Meet Marketing, Ahmedabad V. The Income Tax Officer, S.K.Ward-3, Himatnagar

ITA 2697/AHD/2014

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4793 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N J VYAS
• Keywords: Unexplained cash credit; Unexplained investment; Loose papers; Opportunity of cross examination; Block assessment; Retraction
• Section: 143(3); 142(1); 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 2697/AHD/2014 (ASSESSMENT YEAR: 2005-06) MEET MARKETING NR. TOWER ROAD, NAVA BAZAR, HIMMATNAGAR DIST: SABARKANTHA 383001 V/S INCOME TAX OFFICER, WARD- 3 (SK), HIMATNAGAR (APPELLANT) (RESPONDENT) PAN: AAIFM 2625H APPELLANT BY : SHRI TEJ SHAH, AR RESPONDENT BY : SHRI N.J. VYAS, SR. D.R. ( )/ ORDER DATE OF HEARING : 15 -10-201 8 DATE OF PRONOUNCEMENT : 18 -10-2018 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III, AHMEDABAD DATED 19.07.2014 PERTAINING TO A.Y. 2005- 06 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 2697 -AHD/2014 . A.Y.2005-06 2 1. THE LEARNED CIT (A) ERRED IN LAW AND ON THE FAC TS OF THE* CASE IN CONFIRMING THE ORDER U/S. 143(3) R.W.S. 147 OF THE ACT OF THE A.O. WHO HAS COMPUTED THE INCOME AT RS. 15,00,000/- AS AGAINST NIL INCOME OF THE ASS ESSEE 2. THE LEARNED CIT (A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING THE ADDITION OF RS. 15,00,000/- BY TREATING UNSECURED L OAN RECEIVED FROM SHANTISURI SECURITIES PRIVATE LIMITED AS INCOME OUT OF UNDISCL OSED SOURCES 3. THE LEARNED CIT (A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN CONFIRMING INTEREST CHARGED U/S. 234 A / B/ C OF THE ACT. 2. THE FACTS OF THE CASE ARE THAT ON THE BASIS OF INFO RMATION RECEIVED FROM ITO WARD-8(3), AHMEDABAD, THE CASE OF THE ASSESSEE WAS REOPENED BY ISSUING A NOTICE U/S. 148 OF THE IT. ACT 1961 ON 29.03.2012 W HICH WAS DULY SERVED UPON THE ASSESSEE ON 30.03.2012. THEREAFTER THE ASSESSEE ASKED FOR ON CHANGE OF INCUMBENT A FRESH NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 14.06.2012 WHICH WAS DULY SERVED UPON THE ASSESSEE ON 19.06.20 12. AGAIN A NOTICE U/S. 142(1) OF THE ACT ALONGWITH THE DETAILED QUESTIONNA IRE WAS ISSUED ON 22.10.2012 WHICH WAS SERVED UPON THE ASSESSEE ON 23 .10.2012. AGAIN A NOTICE U/S. 142(1) OF THE ACT WAS ISSUED ON 07.12.2012 WHI CH WAS SERVED UPON THE ASSESSEE ON 11.12.2012. IN RESPONSE TO THESE NOTICE S, SHRI RUPESH H. SHAH, PARTNER OF THE ASSESSEE FIRM, ATTENDED FROM TIME TO TIME AND SUBMITTED THE CALLED FOR DETAILS. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE VIDE THE ABOVE REFERRED NOTICE U/S. 142(1) DATED 22.10.2012, ALONG WITH OTHER DETAILS, WAS ASKED TO FURNISH THE PROOF OF LOAN AND ADVANCES GIVEN BY SHANTISURI SECURITIES PVT. LTD. OF RS. 15,00,000/- ALONGWITH PROOF OF RECEIPT OF THESE LOAN AND ADVANCES AND ALSO CONFIRMATION FROM SHANTISURI SECURITIES PV T. LTD. HOWEVER, THE ASSESSEE DID NOT FURNISH THE CALLED FOR DETAILS. TH EREFORE A SHOW-CAUSE NOTICE ITA NO. 2697 -AHD/2014 . A.Y.2005-06 3 WAS ISSUED TO THE ASSESSEE ON 05.03.2013 AS PER WHI CH HE WAS ASKED WHY SUCH AMOUNT OF RS. 15,00,000/- SHOULD NOT BE TREATED AS YOUR INCOME FROM UNEXPLAINED SOURCES AND ADDED TO HIS TOTAL INCOME. YOU ARE ALSO REQUESTED TO FURNISH COPY OF BALANCE-SHEET WITH AHNEXURES FOR F. Y. 2004-05. 4. THE ASSESSEE VIDE HIS LETTER DATED 11.03.2013 SUBMI TTED HIS REPLY IN THIS OFFICE ON 11.03.2013 WHICH IS REPRODUCED AS UNDER: ' I AM IN RECEIPT OF THE ABOVE REFERRED SHOW CAUSE NOTICE FOR THE A. Y. :-2005- 06 STATING THAT WHY AN AMOUNT OF 1500000/- I.E. UN SECURED LOAN RECEIVED FROM M/S SHANTISURI SECURITIES PVT. LTD SHALL NOT BE ADD ED TO MY INCOME AS INCOME FROM UNEXPLAINED SOURCES. IN RESPONSE TO SAME I BEG TO SUBMIT AS UNDER. 1. I HAD RECEIVED UNSECURED LOAN FROM M/S SHANTIS URI SECURITIES PVT. LTD. OF RS.1500000/- DURING THE FINANCIAL YEAR 2004-05 BY A CCOUNT PAYEE CHEQUES OF HIMATNAGAR NAGRIK SAHKARI BANK. 2. AS STATED IN YOUR SHOW CAUSE NOTICE, RELIANCE P LACED ON THE STATEMENT OF BHAVESH G.BHANDARI DATED 08.012.2009 RECORDED U/S 1 31(1) OF THE ACT. I BEG TO DRAW YOUR KIND ATTENTION TO THE FACT THAT TO THE BH AVESH G.BHANDARI WAS NOT DIRECTOR OF THE COMPANY FOR THE A. Y.:- 2005-06 & 2 006-07 AND HE WAS NOT LOOKING AFTER THE STATE OF AFFAIRS OF THE COMPANY. FURTHER I HAVE TO STATE THAT SHRI BHAVESH G.BHANDAH HAS ALREADY RETRACTED HIS STATEMENT DATED 08.12.2009 VIDE FILLING THE DULY SW ORN IN RETRACTION AFFIDAVIT DATED 18.05.2012. HENCE THE EARLIER STATEMENT DATED 08.12.2009 HAS NO EVIDENTIAL VALUE AND NO ADDITION CAN BE MADE RELYIN G UPON THIS STATEMENT. FURTHER I BEG TO DRAW YOUR KIND ATTENTION TO THE FA CT THAT THE PRESENT DIRECTOR OF THE COMPANY MR. BHAVESH G.BHANDARI HAD ALREADY C ONFIRMED THE ACCOUNT STATEMENT OF MY TRANSACTIONS FOR THE PERIOD 2004-05 . A COPY OF CONFIRMATION ITA NO. 2697 -AHD/2014 . A.Y.2005-06 4 RECEIVED FROM M/S SHANTISURI SECURITIES PVT.LTD. PL EASE ATTACHED HEREWITH FOR YOUR KIND REFERENCE. 3. IN THIS CASE NO INCRIMINATING MATERIAL HAS BEE N FOUND DURING THE COURSE OF THE SEARCH. THE MATERIAL RELIED UPON BY YOUR HONOUR IS ONLY A STATEMENT OF SHRI BHANDARI, WHICH IS A/SO BEEN RETRACTED BY HIM POST SEARCH. THEREOF NO ADDITION COULD BE MADE SOLELY ON THE BASIS OF THE STATEMENT OF SHRI BHANDARI. 4. I ALSO REQUIRE TO CROSS EXAMINE SHRI BHANDARI A ND THEREOF AN OPPORTUNITY TO CROSS EXAMINE HIM IS TO BE PROVIDED. 5.IT WAS HELD BY ITAT AHMEDABAD 'A' BENCH IN THE CA SE OF VIJAYBHAI H.HAH VS. DCIT 6 SOT 75(AHD) THAT A.O. MAKING ADDITION IN BLOCK ASSESSMENT UNDER S.158BD ON THE BASIS OF LOOSE PAPERS FOUND DU RING SEARCH OF G AND S SHOWING PAYMENT TO THE ASSESSEE AND STATEMENT OF TH OSE PERSONS UNDER S. 132(4) WITHOUT CONFRONTING THE SAME TO THE ASSESSEE AND WITHOUT AFFORDING THE ASSESSEE AN OPPORTUNITY OF CROSS EXAMINATION, SUCH BLOCK ASSESSMENT CANNOT BE SUSTAINED FOR VIOLATION OF PRINCIPLES OF NATURE JUS TICE. 6. IN THIS REGARD. I WOULD LIKE TO SUBMIT THAT IN COME TAX OFFICER WARD 8(3). AHMEDABAD. HAS ALREADY CONSIDERED THIS ISSUE IN THE CASE OF M/S SHANTISURI SECURITIES PVT.LTD. FOR A.Y: 2005-06 WHILE PASSING THE ORDER U/S 143 (3) R.W.S.263 OF THE ACT DATED 11.12.2012 AND MADE AN A DDITION OF RS.4,07,95,000/- ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S 68 OF THE ACT BY RELYING UPON THE STATEMENT OF THE ASSESSEE SHRI BHAVESH G.BHANDARI, WHICH HAS ALREADY BEEN RETRACTED BY HIM BY FILLING A DULY SHOWN IN RETRACT ION AFFIDAVIT DATED 18.05.2012. THE COMPANY M/S SHANTISURI SECURITIES PVT.LTD. HAS ALREADY FILED APPEALS BEFORE THE CIT (A) -XIV. AHMEDABAD. AGAINST THE ORD ER PASSED U/S 143(3) R.W.S. 263 OF THE I.T. ACT. 1961 FOR A.Y.: 2005-06 AND THE SAID APPEALS ARE PENDING FOR DISPOSAL BEFORE THE CIT (A). HENCE, IT IS SUBMITTED THAT THE ADDITION ITA NO. 2697 -AHD/2014 . A.Y.2005-06 5 WAS ALREADY MADE IN THE CASE OF THE COMPANY M/S SHA NTISURI SECURITIES PVT.LTD. FOR A.Y.: 2005-06 BY TREATING THE SHARE CAPITAL AS UNEXPLAINED CASH CREDIT, IN VIEW OF ABOVE STATED FACT I KINDLY REQUEST YOU N OT TO MAKE AN ADDITION OF RS. 1500000/- IN MY CASE AND OBLIGED. 5. THE REPLY OF THE ASSESSEE IS DULY CONSIDERED BUT IS NOT FOUND ACCEPTABLE ON THE FOLLOWING GROUNDS: A SEARCH OPERATION WAS CARRIED OUT AT THE PREMISES OF M/S. SHANTISURI SECURITIES PVT. LTD. ON 07.02.2008. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS IN THE CASE OF THIS COMPANY A STATEMENT ON OATH OF SHRI BHAVESH BHANDARI WAS RECORDED ON 08.12.2009 BY THE DCIT, CE NTRAL CIRCLE2(3), AHMEDABAD. IN HIS STATEMENT HE CATEGORICALLY ADMITT ED THAT THE PARTIES WHO HAVE ALLEGEDLY CONTRIBUTED TO THE SHARE CAPITAL OF THE COMPANY ARE EITHER BOGUS OR ARE MERE ENTRY GIVERS. IN HIS STATEMENT HE SUBMI TTED THAT HE ALONGWITH HIS OTHER FAMILY MEMBERS ARE IN THE BUSINESS OF CHEQUE DISCOUNTING AND SHROFF FOR MANY YEARS IN HIMATNAGAR. SOMETIME IN THE YEAR 2005 , SOME OF HIS OLD CLIENTS WHO USE HIS SERVICES FOR CHEQUE DISCOUNTING APPROAC HED HIM TO PROVIDE ACCOMMODATING ENTRIES TO THEM EITHER IN THE FORM OF SHARE CAPITAL OR AS LOANS AND ADVANCES FOR A FIXED PERCENTAGE OF COMMISSION. SINCE HE DID NOT HAVE THE CASH TO PROVIDE THE SAME, HE PURCHASED A LOSS MAKIN G COMPANY AND THEREAFTER HE ACCEPTED CASH FROM THESE PARTIES AND HANDED IT O VER TO THE VARIOUS PARTIES WHO HAVE DEPOSITED THE CASH IN THEIR OWN COMPANIES AND IN TURN 'INVESTED' IN HIS COMPANY AS 'SHARE CAPITAL' OR AS 'LOANS & ADVAN CES'. THIS MONEY WAS FORWARDED BY THE M/S. SHANTISURI SECURITIES PVT. LT D. AS LOANS AND ADVANCES TO VARIOUS PARTIES WHO HAVE GIVEN HIM CASH IN THE FIRS T PLACE. ITA NO. 2697 -AHD/2014 . A.Y.2005-06 6 6. ACCORDINGLY AN ORDER U/S. 153C R.W.S. 143(3) OF THE IT. ACT 1961 WAS PASSED IN THE' CASE OF M/S. SHANTISURI SECURITIES PVT. LTD. O N 24.12.2009 AFTER TAKING INTO CONSIDERATION THE STATEMENT RECORDED OF BHAVESH BHA NDARI ON 08.12.2009. THEREAFTER, ON THE BASIS OF INFORMATION RECEIVED FR OM ITO WARD-8(3), AHMEDABAD, THE CASE OF THE ASSESSEE WAS REOPENED ON 29.03.2012 TO VERIFY THE GENUINENESS OF LOAN TRANSACTIONS OF RS. 15,00,0007- THAT IT HAS RECEIVED FROM M/S. SHANTISURI SECURITIES PVT. LTD. THESE FACTS AR E ALREADY DISCUSSED IN THE PARA 1 AND 2 OF THIS ORDER BUT THEY REPEATED AGAIN FOR T HE REBUTTAL OF THE CONTENTION OF THE ASSESSEE, VIDE LETTER DATED 11.03.2013, THAT SHRI BHAVESH BHANDARI HAS RETRACTED HIS STATEMENT GIVEN ON 08.12.2009 VIDE AF FIDAVIT DATED 18.05.2012. THE RETRACTION OF THE STATEMENT GIVEN BY SHRI BHAVE SH BHANDARI ON 08.12.2009 IS NOTHING BUT AN AFTER-THOUGHT CONSIDERING THE FAC TS THAT THE CASE OF THE ASSESSEE IS REOPENED TO VERIFY THE SOURCE OF LOANS AND ADVANCES THAT HAS INTRODUCED BY M/S. SHANTISURI SECURITIES PVT. LTD I N THE ASSESSEE FIRM. HERE IT IS PERTINENT TO MENTION THAT THE RETRACTION IS MADE AF TER ALMOST 2 AND 1/2 YEARS OF GIVING OF HIS STATEMENT. NO RETRACTION WAS MADE BY SHRI BHAVESH BHANDARI AT THE TIME OF FINALIZATION OF THE ASSESSMENT IN THE C ASE OF M/S. SHANTISURI SECURITIES PVT. LTD. ON 24.12.2009. THEREFORE IT CR YSTAL CLEAR THAT THE RETRACTION MADE BY SHRI BHAVESH BHANDARI ON 18.05.2012 IS ONLY AFTER THE CASE OF THE ASSESSEE WAS REOPENED ON 29.03.2012. THIS RETRACTIO N OF STATEMENT BY SHRI BHAVESH BHANDARI IS NOTHING BUT MERE AVOIDANCE OF P ROPOSED ADDITIONS IN THE CASE OF ASSESSEE ON ACCOUNT OF FACTS CONFESSED HIM WHILE RECORDING HIS STATEMENT ON 08.12.2009. 7. 4.2 FURTHER IT IS PERTINENT TO SUFFICE THAT THE STA TEMENT HAS BEEN RETRACTED AFTER LONG TIME GAP AND HENCE THE RETRACTION IS NOT GENUI NE IN THE EYES OF THE LAW. MORE SO EVEN SHRI BHAVESH G. BHANDARI HAS GIVEN DET AILED NARRATION OF THE ITA NO. 2697 -AHD/2014 . A.Y.2005-06 7 ENTIRE PROCESS OF TAKING SHARE CAPITAL WITH PREMIUM AND INVESTING THE SAME AS LOANS AND ADVANCES IN OTHER COMPANIES. THE NARRATIO N OF THE STATEMENT PROVES THAT THE STATEMENT WAS NOT RECORDED BY THREA TENING SHRI BHAVESH G. BHANDARI. THE PERUSAL OF STATEMENT SHOWS THAT SHRI BHAVESH G. BHANDARI WAS ACTIVELY INVOLVED IN THE BUSINESS OF THE M/S. SHANT ISURI SECURITIES PVT. LTD. AND THEREFORE THE CONTENTION OF THE ASSESSEE AS PER HIS REPLY LETTER DATED 11.03.2013 TO SHOW-CAUSE NOTICE THAT MR. BHAVESH BHANDARI WAS NOT DIRECTOR OF THE COMPANY FOR A.Y. 2005-06 & 2006-07 AND NOT LOOKING INTO THE AFFAIRS OF THE COMPANY IS NOT TENABLE OR ACCEPTABLE. 8. IN VIEW OF THE ABOVE IT IS A CRYSTAL CLEAR THAT THE ASSESSEE HAS SHOWN UNSECURED LOAN FROM M/S. SHANTISURI SECURITIES PVT. LTD. AS ' LOANS AND ADVANCES' WHICH IS FROM HIS UNACCOUNTED/UNDISCLOSED SOURCES. THEREF ORE AN AMOUNT OF RS. 15,00,000/- IS ADDED TO THE TOTAL INCOME OF THE ASS ESSEE ON ACCOUNT OF UNEXPLAINED INVESTMENT ON PROTECTIVE BASIS AS ADDIT ION ON SUBSTANTIAL BASIS IS ALREADY MADE IN THE CASE OF M/S. SHANTISURI SECURIT IES PVT. LTD 9. AGAINST THE SAID ADDITION, ASSESSEE PREFERRED FIRST STATUTORY APPEAL BEFORE THE LD. CIT(A) WHO DISMISSED THE APPEAL OF THE ASSESSEE. 10. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. IN THIS CASE, ADDITION OF RS. 15 LAKHS ON ACCOUNT OF INVESTMENT A S LOANS AND ADVANCES WHICH WAS TREATED AS INCOME FROM UNACCOUNTED/UNDISC LOSED SOURCES WAS MADE ON PROTECTIVE BASIS. THE ADDITION WAS MADE, AS THER E WAS A SEARCH AT THE PREMISES OF M/S SHANTISURI SECURITIES PVT. LTD. DUR ING THE COURSE OF PROCEEDINGS IN THE CASE OF THAT COMPANY THE STATEME NT ON OATH OF SHRI BHAVESH BHANDARI WAS RECORDED AND HE CATEGORICALLY ADMITTED THAT THE PARTIES WHO HAD ITA NO. 2697 -AHD/2014 . A.Y.2005-06 8 ALLEGEDLY CONTRIBUTED TO THE SHARE CAPITAL OF THE C OMPANY WAS EITHER BOGUS OR WHERE MERE ENTRY GIVERS. HE HAD ADMITTED THAT HE AN D HIS FAMILY MEMBERS WERE IN THE BUSINESS OF CHEQUE DISCOUNTING AND SHROFF FO R MANY YEARS. IT WAS ACCEPTED BY HIM THAT HE ROUTED THE ACCOMMODATION EN TRIES FROM SHANTISURI SECURITIES PVT. LTD. BY ACCEPTING SHARE APPLICATION MONEY. AS WE CAN SEE, NO STATEMENT OF SHRI BHAVESH BHANDARI WAS GIVEN TO THE APPELLANT SO, THEREFORE, QUESTION OF CROSS-EXAMINATION DOES NOT ARISE. THOUG H APPELLANT RETRACTED THE STATEMENT OF SHRI BHAVESH BHANDARI. 11. ON THE OTHER HAND, LD. D.R. HAS NOTHING TO CONTROVE RT. THUS, IN OUR CONSIDERED OPINION, DESPITE OF THE FACT THAT APPELLANT REQUEST ED DEPARTMENT TO SUPPLY STATEMENT OF SHRI BHAVESH BHANDARI AND ALLOW HIM TO CROSS-EXAMINE BUT NO SUCH OPPORTUNITY WAS GIVEN TO THE APPELLANT AND SUC H ACTION OF THE LOWER AUTHORITIES AMOUNTING TO INJUSTICE TOWARDS APPELLAN T. THUS, WE ALLOW THE APPEAL OF THE APPELLANT. 12. IN THE RESULT, THE APPEAL FILED BY THE APPELLANT IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 18- 10- 2018 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 18/10/2018 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED.