Deputy Commissioner of Income tax( Central)-2, Raipur V. Mesers Shree Jagdamba Construction Company, Raipur

ITA 37/RPR/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8113 (ITAT-RAIPUR)
• Duration Of Justice: 1 year(s) 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SINGH
• Assessee Lawyers: R B DOSHI
• Keywords: Unexplained cash credit; Revision of order; Business expenditure; Search and seizure; Loose papers; Document seized; Principle of natural justice; Deemed to accrue or arise in india; Additional evidence; Question of law; Corroborative evidences; Deemed dividend; Documents seized; TDS; Set aside
• Section: 40A(3); 143(3); 142(1); 153A; 2(22)(e); 40(a)(ia); 133(6); 113; 72; 13; 22; 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI PAWAN SINGH, JUDICIAL MEMBER ./ I.T.A. NOS. 37 TO 42/RPR/2020 ( ASSESSMENT YEARS : 2009-10 TO 2014-15) DY. COMMISSIONER OF INCOME TAX (CENTRAL)-2 RAIPUR (C.G.) / VS. M/S. SHREE JAGDAMBA CONSTRUCTION CO. FLAT NO.222, 2 ND FLOOR, KRISHNA ARCADE, LODHIPARA CHOWK, RAIPUR-492001 ./ ./PAN/GIR NO. : ABIFS7788L ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI R. K. SINGH, CIT.DR / RESPONDENT BY : SHRI R. B. DOSHI, C.A. DATE OF HEARING 09/08/2021 !'# / DATE OF PRONOUNCEMENT 02/09/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED SIX APPEALS HAVE BEEN FILED AT THE IN STANCE OF THE REVENUE AGAINST THE COMMON ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS)-II, RAIPUR (CIT(A) IN SHORT) , DATED 11.10.2019 ARISING IN THE COMMON ASSESSMENT ORDER D ATED 29.12.2016 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 153A/ 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCE RNING AYS. 2009-10 TO 2015-16. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 2 - 2. IN ITS APPEAL FOR A.YS. 2009-10 TO 2012-13, THE REVENUE HAS CHALLENGED THE REVERSAL OF ADDITIONS MADE BY THE AO UNDER S.40A(III) OF THE ACT BY THE CIT(A). THE FACTS AND ISSUE BEING I DENTICAL, WE FIRST TAKE UP ITA NO. 37/RPR/2020 FOR A.Y. 2009-10 FOR APPRECI ATION OF FACTS AND ADJUDICATION THEREON. ITA NO. 37/RPR/2020 A.Y. 2009-10 3. THE GROUND OF APPEAL RAISED BY REVENUE CONCERNIN G A.Y. 2009-10 READS AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.6,42,06,726/- MADE BY THE ASSESSING OFFICER U/S 40A(3) OF THE INCOME TAX ACT, 1961. 4. BRIEFLY STATED, A SEARCH AND SEIZURE ACTION UNDE R S.132 OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE A SSESSEE FIRM ON 16.10.2014. AS A CONSEQUENCE, THE ASSESSMENT WAS F RAMED UNDER S.153A R.W.S. 143(3) OF THE ACT FOR A.Y. 2009-10 TO 2014-15. THE ORDER FOR A.Y. 2015-16 WAS FRAMED UNDER S.143(3) OF THE ACT. IN THE COURSE OF THE ASSESSMENT PURSUANT TO SEARCH, TH E AO INTER ALIA DISALLOWED EXPENDITURE CLAIMED AMOUNTING TO RS.6,42 ,06,726/- IN A.Y. 2009-10 ALLEGING CASH PAYMENTS ABOVE RS.20,000 /- AND BREACH OF SECTION 40A(3) OF THE ACT. IT WAS NOTED BY THE AO THAT SEARCH PARTY RETRIEVED THE TALLY ACCOUNTS OF THE ASSESSEE FIRM FROM HARD DISK AND SAME WAS SEIZED. THE FILE OF THE TALLY WA S COMPARED WITH THE DATA OF AUDIT REPORT AND CONSEQUENTLY, THE AO W AS OF THE OPINION THAT THE ASSESSEE HAS INCURRED EXPENDITURE AND MADE PAYMENTS IN CASH IN EXCESS OF RS.20,000/- TO VARIOUS PARTIES, A S PER ENTRIES SHOWN ON THE LAST DATE OF THE FISCAL YEAR I.E. 31.0 3.2009. SIMILAR EXPENSES WERE FOUND TO HAVE BEEN CLAIMED IN VIOLATI ON OF PROVISIONS OF SECTION 40A(3) OF THE ACT IN OTHER ASSESSMENT YE ARS ALSO. A TABULATED STATEMENT WAS REPRODUCED IN THE ASSESSMEN T ORDER. IN RESPONSE TO THE SHOW CAUSE NOTICE FOR DISALLOWANCE UNDER S.40A(3) ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 3 - OF THE ACT BY THE AO, THE ASSESSEE TOOK A STAND VID E REPLY DATED 26.12.2016 THAT NO PAYMENT IN EXCESS OF RS.20,000/- HAS BEEN MADE BY THE ASSESSEE TO ANY OF THE PARTIES AND THE SUM S HOWN AGAINST PARTIES ARE AT THE END OF THE RESPECTIVE YEAR WHERE AS THE PAYMENTS WERE STAGGERED OVER THE PERIOD AS PER ENTRIES RECOR DED IN AUDITED ACCOUNTS. IT WAS, THUS, FURTHER REQUESTED TO THE A O THAT DETAILS OF RELEVANT SEIZED MATERIALS AND COPY THEREOF MAY BE P ROVIDED FOR SUBMITTING COMPREHENSIVE REPLY. NO COPY OF SEIZED DATA AS ALLEGED WAS HOWEVER PROVIDED TO ASSESSEE TO APPRECIATE THE FACTS DESPITE REPEATED REQUESTS. IN ESSENCE, IT WAS CLAIMED THAT THE AMOUNT REFERRED IN TABULATION WAS NOT CLAIMED AS EXPENSE. THE ACTUAL EXPENSES INCURRED TOWARDS VARIOUS SUB-CONTRACTORS, LABOUR EXPENSES ETC. WERE CLAIMED TO BE PAID WITHIN THE LIMIT OF RS .20,000/- AND THEREFORE, SUCH EXPENSES ARE OUTSIDE THE PURVIEW OF SECTION 40A(3) OF THE ACT. 5. THE AO WAS, HOWEVER, NOT SATISFIED WITH THE EXPL ANATIONS OF THE ASSESSEE AND CONSEQUENTLY DISALLOWED THE EXPENS ES INCURRED AMOUNTING TO RS.6,42,06,726/- AND ACCORDINGLY ASSES SED THE INCOME AT RS.7,70,23,280/- AS AGAINST THE RETURNED INCOME OF RS.1,28,16,550/-. 6. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) CHALLENGING THE ADDITIONS SO MADE UNDER S.40A(3) OF THE ACT. THE CIT(A) TOOK NOTE OF THE SUBMISSIONS MADE BY THE ASS ESSEE AND SEVERAL CASE LAWS AND FOUND MERIT IN VARIOUS PLEAS RAISED ON BEHALF OF THE ASSESSEE FOR INAPPLICABILITY OF SECTION 40A( 3) OF THE ACT IN THE FACTS OF THE CASE. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 2.3 I HAVE PERUSED THE ASSESSMENT ORDER AND THE SU BMISSIONS MADE BY THE APPELLANT. ON GOING THROUGH THE FACTS OF THE CASE IT IS SEEN THAT ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 4 - THE AO HAS MADE DISALLOWANCE U/S. 40A(3) OF THE ACT IN THE AYS. 2009- 10 TO 2012-13 STATING THAT CASH PAYMENTS HAVE BEEN MADE IN EXCESS OF THE LIMIT OF RS 20000/-. ALTERNATELY THE AO HAS ALS O RELIED ON SECTION 40(A)(IA) OF THE ACT STATING THAT THE APPELLANT HAS NOT MADE TDS FROM THE PAYMENTS. DURING THE SURVEY PROCEEDINGS CERTAIN TALLY ACCOUNTS WERE FOUND FROM ASSESSEES COMPUTERS AND IN THE TAL LY ACCOUNT DETAILS OF PAYMENTS OF VARIOUS PARTIES WERE FOUND WHICH HAS BEEN TREATED BY THE AO AS CASH PAYMENT. THE MATERIAL RELIED UPON BY THE AO IS A TABULATION WHICH CONTAINS DETAILS OF NAME OF PAYEE PERSON AND AMOUNT. AS PER THE AO THESE DETAILS WERE AVAILABLE IN THE C OMPUTER DATA RETRIEVED FROM TALLY SOFTWARE. THE HEADING ON THE P AYMENTS IS ON 31.3.2009, ON 31.3.2010 AND ON 31.3.2011. AO H AS INFERRED THAT THE PAYMENTS WERE MADE ON A SINGLE DAY WHICH WAS 31 ST OF MARCH OF THE YEAR. THE AO HAS STATED THAT ONLY THE PRINT OUT WHI CH HAS BEEN REPRODUCED IN THE ASSESSMENT YEAR WAS AVAILABLE IN THE TALLY DATA. VIDE LETTER DATED 28.2.2019 WORKING COPY OF THE SEIZED H ARD DISK MENTIONED AS HDD-1 WAS SENT. IT WAS LEARNT THAT THE HARD DRIV E WAS NOT WORKING. THE SAME WAS THEREFORE NOT RECEIVED AND RETURNED IM MEDIATELY. APPELLANT HAS OBJECTED TO MAKING OF ADDITION ON THE BASIS OF THIS CHART WITHOUT AFFORDING ANY OPPORTUNITY TO THE ASSE SSEE TO CONTRADICT ITS CONTENTS. RAIPUR OFFICE OF APPELLANT IS NEITHER ADM INISTRATIVE OFFICE NOR ACCOUNTS OFFICE AND ACCOUNTS ARE NOT MAINTAINED AT RAIPUR OFFICE. RAIPUR OFFICE IS MERE LIASONING OFFICE. THE HEAD OF FICE OF APPELLANT IS AT SURAJPUR WHERE THE ACCOUNTS ARE MAINTAINED. SURJAPU R OFFICE WAS NOT SEARCHED. VIDE VARIOUS LETTERS DT. 29.11.2016, 15.1 2.2016, 16.12.2016 AND 24.12.2016 AO WAS REQUESTED TO PROVIDE COPY OF THE TALLY DATA AND OF THE HARD DISK BUT THE AO DID NOT PROVIDE IT AND PROCEEDED TO MAKE ADDITION. INSPITE OF REPEATED REQUESTS, THE AO FAIL ED TO PROVIDE THE BASIS OF ALLEGATION OF CASH PAYMENTS AND THE EVIDEN CE, IF ANY, AVAILABLE ON HIS RECORD. IN THE ASSESSMENT ORDER, VIDE PARA N O. 8.2 AO OBSERVED THAT THE APPELLANT WAS APPRAISED ABOUT THE NATURE O F DATA RETRIEVED FROM THE TALLY DATA ON THE HARD DISC. APPELLANT HAS CONTENDED THAT IT WAS NEVER APPRAISED ABOUT THE NATURE OF DATA AVAILA BLE WITH THE AO. NEITHER COPY OF THE HARD DISC, NOR OF THE ALLEGED D ATA AVAILABLE THEREIN WAS PROVIDED TO THE APPELLANT INSPITE OF REPEATED R EQUESTS. THE AO HAS ONLY MENTIONED THAT THE APPELLANT WAS APPRAISED, BU T HE HAS NOT GIVEN DETAILS OR INSTANCE OF HAVING PROVIDED THE SAME TO APPELLANT. DURING THE ASSESSMENT, ONLY THE CHART WAS PROVIDED TO APPE LLANT. THE DATA FROM WHICH THE CHART WAS PREPARED AND THE COPY OF IMPUGN ED SEIZED MATERIAL WAS NEVER PROVIDED TO APPELLANT. WITHOUT VERIFYING THE SOURCE OF DATA, IT WAS NOT POSSIBLE FOR APPELLANT TO SUBMIT ANY EXP LANATION WHATSOEVER. THE AO HAS BASED HIS ASSESSMENT/ADDITION ON A MATER IAL WHICH WAS NEVER CONFRONTED TO THE APPELLANT. SUCH MATERIAL CO ULD NOT HAVE BEEN USED AGAINST APPELLANT. APPELLANT HAS ALLEGED THAT THE AO HAS VIOLATED PRINCIPLES OF NATURAL JUSTICE. IT IS ESTABLISHED LA W THAT SUCH VIOLATION RENDERS THE ASSESSMENT ORDER TO BE ILLEGAL, AB INTI O VOID AND NOT SUSTAINABLE. WE RELY ON THE DECISION IN FOLLOWING C ASES. THE DELHI HC IN THE CASE OF CIT VS ASHWANI GUPTA (2010) 322 ITR 396 (DEL.) THE FACTS WERE THAT THE AO PASSED THE ASSESSMENT ORDER IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE INASMUCH AS HE NEITHE R PROVIDED COPY OF THE SEIZED MATERIAL TO THE ASSESSEE NOR DID HE ALLO W THE ASSESSEE TO CROSS EXAMINE THE PERSON ON THE BASIS OF WHOSE STAT EMENT THE ADDITION WAS MADE. THE CIT(A) HELD THE ENTIRE ADDITION TO BE INVALID WHICH WAS CONFIRMED BY ITAT. HONBLE HIGH COURT OBSERVED THAT VIOLATION OF ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 5 - PRINCIPLES OF NATURAL JUSTICE REMAINS UNDISPUTED. S UCH DEFICIENCY AMOUNTED TO DENIAL OF OPPORTUNITY AND CONSEQUENTLY WOULD BE FATAL TO THE PROCEEDINGS. THE HIGH COURT UPHELD THE ORDER OF ITAT. IN ANOTHER CASE OF H. R. MEHTA VS ACIT IN INCOME TAX APPEAL NO . 58 OF 2001, JUDGMENT DT. 30.06.2016, JUSTICE M. S. SANKHLECHA & JUSTICE A. K. MENON THE HIGH COURT OBSERVED THAT THE LEAST THAT R EVENUE SHOULD HAVE DONE WAS TO PROVIDE OPPORTUNITY TO THE ASSESSEE TO MEET THE CASE BY PROVIDING THE MATERIAL SOUGHT TO BE USED AGAINST TH E ASSESSEE. THE ASSESSEE WAS BOUND TO BE PROVIDED WITH THE MATERIAL USED AGAINST HIM. THIS NOT HAVING BEEN DONE, IT GOES TO THE ROOT OF T HE MATTER AND STRIKES AT THE VERY FOUNDATION OF THE REASSESSMENT AND THER EFORE, RENDERS THE ORDER PASSED BY THE AO VULNERABLE. THE PRINT OUT WHICH HAS BEEN PRODUCED IN THE ASSESS MENT ORDER IS NOT SUPPORTED BY ANY INDEPENDENT DOCUMENTS. FOR THE AY 2009-10, THE ALLEGATION OF THE AO IS THAT THE PAYMENT OF RS. 6,4 2,06,726/- WAS MADE ON A SINGLE DAY I.E. ON 31.3.2009. SIMILARLY FOR TH E AY 2010-11, THE ALLEGATION OF THE AO IS THAT THE PAYMENT OF RS. 4,4 7,55,792/- WAS MADE ON A SINGLE DAY I.E. ON 31.3.2010 AND FOR AY 2011-1 2, THE ALLEGATION OF THE AO IS THAT THE PAYMENT OF RS. 8,87,87,368/- WAS MADE ON A SINGLE DAY I.E. ON 31.3.2012 AND LASTLY FOR THE AY 2012-13 , THE ALLEGATION OF THE AO IS THAT THE PAYMENT OF RS. 6,11,71,888/- WAS MADE ON A SINGLE DAY I.E. ON 31.3.2013. THESE ALLEGATIONS, MADE ON THE BASIS OF THE ABOVE C HART FOR THESE ASSESSMENT YEARS ARE NOT SUPPORTED BY ANY DOCUMENTS . ON THE CONTRARY THE ASSESSEE HAS VEHEMENTLY OPPOSED THE AOS ALLEGA TION AND HAS STATED THAT FIGURES OF PAYMENTS ARE NOT FOR THE SINGLE DAY ON THE LAST DAY OF THE YEAR BUT ARE FOR THE WHOLE YEAR. THUS THE PAYMENT O F RS. 4,47,55,792/- IS NOT PAYMENT MADE ON 31.3.2010 BUT THE PAYMENTS W ERE MADE DURING THE YEAR 2009-10. SAME IS TRUE FOR THE OTHER ASSESS MENT YEARS ALSO. AO HAS NOT DENIED THAT THE PAYMENTS DID NOT RELATE TO THE BUSINESS OF THE FIRM. THE CONTENTION OF THE ASSESSEE IS THAT THE PA YMENT WAS NOT MADE IN SINGLE DAY BUT WAS MADE OVER THE ENTIRE YEAR. ASSESSEE HAS VEHEMENTLY CONTESTED THE CONCLUSION OF THE AO THAT ALL THE PAYMENTS WERE MADE ON A SINGLE DAY. IT WAS STATED THAT THE ASSESSEE IS A CONTRACTOR AND THE PAYEE ARE SUBCONTR ACTORS. THE PAYMENTS WERE MADE FOR VARIOUS EXPENSES DURING THE YEAR SUCH AS LABOUR PAYMENTS AND MATERIAL. ASSESSEE HAS FURNISHE D ACCOUNT COPIES OF PAYEES. THE TOTAL PAYMENT AS PER THE TABLE TALLIES WITH THE AUDITED ACCOUNTS OF THE ASSESSEE FOR ASSESSMENT YEARS 2009- 10, 10-11, 11-12 AND 12-13. THE FIRST NAME IS AJIT JAISWAL TO WHOM R S 4,13,000/- WAS PAID FROM 12.5.200 TO 12.01.2009 IN THE FY 2008-09. AO HAS TREATED THE WHOLE PAYMENT TO BE MADE ON 31.3.2009 WHEREAS THE P AYMENT HAD STARTED WITH THE FIRST PAYMENT OF RS 19,700/- ON 12 .05.2008 AND LAST PAYMENT OF RS 16,500/- ON 12.1.2009. IN FY 2009-10 TOTAL PAYMENT OF RS 4,10,000/- WAS MADE BETWEEN 10.6.2009 TO 30.3.20 10. AO HAS TREATED THE WHOLE PAYMENT OF RS 4,10,000/- TO BE ON 31.3.2010 WHERE AS THE FIRST PAYMENT OF RS 17000/- WAS MADE OF 10.6.20 09 AND LAST PAYMENT OF RS 17500/- WAS MADE ON 30.3.2010. SIMILARLY IN F Y 2010-11 RS 4,70,000/WAS MADE BETWEEN 5.4.2010 TO 25.3.2011 WHE REAS AO HAS TREATED THE ENTIRE PAYMENT TO BE MADE ON 31.3.2011. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 6 - THE ASSESSEE HAS STATED THAT SEVERAL PAYMENTS HAVE BEEN MADE IN CHEQUE ALSO. IN CASE OF MANY PAYMENTS TDS HAS ALSO BEEN MADE. AO HAS NOT PROVIDED ANY MATERIAL ON THE BASIS OF WHICH THE ADDITION HAS BEEN MADE. ON THESE FACTS THE INFORMATION OBTAINED FROM SEIZED HARD DRIVE IN THE TABULATION FORMAT IS NOTHING BUT A STATEMENT OF CONSOLIDATED PAYMENTS FOR THE WHOLE YEAR. THE HEADING ON THE TAB LE IS CASH PAYMENT ON 31.3.2009, CASH PAYMENT ON 31.3.2010. ETC. HOWEVER ON GOING THROUGH AUDITED ACCOUNTS AND LEDGER IT SHOWS THAT THE TABULATION IN RESPECT OF CASH PAYMENT AS ON 31.03.2009, 31.0 3.2010 ETC AND NOT ON 31.03.09, 31.03.10 ETC. FURTHER THE WORD CASH PAYMENTS IS ERRONEOUS SINCE IN SEVERAL CASES THE PAYMENTS ARE I N CHEQUE. THE PAYMENTS PER SE ARE IN AMOUNTS LESS THAN RS. 20,000 /- IN EACH CASE. ALSO THE PAYMENTS ARE NOT ON CONSECUTIVE DAYS BUT T HERE IS A GAP OF ABOUT A WEEK BETWEEN TWO PAYMENTS. THUS IT CANNOT B E ALLEGED THAT THE PAYMENTS HAVE BEEN DELIBERATELY BROKEN INTO SMALL A CCOUNTS. IN ANY CASE THERE IS NO MATERIAL ON RECORD WHICH WAS THE L AST DATE OF THE YEAR. IN THE CASE OF SEVERAL PAYEES LIKE AMIT AGARWAL TO WHOM RS. 5,06,541/- WAS PAID BETWEEN 02.04.2011 TO 26.03.2012, TDS @ 1% HAVE BEEN MADE. SIMILAR TDS HAVE BEEN MADE IN THE CASE OF OTH ER PAYEES LIKE CHHATRAPAL DEWANGAN, DILIP SONI, IBRAN AHMED, NALIN JINDAL, NITIN SAHU VIVEK AGRAWAL ETC THE ASSESSEE HAS MADE TDS AN D FEW OTHERS. THE AO HAS NOT ENQUIRED AND ESTABLISHED THAT PAYMEN TS MADE BY THE ASSESSEE ARE NOT GENUINE. PURPOSE OF SECTION 40A(3) OF THE ACT IS TO ENSURE THAT THE PAYMENTS WHICH ARE NOT GENUINE ARE NOT ALLOWED. THE AO WAS ALSO SENT THE SET OF ACCOUNT CONFIRMATION FR OM ALL THE RECIPIENTS AND HIS REPORT WAS CALLED FOR. THE AO HAS OPPOSED F URNISHING OF ANY ADDITIONAL EVIDENCES. NO COMMENTS HAVE BEEN MADE ON THE MERIT OF THE CASE. IF PAYMENTS ARE GENUINE, THE DISALLOWANCE U/S 40A(3 ) CANNOT BE MADE AS HELD BEEN HELD IN THE CASE OF [1986] 179 IT R 122 (CAL.) GIRIDHARILAL GOENKA V. COMMISSIONER OF INCOME-TAX. IN THIS CASE THE AO HAS MADE ADDITION UNDER THIS SECTION IN RESPECT OF CASH PAYMENTS. THE HBLE HIGH COURT HELD THAT W HERE ASSESSEE HAD SATISFIED ASSESSING OFFICER AS TO GENUINENESS OF PAYMENT AND IDENTITY O F PAYEE, MERE FACT THAT THERE WAS TIME-GAP BETWEEN DATES OF BILLS AND DATES OF PAYMENT WOULD NOT TAKE OUT ASSESSEES CASE OUT OF AMBIT OF EXCEPTIONAL OR UNAVOIDABLE CIRCUMSTANCES. THE ASSESSMENT OF THE ASSESSCES CASE FOR AY 2009-1 0 TO 2012-13 WERE COMPLETED U/S 143(3) AND DURING WHICH THE ACCO UNT COPIES OF SUBCONTRACTORS WERE FILED TO WHOM THE PAYMENT WERE RELATED. THEREFORE NOW AT THIS STAGE THE ALLEGATION OF THE AO OF MAKIN G PAYMENTS ON SINGLE DAY IS WITHOUT ANY BASIS. THE CONCLUSION MADE BY THE AO IS NOT BORNE OUT FROM ANY FACTS ON RECORD OR AS A RESULT OF ANY INQUIRY. NO RECIPIE NT HAS DENIED HAVING RECEIVED THE PAYMENT AS REFLECTED IN ASSESSEES BOOK S AS PER THE ABOVE CHART. NEITHER THERE IS ANY EVIDENCE THAT THE PAYME NTS WERE NOT MADE ON THE DATES AS PER THE LEDGER ACCOUNTS OF RESPECTI VE RECIPIENTS BUT WERE MADE ON THE LAST DATE OF THE YEAR. ASSESSEE HA S FILED COPY OF LEDGERS AND CONFIRMATIONS FROM ALL RECIPIENTS. PROVISION OF SECTION 40A(3) OF THE ACT HAS BEEN INS ERTED TO ENSURE THAT BOGUS PAYMENTS ARE NOT CLAIMED AS EXPEN SES. WHEN THE ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 7 - PAYMENTS HAVE BEEN CONFIRMED BY RECIPIENTS THERE IS NOT GROUND FOR ADDITION. IN THE CASE OF 179 ITR 122 (CAL.) GIRIDHA RILAL GOENKA V. COMMISSIONER OF INCOME-TAX WHERE ASSESSEE HAD ESTAB LISHED GENUINENESS OF PAYMENT AND IDENTITY OF PAYEE, MERE FACT THAT THERE WAS TIME-GAP BETWEEN DATES OF BILLS AND DATES OF PAYMEN T WOULD NOT TAKE OUT ASSESSEES CASE OUT OF AMBIT OF UNAVOIDABLE CIRCUMS TANCES AND DEDUCTION OF EXPENDITURE WHICH WAS OTHERWISE ALLOWA BLE TO HIM COULD NOT BE DENIED. NOT ONLY THE ABOVE, BUT ALSO WHERE T HE PAYMENTS HAVE BEEN MADE IN CASH TO MAINTAIN HARMONIOUS BUSINESS R ELATION WITH THE PAYEES SUCH PAYMENTS HAVE BEEN HELD AS ALLOWABLE. IN THE CASE OF 263 ITR 145 2003 CAL GOENKA AGENCIES V. COMMISSIONER OF INCOME-TAX IN ORDER TO KEEP HARMONI OUS BUSINESS RELATIONSHIP WITH ITS SUPPLIER, MADE SOME PAYMENT T O HIM IN CASH - ASSESSEE CLAIMED THAT CASH PAYMENT HAD BEEN MADE UN DER UNAVOIDABLE CIRCUMSTANCES AND AS SUCH SAME SHOULD BE DEDUCTED F ROM HIS INCOME. ASSESSING OFFICER, HOWEVER, REJECTED ASSESSEES CLA IM AND ADDED SAID CASH PAYMENT IN ASSESSEES INCOME. COMMISSIONER (AP PEALS) SET ASIDE ORDER OF ASSESSING OFFICER. ON FURTHER APPEAL, TRIB UNAL HELD THAT REQUIREMENTS MENTIONED IN RULE 6DD(J) WERE ONLY SUB SIDIARY REQUIREMENTS IN ADDITION TO THE MAIN REQUIREMENT OF PROVING EXCEPTIONAL CIRCUMSTANCES AND GENUINE DIFFICULTIES WHICH HAD NOT BEEN FULFILLED BY ASSESSEE AND SET ASIDE ORDER OF COMMIS SIONER (APPEALS). HONOURABLE HIGH COURT HELD THAT SINCE COMMISSIONER (APPEALS) HAD OBSERVED THAT PAYMENTS HAD BEEN MADE TO KEEP HARMON IOUS RELATIONSHIP WITH SUPPLIER UNDER UNAVOIDABLE CIRCUMSTANCES, CASH PAYMENT MADE BY ASSESSEE CLEARLY SATISFIED REQUIREMENT UNDER PROVIS IONS OF RULE 6DD(J)(1). IN A SIMILAR CASE OF 249 ITR 113 2001 AL LAHABAD COMMISSIONER-OF INCOME-TAX V. SURESH KUMAR AGARWAL THE TRIBUNAL DELETED DISALLOWANCE MADE UNDER SECTION 40A(3) HOLD ING THAT ASSESSEE'S CASE FELL UNDER SECOND PROVISO TO SECTION 40A(3). H ONOURABLE HIGH COURT HELD THAT IN VIEW OF SUPREME COURT'S OBSERVAT IONS THAT TERMS OF SECTION 40A(3) ARE NOT ABSOLUTE, THAT CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS ARE NOT TO BE EXCLUDED AND THAT GENUINE AND BONA FIDE TRANSACTIONS ARE NOT TAKEN OU T OF SWEEP OF SECTION, NO SUBSTANTIAL QUESTION OF LAW AROSE FROM TRIBUNAL'S ORDER. IN FINE, THE CIRCUMSTANCES UNDER WHICH CASH PAYMENT HA S BEEN MADE MUST BE CONSIDERED AND PARTICULARLY IN THE LINE OF TRANS PORT BUSINESS, WHERE THE PAYMENT PER SE IS NOT DOUBTFUL AND PARTIES HAVE NOT BEEN FOUND TO BE NON-GENUINE, THE PAYMENT CANNOT BE DISALLOWED. IN VIEW OF ABOVE, CONSIDERING THE LEGAL POSITION OF DISALLOWANCE U/S 40A(3) AND IN VIEW OF THERE BEING NO SUPPORTING DOCUMENT TO SUBSTANTIATE THE CLAIM OF THE AO OF MAKING PAYMENT ON A SINGLE DAY THE ADDITION IS HEREBY DELETED. THE CIT(A) ACCORDINGLY REVERSED THE ACTION OF THE A O AND DELETED THE ADDITIONS SO MADE UNDER S.40A(3) OF THE ACT. 7. FURTHER AGGRIEVED, THE REVENUE IS IN APPEAL BEFO RE THE TRIBUNAL. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 8 - 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO N ON THE ISSUE. THE DISALLOWANCE OF EXPENSES INCURRED IS IN CONTROVERSY HAVING REGARD TO PROVISIONS OF SECTION 40A(3) OF TH E ACT. ON PERUSAL OF THE ASSESSMENT ORDER AND THE FIRST APPEL LATE ORDER TOGETHER WITH VARIOUS SUBMISSIONS OF THE ASSESSEE AND THE EV IDENCES PLACED ON RECORD, WE OBSERVE FOLLOWING KEY POINTS RAISED O N BEHALF OF THE ASSESSEE TO DEFEND THE CORRECTNESS OF THE RETURNED INCOME; 8.1 A SEARCH WAS CARRIED OUT IN THE PREMISES OF THE ASSESSEE UNDER S.132 OF THE ACT ON 16.10.2014 AND AS A CONSEQUENCE THEREOF, THE RETURN OF INCOME WAS FILED UNDER S.153A OF THE ACT FOR A.YS. 2009- 10 TO 2014-15 BY THE ASSESSEE. THE ASSESSMENT WAS CARRIED OUT FOR A.YS. 2009-10 TO 2014-15 UNDER S. 153A R.W.S. 143(3 ) OF THE ACT, WHEREAS THE ASSESSMENT ORDER OF A.Y. 2015-16 WAS PA SSED UNDER S.143(3) OF THE ACT. IT IS THE CASE OF THE ASSESSEE THAT THE ASSESSMENT FOR A.Y. 2009-10 TO 2012-13 HAD STOOD COMPLETED AND CONCLUDED UNDER S.143(3) OF THE ACT PRIOR TO INITIATION OF SE ARCH AND THEREFORE REMAINS UNABATED. IT IS THUS SUBMITTED THAT THE AS SESSMENT FOR A.YS. 2009-10 TO 2012-13 HAVING BEEN CONCLUDED AND NOT PE NDING AT THE TIME OF SEARCH, THE ADDITIONS/DISALLOWANCES IN RESP ECT OF SUCH ASSESSMENT COULD BE CARRIED OUT ONLY WITH REFERENCE TO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH AND NOT OTHE RWISE. THE AO HAS INVOKED PROVISIONS OF SECTION 40A(3) OF THE ACT ALLEGING CASH PAYMENTS TO THE CONTRACTORS/SUB-CONTRACTORS TOWARDS BUSINESS EXPENSES IN EXCESS OF THRESHOLD LIMIT ON THE BASIS OF A TABULAR STATEMENT AS REPRODUCED IN PARA 8.1 OF THE ASSESSME NT ORDER. IN THIS CONTEXT, IT IS THE CASE OF THE ASSESSEE THAT TABULA R STATEMENT MERELY PROVIDES THE NAME OF THE PARTIES AND THE PAYMENTS M ADE AS AT THE END OF THE RESPECTIVE F.YS. 2008-09 TO 2011-12 CONC ERNING A.YS. 2009-10 TO 2012-13. THE COPY OF TALLY DATA AND THA T OF HARD DISK CULMINATING IN SUCH TABULATION WAS NEVER PROVIDED T O THE ASSESSEE ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 9 - DESPITE MULTIPLE REQUESTS. IT IS THUS CONTENDED THA T THE CHART / TABULATION PROVIDED TO THE ASSESSEE IN ITSELF IS NO T A SEIZED MATERIAL. IT AT BEST CAN BE SAID TO HAVE BEEN EXTRACTED OUT O F SEIZED MATERIAL. THE RIGHT OF THE ASSESSEE TO VERIFY THE ORIGINAL CO NTENTS OF THE SEIZED MATERIAL, IF ANY, HAS BEEN FRUSTRATED. THE TABULAR STATEMENT REFLECTS THE CONSOLIDATED FIGURE AT THE END OF THE FINANCIAL YEAR WHICH CANNOT BE REGARDED AS ANY INCRIMINATING MATERIAL UNDER S.4 0A(3) OF THE ACT. THE TABULATION RELIED UPON BY THE AO IS INVALID, IN COMPLETE AND AN UNAUTHENTIC IN THE ABSENCE OF ANY UNDERLINE MATERIA L. SUCH TABULATED CHART CANNOT CONSTITUTE INCRIMINATING MAT ERIAL. THE ADDITIONS MADE DEHORS THE INCRIMINATING MATERIAL IS UNSUSTAINABLE IN 153A ASSESSMENT PARTICULARLY WHEN THE ASSESSMENTS ARE ALREADY COMPLETED AND CONCLUDED. NO ENQUIRY WAS MADE WITH THE RESPECTIVE PARTIES BY THE AO NEITHER DURING THE SEARCH NOR THE REAFTER. THE ASSESSEE WAS NEVER APPRAISED OF THE SO CALLED HUGE PAYMENTS TO INDIVIDUAL CONTRACTORS IN ONE DAY. THE INFERENCE O F PAYMENTS AT THE END OF THE YEAR TO ALL PARTIES APPARENTLY SMACKS OF SUPERFLUOUS APPROACH AND GROSS IRRATIONALITY. THE ALLEGED CONT ENT OF HARD DISK WAS NEVER CONFRONTED TO THE ASSESSEE NOR WAS THE AS SESSEE EVER INTERROGATED ON THE SAME. IT IS NOT EVEN THE CASE THAT AUTHORIZED OFFICER HAD TAKEN THE PRINT OF THE ALLEGED DATA AND SUCH PRINT WAS AUTHENTICATED BY THE ASSESSEE. THE HARD DISK WAS N OT EVEN OPENED BY THE AUTHORIZED OFFICER AS THE ASSESSEE WAS NEVER CALLED FOR ANY ENQUIRY ON ITS CONTENTS. NO REFERENCE WAS MADE IN PANCHANAMA ON SUCH HARD DISK. ANY CONCLUSION DRAWN BY THE DDIT(I NV.)/AO ON THE BASIS OF CONTENTS OF SUCH A HARD DISK THUS REMAINS GROSSLY UNAUTHENTIC AND TOTALLY UNRELIABLE AND CANNOT BE UT ILIZED TO FASTEN TAX LIABILITY ON THE ASSESSEE. 8.2 SECOND AND IN THE ALTERNATIVE, THE ASSESSEE HIM SELF ESTIMATED THE PROFITS FROM THE BUSINESS @ 8% AFTER REJECTION OF BOOKS AND ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 10 - DISCLOSED THE SAME IN THE RETURN OF INCOME. IT IS THUS CONTENDED THAT ONCE BOOKS OF ACCOUNTS ARE REJECTED AND INCOME HAS BEEN ESTIMATED SEPARATE DISALLOWANCE UNDER S.40A(3) OF THE ACT IS NOT JUSTIFIED AT ALL. 8.3 IT IS FURTHER CONTENDED THAT THE DISALLOWANCE M ADE BY THE AO UNDER S.40A(3) OF THE ACT WOULD RESULT IN NET PROFI T RANGING BETWEEN 35.58% TO 55.11% WHICH IS NOT ONLY PHENOMENAL BUT I S BEYOND ANY LOGICAL COMPREHENSION. IT WAS CLAIMED THAT THE NET PROFIT RATE OF 8% DECLARED BY THE ASSESSEE IS MUCH HIGHER THAN PEERS IN THE SAME BUSINESS. THE AO HAS PROCEEDED FOR ASSESSMENT ON T HE ESTIMATED INCOME DECLARED @ 8% AND IS THUS NOT JUSTIFIED IN M AKING SEPARATE DISALLOWANCE TO INCREASE THE BUSINESS PROFITS FURTH ER. 8.4 THE ASSESSEE HAS PRODUCED SUPPORTING EVIDENCES AND CONFIRMATIONS FROM THE VARIOUS PARTIES, WHOSE NAME APPEARS IN THE TABULAR STATEMENT REPRODUCED BY THE AO FOR ALL THE YEARS IN APPEAL. THE CONFIRMED COPY OF ACCOUNTS WOULD SHOW THAT NO S UCH PAYMENTS WERE MADE TO THE SUB-CONTRACTORS AS ALLEGED & ASSIG NED IN THE CHART AND HENCE, NO VIOLATION OF SECTION 40A(3) OF THE AC T CAN BE ENVISAGED. IT WAS REITERATED THAT TABULAR CHART ON LY CONTAINS SOME CONSOLIDATED FIGURE AGAINST THE NAME OF THE PARTIES WHILE STAGGERED DATE-WISE ENTRIES ARE APPEARING IN THE REGULAR BOOK S. THE RELIANCE PLACED BY THE AO ON SUCH AGGREGATED DATA AT THE END OF THE YEAR IS THUS TOTALLY MISPLACED AND MISCONCEIVED. 8.5 AS REGARDS ALTERNATE GROUND OF THE AO FOR MAKIN G DISALLOWANCE WITH THE AID OF SECTION 40(A)(IA) OF T HE ACT IN ITSELF IS OUTSIDE THE AMBIT OF SECTION 153A OF THE ACT. FURT HERMORE, ALLEGED PAYMENTS OF AMOUNT SPECIFIED IN THE TABULAR CHART W AS NOT MADE BY THE ASSESSEE AND NO EVIDENCE OF SUCH PAYMENTS HAVE BEEN FOUND BY ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 11 - THE AO. THE AMOUNTS SPECIFIED IN THE CHART HAVE AL SO NOT BEEN CLAIMED BY THE ASSESSEE AS EXPENSE. THE AMOUNTS DE BITED IN THE BOOKS ARE ALTOGETHER DIFFERENT. THE ASSESSMENT UND ER S.143(3) OF THE ACT WAS CARRIED OUT EARLIER AND COMPLIANCE OF S ECTION 40A(3) OF THE ACT WAS EXAMINED IN THE ORIGINAL PROCEEDINGS. IN A.Y. 2009-10, THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS CARRI ED OUT CERTAIN DISALLOWANCE UNDER S.40(A)(IA) OF THE ACT. IN A.Y. 2010-11, CERTAIN LUMPSUM DISALLOWANCES WERE CARRIED OUT BY THE AO. I N A.YS. 2011- 12 & 2012-13, THE PROFIT WAS ESTIMATED @ 5% WITHOUT REJECTING BOOKS IN THE ORIGINAL ASSESSMENT PROCEEDINGS. IN T HE INSTANT CASE, WHERE THE ASSESSEE ITSELF HAS REJECTED THE BOOKS OF ACCOUNT AND OFFERED PROFIT @ 8% IN SUCH RETURNS UNDER S.153A OF THE ACT, NO SEPARATE DISALLOWANCE UNDER S.40(A)(IA) OF THE ACT IS JUSTIFIABLE. 9. IT IS EVIDENT THAT THE ASSESSMENT WAS EARLIER CO MPLETED AND CONCLUDED PRIOR TO SEARCH IN RESPECT OF A.YS. 2009- 10 TO 2012-13 IN QUESTION. WE FIND MERIT IN THE PLEA THAT A TABULAR STATEMENT NARRATING THE NAME OF THE PARTY AND AMOUNT AND CERT AIN AMOUNT ASSIGNED AGAINST THEIR NAME CANNOT BE REGARDED AS I NCRIMINATING MATERIAL IN DEPARTURE WITH REGULAR BOOKS OF ACCOUNT S IN THE ABSENCE OF ANY UNDERLYING EVIDENCES. NO REFERENCE AND DETA ILS OF SEIZED DOCUMENTS IS FOUND IN THE ASSESSMENT ORDER. IN THE ABSENCE OF INCRIMINATING MATERIAL, THE AO IS NOT EMPOWERED TO REASSESS THE RETURNED INCOME IN AN ARBITRARY MANNER WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. THE LAW IS WELL SE TTLED IN THIS REGARD. REFERENCE CAN BE MADE TO THE JUDICIAL PREC EDENTS VIZ. CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL); PR.CIT V S. SAUMYA CONSTRUCTIONS PVT. LTD. (2016) 387 ITR 529 (GUJ); P RINCIPAL COMMISSIONER OF INCOME TAX-1 VS. DEVANGI ALIAS RUPA 2017-TIOL- 319-HC-AHM-IT; CIT VS. IBC KNOWLEDGE PARK PVT. LTD. (2016) 385 ITR 346 (KAR); PR. CIT-2 VS. SALASAR STOCK BROKING LTD. 2016- ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 12 - TIOL-2099-HC-KOL-IT AND CIT VS. GURINDER SINGH BAWA (2016) 386 ITR 483 (BOM). 10. WE FIND COMPLETE MERIT IN THE VARIOUS PLEAS RAI SED ON BEHALF OF THE ASSESSEE AS LISTED ABOVE. THE ADDITIONS MAD E BY THE AO IS COMPLETELY ARBITRARY, BASELESS AND DEHORS ANY UNDERLYING MATERIAL UNEARTHED IN THE COURSE OF SEARCH OR DISCOVERED SUB SEQUENTLY ON THE BASIS OF POST SEARCH MATERIAL RELATABLE TO EVIDENCE FOUND IN SEARCH. THE ADDITIONS MADE BY INVOKING SECTION 40A(3) OF TH E ACT BY THE AO IS THUS UNSUSTAINABLE IN LAW IN THE IMPUGNED SEA RCH ASSESSMENTS. 11. IN THE GROUNDS OF APPEAL, WE FIND NO GRIEVANCE OF REVENUE WITH REFERENCE TO SECTION 40(A)(IA) OF THE ACT. BE THAT AS IT MAY, FOR THE SIMILAR REASONS, THE DISALLOWANCE UNDER S.40(A) (IA) OF THE ACT IS ALSO NOT PERMISSIBLE IN LAW IN THESE FACTS AND IN T HE ABSENCE OF ANY INCRIMINATING MATERIAL. CONSEQUENTLY, THE ADDITION S MADE BY THE AO HAS BEEN RIGHTLY QUASHED BY THE CIT(A) AND REVER SED. WE THUS SEE NO ERROR IN THE ORDER OF THE CIT(A) AND THUS DE CLINE TO INTERFERE. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 13. FOR THE SIMILAR REASONINGS IN THE IDENTICAL FAC TUAL MATRIX, THE APPEAL OF THE REVENUE IN ITA NOS. 38 TO 40/RPR/2020 CONCERNING AYS. 2010-11 TO 2012-13 ARE ALSO DISMISSED. 14. WE NOW ADVERT TO APPEAL IN ITA NO. 41/RPR/2020 CONCERNING A.Y. 2013-14. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 13 - ITA NO. 41/RPR/2020 A.Y. 2013-14 15. THE GROUNDS OF APPEAL RAISED BY REVENUE CONCERN ING A.Y. 2013-14 READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,64,75,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 196 1 ON ACCOUNT OF UNEXPLAINED LOAN RECEIVED FROM M/S ZIGMA DEALCOM PVT. LTD. 2. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN NO T APPRECIATING THE ALTERNATIVE BASIS OF THE ADDITION OF RS.1,64,75 ,000/- WHICH ALSO ATTRACTS THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 AND ACCORDINGLY RIGHTLY ADDED TO THE INCO ME OF THE ASSESSEE BY THE ASSESSING OFFICER. 16. BRIEFLY STATED, IN THE COURSE OF SEARCH, CERTAI N LOOSE PAPERS RELATING TO M/S. ZIGMA DEALCOM PVT. LTD. (ZDCPL), A COMPANY BASED IN KOLKATA WERE FOUND IN THE OFFICE OF THE AS SESSEE FIRM. SHRI SHANKARLAL AGARWAL, THE WORKING PARTNER OF THE ASSE SSEE FIRM. IN THE COURSE OF STATEMENT RECORDED ON OATH UNDER S.13 2(4) OF THE ACT, HE STATED THAT THE ABOVE COMPANY INTENDED TO JOIN H IS PARTNERSHIP FIRM. THE AO NOTICED THAT THE COMPANY (ZDCPL) HAD A DVANCED UNSECURED INTEREST FREE LOAN OF RS.1,64,75,000/- AN D RS.5,63,00,000/- IN A.YS. 2013-14 & 2014-15 RESPECT IVELY TO THE ASSESSEE. THE AO WAS NOT SATISFIED WITH THE GENUIN ENESS OF LOANS RECEIVED FROM THE LENDER COMPANY (ZDCPL). THE COMM ISSION WAS ISSUED BY THE AO TO INVESTIGATION WING, KOLKATA FOR COLLECTION OF INFORMATION ON THE LENDER. THE ADIT-INV. WING, KOL KATA STATED THAT SUMMONS ISSUED TO 14 INVESTORS OF ZDCPL HAS RETURNE D UNSERVED. THE INSPECTOR REPORTED THAT WHEREABOUTS OF 14 INVES TORS OF ZDCPL CANNOT BE FOUND. IT WAS FURTHER OBSERVED BY THE AO THAT ANALYSIS DONE BY ADIT (INV.), KOLKATA REVEALED THAT SOURCE O F CAPITAL INTRODUCED IN ZDCPL IS DOUBTFUL AND ITS INVESTORS D ID NOT EXIST. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 14 - 16.1 THE AO ON THIS BROAD PARAMETERS HELD THE NATUR E AND SOURCE OF LOAN FROM THE LENDER TO BE UNSATISFACTORY. THE AO ACCORDINGLY INVOKED SECTION 68 OF THE ACT AND ADDED THE AMOUNT RECEIVED FROM THE LENDER AS UNEXPLAINED CREDITS IN RESPECTIVE ASS ESSMENT YEARS. 16.2 THE AO ALSO INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN THE ALTERNATIVE AND OBSERVED THAT SUCH UNSEC URED LOAN SHOULD BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE R ECIPIENT ASSESSEE. TO SUPPORT SUCH ACTION, IT WAS CLAIMED THAT THE PAR TNER OF THE FIRM SHRI SHANKAR LAL AGARWAL HOLDS 50% SHARES IN HILLTO P DISTRIBUTERS P. LTD. & GROMEX VANIJYA P. LTD. WHO WERE, IN TURN, SUBSTANTIALLY HOLDING SHARES OF ZDCPL. THE ADDITIONS UNDER S.2(2 2)(E) OF THE ACT WAS THUS CARRIED OUT AS AN ALTERNATIVE MEASURE. 17. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER TAKING NOTE OF THE SUBMISSIONS AND THE EVIDENCES PLACED BEFORE HIM EXONERATED THE ASSESSEE FROM THE ADDITIONS MADE UNDER S.68 OF THE ACT AS WELL AS 2(22)(E) OF THE AC T. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPROD UCED HEREUNDER: 3.3 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND T HE SUBMISSIONS OF THE APPELLANT. THE AO HAS ADDED THE JOAN AS UNEXPLA INED CREDIT U/S 68. THE APPELLANT RECEIVED MONEY FROM M/S ZIGMA FOR WHI CH DOCUMENTS SUCH AS PAN, ROC CERTIFICATE, AUDITED BALANCE SHEET S ETC WERE PROVIDED TO ESTABLISH GENUINENESS OF THE CREDIT. M/S ZIGMA D EALCOM PVT LTD HAD RECEIVED MONEY FROM 14 COMPANIES ON SALE OF INVESTM ENTS TO THESE COMPANIES. AO HAS MENTIONED THAT COMMISSION WAS ISS UED TO ADIT KOLKATA ISSUED COMMISSION TO THE ADIT TO INQUIRE IN TO THE SOURCE OF THESE COMPANIES, UNDER SECTION 68, WHERE A COMPANY RECEIVES SHARE APPLICATION MONEY FROM A PERSON THEN THE SOURCE FRO M WHOM SUCH PERSON HAS RECEIVED MONEY WILL ALSO BE INVESTIGATED . IN CASE OF A COMPANY RECEIVING LOAN, THERE IS NO SUCH PREREQUISI TE U/S 68. IN THE PRESENT CASE THE ADIT ISSUED SUMMONS ON 29/12/2014 TO THE 14 COMPANIES BUT THE SUMMONS WERE RETURNED UNSERVED. THE ADIT AND THE AO DREW CONCLUSION THAT THESE COMPANIES ARE NON-EXI STENT AND THESE WERE DUMMY COMPANIES. DURING THE APPEAL THE ASSESSEE SUBMITTED THAT ALL T HESE INQUIRIES WERE CONDUCTED MUCH EARLIER TO PASSING OF ASSESSMEN T ORDER DATED 29.12.2016. NO OPPORTUNITY WAS PROVIDED TO THE ASS ESSEE FIRM BEFORE ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 15 - TAKING ADVERSE DECISION IN THE ASSESSMENT. THE LOAN WAS RECEIVED AT M/S ZIGMA DEALCOM INTENDED TO ENTER INTO PARTNERSHIP WI TH THE ASSESSEE FIRM. HOWEVER THE PARTNERSHIP COULD NOT MATERIALIZE . THE AMOUNT WAS THEREFORE RETURNED BACK. IN THE SAME YEAR THE ASSES SMENT OF M/S ZIGMA DEALCOM WAS COMPLETED U/S 143(3)/147 AND IN THE SAI D ORDER THE CREDITS WERE ACCEPTED AS GENUINE. COPY OF ASSESSMENT ORDER DATED 18.03.2016 WAS FURNISHED AS PER WHICH THE ASSESSMENT OF M/S ZI GMA WAS REOPENED UNDER DIRECTION U/S 263 AND INQUIRIES WERE MADE. TH E RELEVANT PARTS OF THE ORDER ARE AS UNDER- 5. AFTER EXAMINATION OF THE FACTS AND THE ORDER PAS SED U/S 147/143(3) AND ALSO THE RELEVANT FILED BY THE ASS ESSES COMPANY TO SUBSTANTIATE THE IDENTITY AND CREDITWORTHINESS O F THE SUBSCRIBER COMPANIES AND GENUINENESS OF THE SHARE C APITAL AND SHARE PREMIUM ALREADY DISCLOSED IN THE RETURN OF IN COME, THE HON'BTE PR. CIT- 2, KOLKATA WAS PLEASED TO PASS AN ORDER U/S 263 OF THE ACT ON 18/03/2015 IN THIS CASE BY SETTING AS IDE THE ORDER OF ASSESSMENT U/S 147/143(3) OF THE ACT DATED 30/ 04/2012 FOR DOING IT AFRESH BY ISSUING THE FOLLOWING DIRECTIONS TO THE ASSESSING OFFICER: - I) EXAMINE THE GENUINENESS AND SOURCE OF SHARE CAPI TAL, NOT ON A TEST CHECK BASIS' BUT IN RESPECT OF EACH AND E VERY SHAREHOLDER BY CONDUCTING INDEPENDENT ENQUIRY NOT T HROUGH THE ASSESSEE. II) THE BANK ACCOUNT FOR THE ENTIRE PERIOD BE EXAM INED IN THE COURSE OF VERIFICATION TO FIND OUT THE MONEY TRAIL OF THE SHARE CAPITAL. III) FURTHER THE A.O. SHOULD EXAMINE THE DIRECTORS AS WELL AS EXAMINE THE CIRCUMSTANCES WHICH NECESSITATED THE C HANGE IN DIRECTORSHIP IF APPLICABLE. HE SHOULD EXAMINE THEM ON OATH TO VERIFY THEIR CREDENTIALS AS DIRECTOR AND REACH A LO GICAL CONCLUSION REGARDING THE CONTROLLING INTEREST. 6. IN PURSUANCE OF SET ASIDE ORDER U/S 263 PASSED B Y THE HON'BLE PR CIT - 2, KOLKATA AND THE DIRECTIONS ISSU ED BY HER AND MENTIONED IN HER ORDER, THE CASE OF THE ASSESSES CO MPANY FOR THE A.Y. 2010-11 WAS RE-FIXED FOR HEARING ON 28/09/2015 BY ISSUE OF LETTER OF HEARING DATED AND SIMULTANEOUS ISSUE OF A NOTICE OF REQUISITIONS U/S 142(1) OF THE- ACT DATED 17/09/201 5 ASKING THE ASSESSEE. COMPANY TO FURNISH THE RELEVANT PARTICULA RS AND DOCUMENT INCLUDING COMPLETE LIST OF DIRECTORS, THE DETAILS OF SHARE CAPITAL RECEIVED WITH SHARE PREMIUM FROM DIFF ERENT COMPANIES AND INDIVIDUALS AND THE COPY OF BANK STAT EMENTS FOR THE ENTIRE FY 2009-10 (A Y.2010-11) TO PROVE/ESTABL ISH THE IDENTITY AND CREDIT WORTHINESS OF THE SUBSCRIBERS O F SHARES AND THE GENUINENESS OF THE TRANSACTIONS' 7. ON THE OTHER HAND, THE COMPANIES WHO HAD SUBSCRI BED TO THE SHARES OF THE ASSESSEE COMPANY, HAVE BEEN SEPAR ATELY SERVED WITH NOTICE U/S 133(6) OF THE ACT' ALL DATED 16/02/ 2016 ASKING EACH OF THEM TO FURNISH WITHIN 7 DAYS OF RECEIPT OF THE NOTICE U/S 133(6) THE RELEVANT PARTICULARS AND DOCUMENTS AS HE REIN ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 16 - MENTIONED TO PROVE THEIR IDENTITY AND CREDITWORTHI NESS OF MAKING THE INVESTMENT IN SHARE CAPITAL OF THE ASSES SEE COMPANY ALONG WITH SHARE PREMIUM AND GENUINENESS AND AUTHEN TICITY OF THEIR TRANSACTION MADE WITH ASSESSEE COMPANY 8.. THE ASSESSEE COMPANY AS WELL AS THE SUBSCRIBERS OF THE SHARE CAPITAL FULLY COMPLIED WITH THE REQUISITIONS MADE AND FURNISHED THE DERAILED PARTICULARS AND DOCUMENTS AS WERE CALLED FOR INCLUDING COPY OF THE RELEVANT BANK STATEMENT F OR THE ENTIRE F Y 2009-10. 9. APART FROM THE PAPERS AND DOCUMENTS CALLED FOR SEPARATELY FROM THE ASSESSEE COMPANY AS WELL &S THE SUBSCRIBERS OF THE SHARES, SHRI PRADEEP KUJNAR AGRAWAL DIRECTOR OF THE ASSESSEE COMPANY PERSONALLY APPEARED BEFORE THE UND ER SIGNED ON 17/03/2016 IN COMPLIANCE TO THE SUMMONS U/S 131 OF THE ACT ISSUED TO THE ASSESSEE COMPANY. A STATEMENT OF THE SAID DIRECTOR WAS RECORDED U/S 131 ON THAT DAY I.E. ON 17/03/2016 . HE CONFIRMED THE GENUINENESS / AUTHENTICITY OF THE PAR TICULARS OF DOCUMENTS FILED BY THE ASSESSEE COMPANY AGAINST THE NOTICE U/S 142(1) OF THE ACT. 10. THE PARTICULARS AND DOCUMENTS FILED BY THE ASSE SSEE COMPANY AND SEPARATELY BY THE SUBSCRIBERS OF SHARES WERE RECONCILED AND THOROUGHLY EXAMINED ACCORDING TO THE NEEDS OF THE CASE. THROUGH PRODUCTION AND SUBMISSION OF THE REQUIRED DOCUMENTS, IT APPEARS THAT THE SUBSCRIBER COMPANIES CONTRIBUTING TO THE SHARE CAPITAL AND SHARE PREMIUM OF THE ASSES SEE COMPANY WERE ABLE, TO PROVE THEIR IDENTITY AND CREDITWORTHI NESS BY PROPERLY DECLARING THEIR ADDRESS AND PAN AND EXPLAI NING THE SOURCE OF PAYMENT OF SHARE CAPITA! (INCLUDING PREMI UM) AND THE GENUINENESS OF SHARE TRANSACTIONS MADE THROUGH BANK ING CHANNEL AS PER-THE WHOLE YEAR'S BANK STATEMENT FILED FOR TH E FY 2009-10 (AY 201011) THE SOURCE OF INVESTMENT MADE BY ART TH E SUBSCRIBERS OF SHARES IN THE SHARE CAPITAL (INCLUDI NG SHARE PREMIUM) OF THE ASSESSEE COMPANY APPEARS FULLY EXPL AINED AND THE ONUS OF PROOF WAS FULLY DISCHARGED BY EACH OF T HEM. UNDER THE CIRCUMSTANCES, THE SOURCE OF SHARE CAPITAL OF T HE ASSESSEE COMPANY INCLUDING SHARE PREMIUM INVESTED BY THE SUB SCRIBERS OF SHARES HAVE BEEN ACCEPTED.' WHEN THE CAPITAL IN THE HANDS OF M/S ZIGMA DEALCOM HAVE BEEN FOUND GENUINE AND THE SAME FUNDS WERE USED TO ADVAN CE LOAN TO THE ASSESSEE, IT CANNOT BE DOUBTED. IT MAY BE NOTED THA T WHILE ADIT MADE INQUIRIES IN 2014 AND THE RESULTS OF WHICH WERE NOT INTIMATED TO THE ASSESSEE, THE ASSESSMENT IN THE CASE OF M/S ZIGMA D CALCOM WAS MADE JUST PRIOR TO THE ASSESSMENT IN 2016 IN THE CASE OF THE COMPANY. THE AO OF M/S ZIGMA DCALCOM FOUND ITS FUNDS GENUINE. LASTL Y WHEN THE LOAN HAS BEEN REPAID BACK AS PER THROUGH BANKING CHANNEL IT IS NOT CORRECT TO INTERPRET THAT THE AMOUNT WAS ANY KIND OF INTROD UCTION OF OWN MONEY. IF NO ADVERSE FACTS ARE FOUND IN INQUIRY , THE ENTR Y OF CREDIT IN ASSESSEE'S BOOK CANNOT BE ASSESSED AS INCOME. IN THE CASE OF RAJSHREE SYNTHETICS V CIT 256 ITR 331 RAJ 2002 IT WAS HELD T HAT SEC 68 OF THE ACT EMPOWERS THE AO TO MAKE INQUIRIES IF HE IS NOT SATISFIED WITH ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 17 - ENTRIES OF CASH CREDITS. THE AO'S SATISFACTION TO I NVOKE SEC 68 MUST BE DERIVED FROM RELEVANT FACTORS ON THE BASIS OF PROPE R INQUIRY AND COLLECTION OF FACTS. IF NO PROPER INQUIRY IS MADE, THE CASH CREDIT ENTRY CANNOT BE ASSESSED U/S 68 OF THE ACT. FURTHER THE A O CANNOT FOLLOW THE FINDING OF THE ADIT WITHOUT APPLYING HIS OWN MIND. IN SUCH CASE THE DECISION OF AO CANNOT BE CONFIRMED. IN THE CASE OF [2011] 338 ITR 5] (DELHI) [2012] 20 TAXMANN.COM 797 (DELHI) SIGNATURE HOTELS (P.) LTD. V. INCOME-TAX OFFICER INFORMATION GIVEN BY DIRECTO R OF INCOME-TAX (INVESTIGATION), THAT AMOUNT RECEIVED BY ASSESSEE F ROM OTHER COMPANY WAS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE WA S BENEFICIARY, WAS NOT SUFFICIENT TO REOPEN ASSESSMENT WHEN ASSESS ING OFFICER DID NOT APPLY HIS, OWN MIND TO THAT INFORMATION. AS PER THE ASSESSMENT ORDER OF M/S ZIGMA DEALCOM THE CREDITORS WERE DULY ASSESSED TO TAX AND THEIR CAPITAL WAS ACCEPTED. FURTHER M/S ZIGMA DEALCOM IS DULY ASSESSED TO TAX. IN THE CASE OF PK SETH V. CIT 286 ITR 318 GAU. 2006 HONOURABLE HC APPRECIATED THE FACT THAT OUT OF THE THREE REQUI REMENTS, THE FIRST TWO, VIZ. THE IDENTITY OF THE CREDITORS AND THEIR C REDITWORTHINESS HAD BEEN ESTABLISHED SINCE THE CREDITORS WERE BEING ASS ESSED TO TAX AND THEIR ASSESSMENT PARTICULARS WERE BEFORE THE AO WHI CH WERE NOT PROVED AS FALSE. IN RESPECT OF THE GENUINENESS OF THE TRAN SACTIONS AS FAR AS THE ASSESSEE WAS CONCERNED, IT HAS BEEN PROVED THAT THE ENTIRE AMOUNT INVOLVED WAS RECEIVED BY WAY OF ACCOUNT PAYEE CHEQU ES. THE AO COMPLETING THE ASSESSMENTS OF THE CREDITORS HAD ACC EPTED THEM AS GENUINE IN THE RESPECTIVE ASSESSMENTS OF THE CREDIT ORS. HOWEVER, IN THE CASE OF THE ASSESSEE, HE HELD THEM AS NOT GENUINE. ADMITTEDLY THERE WAS NO OTHER EVIDENCE OR MATERIAL IN SUPPORT OF THE FIN DING OF THE TRIBUNAL THAT THE CASH CREDITS WERE NOT GENUINE, EXCEPT SUBS TITUTING PERSONAL INFERENCES. HENCE THE HC HELD THAT THE ORDER OF THE TRIBUNAL WAS NOT JUSTIFIED. CIT VS. FIVE VISION PROMOTERS (P) LTD (2 016) 131 DTK 0337 (DEL HC) IT WAS HELD THAT PROVISIONS OF S 68 CAN BE INVOKED ONLY WHERE ASSESSEE OFFERS NO EXPLANATION AT ALL OR E XPLANATION OFFERED IS UNSATISFACTORY, AND ADDITION THEREUNDER CAN BE MADE ONLY ON THAT CONDITION'. DELHI HC IN CASE OF CIT VS. VRINDAWAN F ARMS (P) LTD. ITA 71/2015 PRONOUNCED ON 12.08.2015 IT WAS HELD THAT I F THE IDENTITY AND OTHER DETAILS OF THE SHARE APPLICANTS ARE AVAILABLE , THE SHARE APPLICATION MONEY CANNOT BE TREATED AS UNDISCLOSED INCOME IN THE HANDS OF THE CO. THE ADDITIONS IF AT ALL, SHOULD B E IN THE HANDS OF THE APPLICANTS IF THEIR CREDITWORTHINESS CANNOT BE PROV ED. CIT VS. PRANAV FOUNDATION LTD (2015) 117 DTR 0227 (CHENNAI HC) IT WAS HELD THAT 'WHERE THE SHARE APPLICANTS WERE REGISTERED COMPANI ES AND THEY HAD DITTY FURNISHED THE CONFIRM A LIONS ALONG WITH THEI R IT ASST. DETAILS, THE ASSESSING OFFICER OUGHT TO HAVE ACCEPTED THESE C ONTRIBUTIONS TOWARDS SHARE CAPITAL AS GENUINE AND NO ADDITION WAS WARRAN TED U/S 68 IN HANDS OF ASSESSEE ON ACCOUNT OF SHARE APPLICATION MONEY R ECEIVED'. I HAVE CITED THESE DECISIONS PRONOUNCED IN CASE OF SHARE A PPLICATION MONEY SINCE THE AO HAS TREATED THE LOAN AMOUNT AS NOT GEN UINE NOT DUE TO ANYTHING ADVERSE IN RESPECT OF SOURCE OF THE LOAN B UT ON THE BASIS OF SOURCE OF THE SOURCE. STRICTLY READING THE SECTION 68, WHEN THE SOURCE I.E. FUNDS OF M/S ZIGMA DEALCOM WERE EXPLAINED, HE SHOULD NOT HAVE GONE INTO SOURCE OF SOURCE SINCE THE AMOUNT IN QUES TION WAS NOT SHARE CAPITAL. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 18 - ALTERNATELY, THE AO HAS TREATED THE AMOUNT OF LOAN OF RS 7,27,75,000/'- AS DEEMED DIVIDEND IN THE HANDS OF T HE ASSESSEE. FACTS ARE THAT AND AMOUNT OF RS. 7,27,75,000/- WAS RECEIV ED BY M/S. SHRI JAGDAMBA CONSTRUCTION COMPANY FROM A COMPANY M/S. Z IGMA DEALCOM PVT. LTD. ZIGMA DEALCOM P.LTD IS OWNED BY M/S. HILL TOP DISTRIBUTOR PVT. LTD AND M/S, GROWMEX VANIJYA PVT. LTD. BOTH T HESE COMPANIES HELD THE SHARES OF M/S. ZIGMA DEALCOM. 50% SHARE OF M/S. HILLTOP DISTRIBUTOR AND M/S. GROWMEX VANIJYA ARE HELD BY MR . SHANKAR AGARWAL WHO IS THE PROPRIETOR OF THE ASSESSEE COMP ANY M/S. JAGDAMBA CONSTRUCTION COMPANY. THE AO HAS DRAWN THE CONCLUSI ON THAT ON THE ABOVE FACTS THE AMOUNT RECEIVED BY M/S. JAGDAMBA CO NSTRUCTION IS THE DEEMED INCOME OF THESE COMPANY AS PER SECTION 2(22) (E) OF THE ACT. THE AO HAS RELIED ON THE DECISION OF DELHI HIGH COURT I N THE CASE OF CIT VS. NATIONAL TRAVEL SERVICES. ON GOING THROUGH THE SAID DECISION I FIND THAT ISSUE IN THE CASE OF NATIONAL TRAVEL SERVICES IS DIFFERENT. AS PER THE EXISTING LAWS THE PARTNERSHIP FIRM CANNOT HOLD SHARES OF COMPANIES, HOWEVER THEY CAN HOLD SHARES THROUGH PARTNERS. THE ISSUE IN THE PRESENT CASE IS THAT THE ASSESSEE HAS RECEIVED LOAN FROM M/S. JAGDAMBA DEALCOM IN WHICH SHRI SHANKAR AGARWAL PARTNER OF TH E ASSESSEE HAS NO SHARES. HOWEVER HE WAS HOLDING SUBSTANTIAL INTEREST IN TWO OTHER COMPANIES; HILL TOP DISTRIBUTORS AND GROWMEX VANIJY A WHICH WERE OWNED BY M/S. ZIGMA DEALCOM. IT IS NOT THAT THE TW O COMPANIES ARE PARTNERS IN M/S. ZIGMA DEALCOM WHICH IS NOT A 'FIRM ' BUT A LIMITED COMPANY. THEREFORE THE JUDGMENT IN THE HANDS OF THE NATIONAL TRAVEL SERVICES WILL NOT BE APPLICABLE. AS PER SECTION 2(22)(E) ANY PAYMENT BY A COMPANY, O F ANY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN TE N PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTE REST OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUA L BENEFIT; OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPAN Y IN EITHER CASE POSSESSES ACCUMULATED PROFITS WILL BE DEEMED TO BE DIVIDEND IN THE HANDS OF SUCH SHARE BOLDER. IN THE PRESENT CASE, T HE ASSESSEE M/S SHREE JAGDAMBA CONSTRUCTION IS NOT A SHAREHOLDER IN M/S Z IGMA DEALCOM PVT LTD. THE INDIRECT RELATION WITH THIS COMPANY BY VI RTUE OF SHRI SHANKAR AGRAWAL HOLDING SHARES IN M/S HILLTOP DISTRIBUTOR AND M/S GROWMEX VANIJYA WHICH WERE INTURN HOLDING SUBSTANTIAL SHARE S IN M/S ZIGMA DEALCOM CANNOT BE USED TO INVOKE SECTION 2(22)(E) A S HAS BEEN HELD IN SEVERAL COURT DECISIONS. IT HAS BEEN EXPLAINED BY THE ASSESSEE IS THAT HE IS NOT A SHAREHOLDER NEITHER A BENEFICIAL SHAREH OLDER NOR A SHAREHOLDER HOLDING SUBSTANTIAL SHARES IN THE COMPA NY M/S ZIGMA DEALCOM. THEREFORE ANY LOAN TAKEN BY HIM FROM THIS COMPANY WOULD NOT ATTRACT PROVISIONS OF SECTION 2(22)(E). ON GOING TH ROUGH THE PROVISIONS OF SECTIONS 2(22)(E), IT SAYS THAT ' ANY PAYMENT B Y A COMPANY ... OF ANY SUM ... TO A SHAREHOLDER ... OR TO ANY C ONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST WILL BE REGARDED AS DEEMED DIVIDEND. IN THE PRESENT CASE THE ASSESSEE IS NOT SHAREHOLDER IN THE ZIGMA DEALCOM. N EITHER THE PAYMENT HAS BEEN MADE TO A CONCERN IN WHICH THE ASSESSEE MA Y BE A SHAREHOLDER HOLDING 10% SHARES. THEREFORE THE IMPUGNED PAYMENT WILL NOT BE REGARDED AS DIVIDEND. THIS VIEW HAS BEEN TAKEN BY R AJASTHAN HIGH COURT IN THE CASE OF [2012] 18 TAXMANN.COM 308 (RAJ ASTHAN) COMMISSIONER OF INCOME-TAX, UDAIPUR V HOTEL HILLTOP MARCH 17, ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 19 - 2008. THE FACTS IN THAT CASE WERE THAT ASSESSEE-FIR M HAD RECEIVED CERTAIN AMOUNT AS AN ADVANCE FROM A COMPANY UNDER A N AGREEMENT TO HANDOVER MANAGEMENT OF FIRM'S HOTEL TO SAID COMPANY . PARTNERS OF ASSESSEE-FIRM WERE ALSO SHAREHOLDERS IN SAID COMPAN Y. ASSESSING OFFICER TREATED SAID AMOUNT RECEIVED BY ASSES SEE-F IRM AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) IN HANDS OF ASSESSE E AND ASSESSED SAME TO TAX. WHEN THE MATTER REACHED TO THE HIGH COURT, THE H'BLE COURT REPLIED IN AFFIRMATIVE THAT IT WAS NOT ASSESSEE-FIR M WHICH WAS SHOWN TO BE SHAREHOLDER OF COMPANY BUT IN FACT IT WAS ITS PA RTNERS WHO WERE HOLDING MORE THAN REQUISITE AMOUNT OF SHAREHOLDING IN COMPANY AND WERE HAVING REQUISITE INTEREST IN FIRM. THEREFORE, AFORESAID AMOUNT RECEIVED BY ASSESSEE WOULD NOT BE DEEMED DIVIDEND I N HANDS OF ASSESSEE-FIRM. IN ANOTHER CASE OF [2011] 16 TAXMANN.COM 411 (DELHI ) COMMISSIONER OF INCOME-TAX V MCC MARKETING (P.) LTD WITH SIMILAR FACTS, THAT ASSESSEE, A PRIVATE LIMITED COMPANY, RE CEIVED A CERTAIN AMOUNT AS UNSECURED LOAN FROM ITS SISTER CONCERN BY NAME MIPL. 71IE ASSESSING OFFICER HAVING NOTICED THAT ONE A WAS HOL DING MORE THAN 20 PER CENT SHARES IN BOTH MIPL AND ASSESSEE-COMPANY I NVOKED PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND MADE ADDITION OF AFORESAID AMOUNT TO INCOME OF ASSESSEE. THE HONOURABLE HIGH COURT HELD THAT SINCE THE ASSESSEE COMPANY WAS NOT A SHAREHOLDER OF M/S MIPL THEREFORE IN VIEW OF JUDGMENT OF DELHI HIGH COURT RENDERED IN EASE OF C1T V. ANKITECH (P.) LTD. J2011] 199 TAXMAN 341 / 31 TAXMANN.COM 10 0, PROVISIONS OF SECTION 2(22)(E) WERE NOT ATTRACTED IN INSTANT CASE . FURTHER AS PER THIS SECTION, THE AMOUNT TO BE CONSI DERED AS DEEMED DIVIDEND WILL BE TREATED AN AMOUNT TO THE EX TENT OF ACCUMULATED PROFITS OF COMPANY. THE AO HAS MENTIONED THAT M/S Z IGMA DEALCOM HAS ACCUMULATED PROFIT OF ABOVE RS 9 CR WHICH IS NOT AS PER RECORDS. A PERUSAL OF AUDITED ACCOUNTS FOR THE YE31.3.2013 SHO WS FOLLOWING DETAILS- NOTE2: RESERVE AND SURPLUS AS ON 31.3.2014 AS ON 31.3.2013 1. SECURITIES PREMIUM RESERVE 9,14,34,000/- 9,14,34,000/- 2 . SURPLUS (PROFIT & LOSS ACE) (107,459/-) ( 84,289/-) THUS THERE WAS ACCUMULATED SURPLUS OF LOSS RS 84,28 9/- DURING FY 2012-33 AND LOSS RS 1,07,459/- FOR FY 2013-14. R S 9.14 IS THE RESERVE AND SURPLUS AND NOT THE ACCUMULATED PROFIT. IN A CASE DEALT WITH BY KOLKATA HC ( COMMISSIONER O F INCOME- TAX, KOL.-III V SHREE BALAJI GLASS MANUFACTURING (P .) LTD. 72 TAXMANN.COM 118 (CALCUTTA) 2016) THIS ISSUE WAS DEA LT. THE FACTS IN THE CASE WERE THAT IN THE ASSESSMENT YEAR 2004-05 ASSES SEE-COMPANY BORROWED FUNDS FROM TWO COMPANIES A AND P IN WHICH IT HAD SUBSTANTIAL INTEREST. COMPANY A LENT MONEY OUT OF RESERVE AND S URPLUS; IT HAD INSUFFICIENT ACCUMULATED PROFIT. HOWEVER, COMPANY P HAD SOME ACCUMULATED PROFIT, WHICH WAS LENT AND BALANCE SUM WAS PAID OUT OF SHARE PREMIUM ACCOUNT. ASSESSING OFFICER TREATED LO AN AMOUNTS AS DEEMED DIVIDEND IN HANDS OF ASSESSEE COMPANY. AFTER THE CASE REACHED TO THE HIGH COURT, THE HONOURABLE HIGH COURT ANSWER ED IN AFFIRMATIVE THAT SHARE PREMIUM DOES NOT CONSTITUTE ACCUMULATED PROFITS OR EVEN ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 20 - PROFITS OF A COMPANY; AND WHERE MONEY WAS LENT OUT OF RESERVE AND SURPLUS REPRESENTING SHARE PREMIUM AND NOT FROM ACC UMULATED PROFITS, THERE WOULD BE NO DEEMED DIVIDEND IN HANDS OF RECIP IENT. SIMILAR ISSUE HAS BEEN DEALT WITH BY CHANDIGARH BENCH OF THE ITAT IN THE CASE OF 28 TAXMANN.COM 255 (2012) DEPUTY COMMISSIONER OF INCOM E-TAX, CIRCLE VII, LUDHIANA V RADHE SHAM JAIN. DECIDING ON THE SA ME ISSUE FOR THE AY 2008-09 THE ITAT HELD THAT SHARE PREMIUM ACCOUNT WOULD NOT PARTAKE NATURE OF COMMERCIAL PROFITS AND, THEREFORE , CANNOT BE TREATED AS ACCUMULATED PROFITS. IN VIEW OF THE ABOVE FACTS THE GENUINENESS OF LOAN CAN NOT BE DOUBTED AND ALSO THE TRANSACTION WILL NOT COME UNDE R THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. THE ADDITION IS THEREF ORE DELETED. 18. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A) T O THE ASSESSEE, THE REVENUE HAS PREFERRED APPEAL BEFORE THE TRIBUNA L AS PER GROUNDS NOTED ABOVE. 19. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS ADV ANCED ON BEHALF OF THE REVENUE AS WELL AS THE ASSESSEE IN TH E COURSE OF HEARING. WE ALSO PERUSED THE ASSESSMENT ORDER AND THE FIRST APPELLATE ORDER. THE EVIDENCES REFERRED TO AND REL IED UPON HAS BEEN TAKEN NOTE OF IN TERMS OF RULE 18(6) INCOME TAX (AP PELLATE TRIBUNAL) RULES, 1963. 19.1 THE GRIEVANCES OF THE REVENUE ARE TWO FOLDS; ( I) APPLICABILITY OF SECTION 68 OF THE ACT ON THE LOANS RECEIVED IN T HE FACTS OF THE CASE & IN THE ALTERNATIVE (II) APPLICABILITY OF SEC TION 2(22)(E) OF THE ACT IN THE FACTUAL MATRIX. WHILE THE REVENUE HAS R ELIED UPON THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER TO SUPPOR T THE ACTION OF THE AO, THE ACTION OF THE CIT(A) WAS STRONGLY DEFEN DED ON BEHALF OF THE ASSESSEE AND IT WAS CONTENDED THAT THE ACTION O F THE AO WAS WHOLLY UNSUPPORTABLE IN LAW AND RIGHTLY SET ASIDE A ND REVERSED BY THE CIT(A). 19.2 ON PERUSAL, WE NOTICE THAT THE AO HAS PROCEEDE D AGAINST THE ASSESSEE UNDER S.68 OF THE ACT MAINLY ON THE PREMIS ES THAT THE ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 21 - INVESTORS IN THE LENDER COMPANY WERE NOT FOUND TRAC EABLE AT THE TIME OF ENQUIRY. IN DEFENSE, IT IS THE CASE OF THE ASSE SSEE THAT ALL RELEVANT EVIDENCES RELATING TO THE LOAN WERE FILED BEFORE TH E AO IN THE COURSE OF THE ASSESSMENT. NO ENQUIRY WAS MADE BY THE AO O R THE INVESTMENT WING FROM THE LENDER COMPANY PER SE . THE ENQUIRY WAS MADE ON THE INVESTORS OF THE LENDER COMPANY. IT IS THUS THE CONTENTION OF THE ASSESSEE THAT WHERE COGENT EVIDEN CES IN RELATION TO LOAN TRANSACTIONS BETWEEN THE LENDER COMPANY AND TH E ASSESSEE REMAINS UNDISPUTED OR NOT DISPROVED, THE PRIMARY ON US ON THE ASSESSEE STOOD DISCHARGED AND THE BURDEN WAS SHIFTE D TO THE AO, WHICH WAS NEVER SHIFTED BACK TO THE ASSESSEE. SIGN IFICANTLY, WE FURTHER NOTE THAT THE SOURCE OF MONEY IN THE HANDS OF LENDER COMPANY AROSE IN A.Y. 2010-11 WHEREAS THE LOANS WER E GIVEN BY THE LENDER COMPANY TO THE ASSESSEE IN A.YS. 2013-14 & 2 014-15. MORE IMPORTANTLY, THE SOURCE IN THE HANDS OF ZDCPL WAS D ULY ACCEPTED BY THE REVENUE IN THE SCRUTINY ASSESSMENT AS PER AS SESSMENT ORDER DATED 18.03.2016 PASSED UNDER S.143(3) R.W.S. 147 R .W.S. 263 OF THE ACT. THE ORIGINAL ASSESSMENT PASSED UNDER S.143(3) R.W.S. 147 DATED 30.04.2012 WAS TAKEN UP FOR REVISION UNDER S.263 OF THE ACT ON THE GROUND THAT NO PROPER AND FULL ENQUIRY WAS MADE BY THE AO IN RESPECT OF SHARE CAPITAL OF THE ASSESSEE COMPANY IN TRODUCED BY SEVERAL SUBSCRIBER COMPANIES, WHICH IS THE SOURCE O F MONEY IN THE INSTANT CASE LENT TO THE ASSESSEE HEREIN. CONSEQUE NT UPON THE DIRECTIONS IN THE REVISIONAL ORDER, ONE OF THE DIRE CTORS OF LENDER COMPANY APPEARED BEFORE ITS AO IN THE SET ASIDE PRO CEEDINGS. THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF 14 IN VESTORS OF ZDCPL FOUND SATISFACTORY BY THE AO OF ZDCPL. IN TH IS BACKDROP, WHERE THE INCOME TAX AUTHORITIES THEMSELVES HAVE AC CEPTED THE SOURCE OF CAPITAL IN THE HANDS OF THE LENDER COMPAN Y, THE DISPUTE ON BONAFIDES OF LOANS TAKEN OUT OF SUCH SOURCE BY THE ASSESSEE IS INCOMPREHENSIBLE. THE CIT(A), IN OUR VIEW, HAS RIG HTLY APPROACHED ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 22 - THE ISSUE IN HAND AND DELETED THE ADDITIONS MADE UN DER S.68 OF THE ACT. WE SEE NO ERROR IN THE ACTION OF THE CIT(A). WE, THUS, DECLINE TO INTERFERE. 19.3 ADVERTING TO THE ALTERNATIVE GROUND OF MAINTAI NABILITY UNDER S.2(22)(E) OF THE ACT, WE STRAIGHTWAY TAKE NOTE OF THE ASSERTIONS MADE ON BEHALF OF THE ASSESSEE THAT NEITHER ASSESSE E NOR ANY OF ITS PARTNER WAS SHAREHOLDER AT ANY POINT OF TIME IN ZDC PL. THE APPLICABILITY OF DEEMING FICTION CONTAINED IN SECTI ON 2(22)(E) OF THE ACT IS A COMPLETE NON-STARTER AT THE THRESHOLD IN T HE ABSENCE OF PRESENCE OF COMMON INTEREST. WE ALSO APPRECIATE TH E ALTERNATE PLEA OF THE ASSESSEE IN AFFIRMATIVE THAT ZDCPL IS MAINLY ENGAGED IN MONEY LENDING ACTIVITIES. IT IS NOTICED FROM THE B ALANCE SHEET OF THE LENDER COMPANY THAT SUBSTANTIAL PART OF BUSINESS OF LENDER COMPANY IS FINANCING AND THEREFORE, THE APPLICABILITY OF SE CTION 2(22)(E) OF THE ACT IS OUSTED IN VIEW OF EXCEPTIONS CONTAINED I N CLAUSE (2) THEREOF. WE ALSO OBSERVE THAT THE ACCUMULATED PROF IT IN THE HANDS OF THE LENDER COMPANY IS ON ACCOUNT OF SHARE PREMIUM W HICH CANNOT BE RECKONED FOR THE PURPOSES OF SECTION 2(22)(E) OF TH E ACT. THUS, NO ADDITION CAN BE MADE UNDER S.2(22)(E) OF THE ACT IN THE ABSENCE OF ACCUMULATED PROFIT IN THE HANDS OF THE LENDER COMPA NY AS DEFINED UNDER S.2(22)(E) OF THE ACT. 19.4 THUS, LOOKING FROM ANY ANGLE, THE ALTERNATIVE ADDITION UNDER S.2(22)(E) OF THE ACT IS TOTALLY DEVOID OF ANY LEGA L BASIS AND THUS CANNOT BE SUSTAINED. THE CONCLUSION DRAWN BY THE C IT(A) IN FAVOUR OF THE ASSESSEE, THUS, CANNOT BE FAULTED IN ANY OF THE ASSESSMENT YEARS I.E. 2013-14 & 2014-15 IN QUESTION. CONSEQUE NTLY, WE DECLINE TO INTERFERE. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NOS. 37 TO 42/RPR/2020 (M/S. SHREE JAGDAMBA CONSTRUCTIONS CO.) A.YS. 2009-10 TO 2014-15 - 23 - 21. FOR THE SIMILAR REASONINGS PLACED IN THE IDENTI CAL FACTUAL MATRIX, THE APPEAL OF THE REVENUE IN ITA NO. 42/RPR /2020 CONCERNING AY 2014-15 IS ALSO DISMISSED. 22. IN THE COMBINED RESULT, ALL SIX CAPTIONED APPEA LS OF REVENUE ARE DISMISSED. SD/- SD/- (PAWAN SINGH) (PRADIP KUM AR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER RAIPUR: DATED 02/09/2021 TRUE COPY S. K. SINHA / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 / DR, ITAT, RAIPUR 5. 267 8 / GUARD FILE. BY ORDER 4 SR. PRIVATE SECRETARY ITAT 4 RAIPUR (ON TOUR) THIS ORDER PRONOUNCED IN OPEN COURT ON 02/09/ 2021