JINDAL ITF LTD., NEW DELHI V. DCIT, CIRCLE- 13(2), NEW DELHI

ITA 1172/DEL/2020

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5911 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 15-06-2020
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V K BINDAL CA MS RINKI SHARMA
• Keywords: Unexplained cash credit; Gift; Principle of natural justice; Earning of tax free income; Source of fund; Additional evidence; Cost of acquisition; Revised return
• Section: 143(3); 142(1); 14A; 133(6); 201; 143(2); 139(1); 13; 22; 131; 68; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER & DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA. NOS.1170/DEL/2020 ASSESSMENT YEAR 2017-18 JINDAL FITTINGS LTD. 28, NAJAFGARH ROAD, NEW DELHI. V. DCIT CIRCE-13(2), NEW DELHI. PAN: AACCJ5987E (APPELLANT) (RESPONDENT) ITA. NOS.1171/DEL/2020 ASSESSMENT YEAR 2017-18 JINDAL QUALITY TUBULAR LTD. 28, NAJAFGARH ROAD, NEW DELHI. V. DCIT CIRCE-13(2), NEW DELHI. PAN: AADCJ6035G (APPELLANT) (RESPONDENT) ITA. NOS.1172/DEL/2020 ASSESSMENT YEAR 2017-18 JINDAL ITF LTD. 28, NAJAFGARH ROAD, NEW DELHI. V. DCIT CIRCE-13(2), NEW DELHI. PAN: AABCJ9263C (APPELLANT) (RESPONDENT) & ITA. NOS.1173/DEL/2020 ASSESSMENT YEAR 2017-18 JITF URBAN INFRASTRUCTURE SERVICES LTD. 28, SHIVAJI MARG, WEST DELHI, P.O. RAMESH NAGAR, DELHI. V. DCIT CIRCE-13(2), NEW DELHI. PAN: AACCJ4785G (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI V.K. BINDAL, CA MS. RINKI SHARMA, CA RESPONDENT BY: MS. SUNITA SINGH, CIT DR DATE OF HEARING: 05 08 2020 DATE OF PRONOUNCEMENT: 28 09 2020 ITA NOS.1170 TO 1173/DEL/2020 2 O R D E R PER AMIT SHUKLA, J.M.: 1. THE AFORESAID APPEALS HAVE BEEN FILED BY THE ABOVE NAMED FOUR ASSESSEES AGAINST SEPARATE APPELLATE ORDERS OF EVEN DATE, 18.05.2020, PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)- V, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2017-18. 2. IN ALL THE APPEALS, COMMON GROUNDS AND ISSUES ARE INVOLVED WITH SIMILAR SET OF FACTS; HENCE THEY WERE HEARD TO GETHER AND ARE BEING DISPOSED-OFF BY WAY OF THIS CONSOLIDATED ORDER. THE SE APPEALS PERTAIN TO JINDAL GROUP OF COMPANIES WHEREIN THE ASSESSEES HAV E CHALLENGED THE ADDITIONS MADE U/S 68 OF THE ACT BY THE ASSESSING O FFICER AND DISALLOWANCE OF THE INTEREST PAID ON THE SAID LOANS MADE BY THE CIT (A) BY WAY OF ENHANCEMENT. THE CHART OF ADDITIONS MADE IN THE HANDS OF THE RESPECTIVE ASSESSEES ARE AS UNDER: PARTICULARS AND APPEAL NO. AMOUNT OF ADDITION FOR LOANS(RS) LOAN TAKEN FROM GLEBE TRADING (P) LTD. (RS) LOAN TAKEN FROM DANTA ENTERPRISES (P) LTD.(RS) DISALLOWANCE OF INTEREST (RS) JINDAL ITF LTD. ITA/1172/D/2020 167,98,00,000 151,83,70,000 16,15,00,000 9,96,04,252 JINDAL FITTINGS LTD. ITA/1170/D/2020 103,89,25,000 103,89,25,000 NIL 2,43,24,560 JINDAL QUALITY TUBULAR LTD ITA/1171/D/2020 20,52,00,000 20,52,00,000 3,37,315 JITF URBAN INFRASTRUCTURE SERVICES LTD. ITA/1173/D/2020 196,50,00,000 196,50,00,000 NIL 11,03,15,540 3. SINCE THESE APPEALS INVOLVE COMMON ISSUE OF ADDITIO NS U/S 68 OF THE ACT AND THAT TO BE LOANS TAKEN FROM THE S AME LENDER NBFC COMPANIES BELONGING TO SAME GROUP OF THE ASSESSEES, I.E., JINDAL GROUP; AND SINCE THE LOANS WERE TAKEN BY JINDAL ITF LTD.(I TA/ 1172/D/2020) FROM BOTH THE LENDERS; THEREFORE, THIS APPEAL IS BE ING TAKEN UP AS A LEAD CASE AND THE FINDINGS GIVEN THEREIN WILL APPLY MUTA TIS MUTANDIS IN THE OTHER APPEALS ALSO. ITA NOS.1170 TO 1173/DEL/2020 3 JINDAL ITF LTD. APPEAL NO. ITA/1172/D/2020 GROUNDS NO. 1 TO 3 4. GROUND NOS. 1 TO 3 PERTAIN TO THE ADDITION OF RS. 167,98,70,000/- MADE IN RESPECT OF THE LOANS TAKEN AS ABOVE FROM THE TWO GROUP LENDER COMPANIES U/S 68 R.W.S 11 5BBE OF THE ACT. 5. THE FACTS IN BRIEF ARE THAT THE ASSESSEE COM PANY BELONGS TO THE JINDAL GROUP OF COMPANIES ENGAGED IN THE BUSINESS OF COAL HANDLING THROUGH WATERWAYS. IT HAD FILED ITS RETURN OF INCOME U/S 139(1) AT A LOSS OF RS. 309,97 ,01,721/- FOR THE AY 2017-18. THE ASSESSEE COMPANY TOOK LOANS FROM THE FOLLOWING TWO GROUP / ASSOCIATE COMPANIES OF TH E JINDAL GROUP ONLY DURING THE YEAR UNDER CONSIDERATION: A) GLEBE TRADING (P) LTD. (HEREINAFTER REFERRED TO AS GLEBE) RS. 151,83,70,000/-; B) DANTA ENTERPRISES (P) LTD. (HEREINAFTER REFERRED TO AS DANTA)RS. 16,15,00,000/- AND CALLED TOGETHER AS LENDER COMPANIES. BOTH THE LENDER COMPANIES ARE HAVING THEIR REGISTER ED OFFICE AT H. NO. C-2, STAFF COLONY, MACHINERY DIVISION, 13 K M STONE, MANDIR HASAUD, GE ROAD, RAIPUR, CHATTISGARH AND TH EIR PRINCIPAL PLACE OF BUSINESS IS AT THE SAME ADDRESS AT 28, NAJAFGARH ROAD,(CALLED SHIVAJI ROAD ALSO) NEW DELHI 110015 (REFERRED TO AS NEW DELHI ADDRESS) WHERE THE BOOK S OF ACCOUNTS OF THE LENDER COMPANIES ARE KEPT AND THE L OAN TRANSACTION WAS EXECUTED DURING THE RELEVANT PERIOD . THE ASSESSEE COMPANY WAS ALSO CARRYING ON ITS BUSINESS AND ITA NOS.1170 TO 1173/DEL/2020 4 MAINTAINING ITS BOOKS OF ACCOUNT AT THE SAME NEW DE LHI ADDRESS. 6. ANOTHER PERTINENT FACT IS THAT, THE ASSESSIN G OFFICER OF THE ASSESSEE COMPANY IS ALSO THE ASSESSING OFFIC ER OF JINDAL SAW LTD. ANOTHER GROUP COMPANY WHICH ALSO HAD TAKE N LOANS FROM THESE TWO LENDER COMPANIES DURING THE PERIOD R ELEVANT TO THE PRECEDING A.Y. 2016-17. IN THAT CASE DUE TO TRA NSFER PRICING PROCEEDINGS, THE LIMITATION IN THE SAID CAS E GOT EXTENDED BY ONE YEAR. THE ASSESSING OFFICER ISSUED A COMMISSION U/S 131(1)(D) OF THE ACT TO THE ADIT (IN V.), UNIT - 2, RAIPUR VIDE EMAIL DATED 21/12/2019 TO MAKE CERTA IN ENQUIRIES ON THE ABOVE-MENTIONED REGISTERED OFFICE ADDRESS OF THE TWO LENDER COMPANIES. THE COMMISSION HAS BEEN REPRODUCED AT PAGE NOS. 3-5 OF THE ASSESSMENT ORDER WHERE THE ASSESSING OFFICER SPECIFICALLY MENTIONED THE EN QUIRIES TO BE MADE. THE ADIT INV. UNIT -2 RAIPUR SENT HIS REPORT ON THE SAID COMMISSION VIDE HIS EMAIL DATED 24/12/2019 WHI CH IS ALSO REPRODUCED AT PAGE NOS. 5-6 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER STATED THAT THE PHYSICAL SPOT ENQ UIRIES CONDUCTED AT THE SAID REGISTERED OFFICE ADDRESS REV EALED THAT THE PREMISES ARE ACTUALLY A STAFF COLONY AND THERE IS NO SIGN BOARD/ NAME PLATE/ LETTER BOX FOUND IN THE NAME OF THE LENDER COMPANIES ON THE GIVEN ADDRESS. THE WATCHMAN AT THE SAID PREMISES WAS UNAWARE OF THE EXISTENCE OF THESE TWO LENDER COMPANIES WHO STATED THAT THE PREMISES WERE USED ON LY FOR THE RESIDENCE OF STAFF. THUS, THE ASSESSING OFFICER ALLEGED THAT THE LENDER COMPANIES WERE NOT FOUND TO BE EXISTING AT SAID REGISTERED OFFICE ADDRESS. ITA NOS.1170 TO 1173/DEL/2020 5 7. THE ASSESSING OFFICER, THEREAFTER, ISSUED A SHOW- CAUSE NOTICE ON 24/12/2019 TO THE ASSESSEE ASKING F OR VARIOUS DETAILS REGARDING THE SAID LENDERS WHICH WE RE SUBMITTED BY THE ASSESSEE AS REPRODUCED AT PAGES 11 TO 20 OF THE ASSESSMENT ORDER. THE ASSESSING OFFICER STATED THAT THE ASSESSEE PROVIDED THE REGISTERED OFFICE ADDRESS OF THE LENDERS BUT NO PROOF OF THE LENDERS HAVING ACTUALLY EXISTED AT THE SAID ADDRESS WAS PROVIDED. NO DOCUMENTS SUCH AS ELECTRIC ITY / WATER BILLS / REGISTERED RENT AGREEMENT WITH THOSE COMPANIES AT THE SAID ADDRESS WERE PRODUCED. THE ASSESSING OF FICER STATED THAT THE ASSESSEE ALSO FAILED TO PRODUCE ANY EVIDENCE OF THE LENDER COMPANIES HAVING COMMENCED THEIR BUSINES SESAS PER THEIR MAIN OBJECTS AND NO INCOME WAS GENERATED BY THE LENDER COMPANIES FROM PURSUING THEIR MAIN OBJECTS. THE ASSESSING OFFICERALSO STATED THAT GLEBE AND DANTA H AVE GIVEN LOANS OF RS. 557.66 CRORES AND 185.86 CRORES TO VAR IOUS GROUP COMPANIES (CHART ON THE PAGENOS. 26-27 OF THE ASSESSMENT ORDER), WHEREAS THE INCOME AND SHARE CAP ITAL AND RESERVES AND SURPLUS DECLARED BY THE LENDER COMPANI ES ARE SIGNIFICANTLY LOWER THAN THE AMOUNTS OF LOANS GIVEN BY THE LENDER COMPANIES. THUS, THE AO HELD THAT THE LENDER COMPANIES WERE JUST USED AS CONDUITS IN AVAILING TH E UNSECURED LOANS. THE NBFCS PROVIDED LOANS TO THE TW O SHAM BOGUS ENTITIES, WHO HAD NOTHING TO SHOW AS ACTUAL B USINESS ACTIVITY, HAD NO PHYSICAL EXISTENCE ON ANY OF THEIR ADDRESSES, NO PAID DIRECTOR AND NO EMPLOYEES, OWNED NO FIXED A SSETS. THUS, THE IDENTITY AND CREDITWORTHINESS OF THE LEND ERS AND GENUINENESS OF THE TRANSACTION OF UNSECURED LOANS A RE NOT ESTABLISHED. THEREAFTER, THE ASSESSING OFFICER MADE ADDITION OF ITA NOS.1170 TO 1173/DEL/2020 6 THE AMOUNTS OF LOANS TAKEN BY THE ASSESSEE FROM THE SAID TWO LENDER COMPANIES U/S 68 OF THE ACT R.W.S. 115BBE O F THE ACT. 8. IN THE APPELLATE PROCEEDINGS BEFORE THE LD . CIT(A), ALL THE EVIDENCES AND SUBMISSIONS OF THE ASSESSEE W ERE SENT BY HIM TO THE ASSESSING OFFICER FOR A REMAND REPORT AND HIS COMMENTS. THE AO NEGATED THE CONTENTION OF THE APPE LLANT AND STATED THAT THE SANCTION LETTERS OF LOANS ISSUE D BY VARIOUS NBFCS WERE SUBMITTED DURING THE ASSESSMENT PROCEEDI NGS VIDE LETTER DATED 28/12/2019 AND DENIED THE RECEIPT OF THE SAID LETTER AND THEREFORE, STATED THE SAME TO BE AD DITIONAL EVIDENCES. HOWEVER, THE AO FILED COMMENTS ON MERITS ON THE SAID LOANS SANCTION LETTERS. THE AO ALSO STATED THA T NO DETAILS REGARDING THE EXACT NUMBER, VALUE, DISTINCTIVE NUMB ER, STATE OF ENCUMBRANCE OF THE LISTED SHARED OF JSW STEEL LT D. AND JSW ENERGY LTD. PLEDGED AS SECURITY WITH THOSE NBFC S WAS PROVIDED. HE ALSO STATED THAT THE ASSESSEE ALSO DID NOT PROVIDE ANY EVIDENCE TO SHOW THAT THE LENDER COMPANIES ACTU ALLY OWNED THOSE SHARES AS THE INVESTMENT IN THOSE SHARE S WAS SHOWN AT NIL VALUE IN THEIR BALANCE SHEETS. THE AO ALSO STATED THAT THE NBFCS DID NOT CONSIDER THE FINANCIAL PARAM ETERS BEFORE GRANTING HUGE LOANS TO THE LENDER COMPANIES LIKE SUBMISSION OF ANY PROJECT REPORT, ADEQUACY OF SECUR ITY ETC. THE PURPOSE OF THE LOANS BORROWED BY LENDER COMPANI ES DID NOT INCLUDE PROVIDING UNSECURED LOANS TO THE APPELL ANT. THE AO ALSO REFUSED TO ACCEPT THE NEW DELHI ADDRESS OF THE LENDER COMPANIES MENTIONED IN THE PAN DATABASE OF THE INCO ME-TAX DEPARTMENT ON THE PLEA THAT IT IS SELF-SERVING INFO RMATION. 9. THE LD. CIT (A) HAS MAINLY REITERATED THE AVE RMENTS IN THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLA NT, THE ITA NOS.1170 TO 1173/DEL/2020 7 REMAND REPORT AND REJOINDER IN HIS ORDER. THE LD. C IT(A) OBSERVED THAT THE ASSESSEE CONTENDED THAT THE LETTE R DATED 28/12/2019 AND ITS ENCLOSURES BEING THE SANCTION LE TTERS WERE UPLOADED ON THE ITBA IN E-PROCEEDINGS WHEREAS THE AO DENIED THAT THE SAME WERE NEVER UPLOADED AND THEREF ORE, IT WAS APPROPRIATE TO CONSIDER THE SAME AS ADDITIONAL EVIDENCE BECAUSE THE AO HAD NO OCCASION TO EXAMINE THESE DOC UMENTS WHILE PASSING THE ORDER. HOWEVER, HE ADMITTED THE ADDITIONAL EVIDENCE AS PRIMA FACIE THERE WAS SUFFICIENT CAUSE WHICH PREVENTED THE APPELLANT FROM PRODUCING THIS LETTER BEFORE THE AO WHEN SIMILAR LETTERS OF THE SIMILAR DATE WERE CO NSIDERED BY THE AO IN TWO OTHER CASES OF THE APPELLANTS GROUP AND THESE WERE CRUCIAL AND RELEVANT FOR THE PURPOSE OF DISPOS AL OF THE APPEALS. THE AO WITHOUT OBJECTING TO THE ADMISSION OF THE ADDITIONAL EVIDENCES OFFERED HIS COMMENTS ON MERITS ON THE SANCTION LETTERS OF LOANS GIVEN TO THE LENDERS OF T HE ASSESSEE BY THE FINANCIAL INSTITUTIONS IN HIS REMAND REPORT. 10. THE CIT(A) NOTED THAT THE ASSESSEE HAD PLEDG ED THE EQUITY SHARES OF JSW STEEL LTD. AND JSW ENERGY LTD. BUT DID NOT FURNISH THE DETAILS LIKE NUMBER OF SHARES PLEDG ED, VALUE OF EACH SHARE, UNIQUE SERIAL NUMBERS OR THE IDENTIFICA TION NUMBERS, OF THESE SECURITIES PLEDGED FOR SUCH LOANS . HE ALSO STATED THAT THERE WAS NO INDICATION AS TO WHETHER T HE DEMAT ACCOUNTS OF THE LENDING COMPANIES SUBMITTED BY THE APPELLANT VIDE ITS REJOINDER WERE FILED BEFORE THE AO AS THER E WAS NO REFERENCE OF THESE DOCUMENTS EITHER IN THE ASSESSME NT ORDER OR IN THE APPELLATE SUBMISSIONS OR THE REMAND REPOR T. THEREFORE, HE DID NOT CONSIDER THE SAID DEMAT ACCOU NTS WHILE ADJUDICATING THE ISSUE.THE LD. CIT(A) HELD THAT ON PERUSAL OF ITA NOS.1170 TO 1173/DEL/2020 8 THE FINANCIAL STATEMENTS OF THE LENDING COMPANIES, IT IS EVIDENT THAT THE LENDING COMPANIES WERE NOT HAVING ADEQUATE SECURITIES OR FUNDS AVAILABLE TO MEET THE VARIOUS E XIGENCIES LIKE TOP-UP / DROP OF SECURITY COVER /DIP IN THE M ARKET PRICE OF SECURITIES PLEDGED TO FULFILL THE CONDITIONS STI PULATED IN THE SANCTION LETTERS WHICH SHOWED THAT THERE WAS NO DUE DILIGENCE BY THE NBFC IN THIS REGARD. EVEN THE PURPOSE OF SOM E OF THESE LOANS AS PER THE SANCTION LETTERS DID NOT INC LUDE THE PURPOSE FOR PROVIDING UNSECURED LOANS TO THE ASSESS EE COMPANY. FURTHER, THE AMOUNT OF UNSECURED LOAN PROV IDED BY THE LENDER COMPANIES IS MUCH HIGHER THAN THEIR NET WORTH / RESERVES AND SURPLUS. THE RETURNED INCOME OF THE LE NDER COMPANIES IS SIGNIFICANTLY LOWER THAN THE LOANS FUR NISHED BY THEM. THUS, THE LENDER COMPANIES DO NOT HAVE SUFFIC IENT INTERNAL RESOURCES TO PROVIDE SUCH HUGE LOANS. 11. THE LD. CIT(A) STATED THAT THE INVESTMENT OF BOTH THE LENDING COMPANIES IN THE EQUITY SHARES OF JSW S TEEL LTD. AND JSW ENERGY LTD. IS NIL VALUE AS PER THEIR AUDIT ED FINANCIAL STATEMENTS AND THE ASSESSEE HAS NOT FURNI SHED ANY DOCUMENTARY EVIDENCE TO ESTABLISH THAT THESE TWO EN TITIES OWNED THE LISTED EQUITY SHARES OF THESE TWO COMPANI ES. IN THE ABSENCE OF EVIDENCE OF THE OWNERSHIP OF THE SECURIT IES BY THE TWO LENDER COMPANIES, THE IDENTITY OF THE ACTUAL PR OVIDERS OF THE SECURITY IS NOT ESTABLISHED. THUS, THE TWO LEND ER COMPANIES HAVE NOT RECEIVED LOANS ON ACCOUNT OF THE IR INTERNAL RESOURCES OR OWN ASSETS / NET WORTH. 12. IN VIEW OF THE ABOVE FINDINGS, THE LD. CIT(A ) HELD THAT THE APPELLANT FAILED TO PROVE THE IDENTITY AND ITA NOS.1170 TO 1173/DEL/2020 9 CREDITWORTHINESS OF THE ALLEGED LENDING COMPANIES A ND THE GENUINENESS OF THE TRANSACTIONS OF UNSECURED LOANS AND THEREFORE, UPHELD THE ACTION OF THE ASSESSING OFFIC ER. ARGUMENTS ON BEHALF OF THE ASSESSEE 13. THE LD. COUNSEL OF THE ASSESSEE FIRST OF AL L SUBMITTED THAT THE QUESTIONNAIRE DATED 24/12/2019 I SSUED BY THE AO AND THE DATE FIXED FOR THE HEARING WAS ON 26/12/2019 ASKING A LONG LIST OF DETAILS REGARDING THE LENDER COMPANIES SINCE THE DATE OF THEIR INCORPORATION, LI KE ELECTRICITY BILLS, ROC FILING, RENT AGREEMENT, EMPL OYEE DETAILS, COPIES OF ITRS AND AUDITORS REPORTS ON THE BASIS OF A COMMISSION ISSUED IN CASE OF JINDAL SAW LTD. THE AS SESSEE SUBMITTED THAT FIRSTLY, THE AO COULD CALL FOR THE S AID INFORMATION FOR A PERIOD NOT EXCEEDINGLY MORE THAN 3 YEARS PRECEDING THE PREVIOUS YEAR AS PER THE PROVISO TO T HE SECTION 142(1) OF THE ACT, THOUGH THE AO SOUGHT INFORMATION THAT TOO OF THE LENDER COMPANIES SINCE THEIR EXISTENCE WHICH WAS NOT LAWFUL. SECONDLY, EVEN THOUGH THE ASSESSEE SUBMITTE D ALL THE DESIRED INFORMATION TO THE AO BUT THE ASSESSEE WAS NOT ALLOWED SUFFICIENT AND ADEQUATE OPPORTUNITY OF HEAR ING FOR FILING A VERY LARGE LIST OF DETAILS AND PRINCIPLES OF NATURAL JUSTICE WERE IGNORED. 14. HE FURTHER SUBMITTED THAT THE FOLLOWING DOC UMENTS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINE NESS OF THE LENDERS WERE FILEDBEFORE THE AUTHORITIES BELOW AND HAVE ALSO BEEN PLACED IN THE PAPER BOOKS BEFORE US: A) CONFIRMATIONS FROM THE LENDERS; B) BANK STATEMENTS OF THE LENDERS FROM WHERE THE LOANS WERE GIVEN TO THE ASSESSEE. ITA NOS.1170 TO 1173/DEL/2020 10 C) PAN AND ACKNOWLEDGMENTS FOR FILING THE RETURNS OF INCOME BY THE LENDER COMPANIES FROM THE AYS 2011-12 TO 2017-18 WHEREVER APPLICABLE. D) AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31/03/2015 TO 31/03/2017 FILED BY THE LENDERS TO SH OW THAT BOTH THE COMPANIES HAD ANNUAL INCOME OF APPROXIMATELY RS 30 CRORES EACH IN EACH OF THE LAST THREE YEARS INCLUDING THE EXEMPT INCOME FROM DIVIDENDS. E) INCORPORATION CERTIFICATES OF THE LENDERS; F) DOCUMENTS REGARDING THE REGISTERED OFFICE ADDRESS A ND CHANGE THEREIN ALONG WITH BOARD RESOLUTIONS; G) DETAILS OF DIRECTORS; H) NOC FROM THE OWNER OF THE PREMISES USED AS REGISTER ED OFFICE; I) BOARD RESOLUTION AND RELEVANT FORM AOC-5 FILED WITH ROC FOR NOTICE OF THE ADDRESS AT WHICH BOOKS OF ACCOUNTS (EFFECTIVELY THE BUSINESS PREMISES) WERE T O BE MAINTAINED BY THE LENDERS; J) FORM NO. INC 22A FILED WITH ROC (ACTIVE COMPANY TAGGING IDENTITIES AND VERIFICATION ALONGWITH PHOTO S OF THEIR DIRECTORS) K) VARIOUS OTHER FORMS LIKE AOC-4, DIR -12, INC 22, MGT -7 FILED WITH ROC BY THE LENDERS FOR FILING OF THE AUD ITED FINANCIAL STATEMENTS, ANNUAL RETURNS, DETAILS OF DIRECTORS; L) PHOTOCOPIES OF THE ASSESSMENT ORDERS PASSED U/S 143(3) OF THE ACT FOR THE AYS 2015-16, 2016-17 AND 2017-18 IN THE CASE OF BOTH THE LENDER COMPANIES M) PHOTOCOPIES OF THE LOANS SANCTION LETTERS OF THE NBFCS GRANTING LOANS TO BOTH THE LENDERS. ITA NOS.1170 TO 1173/DEL/2020 11 N) MASTER DATA OF THE LENDER COMPANIES FROM THE OFFICI AL WEBSITE OF MCA WHICH CLEARLY SHOW THAT THE BOOKS OF ACCOUNT OF THE LENDERS WERE MAINTAINED AT 28, NAJAF GARH ROAD, NEW DELHI. IT ALSO CLEARLY SHOWS THAT THE LI ST OF LISTED EQUITY SHARES PLEDGED BY THEM FOR TAKING LOA NS SINCE EACH CHARGE ON THE BORROWINGS HAS TO BE STATUTORILY REGISTERED WITH THE ROC BY A COMPANY. O) PHOTOCOPIES OF THE ENVELOPES IN WHICH THE NOTICES W ERE SENT BY THE NCLT TO THOSE TWO LENDER COMPANIES AS L ATE AS ON 09/12/2019 (JUST LESS THAN TWO WEEKS EARLIER THAN THE DATE OF THE ALLEGED AND IMPUGNED ENQUIRY B Y THE INSPECTOR OF THE ADIT (INV.) AT RAIPUR) ON THE REGISTERED OFFICE ADDRESS AND RECEIVED BY THE LENDE R COMPANIES TO SHOW THAT THE REGISTERED OFFICE OF THE COMPANIES SITUATED AT THE RAIPUR ADDRESS WAS PROPER LY FUNCTIONAL . P) TAX AUDIT REPORTS OF THE LENDERS; Q) CHEQUE BOOK COUNTERFOILS TO SHOW THAT THE BANK ACCOUNTS WERE MAINTAINED AT NEW DELHI ADDRESS BY TH E LENDERS; R) REGISTRATION CERTIFICATE UNDER SERVICE TAX, GST AND DVAT ISSUED TO LENDERS; S) TAN AND PAN ALLOTMENT LETTERS ISSUED TO LENDERS; T) NOTICES ISSUED BY THE INCOME-TAX DEPARTMENT, CIT(A) , ITAT AND BY CPC TO THE LENDER COMPANIES FOR VARIOUS PROCEEDINGS UNDERTAKEN FROM TIME TO TIME. 15. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT BOTH THE LENDERS HAD HUGE HOLDING BY WAY OF INVESTM ENTS IN THE EQUITY SHARES OF SOME LISTED COMPANIES OF THE G ROUP AND ITA NOS.1170 TO 1173/DEL/2020 12 THE MARKET VALUE OF SUCH INVESTMENT WAS RS. 1600 CR ORES IN THE CASE OF GLEBE AND RS. 2800 CRORES IN THE CASE O F DANTA AS ON 31/03/2017 AS PROPERLY DISCLOSED AS PER STATUTOR Y REQUIREMENTS IN THEIR AUDITED ANNUAL FINANCIAL STAT EMENTS. THE LENDER COMPANIES PLEDGED SOME OF ITS INVESTMENT AS SECURITY AND BORROWED LOANS FROM SOME REPUTED AND W ELL- KNOWN NBFCS. THUS, THE SOURCE OF THE SOURCE WAS VE RY WELL EXPLAINED AND SUBSTANTIATED WITH THE DOCUMENTS. HE FURTHER SUBMITTED THAT ONE IMPORTANT FACT IS THAT THE REVEN UE HAS ACCEPTED IN THE ASSESSMENT PROCEEDINGS OF THE LENDE RS U/S 143(3) OF THE ACT, THE AUTHENTICITY OF THE LOANS TA KEN BY THEM FROM THE NBFCS AND ARGUED THAT THE SAME CANNOT AT A LL BE ASSESSED AS UNEXPLAINED CASH CREDIT IN THE HANDS OF THE ASSESSEE WHO NOT ONLY PROVED ITS SOURCE BY MEETING ALL THE NECESSARY THREE INGREDIENTS STIPULATED U/S 68 OF TH E ACT, BUT ALSO THE SOURCE OF SOURCE OF THE LENDERS. THUS, ALL EVIDENCES NECESSARY TO DISCHARGE THE ONUS U/S 68 OF THE ACT H AVE BEEN PLACED ON RECORD TO PROVE THE IDENTITY, CREDITWORTH INESS OF THE LENDERS AND GENUINENESS OF THE TRANSACTIONS AND THE ONUS CAST ON IT HAS BEEN FULLY DISCHARGED. 16. THE LD. COUNSEL FURTHER ARGUED THAT PAYMENT OF THE RENT OR ELECTRICITY EXPENSES OR OWNING FIXED ASSETS ARE NOT THE CRITERION WHICH PROVES THE PHYSICAL EXISTENCE OF A COMPANY. EVEN THE ASSESSEE ALSO DID NOT PAY ANY RENT OR ELEC TRICITY AS THE LENDER COMPANIES FOR THE NEW DELHI. THE ASSESSE E ALSO SUBMITTED THAT SOME OF THE DIRECTORS OF DANTA, A LE NDER COMPANY ARE THE DIRECTORS OF THE ASSESSEE. EVEN GLE BE WAS A SHAREHOLDER OF THE ASSESSEE COMPANY SINCE THIS YEAR . THE FACT THAT THE LENDER COMPANIES ARE ASSOCIATED COMPANIES IS VERY ITA NOS.1170 TO 1173/DEL/2020 13 MUCH DISCLOSED IN THE AUDITED ANNUAL ACCOUNTS OF TH E ASSESSEE AS WELL AS OF THE LENDER COMPANIES AS THIS DISCLOSURE IS STATUTORILY REQUIRED UNDER THE COMPANIES ACT 201 3. 17. THE LD. COUNSEL ALSO SUBMITTED THAT ALL TH ESE DOCUMENTARY EVIDENCES PROVE BEYOND DOUBT NOT ONLY T HE PHYSICAL EXISTENCE OF THE BUSINESSES OF THE LENDER COMPANIES BUT ALSO PROVE THAT THEY HAD BANK ACCOUNTS, ACTUALL Y CARRIED ON BUSINESS ACTIVITIES, RECEIVED ACTUAL INCOME IN C RORES OF RUPEES, HAD INVESTMENT BASE AT COST WITH SUBSTANTIA L HIGHER MARKET VALUE OF THOSE ASSETS TO SECURE LOANS BY PLE DGING SOME OF THE SAID INVESTMENTS AND THEN ADVANCE FOR THEIR BUSINESSES OF MONEY LENDING AS PER THEIR OBJECTS AND INCURRED EXPENSES, EARNED AND PAID INTEREST ON THE LOANS, GOT THEIR AC COUNTS AUDITED UNDER COMPANIES ACT AS WELL AS INCOME-TAX A CT, FILED THEIR RETURNS OF INCOME WHERE THOSE WEREASSESSED U/ S 143(3) OF THE ACT, COMPLIED VARIOUS PROVISIONS OF COMPANIE S ACT BY FILING STATUTORY FORMS, RECEIVED NOTICES FROM GOVER NMENT AUTHORITIES, COMPLIED THEM, ASSESSED UNDER VARIOUS TAX LAWS. THEY ALSO PROPERLY DISCLOSED THEIR BUSINESS ADDRESS WITH THE ROC WHICH WAS THE SAME AS IN THE PAN DATABASE OF TH E REVENUE AND AT WHICH ALL THE INCOME-TAX PROCEEDINGS WERE CONDUCTED FROM THE LAST MANY YEARS. HE PLACED RELIA NCE ON THE DECISION IN THE CASE OF SATYAM SMERTEX (P) LTD. VS DCIT 2020-TIOL-722-ITAT-KOL IN SUPPORT OF HIS CONTENTION THAT AN ENTITY WHICH IS DULY ASSESSED BY THE INCOME-TAX DEPARTMENT CANNOT BE PRESUMED AS NON-EXISTING IN OT HER ASSESSMENT AND ARGUED THAT, SINCE BOTH THE LENDERS WERE DULY ASSESSED U/S 143(3) OF THE ACT WHEREIN HUGE ADDITIO NS WERE ITA NOS.1170 TO 1173/DEL/2020 14 ALSO MADE IN THEIR ASSESSABLE INCOMES, THOSE COMPAN IES CANNOT BE CONSIDERED AS NON-EXISTENT IN ANY MANNER. 18. IT WAS FURTHER SUBMITTED THAT THE FACT THAT THE LENDERS WERE HAVING THEIR PRINCIPAL PLACE OF BUSINE SS AT NEW DELHI WAS WITHIN THE KNOWLEDGE OF THE ASSESSING OFF ICER AS THE SAME WAS VERY MUCH MENTIONED IN ALL THE DETAILS SUB MITTED BY THE ASSESSEE TO THE ASSESSING OFFICER, E.G. ON T HE BANK STATEMENTS, ACKNOWLEDGMENT FOR FILING THEIR INCOME- TAX RETURNS AND ASSESSMENT ORDERS PASSED U/S 143(3) OF THE ACT OF THE LENDERS AND THE WEBSITE OF MCA WHICH WASVISI TED AND VERIFIED BY THE AO. NO ENQUIRY WAS CONDUCTED FROM T HE LENDERS AT THE SAID ADDRESS DURING THE ASSESSMENT PROCEEDINGS OR EVEN DURING THE REMAND PROCEEDINGS E VEN THOUGH THE AO WAS REQUIRED TO MAKE INQUIRIES ON THE NEW DELHI ADDRESS OF THE LENDERS AS PER THE MANDATORY RULE 127 OF THE INCOME-TAX RULES 1962 WHICH PROVIDES THAT SERVICE OF THE NOTICE, SUMMONS, REQUISITION, ORDER AND OTHER COMMUNICATION SHOULD BE MADE FIRST OF ALL AT THE AD DRESS AVAILABLE IN THE PAN DATABASE OR AT THE ADDRESS AVA ILABLE WITH THE BANK WHERE THE ASSESSEE MAINTAINS ACCOUNT. IN S UPPORT HE RELIED UPON THE JUDGMENTS IN THE CASE OF PCIT VS I-VEN INTERACTIVE LTD. CIVIL APPEAL NO. 8132 OF 2019 ARIS ING OUT OF SLP (C) NO. 3530/2019 DATE OF JUDGMENT 18/10/201 9 AND HARJEET SURAJPRAKASH GIROTRAVS UOI 2019-TIOL-15 61- HC-MUM-IT. 19. LD. COUNSEL SUBMITTED THAT THE ASSESSING OFFICER MERELY RELIED UPON THE FLAWED ENQUIRY REPORT SENT B Y A COMMISSIONER APPOINTED U/S 131(1)(D) OF THE ACT IN THE CASE ITA NOS.1170 TO 1173/DEL/2020 15 OF JINDAL SAW LTD. AND DID NOT MAKE ANY ENQUIRY U/S 133(6) OR 131 OF THE ACT REGARDING THE SAID LOANS EITHER F ROM THE LENDERS AT THEIR ACTUAL REGISTERED OFFICES AT RAIPU R OR AT THEIR NEW DELHI ADDRESS OR FROM THE ASSESSING OFFICER OF LENDER COMPANIES SITUATED IN THE SAME CR BUILDING. HE ARGU ED THAT OTHERWISE ALSO THE COMMISSIONER WAS REQUIRED TO INV ESTIGATE ON THE SPECIFIC ISSUES REGARDING THE H. NO. C-2, ST AFF COLONY, ITS AREA, PRESENT STATUS, SIGN BOARDS, NAME PLATES ETC. OF DANTA AND GLEBE AND TO TAKE PHOTOGRAPHS OF THE LOCA TION AND SURROUNDING AND MAKE ENQUIRIES FROM THE LOCALS IN T HE VICINITY OF H.NO. C-2. HOWEVER, ON PERUSAL OF THE CONTENTS OF THE ALLEGED REPORT IT IS CLEAR THAT THE INSPECTOR O F THE ADIT (INV.) RAIPUR NEVER VISITED THE H. NO. C-2 BUT HAD ONLY VISITED TO THE MAIN GATE OF THE RESIDENTIAL COLONY AND MET THE WATCHMAN OUTSIDE THE COLONY GATE. NO ENQUIRIES WERE MADE FROM ANY LOCALS IN THE VICINITY OF THE FLAT NO. C-2 AS TO THE EXISTENCE OF THESAIDTWO ENTITIES IN THE PREMISES, T HOUGH SPECIFICALLY DESIRED BY THE AO IN HIS REFERENCE. TH IS PROVES THAT NOBODY EVER VISITED THE SAID FLAT WHICH HAD DE SIRED NAME PLATE ETC. AND OTHER INFORMATION AS SUBMITTED TO TH E ROC. THE INSPECTOR DID NOT TAKE PHOTOGRAPH ON BASELESS R EASONS MENTIONED IN THE REPORT. THUS, THE COMMISSIONER DID NOT AT ALL MAKE ENQUIRIES AS PER THE COMMISSION ISSUED TO HIM. FURTHER, A WATCHMAN EMPLOYED AT THE GATE OF RESIDEN TIAL COLONY CANNOT AT ALL KNOW THE NAMES OF THE ALL THE COMPANIES HAVING OFFICES IN THE COLONY. MOREOVER, THE NAME OF THE WATCHMAN WHO WAS ASKED IS NOT MENTIONED IN THE ALLE GED REPORT. THUS, NO COGNIZANCE OF THIS FLAWED REPORT S ENT IN THE CASE OF ANOTHER ASSESSEE CAN BE TAKEN AGAINST THE A PPELLANT IN ANY MANNER. THE COMMON SURNAME JINDAL MENTIONE D BY ITA NOS.1170 TO 1173/DEL/2020 16 THE WATCHMAN FOR THE SAID COLONY AS BELONGING TO SH OULD HAVE ALERTED THE INSPECTOR WHO WAS MAKING AN INQUIRY IN THE CASE OF JINDAL SAW LTD. AND HE SHOULD HAVE MADE FURTHER ENQUIRIES AS HAS BEEN HELD IN THE CASE OF DCIT VS M/S GDA FINVEST AND TRADE (P) LTD. 2014-TIOL-1485-ITAT-DEL. 20. LD. COUNSEL ALSO SUBMITTED THAT THE CIVIL PROCEDURE CODE OR THE INCOME-TAX ACT HAS NO PROVISI ON AUTHORIZING THE COMMISSIONER TO SUB DELEGATE HIS FU NCTIONS. THE COMMISSIONER APPOINTED U/S 131(1)(D) OF THE ACT WAS REQUIRED TO CONDUCT INVESTIGATIONS HIMSELF WHEREAS IN THIS CASE, THE INVESTIGATION WAS MADE BY SOME UNNAMED INSPECTOR. THUS, THE PROCEDURE LAID DOWN FOR SUCH E NQUIRIES THROUGH THE COMMISSION WAS NOT FOLLOWED. FURTHER, T HE COPY OF THE INSPECTORS REPORT WAS NOT PROVIDED TO THE A PPELLANT. IT WAS ALSO ARGUED THAT THE REPORT OF THE COMMISSIONER IS A PIECE OF EVIDENCE WHICH CAN BE REBUTTED BY OTHER EV IDENCE AND THE REPORT OF THE COMMISSIONER HAS NOT GREATER SANC TITY THAN ANY OTHER EVIDENCE. THE APPELLANT HAS PLACED ON REC ORD MANY EVIDENCES TO PROVE THAT THE REPORT OF THE COMMISSIO NER OR THE INFERENCE DRAWN THEREON IS NOT AT ALL CORRECT. HOWE VER, NO VERIFICATION OF THE SAID DOCUMENTARY EVIDENCES WAS CARRIED AT ALL BY THE AO DURING THE ASSESSMENT PROCEEDINGS OR IN THE REMAND PROCEEDINGS. 21. THE LD. COUNSEL OF THE APPELLANT FURTHER ARGU ED THAT THE REPORT OF THE COMMISSIONER CANNOT BE USED AS EV IDENCE WITHOUT ALLOWING AN OPPORTUNITY TO CROSS-EXAMINE HI M IN VIEW OF THE ORDER XXVI RULE 10(2) OF THE CPC AND PLACED R ELIANCE ON THE UNDERNOTED AUTHORITIES: ITA NOS.1170 TO 1173/DEL/2020 17 I) VIJ KAMAGAR SAHAKARI PATSANSTHA LTD. VS RAMKRUSHNA DHONDIRAM IN WRIT PETITION NO. 4974 OF 2008 (BOMBAY HIGH COURT) II) SMT. VADDA RAJESWARAMMA VS DR. V.L. NARRASMIHA CHARYULU AIR 1998 AP 202 III) TIMA MENGHRE AND OTHERS VS THE COLLECTOR IN WRIT PETITION NO. 808 OF 2018 (BOMBAY HIGH COURT) IV) SKETCH @PALANICHAMY VS AZHAGU MALI IN CRP (NPD)(MD) NOS. 1607 AND 1608 OF 2015 (MADRAS HIGH COURT) V) A NARAYANI VS KITTAN @ KRISHNAN (ORIGINAL PETITION NO. 10521 OF 1996 IN HIGH COURT OF KERELA) VI) AMIYA BALA PAUL VS CIT (2003) 262 ITR 407 (SC) 22. HE FURTHER SUBMITTED THAT ASSESSEE WAS NOT ALLOWED ANY OPPORTUNITY TO CONFRONT AND CROSS-EXAMI NE THE COMMISSIONER APPOINTED U/S 131(1)(D) OF THE ACT AND HIS INSPECTOR WHO PREPARED THE REPORT WAS ALLOWED THOUG H THE APPELLANT SPECIFICALLY REQUESTED FOR THE SAME BEFOR E THE CIT(A) AND THUS, THE SAID REPORT LOSES ITS EVIDENTIARY VAL UE AND CANNOT BE RELIED IN ANY MANNER EVEN AS PER THE LAW IN VIEW OF THE APEX COURTS JUDGMENT IN THE CASE ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONEROFCENTRAL EXCISE (2015) 281 CTR 241 (SC) / 2015-TIOL-255-SC-CX AND CIT VS SUNITA DHADDA 2018-TIOL-212-SC-IT. 23. AS REGARDS THE ALLEGATIONS MADE IN THE REMAND REPORT, HE SUBMITTED THAT THE LOANS SANCTION LETTER S OF THE NBFC WERE PLACED ON RECORD VIDE LETTER DATED 28/12/ 2019. A COPY OF THE LETTER AND ACKNOWLEDGEMENT FOR UPLOADIN G THE ITA NOS.1170 TO 1173/DEL/2020 18 SAME DURING ASSESSMENT PROCEEDINGS WAS PLACED ON RE CORD. THE TERMS AND CONDITIONS BETWEEN THE LENDERS AND TH E NBFCS WERE TO BE DECIDED BY THEM ON THE BASIS OF THEIR PR UDENCE AND CANNOT BE QUESTIONED BY THE REVENUE IN THE CASE OF THE ASSESSEE AND ARE IRRELEVANT FOR THE MATTER UNDER CONSIDERATION. THE ASSESSEE REFERRED TO THE LOANS S ANCTION LETTERS WHERE THE PURPOSE OF LOAN WAS MENTIONED AS EXTENDING ANY FINANCIAL ASSISTANCE TO ONE OR MORE ENTITIES BE LONGING TO THE PROMOTER GROUP (PAGE 288 OF THE PB) OR NORMAL BUSINESS OPERATIONS AND LOANS AND ADVANCES (PAGE 298E OF TH E PB). AS REGARDS THE SHARES PLEDGED WITH THE NBFCS, IT WAS S UBMITTED THAT THE AUDITED FINANCIAL STATEMENTS OF THE LENDER S CLEARLY SHOW THAT THESE COMPANIES HAVE INVESTMENTS IN THE L ISTED EQUITY SHARES OF THE GROUP COMPANIES WHOSE MARKET V ALUE WAS THOUSANDS OF CRORES OF RUPEES AND SOME OF WHICH ONLY WERE PLEDGED AS SECURITY FOR BORROWING THE LOANS. T HE NUMBER OF SHARES PLEDGED FOR TAKING THE LOANS ARE CLEARLY MENTIONED IN THE BALANCE SHEETS ITSELF IN THE NOTES THEREIN. TH E INVESTMENTS WERE SHOWN AS NIL VALUE IN THE BALANCE SHEET SINCE THE COST OF ACQUISITION OF THE SHARES WAS NIL FOR THE LENDER COMPANIES BUT IT DOES NOT MEAN THAT SAID SHA RES WERE NOT HELD BY THE LENDER COMPANIES OR DID NOT CARRY A NY VALUE. THESE INVESTMENTS AND BORROWING OF THE LOANS BY PLE DGING THE SAID EQUITY SHARES HAVE ALREADY BEEN ACCEPTED IN TH E ASSESSMENTS OF THE LENDER COMPANIES MADE U/S 143(3) OF THE ACT BY THE REVENUE FROM THE EARLIER ASSESSMENT YEAR S. 24. THE LD. COUNSEL SUBMITTED THAT THE EQUITY S HARES OF THE LISTED COMPANIES NOW DO NOT HAVE UNIQUE IDEN TIFICATION NUMBERS AS ALL ARE COMPULSORILY IN THE DIGITAL FORM IN A DEMAT ITA NOS.1170 TO 1173/DEL/2020 19 ACCOUNT. WHEN THE SHARES ARE KEPT AS SECURITY AGAIN ST LOAN, A LIEN IS MARKED ON THE NUMBER OF PLEDGED SHARES IN T HE DEMAT ACCOUNT. THE LOANS SANCTION LETTERS ISSUED BY THE N BFCS CLEARLY SHOW THAT THE LENDER COMPANIES HAD PLEDGED THE LISTED EQUITY SHARES HELD BY THEM IN GROUP COMPANIES TO AV AIL LOANS AND A PROPER LIEN WAS MARKED IN THE DEMAT ACCOUNTS OF THE LENDER COMPANIES. PHOTOCOPIES OF THE DEMAT ACCOUNT SHOWING LIEN MARKED WERE ALSO PLACED ON RECORD. HE FURTHER PLACED PHOTOCOPIES OF THE LEDGER ACCOUNTS OF THE LE NDERS IN ITS BOOKS OF ACCOUNT FROM 01/04/2016 TILL DATE TO SHOW THAT THE ENTIRE LOAN WAS REPAID BY THE ASSESSEE TO GLEBE AS WELL AS DANTA IN THE FY 2018-19. RATHER SOME LOAN WAS GIVE N BY THE APPELLANT TO BOTH GLEBE AND DANTA IN THE FY 2019-20 AND ARGUED THAT NO ADDITION U/S 68 OF THE ACT CAN BE MA DE FOR THE LOANS WHICH HAVE BEEN REPAID IN VIEW OF PR.CIT VS SKYLARK BUILD 2018-TIOL-2323-HC-MUM-IT AS THE ONUS UNDER THE SAID SECTION STANDS DISCHARGED. THE IDENTITY AND CREDITWORTHINESS OF THE LENDERS AND GENUINENESS OF THE LOAN TRANSACTION STANDS PROVED BEYOND DOUBT. THE ASSESSI NG OFFICER NEITHER MADE ENQUIRIES NOR ISSUED SUMMONS N OR BROUGHT ANY EVIDENCE ON RECORD TO CONTROVERT THE EV IDENCES PLACED ON RECORD BY THE ASSESSEE. THUS, THE ADDITIO N SO MADE SHOULD BE DELETED. ARGUMENTS OF DR 25. THE LD. DR VEHEMENTLY RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT, HERE IN THIS CASE THE AO ON THE BASIS OF REPORT DID FOUND THAT THE LENDER CO MPANIES WERE NOT FOUND AT THEIR REGISTERED OFFICE HENCE THE GENUINENESS AND IDENTITY OF THE LENDER COMPANIES CO ULD NOT ITA NOS.1170 TO 1173/DEL/2020 20 BE ESTABLISHED. FURTHER, THE LD. CIT (A) HAS DISCUS SED IN DETAIL THAT HOW THE CREDITWORTHINESS OF THE PARTIES AND THE SOURCE OF FUNDS COULD NOT BE ESTABLISHED HENCE THE LOAN CREDITED IN THE BOOKS OF THE ASSESSEE COMPANIES COU LD NOT BE ESTABLISHED. IT IS WELL SETTLED THAT THE SOURCE OF THE CREDITOR AND THE CREDITWORTHINESS HAS TO BE ESTABLISHED BY T HE ASSESSEE WITH COGENT MATERIALS AND SUBSTANTIATE THE SAME. IF NOT THEN ENTIRE LOAN HAS TO BE ADDED US 68. DECISION 26. WE HAVE HEARD THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDERS AS WELL AS THE MATERIAL PLACED AND REFERRED TO BEFORE US. ON GOING THROUGH THE SAID ORDERS AS WELL AS THE DOCUMENTS AN D EVIDENCES FILED BEFORE THE ASSESSING OFFICER AND CI T (A), IT IS SEEN THAT ASSESSEE COMPANY HAD TAKEN LOANS OF RS. 167,98,70,000/- FROM ITS TWO ASSOCIATED CONCERNS NA MELY, GLEBE TRADING (P) LTD. AND DANTA ENTERPRISES (P) LT D. DURING THE YEARFOR WHICH THE ADDITION HAS BEEN MADE U/S 68 OF THE ACT. 27. UNDISPUTEDLY, ALL THESE THREE COMPANIES, I.E ., THE ASSESSEE AND THE TWO LENDER COMPANIES BELONG TO THE SAME JINDAL GROUP AND THE LENDER COMPANIES HAVE LENT THE MONEY TO THE ASSESSEE, SOME OUT OF THEIR OWN FUNDS AND RE MAINING OUT OF THE LOANS BORROWED FROM OTHER REPUTED NBFCS. THE DEEMING FICTION UNDER SECTION 68 OF THE ACT CASTS A N ONUS ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CRED IT. THE SOURCE OF THE CREDIT CAN BE ESTABLISHED BY PRIMA FA CIE ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF T HE LENDER ITA NOS.1170 TO 1173/DEL/2020 21 AND GENUINENESS OF THE TRANSACTIONS. IF ASSESSEE IS ABLE TO EXPLAIN THE NATURE AND SOURCE WITH EVIDENCES THEN O NUS SHIFTS UPON THE ASSESSING OFFICER TO REBUT THE EXPLANATION WITH SOME MATERIAL OR INQUIRY ON RECORD. THE ASSESSEE PLACED ON RECORD: I) THE CONFIRMED COPIES OF ACCOUNTS OF BOTH THE LEN DERS; II) ACKNOWLEDGMENTS FOR FILING THEIR RETURNS OF INCOME FROM THE AYS 2014-15 TO 2017-18; III) ASSESSMENT ORDERS PASS ED U/S 143(3) OF THE ACT FOR THE AYS 2015-16 TO 2017-18; I V) AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDING ON 31/03/ 2015 TO 31/03/2017; V) COPIES OF THEIR BANK ACCOUNTS; VI) INCORPORATION CERTIFICATES; VI) COPIES OF THE FORMS FILED BY THEM BEFORE ROC, THEIR MASTER DATA ON THE WEBSITE OF ROC ; VII) NOTICES SERVED BY THE INCOME-TAX DEPARTMENT ON THES E COMPANIES FOR VARIOUS ASSESSMENT PROCEEDINGS; VIII) THEIR GST AND VAT REGISTRATION CERTIFICATE; IX) THEIR PAN AND TAN ALLOTMENT LETTERS AND VARIOUS OTHER EVIDENCES. THUS , THESE EVIDENCES CLEARLY SHOWS THAT THESE COMPANIES ARE RE GISTERED UNDER THE COMPANIES ACT AND HAVE BEEN REGULAR IN FI LING ALL THE STATUTORY FORMS BEFORE THE ROC. EVEN THE SECURI TIES PLEDGED WITH THE NBFCS HAVE BEEN DULY DECLARED TO T HE ROC BY FILING RELEVANT FORMS CREATING STATUTORY CHARGES IN FAVOUR OF THE NBFCS AND IS VERY MUCH VISIBLE ON THE MASTER DA TA / CARD OF THE COMPANIES ITSELF MAINTAINED BY THE ROC. THE LENDER COMPANIES ARE REGISTERED UNDER VARIOUS STATUTES LIK E VAT AND GST. THE FINANCIAL STATEMENTS OF THESE COMPANIES AR E AUDITED UNDER THE INCOME-TAX AS WELL AS COMPANIES ACT. THES E COMPANIES HAVE BEEN REGULARLY FILING THEIR RETURNS OF INCOME AND ARE BEING ASSESSED U/S 143(3) OF THE ACT. PAN D ATABASE OF THE ASSESSEE WITH THE INCOME-TAX DEPARTMENT IS ALSO SUFFICIENT TO ACCEPT THE EXISTENCE OF THE ASSESSEE AT THE SAID ADDRESS ITA NOS.1170 TO 1173/DEL/2020 22 UNLESS PROVED CONTRARY BY THE REVENUE BY MAKING PRO PER ENQUIRIES. HERE IN THIS CASE, THE REVENUE FAILED TO PROVE THAT THE LENDER COMPANIES DID NOT PHYSICALLY EXIST AT TH EIR PAN ADDRESSES IN TERMS OF RULE 127 OF THE INCOME-TAX RU LES, 1962. MOREOVER, THE SAID ADDRESS WAS VERY MUCH OFFI CIALLY COMMUNICATED TO THE ROC ALSO. ALL THESE EVIDENCES C LEARLY PROVE THE IDENTITY OF THE LENDER COMPANIES. 28. FURTHER, ON PERUSAL OF THE AUDITED BALAN CE SHEETS OF THE LENDER COMPANIES, IT WAS OBSERVED THAT THESE LENDER COMPANIES HAVE SHOWN EQUITY SHARES OF SOME LISTED COMPANIES OF THE JINDAL GROUP AS THEIR INVESTMENTS. THOUGH THE COST OF THESE SHARES HAS BEEN DECLARED AS NIL B UT THE MARKET VALUE OF THE SAME HAS BEEN DECLARED AT RS. 1 600 CRORES AND RS. 2800 CRORES IN CASE OF GLEBE AND DAN TA RESPECTIVELY (AS APPEARING AT PAGES 158 AND 244 OF THE PB). THIS CLEARLY SHOWS THAT THE INTRINSIC VALUE OF BOTH THE LENDERS RAN INTO THOUSAND CRORES OF RUPEES. 29. WE AGREE WITH THE CONTENTION OF THE LD. CO UNSEL THAT SHOWING THE INVESTMENT IN THE SHARES OF LISTED COMPANIES AT NIL DOES NOT MEAN THAT THOSE SHARES WERE NOT H ELD BY THE LENDER COMPANIES, ALBEIT IT MEANS THAT THE COST OF ACQUISITION OF THE SAID SHARES IS NIL WHICH MAY BE DUE TO VARIO US REASONS, FOR E.G., SHARES RECEIVED AS BONUS OR GIFT ETC., BU T THE INTRINSIC VALUE OR THE MARKET VALUE OF THE INVESTMENT HAS TO BE CONSIDERED FOR ASSESSING THE CREDITWORTHINESS OF TH E COMPANY, PARTICULARLY WHEN THOSE WERE PLEDGED AS SECURITY TO BORROW LOANS FOR ADVANCING FURTHER AS LOANS. IT IS WELL K NOWN THAT THE LOANS ARE GIVEN ON THE BASIS OF MARKET VALUE OF THE SECURITY AND NOT ON THE BASIS OF THEIR COST. THUS, THE MARKE T VALUE / ITA NOS.1170 TO 1173/DEL/2020 23 INTRINSIC VALUE OF THE ASSETS IS A DECISIVE FACTOR OF THE DETERMINING THE CREDITWORTHINESS. 30. ON PERUSAL OF THE LOANS SANCTION LETTERS OF THE NBFCS PLACED ON RECORD AT PAGE NOS. 281-307 OF THE PB, IT IS SEEN THAT PURPOSE OF THESE LOANS WAS NORMAL BUSINES S OR TO GIVE LOANS AND ADVANCES TO ASSOCIATED CONCERNS. THE LENDER COMPANIES TOOK THE LOANS BY PLEDGING THE LISTED EQU ITY SHARES OF SOME JINDAL GROUP COMPANIES AND THEN LENT THE SA ME TO THEIR ASSOCIATED CONCERNS AT HIGHER RATE OF INTERES T AND THUS, EARNED DIFFERENTIAL INTEREST INCOME AS ITS FINANCIN G BUSINESS. FURTHER, THE SAID LOANS WERE SANCTIONED AGAINST THE SECURITY OF THE LISTED EQUITY SHARES PLEDGED BY THE LENDER C OMPANIES WITH THE NBFCS. THE DEMAT ACCOUNTS PLACED AT PAGES 457 - 460 OF THE PB CLEARLY SHOW THAT THE SAID SHARES WER E DULY RECORDED IN IT AND A PROPER LIEN HAS BEEN MARKED ON THE EQUITY SHARES PLEDGED AS SECURITY TOWARDS THE FUNDS BORROWED FROM THE NBFCS. THE SHARES PLEDGED AS SECURITY HAS ALSO BEEN MENTIONED IN THE NOTES TO ACCOUNT ATTACHED T O AUDITED BALANCE SHEET WHERE THE DETAILS OF LOANS AND SECURI TIES ARE ALSO PROPERLY DISCLOSED. THUS, THE SANCTION LETTERS , AUDITED BALANCE SHEETS AS WELL AS THE DEMAT ACCOUNTS PLACED ON RECORD CLEARLY SHOW THAT THESE SHARES WERE OWNED BY THE LENDER COMPANIES IN THEIR OWN NAME, HAD HUGE INTRIN SIC VALUE AND WERE PLEDGED AS SECURITY FOR BORROWING THE LOAN S FROM THE NBFCS. IN VIEW OF THE ABOVE FACTS AND EVIDENCES, IT IS ESTABLISHED BEYOND DOUBT THAT THAT THESE COMPANIES OWNED SHARES OF THE LISTED COMPANIES WORTH THOUSAND CRORE S OF RUPEES AND HAD HUGE NET WORTH. ITA NOS.1170 TO 1173/DEL/2020 24 31. THE CREDITWORTHINESS OF A COMPANY IS PROVED BY ITS INTRINSIC VALUE. IT IS NOT NECESSARY THAT A COMPAN Y SHOULD GIVE LOAN OUT OF OWN FUNDS. THERE IS NO BAR THAT A COMPANY CANNOT GIVE LOAN BY BORROWING LOANS. HOWEVER, EVEN FOR BORROWING LOAN, CREDITWORTHINESS OF THE COMPANY HAS TO BE SEEN AS TO WHETHER THE COMPANY HAS RECEIVED LOAN ON THE BASIS OF ITS OWN VALUE OR JUST AS A PASS-THROUGH EN TITY. A COMPANY CAN BE CREDITWORTHY EVEN IF A COMPANY GIVES A LOAN OUT OF THE LOANS TAKEN FROM OTHERS IF THE SAID LOAN S HAVE BEEN OBTAINED ON THE BASIS OF ITS CREDITWORTHINESS / VAL UE. IT IS NOT A CASE WHERE THE LENDER COMPANIES HAVE OBTAINED LOA NS WITHOUT ANY BASIS FROM UNKNOWN LENDERS BUT IT IS A CASE WHERE THE LENDER COMPANIES HAVE OBTAINED LOANS FROM REPUTED NBFCS BY PLEDGING THEIR OWN VALUABLE SECURITIES AND INTIMATED TO THE ROC IN TIME AND DISCLOSED IN THE A UDITED ANNUAL ACCOUNTS. THUS, THE CREDITWORTHINESS OF THE LENDERS TO GRANT LOANS TO THE APPELLANT STANDS ESTABLISHED. 32. FURTHER, GLEBE DECLARED A NET PROFIT OF RS. 31.22 CRORES AND DANTA DECLARED A NET PROFIT OF RS. 30.27 CRORES FOR THE YEAR ENDED 31/03/2017 AND FILED THEIR RETURNS O F INCOME AT RS. 84.74 LACS AND RS. 6.30 CRORES RESPECTIVELY DUE TO HIGH EXEMPT INCOME BY WAY OF DIVIDENDS RECEIVED BY THEM ON THEIR INVESTMENTS. THESE LENDER COMPANIES WERE ASSESSED U /S 143(3) OF THE ACT FOR THE AY 2017-18 AND THEIR ASSE SSMENT ORDERS WERE PLACED AT PAGES 311-324 AND 328-338 OF THE PB. A PERUSAL OF THE SAME CLEARLY SHOWS THAT HUGE ADDIT ION U/S 14A WAS MADE IN THESE CASES WHICH MEANS THAT THE INVESTMENTS WERE HELD BY THE LENDER COMPANIES AND A CCEPTED BY THE DEPARTMENT AND THE SOURCE OF LOANS TAKEN FRO M THE ITA NOS.1170 TO 1173/DEL/2020 25 NBFCS WEREALSO ACCEPTED IN THEIR HANDS. SINCE, THE GENUINENESS OF THE LOANS TAKEN FROM NBFCS HAS BEEN ACCEPTED THEREIN, THE LOANS GIVEN BY THE LENDER COM PANIES OUT OF THE SAID NBFC LOANS CANNOT BE TREATED AS UNEXPLA INED CASH CREDIT IN THE HANDS OF THE ASSESSEE. 33. THE AO HAS DRAWN OUT A CHART WHICH HAS BEEN REPRODUCED BY THE CIT (A) ALSO AT PAGE 92 OF HIS OR DER WHICH IS REITERATED AS UNDER. AS PER THE SAID CHART, GLEBE H AS GRANTED LOANS OF RS. 557.66 CRORES AND DANTA HAS GIVEN LOAN S OF RS. 185.86 CRORES DURING THE YEAR WHICH IS FAR MORE THA N THEIR INCOME AND RESERVES AND SURPLUS: SR. NO. NAME OF COMPANY UNSECURED LOAN RECEIVED FROM GLEBE TRADING PVT. LTD. (IN RS.) UNSECURED LOAN RECEIVED FROM DANTA ENTERPRISE PVT. LTD. (IN RS.) 1. JINDAL SAW LTD. 105,44,00,000 149,19,00,000 2. JINDAL ITF LTD. 151,83,70,000 16,15,00,000 3. JITF URBAN INFRASTRUCTURE SERVICES LTD. 196,50,00,000 NA 4. JINDAL QUALITY TUBULAR LTD. NA 20,52,00,000 5. JINDAL FITTINGS LTD. 103,89,25,000 NA TOTAL 557,66,95,000 185,86,00,000 ITA NOS.1170 TO 1173/DEL/2020 26 34. IN RESPECT OF THE SAME, THE LD. COUNSEL OF THE ASSESSEE CLARIFIED THAT THIS CHART IS NOT CORRECT B ECAUSE; FIRSTLY, AS IN THE CASE OF JINDAL SAW LTD., IT MENT IONS THE GROSS AMOUNT OF LOANS RELEVANT FOR THE AY 2016-17 AND IN CASE OF OTHER PARTIES BEING THE 4 APPELLANTS HERE, THE GROS S AMOUNTS OF LOANS RELEVANT FOR THE AY 2017-18; AND SECONDLY, THIS CHART SHOWS THE AMOUNT OF LOANS GIVEN BY THE LENDERS BUT DID NOT CONSIDER THE AMOUNTS REFUNDED BY THE BORROWER WHICH BECAME AVAILABLE FOR LENDING AGAIN IN THE NEXT YEAR TO THE APPELLANTS HERE AND ALSO SOME AMOUNTS REFUNDED BY S OME OF THE APPELLANTS WHICH WERE GIVEN TO OTHER APPELLANTS HERE. THUS, IN ABSENCE OF A TELESCOPING THE GROSS AMOUNTS HAVE BEEN MENTIONED WHICH UNDISPUTEDLY BECOMES DOUBLE AS COMPARED TO THE ACTUAL AMOUNTS LENT AT A PARTICULAR TIME. 35. ON PERUSAL OF THE RELEVANT EVIDENCES AND RECONCILIATION PLACED ON RECORD, THE CONTENTION OF THE LD. COUNSEL IS FOUND TO BE CORRECT, BECAUSE THE FIGURES OF LOANS MENTIONED AGAINST JINDAL SAW LTD. WERE FOR THE PREC EDING FINANCIAL YEAR I.E. AY 2016-17. FURTHER, ONLY THE FIGURE OF LOANS GIVEN HAS BEEN MENTIONED THEREIN AND THE FIGU RE OF LOANS REFUNDED DURING THE YEAR HAVE NOT AT ALL BEEN MENTIONED THEREIN. THUS, THIS LIST IS MISLEADING AN D DOES NOT GIVE A CORRECT PICTURE OF THE AMOUNTS OF LOANS GIVE N BY THE LENDER COMPANIES AND CANNOT BE RELIED UPON AT ALL. 36. AS REGARDS THE GENUINENESS OF THE LOAN TRANSACTIONS, ALL THE TRANSACTIONS HAVE BEEN UNDERT AKEN THROUGH PROPER BANKING CHANNEL. THE LENDER COMPANIE S BORROWED LOANS FROM THE NBFCS AND THEN FURTHER ADVA NCED ITA NOS.1170 TO 1173/DEL/2020 27 LOANS TO THE ASSESSEE. THE PURPOSE OF THE LOAN TAKE N FROM NBFCS HAS BEEN CLEARLY MENTIONED IN THE LOANS SANCT ION LETTERS AS FOR NORMAL BUSINESS OR TO ADVANCE FURTHE R LOANS AND ADVANCES. THE ASSESSEE WAS RUNNING INTO HUGE LOSSES DURING THE RELEVANT PERIOD AND THEREFORE, NEEDED FUNDS TO MEET ITS BUSINESS EXIGENCIES AND THUS, BORROWED FUNDS FROM T HE LENDER GROUP COMPANIES. A PERUSAL OF THE LEDGER ACCOUNTS O F THE LENDER COMPANIES IN THE BOOKS OF ACCOUNT OF THE ASS ESSEE FOR THE SUBSEQUENT YEARS ALSO SHOW THAT THE ENTIRE LOAN HAS BEEN REPAID WITH INTEREST AND NOW THE LOAN HAS BEEN GIVE N BY THE APPELLANT TO THE LENDER COMPANIES. ALL THESE FACTS CLEARLY PROVE THE GENUINENESS OF THE TRANSACTIONS. 37. THUS, THE ASSESSEE HAS PLACED SUFFICIENT EVI DENCES TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE LEND ERS AND GENUINENESS OF THE LOAN TRANSACTIONS AND NOW THE ON US SHIFTED ON THE ASSESSING OFFICER TO BRING EVIDENCES ON RECORD TO PROVE OTHERWISE. THE ASSESSING OFFICER ALLEGED THAT THE APPELLANT FAILED TO PROVE THE PHYSICAL EXISTENCE OF THE LENDER COMPANIES MERELY ON THE BASIS OF COMMISSION REPORT COLLECTED AT THE BACK OF THE APPELLANT THAT TOO IN THE CASE O F SOME OTHER ASSESSEE. 38. FURTHER, THE LD. COUNSEL HAS POINTED OUT VAR IOUS FLAWS IN THE COMMISSIONERS REPORT. THE COMMISSION WAS ISSUED TO MAKE ENQUIRIES AT H. NO. C-2, STAFF COLON Y, MACHINERY DIVISION, 13 KM STONE, MANDIRHASAUD, GE R OAD, RAIPUR,CHATTISGARH, BEING THE REGISTERED OFFICE OF THE LENDER COMPANIES. THE COMMISSIONER STATED IN THE FIRST PAR A THAT H. NO. C-2, STAFF COLONY, MACHINERY DIVISION, 13 KM ST ONE, ITA NOS.1170 TO 1173/DEL/2020 28 MANDIR HASAUD, GE ROAD, RAIPUR, CHATTISGARH IS A RE SIDENTIAL COLONY. HE FURTHER STATED THAT WATCHMAN EMPLOYED AT THE GIVEN ADDRESS STATED THAT THESE ARE STAFF QUARTERS OF JINDAL COMPANY AND THE SAID COLONY IS ONLY RESIDENCE OF TH E STAFF OF JINDAL COMPANY. ON PERUSAL OF THE COMMISSIONERS RE PORT, IT IS CLEAR THAT THE INSPECTOR NEVER VISITED HOUSE NO. C-2 BUT JUST VISITED THE MAIN GATE OF THE STAFF COLONY. THU S, THE ENQUIRY IS INCOMPLETE AND UNRELIABLE. THE NAME OF T HE WATCHMAN FROM WHOM ENQUIRIES WERE MADE, NAME OF THE INSPECTOR WHO VISITED THE PREMISES, PREMISES ACTUAL LY VISITED ETC. HAVE NOT BEEN MENTIONED IN THE COMMISSIONERS REPORT WHICH CREATES DOUBT ABOUT THE AUTHENTICITY OF THE S AID REPORT. EVEN WHEN THE APPELLANT POINTED OUT MANY FLAWS, NEI THER THE AO NOR THE CIT (A) TRIED TO SUBSTANTIATE THE FINDIN GS OF THE SAID REPORT IN ANY MANNER. THE APPELLANT ALSO ASKED FOR THE CROSS-EXAMINATION OF THE INSPECTOR AS WELL AS THE A DIT (INV.) WHO MADE THE ENQUIRIES AND GAVE REPORT. HOWEVER, NO OPPORTUNITY WAS GRANTED TO THE APPELLANT DESPITE SP ECIFICALLY REQUESTED FOR. IN VIEW OF THE ORDER XXVI RULE 10(2) OF THE CIVIL PROCEDURE CODE, SUCH COMMISSION CANNOT BE ADMITTED AS EVIDENCE IN THE COURT OF LAW WITHOUT PROVIDING CROS S- EXAMINATION OF PERSON PREPARING THE REPORT. IN VIEW OF THE SETTLED POSITION OF LAW IN THIS REGARD, THE COMMISS ION REPORT CANNOT BE USED AGAINST THE ASSESSEE IN ANY MANNER, SINCE NO CROSS-EXAMINATION OF THE PERSON WHO PREPARED THE COMMISSION HAS BEEN ALLOWED TO THE APPELLANT. 39. EVEN IF THE COMMISSIONERS REPORT IS TO BE AD MITTED AS EVIDENCE, THEN IN THAT CASE, THE ASSESSEE PLACED VARIOUS EVIDENCES ON RECORD DURING THE ASSESSMENT PROCEEDIN GS VIDE ITA NOS.1170 TO 1173/DEL/2020 29 LETTERS DATED 26/12/2019 AND 28/12/2019 IN ORDER TO REBUT THE FINDINGS OF THE COMMISSIONERS REPORT, BUT THE AO HAS IGNORED THOSE ALL. THEREAFTER, THE ASSESSEE PLACED VARIOUS ADDITIONAL EVIDENCES DURING THE APPELLATE PROCEEDIN GS TO PROVE THE PHYSICAL EXISTENCE OF THE LENDER COMPANIES WHIC H WERE ALSO SENT TO THE ASSESSING OFFICER FOR VERIFICATION . THE ASSESSEE ALSO SUBMITTED MANY EVIDENCES TO SHOW THAT THE LEND ER COMPANIES WERE IN PHYSICAL EXISTENCE HAVING REGISTE RED OFFICES AT RAIPUR AND PRINCIPAL PLACE OF BUSINESS OF THE LE NDERS AT 28, NAJAFGARH ROAD, NEW DELHI WHERE THE ASSESSEE IS ALS O LOCATED. HOWEVER, NEITHER THE AO NOR THE CIT(A) MADE ANY ENQ UIRY U/S 133(6) OR 131 OF THE ACT EITHER DURING THE ASSESSME NT PROCEEDINGS OR DURING THE REMAND PROCEEDINGS TO COL LECT ANY EVIDENCE OR TO CONTROVERT THE EVIDENCES PLACED ON R ECORD BY THE ASSESSEE TO PROVE PHYSICAL EXISTENCE OF THE LEN DER COMPANIES. THUS, THE ASSESSING OFFICER FAILED TO DI SCHARGE THE BURDEN SHIFTED ON HIM AND FAILED TO CONTROVERT THE EVIDENCES PLACED ON RECORD BY THE ASSESSEE. 40. AS REGARDS THE PHYSICAL EXISTENCE OF THE LE NDER COMPANIES, THE APPELLANT BROUGHT ON RECORD THE CERT IFICATE OF INCORPORATION AND VARIOUS FORMS FILED WITH ROC. ON E OF SUCH FORMS WAS FORM NO. INC 22A FILED WITH ROC WHICH IS AN ACTIVE COMPANY TAGGING IDENTITIES AND VERIFICATION FORM IN WHICH PHOTOGRAPH OF THE REGISTERED OFFICE SHOWING E XTERNAL BUILDING AND INSIDE OFFICE ALSO SHOWING THEREIN AT LEAST ONE DIRECTOR ARE TO BE UPLOADED ON THE MCA WEBSITE. THI S FORM WAS ALSO FILED BY THE LENDER COMPANIES PLACED AT PA GES 81-86 AND 167-173. ON PERUSAL OF THE SAID PAGES, IT WAS O BSERVED ITA NOS.1170 TO 1173/DEL/2020 30 EVEN THE LONGITUDE AND LATITUDE OF THE SAID PREMISE S WAS MENTIONED ON THE PHOTOGRAPH. 41. FURTHER, IT IS NOT NECESSARY THAT A COMPANY UNDERTAKES ITS ACTIVITIES FROM THE REGISTERED OFFIC E WHICH AS PER THE SECTION 12 OF THE COMPANIES ACT 2013 IS JUS T AN ADDRESS WHERE NECESSARY NOTICES, COMMUNICATION AND CORRESPONDENCE SENT TO THE COMPANY IS RECEIVED AND ACKNOWLEDGED. EVEN U/S 12(3) OF THE COMPANIES ACT 2 013, A COMPANY CAN UNDERTAKE ITS ACTIVITIES FROM ANY OTHER ADDRESS. IN FACT EVEN THE FORM NO. 49A, BEING THE APPLICATIO N FOR ALLOTMENT OF PAN UNDER THE INCOME-TAX RULES, DOES N OT REQUIRE THAT THE ADDRESS OF A COMPANY IN PAN DATA W ITH THE REVENUE SHOULD BE THE REGISTERED OFFICE OF THE COMP ANY. IT JUST MENTIONS THE SAME AS OFFICE ADDRESS. THERE IS NO PR OVISION UNDER THE INCOME-TAX ACT FOR AN ASSESSEE TO HAVE AN Y SUCH REGISTERED OFFICE AND THE COMPANY CAN OPT ANY ADDRE SS UNDER THE INCOME-TAX ACT FOR COMMUNICATION BY THE REVENUE WITH THE ASSESSEE AS IS SPECIFICALLY MENTIONED IN THE RU LE 127 OF THE INCOME-TAX RULES WHERE THE REVENUE IS BARRED TO ISSUE ANY COMMUNICATION ON ANY ADDRESS MENTIONED IN THE S UB RULE (2) THEREIN WHEN THE ASSESSEE HAS GIVEN A SPEC IFIC ADDRESSIN WRITING OTHER THAN THE ADDRESS MENTIONED IN THE SAID SUB RULE (2). HERE THE LENDER COMPANIES HAVE S PECIFICALLY MENTIONED THEIR NEW DELHI ADDRESSES TO THE REVENUE THROUGH THEIR PAN APPLICATIONS. ONLY UNDER THE COMPANIES AC T, IT IS STATUTORILY REQUIRED. THUS, IT MEANS THAT UNDER THE INCOME- TAX ACT, THE SAME SHOULD BE THE BUSINESS ADDRESS OF THE COMPANY WHERE THE INCOME-TAX DEPARTMENT CAN QUICKLY ACCESS UNDER THE PROVISIONS OF THE ACT AND THERE ON LY THE AO ITA NOS.1170 TO 1173/DEL/2020 31 SHOULD HAVE MADE ENQUIRIES AND NOT AT THE FAR OFF P LACE IN RAIPUR, KNOWING WELL THAT SAME IS NOT THE BUSINESS ADDRESS AS IS VERY MUCH MENTIONED IN THE MASTER DATA IN THE RECORDS OF ROC OF THE SAID LENDER COMPANIES. 42. THE APPELLANT ALSO RECEIVED A LETTER FROM TH E NCLT AT ITS REGISTERED OFFICE ADDRESS ON 9/12/2019, A PH OTOCOPY IS PLACED AT PAGES 124A AND 216A OF THE PB. THIS CORRESPONDENCE WAS RECEIVED FROM A TRIBUNAL UNDER T HE COMPANIES ACT AND THEREFORE, PROVES BEYOND DOUBT TH AT THE REGISTERED OFFICE OF THE LENDER COMPANIES WAS FUNCT IONAL WHERE THEY RECEIVED CORRESPONDENCE WHICH IS THE MAIN FUNC TION OF A REGISTERED OFFICE OF ANY COMPANY. THIS FACT COULD HAVE BEEN CONFIRMED BY THE ASSESSING OFFICER BY MAKING VERIFI CATION U/S 133(6) OR 131 OF THE ACT ON THE SAID ADDRESS FROM T HE LENDERS. HOWEVER, THE AO DID NOT MAKE ANY ENQUIRY OR VERIFIC ATION FROM THE LENDERS OR ANY OTHER PERSON. IT IS A SETTL ED LAW THAT SUSPICION CANNOT TAKE PLACE OF PROOF. IF THE ASSESS ING OFFICER GOT SUSPICIOUS ABOUT THE PHYSICAL EXISTENCE OF THE LENDER COMPANIES DUE TO THE COMMISSIONERS REPORT, THEN HE SHOULD HAVE CARRIED OUT NECESSARY VERIFICATION TO CONVERT HIS SUSPICION INTO PROOF BUT HE COULD NOT MERELY RELY O N THE SAID REPORT AND IGNORE ALL THE EVIDENCES PLACED ON RECOR D BY THE ASSESSEE. 43. FURTHER, THESE LENDER COMPANIES OWNED LISTE D EQUITY SHARES WORTH MARKET VALUE OF THOUSANDS OF CR ORES OF RUPEES, HAD BANK AS WELL AS DEMAT ACCOUNTS, HAVE TA KEN LOANS FROM THE NBFCS, FILED THEIR RETURNS OF INCOME DECLARING HUGE INCOME IN TENS OF CRORES OF RUPEES FOR THE LAS T 3 YEARS ITA NOS.1170 TO 1173/DEL/2020 32 AND PAID NECESSARY APPLICABLE AND DUE INCOME-TAX TH EREON, GOT THEIR BOOKS AUDITED UNDER COMPANIES AS WELL AS INCOME- TAX ACTS. FURTHER SOME OF THE DIRECTORS OF THE ASSE SSEE AND ONE OF THE LENDERS ARE COMMON. THESE TWO LENDERS WE RE ASSESSED U/S 143(3) OF THE ACT NOT ONLY FOR THE AY 2017-18 BUT ALSO FOR THE EARLIER 2 ASSESSMENT YEARS WHEREIN SUBSTANTIAL ADDITION U/S 14A OF THE ACT WAS MADE FO R THE AY 2017-18. THUS, IF AN ENTITY WHICH IS DULY ASSESSED BY THE INCOME-TAX DEPARTMENT CANNOT BE PRESUMED AS NON-EXI STING IN OTHER ASSESSMENT. IN VIEW OF THE ALL THESE EVID ENCES, THE PHYSICAL EXISTENCE OF THE LENDER COMPANIES STANDS P ROVED BEYOND DOUBT. 44. FURTHER, ON PERUSAL OF THE IMPUGNED ORDER O F LD. CIT (A), IT IS SEEN THAT THE CIT (A) HAS ONLY REITE RATED THE AVERMENTS IN THE ASSESSMENT ORDER, SUBMISSIONS OF T HE APPELLANT, REMAND REPORT, REJOINDER, SYNOPSIS, CASE LAWS ETC. EVEN WHILE DRAWING CONCLUSION, THESE THINGS HAVE BE EN REITERATED AGAIN. THE LD. CIT (A) HAS NOT BROUGHT O N RECORD HIS ANY FINDINGS TO REBUT THE EVIDENCES PLACED ON R ECORD BY THE ASSESSEE. THE LD. CIT (A) HAS NOT GIVEN ANY FIN DING REGARDING THE AUTHENTICITY OF THE COMMISSIONERS RE PORT, ITS ADMISSION AS EVIDENCE, WHY THE ONUS CAST ON THE APP ELLANT WAS NOT DISCHARGED IN VIEW OF THE EVIDENCES PLACED ON RECORD. ANY APPELLATE AUTHORITY CANNOT REJECT THE EVIDENCES WITHOUT ANY DISCUSSION OR REASON. THE CIT (A) HAS NOT MENTI ONED AS TO WHAT MORE EVIDENCE WERE NEEDED TO BE PRODUCED BY TH E ASSESSEE TO SUBSTANTIATE ITS CONTENTION OR WHAT ARE THE MATERIAL OR INFORMATION TO REBUT THE ASSESSEES EXP LANATION AND EVIDENCES AS DISCUSSED ABOVE. THUS, THE AO AS WELL AS ITA NOS.1170 TO 1173/DEL/2020 33 THE CIT(A) FAILED TO APPRECIATE OR CONSIDER THE MOR E THAN SUFFICIENT EVIDENCES PLACED ON RECORD BY THE ASSESS EE TO DISCHARGE THE ONUS U/S 68 OF THE ACT. 45. IN VIEW OF THE ALL THE EVIDENCES PLACED ON RE CORD BY THE APPELLANT AND IN THE ABSENCE OF ANY CONTRARY EV IDENCE BROUGHT ON RECORD BY THE REVENUE TO SUBSTANTIATE IT S ALLEGATION, NOT ONLY THE PHYSICAL EXISTENCE BUT ALS O THE IDENTITIES AND CREDITWORTHINESS OF THE LENDERS AND GENUINENESS OF THE LOAN TRANSACTIONS STAND PROVED. THUS, THE ADDITION OF RS. 167,98,70,000/-MADE U/S 68 OF THE A CT IS HEREBY DELETED. GROUND NO. 4 DISALLOWANCE OF INTEREST OF RS. 9,96,04,252/- ON LOANS TAKEN FROM GROUP COMPANIES 46. THE ASSESSING OFFICER MERELY MADE THE ADDITION U/S 68 OF THE ACT FOR THE AMOUNTS OF LOANS RECEIVED FROM THE TWO LENDER COMPANIES BUT INTEREST PAID ON THESE LOANS WAS ALLO WED AS A DEDUCTION BY HIM. HOWEVER, THE CIT (A) ISSUED AN ENHANCEMENT NOTICE DURING THE APPELLATE PROCEEDINGS AND AFTER ALLOWING OPPORTUNITY OF HEARING, DISALLOWED T HE INTEREST PAID ON THE THESELOANS AS HE CONSIDERED THESE LOANS UNPROVED U/S 68 OF THE ACT. 47. THE ASSESSEES SUBMITTED THAT THE LOANS TAKEN FR OM THE ASSOCIATED CONCERNS WERE GENUINE WHICH HAS BEEN PROVED BY PLACING ALL THESE EVIDENCES ON RECORD. THE SAID LOANS WERE USED FOR THE PURPOSE OF BUSINESS AND NOT DIVERTED F OR ANY NON-BUSINESS PURPOSE. EVEN THE AO HAS ACCEPTED THE USAGE OF LOAN AND THE CIT(A) DID NOT BRING ANY EVIDENCE O N RECORD TO ITA NOS.1170 TO 1173/DEL/2020 34 PROVE OTHERWISE. THE APPELLANT PAID THE SAID INTERE ST THROUGH PROPER BANKING CHANNEL AND ALSO DEDUCTED AND DEPOSI TED DUE INCOME-TAX AT SOURCE ON THE SAID INTEREST. THE SAID INTEREST WAS DECLARED AS INCOME BY THE LENDERS IN THEIR RETU RNS OF INCOME AND OFFERED THE SAME FOR TAXATION WHICH HAS BEEN ACCEPTED IN THEIR ASSESSMENT ORDERS FRAMED U/S 143( 3) OF THE ACT. 48. SINCE WE HAVE HELD THAT THE LOANS TAKEN FROM THE SAID TWO LENDER COMPANIES ARE GENUINE IN THE ABOVE GROUNDS OF APPEAL, THE INTEREST ON THESE LOANS HAS TO BE HE LD AS GENUINE PAYMENT. UNDISPUTEDLY, THESE LOANS WERE US ED FOR THE PURPOSE OF BUSINESS, DUE INCOME-TAX HAS BEEN DE DUCTED AT SOURCE ON THE SAID INTEREST, WHICH HAS ALSO BEEN DECLARED AS INCOME BY THE LENDERS, THE AMOUNT OF INTEREST CA NNOT BE DISALLOWED. THE LOANS WERE ALSO USED ONLY FOR THE P URPOSE OF ITS BUSINESS BY THE ASSESSEE. IN FACT THE AUTHORITI ES BELOW HAVE NOT ADVERTED THAT THE SAID LOANS FOR NOT USED FOR ITS BUSINESS BY THE ASSESSEE. THUS, SINCE THE LOANS WER E USED BY THE ASSESSEE FOR ITS BUSINESS, THE DISALLOWANCE OF INTEREST IS HEREBY DELETED. GROUND NO. 5 DISALLOWANCE OF EDUCATION CESS AS A DEDUCTION WHILE COMPUTING THE ASSESSABLE INCOME 49. THE ASSESSEE SUBMITTED THAT EDUCATION CESS IS AN ALLOWABLE EXPENDITURE AND THEREFORE THE EDUCATION C ESS PAID SHOULD BE ALLOWED AS DEDUCTION. THE APPELLANT PLAC ED RELIANCE ON THE DECISION IN THE CASE OF VOLTAS LIMITED VS ACIT IN ITA NO. 6612/ MUM/2018 WHEREIN RELYING UPON THE ITA NOS.1170 TO 1173/DEL/2020 35 BOMBAY HIGH COURT JUDGMENT IN THE CASE OF SESA GOA LTD. VS JCIT (2020) 107 CCH 375 (BOM) IT WAS HELD THAT EDUCATION CESS IS NOT DISALLOWABLE U/S 40(A)(II) OF THE ACT. 50. WE HAVE HEARD THE RIVAL CONTENTION. IN VIEW OF THE ABOVE JUDICIAL POSITION, WE ARE OF THE VIEW THAT TH E EDUCATION CESS HAS TO BE ALLOWED AS DEDUCTION. THE ITAT, INDORE BENCH, IN A RECENT DECISION IN THE CASE OF M/S AGRA WAL COAL CORPORATION (P) LTD. VS ACIT IN ITA NO. 776/IND/2019 VIDE ITS ORDER DATED 24/08/2020 HAS AL SO HELD THAT EDUCATION CESS IS AN ALLOWABLE EXPENDITUR E. HOWEVER, THE SAME IS NOT ALLOWABLE TO THE ASSESSEE DURING THIS YEAR AS THE ASSESSEE HAS NOT PAID ANY EDUCATIO N CESS ON THE INCOME-TAX FOR THIS ASSESSMENT YEARAS THE RETUR NED INCOME UNDER THE NORMAL AS WELL MAT PROVISIONS WAS AT LOSS. GROUND NO. 6 51. THE APPELLANT ALSO RAISED A LEGAL ISSUE IN GR OUND NO. 6 THAT THE LIMITED SCRUTINY WAS CONVERTED INTO FULL SCRUTINY WITHOUT PRIOR PERMISSION FROM THE PCIT. HOWEVER, SI NCE THE ADDITION HAS BEEN DELETED ON MERITS, THIS GROUND NE EDS NO ADJUDICATION. GROUND NO. 7 52. THE APPELLANT ALSO RAISED A LEGAL ISSUE IN GROU ND NO. 7 THAT THE ASSESSMENT HAS BEEN COMPLETED ON REVISED R ETURN OF INCOME WITHOUT ISSUANCE OF A NOTICE U/S 143(2) OF T HE ACT ON THE REVISED RETURN AS THE EARLIER RETURN HAD BECOME NON EST. HOWEVER, SINCE THE ADDITION HAS BEEN DELETED ON MER ITS, THIS GROUND NEEDS NO ADJUDICATION. ITA NOS.1170 TO 1173/DEL/2020 36 JINDAL FITTINGS LTD. - APPEAL NO. ITA/1170/D/2020 53. IN THIS CASE ALSO, A LOAN WAS TAKEN BY THE ASSESSEE FROM GLEBE TRADING (P) LTD. THE ADDITION HAS BEEN M ADE ON IDENTICAL ISSUES BY RAISING IDENTICAL AVERMENTS AS RAISED IN THE CASE OF JINDAL ITF LTD. IN APPEAL NO. ITA/1172/D/2 020. 54. IT HAS BEEN HELD IN THE SAID APPEAL THAT THE IDENTITY AND CREDITWORTHINESS OF THE LENDER, ITS PHYSICAL EX ISTENCE AND GENUINENESS OF THE LOAN TRANSACTION STANDS PROVED B EYOND DOUBT AND THUS, THE ONUS CAST ON THE ASSESSEE U/S 6 8 OF THE ACT STANDS DISCHARGED AND NO ADDITION U/S 68 COULD BE MADE. THUS, FOLLOWING THE SAME, THE ADDITION OF RS. 103,8 9,25,000/- MADE U/S 68 OF THE ACT FOR THE FULL AMOUNT OF LOAN TAKEN FROM GLEBE AND DISALLOWANCE OF INTEREST OF RS. 2,43,24,5 60/- PAID ON THIS LOAN ARE HEREBY DELETED AS THE ENTIRE AMOUN T OF LOAN WAS USED FOR THE BUSINESS PURPOSE BY THE ASSESSEE. THUS, THE GROUND NOS. 1-4 ARE DECIDED IN FAVOUR OF THE AP PELLANT. 55. IT HAS ALSO BEEN HELD IN THE ABOVE APPEA L THAT EDUCATION CESS PAID IS ALLOWABLE AS DEDUCTION. HOWE VER, THE SAME IS NOT ALLOWABLE TO THE ASSESSEE DURING THIS Y EAR AS THE ASSESSEE HAS NOT PAID ANY EDUCATION CESS ON THE INC OME-TAX FOR THIS ASSESSMENT YEAR AS THE RETURNED INCOME UND ER THE NORMAL AS WELL MAT PROVISIONS WAS AT LOSS. 56. SINCE THE APPEAL HAS BEEN DECIDED ON MER ITS, THE LEGAL GROUNDS RAISED BY THE APPELLANT DO NOT NEED ADJUDICATION. THUS, GROUND NO. 6 IS DISMISSED. ITA NOS.1170 TO 1173/DEL/2020 37 JINDAL QUALITY TUBULAR LTD. APPEAL NO. ITA/1171/D/2020 57. IN THIS CASE, THE LOAN WAS TAKEN BY THE ASSESSEE COMPANY FROM DANTA ENTERPRISES (P) LTD. THE ADDITIO N HAS BEEN MADE ON IDENTICAL ISSUES BY RAISING THE IDENTI CAL AVERMENTS RAISED IN THE CASE OF JINDAL ITF LTD. IN APPEAL NO. ITA/1172/D/2020. 58. IT HAS BEEN HELD IN THE SAID APPEAL THAT THE IDENTITY AND CREDITWORTHINESS OF THE LENDER, ITS PHYSICAL EX ISTENCE AND GENUINENESS OF THE LOAN TRANSACTION STANDS PROVED B EYOND DOUBT AND THUS, THE ONUS CAST ON THE ASSESSEE U/S 6 8 OF THE ACT STANDS DISCHARGED AND NO ADDITION U/S 68 COULD BE MADE. THUS, FOLLOWING THE SAME, THE ADDITION OF RS. 20,52 ,00,000/- U/S 68 FOR THE LOAN TAKEN FROM DANTA AND DISALLOWAN CE OF INTEREST OF RS. 3,37,315/- PAID ON THIS LOAN ARE HE REBY DELETED. THUS, GROUND NOS. 1-3 ARE DECIDED IN FAVO UR OF THE APPELLANT. 59. IT HAS ALSO BEEN HELD IN THE ABOVE APPEA L THAT EDUCATION CESS PAID IS ALLOWABLE AS DEDUCTION. HOW EVER, THE SAME IS NOT ALLOWABLE TO THE ASSESSEE DURING THIS Y EAR AS THE ASSESSEE HAS NOT PAID ANY EDUCATION CESS ON THE INC OME-TAX FOR THIS ASSESSMENT YEAR AS THE RETURNED INCOME UND ER THE NORMAL AS WELL MAT PROVISIONS WAS AT LOSS. 60. SINCE THE APPEAL HAS BEEN DECIDED ON MERI TS, THE LEGAL GROUNDS RAISED BY THE APPELLANT DO NOT NEED ADJUDICATION. THUS, GROUND NO. 5 IS DISMISSED. ITA NOS.1170 TO 1173/DEL/2020 38 JITF URBAN INFRASTRUCTURE SERVICES LTD. APPEAL NO. ITA/1173/D/2020 61. IN THIS CASE, THE LOAN HAS BEEN TAKEN BY THE APPELLANT COMPANY FROM GLEBE TRADING (P) LTD. THE A DDITION HAS BEEN MADE ON IDENTICAL ISSUES BY RAISING IDENTI CAL AVERMENTS AS RAISED IN THE CASE OF JINDAL ITF LTD. IN APPEAL NO. ITA/1172/D/2020. 62. IT HAS BEEN HELD IN THE SAID APPEAL THAT THE IDENTITY AND CREDITWORTHINESS OF THE LENDER, ITS PHYSICAL EX ISTENCE AND GENUINENESS OF THE LOAN TRANSACTION STANDS PROVED B EYOND DOUBT AND THUS, THE ONUS CAST ON THE ASSESSEE U/S 6 8 OF THE ACT STANDS DISCHARGED AND NO ADDITION U/S 68 COULD BE MADE. THUS, FOLLOWING THE SAME, THE ADDITION OF RS.196,50 ,00,000/- U/S 68 FOR LOAN TAKEN AND DISALLOWANCE OF INTEREST OF RS. 11,03,15,540/- PAID ON THIS LOAN ARE HEREBY DELETED . THUS, GROUND NOS. 1-4 ARE DECIDED IN FAVOUR OF THE APPELL ANT. 63. IT HAS ALSO BEEN HELD IN THE ABOVE APPEAL THAT EDUCATION CESS PAID IS ALLOWABLE AS DEDUCTION. HOWE VER, THE SAME IS NOT ALLOWABLE TO THE ASSESSEE DURING THIS Y EAR AS THE ASSESSEE HAS NOT PAID ANY EDUCATION CESS ON THE INC OME-TAX FOR THIS ASSESSMENT YEAR AS THE RETURNED INCOME UND ER THE NORMAL AS WELL MAT PROVISIONS WAS AT LOSS. ITA NOS.1170 TO 1173/DEL/2020 39 64. IN VIEW OF OUR FINDING GIVEN ABOVE ALL THE A BOVE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPTEMBER, 2020 SD/- SD/- [B.R.R. KUMAR] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 28.09.2020 KAVITA ARORA, SR. PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR