ACIT, CC-XXIV, Kolkata, Kolkata V. Radheshyam Agarwal, Kolkata

ITA 254/KOL/2011

• Counselvise Citation: 25423514 RSA 2011
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2011
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 02-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 15-02-2011
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA; S SINHA
• Assessee Lawyers: D S DAMLE
• Keywords: Document seized; Principle of natural justice; Reasonable cause; Accommodation entries; Onus to prove; Retraction; Documents seized; Reassessment proceedings
• Section: 131; 68; 132; 11; 133(6)

Judgement Text

1 , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B , KO LKATA [ . . . . . .. . , ,, , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SHRI B.R.MITTAL, JUDICIAL MEMBER & SRI C.D. RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO. 254 (KOL) OF 2011 %& '( / ASSESSMENT YEAR 2006-07 ASSTT.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE-XXIV, KOLKATA. RADHESHYAM AGARWAL, KOLKATA. (PAN-ADDPA5376M) (+, / APPELLANT ) - % - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / S/SRI S.SINHA & M.BHATTACHARYA /0+, 1 2 ' / FOR THE RESPONDENT: / SRI D.S. DAMLE '3 / ORDER ( . . . . . .. . ), (B.R.MITTAL), JUDICIAL MEMBER : THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSME NT YEAR 2006-07 AGAINST ORDER OF LD. C.I.T.(A), CENTRAL-III, KOLKATA DATED 29/11/ 2010 ON FOLLOWING GROUND :- 1. THAT IN THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.10,00,000/- MA DE U/S. 68 OF THE ACT WITHOUT PROPER APPRECIATION OF THE EVIDENCES BROUGHT ON REC ORD BY THE DEPARTMENT THAT IT WAS ASSESSEES OWN UNACCOUNTED MONEY INTRODUCED AS UNSE CURED LOAN RECEIVED FROM M/S. GLOBE STOCKS & SECURITIES LTD. ARRANGED THROUGH ACC OMMODATION ENTRIES IN THE BOOKS OF THE SAID COMPANY WHICH THE DIRECTOR OF THE COMPA NY HAD CONFESSED TO THE INCOME TAX AUTHORITIES. 2. THE APPEAL OF THE REVENUE IS BARRED BY ONE DAY. THE A.C.I.T., C.C.-XXIV, KOLKATA VIDE HIS PETITION DATED 15/2/2011 HAS EXPLA INED THE REASON FOR SUCH DELAY AND PRAYED FOR CONDONATION OF THE SAME. AFTER CONSIDER ING THE SAME AND HEARING THE PARTIES, WE FIND THAT THE DEPARTMENT WAS PREVENTED BY SUFFIC IENT AND REASONABLE CAUSE IN FILING THE APPEAL BELATEDLY BY ONE DAY BEYOND THE STIPULAT ED DATE. WE, THEREFORE, CONDONE THE SAID DELAY AND ADMIT THE APPEAL FOR DISPOSAL ON MER IT. 3. THE RELEVANT FACTS GIVING RISE TO THIS APPEAL A RE THAT THERE WAS A SEARCH & SEIZURE OPERATION CONDUCTED U/S. 132 OF THE ACT ON 08/12/20 06 IN THE CASE OF AGARWAL GROUP OF COMPANIES AND OFFICE PREMISES OF ONE SRI ARUN KR. K HEMKA WERE ALSO COVERED BY THE 2 SAID SEARCH OPERATION. THE ASSESSEE IS THE MANAGING DIRECTOR OF M/S. R.S. ISPAT LTD., WHICH IS ONE OF THE COMPANIES OF AGARWAL GROUP. DU RING SEARCH OPERATION, SOME PAPERS AND DOCUMENTS RELATING TO LOAN TRANSACTION WITH THE ASSESSEE WERE FOUND WITH THE POSSESSION OF SRI KHEMKA AND SEIZED. THE A.O. OBSER VED THAT THE SEIZED DOCUMENTS CONTAINED UNSECURED LOAN TRANSACTIONS AMOUNTING TO RS. 10 LAKHS MADE WITH THE ASSESSEE DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT YE AR UNDER CONSIDERATION. THIS UNSECURED LOAN WAS GIVEN IN THE FORM OF CHEQUE BY M /S. GLOBE STOCKS & SECURITIES LTD. SRI ARUN KR. KHEMKA IN HIS STATEMENT RECORDED U/S. 132(4) OF THE ACT ON 09/12/2006 STATED THAT THE SAID LOAN TRANSACTION WAS ACCOMMODA TION ENTRIES WHEREIN CASH WAS RECEIVED FROM THE PARTY CONCERNED AND CHEQUE WAS IS SUED IN LIEU THEREOF. DURING THE COURSE OF POST-SEARCH INVESTIGATION AND AT THE TIME OF MAKING THE ASSESSMENT, THE A.O. HAS STATED THAT M/S. GLOBE STOCKS & SECURITIES LTD. , WHO CLAIMED TO HAVE GIVEN UNSECURED LOAN TO THE ASSESSEE, HAS CATEGORICALLY A DMITTED VIDE ITS LETTER DATED 16/1/2007 THAT THE UNSECURED LOANS GIVEN WERE ACCOMMODATION E NTRIES BY RECEIVING CASH AND ISSUING CHEQUES IN LIEU THEREOF. THE A.O. HAS STAT ED THAT THE TRANSACTIONS INVOLVED ARE THUS BOGUS. THE A.O. HAS STATED THAT DURING THE AS SESSMENT PROCEEDINGS, THE ASSESSEE WAS AFFORDED AN OPPORTUNITY TO EXAMINE THE STATEMEN T OF SRI ARUN KR. KHEMKA AS WELL AS THE LETTER DATED 16/1/2007 FILED BY THE SAID LEN DER COMPANY. IN REPLY, THE ASSESSEE FILED A COPY OF AN AFFIDAVIT SWORN BY SRI ARUN KR. KHEMKA AS DIRECTOR OF M/S. GLOBE STOCKS & SECURITIES LTD. RETRACTING THE CONTENTS OF STATEMENT U/S. 132(4) AND LETTER DATED 16/1/2007. THE A.O. HAS REPRODUCED THE CONTENTS OF THE AFFIDAVIT AT PAGE 2 OF THE ASSESSMENT ORDER WHEREIN IT IS, INTER ALIA, STATED THAT THE STATEMENTS RECORDED DURING SEARCH WERE OBTAINED BY THE SEARCH TEAM USING COERC ION AND THREAT AND THEY HAD PUT UNDUE INFLUENCE AND PRESSURE AS A RESULT OF WHICH H E WAS COMPELLED TO MAKE STATEMENT U/S. 132(4) OF THE ACT IN ACCORDANCE WITH THE DIREC TIONS OF THE SEARCHING OFFICERS. THE A.O. DID NOT ACCEPT THE SAID RETRACTION AND BY REFE RRING TO THE DECISION OFHONBLE APEX COURT IN THE CASE OF SURJIT SINGH CHABRA VS. UNION OF INDIA [AIR 1997 (SC) 2560] CONSIDERED THE SAID UNSECURED LOAN OF RS.10 LAKHS A S APPEARING IN THE BOOKS OF THE ASSESSEE NOT GENUINE AND ADDED THE SAME TO THE INCO ME OF THE ASSESSEE U/S. 68 OF THE ACT 3 FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. ON BEHALF OF THE ASSESSEE IT WAS CONTENDED BEFO RE THE LD. C.I.T.(A) THAT ADDITION U/S. 68 OF THE ACT HAD BEEN MADE BY THE A.O. ON SUR MISE, CONJECTURE AND BY NOT OBSERVING PRINCIPLES OF NATURAL JUSTICE, BECAUSE TH E ALLEGED STATEMENT OF SRI ARUN KR. KHEMKA U/S. 132(4) OF THE ACT WAS RECORDED NEITHER IN THE PRESENCE OF THE ASSESSEE NOR HIS REPRESENTATIVE, NOR ANY OPPORTUNITY WAS AFFORDE D TO CROSS-EXAMINE SRI KHEMKA OR THE DIRECTOR OF THE LENDER COMPANY EITHER DURING SE ARCH OR DURING ASSESSMENT PROCEEDINGS BY THE A.O. BEFORE THEIR STATEMENTS WER E USED. THE ASSESSEE WAS CONFRONTED FOR THE FIRST TIME WITH THE SAID STATEMENT AND LETT ER OF LENDER COMPANY ONLY AT THE FAG END OF TIME BARRING ASSESSMENT IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT EVIDENCES HEAVILY RELIED UPON BY THE A.O. FOR MAKING ADDITION WERE NEVER PROVIDED TO THE ASSESSEE FOR HIS EXAMINATION. IT WAS ALSO CONTENDED BEFORE T HE LD. C.I.T.(A) THAT IT WAS ONLY WHEN THE ASSESSEE WAS SHOWN THE STATEMENT OF SRI KHEMKA AND LETTER OF THE LENDER COMPANY DATED 16/1/2007 IN COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE TOOK IMMEDIATE STEPS TO ASCERTAIN THE FACTS FROM THEM AND THEN THE ASSESSEE WAS INFORMED ABOUT THE SWORN AFFIDAVIT OF SRI KHEMKA AND LETTER OF M/S. GL OBE STOCKS & SECURITIES LTD. SRI KHEMKA AND M/S. GLOBE STOCKS & SECURITIES LTD. ALSO PROVIDED THE ASSESSEE WITH CONFIRMATION OF ACCOUNT, COPY OF RELEVANT BANK STAT EMENT, COPY OF I.T. ACKNOWLEDGEMENT ETC. TO ESTABLISH AND CONFIRM THE A SSESSEES LOAN TRANSACTION WITH THE SAID M/S. GLOBE STOCKS & SECURITIES LTD., WHICH WER E IN TURN FILED WITH THE A.O. AND CLARIFIED THAT THE IMPUGNED LOAN TRANSACTION WAS GE NUINE. REFERRING TO BANK STATEMENT OF M/S. GLOBE STOCKS & SECURITIES LTD., WHICH IS RE GULARLY ASSESSED TO TAX, THE ASSESSEE CONTENDED BEFORE THE LD. C.I.T.(A) THAT APART FROM THE ASSESSEES LOAN TRANSACTION, THE SAID COMPANY HAD CONDUCTED SEVERAL HIGH VALUE TRANS ACTIONS WITH MANY OTHER PARTIES. IT WAS FURTHER CONTENDED THAT THE BANK STATEMENT OF TH E SAID LENDER COMPANY SHOWED THAT THERE WAS NO CASH DEPOSIT IN ITS BANK ACCOUNT AND F URTHER THERE WAS NO EVIDENCE ON RECORD WHICH IN ANY MANNER ESTABLISHES THAT BEFORE THE LOAN WAS RECEIVED BY THE ASSESSEE, THE ASSESSEE HAD ANY CASH TRANSACTION WIT H THE SAID LENDER COMPANY AND, THEREFORE, THE ALLEGATION OF THE A.O. THAT THE LOAN REPRESENTED MERE ACCOMMODATION 4 ENTRY IS NOT ESTABLISHED. IT WAS CONTENDED THAT THA T THE SAID LOAN IS STILL OUTSTANDING AND APPEARING IN THE ACCOUNTS OF THE LENDER COMPANY, ON WHICH THE ASSESSEE HAS BEEN PAYING INTEREST, WHICH IS BEING ASSESSED IN THE HANDS OF T HE SAID COMPANY YEAR AFTER YEAR. THE ASSESSEE, THEREFORE, SUBMITTED THAT THE ADDITION MA DE U/S. 68 OF THE ACT IN RESPECT OF UNSECURED LOAN WAS TOTALLY MISCONCEIVED. IN SUPPORT OF THE SUBMISSION THAT THE A.O. IS NOT ENTITLED TO MAKE PURE GUESS AND MAKE THE ASSESS MENT WITHOUT REFERENCE TO ANY EVIDENCE OR MATERIAL AT ALL, THE ASSESSEE RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF DHAKESWARI COTTON MILLS LTD. VS. CIT [2 6 ITR 775 (SC)]. IT WAS ALSO CONTENDED THAT THE A.O. WHILE TAKING FOR CONSIDERAT ION THE STATEMENT RECORDED U/S. 132(4) OF THE ACT PLACED RELIANCE ON THE DECISION O F HONBLE APEX COURT IN THE CASE OF SURJIT SINGH CHABRA VS. UNION OF INDIA [AIR 1997 (S C) 2560], WHICH IS FACTUALLY NOT CORRECT. IT WAS CONTENDED THAT IN THE SAID CASE THE ACCUSED HIMSELF HAD COMMITTED THE OFFENCE AT THE TIME OF SEARCH AND, THEREFORE, IT WA S HELD THAT ACCUSED COULD NOT BE GIVEN BENEFIT OF RETRACTION UNLIKE THE CASE OF THE ASSESS EE. IT WAS ALSO CONTENDED THAT IN THE SAID CASE THE ACCUSED WAS INTERCEPTED WHILE IN POSS ESSION OF CONTRABAND GOODS AND, THEREFORE, HIS OFFENCE WAS PROVED AT THE RELEVANT T IME WITH REQUISITE EVIDENCE. THE ASSESSEE CONTENDED BEFORE THE LD. C.I.T.(A) THAT TH E A.O. WAS NOT JUSTIFIED TO PLACE RELIANCE ON THE SAID DECISION OF HONBLE APEX COURT AS IN THE CASE OF THE ASSESSEE THE A.O. HAS USED THE STATEMENT OF A THIRD PERSON, WHO WAS NEITHER EXAMINED IN THE PRESENCE OF THE ASSESSEE NOR EXAMINED PERSONALLY, NOR ALLOWE D TO BE CROSS-EXAMINED BY THE DEPARTMENT AT ANY STAGE. 4.1. THE LD. C.I.T.(A) SOUGHT REMAND REPORT FROM T HE A.O. ON THE SUBMISSIONS OF THE ASSESSEE AND THE A.O. IN HIS REMAND REPORT JUSTIFIE D THE ADDITION U/S. 68 OF THE ACT BY STATING AS UNDER :- REGARDING THE ALLEGATION OF VIOLATION OF THE PRINC IPLES OF NATURAL JUSTICE, IT IS TO BE SUBMITTED THAT AS DESCRIBED IN THE ASSESSMENT OR DER ITSELF, THE ASSESSEE WAS AFFORDED AN OPPORTUNITY TO EXAMINE THE CONTENTS OF THE STATEMENT GIVEN U/S. 132(4) BY SRI ANIL KUMAR KHEMKA ON 09.12.2006 WHERE IN IT WAS STATED THAT CASH WAS RECEIVED FROM THE ASSESSEE AND CHEQUES WER E ISSUED TOWARDS SHARE CAPITAL IN LIEU THEREOF ALONG WITH THE CONTENTS OF THE LETTERS DATED 16.01.2007 WRITTEN BY M/S GLOBE STOCKS & SECURITIES LTD. 5 IT IS ALSO PERTINENT TO POINT OUT THAT AFTER THE AS SESSEE WAS SHOWN AND CONFRONTED WITH THE SAID STATEMENT AND LETTER, THE ASSESSEE DI D NOT ASK FOR FURNISHING COPIES OF THE SAME AT ANY POINT OF TIME. HENCE, THE ASSESS EE CANNOT TAKE THIS GROUND WHEN IT WAS NEVER AGGRIEVED ON THIS ACCOUNT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT MAY ALSO BE REMARKED THAT NO EVIDENCE WAS PUT ON RECORD BEHIND THE BACK OF THE ASSESSEE AT ANY STAGE OF THE ASSESSMENT PROCEED INGS. THE FACT THAT THE ASSESSEE WAS SHOWN AND CONFRONTED WITH THE SAID STA TEMENT AND LETTER SATISFIES THE BASIC ESSENCE OF THE PRINCIPLES OF NATURAL JUST ICE. IT IS ALSO RESPECTFULLY SUBMITTED THAT SINCE NO PRO CEEDINGS ARE PENDING BEFORE THE UNDERSIGNED, THE ISSUE OF SUMMONS FOR CROSS-EXAMINA TION AND RE-EXAMINATION OF WITNESSES CANNOT BE DONE AT THIS END. THE SAME, IF DEEMED NECESSARY, MAY BE CARRIED OUT DURING THE COURSE OF APPELLATE PROCEEDI NGS. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTE D THAT ANY PERCEIVED INADEQUACY REGARDING AFFORDING OF OPPORTUNITY CAN B E CURED DURING THE COURSE OF APPELLATE PROCEEDINGS. IN THE SUBMISSION FILED BY THE ASSESSEE, IT IS SEEN THAT THE ASSESSEE HAS NOT FURNISHED ANY NEW OR FRESH EVIDENCE WHATSOEVER REGA RDING THE IMPUGNED UNSECURED LOAN TRANSACTIONS. THE ASSESSEE HAS MEREL Y REITERATED ITS SUBMISSIONS MADE DURING THE COURSE OF ASSESSMENT PROCEEDINGS WH ICH HAVE ALREADY BEEN TAKEN ON RECORD AND CONSIDERED BY THE AO. IN THE CIRCUMSTANCES, THE AO WAS ENTIRELY JUSTIFIED IN INFERRING THAT THE GENUINENESS OF THE PURPORTED UNSECURED LOAN TRANSAC TIONS WAS NOT ESTABLISHED AND THEREBY, THE CORRESPONDING AMOUNT OF RS.10,00,0 00/- WAS LIABLE TO BE ADDED BACK U/S 68. ACCORDINGLY, THE APPEAL OF THE ASSESSE E DESERVES TO BE DISMISSED. 4.2. THE LD. C.I.T.(A) SOUGHT REJOINDER OF THE REM AND REPORT FROM THE ASSESSEE WHICH IS STATED BY HIM IN PARA-5, PAGES 7 TO 10 OF THE IM PUGNED ORDER AND THE CRUX OF THE SAID REJOINDER GIVEN BY THE ASSESSEE IS THAT THE ASSESSE E REITERATED THE SUBMISSIONS WHICH WERE MADE EARLIER AND THE EXTRACT OF WHICH HAS ALRE ADY BEEN STATED ABOVE. BESIDES THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF H ONBLE GUJARAT HIGH COURT IN THE CASE 6 OF DY.CIT VS. ROHINI BUILDERS [256 ITR 360 (GUJ)] A S ALSO OTHER DECISION OF HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMICHAND KOTHARI VS. CIT [264 ITR 254 (GAU)]. THE LD. C.I.T.(A) AFTER CONSIDERING THE SAID SUBMIS SIONS OF THE ASSESSEE AS WELL AS THE REMAND REPORT OF THE A.O. HAD DELETED THE ADDITION MADE BY THE A.O. VIDE PARAS 6 TO 16 OF THE IMPUGNED ORDER, WHICH READ AS UNDER :- 6. I HAVE CONSIDERED THE SUBMISSIONS OF THE A/R AN D THE AOS FINDINGS IN THE IMPUGNED ORDER AS ALSO IN THE REMAND REPORT. THE AD DITION U/S 68 IS IN RESPECT OF LOAN RECEIVED BY THE ASSESSEE FROM M/S. GLOBE STOCKS & S ECURITIES LTD. THE ADDITION WAS PRIMARILY MADE ON THE BASIS OF STATEMENT OF SRI ARU N KUMAR KHEMKA RECORDED U/S 132(4) OF THE ACT DTD. 9TH DECEMBER 2006 WHEREIN IT WAS STATED THAT THE LOAN TRANSACTIONS WERE ONLY ACCOMMODATION ENTRIES WHEREI N CASH WAS RECEIVED AND THE CHEQUES WERE ISSUED IN LIEU THEREOF. DURING THE POS T-SEARCH INVESTIGATION THE LOAN CREDITOR I.E. GLOBE STOCKS & SECURITIES LTD SUBMITT ED LETTER DATED 16.01.2007 SIGNED BY ITS DIRECTOR WHEREIN IT WAS ADMITTED THAT UNSECURE D LOANS WERE IN FACT ACCOMMODATION ENTRIES. THE STATEMENT OF SRI KHEMKA AND THE LETTER OF THE LOAN CREDITOR WERE SHOWN TO THE A/R OF THE ASSESSEE IN RESPONSE TO WHICH THE AP PELLANT FURNISHED COPY OF AFFIDAVIT DATED 26.02.2007 OF SRI ARUN KUMAR KHEMKA, DIRECTOR OF GLOBE STOCKS & SECURITIES LTD. RETRACTING STATEMENTS EARLIER MADE ON 16.01.20 07. THE A.O. REFUSED TO ACCEPT THE RETRACTION AFFIDAVIT ON THE GROUND THAT THERE WAS C ONSIDERABLE TIME GAP BETWEEN TWO STATEMENTS AND THE RETRACTION STATEMENT WAS NEVER F URNISHED BEFORE THE DDIT (INV.). THE RETRACTION AFFIDAVIT WAS FILED BEFORE THE A.O. ONLY AT THE FAG END OF ASSESSMENT PROCEEDINGS. IN A.OS OPINION THE RETRACTION AFFIDA VIT WAS MERE A SELF SERVING AFTER THOUGHT WHICH WAS MADE TO SUITE THE ASSESSEES CONV ENIENCE. RELYING ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF SURJIT SINGH CH ABRA VS UNION OF INDIA (AIR 1997 SC 2560) THE AO HELD THAT THE CONFESSION MADE BEFOR E THE REVENUE AUTHORITIES CAN NOT BE RETRACTED AND ORIGINAL STATEMENT BEING ADMISSION BEFORE THE REVENUE AUTHORITIES CARRIES MORE EVIDENTIARY VALUE. 7. FROM THE SUBMISSIONS OF THE A/R & THE IMPUGNED O RDER IT HOWEVER APPEARED THAT ALTHOUGH STATEMENTS OF SRI ARUN KUMAR KHEMKA & DIRE CTOR OF THE LOAN CREDITOR COMPANY WAS RECORDED IN DECEMBER 2006 AND JANUARY 2 007 NO STATEMENT OF THE APPELLANT WAS RECORDED BY THE DEPARTMENTAL AUTHORIT IES. FROM THE STATEMENT OF SRI KHEMKA AS EXTRACTED IN THE IMPUGNED ORDER IT APPEAR ED THAT SERIOUS ALLEGATIONS OF MONEY LAUNDERING AND TAX EVASION WERE LEVELLED AGAI NST THE ASSESSEE YET THE DDIT (INV.) NEVER CONFRONTED THE ASSESSEE WITH THE STATE MENT OF SRI KHEMKA NOR THE APPELLANT WAS EXAMINED WITH REFERENCE TO THE ALLEGATIONS EITH ER BY DDIT (INV.) OR BY THE AO AT ANY STAGE TILL REMAND PROCEEDINGS. IT ALSO APPEARED THAT THE STATEMENT OF SRI KHEMKA AND THE LOAN CREDITORS WERE OBTAINED IN THE ASSESSE ES ABSENCE AND NO OPPORTUNITY OF CROSS-EXAMINATION WAS ALLOWED AT ANY STAGE. 8. IT IS SETTLED LEGAL PROPOSITION THAT PRINCIPLES OF NATURAL JUSTICE ARE APPLICABLE IN INCOME TAX ASSESSMENT PROCEEDINGS AS WELL. PRINCIPLES OF N ATURAL JUSTICE DEMAND THAT EVIDENCE GATHERED BEHIND THE ASSESSEES BACK CAN BE USED IN EVIDENCE ONLY AFTER THE ASSESSEE IS 7 GIVEN COPY OF THE MATERIAL OR EVIDENCE SO GATHERED AND THE ASSESSEE IS ALSO GIVEN EFFECTIVE OPPORTUNITY OF REBUTTAL. PERUSAL OF THE A SSESSMENT ORDER AND THE REMAND REPORT SHOWS THAT COPY OF THE RECORDED STATEMENTS WERE NEV ER PROVIDED TO THE APPELLANT BUT ONLY THE A/R OF THE ASSESSEE WAS SHOWN THESE STATEM ENTS IN NOVEMBER 2008 WHEREAS THE ASSESSMENT WAS GETTING BARRED BY LIMITATION ON 31.12.2008. 9. THE IMPUGNED ORDER AND THE REMAND REPORT SHOW TH AT THE STATEMENT OF SRI KHEMKA AND THE LETTER OF THE LOAN CREDITOR COMPANY WERE US ED IN EVIDENCE FOR THAWING ADVERSE INFERENCE AGAINST THE ASSESSEE. THE ADDITION HAS BE EN JUSTIFIED WITH REFERENCE TO THESE STATEMENTS. IN THE CIRCUMSTANCES, SRI KHEMKA AND TH E DIRECTOR OF THE LOAN CREDITOR COMPANY BECAME WITNESSES FOR THE DEPARTMENT BECAUSE THEIR STATEMENTS HAVE BEEN RELIED UPON BY THE AO TO SUPPORT THE ADDITION MADE. IN THE CIRCUMSTANCES, NOT ONLY THE AO WAS REQUIRED TO PROVIDE COPIES OF THE FULL STATE MENTS FOR ENABLING THE ASSESSEE TO REBUT THE SAME BUT ALSO TO ALLOW THE OPPORTUNITY OF CROSS EXAMINING THE DEPARTMENTAL WITNESSES BEFORE THESE STATEMENTS WERE USED IN EVI DENCE FOR MAKING ADDITION U/S 68 OF THE ACT. 10. IT IS ADMITTED BY AO THAT AFTER THE COPY OF T HE STATEMENT WAS SHOWN TO THE ASSESSEE, RETRACTION AFFIDAVIT WAS FILED WHEREIN SRI KHEMKA R ETRACTED HIS EARLIER STATEMENT MADE BEFORE THE DDIT (INV.). IN THE RETRACTION AFFIDAVIT THE CREDITOR HAD ADMITTED THE LOAN TRANSACTION WITH THE ASSESSEE WAS GENUINE. THE AO H OWEVER REJECTED THE RETRACTION AFFIDAVIT ON THE GROUND THAT THERE WAS CONSIDERABLE TIME DIFFERENCE BETWEEN THE ORIGINAL STATEMENT AND RETRACTION AFFIDAVIT AND THE LATER AF FIDAVIT WAS NEVER FILED BEFORE THE DDIT (INV.). I HOWEVER FIND THAT THE ASSESSEE WAS NEVER MADE AWARE ABOUT THE FIRST AFFIDAVIT OR LATER AFFIDAVIT AT THE TIME OF SEARCH OR DURING POS T-SEARCH ENQUIRY. IT WAS ONLY IN NOVEMBER 2008 THE ASSESSEE WAS MADE AWARE ABOUT THE STATEMENTS MADE BEFORE THE DDIT (INV.) AND ALSO THAT OF THE RETRACTION AFFIDAV IT. IN THE CIRCUMSTANCES, NO FAULT COULD BE PLACED AT THE ASSESSEES DOOR BECAUSE THE APPELL ANT WAS NOT PARTY EITHER TO THE STATEMENTS ORIGINALLY TAKEN BY THE DDIT OR THE RETR ACTION AFFIDAVITS. 11. IN THE IMPUGNED ORDER, THE AO REFERRED ONLY TO THE RETRACTION AFFIDAVIT OF SRI ARUN KUMAR KHEMKA BEING DIRECTOR OF GLOBE STOCKS & SECUR ITIES LTD. THE ASSESSMENT ORDER IS CONSPICUOUSLY SILENT WITH REGARD TO THE INFORMAT ION WHICH WAS GATHERED BY THE AO BY ISSUING NOTICE U/S 133(6) OF THE ACT. FROM THE INFO RMATION PLACED ON RECORD, I FIND THAT IN THE COURSE OF ASSESSMENT THE AO ISSUED NOTICE U/ S 133(6) OF THE ACT TO LOAN CREDITOR I.E. GLOBE STOCKS & SECURITIES LTD. IN RESPONSE TO THE NOTICE U/S 133(6) THE LOAN CREDITOR FURNISHED LOAN CONFIRMATION, XEROX COPY OF THE BANK STATEMENTS AND THE CONFIRMATION LETTER ADMITTING GRANTING OF LOAN TO THE ASSESSEE B Y ISSUING 2 CHEQUES FOR RS.4 LACS & RS.6 LACS RESPECTIVELY WHICH WERE DRAWN ON BANK OF RAJASTHAN & IDBI BANK RESPECTIVELY. COPY OF THE AUDITED BALANCE-SHEET FOR THE YEAR ENDED 31ST MARCH 2006 WAS ALSO FILED. COPIES OF THE DOCUMENTS FURNISHED BEFOR E THE AO WERE FURNISHED BEFORE ME. IN THE REMAND REPORT THE AO HAS ADMITTED THAT NO FR ESH EVIDENCES WERE PRODUCED BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS. IT THERE FORE APPEARED THAT THE RETRACTION STATEMENT OF SRI ARUN KUMAR KHEMKA, DIRECTOR OF GLO BE STOCKS & SECURITIES LTD WAS BACKED BY THE COGENT DOCUMENTARY EVIDENCES WHICH PR OVED THAT LOAN OF RS.10 LACS WAS GRANTED BY THE SAID COMPANY AND IT WAS RECORDED IN THE REGULAR BOOKS OF M/S. GLOBE STOCKS & SECURITIES LTD. THE LOAN CREDITOR ALSO FIL ED COPIES OF ITS BANK STATEMENTS IN RESPECT OF ITS ACCOUNTS WITH BANK OF RAJASTHAN & ID BI BANK THROUGH WHICH RS.6 LACS & RS. 4 LACS WERE PAID TO THE ASSESSEE. ENTRIES IN THE BANK STATEMENTS SHOWED THAT THE 8 CHEQUES WERE CLEARED IN THE NAME OF SRI RADHESHYAM AGARWAL. IT ALSO APPEARED THAT THERE WAS NO CASH DEPOSIT IN THE BANK A/CS OF GLOBE STOCKS & SECURITIES LTD. PRIOR TO DATES ON WHICH CHEQUES WERE ENCASHED BY THE ASSESSE E. THE BALANCE-SHEET OF GLOBE STOCKS & SECURITIES LTD. SHOWED THAT NET-OWNED FUN D OF THE CREDITOR COMPANY WAS RS.L0.06 CRORES AND AGGREGATE OF LOANS & ADVANCES G RANTED BY THE SAID COMPANY AS ON 31.03.2006 WAS RS.286.76 LACS WHEREAS THE LOAN GRAN TED TO THE APPELLANT WAS BARELY RS. 10 LACS. 12. ALTHOUGH LOAN CREDITOR CONFIRMED TO THE AO IT S LOAN TRANSACTION AND PRODUCED DOCUMENTS REQUISITIONED IN THE NOTICE U/S 133(6); F OR THE REASONS KNOWN TO AO; HE OMITTED TO TAKE NOTE OF OR DEAL WITH ANY OF THE DOC UMENTS IN THE ASSESSMENT ORDER. IT APPEARED THAT THE AO SIMPLY BRUSHED ASIDE THE EVIDE NCES WHICH HE HIMSELF GATHERED BY ISSUE OF STATUTORY NOTICE U/S 133(6) OF THE ACT. TH E OMISSION ON THE PART OF THE AO TO DEAL WITH EVIDENCES GATHERED THROUGH ISSUE OF NOTIC E U/S 133(6); IS GLARING AND INEXPLICABLE TO SAY THE LEAST. BOTH IN THE ASSESSME NT ORDER AS ALSO IN THE REMAND REPORT EMPHASIZE IS PLACED ON THE STATEMENT RECORDED FROM SRI KHEMKA IN THE COURSE OF SEARCH. HOWEVER, I FIND THAT THE STATEMENT RECORDED AT THE TIME OF SEARCH WAS BEREFT OF ANY SUPPORTING DOCUMENTS. ALTHOUGH THE STATEMENT CONTAI NED ALLEGATION OF AVAILING ACCOMMODATION ENTRIES, THE STATEMENT WAS NOT BACKED BY ANY COGENT MATERIAL. I ALSO FIND THAT THE AO HIMSELF DID NOT FIND THE SAID STAT EMENT TO BE SUFFICIENT AND THEREFORE CONDUCTED HIS INDEPENDENT ENQUIRIES BY ISSUE OF NOT ICE U/S 133(6). HOWEVER, WHEN IN RESPONSE TO NOTICE U/S 133(6) THE LOAN CREDITOR FIL ED CONFIRMATION OF TRANSACTIONS AND SUBSTANTIATED THE CONFIRMATION WITH SUPPORTING DOCU MENTS SUCH AS BANK STATEMENTS, AUDITED ACCOUNTS, ETC. THE AO CHOSE TO IGNORE ALL T HESE DOCUMENTS. THE AO HAS NOT DISPUTED IN THE REMAND REPORT THAT THE NOTICE U/S 1 33(6) WAS SERVED ON THE LOAN CREDITOR & IT WAS COMPLIED WITH. THE BANK STATEMENT OF THE L OAN CREDITOR ALSO SHOWED THAT THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNT OF THE CRED ITOR PRIOR TO ENCASHMENT OF CHEQUES BY THE APPELLANT. IN THE CIRCUMSTANCES, THE AOS BA SIC PREMISE THAT THE CASH GIVEN TO THE LOAN CREDITOR AND SAME WAS RETURNED IN FORM OF CHEQ UE WAS NOT EVEN PRIMA-FACIE PROVED BY ENTRIES IN CREDITORS BANK STATEMENT. THE BA1NCE -SHEET OF THE LOAN CREDITOR PROVED THAT IT HAD SUBSTANTIAL FUNDS OF ITS OWN OUT OF WHI CH IT COULD GRANT LOAN TO THE APPELLANT. THE CREDITWORTHINESS OF THE LOAN CREDITOR WAS THUS ESTABLISHED. THE ENTRIES IN BANK STATEMENTS PROVED THAT THE LOAN WAS RECEIVED THROUG H PROPER BANKING CHANNEL AND THE LOAN CREDITOR WAS HAVING HIGH VALUE TRANSACTIONS NO T ONLY WITH THE ASSESSEE BUT ALSO WITH SEVERAL OTHER PERSONS AS WELL. THESE FACTS HAVE NOT BEEN DENIED BY THE AO IN THE REMAND REPORT EVEN THOUGH THE IMPUGNED ORDER OF ASS ESSMENT WAS CONSPICUOUSLY SILENT ABOUT THESE DOCUMENTS WHICH WERE ADMITTEDLY MADE AV AILABLE TO THE AO BY THE LOAN CREDITOR IN RESPONSE TO NOTICE U/S 133(6). 13. FROM THE DOCUMENTS ON RECORD I THUS FIND THAT THE AO HAD ISSUED NOTICE U/S 133(6) TO LOAN CREDITOR. IN RESPONSE HE RECEIVED NOT ONLY THE RETRACTION AFFIDAVIT OF THE CREDITOR BUT ALSO THE LETTERS OF CONFIRMATION AND OTHER SUPP ORTING DOCUMENTS. THESE EVIDENCES WERE CONTRARY TO THE STATEMENT OF SRI KHEMKA RECORD ED U/S 132(4) WHICH WAS NOT BACKED WITH ANY INDEPENDENT DOCUMENTARY EVIDENCE. I N VIEW OF THE APPARENT CONTRADICTIONS BETWEEN THE TWO SETS OF STATEMENTS O F SRI KHEMKA, IT WAS OBLIGATORY FOR THE AO TO EXAMINE SRI KHEMKA AND M/S. GLOBE STOCKS & SECURITIES LTD. U/S 131 OF THE ACT. HOWEVER, FOR THE REASONS BEYOND COMPREHENSION THE AO CHOSE NOT TO EXAMINE EITHER SRI KHEMKA OR GLOBE STOCKS & SECURITIES LTD. IN MY LETTER DATED 20TH APRIL 2010 THE AO WAS SPECIFICALLY DIRECTED TO STATE WHETHER H E HAD ANY MATERIAL EVIDENCE TO PROVE 9 THE CHAIN OF TRANSACTIONS LEADING TO THE ULTIMATE D ESTINATION OF THE CASH AND TO EXAMINE SRI KHEMKA AGAIN AND AFFORD AN OPPORTUNITY OF CROSS -EXAMINATION TO THE ASSESSEE. DESPITE SUCH DIRECTION; THE AO CHOSE NOT TO EXAMINE EITHER THE CHAIN OF TRANSACTION LEADING TO THE DESTINATION OF CASH NOR EXAMINED SRI KHEMKA NOR GRANTED CROSS- EXAMINATION TO THE ASSESSEE. IN THE CIRCUMSTANCES, THE ONLY CONCLUSION THAT CAN BE DRAWN IS THAT THE AO DID NOT HAVE ANY ADVERSE MATER IAL IN HIS POSSESSION TO COUNTER THE DOCUMENTARY EVIDENCES PLACED ON RECORD BY THE LOAN CREDITOR. 14. THE ITAT DELHI BENCH IN ITS RECENT DECISION IN THE CASE OF MOBILE COMMUNICATION PVT. LTD. VS DCIT (125 ITD 309) CONSIDERED SOMEWHAT SIMILAR SITUATION. IN THIS CASE, ASSESSEE HAD PAID COMMISSION WHICH WAS DISALLOWED B Y THE AO EVEN THOUGH THE RECIPIENT OF THE COMMISSION HAD CONFIRMED THE TRANS ACTION IN RESPONSE TO THE NOTICE U/S 133(6). BEFORE THE AO THE RECIPIENTS OF THE COMMISS ION NOT ONLY CONFIRMED THE TRANSACTIONS BUT ALSO FILED EVIDENCES, SUCH AS COPY OF INVOICE, I.T. ACKNOWLEDGEMENT, PAN CARD, BANK STATEMENT, ETC. EVEN THOUGH THE AO H AD RECEIVED CONFIRMATIONS FROM THE PARTIES THE AO DISALLOWED THE COMMISSION WITHOU T EXAMINING THE CONCERNED PARTIES U/S 131 OF THE ACT. THE TRIBUNAL HELD THAT WHEN THE RECIPIENTS OF THE COMMISSION HAD CONFIRMED THE TRANSACTIONS IN RESPONSE TO NOTICES U /S 133(6) IT WAS HIGHLY UNJUSTIFIABLE ON THE AOS PART TO MAKE THE DISALLOWANCE WITHOUT I SSUING NOTICES U/S 131 OF THE ACT. THE DELHI HIGH COURT IN THE CASE OF CIT VS GENESIS COMET PVT. LTD. (163 TAXMAN 482) SIMILARLY HELD THAT IF AN OFFICER IS NOT INCLINED T O BELIEVE THE MATERIAL PLACED BY THE ASSESSEE THEN THE AO SHOULD USE POWERS AVAILABLE TO HIM U/S 131 AND IF SUCH POWER IS NOT EXERCISED THEN HE CAN NOT BE HELD TO BE JUSTIFI ED TO DRAW ADVERSE INFERENCE PARTICULARLY WHEN THE PARTY TO THE TRANSACTION HAS CONFIRMED THE SAME. 15. APPLYING THE RATIO LAID DOWN IN THESE DECISIO NS TO THE ASSESSEE S CASE, I FIND THAT THE AO HAD HIMSELF ISSUED NOTICE TO THE LOAN CREDIT OR U/S 133(6). IN RESPONSE THE LOAN CREDITOR FURNISHED THE DOCUMENTS REQUISITIONED AND IN THE AFFIDAVIT THE LOAN CREDITOR CONFIRMED THE TRANSACTION WITH THE ASSESSEE. DESPIT E RECEIPT OF ALL THESE EVIDENCES AND DOCUMENTS AS WERE REQUISITIONED U/S 133(6) THE AO F AILED TO DEAL WITH THESE EVIDENCES ON MERIT. SAVE AND EXCEPT THE AFFIDAVIT FURNISHED B Y THE CREDITOR, THE AO FAILED TO TAKE NOTE OF AND DEAL WITH ALL OTHER DOCUMENTS GATHERED BY HIM U/S 133(6). THE SUPPORTING DOCUMENTS SUCH AS BANK STATEMENTS, LOAN CONFIRMATIO NS, BA1ANCESHEET PROVED IDENTITY; GENUINENESS AND CREDITWORTHINESS OF THE LOAN TRANSA CTION & LOAN CREDITOR. NO INFIRMITY IN ANY OF THE DOCUMENT WAS SHOWN BY THE AO NOR THE AO PROVED ANY OF THE DOCUMENTS TO BE SHAM, FABRICATED OR FALSE. THE ENTRIES IN BAN K STATEMENTS PROVED THAT THE SOURCE OF PAYMENT OF LOAN WAS NOT CASH RECEIVED FROM THE ASSE SSEE BUT THE LOANS WERE PAID OUT OF FUNDS CLEARED THROUGH BANKING CHANNEL IN THE BANK A CCOUNT OF THE CREDITOR. THERE APPEARED NO CASH DEPOSITS IN THE BANK ALE OF THE CR EDITOR PRIOR TO CLEARING OF THE CHEQUES IN THE ASSESSEES NAME. HAVING REGARD TO AL L FACTS AND CIRCUMSTANCES OF THE CASE & THE DOCUMENTS ON RECORD, I DO NOT FIND JUSTIFICAT ION ON THE PART OF THE AO TO MAKE ADDITION SOLELY WITH REFERENCE TO STATEMENT OF SRI ARUN KUMAR KHEMKA AND GLOBE STOCKS & SECURITIES LTD. WHICH WERE NOT ONLY RETRAC TED LATTER BUT GLOBE STOCKS & SECURITIES LTD. SUBSTANTIATED ITS LOAN TRANSACTIONS WITH ADEQUATE AND COGENT DOCUMENTARY EVIDENCES. 16. IT IS BY NOW SETTLED LEGAL PRINCIPLE THAT BEF ORE AN ADDITION U/S 68 IS MADE THE AO HAS TO PROVE THAT THE ASSESSEE HAD FAILED TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITOR AND GENUINENESS OF THE TRANSACTION. I N THE PRESENT CASE THE IDENTITY OF THE 10 LOAN CREDITOR WAS NEVER IN QUESTION. THE LOAN CREDI TOR CONFIRMED THE LOAN TRANSACTION BY FURNISHING ACCOUNT CONFIRMATION, BANK STATEMENT AND BALANCE-SHEET. THE BANK STATEMENT SHOWED THAT THE CHEQUES IN THE NAME OF THE ASSESSEE WERE DEBITED TO THE BANK ACCOUNT OF THE LOAN CREDITOR. AS SUCH THE GENUINENESS OF TH E TRANSACTION WAS ESTABLISHED. THE LOAN CREDITOR ALSO FILED ITS BALANCE-SHEET AS OF 31 MARCH 2006 WHICH SHOWED THAT CREDITOR COMPANYS OWN CAPITAL WAS IN EXCESS OF RS. L0 CRORES WHICH WAS 100 TIMES MORE THAN THE LOAN AMOUNT. THE BALANCE-SHEET OF THE CREDITOR PROVES CREDITWORTHINESS OF THE LOAN CREDITOR. ON THE FACTS AND CIRCUMSTANCES O F THE CASE, I AM THEREFORE CONVINCED THAT THE CRITERIAS LAID DOWN BY THE GUJARAT HIGH CO URT IN THE CASE OF DCIT VS ROHINI BUILDERS (256 ITR 360) AND THE GAUHATI HIGH COURT I N THE CASE OF NEMICHAND KOTHARI VS CIT (264 ITR 254) WERE SATISFIED IN THE ASSESSEE S CASE. HAVING REGARD TO THE FACTS AND DOCUMENTS ON RECORD, I AM FULLY SATISFIED THAT THE ASSESSEE PROVED IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITOR AND ALSO PROV ED THE GENUINENESS OF THE LOAN TRANSACTION AND THEREFORE, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION U/S 68 AMOUNTING TO RS. 10 LACS. THE ADDITION AS MADE IN THE IMPUGN ED ORDER IS ORDERED TO BE DELETED. HENCE THE DEPARTMENT IS IN APPEAL BEFORE THE TRIBUN AL. 5. DURING THE COURSE OF HEARING, THE LD. DEPARTMEN TAL REPRESENTATIVE SUPPORTED THE ACTION OF THE A.O. HE SUBMITTED THAT THE LD. C.I.T .(A) HAS DELETED THE ADDITION MADE BY THE A.O. BY CONSIDERING THE SUBSEQUENT RETRACTION M ADE BY SRI ARUN KR. KHEMKA AS WELL AS THE LENDER COMPANY M/S. GLOBE STOCKS & SECU RITIES LTD. HE SUBMITTED THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD THAT THE SEARCH ING TEAM RECORDED THE STATEMENT U/S. 132(4) OF THE ACT BY USING COERCION OR THREAT. HE SUBMITTED THAT AS PER EVIDENCE ACT, WHEN A STATEMENT IS RECORDED, IT IS TEMPORARY EVIDE NCE AND THE SAME SHOULD NOT BE IGNORED. HE SUBMITTED THAT THE ACTION OF THE A.O. SHOULD BE CONFIRMED. 6. ON THE OTHER HAND, THE LD. A/R SUPPORTED THE OR DER OF LD. C.I.T.(A). HE MADE HIS SUBMISSIONS ON THE LINES OF THE SUBMISSIONS MADE BE FORE THE LD. C.I.T.(A). HE FURTHER SUBMITTED THAT THE A.O. WHILE MAKING THE ASSESSMENT BRUSHED ASIDE THE DOCUMENTARY EVIDENCE AND MADE THE ADDITION MERELY RELYING ON TH E STATEMENT RECORDED AT THE TIME OF INVESTIGATION AND THAT TOO WITHOUT BRINGING ANY COR ROBORATING EVIDENCE ON RECORD. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS NEVER CONFR ONTED WITH THE SAID STATEMENTS ALLEGEDLY RECORDED U/S. 132(4) OF THE ACT TILL OCTO BER, 2008 AND ONLY AT THE FAG END OF THE ASSESSMENT PROCEEDINGS IN NOVEMBER, 2008, STATE MENT OF SHRI KHEMKA AND LETTER OF LENDER COMPANY DATED 16/1/2007 WERE SHOWN TO THE AS SESSEE. HE SUBMITTED THAT THE ASSESSEE TOOK IMMEDIATE STEPS TO ASCERTAIN THE FACT S FROM THEM AND THEN THE ASSESSEE WAS INFORMED ABOUT THE SWORN AFFIDAVIT OF SRI KHEMK A AND LETTER DATED 15/12/2008 OF M/S. GLOBE STOCKS & SECURITIES LTD. SRI KHEMKA AND M/S. GLOBE STOCKS & SECURITIES 11 LTD. ALSO PROVIDED THE ASSESSEE WITH CONFIRMATION O F ACCOUNT, COPY OF RELEVANT BANK STATEMENT, COPY OF I.T. ACKNOWLEDGEMENT ETC. TO EST ABLISH AND CONFIRM THE ASSESSEES LOAN TRANSACTION WITH THE SAID M/S. GLOBE STOCKS & SECURITIES LTD., WHICH WERE IN TURN FILED WITH THE A.O. AND CLARIFIED THAT THE IMPUGNED LOAN TRANSACTION WAS GENUINE. REFERRING TO BANK STATEMENT OF M/S. GLOBE STOCKS & SECURITIES LTD., WHICH IS REGULARLY ASSESSED TO TAX, THE ASSESSEE CONTENDED BEFORE THE LD. C.I.T.(A) THAT APART FROM THE ASSESSEES LOAN TRANSACTION, THE SAID COMPANY HAD C ONDUCTED SEVERAL HIGH VALUE TRANSACTIONS WITH MANY OTHER PARTIES. THE LD. A/R S UBMITTED THAT THE COPIES OF THE RELEVANT DOCUMENTS IN RESPECT OF THE UNSECURED LOAN ARE PLACED AT PAGES 1 TO 13 OF THE PAPER BOOK. HE FURTHER SUBMITTED THAT THE A.O. DID NOT DEAL WITH ANY OF THE EVIDENCE/DOCUMENTS/EXPLANATION FURNISHED BY THE LOA N CREDITOR AND MADE THE ADDITION ONLY ON THE BASIS OF STATEMENT ALLEGEDLY RECORDED U /S. 132(4) OF THE ACT AND LETTER OF M/S. GLOVE STOCKS & SECURITIES LTD. DATED 16/1/2007 . THE LD. A/R SUBMITTED THAT THE LD. C.I.T.(A) HAS NOT RELIED ONLY THE RETRACTED STATEME NTS WHILE DELETING THE ADDITION MADE BY THE A.O. BUT ALSO CONSIDERED THE COPIES OF THE D OCUMENTS FILED BY THE ASSESSEE IN SUPPORT OF TAKING UNSECURED LOAN AND ALSO CONSIDERE D THE REMAND REPORT OF THE A.O. IN RESPECT OF ADMISSIBILITY OF CONFESSIONAL STATEMENT, THE LD. A/R REFERRED THE DECISION OF HONBLE APEX COURT IN THE CASE OF VINOD SOLANKI VS. UNION OF INDIA & ANOTHER IN CIVIL APPEAL NO. 740 OF 2008 DATED 18/12/2008 AND IN PART ICULAR PARAS 14, 22 & 34 OF THE SAID JUDGMENT AND SUBMITTED THAT THE ENTIRE BURDEN TO PROVE THAT THE CONFESSION WAS VOLUNTARY IN NATURE IS ON THE DEPARTMENT. HE SUBMIT TED THAT THE SAID DECISION OF HONBLE APEX COURT WAS FOLLOWED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UTTAM CHAND JAIN IN INCOME TAX APPEAL NO. 634 OF 20 09 AND THE HONBLE BOMBAY HIGH COURT VIDE ITS JUDGMENT DATED 2/7/2009 HELD TH AT THE RETRACTED CONFESSION COULD BE RELIED UPON IF THERE IS INDEPENDENT AND COGENT EVID ENCE TO CORROBORATE THE SAID STATEMENT. HE SUBMITTED THAT IN THE SAID CASE, THE HONBLE BOMBAY HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL, WHEREIN THE TR IBUNAL HAD GIVEN THE FINDING THAT THE STATEMENT OF ONE MR. TRIVEDI TO THE EFFECT THAT HE WAS NOT DOING ACTUAL BUSINESS OF TRADING AND MANUFACTURE OF DIAMONDS AND THAT THE TR ANSACTIONS REFLECTED IN HIS BOOKS OF ACCOUNTS WERE MERELY ACCOMMODATION ENTRIES GIVEN TO VARIOUS VDIS DECLARANTS WAS 12 ONLY A GENERAL STATEMENT AND NOT BASED ON ANY INDEP ENDENT EVIDENCE GATHERED PRIOR TO OR DURING THE COURSE OF REASSESSMENT PROCEEDINGS AND, ON THE OTHER HAND, THE ENTRIES FOUND RECORDED IN THE BOOKS WERE CONSIDERED AS GENUINE AN D THE TRANSACTION WAS HELD TO BE GENUINE. HE SUBMITTED THAT THE LD. C.I.T.(A) HAS C ATEGORICALLY STATED IN PARA-15 OF THE IMPUGNED ORDER THAT THE SUPPORTING DOCUMENTS SUCH A S BANK STATEMENTS, LOAN CONFIRMATIONS AND BALANCE SHEET PROVED IDENTITY, GE NUINENESS AND CREDITWORTHINESS OF THE LOAN TRANSACTION AND LOAN CREDITOR AND THE A.O. COULD NOT PROVE ANY OF THE DOCUMENTS TO BE SHAM, FABRICATED OR FALSE. HE FURT HER SUBMITTED THAT THE LD. C.I.T.(A) HAS STATED THAT THE ENTRIES IN THE BANK STATEMENTS PROVED THAT THE SOURCE OF PAYMENT OF LOAN WAS NOT CASH RECEIVED FROM THE ASSESSEE BUT TH E LOANS WERE PAID OUT OF FUNDS CLEARED THROUGH BANKING CHANNEL IN THE BANK ACCOUNT OF THE CREDITOR AND THERE WAS NO CASH DEPOSIT IN THE BANK ACCOUNT OF THE CREDITOR PR IOR TO CLEARING OF THE CHEQUES IN THE ASSESSEES NAME. HE, THEREFORE, SUBMITTED THAT THE ASSESSEE HAS ESTABLISHED NOT ONLY THE IDENTITY AND CREDITWORTHINESS OF THE SHARE-APPLICAN TS BUT ALSO THE GENUINENESS OF THE TRANSACTION. THEREFORE, THE ORDER OF LD. C.I.T.(A) BE CONFIRMED. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE FACTS OF THE CASE HAVE BEEN NARRATED ABOVE. AFTER PERUSING THE ASSESSMENT ORDER, WE OBSERVE THAT THE IMPUGNED ADDITION U/S. 68 OF THE ACT OF RS.10 LAKHS WAS MADE BY THE A.O. MAINLY RELYING ON THE ST ATEMENT OF SHRI KHEMKA RECORDED ON 9/12/2006 U/S. 132(4) OF THE ACT AND LETTER OF M /S. GLOBE STOCKS & SECURITIES LTD. DATED 16/1/2007 IN WHICH THEY HAD CLAIMED TO HAVE A DMITTED THAT THE ASSESSEE WAS PROVIDED ACCOMMODATION ENTRIES BY THEM IN LIEU OF C ASH RECEIPT. EXCEPT THESE STATEMENTS OF SRI KHEMKA AND M/S. GLOBE STOCKS & SE CURITIES LTD., NO OTHER CORROBORATIVE OR SPECIFIC EVIDENCE COULD BE BROUGHT ON RECORD BY THE A.O. TO JUSTIFY THE DEPTH OF AUTHENTICITY OF SUCH STATEMENTS AND SUBSEQ UENT ACTION THEREUPON AS PER LAW, WHICH WERE SUBSEQUENTLY RETRACTED BY THOSE PERSONS BY FILING AFFIDAVIT STATING THEREIN THAT THE SEARCHING TEAM RECORDED THE STATEMENT OF S RI AURN KR. KHEMKA, WHO IS ALSO DIRECTOR OF M/S. GLOBE STOCKS & SECURITIES LTD., BY USING COERCION AND THREAT AND FURTHER IT WAS DUE TO UNDUE INFLUENCE, PRESSURE AND THREAT OF DIRE CONSEQUENCES BY THE SEARCHING TEAM THAT HE WAS COMPELLED TO MAKE STATEM ENTS, WHICH WERE BEYOND THE 13 CORRECT STATE OF AFFAIRS. WE OBSERVE THAT THE LD. C .I.T.(A) NOT ONLY CONSIDERED THE RETRACTED STATEMENT BUT ALSO CONSIDERED THE EVIDENC ES FILED IN SUPPORT OF PAYMENTS MADE TOWARDS ADVANCING UNSECURED LOAN TO THE ASSESSEE IN RESPONSE TO NOTICE U/S. 133(6) OF THE ACT. WE OBSERVE FROM THE ASSESSMENT ORDER THAT THE A.O. DID NOT EXAMINE SRI KHEMKA, DIRECTOR OF THE LENDER COMPANY ON HIS RETRA CTION FROM THE EARLIER STATEMENT TO ESTABLISH THAT THE CASH WAS GIVEN BY THE ASSESSEE B EFORE INTRODUCTION OF THE SAME IN THE SHAPE OF UNSECURED LOAN TO THE ASSESSEE. HE HAS ALS O NOT MADE ANY EFFORTS TO LINK THE CASH RECEIVED AND DEPOSITED BY SRI KHEMKA IN HIS BA NK ACCOUNT TO ESTABLISH THAT THE MONEY WAS, IN FACT, CAME FROM THE COFFER OF THE ASS ESSEE. THEREFORE, THE MONEY ADVANCED AS UNSECURED LOAN WAS THE UNDISCLOSED MONE Y OF THE ASSESSEE, AS ALLEGED BY THE A.O., IS NOT BASED ON ANY INDEPENDENT EVIDENCE GATHERED PRIOR TO OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IT IS ALSO AN EST ABLISHED POSITION IN LAW THAT THE INITIAL BURDEN TO PROVE THAT THE CONFESSION WAS VOLUNTARY I N NATURE WOULD BE ON THE DEPARTMENT, WHICH, IN OUR OPINION, HAS NOT BEEN DISCHARGED BY T HE DEPARTMENT. THE LD. A/R RELIED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF V INOD SOLANKI VS. UNION OF INDIA (SUPRA) AND DECISION OF HONBLE BOMBAY HIGH COURT I N THE CASE OF CIT VS. UTTAMCHAND JAIN (SUPRA). THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UTTAMCHAND JAIN (SUPRA) FOLLOWING THE SAID DECISION OF HONBLE APEX COURT HAS HELD THAT THE RETRACTED CONFESSION OF A PERSON CAN BE RELIED UPON ONLY IF T HERE IS INDEPENDENT AND COGENT EVIDENCE TO CORROBORATE THE STATEMENT OF THAT PERSO N MADE EARLIER. IN THE PRESENT CASE, SRI KHEMKA WHO IS ALSO DIRECTOR OF M/S. GLOBE STOCK S & SECURITIES LTD. NOT ONLY RETRACTED HIS STATEMENT RECORDED EARLIER BY FILING AFFIDAVIT BUT ALSO FILED AUDITED ACCOUNTS, EVIDENCE OF FILING OF I.T. RETURN, BANK S TATEMENT, DETAILS OF CHEQUES AND CONFIRMATION IN SUPPORT OF GENUINENESS OF UNSECURED LOAN. THEREFORE, IN OUR CONSIDERED OPINION, THE LD. C.I.T.(A) ACTED JUDICIOUSLY IN TAK ING INTO CONSIDERATION THE RETRACTED STATEMENTS CORROBORATED BY THE EVIDENCES REFERRED T O ABOVE. 7.1. WE FURTHER OBSERVE THAT THE LD. C.I.T.(A) FIN DING THAT THERE WAS OMISSION ON THE PART OF THE A.O. TO EXAMINE SRI KHEMKA PERSONALLY A ND AS THERE WAS NO EVIDENCE EXCEPT THE STATEMENT OF SRI KHEMKA RECORDED U/S. 132(4) OF THE ACT AND LETTER OF M/S. GLOBE STOCKS & SECURITIES LTD. FILED BEFORE THE A.D.I.T. (INV.) TO JUSTIFY THE ADDITION AND THE 14 A.O. COULD NOT BRING ON RECORD ANY EVIDENCE TO LINK THE ALLEGED CASH PAID BY THE ASSESSEE AND ITS RECEIPT IN THE FORM OF UNSECURED L OAN, THE A.O. WAS GIVEN OPPORTUNITY IN THE REMAND PROCEEDINGS TO INVESTIGATE THE MATTER FU RTHER AND ESTABLISH THE ALLEGED TRAIL OF CASH AND ALSO AFFORD OPPORTUNITY OF CROSS-EXAMINATI ON OF THE DEPARTMENTAL WITNESSES TO THE ASSESSEE. DESPITE THIS CLEAR INSTRUCTIONS BY T HE LD. C.I.T.(A) IN THIS REGARD, WE OBSERVE THAT IN THE REMAND PROCEEDINGS ALSO THE A.O . WAS NOT ABLE TO BRING ON RECORD ANY MATERIAL ESTABLISHING THE ALLEGED TRAIL OF CASH WHICH ALLEGEDLY ORIGINATED FROM THE ASSESSEE AND CULMINATED IN THE FORM OF RECEIPT OF C HEQUE TOWARDS PAYMENT OF UNSECURED LOAN. THE FAILURE ON THE PART OF THE A.O. TO CONDUC T ANY ENQUIRY OF HIS OWN AND HIS FURTHER FAILURE TO PROVE ANY INFIRMITY OR FALSITY I N THE EVIDENCES FILED BEFORE HIM BY THE LOAN CREDITOR IN RESPONSE TO NOTICE U/S. 133(6) OF THE ACT IS NOTHING BUT GLARING. EVEN BEFORE US, THE DEPARTMENT WAS NOT ABLE TO BRING ON RECORD ANY MATERIAL TO DISPROVE THE GENUINENESS THE DOCUMENTARY EVIDENCES FILED BEFORE THE A.O. BY THE LOAN CREDITOR IN SUPPORT OF ITS ADVANCING UNSECURED LOAN TO THE ASSE SSEE. 7.2. IN THE ABOVE BACKGROUND OF THE CASE, NOW LE T US EXAMINE WHETHER ADDITION OF RS.10 LAKHS IS WARRANTED IN THE HANDS OF THE ASSESS EE. PROVISIONS OF SEC.68 OF THE ACT HAVE BEEN JUDICIALLY CONSIDERED BY SEVERAL COURTS O F LAW, AS PER WHICH AN ADDITION U/S. 68 CAN BE MADE WHERE AN ASSESSEE FAILS TO PROVE IDE NTITY OF THE CREDITOR; HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION . IN THE PRESENT CASE IT WAS NECESSARY FOR A.O. TO PROVE THAT ON ALL 3 INGREDIENTS THE ASS ESSEE HAD FAILED AND, THEREFORE, ADDITION WAS WARRANTED. IT WAS THEREFORE, NECESSARY THAT THE AO PROVED INFIRMITY IN THE DOCUMENTS TO WARRANT ADDITION U/S. 68 OF THE ACT. I N THE CASE BEFORE US, THE A.O. DID NOT DISPUTE THE IDENTITY OF THE LOAN CREDITOR AND ITS C REDITWORTHINESS. AS STATED BY THE LD. C.I.T.(A) AND EVIDENT FROM THE AUDITED ACCOUNTS OF M/S. GLOBE STOCKS & SECURITIES LTD. PLACED IN THE PAPER BOOK AT PAGES 8 TO 13, IN PARTI CULAR BALANCE SHEET AS AT 31/3/2006 THAT THE SAID COMPANY WAS HAVING OWN CAPITAL IN EXCESS O F RS.10 CRORES WHICH WAS SEVERAL TIMES MORE THAN THE LOAN AMOUNT. FURTHER THE IMPUG NED LOAN TRANSACTION IS DULY RECORDED IN THE BOOKS OF ACCOUNT OF BOTH THE ASSESS EE AS WELL M/S. GLOBE STOCKS & SECURITIES LTD. AND NO INFIRMITY THEREIN COULD BE P OINTED OUT BY THE A.O. THE SUBMISSION OF THE LD. A/R THAT THE SAID LOAN IS STI LL OUTSTANDING AND APPEARING IN THE 15 ACCOUNTS OF THE LENDER COMPANY, ON WHICH THE ASSESS EE HAS BEEN PAYING INTEREST, WHICH IS BEING ASSESSED IN THE HANDS OF THE SAID COMPANY YEAR AFTER YEAR HAS NOT BEEN CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . THEREFORE, IN SUCH CIRCUMSTANCES, THE GENUINENESS OF THE TRANSACTION COULD NOT BE DOU BTED MERELY ON GUESS, SURMISE AND CONJECTURE, MORE SO WHEN ADVANCING OF LOAN IS DULY SUPPORTED BY DOCUMENTS INCLUDING CONFIRMATION FROM THE LENDER COMPANY WHICH THE DEPA RTMENT COULD NOT CONTROVERT BY ADDUCING ANY EVIDENCE ON RECORD. 7.3. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF DCIT VS. ROHINI BUILDERS (SUPRA) AND HONBLE GAUHATI HIGH COURT IN THE CASE OF NEMIC HAND KOTHARI VS. CIT (SUPRA) HAVE HELD THAT WHERE THE LOAN CREDITORS ARE IDENTIFIED A ND THEY ARE REGULARLY ASSESSED TO TAX AND HAVE ADMITTED THE LOAN TRANSACTION WITH THE ASS ESSEE, THEN ADDITION U/S. 68 OF THE ACT IS NOT PERMISSIBLE. REFERRING TO SEC. 106 OF THE E VIDENCE ACT, THE HONBLE GAUHATI HIGH COURT IN THE SAID CASE OF NEMICHAND KOOTHARI (SUPRA ) HELD THAT WHERE THE PAYMENT HAS BEEN MADE BY THE LOAN CREDITOR BY ACCOUNT PAYEE CHE QUE AND GOES THROUGH THE BANK ACCOUNT OF THE LOAN CREDITOR, THEN IT CAN BE HELD T HAT THE ASSESSEE ESTABLISHED THE CREDITWORTHINESS OF THE LOAN CREDITOR. IN THE CASE BEFORE US, IDENTITY OF M/S. GLOBE STOCKS & SECURITIES LTD. IS BEYOND DOUBT. THE GENUI NENESS OF THE TRANSACTION RECORDED IN THE AUDITED BOOKS OF ACCOUNTS OF BOTH THE PARTIE S HAS NOT BEEN DISPUTED AND THE CAPACITY OF THE LOAN CREDITOR IS ALSO PROVED BEYOND DOUBT. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER PASSED BY THE LD. C.I.T.(A) DELETING THE ADDITION OF RS. 10 LAKHS MADE BY THE A.O. U/S. 68 OF THE ACT IN THE HANDS OF THE ASSESSEE. THE ORDER OF LD. C.I.T.( A) IS, THEREFORE, UPHELD AND THE GROUND OF APPEAL OF THE DEPARTMENT IS DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED. 4 '3 #5' 6 5% 7 48 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 06-09 -2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( . . . . . .. . ) (C.D.RAO) , ACCOUNTANT MEMBER (B.R.MITTAL) , JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 06-09-2011 16 $ $ $ $ / ITA NO. 254 (KOL) OF 2011 '3 1 /9 :'9';- COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT : A.C.I.T., CENTRAL CIRCLE-XXIV, KOLKATA. 2 /0+, / THE RESPONDENT : RADHESHYAM AGARWAL, R-605, CITY CENTRE, SALT LAKE, KOLKATA-700 064. 3. 3% () : THE C.I.T.(A), CENTRAL-III, KOLKATA. 4. 3% : THE C.I.T., CENTRAL-III, KOLKATA. 5. ?7 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 . GUARD FILE . 09 // TRUE COPY, '3%5/ BY ORDER, (DKP) @ A / DY/ASSTT. REGISTRAR .