak Commotrade Pvt Ltd 5,550 5,55,00,000 2011-12 5,55,00,000 Topgrain Financial Advisory Pvt Ltd 12,300 1,23,00,000 2011-12 1,23,00,000 Touchpoint Marketing Pvt Ltd 5,000 50,00,000 2011-12 50,00,000 Grand Total 18,27,00,000 18,27,00,000 The above-mentioned shares held by the amalgamating company were sold to the following companies during the F.Y: 2016-17: SL No. Name of the Concern to whom shares sold Consideration value 1. Blueberry Tradelink Pvt Ltd 1,41,00,000 2. Kalyani Vincom Pvt Ltd 2,98,00,000 3. StrongwellCommodeal Pvt Ltd 5,33,00,000 4. Risewell Tradelink Pvt Ltd 7,28,00,000 5. Sagarika Dealcom Pvt Ltd 1,27,00,000 Total 18,27,00,000 The appellant has adduced evidences to demonstrate that all the proceeds from such sale of shares were received through banking channels and that in response to notice u/s 133(6) all the buyers have filed the requisite details and documents as required by the AO. The details submitted by them are as under: Documents of the Purchasers to show their identity, credit worthiness & also the genuineness of the transactions M/s Kalyani Vincom Pvt Ltd Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Page | 6 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Copy of ledger of Nextgen Commosales Pvt. Ltd. In the books of said Company for the A.Y. 2017-18 Copy of ITR Acknowledgement filed for A.Y. 2017-18 Copy of Bank Statement. Copy of Sales Invoice of Nextgen Commosales Pvt. Ltd. M/s StrongwellCommodeal Pvt Ltd Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Copy of ITR Acknowledgement filed for A.Y. 2017-18 Copy of Bank Statement. Copy of Sales Invoice of Nextgen Commosales Pvt. Ltd. M/s Risewell Tradelink Pvt Ltd M/s Sagarika Dealcom Pvt Ltd. Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Copy of ledger of Nextgen Commosales Pvt. Ltd. In the books of said Company for the A.Y. 2017-18 Copy of ITR Acknowledgement filed for A.Y. 2017-18 Copy of Bank Statement. Copy of Sales Invoice of Nextgen Commosales Pvt. Ltd. M/s Sagarika Dealcom Pvt Ltd. Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Copy of ledger of Nextgen Commosales Pvt. Ltd. In the books of said Company for the A.Y. 2017-18 Copy of ITR Acknowledgement filed for A.Y. 2017-18 Copy of Bank Statement. Copy of Sales Invoice of Nextgen Commosales Pvt. Ltd. M/s Blueberry Tradelinks Pvt Ltd. Copy of reply submitted by company in response to notice u/s 133(6) of I.T.Act Copy of ledger of Nextgen Commosales Pvt. Ltd. In the books of said Company for the A.Y. 2017-18 Copy of ITR along with Acknowledgement filed for A.Y. 2017-18 Copy of Bank Statement. Copy of Sales Invoice of Nextgen Commosales Pvt. Ltd From the documentary evidences adduced by the appellant company it is evident that he had submitted all the requisite documentary evidences before the AO to establish the identity & creditworthiness of the buyers and also the genuineness of the transactions as the sale proceeds was received through proper banking channels. However the A.O added the entire sales proceeds of Rs. 18,27,00,000/- as unexplained cash credit u/s 68. On perusal of the assessment order it is observed that the AO has made the addition based upon two contentions, first that the names of the buyer companies (to whom such shares were sold during the F.Y: 2016-17) were listed in the Departmental database of Shell companies and second that statement of various alleged entry operators were recorded on various dates, who allegedly managed and controlled such buyer companies. The statements of the entry operators referred to by the AO are given as under: Sl. No Name of alleged entry operator Recorded on 1 Dinesh Kumar Dhandhania 19.11.2014 Page | 7 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 2 Praveen Agarwal 10.02.2015 3 Akash Agarwal 10.02.2015 4 Dipankar Sarkar 10.02.2015 5 Subrata Banerjee 10.02.2015 The relevant portions of the statements of these entry operators have been reproduced by the AO in his assessment order. It is observed from such relevant portions of the statements that such entry operators in their statements recorded have not made any direct reference to any transaction made by the above mentioned 5 buyer companies with the amalgamating company or the assessee company. The appellant has stated that no opportunity for cross examination of such persons were provided to the appellant based upon whose statements the AO made the alleged addition of bogus sale of investments. It is also observed from Para 8 of the Assessment order that the AO has simply brushed aside the explanation offered by the assessee in respect of the sales by stating that the said explanation was not satisfactory and convincing, but he has failed to point out any specific defect in the submissions made by the assessee during the assessment proceedings as well as in the replies filed by the buyer companies in response to notices issued u/s 133(6). Now that the facts, the AO`s contention and the appellant`s arguments have been elaborated, the following observations deserve further discussion. Purchase of investments accepted during assessment of the amalgamating company The amalgamating company M/s Nextgen Commosales Pvt Ltd had raised share capital to the tune of Rs. 93 Crores during the F.Y: 2010-11 and subsequently such investments were made. Assessment u/s 143(3) in respect of M/s Nextgen Commosales Pvt Ltd for the AY: 2011-12 was completed on 24.03.2014 by the ITO, Ward – 6(3), Kolkata. During such assessment, the issue of raising share capital by M/s Nextgen Commosales Pvt Ltd was specifically looked upon and no discrepancies were found. M/s Nextgen Commosales Pvt Ltd was again subject to assessment u/s 143(3) for the A.Y: 2013-14 wherein assessment was completed by the ITO, Ward – 6(3), Kolkata and addition was made u/s 14A only. It is therefore evident that the said investments made to the tune of Rs. 93 Crores by M/s Nextgen Commosales Pvt Ltd was duly accepted by the Department. It is only out of the said investments of 93 crores, the investments of Rs. 18.27 Crores were sold during the A.Y: 2017-18 by the amalgamating company. Veracity of statements of the 5 alleged entry operators relied upon by the AO not tested The statements of the alleged 5 entry operators tabulated above were recorded during F.Y: 2014-15 much prior to the transaction which was made during the F.Y: 2016-17. Whether such entry operators who were allegedly controlling the 5 buyer companies during F.Y: 201415, were still managing and looking after these companies` affairs during the F.Y: 2016-17 has not been verified and commented upon by the AO. The statements nevertheless are generalized statements and do not state anything specific about the impugned transaction of sale of shares of M/s Nextgen Commosales Pvt Ltd undertaken 2 years after recording such statements. Page | 8 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 AO not making any specific comment as to why evidences offered by the assessee as well as the buyer companies not sufficient towards establishing the identity, creditworthiness of the buyer companies and the genuineness of the transaction It has already been tabulated above that during the course of assessment proceedings the appellant submitted requisite documentary evidences towards establishing the identity, creditworthiness of the buyer companies and the genuineness of the transaction. Furthermore all the buyer companies have also responded to notice u/s 133(6) before the AO. Since all the buyer companies have responded to the communication before the AO and no defect has been pointed out by the AO in the documentary evidences submitted, there is no specific reason to doubt the identity and creditworthiness of the buyers. Since all the transactions relating to sale of shares were made through banking channels, no doubt can be raised towards the genuineness of such transactions. There are several judicial precedents on these issues as well which need discussion in the instant case. Firstly, since the AO`s action is solely based upon the statement of the entry operators, the issue of denial of cross examination is a serious fundamental infirmity which renders the adverse inferences drawn, by relying on such unverified statements collected at the back of the appellant, to be legally unsustainable. In this regard, it is apt to refer to the following findings recorded by the Hon’ble Apex Court in the case of Andaman Timber Industries Ltd vs Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 reported in (2015) 62 Taxman 3 (SC),which read as under: \"According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.” It has been held that unless oral evidence is tested on the touch-stone of cross- examination, the veracity of such evidence cannot be assumed to be a fact and it cannot be acted upon to the disadvantage of an assessee. The Hon. Jurisdictional High Court inPCIT vs Rashmi Infrastructure Ltd. (ITAT 99 of 2019, G.A No. 1211 of 2019 dtd. 24.02.2020) (Hon’ble Calcutta HC) also held the following: “10. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever that cash has been routed from the assessee company to any of this chain of companies. There is no evidence that any cash was deposited by the assessee company. Moreover, there is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross-examine any these parties was provided to the assessee. The bank statements based on which the cash trail was Page | 9 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 prepared are part of the disclosed documents and cannot be held as incriminating material.” The facts that emerge are that, even in the statements of the entry operators tabulated above, neither has the appellant/ nor Dollar Group, nor indeed any transaction through the aforementioned companies been named or specified. The transactions of sale of shares in any case have also been made much after the date of recording such statements. In these conditions, without the least bit of corroboration, it is not possible to accept such a bland generalised statement which is bringing nothing specific on record. In view of the various objections put forth by the appellant and that the statements being stand alone statements, with no connection having been established by the A.O / persons taking the statement of the entry operators and the purchase or sale of such shares, it is quite clear that nothing has been brought on record by the AO / investigating officer that the statement of the alleged entry operators offer any testable facts on anything that have any bearing upon the impugned transaction; and finally that this statement has not been tested upon the touchstones of confrontation of the appellant or the opportunity of cross examination provided to the appellant, no support can be drawn from the said statement towards making the impugned addition. Such evidences therefore cannot form the basis of making assessments. The purchase of the said shares M/s Nextgen Commosales Pvt Ltd have not doubted by the Department since M/s Nextgen Commosales Pvt Ltd was subject to scrutiny assessment for AY`s 2011-12 & 2013-14 , wherein the issue of raising share capital by M/s Nextgen Commosales Pvt Ltd and the subsequent investments was specifically looked upon and no discrepancies were found. The source of such investment by M/s Nextgen Commosales Pvt Ltd therefore stands clear and the AO nowhere in his assessment order has been able to bring forward any cash flow or fund flow statement to demonstrate that M/s Nextgen Commosales Pvt Ltd`s unaccounted money was brought back in the form of share capital or anything else. Since the purchase is bonafide, the subsequent sale of such shares during the F.Y: 2016-17, and that also at par i.e the sale being made at the same cost of acquisition of shares, no adverse inferences can be drawn out of such transactions. The decision of Hon’ble Gujarat High Court in the case of PCIT vs Ramniwas Ramjivan Kasat [2017] 82 taxmann.com 458 (Gujarat) is very pertinent here wherein it was held that once purchase of shares have been accepted as genuine in earlier assessment years, sales out of such shares could not be subjected to addition under section 68 of the Act in subsequent years, treating the transaction to be bogus. Relevant extract of the judgement is provided hereunder for easy reference: “Having heard learned counsel for the Revenue on this issue, we are in agreement with the Tribunal. As facts recorded by the Tribunal would suggest, the shares were purchased by the assessee during the period relevant to the Assessment Year 2005- 2006. The return for the said year was scrutinized by the Revenue. The Assessing Officer did not disturb the investment. It would therefore later on not be open to the Assessing Officer to make addition with the aid of Section 68 of the Act when such shares were sold on the premise that the purchasers themselves were bogus. No question of law therefore arise on this issue.” Page | 10 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 The Hon. ITAT, New Delhi in the case of Brij Resources Pvt Ltd vs ITO in ITA No. 8835/Del/2019 dated 07.07.2021 also took the same view where it was held as under:- “I find, the assessee, during the year, has sold the investment and has received the amount by cheque and, therefore, in my opinion, provisions of section 68 of the Act cannot be applied to realization of investment which was duly reflected in the balance sheet of the assessee company in the preceding assessment year. In my opinion, if the sale of share is bogus, then the purchase of the same shares is also bogus. If the case of the Revenue is that assessee’s own money has come back to the assessee in shape of accommodation entry, then, the money of the assessee had gone in the preceding year in shape of purchase of the shares which were sold during the year. No action appears to have been taken in the preceding assessment year treating the purchase of the shares as bogus. Therefore, once such bogus purchase is sold then the entire amount, in my opinion, cannot be added u/s 68 of the IT Act, 1961. I, therefore, set aside the order of the CIT(A) on this issue and direct the AO to delete the addition. Similarly, the commission of Rs.20,000/- disallowed by the AO and sustained by the CIT(A) is also deleted in view of the discussion above. The grounds raised by the assessee challenging the addition on merit are accordingly allowed.” Therefore in my considered opinion, since purchases were never disputed by the AO in earlier years, the AO cannot doubt the sale & its proceeds. The share purchasing companies, it is seen, have duly filed their return of income and audited accounts before various statutory authorities & details of the same such as the ITR, Audit Reports, relevant bank statements were also produced before the AO by the appellant and the companies had also complied with the notices u/s 133(6). In this case, therefore the assessee submitted the requisite documents to prove the identity, creditworthiness of the share applicants, the genuineness of transactions, and the AO has not brought forward any evidences to dispute these documents submitted by the appellant.Once the appellant has discharged its onus to submit the requisite documents to prove the identity, creditworthiness of the share applicants, the onus shifts upon the AO to verify the same and bring on record details of the enquiry conducted by him as well as the results of such enquiry alongwith counter evidences if he does not agree with the evidences submitted by the appellant. There is singular absence of anything in this regard in the assessment order. The contention of the AO is merely based upon the statements of some alleged entry operators which also stand unverified. In this regard, the following judicial precedents deserve to be discussed: The Hon'ble Jurisdictional High Court in the case of CIT VS. Dataware Private Ltd. [ITAT No. 263 of 2011 dated 21.09.2011] while examining the issue of addition of share application money received by the assessee therein u/s 68 of the Act, held that after getting the PAN number and getting the information that the creditor is assessee under the Act, the Assessing Officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing Officer of the Creditor but instead of adopting such course, the Assessing Officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. The Hon'ble High Court further held that so long as it is not established that the return submitted by the creditor (subscriber shareholder) has been rejected by its Assessing Officer, the Assessing Officer of the Page | 11 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established. The Hon. Jurisdictional High Court in PCIT v. Sreeleathers [2022] 143 taxmann.com 435 (Calcutta)took a similar view: “Section 68, read with section 143, of the Income-tax Act, 1961 - Cash credit (Loans and advances) - Assessment year 2015-16 - During scrutiny proceedings, Assessing Officer noted that assessee-company had received certain unsecured loans from various companies out of which 13 were alleged paper companies having no worth and, thus, issued a show cause notice - Subsequently, assessee furnished various documents, however, same were rejected by Assessing Officer in a very casual manner and an assessment order was passed - It was noted that show-cause notice issued on assessee was only in respect of one lender company, namely, FGD - Assessee provided various documents in form of PAN card, income-tax acknowledgement, copy of bank statement, certification of incorporation, master data from register of companies, certificate of incorporation and annual account to prove FGD's identity and creditworthiness and genuineness of transaction - However, Assessing Officer by relying on statement of one AKA, who was alleged operator of such bogus companies, brushed aside these documents on mere ground that they did not absolve assessee from his responsibility of proving nature of transaction - It was noted that statement of AKA was not recorded in presence of assessee nor an opportunity of cross-examination was provided to it - Whether where there was no evidence brought on record by Assessing Officer to connect statement of AKA with loan transaction of assessee, said statement was of little avail and could not be basis of allegations - Held, yes - Whether, further, since assessee had discharged its initial burden by providing documentary evidences and burden had now shifted to Assessing Officer, who failed to bring on record any reason in writing as to why these documents did not establish identity of lender or proved genuineness of transaction, impugned assessment order passed by casually brushing aside these evidences was utterly perverse and liable to be quashed - Held, yes [Paras 4 and 5] [Matter remanded]” In CIT vs. Roseberry Mercantile (P) Ltd, ITAT 241 of 2010, the Hon’ble Calcutta High Court had followed the decision of the Hon’ble Supreme Court in the case of Lovely Export (2008) 216 CTR 195 that if the share subscription was received from alleged bogus shareholders, the Revenue can reopen their individual assessment and addition cannot be made in the hands of the recipient company: \"On the facts and in the circumstances of the case, Ld. CIT(A) ought to have upheld the assessment order as the transaction entered into by the assessee was a scheme for laundering black money into white money or accounted money and the Ld. CIT(A) ought to have held that the assessee had not established the genuineness of the transaction. It appears from the record that in the assessment proceedings it was noticed that the assessee company during the year under consideration had brought Rs. 4, 00, 000/- and Rs.20,00,000/- towards share capital and share premium respectively amounting to Rs.24,00,000/- from four shareholders being private limited companies. The Assessing Officer on his part called for the details from the assessee and also from the share applicants and analyzed the facts and ultimately observed certain abnormal Page | 12 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 features, which were mentioned in the assessment order. The Assessing Officer, therefore, concluded that nature and source of such money was questionable and evidence produced was unsatisfactory. Consequently, the Assessing Officer invoked the provisions under Section 68/69 of the Income Tax Act and made addition of Rs.24,00,000. On appeal the Learned CIT (A) by following the decision of the Supreme Court in the case of CIT. vs. M/s. Lovely Exports Pvt. Ltd., reported in (2008) 216 CTR 195 allowed the appeal by holding -that share capital/premium of Rs. 24,00,000/- received from the investors was not liable to be treated under Section 68 as unexplained credits and it should not be taxed in the hands of the appellant company. As indicated earlier, the Tribunal below dismissed the appeal filed by the Revenue. After hearing the learned counsel for the appellant and after going through the decision of the Supreme Court in the case of CIT. vs. M/s. Lovely Exports Pvt. Ltd. [supra], we are at one with the Tribunal below that the point involved in this appeal is covered by the said Supreme Court decision in favour of the assessee and thus, no substantial question of law is involved in this appeal. The appeal is devoid of any substance and is dismissed.” I find that a very similar issue has been addressed by the Hon. Jurisdictional Tribunal, “A”Bench, in the case of M/s Swarna Kalash Commercial Pvt. Ltd. vs ACIT, Central Circle-2(2), Kolkata for AY: 2019-20 in I.T.(SS)A. No.53/Kol/2022. In the said case also, the assessee during the year had received Rs.17,05,60,000/- on account of sale of shares/investments. The Assessing Officer in this case held that the assessee failed to prove the genuineness of the transaction and creditworthiness of the entities purchasing the investment. He, accordingly, added the entire amount received by assessee on sale of investments as unexplained income of the assessee u/s 68 of the Act. In this case it was observed by the Hon. Tribunal that the assessee had filed all the details of sale of investments and the bank statements. Buyers were identifiable persons/concerns and assessed to income tax. They had made the payments through proper banking channel and copies of sale bills, other related documents, copy of ITR, copy of audited accounts, copy of relevant bank statements of the buyers were submitted before the AO. There was no cash deposit before payment made by the buyer through their bank accounts. The assessee company had raised share capital (including premium) amounting to Rs.69,77,00,000/- in financial year 2005-06, relevant to AY 2006-07. The capital so raised in AY 2006-07 was lying as investment in shares and during the year under consideration, and a further investment of Rs.66.47 crores was also made. Assessee sold investments worth Rs.17.05 crores during the F.Y: 2018-19. The Hon. Tribunal in its decision deleted the additions made by the AO and held the following: “All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in shares and the purchases made during the year Page | 13 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax. 14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitted that the conduct of business is always with a profit motive, more particularly when the assessee had held these shares for past several years and had also made purchases during the year, deploying its funds. There ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. 15. Considering the above submission of the ld. DR and taking a holistic view of the facts and circumstances of the case, we find it proper to consider net profit element @ 5% of the sale consideration i.e. 5% of Rs.17,05,60,000/- which comes to Rs.85,28,000/- be subjected to tax. We, accordingly delete the addition to the extent of Rs.16,20,32,000/- made u/s 68 of the Act and sustain the balance of Rs.85,28,000/- towards profit element on the impugned sale transaction of shares undertaken by the assessee.” A similar view has also been taken by the Hon. Tribunal, “ B” Bench in the case of M/s Ashtvinayak Sales Pvt. Ltd.. vs ACIT, Central Circle-2(2), Kolkata for AY: 2019-20 in IT(SS)A No.54/Kol/2022. In the instant appeal being adjudicated, it has already been discussed in detail earlier that the assessee submitted the requisite documents to prove the identity, creditworthiness of the share applicants, the genuineness of transactions, and the AO has not pointed out any specific defects in such evidences filed. Once the appellant has discharged its onus to submit the requisite documents to prove the identity, creditworthiness of the share applicants, the onus shifts upon the AO to verify the same and bring on record details of the enquiry conducted by him as well as the results of such enquiry alongwith counter evidences if he does not agree with the evidences submitted by the appellant. In this scenario, when the appellant has discharged its onus and the purchase of the shares have not been disputed or doubted by the AO during the course of assessment for A.Y: 2011-12 and 2013-14, the action of the AO in considering the entire proceeds to the tune of Rs.18,27,00,000/- from sale of shares as unexplained cash credit u/s 68 therefore is not sustainable and stands deleted. However, following the decision of the Hon. Jurisdictional Kolkata Tribunal in the case of M/s Swarna Kalash Commercial Pvt. Ltd. vs ACIT, Central Circle-2(2), Kolkata for AY: 201920 in I.T.(SS)A. No.53/Kol/2022 when the assessee had held these shares for past several years and subsequently sold them during the F.Y: 2016- 17, there ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. Therefore, respectfully following the judicial precedents, with a view to plug the leakage of revenue, the AO is directed to make an addition of the net profit element @ 5% of the sale consideration i.e. 5% of Rs.18,27,00,000/- which comes to Rs.91,35,000/- as the appellant`s business profits. The addition made by the AO u/s Page | 14 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 68 to the tune of Rs. 18,27,00,000/- stands deleted. In the result the grounds are partly allowed.” 06. The ld. CIT(A) partly allowed the appeal of the assessee by following the decision of the co-ordinate bench in case of M/s Swarna Kalash Commercial Pvt. ltd. Vs. ACIT in IT(SS)A No. 53/KOL/2022 for A.Y. 2019-20 vide order dated 01.09.2023, wherein the similar issue has been decided in favour of the assessee by the co-ordinate Bench. 07. After hearing the rival contentions and perusing the materials available on record, we find that the issue is squarely covered in favour of the assessee by the decision of the co-ordinate Bench in the case of M/s Ashtvinayak Sales Pvt. ltd. Vs. ACIT in ITA(SS)A No. 54/KOL/2022 for A.Y. 2019-20 vide order dated 14.09.2023 as well as the decision in the case of M/s Swarna Kalash Commercial Pvt. ltd. Vs. ACIT in IT(SS)A No. 53/KOL/2022 for A.Y. 2019-20 vide order dated 01.09.2023, wherein similar issue has been decided in favour of the assessee. We note that the coordinate bench while passing he above decision has relied on the decision as referred to and relied by the ld CIT(A) in the case of M/s Swarna Kalash Commercial Pvt. ltd. Vs. ACIT(Supra).We note that the ld. CIT (A) has taken into account each and every aspect including factual matrix and legal position as regards of sale of investments and passed a reasoned and speaking order which has been extracted above. We note that the sale proceeds from the sale of investments were received during the current financial year which were purchased by the amalgamating company in the earlier assessment years and these investments were accepted by the department at the time of purchase of shares. Therefore, we do not find any infirmity in the order of ld. CIT (A). We also note that the decision of the co-ordinate Bench in the case of M/s Swarna Kalash commercial Pvt. ltd. (supra) has been followed by the co-ordinate Page | 15 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Bench in the case of Ashtvinayak Sales Pvt. ltd. (supra). For the sake of read reference the operative part of the decision in the case of Ashtvinayak Sales Pvt. ltd (supra) is extracted below:- “9. We have heard the rival contentions and perused the materials as placed before us. The issue for adjudication before us is in respect of confirmation of addition by ld CIT(A) as made by the AO on the ground that the identity and credentials of the purchasers are suspicious. We observe that the assessee has been in the regular business of purchase and sales of investments over the years as corroborated by the materials placed before us. Even the sales proceeds received during the current financial year were in respect of sale of shares /investments partly out of opening balance and partly out of current purchases as is apparent from the following chart placed before us:- Opening Investment Purchases made during the year Investments sold during the year Closing balance of investments 24,81,12,740 106,69,21,561 99,72,36,896 31,77,97,405 9.1. The assessee has also filed movement of investments over the years which showed that the phenomenon of purchase and sale of shares/investments was regular feature of the assessee’s business. This is also undisputed that the assessee company had raised share capital (including premium) amounting to Rs.119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12 and the capital so raised in AY 2011-12 was invested in shares/securities and accounted for in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol.-1. We also note that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol.-1 and the neither the share capital/share premium nor the investments out of that source were doubted by the AO. 9.2. We also note that similar issue was involved in the case of M/S Swarna Kalash Commercial Pvt Ltd. Vs ACIT ,Central Circle -2(2), Kolkata, a group concern of the Rashmi Group of Companies ,which was also subjected to search u/s 132(1) of the Act in the same search proceedings. We note that the coordinate bench has decided the issue in favour of the assessee in ITA No. I.T.(S.S.)A.No.53/Kol/2022 A.Y.2019-20 vide order dated 01.09.2023 involving the same issue of addition of sale of shares/investments by the AO on the ground that identity and credentials of the purchasers of shares/investments were suspicious. The operative part of the order is extracted as under: “6.1.We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019. Page | 16 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 6.1. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of the assessment order cannot be taken cognisance of. 7. So far as the original order (extracted above) passed by the Assessing Officer is concerned, we are in agreement with the contentions of the Ld. Counsel for the assessee that the same is a small and cryptic order and the additions have been made by the Assessing Officer in the said order in a mechanical manner without any discussion on merits and without pointing out any justifying material warranting such additions. Therefore, the additions made by the Assessing Officer by way of such an cryptic order are not sustainable as per law. …….. 11. We have considered the rival contentions and gone through the record.We find force in the submissions made by the learned Counsel of the assessee which have been discussed above in detail. We note that it is an admitted fact on record that assessee raised share capital at a premium in FY 2005-06 which was accepted by the AO in scrutiny assessment under section 143(3). The capital so raised was invested in shares of Pvt. Ltd. of various companies. These shares were sold during the year under consideration to different parties, corporate/non-corporate. The sale proceeds have come in assessee’s bank account through banking channel. 11.1. In its normal course of business, the assessee had made purchases and sale of investments as under which is tabulated as under: Opening Investment Purchases made during the year Investments sold during the year Closing Balance of Investments 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,635 The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment. We also look at the movement of investment held by the assessee, which is tabulated below: FY AY Opening Amount Purchase Amount Sales Amount Closing Balance Addition made by A.O. 201415 201516 63,42,00,000 - - 63,42,00,000 - 201516 201617 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 201617 201718 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 201718 201819 71,43,45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 Page | 17 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 201819 201920 20,40,09,628 66,47,64,007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,239 We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee: Sl No Name of the Script Opening Balance Purchases Sales Closing Balance Amount Amount Amount Amount 1 Bellona Supply Pvt. Ltd. 1,24,57,344 0 1,24,57,344 0 2 P N Jewellers Pvt Ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up Pvt Ltd 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd 0 1,57,32,000 0 1,57,32,000 5 CimmcoVinimay Pvt Ltd 13,32,04,353 53,71,44,701 0 67,03,49,054 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 8 SwabhimanCommosales Pvt Ltd 26,15,900 0 0 26,15,900 9 Topline Business Pvt Ltd 41,00,205 0 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11 BadrinathMinning Pvt Ltd 59,36,974 75,250 60,12,224 0 12 Sankul Retailers Private Ltd 0 74,49,572 74,49,572 0 13 Alok Financial Services Pvt Ltd 0 8,10,000 8,10,000 0 14 Asankul Cosmetics Pvt Ltd 0 6,55,26,090 6,55,26,090 0 15 Daffodil Plaza Pvt Ltd 0 88,198 88,198 0 16 NAT Communication & Marketing Pvt Ltd 0 1,26,37,632 1,26,37,632 0 17 AlokPattanayak 0 3,00,000 3,00,000 0 Total 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,634 11.4 Based on the analysis of the above details, it is evident that entire sales is made from purchases & opening stock as under: Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Year 11,18,86,806 Total 17,05,60,000 11.5 It is also important to note that the AO has made enquiries from the buyers of the shares sold by the assessee by issuing summons u/s 131 of the Page | 18 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Act who have responded and furnished the required details. Summary Statement of the replies made in response to notice u/s 131 by various buyers (Sale of Shares) is tabulated below: SL No. CORPORATE ASSESSE Page No. FY 2018-19 1 Bhootnath Commodities Pvt Ltd 1-262 ₹ 1,71,59,300 2 Bluestar Mercantile Pvt Ltd 263-265 ₹ 5,00,000 3 CharviDealmark Pvt Ltd 267-356 ₹ 10,00,000 4 Daania Trading Pvt Ltd 357-359 ₹ 30,00,000 5 Elvof Trading Pvt Ltd 361-369 ₹ 1,00,000 6 Express Image Pvt Ltd 370-542 ₹ 1,11,00,000 7 Laxhmidhan Business Pvt Ltd 544-546 ₹ 6,00,000 8 MuditVanijya Pvt Ltd 547-597 ₹ 5,50,000 9 Outright Commodities Pvt Ltd 599-846 ₹ 2,44,90,700 10 Over Arching Impex Pvt Ltd 847-1053 ₹ 81,00,000 11 RadhacharanTradevin Pvt Ltd 1055-1158 ₹ 10,00,000 12 S P Udyog Pvt Ltd 1159-1161 ₹ 25,00,000 13 SamundarTradelink Pvt Ltd 1162-1164 ₹ 34,00,000 14 Shatabdi Entertainment Pvt Ltd 1165-1193 ₹ 14,00,000 15 Spur Trading Pvt Ltd 1195-1204 ₹ 7,50,000 16 SwarnmahalVyapaar Pvt Ltd 1205-1252 ₹ 15,00,000 17 Swetang Retails Pvt Ltd 1253-1356 ₹ 50,00,000 18 Viewpoint Advisory Pvt Ltd 1357-1490 ₹ 85,00,000 19 Yuthika Merchandise Pvt Ltd 1492-1603 ₹ 25,00,000 Total (A) 9,31,50,000 SL No. NON- CORPORATE ASSESSE Page No. FY 2018-19 20 Bengal Trade Agency 1604-1613 ₹ 1,64,00,000 21 Bhagwati Trading 1614-1616 ₹ 57,90,000 22 Om Sai Enterprise 1617-1619 ₹ 24,90,000 23 Simplex Xallolloy 1620-1622 ₹ 78,05,000 24 Others-Non- Corporate ₹ 4,17,35,000 Total ₹ 7,42,20,000 Page | 19 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 12. Further, according to the ld. Counsel, the only piece of evidence that is there in this case is the statement of Sri SanjibPatwari who is one of the owners of the Rashmi group and Sri KK Verma is the accountant, recorded u/s 132(4) of the Act which have been relied upon by the Assessing Officer. These statements have been retracted the very next day by furnishing affidavits. Subsequent to retraction, no further cross-examination was conducted of these persons. The ld. Counsel has further submitted that even otherwise the addition made by the Assessing Officer was far more than the alleged disclosure made by these persons in their retracted statements and hence, no cognizance in fact can be taken for the purpose of the addition. 12.1 We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement can not be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta) has held that where assessing officer solely based on statement of assessee’s director recorded during search operation treated share application money received by assessee company as undisclosed income and made additions u/s 68 of the Act, since said statement was retracted and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were liable to be deleted. Even the Hon’ble A.P. High Court in the case of “Naresh Kumar Agarwal” (2015) 53 taxmann.com 306 (Andhra Pradesh) has observed that where, in the absence of any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of “Shree Chand Soni vs. DCIT” (2006) 101 TTJ 1028 (Jodhpur). The Hon’ble Delhi High Court in the case of “CIT vs. HarjeevAgarwal” in ITA No.8/2004 vide order dated 10.03.16 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of “Commissioner of Income Tax vs. Sunil Agarwal” (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he had been compelled and perturbed by events of search and that the pressure of search was built so much that he had to make the surrender without having actual possession of the assets or unexplained investments or expenses incurred and that there was no such income as undisclosed. The Hon’ble Delhi High Court, after considering the fact and circumstances of the case, while dismissing the appeal of the revenue, observed that though the fact that the assessee may have retracted his statement Page | 20 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 belatedly, yet, it did not relieve the AO from examining the explanation offered by the assessee with reference to the books of account produced before him. Although, a statement under section 132(4) of the Act carries much greater weight than the statement made under section 133A of the Act, but a retracted statement even under section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. 12.2 In the case of “Basant Bansal vs. ACIT” reported in (2015)63 taxmann.com 199 (Jaipur Trib.), the assessee therein, during the search and seizure action u/s 132 of the Act, offered a summary discloser of income as undisclosed and the department accepted the summary surrender of income and thereafter advance tax for the said surrendered of income was also deposited, but thereafter it was contended by the assessee that the surrender was made under threat or coercion and that no incriminating material was found during the search action. The stand of the department was that the admission was voluntary and was not under a mistaken belief of fact or law and that the assistance had enough time to go through the facts of their case, law applicable in their case and take advice from their counsels and advisors before filing the letter of surrender of undisclosed/unaccounted income and that the admission by them was final and binding on them; The co-ordinate Jaipur Bench of the Tribunal, after overall appreciation of the fact and evidences before it, observed that the assessee’s surrender was not based on any incriminating material and that the discloser being not voluntary and extracted by the department in creating a coercive situation cannot be relied solely to be basis of addition as undisclosed income. The coordinate bench of the Tribunal while relying upon various case laws of the higher authorities observed that it is well settled legal position that merely on the basis of a statement which is not supported by the department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and preponderance of possibilities. During the search proceedings, record relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of “Dy CIT vs. Pramukh Builders” (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a statement or a letter. 12.3 The case of the assessee, before us, is on better footing as in this case, there is no delay in retraction of the statement which was done on the very next day by filing affidavits before the Metropolitan Magistrate Page | 21 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 12.4 Even the CBDT Letter No.286/2/2003-IT(Inv) dated Oct 3, 2003 in this respect read as under: “To The Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully,” 12.5. A perusal of the above circular also shows that it is in the notice of the statutory controlling body of the Income Tax Authorities that the revenue officials are used to take confessional statements from the person searched under force, pressure or threat and that is why they have made it mandatory that additions solely on the basis on such statements should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made. 13. All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in Page | 22 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 shares and the purchases made during the year have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax. 14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitted that the conduct of business is always with a profit motive, more particularly when the assessee had held these shares for past several years and had also made purchases during the year, deploying its funds. There ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. 15. Considering the above submission of the ld. DR and taking a holistic view of the facts and circumstances of the case, we find it proper to consider net profit element @ 5% of the sale consideration i.e. 5% of Rs.17,05,60,000/- which comes to Rs.85,28,000/- be subjected to tax. We, accordingly delete the addition to the extent of Rs.16,20,32,000/- made u/s 68 of the Act and sustain the balance of Rs.85,28,000/- towards profit element on the impugned sale transaction of shares undertaken by the assessee. 16. In the result, appeal of the assessee is partly allowed. 9.4. It is clear from the above that the facts in the instant case before us are materially same vis a vis the facts in the case decided by the coordinate bench supra in group concern. We, therefore, respectfully following the same set aside the order of ld CIT(A) and direct the AO to apply profit of 5% on the sales proceeds of Rs. 99,72,36,896/- which comes to Rs. 4,98,61,845/- and delete the remaining addition of Rs. 94,73,75,051/-. 10. In the result the appeal of the assessee is partly allowed.” 08. Since the facts of the instant case are materially same vis-à-vis, the facts in the cases as decided by the co-ordinate Benches in the case of M/s Ashtvinayak Sales Pvt. ltd. (supra) and M/s Swarna Kalash Commercial Pvt. ltd. (supra), therefore, we respectfully following the same uphold the order of ld. CIT (A). The ground no. 1 and 2 of the appeal of the Revenue are dismissed. ITA No. 1728/KOL/2024 09. The Revenue has raised following grounds of appeal:- Page | 23 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 “1. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the addition of Rs. 4,49,37,500/- under section 68 of the Act on account of bogus unsecured loans despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 2. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 40,44,375/- under section 69C of the Act on account of interest on bogus unsecured loan despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 3. Whether the Ld. CIT(A) has erred in facts and in law by allowing the appeal of the assessee by deleting the disallowance of Rs. 2,24,687/- under section 69C of the Act on account of commission paid for accommodation entry despite the assessee failing to establish the genuineness of the transactions and the identity and creditworthiness of the creditors? 4. Whether the Ld. CIT(A) has erred in facts and in law by restricting the disallowance of Rs. 18,67,227/- under section 14A of the Act on account of expenses incurred to earn exempt income to Rs. 86,368/- in contravention of CBDT's Circular No. 5/2014 dated 11/02/2014?” 010. The issue raised in ground no.1 of appeal is against the deletion of addition of ₹4,49,37,500 by the ld. CIT (A) as made by the ld. AO u/s 68 of the Act. 011. The facts in brief are that the assessee filed the return of income on 29.09.2015, declaring total income at ₹ 31,62,160/-. The case of the assessee was selected for scrutiny and statutory notices along with questionnaire were issued and served on the assessee. The assessee is a Non-Banking Financial Company (NBFC) was engaged in the business of granting loans and advances and making investments in shares and securities. The assessee has taken unsecured loans from various individuals, HUFs and repaid the same as well. The opening and closing balances of loans given were ₹13,55,93,347 and ₹18,03,46,998/- respectively. The ld. AO also noted that during the year the assessee has taken loan from M/s V.K. Mercantile Pvt. Ltd. amounting to ₹9,05,45,000/- out of which ₹2,20,00,000/- was repaid during the year and a net amount of ₹6,85,45,000/- was outstanding Page | 24 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 at the end of this assessment year. The ld. AO further noted from the bank statement that the amount has been credited in the account of VK Mercantile Pvt. ltd. from two banks i.e. ICICI bank and HDFC bank. After examination of the bank statements the ld. AO noted that immediately before making the payment there was a credit of amount in the assessee bank account from two concerns namely M/s Niranjani Tradelink Pvt. ltd. and M/s Bajrangi Realty Developers Pvt. ltd. Thereafter the ld. AO called for the information u/s 133(6) of the Act from banks and also issue notice u/s 131(1) of the Act to the Directors of the above two concerns which were returned back as unserved with a remark ‘not found/ not known’. That the A.O observed that the unsecured loan was taken Rs.4,49,37,500/- from V.K.Mercantile Pvt.Ltd. after deposits in various bank accounts were routed back in form of loan to the said lender. It was also submitted that the loan creditor V.K.Mercantile Pvt. Ltd. was a very old loan creditor who is assessed to tax. Its directors personally appeared and confirmed the loan given. The said loan transactions were made through banking channel and it was an interest bearing loan on which the TDS was duly deducted and deposited the same. Further, the part of the said loan has also been squared up during this F.Y. and entire loan was refunded subsequently. Finally, the ld. AO after rejecting the replies/contentions of the assessee treated the unsecured loan of ₹4,49,37,500/- as unexplained cash credit u/s 68 of the Act and added the same to the income of the assessee in the assessment framed u/s 143(3) of the Act vide order dated 27.12.2017. 012. The aggrieved assessee preferred an appeal before ld CIT(A). The ld CIT(A) after taking into account the contentions/arguments/documents submitted by the assessee allowed Page | 25 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 the appeal by directing the AO to delete the addition by observing and holding as under:- “All these grounds agitate against the action of the AO in making addition of unsecured loan taken as unexplained cash credit u/s 68 of Rs.4,49,37,500/- received from V.K.Mercantile Pvt.Ltd. On perusal of the assessment order, it is observed that the AO has come to the conclusion based upon the following: 1. Statement of one Neeraj Jain, an alleged entry operator dated 29.12.2014, 2. A cash trail prepared alleging that the assessee has brought its unaccounted money in the guise of unsecured loan. The AO has made the addition of Rs. 4,49,37,500/- by relying on the alleged cash trail. On perusal of the cash trail prepared by the AO it is observed that it has been alleged by the AO that cash was deposited in 4th/5th layers in the name of various parties such as P K Infotech, Jyoti Enterprise, Bharat Traders, Bajrang Realty, Ashika Traders, Narayan Enterprises, Om Enterprises, Vandana Emporium, Bluebell Trading, Astha Traders, Global Enterprises, Mortex Emporium, Kanha Creations, Vasant Agarwal, Ranisati Emporium, Satkar Trading, Prabhat Sultania, Niranjan Trading and Uma Udyog etc. In the submissions filed by the appellant during the course of appeal proceedings, the appellant has stated that the following documents were submitted before the AO to substantiate the identity, creditworthiness and genuineness of the transaction, given as under: a. Copy of Loan confirmation for FY 2014-15 b. Copy of ITR Acknowledgment for AY 2015-16 c. Copy of Audited Financial Statement for FY 2014-15 d. Relevant pages of bank statement reflecting the loan transaction e. Copy of Loan confirmation for FY 2015-16, FY 2016-17 Copy of Ledger of loan transaction for FY 2017-18 The appellant has further submitted that the loan creditor is a group company of the assessee. As per the appellant, the directors of both the assessee and the loan creditor are as follows: Dollar Holdings Pvt Ltd V K Mercantiles Pvt Ltd Binay Kumar Gupta Krishan Kumar Gupta Vinod Kumar Gupta Ankit Gupta (Son of Vinod Kumar Gupta) Aayush Gupta (Son of Vinod Kumar Gupta) Gaurav Gupta (Son of Binay Kumar Gupta) Page | 26 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 The appellant has thereafter submitted that it is an NBFC company and during the relevant AY, it received unsecured loan of Rs. 9,05,45,000/- from M/s V. K. Mercantile Pvt Ltd out of which Rs. 2,20,00,000/- was refunded during the same year and balance amount was refunded in the subsequent years. It is worthwhile to mention here that the appellant has stated that it received loans from M/s V. K. Mercantile Pvt Ltd starting from F.Y: 2013-14 and then also during F.Y: 2014-15 and in subsequent F.Y`s 2016-17, 2017-18 and 2018-19 and loan received from the same loan creditor was never disputed by the AO in earlier years, as well as in the subsequent years. This is evident from the scrutiny assessment order u/s 143(3) dated 24.10.2016 passed by the AO for AY 2014-15 as well the assessment order for A.Y: 2017-18 dated 30.12.2019 (which has been passed by the same AO). The details of unsecured loan from V K Mercantiles Pvt Ltd as existing in the books of accounts of the assessee for AY 2015-16 is as under: (Amt in Rs.) Opening Balance of Loan Loan received during FY 2014-15 Loan refunded during FY 2014-15 Closing Balance of Loan 8,51,75,810 9,05,45,000 2,20,00,000 16,67,53,743 Further, the complete details of loan received and repaid to M/s V K Mercantiles Pvt Ltd is as under: (Amt in Rs.) F.Y. Opening Balance Loan Received Loan Repaid Interest TDS Closing Balance 2013-14 - 8,46,00,000 - 6,39,789 63,979 8,51,75,810 2014-15 8,51,75,810 9,05,45,000 2,20,00,00 1,44,81,037 14,48,104 16,67,53,743 2015-16 16,67,53,743 - 9,55,75,000 1,39,45,972 13,94,597 8,37,30,118 2016-17 8,37,30,118 12,56,30,118 10,57,00,000 56,66,156 5,66,616 2,50,29,658 2017-18 2,50,29,658 4,00,00,000 13,38,29,658 6,64,817 73,869 6,89,44,326 (Cr.) 2018- 19 6,89,44,326 (Cr.) 6,89,44,326 - 10,86,298 1,20,700 - The interest bearing loans received from M/s V. K. Mercantile Pvt Ltd, were ultimately repaid in entirety during the F.Y: 2018-19 and TDS was duly deducted on the same. The appellant has submitted Ledger copies along with relevant pages of bank statement to substantiate its contention. The appellant has also stated the following to prove the three limbs of section 68 i.e., identity, creditworthiness and genuineness, it is pertinent to note the following: Identity The loan creditor is an Income Tax Assessee vide PAN AABCV0257A and is regular in filing ITR. Copy of the ITR Acknowledgement filed for AY 2015-16 and current AY 2023-24 has been enclosed by the appellant. The books of accounts of M/s V K Merchantile Pvt Ltd are regularly audited and its annual return to ROC is also filed on regular basis. The loan creditor is regularly assessed to income tax. The assessment w.r.t. the loan creditor has been completed vide order u/s 143(3) dated 24.10.2016 w.r.t. AY 2014-15. Page | 27 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Creditworthiness: The appellant has adduced the Audited Statement of accounts for the relevant year from where it is evident that the own fund of the loan creditor is Rs. 25.01 crore for FY 2014-15 and has earned revenue of Rs. 1.66 crore in FY 2014-15. Total loans and advances as per their audited accounts is Rs. 17.78 crore for FY 2014-15. Genuineness: The loans were received through proper banking channel as evident from the bank statement of the company as well as the loan creditor. The appellant has also submitted the bank statement of the loan creditor to substantiate that there was not a single instance where cash has been deposited before transferring loan to the assessee company. It has also been submitted that the said loans were interest bearing @ 9% and TDS has been duly deducted on interest and deposited. The loan taken from M/s V K Mercantile Pvt Ltd has been gradually refunded to the said party and in the FY 2018- 19, the said loans were completely squared up. The AO relied on the statement of alleged entry operator Sri Neeraj Jain recorded on 29.12.2014. On this issue the appellant submitted that the certified copy of the statement was never provided to the assessee in the course of assessment proceedings and in any case a perusal of the extract of the statement given at page No. 13 of the Assessment Order provides that the alleged entry operator has not taken the name of the loan creditor or the assessee company so as to raise doubt on the genuineness of the loan transaction. It has also been submitted that in the instant case, the AO grossly erred in not providing the assessee any opportunity for cross examination of the recorded statement based on which he made the alleged addition of bogus unsecured loan. As far as the cash trail is concerned, the appellant has stated that no addition can be made in the hands of the assessee since the AO did not provide the copy of the relevant bank statements of those third parties in which cash has been deposited to the assessee. The appellant has also raised several doubts against such cash trails reproduced by the AO in his order, few of which are being discussed below: Chart 1 in Page No. 22 of the assessment order: The AO has alleged that in the 4th layer there has been cash deposits of Rs.5,00,000/- each in Jyoti Enterprises as well as in P K Infotech which have collectively remitted 15 lakhs to M/s Niranjani Tradelink Pvt. Ltd, which apparently is the source of funds of the loan creditor. However the AO has completely ignored the fact that there were also NEFT of Rs.6,40,500/- by Ubique Consultancy and clearing cheque of Rs. 2,40,450/-. But the AO having a biased opinion has only considered the cash deposits. Further, why there were cash deposits in the said bank accounts of Jyoti Enterprises and P K Infotech can only be answered by the respective concerns and merely because some cash deposits were made in accounts of third parties at some point of time, that does not imply that it was the appellant`s unaccounted money being deposited there as the AO has not been able to point the respective withdrawals of such amount from the appellant`s bank account. Page | 28 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Chart 2 in Page 23 of the assessment order: The AO has alleged that in the 5th layer there has been cash deposits of Rs.15,50,000/- (no name provided) which allegedly found its way to the appellant`s bank account through M/s Niranjani Tradelink Pvt. Ltd, which apparently is the source of funds of the loan creditor. In this regard, the appellant has stated the AO has completely ignored the RTGS transfer of Rs.6 Lakhs by M/s Mittal Ferrocast Pvt. Ltd at the 5th Layer, the RTGS transfer of Rs. 7,00,000/- from M/s Baba Basukinath Steel Co. and Rs.145713, Rs.138867, Rs.153537 from M/s Ubique Consultancy at the 4th Layers. These evidences relied upon by the AO are therefore grossly inconclusive as there might have been a cash deposit at a certain stage which only the said party can explain, but there were several bank transfers which were never been commented upon by the AO. Chart 6 in Page 23 of the assessment order: The AO has alleged that in the 5th layer there has been cash deposits of Rs.20,00,000/- on 07.05.2014 and 13,40,000/- on 06.05.2014 (no name provided) which allegedly found its way to the appellant`s bank account through M/s Bajrangi Realty Developers Pvt. Ltd, which apparently is the source of funds of the loan creditor. The astonishing fact here is that the transfer of Rs.25,00,000/- to the account of M/s V K Merchantile Pvt Ltd was made on 03.05.2014 which was much prior to the date of the alleged cash deposits. This evidence is therefore completely frivolous. It is evident from the above discussion towards the submissions made by the appellant, that the appellant was in receipt of loans from M/s V K Mercantile Pvt Ltd from the F.Y: 2013-14 to F.Y: 2017-18. During this period, loans were received and repaid by the appellant alongwith interest payment at the rate of 9 percent and requisite TDS deduction. It is not that all of a sudden some loans were received which were not repaid back or that the loans were interest free. The account with M/s V K Merchantile Pvt Ltd was finally settled during F.Y: 2018-19. Since the loans received were repaid by the assessee in the subsequent years the assessee cannot be said to be the beneficiary of the loan received. The AO has contended that some directors or principal officers of some concerns at the 3rd or 4th layer did not appear before him in response to summons u/s 131. On this issue, it can be expected of the appellant to present the director of the lender concern, but it cannot be expected from the appellant to present directors of some concerns which are not known to him, in the sense as it is not having direct transactions with such parties. I find that one of the directors of the lender concern M/s V K Mercantile Pvt Ltd appeared before the AO and submitted all the requisite documents before the AO besides recording her statement. In her statement the director stated the source of funds of such loans were from sale of her company`s investments, refund of loans and advance given to parties earlier as well as from maturity of Fixed Deposits. The AO has not been able to dispute this answer of the Director of the lender company anywhere in his assessment order and has simply relied upon the cash trail. The appellant in its submissions has already demonstrated that the cash trails provided by the AO are very Page | 29 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 much inconclusive and therefore the answer provided by the Director cannot be disputed merely based upon the said cash trail. In this regard it is pertinent to refer to the decision of Hon’ble High Court of Calcutta in the case of DCIT vs Rashmi Infrastructure in ITAT No. 99 of 2019, GA 1211 of 2019 dated 24.02.2020, where the Hon’ble High Court has upheld the decision of ITAT Kolkata in IT (SS)A No. 79/kol/2017 dated 05.12.2018, wherein it was held as under: “10. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever that cash has been routed from the assessee company to any of this chain of companies. There is no evidence that any cash was deposited by the assessee company. Moreover, there is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross- examine any these parties was provided to the assessee. The bank statements based on which the cash trail was prepared are part of the disclosed documents and cannot be held as incriminating material.” The statement of Shri Neeraj Jain has been perused by me. The said statement, first of all is not related to the appellant company and specifically speaks about entries provided to M/s Gupta Power Infrastructure Pvt. Ltd. The AO`s contention is that Shri Neeraj Jain was controlling two companies related to this case, viz. Ridhi SIddhi Infra Properties Pvt. Ltd and M/s Skylark logistics agencies Pvt. Ltd from whom M/s V K Mercantiles Pvt Ltd received funds to the tune of Rs. 40 Lakhs. No questions were asked by the AO in this regard to the director of the lender concern M/s V K Mercantiles Pvt Ltd during her deposition. There is also no evidence in the order as to whether at any point of time M/s V K Mercantiles Pvt Ltd was asked anything in this regard. The appellant has also alleged that it was not provided opportunity of cross examination of Neeraj Jain. It has been held that unless oral evidence is tested on the touch-stone of cross- examination, the veracity of such evidence cannot be assumed to be a fact and it cannot be acted upon to the disadvantage of an assessee. The above is a serious fundamental infirmity which rendered the adverse inferences drawn, by relying on such unverified database/statements collected at the back of the appellant, to be legally unsustainable. In this regard, it is apt to refer to the following findings recorded by the Hon’ble Apex Court in the case of Andaman Timber Industries Ltd vs Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 reported in (2015) 62 Taxman 3 (SC) ,which read as under: \"According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected.” Page | 30 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 Besides the above discussion, I find the following facts to be of supreme importance while adjudicating this issue: 1.The appellant has been assessed for the following years during which it was in receipt of such unsecured loans from M/s V K Mercantile Pvt. Ltd : A.Y. Order u/s Date of Order 2011-12 153A/143(3) 31.03.2016 2012-13 153A/143(3) 31.03.2016 2013-14 153A/143(3) 31.03.2016 2014-15 143(3) 24.10.2016 2017-18 143(3) 30.12.2019 The appellant had received an amount of Rs. 8.46 crores during F.Y: 2013-14 and Rs. 12.56 crores during F.Y: 2016-17, both of which has been accepted by the AO. A special mention needs to be made for the A.Y: 2017-18, wherein assessment was completed by the same AO, but no additions were made in this regard which implies the fact that such unsecured loans to the tune of Rs. 12.56 crores were accepted. This is an inexplicable circumstance where unsecured loans received from the same company is treated as bogus in the case of A.Y: 2015-16 and not as bogus for unsecured loans received during A.Y`s 2014-15 and 2017-18 from the same lender company. 2. The loan creditor, M/s V K Mercantiles Pvt Ltd has also been assessed for the A.Y: 2014-15. The assessment order was passed on 24.10.2016 u/s 143(3) by the ITO, Ward-9(2), Kol, wherein the investments of the lender were before the AO and no adverse inferences were made regarding such investments to the tune of Rs.14.26 Crores. M/s V K Mercantiles Pvt Ltd has also been assessed for the A.Y: 2017-18, where also no adverse inferences were made. As per the audited accounts of the lender concern, it had own funds to the tune of Rs. 25.01 crore during FY 2014-15 and earned revenue of Rs. 1.66 crore in FY 2014-15. Total loans and advances as per their audited accounts is Rs. 17.78 crore for FY 2014-15. These facts have not been disputed by the AO. 3.The Dollar Group to which the appellant concern belongs, itself was subject to search proceedings on 07.11.2013, i.e during F.Y: 2013-14. During this period the appellant concern received unsecured loans to the tune of Rs.8.46 Crores. The AO has not mentioned anything in his order as to whether any evidences were unearthed during the search relating to such unaccounted cash of the appellant which allegedly has been deposited in bank accounts of third parties mentioned by the AO. 4. M/s V K Mercantile Pvt Ltd had been a regular lender to the appellant company starting from F.Y: 2013-14 to 2018-19 and huge amounts of loans were regularly taken from such lender and were repaid in full. Since the loans have been repaid in the next few years along with the requisite interest and deduction of TDS, the same cannot be placed under doubt. I find that a similar matter has been dealt with by the Hon. Jurisdictional High Court in a recent judgement in [2022] 143 taxmann.com 435 (Calcutta) Page | 31 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 HIGH COURT OF CALCUTTA, Principal Commissioner of Income- taxv.Sreeleathers*, wherein the Hon. Court has held: “4. Before we examine the correctness of the order passed by the Tribunal and consider whether a substantial question of law arises for consideration in this appeal we need to take note of section 68 of the Act. This provision deals with cash credits. It states that 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 thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year. The crucial words in the said provision are \"assessee offers no explanation\". This would mean where the assessee offers no proper, reasonable and acceptable explanation as regard the amount credited in the books maintained by the assessee. No doubt the Income-tax Act places the burden of proof on the tax payer. However, this is only the initial burden. In cases where the assessee offers an explanation to the credit by placing evidence regarding the identity of the investor or lender along with their conformations, it has been held that the assessee has discharged the initial burden and, therefore, the burden shifts on the Assessing Officer to examine the source of the credit so as to be justified in referring to section 68 of the Act. After the Assessing Officer puts the assessee on notice and the assessee submits the explanation with regard to the cash credit, the Assessing Officer should consider the same objectively before he takes a decision to accept or reject it. In Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC), it was held that if the explanation given by the assessee shows that the receipt is not of income nature, the department cannot convert good proof into no proof or otherwise unreasonably reject it. On the other hand, if the explanation is unconvincing, the same can be rejected and an inference shows that the amount represents undisclosed income either from a disclosed or an undisclosed source CIT v. P. Mohanakala [2007] 161 Taxman 169/291 ITR 278/210 CTR 20 (SC). The explanation given by the assessee cannot be rejected arbitrarily or capriciously, without sufficient ground on suspicion or on imaginary or irrelevant grounds Lal Mohan Krishna Lal Paul v. CIT [1944] 12 ITR 441 (Cal.) and Anil Kumar Singh v. CIT [1972] 84 ITR 307 (Cal.). Further to be noted that where the assessee furnishes full details regarding the creditors, it is up to the department to pursue the matter further to locate those creditors and examine their creditworthiness. It has been further held in A.S. Sivan Pillai v. CIT [1958] 34 ITR 328 (Mad.) that while drawing the inference, it cannot be assumed in the absence of any material that there has been some illegalities in the assessee's transaction. Thus, more importantly, as held by the Hon'ble Supreme Court in CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 (SC), the onus of proving that the appellant was not the real was on the party who claims it to be so. Bearing the above legal principles in mind, if we examine the case on hand, it is clear that the assessing officer issued show cause notice only in respect of one of the lender M/s. Fast Glow Distributors. The assessee responded to the show cause notice and submitted the reply dated 22-12-2017.The documents annexed to the reply were classified under 3 categories namely: to establish the identity of the lender, to prove the genuineness of the transactions and to establish the creditworthiness of the lender. The assessing officer has brushed aside these documents and in a very casual manner has stated that mere filing PAN details, balance sheet does not absolve the assessee from his responsibility of proving the nature of transaction. There is no discussion by the Page | 32 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 assessing officer on the correctness of the stand taken by the assessee. Thus, going by the records placed by the assessee, it could be safely held that the assessee has discharged his initial burden and the burden shifts on the assessing officer to enquire further into the matter which he failed to do. In more than one place the assessing officer used the expression \"money laundering.\" We find such usage to be uncalled for as the allegations of money laundering is a very serious allegations and the effect of a case of money laundering under the relevant Act is markedly different. Therefore, the assessing officer should have desisted from using such expression when it was never the case that there was any allegations of money laundering. Paragraphs 5.4 and 5.5 of the assessment order are all personal perception and opinion of the assessing officer which needs to be ignored. Much reliance was placed on the statement of Shri Ashish Kumar Agarwal, which statement has been extracted in full in the assessment order and it cannot be disputed that there is no allegation against the assessee company in the said statement. There is no evidence brought on record by the assessing officer to connect the said entry operator with the loan transaction done by the assessee. Therefore, the statement is of little avail and could not have been the basis for making allegations. The assessing officer ignored the settled legal principle and in spite of the assessee having offered the explanation with regard to the loan transaction, no finding has been recorded as regards the satisfaction on the explanation offered by the assessee. Therefore, the assessing officer ignored the basic tenets of law before invoking his power under section 68 of the Act. Fortunately, for the assessee, CIT(A) has done an elaborate factual exercise, took into consideration, the creditworthiness of the 13 companies the details of which were furnished by the assessee. More importantly, the CIT noted that all these companies responded to the notices issued under section 133 (6) of the Act which fact has not been denied by the assessing officer. On going through the records and the net worth of the lender companies, the CIT has recorded the factual findings that the net worth of those companies is in crores of rupees and they have declared income to the tune of Rs. 45,00,000/- and 75,00,000/-. Therefore, the assessing officer if in his opinion found the explanation offered by the assessee to be not satisfactory, he should have recorded so with reasons. We find that there is no discussion on the explanation offered by the assessee qua, one of the lenders. Admittedly, the assessee was not issued any show cause notice in respect of other lenders. However, they are able to produce the details before the CIT(A) who had in our view rightly appreciated the facts and circumstances of the case. As pointed out earlier, the assessing officer brushed aside the explanation offered by the assessee by stating that merely filing PAN details, balance sheet does not absolve the assessee from his responsibilities of proving the nature of transactions. It is not enough for the assessing officer to say so but he should record reasons in writing as to why the documents which were filed by the assessee along with the reply dated 22-122017 does not go to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. In the absence of any such finding, we have to hold that the order passed by the assessing officer was utterly perverse and rightly interfered by the CIT(A). The Tribunal re-appreciated the factual position and agreed with the CIT(A). The tribunal apart from taking into consideration, the legal effect of the statement of Ashish Kumar Agarwal also took note of the fact that the notices which were issued by the assessing officer under section 133(6) of the Act to the lenders where duly acknowledged and all the lenders confirmed the loan transactions by filing the documents which were placed before the tribunal in the form of a paper book. These materials were available on the file of the assessing officer and Page | 33 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 there is no discussion on this aspect. Thus, we find that the tribunal rightly dismissed the appeal filed by the revenue. For all the above reasons, we find that no question of law much less, substantial question of law arises for consideration in this appeal.” So the Hon. Jurisdictional High Court has held that the AO cannot simply brush aside the explanation offered by the assessee since the appellant had filed all the relevant documents to establish the identity of the lender or prove the genuineness of the transaction or establish the creditworthiness of the lender. Since these documents have not been disputed, these loans cannot be treated as bogus. The Hon. Gujarat High Court in its judgement in the case of Principal Commissioner of Income-tax v.Ambe Tradecorp (P.) Ltd [2022] 145 taxmann.com 27 (Gujarat) held that: “3. The issue in this case arose in respect of the assessment year 2012-2013. It appears that the two loan transactions of Rs. 8,50,00,000/- and Rs. 23,70,00,000/- received by respondent assessee from one M/s. J.A Infracon Private Limited and M/s. Satya Retail Private Limited were treated by assessing officer to be sham in the sense that the creditworthiness etc. of the giver of the loan were not established. Accordingly, the assessing officer made addition under section 68 of the Act. While the assessing officer dealt with unexplained cash credit from the M/s. Satya Retail Private Limited and from M/s. J.A Infracon Private Limited in his order in paras 5.1 and 5.2 respectively, the Commissioner of Income-tax in the appeal preferred by assessee found on facts and the material before it that the said two cash creditors had been holding there identity, creditworthiness and genuineness in respect of the loan transactions. The appellate authority observed that, \"In this regard, it has been noticed that ledger accounts and confirmations of the aforesaid two parties have been provided by the appellant to the AO in the assessment proceedings. Thereafter, the AO also carried out the independent inquiries u/s. 133(6) of the I.T. Act and in compliance thereto both the companies have submitted the requisite information.\" The information supplied by assessee was duly noticed by appellate authority and facts in that regard were recorded also to arrive at a finding that the unsecured loans to the aforesaid parties have been paid by account payee cheques from the bank account of the assessee which was not in dispute, muchless in doubt. The accounts were finally settled with the repayment of the loan to the lender companies. When the revenue preferred appeal before the Appellate Tribunal, the Tribunal confirmed the findings recorded by the Appellate Authority. The Tribunal referred to the decision of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC) and also in Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC), to further record on the basis of the facts that the assessee had furnished the details such as copy of ledger account, bank statements, income tax returns, balance sheet etc. It was also recorded that notice under section 133(6) of the Act was issued to the said parties which were duly responded by them. The identity of the parties could not be, therefore disputed, Page | 34 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 recorded the tribunal. The aspect was also noticed that the assessee was not beneficiary of the loan received by it and the loan was repaid by the assessee in the subsequent year. It led to unacceptable conclusion that the impugned transaction was a business transaction between the assessee and the loan parties and that they could not be doubted for their genuineness. While the revenue has tried to put up a case that the transactions were in the nature of accommodation entries, this case has only presumptive and assumptive value not supported by any factual data. On the contrary, on the basis of the material before the authorities, the transactions were found to be genuine. Learned advocate for the appellant attempted to emphasize that for the purpose of application of section 68 of the Act, three ingredients were necessary. Firstly identity of the parties to the transaction of loan, second is the creditworthiness of such parties and thirdly the genuineness of the transaction. It was submitted in vain that neither of the ingredients were satisfied. As discussed above, since the requisite material was furnished by assessee showing the identity and since the assessee was not beneficiary when the loan was repaid in the subsequent year, even the ingredients of creditworthiness and genuineness of transaction were well satisfied. The Tribunal rightly recorded in para 29 of the judgment, \"Once repayment of the loan has been established based on the documentary evidence, the credit entries cannot be looked into isolation after ignoring the debit entries despite the debit entries were carried out in the later years. Thus, in the given facts and circumstances, were hold that there is no infirmity in the order of the Ld. CIT-A. \" For the reasons recorded above, no question of law much less substantial questions arises in this appeal. It stands meritless and accordingly dismissed. “ Therefore based upon the facts discussed above and respectfully relying upon the admonishments of various High Courts including the Hon. jurisdictional High Court, since the assessee submitted the relevant documents to establish the identity, creditworthiness of the lender as well as the genuineness of the transactions, and since the loans were also repaid in entirety in the subsequent years, no addition can be made in this regard. The action of the AO in treating the unsecured loans to the tune of Rs. 4,49,37,500/- as bogus therefore cannot be sustained and stands deleted. These grounds are therefore allowed.” 013. After hearing the rival contentions and perusing the materials available on record, we find that Assessee is a NBFC company and during the relevant assessment year it received unsecured loan from M/s VK Mercantile Ltd and partly repaid the same during the year and Page | 35 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 balance outstanding was repaid in the subsequent years. In all the earlier assessment years also assessee took loans from the same lender but the ld. AO did not have any objection qua the loans taken from M/s VK Mercantile Ltd. We note that the assessee is a NBFC company and is against the business of taking/ borrowing money and advances and same to the public at large on interest basis. During the year the assessee borrowed from V K Mercantile Pvt. ltd. amounting to ₹9,05,45,000/- out of which ₹2,20,00,000/- was repaid during the year itself and the remaining of ₹6,85,45,000/- was repaid during the subsequent years. We note that the assessee has taken loan regularly from VK Mercantile Ltd. as is apparent from the perusal from the facts that the opening balance of loans from said party was amounting to ₹8,51,75,810/-, borrowed during the year was ₹9,05,45,000/- and ₹2,20,00,000/- was repaid during the year and closing balance amounting of unsecured loan to ₹16,67,53,743/-during the subsequent assessment years. We also note that the assessee has taken loan from VK Mercantile Pvt. Ltd. right from F.Y. 2013-14 to 2018-19. The interest was duly paid to the lender after deduction of tax at source. The ld. AO has made the addition simply on the basis that a cash trail was established by ignoring the facts that the assessment was already framed u/s 143(3) read with section 144 of the Act dated 30.12.2019. We note that the ld. CIT (A) has discussed at length the evidences furnished by the assessee and also the fact that the money was repaid in the subsequent years. We also note that loan from the same party was accepted in the preceding as well as succeeding assessment years. In these circumstances, we do not find any infirmity in the order of the ld. CIT (A) and accordingly, uphold the same by dismissing ground no.1 of Revenue’s appeal. Page | 36 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 014. The issue in ground no.2 and 3 is consequential to our decision in ground no.1 and accordingly, ground no.2 and 3 are also dismissed. 015. The issue raised in ground no.4 is against the order of ld. CIT (A) rejecting the disallowance of ₹18,67,227/- u/s 14A of the Act on account of expenses incurred to earn exempt income. 016. The facts are that the appellant was in receipt of dividend income to the tune of Rs. 40,10,280/-. The assessee had investments of Rs. 3,24,23,600/- during the year under consideration and out of the total investments, Investments to the tune of Rs. 2,18,23,600/- have been said to be strategic investments made in the group companies of the assessee. The assessee has submitted that during the year interest of Rs. 1,86,66,104/- was paid and interest of Rs. 2,21,49,774/- was received by the assessee and that all the investments were made using the own funds of the assessee company. 017. It is also pertinent to mention that the total own funds of the assessee company was much higher than the investments made and the ld. CIT(A) has recorded findings of act to that effect in the appellate order. The ld CIT(A) while allowing the appeal of the assessee has followed the decision of the Apex Court in South Indian bank Ltd. v. CIT (2021) 130 taxmann.com 178 (SC) – Hon’ble Supreme Court held that where interest-free own funds are available with the assessee and which exceeds their investments, interest-free securities, investment can be presumed to be made out of assessee’s own funds and proportionate disallowance of interest was not warranted under section 14A. 018. Therefore, we do not find any infirmity in the order of ld. CIT(A) who has correctly decided the issue .Accordingly, we are inclined to dismiss Page | 37 ITA Nos.1728 & 1729/KOL/2024 Dollar Holding Pvt. Ltd; A.Y. 15-16 and 17-18 the appeal of the Revenue by upholding the appellate order on this issue. 019. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on 11.02.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated:11.02.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "