MRS. REENA JAIN, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 8(4), MUMBAI

ITA 1007/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0927 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K SRIVASTAVA
• Keywords: Unexplained cash credit; Gift; Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Question of law; Deemed dividend; Accommodation entries; Block assessment; Documents seized; Reassessment proceedings; Set aside
• Section: 271(1)(c); 143(3); 153A; 2(22)(e); 14A; 133(6); 131; 132; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 1001/MUM/2018 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 1002/MUM/2018 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 1003/MUM/2018 ASSESSMENT YEAR: 2011 - 12 & ITA NO. 1004/MUM/2018 ASSESSMENT YEAR: 2013 - 14 MR. RATNESH CHAND JAIN, 902/903, A WING, KALINGA TOWER, NIRMAL NAGAR , LINK ROAD, MULUND (WEST), MUMBAI - 400080 VS. DEPUTY COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE - 8(4), 658, 6 TH F LOOR, AAYAKAR BHAVAN MUMBAI. PAN NO. AABPJ0683P APPELLANT RESPONDENT ITA NO. 1005/MUM/2018 ASSESSMENT YEAR: 2009 - 10 & ITA NO. 1006/MUM/2018 ASSESSMENT YEAR: 2010 - 11 & ITA NO. 1007/MUM/2018 ASSESSMENT YEAR: 2014 - 15 MRS. REENAJAIN, 902/903, A WING, KALINGA TOWER, NIRMAL NAGAR LINK ROAD, MULUND (WEST), MUMBAI - 400080 VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 8(4), 658, 6 TH F LOOR, AAYAKAR BHAVAN MUMBAI. PAN NO. AEAPJ6605C MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 2 APPELLANT RESPONDENT ASSESSEE BY : MR. BHUPENDRA SHA H , AR REVENUE BY : MR. A.K. SRIVASTAVA , DR DATE OF HEARING : 27 /1 2 /2018 DATE OF PRONOUNCEMENT: 25/03/2019 ORDER PER N.K. PRADHAN, AM THE CAPTIONED APPEALS FILED BY THE ASSESSEE S ARE DIRECTED AGAINST THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) - 50 , MUMBAI [IN SHORT CIT(A) ] AND ARISE OUT OF THE ASSESSMENT COMPLETED U/S 153A R.W.S 143(3) OF THE INCOME TAX ACT 19 61 (THE ACT). AS COMMON ISSUES ARE INVOLVED, WE ARE PROCEEDING TO DISPOSE THEM OFF THROUGH A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. FACTS BEING IDENTICAL, WE BEGIN WITH THE ASSESSMEN T YEAR (AY) 2009 - 10 (ITA NO. 1001/MUM/2018 ). 2 . THE GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT ( A ) ERRED IN SUSTAINING THE ADDITION MADE BY A.O. WHILE PASSING AN ORDER U/S 143(3) R.W.S 153A OF THE INCOME TAX ACT, 1961 EVEN THOUGH NO INCRIMINATING MATERIAL OR DOCUMENTS WERE FOUND AT THE TIME OF SEARCH CONDUCTED U/S 132. WITHOUT PREJUDICE TO THE ABOVE AN D ALTERNATIVELY, 2. IN THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE VIEW OF APPELLANT THAT THE A.O. HAD ERRED IN ISSUING NOTICE U/S 153A OF THE INCOME TAX ACT, 1961 EVEN THOUGH NO ASSETS WERE SEIZED FROM THE PREMI SES OF THE APPELLANT DURING SEARCH PROCEEDINGS. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE VIEW OF APPELLANT THAT THE A.O. HAD ERRED IN MAKING MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 3 A SSESSMENT U/S 153A EVEN THOUGH NO ADEQUATE SATISFACTION WAS RECORDED TO ISSUE SEARCH WARRANT TO THE APPELLANT. 4. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION MADE BY THE A.O. AMOUNTING TO RS.1,62,50,000/ - U/S 68 OF THE INCOME TAX ACT, 1961 ON ACCOUNT OF U N EXPLAINED C ASH C REDIT ON THE BASIS OF STATEMENT GIVEN BY MR.NAYAN BHEDA AT THE TIME OF S EARCH. 5. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE THE LD. CIT(A) ERRED IN DISMISSING THE VIEW OF APPELLANT THAT THE A.O. HAD ERRED IN PASSING THE A SSESS MENT O RDER WITHOUT GRANTING AN OPPORTUNITY OF CROSS EXAMINATION OF THE U NSECURED L OAN C REDITORS AND NOT ISSUING SUMMONS U/S 131 OF THE INCOME TAX ACT, 1961. 6. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE VIEW OF APPELLANT THAT THE AO HAD ERRED IN PASSING THE A SSESSMENT ORDER ONLY ON THE BASIS OF THE S TATEMENT GIVEN BY THE THIRD PARTY AND THAT TOO WITHOUT GRANTING A N OPPORTUNITY FOR CROSS EXAMINATION OF MR. NAYAN BHEDA. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DISMISSING THE VIEW OF APPELLANT THAT THE AO HAD ERRED IN INITIATING PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 W HICH IS NOT APPLICABLE IN THE CASES OF S EARCH & S EIZURE. 3. WE BEGIN WITH THE 1 ST , 2 ND AND 3 RD GROUND OF APPEAL TOGETHER AS THEY ADDR ESS A COMMON ISSUE. IN A NUTSHELL, THE FACTS ARE THAT A SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CARRIED OUT ON THE NEPTUNE GROUP ON 07.01.2015. THE RESIDENCE AND BUSINESS PREMISES OF THE ASSESSEE WAS ALSO COVERED U/S 132 OF THE ACT. THEREAFTER NOTICE U/S 153A WAS ISS UED TO THE ASSESSEE ON 16.09.2015. IN RESPONSE TO IT, THE ASSESSEE VIDE LETTER DATED 23.11.2015 REQUESTED THE ASSESSING OFFICER MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 4 (AO) TO TREAT THE ORIGINAL RETURN OF INCOME AS RETURN IN RESPONSE TO NOTICE U/S 153A. THE AO HAS PASSED AN ORDER U/S 153A R.W.S. 143(3) DATED 26.12.2016 DETERMINING THE TOTAL INCOME AT RS.1,78,99,000/ - . IN RESPECT OF SIMILAR GROUNDS OF APPEAL AS ABOVE, THE LD. CIT(A) HAS HELD THAT THE SEARCH ACTION ON 07.01.2015 REVEALED THAT THE ASSESSEE WAS ENGAGED IN PROVIDING ACCOMMODATION EN TRIES TO NEPTUNE GROUP OF COMPANIES. DURING THE COURSE OF SEARCH, THE STATEMENT OF THE ASSESSEE WAS RECORDED ON OATH U/S 132(4) OF THE ACT, WHEREIN HE HAD CONFESSED THAT HE HAD ARRANGED ACCOMMODATION ENTRIES FROM BOGUS KOLKATA AND MUMBAI PARTIES. FURTHER, STATEMENT OF ONE SHRI MANOJ CHANDALIYA WAS ALSO RECORDED ON OATH U/S 132(4), WHEREIN HE HAS ADMITTED THAT HE HAS ARRANGED ACCOMMODATION ENTRIES FROM SEVERAL PARTIES BASED IN KOLKATA AND MUMBAI TO THE NEPTUNE GROUP. THE ABOVE FACTS WERE ALSO CONFIRMED BY SH RI NAYAN BHEDA, DIRECTOR AND PROMOTER OF NEPTUNE GROUP IN THE STATEMENT RECORDED ON OATH U/S 132(4). SHRI BHEDA HAS CATEGORICALLY ADMITTED THAT ACCOMMODATION ENTRIES WERE ARRANGED FOR THE NEPTUNE GROUP BY SHRI CHANDALIYA AND SHRI R.C. JAIN (THE ASSESSEE). FURTHER, SHRI BHEDA HAS ACCEPTED THE FACT THAT CAS H HAD BEEN PAID FOR OBTAINING THE ACCOMMODATION ENTRIES OF LOAN/ADVANCES. THE LD. CIT(A) HAS ALSO NOTED THAT THE NEPTUNE GROUP HAS FILED A SETTLEMENT APPLICATION BEFORE THE INCOME TAX SETTLEMENT COMMISSIO N, MUMBAI, WHEREIN SUCH ACCOMMODATION ENTRIES HAVE BEEN ACCEPTED. FURTHER, IT IS OBSERVED BY HIM THAT NOT ONLY THE ASSESSEE HAS ARRANGED ACCOMMODATION ENTRIES FOR THE NEPTUNE GROUP, BUT ALSO SUCH MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 5 ACCOMMODATION ENTRIES WERE TAKEN BY THE ASSESSEE IN HIS OWN NAME AND IN THE NAME OF HIS WIFE, SMT. REENA JAIN. IN VIEW OF THE ABOVE FACTS, THE LD. CIT(A) HELD THAT THERE WAS ENOUGH MATERIAL BEFORE THE AO FOR MAKING AN ASSESSMENT U/S 153A R.W.S. 143(3) OF THE ACT. 4. BEFORE US, T HE LD. COUNSEL SUBMITS THAT THE ASS ESSEE HAD FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DECLARING TOTAL INCOME OF RS.19,99,440/ - . A SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS INITIATED ON THE NEPTUNE GROUP OF COMPANIES ON 07.01.2015 AND THE ASSESSEE WAS ALSO COVERE D UNDER THE PROCEEDINGS. HOWEVER, NOTHING HAD BEEN SEIZED AT THE PREMISES OF THE ASSESSEE AT THE TIME OF SEARCH. FURTHER, ONLY JEWELLERY WAS FOUND IN THE BANK LOCKER OF THE ASSESSEE. JUST BECAUSE, THE LOCKER WAS IN THE NAME OF THE ASSESSEE, THEY WERE COVER ED U/S 153A OF THE ACT. ACCORDINGLY, THE ASSESSEE RECEIVED NOTICE U/S 153A OF THE ACT AND THE BLOCK ASSESSMENT WAS OPENED FROM AY 2009 - 10 TO AY 2015 - 16. FURTHER THE LD. COUNSEL SUBMITS THAT THE ISSUE DEALT WITH BY THE AO IN THE ASSESSMENT ORDER U/S 153A OUGHT NOT TO HAVE BEEN EXAMINED BY HIM IN THE ASSESSMENT PROCEEDINGS U/S 153A AS THE SAID ISSUE STOOD CONCLUDED WITH THE ASSESSEES RETURN OF INCOME BEING ACCEPTE D PRIOR TO THE DATE OF SEARCH AND NO NOTICE HAVING BEEN ISSUED U/S 143(2) WITHIN THE TIME LIMIT LAID DOWN IN THAT SECTION. IT IS STATED THAT SUCH ASSESSMENT DID NOT ABATE ON THE DATE OF SEARCH WHICH TOOK PLACE ON 07.01.2015 AND IN RESPECT OF ASSESSMENTS CO MPLETED PRIOR TO THE DATE OF SEARCH THAT MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 6 HAVE NOT ABATED, THE SCOPE OF PROCEEDINGS U/S 153A HAS TO BE CONFINED ONLY TO MATERIAL FOUND IN THE COURSE OF SEARCH. IT IS ARGUED BY HIM THAT SINCE NO MATERIAL WHATSOEVER WAS FOUND IN THE COURSE OF SEARCH AS STATED ABOVE, THE ADDITIONS MADE BY THE AO IN THE ORDER OF ASSESSMENT COULD NOT HAVE BEEN SUBJECT MATTER OF PROCEEDINGS U/S 153A. IN THIS REGARD RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. DEEPAK KUMAR AGARWAL (ITA NO. 566 OF 2017) (BOMBAY HIGH COURT), C IT V. CONTINENTAL WAREHOUSING CORPORATION (2015) 58 TAXMANN.COM 78 (BOM), CIT V. KABUL CHAWLA (2015) 61 TAXMANN.COM 412 (DELHI). ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. M/S ARPIT LAND PVT. LTD. (ITA NO. 83 OF 2014) OF BOMBAY HIGH COURT AND THE DECISION IN CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY (CIVIL APPEAL NO. 11080 OF 2017) OF SUPREME COURT. 5. ON THE OTHER HAND, THE LD. DR DRAWS OUR ATTENTION TO THE STATEMENT RECORDED U/S 132(4) FROM THE (I) ASSESSEE, (II) SHRI MANOJ CHANDALIYA AND (III) SHRI NAYAN BHEDA AND ALSO THE FACT THAT THE NEPTUNE GROUP HAS FILED A SET TLEMENT APPLICATION BEFORE THE INCOME TAX SETTLEMENT COMMISSION , MUMBAI, WHEREIN SUCH ACCOMMODATION ENTRIES HAVE BEEN ACCEPTED. THUS THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. REGARDING 3 RD GROUND OF APPEAL, WE MAY MENTION HERE THAT THE TRIBUNAL IS NOT HAVING JURISDICTION TO EXAMINE THE SATISFACTION RECORDED MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 7 TO ISSUE SEARCH WARRANT TO THE ASSESSEE. WE THEN TURN TO THE 1 ST & 2 ND GROUND OF APPEAL. 6.1 WE BEGIN WITH THE CASE LAWS RELIED ON BY T HE LD. COUNSEL. IN THE CASE OF DEEPAK KUMAR AGARWAL (SUPRA), THE ASSESSEE FILED HIS RETURN OF INCOME ON 02.08.2004 DECLARING TOTAL INCOME AT RS.24,05,800/ - . A SEARCH AND SEIZURE ACTION U/S 132(1) OF THE ACT WAS CONDUCTED ON 03.01.2008 IN THE CASE OF EVERSH INE GROUP AND IN THE CASE OF THE ASSESSEE WARRANT OF AUTHORIZATION U/S 132 OF THE ACT WAS EXECUTED ON THE SAME DATE. THE ASSESSMENT PROCEEDINGS U/S 153A WERE INITIATED. THE AO MADE SEVERAL ADDITIONS TO THE TOTAL INCOME AND PASSED AN ORDER U/S 143(3) R.W.S. 153A ON 31.12.2009 ON A TOTAL INCOME OF RS.40, 07,379/ - . BEING AGGRIEVED BY THE ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) DIRECTED THE AO TO RECOMPUTE THE DISALLOWANCES MADE U/S 14A OF THE ACT AS PER THE DECISION OF BOMBAY HIGH COURT IN M/S DAGA CAPITAL MANAGEMENT PVT. LTD., WHICH ACCORDING TO THE FIRST APPELLATE AUTHORITY, ON THE VERY POINT. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL. IN DELIVERING A COMMON ORDER DEALING WITH ABOUT 12 APPEALS, THE TRIBUNAL, ON 10.04.2014, HELD THAT THE ADDITIONS WERE MADE BEYOND THE SCOPE OF SECTION 153A/153C OF THE ACT, AS NO INCRIMINATING MATERIAL IN SUPPORT OF THE ADDITIONS MADE U/S 68 AND U/S 14A WERE BROUGHT ON RECORD BY THE REVENUE. THAT IS HOW THE TRIBUNAL ALLOWED THE ASSESSEES APPEAL AND DISMISSED THAT OF THE REVENUE. THE LD. COUNSEL OF THE ASSESSEE, APPEARING BEFORE THE HIGH COURT WOULD SUBMIT THAT THE FOLLOWING TWO QUESTIONS ARE THE SUBSTANTIAL QUESTIONS OF LAW MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 8 6.1 WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT WAS JUSTIFIED IN HOLDING THAT ASSESSMENT U/S 153A CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND IN THE SEARCH AND NO OTHER ISSUE CAN BE TAKEN FOLLOWING T HE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD., WHEN THE SB DECISION OF HONBLE ITAT, MUMBAI HAS BEEN DISAPPROVED BY HONBLE KARNATAKA HIGH COURT IN THE CASE OF CANARA HOUSING DEVELOPMENT CO. V. DCIT (UNREPORTED)? 6.2 WHETHER ON T HE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE ITAT WAS JUSTIFIED IN DELETING THE ADDITION MADE U/S 68 OF THE IT ACT OF UNEXPLAINED GIFT RECEIVED, WHICH COULD NOT BE PROVED TO BE GENUINE BY THE ASSESSEE, BY NOT GOING INTO THE MERITS OF THE CASE, BUT BY HOLDING THAT ONLY INCOME RELATED TO INCRIMINATING DOCUMENTS FOUND DURING THE SEARCH U/S 132 OF THE IT ACT CAN BE CONSIDERED IN ASSESSMENT U/S 153A OF THE IT ACT AND IT IS BEYOND THE SCOPE OF SECTION 153A OF THE IT ACT, 1961? THE HONBL E BOMBAY HIGH COURT DISMISSED THE ABOVE APPEAL FILED BY THE REVENUE BY OBSERVING AT PARA 33 AND 34 THAT : 33. EVEN WITH REGARD TO THE UNEXPLAINED GIFTS RECEIVED BY THE ASSESSEE ALLEGEDLY AND THE ADDITIONS MADE U/S 68 OF THE ACT, THE TRIBUNAL HAS RELIED UPON ITS ORDER IN THE CASE OF GOVIND AGARWAL (HUF) V. DCIT (ITA NO. 8917/M/2010) DECIDED ON 16 TH MAY, 2013 FOR THE ASSESSMENT YEAR 2005 - 06. 34. THERE AS WELL, RELIANCE WAS PLACED ON ALL CARGO GLOBAL LOGISTIC LTD. (SUPRA) AND EQUALLY, THE CONCLUSION THAT HA S BEEN REACHED THAT ONCE THERE IS NO INCRIMINATING MATERIAL IN SUPPORT OF THE ADDITION AND BROUGHT ON RECORD BY THE REVENUE, THEN, THE EARLIER VIEW OF THIS COURT BINDS THE REVENUE EVEN ON THIS ADDITION. THUS, EVEN THIS QUESTION CANNOT BE TERMED AS SUBSTANT IAL QUESTION OF LAW IN THE LIGHT OF THE TWO JUDGMENTS OF THIS COURT IN CONTINENTAL WAREHOUSING CORPORATION AND MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 9 ALL CARGO GLOBAL LOGISTICS (SUPRA) FOLLOWED BY M/S SKS ISPAT & POWER LIMITED (SUPRA). 6.1 .1 IN THE CASE OF KABUL CHAWLA (SUPRA), A SEARCH WAS CA RRIED OUT U/S 132 ON BPTP LTD., A LEADING REAL ESTATE DEVELOPER AND SOME OF ITS GROUP COMPANIES. ON THE SAME DATE, SEARCH PROCEEDINGS WERE CONDUCTED IN THE PREMISES OF THE ASSESSEE, WHO ALONG WITH HIS WIFE OWNED AND CONTROLLED THE AFORESAID GROUP. PURSUANT TO THE SEARCH, A NOTICE U/S 153A(1) WAS ISSUED TO THE ASSESSEE. IN COURSE OF ASSESSMENT, THE AO OPINED THAT SINCE LOANS AND ADVANCES WERE GIVEN BY ONE GROUP COMPANY TO OTHER GROUP COMPANY WHERE ASSESSEE HAD SHARES CONSTITUTING MORE THAN 10% OF VOTING RIGH TS, SUCH LOANS AND ADVANCES WERE TO BE ASSESSED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE TRIBUNAL NOTED THAT IN CASE OF THE ASSESSEE, ASSESSMENT FOR ASSESSMENT YEARS IN QUESTION HAD ALREADY BEEN COMPLETED AND, IN SUCH A CASE, SINCE THE IMPUGNED ADDITION WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING SEARCH, IT WAS NOT SUSTAINABLE. ON REVENUES APPEAL, THE HONBLE DELHI HIGH COURT HELD INTER ALIA THAT (I) ALTHOUGH SECTION 153A DOES NOT SAY THAT ADDITIONS SHOULD B E STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF SEARCH, OR OTHER POST - SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT AN Y RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL, (II) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 10 MADE. THE WORD ASSESS IN SECTION 153A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD REASSESS TO COMPLETE ASSESSMENT PROCEEDINGS, (III) IN SO FAR AS PENDING ASSESSMENTS ARE CONCERNE D, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT U/S 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH ASSESSMENT YEAR ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON RECORD OF THE AO AND (IV) COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT U/S 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME O R PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT PROPERLY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 6.1.2 IN THE CASE OF SINHGAD TECHNICAL EDUCATION SOCIETY (SUPRA), REFERRING TO THE DECISION IN THE CASE OF KAMLESHBHAI DHARAMSHIBHAI PATEL V. CIT - III, (20 13) 31 TAXMANN.COM 50 (GUJARAT) AND DEALING WITH SECTION 153C OF THE ACT, THE HONBLE SUPREME COURT HELD AT PARA 20 THAT : IN SO FAR AS THE JUDGMENT OF THE GUJARAT HIGH COURT RELIED UPON BY THE LD. SOLICITOR GENERAL IS CONCERNED, WE FIND THAT THE HIGH COURT IN THAT CASE HAS CATEGORICALLY HELD THAT IT IS AN ESSENTIAL CONDITION PRECEDENT THAT ANY MONEY, BULLION OR JEWELLERY OR OTHER VALUABLE ARTICLES OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A OF THE ACT. THIS PROPOSITION OF LAW LAID DOWN BY THE HIGH COURT IS CORRECT, WHICH IS STAT ED BY THE BOMBAY HIGH COURT IN THE IMPUGNED JUDGMENT AS WELL. THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE SAID CASE WENT IN FAVOUR OF THE REVENUE WHEN IT WAS FOUND ON FACTS THAT MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 11 THE DOCUMENTS SEIZED, IN FACT, PERTAIN TO THIRD PARTY, I.E. THE ASSESSEE, AN D, THEREFORE, THE SAID CONDITION PRECEDENT FOR TAKING ACTION U/S 153C OF THE ACT HAD SATISFIED. 6.1.3 IN THE CASE OF M/S AMBIT REALTY PVT. LTD . (SUPRA), THE HONBLE BOMBAY HIGH COURT NOTED THAT IN TERMS OF SECTION 153C OF THE ACT AT THE RELEVANT TIME I .E. PRIOR TO 01.06.2015, THE PROCEEDINGS U/S 153C OF THE ACT COULD ONLY BE INITIATED/PROCEEDED AGAINST A PARTY - ASSESSEE IF THE DOCUMENT SEIZED DURING THE SEARCH AND SEIZURE PROCEEDINGS OF ANOTHER PERSON BELONGED TO THE PARTY - ASSESSEE CONCERNED. 6.1.4 IN CONTINENTAL WAREHOUSING CORPORATION LTD. (SUPRA), THE ASSESSEE - COMPANY WAS ENGAGED IN THE BUSINESS OF PROVIDING LOGISTIC SUPPORT. CONSEQUENT TO SEARCH CARRIED OUT ON ITS PREMISES A NOTICE U/S 153A WAS ISSUED TO THE COMPANY TO FILE A RETURN OF INCOME. THE C OMPANY FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.5.55 CRORES WHILE CLAIMING DEDUCTION U/S 80 - IA(4) OF RS.1.26 CRORES. THE AO HELD THAT THE COMPANY WAS NOT ENTITLED TO DEDUCTION U/S 80 - IA(4). ACCORDINGLY, THE AMOUNT CLAIMED WAS ADDED BACK TO T HE INCOME. ON APPEAL, THE CIT(A) UPHELD THE ORDER OF THE AO. ON FURTHER APPEAL, A SPECIAL BENCH OF THE TRIBUNAL WAS CONSTITUTED FOR PURPOSES OF DECIDING TWO QUESTIONS, NAMELY WHAT IS THE SCOPE OF ASSESSMENT U/S 153A, WHETHER THAT ENCOMPASSES ADDITIONS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH AND WHETHER THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80 - IA(4). THE SPECIAL BENCH HELD THAT BY THE CLEAR LANGUAGE OF SECTION 153A TOGETHER WITH ITS PROVISOS, PENDING ASSESSMENTS ABATE. THE OTHER QUESTION WAS ANSWERED BY UPHOLDING THAT MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 12 THE ASSESSING OFFICER IS REQUIRED TO MAKE ONE ASSESSMENT FOR EACH OF THE SIX YEARS ON THE BASIS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON RECORD BY THE ASSESSING OFFICER . IN OTHER CASES ASSESSMENTS WILL BE MADE ON THE BASIS OF THE BOOKS OF ACCOUNT AND OTHER DOCUMENTS FOUND DURING THE SEARCH AND NOT PRODUCED DURING ASSESSMENT AND ALSO ON ANY OTHER UNDISCLOSED INCOME OR PROPERTY FOUND DURING THE SEARCH. ON THE ISSUE OF DEDU CTION U/S 80 - IA(4) IT WAS CONCLUDED THAT THE CFS IN A INLAND PORT AND ITS INCOME IS ENTITLED TO DEDUCTION U/S 80 - IA(4). IN FURTHER APPEAL BY THE REVENUE, THE HONBLE BOMBAY HIGH COURT HELD AT PARA 28 : 28. IN DEALING WITH THOSE ARGUMENTS, THE DIVISION BE NCH OUTLINED THE AMBIT AND SCOPE OF THE POWERS CONFERRED BY SECTION 153A AND OBSERVED THUS : '(8) WE FIND IT DIFFICULT TO ACCEPT THE ABOVE CONTENTION RAISED ON BEHALF OF THE REVENUE. THE OBJECT OF INSERTING SECTIONS 153A, 153B AND 153C BY FINANCE ACT, 2003 BY DISCARDING THE EXISTING PROVISIONS RELATING TO SEARCH CASES CONTAINED IN CHAPTER XIV B OF THE INCOME - TAX ACT, AS STATED IN THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL 2003 (SEE 260 ITR (ST) 191 AT 219) WAS THAT UNDER THE EXISTING PROVI SIONS RELATING TO SEARCH CASES, OFTEN DISPUTES WERE RAISED ON THE QUESTION, AS TO WHETHER A PARTICULAR INCOME COULD BE TREATED AS `UNDISCLOSED INCOME' OR WHETHER A PARTICULAR INCOME COULD BE SAID TO BE RELATABLE TO THE MATERIAL FOUND DURING THE COURSE OF S EARCH, ETC. WHICH LED TO PROLONGED LITIGATION. TO OVERCOME THAT DIFFICULTY, THE LEGISLATURE BY FINANCE ACT 2003, DECIDED TO DISCARD CHAPTER XIV B PROVISIONS AND INTRODUCE SECTIONS 153A, 153B AND 153C IN THE IT ACT. (9) WHAT SECTION 153A CONTEMPLATES IS THA T, NOTWITHSTANDING THE REGULAR PROVISIONS FOR ASSESSMENT/REASSESSMENT CONTAINED IN THE IT ACT, WHERE SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITION IS MADE UNDER SECTION 132A ON OR MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 13 AFTER 31/5/2003 IN THE CASE OF ANY PERSON, THE ASSESSING OFFICER SHAL L ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH RETURN OF INCOME WITHIN THE TIME STIPULATED THEREIN, IN RESPECT OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR REQUI SITION IS MADE AND THEREAFTER ASSESS OR REASSESS THE TOTAL INCOME FOR THOSE ASSESSMENT YEARS. THE SECOND PROVISO TO SECTION 153A PROVIDES FOR ABATEMENT OF ASSESSMENT/REASSESSMENT PROCEEDINGS WHICH ARE PENDING ON THE DATE OF SEARCH/REQUISITION. SECTION 153A (2) PROVIDES THAT WHEN THE ASSESSMENT MADE UNDER SECTION 153(A)(1)IS ANNULLED, THE ASSESSMENT OR REASSESSMENT THAT STOOD ABATED SHALL STAND REVIVED. (10) THUS ON A PLAIN READING OF SECTION 153A OF THE INCOME - TAX ACT, IT BECOMES CLEAR THAT ON INITIATION OF THE PROCEEDINGS UNDER SECTION 153A, IT IS ONLY THE ASSESSMENT/REASSESSMENT PROCEEDINGS THAT ARE PENDING ON THE DATE OF CONDUCTING SEARCH UNDER SECTION 132 OR MAKING REQUISITION UNDER SECTION 132A OF THE ACT STAND ABATED AND NOT THE ASSESSMENTS/REASSESSMEN TS ALREADY FINALISED FOR THOSE ASSESSMENT YEARS COVERED UNDER SECTION 153A OF THE ACT. BY A CIRCULAR NO. 8 OF 2003 DATED 18 - 9 - 2003 (SEE 263 ITR (ST) 61 AT 107) THE CBDT HAS CLARIFIED THAT ON INITIATION OF PROCEEDINGS UNDER SECTION 153A, THE PROCEEDINGS PEN DING IN APPEAL, REVISION OR RECTIFICATION PROCEEDINGS AGAINST FINALISED ASSESSMENT/REASSESSMENT SHALL NOT ABATE. IT IS ONLY BECAUSE, THE FINALISED ASSESSMENTS/REASSESSMENTS DO NOT ABATE, THE APPEAL REVISION OR RECTIFICATION PENDING AGAINST FINALISED ASSESS MENT/REASSESSMENTS WOULD NOT ABATE. THEREFORE, THE ARGUMENT OF THE REVENUE, THAT ON INITIATION OF PROCEEDINGS UNDER SECTION 153A, THE ASSESSMENTS/REASSESSMENTS FINALISED FOR THE ASSESSMENT YEARS COVERED UNDER SECTION 153A OF THE INCOME - TAX ACT STAND ABATED CANNOT BE ACCEPTED. SIMILARLY ON ANNULMENT OF ASSESSMENT MADE UNDER SECTION 153A (1) WHAT STANDS REVIVED IS THE PENDING ASSESSMENT/REASSESSMENT PROCEEDINGS WHICH STOOD ABATED AS PER SECTION 153A(1). MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 14 (11) IN THE PRESENT CASE, AS CONTENDED BY SHRI MANI, LEA RNED COUNSEL FOR THE ASSESSEE, THE ASSESSMENT FOR ASSESSMENT YEAR 1998 - 99 WAS FINALISED ON THE 29 - 12 - 2000 AND SEARCH WAS CONDUCTED THEREAFTER ON 3 - 12 - 2003. THEREFORE, IN THE FACTS OF THE PRESENT CASE, INITIATION OF PROCEEDINGS UNDER SECTION 153A WOULD NOT AFFECT THE ASSESSMENT FINALISED ON 29 - 12 - 2000. (12) ONCE IT IS HELD THAT THE ASSESSMENT FINALISED ON 29.12.2000 HAS ATTAINED FINALITY, THEN THE DEDUCTION ALLOWED UNDER SECTION 80 HHC OF THE INCOME - TAX ACT AS WELL AS THE LOSS COMPUTED UNDER THE ASSESSMENT D ATED 29 - 12 - 2000 WOULD ATTAIN FINALITY. IN SUCH A CASE, THE A.O. WHILE PASSING THE INDEPENDENT ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTION 143 (3) OF THE I.T. ACT COULD NOT HAVE DISTURBED THE ASSESSMENT/REASSESSMENT ORDER WHICH HAS ATTAINED FINALI TY, UNLESS THE MATERIALS GATHERED IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 153A OF THE INCOME - TAX ACT ESTABLISH THAT THE RELIEFS GRANTED UNDER THE FINALISED ASSESSMENT/REASSESSMENT WERE CONTRARY TO THE FACTS UNEARTHED DURING THE COURSE OF 153 A PROCE EDINGS. (13) IN THE PRESENT CASE, THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY MATERIAL WAS UNEARTHED DURING THE SEARCH OR DURING THE 153A PROCEEDINGS WHICH WOULD SHOW THAT THE RELIEF UNDER SECTION 80 HHC WAS ERRONEOUS. IN SUCH A CASE, THE A.O. WHILE PAS SING ORDER UNDER SECTION 153A READ WITH SECTION 143(3) COULD NOT HAVE DISTURBED THE ASSESSMENT ORDER FINALISED ON 29.12.2000 RELATING TO SECTION 80 HHC DEDUCTION AND CONSEQUENTLY THE C.I.T. COULD NOT HAVE INVOKED JURISDICTION UNDER SECTION 263 OF THE ACT.' 6.2 THUS AS PER THE RATIO LAID DOWN IN THE ABOVE DECISIONS COMPLETED ASSESSMENT CAN BE INTERFERED WITH BY THE AO WHILE MAKING ASSESSMENT U/S 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH WHICH WAS NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN COURSE OF ORIGINAL ASSESSMENT. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 15 AT THIS MOMENT, WE MAY REFER TO THE STATEMENTS RECORDED DURING THE COURSE OF SEARCH. IN THE STATEMENT RECORDED U/S 132(4) OF THE ACT , THE ASSESSEE HAS STATED AS UNDER: Q.13 PLEASE PROVIDE THE DETAILS OF THE PARTIES FROM WHERE YOU HAVE ARRANGED ACCOMMODATION ENTRIES FOR NEPTUNE GROUP. PLEASE ALSO PROVIDE THE DETAILS OF YOUR GROUP CONCERN WHO HAVE GIVEN ACCOMMODATION ENTRIES TO NEPTUNE GROUP. ANS. SIR, FROM OUR CONCERN, ONLY D AINIK CONSULTANT PVT. LTD. HAS GIVEN ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOAN, LEDGER OF THE SAME IS SUBMITTED TO YOU AND I HAVE ALSO ARRANGED ACCOMMODATION ENTRIES FROM FOLLOWING PARTIES. THE AMOUNT AND DETAILS CAN BE GATHERED FROM THE BOOKS OF NEPTUNE GROUP. 1. HINDUSTAN CONTINENTAL LTD. 2. SHALIMAR BANSAL REALTORS PVT. LTD. 3. HARMONY ENERGY PVT. LTD. 4. CITIBASE MULTITRADE PVT. LTD. 5. REALSTONE EXPORTS LTD. 6. PARK TOOLS LTD. 7. RIGVEDA PROPERTIES LTD. 8. UTKANTHA TRADING P. LTD. 9. EPSON TRADING PVT. LTD. 10. K RIPASOFT SOLUTIONS 11. HOT N ICE ENTERTAINMENT PVT. LTD. 12. HARE KRISHNA SECURITIES P. LTD. 6.2.1 IN THE STATEMENT RECORDED U/S 132(4) DATED 09.01.2015, SHRI NAYAN BHEDA, DIRECTOR OF THE NEPTUNE GROUP HAS STATED AS UNDER: MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 16 Q.13 I AM SHOWING YOU THE LIST AND LEDGER OF ALL UNSECURED LOAN TAKEN IN YOUR GROUP CONCERN AS EXTRACTED FROM YOUR ACCOUNT DETAILS? ANS. YES SIR, I CONFIRM THAT I HAVE BEEN SHOW LIST AND LEDGER OF ALL UNSECURED LOANS, TAKEN IN OUR GROUP CONCERN AS EXTRACTED FROM OUR REGULAR BOOKS OF ACCOUN TS. Q.14 FROM THE LEDGER EXTRACTS OF THE UNSECURED LOANS TAKEN BY THE VARIOUS ENTITIES OF NEPTUNE GROUP, IT IS SEEN THAT YOU HAVE TAKEN LOAN FROM THE FOLLOWING PARTIES FROM FY 2007 - 08 TILL 2013 - 14 AS UNDER: SR. NO. NAME OF THE PARTY AMOUNT (RS.) 1. INOX MANAGEMENT CONSULTANCY PVT. LTD. 1,00,000,000 2. FOOTMARK INFRA VENTURES PVT. LTD. 1,00,000,000 3. CONFIDENT VINIMAY PVT. LTD. 60,10,652 4. NOVA FERROUS PVT. LTD 76,03,530 5. SURYA KIRAN TRADECOM PVT. LTD. 20,03,530 6. CRESTA VANIJYA PVT. LTD. 23,00,000 7. SAIKIA TRADING PVT. LTD. 25,00,000 8. WINSHER COMMERCIAL PVT. LTD. 50,000,000 9. DAINIK CONSULTANCY PVT. LTD. 1,01,55,343 10. HINDUSTAN CONTINENTAL LTD. 3,35,09,651 11. TAC TECHNOSOFT PVT. LTD. 91,56,014 12. PUROTECH MERCHANTS PVT. LTD. 40,00,000 13. HARMONY ENERGY PVT. LTD. 35,00,00 TOTAL 10,57,38,720 MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 17 Q. PLEASE CONFIRM THE ABOVE TABLE AND ALSO EXPLAIN THE PROCEDURE IN WHICH SUCH LOANS WERE OBTAINED. PLEASE ALSO STATE THE RELATIONSHIP OF THE ABOVE MENTIONED PARTIES WITH THE ENTRIES OF NEPTUNE GROUP. ANS: YES SIR, I CONFIRM. THESE LOANS HAVE BEEN ARRANGED BY SHRI RATNESH C. JAIN AND SHRI MANOJ CHANDALIYA. SR. NO.1 TO 8 HAS BEEN ARRANGED BY SHRI MANOJCHANDALIYA AND SR. NO. 9 TO 13 HAS BEEN ARRANGED BY SHRI RATN ESH C. JAIN. THE ABOVE PARTIES HAVE NO RELATIONSHIP WITH OUR GROUP COMPANIES. ACCOMMODATION ENTRIES WERE PROVIDED BY THOSE GROUP COMPANIES AS UNSECURED LOANS. THEY HAVE PROVIDED LOANS TO OUR GROUP ENTITIES IN LIEU OF CASH IN RETURN FOR LOANS THROUGH CHEQUE S. THE SAID AMOUNT PAID IN CASH ARE THE APPLICATION FROM THE INCOME OFFERED ABOVE. Q.15 I AM SHOWING YOU THE STATEMENT OF SHRI RATNESH C. JAIN RECORDED U/S 132(4) ON 08.01.2015 WHEREIN HE HAS STATED THAT HE HAS ARRANGED UNSECURED LOAN TO YOUR GROUP ENTITIE S FROM THE FOLLOWING CONCERNS: 1. HINDUSTAN CONTINENTAL LTD. 2. SHALIMAR BANSAL REALTORS PVT. LTD. 3. HARMONY ENERGY PVT. LTD. 4. CITIBASE MULTITRADE PVT. LTD. 5. REALSTONE EXPORTS LTD. 6. PARK TOOLS LTD. 7. RIGVEDA PROPERTIES LTD. 8. UTKANTHA TRADING P. LTD. 9. EPSON TRADIN G PVT. LTD. 10. KRIPASOFT SOLUTIONS 11. HOT N ICE ENTERTAINMENT PVT. LTD. 12. HARE KRISHNA SECURITIES P. LTD. PLEASE CONFIRM THE SAME. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 18 ANS: I CONFIRM THAT I HAVE SEEN THE STATEMENT. HOWEVER, IT IS NOT CORRECT THAT OUR GROUP COMPANIES HAVE OBTAINED UNSECURED LOANS FROM ALL THE ABOVE ENTITIES. OUR GROUP ENTITIES HAVE OBTAINED ACCOMMODATION ENTRIES TOWARDS UNSECURED LOANS ONLY FROM THE FOLLOWING COMPANIES THROUGH SHRI R.C. JAIN. SR. NO. COMPANY OF THE CREDITOR COMPANY WHICH GAVE ACCOMMODATION ENTRY NAME OF OUR GROUP ENTITY IN WHICH LOAN IS ACCOUNTED AMOUNT 1. HINDUSTAN CONTINENTAL LTD. NEPTUNE VENTURES DEVELOPMENT PVT. LTD. AND NEPTUNE DEVELOPERS & CONSTRUCTION PVT. LTD. 2,65,00,000 70,09,651 2. SHALIMAR BANSAL REALTORS PVT. LTD. NAYANBHEDA SACHINDESHMUKH AND NEPTUNE VENTURES DEVELOPMENT PVT. LTD. 56,60,274 78,31,781 1,00,00,000 3. HARMONY ENERGY PVT. LTD. NEPTUNE VENTURES DEVELOPMENT PVT. LTD. 35,00,000 4. HARE KRISHNA SECURITIES PVT. LTD. NEPTUNE VENTURES DEVELOPMENT PVT. LTD. 71,91,589 5. SIGNORA FINANCE PVT. LTD. SACHINDESHMUKH 50,00,000 6. BHIMLALNIRMAL PVT. LTD. SACHINDESHMUKH 50,00,000 7. UTSAV TEXTILES TRADERS PVT. LTD. SACHINDESHMUKH 25,00,000 TOTAL 8,01,93,295 6.3 IN THE INSTANT CASE, THE LD. CIT(A) HAS MENTIONED AT PARA 12.11 OF HIS ORDER DATED 30.01.2018 THAT IN THE SOF (STATEMENT OF FACT) FILED BEFORE THE INCOME TAX SETTLEMENT COMMISSION, MUMBAI , THE NEPTUNE GROUP HAS ADMITTED THAT THEY HAVE TAKEN ACCOMMODATION ENTRIES/LOAN IN CHEQUES FROM VARIOUS PART IES AGAINST PAYMENT OF CASH. THIS CASH OUTFLOW ON RECEIPT OF CHEQUE LOANS/ACCOMMODATION ENTRIES HAS BEEN SHOWN AS MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 19 APPLICATION OF INCOME. FURTHER, WHEN THE LOAN HAS BEEN REPAID BY THE NEPTUNE GROUP, THE CASH AMOUNT HAS BEEN SHOWN AS CASH INFLOW. THE INCOME HAS BEEN OFFERED BY THE NEPTUNE GROUP BEFORE THE INCOME TAX SETTLEMENT COMMISSION BASED ON SUCH UNACCOUNTED CASH INFLOW/OUTFLOW STATEMENT. THE NEPTUNE GROUP HAVE ADMITTED ALL SUCH ACCOMMODATION ENTRIES AMOUNTING TO RS.16,47,03,019/ - BEFORE THE INCOME TAX S ETTLEMENT COMMISSION, MUMBAI. WE MAY MENTION HERE THAT B ASED ON THE RECOMMENDATION OF THE WANCHOO COMMISSION, THE CENTRAL GOVERNMENT CONSTITUTED SETTLEMENT COMMISSION. THE ORIGIN OF THE PROVISIONS REGARDING SETTLEMENT OF CASES LIES IN THE WANCHOO COMMITTE E REPORT WHICH PREFERRED A MECHANISM OF STATUTORY SETTLEMENT MACHINERY AS A DOOR FOR COMPROMISE WITH AN ERRANT TAX PAYER. 6.4 IN THE INSTANT CASE, THE STATEMENT GIVEN ON OATH BY THE ASSESSEE U/S 132(4) AS WELL AS THE STATEMENT GIVEN BY SHRI NAYAN BHEDA , D IRECTOR OF NEPTUNE GROUP U/S 132(4) AND THE STATEMENT OF FACT FILED BY THE NEPTUNE GROUP BEFORE THE INCOME TAX SETTLEMENT COMMISSION , MUMBAI ARE TO BE READ TOGETHER. CONTINENTAL WAREHOUSING CORPORATION LTD. (SUPRA), THE LOCUS CLASSICUS ON SECTION153A O F THE ACT, SUMS UP AS UNDER: ONCE IT IS HELD THAT THE ASSESSMENT HAS ATTAINED FINALITY, THEN THE ASSESSING OFFICER WHILE PASSING THE INDEPENDENT ASSESSMENT ORDER UNDER SECTION 153A READ WITH SECTION 143 (3) COULD NOT HAVE DISTURBED THE ASSESSMENT/REASSESSMENT ORDER WHICH HAS ATTAINED FINALITY, UNLESS THE MATERIALS GATHERED IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 153A MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 20 ESTABLISH THAT THE RELIEFS GRANTED UNDER THE FINALISED ASSESSMENT/REASSESSMENT WERE CONTRARY TO THE FACTS UNEARTHED DURING THE COURSE OF 153A PROCEEDINGS. IF THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY MATERIAL WAS UNEARTHED DURING THE SEARCH OR DURING THE 153A PROCEEDINGS, THE ASSESSING OFFICER WHILE PASSING ORDER UNDER SECTION 153A READ WITH SECTION 143(3) CANNOT DISTURB THE ASSESSMENT ORDER . IN THE STATEMEN T RECORDED U/S 132(4), THE ASSESSEE HAS ADMITTED THAT FROM THEIR GROUP CONCERN, ONLY DAINIK CONSULTANT PVT. LTD. HAS GIVEN ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOAN, LEDGER OF WHICH WAS SUBMITTED. THE ASSESSEE ALSO ADMITTED THAT HE HAD ARRANGED A CCOMMODATION ENTRIES FROM 12 PARTIES WHICH HAS BEEN MENTIONED HEREINBEFORE. THUS THE FACTS IN THE INSTANT CASE ARE SUE GENERIS . IT IS FOUND THAT THE ABOVE FACTS WERE NOT DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. FURTHER, THE ABOVE STA TEMENT RECORDED U/S 132(4) ESTABLISH THAT THE RELIEFS GRANTED UNDER THE ORIGINAL ASSESSMENT WERE CONTRARY TO THE FACTS FOUND DURING THE COURSE OF 153A PROCEEDINGS. WE MAKE IT ABUNDANTLY CLEAR THAT BY FOLLOWING THE RATIO LAID DOWN IN (I) CONTINENTAL WAREH OUSING CORPORATION , LATER ON FOLLOWED IN DEEPAK KUMAR AGARWAL , AND (II) KABUL CHAWLA MENTIONED HEREINBEFORE WHICH DEAL WITH ASSESSMENT U/S 153A, WE ARRIVE AT THE FOLLOWING FINDING: THE ADMISSION OF THE ASSESSEE THAT FROM THEIR GROUP CONCERN , ONLY DAINIK CONSULTANT PVT. LTD. HAD GIVEN ACCOMMODATION ENTRIES IN THE FORM OF UNSECURED LOANS, LEDGER COPY OF WHICH WAS PRODUCED WAS NOT MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT . MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 21 THE SALUTARY EXPOSITION IN CONTINENTAL WAREHOUSING CORPORATION FAC TS UNEARTHED DURING THE COURSE OF 153A PROCCEDINGS ILLUMINATE S THE ISSUE AT HAND. THUS THERE IS NO INFIRMITY ON THE PART OF THE AO WHILE ISSUING NOTICE U/S 153A OF THE ACT. IN THE INSTANT CASE TAKING A HOLISTIC VIEW I.E. THE ADMISSION IN THE STATEMENT RECORDED U/S 132(4) BY THE ASSESSEE, BY SHRI NAYAN BHEDA DIRECTOR OF THE NEPTUNE GROUP AND THE SETTLEMENT APPLICATION FILED BY THE NEPTUNE GROUP BEFORE THE INCOME TAX SETTLEMENT COMMISSION, MUMBAI, WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS RIGHTLY INIT IATED THE PROCEEDINGS U/S 153A. THUS, THE 1 ST , 2 ND & 3 RD GROUNDS OF APPEAL ARE DISMISSED. 7. NOW WE TURN TO THE 4 TH , 5 TH & 6 TH GROUND OF APPEAL AS THEY ADDRESS SIMILAR ISSUES. THE AO REFERRED TO (I) THE STATEMENT RECORDED ON OATH U/S 132(4) OF SHRI R.C. JAIN (THE ASSESSEE), (II) THE STATEMENT RECORDED ON OATH U/S 132(4) OF SHRI MANOJ CHANDALIYA, ALLEGING THAT HE ARRANGED BOGUS AC COMMODATION ENTRIES FROM THE BOGUS PARTIES BASED IN KOLKATA AND MUMBAI TO THE NEPTUNE GROUP AND (III) THE STATEMENT RECORDED U/S 132(4) OF SHRI NAYAN BHEDA, PROMOTER OF THE NEPTUNE GROUP. ALSO THE AO, ON PERUSAL OF THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOU ND THAT THE ASSESSEE HAD TAKEN UNSECURED LOAN FROM THOSE BOGUS ENTITIES IN HIS PERSONAL BOOKS OF ACCOUNTS AND IN THE ACCOUNTS OF HIS WIFE SMT. REENA JAIN. AS PER THE AO, THE ASSESSEE HAD ALSO TAKEN UNSECURED LOANS FROM VARIOUS OTHER PARTIES DURING THE YEAR UNDER CONSIDERATION. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 22 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ASKED THE ASSESSEE TO SUBMIT THE CONFIRMATION SUCH AS PAN, ADDRESS, LEDGER COPY OF THE BANK ACCOUNT STATEMENT, COPY OF AUDIT REPORT OF THE PARTY, IF APPLICABLE AND THE BALANCE SHEE T, CAPITAL ACCOUNT OF THE PARTY FROM WHOM FRESH UNSECURED LOANS WERE TAKEN, COPY OF RETURN OF INCOME FILED ETC. AS NOTED BY THE AO, IN RESPONSE TO IT THE ASSESSEE SUBMITTED A REPLY DATED 25.10.2016 FILING LIST OF PARTIES WITH THE AMOUNT OF TRANSACTION. HOW EVER, NO FURTHER DETAILS LIKE LOAN CONFIRMATION, BANKS STATEMENTS, PAN OR OTHER RELEVANT DETAILS WERE FILED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO ISSUED NOTICE U/S 133(6) TO THE CONCERNED PARTIES. HOWEVER, THE AO FOUND THAT MOST OF THE NOT ICES WERE RETURNED BY THE POSTAL AUTHORITIES UNSERVED WITH THE REMARK UNSERVED, LEFT UNCLAIMED. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE AO DATED 02.12.2016 TO EXPLAIN AS TO WHY THE LOANS RECEIVED FROM THE IDENTIFIED BOGUS PARTIES OVER THE YEARS UNDER CONSIDERATION SHOULD NOT BE ADDED TO THE TOTAL INCOME AS UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT, THE ASSESSEE FILED A REPLY DATED 20.12.2016, WHICH HAS BEEN EXTRACTED BY THE AO AT PAGE 7 - 8 OF THE ASSESSMENT ORDER DATED 26.12.2016. HOWEVER, T HE AO WAS NOT CONVINCED WITH THE SAID EXPLANATION OF THE ASSESSEE FOR THE REASON THAT EVEN THOUGH SUBSEQUENTLY, THE NOTICES WERE SERVED ON THE PARTY AND REPLY WAS RECEIVED, A PERUSAL OF THE DOCUMENTS I.E. RETURN OF INCOME, FINANCIAL STATEMENTS AND BANK STA TEMENTS SUBMITTED BY THE LENDERS ESTABLISH THAT THE FINANCIALS WERE TYPICALLY THOSE OF AN ENTRY PROVIDER AND THERE ARE NO MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 23 SUBSTANTIAL INCOME REPORTED BY THE PARTIES IN THEIR RETURN OF INCOME TO ESTABLISH THEIR CREDITWORTHINESS FOR PROVIDING THE LOANS. TH E AO HAS RECORDED THAT HE ISSUED A SUMMONS ON 16.12.2016 TO THE PARTY TO APPEAR AND ESTABLISH THE GENUINENESS OF THE TRANSACTIONS. HOWEVER, NOBODY APPEARED BEFORE HIM. FINALLY, THE AO HAS NOTED THAT THE ASSESSEE COULD PROVIDE ONLY CONFIRMATION OF LOAN AN D THAT TOO FROM ONLY SELECT PARTIES. NO COPY OF THEIR RETURN OF INCOME, CREDITWORTHINESS, THEIR ACCOUNTS WERE SUBMITTED BY THE ASSESSEE BEFORE HIM. THEREFORE, THE AO MADE AN ADDITION OF RS.1,62,50,000/ - U/S 68 OF THE BOGUS ACCOMMODATION LOAN ENTRY. 8. IN APPEAL, THE LD. CIT(A) REFERRED TO THE ABOVE FINDINGS OF THE AO AND ALSO THE STATEMENT OF FACT FILED BY THE NEPTUNE GROUP BEFORE THE INCOME TAX SETTLEMENT COMMISSION , MUMBAI THAT THEY HAVE TAKEN ACCOMMODATION ENTRIES/LOAN IN CHEQUES FROM VARIOUS PARTIES AGAINST PAYMENT/CASH. FURTHER OBSERVING THAT THE ASSESSEE FAILED TO FILE THE RETURN OF INCOME, THEIR ACCOUNTS, THE LD. CIT(A) HELD THAT THE ASSESSEE FAILED TO DISCHARGE TO ONUS CAST UPON IT. ON THE ABOVE REASONS, THE LD. CIT(A) CONFIRMED THE ADDITION U/S 6 8 MADE BY THE AO. 9. BEFORE US, THE LD. COUNSEL SUBMITS THAT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH DETAILS WITH RESPECT TO THE UNSECURED LOANS TAKEN FROM VARIOUS PARTIES INCLUDING THE COMPANIES FROM WHOM NEPTUN E GROUP HAD TAKEN ACCOMMODATION ENTRIES. THE ASSESSEE FURNISHED ALL THE REQUISITE DETAILS ALONG WITH LOAN CONFIRMATION, COMPLETE IT SET AND BANKS STATEMENT OF THE UNSECURED MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 24 LOAN LENDERS. FURTHER, THE AO ISSUED NOTICE U/S 133(6) OF THE ACT TO VERIFY THE GEN UINENESS AND CREDITWORTHINESS OF THE LENDERS. SOME OF THE NOTICES WERE RETURNED UNSERVED DUE TO CHANGE IN THE ADDRESS. NEW ADDRESS OF THE LENDER WERE FURNISHED TO THE AO AND SUBSEQUENTLY, THE LENDERS DULY SUBMITTED THEIR RESPONSE. THE LD. COUNSEL SUBMITS T HAT THE AO WITHOUT CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE REPLY RECEIVED FROM THE LENDERS ERRED IN MAKING THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT ON THE BASIS OF THE STATEMENT OF MR. NAYAN BHEDA RECORDED AT THE TIME OF SEARCH OPERATIONS U/S 132(4) OF THE ACT FURTHER THE LD. COUNSEL EXPLAINS THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD TAKEN UNSECURED LOANS OF RS.17,50,000/ - FROM SIGNORA FINANCE PVT. LTD. AND RS.95,00,000/ - FROM HINDUSTAN CONTINENTAL PVT. LTD. THE ABOVE LOANS WERE TAKEN BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS OF FINANCING FROM THE AFOREMENTIONED PARTIES. THE NEPTUNE GROUP OF COMPANIES, WHO ARE ACTUALLY THE SUBJECT MATTER OF SEARCH PROCEEDINGS HAD ALSO TAKEN LOAN FROM THE ABOVE PART IES IN THE FORM OF ACCOMMODATION ENTRIES WHICH WAS ACCEPTED BY THE DIRECTOR OF THE COMPANY MR. NAYAN BHEDA IN HIS STATEMENT RECORDED U/S 132 OF THE ACT. FURTHER IT WAS ALSO STATED BY HIM THAT THE ACCOMMODATION ENTRIES WERE ARRANGED THROUGH THE ASSESSEE. TH IS FACT IS ACCEPTED BY THE ASSESSEE BUT NOT IN ENTIRETY. REFERENCE IS MADE HERE TO THE WRITTEN SUBMISSION FILED BY THE ASSESSEE BEFORE THE LD. CIT(A), EXTRACTED AT PAGE 11 OF THE ORDER DATED 30.01.2018. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 25 THE LD. COUNSEL FURTHER SUBMITS THAT IN THE ASSESSME NT ORDER THE AO HAS PLACED HEAVY RELIANCE ON THE STATEMENT OF MR. NAYAN BHEDA, THE DIRECTOR OF THE NEPTUNE GROUP FOR MAKING THE ADDITION U/S 68 OF THE ACT. HOWEVER, NO CORROBORATIVE EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE AO TO SATISFY HIMSELF ABOUT THE NON - GENUINENESS OF THE TRANSACTION ENTERED BY THE ASSESSEE EITHER AT THE TIME OF SEARCH PROCEEDINGS OR AT THE TIME OF ASSESSMENT PROCEEDINGS. IT IS STATED BY HIM THAT THE AO NEVER AFFORDED AN OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE THE STATEMENT OF M R. NAYAN BHEDA BY SUMMONING HIM U/S 131 SO THAT THE ASSESSEE CAN OFFER PROPER EXPLANATION AS TO WHY THE PRESUMPTIONS MADE BY THE AO FOR MAKING THE ADDITION ARE NOT APPROPRIATE AND THE SAME CAN BE REBUTTED. IT IS STATED THAT THE AO OUGHT TO CARRY OUT HIS DU TY TO PROVIDE THIS OPPORTUNITY OF CROSS - EXAMINATIONS SINCE THAT WAS THE ONLY EVIDENCE ON WHICH HE WAS PLACING HIS RELIANCE FOR THE PURPOSE OF MAKING ADDITION IN THE CASE OF THE ASSESSEE AND THERE WAS NO COGENT CONCLUSION REACHED BY THE AO, CONSIDERING THE EVIDENCE RELIED UPON. IN SUPPORT OF HIS CONTENTIONS, THE LD. COUNSEL RELIES ON THE DECISION IN CANON INDUSTRIES (P.) LTD. V. DCIT (2015) 59 TAXMANN.COM 65 (MUMBAI - TRIB), CIT V. JAGATKUMAR SATISHBHAI PATEL (2014) 45 TAXMANN.COM 441 (GUJ), ITO V. NASHIR KH AN J. MAHADIK (ITA NO. 153/MUM/2010 FOR AY 2006 - 07) OF ITAT B BENCH, MUMBAI, ITO V. M/S SUPERLINE CONSTRUCTIONS P. LTD. (ITA NO. 3645/MUM/2014 FOR AY 2007 - 08) OF ITAT A BENCH MUMBAI, CIT V. NIKUNJ EXIMP ENTERPRISES (P.) LTD. (2013) 35 TAXMANN.COM 384 ( BOM) UMACHARAN SHAW & BROS (1959) 37 ITR 271 (SC), WEST COAST PAPER MILLS LTD. V. JCIT (2006) 100 TTJ MUM MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 26 833, ITO V. WD ESTATE (P.) LTD . (1993) 45 ITD 473 (BOM). ADDL. CIT V. MS. LATA MANGESHKAR (1974) 97 ITR 696 (BOM), UNITEX PRODUCTS LTD. V. ITO (2008) 22 SOT 429 (MUMBAI), CIT V. BALAJI WIRE (P.) LTD . (2008) 304 ITR 393 (DEL), KISHINCHAND CHELLARAM (1980) 125 ITR 713 (SC), R.B. SHREERAM DURGA PRASAD & FATEHCHAND NURSING DAS V. SETTLEMENT COMMISSION [1989] 43 TAXMAN 34 (SC), HR MEHTA V. ACIT (2016) 387 IT R 561 (BOM), PRAKASH CHAND NAHTA V. CIT (2008) 301 ITR 134 (MP) AND CIT V. S. KHADER KHAN SON (2008) 300 ITR 157 (MADRAS). 10. ON THE OTHER HAND, THE LD. DR SUPPORTS THE ORDER PASSED BY THE LD. CIT(A). ALSO RELIANCE IS PLACED BY HIM ON THE DECISION IN CIT V. MUKUNDRAY K. SHAH (2007) 290 ITR 433 (SC) AND CIT V. HARJEEV AGGARWAL (2016) 70 TAXMANN.COM 95 (DELHI). THE LD. DR FURTHER SUBMITS THAT IN THE CASE OF PR. CIT V. BEST INFRASTRUCTURE (INDIA) (P.) LTD. (2018) 94 TAXMANN.COM 115 (SC), THE HONBLE SUPREM E COURT HAS GRANTED SLP AGAINST THE IMPUGNED ORDER OF THE HIGH COURT THAT (I) SECTION 68 ADDITION WAS NOT CALLED FOR ON THE BASIS OF STATEMENT OF ACCOMMODATION ENTRY PROVIDER THAT ASSESSEE HAD RECEIVED SHARE CAPITAL THROUGH ACCOMMODATION ENTRY, RECORDED A T BACK OF ASSESSEE AND (II) WHERE DURING SEARCH PROCEEDINGS ONE OF DIRECTORS OF ASSESSEE - COMPANY SURRENDERED A CERTAIN SUM AS UNDISCLOSED INCOME ONLY FOR ASSESSMENT YEAR IN QUESTION AND NOT FOR EACH OF 6 ASSESSMENT YEARS PRECEDING YEAR OF SEARCH, SAID SUBM ISSION COULD NOT BE SAID TO BE INCRIMINATING MATERIAL QUA EACH OF PRECEDING ASSESSMENT YEARS. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 27 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. THE REASONS FOR OUR DECISIONS ARE GIVEN BELOW. IT IS WELL SETTLED THAT IN ORDER TO DISCHARGE THE ONUS U/S 68 OF THE ACT, THE ASSESSEE MUST PROVE THE FOLLOWING: (I) THE IDENTITY OF THE CREDITOR, (II) THE CAPACITY OF THE CREDITOR TO ADVANCE MONEY; AND (III) THE GENUINENESS OF THE TRANSACTION. AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH PRIMA FACIE THE AFORESAID, THE ONUS SHIFTS TO THE DEPARTMENT AS SUCCINCTLY HELD IN SHANKAR IND V. CIT 114 689, PRAKASH TEXTILE V. CIT 121 ITR 890; CIT V. UNITED 187 ITR 596 RAJSHREE V. CIT 256 ITR 331; A SHOKPAL V. CIT 220 ITR 452, 454; CIT V. METACHEM 245 ITR 160; CIT V. SHREE GOPAL 204 ITR 285. AS THE HONBLE SUPREME COURT LAID DOWN IN KALEKHAN MOHAMMED HANIF V. CIT 50 ITR 1 THE ONUS IS ON THE ASSESSEE TO EXPLAIN THE NATURE AND SOURCE OF CASH CREDITS, WHETHER THEY STAND IN THE ASSEESSEES ACCOUNT OR IN THE ACCOUNT OF A THIRD PARTY. IN THE INSTANT CASE, AS FOUND BY THE AO SUBSEQUENTLY, WHEN NOTICES U/S 133(6) WERE ISSUED BY HIM TO THE PARTIES VIDE LETTER DATED 22.11.2016 IN THE NEW ADDRESS GIVEN BY TH E ASSESSEE, THE SAID NOTICES WERE RECEIVED BY THE PARTIES AND REPLY WAS RECEIVED BY THE AO. HOWEVER, THE AO ON PERUSAL OF THE DOCUMENTS I.E. RETURN OF INCOME, FINANCIAL STATEMENTS AND BANKS STATEMENTS SUBMITTED BY THE LENDERS, FOUND THAT THE FINANCIALS ARE TYPICALLY THOSE OF AN ENTRY PROVIDER AND MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 28 THERE ARE NO SUBSTANTIAL INCOME REPORTED BY THE PARTIES IN THEIR RETURN OF INCOME TO ESTABLISH THE CREDITWORTHINESS FOR PROVIDING THE LOANS. THEREFORE, TO VERIFY THE SAME, THE AO ISSUED SUMMONS DATED 16.12.2016 TO ASCERTAIN THE GENUINENESS OF THE TRANSACTIONS. HOWEVER, NO ONE APPEARED BEFORE HIM. WE ALSO FIND THAT DURING THE PROCEEDINGS BEFORE THE LD. CIT(A) THE ASSESSEE FILED A REPLY CONTESTING THAT: MOREOVER, AS IT IS EVIDENT FROM THE ASSESSMENT ORDER U/S 143(3) R.W.S. 153A OF THE ACT, THE LD. AO HAS PLACED HEAVY RELIANCE ON THE STATEMENT OF MR. NAYAN BHEDA, THE DIRECTOR OF THE NEPTUNE GROUP FOR MAKING ADDITION U/S 68 OF THE ACT. NO CORROBORATIVE EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE LD. AO TO SATISFY HIMSEL F ABOUT THE NON - GENUINENESS OF THE TRANSACTION ENTERED BY THE APPELLANT NEITHER AT THE TIME OF SEARCH PROCEEDINGS NOR AT THE TIME OF ASSESSMENT PROCEEDINGS. THE AO NEVER AFFORDED AN OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE STATEMENT OF MR. NAYAN B HEDA BY SUMMONING HIM U/S 131 SO THAT THE APPELLANT CAN OFFER EXPLANATION AS TO WHY THE PRESUMPTIONS MADE BY THE LD. AO FOR MAKING THE ADDITIONS ARE NOT APPROPRIATE AND THE SAME CAN BE REBUTTED. THE LD. AO OUGHT TO CARRY OUT HIS DUTY TO PROVIDE THIS OPPORT UNITY OF CROSS EXAMINATION SINCE THAT WAS THE ONLY EVIDENCE ON WHICH HE WAS PLACING HIS RELIANCE FOR THE PURPOSE OF MAKING ADDITIONS IN THE CASE OF THE APPELLANT AND THERE WAS NO COGENT CONCLUSION REACHED BY THE LD. AO CONSIDERING THE EVIDENCE RELIED UPON. THE ADDITIONS WERE MERELY AN OUTCOME OF THE INCRIMINATING MATERIAL FOUND AT THE PREMISES OF A THIRD PARTY AND THE STATEMENT GIVEN BY HIM TO THE INCOME TAX AUTHORITIES. WITH PROVIDING A REASONABLE OPPORTUNITY TO THE APPELLANT TO CROSS EXAMINE THE THIRD PAR TY THE LD. AO WENT AHEAD WITH MAKING THE ADDITIONS IN THE CASE OF THE APPELLANT U/S 68 OF THE ACT WHICH IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 29 11.1 AS MENTIONED EARLIER, THE AO HAS ISSUED SUMMONS DATED 16.12.2016 TO ESTABLISH THE GENUINENESS OF TRA NSACTION AND NOBODY APPEARED BEFORE HIM. WE REFER HERE TO PARA C (PAGE 9 OF THE ASSESSMENT ORDER DATED 26.12.2016. IN SUCH A SITUATION, THE AO WAS NOT IN A POSITION TO ALLOW THE ASSESSEE THE OPPORTUNITY TO CROSS - EXAMINE THE SAID PARTIES. IN PULLANGODE RUB BER PRODUCE CO. LTD. V. STATE OF KERALA [1973] 91 ITR 18 (SC), IT IS HELD THAT AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. A PROPER HEARING MUST ALWAYS INCLUDE A FAIR OPPORTUNITY TO THOSE WHO ARE PARTIES IN THE CONTROVERSY FOR CORRECTING OR CONTRADICTING ANYTHING PREJUDICIAL TO THEIR VIEW. LORD DENNING IN KANDA V. GOVERNMENT OF MALAYA [1962] AC 322 HAS ADDED : IF THE RIGHT TO BE HEARD IS TO BE REAL RIGHT WHICH IS WORTH ANYTHING, IT MUST CARRY WITH IT A RIGHT IN THE ACCUSED MAN TO KNOW THE CASE WHICH IS MADE AGAINST HIM. HE MUST KNOW WHAT EVIDENCE HAS BEEN GIVEN AND WHAT STATEMENTS HAVE BEEN MADE AFFECTING HIM: AND THEN HE MUST BE GIVEN A FAIR OPPORTUNITY TO CORRECT OR CONTRADICT THEM. CROSS - EXAMINATION IS ALLOWED BY PROCEDURAL RULES AND EVIDENTLY ALSO BY THE RULES OF NATURAL JUSTICE. ANY WITNESS WHO HAS BEEN SWORN ON BEHALF OF ANY PARTY IS LIABLE TO BE CROSS - EXAM INED ON BEHALF OF THE OTHER PARTY TO THE PROCEEDINGS. THE HON'BLE SUPREME COURT IN STATE OF KERALA VS. K.T. SHADULI GROCERY DEALER AIR 1977 SC 1627, RECOGNISED THE IMPORTANCE OF ORAL MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 30 EVIDENCE BY HOLDING THAT THE OPPORTUNITY TO PROVE THE CORRECTNESS OR COMP LETENESS OF THE RETURN NECESSARILY CARRY WITH IT THE RIGHT TO EXAMINE WITNESSES AND THAT INCLUDES EQUALLY THE RIGHT TO CROSS - EXAMINE WITNESSES. IN ITO VS. M. PIRAI CHOODI (2012) 20 TAXMANN.COM 733 (SC), THE HON'BLE SUPREME COURT HAS HELD THAT ORDER OF A SSESSMENT PASSED WITHOUT GRANTING AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE, SHOULD NOT HAVE BEEN SET ASIDE BY HIGH COURT; AT MOST, HIGH COURT SHOULD HAVE DIRECTED ASSESSING OFFICER TO GRANT AN OPPORTUNITY TO ASSESSEE TO CROSS - EXAMINE CONCERNED WITNESS. 11.2 WE ARE OF THE CONSIDERED VIEW THAT PROVIDING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE SHRI NAYAN BHEDA, DIRECTOR OF THE NEPTUNE GROUP AND THE OTHER UNSECURED LOAN CREDITORS WOULD RESOLVE THE CONTENTIOUS ISSUE. THEREFORE, KEEPING IN MIND THE RATIO LAID DOWN IN DECISIONS MENTI ONED AT PARA 11.1 HEREINABOVE, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF ADDITION MADE BY THE AO OF RS.1,62,50,000/ - U/S 68 AND RESTORE THE MATTER TO THE FILE OF THE AO TO MAKE AN ORDER AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHICH WOULD INCLUDE OPPORTUNITY TO CROSS - EXAMINE SHRI NAYAN BHEDA AND OTHER UNSECURED LOAN CREDITORS. WE ALSO DIRECT THE ASSESSEE TO FILE THE RELEVANT DOCUMENTS/EVIDENCE BEFORE THE AO. AS THE AB OVE MATTER HAS BEEN RESTORED TO THE FILE OF THE AO, WE ARE NOT ADVERTING TO THE CASE - LAWS RELIED ON BY BOTH SIDES. THUS THE 4 TH , 5 TH & 6 TH GROUNDS OF APPEAL ARE ALLOWED FOR STATISTICAL PURPOSES. MR. RATNESH CHAND JAIN & MRS. REENA JAIN ITA NOS. 1001, 1002, 1003, 1004, 1005, 1006 & 1007/MUM/2018 31 FACTS BEING IDENTICAL, OUR DECISION FOR THE AY 2009 - 10 APPLI ES MUTATIS MUTANDIS TO AYS 2010 - 11 ( ITA NO. 1001/MUM/2018) , 2011 - 12( ITA NO. 1002/MUM/2018) , 2012 - 13 ( ITA NO. 1003/MUM/2018) AND 2013 - 14 ( ITA NO. 1004/MUM/2018) FOR THE ASSESSEE AND AYS 2009 - 10 ( ITA NO. 1005/MUM/2018) , 2010 - 11( ITA NO. 1006/MUM/2018) AND 201 4 - 15 ( ITA NO. 1007/MUM/2018) FOR MRS. REENA JAIN. 12. AS THE PENALTY U/S 271(1)(C) HAS BEEN INITIATED ONLY, THE 7 TH GROUND OF APPEAL IS PREMATURE. 13. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT 25/03/2019. SD/ - SD/ - ( PAWAN SINGH ) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 25/03/2019 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (SR. PRIVATE SECRETARY) ITAT, MUMBAI