A.C.I.T., Circle-33, Kolkata V. M/s Sreeleathers , Kolkata

ITA 254/KOL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5798 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-01-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 27-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI ROY
• Assessee Lawyers: RTGS
• Keywords: Unexplained cash credit; Opportunity of being heard; Principle of natural justice; Accommodation entries; Assessment record; Onus to prove; TDS; Bogus
• Section: 68; 132; 143(3); 133A; 133(6); 13; 22

Judgement Text

ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 1 | P A GE , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA [BEFORE SHRI J. SUDHAKAR REDDY, AM AND SHRI A. T. VARKEY, JM] I.T.A. NO. 254/KOL/2020 ASSESSMENT YEAR: 2015-16 ASSISTANT COMMISSIONER OF INCOME- TAX, CIRCLE-33, KOLKATA. VS. M/S. SREELEATHERS (PAN: AAKFS2993L) APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 19.01.2021 DATE OF PRONOUNCEMENT 05.02.2021 FOR THE APPELLANT SHRI DHRUBAJYOTI ROY, JCIT FOR THE RESPONDENT SHRI M. D. SHAH, AR ORDER PER SHRI A. T. VARKEY, JM: THIS APPEAL PREFERRED BY THE REVENUE IS AGAINST TH E ORDER OF LD. CIT(A)-09, KOLKATA DATED 14.11.2019 FOR ASSESSMENT YEAR 2015-16. 2. THE MAIN GRIEVANCE OF THE REVENUE IS AGAINST TH E ACTION OF THE LD. CIT(A) DELETING THE DISALLOWANCE RELATED TO THE UNEXPLAINED CASH CR EDIT OF RS.4,50,00,000/- AND THE UNEXPLAINED INTEREST EXPENDITURE ON IT TO THE TUNE OF RS.74,30,571/-. 3. BRIEF FACTS OF THE CASE AS NOTED BY THE AO ARE T HAT THE ASSESSEE HAD FILED RETURN OF INCOME DISCLOSING A TOTAL INCOME OF RS.75,35,310/-. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS UNDER LIMITED CATEGORY. THE AO NOTES THAT THE ASS ESSEE IS A FIRM INVOLVED IN THE BUSINESS OF TRADING/RETAILING OF FO OT-WARE AND OTHER LEATHER AND NON-LEATHER ACCESSORIES. THE AO NOTES ON PERUSAL OF THE ACCOUNT S AND DETAILS SUBMITTED DURING THE COURSE OF HEARING THAT THE ASSESSEE HAS RECEIVED UN SECURED LOANS FROM VARIOUS COMPANIES OUT OF WHICH ACCORDING TO AO, ARE PAPER COMPANIES ( 13 IN NUMBERS) THE DETAILS OF WHICH HE HAS GIVEN IN A CHART AT PAGE 2 AND 3 OF THE ASSE SSMENT ORDER ;AND ACCORDING TO AO FROM THESE 13 COMPANIES ASSESSEE HAD RECEIVED RS.4.50 CR . AND HAS SHOWN TO HAVE MADE THE PAYMENT OF RS.74,30,571/- AS INTEREST. IN THE CHAR T AFTER GIVING THE SL. NO., NAME AND ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 2 | P A GE ADDRESS OF THE PARTIES AND THE LOAN RECEIVED AND TH E INTEREST PAID, THE AO NOTES THAT THE PHYSICAL VERIFICATION DONE BY THE INCOME-TAX INSPEC TOR COULD NOT FIND THE SAID ENTITY AT THE GIVEN ADDRESS. ACCORDING TO AO, HE BROUGHT THIS MA TTER TO THE NOTICE OF THE ASSESSEE BY ISSUING NOTICE AND THEREAFTER HE REPRODUCED THE REP LY GIVEN BY THE ASSESSEE DATED 22.12.2017 WHICH IS FOUND AT PAGE 4 AND 5 OF THE AS SESSMENT ORDER. THEREAFTER, THE AO EXPLAINED THE MODUS OPERANDI FOLLOWED BY PAPER COM PANIES FOR ROUTING THE BLACK MONEY IN THE GUISE OF UNSECURED LOANS. ACCORDING TO HIM, THESE TRANSACTIONS ARE NOTHING BUT ACCOMMODATION ENTRIES AND THESE ARE NOT REAL TRANSA CTIONS. ACCORDING TO HIM, MERELY BY FILING PAN DETAILS, BALANCE SHEET AND RECEIVING MON EY THROUGH THE BANKING CHANNEL CANNOT ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINITY OF THE TRANSACTIONS. THEREAFTER, HE EXPLAINED SOME MODUS OPERANDI AND AL SO LIST OUT THE CHARACTERISTIC OF THE PAPER COMPANIES AT PARA 5.4 AND 5.5 OF THE ASSESS MENT ORDER. THEREAFTER, THE AO NOTES THAT IN THIS YEAR THE ASSESSEE HAS RECEIVED UNSECUR ED LOAN FROM ONE M/S. FAST GLOW DISTRIBUTORS PVT. LTD. (M/S. FGDPL) FROM LOAN ENTRY OPERATOR SHRI ASHISH KR. AGARWAL. AND ACCORDING TO HIM, SHRI ASHISH KR. AGARWALS STA TEMENT HAD BEEN RECORDED BY THE INVESTIGATION WING OF THE DEPARTMENT WHICH IS REPRO DUCED FROM PAGE 8 TO 12 OF THE ASSESSMENT ORDER WHICH, ACCORDING TO HIM, PROVES BE YOND DOUBT THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES IN THE FORM OF UNSEC URED LOANS. THEREAFTER, THE AO AFTER REFERRING TO THE REPLY OF SHRI ASHISH KR. AGARWAL TO QUESTION NO. 9 AND THE STATEMENT RECORDED ON 27.01.2015 BY SHRI ASHISH KR. AGARWAL, THE AO NOTED THAT SHRI ASHISH KR. AGARWAL HAS CONFESSED THAT M/S. FGDPL IS USED TO PR OVIDE ACCOMMODATION ENTRIES. THEREAFTER, HE SAYS THAT FOR THE SAKE OF NATURAL JU STICE HE DEPUTED AN INSPECTOR TO VERIFY THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE L OAN CREDITORS. HOWEVER, ACCORDING TO HIM, THE INSPECTOR FAILED TO TRACE THE LOAN CREDITO RS. THUS, ACCORDING TO HIM, THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES IN THE FORM OF UNSE CURED LOANS BY ROUTING THESE UNACCOUNTED MONIES, WHICH FACT HAS BEEN PROVED BEYO ND DOUBT. THEREAFTER, HE REFERRED TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN CIT VS. NIPPON BUILDERS & DEVELOPERS 350 ITR 407. THEREAFTER, HE REFERRED TO THE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. MAITHAN INTERNATIONAL (2015) 56 TA XMAN 283 (KOL), AND HE WAS OF THE OPINION THAT THE UNSECURED LOAN RECEIVED FROM BOGUS COMPANIES AS MENTIONED IN THE CHART OF RS.4.50 CR. NEED TO BE ADDED, SINCE ASSESSEE COU LD NOT DISCHARGE ITS BURDEN OF PROOF TO ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 3 | P A GE SUBSTANTIATE THE GENUINENESS OF INTRODUCTION OF UNS ECURED LOANS. THE AO HELD THAT THE PURPORTED UNSECURED LOANS OF RS.4.50 CR. ARE NOTHIN G BUT THE ASSESSEES OWN MONEY INTRODUCED UNDER THE GARB OF FRESH UNSECURED LOANS INTO THE ASSESSEES BUSINESS. THEREFORE, HE TREATED RS.4.50 CR. AS UNEXPLAINED CASH CREDIT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. THEREAFTER, HE NOTED THAT THE ASSESSEE H AS INCURRED EXPENSES ON ACCOUNT OF INTEREST PAYMENT OF RS.74,30,571/- ON THE LOANS. T HEREFORE, THE CORRESPONDING INTEREST EXPENSES OF R.S74,30,571/- ACCORDING TO HIM, CANNOT BE ALLOWED AS GENUINE EXPENDITURE. SO, HE DISALLOWED THE SAME AND ADDED TO THE TOTAL I NCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE LD. CIT(A), WHO NOTED THAT THE LOANS WERE SQUARED OFF IN THE SAME YEAR (I.E. A Y 2015-16) AND THAT ALL THE LOAN CREDITORS PURSUANT TO THE NOTICE ISSUED U/S. 133(6) OF THE ACT BY THE AO HAVE CONFIRMED TO HAVE PROVIDED LOAN TO THE ASSESSEE. THE LD. CIT(A) AFTER PERUSAL OF THE LOAN CONFIRMATIONS AND THE LOAN SCHEDULE, GAVE A FINDING THAT THE ASSE SSEE DURING THE YEAR HAD ENDED UP HAVING ZERO BALANCE CREDIT, SINCE THE MONEY WHICH WAS RECE IVED, HAD BEEN REPAID IN THE SAME YEAR. THUS, ACCORDING TO HIM, IT IS DIFFICULT TO A SSUME THAT THE LOANS IN QUESTION ARE IN THE FORM OF ACCOMMODATION ENTRY, SINCE THEY EFFECTIVELY ACCOMMODATE ZERO VALUE AT THE END OF THE YEAR AND RELIED ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. CHANDRA SHEKHAR . THEREAFTER, THE LD. CIT(A) NO TES THAT INTEREST HAS BEEN PAID @ 12% PER ANNUM IN MOST CASES WITH PROPER TDS DEDUCTION. ACCORDING TO LD. CIT(A), THE BUSINESS SENSE OF EXTENDING SUCH LOAN TO A BRAND LIKE SREELEATHERS/ASSESSEE CANNOT BE IGNORED. THE LD. CIT(A) NOTES THAT HE HAS TAKEN NOT E OF THE REPLIES GIVEN BY THE LENDER COMPANIES PURSUANT TO THE NOTICE U/S 133(6) OF THE ACT WHICH WERE DULY SERVED UPON THEM AND FROM THE REPLIES IT IS ESTABLISHED THAT THESE L ENDER COMPANIES HAD ENOUGH NET-WORTH WHICH ARE IN CRORES. THE LD. CIT(A) NOTES THAT SOME OF THE COMPANIES DECLARED INCOME TO THE TUNE OF RS. 45 LAKHS, 75 LAKHS ETC. THUS, ACCOR DING TO LD. CIT(A), THE ASSESSEE HAS SATISFIED THE REQUIREMENT OF LAW INSISTED U/S 68 OF THE ACT AS LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRECISION FINANCE PVT. LTD. IN RESPECT OF CREDITWORTHINESS, IDENTITY AND GENUINENESS OF THE T RANSACTION. THE LD. CIT(A) HAS TAKEN NOTE OF THE FACT THAT THE STATEMENT RELIED ON BY TH E AO TO TAKE ADVERSE VIEW AGAINST THE ASSESSEE I.E. SHRI ASHISH KUMAR AGARWALS IN RESPEC T OF LENDER M/S FAST GLOW DISTRIBUTORS ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 4 | P A GE CANNOT BE CONSIDERED AS PER THE RATIO LAID DOWN IN CASE OF CIT VS. S. KHADER KHAN SON IN 352 ITR 480 (SC). ACCORDING TO LD. CIT(A), THE STAT EMENT SINCE HAVE BEEN TAKEN ON OATH UNDER SURVEY DOES NOT HAVE ANY EVIDENTIARY VALUE AND MOREOVER THE STATEMENT HAS BEEN RECORDED IN THIRD PARTY CASE (NOT THAT OF ASSESSEE) AND WITHOUT GIVING THE FULL COPY OF THE STATEMENT TO THE ASSESSEE AND WITHOUT THE AO HIMSEL F EXAMINING SHRI ASHISH KUMAR AND WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSEE TO CR OSS-EXAMINE THE STATEMENT OF SHRI ASHISH KUMAR AGARWAL CANNOT BE USED ADVERSELY AGAIN ST THE ASSESSEE. FOR THE SAID PROPOSITION, HE REFERRED TO SEVERAL DECISIONS OF TH E HONBLE HIGH COURTS AND SUPREME COURT. THE LD. CIT(A) ALSO NOTED THAT THE AO ERRED IN GIVING THE SHOW CAUSE NOTICE REFERRING TO ONLY ONE (1) LENDER I.E. M/S FAST GLOW DISTRIBUTORS AND NOT CALLING UPON FROM ANY OTHER LENDERS DETAILS THUS LIMITING REPLY OF TH E ASSESSEE AND SECONDLY THE AO HAS NOT PROVIDED THE INSPECTORS REPORT ON THE BASIS OF WHI CH THE AO HAS INFERRED THE NON-EXISTENCE OF THE LENDER COMPANIES AT THE ADDRESS GIVEN ; AND THE LD. CIT(A) TOOK NOTE OF THE FACT THAT ALL THE LENDER COMPANIES WERE SERVED WITH NOT ICE ISSUED BY AO U/S 133(6) BY THE POSTAL AUTHORITIES AND PURSUANT TO WHICH THE LD. CI T(A) NOTES THAT ALL OF THEM HAVE COMPLIED DIRECTLY TO THE AO BY FURNISHING THEIR RES PECTIVE REPLIES CALLED FOR BY THE AO. THEREFORE, THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSMENT ORDER IS BAD INTER-ALIA , FOR VIOLATION OF NATURAL JUSTICE ALSO AND THEREFOR E ACCORDING TO HIM ADDITIONS CANNOT BE SUSTAINED. THEREFORE, HE DELETED THE ADDITION MADE AGAINST THE LOAN OF RS. 4,50 CRORES AND INTEREST THEREON OF RS. 74,30,571/-. 5. AGGRIEVED THE REVENUE IS BEFORE US. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. THE LD. D.R SHRI DHRUBAJYOTI ROY ASSAILING THE ACTION OF THE LD. CIT (A) CONTENDED THAT THE AO HAS MADE DETAILED ENQUIRIES THROUGH INSPECTOR WHOSE PHYSICAL VERIFICATION COULD NOT TRACE OUT THE LENDER COMPANIES IN THE ADDRESSES FURNISHED. ACCORD ING TO HIM, AO HAS GIVEN SHOW CAUSE NOTICE TO THE ASSESSEE POINTING OUT THE ADVERSE OBS ERVATIONS MADE BY THE INSPECTOR AND PURSUANT TO WHICH THE REPLY WAS GIVEN WHICH HAS BEE N REPRODUCED BY THE AO IN THE ASSESSMENT ORDER WHICH SHOWS THAT THE ASSESSEE HAD REPLIED ONLY IN RESPECT OF ONE (1) LENDER COMPANY M/S FAST GLOW DISTRIBUTORS, WHEN THE FACT REMAINS THAT THE ASSESSEE HAD ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 5 | P A GE TAKEN LOAN FROM THIRTEEN (13) LENDERS. ACCORDING TO LD. D.R, THE ASSESSEE HAS TAKEN LOAN FROM THE LENDER COMPANY CALLED M/S FAST GLOW DISTRI BUTORS WHICH IS A PAPER COMPANY OPERATED BY ENTRY PROVIDER SHRI ASHISH KUMAR AGARWA L WHOSE STATEMENT WHICH THE AO HAS REPRODUCED FROM PAGES 8 TO 12 WOULD REVEAL THAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRY FROM PAPER COMPANIES AND THEREF ORE, THE AO RIGHTLY TAKING NOTE OF THESE FACTS HAS GIVEN THE MODUS-OPERANDI OF SUCH EN TRY PROVIDER AND HAS RIGHTLY ADDED THE ADDITION WHICH HAS BEEN ERRONEOUSLY DELETED BY THE LD. CIT(A) WHICH HE WANTS US TO REVERSE. PER CONTRA, THE LD. A.R SHRI MIRAJ D SHAH SUPPORTING THE ORDER OF THE LD. CIT(A) POINTED OUT THAT ALL THE ELEVEN (11) LENDER COMPANI ES FROM WHOM THE ASSESSEE HAD TAKEN LOAN OF RS. 4.50 CRORES IN THIS ASSESSMENT YEAR HAS BEEN GIVEN BACK (EXCEPT RS. 15 LAKHS). ACCORDING TO LD. A.R, IT IS NOT 13 LENDER COMPANIES AS NOTED BY AO, BUT IT IS ONLY 11 COMPANIES FROM WHICH THE ASSESSEE HAS TAKEN LOAN OF RS. 4.50 CRORES IN THIS RELEVANT ASSESSMENT YEAR. ACCORDING TO LD. A.R, THE SO-CALLE D INSPECTORS REPORT WHICH ADVERSELY STATES ABOUT NON-EXISTENCE OF LENDERS AT THEIR RESP ECTIVE ADDRESS IS FAULTY ON TWO ACCOUNTS. FIRSTLY COPY OF THE INSPECTORS REPORT WAS NOT GIVEN TO ASSESSEE, SO THAT ASSESSEE COULD HAVE RESPONDED / EXPLAINED THE CORRECT FACTS. SECONDLY, THE SO-CALLED INSPECTORS REPORT CANNOT BE BELIEVED BECAUSE THE AO HAD ISSUED DIRECTLY NOTICES U/S 133(6) OF THE ACT TO ALL THE LENDER COMPANIES TO THEIR RESPECTIVE ADDRESSES AND PURSUAN T TO THE SAME, ALL OF THEM HAVE CONFIRMED THE LOAN TRANSACTION WITH THE ASSESSEE. I N ORDER TO PROVE THIS FACT, THE LD. A.R DREW OUR ATTENTION TO THE NOTICES U/S 133(6) OF THE ACT ISSUED BY AO TO EACH LENDER COMPANIES AND THE REPLIES THERETO BY THE RESPECTIVE LENDERS, WHEREIN THE LENDERS HAVE GIVEN THE FOLLOWING DOCUMENTS IN SUPPORT OF LOAN TR ANSACTION WITH THE ASSESSEE (I) COPY OF THE LEDGER FY 2014-15 (AY 2015-16) (II) DETAIL OF AMOUNT ADVANCED TO ASSESSEE BY RTGS / CHEQUE ETC, AMOUNT, BANK DETAILS (III) COPY OF BA NK STATEMENT (RELEVANT EXTRACT) (IV) LENDER COMPANIES PAN DETAILS (V) ITR DETAILS (VI) A UDITED BALANCE SHEET. THESE DETAILS ARE FOUND AT PAGE 51,73,95,123,146,169,196,220,240, 263,289,311,384 OF THE PB. 7. THEREAFTER THE LD. A.R DREW OUR ATTENTION TO VOL UMINOUS PAPER BOOK WHICH CONTAINS 340 PAGES AND DREW OUR ATTENTION TO THE SHOW CAUSE NOTICE (SCN) ISSUED BY THE AO DATED 20.12.2017 WHICH IS PLACED AT PAGE 2 OF THE PB WHIC H IS REPRODUCED AS UNDER: ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 6 | P A GE DATED: 20.12.2017 SREELEATHERS, 3 & 4, LINDSAY STREET, KOLKATA SIR, SUB: SHOW CAUSE IN THE CASE OF M/S SREELEATHERS [PA N: AAKFS 2993 L] FOR THE ASSESSMENT YEAR 2015-16 MATTER REGARDING 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, YO U HAVE SUBMITTED A LIST OF UNSECURED LOANS IN RESPECT OF YOUR CLAIM OF LIABILI TY. NOTICES U/S 133(6) OF THE INCOME TAX ACT, 1961 WERE ISSUED TO VARIOUS PARTIES CALLING FO R INFORMATION FOR VERIFICATION OF THE TRANSACTIONS CLAIMED BY YOU. REPLIES / CONFIRMATION S WERE OBTAINED FROM THEM AND THE SAME HAVE PLACED IN THE ASSESSMENT RECORDS. 3. ON PERUSAL OF THE ACCOUNTS AND DETAILS SUBMITTE D DURING THE COURSE OF HEARING, IT IS NOTICED THAT DURING THE YEAR UNDER CONSIDERATION, T HAT YOU HAVE RECEIVED UNSECURED LOANS FROM VARIOUS COMPANIES OUT OF WHICH ONE (1) COMPANY HAVE BEEN FOUND TO BE PAPER COMPANY HAVING NO WORTH AS MENTIONED IN TABLE BELOW : SL. NO. NAME AND ADDRESS OF THE PARTY LOAN RECEIVED INTEREST 1 FAST GLOW DISTRIBUTORS 50,00,000 12,79,268 4. YOU ARE REQUESTED TO PROVE IDENTITY OF LENDERS, GENUINENESS OF TRANSACTION, AND CREDITWORTHINESS OF LENDERS, FAILING WHICH ADVERSE INFERENCE WOULD BE DRAWN. 5. YOUR CASE IS RE-FIXED FOR HEARING AT 12.30 PM ON 22 ND DECEMBER, 2017 AT THE OFFICE OF THE UNDERSIGNED. IF YOU DO NOT WISH TO AVAIL YOU RSELF OF THIS OPPORTUNITY OF BEING HEARD IN PERSON OR THROUGH AN AUTHORIZED REPRESENTATIVE, YOU MAY SHOW CAUSE IN WRITING ON OR BEFORE THE SAID DATE WHICH WILL BE CONSIDERED BEFOR E ANY SUCH ORDER IS MADE UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 6. IT MAY BE NOTED THAT REQUEST FOR ADJOURNMENT OF THE CASE WILL NOT BE ENTERTAINED UNDER ANY CIRCUMSTANCES AS THE MATTER IS TIME BARRI NG. IN CASE OF NON-COMPLIANCE, IT WILL BE ASSUMED THAT YOU HAVE NO EXPLANATION TO OFFER A ND THE ASSESSMENT WILL BE COMPLETED AS PER PROVISIONS OF THE INCOME TAX ACT, 1961 WITHOUT GIVING ANY FURTHER OPPORTUNITY TO YOU. 8. DRAWING OUR ATTENTION TO THE SCN, THE LD. A.R SU BMITTED THAT THE SCN IS DATED 20.12.2017 AND THE AO FRAMED THE ASSESSMENT ORDER W ITHIN SIX DAYS I.E. ON 26.12.2017. THEREAFTER, HE DREW OUR ATTENTION TO THE FACT THAT ON PERUSAL OF THE SCN IT WOULD REVEAL THAT THE AO HAS CLEARLY EXPRESSED DOUBT ABOUT ONLY ONE ( 1) LENDER COMPANY AND NOT ABOUT THE OTHER TEN (10) LENDERS, WHICH FACT IS EVIDENT FROM A PLAIN READING OF THE CONTENT OF SCN WHICH READS;- IT IS NOTICED THAT DURING THE YEAR UNDER CONSIDERA TION, THAT YOU HAVE RECEIVED UNSECURED LOANS FROM VARIOUS COMPANIES OUT OF WHICH ONE (1) COMPANY HAVE BEEN FOUND TO BE PAPER COMPANY HAVING NO WORTH AS MENTIO NED IN TABLE BELOW: ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 7 | P A GE SL. NO. NAME AND ADDRESS OF THE PARTY LOAN RECEIVED INTEREST 1 FAST GLOW DISTRIBUTORS 50,00,000 12,79,268 9. THEREAFTER, IT WAS BROUGHT TO OUR NOTICE THAT TH E CASE WAS RE-FIXED FOR HEARING AT 12.30 PM ON 22.12.2017. ACCORDING TO LD. A.R THE AS SESSEE HAD FILED THE REPLY TO THE SCN WHICH THE AO HAS REPRODUCED FROM PAGES 4 AND 5 OF T HE ASSESSMENT ORDER. FROM A PERUSAL OF THE SAME IT CAN BE UNDERSTOOD THAT THE ASSESSEE SINCE WAS CONFRONTED ADVERSELY ONLY IN RESPECT OF ONE LENDER COMPANY I.E. M/S FAST GLOW D ISTRIBUTORS, HAD OBVIOUSLY RESTRICTED THE REPLY ALONG WITH SUPPORTING DOCUMENTS IN RESPEC T OF THIS COMPANY ONLY AND FURNISHED THE FOLLOWING DOCUMENTS TO PROVE THE IDENTITY, CRED ITWORTHINESS AND GENUINETY OF THE LENDER M/S FAST GLOW DISTRIBUTORS: A) COPY OF PAN CARD OF M/S FAST GLOW DISTRIBUTORS B) INCOME ACKNOWLEDGMENT FOR AY 2015-16 C) COPY OF BANK STATEMENT D) COPY OF INCORPORATION OF LENDER COMPANY E) COMPANY MASTER DATA FROM ROC OF M/S FAST GLOW DISTR IBUTORS F) ANNUAL ACCOUNT OF M/S FAST GLOW DISTRIBUTORS FOR FY 2014-15 G) LOAN-CONFIRMATION FROM M/S FAST GLOW DISTRIBUTORS 10. ACCORDING TO LD. A.R WHEN THE ASSESSEE RECEIVED ASSESSMENT ORDER DATED 26.12.2017, THE ASSESSEE WAS SHOCKED TO NOTE THAT E VEN THOUGH THE AO EXPRESSED HIS DOUBTS OF M/S FAST GLOW DISTRIBUTORS FROM WHICH THE ASSESSEE BORROWED RS. 50 LAKHS, THE AO HAS MADE THE ADDITION OF THE ENTIRE LOAN TRANSAC TION OF THIS ASSESSMENT YEAR TO THE TUNE OF RS. 4.50 CRORES, WHICH ACCORDING TO LD. A.R IS A RBITRARY AND WHIMSICAL. MOREOVER, ACCORDING TO LD. A.R HE WAS SURPRISED THAT THE ADVE RSE VIEW OF AO HAS TAKEN AGAINST THE LENDING COMPANIES BASED ON A STATEMENT RECORDED BY THE INVESTIGATION WING I.E. DDIT(INV) DATED 27.01.2015 WHICH IS TWO YEARS PRIOR TO FRAMING OF ASSESSMENT. ACCORDING TO LD. A.R, THE STATEMENT CANNOT BE RELIED UPON FOR TWO REASONS. ACCORDING TO HIM, THE STATEMENT OF SHRI ASHISH KUMAR AGARWAL HAS BEEN REC ORDED DURING SURVEY U/S 133A OF THE ACT AND THAT ON OATH WHICH IS NOT IN ACCORDANCE TO LAW AND THEREFORE DOES NOT HAVE ANY EVIDENTIARY VALUE AS HELD BY THE HONBLE SUPREME CO URT IN S. KHADER KHAN SONS (SUPRA). ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 8 | P A GE ACCORDING TO LD. A.R., THE COPY OF THE SURVEY STATE MENT WHICH THE AO HAS RELIED UPON HAS NOT BEEN GIVEN TO THE ASSESSEE BEFORE FRAMING OF AS SESSMENT AND THE ASSESSEE WAS NOT ALLOWED TO CROSS-EXAMINE SHRI ASHISH KUMAR AGARWAL. THEREFORE, THE STATEMENT CANNOT BE TAKEN AS EVIDENCE AGAINST THE ASSESSEE AS HELD BY H ONBLE SUPREME COURT IN ANDAMAN TIMBERS FINANCE VS. CCE [CA NO. 4228 OF 2006]. IT W AS POINTED OUT BY THE LD AR THAT THE SURVEY STATEMENT OF SHRI ASHISH KUMAR AGARWAL H AS BEEN TAKEN DURING THE SURVEY OF A THIRD PARTY AND WITHOUT IT BEING TESTED ON THE TOUC H-STONE OF CROSS-EXAMINATION CANNOT BE USED ADVERSELY AGAINST THE ASSESSEE. MOREOVER, ACCO RDING TO LD. A.R, AT THE FAG END (SIX DAYS) BEFORE THE ASSESSMENT WAS FRAMED, THE AO ISSU ED THE SCN IN WHICH HE CONFRONTED THE ASSESSEE ONLY AGAINST ONE LENDER I.E, M/S FAST GLOW DISTRIBUTORS WHICH WAS DULY REPLIED WITHIN THE TIME GIVEN BY THE AO. THEREFORE , IN THE AFORESAID FACTS AND CIRCUMSTANCES DRAWING ADVERSE INFERENCE AGAINST ENT IRE LOAN TAKEN BY THE ASSESSEE [RS 4.50 CRORES] WHICH HAS BEEN SQUARED UP HAS BEEN AN ARBIT RARY ACTION WHICH WAS RIGHTLY DELETED BY THE LD. CIT(A) WHICH ACTION DOES NOT CALL FOR AN Y INTERFERENCE FROM OUR SIDE. 11. HAVING HEARD BOTH THE PARTIES AND AFTER PERUSAL OF RECORDS, WE NOTE THAT THE ASSESSEE IS A LEADING SHOE MAKER / MANUFACTURER OF LEATHER G OODS AND THE ASSESSEE HAS SHOWN INCOME OF RS. 7.35 CRORES AND THE ASSESSEE HAS TAKE N WORKING CAPITAL FROM ELEVEN (11) LENDER COMPANIES IN THIS RELEVANT ASSESSMENT YEAR T O THE TUNE OF RS. 4.50 CRORES. IN ORDER TO CONFIRM THE IDENTITY AND GENUINENESS OF THE LOAN TR ANSACTION, IT IS NOTED THAT PURSUANT TO NOTICE ISSUED BY AO U/S 133(6) OF THE ACT, ALL THE LENDER COMPANIES HAVE RESPONDED DIRECTLY TO THE AO WHICH FACT IS EVIDENT FROM PERUS AL OF PAGE 51,73,95,123,146,169,196,220,240,263,289,311,384 OF THE PB. THE LENDER COMPANIES HAVE FILED THE FOLLOWING DOCUMENTS CALLED FOR BY THE AO TO ESTABLISH THEIR IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION (S) ETC. COPY OF PAN CARD OF LENDER COMPANIES ; INCOME ACKNOWLEDGMENT FOR AY 2015-16; C OPY OF BANK STATEMENT ; COPY OF INCORPORATION OF LENDER COMPANIES; COMPANY MASTER D ATA FROM ROC OF LENDER COMPANIES; ANNUAL ACCOUNT OF LENDER COMPANIES FOR FY 2014-15; LOAN-CONFIRMATION FROM LENDER COMPANIES. HOWEVER, THE AO, IT IS NOTED , HAD ISSUE D ANOTHER SCN FIRST BEFORE SIX DAYS OF FRAMING THE ASSESSMENT DATED 20.12.2017 CALLING UP ON THE ASSESSEE TO GIVE DETAILS TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF T HE TRANSACTION WITH M/S FAST GLOW ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 9 | P A GE DISTRIBUTORS FROM WHOM THE ASSESSEE HAD TAKEN RS. 5 0 LAKHS AND HAS INCURRED INTEREST EXPENDITURE TO THE TUNE OF RS. 12,79,268/-. PURSUAN T TO THE SCN, THE ASSESSEE HAD REPLIED AND GIVEN ALL THE DOCUMENTS TO THE AO WHICH HE HAS REPRODUCED AT PAGE 4 & 5 OF ASSESSMENT ORDER (REFER PAGE 126-148 OF PB). THEREA FTER, THE AO HAS FRAMED THE ASSESSMENT BY RELYING ON THE STATEMENT OF SHRI ASHI SH KUMAR AGARWAL WHICH WAS RECORDED U/S 133A OF THE ACT (ON OATH) DATED 27.01. 2015 IN A THIRD PARTY CASE AND THEREAFTER MADE AN ADDITION OF RS. 4.50 CRORES AND DISALLOWED INTEREST EXPENDITURE OF RS. 74,30,571/-. ON APPEAL, THE LD. CIT(A) HAD DELETED THE ADDITION, WHICH ACTION OF LD. CIT(A) IS UNDER CHALLENGE BEFORE US. WE FIND THAT I N THIS ASSESSMENT YEAR, THE ASSESSEE WHICH IS A LEADING SHOE MANUFACTURING STATE OF WEST BENGAL HAD TAKEN LOAN OF RS. 4.50 CRORES FROM ELEVEN (11) LENDER COMPANIES AND SQUARE D UP THE LOAN (EXCEPT 15 LAKHS) WITH THEM, WHICH FINDING OF FACT OF LD. CIT(A) HAS NOT B EEN CHALLENGED BY THE REVENUE BY PREFERRING ANY GROUNDS OF APPEAL, SO THIS FACT ATTA INS FINALITY. WE FIND THAT AO IN ORDER TO EXAMINE THE IDENTITY AND GENUINENESS OF THE IBID LO AN TRANSACTION HAD ISSUED NOTICE U/S 133(6) OF THE ACT DIRECTLY FROM THEM ALONG WITH DET AILS AND SUPPORTING DOCUMENTS CALLED FOR AS DISCUSSED (SUPRA). THEREAFTER THE AO CONFRON TED THE ASSESSEE WITH A SCN DATED 20.12.2017 (I.E. SIX DAYS BEFORE FRAMING ASSESSMENT ORDER) THAT HE WANTS DETAILS OF ONE LENDER COMPANY ONLY (I.E. M/S FAST GLOW DISTRIBUTOR S PVT. LTD.) FROM WHICH ASSESSEE TOOK RS. 50 LAKHS WHICH WAS DULY REPLIED BY THE ASSESSEE (THE REPLY OF ASSESSEE HAS BEEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER). THER EAFTER, THE AO FRAMED THE ASSESSMENT ORDER ON 26.12.2017 WHEREIN HE DREW ADVERSE INFEREN CE AGAINST THE ENTIRE LOAN OF RS. 4.50 CRORES ON THE STRENGTH OF AN INSPECTOR REPORT AND STATEMENT OF SHRI ASHISH KUMAR AGARWAL WHICH ACTION OF AO CANNOT BE COUNTENANCED F OR THE FOLLOWING REASONS. FIRSTLY BECAUSE THE SO-CALLED INSPECTORS REPORT WHICH ST ATES THAT THE LENDER COMPANIES COULD NOT BE TRACED IN THEIR RESPECTIVE ADDRESSES WAS NOT FUR NISHED TO THE ASSESSEE. SECONDLY BECAUSE, THE EVIDENCE ON RECORD SHOW THAT PURSUANT TO THE N OTICE ISSUED BY AO U/S 133(6) OF THE ACT TO ALL THESE LENDERS AT THE VERY SAME ADDRESSE S, IT GOT SERVED UPON THEM BY THE POSTAL AUTHORITIES WHICH FACT CAN BE SAFELY INFERRED BECAU SE IT IS NOT THE CASE OF THE AO THAT NOTICES ISSUED U/S 133(6) HAS BEEN RETURNED BACK U N-SERVED. THIRDLY ALL THE LENDER COMPANIES HAVE REPLIED DIRECTLY TO THE AO PURSUANT TO THE NOTICES ISSUED U/S 133(6) OF THE ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 10 | P A GE ACT, WHICH FACT IS EVIDENT FROM PAGES 51,73,95,123, 146,169,196,220,240,263,289,311,384 OF THE PB. 12. COMING TO THE STATEMENT OF SHRI ASHISH KUMAR AG ARWAL IT IS NOTED THAT THE STATEMENT OF SHRI ASHISH KUMAR AGARWAL WAS RECORDED ON 27.01.2015 U/S 133A OF THE ACT (SURVEY). AND THE FOLLOWING LEGAL INFIRMITIES ARE F OUND FOR THIS STATEMENT. FIRSTLY THE SURVEY STATEMENT HAS BEEN RECORDED BY DDIT(INV) IN SOME TH IRD PARTY CASE AND NOT THAT OF ASSESSEE. SECONDLY THE DEPONENT HAS BEEN ADMINISTER ED OATH BEFORE HIS STATEMENT WAS RECORDED, WHICH IS NOT IN ACCORDANCE TO SECTION 133 A OF THE ACT AND THE HONBLE SUPREME COURT IN KHADER KHAN & SONS (SURPA) HAS HELD THAT T HE STATEMENT RECORDED U/S 133A OF THE ACT IS NOT GIVEN EVIDENTIARY VALUE FOR THE REASON T HAT OFFICER IS NOT AUTHORIZED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT IN CONTRA DIST INCTION TO THE POWER VESTED IN AUTHORITIES TO RECORD STATEMENT UNDER OATH DURING SEARCH U/S 132 OF THE ACT. THEREFORE ON THE SOLE STATEMENT RECORDED U/S 133A OF THE ACT OF SHRI ASHISH KUMAR AGARWAL, NO ADVERSE VIEW CAN BE TAKEN AGAINST THE ASSESSEE SIN CE THERE IS NO EVIDENTIARY VALUE TO BE GIVEN TO IT. MOREOVER, IF THE AO STILL FELT THAT HE NEEDS TO USE SHRI ASHISH KUMAR AGARWALS STATEMENT AGAINST THE ASSESSEE, THEN IN A LL FAIRNESS HE SHOULD HAVE GIVEN A COPY OF THE STATEMENT WELL IN ADVANCE AND CALLED FOR EXP LANATION FROM ASSESSEE AND THEREAFTER IF THE AO IS NOT SATISFIED THEN HE SHOULD HAVE SUMMONE D AND EXAMINED (ASHISH KUMAR) AND THEREAFTER GIVEN AN OPPORTUNITY TO ASSESSEE TO CROS S-EXAMINE SHRI ASHISH KUMAR AGARWAL. AFTER DOING THESE EXERCISES, STILL IF THE AO FINDS THAT FROM THE STATEMENT WHICH HAS UNDERGONE CROSS-EXAMINATION, A WRONG-DOING ON THE P ART OF ASSESSEE, THEN HE COULD HAVE DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE. HOWEV ER ADMITTEDLY THESE ACTIONS WERE NOT TAKEN BY AO. SO THE STATEMENT OF SHRI ASHISH KUMAR CANNOT BE RELIED UPON AGAINST THE ASSESSEE AS HELD BY HONBLE SUPREME COURT IN ANDAMA N TIMBERS (SUPRA). SO WHEN BOTH FOUNDATION ON WHICH THE AO DREW ADVERSE INFERENCE A GAINST THE ASSESSEE GOES, APPLYING THE LEGAL MAXIM SUBLATO FUNDAMENTS CREDIT OPUS MEANING IN A CASE FOUNDATION IS REMOVED, THE SUPER-STRUCTURE FALLS, THE ADDITIONS G OES. THEREFORE, IN THE LIGHT OF THE FACT THAT ALL THE ELEVEN (11) LENDER COMPANIES FROM WHICH THE ASSESSEE HAD TAKEN LOAN OF RS. 4,50 CRORE HAD REPLIED DIRECTLY TO AO PURSUANT TO SECTIO N 133(6) NOTICE OF COPY OF WHICH WE HAVE SEEN IN THE PB AS DISCUSSED SUPRA AND THE FACT THAT ALL THE LENDER COMPANIES ARE ITA NO.254/KOL/2020 SREELEATHERS, , A.Y. 2015-16 11 | P A GE REGULAR INCOME TAX ASSESSEES & HAVING PAN AS WELL AS THEIR ROC DETAILS WERE BROUGHT TO THE NOTICE OF AO & THEIR RESPECTIVE BALANCE SHEET S HOWS THAT ALL OF THEM HAVE ENOUGH CREDITWORTHINESS TO LEND THE AMOUNTS IN QUESTION TO ASSESSEE AND THE ASSESSEE HAD SQUARED UP THE LOAN TRANSACTION WITH ALL THESE LENDERS (EXC EPT 15 LAKHS) AND ALL THE PAYMENTS/TDS WERE MADE & PAYMENTS WERE MADE THROUGH BANKING CHAN NEL, THE ADDITION MADE BY AO WAS UNTENABLE AND THEREFORE THE LD. CIT(A) RIGHTLY DELETED THE ADDITION WHICH ACTION IS CONFIRMED. AND THEREFORE REVENUE APPEAL IS DISMISSE D. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT 5 TH FEBRUARY, 2021. SD/- SD/- (J.S. REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 05.02.2021 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- ACIT, CIRCLE-33, KOLKATA. 2. RESPONDENT M/S. SREELEATHERS, 3&4, LINDSAY STREET , KOLKATA-700 087 3. THE CIT(A)- 9, KOLKATA (SENT THROUGH E-MAIL) 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA