ACIT, New Delhi V. M/s. Paras Dyes & Chemicals, New Delhi

ITA 6706/DEL/2013

• Counselvise Citation: 670620114 RSA 2013
• Duration Of Justice: 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2004-2005
• Appeal Filed On: 20-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL BAJPAI
• Assessee Lawyers: RANO JAINARS; VEN JAIN
• Keywords: Unexplained cash credit; Additional evidence; Validity of assessment; Documents seized
• Section: 143(3); 153A; 68; 132; 2; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI I.C. SUDHIR AND SHRI T.S. KAPOOR ITA NO.6706/DEL/2013 ASSESSMENT YEAR: 2004-05 ASSISTANT CIT, VS. M/S. PARAS DYES & CHEMICALS, CENTRAL CIRCLE-17, B-82, DEFENCE COLONY, NEW DELHI. NEW DELHI. (PIN: AADFP3428J) (APPLICANT) (RESPONDENT) CROSS OBJECTION NO. 162/DEL/2014 ( IN ITA NO.6706/DEL/2013 ) ASSESSMENT YEAR: 2004-05 M/S. PARAS DYES & CHEMICALS, VS. ASSISTANT CIT, B-82, DEFENCE COLONY, CENTRAL CIRCLE-17, NEW DELHI. NEW DELHI. (PIN: AADFP3428J) (APPLICANT) (RESPONDENT) REVENUE BY: SHRI SUNIL BAJPAI, CI T (DR) ASSESSEE BY : SHRI VEN JAIN & MS. RANO JAIN, ARS ORDER PER I.C. SUDHIR: JUDICIAL MEMBER SINCE IN THE CROSS-OBJECTION, THE ASSESSEE HAS RAIS ED LEGAL ISSUES, HENCE, WE PREFER TO HEAR IT FIRST. THE ASSESSEE HAS RAISED FOLLOWING OBJECTIONS AGAINST THE FIRST APPELLATE ORDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEA RNED CIT(APPEALS) HAS ERRED BOTH ON FACTS & IN LAW IN RE JECTING THE CONTENTION OF THE ASSESSEE THAT THE PROCEEDINGS INI TIATED UNDER SEC. 2 153A AND ORDER PASSED BY THE ASSESSING OFFICER UNDE R SEC. 153A/143(3) IS WITHOUT JURISDICTION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED CIT(APPEALS) HAS ERRED BOTH ON FACTS & IN LAW IN RE JECTING THE CONTENTION OF THE ASSESSEE THAT THE ORDER PASSED BY THE LEARNED A.O. UNDER SEC. 153A IS BAD AND LIABLE TO BE QUASHED AS THE SAME HAS BEEN FRAMED CONSEQUENT TO A SEARCH WHICH ITSELF WAS UNLA WFUL AND INVALID IN THE EYE OF LAW. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED CIT(APPEALS) HAS ERRED BOTH ON FACTS & IN LAW IN RE JECTING THE CONTENTION OF THE ASSESSEE THAT THE PROCEEDINGS INI TIATED UNDER SEC. 153A ARE BAD IN LAW IN THE ABSENCE OF ANY INCRIMINA TING MATERIAL BELONGING TO THE ASSESSEE BEING FOUND DURING THE CO URSE OF THE SEARCH. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED CIT(APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN GOING AHEAD WITH THE REASSESSMENT ORDER AND NOT CLOSING THE REASSESS MENT PROCEEDINGS,, DESPITE THE FACT THAT NO INCRIMINATIN G MATERIAL BELONGING TO THE ASSESSEE WAS FOUND AND HAS BEEN SU BJECT MATTER OF ADDITION IN ANY OF THE REASSESSMENT UNDER SEC. 153A FOR ALL THE SIX YEARS. 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LEAR NED CIT(APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN IGNORING THE FACT THAT THE ADDITIONS MADE BY THE A.O. ARE OTHERWISE U NTENABLE SINCE THE SAME IS NOT ARISING FROM THE ANY INCRIMINATING MATE RIAL SEIZED DURING 3 THE COURSE OF SEARCH AND REASSESSMENT UNDER SEC. 15 3A/143(3) CONSEQUENT TO SEARCH IS TO BE CONFINED ONLY TO THE INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE FOUND DURING THE COURSE OF THE SEARCH. 2. THE FACTS IN BRIEF ARE THAT THE SEARCH AND SEIZU RE OPERATION UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 WAS CONDUCT ED AT THE BUSINESS/RESIDENTIAL PREMISES OF THE ASSESSEE ON 10 .03.2010. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 153A OF THE INC OME-TAX ACT, 1961 TO THE ASSESSEE. IN RESPONSE TO WHICH RETURN WAS FILED AND THE ASSESSMENT UNDER SECTION 153A READ WITH SECTION 143(3) OF THE ACT WA S FRAMED. LEARNED ASSESSING OFFICER MADE ADDITION OF RS.9,83,49,684 ( RS.6,44,11,974 + 2,87,10,000 ) ON ACCOUNT OF UNEXPLAINED CASH CREDIT S AGAINST RETURNED INCOME OF RS.52,27,710. THE ASSESSEE QUESTIONED THE ACTION OF THE ASSESSING OFFICER ON THE ISSUE OF VALIDITY OF ACQUISITION OF JURISDICTION UNDER SEC. 153A BY THE ASSESSING OFFICER AS THE ASSESSMENT WAS MADE IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. THE ASSESSEE ALSO QUESTIONED THE ADDITIONS MADE BY THE ASSESSING OFFI CER. THE ASSESSEE COULD NOT SUCCEED BEFORE THE LEARNED CIT(APPEALS) ON THE VALIDITY OF ASSESSMENT FRAMED UNDER SEC. 153A OF THE ACT QUESTIONED BEFORE THE LEARNED 4 CIT(APPEALS). THE ASSESSEE HAS, HOWEVER, GOT RELIE F FROM THE LEARNED CIT(APPEALS) ON THE ADDITIONS MADE BY THE ASSESSING OFFICER AS THE SAME HAS BEEN DELETED BY THE LEARNED CIT(APPEALS) AFTER DETAILED DISCUSSION. THE ASSESSEE IS THUS IN CROSS-OBJECTION QUESTIONING THE VALIDITY OF THE FIRST APPELLATE ORDER ON THE ISSUE OF VALIDITY OF ACQUISI TION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SEC. 153A OF THE ACT. THE R EVENUE IS IN APPEAL BEFORE THE ITAT QUESTIONING THE ACTION OF THE LEARN ED CIT(APPEALS) IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICE R. 3. IN SUPPORT OF THE OBJECTIONS RAISED, LEARNED AR SUBMITTED THAT PROCEEDINGS UNDER SEC. 153A OF THE ACT WERE INITIAT ED BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY INCRIMINATING MATERIA L BELONGING TO THE ASSESSEE BEING FOUND DURING THE COURSE OF SEARCH. H E ALSO SUBMITTED THE COPY OF STATEMENTS OF SHRI RAKESH JAIN RECORDED DURING T HE COURSE OF SEARCH PROCEEDINGS TO SUPPORT HIS CONTENTIONS THAT NOTHING INCRIMINATING WAS THERE AS WELL IN THE STATEMENT OF SHRI RAKESH JAIN TO JUS TIFY THE PROCEEDINGS INITIATED UNDER SEC. 153A OF THE ACT AND THE ADDITI ONS MADE IN THE ASSESSMENT FRAMED UNDER THE SAID PROVISIONS OF SECT ION 153A READ WITH SECTION 143(3) OF THE INCOME-TAX ACT, 1961. LEARNED AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: 5 1) SHRI KABUL CHAWLA VS. ACIT, ITA NO. 779/DEL/2013 (A .Y. 2002- 03) DATED 23.5.2014; 2) SHRI V.K. FISCAL SERVICES P. LTD. VS. DCIT, ITA NO. 5460/DEL/12 & ORS. (A.YS. 2004-05 TO 2009-10) DATED NOVEMBER 2013 . 3) ACIT VS. ASHA KATARIA ITA NO. 3105/DEL/2011 ORDE R DATED 20.5.2013. 4) KUSUM GUPTA VS. DCIT, ITA NO. 4873/DEL/2009 ORDE R DATED 28.3.2013. 5. DCIT VS. VRINDAVAN FARMS PVT. LTD. ITA NOS. 335 9, 3360, 3361/DEL/2013 DATED 6.6.2014. 6. DCIT VS. DCM SHRIRAM IND LTD. ITA NOS. 1648-1653/DE L/2013 DATED 11.10.2013 (DELHI TRI.); 7. V.K. FISCAL SERVICES P. LTD. VS. DCIT ITA NOS. 5460 - 5465/DEL/2012 DATED 27.11.2013. 8. JAKSON ENGINEERING LTD. VS. ACIT ITA NO. 349-350/DE L/13 DATED 11.4.2014. 9. DREAM BUILDCON PVT. LTD. VS. DCIT ITA NO. 5392/DEL/ 2012; 10. BHARATI VIDYAPEETH MEDICAL FOUNDATION VS. ACIT ITA NO. 36, 37, 39/2012 DATED 10.4.2014 (BOM.); 11. ACIT VS. PRITHVI SOUND PRODUCTS CO. PVT. LTD. ITA N O. 3422- 6/DEL/2011 DATED 17.4.2014 (DELHI TRI.). 12. A1 CARGO GLOBAL LOGISTICS LTD. 23 TAXMAN.COM 10 3(MUM)(S.B). 4. LEARNED CIT(DR) ON THE OTHER HAND TRIED TO JUSTI FY THE FIRST APPELLATE ORDER ON THE ISSUE. HE SUBMITTED THAT THE PLAIN REA DING OF THE STATUTE IS REQUIRED TO BE GONE THROUGH AND IN SUPPORT HE PLACE D RELIANCE ON THE FOLLOWING DECISIONS: I) 77 DTR 140 (AP) GOPAL LAL BHADRUPA & ORS. VS. DCIT; II) ORISSA STATE WAREHOUSING CORPN. & ANOTHER VS. CIT - 237 ITR 589 (S.C) 6 5. LEARNED CIT(DR) FURTHER SUBMITTED THAT THERE IS NO REQUIREMENT OF FINDING OF INCRIMINATING MATERIAL DURING THE COURSE OF THE SEARCH PROCEEDINGS TO INITIATE PROCEEDINGS UNDER SEC. 153A OF THE ACT. HE CONTENDED THAT TECHNICALITY OF THE PROCEEDINGS SHOULD BE AVOIDED T O MAKE THE JUST ASSESSMENT AS IT HAS BEEN AN ESTABLISHED PROPOSITIO N OF THE LAW. LEARNED CIT(DR) ALSO PLACED RELIANCE ON THE FOLLOWING DECIS IONS IN THIS REGARD: I) MADUGULA VEENA VS. DIT & ORS., WRIT PETITION (C) 76 56/2012, DATE OF DECISION 14.12.2012 (DELHI HIGH COURT); II) CIT VS. CHETAN DASS LAXMAN DASS ITA NO. 2045 & /DEL/2010, DECISION DATED 07.08.2012 (D.HC). 6. LEARNED CIT(DR) ALSO FURNISHED THE COPY OF THE APPRAISAL REPORT WITH THE SUBMISSIONS THAT ADDITIONS ARE BASED ON IN CRIMINATING MATERIAL AS IN THE APPRAISAL REPORT, LIST OF DOCUMENTS SEIZED AS W ELL AS HARD DISC OF LAPTOP ETC., LEDGER ACCOUNT WERE SEIZED. IN THIS REGARD, H E REFERRED PAGE NOS. 7 TO 15, PAGE NOS. 34 TO 36, 49 TO 67 OF THE APPRAISAL R EPORT. 7. IN THE REJOINDER, LEARNED AR WITH THE ASSISTANCE OF APPRAISAL REPORT AND THE PAGE NUMBERS OF THE APPRAISAL REPORT REFERRED B Y THE LEARNED DR SUBMITTED THAT THERE WAS NO INCRIMINATING MATERIAL AND ONLY THE ABATED ASSESSMENT CAN BE DISTURBED IF INCRIMINATING DOCUME NT IS FOUND DURING THE 7 COURSE OF SEARCH. HE POINTED OUT THAT IN THE ASSESS MENT ORDER, THE ASSESSING OFFICER DOES NOT TALK ABOUT ANY INCRIMINATING DOCUM ENTS FOUND DURING THE COURSE OF THE SEARCH. HE SUBMITTED FURTHER THAT THE EVENT RELATING TO THIS YEAR CAN ONLY BE ADDED IN THIS YEAR. LEARNED AR SUBMITTE D FURTHER THAT ASSESSEE DID NOT BLOCK THE INQUIRIES BUT PROVIDED ALL THE NE CESSARY DOCUMENTS FOR VERIFICATION OF THE ASSESSING OFFICER. NOW, IT HAS BEEN SETTLED BY THE DECISION OF SEVERAL DECISIONS OF THE CO-ORDINATE BE NCHES OF THE ITAT AS WELL AS SPECIAL BENCHS DECISIONS OF THE ITAT THAT ONLY THOSE ASSESSMENTS WHICH ARE PENDING ON THE DATE OF COMMENCEMENT OF SEARCH W OULD BE ABATED UNDER THE PROVISIONS OF SEC. 153A OF THE ACT AND IF ON TH E DATE OF COMMENCEMENT OF SEARCH, THE ASSESSMENT HAS ALREADY REACHED ITS F INALITY, THUS SUCH ASSESSMENT WILL NOT BE ABATED IN ABSENCE OF INCRIMI NATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IN THE PRESENT CASE BE FORE US, UNDISPUTEDLY THE ASSESSMENT HAD REACHED ITS FINALITY IN ABSENCE OF I SSUANCE OF NOTICE UNDER SEC. 143(2) OF THE ACT WITHIN THE PRESCRIBED TIME L IMIT FROM THE END OF THE MONTH IN WHICH THE RETURN OF INCOME WAS FILED AND T HE RETURN OF INCOME WAS PROCESSED UNDER SEC. 143(1)(A) OF THE ACT. THERE IS ALSO NO DISPUTE THAT DURING THE COURSE OF SEARCH, NO INCRIMINATING MATER IAL WAS FOUND AND SEIZED AS IT IS EVIDENT FROM THE ASSESSMENT ORDER AS NOTHI NG HAS BEEN MENTIONED BY 8 THE ASSESSING OFFICER ABOUT THE INCRIMINATING MATER IAL, IF ANY, FOUND DURING THE COURSE OF SEARCH ON THE BASIS OF WHICH HE HAS M ADE ADDITIONS IN QUESTION. UNDER, ALMOST SIMILAR FACTS IN THE DECISIONS RELIED UPON BY THE LEARNED AR, AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE. 8. CONSIDERING THE ABOVE SUBMISSIONS AND HAVI NG GONE THROUGH THE DECISIONS RELIED UPON, WE FIND THAT THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA) VIDE PARA NO. 58 OF ITS ORDER HAS ANSWERED THE ISSUE AS UNDER :- 58. THUS, QUESTION NO. 1 BEFORE US IS ANSWERED AS UNDER :- (A) IN ASSESSMENTS THAT ARE ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFE RRED ON HIM U/S 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EA CH OF THE SIX ASSESSMENT YEAR SEPARATELY : (B) IN OTHER CASES, IN ADDITION TO THE INCOME THA T HAS ALREADY BEEN ASSESSED, THE ASSESSMENT U/S 153A WI LL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL, WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (I) BOOKS OF A CCOUNT, OTHER DOCUMENTS, FOUND IN THE COURSE OF SEARCH BUT NOT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT, AND (II) UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH. 9. THE ISSUE RAISED BEFORE THE SPECIAL BENCH WA S AS TO WHETHER SCOPE OF ASSESSMENT U/S 153A ENCOMPASSES ADDITIONS NOT BA SED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH? 9 10. IN THE CASE OF KUSUM GUPTA (SUPRA) ALSO TH E RETURN WAS PROCESSED U/S 143(1) OF THE ACT AND TIME LIMIT FOR ISSUANCE O F NOTICE U/S 143(2) HAD EXPIRED ON THE DATE OF SEARCH AND IT WAS HELD THAT NO ASSESSMENT WAS PENDING IN THAT CASE AND THUS THERE WAS NO QUESTION OF ABATEMENT OF ASSESSMENT. THEREFORE ADDITION IN THE ASSESSMENT U/ S 153A WOULD BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FO UND DURING THE SEARCH. THE DELHI BENCH OF THE TRIBUNAL IN ITS RECENT DECIS ION ON THE ISSUE IN THE CASE OF SHRI KABUL CHAWLA VS. ACIT, ITA NO. 783/D/2 013 (ASSTT. YEAR 2008-09) AND OTHERS VIDE ORDER DATED 23.5.2014 HAS EXPRESSED THE SIMILAR VIEW. IT HAS ALSO DISCUSSED THE DECISION OF HONBLE JURISDICTIONAL DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) WHILE DECIDING THE ISSUE. THE RELEVANT PARA NO. 8 & 9 IN THIS REGARD I S BEING REPRODUCED AS UNDER :- 8. WE ARE UNABLE TO ACCEPT THE CONTENTION ADVANCED ON BEHALF OF THE REVENUE FOR THE REASON THAT IF BOTH THE PENDING AND COMPLETED ASSESSMENT WERE TO BE TAKEN ON SAME PEDESTAL, THEN THERE WAS NO NEED TO ENSHRINE SECOND PROVISO TO SEC. 153A( 1) PROVIDI NG THAT THE PENDING ASSESSMENTS WITHIN THE PERIOD OF SIX ASSESSMENT YEA RS SHALL ABATE. THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) DEALT WITH A SITUATION IN WHICH SOME INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF A NON-PENDING ASSESSMENT. IT WAS IN T HAT BACKGROUND THAT THE HON'BLE HIGH COURT HELD THAT SEC. 153A APPLIES IF INCRIMINATING 10 MATERIAL IS FOUND EVEN IF ASSESSMENTS ARE COMPLETED . THE QUESTION AS TO WHETHER ANY ADDITION CAN BE MADE IN RESPECT OF C OMPLETED ASSESSMENTS WHEN NO INCRIMINATING MATERIAL WAS FOUN D, WAS APPARENTLY LEFT OPEN. HOWEVER, WE FIND THAT THERE A RE SUFFICIENT INDIRECT HINTS GIVEN BY THE HON 'BLE DELHI HIGH COU RT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) ABOUT NOT MAKING OF ANY A DDITION IN RESPECT OF AN ASSESSMENT YEAR FOR WHICH THE ASSESSM ENT IS ALREADY COMPLETED UNLESS SOME INCRIMINATING MATERIAL IS FOU ND DURING THE COURSE OF SEARCH. THIS CAN BE SEEN FROM THE . FOLLO WING OBSERVATIONS OF THE HON'BLE HIGH COURT :- '20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESS MENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 14 3(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF TH E SEARCH/REQUISITION, THE ASSESSING OFFICER IS EMPOWE RED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEA RTHED DURING THE SEARCH. 9. THE ABOVE EXTRACTED OBSERVATIONS OF THE HON'BL E HIGH COURT, WHICH ARE THOUGH OBITER DICTA, MAKE THE POINT CLEAR THAT WHERE AN ASSESSMENT ORDER HAS ALREADY BEEN PASSED FOR A YEAR (S) WITHIN THE RELEVANT SIX ASSESSMENT YEARS, THEN ALSO THE A.O IS DUTY BOUND TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME BUT BY 'TAKING NOTE OF THE UNDISCLOSED INCOME IF ANY, UNEARTHED DU RING THE SEARCH'. THE EXPRESSION 'UNEARTHED DURING THE SEARCH' IS QUI TE SIGNIFICANT TO DENOTE THAT IN RESPECT OF COMPLETED OR NON-PENDING ASSESSMENTS, THE ASSESSING OFFICER IS ALBEIT DUTY BOUND TO ASSESS OR REASSESS THE TOTAL INCOME BUT THERE IS A CAP ON THE SCOPE OF ADDITIONS IN SUCH ASSESSMENT, BEING THE ITEMS OF INCOME 'UNEARTHED DU RING THE SEARCH'. IN OTHER WORDS, THE DETERMINATION OF 'TOTAL INCOME' IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE ALRE ADY COMPLETED ON THE DATE OF SEARCH, SHALL NOT BE INFLUENCED BY THE ITEMS OF INCOME OTHER THAN THOSE BASED ON THE MATERIAL UNEARTHED DURING T HE COURSE OF 11 SEARCH. THERE IS NOT AND CANNOT BE ANY QUARREL OVER THE PROPOSITION THAT THE ASSESSING OFFICER HAS NO OPTION BUT TO DET ERMINE THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF THE RELEVANT S IX ASSESSMENT YEARS. HOWEVER, THE SCOPE OF SUCH DETERMINATION OF TOTAL I NCOME IS DIFFERENT IN RESPECT OF THE YEARS FOR WHICH THE ASSESSMENTS A RE PENDING VIS-VIS THE YEARS FOR WHICH ASSESSMENTS ARE NON-PENDING. IN RESPECT TO THE ASSESSMENT YEARS FOR WHICH THE ORIGINAL ASSESSMENTS HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH, THE TOTAL INC OME SHALL BE DETERMINED BY RESTRICTING ADDITIONS ONLY TO THOSE W HICH FLOW FROM INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH COMPLETED ASSESSMENT, THEN THE TOTAL INCOME IN THE PROCEEDING S U/S 153A SHALL BE COMPUTED BY CONSIDERING THE ORIGINALLY DETERMINED I NCOME. IF SOME INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSESSMENT IS NOT PENDING, THEN THE ' TOTAL INCOME' WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMI NED INCOME PLUS INCOME EMANATING FROM THE INCRIMINATING MATERIAL FO UND DURING THE COURSE OF SEARCH. IN THE OTHER SCENARIO OF THE ASSE SSMENTS PENDING ON THE DATE OF SEARCH WHICH WOULD ABATE IN TERMS OF SE COND PROVISO TO SEC. 153A( 1), THE TOTAL INCOME SHALL BE COMPUTED A FRESH UNINFLUENCED BY THE FACT WHETHER OR NOT THERE IS ANY INCRIMINATI NG MATERIAL. IN FACT, THIS IS THE POSITION WHICH FOLLOWS WHEN WE READ THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN ANIL KUMAR BHATIA (SUPR A) IN JUXTAPOSITION TO THE SPECIAL BENCH ORDER IN THE CAS E OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). THE OTHER JUDGMENT R ELIED BY THE LD. DR IN THE CASE OF MADUGULU VENU (SUPRA) ALSO TALKS ABOUT THE NEED FOR MAKING FRESH ASSESSMENT IN RESPECT OF THE ASSES SMENT YEARS FOR WHICH THE ASSESSMENTS ARE NOT PENDING ON THE DATE O F SEARCH BUT DOES NOT SET OUT THE SCOPE OF SUCH ASSESSMENT, WHICH IS THE ISSUE BEFORE USE. 11. THE ISSUE RAISED IN THE CROSS-OBJECTION PREFERR ED BY THE ASSESSEE IS THUS DECIDED IN FAVOUR OF THE ASSESSEE, WITH THIS F INDING THAT LEARNED CIT(APPEALS) WAS NOT JUSTIFIED IN UPHOLDING THE VAL IDITY OF THE PROCEEDINGS 12 INITIATED UNDER SEC. 153A OF THE ACT AND THE ASSESS MENT FRAMED UNDER SEC. 153A READ WITH SECTION 143(3) IN FURTHERANCE THERET O. WE, THUS, WHILE SETTING ASIDE ORDERS OF THE AUTHORITIES BELOW IN THIS REGAR D HOLD THAT THE INITIATION OF PROCEEDINGS UNDER SEC. 153A OF THE ACT AND FRAMING OF ASSESSMENT UNDER SEC. 153A READ WITH SEC. 143(3) IN FURTHERANCE THER ETO IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH WERE NOT VALID AND IN CONSEQUENCE THE ASSESSMENT IS QUASHED. THE RELAT ED OBJECTION NOS. 1 TO 5 OF THE C.O. ON THE ISSUE ARE THUS ALLOWED. 12. THE CROSS-OBJECTION IS ACCORDINGLY ALLOWED. ITA NO. 6706/DEL/2013 : 13. BOTH THE PARTIES ALSO INSISTED FOR DISPOSAL OF THE APPEAL PREFERRED BY THE REVENUE WHICH IS ON THE MERIT OF THE ADDITION DELETED BY THE LEARNED CIT(APPEALS). 14. THE REVENUE HAS QUESTIONED FIRST APPELLATE ORD ER ON THE FOLLOWING GROUNDS: 1. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON FA CTS IN DELETING THE ADDITION OF RS.6,44,11,974 MADE ON ACCOUNT OF U NEXPLAINED CASH CREDITS. 13 2. THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS IN DELETING THE ADDITION OF RS.2,87,10,000 MADE ON ACCOUNT OF U NEXPLAINED CASH CREDITS. 15. THE FACTS IN BRIEF ARE THAT THE ASSESSING OFFIC ER HAD MADE ADDITION OF RS.6,24,94,470 RECEIVED FROM THE CREDITOR M/S. JAYN A CLOSURE, RS.19,17,500 FROM M/S. JAYCO PIPES LTD. AND RS.2,87,10,000 FROM M/S. QUASAR INDIA FINCAP PVT. LTD. AS UNEXPLAINED UNDER SEC. 68 OF TH E ACT ON THE BASIS THAT ASSESSEE HAS FAILED TO EXPLAIN THE IDENTITY, CREDIT WORTHINESS AND GENUINENESS AND THAT THE LOAN CREDITORS WERE NOT PRODUCED FOR V ERIFICATION BEFORE THE A.O. BEFORE LEARNED CIT(APPEALS) THE ASSESSEE ALSO, FILE D SOME ADDITIONAL EVIDENCE LIKE AUDITED BALANCE SHEET OF VARIOUS YEAR S, BALANCE SHEET OF CREDITORS FOR VARIOUS YEARS, LEDGER ACCOUNT OF CRED ITORS FOR VARIOUS YEARS, BANK STATEMENT OF CREDITORS, INCOME-TAX RETURNS OF THE CREDITORS, INVOICES RAISED BY THE ASSESSEE AND RECONCILIATION OF ACCOUN TS OF ASSESSEE AND CREDITORS WITH REQUEST TO ADMIT THEM ON THE BASIS O F THAT PROPER OPPORTUNITY FOR THE SAME WAS NOT GIVEN BY THE ASSESSING OFFICER TO THE ASSESSEE DUE TO PAUCITY OF TIME. LEARNED CIT(APPEALS) CALLED FOR TH E REMAND REPORT FROM THE ASSESSING OFFICER WHO OBJECTED THE ADMISSION OF ADD ITIONAL EVIDENCE ON THE GROUND THAT SUFFICIENT OPPORTUNITIES WERE GIVEN DUR ING THE ASSESSMENT 14 PROCEEDINGS. LEARNED CIT(APPEALS) AFTER CONSIDERING THE REMAND REPORT NOTED THAT THE ASSESSING OFFICER HAD GIVEN THE SHOW -CAUSE NOTICE IN RESPECT OF THE CREDITORS APPEARING IN THE BOOKS FOR THE FIR ST TIME, ON 14.12.2011 AND HAD GIVEN JUST TWO DAYS TO THE ASSESSEE TO GIVE DET AILED SUBMISSIONS/EVIDENCE TO PROVE THE GENUINENESS OF TH E TRANSACTION AND AFTER SUBMISSION OF ITS REPLY, THE ASSESSING OFFICER DID NOT RAISE ANY FURTHER QUERY. LEARNED CIT(APPEALS) ACCORDINGLY NOTED THAT THE TIM E OF TWO DAYS NOTICE GIVEN TO THE ASSESSEE WAS TOO SHORT. HE ACCORDINGLY ALLOWED THE ADDITIONAL EVIDENCES AND AFTER DISCUSSING THE CASES OF THE RES PECTIVE PARTIES IN DETAIL HAS DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER AGAINST WHICH THE REVENUE IS IN APPEAL RAISING THE ABOVE GROUNDS. 16. GROUND NO.1 : THE FACTS IN BRIEF ARE THAT ASSESSING OFFICER MAD E AN ADDITION OF RS.6,44,11,974 AS UNEXPLAINED INCOME UN DER SEC. 68 OF THE INCOME-TAX ACT, 1961. THE AMOUNT IN ADDITION COMPRI SES OF TWO FIGURES, VIZ. (I) M/S. JAYCO CLOSURE RS.6,24,94,474; AND (II) M/S . JAYCO PIPES LTD. RS.19,17,500. THE REASONS FOR THE ADDITION SHOWN BY THE ASSESSING OFFICER REMAINED THAT THE ABOVE LOAN CREDITORS WERE NOT PRO DUCED BEFORE HIM FOR VERIFICATION. THE ASSESSEE HAD MERELY FILED A PHOTO COPY TITLED AS CONFIRMATION-CUM-NO DUES CERTIFICATE DATED 31.10.20 07. LEARNED ASSESSING 15 OFFICER THUS CAME TO THE CONCLUSION THAT THE ASSESS EE HAD NOT BEEN ABLE TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE ABOVE L OAN CREDITORS AND GENUINENESS OF THE LOAN. THE ASSESSEE QUESTIONED TH E ACTION OF THE ASSESSING OFFICER IN THIS REGARD BEFORE THE LEARNED FIRST APP ELLATE AUTHORITY AND THE LEARNED CIT(APPEALS) BEING SATISFIED WITH THE SUBMI SSIONS OF THE ASSESSEE HAS DELETED THE ADDITION WHICH HAS BEEN QUESTIONED BY THE REVENUE. 17. IN SUPPORT OF THE GROUND, LEARNED CIT(DR) HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. LEARNED CIT(DR) R EFERRED CONTENTS OF PAGE NOS. 2 & 3 OF THE ASSESSMENT ORDER. HE SUBMITTED TH AT AS PER THE ASSESSMENT ORDER M/S. JAYCO CLOSURE, PROPRIETARYSHIP CONCERN O F M/S. JAYCO PIPES LTD. WHICH IS ALSO A COMPANY OWNED BY THE FAMILY AND SMT . SANTOSH BALA JAIN IS A DIRECTOR IN THIS COMPANY. THE ABOVE LOANS RECEIVE D FROM THE SAID TWO PERSONS WERE CREDITED IN THE ACCOUNT OF SHENECTADY HERDICIA LTD. ( IN SHORT SH LTD. ) IN THE LEDGER OF THE ASSESSEE FIRM WHICH CONTINUED TO REMAIN THERE UP TO 31.3.2006. THE ASSESSEE STATED THAT THIS AMOU NT WAS INDEPENDENTLY SO. ON 01.04.2006, THIS AMOUNT WAS TRANSFERRED IN THE L EDGER ACCOUNT OF SHRI RAKESH KUMAR (M/S. JAYCO PROPRIETARYSHIP FIRM ) ON THE SAME DAY I.E. 01.04.2006, THIS LIABILITY WAS WRITTEN OFF BY THE F IRM M/S. PARAS DYES & CHEMICALS (THE ASSESSEE) AND THE AMOUNT WAS CREDIT ED IN THE ACCOUNTS OF 16 PARTNERS IN THE FIRM, SHRI PARVESH JAIN AND SHRI SA RTHAN JAIN (RS.3,86,47,184 AND RS.2,57,64,789 RESPECTIVELY ). LEARNED CIT(DR) POINTED OUT THAT THE ASSESSEE HAD NOT PAID THE CREDITED AMOUNT WHICH CAS TES DOUBT ON THE GENUINENESS OF TRANSACTION. THE SHOW-CAUSE NOTICE D ATED 14.12.2011 WAS ACCORDINGLY ISSUED TO THE ASSESSEE INTIMATING THAT ON EXAMINATION OF DETAILS DURING PROCEEDINGS, THIS TRANSACTION NEEDS EXPLANAT ION AND IN CASE THE ASSESSEE CLAIMS THIS TO BE GENUINE LOAN THEN SHRI R AKESH KUMAR JAIN AND THE PRINCIPAL OFFICER OF JAYCO PIPES LTD. MAY BE PRODUC ED FOR VERIFICATION ABOUT THE GENUINENESS OF THIS LOAN. THE ASSESSEE FAILED T O GIVE ANY SATISFACTORY EXPLANATION. THE ABOVE LOAN CREDITORS WERE NOT PROD UCED FOR VERIFICATION. INSTEAD ASSESSEE, MERELY FILED A PHOTOCOPY TITLED A S CONFIRMATION-CUM-NO DUES CERTIFICATE DATED 31.10.2007. BOTH THESE CERTI FICATES HAVE BEEN SIGNED BY SHRI SANTOSH BALA JAIN, ONE AS A DIRECTOR OF M/S . JAYCO PIPES LTD. AND THE OTHER AS AUTHORIZED SIGNATORY FOR AND ON BEHALF OF M/S. JAYCO CLOSURE. THUS, IT IS VERY MUCH APPARENT THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THE IDENTITY, CREDITWORTHINESS OF THE ABOVE LOAN CREDIT ORS AND THE GENUINENESS OF THE LOAN. LEARNED CIT(DR) SUBMITTED THAT THE FACT O F FULL WAIVER AT A SUBSEQUENT DATE AND CREDIT IN THE PARTNERS ON CAPIT AL ACCOUNT GIVES RISE TO THE DOUBT ABOUT THE GENUINENESS OF THESE LOANS. WITHOUT APPRECIATING THESE 17 MATERIAL ASPECTS, LEARNED CIT(APPEALS) HAS DELETED THE ADDITION. LEARNED CIT(APPEALS) HAD GIVEN HIS OWN COLOUR TO THE TRANSA CTION AND HAS EVEN ACCEPTED THE CONTRADICTORY SUBMISSIONS OF THE ASSES SEE BEFORE HIM TO THE LETTER DATED 22.12.2011 FILED BY THE ASSESSEE BEFOR E THE ASSESSING OFFICER. IN THIS REGARD, LEARNED CIT(APPEALS) REFERRED LETTER D ATED 22.12.2011 WRITTEN ON BEHALF OF THE ASSESSEE TO THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS UNDER SEC. 143(2)/153A OF THE ACT MENTI ONING THAT THE FUNDS RECEIVED AMOUNTING TO RS.6,24,94,470 FROM MRS. JAIN A DURING THE FINANCIAL YEAR 2003-04 WAS WRONGLY CREDITED TO S.H. LTD. 18. LEARNED AR ON THE OTHER HAND SUBMITTED THAT BEF ORE THE ASSESSING OFFICER, IT WAS BROUGHT ON RECORD BY THE ASSESSEE O N 14.12.2011 THAT THE MISTAKE OF CREDITING THIS LOAN AMOUNT TAKEN FROM TH E ABOVE TWO PARTIES IN THE ACCOUNT OF S.H. LTD. HAD OCCURRED AND AFTER MAKING THE NECESSARY CORRECTIONS, THIS AMOUNT WAS TRANSFERRED IN THE ACC OUNT OF ABOVE TWO PERSONS ON 01.01.2006 THOUGH THE DETAILS FILED WITH THE RET URN OF INCOME SHOWED CREDIT IN THE ACCOUNT OF PARTNERS SHRI PARVESH JAIN AND SARTHAK JAIN BY AN AMOUNT OF RS.3,86,47,184 AND RS.2,57,64,789 RESPECT IVELY AFTER WAIVER OF THE LOANS. IT WAS POINTED OUT AND EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE LIST OF LOAN CREDITORS FILED WITH THE RETURN OF INCOME FOR THE EARLIER YEARS 18 DID NOT REFLECT LOAN OUTSTANDING IN THE NAME OF THE ABOVE TWO LOAN CREDITORS. IT WAS EXPLAINED THAT IT MIGHT BE SO AT THAT TIME T HIS AMOUNT WAS CREDITED IN THE WRITTEN ACCOUNT. IN THE CONFIRMATION LETTERS FI LED BY THE ASSESSEE, THE CREDITORS HAVE CONFIRMED THAT THERE WAS NO DUES WHA TSOEVER IN ANY MANNER FROM THE ASSESSEE. WITH THIS FURTHER CERTIFICATION THAT OLD RECEIVABLE STAND SETTLED AND ACCOUNTS REMAIN SQUARED UP IN ALL RESPE CT AS ON DATE, HE TRIED TO JUSTIFY FIRST APPELLATE ORDER ON THE ISSUE. HE SUBM ITTED THAT THE LEARNED CIT(APPEALS) HAS DISCUSSED THE ISSUE IN DETAIL AT P AGE NOS. 9 TO 20 OF THE FIRST APPELLATE ORDER AND ON PAGE NOS.21 & 22, HE H AS GIVEN HIS FINDINGS. LEARNED CIT(APPEALS) HAS ALSO CALLED FOR REMAND REP ORT FROM THE ASSESSING OFFICER. 19. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE ASSESSING OFFICER HAD MADE ADDITION IN QUESTION UNDER SEC. 68 OF THE INCOME-TAX ACT, 1961 MAINLY ON THE BASIS THAT HE WA S HAVING DOUBTS ABOUT THE GENUINENESS OF THE TRANSACTION, AS ON THE SAME DATE WHEN THE AMOUNT WAS TRANSFERRED IN THE LEDGER ACCOUNT OF SHRI RAKESH KU MAR (JAYNA PROPRIETARYSHIP FIRM), THIS LIABILITY WAS WRITTEN O FF BY THE ASSESSEE FIRM AND THE AMOUNT WAS CREDITED IN THE ACCOUNT OF PARTNERS IN THE FIRM, SHRI PARVESH JAIN & SARTHAK JAIN AND FURTHER THAT THE LOAN CREDI TORS WERE NOT PRODUCED 19 FOR VERIFICATION. LEARNED ASSESSING OFFICER WAS THU S OF THE VIEW THAT IDENTITY, CREDITWORTHINESS OF THE ABOVE LOAN CREDIT ORS AND THE GENUINENESS OF THE LOAN WERE NOT ESTABLISHED BY THE ASSESSEE. HE A CCORDINGLY ADDED THE AMOUNT OF RS.6,44,11,974 TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH CREDITS UNDER SEC. 68 OF THE ACT. LEARNED ASSE SSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE MADE TO HIM VIDE LETTER DATED 14.12.2011 AND 22.12.2012 AND HE ALLEGED THAT MERE FILING OF THE CONFIRMATION-CUM-NO DUES CERTIFICATE DATED 31.10.20 07 OF THE CREDITORS IS NOT SUFFICIENT. LEARNED CIT(APPEALS) MEETING OUT THE OB JECTIONS RAISED BY THE ASSESSING OFFICER AFTER CALLING THE REMAND REPORT O F THE ASSESSING OFFICER AND DISCUSSING THE ASSESSEE IN DETAIL HAS COME TO T HE FOLLOWING CONCLUSION VIDE PARAGRAPH NO. 9.4 AND 9.5 OF THE FIRST APPELLA TE ORDER, REPRODUCED HEREUNDER FOR A READY REFERENCE: 9.4 M/S. JAYNA CLOSURE PROP. RAKESH KUMAR (RS.6 ,24,94,470) I HAVE GONE THROUGH THE ASSESSMENT ORDER, THE WRITT EN SUBMISSIONS, THE REMAND REPORT AND THE REJOINDER FI LED BY THE APPELLANT ON THE REMAND REPORT AND HAVE PERUSED THE PAPER BOO K FILED BY THE APPELLANT IN SUPPORT OF ITS CONTENTION. ON GOING THROUGH THE ASSESSMENT ORDER, IT IS NOTICE D THAT THE A.O. HAS MADE THE ADDITION OF RS.6,24,94,470 AS UNE XPLAINED CREDIT IN 20 THE YEAR UNDER CONSIDERATION IN THE NAME OF NAYNA C LOSURE PROP. RAKESH KUMAR. THE ALLEGATION OF THE A.O. IS THAT TH E APPELLANT HAS FAILED TO EXPLAIN HE CREDITWORTHINESS, IDENTITY ETC . UNDER SEC. 68 OF THE INCOME-TAX ACT, 1961 AND HENCE THE ADDITION IS TO B E MADE. THE APPELLANT ON THE OTHER HAND HAS FILED EVIDENCES WHI CH SHOWS THAT THERE IS NO ACTUAL CREDIT PER SE, OF THE SAID AMOUNT RECE IVED DURING THE YAER UNDER CONSIDERATION FROM JAYNA CLOSURE PROP. RAKESH KUMAR, BUT THE SAME IS MERE JOURNAL ENTRY PASSED IN ASSESSMENT YEA R 2006-07. FROM THE FACTS AND EVIDENCES AVAILABLE ON RECORD IT IS SEEN THAT THE APPELLANT HAS BEEN REGULARLY DEALING WITH A COM PANY, NAMED SCHENECTADY HERDILLIA LTD. TO WHOM THEY ARE SELLING DYES AND CHEMICALS REGULARLY AND IT HAS A RUNNING ACCOUNT WI TH THE COMPANY. IN SUPPORT OF ITS CONTENTION THE APPELLANT HAS FILED I TS BALANCE SHEET AS ON 31 ST MARCH 2003 ALONG WITH LIST OF THE DEBTORS RS.22,43 ,71,351.91 (PAPER BOOK PAGES 86-101). THIS LIST OF DEBTORS INC LUDES A SUM OF RS.2,24,29,046.71 DUE FROM SCHENECTADY HERDILLIA LT D. THE APPELLANT HAS ALSO FILED COPY OF ACCOUNT OF THE SAID COMPANY STARTING FROM FINANCIAL YEAR 2002-03 TO FINANCIAL YEAR 2006-07. ON GOING THROUGH THE ABOVE DETAILS FILED BY THE APP ELLANT WITH RESPECT TO TRANSACTIONS OF THE APPELLANT WITH SCHEN ECTADY HERDILLIA LTD., FOLLOWING FACTS EMERGE: (I) IN ASSESSMENT YEAR 2004-05 I.E. THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD MADE SALES TO SCHENECTADY HERDILL IA LEARNED. AS PART OF ITS REGULAR BUSINESS ACTIVITY FOR RS.29,67,31,29 1 AND AGAINST WHICH 21 THE APPELLANT RECEIVED RS.28,45,14,154. HOWEVER, IN ASSESSMENT YEAR 2006-07 THE APPELLANT MADE A JOURNAL ENTRY OF RS.6, 24,94,474 COMPRISING OF FOLLOWING CHEQUES WHICH WERE ALREADY SHOWN AS PART OF THE RECEIPTS OF RS.28,45,14,154 IN ASSESSMENT YEAR 2004-05, BY DEBITING THE ACCOUNT OF SCHENECTADY HERDILLIA LTD. AND CREDITING HE ACCOUNT OF SCHENECTADY HERDILLIA LTD. (CURRENT ACCO UNT): S.NO. CHEQUE NO. AMOUNT (RS.) 1 964042 40,74,761 2 966508 59,62,846 3 966706 47,08,804 4 966707 48,52,512 5 966800 71,96,448 6 969635 31,33,305 7 969644 39,00,983 8 970343 51,73,603 9 970630 45,57284 10 971393 61,59,144 11 972163 30,39,525 12 975897 67,35,259 TOTAL 6,24,94,474 (II) IN ASSESSMENT YEAR 2006-07 THE FOLLOWING JOURN AL ENTRY WAS PASSED: ENTRY 1 SCHENECTADY HERDILLIA LTD. A/C (DR.)RS.6,24,94,47 4 TO SCHENECTADY HERDILLIA LTD. CURRENT ACCOUNT A/C (CR.)RS.6,24,94,474 (III) IN ASSESSMENT YEAR 2007-08 THE FOLLOWING JOUR NAL ENTRY WAS PASSED: 22 ENTRY 2 SCHENECTADY HERDILLIA LTD. CURRENT ACCOUNT A/C. (D R.) RS.6,24,94,474 TO JAYNA CLOSURE PROP. RAKESH KUMAR (CR.) RS .6,24,94,494 I HAVE PERUSED THE COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF SCHENECTADY HERDILLIA LTD. FOR THE ASSESSMENT YE AR 2004-05 WHICH ALSO CONFIRMS THAT ALL THESE PAYMENTS COMPRISING OF RS.6,24,94,474 HAVE DULY BEEN DEBITED TO THE APPELLANTS ACCOUNT. I FIND THAT THERE IS NO ACTUAL CREDIT FROM JAYNA CLOSURE PROP. RAKESH KU MAR AMOUNTING TO RS.6,24,94,474 IN THE BOOKS OF THE APPELLANT DUR ING THE YEAR UNDER CONSIDERATION. THEREFORE, WITH THESE FACTS AVAILABL E, I FAIL TO UNDERSTAND HOW IN THE YEAR UNDER CONSIDERATION THE A.O. CAN COME TO THE CONCLUSION THAT THE APPELLANT HAS RECEIVED RS.6 ,24,94,494 FROM JAYNA CLOSURE PROP. RAKESH KUMAR WHEN ACTUALLY NO S UCH AMOUNT HAS BEEN RECEIVED FROM IT. THE ACCOUNT STATEMENTS SUBMITTED BY THE APPELLANT S UPPORT THE ABOVE FACTS EXPLAINED BY THE APPELLANT. THE IDENTIT Y AND GENUINENESS OF THE TRANSACTIONS WITH SCHENECTADY HERDILLIA LTD. HAS NOT BEEN QUESTIONED BY THE A.O. ALSO. HENCE IN VIEW OF THESE FACTS THE CONTENTION OF THE APPELLANT IS CORRECT THAT NO ADDI TION CAN BE MADE ON ACCOUNT OF UNEXPLAINED CREDIT OF RS.6,24,94,474 AS HAS BEEN MADE BY THE A.O. IN THE YEAR UNDER CONSIDERATION. IN THE REMAND REPORT THE A.O. HAS RAISED THE ISSUE THAT THE APPELLANT HAS NOT BEEN ABLE TO ESTABLISH THAT HOW A N AMOUNT DUE TO A LIMITED COMPANY BEING A BUSINESS ASSOCIATE OF THE A PPELLANT HAS BEEN CONVERTED IN THE NAME OF JAYNA CLOSURE. THE A.O. HA S FURTHER STATED 23 THAT THE APPELLANT HAS FAILED TO PROVIDE ANY REASON AND THE DOCUMENTS FOR TRANSFERRING THIS AMOUNT IN THE NAME OF JAYNA C LOSURE. IN MY HUMBLE VIEW, THIS CONTENTION OF THE A.O. CANNOT BE THE SOLE GROUND FOR JUSTIFYING AN ADDITION UNDER SEC. 68 OF THE INC OME-TAX ACT, 1961 AS UNEXPLAINED CREDIT UNLESS IT IS BACKED BY ANY CREDI BLE EVIDENCE THAT THE SAID AMOUNT HAS COME FROM THE COFFERS OF M/S. J AYNA CLOSURES. THE APPELLANT HAS FILED COPY OF THE ACCOUNT AND THE BANK STATEMENT AND ALL RELEVANT SUPPORTING DOCUMENTS IN RESPECT OF ITS TRANSACTIONS WITH SCHENECTADY HERDILLIA LTD. AND DURING THE REMA ND PROCEEDINGS AND THE A.O. HAS NOT BEEN ABLE TO DISPUTE THESE TRA NSACTIONS AND THE ENTRIES AS STATED IN THE STATEMENT OF ACCOUNT, SALE S INVOICES, BANK STATEMENT ETC. IN MY VIEW, APPARENTLY THE ABOVE STATED ACCOUNTING ENTRIES HAVE BEEN RESORTED TO, AS A SORT OF WINDOW DRESSING SO A S TO PUT ROSY PICTURE ITS FINANCIAL POSITION, BY INCREASING THE DEBTORS O N ONE HAND AND CORRESPONDINGLY THE CAPITAL ON THE OTHER HAND, PROB ABLY TO OBTAIN ENHANCED CREDIT FACILITIES. THERE IS NO ACTUAL CRED IT IN THE BOOKS OF THE APPELLANT ON ACCOUNT JAYNA CLOSURE PROP. RAKESH KUM AR AS STATED BY THE A.O., WHEREAS THE SAME WAS ACCOUNTING ADJUSTMEN T PASSED IN THE ACCOUNT OF SCHENECTADY HERDILLIA LTD. 9.5 JAYCO PIPES LTD. (RS.19,17,500 ) I HAVE GONE THROUGH THE SUBMISSION MADE BY THE APPE LLANT IN THIS REGARD. ON GOING THROUGH THE SAME I NOTICE THA T THIS AMOUNT WAS OUTSTANDING IN THE ASSESSMENT YEAR 2001-02 ALSO. TH IS IS A CARRIED 24 FORWARD BALANCE IN THE CURRENT YEAR FROM THE LAST M ANY YEARS. THE ASSESSMENT FOR THE ASSESSMENT YEAR 2001-02 WAS COMP LETED UNDER SEC. 143(3) OF THE INCOME-TAX ACT, 1961. THIS BALANCE IS A CONTINUING BALANCE AND THE APPELLANT HAS ALSO FILED A CONFIRMA TION FROM JAYCO PIPES LTD. PLACED IN PAPER BOOK PAGE 245 WHICH GIVE S COMPLETE NAME AND ADDRESS AND TELEPHONE NUMBER OF THE CREDITOR. T HE A.O. HAS MADE THIS ADDITION EVEN WITHOUT VERIFICATION OF THE FACT S BY WRONGLY ASSUMING TO BE A CREDIT OF THE YEAR CONSIDERATION. IN THE REMAND REPORT THE A.O. HAS NOT BEEN ABLE TO REBUT AND/OR CONTROVE RT THE SUBMISSION MADE BY THE APPELLANT AND THE EVIDENCES FILED IN SU PPORT THEREOF. ACCORDINGLY, SINCE IN THE YEAR UNDER CONSIDERATION NO CREDIT HAVE BEEN RECEIVED FROM JAYCO PIPES, THEREFORE, IN ANY CASE N O ADDITION CAN BE MADE IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.19,17,500. 20. FROM THE PERUSAL OF THE FIRST APPELLATE ORDER O N THE ISSUE, WE NOTE THAT THE FINDINGS OF THE LEARNED CIT(APPEALS) ARE SUPPOR TED WITH THE EVIDENCE ALSO FILED BY THE ASSESSEE BEFORE THE TRIBUNAL IN T HE SHAPE OF PAPER BOOK. BASED ON THESE DOCUMENTS, THE LEARNED CIT(APPEALS) HAS COME TO THIS CONCLUSION THAT THERE IS NO ACTUAL CREDIT IN THE BO OKS OF THE ASSESSEE ON ACCOUNT OF M/S. JAYNA CLOSURE, PROPRIETOR RAKESH KU MAR AS STATED BY THE ASSESSING OFFICER WHEREAS THE SAME WAS ACCOUNTING A DJUSTMENT PASSED IN THE ACCOUNTS OF S.H. LTD. AND THAT SINCE THE IDENTI TY OF S.H. LTD. IS NOT IN DISPUTE, THE SOURCE OF PAYMENT IS ALSO NOT IN DIS PUTE AS WELL AS THE TRANSACTION ENTERED INTO BY THE ASSESSEE WITH S.H. LTD. ARE ALSO NOT IN 25 DISPUTE. THESE MATERIAL FINDING OF THE LEARNED CIT (APPEALS) HAVE NOT BEEN SUCCESSFULLY REBUTTED BY THE LE ARNED D.R. WE ARE THUS HAVING NO REASON TO INTERFERE WITH THE FIRST APPELL ATE ORDER WHICH, IN OUR VIEW, IS A COMPREHENSIVE AND REASONED ORDER. WE, TH US, UPHOLD THE ACTION OF THE LEARNED CIT(APPEALS) IN DELETING THE ADDITION O F RS.6,24,94,474 MADE BY THE ASSESSING OFFICER UNDER SEC. 68 OF THE INCOM E-TAX ACT, 1961 IN THIS REGARD AS JUSTIFIED. 21. THE REVENUE HAS ALSO NOT BEEN ABLE TO REBUT TH E FINDING OF THE LEARNED CIT(APPEALS) THAT THE AMOUNT OF RS.19,17,500 WAS OU TSTANDING IN THE ASSESSMENT YEAR 2001-02 ALSO, WHICH WAS A CARRIED F ORWARD BALANCE IN THE CURRENT YEAR FROM THE LAST MANY YEARS. THE ASSESSME NT FOR THE ASSESSMENT YEAR 2001-02 WAS COMPLETED UNDER SEC. 143(3) OF THE ACT. THE BALANCE WAS A CONTINUING BALANCE AND THE ASSESSEE HAD ALSO FILED CONFIRMATION FROM M/S. JAYCO PIPE LTD. GIVING COMPLETE NAME AND ADDRESS AN D TELEPHONE NUMBERS OF THE CREDITORS. IN THE REMAND REPORT ALSO, THE AS SESSING OFFICER WAS NOT ABLE TO REBUT OR CONTROVERT THE SUBMISSIONS MADE BY THE ASSESSEE AND THE EVIDENCE FILED IN SUPPORT THEREOF. WE ARE THUS OF T HE VIEW THAT LEARNED CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION OF RS .19,17,500 MADE BY THE ASSESSING OFFICER UNDER SEC. 68 OF THE INCOME-TAX A CT, 1961. THE SAME IS UPHELD. THE GROUND NO.1 IS ACCORDINGLY REJECTED. 26 22. IN GROUND NO.2 : THE FACTS IN BRIEF THAT DURING THE YEAR, THE ASSE SSEE RAISED ANOTHER LOAN OF RS.2,87,10,000 FROM QUASOR I NDIA FINCAP PVT. LTD. (IN SHORT QIFP LTD.) 419-INTERNATIONAL TRADE TOWER, NEH RU PLACE, NEW DELHI. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE OWNER OF THE SAID CREDITOR COMPANY SHRI UDAY DUTT ON 21.10.2011. THE ASSESSEE COULD NOT PRODUCE HIM. THE ASSESSING OFFICER CONDUCTED INQUIR Y THROUGH THE INSPECTOR OF THE CIRCLE FROM THE GIVEN ADDRESS OF THE COMPANY , WHO REPORTED THAT THIS COMPANY WAS PRESENTLY NOT RUNNING FROM THE SAID ADD RESS. THE ASSESSEE WAS AGAIN GIVEN OPPORTUNITY TO PRODUCE SHRI UDAY DUTT F OR VERIFICATION BUT THE ASSESSEE AGAIN FAILED TO PRODUCE HIM. ON 12.12.2011 , THE ASSESSEE STATED THAT THEY WANT TO PRODUCE SHRI UDAI DUTT FOR VERIFICATIO N ON 18.12.2011 BUT THE ASSESSEE AGAIN FAILED TO PRODUCE HIM. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE THE LOAN CREDITOR FO R VERIFICATION ABOUT THE LOAN AND THE WAIVER OF SUBSTANTIAL PORTION OF THE L OAN. HE ACCORDINGLY ADDED THE AMOUNT OF RS.2,87,10,000 AND THE TOTAL INCOME O F THE ASSESSEE AS UNEXPLAINED CASH CREDITS UNDER SEC. 68 OF THE INCOM E-TAX ACT, 1961 ON THE BASIS THAT THE ASSESSEE WAS NOT ABLE TO PROVE THE I DENTITY, CREDITWORTHINESS OF THE ABOVE LOAN CREDITOR AND THE GENUINENESS OF THE LOAN. LEARNED CIT(APPEALS) HAS, HOWEVER, DELETED THE ADDITION. 27 23. IN SUPPORT OF THE GROUND, LEARNED DR HAS BASICA LLY PLACED RELIANCE ON THE ASSESSMENT ORDER. IN THIS REGARD, HE REFERRED T HE CONTENTS OF PAGE NO.3 OF THE ASSESSMENT ORDER. HE SUBMITTED THAT THOUGH THE ASSESSEE WAS IN TOUCH WITH THE CREDITOR BUT STILL THE CREDITOR WAS NOT PR ODUCED BEFORE THE ASSESSING OFFICER FOR VERIFICATION IDENTITY WAS THUS NOT ESTA BLISHED BY THE ASSESSEE NOR ANY RELEVANT EVIDENCE WAS FILED BY THE ASSESSEE IN SUPPORT OF THE GENUINENESS OF THE CLAIM AND FURTHER THAT SUBSTANTI AL CREDIT HAS BEEN WRITTEN OFF WHICH ALSO RAISED DOUBTS ABOUT THE GENUINENESS OF THE TRANSACTION. IN THIS REGARD, HE PLACED RELIANCE ON THE DECISION OF HON'B LE DELHI HIGH COURT IN THE CASE OF NAF ACADEMY PVT. LTD. 2013 , TIOL.1017-XE-D EL-IT. 24. LEARNED AR ON THE OTHER HAND PLACED RELIANCE ON THE FIRST APPELLATE ORDER. HE ALSO REFERRED COPIES OF SEVERAL DOCUMENTS FILED IN THE SHAPE OF PAPER BOOK ON BEHALF OF THE ASSESSEE IN SUPPORT OF ITS CLAIM BEFORE THE TRIBUNAL AS WELL. HE ALSO REFERRED THE FOLLOWING CA SE LAWS RELIED UPON BY HIM; A) ADDL. CIT BIHAR VS. HANUMAN AGARWAL (1985) 151 I TR 151 (PATNA); B) JALAN TIMBER VS. CIT (1997) 223 ITR 11 (GAUHATI HIGH COURT); C) NEERU DEVI KOTHARI VS. ITO (2001) 116 TAXMAN 224 (JODHPUR); 28 D) SAROGI CREDIT CORPORATION VS. CIT (1976) 103 ITR 344 (PATNA HC); E) NEMI CHAND KOTHARI VS. CIT (2004) 264 ITR 254 (G AU.) F) S. HASTIMAL VS. CIT 49 ITR 272; G) CIT VS. K.S. KANAN KUNHI 87 ITR 3958; H) CIT VS. PITHAMPUR CONZIMA (P) LTD. (2000) 244 IT R 442 (MP HIGH COURT); I) TOLARAM DAGAS CASE (1996) 59 ITR 632 (ASSAM); & J) CIT VS. MEHROTRA BROTHERS 270 ITR 157 (MP). 25. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW, WE FIND THAT THE REVENUE HAS NOT BEEN ABLE TO REBUT SOME MATERI AL FINDING OF FACTS BY THE LEARNED CIT(APPEALS) BEFORE THE ITAT. LEARNED CIT(A PPEALS) WHILE GIVING RELIEF TO THE ASSESSEE HAS NOTED THAT BALANCE SHEET OF QUASAR INDIA FINCAP PVT. LTD. I.E. THE CREDITOR (WHICH WAS EARLIER KNOW N AS ANITA LEASING PVT. LTD. ) FOR THE YEAR 31.3.2002, 2003, 2004, 2005 & 2 006 SHOWS THE NET WORTH OF THE CREDITOR AS ON 31.3.2004 WAS MORE THAN RS. 1 0 CRORES. LEARNED CIT(APPEALS) HAS FURTHER NOTED THAT THE AMOUNT STAN DING IN THE NAME OF THE ASSESSEE FIRM WAS BEING SHOWN IN THE BALANCE SHEET OF EACH OF THE YEAR OF THE CREDITOR COMPANY. THE CREDITOR HAS BEEN FILING ITS ITR (INCOME-TAX RETURN) AND THESE RETURNS HAVE BEEN ACCEPTED. LEARNED CIT(A PPEALS) ON GOING 29 THROUGH THE ACCOUNT OF THE CREDITOR HAS ALSO NOTICE D THAT THE SAID ACCOUNT WAS A RUNNING ACCOUNT SINCE EARLIER YEARS. IN THE PRECE DING YEAR IN THE NAME OF THE CREDITOR WAS RS.4,97,43,593. THIS AMOUNT GOT IN CREASED TO RS.7,95,572 IN THE YEAR UNDER CONSIDERATION. THIS INCLUDES INTE REST OF RS.48,45,445 CREDITED DURING THE YEAR AND TAXED DEDUCTED THERETO WAS RS.9,43,316. THE NET ADDITION DURING THE YEAR WAS THUS RS.2,87,10,00 0 ADDED BY THE ASSESSING OFFICER AS AN UNEXPLAINED CREDITS UNDER SEC. 68 OF THE INCOME-TAX ACT, 1961. FOR READY REFERENCE, PARA NO. 9.6 OF THE FIRST APPE LLATE ORDER IS BEING REPRODUCED HEREUNDER: 9.6 QUASAR INDIA FINCAP PVT. LTD. (RS.2,87,10,000 ) I HAVE GONE THROUGH SUBMISSION MADE BY THE APPELLA NT AND ALSO THE EVIDENCE FILED IN SUPPORT THEREOF. I HAVE PERUS ED THE ASSESSMENT ORDER AND THE REMAND REPORT SUBMITTED BY THE A.O. O N GOING THROUGH THE COPY OF ACCOUNT OF QUASAR INDIA FINCAP PVT. LTD ., I NOTICE THAT THIS ACCOUNT IS A RUNNING ACCOUNT SINCE EARLIER YEAR. TH E NAME OF THE CREDITOR EARLIER WAS ANILA LEASING PVT. LTD. AND TH E BALANCE AS ON 31 ST MARCH, 2003 I.E. IN PRECEDING YEAR IN THE NAME OF T HIS COMPANY WAS RS.4,97,43,,593. THIS AMOUNT GOT INCREASED OF RS.48 ,45,445 CREDITED DURING THE YEAR AND TAX DEDUCTED THEREON WAS RS.9.4 3,316. THE NET ADDITION DURING THE YEAR THUS WAS RS.2,87,10,000 WH ICH HAS BEEN ADDED BACK BY THE A.O. AS UNEXPLAINED CREDIT BY INV OKING PROVISION OF SEC. 68 OF THE ACT. 30 I HAVE ALSO PERUSED THE BALANCE SHEET OF THE QUASSA R INDIA FINCAP PVT. LTD. FOR THE YEAR 31 ST MARCH, 2002, 2003, 2004, 2005 AND 2006 AND IT IS SEEN THAT THE NET WORTH OF THE QUASA R INDIA FINCAP PVT. LTD. AS ON 31 ST MARCH 2004 WAS MORE THAN RS.10 CRORES. THE AMOUNT STANDING IN THE NAME OF THE APPELLANT FIRM IS BEING SHOWN IN THE BALANCE SHEET OF EACH OF THE YEAR OF THE CREDITOR C OMPANY. FURTHER QUASAR INDIA FINCAP P. LTD. HAS BEEN FILING ITS INC OME-TAX RETURN AND THESE RETURNS HAVE BEEN ACCEPTED AND THE ASSESSMENT ORDERS ARE PLACED IN THE PAPER BOOK. NO ADVERSE INFERENCE HAS BEEN DR AWN ABOUT THESE TRANSACTIONS AND THE FINANCIALS OF THE CREDITOR COM PANY BY THE TAX AUTHORITIES. THUS, IT CANNOT BE SAID THAT THE CREDI TOR IS NOT IN EXISTENCE. THE APPELLANT FIRM HAS FILED SUFFICIENT EVIDENCES I N SUPPORT OF ITS CONTENTION REGARDING THE CREDIT WORTHINESS AND GENU INENESS OF THE TRANSACTION. THE PAYMENTS HAVE BEEN RECEIVED THROUG H BANKING CHANNEL AND THE BANK STATEMENT FILED IN SUPPORT ALS O IN SUPPORT OF THEN CONTENTION OF THE APPELLANT. THERE IS NOTHING INCRIMINATION MATERIAL BROUGHT ON RECORD BY THE ASSESSING OFFICER. IT IS ALSO NOT A CASE OF THE A.O. THAT ANYTHING ADVERSE OR INCRIMINATING MATERIAL WAS FOUND REGARDI NG THIS CREDIT DURING THE COURSE OF THE SEARCH. THERE IS NO DENIAL FROM ANY QUARTER NOR ANY ADVERSE STATEMENT FROM ANY PERSON ABOUT THE SE CREDITS. THE APPELLANT FIRM HAS DISCHARGED ITS ONUS BY FILING NE CESSARY EVIDENCES. 31 THE A.O. IN THE REMAND REPORT HAS NOT REBUTTED OR C ONTRADICTED ANY OF THESE EVIDENCES SUBMITTED BY THE APPELLANT. THE DOCUMENTS AVAILABLE ON RECORD VIZ. BALANCE SHEET, INCOME-TAX ASSESSMENT ORDER ESTABLISHES THE IDENTITY CREDITWORTHINESS AND GENUI NENESS OF THE TRANSACTION AND AS SUCH I HOLD THAT THE A.OS CONTE NTION THAT THE ASSESSEE HAS NOT DISCHARGED THE BURDEN PLACED UPON HIM UNDER SEC. 68 OF THE ACT IS NOT CORRECT. HENCE, IN VIEW OF THIS T HE ADDITION OF RS.2,87,10,000 MADE BY THE A.O. DESERVED TO BE DELE TED. 26. ON THE BASIS OF ABOVE UNDISPUTED MATERIAL FACTS NOTED BY THE LEARNED CIT(APPEALS), WE ARE OF THE VIEW THAT THE LEARNED C IT(APPEALS) HAS RIGHTLY COME TO THE CONCLUSION THAT THE CREDITOR WAS VERY M UCH IN EXISTENCE AND THE ASSESSEE HAD FILED SUFFICIENT EVIDENCE TO SUPPORT I TS CONTENTION REGARDING THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION AS THE PAYMENTS HAVE BEEN RECEIVED THROUGH BANKING CHANNEL AND THE BANK STATEMENT FILED ALSO SUPPORTS THE CASE OF THE ASSESSEE. IN VIEW OF THESE UNREBUTTED FINDINGS OF THE LEARNED CIT(APPEALS), WE ARE OF THE VIEW THAT THE L EARNED CIT(APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,87,1 0,000 IN QUESTION MADE BY THE ASSESSING OFFICER UNDER SEC. 68 OF THE INCOME-T AX ACT, 1961. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. GROU ND NO.2 IS ACCORDINGLY REJECTED. 27. IN THE RESULT, THE APPEAL IS DISMISSED. 32 28. CONSEQUENTLY, THE CROSS-OBJECTION PREFERRED BY THE ASSESSEE IS ALLOWED AND THE APPEAL PREFERRED BY THE REVENUE IS DISMISS ED. 29. ORDER PRONOUNCED IN THE OPEN COURT ON 07.08.20 14. SD/- SD/- ( T.S. KAPOOR ) ( I.C. SUDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07/08/2014 MOHAN LAL COPY FORWARDED TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR:ITAT ASSISTANT REGISTRAR