DCIT, Circle-3(1), Kolkata, Kolkata V. M/s. Lal Baba Seamless Tubes Pvt. Limited , Kolkata

ITA 1637/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8316 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 13-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI; S C MOHANTI
• Assessee Lawyers: VIKASH SURANA
• Keywords: Unexplained cash credit; Business income; Opportunity of being heard; Principle of natural justice; Peak credit; Source of fund; TDS; Set aside
• Section: 43B; 131; 68

Judgement Text

I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1033/KOL/2017 ASSESSMENT YEAR: 2014-2015 M/S. LALBABA SEAMLESS TUBES PVT. LIMITED,.......... .......................APPELLANT 13A, RANGERS CLUB, GOVT. PLACE EAST, KOLKATA-700 069 [PAN: AABCL 2668 M] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,...... .........RESPONDENT CIRCLE-3(1), KOLKATA, AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -AND- I.T.A. NO. 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 DEPUTY COMMISSIONER OF INCOME TAX,...... .........APPELLANT CIRCLE-3(1), KOLKATA, AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. LALBABA SEAMLESS TUBES PVT. LIMITED,.......... .........................RESPONDENT 13A, RANGERS CLUB, GOVT. PLACE EAST, KOLKATA-700 069 [PAN: AABCL 2668 M] APPEARANCES BY: SHRI VIKASH SURANA, FCA, FOR THE ASSESSEE DR. P.K. SRIHARI, CIT (D.R.) & SHRI S.C. MOHANTI, J CIT, SR. D.R., FOR THE REVENUE DATE OF CONCLUDING THE HEARING : JANUARY 29, 2019 DATE OF PRONOUNCING THE ORDER : APRIL 12, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KOLKATA ZONE) :- THESE TWO APPEALS, ONE PREFERRED BY THE ASSESSEE B EING ITA NO.1033/KOL/2017 AND THE OTHER PREFERRED BY THE REV ENUE BEING ITA NO. 1637/KOL/2017 ARE CROSS APPEALS, WHICH ARE DIRECTED AGAINST THE ORDER I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 2 OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, KOL KATA DATED 07.04.2017. 2. FIRST WE TAKE UP THE APPEAL OF THE ASSESSEE, WHI CH INVOLVES A SOLITARY ISSUE RELATING TO THE ADDITION OF RS.6.22 CRORES MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS) ON ACCOUNT OF UNEXPLAINED CASH CREDIT UNDER SECTION 68 AND THE SA ME IS RAISED BY THE ASSESSEE BY WAY OF THE FOLLOWING GROUND:- 1.(A) FOR THAT THE LD. CIT (A) ERRED IN LAW AS WEL L AS ON FACTS IN CONFIRMING THE ADDITION MADE RS.6,22,00,00 0/- AS UNEXPLAINED CASH CREDIT U/S 68 ON THE GROUND THAT ' IDENTITY AND CREDITWORTHINESS/SOURCE OF INCOME COULD NOT BE ESTABLISHED SATISFACTORILY' WHEN, THE APPELLANT DUL Y FURNISHED COGENT EVIDENCES TO SUBSTANTIATE THE CAPA CITY OF THE LOAN CREDITORS AND GENUINENESS OF THE TRANSACTI ONS, THE IDENTITY WAS DULY ESTABLISHED AND THE LOAN CREDITOR S DULY CONFIRMED THE TRANSACTIONS WITH THE APPELLANT AS RE CORDED IN THEIR AUDITED ACCOUNTS, INCLUDING REPAYMENT OF L OAN THEREOF, THE APPELLANT'S ONUS THUS GETS DISCHARGED, FURTHER THE LOAN CREDITORS HAD SUFFICIENT NETWORTH TO ADVAN CE LOANS TO THE APPELLANT. (B) FOR THAT THE LD. CIT CA) ERRED IN CONFIRMING TH E CASH CREDIT U/S 68 WHEN BOTH THE LOWER AUTHORITIES FAILE D TO APPRECIATE THAT INTEREST WAS DULY ACCOUNTED FOR BY THE LOAN CREDITORS AND DECLARED AS THEIR INCOME IN THEIR AUD ITED ACCOUNTS ON WHICH TDS DULY DEDUCTED BY THE APPELLAN T. (C) FOR THAT THE LD. CIT (A) ERRED IN CONFIRMING TH E CASH CREDIT U/S 68, WHEN, INSPITE OF GIVING THE ASSESSIN G OFFICER A 2 ND INNINGS DURING REMAND PROCEEDINGS, NO NEXUS COULD BE ESTABLISHED THAT THE SOURCE OF CREDITORS' DEPOSITS EMANATED FROM THE APPELLANT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF COLD DRAWN SEAMLES S PIPES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILE D BY IT ON 29.09.2014 DECLARING A LOSS OF RS.6,45,82,182/-. AS NOTED BY T HE ASSESSING OFFICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, UNSECU RED LOANS TAKEN BY THE ASSESSEE-COMPANY WERE INCREASED BY RS.7,74,26,9 96/- IN THE YEAR UNDER CONSIDERATION. HE, THEREFORE, REQUIRED THE AS SESSEE TO FURNISH THE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 3 DETAILS OF UNSECURED LOANS TAKEN DURING THE YEAR UN DER CONSIDERATION. IN REPLY, THE DETAILS OF UNSECURED LOANS WERE FURNISHE D BY THE ASSESSEE ALONG WITH THE LOAN CONFIRMATIONS, BALANCE-SHEETS, BANK S TATEMENTS AND SOURCE OF FUNDS OF THE CONCERNED LOAN CREDITORS. ON PERUSA L OF THE SAID DETAILS AND DOCUMENTS, THE ASSESSING OFFICER ARRIVED AT A C ONCLUSION THAT THE CREDITWORTHINESS OF THE LOAN CREDITORS WAS DOUBTFUL FOR THE FOLLOWING REASONS:- (1) ALLIANCE INFRA PROPERTIES PVT. LTD:- DURING TH E YEAR THE ASSESSEE RECEIVED OF RS.15,00,000 AS A UNSECURED LO AN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTE R PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE, IT WAS APPARE NT THAT M/S ALLIANCE INFRA PROPERTIES PVT. LTD HAD NO REAL BUSI NESS ACTIVITIES AND ITS DISCLOSED INCOME WAS ONLY RS.40, 310, AND THE INCOME OF THE EARLIER YEAR WAS NIL IN REVENUE FROM OPERATION. THERE WAS NEGATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BANK STATEMENT THERE WAS PEAK BALANCE ONLY OF RS.L0 ,750. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFE R TO ASSESSEE AS LOAN. AS PER THE DOCUMENT FILLED BY THE A/R OF T HE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORT H COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINI ON THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR A DVANCING THE LOAN. THEREFORE, THE AMOUNT 15,00,000 IS TREATE D AS CASH CREDIT UNDER SECTION 68 OF THE LT. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 15,00,000 02. M/S BHIMA AGENCIES PVT. LTD:- DURING THE YEAR T HE ASSESSEE RECEIVED OF RS.40,00,000 AS A UNSECURED LOAN FROM T HE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALANCE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PER USAL OF RECORDS FURNISHED BY THE ASSESSEE, IT WAS APPARENT THAT M/S BHIMA AGENCIES PVT. LTD HAD NO REAL BUSINESS ACTIVI TIES ITS DISCLOSED INCOME WAS ONLY RS.20,115 AND THE INCOME OF THE EARLIER YEAR WAS NIL IN REVENUE FROM OPERATION. THE RE WAS NEGATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BA NK STATEMENT THERE WAS PEAK BALANCE ONLY OF RS.40,766. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFE R TO ASSESSEE AS LOAN. AS PER THE DOCUMENT FILLED BY THE A/R OF T HE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORT H COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINI ON THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR A DVANCING THE LOAN. THEREFORE, THE AMOUNT RS.40,00,000 IS TRE ATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE ADDITION:- RS.40,00,000/- I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 4 03. M/S CRANBERRY ENTERPRISES PVT. LTD:- DURING THE YEAR THE ASSESSEE RECEIVED OF RS.30,00,000 AS A UNSECURED LO AN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTE R PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE, IT WAS APPARE NT THAT M/S CRANBERRY ENTERPRISES PVT. LTD HAD NO REAL BUSINESS ACTIVITIES AND ITS DISCLOSED INCOME WAS ONLY RS. 48,931. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFER TO ASSES SEE AS LOAN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORTH COMPANY W ITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR ADVANC ING THE LOAN. THEREFORE, THE AMOUNT RS.30,00,000 CREDITED I N THE BOOKS OF THE ASSESSEE IS TREATED AS CASH CREDIT UNDER SEC TION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS . 30,00,000 04. M/S DALMIA INDUSTRIAL DEVELOPMENT LIMITED:- DUR ING THE YEAR THE ASSESSEE RECEIVED OF RS.1,45,00,000 AS UNS ECURED LOAN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATI ON, BALANCE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE IT WAS APPARENT THAT M/S DALMIA INDUSTRIAL DEVELOPMENT LIMITED HAD NO REAL BUSINESS ACTIVITIES ITS DISCLOSED INCOME WAS ONLY RS.9,70,005 AND IN THE EA RLIER YEAR THE REVENUE FROM OPERATION WAS NIL. THERE WAS NEGAT IVE RESERVE AND SURPLUS. AS PER THE BANK STATEMENT THERE WAS PE AK BALANCE ONLY RS.1,76,664. DURING THE YEAR THE COMPANY M/S D ALMIA INDUSTRIAL DEVELOPMENT LIMITED ISSUED 20,000,000 SH ARE AT THE FACE VALUE RS. 10/-PER SHARE. THE TOTAL CAPITAL REC EIVED DURING THE YEARS OF RS.20,00,00,000 OUT OF WHICH THE COMPA NY GIVE LOAN ENTRIES TO OTHER COMPANIES RS.11,58,13,568. TH E ASSESSEE WAS ONE SUCH BENEFICIARY. THE COMPANY HAD NO OWNED FUND TO GIVE LOAN ENTRY TO OTHER COMPANIES. THE AIR WAS ASK ED TO PRODUCED THE DIRECTOR OF THE SAID COMPANY TO ESTABL ISH THE CREDITWORTHINESS OF THE TRANSACTION. THERE WAS NO E VIDENCE FOR ESTABLISHING THE CREDITWORTHINESS OF THE LOAN CREDI TORS EXCEPT DRY DOCUMENTS. THE FUNDS RECEIVED BY THE CREDITOR W ERE GIVEN OUT IMMEDIATELY ON THE SAME DAY TO OTHERS. IT HAS B EEN AMPLY DOCUMENTED BY THE INCOME TAX DEPARTMENT INVESTIGATI ON WING AND ASSESSMENT ORDERS OF ASSESSING OFFICERS OF THE DEPARTMENT THAT THESE COMPANIES ARE CREATED AND EXISTS ONLY FO R PROVIDING BOGUS FUNDS IN LIEU OF COMMISSION THROUGH LAYERED R OTATION OF FUNDS IN BANKS. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR ADVANC ING THE LOAN. THEREFORE, THE AMOUNT RS.1,45,00,000 CREDITED IN THE BOOKS OF THE ASSESSEE IS TREATED AS CASH CREDIT UND ER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITI ON:- RS.1,45,00,000/- 05. M/S DERBY MERCANTILE PVT. LTD:- DURING THE YEAR THE ASSESSEE RECEIVED OF RS.37,09,712 AS UNSECURED LOAN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALANCE SHEET, BANK I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 5 STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PER USAL OF RECORDS FURNISHED BY THE ASSESSEE IT WAS APPARENT T HAT M/S DERBY MERCANTIL PVT. LTD HAD NO REAL BUSINESS ACTIV ITIES AND ITS DISCLOSED INCOME WAS ONLY RS.16,556 AND IN THE EARL IER YEAR THE REVENUE FROM OPERATION WAS NIL. THERE WAS NEGATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BANK STATEMENT THER E WAS PEAK BALANCE ONLY RS.8,387. EQUAL AMOUNT OF FUND WAS REC EIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LOAN. AS PE R THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY ITS APPA RENT THAT THIS IS 'SHELL' COMPANY WHICH EXISTED SOLELY FOR PR OVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, THE CREDITWO RTHINESS OF THE LOAN CREDITOR IS NOT ESTABLISHED. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDI TWORTHINESS FOR ADVANCING THE LOAN. THEREFORE, THE AMOUNT RS.37 ,09,712 CREDITED IN THE BOOKS OF THE ASSESSEE IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 37,09,712/- 06. M/S IMPERIAL RETAILS PVT. LTD:- DURING THE YEAR THE ASSESSEE RECEIVED OF RS.80,00,000 AS A UNSECURED LOAN FROM T HE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALANCE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PER USAL OF RECORDS FURNISHED BY THE ASSESSEE IT WAS APPARENT T HAT M/S IMPERIAL RETAILS PVT. LTD HAD NO REAL BUSINESS ACTI VITIES ITS DISCLOSED INCOME WAS ONLY RS.22,950, WHILE IN THE E ARLIER YEAR THERE WAS NO REVENUE FROM OPERATIONS. THERE WAS NEG ATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BANK STATEM ENT THERE WAS PEAK BALANCE OF ONLY RS.1,62,567. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE A S LOAN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COM PANY ITS APPARENT THAT THIS IS 'SHELL' COMPANY WHICH EXISTED SOLELY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFO RE, THE CREDITWORTHINESS OF THE LOAN CREDITOR IS NOT ESTABL ISHED. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDIT OR COMPANY HAS NO CREDITWORTHINESS FOR ADVANCING THE LOAN. THE REFORE, THE AMOUNT RS.80,00,000 CREDITED IN THE BOOKS OF THE AS SESSEE IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE LT. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 80,00,000 07. M/S MOONNIGHT DEALERS PVT. LTD:- DURING THE YEA R THE ASSESSEE RECEIVED RS.80,20,416 AS UNSECURED LOAN FR OM THIS COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTE R PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE IT WAS APPAREN T THAT M/S IMPERIAL RETAILS PVT. LTD HAD NO REAL BUSINESS ACTI VITIES AND ITS DISCLOSED INCOME OF THE YEAR WAS ONLY RS.22,950, WH ILE IN THE EARLIER YEAR REVENUE FROM OPERATION WAS ZERO. THE R ESERVE AND SURPLUS BALANCE WAS NEGATIVE. AS PER THE BANK STATE MENT THERE WAS PICK BALANCE ONLY RS.1,62,567. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LO AN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY ITS APPARENT THAT THIS IS 'SHELL' COMPANY WHICH EXISTED SOLELY FOR I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 6 PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFO RE, THE CREDITWORTHINESS OF THE LOAN CREDITOR IS NOT ESTABL ISHED. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDIT OR COMPANY HAS NO CREDITWORTHINESS FOR ADVANCING THE LOAN. THE REFORE, THE AMOUNT RS.80,00,000 CREDITED IN THE BOOKS OF THE AS SESSEE IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 80,00,000/- 08. M/S PASHUPATI ADVISORY PVT. LTD:- DURING THE YE AR THE ASSESSEE RECEIVED OF RS.30,00,000 AS UNSECURED LOAN FROM THIS COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTE R PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE. ITS APPARENT THAT THE MLS PASHUPATI ADVISORY PVT. LTD HAD NO REAL BUSINESS AC TIVITIES ITS DISCLOSED INCOME WAS ONLY RS.8089 BUT WHILE LAST YE AR THERE IT WAS NIL FROM REVENUE FROM OPERATIONS. THERE WAS NEG ATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BANK STATEM ENT THERE WAS PEAK BALANCE OF ONLY RS.50,000. EQUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LO AN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY ITS APPARENT THAT THIS IS 'SHELL' COMPANY WHICH EXISTED SOLELY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFO RE, THE CREDITWORTHINESS OF THE LOAN CREDITOR IS NOT ESTABL ISHED. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDIT OR COMPANY HAS NO CREDITWORTHINESS FOR ADVANCING THE LOAN. THE REFORE, THE AMOUNT RS.30,00,000 CREDITED IN THE BOOKS OF THE AS SESSEE IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE LT. ACT IN THE HAND OF THE ASSESSEE. ADDITION: RS.30,00,000/- 09. M/S SATVICHAR PROMOTERS PVT. LTD:- DURING THE Y EAR THE ASSESSEE RECEIVED RS.50,00,000 AS UNSECURED LOAN FR OM THIS COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET AND BANK STATEMENT. AFTER PERUSAL OF RECORDS FURNIS HED BY THE ASSESSEE, IT BECOMES APPARENT THAT THE M/S SATVICHA R PROMOTERS PVT. LTD HAD NO REAL BUSINESS ACTIVITIES. THE A/R C OULD NOT FURNISH ANY EVIDENCE OF FILING OF RETURN OF INCOME. THERE WAS NEGATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BA NK STATEMENT THERE WAS PEAK BALANCE OF ONLY RS.9000. E QUAL AMOUNT OF FUND WAS RECEIVED BEFORE ITS FULL TRANSFE R TO ASSESSEE AS LOAN. AS PER THE DOCUMENT FILLED BY THE A/R OF T HE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORT H COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINI ON THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR A DVANCING THE LOAN. THEREFORE, THE AMOUNT RS.50,00,000 IS TRE ATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS.50,00,000/- 10. HARDSOFT COMMERCIAL PVT.LTD:- DURING THE YEAR T HE ASSESSEE RECEIVED OF RS.30,00,000 AS UNSECURED LOAN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALANCE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PER USAL OF I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 7 RECORDS FURNISHED BY THE ASSESSEE, IT WAS APPARENT THAT THE M/S HARDSOFT COMMERCIAL PVT. LTD HAD NO REAL BUSINESS A CTIVITIES AND ITS DISCLOSED INCOME WAS ONLY RS.15,624 WHILE I N THE EARLIER YEAR THE REVENUE FROM OPERATION WAS NIL. THERE WAS NEGATIVE RESERVE AND SURPLUS BALANCE. AS PER THE BANK STATEM ENT THERE WAS PEAK BALANCE OF ONLY RS.7210. EQUAL AMOUNT OF F UND WAS RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LO AN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORTH COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR ADVANC ING THE LOAN. THEREFORE, THE AMOUNT RS.30,00,000 IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 30,00,000/- 11. SWARNIM COMMOSALE PVT. LTD:- DURING THE YEAR TH E ASSESSEE RECEIVED OF RS.38,00,000/-- AS UNSECURED LOAN '' FR OM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALAN CE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTE R PERUSAL OF RECORDS FURNISHED BY THE ASSESSEE, IT IS APPAREN T THAT M/S_SWARNIM COMMOSALE PVT. LTD HAD NO REAL BUSINESS ACTIVITIES AND ITS DISCLOSED INCOME OF THE YEAR WAS ONLY RS.36,889 WHILE THE REVENUE FROM OPERATION IN THE E ARLIER YEAR WAS ZERO. THERE WAS NEGATIVE RESERVE AND SURPLUS BA LANCE IN THE BALANCE SHEET. AS PER THE BANK STATEMENT THERE WAS PEAK BALANCE WAS ONLY RS.18,274. EQUAL AMOUNT OF FUND WA S RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LOAN. AS PE R THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY IT IS AP PARENT THAT THIS IS A ZERO NET WORTH COMPANY WITH NO REAL BUSIN ESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMI SSION. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDIT OR COMPANY HAS NO CREDITWORTHINESS FOR ADVANCING THE LOAN. THE REFORE, THE AMOUNT RS.38,00,000IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITI ON:- RS. 38,00,000/- 12. UTMOST TRADERS PVT. LTD: DURING THE YEAR THE AS SESSEE RECEIVED OF RS.45,00,000 AS UNSECURED LOAN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, BALANCE SHEET, BANK STATEMENT AND COPY OF ITR ACKNOWLEDGMENT. AFTER PER USAL OF RECORDS FURNISHED BY THE ASSESSEE, IT WAS APPARENT THAT THE M/S SWARNIM COMMOSALE PVT. LTD HAD NO REAL BUSINESS ACT IVITIES AND ITS DISCLOSED INCOME WAS ONLY RS.6463 WHILE REV ENUE FROM OPERATION IN THE EARLIER YEAR WAS ZERO. THERE WAS N EGATIVE RESERVE AND SURPLUS BALANCE. EQUAL AMOUNT OF FUND W AS RECEIVED BEFORE ITS FULL TRANSFER TO ASSESSEE AS LO AN. AS PER THE DOCUMENT FILLED BY THE A/R OF THE AFORESAID COMPANY IT IS APPARENT THAT THIS IS A ZERO NET WORTH COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PROVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM OF THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHINESS FOR ADVANC ING THE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 8 LOAN. THEREFORE, THE AMOUNT RS.45,00,000 IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HAND OF THE ASSESSEE. ADDITION:- RS. 45,00,000/- 13. VENKATESHWAR EQUIPMENT PARTS PVT. LTD:- DURING THE YEAR THE ASSESSEE RECEIVED OF RS.45,00,000 AS UNSECURED LOAN FROM THE COMPANY. THE A/R FURNISHED LOAN CONFIRMATION, B ANK STATEMENT. THERE WAS ONLY FUND RECEIVED AND THE SAM E DAY THE AFORESAID FUND TRANSFER. THE A/R DID NOT FURNISH CO PY OF BALANCE SHEET AND ITR OF THE CREDITOR. AS PER THE D OCUMENT FILED BY THE A/R IT IS APPARENT THAT THIS IS A ZERO NET WORTH COMPANY WITH NO REAL BUSINESS, AND USED ONLY FOR PR OVIDING BOGUS FUND IN LIEU OF COMMISSION. THEREFORE, I AM O F THE OPINION THAT THE LOAN CREDITOR COMPANY HAS NO CREDITWORTHIN ESS FOR ADVANCING THE LOAN. THEREFORE, THE AMOUNT OF RS.45, 00,000/- IS TREATED AS CASH CREDIT UNDER SECTION 68 OF THE I.T. ACT IN THE HANDS OF THE ASSESSEE. ADDITION: RS.45,00,000/-. ON THE BASIS OF THE ABOVE OBSERVATIONS RECORDED BY HIM, THE ASSESSING OFFICER TREATED THE CONCERNED UNSECURED LOANS AS UN EXPLAINED CASH CREDIT AND AN ADDITION OF RS.6,22,00,000/- WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE. 3. THE ADDITION OF RS.6.22 CRORES MADE BY THE ASSES SING OFFICER WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE A SSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD INCLUDING THE REMAND R EPORT SUBMITTED BY THE ASSESSING OFFICER, THE LD. CIT(APPEALS) CONFIRM ED THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 68 FOR THE F OLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- ON CAREFUL CONSIDERATION OF THE CONTENTIONS OF THE A/R OF THE APPELLANT, IT IS INFERRED THEREFROM THAT, FIRSTLY, AN OBJECTION WAS RAISED REGARDING NON-APPEARANCE OF THE DIRECTOR S OF ALL THE 13 COMPANIES BEFORE THE A.O IN RESPONSE TO SUMMONS ISSUED U/S 131 OF THE I.T. ACT THAT THE DATE PRESCRIBED FOR AT TENDANCE WAS A SATURDAY I.E.25-03-2017 AT 4 P.M AND THAT NO SPEC IFIC DOCUMENTS WERE REQUISITIONED BY THE A.O AND THAT TH E APPELLANT HAD ALREADY ALL RELEVANT DOCUMENTARY EVIDENCES IN T HE FORM OF A PAPER BOOK BEFORE THE A.O AND ABSENCE OF MENTION CROSS- EXAMINATION IN THE SUMMONS FORM. IN THIS REGARD, IT IS INFERRED THAT APPELLANT HAS BEEN UNABLE TO CONTROVERT THE FI NDING OF THE A.O REGARDING THE NON-EXISTENCE OF THE COMPANIES AT THEIR GIVEN ADDRESSES INTIMATED TO THE A.O AND THE REASON ADDUC ED I.E. ASKED TO APPEARANCE BY DIRECTORS ON A SATURDAY, IS AN AFTER- THOUGHT AS IT IS A MATTER OF INFORMATION IN THE PUB LIC DOMAIN THAT THE DEPARTMENT HAD THROUGH WIDE PUBLICITY INTI MATED THE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 9 GENERAL PUBLIC THAT OFFICES WOULD BE FUNCTIONING ON THE SAID WEEKEND TO FACILITATE THE SUBMISSION OF TAXES FOR T HE PMGKY SCHEME. FURTHER, THE ABSENCE OF MENTION OF EXAMINAT ION OF DIRECTORS PERTAINS TO A PROCEDURAL MATTER, WHICH DO ES NOT EFFECT THE VALIDITY OF THE STATEMENTS RECORDED OR T HEIR ADMISSIBILITY REGARDING THE EVIDENTIARY VALUE OF TH E AVERMENTS MADE BY THE DEPONENT UNDER THE CPC/INCOME- TAX ACT. IN SUPPORT OF HIS CONTENTIONS, THE A/R RELIED UPON THE DECISIONS OF THE RAJASTHAN HIGH COURT IN ARAVALI TRADING CO. VS. ITO 220 CTR 622, HELD THAT NEITHER THE PROVISION OF 68 NOR ON GENERAL PRINCIPLE, IT CAN BE SAID THAT ONCE THE EXISTENCE O F LOAN CREDITORS ARE PROVED AND SUCH LOAN CREDITORS OWN SU CH CREDITS WITH THE ASSESSEE, THERE IS NO REASON TO DISBELIEVE THE TRANSACTION. IT HAS BEEN HELD BY VARIOUS COURTS THA T WHERE LENDER IS ASSESSED TO TAX AND LOAN CONFIRMATION WIT H PARTICULARS OF PAN ARE FILED NO ADDITION 'COULD BE MADE U/S 68 AS HELD IN CIT VS. ORISSA CORPORATION (P) LTD. (159 ITR 78)(SC ). THE IT DEPARTMENT HAS ACCEPTED THE RETURNS OF THE LOAN CRE DITORS IT SHOULD GO TO MEAN THAT THE' AMOUNTS GIVEN BY THESE LOAN CREDITORS WERE ALSO GENUINE AS THE CONCERNED ASSESS ING OFFICER ACCEPTED ALL THE LOAN CREDITOR'S OF INCOME AND THEI R CORRESPONDING SOURCES OF FUNDS AND INVESTMENTS. AS FAR AS CREDIT-WORTHINESS OR SOURCES OF THE CREDITOR/SUBSCR IBER IS CONCERNED, IT WAS ARGUED THAT IS PROVED ONCE THE BA NK STATEMENT OF THE CREDITORS/IS PRODUCED SHOWING THAT IT HAD SUFFICIENT BALANCE IN ITS ACCOUNTS, ONCE THESE DOCU MENTS ARE PRODUCED, THE ASSESSEE WOULD HAVE SATISFACTORILY DI SCHARGED IT'S ONUS CAST UPON HIM. IT WAS THUS SUBMITTED THAT THE LOAN CREDITORS HAD SUFFICIENT NET WORTH OF THEIR OWN SO AS TO ADVANCE LOAN TO THE ASSESSEE COMPANY A.O HAS TO ESTABLISH B RING COGENT MATERIAL ON RECORD IN CASE HE NURTURES ANY DOUBT AB OUT THE VERACITY OF THESE DOCUMENTS TO PROBE THE MATTER FUR THER, BUT NOT MERELY ON BASIS OF SUSPICION. AS REGARDS THE ISSUE OF ESTABLISHING THE GENUINENES S OF AN AMOUNT CREDITED TO THE BOOKS OF ACCOUNTS OF THE APP ELLANT COMPANY, IT IS WELL ESTABLISHED THAT THE ONUS TO PR OVE HIS EXPLANATION SATISFACTORILY TO THE ASSESSING OFFICER WAS ON THE ASSESSEE. THE APPELLANT HAS MISERABLY FAILED TO DIS CHARGE SUCH ONUS. FROM THE ABOVE DECISION, IT IS APPARENT THAT THE GENUINENESS OF THE IMPUGNED TRANSACTIONS OF RECEIPT OF THE IMPUGNED AMOUNTS FROM THE 13 COMPANIES AS UNSECURED LOANS TOTALLING RS.6,22,00,000/- AS DETAILED IN THE ABOVE PARAGRAPHS CANNOT BE DETERMINED WITHOUT LOOKING INTO THE HUMAN PROBABILITY ASPECTS, SURROUNDING CIRCUMSTANCES SUCH AS RELATIONSHIP OF THE ENTITIES LE COMPANIES SHOWN AS CASH CREDITORS AND THE RECIPIENT I.E APPELLANT COMPANY. IT IS ALSO PERTINENT TO MENTION THAT IF THE ASSESSEE FAILS TO ESTABLISH ANY OF THE ESSENTIAL INGREDIENTS OF A CASH CREDIT I.E I DENTITY, MODE OF RECEIPT AND CREDIT- WORTHINESS / SOURCES OF THE CAS H CREDITORS, THE IMPUGNED TRANSACTIONS I.E UNSECURED LOANS CANNO T BE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 10 TREATED AS GENUINE. IN THIS REGARD, IT IS PERTINENT TO REFER TO THE DECISION IN SAJAN DASS AND SONS V. CIT [20.03] 264 ITR 435 (DELHI) WHEREIN THE HON'BLE DELHI HIGH COURT HELD T HAT MERE IDENTIFICATION AND SHOWING MOVEMENT THOUGH BANKING CHANNELS IS NOT SUFFICIENT. SIMILAR VIEW WAS TAKEN IN SANDEE P KUMAR V. CIT (293 ITR 294) (DEL), JASPAL SINGH 290 ITR 306 ( P & H), YASH PAL GOEL ,310 ITR 75/76(P&H} AND RAJEEV TANDON VS. ASSISTANT COMMISSIONER OF INCOME TAX IN ITA NO. 77 OF 2007 DA TED 13.7.2007 AS ALSO IN SUBHASH CHANDER SEKHRI V: DEPU TY CIT [2007] 290 ITR 300 (P&H).IN THE PRESENT CASE ALSO, IT IS NOT ESTABLISHED THAT UNSECURED LOAN CREDITORS I.E 13 CO MPANIES WHICH WERE FOUND TO HAVE MEAGER CASH BALANCES/CAPIT AL IN THEIR BOOKS OF ACCOUNTS HAD CAPACITY TO MAKE THE LO ANS.. THEREFORE, THE A.O WAS JUSTIFIED IN UPHOLDING THE A DDITION OF THE AMOUNT CLAIMED AS IMPUGNED UNSECURE LOANS. IN RAM L AL AGRAWAL V. CIT [2006] 280 ITR 547 (ALL), THE HON'BL E ALLAHABAD HIGH COURT HELD THAT WHERE THERE IS A FINDING GIVEN BY THE INCOME-TAX AUTHORITIES THAT CREDITWORTHINESS OF DEP OSITORS WAS NOT PROVED, THE AMOUNT COULD BE ASSESSED AS INCOME OF THE ASSESSEE. IN SUNIL SIDDHARTHBHAI V. CIT [1985] 156 ITR 509 (SC), THE HON'BLE SUPREME COURT HELD THAT IT IS THE RIGHT OF THE INCOME-TAX AUTHORITIES TO CONSIDER GENUINENESS OF T HE TRANSACTIONS AND TO PENETRATE THE VEIL AND ASCERTAI N THE TRUTH. IT IS WITHIN THEIR POWER TO CONSIDER WHETHER. A PAR TICULAR TRANSACTION WAS TO EVADE TAX. IN K. RAMASAMY V. CIT [2003] 261 ITR 358 (MAD), IT WAS HELD THAT VEIL CAN BE PIERCED IN EXCEPTIONAL CIRCUMSTANCES. THE INCOME-TAX AUTHORITI ES ARE ENTITLED TO LOOK AT THE REALITY OF THE TRANSACTION. MOREOVER, THE DECISIONS IN ITO V. DIZA HOLDINGS P. LTD. [2002] 25 5 ITR 573 (KER); RAUNAQ RAM NAND LAL V. CIT [2002 254 ITR 617 (P & H); SMT. IVA GOGOI V. CIT [2002] 254 ITR 576 (GAUHATI); CIT V. PRECISION FINANCE PVT. LTD. [1994] 208 ITR 465 (CAL ); RAJSHREE SYNTHETICS PVT. LTD. V. CIT [2002] 256 ITR 331 (RAJ ); R. B. MITTAL V. CIT [2000] 246 ITR 283 (AP) ; CIT V. UNITED COMM ERCIAL AND INDUSTRIAL CO. P. LTD. [1991] 187 ITR 596 (CAL); M. A. UNNEERI KUTTY V. CIT [1992] 198 ITR 147 (KER); NEMI CHAND K OTHARI V. CIT [2003] 264 ITR 254 (GAUHATI); AND HINDUSTHAN TE A TRADING CO. LTD. V. CIT [2003] 263 ITR 289 (CAL) SUPPORT TH E VIEW THAT REVENUE AUTHORITIES ARE ENTITLED TO CONSIDER GENUIN ENESS OF THE TRANSACTIONS AND TO PENETRATE THE VEIL IN ORDER TO ASCERTAIN THE TRUTH. THEY ARE ENTITLED TO LOOK INTO THE SURROUNDI NG CIRCUMSTANCES TO FIND OUT THE REALITIES OF THE TRAN SACTIONS SHOWN TO HAVE BEEN ENTERED INTO BY THE PARTIES. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW T HAT CONSIDERING THE INFERENCES DRAWN FROM MATERIALS ON RECORD BY THE A.O IT IS HELD THAT THE APPELLANT WAS UNABLE TO ESTABLISH THE GENUINENESS OF THE IMPUGNED CASH CREDITORS AS THEIR IDENTITY AND CREDIT-WORTHINESS/SOURCES OF INCOME COULD NOT B E ESTABLISHED SATISFACTORILY. THEREFORE, I HOLD THAT THERE IS NO INFIRMITY IN THE FINDING OF THE A.O IN TREATING THE IMPUGNED UNSECURED LOANS FROM THE 13 COMPANIES TOTALLING RS.6,65,09,712/- (CORRECTED AS RS.6,22,00,000/-) AS UNEXPLAINED I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 11 CASH CREDITS U/S 68 OF THE I.T. ACT, 1961. AS A RES ULT, THE IMPUGNED ADDITION ON ACCOUNT OF TREATING THE CASH C REDITS AMOUNTING TO RS.6,27,00,000/- IS CONFIRMED. THIS GR OUND IS PARTLY ALLOWED. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT THE RELEVANT DOCUMENTS IN THE FORM O F LOAN CONFIRMATIONS OF THE CONCERNED LOAN CREDITORS, THEIR BALANCE-SHEE TS, BANK STATEMENTS, ETC. WERE FILED BY THE ASSESSEE DURING THE COURSE O F ASSESSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER, BUT HE ST ILL DOUBTED THE CREDITWORTHINESS OF THE CONCERNED LOAN CREDITORS WI THOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE OF BEING HEARD ON THE I SSUE. HE HAS SUBMITTED THAT WHEN THIS POSITION WAS BROUGHT BY THE ASSESSEE TO THE NOTICE OF THE LD. CIT(APPEALS), HE REMANDED THE MATTER TO THE ASS ESSING OFFICER FOR GIVING SUCH OPPORTUNITY. HE HAS SUBMITTED THAT THE ASSESSING OFFICER, HOWEVER, ASKED THE CONCERNED LOAN CREDITORS TO APPE AR ON SATURDAY WHEN ONLY ONE CREDITOR COULD APPEAR. HE HAS SUBMITTED TH AT EVEN THOUGH THE SAID CREDITOR ADMITTED THE LOAN GIVEN TO THE ASSESS EE AS ACCOMMODATION ENTRY, HE SUBSEQUENTLY RETRACTED THE SAID ADMISSION . HE HAS CONTENDED THAT PROPER AND SUFFICIENT OPPORTUNITY THUS HAS NOT BEEN GIVEN EITHER BY THE ASSESSING OFFICER OR BY THE LD. CIT(APPEALS) TO THE ASSESSEE TO PROVE THE CREDITWORTHINESS OF THE CONCERNED CREDITORS AND URGED THAT THIS ISSUE MAY BE SENT BACK TO THE ASSESSING OFFICER FOR GIVIN G SUCH OPPORTUNITY TO THE ASSESSEE. KEEPING IN VIEW ALL THE RELEVANT FACT S OF THE CASE, WE ARE OF THE VIEW THAT THE ASSESSEE DESERVES TO BE GIVEN ONE MORE OPPORTUNITY TO EXPLAIN THE RELEVANT CASH CREDITS REPRESENTING UNSE CURED LOANS IN TERMS OF SECTION 68 AND SINCE THE LD. D.R. HAS ALSO NOT R AISED ANY OBJECTION IN THIS REGARD, WE SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSESSEE ONE MORE OPPORTUNITY OF BEING HEARD. AS UNDERTAKEN BY THE LD. COUNSEL FOR THE ASSESSEE, THE ASSESSEE SHALL MAKE DUE COMPLIANCE BEFORE THE ASSESSING OFFICER AN D PRODUCE THE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 12 CONCERNED LOAN CREDITORS ALONG WITH THE RELEVANT DO CUMENTARY EVIDENCE FOR EXAMINATION/VERIFICATION OF THE ASSESSING OFFIC ER. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ACC ORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 6. NOW WE SHALL TAKE UP THE REVENUES APPEAL BEING ITA NO. 1637/KOL/2017 . AT THE OUTSET, IT IS NOTED THAT THERE IS A DELAY OF 61 DAYS ON THE PART OF THE REVENUE IN FILING THE APPEAL BEF ORE THE TRIBUNAL. IN THIS REGARD, THE REVENUE HAS FILED AN APPLICATION SEEKIN G CONDONATION OF THE SAID DELAY AND KEEPING IN VIEW THE REASONS THEREIN, WE ARE SATISFIED THAT THERE WAS A SUFFICIENT CAUSE FOR THE DELAY OF 61 DA YS ON THE PART OF THE REVENUE FOR FILING THIS APPEAL BEFORE THE TRIBUNAL. EVEN THE LD. COUNSEL FOR THE ASSESSEE HAS NOT RAISED ANY OBJECTION IN THIS R EGARD. THE SAID DELAY IS ACCORDINGLY CONDONED AND THIS APPEAL OF THE REVENUE IS BEING DISPOSED OF ON MERIT. 7. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE ADDITION OF RS.4,39,92 ,000/- MADE BY THE ASSESSING OFFICER UNDER SECTION 68 READ WITH SECTIO N 158BBE ON ACCOUNT OF ALLEGED UNDISCLOSED SALES. 8. IN THE MANUFACTURING OF COLD DRAWN SEAMLESS PIPE S, MAIN RAW MATERIALS USED BY THE ASSESSEE-COMPANY WAS MS ROUND . AS PER THE TAX AUDIT REPORT FURNISHED BY THE ASSESSEE, THE YIELD O F FINISHED GOODS FROM THE RAW MATERIALS WAS SHOWN AT 84%. IN THIS REGARD, IT WAS NOTED BY THE ASSESSING OFFICER THAT RAW MATERIAL IN THE FORM OF MS ROUND CONSUMED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION WA S 97,97,346 KGS. AS PER THE STANDARD YIELD OF 84% GIVEN IN THE TAX AUDI T REPORT, THE FINISHED PRODUCTS PRODUCED BY THE ASSESSEE, ACCORDING TO THE ASSESSING OFFICER, SHOULD HAVE BEEN 82,29,770 KG. AS NOTED BY THE ASSE SSING OFFICER, THE ASSESSEE, HOWEVER, HAD SHOWN PRODUCTION OF 76,01,30 9 OF COLD DRAWN SEAMLESS PIPES ONLY DURING THE YEAR UNDER CONSIDERA TION. THERE WAS THUS A SHORTAGE OF 628.46 METRIC TON IN THE PRODUCTION S HOWN BY THE ASSESSEE I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 13 AND IN THE ABSENCE OF ANY SATISFACTORY EXPLANATION OFFERED BY THE ASSESESE FOR THE SAID SHORTAGE, THE ASSESSING OFFICER TREATE D THE SAME AS UNDISCLOSED SALE OF THE ASSESSEE. THE VALUE OF SUCH SALE WORKED OUT AT RS.4,39,92,000/- BY APPLYING THE AVERAGE RATE OF 70 ,000/- PER METRIC TON ACCORDINGLY WAS ADDED BY THE ASSESSING OFFICER TO T HE TOTAL INCOME OF THE ASSESESE BY TREATING THE SAME AS UNDISCLOSED SALE U NDER SECTION 68 READ WITH SECTION 158BBE OF THE ACT. 9. THE ADDITION OF RS.4,39,92,000/- MADE BY THE ASS ESSING OFFICER ON ACCOUNT OF ALLEGED UNDISCLOSED SALE WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MAT ERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED THE SAID ADDIT ION FOR THE FOLLOWING REASONS GIVEN IN HIS IMPUGNED ORDER:- THE RIVAL CONTENTIONS AND JUDICIAL PRONOUNCEMENTS WERE CONSIDERED. IT IS FOUND THAT THE A.O HAS MADE THE A DDITION OF THE IMPUGNED AMOUNT OF RS.,4,39,92,200/- BASED ON T HE ARITHMETICAL WORKING OUT OF THE VALUE OF THE SHORTA GE OF 628,461 KGS 70,000 MT FROM ANALYSIS OF QUANTITATIVE CONSUMPTION OF RAW MATERIALS AND PRODUCTION OF FINI SHED MATERIALS BY THE APPELLANT COMPANY. THE APPELLANTS AR HAS MAINLY ARGUED THAT THE AO HAS MADE ADDITION ON ARBI TRARILY WITHOUT REFERENCE TO RELEVANT MATERIAL ON RECORD AN D IGNORING THE AUDITED BOOK RESULTS, WHICH WERE BASED UPON EXC ISE RECORDS AND WITHOUT POINTING OUT ANY MATERIAL DEFEC TS. IT WAS ALSO CONTENDED THAT THE AO HAS IGNORED THE QUANTUM OF WORK IN PROGRESS, IN WORKING OUT THE SHORTAGE, WHICH MAI NLY ACCOUNTS FOR THE ESTIMATED 16% SHORTAGE TREATED AS UNEXPLAINED SALES. IN THIS REGARD, IT WAS ALSO EXPL AINED THAT THE CLOSING STOCK AS PER AUDITED ACCOUNTS INCLUDED IN THE VALUATION OF INVENTORY OF CLOSING WIP 579604 KGS AS PER ANNEXURE IN PAPER BOOK VIZ. PB-1 PG 99 & 100 THEREO F. IT WAS ALSO ARGUED THAT THE TREATMENT OF THE VALUE OF THE PURPORTED SHORTAGE OF 628.46 MTS VALUED AT 4,39,92,200/- AS UNEXPLAINED INCOME U/S 68 OF THE I.T. ACT WAS UNWAR RANTED AS THE APPELLANT COMPANY DERIVED INCOME FROM BUSINESS OF MANUFACTURE OF MS PIPES AND ADDITIONAL INCOME WAS L IABLE TO BE TREATED AS THE COMPANYS BUSINESS INCOME AS HELD BY VARIOUS HIGHER COURTS. IN VIEW OF THE ABOVE DISCUSSION, I FIND THAT THERE IS SUFFICIENT MERIT IN THE SUBMISSIONS OF THE APPELLAN T THAT THE AO HAS MADE THE ADDITION IN AN ARBITRARY AND CAPRIC IOUS MANNER, WITHOUT REFERENCE TO THE MATERIAL ON RECORD , CONSIDERING THE FACT THAT THE AO HAS MADE THE ADDIT ION OF I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 14 RS.4,39,92,200/- AS UNEXPLAINED INCOME U/S 68 TREAT ED 16% DIFFERENCE BETWEEN RAW MATERIAL AND FINISHED GOODS AS SHORTAGE, MERELY ON THE BASIS OF ARITHMETICAL WORKI NG OF QUANTITATIVE FIGURES FROM THE ANNEXURES TO THE COMP ANYS AUDIT REPORT WITHOUT ANALYZING THE STAGE WISE MANUF ACTURING PROCESS AND THE CONSTITUENTS OF THE OPENING/CLOSING STOCK OF RAW MATERIALS, CONSUMPTION THEREOF AS REFLECTED IN THE WORK IN PROGRESS (WIP) AND INFLOW/OUTFLOW OF FINISHED MATER IALS. THE AO HAS NEGLECTED TO FACTOR IN THE QUANTITY OF WIP I ;.E. WORK IN PROGRESS AMOUNTING TO 57,9604 KGS OR THE QUANTITY O F RAW MATERIAL ALONG WITH QUANTUM OF BURNING LOSS & GENER ATION OF SCRAP ETC WHICH ARE AN INTRINSIC PART OF THE MANUFA CTURING PMROCEDSS, WHICH SUBSTANTIALLY ACCOUNTS FOR THE APP ARENT SHORTAGE OF 16% WORKED OUT AT A ESTIMATED 628,461 K GS, WITHOUT CONFRONTING THE SASME TO THE APPELLANT TO E XPLAIN THE REASONS WITH REFERENCE TO THE BOOK RESULTS AS REFLE CTED IN THE AUDITED ACCOUNTS. THE AO HAS ALSO NOT FOLLOWED THE PROPER PROCEDURE I N NOT CONFRONTING THE ALLEGED DISCREPANCIES TO THE AP PELLANT OR AFFORDING AN ADEQUATE OPPORTUNITY AS PER PRINCIPLES OF NATURAL JUSTICE. HE HAS ALSO NOT MADE ANY RELEVANT ENQUIRIES OR EXAMINED THE RELEVANT SUPPORTING DOCUMENTARY EVI DENCES VIZ. EXCISE/STOCK REGISTERS AND RELATED VOUCHERS ET C RELATING TO THE MANUFACTURING PROCESS NOR MADE AN EFFORT TO HAS ESTABLISHED ANY PATENT DEFECT IN THE BOOKS OF ACCOU NT OR METHOD OF ACCOUNTING TO SUBSTANTIATE THE ESTIMATED ADDITION. IN THIS REGARD, IT IS WELL SETTLED BY JUDICIAL DECI SIONS RELIED UPON BY THE AR A ND THAT OF THE HONBLE SUPREME COU RT IN THE CASE OF S.N. NAMASIVAYAM CHJETTIAR VS.- CIT 38 ITR 579 (SC) WHEREIN IT WAS HELD THAT WHETHER POWER TO COMPUTE PROFITS UNDER PROVISO TO SECTION 13 OF 1922 ACT, ARISES ONL Y WHERE NO METHOD OF ACCOUNTING HAS BEEN REGULARLY EMPLOYED BY ASSESSEE OR WHERE METHOD EMPLOYED IS SUCH THAT INCO ME, PROFITS AND GAIN COULD NOT PROPERLY BE DEDUCED THER EFROM HELD, YES. IN VIEW OF THE ABOVE DISCUSSION AND TH E RATIO OF THE CITED CASE LAWS, IT IS HELD THAT THE AO WAS NOT JUS TIFIED IN ARBITRARILY TREATING THE VALUE OF QUANTITATIVE SHOR TAGE BASED ON MERE ARITHMETICAL WORKING AS UNEXPLAINED INCOME U/S 68 WITHOUT ESTABLISHING ANY PATENT MATERIAL DEFECTS LI N THE METHOD OF ACCOUNTING OR THE BOOK RESULTS OF THE APP ELLANT COMPANY. ACCORDINGLY, THE ADDITION MADE BY THE AO W AS UNWARRANTED AND IS DIRECTED TO DELETE THE ADDITION OF RS.4,39,92,200/-. THIS GROUND IS ALLOWED. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AS WELL AS BEF ORE US, ONLY FINAL PRODUCTION OF 76,01,309 KGS. WAS CONSIDERED BY THE ASSESSING OFFICER TO ARRIVE AT THE CONCLUSION THAT THE ACTUAL YIELD WAS LESS THAN THE STANDARD I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 15 YIELD OF 84% AND THE CLOSING WIP OF 5,79,604 KGS. W HICH ALSO INVOLVED THE CONSUMPTION OF RAW MATERIAL WAS COMPLETELY IGNORED BY THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTE NDED THAT THIS VITAL FACTOR, HOWEVER, WAS RIGHTLY APPRECIATED BY THE LD. CIT(APPEALS) AND ON SUCH APPRECIATION, HE RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER AFTER HAVING FOUND THAT THE YIELD WAS NORMA L. HOWEVER, AS RIGHTLY POINTED OUT BY THE LD. D.R. IN THIS REGARD, THE CLO SING WIP ALONE CANNOT BE TAKEN INTO CONSIDERATION FOR DETERMINING THE ACTUAL YIELD AND IT IS ONLY THE DIFFERENCE OF THE CLOSING WIP AND OPENING WIP T HAT HAS TO BE CONSIDERED AS THE INCREASE IN WIP ALONE WILL REQUIR E CONSUMPTION OF RAW MATERIAL DURING THE YEAR UNDER CONSIDERATION. MOREO VER, IT IS ALSO OBSERVED THAT NO EXPLANATION WHATSOEVER WAS OFFERED BY THE ASSESSEE IN RESPECT OF THE SHORTAGE IN PRODUCTION YIELD AS POIN TED OUT BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS AND THE ASSESSING OFFICER THUS NEVER GOT AN OPPORTUNITY TO VERIFY THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE LOW YIELD OR SHOR TAGE IN PRODUCTION, VIS- A-VIS CONSUMPTION OF RAW MATERIAL FROM THE RELEVANT RECORD. KEEPING IN VIEW ALL THESE FACTS OF THE CASE, WE CONSIDER IT FA IR AND PROPER AND IN THE INTEREST OF JUSTICE TO RESTORE THIS ISSUE TO THE FI LE OF THE ASSESSING OFFICER FOR DECIDING THE SAME AFRESH AFTER GIVING THE ASSES SEE PROPER AND SUFFICIENT OPPORTUNITY OF BEING HEARD AND AFTER VER IFYING THE WORKING FURNISHED BY THE ASSESSEE WHILE EXPLAINING THE LOW YIELD OR SHORTAGE IN PRODUCTION. GROUND NO. 1 OF THE REVENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11. AS REGARDS GROUND NO. 2 OF THE REVENUES APPEAL , IT IS OBSERVED THAT THE ISSUE INVOLVED THEREIN RELATING TO THE DELETION BY THE LD. CIT(APPEALS) OF THE DISALLOWANCE OF RS.6,25,576/- MADE BY THE AS SESSING OFFICER ON ACCOUNT OF BELATED PAYMENT OF EMPLOYEES CONTRIBUTI ON TOWARDS P.F. AND ESI IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE, INTER ALIA, BY THE DECISION OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VIJAY SHREE LIMITED (ITAT 245 OF 2011 DATED 06.09.2011), WHEREI N IT WAS HELD THAT I.T.A. NOS. 1033 & 1637/KOL/2017 ASSESSMENT YEAR: 2014-2015 M /S. LALBABA SEAMLESS TUBES PVT. LIMITED 16 DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TOWARDS P .F. CANNOT BE DISALLOWED UNDER SECTION 43B IF THE SAME IS DEPOSIT ED BEFORE THE DUE DATE OF FILING OF THE RETURN OF INCOME. RESPECTFULLY FOL LOWING THE SAID DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND DISMISS GROUND NO. 2 OF THE REVENUES APPEAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED FOR STATISTICAL PURPOSES, WHILE THE APPEAL OF THE R EVENUE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 12, 201 9. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 12 TH DAY OF APRIL, 2019 COPIES TO : (1) M/S. LALBABA SEAMLESS TUBES PVT. LIMITED, 13A, RANGERS CLUB, GOVT. PLACE EAST, KOLKATA-700 06 9 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(1), KOLKATA, AAYAKAR BHAWAN P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (3) COMMISSIONER OF INCOME TAX (APPEALS)-1, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.