THE ACIT, 1(1), Indore V. M/S. ADMANUM FINANCE LIMITED, Indore

ITA 807/IND/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5892 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 06-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 24-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHANEY; R A VERMA DRS
• Keywords: Reopening of assessment; Recovery proceedings; Depreciation; Income from undisclosed sources; Search and seizure; Opportunity of being heard; Earning of tax free income; Period of limitation; Source of fund; Question of law; Tangible material; Fair market value; Bad and doubtful debts; Difference of opinion; Accommodation entries; Non compliance; Time period of passing order; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 133A; 14A; 115JB; 133(6); 139(5); 131; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NOS. 202 & 294/IND/2012 A.YS. : 2003-04 & 2008-09 ACIT, 5(1), INDORE. M/S.AGRAWAL COAL CORPORATION PRIVATE LIMITED, VS INDORE APPELLANT RESPONDENT C.O.NO.63/IND/2012 (ARISING OUT OF I.T.A.NO. 202/IND/2012) A.Y. : 2003-04. M/S.AGRAWAL COAL CORPORATION PRIVATE LIMITED, ACIT, 5(1), INDORE. INDORE. VS CROSS OBJECTOR RESPONDENT PAN NO. AACCA8468R I.T.A.NOS. 389/IND/2012, 807 & 808/IND/2014 A.YS. :2008-09, 2010-11 & 2011-12. ACIT, 1(1), INDORE. M/S.ADMANUM FINANCE LIMITED, INDORE VS APPELLANT RESPONDENT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 2 2 PAN NO.AABCA4980F DEPARTMENT BY : SHRI RAJEEV VARSHANEY AND SHRI R. A. VERMA, DRS ASSESSEE BY : SHRI AJAY VOHRA, ADVOCATE SHRI AJAY TULSIYAN, SHRI ROHIT JAIN AND SHRI KAPIL SHAH, CAS O R D E R PER D.T.GARASIA, J.M. ALL THESE APPEALS PERTAIN TO THE SAME GROUP OF ASSE SSEE. SINCE COMMON ISSUES ARE INVOLVED, THEY ARE ALL HEAR D TOGETHER AND DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. DURING THE COURSE OF HEARING, BOTH THE PARTIES HAD AGREED THAT MOST OF THE GROUNDS WILL BE COVERED IF WE DECIDE APPEAL NO. 294/IND/2012. THEREFORE, FIRST WE WILL DEC IDE DEPARTMENTAL APPEAL NO.294/IND/2012. 3. THE SHORT FACTS OF THE CASE ARE AS UNDER :- 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF COAL TRADING AND POWER GENERATION. RETURN OF INCOME DECLARING TOTAL INCOME WAS FILED DECLARING TOTAL INCOME OF RS . DATE OF HEARING : 06.04.2016 DATE OF PRONOUNCEMENT : 27.06. 2016 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 3 3 43,92,06,790/-( BOOK PROFIT U/S 115JB AT RS.43,89,8 6,856/-). THE AO HAS NOTED THE DETAILS OF ISSUE OF STATUTORY NOTICES AND BROAD COMPLIANCES MADE BY THE ASSESSEE ON PAGE 1 OF THE ASSESSMENT ORDER. THE DEPARTMENT HAS RAISED GROUND NO. 2 TO 4 WHICH RELATE TO ADDITION OF LOAN TAKEN FROM 12 COM PANIES WHICH ARE KOLKATA BASED AGGREGATING TO RS. 6,69,00,0 00/- AND FURTHER DISALLOWANCE OF INTEREST PAID ON THESE LOAN S AT RS. 1,03,20,567/- AS PER DETAILS GIVEN BELOW : S.NO. NAME AND ADDRESS OF THE PARTIES OPENING BALANCE TAKEN DURING THE YEAR REPAID DURING THE YEAR INTEREST PAID 1. AEREO DEALCOMM PVT.LTD. 98,73,663 3,26,00,000 42,93,663 33,04,583 2. CHAMAK TREXIM PVT.LTD. 3,91,86,415 25,00,000 78,86,415 59,19,345 3. PANCHANAN VANIJYA PVT.LTD. - 35,00,000 - 25,615 4. KAMALNAYAN COMMERCIAL PVT.LTD. - 15,.00,000 - 7,992 5. REWARD CONSULTANTS PVT.LTD. 16,39,608 12,00,000 1,39,608 3,76,804 6. KHATU VANIJAY PVT.LTD. - 50,00,000 - 34,631 7. PUSHPAK TRADING & CONSULTANCY PVT.LTD. - 50,00,000 - 2,41,803 8. SAVERA DISTRIBUTION PVT.LTD. - 50,00,000 - 3,10,656 9. RANCHHOD AGENCIES PVT.LTD. - 14,00,000 - 7,746 10. PRATHMESH VANIJYA PVT.LTD. - 20,00,000 - 21,721 11. LAMBODHAR BARTER PVT.LTD. - 47,00,000 - 37,909 12. PARADISE GARMENTS P.LTD. - 25,00,000 - 31,762 TOTAL 6,69,00,000 1,03,20,567 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 4 4 THE AO ISSUED NOTICE U/S 133(6) TO SUCH KOLKATA BAS ED COMPANIES ON THE ADDRESSES GIVEN BY ASSESSEE COMPAN Y AND FURTHER DEPUTED TWO INSPECTORS ATTACHED TO HIS RANGE TO MAKE ENQUIRIES AND ALSO GOT FURTHER ENQUIRIES MADE WITH T HE INVESTIGATION WING AT KOLKATA AND FOR WHICH COMMISSI ONS U/S 131(D) WERE ISSUED. THE AO HAS THEN INCORPORATED THE DETAILS OF ENQUIRY REPORT SUBMITTED BY THE INSPECTO RS IN RESPECT OF 12 COMPANIES AS PER PARA 2.6 OF ASSESSME NT ORDER ON PAGE 3 TO 7. THERE AFTER THE AO HAS REPROD UCED CONTENTS OF COMMISSION ISSUED U/S 131 (D) IN THE CASE OF THE APPELLANT AND ALSO IN OTHER CASES WHICH WERE SIMULTANEOUSLY BEING EXAMINED BY HIM ON PAGE 7 OF T HE ASSESSMENT ORDER ABSTRACTED HERE UNDER: 'ON THE PERUSAL OF THE CASE RECORDS DURING ASSESSMENT PROCEEDINGS OF THE COMPANIES FOR A. YR. 2008-09 MENTIONED AS UNDER, IT IS OBSERVED THAT HEAVY AMOUNTS HAVE BEEN REFLECTED IN THEIR BALANCE SHEETS TOWARDS SHARE APPLICATION MONEY RECEIVED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 5 5 THESE NAMES ARE MENTIONED IN THE FIVE LISTS ENCLOSE D WITH THE LETTER AS ANNEXURE A TO E. THE NOTICES ISSUED TO THE PERSONS/COMPANIES APPLYING FOR SHARES OF THE COMPANIES AS MENTIONED I N COLUMN 3 ABOVE, UNDER SECTION 133(6) OF THE ACT H AVE BEEN RETURNED BY THE POSTAL AUTHORITIES, GENERALLY WITH COMMENTS AS 'REFUSED/ NO SUCH BUILDING NO., HENCE RETURNED TO SENDER/NOT KNOWN', ETC. IN THIS BACKDROP, IT IS REQUESTED TO ISSUE SUMMONS U/S L31 TO THE SAID PERSONS/ COMPANIES, AND ENQUIRE ; RECORD THEIR STATEMENTS & SUBMIT A REPORT IN THIS MATTER AT THE EARLIEST, THE MATTER BEING GETTING BARRED BY LIMITATION OF TIME ON 31.12.2010. BESIDES SEEKING OTHER NECESSARY RELEVANT INFORMATION, THESE PERSONS MAY BE PARTICULARLY ASKE D REGARDING- 1 COPY OF BANK ACCOUNTS. 2. COPY OF TAX AUDIT REPORTS, OF LAST THREE YEARS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 6 6 3. NO. OF SHARES APPLIED FOR, AMOUNT PAID AS SHARE APPLICATION MONEY, MODE OF PAYMENT, ETC.' THIS LETTER MAY BE TREATED AS COMMISSION ISSUED U/S 131(L)(D) OF THE INCOME TAX ACT, 1961. THE AO HAS THEN REPRODUCED REPORT FURNISHED BY DDIT , KOLKATA, ON PAGE 8 OF THE ASSESSMENT ORDER: 'SUMMON U/S 131 WERE ISSUED TO ALL THE COMPANIES AS MENTIONED IN ANNEXURE 'A' TO 'F' IN THE CASE OF KETI CONSTRUCTIONS (INDIA) LIMITED, AGRAWAL TRANSPORT CORPORATIONS P LTD, ADMANUM FINANCE LTD, EAGLE FUEL P LTD, AGRAWAL COAL CORPORATION P. LTD, SWASTI K COAL CORPORATION P LTD FOR FINANCIAL YEAR 2007 -08 ASKING FOR. 1. COPY OF BALANCE SHEET. 2. TAX AUDIT REPORT 3. BANK STATEMENT. 4. PERSONAL APPEARANCE. AND THE CASE WAS FIXED FOR HEARING ON 15.12.2010 IN ALL OF THE CASES. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 7 7 OUT OF THEM FOLLOWING COMPANIES HAS MADE PARTLY COMPLIANCE SUMMON ISSUED U/S 131 OF THE INCOME-TAX ACT, 1961, NAMELY. 1. MIDDLETON GOODS PRIVATE LIMITED 2. AEREO DEALCOM PRIVATE LIMITED 3. CHAMAK TREXIM PRIVATE LIMITED 4. PACEMAN TRADERS PRIVATE LIMITED FURTHER, FOLLOWING COMPANIES WERE MERGED WITH MIDDLETON GOODS P. LTD, NAMELY , 1. LAMBODAR BARTEK P.LTD. 2. PRATHMESH VANIJAY P LTD. 3. KHANTU VANIJYA P LTD. 4. KAMAL NAYAN COMMERECIAL P LTD. 5. PANCHANANVANIJAY P LTD. 6. RANCHHOD AGANCIES P LTD ABOVE COMPANIES (INCLUDING MERGED COMPANIES) HAVE SUBMITTED:- 1. COPY OF AUDITED ANNUAL ACCOUNTS. 2. PHOTOCOPY OF BANK STATEMENTS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 8 8 3. CONFIRMATION OF ACCOUNT. NONE OF THE DIRECTORS HAS MADE PERSONAL APPEARANCE; HENCE, IDENTITY AS WELL AS GENUINENESS OF ALL THE ABOVE MENTIONED COMPANIES COULD NOT BE ASCERTAINED. ALL OF THE ABOVE MENTIONED COMPANIES ARE INVESTMENT COMPANY AND THEY HAD NOT SHOWN VERY MUCH PROFIT IN THE FINANCIAL UNDER REVIEW. INSPITE OF THAT THEY HAD ISSUED SHARE AT A VERY HIGH PREMIUM AND SHARES WERE TO DIFFERENT COMPANIES AND ALL THES E COMPANIES WERE INCORPORATED RECENTLY. AS A RESULT, CREDITWORTHINESS OF THESE COMPANIES COULD NOT BE ASCERTAINED. REST OF THE COMPANIES HAS NOT YET MADE ANY COMPLIANCE HENCE, UNDERSIGNED CANNOT ASCERTAIN THE IDENTITY, GENUINENESS & CREDITWORTHINESS OF THESE COMPANIES. FURTHERMORE YOU ARE KINDLY REQUESTED THAT DEPUTE ANY INSPECTOR, SO THAT THEY CAN COLLECT ALL DETAILS WHICH WAS FURNISHED BY THE ASSESSEE. THE AO ALSO DEPUTED TWO INSPECTORS ATTACHED TO HIS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 9 9 RANGE AGAIN FOR FURTHER ENQUIRY ON 16.12.2010 IN CONTINUATION OF THEIR FIRST VISIT ON 3.12.2010 AND HAS REPRODUCED THE SECOND REPORT SUBMITTED BY IT INSPECTORS DATED 23.12.2010. THE AO, THEREAFTER, HAS DRAWN CONCLUSION FROM SUCH ENQUIRY REPORT IN PARA 2.11 TO 2.12 HEREUNDER: 2.11 A PERUSAL OF HUGE INFLOW-OUTFLOW OF FUND WITHOUT ANY BUSINESS RATIONAL IN THE ACCOUNTS OF TH E COMPANIES (CLAIMED SHARE APPLICANT) CLEARLY LEAD TO THE CONCLUSION THAT SUCH COMPANY WAS BEING USED AS CONDUIT FOR FLOATING OF UNACCOUNTED FUNDS AND MERE EXISTENCE ON PAPER AND FILING OF RETURN DO NOT ESTABLISH THAT A GENUINE COMPANY ENGAGED IN THE BUSINESS AS CLAIMED WAS IN EXISTENCE. FURTHER STILL , IN CASE OF ENOUGH MATERIAL ON RECORD TO ESTABLISH THAT IT WAS NOT A GENUINE EXISTING COMPANY. 2.12 FURTHER IT WAS NOTED FROM THE CONFIRMATION PRODUCED BY ASSESSEE THAT ONE SHRI RAMCHANDRA KEDIA HAS SIGNED THE CONFIRMATION FOR M/S. CHAMAK TREXIM P. LTD, KOLKATA. DURING THE ENQUIRY CONDUCTE D BY THE INSPECTORS, THEY VISITED THE ADDRESS OF THE CLAIMED LENDER OF KOLKATA WHERE THEY FOUND ONE SHRI I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 10 10 RAVIN UMRETIYA (WHO WAS WORKING AS ACCOUNTANT SINCE LAST THREE MONTHS ONLY) AND WHOSE STATEMENT WAS TAKEN. THE LETTER ISSUED U/S 133(6) TO M/S.C HAMAK TREXIM P. LTD., KOLKATA. IN REPLY CONFIRMATION WAS RECEIVED WHICH WAS SIGNED BY SHRI RAVIN UMRETIYA (WHO WAS WORKING AS ACCOUNTANT SINCE LAST THREE MONTHS ONLY). FURTHER DURING THE ENQUIRY CONDUCTED BY INSPECTORS, IT WAS ALSO NOTICED IN OTHER GROUP CASES CHAT SHRI RAMCHANDRA KEDIA (WHO SIGNED THE CONFIRMATION PRODUCED BY ASSESSEE ON HEARING DATED 28.12.2010) M/S. CHAMAK TREXIM P. LTD., THEY CLAIMED CREDITOR IN THIS CASE. 2.6 THE AO ACCORDINGLY CONFRONTED THE APPELLANT WITH THE FACTS COLLECTED TO ESTABLISH THREE INGREDIENTS AS PER REQUIREMENT OF SECTION 68 FOR TH E AFORESAID 12 CALCUTTA BASED COMPANIES AND HAS REPRODUCED THE DETAILED REPLY SUBMITTED BY APPELLANT IN PARA 2. 14 RUNNING FROM PAGE 10 TO 24 OF ASSESSMENT ORDER. 2.7 THEREAFTER THE AO HAS DISCUSSED THE LEGAL ASPECTS PERTAINING TO DISCHARGE OF ONUS U/S 68 UNDER THE HEADING ,; DEPARTMENT'S SIDE DISCUSSION OF CASE LAWS' FROM PAGE 24 TO 35 AND HAS FINALLY SUMMED UP IN PARA 3.18 AS UNDER: I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 11 11 3.18 THU S THE ABOVE DISCUSSION RELATED TO FACTS OF THE CASE AND RELATED CASE LAWS TOGETHER AS MADE ABOVE FROM PARA NO. 2 TO 3.18 UNSECURED LOAN IN THE BOOKS OF THE ASSESSEE COMPANY AMOUNTING TO RS. 6,69,00,000/- IS FOUND UNEXPLAINED U/S 68 OF THE 'ACT' AND INTEREST PAID ON THESE UNSECURED LOAN AMOUNTING TO RS 1,03,20,567/- IS DISALLOWABLE EXPENDITURE RESPECTIVELY. THUS TOTAL RS. 7,72,20,567/- ADDED TO TOTAL INCOME OF THE ASSESSEE. SINCE INACCURATE PARTICULARS OF INCOME FURNISHED PENALTY PROCEEDINGS U/S 271(1)(C) ARE INITIATED FOR WHICH NOTICE IS BEING GIVEN SEPARATELY. 3.19 THIS RESULTS IN AN ADDITION OF RS. 7,72,20,567/-. 5. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER :- 4.1 THE FIRST AND FOREMOST GROUND OF APPEAL IS DIRECTED AGAINST ADDITION OF RS.6.69 CRORES FOR LOANS TAKEN FROM 12 KOLKATA BASED COMPANIES AS PER CHART INCLUDED IN PARA 2.3 OF ASSESSMENT ORDER TREATED AS UNEXPLAINED. THE AO ( ADDL. CLT, RANGE-5) HAD DEPUTED TWO INSPECTORS ATTACHED TO I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 12 12 HIS RANGE IN MAKING LOCAL ENQUIRIES AT CA LCUTTA IN THE MONTH OF DE CEMBER, 2010; FIRST TIME FOR THE PERIOD 6.12.2010 TO 10.12.2010 AND THEN AGAIN FOR THE PERIOD 20.12.2010 TO 25.12.2010.THE AO ALSO TOOK ASSISTANCE OF THE INVESTIGATION WING OF THE DEPARTMENT BASED AT CALCUTTA TO MAKE VERIFICATION ABOUT THE EXISTENCE OF THESE 12 CALCUTTA BASE D COMPANIES FROM WHOM THE APPELLANT BORROWED SUBSTANTIAL FUNDS DURING THE YEAR UNDER CONSIDERATION. THE AO HAS TAKEN NOTE OF THE ENQUIRY REPORT SUBMITTED BY DDIT (INV. WING) AND ON PAGE 8 OF THE ASSESSMENT ORDER IT WILL BE WORTHWHILE TO REPRODUCE THE REPORT S UBMITTED BY DDIT (INV. WING)-13, KOLKATA TO APPRECIATE THE FACT SURROUNDING THE TRANSACTIONS I.E. IDENTITY OF SUCH CREDITORS AND FURTHER GENUINENESS AND CREDITWORTHINESS OF SUCH TRANSACTIONS. 4.1.1 THE INSPECTORS IN THEIR ENQUIRY REPORT HAVE NOTED THAT TWO COMPANIES M/S. AEREO DEAL COMM. PVT. LTD. AND CHAMAK TREXIM PVT. LTD, WERE IN EXISTENCE ON THE GIVEN ADDRESSES AND SOME OTHER COMPANIES WERE ALSO OPERATING ON THE SAME ADDRESSES BUT THEY HAVE EXPRESSED DOUBT ABOUT THEIR CREDITWORTHINESS. FURTHER THEY HAVE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 13 13 NOTED THAT SIX OTHER PVT. LTD. COMPANIES VIZ. PANCHANAN VANIJYA PVT.LTD.,(IN SHORT PANCHANAN), KAMALNAYAN COMMERCIAL PVT.LTD.( IN SHORT KAMAL NAYAN), KHATU VANIJYA PVT.LTD.,(IN SHORT KHATU), RANCHHOD AGENCIES PVT. LTD. (IN SHORT RANCHHOD), ,PRATHMESH VANIJYA PVT. LTD. (IN SHORT PRATHMESH) AND LAMBODHAR BARTER PVT. LTD. (IN SHORT LAMBODHAR) WERE MERGED WITH M/S. MIDDLTON GOODS PVT. LTD. W.E.F 01.04.2008 AND HENCE WERE NOT OPERATING OR DID NOT EXIST AS ON DATE OF THEIR ENQUIRY. THE STATEMENT OF THE BROTHER OF THE DIRECTOR OF THE NEW AMALGAMATED COMPANY WAS RECORDED AND THE INSPECTORS HAVE STATED THAT THE TRANSACTIONS OF THESE SIX COMPANIES WITH THE APPELLANT APPEAR TO BE GENUINE, HOWEVER, THEY HAVE EXPRESSED DOUBT ABOUT THEIR CREDITWORTHINESS ON ACCOUNT OF NON-EXISTENCE OF SUCH COMPANIES ON THE DATE OF THEIR VISITS. THE INSPECTORS, HOWEVER, IN RESPECT OF THREE OTHER THREE PVT. LTD. COMPANIES VIZ. M/S. REWARD CONSULTANTS PVT. LTD.,(IN SHORT REWARD), M/S. PUSHPAK TRADING & CONSULTANCY P. LTD. (IN SHORT PUSHPAK) AND PARADISE GARMENTS P .LTD. (IN SHORT PARADISE) HAVE REPORTED THAT THESE COMPANIES DID NOT EXIST ON THE GIVEN ADDRESSES. IN RESPECT OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 14 14 PARADISE THE INSPECTORS IN THEIR REPORT HAVE NOTED THAT SOME OF THE PERSONS CONTACTED NEARBY THE ADDRESSES OF THE COMPANY STATED THAT SUCH COMPAN Y WAS IN EXISTENCE ON THAT ADDRESS ABOUT A YEAR BACK AND THE LOCATION WAS LOCKED AT THE TIME OF THEIR VISIT HOWEVER CERTAIN PEOPLE CONTACTED BY THE INSPECTORS CONFIRMED THAT THE COMPANY WAS RUN BY A SIKH PERSON. IN RESPECT OF REWARD CONSULTANTS PVT. LTD. ALSO ON DETAILED ENQUIRY THE INSPECTORS WERE TOLD THAT THE PRESENT OCCUPANT HAS ACQUIRED THE SAID BUSINESS PREMISES FROM ONE SHRI D.P. AGARWAL WHO WAS THE KEY PERSON OF M/S. REWARD CONSULTANTS BUT THE INSPECTORS WERE UNABLE TO CONTACT SHRI O.P.AGARWAL. THE INSPECTORS IN THE FIRST ENQUIRY REPORT HAS THUS CONCLUDED THAT TRANSACTIONS WITH ALL THE COMPANIES AS AFORESAID WHICH HAVE MERGED WITH M/S. MIDDLETON GOODS PRIVATE LIMITED, KOLKATA UNDERTAKEN BY THE APPELLANT APPEARED TO BE GENUINE. THE RELEVANT FINDINGS ARE REPRODUCED HEREUNDER :- 'M/S. AEREO DEAL COMM, PVT LTD &M/ S CHAMAK TREXIM. PUT LTD ARE FUNCTIONING AT THE GIVEN ADDRESS. COPIES OF THE RETURNS ARE ALSO ENCLOSED. S HRI I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 15 15 RAVIN UMARETHIYA IS THE ACCOUNTANT TO BOTH THESE COMPANIES AND IN HIS STATEMENT HE HAS ADMITTED THAT THESE COMPANIES HAVE NOT APPLIED FOR ANY SHARES IN M/S.AGRAWAL COAL CORPORATION PVT. LTD., INDORE, BUT HAVE PROVIDED UNSECURED LOANS/ADVANCES TO IT. THE REMAINING SIX COMPANIES MENTIONED ABOVE WERE EXISTING EARLIER AND THEY HAVE NOW MERGED INTO M/ S. MIDDLETON GOODS PUT. LTD, KOLKATA WHICH IS NOW FUNCTIONING AT THE SAME ADDRESS. IN THE STATEMENT O F SHRI RAMCHANDRA KEDIA, HE HAS ADMITTED THAT THESE SIX COMPANIES HAD ADVANCED UN-SECURED LOANS T O M/ S. AGRAWAL COAL CORPORATION. PVT. LTD., INDORE AND THEREFORE, THESE TRANSACTIONS WITH THE ASSESSEE COMPANY M/ S. AGRAWAL COAL CORPORATION PVT. LTD. APPEAR TO BE GENUINE. 4.1.2 THE INSPECTORS IN THEIR SECOND REPORT SUBMITTED AFTER SUBSEQUENT VISIT REPORTED THAT M/S. SAVERA DISTRIBUTION PVT.LTD. COULD NOT BE LOCATED AT THE GIVEN ADDRESS AND NEITHER ANY SIGN BOARD WAS THERE AND THE LIFTMAN OF THE BUILDING EXPRESSED HIS IGNORANCE ABOUT COMPANY'S NAME AND THUS THE INSPECTORS CONCLUDED THAT IDENTITY OF SUCH COMPANY APPEARED TO BE DOUBTFUL. THE AO BASED ON I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 16 16 INSPECTORS AND DDIT'S REPORTS AND OTHER MATERIAL GATHERED CONCLUDED THAT THERE WERE HUGE ROTATION OF FUNDS IN THE ACCOUNTS OF SUCH COMPANIES FOR WHICH THERE WAS NO BUSINESS RATIONAL AND SUCH COMPANIES WERE BEING USED AS CONDUIT IN FLOATING UNACCOUNTED FUNDS AND WERE MERE PAPER COMPANIES. THE AO HAS FURTHER NOTED IN PARA 2.12 THAT EARLIER ACCOUNT CONFIRMATION OF THE COMPANY M/S. CHAMAK WAS SIGNED BY ONE SHR I RAMCHANDRA KEDIA BUT THE LATTER CONFIRMATION WAS SIGNED BY THE ACCOUNTANT SHRI RAVIN UMARETHIYA. 4.1.3 THE APPELLANT WHEN CONFRONTED ON 23.12.2010 SUBMITTED BEFORE AO THAT THE CONFIRMATIONS LETTERS HAVE BEEN FILED FROM ALL SUCH COMPANIES ALONG WITH THEIR PAN AND SIX OF SUCH COMPANIES MERGED/AMALGAMATED INTO ANOTHER COMPANY NAMELY MIDDLETON GOODS PVT. LTD. BY ORDER OF HON'BLE HIGH C OURT OF KOLKATA PASSED IN COMPANY PETITION NO.135 OF 2009 AND THEIR IDENTITY WAS BEYOND ANY DOUBT RELYING ON THE ORDER OF HON'BLE HIGH COURT AND THE FINDINGS RECORDED IN THE SAID ORDER. THE APPELLANT FURTHER IN RESPECT OF SIX REMAINING COMPANIES ALSO FILED VOLUMINOUS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 17 17 DOCUMENTS SUCH AS CONFIRMATION LETTERS, BANK STATEMENTS OF SUCH CREDITORS ALONG WITH BANK STATEMENT OF APPELLANT COMPANY, COPY OF AUDITED FINAL ACCOUNTS OF THE SAID COMPANIES, COPIES OF ITR ACKNOWLEDGEMENTS ETC. TO ESTABLISH THAT SUCH LOAN TRANSACTION WAS REFLECTED IN THE BALANCE SHEETS OF SUCH COMPANIES AS LOANS AND ADVANCES AND CERTIFICATE ABOUT CONTINUOUS EXISTENCE OF SUCH COMPANIES FROM THE STATUS REPORT OBTAINED FROM ROC, WEST BENGAL AND COPIES OF INCOME-TAX RETURNS FILED BY THEM AND TDS CERTIFICATES ISSUED BY APPELLANT COMPANY FOR TDS FROM INTEREST PAYMENT MADE WERE ALSO FILED. 4.1.4 THE APPELLANT THEREAFTER MADE A DETAILED SUBMISSIONS THAT IN VIEW OF THESE FACTS THE APPELLANT HAD DISCHARGED THE ONUS CAST ON IT BY PROVISIONS OF SECTION 68 RELYING ON JUDICIAL DECISIONS CITED IN WRITTEN SUBMISSIONS. THE APPELLANT COMING TO THE ENQUIRIES CONDUCTED BY AO MADE DETAILED SUBMISSIONS IN PARA 11 TO 16 OF ITS SUBMISSIONS EXPLAINING THE POSITION AND ADVANCING CONTENTIONS THAT THE EXISTENCE OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 18 18 THESE COMPANIES HAVE BEEN PROVED BY SERVICE OF NOTICE U/S 133(6) ISSUED BY THE AO AS WELL AS BY THE DDIT (INV.) AT CALCUTTA. IT WAS ALSO CONTENDED BEFORE AO THAT MERELY BECAUSE SOME OF THE COMPANIES COULD NOT BE LOCATED BY INSPECTORS DURING THEIR SHORT VISIT AT THE GIVEN ADDRESSES CAN NOT LEAD TO THE CONCLUSION THAT SUCH COMPANIES WHICH ARE LEGAL AND JURISTIC PERSONS WERE NOT IN EXISTENCE. 4.1.5 THE AO AFTER TAKING NOTE OF SUCH FACTUAL AND LEGAL SUBMISSIONS MADE BY THE APPELLANT HAD VERY ELABORATELY DISCUSSED THE PROVISIONS OF SECTION 68 AND ALSO ISSUES ARISING IN CASE OF SHARE CAPITAL CONTRIBUTION IN PVT. LTD. COMPANIES DISCUSSED IN DETAIL FIND LEGAL POSITION EMERGING FROM THE DISMISSAL OF SLP BY HON'BLE S UPREME COURT IN THE CASE OF LOVELY EXPORT AS REPORTED IN 216CTR 195 AND HE HAS CONCLUDED THAT THE LOAN AGGREGATING TO RS.6.69 CRORES WERE UNEXPLAINED AND AS A CONSEQUENTIAL FINDING HAS ALSO DISALLOWED INTEREST PAID PAYABLE ON SUCH LOANS AGGREGATING AT RS. 1, 03,20,567/-. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 19 19 4.1.6 IT MAY BE OBSERVED HERE THAT MUCH OF CASE LAWS AND THE DISCUSSIONS MADE BY AO ON PAGE 25 TO 34 ARE MORE RELEVANT AND DIRECTLY RELATED TO SHARE CAPITAL CONTRIBUTION IN THE CASE OF PURVI FINVEST PVT. LTD. AND BY OTHER PVT. LTD. COMPANIES FOR WHICH SEPARATE ADDITIONS HAVE BEEN MADE BY AO AT RS.1.55 CRORES AS PER DISCUSSION IN PARA 4 OF THE ASSESSMENT ORDER REFERRING TO SUCH DETAILED LEGAL DISCUSSION. THE SAME WOULD BE ACCORDINGLY CONSIDERED IN DECIDING THE GROUND RELATING TO SAID ADDITION OF RS.1.55 CRORES. 4.1.7 IN THE AFORESAID FACTUAL BACKGROUND IT HAS TO BE NOW DECIDED WHETHER THE APPELLANT HAS BEEN ABLE TO DISCHARGE THE ONUS CAST U/ S 68 AND WHETHER THE ADDITION MADE U/ S 68 WAS, JUSTIFIED ON THE FACTS OF THIS CASE. IT SHOULD BE APPRECIATED THAT DEGREE OF ONUS TO EXPLAIN THE CASH CREDIT TRANSACTION CANNOT BE UNIFORM AND RIGID IN ALL THE SITUATIONS. DEGREE OF ONUS REGARDING GENUINENESS OF TRANSACTION IN RESPECT OF RECEIPT OF SHARE CAPITAL AT HUGE PREMIUM IN UNLISTED COMPANIES OTHERWISE THROUGH PUBLIC ISSUE CANNOT BE VIEWED BUT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 20 20 WITH SUSPICION AND THE APPELLANT MAY BE REQUIRED TO JUSTIFY SUCH RECEIPT OF MONEY ON HUGE PREMIUM AS SUCH TRANSACTION WOULD DEFY NORMAL FINANCIAL PRUDENCE AND LOGIC. BUT THE SAME DEGREE OF ONUS CANNOT BE CAST ON THE APPELLANT TO EXPLAIN THE LOAN TRANSACTION WHICH HAVE BEEN REPAID IN A SPAN OF 1 % YEARS OR SO WHEN THE APPELLANT IS ABLE TO DISCHARGE HIS ONUS TO ESTABLISH THE IDENTITY OF THE CREDITORS , RECEIPT OF MON EY THROUGH BANKING CHANNEL AND EXISTENCE AND APPARENT FINANCIAL WORTH OF CREDITORS AS REFLECTED FROM THE AUDITED ACCOUNTS AND IT. RETURNS. IT MAY BE ALSO OBSERVED THAT ONUS TO ESTABLISH ALL THE THREE INGREDIENTS WOULD VARY FROM CASE TO CASE IDENTITY IS FIRST INGREDIENTS, WHICH CAN BE ESTABLISHED BY GIVING COMPLETE ADDRESS, PHYSICAL EXISTENCE OF THE PERSON AND IT. PARTICULARS I.E. PAN AND DETAILS OF FILING OF RETURN ETC. IN A GIVEN CASE, WHERE THE TRANSACTION OF SAY A SMALLER AMOUNT OF RS. 50000/-OR 1 LAKH IS INVOLVED THE CREDIT WORTHINESS OF PERSON INVOLVING NOMINAL INCOME IN THE SAME RANGE MAY BE ACCEPTABLE, BUT CAN BECOME SUSPICIOUS AND DOUBTFUL IF THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 21 21 AMOUNT ADVANCED RUNS IN MILLIONS AND CRORES, WITHOUT THERE BEING OTHER VERIFIABLE DETAILS AND EVIDENCES OF SOURCES OF SUCH FUNDS ADVANCED. 4.2 IN THE ABOVE LEGAL BACK DROP FIRSTLY THE ISSUE OF SIX COMPANIES VIZ. M/S PAMCHANAN VANIJYA PVT. LTD., KAMALNAYAN COMMERCIAL PVT. LTD., KHATU VANIJYA PVT. LTD., RANCHHOD AGENCIES PVT. LTD., ,PRATHMESH VANIJYA PVT. LTD. AND LAMBODHAR BARTER PVT. LTD. IS TAKEN UP FOR CONSIDERATION WHICH AS PER FACTS AVAILABLE ON RECORD MERGED AS PER HON'BLE CALCUTTA HIGH COURT'S ORDER IN ANOTHER COMPANY M/S MIDDLETON GOODS PVT. LTD (MIDDLETON). THE AMOUNT INVOLVED IN ALL THE SIX COMPANIES TAKEN TOGETHER IS AT RS.1.81 CRORES. THE IDENTITY OF THESE SIX COMPANIES CANNOT BE DOUBTED OR DISPUTED IN VIEW OF THE ORDER OF HON'BLE KOLKATA HIGH COURT AND EVEN THE INSPECTORS IN THE INITIAL REPORT HAS CERTIFIED THEIR GENUINENESS. THE APPELLANT IN COMPILATION FILED HAS INCLUDED COPY OF AMALGAMATION ORDER PASSED BY HON'BLE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 22 22 KOLKATA HIGH COURT AND COPY OF NOTIFICATION OF SUCH AMALGAMATION IN NEWS PAPER AND CONSOLIDATED FINAL BALANCE SHEETS AND PROFIT & LOSS ACCOUNTS AS INCLUDED IN COMPILATION ON PAGE 295 AND 296 AND OTHER SCHEDULE ATTACHED TO SUCH FINAL ACCOUNTS; IN PARTICULAR THE DETAILS OF LOANS AND ADVANCES AS INCLUDED IN COMPILATION ON PAGE 299 WHERE ALL SUCH LOANS WERE GIVEN TO THE APPELLANT BY THE AFORESAID SIX COMPANIES TOGETHER WITH INTEREST PAYABLE ARE DULY REFLECTED. THE TRANSACTIONS WITH THE APPELLANT HAVE BEEN DULY CONFIRMED BY THESE LENDER COMPANIES IN RESPONSE TO THE AO'S NOTICES U/S 133(6), BEFORE THE ITIS AND BEFORE DDIT (INV.), KOLKATA ALSO AGAINST ISSUE OF SUMMONS U/S 131 COMPLIANCES WERE MADE BY FILING OF COPIES OF AUDITED ANNUAL ACCOUNTS, PHOTO COPY OF BANK STATEMENT AND CONFIRMATION LETTERS. IT HAS TO BE NECESSARILY CONCLUDED THAT THE APPELLANT HAD FULLY DISCHARGED THE ONUS TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THESE SIX COMPANIES AND GENUINENESS OF LOAN TRANSACTIONS AND ACCORDINGLY THE AO'S ACTION IN TREATING SUCH LOANS AS UNEXPLAINED IS UNSUSTAINABLE BOTH IN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 23 23 FACTS AND IN LAW. 4.3 NOW THE ISSUE OF LOAN TAKEN FROM AEREO DEALCOMN PVT LTD. AT RS.3.26CRORES IS TAKEN UP FOR CONSIDERATION. THE A PPELLANT HAD AN OPENING BALANCE APPEARING IN THE NAME OF SAID COMPANY AT RS.98,73,663/- AND AN AMOUNT OF RS.42,93,663/- WAS REPAID DURING THE YEAR UNDER CONSIDERATION THE INTEREST PAID BEING RS.33,04,583/-. 4.3.1 THE AR PRESENT POINTING OUT THE REPAYMENT CHART IN PAPER BOOK D AT PAGE 837 SUBMITTED THAT THE LOAN RECEIVED FROM THESE COMPANY STAND FULLY REPAID IN FEB 2010. THE INSPECTORS IN THEIR REPORT AS NOTED ON PAGE 3 OF ASSESSMENT ORDER HAS CONFIRMED ABOUT EXISTENCE OF SUCH COMPANY AT THE GIVEN ADDRESS. THE INSPECTORS HAVE CONFIRMED, AS NOTED ON PAGE 7 OF THE ASSESSMENT ORDER THAT THE ACCOUNTANT OF THIS COMPANY, IN THE STATEMENT RECORDED BY THE INSPECTORS, HAS CONFIRMED HAVING ADVANCED UNSECURED LOANS TO THE APPELLANT AND ALSO IN RESPONSE TO THE AO'S NOTICES U/ S 133(6) THE SAID LENDER COMPANY REPLIED VIDE LETTER DATED 09.12.2010 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 24 24 AT PAGE 839 STATING THAT IT HAS ADVANCED LOANS TO THE APPELLANT AND ALSO FILED COPY OF ITS LEDGER FOR THE IMPUGNED YEAR, COPIES OF ITR ACKNOWLEDGEMENT ALONG WITH COMPUTATION FOR AYS 2006-07 TO 2008-09 AS WAS REQUIRED BY THE AO. BEFORE DDIT (INV.), KOLKATA ALSO AGAINST ISSUE OF SUMMONS U/ S 131 COMPLIANCES WERE MADE BY FILING OF COPIES OF AUDITED ANNUAL ACCOUNTS, PHOTO COPY OF BANK STATEMENT AND CONFIRMATION LETTERS. THUS, IT CANNOT BE SAID THAT INSPECTORS AND DDIT(INV.) HAVE EXPRESSED ANY DOUBT ABOUT THE EXISTENCE OF SUCH COMPANY. THE DOUBT EXPRESSED BY INSPECTORS AND DDIT (INV.) BOTH OF THEM ARE APPARENTLY SUBJECTIVE AND IN CASE OF DDIT'S REPORT IS MERELY BASED UPON NONAPPEARANCE BY THE DIRECTORS OF THE SAID COMPANY. THE COPY OF AUDITED ACCOUNTS OF THE SAID COMPANY, ALONG WITH COPY OF BANK STA T EMENT, CONFIRMATION, ITR ACKNOWLEDGEMENT ETC. ARE INCLUDED IN COMPILATION BY THE APPELLANT FROM PAGE 160 TO 200. THE MAIN SOURCE OF T HE SAID COMPANY IS FROM GROSS INTEREST INCOME OF RS.47.83 LACS. THE NET PROFIT OF THE COMPANY IS REFLECTED AT A HEALTHY FIGURE OF RS.11.29 LACS. THE LOAN IN THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 25 25 NAME OF THE APPELLANT COMPANY INCLUDING OUTSTANDING LOAN FROM EARLIER YEAR IS REFLECTED IN THE HEAD AS SCHEDULE-7 TO BALANCE SHEET UNDER 'LOANS AND ADVANCES. THUS, IT COULD NOT BE SAID THAT THE FINANCIAL POSITION OF THE COMPANY WAS DUBIOUS AND NOMINAL RETURNED INCOME WAS DISCLOSED. 4.3.2 THE APPELLANT IN ANOTHER COMPILATION (PAPER BOOK 'D') HAS INCLUDED A COPY OF NBFC REGISTRATION ISSUED BY THE RBI AT PAGE 836 AND AN INTIMATION U/S 143(1) FOR THE AY 2009- 10 AT PAGE 835 WHEREIN A REFUND OF RS 14.67 LACS HAS BEEN ISSUED TO THIS COMPANY AND ALSO ASSESSMENT ORDER FOR ASSTT. YEAR 2002~ 03 OF THIS COMPANY AT PAGE 833 AND 834 WHEREIN THE SOURCE OF SHAREHOLDERS FUND BEING SHARE CAPITAL AND SHARE PREMIUM ACCOUNT WAS EXAMINED AND FOUND TO BE VERIFIABLE AND DETAILED FINDINGS IN THIS BEHALF HAVE BEEN RECORDED IN THE SAID ASSESSMENT ORDER. IT WILL BE APPROPRIATE TO REPRODUCE THE SAME HERE UNDER FOR READY REFERENCE: ' IT ALSO APPEARED FROM THE SAID DOCUMENTS THAT THE ASSESSEE COMPANY HAD INFUSED FRESH SHARE CAPITAL FOR RS.47,75,OOO/-. AGAIN ASSESSEE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 26 26 COMPANY HAD RECEIVED TOTAL SHARE PREMIUM OF RS.4,29,75,OOO/- ON ACCOUNT OF SHARE ALLOTMENT. THUS TOTAL 'SHARE CAPITAL' WAS RAISED TO THE TUNE OF RS. 4,77,5O,OOO/-. ASSESSEE COMPANY WAS ASKED TO PROVIDE LIST OF NEW 'SHARE HOLDERS' FROM WHOM SUCH FRESH SHARE CAPITAL WAS RAISED. THE AR HAD SUBMITTED THE LIST OF SHAREHOLDERS TO WHOM SHARES WERE ALLOTTED DURING THE RELEVANT PREVIOUS YEAR. NOTICES U/S 133(6) OF THE I'T ACT WERE ISSUED TO SOME OF THOSE NEW SHARE-HOLDERS ON TEST-CHECK BASIS FOR THE PURPOSE OF VERIFICATION OF THE CLAIM MADE BY THE ASSESSEE COMPANY IN THIS CONNECTION. REPLIES WERE RECEIVED FROM THOSE SHAREHOLDERS AND THOSE WERE CONSIDERED IN THE LIGHT OF THEIR CAPABILITIES TO INVEST SUCH HUGE SUM TO PAY SHARE PRICES INCLUDING PREMIUM. COPIES OF BANK ACCOUNTS OF THOSE SHAREHOLDERS HAVE ALSO BEEN VERIFIED TO CROSS-CHECK THE TRANSACTIONS THEY HAD ENTERED WITH THE ASSESSEE COMPANY. IN THIS CONNECTION INSPECTOR WAS ENTRUSTED WITH INDEPENDENT INQUIRIES. FROM THE REPORT SUBMITTED BY THE INSPECTOR, NOTHING OBJECTIONABLE WAS FOUND; NO INTERFERENCE IS THUS MADE ON THIS GROUND.' I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 27 27 4.3.3 IT WILL BE APPROPRIATE TO REFER TO THE DECISION OF HON'BLE KOLKATA HIGH COURT AS RELIED AND REFERRED BY APPELLANT IN THE WRITTEN SUBMISSIONS DECIDED IN THE CASE OF CIT VS. DATA WARE PVT. LTD. ON 21 ST SEPTEMBER, 2009, WHEREIN HON'BLE CALCUTTA HIGH COURT CATEGORICALLY HELD - 'AFTER GETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING OFFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CREDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHER SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, THE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CREDENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMITTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFFICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 28 28 TO ACCEPT THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR AND THE GENUINENESS OF TRANSACTION THROUGH ACCOUNT PAYEE CHEQUE HAS BEEN ESTABLISHED.' 4.3.4 IN VIEW OF ABOVE FACTUAL AND LEGAL POSITION WHEREIN EVEN THE SOURCES OF THE FUNDS OF THE CREDITOR COMPANY HAVE BEEN FOUND AND VERIFIED BY THE CONCERNED AO AND THE TRANSACTIONS DULY GETTING REFLECTED IN THE AUDITED FINAL ACCOUNTS OF THE CREDITOR COMPANY, THE AO'S ACTION IN DOUBTING SUCH LOAN TRANSACTION IS ABSOLUTELY WITHOUT ANY MER IT AND SUBSTANCE AND ACCORDINGLY THE AO'S ACTION IN TREATING SUCH LOAN OF RS. 3.26 CRORES AS UNEXPLAINED IS HELD TO BE UNJUSTIFIED. 4.4 PROCEEDINGS NEXT TO THE LOAN OF RS.25 LACS FROM CHAMAK TREXIM PVT. LTD. WHICH IS ALSO A REGISTERED NBFC WITH RBI IT IS NOTED THAT THE APPELLANT HAS OPENING BALANCE OF MORE THAN RS.3.91 CRORES FROM THE SAME COMPANY DURING THE YEAR UNDER CONSIDERATION. A LARGER AMOUNT OF RS.78.86 LACS WAS REPAID AND SUBSTANTIAL INTEREST OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 29 29 RS.59.19 LACS WAS PAID AFTER DEDUCTING THE TDS. AS PER THE REPAYMENT CHART ON PAGE 851 OF PAPER BOOK D THE LOAN STAND FULLY REPAID IN FEB 2010. THE POSITION IN RESPECT OF ENQUIRY REPORT SUBMITTED BY INSPECTORS AND COMPLIANCES MADE BEFORE DDIT IS EXACTLY THE SAME AS NOTED IN THE CASE OF AEREO DEALCOMM PVT. LTD., ABOVE. AS PER RELEVANT FINAL ACCOUNTS AND OTHER DOCUMENTS OF THIS COMPANY ARE CONCERNED, THE SAME ARE FILED IN THE COMPILATION FROM PAGE 201 TO 245. IN THIS COMPANY ALSO THE MAIN SOURCE OF INCOME IS INTEREST AND GROSS AMOUNT IS REFLECTED AT RS.85.30 LACS AND NET PROFIT IS IN EXCESS OF RS.14 LACS AND LOAN IN THE NAME OF APPELLANT COMPANY IS DULY REFLECTED INCLUDING OPENING BALANCE OF REPAYMENT IS AT RS. 3.84 CRORES. 4.4.1 THE AO OF THIS COMPANY FOR ASSTT. YEAR 2004-05 IN ASSESSMENT ORDER PASSED U/S 143(3) ON 31.01.2006 HAS VERIFIED THE SOURCE OF OWNERS FUND BEING SHARE CAPITAL, SHARE PREMIUM RECEIVED WHICH WERE INVESTED BY WAY OF LOANS AND ADVANCES. IN THE INTIMATION ISSUED U/S 143(1) FOR AY 2009-10 AT PAGE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 30 30 849 OF PAPER BOOK D, THE RETURNED INCOME HAS BEEN STATED AT RS 11.66 LACS AND A REFUND OF RS. 11.27 LACS HAS BEEN ISSUED TO THIS COMPANY. THUS IN VIEW OF DETAILED FINDINGS ARRIVED IN THE CASE OF AEREO DEALCOMM PVT. LTD. ABOVE, THE SAID LOAN OF RS.25 LACS FROM THIS COMPANY IS ALSO HELD TO BE EXPLAINED. 4.5 PROCEEDINGS NEXT TO THE LOAN OF RS.50 LACS RECEIVED FROM PUSHPAK TRADING & CONSULTANCY THE INSPECTORS IN THEIR REPORT HAVE STATED THAT EXISTENCE OF THE COMPANY AT THE GIVEN ADDRESS IS NOT ESTABLISHED. NO COMPLIANCE APPEARS TO HAVE BEEN MADE BEFORE DDIT (INV.) ALSO AS PER REPORT SUBMITTED BY HIM. HOWEVER THE COPY OF LETTER DATED 02.12.2011 ISSUED BY THE AO SEEKING INFORMATION U/S 133(6) WHICH IS AT PAGE 933 HAS BEEN DULY REPLIED BY THE SAID LENDER ON 10.12.2010 SENT TO THE AO ON 11.12.2010 WHICH IS AT PAGE 934, WHEREIN THE SAID COMPANY HAS ACCEPTED THE FACT OF HAVING ADVANCED LOANS TO THE APPELLANT GIVING DETAILS OF CHEQUES ALSO BALANCE CONFIRMATION FILED RELEVANT COPIES OF ITS BANK STATEMENTS, I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 31 31 BALANCE SHEET AND ITR ACKNOWLEDGEMENT FOR THIS YEAR. THE ADIT (INV) UNIT II (3) KOLKATA ALSO ISSUED SUMMONS U/S 131 PLACED AT PAGE 935 THE REPLY TO WHICH IS AT PAGE 936 WHEREIN IN ADDITION TO THE DOCUMENTS FILED BEFORE THE AO U/S 133(6), BALANCE SHEETS AND ITR ACKNOWLEDGEMENTS FOR FY 2006-07 TO 2008-09 AND BANK STATEMENTS FOR RELEVANT TWO YEARS WERE ALSO FILED. THE APPELLANT, IN THE COMPILATION HAS INCLUDED AUDITED FINAL ACCOUNTS AND OTHER DOCUMENTS SUCH AS THE CONFIRMATION, ITR ACKNOWLEDGEMENT, BANK STATEMENT ETC. OF THE COMPANY AT PAGES 662 TO 712 WHEREBY IT IS SEEN THAT APPELLANT COMPANY HAS SHAREHOLDERS FUND OF RS. 13.47 CRORES AND THE INVESTMENT WERE MADE AT RS. 17.70 CRORES BESIDES LOANS AND ADVANCES OF RS.91.27 LACS. SUCH COMPANY WAS FOUND TO BE ENGAGED IN TRADING HAVING TURNOVER OF RS. 1.97 CRORE BESIDES OTHER INCOME OF RS.4.45 LACS AND DISCLOSING NET PROFIT AFTER INCURRING ADMINISTRATIVE EXPENSES OF RS. 42.45 LACS AT RS.11.15 LACS. THE APPELLANT HAS ALSO INCLUDED NBFC CERTIFICATE ISSUED BY RBI DATED 11.06.1998 FOR THE SAID COMPANY I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 32 32 BESIDES INTIMATION FOR ASSTT YEAR 2009-10 ISSUED BY CPC, BANGALORE TO ESTABLISH CONTINUED EXISTENCE OF THE COMPANY ON THE RECORD OF THE DEPARTMENT. 4.5.1 COMING TO NON-AVAILABILITY OF THE APPELLANT COMPANY AT THE GIVEN ADDRESS IT WAS CLARIFIED BY THE AR PRESENT THAT THE AMOUNT WAS REPAID TO THE COMPANY IN MARCH, 2009 AND THEREAFTER THERE BEING NO TRANSACTION WITH THE SAID COMPANY PRESENT ADDRESSES WERE NOT AVAILABLE WITH THE APPELLANT COMPANY. IT WAS ALSO POINTED OUT THAT THE APPELLANT HAS SINCE OBTAINED THE CURRENT INTIMATION U/S 143(1) OF THE APPELLANT COMPANY WHEREIN THE CHANGED ADDRESS AT 7/1A, GRANT LANE, 2ND FLOOR, ROOM NO.206, BAU BAZAR, CALCUTTA, IS REFLECTED AND THE SAME ADDRESS IS AVAILABLE ON THE SITE OF MINISTRY OF CORPORATE AFFAIRS AS DOWNLOADED AND INCLUDED IN COMPILATION ON PAGE 923 WHICH ALSO REFLECT THAT THE COMPANY WAS HAVING REGULAR AGM AND LATEST BALANCE SHEETS FOR FINANCIAL YEAR 2010-11 WAS ALSO FILED WITH ROC. THUS IT WAS CONTENDED THAT THE ENQUIRY REPORT ON BEING CONFRONTED TO THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 33 33 APPELLANT AT THE FAG END OF LIMITATION PERIOD, THE APPELLANT COULD NOT CLARIFY THE PRESENT ADDRESS WHICH THE AO COULD HAVE VERY WELL OBTAINED BY APPRISING THE SITE OF MINISTRY OF CORPORATE AFFAIRS AS HAS BEEN NOW DONE BY THE APPELLANT. REFERENCE WAS ALSO MADE TO THE DECISION OF THE CALCUTTA HIGH COURT IN THE CASE OF DATAWARE (P) LTD. (SUPRA) TO IMPRESS THAT IF AO HAD ANY DOUBT ABOUT THE EXISTENCE AND GENUINENESS OF SUCH COMPANY THE AO SHOULD HAVE APPROACHED THE CONCERNED AO HAVING JURISDICTION OVER THE CREDITOR THROUGH THE DEPARTMENT NET WORK BASED ON PAN GIVEN IN CONFORMATION LETTERS WHICH HAS NOT BEEN DOUBTED BY THE AO. 4.5.2 THUS ON CONSIDERATION, OF THE FACTS AND DOCUMENTS AVAILABLE ON RECORD IT HAS TO BE CONCLUDED THAT THE APPELLANT HAS BEEN ABLE TO DISCHARGE THE ONUS CAST ON IT U/S 68 IN RESPECT OF FRESH LOAN OF RS.50 LACS RECEIVED FROM THIS COMPANY ALSO. ACCORDINGLY THIS LOAN IS ALSO HELD TO BE EXPLAINED. 4.6 PROCEEDINGS NEXT TO LOAN OF RS.50 LACS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 34 34 FROM SAVERA THE FACTS AS MENTIONED IN THE ASSESSMENT ORDER RELATING TO ITI'S REPORT AND REPORT OF THE DDIT (INV.) ARE SAME AS NOTED FOR PUSHPAK TRADING & CONSULTANCY PVT. LTD. COMING TO NON COMPLIANCE REPORT OF THE DDIT, THE AR PRESENT POINTED OUT THAT THE SUMMONS ISSUED BY THE DDIT KOLKATA ON 07.12.2010/ 09.12.2010 WERE DULY SERVED AS THE SAID COMPANY HAS ALSO FILED ITS REPLY IN COMPLIANCE ON 22.12.2010 DULY ACKNOWLEDGED BY THE OFFICE OF THE DDIT FILED AT PAGE 953 WHEREIN THE SAID LENDER COMPANY HAS FILED COPIES OF ITS BALANCE SHEET WITH SCHEDULES AND ITR ACKNOWLEDGEMENTS FOR FY 2005-06 TO 2007-08, COPY OF RELEVANT PORTION OF THE BANK STATEMENT, COPY OF ACCOUNT AND CONFIRMATION OF THE LOAN TRANSACTIONS WITH THE APPELLANT. IT WAS ALSO POINTED OUT THAT SINCE THE SAID COMPANY COMPLIED THAT SUMMONS ON 22.1.2.2010 AND THE DDIT KOLKATA HAS PREPARED HIS REPORT ON 20.12.2010, WHICH WAS RECEIVED BY THE AO AT INDORE ON 22.12.2010 STATING NO COMPLIANCE BY THE AFORE SAID COMPANY CANNOT BE CONSTRUED AS NON EXISTENCE OF THE SAID I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 35 35 CREDITOR . IT WAS ALSO POINTED OUT THAT THE LETTER OF THE AO U/S 133(6) DATED 02.12.2010 WAS ALSO SERVED AND WAS ALSO COMPLIED WITH ON 10.12.2010 FILING ALL THE RELEVANT DOCUMENTS AS CALLED FOR BY THE AO. THE RELEVANT DOCUMENTS ARE INCLUDED IN COMPILATION FROM PAGE 949 TO 955 AND OTHER DOCUMENTS ARE AT 468 TO 510 BEING DIRECTOR'S REPORT, AUDITOR'S REPORT FOR ASSTT. YEAR 2008- 09, COPY OF CONFIRMATION LETTER, ACKNOWLEDGEMENT OF INCOME-TAX RETURN FOR ASSTT. YEAR 2007-08, BANK STATEMENT AND MASTER DATA OF COMPANY WITH ROC. 4.6.1. COMING TO THE ITI'S REPORT, IT WAS URGED BY THE AR THAT THE ITIS HAVE NOT MADE ANY SERIOUS EFFORTS TO LOCATE THE SAID CREDITOR, AS THE SUMMONS ISSUED BY THE DDIT AS WELL AS BY THE ADIT WERE SERVED ON THE SAME ADDRESS ON WHICH THE AO'S ENQUIRY LETTER U/S 133(6) WAS SERVED AND THE SAID LENDER COMPANY DULY COMPLIED WITH THESE AUTHORITIES FROM THE SAME ADDRESS AS EVIDENT FROM THE LETTER HEAD, STILL FURTHER REFERRING TO THE REPAYMENT CHART OF LOANS AT PAGE 956 OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 36 36 PAPER BOOK D THAT THE AMOUNT WAS REPAID AS EARLY AS IN THE MONTH JULY, 2008 AND THEREAFTER THERE WAS NO CONTACT WITH THE SAID COMPANY AND THE DOCUMENTS WERE OBTAINED FROM THE SITE OF ROC. PAGE 507 OF COMPILATION ESTABLISHED THAT SUCH COMPANY WAS IN EXISTENCE DURING FINANCIAL YEAR 2006-07 AND 07-08 AND IF ASSUMING FOR A MOMENT THAT THE SAID COMPANY ITSELF DISCONTINUED ITS OPERATION OR CHANGED ITS ADDRESS THEREAFTER NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE APPELLANT IN RESPECT OF LOAN TRANSACTIONS DONE THROUGH BANKING CHANNEL ON WHICH DUE TAXES WERE DEDUCTED AT APPROPRIATE RATE OF INTEREST PAYMENT MADE. THE E- ITR ACKNOWLEDGEMENT ENCLOSED IN COMPILATION FOR AY 2007-08 REVEALS THAT THE COMPANY HAD SHOWN GROSS TOTAL INCOME AT A NOMINAL AMOUNT OF RS.31,318/- AND HAS CLAIMED A REFUND OF RS.4.73 LACS ON ACCOUNT OF EXCESS TDS DEDUCTED. IT WAS FURTHER POINTED OUT THAT THE CREDITOR COMPANY WAS ENGAGED AS NBFC DURING THE YEAR UNDER CONSIDERATION AND ENGAGED IN SHARE TRADING AND OTHER ANOTHER ACTIVITIES. ITS SHAREHOLDERS FUNDS IS AT RS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 37 37 13.66 CRORES, INVESTMENTS STAND AT RS 7.87 CRORES AND EARNED GROSS INTEREST OF RS.18.72 LACS AND ACHIEVED TURNOVER OF RS. 2.34 CRORES AND HAD GIVEN A LOAN OF RS.1.33 CRORES TO VARIOUS PARTIES INCLUDING THE APPELLANT, BESIDES OTHER ADVANCES AT RS 6.57 CRORES AS PER AMOUNT REFLECTED IN BALANCE SHEET. IT WAS EMPHASIZED THAT THE APPELLANT WAS HANDICAP IN OBTAINING FURTHER INFORMATION ABOUT THE COMPANY AS THE AMOUNT HAVING BEEN REPAID EARLIER AS THERE WAS NO CONTACT LEFT FROM WHICH FURTHER DETAILS OF THE COMPANY COULD BE ASCERTAINED. AS FAR AS LOAN TRANSACTION WAS CONCERNED THE SAME HAVING BEEN REPAID IN THE NEXT FINANCIAL YEAR ITSELF AND THUS THE APPELLANT HAS DISCHARGED ITS ONUS CAST U/S 68 . 4.6.2 ON CONSIDERATION OF OVERALL FACTS ON RECORD THERE APPEARS TO BE SUFFICIENT FORCE AND MERIT IN THE CONTENTION OF THE APPELLANT AS THE APPELLANT HAS PRIMA FACIE ESTABLISHED THE ONUS CAST ON IT BY GIVING NECESSARY DOCUMENTS ON RECORD TO ESTABLISH THE IDENTITY AND CREDIT WORTHINESS OF THE CREDITOR I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 38 38 COMPANY AND THE AMOUNT HAVING REPAID IN THE NEXT FINANCIAL YEAR AFTER DUE DEDUCTION OF TDS, THE GENUINENESS OF THE TRANSACTION CANNOT BE DOUBTED AND ACCORDINGLY THE SAID LOAN OF RS.50 LACS IS DIRECTED TO BE TREATED AS EXPLAINED. 4.7 THE NEXT LOAN FROM PARADISE GARMENTS OF RS.25 LACS IS TAKEN UP FOR CONSIDERATION. THE APPELLANT HAS INCLUDED A COPY OF ACKNOWLEDGEMENT OF IT RETURN FOR ASSTT. YEAR 2008-09, BANK STATEMENT, MASTER DATA OF COMPANY WITH ROC, CONFIRMATION LETTER, AUDITOR'S REPORT FOR FINANCIAL YEAR 2007-08 IN COMPILATION FROM PAGE 246 TO 263. FIRSTLY, PARADISE HAS DECLARED TAXABLE INCOME AT RS.18.50 LACS AS PER E ITR ACKNOWLEDGEMENT FOR THE AY 2008-09, PAID TAXES OF RS 6.31 LACS AND CLAIMED A REFUND OF RS 6.53 LACS. SECONDLY, SUCH CREDITOR COMPANY HAS INVESTIBLE FUND OF RS.7.62 CRORES WHICH WAS INVESTED IN INVENTORIES, LOANS AND ADVANCES. FURTHER AS PER P&L A/C THE LENDER COMPANY HAS TURNOVER OF RS.1.14 CRORES BESIDE GROSS INTEREST INCOME OF RS.59.29 LACS AND THE LOAN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 39 39 AMOUNT WAS FINALLY REPAID IN FEBRUARY,2011.THE APPELLANT HAS ALSO INCLUDED THE ASSESSMENT ORDER IN CASE OF SUCH COMPANY IN ANOTHER COMPILATION AT PAGE 959 AND 960 FOR ASSTT. YEAR 2006-07 WHERE THE INCOME RETURNED AT RS. 14.32 LACS WAS ACCEPTED WITHOUT VARIATION AND NO ADVERSE FINDINGS OF ANY SHORT WERE RECORDED IN THE ASSESSMENT, ORDER PASSED AND A REFUND OF RS 7.78 LACS WAS WORKED OUT. 4.7.1 THUS IN VIEW OF THE AFORESAID FACTUAL POSITION IT HAS TO BE NECESSARILY CONCLUDED THAT THE APPELLANT HAD DISCHARGED PRIMARY ONUS CAST U/S 68 OF THE ACT. EVEN THOUGH THE INSPECTORS IN THE ENQUIRY REPORT DURING THEIR VISIT COULD NOT LOCATE THE COMPANY AT THE GIVEN ADDRESS BUT HAVE REPORTED THAT THIS COMPANY WAS NOT EXISTING AT THAT ADDRESS AS ON THAT DATE AND AS PER LOCAL ENQUIRIES IT WAS GATHERED BY THEM THAT SUCH COMPANY WAS IN EXISTENCE ABOUT A YEAR BACK FROM THE PERIOD OF THEIR VISIT IN DECEMBER, 2011. THE AR PRESENT EMPHASIZED THAT IN THE CONCLUDING PARA OF THE REPORT OF THE ITIS REPRODUCED IN THE ASSESSMENT ORDER ON PAGE 6, JUST BELOW I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 40 40 THE FINDINGS GIVEN IN RESPECT OF THIS COMPANY HAVE CATEGORICALLY STATED THAT ALL THE LOCATIONS WERE VISITED AND ONLY TWO COMPANIES NAMELY REWARD AND PUSHPAK COULD NOT BE LOCATED AND THUS HAVE DOUBTED THE IDENTITY OF THESE TWO COMPANIES AND NOT OF PARADISE. IT WAS ALSO EMPHASIZED THAT OVERWHELMING EVIDENCES GIVEN BY APPELLANT CLEARLY ESTABLISHED THAT ALL SUCH LOAN TRANSACTIONS WERE GENUINE LOAN TRANSACTIONS AND LOANS GRANTED BY KOLKATA BASED COMPANIES ON THE BASIS OF STRONG FINANCIALS OF THE APPELLANT COMPANY AND THEREFORE, BECAUSE OF SOME DOUBTS EXPRESSED BY INSPECTORS IN THEIR REPORT WHICH WERE BASED ON A VERY VAGUE ENQUIRY NO ADVERSE VIEW AGAINST THE APPELLANT SHOULD BE TAKEN. IN VIEW OF ABOVE DISCUSSION THE LOAN OF RS.25 LACS FROM PARADISE IS HELD TO BE EXPLAINED. 4.8 NOW THE LOAN FROM REWARD CONSULTANCY AT RS.12 LACS IS TAKEN UP FOR CONSIDERATION. IN THIS CASE THERE WAS AN OPENING BALANCE OF RS.16,39,608/- AND AN AMOUNT OF RS.1,39,608/- WAS REPAID DURING THE YEAR UNDER CONSIDERATION. THE APPELLANT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 41 41 HAS INCLUDED SIMILAR PAPER AND DOCUMENTS AS NOTED IN OTHER COMPANIES IN COMPILATION FROM PAGE 264 TO 281. THE CREDITOR COMPANY AS PER BALANCE SHEET FOR THE FINANCIAL YEAR 2007-08 HAD INVESTABLE FUNDS OF RS.6.61 CRONES WHICH WE INVESTED IN THE INVENTORIES TO THE EXTENT OF RS.1.41 CRORES AND THE REMAINING AMOUNT BEING INVESTED IN LOANS AND ADVANCES. FURTHER AS PER P&L A/ C SUCH CREDITOR COMPANY HAD TURNOVER OF RS. 1.66 CRORES AND THE GROSS INTEREST RECEIPT AT RS, 32.54 LACS AND THE NET PROFIT WAS ARRIVED AT RS. 9.43 LACS. THE E-ITR ACKNOWLEDGEMENT FOR AY 2008-09 AT PAGE 270 OF PAPER BOOK B SHOWS THE TOTAL TAXABLE INCOME AT RS 9.43 LACS CL AIMING A REF UND OF RS 3.7 3 L ACS AN D THE E - IT R ACKNOWLEDGEMENT FOR AY 2007-08 AT PAGE 265 OF PAPER BOOK B SHOWS THESE FIGURES AT RS 6.13 LACS AND RS 2.73 LACS RESPECTIVELY. THE INTIMATION U/S 143(1) ON PAGE 939 OF PAPER BOOK D FOR THIS YEAR REVEALS THAT THE RETURNED INCOME AT RS. 6.13 HAS BEEN PROCESSED AND REFUND OF RS 3.04 INCLUDING INTEREST HAS BEEN ISSUED. THE DATA I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 42 42 OBTAINED FROM THE WEB SITE OF MINISTRY OF CORPORATE AFFAIRS INCLUDED IN COMPILATION AT PAGE 937 AND 938 ALSO REFLECTED CONTINUOUS EXISTENCE AND COMPLIANCES BY THE CREDITOR COMPANY BEFORE ROC. 4.8.1 THE INSPECTORS REPORT IN THE CASE OF SUCH COMPANY HAS ALREADY BEEN NOTICED ABOVE THAT THE PRESENT OCCUPANT OF THE PREMISES HAS PURCHASED IT FROM THE OWNERS OF REWARD CONSULTANT AND AS SUCH AMOUNT WAS REPAID BY THE APPELLANT AS PER DETAILS FILED AT PAGE 948 IN SEPTEMBER, 2010 EVEN BEFORE THE ENQUIRY CONDUCTED BY THE AO. IT WAS ALSO POINTED OUT THAT A MUCH HIGHER AMOUNT THAN THE AMOUNT TAKEN DURING THE YEAR STAND ACCEPTED IN THE IMMEDIATELY PRECEDING YEAR. THUS ON CONSIDERATION OF AVAILABLE FACTS ON RECORD AND IN PARTICULAR CONSIDERING THE FACT THE COMPANY WAS IN EXISTENCE IN EARLIER YEARS, IT IS HELD THAT THE APPELLANT HAS DISCHARGED THE ONUS CAST U/S 68 IN THIS BEHALF AND THE LOAN OF RS.12 LACS IS DIRECTED TO BE TREATED AS EXPLAINED. 4.9 BEFORE CONCLUDING IT HAS TO BE OBSERVED, AS ALSO POINTED OUT BY THE AR, THAT THERE IS NO SPECIFIC ADVERSE COMMENT IN THE ASSESSMENT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 43 43 ORDER ON THE VOLUMINOUS DOCUMENTS FILED AS DISCUSSED ABOVE SUBSTANTIATING ALL THE THREE INGREDIENTS OF SECTION 68 AND DETAILED SUBMISSIONS MADE BY THE APPELLANT DURING THE ASSESSMENT PROCEEDINGS REMAINED UNCONTROVERTED AND AO HAS MAINLY BANKED ON ITIS AND DDIT'S REPORT, WHICH WERE IN NO WAY CONCLUSIVE. 4.10 TO SUM UP THE ENTIRE CASH LOAN TAKEN DURING THE YEAR UNDER CONSIDERATION FROM 12 COMPANIES AGGREGATING AT RS.6.69 CRORES IS HELD TO BE EXPLAINED AND ACCORDINGLY THE ADDITION MADE BY AO IN THIS BEHALF IS DIRECTED TO BE DELETED. 4.11 GROUND NO. 2, IN THE MATTER OF DISALLOWANCE OF INTEREST AT RS. 1,03,20,567/- ON AFORESAID LOANS HELD TO BE UNEXPLAINED. THE APPELLANT HAS CLAIMED THAT SUCH INTEREST HAVING PROPERLY EXPENDED AND CLAIMED U/S 36(1)(III), AFTER DUE TD$ IN RESPECT OF AMOUNTS BORROWED AND UTILIZED FOR THE PURPOSE OF ITS BUSINESS SHOULD NOT HAVE BEEN DISALLOWED. IN VIEW OF THE FINDINGS ARRIVED ABOVE IN RESPECT OF GROUND NO L WHEREBY ALL SUCH LOANS HAVE BEEN HELD TO BE EXPLAINED, THE DISALLOWANCE OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 44 44 INTEREST PAID AFTER DUE DEDUCTION OF TAX THEREON IS DIRECTED TO BE DELETED BEING CONSEQUENTIAL TO THE FINDINGS ARRIVED IN RESPECT OF GROUND NO.1 ABOVE. 6. THE LD. DR SUBMITTED THAT IN THIS CASE THE ASSESSEE HAD TAKEN UNSECURED LOAN FROM TWELVE COMPANIES, WHIC H HAVE BEEN STATED IN THE ASSESSMENT ORDER AND TO VERIFY T HE GENUINENESS OF THE UNSECURED LOAN, THE INSPECTOR WA S DEPUTED BY THE AO TO MAKE THE ENQUIRIES AT CALCUTTA AND THE AO ALSO GOT ENQUIRIES DONE FROM INVESTIGATION WING OF CALCU TTA. IN THE CASE OF M/S AEREO DEAL COMM. PRIVATE LIMITED, THE I NSPECTOR FOUND THE COMPANYS EXISTENCE WITH FEW MORE COMPANIE S AT ROOM NO. 2-D OF THE GIVEN ADDRESS. HE FOUND THAT NO NE OF THE DIRECTORS WAS AVAILABLE, BUT THE ACCOUNTANT OF THE C OMPANY RAVIN KUMAR WAS AVAILABLE AND HIS STATEMENT WAS RECOR DED. BANK ACCOUNT DETAILS AND THE BANK STATEMENTS OF THE SAID COMPANY WERE GATHERED AND THE COPY OF THE TAX AUDIT REPORTS, DIRECTORS REPORT ETC FOR FY 2007-08 WERE ALSO SUBMI TTED. IN THE SAID COMPANY, ONE SHRI DEEPAK KUMAR KALANI WAS A DIRECTOR. SIMILARLY, THE ENQUIRY WAS MADE IN ALL THE COMPANIES I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 45 45 AND COPY OF THE BANK ACCOUNT, COPY OF THE AUDIT REP ORT OF LAST THREE YEARS, AMOUNT OF LOANS GIVEN AND MODE OF PAYM ENTS WERE VERIFIED BY THE INSPECTOR. THE INSPECTOR NOTED THAT THE IDENTITY, CREDITWORTHINESS OF THE CREDITORS COULD NO T BE PROVED. THE LOAN TRANSACTION WAS ROUTED THROUGH BANK AND ALL THE MONEY HAS BEEN TAKEN THROUGH BANK TRANSACTIONS. SOM E OF THE COMPANIES WERE MERGED INTO ANOTHER COMPANY AND SOURCE OF THE SOURCE WAS NOT PROVED. MOREOVER, THE LD. DEP ARTMENTAL REPRESENTATIVE SUBMITTED THAT IN ALL THESE CASES TH E SURROUNDING CIRCUMSTANCES HAVE TO BE SEEN. IN ALL T HESE CASES, THE ASSESSEES DIRECTORS WERE NOT PRESENT. THEREFORE , THE LD. DEPARTMENTAL REPRESENTATIVE WAS OF THE VIEW THAT CREDITWORTHINESS AND IDENTITY OF THE CREDITORS COULD NOT BE ESTABLISHED BY THE ASSESSEE. MOREOVER, THE LD. DEPA RTMENTAL REPRESENTATIVE SUBMITTED THAT IN THIS CASE, THE CRU CIAL JUDGEMENT OF VARIOUS HIGH COURTS ARE IN FAVOUR OF T HE DEPARTMENT AND ALSO IN FAVOUR OF THE ASSESSEE. THER EFORE, EACH CASE HAS TO BE DECIDED ON THE FACTS OF ITS OWN CASE. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE LOAN WAS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 46 46 RECEIVED FROM 12 COMPANIES AND THE GENUINENESS OF T HE SAME COULD NOT BE PROVED. INSPECTOR WAS ALSO DEPUTED TO M AKE THE ENQUIRY AT KOLKATA AND THE AO ALSO GOT ENQUIRIES CO NDUCTED FROM INVESTIGATION WING, CALCUTTA. THE LD. DEPARTME NTAL REPRESENTATIVE DURING THE COURSE OF HEARING HAS RE LIED UPON THE DECISION OF AGRAWAL COAL CORPORATION PRIVATE LIM ITED VS. ACIT, 19 TAXMAN.COM 209 (I.T.A.T. INDORE BENCH), WHE REIN IN THE SAME GROUP, THE TRIBUNAL HAS DISMISSED THE APP EAL OF THE ASSESSEE AND THIS IS THE SAME ASSESSEE WHO IS IN THE ANOTHER ASSESSMENT YEAR BEFORE THIS TRIBUNAL AND WHEN ONCE T HE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE DEP ARTMENT, THE TRIBUNAL IS BOUND TO FOLLOW THE ORDER OF THE TRI BUNAL AND THE PRESENT APPEAL DESERVES TO BE DISMISSED. THOSE APPEALS RELATE TO ASSESSMENT YEARS 2005-06 AND 2006-07 AND IN THE YEARS UNDER CONSIDERATION I.E ASSESSMENT YEAR 2008- 09, THE SAME ASSESSEE HAS NOT PROVIDED ANY INFORMATION. THE REFORE, THE APPEAL MAY BE DISMISSED. SIMILARLY, THE LD. DEP ARTMENTAL REPRESENTATIVE ALSO RELIED UPON THE DECISION OF HO N'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAVODAYA CASTLES PVT.LTD., I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 47 47 367 ITR 306 (DEL) AND SUBMITTED THAT AS PER THIS DE CISION OF HON'BLE DELHI HIGH COURT, WHEREIN IT IS HELD THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY AO, HE OBSERVE D THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CREDITWO RTHINESS OF THE SHAREHOLDERS AS WELL AS GENUINENESS OF THE T RANSACTION. THEREFORE, THE HON'BLE HIGH COURT HAS REFERRED THIS MATTER BACK TO THE FILE OF TRIBUNAL. SIMILARLY, THE DECISI ON OF FULL BENCH IN THE CASE OF CIT VS. SOPHIA FINANCE LIMITED , 205 ITR 98 (DEL), WHEREIN IT IS HELD THAT U/S 68, THE ITO HA S JURISDICTION TO MAKE THE ENQUIRY WITH REGARD TO NATU RE AND SOURCE OF SUM CREDITED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND IT WOULD BE IMMATERIAL AS TO WHETHER THE AMOUNT SO CREDITED IS GIVEN COLOUR OF LOAN OR SUM REPRESEN TING SALE PROCEEDS AND EVEN RECEIPTS OF SHARE APPLICATION MON EY AND THE ITO SHOULD HAVE ENQUIRED WHETHER ALLEGED SHAREHOLDE RS DO EXIST OR NOT AND IF THE SHAREHOLDERS EXIST, THEN, P OSSIBLY, NO FURTHER ENQUIRY NEED TO BE MADE. BUT IF THE ITO FIN DS THAT THE ALLEGED SHAREHOLDERS DO NOT EXIST, THEN, IN EFFECT, IT WOULD MEAN THAT THERE IS NO VALID ISSUANCE OF SHARE CAPIT AL. SHARES I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 48 48 CANNOT BE ISSUED IN THE NAME OF NON-EXISTING PERSON S. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE DECISIO N OF HON'BLE KOLKATA HIGH COURT IN CIT VS. PRECISION FIN ANCE, 208 ITR 465 (KOL) AND VARIOUS JUDGMENTS AS FOLLOWS :- 1. M/S. AGRAWAL COAL CORPN. PVT. LTD., INDORE VS. ADDL . CIT, RANGE 5, INDORE, 19 TAXMAN.COM 209 (I.T.A.T. INDORE). 2. CIT VS. NAVODAYA CASTLES PVT.LTD., 367 ITR 306 ( DEL) . 3. CIT VS. SOPHIA FINANCE LIMITED, 205 ITR 98 (DEL) 4. CIT(A) ORDER M/S. BALAJI LTD., INDORE 5. DCIT 1(1) VS. BALAJI COAL P.LTD. (I.T.A.T. INDORE) 6. ACIT VS. NARMADA EXTRUSIONS LTD. AND OTHERS, 19 ITJ 202 (I.T.A.T. INDORE) 7. SUMATI DAYAL VS. CIT, 214 ITR 801 ( S. C.) 8. ROSHAN DI HATTI VS. CIT, 107 ITR 938 ( S. C. ) 9. SHANKAR INDUSTRIES VS. CIT, 114 ITR 689 (CAL) 10. CIT VS. BIJU PATNAIK, 160 ITR 674 ( S.C.) 11. CIT VS. PRECISION FINANCE PVT.LTD.,208 ITR 465 12. CIT VS. P.MOHANKALA & ORS., 291 ITR 625(SC) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 49 49 13. CIT VS. PODAR CEMENT (P) LTD,226 ITR 625 (SC) 14. CIT VS. GOLD COIN HEALTH FOOD (P) LTD. ,304 ITR 308 ( S.C.) 15. CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD., 342 ITR 169 (DEL) 16. ASHOK MAHINDRA & SONS ( HUF) VS. CIT, 173 TAXMAN 178 ( DEL ) 17. JT. CIT VS. SAHELI LEASING & INDUSTRIES LIMITED, 324 ITR 170(S.C.) 18. VAIBHAV COTTON (P) LIMITED VS. ITO, 139 ITR 254 I.T.A.T., INDORE BENCH 19. CIT VS. DURGA PRASAD MORE, 82 ITR 540 (S.C.) 7. THE LD. DEPARTMENTAL REPRESENTATIVE RELYING UPON THESE DECISIONS HAS ARGUED THAT U/S 68 OF THE ACT, THE PROBABILITY HAS TO BE SEEN AND IN THIS CASE, THE EN QUIRY HAS BEEN MADE BY THE ITO AND NO ONE WAS FOUND AT THE G IVEN ADDRESS. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN HIS ACTION OF DELETING THE ADDITION. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 50 50 8. THE LD. AUTHORIZED REPRESENTATIVE HAS ARGUED ORALLY AND HAS ALSO SUBMITTED THE WRITTEN SUBMISSIONS IN AL L THE APPEALS, WHICH ARE PLACED ON RECORD. THE LD. AUTHORI ZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THER E IS NO MERIT IN THE PRESENT APPEAL FILED BY THE REVENUE. E XTENSIVE ENQUIRIES WERE CONDUCTED BY THE AO TO VERIFY THE LO AN TRANSACTIONS WHICH MAY BROADLY BE CATEGORIZED IN FIV E STAGES. THE NOTICES WERE DIRECTLY ISSUED UNDER SECTION 133( 6) OF THE ACT IN DECEMBER, 2010 TO THE LENDERS CALLING FOR DO CUMENTARY EVIDENCES IN SUPPORT OF THE AMOUNTS ADVANCED. IN RE SPONSE THERETO, VARIOUS DOCUMENTS IN THE FORM OF CONFIRMAT IONS, INCOME TAX RETURN, BANK STATEMENTS, ETC., WERE DIRE CTLY RECEIVED FROM VARIOUS PARTIES. IN THE MEANWHILE, INC OME-TAX INSPECTORS WERE DEPUTED BY THE ASSESSING OFFICER TO PERSONALLY VISIT AND MAKE ENQUIRIES AT KOLKATA, WHO VIDE REPORT DATED 10.12.2010 CONFIRMED EXISTENCE OF MOST OF THE LENDE RS AND THE TRANSACTIONS ENTERED INTO WITH THE ASSESSEE. COMMISS ION WAS ALSO ISSUED TO DDIT, INV., KOLKATA UNDER SECTION 13 1 OF THE ACT, WHO INDEPENDENTLY CONDUCTED INVESTIGATION AND S ENT HIS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 51 51 REPORT DATED 20.12.2010. PERTINENTLY, MOST OF THE P ARTIES APPEARED AND FILED DOCUMENTARY EVIDENCES AS REQUIRE D BY DDIT(INV), KOLKATA, THEREBY CONFIRMING THE TRANSACT ION WITH THE ASSESSEE. LATER, INCOME-TAX INSPECTORS WERE AGA IN DEPUTED TO PERSONALLY VISIT AND MAKE ENQUIRIES AT KOLKATA, WHICH FILED ANOTHER REPORT DATED 23.12.2010. THE INSPECTORS EVE N COLLECTED CERTAIN INFORMATION DIRECTLY FROM THE BAN KS, WHICH FURTHER SUPPORTED THE CONTENTION OF THE ASSESSEE. L ASTLY, THE ASSESSEE WAS DIRECTED TO FURNISH DOCUMENTARY EVIDEN CES IN SUPPORT OF THE UNSECURED LOAN. THE ASSESSEE, ACCORD INGLY VIDE LETTER DATED 28.12.2010, SUBMITTED THE DETAILS/ DOC UMENTS SUCH AS CONFIRMATION LETTERS ALONGWITH PAN, COMPANY MASTER DETAILS WITH THE REGISTRAR OF COMPANIES, COPY OF INC OME TAX RETURNS, AUDITORS REPORT OF THE CREDITOR COMPANIES , BANK STATEMENTS REFLECTING RECEIPT AND PAYMENT OF THE SA ID LOAN AMOUNT AND FORM 16A ISSUED ON TAX WITHHELD ON INTERE ST PAID TO ESTABLISH THE CREDIBILITY OF THE TRANSACTIONS. T HE ASSESSEE, THUS, PLACED ON RECORD REQUISITE DOCUMENTARY EVIDEN CES, WHICH CLEARLY ESTABLISHES BEYOND ANY REASONABLE DOUB T THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 52 52 IDENTITY AND THE SOURCE OF THE CREDIT, INCLUDING TH E EXISTENCE AND THE CREDITWORTHINESS OF THE CREDITORS AND ALSO T HE GENUINENESS OF THE LOAN TRANSACTION. MOST IMPORTANT LY, THE DOCUMENTS SO FURNISHED BY THE ASSESSEE WERE FURTHER CORROBORATED BY MATERIALS/EVIDENCES GATHERED DURING THE COURSE OF EX-PARTE INDEPENDENT ENQUIRIES CONDUCTED BY THE ASSESSING OFFICER. IN THE ASSESSMENT ORDER, THE ASS ESSING OFFICER HAS ALSO NOT BEEN ABLE TO REBUT ANY OF THE DOCUMENTARY EVIDENCES PLACED ON RECORD BY THE ASSESSEE. THE AF ORESAID EVIDENCES, IN THE SUBMISSION OF THE ASSESSEE, UNEQU IVOCALLY PROVES/ESTABLISHES ALL THE INGREDIENTS OF SECTION 6 8 OF THE ACT, VIZ. THE IDENTITY, SOURCE, GENUINENESS AS WELL AS TH E CREDITWORTHINESS OF THE CREDITORS. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED UPON THE FOL LOWING DECISIONS :- (I) ORISSA CORPORATION (P) LTD., 159 ITR 78. (II) CIT VS. METACHEM INDUSTRIES, 245 ITR 160 (III) ASHOK PAL DAGA V. CIT: 220 ITR 452 (MP) (IV) CIT V. KHOOBSURAT RESORTS (P.) LTD.: 256 CTR 371(DE L) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 53 53 (V) ORIENT TRADING CO. LIMITED: 49 ITR 723 (BOM.) (VI) CIT V. BAHRI BROTHERS: 154 ITR 247 (PAT.) (VII) DCIT V. ROHINI BUILDERS: 256 ITR 360 (GUJ) (VIII) CIT V. APEX THERM PACKAGING (P.) LTD.: 222 TAXMAN 125 (GUJ) (IX) NEMI CHAND KOTHARI V. CIT: 264 ITR 254 (GAUHATI) (X) CIT V. MORANI AUTOMOTIVES (P.) LTD.: 264 CTR 86 (RA J) (XI) ACIT V. KALANI INDUSTRIES LTD.: 8 ITJ 165 (INDORE). 9. THE SETTLED LEGAL POSITION IS THAT THE INITIAL BURD EN TO SATISFY THE INGREDIENTS OF SECTION 68 OF THE ACT IS ON THE ASSESSEE AND ONCE THE INITIAL BURDEN IS DISCHARGED AND THERE IS NOTHING TO CONTROVERT THE EVIDENCES PLACED ON RECOR D BY THE ASSESSEE, ADDITION CANNOT BE MADE BY THE ASSESSING OFFICER UNDER THAT SECTION. 10. IN THIS REGARD, IT WAS FURTHER SUBMITTED THAT THERE IS NO DISPUTE THAT THE INITIAL BURDEN LIES ON THE ASSE SSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE CREDITOR. H OWEVER, AS STATED ABOVE, IT IS EQUALLY WELL SETTLED THAT ONCE SUCH INITIAL I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 54 54 BURDEN IS DISCHARGED BY THE ASSESSEE, THEN, THE ONU S SHIFTS ON THE REVENUE TO BRING EVIDENCE ON RECORD TO CONTRADICT/CONTROVERT THE SAME, BEFORE MAKING ANY A DDITION UNDER SECTION 68 OF THE ACT. 11. IT IS FURTHER SUBMITTED THAT THE ONUS OF THE ASSESS EE IS TO MERELY ESTABLISH THE SOURCE OF THE CREDIT AND NO T SOURCE OF SOURCE. THE ASSESSEE HAS CLEARLY ESTABLISHED THE SO URCE BY PLACING ON RECORD UNCONTROVERTED DOCUMENTARY EVIDEN CES THAT THE LOAN HAD, IN FACT, BEEN ADVANCED BY THE CREDITO RS AND IS DULY REFLECTED IN THEIR REGULAR BOOKS OF ACCOUNTS. IT IS NOT FOR THE ASSESSEE TO ESTABLISH THE SOURCE OF THE SOURCE. 12. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER PLACED RELIANCE IN THIS REGARD ON THE FOLLO WING DECISIONS: (A) S.K. BOTHRA & SONS, HUF VS. ITO, 347 ITR 347. (B) CIT VS. KISHORI LAL CONSTRUCTION LIMITED, 191 TAXMAN 194. 13. BY ADDUCING VOLUMINOUS DOCUMENTARY EVIDENCES REFERRED SUPRA, THE ASSESSEE, SUBMITTED THAT IT HAD CLEARLY I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 55 55 DISCHARGED THE ONUS CAST ON IT TO ESTABLISH THE IDE NTITY AND THE EXISTENCE OF THE CREDITOR FOR THE PURPOSES OF SECTI ON 68 OF THE ACT AND, THEREFORE, NO ADDITION WAS CALLED FOR IN LI GHT OF LEGAL PRINCIPLES LAID DOWN IN THE DECISION OF THE SUPREME COURT IN THE CASE OF ORISSA CORPORATION (SUPRA). 14. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED BRIEFLY REGARDING CREDITOR COMPANIES IN H IS WRITTEN SUBMISSION, WHICH READS AS UNDER :- AEREO DEALCOMM PVT LTD. DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; EXISTENCE OF COMPANY ACCEPTED BY INSPECTORS IN REPO RT DATED 10.12.2010 AND ITS EXISTENCE HAS ALSO NOT BEE N DISPUTED BY THE AO; STATEMENT OF THE ACCOUNTANT WAS RECORDED BY THE INSPECTOR, WHEREIN HE CONFIRMED THE LOAN TRANSACTIO N WITH THE ASSESSEE; IN ASSESSMENT FOR A.Y. 2002-03, SOURCE OF FUNDS OF THE CREDITOR COMPANY WERE EXAMINED AND VERIFIED BY THE AO OF THE CREDITOR COMPANY U/S 143(3) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 56 56 OPENING BALANCE OF LOAN FROM THE SAID COMPANY STAND S ACCEPTED, SINCE NO ADDITION WAS MADE IN A.Y. 2007-0 8; COMPANY HAD SHOWN INTEREST INCOME OF RS.47.83 LACS AND PROFIT OF RS.11.29 LACS IN A.Y. 2008-09, THUS, REFL ECTING A HEALTHY FINANCIAL POSITION; ENTIRE LOAN REPAID IN FEBRUARY, 2010; COMPANY REGISTERED AS NBFC; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA. CHAMAK TREXIM PVT. LTD. DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; EXISTENCE OF COMPANY ACCEPTED BY INSPECTORS IN REPO RT DATED 10.12.2010 AND ITS EXISTENCE HAS ALSO NOT BEE N DISPUTED BY THE AO; STATEMENT OF THE ACCOUNTANT WAS RECORDED BY THE INSPECTOR, WHEREIN HE CONFIRMED THE LOAN TRANSACTIO N WITH THE ASSESSEE; IN ASSESSMENT FOR A.Y. 2004-05, SOURCE OF FUNDS OF THE CREDITOR COMPANY WERE EXAMINED AND VERIFIED BY THE AO I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 57 57 OF THE CREDITOR COMPANY U/S 143(3), WHICH FURTHER ESTABLISHES THE IDENTITY AND CREDITWORTHINESS. OPENING BALANCE FROM THE COMPANY WAS ACCEPTED SINCE NO ADDITION WAS MADE IN A.Y. 2007-08; COMPANY HAD SHOWN INTEREST INCOME OF RS.85.30 LACS AND PROFIT OF RS.14 LACS IN A.Y. 2008-09, THUS, REFLECT ING A HEALTHY FINANCIAL POSITION ENTIRE LOAN REPAID IN FEBRUARY, 2010; COMPANY REGISTERED AS NBFC; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA. IN RESPECT OF THE AFORESAID TWO PARTIES, THE ASSESS ING OFFICER HAS, IN PARA 3.17 OF THE ASSESSMENT ORDER, REFERRED TO INFORMATION BEING RECEIVED ON 30.12.2010, I.E., ON THE DATE ON WHICH ORDER WAS PASSED (WITHOUT CONFRONTING THE SAI D INFORMATION TO THE ASSESSEE) THAT BANK ACCOUNTS OF THE TWO COMPANIES WERE INTRODUCED BY THE ASSESSEE AND HAS OBSERVED THAT THE SAID FACT ESTABLISHED RELATION AN D NEXUS BETWEEN THE PARTIES AND THE ASSESSEE. IN REBUTTAL, IT IS SUBMITTED THAT THE ASSESSING OFF ICER FAILED TO APPRECIATE THAT MERE FACT THAT BANK ACCOUNT OF THE CREDITOR HAD BEEN INTRODUCED BY THE ASSESSEE NOWHERE ESTABLI SHED THAT THE TRANSACTION WAS NOT GENUINE. IN FACT, THE VERY FACT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 58 58 THAT LOAN HAD BEEN RECEIVED FROM THE TWO COMPANIES, ITSELF SHOWS THAT THERE WAS BUSINESS TRANSACTIONS WITH THE CREDITOR AND HENCE RELATION BETWEEN THE PARTIES. THEREFORE, ADVERSE INFERENCE DRAWN BY THE ASSESSING OFFICER IS, IT IS SUBMITTED, PATENTLY ERRONEOUS AND LEGALLY UNSUSTAINABLE. KHATU VANIJAY PVT. LTD. PANCHANAN VANIJYA PVT. LTD. KAMALNAYAN COMMERCIAL PVT. LTD. RANCHHOD AGENCIES PVT. LTD. PRATHMESH VANIJYA PVT. LTD. LAMBODHAR BARTER PVT. LTD. THE ABOVE SIX COMPANIES MERGED WITH M/S MIDDLETON G OOD PVT. LTD. IN APRIL 2009, W.E.F. 01.04.2008 (PAGE 4 OF THE AO ORDER AND PAGE 70 OF CIT(A) ORDER) . IN RESPECT OF THE AFORESAID 6 COMPANIES FOLLOWING D OCUMENTS PLACED ON RECORD: DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; EXISTENCE OF COMPANY ACCEPTED BY INSPECTORS IN REPO RT DATED 10.12.2010 AND ITS EXISTENCE HAS ALSO NOT BEE N DISPUTED BY THE AO; I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 59 59 STATEMENT OF BROTHER OF THE MERGED ENTITY WAS RECOR DED BY THE INSPECTOR, WHEREIN HE CONFIRMED THE LOAN TRANSA CTION WITH THE ASSESSEE; INSPECTORS IN REPORT DATED 10.12.2010 ALSO STATED T HAT THE LOAN TRANSACTIONS ARE GENUINE; CREDITORS RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONS E TO NOTICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV.). KOLKATA; THE FACT THAT THE COMPANY MERGED PURSUANT TO ORDER OF THE HON'BLE HIGH COURT AFTER ALL REGULATORY COMPLIANCES , ESTABLISHES THE IDENTITY AND EXISTENCE OF THE ERSTW HILE CREDITORS; IN THE BOOKS OF THE MERGED ENTITY, AMOUNT OF LOANS ADVANCES TO THE ASSESSEE-COMPANY IS DULY REFLECTED. NO SPECIFIC FINDING HAS BEEN RECORDED BY THE ASSESS ING OFFICER IN RESPECT OF THE ABOVE SIX CREDITORS AND THEREFORE, A DDITIONS IN RESPECT OF AMOUNT RECEIVED THEREFROM IS LEGALLY UNS USTAINABLE AND RIGHTLY DELETED BY THE CIT(A). REWARD CONSULTANTS PVT. LTD. : DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 60 60 ON ENQUIRY, INSPECTORS FOUND THAT THE CURRENT OCCUP ANT OF THE PREMISES WAS SOME OTHER COMPANY AND THE CURRENT OWNER OF THE PREMISES CLARIFIED THAT HE PURCHASED O FFICE FROM SH. O.P. AGARWAL, KEY PERSON OF REWARD CONSULT ANTS PVT. LTD. IN THE YEAR 2007. THUS, EXISTENCE OF THE CREDITOR CANNOT BE DISPUTED; OPENING BALANCE FROM THE COMPANY STANDS ACCEPTED, SINCE NO ADDITION WAS MADE IN A.Y. 2007-08; ENTIRE LOAN REPAID IN SEPTEMBER, 2010; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA; COMPANY HAD SHOWN TURNOVER OF RS.1.66 CR, GROSS INT EREST OF RS.32.54 LACS AND NET PROFIT OF RS.9.43 LACS IN A.Y. 2008-09, THUS, REFLECTING A HEALTHY FINANCIAL POSIT ION. NO SPECIFIC FINDING HAS BEEN RECORDED BY THE ASSESS ING OFFICER IN RESPECT OF THE ABOVE CREDITOR AND THEREFORE, ADDITI ON IN RESPECT OF AMOUNT RECEIVED THEREFROM IS LEGALLY UNSUSTAINAB LE AND RIGHTLY DELETED BY THE CIT(A). PUSHPAK TRADING & CONSULTANCY (P) LTD. DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 61 61 CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; ENTIRE LOAN REPAID IN MARCH, 2009; COMPANY REGISTERED AS NBFC; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA; COMPANY HAD SHAREHOLDERS FUNDS OF RS.13.47 CRORES AS ON 31.03.2008; INTIMATION FOR A.Y. 2009-10 SHOWED CONTINUED EXISTE NCE OF THE CREDITOR. IN THE ASSESSMENT, THE ASSESSING OFFICER HAS SIMPLY REFERRED TO THE REPORT OF INSPECTOR DATED 10.12.2010 WHEREIN IT HAS BEEN OBSERVED THAT IDENTITY OF COMPANY IS DOUBTFUL. IN REBUTTAL, IT IS SUBMITTED THAT SIMPLY BECAUSE NO BODY COULD IDENTIFY THE COMPANY WHEN INSPECTORS VISITED THE PR EMISES CANNOT BE THE GROUND TO DOUBT THE TRANSACTION. THE ASSESSEE HAD REPAID THE LOAN AND HENCE WAS NOT AWARE OF THE CHANGE IN ADDRESS OF THE PARTY. AS A MATTER OF FACT, AS PER I NTIMATION FOR A.Y. 2009-10, THERE WAS SUBSEQUENT CHANGE IN THE AD DRESS OF THE CREDITOR. IN VIEW OF THE ABOVE, ADDITION MADE BY THE ASSESSIN G OFFICER IS LEGALLY UNSUSTAINABLE AND RIGHTLY DELETED BY THE CI T(A). I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 62 62 SAVERA DISTRIBUTION PVT. LTD. DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; ON ENQUIRY, INSPECTORS COULD NOT LOCATE THE COMPANY AT THE GIVEN ADDRESS; ENTIRE LOAN REPAID IN JULY, 2008; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA; AS PER AUDITED ANNUAL ACCOUNTS OF THE COMPANY AS ON 31.03.2008, THERE WERE SHAREHOLDERS FUND OF RS.13.6 6 CRORES. FURTHER THE COMPANY SHOWED TURNOVER OF RS.2 .34 CRORES AND INTEREST INCOME OF RS.18.72 LACS, THUS, REFLECTING A SOUND FINANCIAL POSITION. IN THE ASSESSMENT, THE ASSESSING OFFICER HAS SIMPLY REFERRED TO THE REPORT OF INSPECTOR DATED 23.12.2010 WHEREIN IT HAS BEEN OBSERVED THAT IDENTITY OF COMPANY IS DOUBTFUL. IN REBUTTAL, IT IS SUBMITTED THAT SIMPLY BECAUSE NO BODY COULD IDENTIFY THE COMPANY WHEN INSPECTORS VISITED THE PR EMISES CANNOT BE THE GROUND TO DOUBT THE TRANSACTION. THE ASSESSEE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 63 63 HAD REPAID THE LOAN AND HENCE WAS NOT AWARE OF THE CHANGE IN ADDRESS OF THE PARTY. IN VIEW OF THE ABOVE, ADDITION MADE BY THE ASSESSIN G OFFICER IS LEGALLY UNSUSTAINABLE AND RIGHTLY DELETED BY THE CI T(A). PARADISE GARMENTS PVT. LTD. : : DOCUMENTARY EVIDENCES LIKE CONFIRMATIONS, BANK STATEMENT, INCOME-TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF COMPANY WITH ROC, MEMORANDUM OF ASSOCIATION, HAVE BEEN PLACED ON RECO RD; ON ENQUIRY, INSPECTORS WERE INFORMED BY THE CURRENT OCCUPANT OF THE PREMISES THAT THE COMPANY WAS IN EXISTENCE AT THE GIVEN ADDRESS A YEAR BACK AND WAS NOW SHIFTED TO SOME OTHER PLACE. THUS, EXISTENCE OF THE CREDITOR CANNOT BE DISPUTED; ENTIRE LOAN REPAID IN FEBRUARY, 2011; COMPANY HAD SHOWN A TURNOVER OF RS.1.14 CRORES, INTEREST INCOME OF RS.59.29 LACS AND TAXABLE INCOME OF RS.18.50 LACS IN A.Y 2008-09. THE COMPANY HAD SHAREHOLDERS FUND OF RS.7.62 CRORES AS ON 31.03.200 8; CREDITOR RESPONDED TO NOTICES ISSUED UNDER SECTION 133(6) BY THE ASSESSING OFFICER AND ALSO IN RESPONSE TO NO TICE UNDER SECTION 131 OF THE ACT ISSUED BY THE DDIT(INV .). KOLKATA. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 64 64 IN THE ASSESSMENT, THE ASSESSING OFFICER HAS NOT SPECIFICALLY REFERRED TO ANY MATERIAL TO DOUBT THE IDENTITY OF COMPANY. REFERENCE TO REPORT OF INSPECTOR THAT HE C OULD NOT LOCATE THE COMPANY IS MISPLACED SINCE THE INSPECTOR S REPORTED THAT CURRENT OCCUPANT OF THE PREMISES STAT ED THAT THE COMPANY WAS IN EXISTENCE AT THE GIVEN ADDRESS A YEAR BACK AND HAS SHIFTED TO SOME OTHER PLACE. 15. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE PLACED SPECIFIC RELIANCE ON THE DECISION OF THE TRI BUNAL IN THE CASE OF A GROUP CONCERNS NAMELY EAGLE FUEL PVT. LTD . ITA NO. 221/IND/2012 AND STATED THAT ON EXACTLY SIMILAR FAC TS, THE TRIBUNAL HAS RESTORE THE ORDER OF THE CIT(A) IN DEL ETING THE DISALLOWANCE MADE U/S 68. 16. FOR THE REASONS ELABORATELY DISCUSSED SUPRA, IT WAS SUBMITTED THAT ADDITION MADE BY THE ASSESSING OFFIC ER HAS RIGHTLY BEEN DELETED BY THE CIT(A). IN VIEW OF THE A FORESAID, IT WAS SUBMITTED THAT SINCE THE ASSESSEE HAS DISCHARGED THE ONUS UNDER SECTION 68 OF THE ACT, THE ADDITION OF RS.6,69,00,000/- MADE BY THE ASSESSING OFFICER HAS RIGHTLY BEEN DELETED BY THE CIT(A). I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 65 65 17. AS A NECESSARY CONSEQUENCE, THE CIT(A) HAS RIGHTLY DELETED DISALLOWANCE OF INTEREST OF RS.1,03,20,567/- ON THE ABOVE LOANS. 18. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO SUBMITTED THAT THE FACTS OF THE ASSESSEES OWN CASE FOR AY 2005-06, WHERE THE ADDITION MADE U/S 68 WAS CONFIRMED BY THE TRIBUNAL IN AGRAWAL COAL CORPORATION PVT LTD. IN DORE VS. ADDL. CIT, RANGE 5, INDORE, 19 TAXMAN.COM 209 (ITAT INDORE), ARE CLEARLY DISTINGUISHABLE FROM THE PRESENT CASE. IN THE CASE OF AY 2005-06 THE NOTICES ISSUED U/S 133(6) COULD N OT BE SERVED AND THE EXISTENCE OF THE COMPANIES COULD NOT BE ESTABLISHED, THEREFORE, THE IDENTITY OF THE CREDITO RS BECAME DOUBTFUL, WHEREAS IN THE PRESENT CASE THE IDENTITY O F THE CREDITORS WAS VERY WELL ESTABLISHED THROUGH VARIOUS LEVEL OF ENQUIRIES CONDUCTED BY THE AO HIMSELF. FURTHER THE CREDITORS INVOLVED IN ASSESSMENT YEAR 2005-06 WERE ENTIRELY D IFFERENT FROM THE CREDITORS INVOLVED IN THE PRESENT APPEAL O F ASSESSMENT YEAR 2008-09. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 66 66 19. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ALSO SUBMITTED THAT THE OBSERVATION OF THE AO WHILE ISSUING COMMISSION U/S 131D TO THE DDIT INVESTIGATION KOLKA TA WERE FACTUALLY INCORRECT AS THE ASSESSEE HAS NOT RECEIVE D ANY SHARE APPLICATION MONEY FROM KOLKATA BASED PARTIES BUT RE CEIVED ONLY UNSECURED LOANS AND THE OBSERVATION THAT THE N OTICES ISSUED U/S 133(6) HAVE BEEN RETURNED UN-SERVED WAS ALSO NOT CORRECT AS ALL THE NOTICES WERE SERVED AND WERE ALS O COMPLIED BY THE CREDITORS. HE ALSO STATED THAT THE INSPECTOR S IN THEIR ENQUIRY REPORT HAVE NOT ONLY ADMITTED THE EXISTENCE OF MOST OF THE COMPANIES BUT IN SOME CASES HAVE ALSO STATED TH AT THE TRANSACTIONS WITH THE ASSESSEE COMPANY APPEAR TO BE GENUINE. HE ALSO SUBMITTED THAT THE ASSESSEE WAS NEVER REQUIR ED TO PRODUCE THE DIRECTORS OF THE CREDITOR COMPANIES. 20. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND ALSO THE ORDER OF THE CIT(A). WE HAVE ALSO PERUSED THE C ASE LAWS CITED BY THE LD. DEPARTMENTAL REPRESENTATIVE AS WEL L AS THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 67 67 21. WE FIND THAT DURING THE YEAR UNDER CONSIDERATION T HE ASSESSEE HAS RECEIVED UNSECURED LOAN AGGREGATING TO RS. 6,69,00,000/- FROM 12 KOLKATA BASED COMPANIES, THE DETAILS OF WHICH ARE AS UNDER :- S.NO. NAME OPENING BALANCE LOAN TAKEN INTEREST PAID TDS ON INTEREST AMOUNT REPAID BALANCE 1. AEREO DEALCOMM. PVT LTD. 98,73,663 3,26,00,000 3 3,04,583 6,80,745 42,93,663 4,08,03,838 2. CHAMAK TREXIM PVT LTD. 3,91,86,415 25,00,000 59, 19,345 12,19,384 78,86,415 384,99,961 3. REWARD CONSULTANTS PVT. LTD. 16,39,608 12,00,000 3,76,804 77,622 1,39,608 29,99, 182 4. PUSHPAK TRADING & CONSULTANCY PVT. LTD - 50,00,000 2,41,803 49,881 - 51,91,922 5. SAVERA DISTRIBUTION PVT. LTD. - 50,00,000 3,10,656 63,995 - 52,46,661 6. PARADISE GARMENTS P. LTD. - 25,00,000 31,762 6,5 43 - 25,25,219 7. KHATU VANIJYA PVT LTD. - 50,00,000 34,631 7,134 - 50,27,497 8. PANCHNAN VANIJYA PVT. LTD. - 35,00,000 25,615 5, 277 - 35,20,338 9. KAMAL NAYAN COMMERCIAL PVT. LTD. - 15,00,000 7,992 1,646 - 15,06,345 10. RANCHHOD AGENCIES PVT. LTD. - 14,00,000 7,746 1,595 - 14,06,151 11. PRATHMESH VANIJAY PVT LTD. - 20,00,000 21,721 4 ,474 - 20,17,247 12. LAMBODAR BARTER PVT LTD. - 47,00,000 37,909 7,8 09 - 47,30,100 TOTAL 6,69,00,000 1,03,20,567 22. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS TRIED TO VERIFY THE AFORESAID UNSECURED LOAN. NOTICES WER E ISSUED U/S 133(6) TO THE LENDERS CALLING FOR DOCUMENTARY EVIDE NCES IN SUPPORT OF THE AMOUNTS ADVANCED. SECONDLY, THE INCO ME-TAX INSPECTORS WERE DEPUTED PERSONALLY TO VISIT AND MAK E ENQUIRIES. THE COMMISSION WAS ALSO ISSUED TO DDIT, K OLKATA U/S 131 OF THE ACT AND INCOME TAX INSPECTORS WERE AG AIN DEPUTED TO PERSONALLY VISIT AND MAKE ENQUIRIES AT K OLKATA AND I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 68 68 LASTLY THE ASSESSEE WAS DIRECTED TO FURNISH DOCUMENT ARY EVIDENCES IN SUPPORT OF THE UNSECURED LOAN. THE AO HAS ISSUED NOTICES DIRECTLY U/S 133(6) TO LENDERS CALLI NG FOR DOCUMENTARY EVIDENCE IN SUPPORT OF THE AMOUNTS ADVA NCED. THE LENDER COMPANIES, IN RETURN, FILED THE VARIOUS DOCUMENTS IN THE FORM OF CONFIRMATIONS, INCOME TAX RETURNS, B ANK STATEMENTS ETC. INCOME TAX INSPECTORS WERE DEPUTED B Y THE AO TO MAKE ENQUIRIES AT KOLKATA, WHO VIDE REPORT DATED 10.12.2010 CONFIRMED EXISTENCE OF MOST OF THE LENDE RS. THEREAFTER, COMMISSION WAS ISSUED TO DDIT, INV., KOL KATA UNDER SECTION 131 OF THE ACT, WHO INDEPENDENTLY COND UCTED INVESTIGATION AND SENT HIS REPORT DATED 20.12.2010 AND MOST OF THE PARTIES APPEARED AND FILED DOCUMENTARY EVIDE NCES AS REQUIRED BY DDIT(INV), KOLKATA, THEREBY CONFIRMING THE TRANSACTION WITH THE ASSESSEE. THE INCOME-TAX INSPEC TORS WERE AGAIN DEPUTED TO PERSONALLY VISIT AND MAKE ENQUIRIE S AT KOLKATA AND COLLECTED CERTAIN INFORMATION DIRECTLY FROM THE BANKS AND FILED ANOTHER REPORT DATED 23.12.2010. TH E ASSESSEE HAS ALSO SUBMITTED THE CONFIRMATION LETTER S ALONGWITH I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 69 69 PAN, COMPANYS MASTER DETAILS WITH THE REGISTRAR OF COMPANIES, COPY OF INCOME TAX RETURNS, AUDITORS RE PORT OF THE CREDITOR COMPANIES, BANK STATEMENTS REFLECTING RECE IPT AND PAYMENT OF THE SAID LOAN AMOUNT AND FORM NO.16A ISS UED ON TAX WITHHELD ON INTEREST PAID. THE ASSESSEE HAS PLAC ED ON RECORD REQUISITE DOCUMENTS, WHICH PROVED THE IDENTIT Y, SOURCE OF CREDIT INCLUDING EXISTENCE AND CREDITWORTHINESS AND GENUINENESS OF THE LOAN. THE AO HAS MADE THE EXTENS IVE ENQUIRY. 23. THE ASSESSEE HAS TAKEN LOAN FROM AEREO DEALCOMM. PRIVATE LIMITED. THE ASSESSEE HAS SUBMITTED DOCUMEN TARY EVIDENCE LIKE CONFIRMATION, BANK STATEMENT, INCOME TAX RETURN, AUDITED ACCOUNTS, TDS CERTIFICATE, MASTER DATA OF T HE COMPANY WITH REGISTRAR OF COMPANIES, MEMORANDUM OF ASSOCIATI ON. THE EXISTENCE OF THE COMPANY WAS INSPECTED BY THE I NSPECTOR ON 10.12.2010 AND THE AO HAS NOT DISPUTED ABOUT THE EXISTENCE. DURING THE COURSE OF INVESTIGATION, STAT EMENT OF ACCOUNTANT WAS RECORDED BY THE INSPECTOR, WHEREIN HE HAS CONFIRMED THE LOAN TRANSACTION IN ASSESSMENT YEAR 2 002-03. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 70 70 THE SOURCE OF FUND OF CREDITOR COMPANY WAS EXAMINED. THE AO HAS ALSO EXAMINED THE OPENING BALANCE, WHICH STA NDS ACCEPTED, SINCE NO ADDITION WAS MADE IN THE ASSESSME NT YEAR 2007-08. THE COMPANY HAS ALSO SHOWN THE INTEREST INC OME OF RS.47.83 LACS AND PROFIT OF RS. 11.20 LACS IN ASSES SMENT YEAR 2008-09 REFLECTING A HEALTHY FINANCIAL POSITION. 24. DURING THE COURSE OF HEARING, THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IN A SSESSMENT YEAR 2007-08, THE OPENING BALANCE OF THE COMPANY WAS RS. 98,73,663/- WHICH HAS BEEN ACCEPTED BY THE DEPARTMEN T AS NO ADDITION WAS MADE IN THAT YEAR AND THIS YEAR INTERES T WAS PAID OF RS. 33,04,583/-. WE FIND THAT THE LOAN RECEIPT F ROM THIS COMPANY WERE REPAID IN FEBRUARY, 2010. THE INSPECTO R HAS CONFIRMED THAT THE ACCOUNTANT OF THIS COMPANY OF WHO M STATEMENT WAS ALSO RECORDED BY THE INSPECTOR, HAS CONFIRMED HAVING ADVANCED UNSECURED LOAN TO THE ASSESSEE. THE DDIT HAS ALSO ISSUED SUMMONS U/S 131 AND IN RESPONSE TO THAT THE COMPANY HAS FILED THE COPY OF THE AUDITED ANNUAL AC COUNT, PHOTOCOPY OF THE BANK STATEMENT AND CONFIRMATION. T HEREFORE, I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 71 71 THE INSPECTOR AND DDIT HAVE CONFIRMED THE EXISTENCE OF SUCH COMPANY. THE ASSESSEE HAS ALSO FILED COPY OF THE AS SESSMENT ORDER FOR ASSESSMENT YEAR 2002-03 OF THE SAID LENDE R COMPANY, WHEREIN THE SHAREHOLDER FUNDS BEING SHAREHO LDER CAPITAL AND SHARE PREMIUM ACCOUNT WAS EXAMINED AND F OUND TO BE VERIFIABLE. AO FOUND THAT THE SAID LENDER COM PANY HAD SHARE CAPITAL OF RS.47,75,000/- AND IT HAS RECEIVED SHARE PREMIUM OF RS. 4,29,75,000/- ON ACCOUNT OF SHARE AL LOTMENT. THE AO OF THE LENDER COMPANY HAS ALSO VERIFIED THE SHAREHOLDER ON TEST CHECK BASIS AND SHAREHOLDERS B ANK ACCOUNTS WERE ALSO VERIFIED. THEREFORE, WE ARE OF T HE VIEW THAT THE ASSESSEE HAS PROVED THE IDENTITY, CREDITWORTHINE SS OF THIS LENDER COMPANY AND ALSO THE GENUINENESS OF THE TRAN SACTION WITH THE SAID COMPANY WITH SUFFICIENT EVIDENCE. 25. IN THE CASE OF CHAMAK TREXIM PRIVATE LIMITED, THE ASSESSEE HAS FILED DOCUMENTARY EVIDENCE LIKE CONFIR MATION, BANK STATEMENT, INCOME TAX RETURN, AUDITED REPORT, TDS CERTIFICATE, MASTER DATA OF THE COMPANY WITH REGISTR AR OF COMPANIES, MEMORANDUM OF ASSOCIATION. THE EXISTENCE OF THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 72 72 COMPANY WAS INSPECTED BY THE INSPECTOR ON 10.12.201 0. THE STATEMENT OF THE ACCOUNTANT OF THIS COMPANY WAS RECO RDED WHEREIN, HE CONFIRMED THE LOAN TRANSACTION OF THE AS SESSEE. IN ASSESSMENT YEAR 2004-05, SOURCE OF FUNDS OF THIS CR EDITOR COMPANY WAS EXAMINED AND VERIFIED BY THE AO IN ITS ASSESSMENT PROCEEDINGS U/S 143(3). THE OPENING BALA NCE FROM THE SAID COMPANY WAS ACCEPTED. THE COMPANY HAS SHOWN THE INTEREST INCOME OF RS. 85.30 LACS AND PROFIT OF RS. 14 LACS IN ASSESSMENT YEAR 2008-09 AND THE ENTIRE LOAN WAS REPA ID IN FEBRUARY, 2010. 26. OUT OF TWELVE COMPANIES, THE SIX LENDER COMPANIES, VIZ., KHATU VANIJYA PRIVATE LIMITED, PANCHANAN VANI JYA PRIVATE LIMITED, KAMALNAYAN COMMERCIAL PRIVATE LIMITED, RAN CHHOD AGENCIES PRIVATE LIMITED, PRATHMESH VANIJYA PRIVATE LIMITED AND LAMBODHAR BARTER PRIVATE LIMITED MERGED WITH M/S . MIDDLETON GOOD PRIVATE LIMITED IN APRIL, 2009. IN R ESPECT OF THESE SIX COMPANIES, THE ASSESSEE HAS FILED DOCUMEN TARY EVIDENCE LIKE CONFIRMATIONS, BANK STATEMENTS, INCOM E TAX RETURNS, AUDITED REPORTS, TDS CERTIFICATES, MASTER DATA OF THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 73 73 COMPANY WITH REGISTRAR OF COMPANIES, MEMORANDUM OF ASSOCIATION, THE COPY OF MERGER ORDER PASSED BY THE HONBLE CALCUTTA HIGH COURT, WHICH HAVE BEEN ALSO PLACED ON RECORD. THE EXISTENCE OF THESE COMPANIES HAVE BEEN ACCEPTED BY THE INSPECTOR IN HIS REPORT DATED 10.12.2010. THE AO HA S ALSO NOT DISPUTED THE EXISTENCE OF THIS COMPANY. THE INSPECT OR RECORDED STATEMENT OF BROTHER OF THE DIRECTOR, WHERE IN HE CONFIRMED THE LOAN TRANSACTION WITH THE ASSESSEE. TH E INSPECTOR ALSO REPORTED THAT LOAN TRANSACTIONS ARE GENUINE. THE FACT THAT THE COMPANIES WERE MERGED PURSUANT TO THE ORDER OF THE HON'BLE HIGH COURT AFTER ALL REGULATOR Y COMPLIANCES, ESTABLISHES THE IDENTITY AND EXISTENCE OF THE ERSTWHILE CREDITORS. SIMILARLY, IN ALL THE OTHER CASES, NAMELY, REWARD CO NSULTANTS PRIVATE LIMITED, PUSHPAK TRADING & CONSULTANCY (P) LIMITED, SAVERA DISTRIBUTION PRIVATE LIMITED AND PARADISE GA RMENTS PRIVATE LIMITED, THE ASSESSEE HAS FILED DOCUMENTARY EVIDENCE LIKE CONFIRMATIONS, BANK STATEMENTS, INCOME TAX RET URNS, AUDITED REPORTS, TDS CERTIFICATES, MASTER DATA OF T HE COMPANY I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 74 74 WITH REGISTRAR OF COMPANIES, MEMORANDUM OF ASSOCIATI ON. IN THE CASE OF REWARD CONSULTANTS PRIVATE LIMITED, ON INQUIRY MADE BY THE INSPECTOR, IT WAS INFORMED THAT THE PRES ENT OCCUPANT HAS PURCHASED THE OFFICE FROM ONE SHRI O.P . AGRAWAL WHO WAS THE KEY PERSON OF M/S. REWARD CONSULTANTS PVT. LIMITED. THIS LENDER COMPANY HAD TURNOVER OF RS. 1. 66 CRORES, GROSS INTEREST OF RS. 32.54 LACS AND NET PROFIT OF RS. 9.43 LACS IN ASSESSMENT YEAR 2008-09. OPENING BALANCE FROM TH E SAID COMPANY STANDS ACCEPTED, SINCE NO ADDITION WAS MADE IN THE AY 2007-08. THE ENTIRE LOAN WAS REPAID IN SEPTEMBER, 2010. THE SAID CREDITOR COMPANY ALSO RESPONDED TO THE NOT ICES ISSUED U/S 133(6) BY THE AO. SIMILARLY, IN PUSHPAK TRADING & CONSULTANCY (P) LIMITED, IT HAD SHAREHOLDERS FUNDS OF RS. 13.47 CRORES AS ON 31.3.2008. THE ENTIRE LOAN WAS R EPAID IN MARCH, 2009. THE SAID COMPANY IS A REGISTERED NBFC. THE SAID CREDITOR COMPANY ALSO RESPONDED TO THE NOTICES ISSUED U/S 133(6) BY THE AO AND ALSO IN RESPONSE TO THE NO TICE ISSUED U/S 131 BY THE DDIT (INV) KOLKATA. SIMILARLY, IN TH E CASE OF SAVERA DISTRIBUTION PRIVATE LIMITED, IT HAD SHAREHO LDERS FUNDS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 75 75 OF RS. 13.66 CRORES. FURTHER, THE COMPANY HAD SHOWN THE TURNOVER OF RS. 2.34 CRORES AND INTEREST INCOME WAS RS. 18.72 LACS. THE SAID CREDITOR COMPANY ALSO RESPONDED TO T HE NOTICES ISSUED U/S 133(6) BY THE AO. SIMILARLY, IN THE CASE OF PARADISE GARMENTS PRIVATE LIMITED, IT HAD SHOWN THE TURNOVER OF RS. 1.14 CRORES, INTEREST INCOME AT RS. 59.29 LACS AND ITS TAXABLE INCOME WAS RS. 18.50 LACS IN ASSESSMENT YEAR 2008-09 . THE COMPANY HAD SHAREHOLDERS FUND OF RS. 7.62 CRORES AS ON 31.03.2008. THE ENTIRE LOAN WAS REPAID IN FEBRUARY 2 011. ON ENQUIRY, THE INSPECTOR WAS INFORMED BY THE CURRENT O CCUPANT OF THE PREMISES THAT THE COMPANY WAS IN EXISTENCE AT THE GIVEN ADDRESS A YEAR BACK AND WAS NOW SHIFTED TO SOME OTHE R PLACE. THUS THE EXISTENCE OF THE CREDITOR CANNOT BE DISPUT ED. THE SAID CREDITOR COMPANY ALSO RESPONDED TO THE NOTICES ISSUED U/S 133(6) BY THE AO. THEREFORE, WE ARE OF THE VIEW T HAT IN RESPECT OF ALL THE TWELVE COMPANIES, THE ASSESSEE WA S ABLE TO PROVE NOT ONLY THE IDENTITY AND CREDITWORTHINESS BUT ALSO THE SOURCE OF THE FUNDS. MOREOVER, THE ASSESSEE HAS ALS O SUBMITTED ALL THE EVIDENCES, WHICH WERE REQUIRED BY T HE AO. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 76 76 SECTION 68 OF THE INCOME-TAX ACT, 1961, WHICH IS REP RODUCED AS UNDER :- 68 . WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INC OME OF THE ASSESSEE OF THAT PREVIOUS YEAR. 27. IN TERMS OF THE AFORESAID PROVISIONS OF SECTION 68 OF THE ACT THE PRIMARY ONUS TO EXPLAIN THE NATURE AND SOUR CE OF THE AMOUNT SO FOUND TO BE CREDITED IS ON THE ASSESSEE. THE EXPRESSION NATURE ENCOMPASSES BRINGING ON RECORD, EVIDENCE ABOUT NATURE OF THE RECEIPT, BE IT LOAN, ADVANCE, S HARE APPLICATION MONEY, ETC. THE EXPRESSION `SOURCE ENV ISAGES ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF TH E SOURCE/ PERSON FROM WHOM THE AMOUNT IS RECEIVED. HOWEVER, ONC E REASONABLE EXPLANATION IS FURNISHED BY THE ASSESSEE , THE ONUS, SHIFTS TO THE REVENUE. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 77 77 28. WE FIND THAT IN THE CASE OF ORISSA CORPORATION (P) LIMITED, 159 ITR 78, IN THE CONTEXT OF REQUIREMENT OF THE ASSESSEE TO DISCHARGE PRIMARY ONUS UNDER SECTION 68 OF THE ACT, OBSERVED THAT THE ASSESSEE HAVING GIVEN THE NA MES AND ADDRESSES OF THE CREDITOR WHO WERE INCOME-TAX ASSESS EES, THE MERE FACT THAT SUCH CREDITORS DID NOT RESPOND PURSU ANT TO NOTICE UNDER SECTION 131 OF THE ACT COULD NOT BE US ED AGAINST THE ASSESSEE. THE HON'BLE SUPREME COURT OBSERVED AS UNDER: IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN THE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER SECTION 131 AT THE INSTANCE OF THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. THE REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFOR T MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO THE CONCLUSION THAT THE ASSESSEE HAS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 78 78 DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COUL D NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUS ION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. 29. SIMILARLY, IN THE CASE OF CIT VS. METACHEM INDUSTRI ES, 245 ITR 160 (MP), JURISDICTIONAL HIGH COURT HAS OBS ERVED AS UNDER :- 3. WE HAVE HEARD THE LEARNED COUNSELS FOR THE PARTIES . SECTION 68 OF THE ACT SAYS THAT WHERE ANY SUM IS FO UND CREDITED IN THE BOOKS OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATI ON ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT, IN THE OPINION OF THE ITO, S ATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. THERE FORE, ACCORDING TO SECTION 68, THE FIRST BURDEN IS ON THE ASSESSEE TO SATISFACTORILY EXPLAIN THE CREDIT ENTRY IN THE B OOKS OF ACCOUNT OF THE PREVIOUS YEAR. IF THE EXPLANATION GI VEN BY THE ASSESSEE IS SATISFACTORY, THEN THAT ENTRY WILL NOT BE CHARGED WITH THE INCOME OF THE PREVIOUS YEAR OF THE ASSESSEE. IN CASE THE EXPLANATION OFFERED BY THE AS SESSEE IS NOT SATISFACTORY OR THE SOURCE OFFERED BY THE AS SESSEE- I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 79 79 FIRM IS NOT SATISFACTORY, THEN IN THAT CASE THE AMO UNT SHOULD BE TAKEN TO BE THE INCOME OF THE ASSESSEE. I N THE PRESENT CASE, THE ASSESSING OFFICER DID NOT FEEL SA TISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND, ACCORDINGLY, ASSESSED ALL THE THREE CREDIT ENTRIES TO THE ACCOUNT OF THE ASSESSEE AS THE INCOME. THE HON'BLE COURT FURTHER HELD THAT ONCE SATISFACTO RY EXPLANATION IS ADDUCED BY THE ASSESSEE, THEN, ADDIT ION CANNOT BE MADE AND THE AMOUNT MAY BE TAXED IN THE HANDS OF THE PERSON WHO HAS DEPOSITED THE AMOUNT. TH E RELEVANT OBSERVATIONS OF THE COURT ARE AS UNDER: 5. SO FAR AS THE RESPONSIBILITY OF THE ASSESSEE IS CONCERNED, IT IS SATISFACTORILY DISCHARGED. WHETHER THAT PERSON IS INCOME-TAX PAYER OR NOT OR FROM WHERE HE HAS BROUGHT THIS MONEY IS NOT THE RESPONSIBILITY OF THE FIRM. THE MOMENT THE FIRM GIVES SATISFACTORY EXPLANATION AND PRODUCES THE PERSON WHO HAS DEPOSITED THE AMOUNT, T HEN THE BURDEN OF THE FIRM IS DISCHARGED AND IN THAT CA SE THAT CREDIT ENTRY CANNOT BE TREATED TO BE INCOME OF THE FIRM FOR THE PURPOSES OF INCOME-TAX. IT IS OPEN FOR THE ASSE SSING OFFICER TO TAKE APPROPRIATE ACTION UNDER SECTION 69 OF THE ACT AGAINST THE PERSON WHO HAS NOT BEEN ABLE TO EXP LAIN THE INVESTMENT. IN THE PRESENT CASE, THERE IS THE C ONCURRENT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 80 80 FINDING OF BOTH THE COMMISSIONER (APPEALS) AS WELL AS OF THE TRIBUNAL THAT THE FIRM HAS SATISFACTORILY EXPLA INED THE AFORESAID ENTRIES. 30. WE FIND THAT IN THE CASE OF S. K. BOTHRA & SONS, HUF V. ITO: 347 ITR 347, THE ASSESSEE TOOK LOAN FRO M TWO PERSONS. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 131 O F THE ACT TO SUCH PARTIES WHICH WERE DULY RESPONDED. THE ASSESSING OFFICER, HOWEVER, ADDED THESE LOAN AMOUNTS AS UNEXPLAINED CR EDIT SIMPLY BASED ON THE REPORT OF THE INSPECTOR AND HEL D THE SAME AS NOT GENUINE. THE APPEAL PREFERRED BY THE ASSESS EE WAS DISMISSED BY THE CIT(A) AS WELL AS BY THE TRIBUNAL. ON FURTHER APPEAL BEFORE THE HIGH COURT, WHILE SETTI NG ASIDE THE MATTER TO THE ASSESSING OFFICER, THE COUR T OBSERVED AS UNDER: .. IN SUCH CIRCUMSTANCES, WE FIND SUBSTANCE IN THE CON TENTION OF MR. KHAITAN THAT THE ORDER OF ASSESSMENT CANNOT BE SUPPORTED AS THE MATERIALS COLLECTED BY THE ASSESSI NG I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 81 81 OFFICER THROUGH THE INSPECTOR WHICH WERE RELIED UPO N WERE NEITHER DISCLOSED TO THE APPELLANT NOR WAS THE APPE LLANT ASKED TO EXPLAIN THE REPORT SUBMITTED BY THE INSPEC TOR. IT IS NOW A SETTLED LAW THAT WHILE CONSIDERING THE QUESTION WHETHER THE ALLEGED LOAN TAKEN BY THE ASSESSEE WAS A GENUINE TRANSACTION, THE INITIAL ONUS IS ALWAYS UPO N THE ASSESSEE AND IF NO EXPLANATION IS GIVEN OR THE EXPL ANATION GIVEN BY THE APPELLANT IS NOT SATISFACTORY, THE ASS ESSING OFFICER CAN DISBELIEVE THE ALLEGED TRANSACTION OF L OAN. BUT THE LAW IS EQUALLY SETTLED THAT IF THE INITIAL BURD EN IS DISCHARGED BY THE ASSESSEE BY PRODUCING SUFFICIENT MATERIALS IN SUPPORT OF THE LOAN TRANSACTION, THE O NUS SHIFTS UPON THE ASSESSING OFFICER AND AFTER VERIFIC ATION, HE CAN CALL FOR FURTHER EXPLANATION FROM THE ASSESSEE AND IN THE PROCESS, THE ONUS MAY AGAIN SHIFT FROM THE ASSE SSING OFFICER TO ASSESSEE. IN THE CASE BEFORE US, THE ASSESSEE BY PRODUCING TH E LOAN- CONFIRMATION CERTIFICATES SIGNED BY THE CREDITORS, DISCLOSING THEIR PERMANENT ACCOUNT NUMBERS AND ADDRESS AND FUR THER INDICATING THAT THE LOAN WAS TAKEN BY ACCOUNT PAYEE CHEQUES, NO DOUBT, PRIMA FACIE, DISCHARGED THE INIT IAL BURDEN AND THOSE MATERIALS DISCLOSED BY THE ASSESSE E PROMPTED THE ASSESSING OFFICER TO ENQUIRE THROUGH T HE INSPECTOR TO VERIFY THE STATEMENTS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 82 82 WE FIND SUBSTANCE IN THE CONTENTION OF MR. KHAITAN THAT ON THE BASIS OF THE REPORT SUBMITTED BY SUCH INSPECTOR , THE ASSESSING OFFICER COULD NOT STRAIGHTWAY ARRIVE AT T HE CONCLUSION THAT THE TRANSACTIONS WERE NOT GENUINE W ITHOUT GIVING FURTHER OPPORTUNITY TO THE APPELLANT TO EXPL AIN THE ALLEGED INFORMATION DISCLOSED BY THE INSPECTOR TO T HE ASSESSING OFFICER. . 31. WE ALSO FIND THAT IN THE CASE OF CIT V. KISHORI LAL CONSTRUCTION LTD.: 191 TAXMAN 194, HON'BLE DELHI HI GH COURT HAS OBSERVED AS UNDER: AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDE S, WE FIND OURSELVES IN FAVOUR OF THE SUBMISSION MADE BY LEARN ED COUNSEL FOR THE RESPONDENT. AS MENTIONED ABOVE, THE ASSESSEE HAD PRODUCED THE FOLLOWING WHICH WOULD CLE ARLY DEMONSTRATE IT HAS DISCHARGED ITS INITIAL BURDEN:- (A) THE IDENTITY OF M/S. YADAV AND COMPANY, BY FILI NG THEIR CONFIRMATION AND THEIR ASSESSMENT PARTICULARS. (B) GENUINENESS OF THE TRANSACTION BY POINTING OUT THAT THE ASSESSEE HAD SOLD SHARES TO M/S. YADAV AND COMPANY IN THE IMMEDIATELY PRECEDING YEAR (WHICH HAS BEEN ACCE PTED BY THE DEPARTMENT) AND THAT THE PAYMENT RECEIVED DURIN G THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 83 83 RELEVANT PREVIOUS YEAR WAS AGAINST THE DEBT DUE FRO M M/S. YADAV AND COMPANY. (C) CREDITWORTHINESS OF THE CREDITOR BY POINTING OU T THAT THE AMOUNT WAS RECEIVED BY WAY OF CHEQUES DRAWN ON THE BANK ACCOUNT OF M/S. YADAV AND COMPANY MAINTAINED WITH U NION BANK OF INDIA, MOTI BAGH BRANCH, NEW DELHI, WHICH, DESPITE DENIAL BY THE YADAVS, WAS, AS PER BANK RECORDS, FOU ND TO BE OPENED AND OPERATED BY SH. O.P. YADAV/MOHINDER SING H YADAV. THE INITIAL BURDEN THUS DISCHARGED, IT WAS FOR THE REVENUE TO ESTABLISH THAT THE TRANSACTION IN QUESTION WAS BOGU S. THIS WOULD BE SO EVEN IF THERE IS A DENIAL BY THE CREDIT ORS THAT THE CREDITS WERE NOT GENUINE AS HELD BY THE SUPREME COU RT IN CIT V. ORISSA CORPN. (P.) LTD. [1986] 159 ITR 78. MERE DENIAL BY YADAVS THAT ACCOUNT IN QUESTION WAS NOT OPERATED BY THEM WOULD NOT AUTOMATICALLY LEAD TO THE INFERENCE THAT ASSESSEE DEPOSITED IN THE SAID ACCOUNT AND, THEREFORE, IT BE CAME ITS UNACCOUNTED INCOME. THE CIT(A) AS WELL AS THE ITAT HAVE RIGHTLY POINTED OUT THAT THE NECESSARY EXERCISE WHI CH WAS TO BE UNDERTAKEN BY THE ASSESSING OFFICER WAS NOT CARR IED OUT. IT WAS FOR THE ASSESSING OFFICER TO PROBE THE MATTE R FURTHER. HE COULD NOT SIMPLY PASS ON THE BUCK TO THE ASSESSE E ASKING HIM TO PRODUCE SH. O.P. YADAV OR SH. MOHINDER SINGH YADAV. IT IS THE DEPARTMENT WHICH HAD REOPENED THE ASSESSM ENT ON I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 84 84 THE BASIS OF THE STATEMENTS OF THE YADAVS. THE DEPA RTMENT WAS RELYING UPON THE SAID STATEMENTS. WHEN THE PREM ISES OF M/S. YADAV AND COMPANY WERE SEARCHED BY THE DEPARTM ENT IN 2002 AND THE STATEMENTS OF AFORESAID TWO PERSONS WERE RECORDED, IT IS CLEAR THAT YADAV AND COMPANY WAS VE RY MUCH IN EXISTENCE. MORE INTERESTINGLY, M/S. YADAV AND CO MPANY EVEN ASSESSED TO INCOME-TAX. IN THE CASE OF ASSESSE E, THE ASSESSMENT WAS COMPLETED IN DECEMBER, 2003. IN SUCH A SCENARIO, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE ASSESSING OFFICER TO FIND THE WHEREABOUTS OF YADAVS PARTICULA RLY HAVING REGARD TO THE STATEMENT OF THE ASSESSEE THAT IT HAD NO DEALING WITH M/S. YADAV AND COMPANY AFTER ASSESSMENT YEAR 2 000- 01 AND WAS THUS UNAWARE OF ITS PRESENT WHEREABOUTS. LIVE LINK BETWEEN THE BANK ACCOUNT OF M/S. YADAV AND COM PANY AND THE ASSESSEE HAS NOT BEEN ESTABLISHED. 32. WE FIND THAT IN THE CASE OF CIT V. DATA WARE (P) LIMITED: ITA NO. 263 OF 2011, THE HONBLE KOLKATA H IGH COURT HELD THAT ONCE THE ASSESSEE FURNISHED PAN OF THE CREDITOR, THE ASSESSING OFFICER MUST ENQUIRE FROM T HE ASSESSING OFFICER OF THE CREDITOR. THE COURT OBSERV ED AS UNDER: BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AND T HE TRIBUNAL BELOW HAVE IN DETAILS CONSIDERED THE FACT THAT THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 85 85 SHARE APPLICATION MONEY WAS PAID BY ACCOUNT PAYEE CHEQUE, THE CREDITOR APPEARED BEFORE THE ASSESSING OFFICER, DISCLOSED ITS PAN NUMBER AND ALSO OTHER DETAILS OF THE ACCOUNTS BUT IN SPITE OF THAT THE ASSESSING OFFICER DID NOT ENQUIRE FURTHER FROM THE ASSESSING OFFICER OF THE C REDITOR BUT INSTEAD, HIMSELF PROCEEDED TO CONSIDER THE PROF IT AND LOSS ACCOUNT OF THE CREDITOR AND OPINED THAT HE HAD SOME DOUBT ABOUT THE GENUINENESS OF SUCH ACCOUNT. IN OUR OPINION, IN SUCH CIRCUMSTANCES, THE ASSESSING OFFIC ER OF THE ASSESSEE CANNOT TAKE THE BURDEN OF ASSESSING THE PR OFIT AND LOSS ACCOUNT OF THE CREDITOR WHEN ADMITTEDLY TH E CREDITOR HIMSELF IS AN INCOME TAX ASSESSEE. AFTER G ETTING THE PAN NUMBER AND GETTING THE INFORMATION THAT THE CREDITOR IS ASSESSED UNDER THE ACT, THE ASSESSING O FFICER SHOULD ENQUIRE FROM THE ASSESSING OFFICER OF THE CR EDITOR AS TO THE GENUINENESS OF THE TRANSACTION AND WHETHE R SUCH TRANSACTION HAS BEEN ACCEPTED BY THE ASSESSING OFFI CER OF THE CREDITOR BUT INSTEAD OF ADOPTING SUCH COURSE, T HE ASSESSING OFFICER HIMSELF COULD NOT ENTER INTO THE RETURN OF THE CREDITOR AND BRAND THE SAME AS UNWORTHY OF CRED ENCE. SO LONG IT IS NOT ESTABLISHED THAT THE RETURN SUBMI TTED BY THE CREDITOR HAS BEEN REJECTED BY ITS ASSESSING OFF ICER, THE ASSESSING OFFICER OF THE ASSESSEE IS BOUND TO ACCEP T THE SAME AS GENUINE WHEN THE IDENTITY OF THE CREDITOR A ND THE GENUINENESS OF TRANSACTION THROUGH ACCOUNT PAYEE CH EQUE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 86 86 HAS BEEN ESTABLISHED. WE FIND THAT BOTH THE COMMISS IONER OF INCOME TAX(APPEAL) AND THE TRIBUNAL BELOW FOLLOW ED THE WELL-ACCEPTED PRINCIPLE WHICH ARE REQUIRED TO BE FO LLOWED IN CONSIDERING THE EFFECT OF SECTION 68 OF THE ACT AND WE THUS FIND NO REASON TO INTERFERE WITH THE CONCURREN T FINDINGS OF FACT RECORDED BY BOTH THE AUTHORITIES. THE APPEAL IS THUS DEVOID OF ANY SUBSTANCE AND IS SUMMA RILY DISMISSED. 33. ON GOING THROUGH THE ABOVE CASE LAWS AND APPLYING THEM ON THE FACTS OF THE ASSESSEES CASE, WE FIND TH AT THE SAME ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE . WE FIND THAT IN THE INSTANT CASE THE ASSESSEE HAD, DURING T HE COURSE OF ASSESSMENT PROCEEDINGS, FILED ALL THE RELEVANT D ETAILS/ DOCUMENTS/ INFORMATION, REQUIRED BY THE ASSESSING O FFICER, AS WERE NECESSARY TO SUBSTANTIATE THE IDENTITY AND C REDIT- WORTHINESS OF THE CREDITOR COMPANIES AND ALSO THE GENUINENESS OF TRANSACTION. 34. THE AO HAS NOT BEEN ABLE TO REBUT, IN ANY MANNER, VOLUMINOUS DOCUMENTARY EVIDENCES PLACED ON RECORD. IN FACT, DISREGARDING THE DOCUMENTS PLACED ON RECORD, THE ASSESSING OFFICER, PROCEEDED TO MAKE ADDITION UNDER SECTION I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 87 87 68 OF THE ACT, SIMPLY BY CHERRY PICKING CERTAIN PAR TS OF THE REPORTS OF THE INSPECTORS OF INCOME TAX/ INVESTIGAT ION WING, WITHOUT APPRECIATING THAT THE REPORTS CONSIDERED ALO NG WITH EX-PARTE MATERIAL/ DOCUMENTS COLLECTED/ RECEIVED FR OM CREDITORS, ESTABLISHED, BEYOND ANY DOUBT, THE INGRE DIENTS OF SECTION 68 OF THE ACT. 35. MOST PERTINENTLY, THE AO HAS NOT SPECIFICALLY DEALT WITH ANY OF THE VOLUMINOUS MATERIAL/ DOCUMENTS AVAILABLE ON RECORD. IN THE ASSESSMENT ORDER, THE ASSESSING OFFI CER HAS SIMPLY REPRODUCED THE REPORTS FURNISHED, SUBMISSION S OF THE ASSESSEE AND DISCUSSION ON CASE LAWS, WITHOUT DEALING WITH THE SAME AND SPECIFYING THEIR APPLICABILITY VIS-A-V IS THE FACTS OF VARIOUS CREDITORS. 36. WE FIND THAT IN ASSESSMENT YEAR 2005-06 IN THE CASE OF AGRAWAL COAL CORPORATION 19 TAXMAN.COM 209 (ITAT IND ORE), OF THE SAME ASSESSEE, RELIED UPON BY THE LD. DEPART MENTAL REPRESENTATIVE, THE CREDITORS WERE NOT TRACEABLE, W HICH IS NOT THE FACT IN THE PRESENT CASES. ON THE CONTRARY, IN THE PRESENT CASE ALL THE CREDITORS NOT ONLY RESPONDED TO THE NO TICES I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 88 88 ISSUED U/S 133(6), BUT MOST OF THEM WERE ALSO FOUND EXISTING BY THE INSPECTORS AND MOST OF THEM ALSO PRESENTED B EFORE THE DDIT (INVESTIGATION) KOLKATA. THEREFORE, THE FACTS ARE CLEARLY DISTINGUISHABLE. MOREOVER, IN THE CASE OF CIT VS. N AVODAYA CASTLES PVT. LTD., ALSO THE PARTY WAS NOT PRESENT AN D THE SUMMONS ISSUED U/S 131 RETURNED UNSERVED. IN THAT C ASE, THE ASSESSEE WAS ASKED TO PRODUCE THE SHAREHOLDERS T O SUBSTANTIATE THE CLAIM OF GENUINENESS BUT THE ASSES SEE WAS UNABLE TO PRODUCE THEM. BUT, IN THE INSTANT CASE, WE HAVE GONE THROUGH THE CASE RECORDS AND WE FOUND THAT THE AO HAS MADE THE VARIOUS ENQUIRIES HIMSELF. MOREOVER, HE HA S ALSO DEPUTED THE INSPECTOR AND IN MOST OF THE CASES, THE INSPECTORS CONFIRMED THE EXISTENCE OF THE CREDITORS . THEREAFTER, IF THE AO HAD ANY DOUBT, HE SHOULD HAVE ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE TO PRODUCE THE CRE DITORS BEFORE HIM. THE AO DID NOT REQUIRE THE ASSESSEE TO PRODUCE THE CREDITORS. THEREFORE, WE HAVE TO DECIDE THE MATT ER AS PER THE FACTS AVAILABLE ON RECORD. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 89 89 37. THE ENTIRE ADDITION UNDER SECTION 68 OF THE ACT IS, THUS, WITHOUT ANY BASIS AND IS LEGALLY UNSUSTAINABLE . 38. THE VIEW OF THE LD. CIT(A) THAT THE LOAN TAKEN BY TH E ASSESSEE FROM TWELVE COMPANIES AGGREGATING TO RS. 6,69,00,000/- WAS EXPLAINED, IS PROPER AND DOES NOT REQUIRE ANY INTERFERENCE AND THE ADDITION WAS RIGHTLY DELETE D BY THE LD. CIT(A) AND HAS ALSO RIGHTLY DELETED THE DISALLO WANCE OF INTEREST OF RS. 1,03,20,567/- ON THE ABOVE LOANS. G ROUND NOS. 2 TO 4 OF THE REVENUE ARE DISMISSED. 39. GROUND NO. 5 READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIA(A) ERRED, ERRED IN DELETING THE ADDITIO N OF RS. 1,55,00,000/- BEING SHARE CAPITAL FROM THREE COMPANIES BEING PART OF LINKED GROUP OF COMPANIES WHICH WERE FOUND TO BE ACCOMMODATION ENTRY PROVIDER DURING PROCEEDING U/S 133A OF THE INCOME- TAX ACT, 1961. 40. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE ISSUED SHARES OF RS.10/- EACH AT PREMIUM OF RS.190/- PER SHARE (I.E. @ RS.20 0/- PER SHARE). THE SHARES WERE SUBSCRIBED BY M/S. TRIMURTH I I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 90 90 FINVEST PVT. LTD., M/S PURVI FINVEST PVT. LTD. AND M/S. EAST WEST FINVEST (I) LTD. AS UNDER : - AMOUNT (RS.) S. NO. NAME OF THE COMPANY TOTAL SHARE CAPITAL OLD UNSECURED LOAN FRESH SHARE CAPITAL 1 TRIMURTHI FINVEST P. LTD. 1,17,00,000 72,00,000 45,00,000 2 PURVI FINVEST P. LTD. 1,12,00,000 62,00,000 50,00,000 3 EAST WEST FINVEST (I) LTD. 1,18,00,000 58,00,000 60,00,000 TOTAL FRESH SHARE CAPITAL 1,55,00,000 THE ASSESSING OFFICER MADE ADDITION OF THE AFORESAI D AMOUNT OF RS.1.55 CRORES SOLELY ON THE GROUND THAT THE AFORESAID COMPANIES WERE HIT BY RIGORS OF SECTION 68 OF THE ACT IN VIEW OF FINDINGS GIVEN IN ASSESSEES OWN C ASE FOR A.Y 2003-04. 41. WE OBSERVE THAT IN ASSESSMENT YEAR 2003-04, THE AO HAS MADE AN ADDITION OF RS. 70 LACS RECEIVED BY THE ASSESSEE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 91 91 FROM THE ABOVE REFERRED THREE COMPANIES AS UNSECURE D LOAN. THE SAID ADDITION WAS DELETED BY THE LD CIT(A), AGAI NST WHICH THE DEPARTMENT IS IN APPEAL BEFORE US FOR ASSESSMEN T YEAR 2003-04 IN ITA NO. 202/IND/2012, WHICH WAS ALSO HEARD TOGETHER WITH ALL THE ABOVE APPEALS. 42. IT IS SEEN THAT IN AY 2003-04, THE CASE OF THE ASSE SSEE WAS RE-OPENED AND AN ADDITION OF RS. 70 LACS RECEIVE D AS UNSECURED LOAN FROM ABOVE REFERRED THREE COMPANIES WAS MADE U/S 68 HOLDING THAT THE THREE COMPANIES BELONG TO LUNKAD GROUP. IN THE COURSE OF SURVEY CONDUCTED BY THE DEPARTMENT U/S 133A IN THE CASE OF LUNKAD GROUP OF COMPANIES ON 02.05.2006, IT WAS FOUND THAT THE SAID LUNKAD GROUP IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIE S. SINCE THESE THREE COMPANIES WERE CONSIDERED TO BE A PART OF THE LUNKAD GROUP BY THE AO, HE MADE ADDITION OF THE UNS ECURED LOAN AMOUNT RECEIVED BY THE ASSESSEE FROM THESE THR EE COMPANIES IN ASSESSMENT YEAR 2003-04 AND ON THE BAS IS OF THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2003-04, HE MADE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 92 92 ADDITION OF THE SHARE CAPITAL AND SHARE PREMIUM REC EIVED FROM THESE THREE COMPANIES IN ASSESSMENT YEAR 2008- 09. 43. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT(A) DELETED THE ADDITION MADE IN BOTH THE YEARS. 44. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON TH E ORDER OF THE AO OF ASSESSMENT YEAR 2003-04. 45. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESS EE SUBMITTED THE WRITTEN SUBMISSION, WHICH IS ON RECORD, THE RELEVANT PORTION OF HIS REPLY READS AS UNDER :- IT IS SUBMITTED THAT THE ADDITION MADE UNDER SECTION 68 O F THE ACT IN A.Y 2003-04 WAS ON ACCOUNT OF UNSECURED LOANS AND NOT ON ACCOUNT OF SHARE CAPITAL AS ALLEGED BY T HE ASSESSING OFFICER IN THE PRESENT PROCEEDINGS. IT IS FURTHER RESPECTFULLY SUBMITTED THAT IN A.Y 20 03-04, THE ASSESSMENT PROCEEDINGS WERE REOPENED IN THE ASSESSE ES CASE, PURPORTEDLY ON THE BASIS OF SURVEY CONDUCTED ON LUNKAD GROUP OF COMPANIES ON 02.05.2006. IT WAS H ELD THAT THE ASSESSEE HAD RECEIVED UNSECURED LOANS FROM THE ABOVE THREE COMPANIES, ALLEGED TO BE PART OF LUNKAD GROUP . IN THIS REGARD, IT IS RESPECTFULLY SUBMITTED THAT T HE ABOVE THREE SHARE APPLICANTS, ARE NOT PART OF LUNKAD GROUP OF C OMPANIES. THE CIT(A) IN ASSESSEES OWN CASE FOR AY 2003-04 IN IT NO. 325/10-11/416 DATED 31.01.2012, DELETED SIMILAR ADD ITION MADE U/S 68 OF THE ACT, THOUGH ON ACCOUNT OF UNSECU RED LOANS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 93 93 AND ACCEPTED THE IDENTITY AND THE CREDITWORTHINESS OF TRIMURTI FINVEST P. LTD., PURVI FINVEST P. LTD. AND EAST WEST FINVEST (I) LTD, AND ALSO GENUINENESS OF THE TRANSA CTION. IT WAS ALSO OBSERVED THAT THE SAID COMPANIES DO NOT APPEAR TO BE PART OF LUNKAD GROUP. THE PERTINENT OBSERVATIONS OF THE CIT(A) ARE REPRODUCED HEREUNDER FOR EASE OF REFERENCE : 4.2 COMING TO GROUND NO.2, THE SAME IS DIRECTED AG AINST ADDITION OF RS.70,00,000/- IN RESPECT OF UNSECURED LOANS TAKEN FROM 3 COMPANIES VIZ. (1) M/S EAST WEST FINVE ST INDIA LTD., (2) TRIMURTHI FINVEST P.LTD., AND (3) PURVI F INVEST P.LTD. ALL HAVING COMMON ADDRESS AS: KAMLA HARI VILA, BESI DES APPOLLO PHARMACY, MAIN ROAD, VIDYANAGAR, BILASPUR. BEFORE THE A.O. THE APPELLANT FILED ALL NECESSARY DOCUMENT S IN SUPPORT OF SUCH LOAN TRANSACTIONS, I.E. CONFIRMATIO N LETTERS INCORPORATING PAN DETAILS, ACCEPTANCE OF LOAN, POST AL ADDRESS, THEIR INCOME-TAX RETURNS FOR THE RELEVANT ASSESSMEN T YEARS AND COPIES OF FINAL ACCOUNTS WHEREIN SUCH LOAN TRAN SACTIONS WERE REFLECTED AND NOT ONLY THIS EVEN COPY OF BANK STATEMENT AND COPIES OF ANNUAL RETURNS FILED WITH REGISTRAR O F COMPANIES, MEMORANDUM OF ASSOCIATION OF THESE COMPA NIES WERE ALSO FILED. THE INTEREST PAYMENT MADE TO THEM WERE SUBJECT TO TDS AND TDS CERTIFICATES WERE ALSO FILED ALONG WITH APPELLANTS BANK STATEMENT WHEREIN THE LOAN TRANSAC TIONS WERE REFLECTED AND COPIES OF SUCH CREDITORS ACCOUNT S AS PER BOOKS OF THE APPELLANT, WERE ALSO FILED. IT WAS CON TENDED BEFORE AO THAT THE APPELLANT HAD FULLY DISCHARGED P RIMARY ONUS CAST ON IT AND RELIANCE WAS PLACED ON HONBLE SUPREME COURTS DECISION IN THE CASE OF SREELEKHA BANERJEE & OTHERS I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 94 94 VS. CIT 49 ITR 122 (SC) AND ROSHAN DI HATTI VS. CIT (1977) 107 ITR 938 (SC). 4.2.1 ON EXAMINATION OF ANALYSIS MADE BY AO IT CLEA RLY EMERGES THAT THE AO HAS PROCEEDED WITH THE DEFINITE NOTION THAT SINCE THESE TRANSACTIONS WERE WITH LUNKAD GROU P OF COMPANIES, THESE ARE NOT GENUINE TRANSACTIONS AND A LL THE THREE CREDITOR COMPANIES WITHOUT CITING ANY DETAIL AND INSTANCES, THE AO HAS PROCEEDED TO HOLD THAT THEY W ERE ENTANGLED IN FINANCIAL TRANSACTIONS WITH LUNKAD GRO UP OF COMPANIES AS PER SURVEY FINDINGS OF LUNKAD GROUP. I T IS NOT CLEAR HOW THE AO HAS PROCEEDED TO CONCLUDE THAT THE LOAN TRANSACTIONS OF THE APPELLANT WITH SUCH COMPANIES W ERE NOT GENUINE. THEN THE AO HAS PROCEEDED TO EXAMINE SUCH TRANSACTIONS FROM THE POINT OF VIEW OF A COLORABLE DEVICE AND IN THIS RESPECT HAS PLACED RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. DURGAPRASAD MO RE, (1971) 540 ITR PAGE 545 (SC) AND FURTHER IN THE CAS E OF MC.DOWELL & CO. LTD. VS. CTO (1985) 154 ITR 148 (SC ), CWT VS. ARVIND NAROTTAMDAS (1988) 173 ITR 479 (SC) AND UNION OF INDIA VS. PLAYWORLD ELECTRONICS PVT. LTD. (1990) 18 4 ITR 308 (SC) (SUPRA). THE THREE AFORESAID DECISIONS RELATED TO TAX EVASION BY TAX PLANNING WHEREAS IN APPELLANTS CASE THESE WERE PLAIN AND SIMPLE LOAN TRANSACTIONS. THUS IT EM ERGES THAT THE AO HAS NOT PROPERLY APPRECIATED THE FACTS AND D ETAILS SURROUNDING SUCH TRANSACTIONS AND HAS CONSIDERED TH EM TO BE IN-GENUINE TRANSACTIONS WITHOUT BRINGING ANY DEFINI TE DETAILS AND EVIDENCES ON RECORD. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 95 95 4.2.2 IN THE COURSE OF APPEAL PROCEEDINGS THE APPEL LANT HAS BROUGHT NECESSARY DETAILS AND EVIDENCES TO ESTABLIS H THE BASIC AND PRIMARY FACT THAT ALL THE THREE COMPANIES WERE NOT RELATED TO LUNKAD GROUP OF COMPANIES. IN COURSE OF DISCUSSION, IT WAS ADMITTED BY THE AR PRESENT THAT THESE COMPANIES MAY HAVE SOME FINANCIAL TRANSACTIONS WITH SOME OF LUNKAD GROUP BUT THAT IN ITSELF WOULD NOT BE SUF FICIENT TO HOLD THEM AND CLUB THEM IN THE SAME CATEGORY AS LUN KAD GROUP OF COMPANIES. IT WAS FURTHER EMPHASIZED THAT ONCE THE PRIMARY ONUS WAS FULLY DISCHARGED BY THE APPELLANT THE ONUS TOTALLY SHIFTED TO THE AO TO BRING NECESSARY DEFINI TE AND CREDITABLE DETAILS AND EVIDENCES ON RECORD TO AT LE AST PRIMA FACIE ESTABLISH THAT THE LOAN TRANSACTIONS ENTERED INTO BY THE APPELLANT WERE NOT GENUINE AND THESE COMPANIES WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES BUT NOTH ING OF THAT SORT HAS BEEN DONE. RATHER ON THE OTHER HAND T HE SENIOR FUNCTIONARY OF THE DEPARTMENT THE CIT-I, INDORE HAS CONSIDERED THESE THREE COMPANIES TO BE IDENTIFIABLE GENUINE CA SES WHOSE REQUEST FOR TRANSFER OF THEIR JURISDICTION FROM IND ORE TO BILASPUR WAS ACCEPTED. IT WAS ALSO STATED THAT HAD THESE COM PANIES BEEN CLOSELY CONNECTCD WITH LUNKAD GROUP OF COMPANI ES OR HAD LARGE NUMBER OF TRANSACTION WITH THEM, THEIR RE QUEST FOR TRANSFER OF THEIR CASES TO BILASPUR WOULD NOT HAVE BEEN ACCEPTED AND THIS VERY ORDER U/S 127 SUPPORTS THE A PPELLANT CASE THAT THESE COMPANIES WERE NOT IN THE SAME CLAS S AS THAT OF OTHER LUNKAD GROUP OF COMPANIES. THE AR FURTHER EMPHASIZED THAT IN THE RECENT YEAR THE ORDER PASSED BY AO AT BILASPUR FOR ASSTT. YEAR 2008-09 IN THE CASES OF AL L THE THREE COMPANIES, THERE IS CATEGORICAL FINDINGS BY AO ABOU T I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 96 96 EXAMINATION OF SHARE CAPITAL RESERVE AND FINANCE OF ALL THESE COMPANIES AND THE RETURNED INCOME HAS BEEN ACCEPTED AS DECLARED WITHOUT ANY VARIATION AND NO ADVERSE FINDI NGS OF ANY NATURE HAS BEEN RECORDED IN ANY OF THE THREE CASES. IT IS FURTHER SEEN THAT THE APPELLANT IN THE WRITTE N SUBMISSION HAS EFFECTIVELY MET ALL THE OBSERVATIONS OF AO AND AR POINTED OUT THAT THE FINDINGS ARRIVED BY AO IN REJECTING TH E EXPLANATION OFFERED BY THE APPELLANT IN LOAN TRANSACTIONS WERE DEVOID OF ANY MERIT AND WITHOUT SUPPORT OF LAW AS SETTLED THR OUGH VARIOUS JUDICIAL DECISIONS. THUS WITHOUT GOING INTO FURTHER DETAILED CONTENTIONS ADVANCED IN WRITTEN SUBMISSION AND VARIOUS JUDICIAL DECISIONS CITED IN THIS BEHALF, IN THE FACTS OF THE APPELLANT'S CASE IT HAS TO BE NECESSARILY HELD THAT THE APPELLANT HAS DISCHARGED HIS ONUS OF ESTABLISHING A LL THE THREE INGREDIENTS AS REQUIRED BY SECTION 68 OF INCOME-TAX ACT I.E. ESTABLISHING IDENTITY AND GENUINENESS OF TRANSACTIO N AND CREDITWORTHINESS. IT SHOULD BE APPRECIATED THAT DEGREE OF ONUS TO EXP LAIN THE CASH CREDIT TRANSACTION CANNOT BE UNIFORM AND RIGID IN ALL THE SITUATIONS. DEGREE OF ONUS REGARDING GENUINENESS OF TRANSACTION IN RESPECT OF RECEIPT OF SHARE CAPITAL AT HUGE PREMIUM IN UNLISTED COMPANIES OTHERWISE THROUGH PUB LIC ISSUE CANNOT BE VIEWED BUT WITH SUSPICION AND THE APPELLA NT MAY BE REQUIRED TO JUSTIFY SUCH RECEIPT OF MONEY ON HUG E PREMIUM AS SUCH TRANSACTION WOULD DEFY NORMAL FINANCIAL PRU DENCE AND LOGIC. BUT THE SAME DEGREE OF ONUS CANNOT BE CA ST ON THE APPELLANT TO EXPLAIN THE LOAN TRANSACTION WHICH HAV E BEEN REPAID IN A SPAN OF 1 YEARS OR SO WHEN THE APPELL ANT IS ABLE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 97 97 TO DISCHARGE HIS ONUS TO ESTABLISH THE IDENTITY OF THE CREDITORS, RECEIPT OF MONEY THROUGH BANKING CHANNEL AND EXISTE NCE AND APPARENT FINANCIAL WORTH OF CREDITORS AS REFLECTED FROM THE AUDITED ACCOUNTS AND I.T. RETURNS. IT MAY BE ALSO O BSERVED THAT ONUS TO ESTABLISH ALL THE THREE INGREDIENTS WO ULD VARY FROM CASE TO CASE IDENTITY IS FIRST INGREDIENTS, WH ICH CAN BE ESTABLISHED BY GIVING COMPLETE ADDRESS, PHYSICAL EX ISTENCE OF THE PERSON AND I.T. PARTICULARS I.E. PAN AND DETAIL S OF FILING OF RETURN ETC. IN A GIVEN CASE, WHERE THE TRANSACTION OF SAY A SMALLER AMOUNT OF RS. 50000/- OR 1 LAKH IS INVOLVED THE CREDIT WORTHINESS OF PERSON INVOLVING NOMINAL INCOME IN TH E SAME RANGE MAY BE ACCEPTABLE, BUT CAN BECOME SUSPICIOUS AND DOUBTFUL IF THE AMOUNT ADVANCED RUNS IN MILLIONS AN D CRORES, WITHOUT THERE BEING OTHER VERIFIABLE DETAILS AND EV IDENCES OF SOURCES OF SUCH FUNDS ADVANCED. FURTHER STILL, INVE STMENT BY THE VERY SAME PERSON OR ENTITY IN SHARE CAPITAL AT PREMIUM IN PVT. LTD. COMPANIES, WHERE NEITHER ANY FIXED RETURN IS ASSURED NOR ARE THERE EXIT OPTIONS TO GET BACK THE FUNDS INVESTED WOULD RENDER THE GENUINENESS OF THE TRANSA CTIONS ITSELF TOTALLY SUSPICIOUS AND SO THE CREDIT WORTHIN ESS TO PARK HUGE FUNDS IN ILLIQUID INVESTMENT WITH NO CERTAINTY ABOUT ANY RETURN. BEFORE CONCLUDING IT HAS TO BE OBSERVED THAT SUCH L OANS WERE REPAID FULLY AS PER SUBMISSIONS FILED BY THE APPELL ANT IN THE COURSE OF ASSESSMENT PROCEEDINGS BEFORE AO. THE APP ELLANT HAS CONTINUED THE FINANCIAL TRANSACTIONS WITH THREE SUCH COMPANIES WHICH WERE SPREAD OVER 4-5 YEARS FROM FIN ANCIAL YEAR 2001-02 ONWARDS ,AS PER COPY OF LEDGER ACCOUNT FILED IN THE COMPILATION AND IT WAS EMPHASIZED THROUGH WRITT EN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 98 98 SUBMISSION AND IN THE COURSE OF DISCUSSION THAT SUR PRISINGLY ADDITIONS WERE MADE ONLY FOR THE YEAR UNDER APPEAL AND EVEN FOR EARLIER /LATTER YEARS IN SCRUTINY ASSESSMENTS S UCH LOAN TRANSACTIONS WERE ACCEPTED AS PROPER AND GENUINE AN D THUS THERE WAS ABSOLUTELY NO REASON FOR THE AO TO HAVE A DOPTED A DIFFERENT VIEW FOR AY UNDER CONSIDERATION WITH THE SAME SET OF COMPANIES. IT WAS ALSO FINALLY SUBMITTED THAT SURPR ISINGLY THOUGH THE LOAN AMOUNT WAS ADDED BACK BUT INTEREST PAYMENT CLAIMED AS DEDUCTION ON SUCH LOAN DURING THE YEAR U NDER CONSIDERATION THOUGH BEING SUBSTANTIAL WAS NOT DISA LLOWED. 4.2.6 THUS ON OVER ALL CONSIDERATION OF FACTS AND CIRCUMSTANCES OF THE CASE THE DETAILS AND EVIDENCES FILED BY THE APPELLANT BEFORE AO AND THE SUBMISSIONS MADE IN COURSE OF APPEAL PROCEEDINGS, THE ADDITION MADE BY AO BY T REATING UNSECURED LOANS FROM THREE COMPANIES AS UNEXPLAINED IS NOT AT ALL FOUND TO BE PROPER AND JUSTIFIED AND ACCORDI NGLY DIRECTED TO BE DELETED. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. 46. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT IDENTITY OF THE ABOVE COMPAN IES CANNOT BE DISPUTED SINCE THESE COMPANIES WERE EARLIER ASSE SSED AT INDORE AND SUBSEQUENT TO THE TRANSFER OF THEIR JURI SDICTION VIDE ORDER PASSED UNDER SECTION 127 BY THE CIT, INDORE I N 2008, ARE CURRENTLY BEING ASSESSED AT BILASPUR. COPIES OF THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 99 99 ASSESSMENT ORDERS FOR THE ASSESSMENT YEAR 2008-09 I N THE CASE OF THREE COMPANIES WERE ALSO ENCLOSED AT PAGES 729-800 OF THE PAPER BOOK. TRANSFER ORDER U/S 127 WAS PASSED MUCH AFTER THE SURVEY PROCEEDINGS IN THE CASE OF LUNKAD GROUP OF CASES. 47. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE F URTHER CONTENDED THAT HAD THE AFORESAID THREE COMPANIES BE EN CLOSELY ASSOCIATED WITH LUNKAD GROUP, THEIR REQUEST FOR TRAN SFER OF CASES TO BILASPUR WOULD NOT HAVE BEEN ACCEPTED. THIS FACT ALSO CONFIRMS THAT THESE COMPANIES ARE NOT RELATED TO LU NKAD GROUP. FURTHER, REGULAR ASSESSMENT U/S 143(3) OF TH E ABOVE THREE COMPANIES FOR ASSESSMENT YEAR 2008-09 WERE CA RRIED OUT AT BILASPUR, WHICH ALSO ESTABLISH THE EXISTENCE AND CREDITWORTHINESS OF THESE COMPANIES. THE LIST OF DIR ECTORS OF THE THREE COMPANIES, AS AVAILABLE ON THE WEBSITE OF MINISTRY OF CORPORATE AFFAIRS, SUBMITTED BY THE ASSESSEE ALSO S UBSTANTIATE THAT THESE COMPANIES ARE NOT MANAGED BY LUNKAD GROU P. 48. REFERRING TO THE ASSESSMENT ORDER PASSED U/S 143(3) IN THE CASES OF ALL THE THREE COMPANIES, OUR ATTENTION WAS INVITED I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 100 100 TO THE FINDINGS GIVEN IN THESE ASSESSMENT ORDERS TH AT THE SHARE CAPITAL AND RESERVES AND SURPLUS OF THESE COMPANIES WERE EXAMINED BY THE AO, WHICH FACT HAS BEEN MENTIONED IN THEIR RESPECTIVE ASSESSMENT ORDERS. 49. REFERENCE WAS ALSO INVITED TO THE DECISION OF THE IN DORE BENCH OF THE TRIBUNAL IN CASE OF NARMADA EXTRUSIONS PVT. LTD. AND OTHERS: IT(SS) NOS.3 TO 7/IND/2011 AND CO NOS. 25 TO 29/IND/2011, WHEREIN THE AFORESAID THREE COMPANIES DO NOT APPEAR IN THE LIST OF LUNKAD GROUP OF COMPANIES. 50. IN VIEW OF THE AFORESAID AND FOR THE REASONS DISCUSS ED IN THE FIRST APPEAL ORDER OF ASSESSMENT YEAR 2003-0 4 PASSED BY THE CIT(A), IT WAS SUBMITTED THAT ADDITION OF RS.1.5 5 CRORES IS UNTENABLE AND HAS RIGHTLY BEEN DELETED BY THE CIT(A ). 51. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE ADDITION OF RS. 1.55 CRORES WAS MADE BY THE AO IN ASSESSMENT YEAR 2008- 09 ON THE BASIS OF THE ASSESSMENT ORDER OF ASSESSMENT YEAR 2003-04. THE CIT(A) WHILE DELETING THE ADDITION MADE IN AY 2003-04 HAS GIVEN ELABORATE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 101 101 FINDING, WHICH WERE HEAVILY RELIED UPON BY THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND HAVE BEEN REPRODUCED ABOVE. WE FIND THAT THE CIT(A) HAS NOTED THAT THE JURISDICTION OF THE ABOVE THREE COMPANIES WAS TRANSFERRED FROM INDORE TO BILASPUR BY CIT INDORE U/S 127 AND THE SCRUTINY ASSESSMENT OF THESE THREE COMPANIES FOR ASSESSMENT YEAR 2008- 09 WAS MADE BY THEIR RESPECTIVE AO AT BILASPUR. THI S FACT SUBSTANTIATE THE IDENTITY AS WELL AS CREDITWORTHINESS OF THESE COMPANIES. 52. WE ALSO FIND THAT THE CIT(A) HAS NOTED THAT THE AO HAS PROCEEDED WITH THE DEFINITE NOTION THAT THE TRANSACTIONS OF THE ASSESSEE WERE WITH LUNKAD GROUP OF COMPANIES WHICH ARE ENTANGLED IN FINANCIAL TRANSACTIONS AS PER THE SURVEY FINDINGS OF THE LUNK AD GROUP. IT IS NOT CLEAR HOW THE AO HAS PROCEEDED TO CONCLUDE THAT THE LOAN TRANSACTIONS OF THE ASSESSEE WITH SUCH COMPANIES WERE NOT GENUINE. THE CIT(A) HAS STATED THAT THESE THREE COMPANIES DO NOT BELONG I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 102 102 TO THE LUNKAD GROUP OF COMPANIES, THOUGH THEY MAY HAVE SOME FINANCIAL TRANSACTIONS WITH SOME OF THE LUNKAD GROUP COMPANIES BUT THAT IN ITSELF WOULD NOT BE SUFFICIENT TO HOLD THEM AND CLUB THEM IN THE SAM E CATEGORY AS LUNKAD GROUP OF COMPANIES. THE CIT(A) HAS HELD THAT ON FACTS OF THE CASE IT HAS TO BE NECESSARILY HELD THAT THE ASSESSEE HAS DISCHARGED H IS ONUS OF ESTABLISHING ALL THE THREE INGREDIENTS AS REQUIRED BY SECTION 68 I.E. ESTABLISHING THE IDENTI TY AND CREDITWORTHINESS AND ALSO THE GENUINENESS OF TH E TRANSACTIONS. THE CIT(A) HAS ALSO DRAWN SUPPORT FRO M THE FACT THAT THE ASSESSEE HAD TRANSACTIONS WITH THESE THREE COMPANIES EVEN IN EARLIER / LATER YEARS AND IN THE SCRUTINY ASSESSMENTS OF THE ASSESSEE SUC H LOAN TRANSACTIONS WERE ACCEPTED AS PROPER AND GENUINE AND THERE WAS ABSOLUTELY NO REASON FOR THE AO TO HAVE TAKEN A DIFFERENT VIEW FOR THE YEAR UNDE R CONSIDERATION WITH THE SAME SET OF COMPANIES. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 103 103 53. ON CAREFUL CONSIDERATION OF THE FACTUAL AND THE LEGAL PREMISES AS RELIED UPON BY AO AND ALSO THE ASSESSEE IT HAS TO BE OBSERVED THAT IT HAS BEEN BROADLY A SETTLED PREPOSITION IN LAW THAT WHETHER IN A GIVEN CASE IDENTITY CREDITWORTHINESS AND GENUINENESS HAS BEEN ESTABLISHED IS BROADLY A FINDI NG OF FACTS WHICH HAS TO BE ARRIVED ON APPRECIATION OF CUMULATIVE FACTS AVAILABLE ON RECORDS. IN THE INSTA NT CASE THE IDENTITY OF THE THREE COMPANIES STOOD ACCEPTED IN APPEAL ORDER PASSED FOR ASSESSMENT YEAR 03-04 BY CIT(A) AND NO MATERIAL HAS COME ON RECORD IN ANY MANNER TO WARRANT A DIFFERENT VIEW IN THE PRESENT APPEAL PROCEEDINGS. SECONDLY, THE CREDITWORTHINESS OF SUCH COMPANIES WERE ACCEPTED FOR SUBSTANTIAL AMOUNT OF LOANS AS NOTED ABOVE IN THE APPEAL ORDER FOR ASSESSMENT YEAR 2003-04 BY THE CIT(A) AND SINCE THERE IS NO ADVERSE MATERIAL AVAILABLE, THE CREDITWORTHINESS CANNOT ALSO BE DOUBTED. THE ABOVE DECISION LEAVES THE ONLY ISSUE T O I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 104 104 BE DECIDED IS GENUINENESS OF SHARE APPLICATION MONE Y RECEIVED BY PRIVATE LIMITED COMPANY THAT TOO AT SUBSTANTIAL PREMIUM WHEN THE INVESTMENT IS APPARENTLY AN ILLIQUID INVESTMENT. WE OBSERVE THAT IN OTHER CASES WHERE SHARE CAPITAL CONTRIBUTION WAS OBTAINED FROM PAPER CONCERNS/DUMMY COMPANIES THAT IN CASES OF SUCH COMPANIES, THERE WERE USUALLY ADVERSE FINDINGS BY THE CONCERNED AO'S. BUT, IN THE CASE OF AFORESAID THREE COMPANIES NO ADVERSE FINDIN GS ARRIVED, IN THE INDIVIDUAL CASES, HAS BEEN BOUGHT O N RECORD EITHER BY THE AO OR BY THE DEPARTMENT. THE SECOND ISSUE USUALLY NOTICED WAS THAT SUCH SHARES ISSUED WERE ACQUIRED BACK BY THE INDIVIDUAL ENTITIES CONNECTED WITH DIRECTORS AND THERE FAMILY MEMBERS WITHIN A SPAN OF 1-2 YEARS IN PARTICULAR BEFORE AMENDMENT OF PROVISION OF SECTION 56 WITH EFFECT FROM 1.10.2009, WHERE BY ACQUISITION OF ANY MOVABLE PROPERTY FOR A CONSIDERATION, WHICH WAS LESS THAN FAIR MARKET VALUE OF PROPERTY EXCEEDING I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 105 105 RS. 50000 WAS MADE SPECIFICALLY EXGIBILE TO TAX AS INCOME FROM OTHER SOURCES. THUS THE CYCLE OF FIRST GETTING UNACCOUNTED FUNDS INTRODUCED IN THE GARB OF SHARE CAPITAL CONTRIBUTION ETC. AT SUBSTANTIAL PREMIUM WITHOUT ANY FINANCIAL JUSTIFICATION OF THE SAME AND REACQUISITION OF SUCH SHARES BY PROMOTERS / DIRECTORS AND THEIR CONNECTED ENTITIES AT MUCH LESS ER VALUE THEN THE AMOUNT ON WHICH SUCH SHARES WERE ISSUED WAS COMPLETE. IN THE INSTANT CASE, AS NOTED BY THE CIT(A) THE FACTS ARE OTHERWISE. THE CIT(A) HAS NOTED THAT THERE IS BROAD JUSTIFICATION ABOUT THE PREMIUM CHARGED LOOKING TO THE FINANCIAL OF THE COMPANY ENGAGED IN THE BUSINESS OF IMPORTING AND SALE OF COAL AND COKE PRODUCTS AND EARNING AND DECLARING HUGE INCOME WHICH STOOD AT RS 43 CRORES O N A SHARE CAPITAL OF RS.2.87 CR. AND RESERVES AND SURPLUS STANDING AT RS. 57.22 AT YEAR END. THE CIT( A) HAS FURTHER OBSERVED THAT THESE SHARES WERE ACQUIRE D BY ANOTHER ENTITIES AT THE SAME PRICE WHICH ARE NOT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 106 106 EVEN REMOTELY CONNECTED WITH THE PROMOTER/ DIRECTOR OF THE COMPANY AND CONTINUED TO BE HELD AS SUCH. THUS IN THE FACTS AND THE CIRCUMSTANCES OF THE CASE EVEN GENUINENESS OF THE TRANSACTION IS VERY DIFFICU LT TO DOUBT. NEVERTHELESS, AS ALREADY NOTED ABOVE THE AO HAS DONE PRECISELY NOTHING TO BRING ON RECORD ANY ADVERSE MATERIAL TO EVEN RAISE DOUBT ABOUT THE THRE E INGREDIENTS OF SECTION 68 AS DISCUSSED ABOVE. 54. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANYTHING CONTRARY TO THE FINDINGS OF THE LD. CIT(A). WE FIND THAT IN ASSESSMENT YEAR 2003-04 THE AO HAS ADDED BACK THE LOAN AMOUNT RECEIVED FROM THESE THREE COMPANIES U/S 68 BUT HAS NOT DISALLOWED THE INTEREST PAYMENT CLAIMED BY THE ASSESSEE AS DEDUCTION ON SUCH LOANS DURING THE YEAR UNDER CONSIDERATION. HENCE ON OVER ALL CONSIDERATION OF T HE FACTS AND CIRCUMSTANCES OF THE CASE THE ADDITION MADE BY THE AO TREATING THE SHARE CAPITAL CONTRIBUTION AS UNEXPLAINED IS NOT FOUND TO BE AT A LL I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 107 107 JUSTIFIED MORE SO WHEN SUCH CONTRIBUTION IN THE IMMEDIATE PRECEDING YEAR STOOD UNDISTURBED IN SCRUTINY ASSESSMENT COMPLETED U/S 143(3). THEREFORE THE ADDITION OF RS 1.55 CRORE IS RIGHTLY DELETED BY THE CIT(A). GROUND NO. 5 OF THE REVENUE IS DISMISSED. 55. GROUND NO. 6 READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 20,34,246/- AND RS. 2,29,754/- MADE FOR INTEREST ON LOAN TO COMPANIES BEING PART OF THE LUNKAD GROUP OF COMPANIES OTHER COMPANIES WHICH WERE FOUND TO BE BOGUS/ NAME LENDERS IN EARLIER YEARS. 56. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEA R UNDER CONSIDERATION, THE ASSESSING OFFICER DISALLOW ED RS.22,64,000/- PAID AS INTEREST ON ACCOUNT OF UNSEC URED LOANS TAKEN BY THE ASSESSEE IN EARLIER YEARS, WHICH IS TAB ULATED AS UNDER:- I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 108 108 S.NO. NAME OF THE CREDITOR COMPANY INTEREST PAID (RS.) NAME OF THE CASE IN WHICH ADDITION WAS MADE 1 TRIMURTI FINVEST P. LTD. 7,62,842 AGRAWAL COAL U/S 148 A.Y. 2003-04 2 PURVI FINVEST P. LTD. 6,49,829 AG RAWAL COAL U/S 148 A.Y. 2003-04 3 EAST WEST FINVEST (I) LTD. 6,21,575 AGRAWAL COAL U/S 148 A.Y. 2003-04 4 UNNO INDUSTRIES LTD., MUMBAI 2,25,000 KARAN MITTAL A.Y. 2007- 08 5 NORFLOX VINCON P. LTD. 4,754 TOTAL 22,64,000 57. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) DELETED THE ADDITION BY OBSERVING AS UNDER :- 6. GROUND NO. 4.1 AND 4.2 ARE IS DIRECTED AGAINST DISALLOWANCE OF INTEREST OF RS. 2,03,42,461/- AND RS. 2,29,754/- AS PER DISCUSSION MADE IN PARA 5 OF THE ASSESSMENT ORDER. THE AO HAS MADE ADDITION OF INTER EST IN THE SIMILAR FASHION AS IN ANOTHER GROUP CASE VIZ. A GRAWAL TRANSPORT CORPORATION FOR ASSTT. YEAR 2008-09. THIS ISSUE WAS EXAMINED IN DETAIL AND THE APPEAL WAS DECIDED O N 31.01.2012. THE SAME COMPANIES ARE INVOLVED AND I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 109 109 ACCORDINGLY THE RELEVANT PORTION FROM THE FINDINGS ARRIVED ARE EXTRACTED HEREUNDER: 4.1 GROUND NO.1 AND 2 RELATES TO DISALLOWANCE OF INTEREST FOR WHICH THE FINDINGS ARE CONSIDERED TOGETHER. AT THE OUTSET IT HAS TO BE NECESSARILY OBSERVED THAT THE AO'S APPROACH FOR DISALLOWING THE INTEREST PAID BY APPELLANT TO SUCH LOAN CREDITORS FROM WHOM SUCH LOANS WERE RECEIVED IN EARLIER YEARS WITHOUT THERE BEING ANY ADVERSE FINDINGS AGAINST SUCH LOAN IN THE YEAR OF RECEIPT OF LOAN IS NOT JUSTIFIED AND PROPER AS PER PRINCIPLE OF LAW . THE AR HAS RIGHTLY STRESSED THAT IF THE AO WAS NOT SATISFIED ABOUT GENUINENESS OF SUCH LOAN TRANSACTION, THE ONLY AND APPROPRIATE ACTION AVAILABLE TO HIM WAS TO FIRST TAKE NECESSARY STEPS TO ENQUIRE AND HOLD THAT SUCH LOANS WERE NOT GENUINE WHICH HAS PRIMA FACIE NOT BEEN DONE. THE AR PRESENT IN THE COURSE OF DISCUSSION EXPLAINED THAT SO FAR THE APPELLANT HAS NOT RECEIVED ANY FRESH NOTICE U/S 148, SUBSEQUENT TO SUCH ASSESSMENT ORDER BEING PASSED IN THE CASE OF THE APPELLANT, FOR EARLIER ASSESSMENT YEAR(S). THUS WITHOUT GOING FURTHER INTO MERIT OF THE FINDINGS ARRIVED BY AO IN DISALLOWING SUCH I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 110 110 INTEREST, DISALLOWANCE DESERVES TO BE QUASHED. BUT SINCE THE AO HAS REFERRED TO FINDINGS IN OTHER CASES THESE FINDINGS ARE ALSO EXAMINED TO THE EXTENT CONSIDERED NECESSARY ON THE BASIS OF AVAILABLE MATERIAL IN THIS OFFICE RECORD. 4.1.1 THE AO HAS DISALLOWED INTEREST AMOUNT OF RS.10,48,155/- IN RESPECT OF INTEREST PAID TO THREE COMPANIES OF ONE GROUP VIZ. TRIMURTI FINVEST P. LTD., PURVI FINVEST P. LTD. AND EAST WEST FINVEST (I) LTD. REFERRING TO THE ASSESSMENT ORDER IN THE CASE OF AGARWAL COAL CORPORATION FOR ASSTT. YEAR 2003-04. IN SIMULTANEOUSLY DECIDED APPEALS IN THE CASE OF M/S AGARWAL COAL CORPORATION, THE FINDINGS ARRIVED BY THE AO HAVE BEEN HELD TO BE NOT JUSTIFIED AND IT HAS BEEN HELD THAT THE APPELLANT HAS DISCHARGED ITS ONUS CAST U/S 68 IN RESPECT OF SUCH LOANS. THUS THE VERY BASIS OF DISALLOWANCE OF SUCH INTEREST DO NOT SURVIVE IN VIEW OF THE APPEAL ORDER IN THE CONNECTED CASE PASSED ON EVEN DATE. 4.1.2 PROCEEDING NEXT TO TILE INTEREST DISALLOWANCE AGGREGATING AT RS 4,20,000/- IN RESPECT OF LOAN FROM UNNO INDUSTRIES (P.) LTD. AND M/S SIDDHACHAL DEVELOPERS, MUMBAI I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 111 111 THE GENUINENESS OF SUCH LOANS WERE EXAMINED IN THE CASE OF SHARI KARAN MITTAL, REFERRED BY AO AND AS PER APPEAL ORDER PASSED BY THIS OFFICE ON 06.06.2011, IT WAS HELD THAT THE APPELLANT HAS DISCHARGED THE ONUS CAST ON HIM U/S 68 OF IT ACT. THUS IN CASE OF THESE TWO LOANS ALSO THE VERY BASIS REFERRED BY AO FOR MAKING DISALLOWANCE DO NOT SURVIVE ANY LONGER. 4.1.3 IN CASE OF OTHER DISALLOWANCE OF INTEREST TH E ISSUES ARE BEING EXAMINED IN OTHER CONNECTED CASES, BUT IT WILL SUFFICE TO HOLD THAT AO'S ACTION IN VIEW OF ABOVE DISCUSSION WITHOUT ESTABLISHING SUCH LOANS TO BE UNEXPLAINED AND IN GENUINE IN APPELLANT'S OWN CASE, IN MAKING DISALLOWANCE OF INTEREST DO NOT HAVE SANCTITY AND APPROVAL OF LAW AND ACCORDINGLY TOTAL DISALLOWANCE OF INTEREST MADE BY AO AT RS.7,50,000/- AND RS.20,31,639/- IS HEREBY DIRECTED TO BE DELETED. 6.1 IN VIEW OF THE AFORESAID FINDINGS THE ADDITION MADE BY AO AT RS.22,64,000/- FOR DISALLOWANCE OF INTEREST IS NOT FOUND TO BE SUSTAINABLE AND ACCORDINGLY CORRECTED TO BE DELETED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 112 112 58. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANYTHING CONTRARY TO THE FINDING OF THE LD. CIT(A) AND RELIED ON THE ORDER OF THE AO. 59. THE LD. AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT INSOFAR AS DISALLOWANCE AT S. NOS.1 T O 3 ARE CONCERNED, THE SAME HAVE BEEN MADE ON THE BASIS ADD ITION OF UNSECURED LOANS OF THE SAID 3 COMPANIES IN ASSESSME NT YEAR 2003-04. THEREFORE, THE SAID DISALLOWANCE IS LINKED TO ADDITION MADE IN ASSESSMENT YEAR 2003-04. REGARDING INTEREST PAID TO M/S. UNNO INDUSTRIES LTD (S.NO.4), THE SAME HAS BEE N DISALLOWED SIMPLY BASED ON SOME CASE OF SHRI KARAN MITTAL FOR ASSESSMENT YEAR 2007-08, WHICH IS IN NO WAY CONNECTE D/ RELATED TO THAT OF THE ASSESSEE. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED TH AT THE LOAN AMOUNT FROM UNNO INDUSTRIES WAS RECEIVED BY THE ASSE SSEE IN EARLIER YEARS WHICH STAND ACCEPTED AS NO ADDITION U/ S 68 WAS EVER MADE IN THE HANDS OF THE ASSESSEE. REFERENCE I N THIS REGARD WAS INVITED TO THE DECISION OF THE INDORE BEN CH OF THE TRIBUNAL IN CASE OF AGRAWAL TRANSPORT CORPORATION P VT. LTD.: I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 113 113 ITA NO. 201/IND./2012, WHEREIN THE TRIBUNAL HAS DELE TED SIMILAR DISALLOWANCE OF INTEREST PAID TO THE AFORES AID COMPANIES. AS REGARDS NORFLOX VINCON P. LTD (S.NO.5), IT WAS ST ATED THAT THE SAID INTEREST DISALLOWANCE HAS BEEN MADE WITHOUT ANY DISCUSSION IN THE ASSESSMENT ORDER. 60. IN VIEW OF THE AFORESAID SUBMISSIONS, IT WAS STATED T HAT THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF INTEREST. 61. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE AO HAS DISALLOWED INTEREST AMOUNT OF RS.20,34,246/- IN RESPECT OF INTEREST PAID TO THREE COMPANIES OF ONE GROUP VIZ. TRIMURTI FINVEST P. LTD ., PURVI FINVEST P. LTD. AND EAST WEST FINVEST (I) LTD . REFERRING TO THE ASSESSMENT ORDER IN THE CASE OF AGARWAL COAL CORPORATION FOR ASSTT. YEAR 2003-04. I N THE PRECEDING PART OF THIS ORDER THE FINDINGS ARRIV ED BY THE AO HAVE BEEN HELD TO BE NOT JUSTIFIED AND IT HA S BEEN HELD THAT THE ASSESSEE HAS DISCHARGED ITS ONU S I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 114 114 CAST U/S 68 IN RESPECT OF SUCH LOANS. THUS, THE VER Y BASIS OF DISALLOWANCE OF SUCH INTEREST OF RS. 20,34 ,246/- DO NOT SURVIVE IN VIEW OF OUR FINDING GIVEN IN RESP ECT OF GROUND NO 5 ABOVE. 62. REGARDING INTEREST DISALLOWANCE OF RS 2,29,754/- IN RESPECT OF LOAN FROM UNNO INDUSTRIES (P.) LTD. AND NORFIOX VINCOM PVT. LTD., WE FIND THA T THE AO HAS DISALLOWED ONLY THE INTEREST PAID TO THE SE COMPANIES BY THE ASSESSEE AND THE LOAN AMOUNT RECEIVED IN EARLIER YEARS WAS NOT ADDED U/S 68 IN T HE SCRUTINY ASSESSMENT OF EARLIER YEARS. WE ALSO FIND THAT IN THE CASE OF M/S AGRAWAL TRANSPORT PVT. LTD. IN ITA NO. 201/IND/2012 FOR ASSESSMENT YEAR 2008- 09 WHEREIN STAND ALONE DISALLOWANCE OF INTEREST PAI D TO ABOVE REFERRED COMPANIES WAS HELD TO BE NOT JUSTIFIED WHEN NO ADDITION WAS MADE BY THE AO IN RESPECT OF LOANS TAKEN FROM SUCH LOAN CREDITORS. TH E FINDING RECORDED BY CIT(A) TO THE EFFECT THAT THERE IS NO ADDITION ON ACCOUNT OF LOAN CREDITOR, THERE IS N O I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 115 115 JUSTIFICATION FOR DISALLOWANCE OF INTEREST ON SUCH LOAN WAS NOT CONTROVERTED BY THE DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. IT WILL B E SUFFICE TO HOLD THAT AO'S ACTION IN VIEW OF ABOVE DISCUSSION WITHOUT ESTABLISHING SUCH LOANS TO BE UNEXPLAINED AND INGENUINE IN ASSESSEES OWN CASE, I N MAKING DISALLOWANCE OF INTEREST DO NOT HAVE SANCTIT Y AND APPROVAL OF LAW AND ACCORDINGLY THE DISALLOWANC E OF INTEREST MADE BY AO AT RS. 2,29,754/- IS RIGHTLY DE LETED BY THE LD. CIT(A). OUR INTERFERENCE IS NOT CALLED F OR. GROUND NO. 6 OF THE REVENUE IS REJECTED. 63. GROUND NOS. 7 AND 7.1 TAKEN BY THE REVENUE READ AS UNDER :- 7 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE U/S 14A EVEN WHEN THE ASSESSEE FAILED TO ESTABLISH THE NEXUS THAT INTERES T BEARING FUNDS WERE USED FOR PURCHASE OF FDRS. 7.1 WHILE HOLDING SO, THE LD. CIT(A) DID NOT CONSIDER THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. DR. V.P. GOPINATH, 248 ITR 449 IN WHICH IT HAS BEEN HELD THAT NO NETTING WOULD BE DONE IN RESPECT OF INTEREST ON LOAN FROM INTEREST RECEIVED FROM BANK. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 116 116 64. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE REL EVANT ASSESSMENT YEAR, THE ASSESSEE EARNED DIVIDEND INCOM E OF RS.2,64,58,139 FROM INVESTMENTS IN SHARES AND MUTUA L FUNDS, WHICH WERE EXEMPT UNDER SECTION 10(33)/ (34) OF THE ACT. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER, WITHOUT POINTING OUT ANY SINGLE EXPENDITURE HAVING RELATION WITH EARN ING OF EXEMPT DIVIDEND INCOME, MECHANICALLY INVOKED SUB-SE CTION (2) OF SECTION 14A OF THE ACT AND COMPUTED DISALLOWANCE OF RS.4,95,273 BY APPLYING PROVISIONS OF RULE 8D OF TH E RULES IN THE FOLLOWING MANNER: ON FURTHER APPEAL, THE CIT(A) DELETED THE DISALLOWAN CE OF INTEREST OF RS.3,23,640/- ATTRIBUTED BY THE ASSE SSING S.NO. PARTICULARS AMOUNT (IN RS.) 1 DIRECT EXPENDITURE NIL 2 INTEREST EXPENDITURE INCURRED DURING THE YEAR (RS.4.35 CRORES) ATTRIBUTED IN THE RATIO OF AVERAGE VALUE OF INVESTMENTS RESULTING IN EXEMPT INCOME TO AVERAGE VALUE OF TOTAL ASSETS 3,23,640 3 % OF AVERAGE VALUE OF INVESTMENTS 1,71,633 TOTAL 4,95,273 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 117 117 OFFICER AS PER RULE 8D(2)(II) OF THE RULES. AS REGA RDS ADMINISTRATIVE EXPENSES, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO RE-COMPUTE DISALLOWANCE AFTER EXCLUDING INVESTMENT IN OVERSEAS COMPANIES. 65. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) PARTLY ALLOWED THE GROUND BY OBSERVING AS UNDER :- 7. NEXT GROUND NO. 5.1 AND 5.2 ARE DIRECTED AGAINST DISALLOWANCE OF INTEREST U/S 14A AS PER AMOUNT WORKED OUT IN ACCORDANCE WITH PROVISIONS OF RULE 8D OF 1962. THE AO HAS DISCUSSED THIS ISSUE ON PAGE 37 TO 42 OF THE ASSESSMENT ORDER AND WORKING OF DISALLOWABLE INTEREST AND PROPORTIONATE OTHER EXPENSES IN PARA 6.9 ON PAGE 42 AS ALREADY EXTRACTED ABOVE. THE AO HAS MADE SUCH DISALLOWANCE IGNORING APPELLANT'S OBJECTION THAT BORROWED FUNDS WERE NOT UTILIZED FOR PURPOSES OF INVESTMENT. HE HAS ARRIVED AT THIS CONCLUSION BASED ON ANALYSIS OF BALANCE SHEET MADE IN PARA 6.4 WHERE HE HAS IDENTIFIED INVESTMENT IN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 118 118 FIXED AND CURRENT ASSETS AT RS. 55042.3 LACS AGAINST SHARE CAPITAL RESERVE AND SURPLUS CURRENT LIABILITY AND PROVISION ETC. AGGREGATING AT RS. 39530.78 LACS. HE HAS THUS CONSIDERED SUCH INVESTMENT AT RS 463.38 LACS AGAINST UNSECURED AND SECURED LOAN OBTAINED BY THE APPELLANT RS.15974.90 LACS. THE AR OF THE APPELLANT APART FROM WRITTEN SUBMISSION FIRSTLY EMPHASIZED THAT THE QUESTION OF DISALLOWANCE OF INTEREST U/S 14A WITH REFERENCE TO INVESTMENT YIELDING EXEMPT INCOME CAN BE CONSIDERED ONLY AND IF THERE IS INTEREST EXPENDITURE INCURRED BY THE APPELLANT WHEREAS IN THE CASE OF THE APPELLANT THERE WAS NET INTEREST RECEIPT OF RS.922.25 LACS AND THUS THERE WAS EVIDENTLY NO CLAIM FOR DEDUCTION OF INTEREST. HE FURTHER INVITED ATTENTION TO THE SCHEDULE 8OF THE BALANCE SHEET INCLUDED IN PAPER BOOK 'A' ON PAGE 26 WHICH IS REPRODUCED HEREUNDER FOR APPRECIATION OF FACT. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 119 119 SCHEDULE -8 CASH & BANK BALANCES CASH IN HAND 15,16,938 15,23,226 BALANCES WITH. SCHEDULED BANKS A) IN CURRENT ACCOUNTS 0,58,87,157 1,42,32,493 B) IN FIXED DEPOSIT ACCOUNTS (UCO BANK & SBI PLEDGED WITH BARK AGAINST L/C, BUYERS LINE OF CREDIT & 278,07,94,799 178,11,31,933 C IN FIXED DEPOSIT ACCOUNTS (PLEDGED WITH. GOVT. DEPT. AS SECURITY 15,81,192 50,78,607 284,97,80,086 180,19,66,259 7.1 THE AR EMPHASIZED THAT A MERE GLANCE OF THE SCHEDULE REVEALED THAT A MUCH LARGER AMOUNT THAN THE AGGREGATE OF SECURED AND UNSECURED LOAN OF RS.159.17 CRORE, THE INVESTMENT IN FIXED DEPOSIT ALONE YIELDING INTEREST WAS RS. 278.04 CRORES. THUS IN NO WAY IT CAN BE CONSIDERED THAT THE BORROWED FUNDS WERE UTILIZED FOR MAKING INVESTMENT YIELDING EXEMPT INCOME. HE WENT TO STRESS THAT THERE WAS A BUSINESS COMPULSION AND EXIGENCIES ON THE PART OF THE APPELLANT TO HAVE DEPLOYED SUCH HUGE AMOUNT IN THE FIXED DEPOSIT WITH BANK AS INDICATED IN THE BAL ANCE SHEET ITSELF FOR OBTAINING MAINLY LETTER OF CREDITS AND BUYERS LINE CREDIT WHICH WOULD BE IN PRINCIPLE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 120 120 OTHERWISE NOT AVAILABLE. THE AR ALSO EMPHASIZED HAD THERE BEEN NO BUSINESS COMPULSION, THE APPELLANT COMPANY WOULD HAVE NEVER DEPLOYED SUCH HUGE AMOUNT IN FIXED DEPOSIT YIELDING INTEREST RATE ABOU T 9% ALSO WHICH WAS FURTHER SUBJECT TO TAX AND THIS AMOUNT COULD VERY WELL BE OTHERWISE UTILIZED FOR EARNING HIGHER INTEREST INCOME OR IN OTHER HIGH RETURNING YIELD AVENUES. IT WAS ALSO EMPHASIZED THA T HAD THE APPELLANT NOT MADE ANY FIXED DEPOSITS, ITS BORROWINGS WOULD HAVE ALSO BEEN NIL AND ON THE CONTRARY IT WOULD HAVE SURPLUS FUNDS AND WOULD NOT HAVE INCURRED ANY INTEREST COST AND THUS IT WAS SUMMED UP THAT IN THE FACTUAL PECULIAR FACTS OF THE APPELLANT'S CASE, WHICH THE AO NOT CARED TO APPRECIATE, THERE WAS ABSOLUTELY NO CASE FOR MAKING ANY DISALLOWANCE U/S 14A. IT WAS ALSO POINTED OUT BY THE AR THAT OUT OF THE TOTAL INVESTMENT OF RS.463.38 CRORE AT THE YEAR END THE AMOUNT OF RS.89.61 LACS WAS INVESTED IN EQUITY SHARES OF OVERSEAS ASSOCIATE COMPANY, IN THE SAME BUSINESS LINE, THE DIVIDEND INCOME FROM WHICH AS AND WHEN RECEIVED COULD NOT BE EXEMPT IN THE HANDS OF THE APPELLANT COMPANY AND HENCE AO'S ACTION IN CONSIDERING SUCH AMOUNT OF INVESTMENT IN WORKING OUT DISALLOWANCE UNDER RULE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 121 121 8D WAS NO WAY JUSTIFIED AND WAS AGAINST THE PROVISIONS OF SECTION 14A OF THE ACT. 7.2 THE APPELLANT'S CONTENTION AND CAREFULLY CONSIDERED FACTS AVAILABLE ON RECORD ARE FOUND TO CARRY SUFFICIENT FORCE ON MERITS. IT HAS BEEN CLEAR LY INDICATED IN SCHEDULE 8 OF BALANCE SHEET ITSELF THA T FIXED DEPOSITS WERE PLEDGED WITH BANK AGAINST LETTE R OF CREDIT (LC), BUYERS' LINE OF CREDIT AND OVER DRA FT LOAN FACILITY. THUS THIS FIXED DEPOSIT HAS AN INEXTRICABLE NEXUS AND LINK WITH THE BUSINESS OPERATION OF THE APPELLANT AND AS STATED BY AR THAT SUCH INVESTMENT OF FIXED DEPOSIT WAS INEVITABLE IN THE LINE OF APPELLANT'S BUSINESS WHERE OVERSEAS PURCHASES WERE INVOLVED. THUS THERE IS SUFFICIENT MERIT IN THE CONTENTION OF THE APPELLANT WHICHEVER WAY THE ISSUE IS EXAMINED THAT BY AND LARGE INVESTMENT CANNOT BE SAID TO BE MADE OUT OF INTEREST BEARING BORROWED FUNDS IN VIEW OF HUGE AMOUNT OF SHAREHOLDERS FUND EXCEEDING RS.60 CRORE AND IN ALTERNATIVE THERE WERE NO NET INTEREST DEDUCTION CLAIMED WAS PRESSED BY THE APPELLANT AS DEDUCTION FROM WHICH DISALLOWANCE U/S 14A COULD BE CONSIDERED. 7.3 FURTHER STILL THERE IS APPARENT MERIT IN APPELLANT'S CONTENTION IN RESPECT OF INVESTMENT IN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 122 122 OVERSEAS ASSOCIATE COMPANY AT RS.89.61 LACS THAT SUCH AMOUNT COULD NOT BE CONSIDERED FOR WORKING OUT DISALLOWANCE UNDER RULE 8D OF IT RULES, 1962 AS THE SAID INVESTMENT IS NOT AN INVESTMENT IN RESPECT OF WHICH THE APPELLANT WILL EVER RECEIVE ANY EXEMPT INCOME. THUS IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND THE ABOVE DISCUSSION MADE BY AR, THE DISALLOWANCE - U/S 14A IN RESPECT OF INTEREST, WORKED OUT AT RS 3,23,640/- BY THE AO IS DIRECTED TO BE DELETED AND THE DISALLOWANCE IN RESPECT OF EXPENSES WORKED OUT AT R S 1,71,633/- @ .5% OF THE AVERAGE INVESTMENTS IS DIRECTED TO BE WORKED OUT AFTER EXCLUDING INVESTMENT MADE IN OVERSEAS ASSOCIATE COMPANY. THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 66. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF AO AND COULD NOT BRING ANYTHING CONTRARY T O CONTROVERT THE FINDING OF THE CIT(A). 67. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REGARDING INTEREST EXPENDITURE SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF THE CIT(A) IN DELETING DISALL OWANCE UNDER SECTION 14A OF THE ACT OUT OF INTEREST EXPENDITURE, FOR REASONS EXPLAINED HEREUNDER: I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 123 123 68. REGARDING INVESTMENTS UPTO AY 2007-08, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT NO DISALLO WANCE HAD BEEN MADE UNDER SECTION 14A OF THE ACT TILL THE ASS ESSMENT YEAR 2007-08. THEREFORE, IT STANDS ACCEPTED BY THE REVENUE THAT THE INVESTMENTS HELD BY THE ASSESSEE AS ON 31. 03.2007 WERE MADE OUT OF OWN FUNDS/ NON-INTEREST BEARING FUND S OF THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE FUR THER CONTENDED THAT OUT OF TOTAL OPENING INVESTMENT OF R S.2.28 CRORES, INVESTMENT OF RS.2.22 CR WAS IN OVERSEAS ENT ITY AND INVESTMENT OF RS.5 LAC IN REDEEMABLE BONDS, WHICH CA NNOT BE CONSIDERED FOR THE PURPOSE OF DISALLOWANCE UNDER SEC TION 14A OF THE ACT. THE BALANCE INVESTMENT AMOUNTED TO RS.3 8,400 ONLY, WHICH WAS MADE OUT OF OWN FUNDS OF THE ASSESSE. THE LD. AUTHORIZED REPRESENTATIVE RELIED ON THE FOLLOWING D ECISIONS WHEREIN IT HAS BEEN HELD THAT WHERE NO PORTION OF BOR ROWED FUNDS HAD BEEN ATTRIBUTED TO INVESTMENTS HELD AS AT THE BEGINNING OF THE RELEVANT PREVIOUS YEAR, NO PART OF THE INTEREST EXPENDITURE COULD BE DISALLOWED DURING THE RELEVANT YEAR BY REFERENCE TO SUCH INVESTMENTS: I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 124 124 (I) CIT V. SRIDEV ENTERPRISES: 192 ITR 165 (KAR.) (II) CIT V. GIVO LTD.: ITA NO. 941/2010 (DEL) (III) PUNJAB WOOLCOMBERS LTD. V. ACIT: (2004) 1 SOT 114 (CHAND) (IV) MOTOR AND GENERAL FINANCE LTD. V. DCIT: 90 ITD 449 (DEL.) (V) MEENAKSHI SYNTHETICS V. CIT: 84 ITD 563 (LUCKNOW) (VI) GR AGENCIES V. ITO; 79 TTJ 496 (LUCKNOW) (VII) MALWA COTTON SPINNING MILLS: 89 ITD 65 (CHD) (TM) (VIII) USHA MARTIN INDUSTRIES LTD V. DCIT: 86 ITD 261(CAL.) ACCORDINGLY, DISALLOWANCE UNDER SECTION 14A OF THE ACT, IN THE PRESENT CASE, IN RESPECT OF INVESTMENTS HELD RELATING TO EARLIER YEARS IS UNSUSTAINABLE. 69. REGARDING AVAILABILITY OF SURPLUS INTEREST FREE FUN DS, THE LD. AUTHORIZED REPRESENTATIVE SUBMITTED THAT TH E ASSESSEE HAD, DURING PREVIOUS YEAR RELEVANT TO THE ASSESSMEN T YEAR I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 125 125 UNDER CONSIDERATION, MADE NEW INVESTMENT IN MUTUAL F UNDS AMOUNTING TO RS.3.73 CRORES. SUCH INVESTMENT IN MUT UAL FUNDS WAS MADE OUT OF THE INTEREST FREE FUNDS AVAIL ABLE WITH THE ASSESSEE, AS IS EVIDENT FROM THE FOLLOWING. SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AMOUNTING TO RS.2.87 CRORES AND RESERVES AND SURPLU S OF RS.57.22 CRORES WERE AVAILABLE WITH THE ASSESSEE AS O N 31.03.2008; NET CASH FROM OPERATING ACTIVITIES FOR THE YEAR UNDER CONSIDERATION AMOUNTED TO RS.10.48 CRORES, WHI CH BY ITSELF IS SUFFICIENT TO COVER THE NET FRESH INVESTM ENTS MADE DURING THE YEAR; 70. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONTENDED THAT THE CORRECT METHOD TO ESTABLISH SOUR CE OF INVESTMENT WOULD BE TO CONSIDER THE MACRO FUND/ CASH FLOW POSITION DURING THE YEAR AND IF THE ASSESSEE HAD SU FFICIENT SURPLUS FUNDS AVAILABLE, PRESUMPTION SHOULD BE DRAWN IN FAVOUR OF THE ASSESSEE THAT SURPLUS FUNDS HAVE BEEN UTILIZED FOR MAKING INVESTMENTS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 126 126 71. LD. AUTHORISED REPRESENTATIVE IN THIS REGARD PLACED RELIANCE ON THE FOLLOWING DECISIONS, WHEREIN IT HAS B EEN HELD THAT WHERE ASSESSEE HAD SUFFICIENT FUNDS/ DEPOSITS F OR ADVANCING INTEREST FREE LOANS OR MAKING INVESTMENT IN SHARES, ETC., AND THERE IS NOTHING ON RECORD TO SHOW THAT BO RROWED FUNDS HAVE BEEN DIRECTLY UTILIZED FOR SUCH PURPOSE, A PRESUMPTION IN FAVOUR OF THE ASSESSEE CAN BE DRAWN WI TH RESPECT TO UTILIZATION OF INTEREST FREE AND BORROWE D FUNDS: THE GUJARAT HIGH COURT IN THE CASE OF CIT V. UTI BANK LTD : [2013] 32 TAXMANN.COM 370 HELD THAT WHERE THERE ARE SUFFICIENT INTEREST FREE FUNDS TO MEET TAX FREE INVESTMENTS, THEY ARE PRESUMED TO BE MADE FROM INTEREST FREE FUNDS AND NOT LOANED FUNDS AND NO DISALLOWANCE CAN BE MADE UNDER SECTION 14A OF THE ACT. THE SUPREME COURT HAS RECENTLY DISMISSED THE REVENU ES SLP IN CIVIL APPEAL NO. 468/2014 AGAINST THE AFORES AID DECISION. INDIAN EXPLOSIVES LTD. V. CIT: 147 ITR 392 (CAL.) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 127 127 WOOLCOMBERS OF INDIA LTD. V. CIT: 134 ITR 219 (CAL.) - APPROVED BY SUPREME COURT IN THE CASE OF EAST INDIA PHARMACEUTICAL WORKS LTD. V. CIT: 224 ITR 627 CIT V. RELIANCE UTILITIES AND POWER LTD.: 313 ITR 340 (BOM.) CIT VS. M/S. ASHOK COMMERCIAL ENTERPRISES: ITA NO. NO.2985 OF 2009 (BOM) 72. WHILE FOLLOWING THE RATIO EMANATING FROM THE AFORES AID DECISIONS, IT HAS BEEN HELD IN THE FOLLOWING CASES, THAT INTEREST EXPENDITURE CANNOT BE DISALLOWED UNDER SECTION 14A OF THE ACT, WHERE THE ASSESSEE HAD SUFFICIENT SURPLUS FUNDS AND THERE WAS NO FINDING BY THE ASSESSING OFFICER OF ANY DIREC T NEXUS OF BORROWED FUNDS WITH INVESTMENTS: 1. GURDAS GARG V. CIT: ITA NO.413 OF 2014 (P&H) 2. BRIGHT ENTERPRISES PVT LTD. V. CIT: ITA NO. 224 OF 2014 (P&H) 3. LUBI SUBMERSIBLES LTD.: ITA NO.868 OF 2010 (GUJ.) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 128 128 4. CIT V. K. RAHEJA CORPORATION PVT. LTD: INCOME- TAX ACT, 1961NO.1260 OF 2009 (BOM.) 5. CIT V. GUJARAT POWER CORPORATION LTD.: 352 ITR 583 (GUJ) 6. GUJARAT STATE FERTILIZERS AND CHEMICALS LTD : TAX APPEAL NO. 82 OF 2013 (GUJ HC). 7. CIT V. TORRENT POWER LTD.: 363 ITR 474 (GUJ) 8. CIT VS. SUZLON ENERGY LTD.: 215 TAXMAN 272 (GUJ) 9. CIT VS. UTI BANK LTD: 215 TAXMAN 8 (GUJ) (MAG.). 10. M/S.AGROVET LTD. V. ACIT: ITA NO. 1629/MUM/09 (MUM.) 11. DY. CIT V. EIMCO ELECON (INDIA) LTD.: 142 ITD (AHD). 12. DY.CIT V. JAMMU & KASHMIR BANK LTD.: 142 ITD 553(ASR.) 13. HERO HONDA FINLEASE LTD VS. ACIT: ITA NO. 3726/DEL/2012 (DEL) 14. ACIT VS. CHAMPION COMMERCIAL CO LTD: 152 TTJ 241 (KOL). 15. TML DRIVE LINES LTD VS. ACIT : ITA NO. 6064/MUM/2010 (MUM) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 129 129 16. KULGAM HOLDINGS PVT. LTD. VS. ACIT : ITA NO. 1259/AHD/2006 (AHD) 17. MAX INDIA LIMITED VS. DCIT: ITA NO. 103/2006 (AMR) SPECIFIC RELIANCE IS ALSO PLACED ON THE FOLLOWING DE CISIONS: CIT V. ABHISHEK INDUSTRIES LTD - 231 TAXMAN 85 (P&H )- WHERE ASSESSING OFFICER DISALLOWED AN AMOUNT BY HOL DING THAT INTEREST BEARING FUNDS HAD BEEN USED TO EARN TAX FREE DIVIDEND, ETC., BUT THERE WAS NO TANGIBLE MATER IAL TO RECORD HIS SATISFACTION, DISALLOWANCE UNDER SECTION 14A R.W RULE 8D MADE WAS UNJUSTIFIED. T AND T MOTORS LTD. V. ADDL. CIT -154 ITD 306 (DELH I)- WHERE ASSESSEE-COMPANYS SHARE CAPITAL WITH RESERVES AND SURPLUS WAS FAR IN EXCESS OF AMOUNT INVESTED IN SECURITIES FETCHING EXEMPT INCOME, INTEREST COULD N OT BE DISALLOWED UNDER SECTION 14A OF THE ACT. 73. IN VIEW OF ABOVE, IT WAS SUBMITTED THAT INTEREST PAI D ON BORROWED FUNDS HAD NO NEXUS WITH THE INVESTMENT M ADE IN SHARES/ MUTUAL FUNDS AND, THEREFORE, NO PORTION OF THE SAME WAS RELATABLE TO MAKING INVESTMENTS FOR THE PURPOSES OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 130 130 DISALLOWANCE UNDER SECTION 14A OF THE ACT, MUCH LESS BY APPLYING PROVISION OF RULE 8D OF THE RULES. THE BOR ROWED FUNDS, IT WAS SUBMITTED, WERE UTILIZED BY THE ASSESS EE IN CARRYING OUT OTHER ACTIVITIES WHICH CANNOT BE APPORT IONED FOR DISALLOWANCE UNDER SECTION 14A IN ACCORDANCE WITH PRO VISIONS OF SUB-RULE (2)(II) OF RULE 8D OF THE RULES. 74. FOR THE AFORESAID REASONS, CONSIDERING THAT THERE W ERE SUBSTANTIAL INTEREST FREE FUNDS, NO PORTION OF THE INTEREST EXPENDITURE CAN BE SAID TO HAVE NEXUS WITH THE INVES TMENTS HELD DURING THE YEAR AND, ACCORDINGLY, NO PORTION O F INTEREST EXPENDITURE WARRANTS DISALLOWANCE UNDER SECTION 14A O F THE ACT. 75. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER ALSO E RRED IN INCLUDING INVESTMENTS IN GROWTH MUTUAL FUND AND ALSO INVESTMENT IN INTEREST BEARING BONDS WHICH HAD NOT/ WOULD NOT YIELD ANY EXEMPT INCOME WHILE COMPUTING AVERAGE INVESTMENTS UNDER SECTION 14A OF THE ACT R.W. RULE 8 D OF THE RULES. THE LD. AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 131 131 REFERRED THE DECISION OF MANUGRAPH INDIA LTD. V. DC IT: ITA NO. 4761/MUM/2013 (MUM. TRIB.); EVEREST KANTO CYLINDERS LTD. (ITA NO. 7073/MUM/2012)]. 76. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER ERR ED IN CONSIDERING THE ENTIRE INVESTMENTS AND NOT INVES TMENTS WHICH ACTUALLY RESULTED IN ANY EXEMPT INCOME, AS HAS BEEN HELD IN THE FOLLOWING DECISIONS: CIT V WINSOME TEXTILE INDUSTRIES LTD.: 319 IT R 204 (P&H) CORRTECH ENERGY PVT. LTD.: 223 TAXMAN 130 (GUJ.) CIT V. M/S. SHIVAM MOTORS (P) LTD.: 272 CTR 277 (ALL). CIT V. M/S LAKHANI MARKETING: 272 CTR 265 (P&H) CIT V. HOLCIM INDIA (P) LIMITED: 272 CTR 282 (DEL) ACB INDIA LTD. V. ACIT : 374 ITR 108 (DEL.) REI AGRO LTD VS. DCIT: 144 ITD 141 (KOL. TRIB.) FOR THE AFORESAID CUMULATIVE REASONS, THE CITA) RIG HTLY DELETED THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. 77. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 132 132 ANYTHING CONTRARY TO THE FINDINGS OF THE LD. CIT(A) . OUR INTERFERENCE IS NOT CALLED FOR. GROUND NOS. 7 AND 7.1 ARE REJECTED. 78. GROUND NO. 8 READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) ERRED IN DELET ING THE DISALLOWANCE OF RS. 6,50,000/- OUT OF COLLIERY EXPEN SES AND RS. 2,00,000/- OUT OF GENERAL EXPENSES AS THE VOUCHERS REGARDING COLLIERY AND GENERAL EXPENSES WER E FOUND NOT ONLY SELF MADE BUT ALSO UNVERIFIABLE BY T HE ASSESSING OFFICER. 79. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEA R UNDER CONSIDERATION, THE ASSESSEE HAD, INTER-ALIA, CLAIMED COLLIERY EXPENSES OF RS.62,13,757/- AND OFFICE GENE RAL EXPENSES OF RS.19,92,429/-. OUT OF THE ABOVE EXPEND ITURE CLAIMED, THE ASSESSING OFFICER, HOWEVER, MADE DISAL LOWANCE OF RS.6,50,000/- OUT OF TOTAL COLLIERY EXPENSES AND OF RS.2,00,000/- OUT OF OFFICE GENERAL EXPENSES. WHILE MAKING SUCH DISALLOWANCE, THE ASSESSING OFFICER REFERRED TO DISPROPORTIONATE INCREASE IN THE ABOVE EXPENDITURE VIS--VIS TURNOVER AND ALLEGED THAT THESE EXPENSES WERE NOT P ROPERLY I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 133 133 SUPPORTED BY BILLS/VOUCHER. THE ASSESSING OFFICER, THUS, MADE DISALLOWANCE AN AD-HOC RATE OF 10%. 80. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) DELETED THE DISALLOWANCE. 81. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE AO AND COULD NOT BRING ANYTHING CONTRA RY TO THE FINDING OF THE LD. CIT(A). 82. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ACTION OF THE ASSESSING OFFICER IS BAD-IN- LAW AND THE DISALLOWANCE CALLS FOR BEING DELETED FOR THE REASONS STATED HEREUNDER: THE ASSESSING OFFICER FAILED TO APPRECIATE THAT TH E BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE BEING DU LY AUDITED, WHICH HAS NOT BEEN REJECTED BY THE ASSESSIN G OFFICER. WITH RESPECT TO THE VOUCHERS/BILLS PRODUCE D FOR VERIFICATION DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD SIMPLY MADE THE BALD ALLEGATI ON, WITHOUT POINTING OUT THE SPECIFIC DEFECTS, IF ANY, R ELATING TO THESE VOUCHERS/BILLS. THE ASSESSING OFFICER FAIL ED TO APPRECIATE THAT CORRELATION OF INCREASE IN EXPENSES WITH INCREASE IN TURNOVER IS NOT THE ONLY CRITERIA FOR M AKING DISALLOWANCE. THE ASSESSING OFFICER LOST SIGHT OF TH E FACT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 134 134 THAT THE INSPITE OF THE INCREASE IN THE EXPENSES, T HE GROSS PROFIT MARGIN OF THE ASSESSEE HAD INCREASED FROM 3. 45% TO 6.68%. 83. THE ASSESSING OFFICER MADE THE DISALLOWANCE MERELY O N THE CONJECTURE AND SURMISES, ON AN AD-HOC BASIS, WHI CH IS NOT PERMISSIBLE IN LAW. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: J J ENTERPRISES VS. CIT: 254 ITR 216 (SC) FRIENDS CLEARING AGENCY P. LTD. V. CIT: 332 ITR 269 (DEL.) DWARKA PRASAD AGARWAL V. ITO: 52 ITD 239 (CAL) MAHENDRA OIL CAKE INDUSTRIES PVT. LTD. V ACIT: 55 TTJ 711 RATTAH MECHANICAL WORKS LTD. V ITO: 87 TAXMAN 288 (MAG) (CHAND. SHRIRAM PISTONS AND RINGS LTD. V IAC: 39 TTJ 132 (DEL.) NODI EXPORTS V. ACIT: 24 SOT 526 (DEL.) ACIT V. AMTEK AUTO LTD.: 112 TTJ 455(DEL.) ROGER ENTERPRISES PVT. LTD. V. ITA : 52 TTJ 198 (DEL.) RAMJI DAS MODI V. DCIT: 110 TAXMAN 107 (JP) (MAG) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 135 135 CONTINENTAL SEEDS &CHEMICALS LTD. V. ACIT: (2003) SOT 393(DEL.) AGARWAL TRADING CO. VS. ITO 108 TTJ 589 (DEL.) STERLING MOTORS V. ADDL. CIT: ITA NO. 3217 TO 3219/MUM/2009 (MUM.) ASSTT. CIT V. AMRIK SINGH: ITA NO. 987/2010 (KOL.) RAJNI COMBUSTION P. LTD. V. DCIT: ITA NO. 1779/AHD./2009 (AHD.) 84. THE LD.AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE CONCLUDED HIS ARGUMENTS BY SUBMITTING THAT THE AFOR ESAID DISALLOWANCE HAS BEEN RIGHTLY DELETED BY THE CIT(A). 85. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE DISALLOWANCE MADE WAS DELETED FULLY IN APPEAL ORDER BY THE CIT(A). WE FIN D THAT THE LD. CIT(A) HAS OBSERVED THAT WHILE MAKING THE DISALLOWANCE THE AO HAS IGNORED THE FACT THAT THERE WAS NEARLY FIVEFOLD INCREASE IN NET TAXABLE INCOME FROM RS. 7.3 CRORES TO RS. 43.92 CORERS AND ALSO THE FAC T THAT THERE WAS AN OVERALL INCREASE OF NEARLY TWO FO LD IN THE GP RATE FROM 3.45% TO 6.8% AND THEREFORE THE AO I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 136 136 SHOULD NOT HAVE RESORTED TO SUCH UNWARRANTED AD HOC DISALLOWANCE OF RS. 8.5 LACS WHEN THE ASSESSEE HAS OVER NEARLY FIVEFOLD INCREASE IN ITS TAXABLE INCOME . SUCH DISALLOWANCES ARE NOT FOUND TO BE JUSTIFIED AN D PROPER IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE UPHOLD THE ACTION OF THE LD. CIT(A). OUR INTERFEREN CE IS NOT CALLED. GROUND NO.8 IS ALSO REJECTED. 86. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMISS ED. I.T.A.NO. 202/IND/2012 : A.Y. 2003-04 (DEPARTMENTAL APPEAL : (AGRAWAL COAL CORPORATION PVT. LTD.): 87. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE ORDER OF THE LD. CIT(A) I S CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIA(A) ERRED, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 70,00,000/- MADE BY THE AO U/S 68 OF THE INCOME-TAX ACT, 1961. ON ACCOUNT OF UNSECURED LOAN FROM THREE COMPANIES BEING PART OF THE LUNKAD GROUP OF COMPANIES WHICH WERE FOUND TO BE ACCOMMODATION ENTRY PROVIDER DURING THE PROCEEDINGS U/S 133A OF THE INCOME-TAX ACT, 1961. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 137 137 2(I) WHILE HOLDING SO, THE LD. CIT(A) FAILED TO APPRECIATE THAT THE SAID THREE COMPANIES, NO WHERE REBUTTED THE SURVEY FINDINGS AND ITS CLOSE PROXIMIT Y WITH THE LUNKAD GROUP OF COMPANIES AND FURTHER NO MATERIAL WAS BROUGHT ON RECORD TO ESTABLISH THAT THE SAID COMPANIES DID NOT TAKE ACCOMMODATION ENTRIES FROM THE COMPANIES CONNECTED WITH LUNKAD GROUP OF COMPANIES. 88. THIS ISSUE HAS ALREADY BEEN CONSIDERED BY US WHILE DECIDING GROUND NO. 5 IN ITA NO. 294/IND/2012 FOR T HE ASSESSMENT YEAR 2008-09, WHEREIN WE HAVE DEALT WITH TH IS ISSUE IN DETAIL FOR THE ASSESSMENT YEAR 2003-04 ALS O. THE ADDITION MADE BY THE AO U/S 68 IN RESPECT OF CREDIT S RECEIVED BY THE ASSESSEE FROM THE THREE COMPANIES WAS DELETED BY THE LD. CIT(A) HOLDING THAT THE THREE COMPANIES WERE NO T PART OF LUNKAD GROUP OF COMPANIES AND THEIR IDENTITY AND CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACT IONS WAS ESTABLISHED. WE HAVE UPHELD THE DECISION OF THE LD. CIT(A) AND DISMISSED THE SAID GROUND OF REVENUE IN THAT APPEAL . FOLLOWING THE SAME, WE HOLD THAT THE CIT(A) HAS RIGHT LY DELETED THE ADDITION OF RS. 70 LACS MADE BY THE AO IN THIS YEAR. ACCORDINGLY, THIS DEPARTMENTAL APPEAL IS DISMISSED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 138 138 89. IN THE RESULT THE DEPARTMENTAL APPEAL NO. 202/IND/2012 FOR ASSESSMENT YEAR 2003-04 IS DISMISS ED. C.O.NO. 63/IND/2012 : ASSESSMENT YEAR 2003-04 (AGRAWAL COAL CORPORATION PVT. LTD.) : 90. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN THE CROSS OBJECTION:- THAT THE LD. CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN RE-OPENING THE ASSESSMENT AND ISSUING NOTICE U/S 148. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND AS PER LAW, THE NOTICE ISSUED U/S 148 AS WELL AS THE SUBSEQUENT REASSESSMENT PROCEEDINGS ARE UNWARRANTED, INVALID AND VOID AB-INITIO. IT IS THEREFORE PRAYED THAT THE SE PROCEEDINGS AND THE ASSESSMENT ORDER MAY KINDLY BE QUASHED. 91. IN RESPECT OF C.O., THE LD.AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE HAS FILED THE WRITTEN SUBMISSION, WHICH READS AS UNDER :- THE ASSESSEE (RESPONDENT HEREIN) IS A PRIVATE LIMI TED COMPANY ENGAGED, INTER ALIA, IN THE BUSINESS OF COA L TRADING AND POWER GENERATION. FOR THE PREVIOUS YEAR , RELEVANT TO THE ASSESSMENT YEAR 2003-04, THE YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 139 139 INCOME, DECLARING INCOME OF RS.90,73,770. THE RETUR N WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME-TA X ACT, 1961(THE ACT). SINCE NO REGULAR ASSESSMENT U NDER SECTION 143(3) WAS UNDERTAKEN, THE RETURN SO FILED BY THE ASSESSEE-COMPANY, DULY PROCESSED UNDER SECTION 143(1) OF THE ACT, STOOD ACCEPTED AND ATTAINED FINA LITY. SUBSEQUENTLY, AT THE FAG-END OF LIMITATION PERIOD O F SIX YEARS, NOTICE DATED 29.03.2010 WAS ISSUED UNDER SEC TION 148 FOR INITIATING ASSESSMENT UNDER SECTION 147 OF THE ACT. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE VIDE L ETTER DATED 27.04.2010 (FILED ON 30.04.2010) REQUESTED TH E ASSESSING OFFICER TO TREAT THE RETURN ORIGINALLY FI LED AS RETURN IN PURSUANCE TO NOTICE ISSUED UNDER SECTION 148 OF THE ACT. THE SAID RETURN, IT IS PERTINENT TO MENTIO N, WAS FILED UNDER PROTEST, CHALLENGING, INTER ALIA, THE A SSUMPTION OF JURISDICTION UNDER SECTION 147/148 OF THE ACT. T HE REASONS RECORDED BY THE ASSESSING OFFICER FOR INITI ATING ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE COMMUNICATED AS PART OF THE ORDER DATED 24.09.2010 PASSED BY THE ASSESSING OFFICER REJECTING THE LEGAL OBJECTIONS RAISED VIDE LETTER DATED 27.04.2010 (WHI CH OBJECTIONS WERE MERELY PRELIMINARY IN NATURE AND RA ISED WITHOUT RECEIVING REASONS RECORDED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 140 140 IN THE AFORESAID FACTS, IT IS THE RESPECTFUL SUBMIS SION OF THE ASSESSEE THAT THE PROCEEDINGS INITIATED UNDER SECTI ON 147/148 OF THE ACT ARE WHOLLY WITHOUT JURISDICTION, ILLEGAL AND BAD IN LAW. PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITI ATED SIMPLY ON THE BASIS OF INCOMPLETE/ INSUFFICIENT MAT ERIAL RECEIVED FROM ANOTHER AUTHORITY, WHICH COULD NOT HA VE BEEN THE BASIS FOR FORMING REASONABLE BELIEF OF ESC APEMENT OF INCOME; AND, NO FRESH TANGIBLE MATERIAL HAD COME TO THE KNOWLEDGE OF THE ASSESSING OFFICER WHICH COULD FORM THE BASIS FOR FORMING BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. PROCEEDINGS UNDER SECTION 147 ARE BARRE D BY LIMITATION PRESCRIBED IN SECTION 149 OF THE ACT. RE (A): NO REASONS TO BELIEVE SECTION 147 OF THE ACT AUTHORIZES AND PERMITS AN ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHAR GEABLE TO TAX IF AND ONLY IF HE HAS `REASON TO BELIEVE TH AT ANY INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSME NT. THE RELEVANT PROVISIONS OF SECTION 147 OF THE ACT R EAD AS UNDER: 147. INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 141 141 SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RE-COMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): SECTION 147 OF THE ACT EMPOWERS THE ASSESSING OFFIC ER TO INITIATE PROCEEDINGS UNDER THAT SECTION TO ASSESS O R REASSESS ANY INCOME OF THE ASSESSEE THAT ESCAPED ASSESSMENT. THE POWERS TO INITIATE PROCEEDINGS UNDE R SECTION 147 OF THE ACT ARE, HOWEVER, NOT UNFETTERED AND UNRESTRICTED. IN ORDER TO INITIATE PROCEEDINGS UNDE R SECTION 147, THE ASSESSING OFFICER HAS TO COMPLY WITH THE PROVISIONS OF SECTIONS 148 TO 153 OF THE ACT. UNDER THE SCHEME OF THE ACT, THE ASSESSING OFFICER CAN INITIA TE PROCEEDINGS UNDER SECTION 147 OF THE ACT ONLY IF HE HAS REASON TO BELIEVE THAT ANY INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. SUCH BELIEF HAS TO BE ARRIVED A T BY THE ASSESSING OFFICER ON THE BASIS OF TANGIBLE/ REL IABLE INFORMATION IN THE POSSESSION OF THE ASSESSING OFFI CER. IN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 142 142 TERMS OF SECTION 148 OF THE ACT, THE ASSESSING OFFI CER IS REQUIRED TO RECORD THE REASONS ON THE BASIS OF WHIC H PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE INITIA TED. THE REASONS RECORD APPLICATION OF MIND BY THE ASSESSING OFFICER TO COME TO THE BELIEF THAT ANY INCOME OF THE ASSESS EE HAD ESCAPED ASSESSMENT AND THUS ACT AS THE STEPPING STO NE FOR THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE VALIDITY OR OTHERWISE OF THE PROCEEDINGS I NITIATED UNDER SECTION 147 IS TO BE ADJUDGED ON THE BASIS OF SUCH REASONS RECORDED. THE REASONS RECORDED MUST, THEREF ORE, SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER. IF THE REASONS RECORDED ARE VAGUE OR AMBIGUOUS, THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT ARE LIABLE TO BE HELD AS INVALID AND BAD IN LAW. YOUR HONOURS KIND ATTENTION IN THIS REGARD IS INVIT ED TO THE FOLLOWING DECISIONS EXPLAINING THE MEANING OF `REASONS TO BELIEVE: 1. SHEO NATH SINGH VS. ACIT: 82 ITR 148, (S.C.). 2. GANGA SARAN & SONS (P) LTD VS. ITO: 130 ITR 1, 11. 3. BIRLA VXL VS. ACIT: 217 ITR 1 (GUJ). 4. MULTISCREEN MEDIA (P) LTD. VS UOI: 324 ITR 54 (BOM) . 5. ITO VS. LAKHMANI MEWAL DAS: 103 ITR 437, 448 (SC) 6. ARJUN SINGH: 246 ITR 363, 405 (MP) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 143 143 7. BOMBAY PHARMA PRODUCTS VS. ITO: 237 ITR 614 (MP) 8. LOKENDRA SINGH RATHORE VS. WTO: 155 ITR 629 (MP) 9. SETH BROTHERS VS. JCIT: 251 ITR 270 (GUJ.) 10. UNITED ELECTRICAL CO. (P) LIMITED VS. CIT: 258 ITR 317 (DEL.). NO REASON TO BELIEVE REASONS BASED ON MERE PRESUMPTION/SUSPICION IT IS RESPECTFULLY SUBMITTED THAT IN ORDER TO INITI ATE PROCEEDINGS UNDER SECTION 147 OF THE ACT, IT IS INC UMBENT ON THE PART OF THE ASSESSING OFFICER TO FIRST POSSE SS SOME TANGIBLE MATERIAL, ON THE BASIS OF WHICH PRIMA FAC IE CASE/ BELIEF OF ANY ESCAPEMENT OF INCOME ON THE PAR T OF THE ASSESSEE IS MADE OUT. IN THIS REGARD, IT IS RESPECTFULLY SUBMITTED THAT D RAWING ADVERSE INFERENCE, THAT TOO, ON THE BASIS OF PRESUM PTION AND/ OR INCORRECT APPRECIATION OF THE AVAILABLE FAC TS AND RECORDS, DO NOT CONSTITUTE VALID REASONS TO BELIEV E FOR INITIATING RE-ASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 144 144 RELIANCE, IN THIS REGARD, IS ALSO PLACED ON THE FOL LOWING DECISIONS :- SHIPRA SRIVASTAVA VS. ACIT: 319 ITR 221. NITIN P. SHAH VS. DCIT, 146 TAXMAN 536 (GUJ) CIT V. VINEETA JAIN AND CIT VS. ATUL JAIN: 299 ITR 383 (DEL). CIT VS. SFIL STOCK BROKING LTD: 325 ITR 285.(DEL) THE REASONS, IT IS REITERATED, MUST REFLECT APPLICA TION OF MIND ON THE PART OF THE ASSESSING OFFICER AND THE PROCESS O F REASONING BY VIRTUE OF WHICH THE CONCLUSION AS TO ESCAPEMENT OF INCOME BY THE ASSESSEE WAS ARRIVED AT. APPLYING LEGAL POSITION TO FACTS OF PRESENT CASE IN THE PRESENT CASE, PROCEEDINGS UNDER SECTION 147 WERE INITIATED ON THE BASIS OF THE FOLLOWING REASONS REP RODUCED IN THE ORDER DATED 24.9.2010 REJECTING THE LEGAL OB JECTIONS OF THE ASSESSEE : DURING THE COURSE OF A SURVEY U/S 133A CONDUCTED B Y THE DEPARTMENT ON 02.05.2006 IN THE LUNKAD GROUP OF CAS ES IT HAD BEEN NOTICED THAT THE ASSESSEE THROUGH COMPANIE S OF LUNKAD GROUP BRINGING BACK ITS UNACCOUNTED INCOME I N THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 145 145 BOOKS OF ACCOUNT BY WAY OF ACCOMMODATION ENTRIES. D URING THE YEAR UNDER CONSIDERATION (AY 2003-04) ASSESSEE HAS RECEIVED RS.70,00,000/- AS UNSECURED LOANS FROM THE COMPANIES OF LUNKAD GROUP. A REPORT DATED 15.02.200 7 OF THE SAID TRANSACTIONS HAS BEEN RECEIVED FROM THE AD DL. COMMISSIONER OF INCOME TAX, RANGE 3 FROM WHICH IT IS REVEALED THAT THE ASSESSEE IS ROUTING ITS OWN MONEY THROUGH THE COMPANIES OF LUNKAD GROUP. ON THE BASIS OF ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT INC OME CHARGEABLE TO TAX TO THE EXTENT OF RS.70,00,000/- F OR THE AY 2003-04 HAS ESCAPED ASSESSMENT WITHIN THE MEANIN G OF SECTION 147 OF THE INCOME TAX ACT. ACCORDINGLY N OTICE U/S 148 OF THE INCOME TAX ACT, 1961 IS TO BE ISSUED . ON PERUSAL OF THE AFORESAID, IT WILL KINDLY BE NOTI CED THAT PROCEEDINGS UNDER SECTION 147 WERE INITIATED PURPOR TEDLY ON THE GROUND THAT AS A RESULT OF SURVEY CONDUCTED UNDER SECTION 133A OF THE ACT IN THE CASE OF LUNKAD GROUP OF CASES, IT HAS BEEN NOTICED THAT THE SAID GROUP WAS ENGAGED IN GIVING ACCOMMODATION ENTRIES. IT IS FURT HER OBSERVED THAT CERTAIN REPORT DATED 15 TH FEBRUARY, 2007 WAS RECEIVED FROM ADDL. CIT, RANGE -3, INDORE, REVE ALING THAT THE ASSESSEE IS ROUTING ITS MONEY THROUGH THE COMPANIES OF THE LUNKAD GROUP. BASED ON THE SAID INCOMPLETE/ INSUFFICIENT INFORMATION, IT HAS BEEN C ONCLUDED THAT THE ASSESSEE RECEIVED RS.70 LACS AS UNSECURED LOAN I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 146 146 FROM THE COMPANIES OF THE SAID GROUP, WHICH HAS RES ULTED IN ESCAPEMENT OF INCOME. IN THIS REGARD, IT IS, AT THE OUTSET, RESPECTFULLY SUBMITTED THAT DESPITE REQUEST MADE BY THE ASSESSEE VIDE LETT ER DATED 13.12.2010 FILED DURING THE ASSESSMENT PROCEE DINGS (PLEASE REFER PAGE 45 TO 49 OF THE PAPER BOOK), COP Y OF THE SO-CALLED SURVEY REPORT AND/OR THE REPORT RECEIVED FROM THE ADDL. CIT, RANGE-3, INDORE, HAVE NOT BEEN MADE AVAI LABLE TO THE ASSESSEE EVEN TILL DATE. IT IS THE RESPECTFUL SUBMISSION OF THE ASSESSEE THA T THERE WAS NO RELIABLE/ SUFFICIENT/ TANGIBLE INFORMATION/ MATERIAL AVAILABLE WITH THE ASSESSING OFFICER TO HAVE COME T O A REASONABLE BELIEF THAT ANY INCOME OF THE ASSESSEE ESCAPED ASSESSMENT. IN THIS REGARD, IT IS OF UTMOST IMPORTANCE TO NOTE THAT THE ASSESSEE HAD RECEIVED UNSECURED LOANS FROM THE FOLL OWING THREE COMPANIES: NAME OF THE CREDITOR AMOUNT (RS.) EAST WEST FINVEST LTD. 25,00,000 TRIMURTHI FINVEST PVT. LTD. 35,00,000 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 147 147 PURVI FINVEST PVT. LTD. 10,00,000 TOTAL 70,00,000 THE ASSESSEE, IT IS RESPECTFULLY SUBMITTED, BELIEVE S THAT NONE OF THE AFORESAID THREE COMPANIES ARE PART OF T HE SO- CALLED LUNKAD GROUP. THOUGH THE ASSESSEE HAS NOT BEEN PROVIDED WITH THE DETAILS OF THE GROUP COMPANIES OF THE SAID LUNKAD G ROUP, IT IS, HOWEVER, PERTINENT TO MENTION THAT WHILE CON SIDERING SIMILAR ADDITIONS IN THE CASE OF ACIT VS. NARMADA EXTRUSION LTD. AND VARIOUS OTHER COMPANIES IN ITA N OS. IT(SS)A NOS. 3-7 (IND)/ 2011, THE LIST OF THE COMPA NIES OF THE LUNKAD GROUP WERE MADE AVAILABLE BY THE REVENUE TO THE HONBLE TRIBUNAL. THE LIST OF THE COMPANIES OF THE LUNKAD GROUP IS REPRODUCED AT PAGE 15 OF THE ORDER OF THE TRIBUNAL DATED 30.12.2011, COPY WHEREOF IS PLACED A T PAGES 74-129 OF PAPER BOOK OF CASE LAWS OF VOLUME B . ON PERUSAL OF THE LIST OF COMPANIES AT PAGE 88-89 OF T HE CASE LAW PAPER BOOK VOLUME B, IT WILL KINDLY BE NOTICED BY THE HONBLE TRIBUNAL THAT NONE OF THE AFORESAID THREE COMPANIES REFERRED BY THE ASSESSING OFFICER ARE PAR T OF THE LUNKAD GROUP. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 148 148 AS A NECESSARY COROLLARY, IT WILL KINDLY BE APPRECI ATED THAT THE ASSESSING OFFICER WHILE RECORDING REASONS FOR I NITIATING PROCEEDINGS UNDER SECTION 147/148 OF THE ACT PROCEE DED ON A FACTUALLY INCORRECT PREMISE THAT THE AFORESAID THREE COMPANIES FROM WHOM THE ASSESSEE HAD RECEIVED UNSECURED LOANS WERE PART OF THE LUNKAD GROUP. IT WILL KINDLY BE APPRECIATED THAT THE VERY FOUNDAT ION OF REOPENING OF ASSESSMENT OF THE ASSESSEE WAS THAT TH E ASSESSEE HAD RECEIVED UNSECURED ACCOMMODATION ENTRI ES IN THE FORM OF UNSECURED LOANS FROM THE COMPANIES O F THE LUNKAD GROUP. HOWEVER, AS A MATTER OF FACT, NONE OF THE THREE COMPANIES ARE PART OF THE SAID GROUP AND, THE REFORE, FOR THIS REASON ALONE, THE REOPENING OF ASSESSMENT BY THE ASSESSING OFFICER IS WITHOUT ANY TANGIBLE MATERIAL AND PURELY ON CONJECTURES/ SURMISES, BEING BASED ON IRRELEVANT/ INCORRECT FACTS. THE SO-CALLED BELIEF O F THE ASSESSING OFFICER WAS MERELY BASED ON SUSPICIONS, SURMISES AND IRRELEVANT/ INCORRECT FACTS, WHICH CAN NOT, BY ANY STRETCH OF ARGUMENT, BE, IT IS SUBMITTED, REGAR DED AS REASONABLE BELIEF OF AN ESCAPEMENT OF INCOME, WHI CH IS A CONDITION PRECEDENT FOR INITIATING PROCEEDINGS UNDE R SECTION 147OF THE ACT. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS WHEREIN THE COURTS HAVE CONSISTENTLY HELD THAT WHER E AN AUTHORITY RELIES UPON PARTLY RELEVANT AND PARTLY IR RELEVANT/ I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 149 149 INCORRECT FACTS, IT IS NOT POSSIBLE TO COMPREHEND T O WHAT EXTENT SUCH IRRELEVANT/ INCORRECT FACTS INFLUENCED THE MIND OF THE AUTHORITY AND CONSEQUENTLY, THE CONCLUSION O F THE PARTY WOULD BE VITIATED IN LAW. RELIANCE IN THIS REGARD IS PLACED ON THE FOLLOWING DECISIONS: DAULAT RAM RAWATMALL: 87 ITR 349 (SC) COMMISSIONER OF AGRICULTURAL INCOME TAX VS. M.N. MONI: 291 ITR 387 (SC) SAGAR ENTERPRISES VS. ACIT: 257 ITR 335 (GUJ). ACIT V. SHARIA CONSTRUCTION COMPANY: 328 ITR 515 (SC) CIT V. KAMDHENU STEEL & ALLOYS LTD. (2012) 248 CTR 33 (DEL HC): SARTHAK SECURITIES COMPANY P. LIMITED. VS. ITO: 329 ITR 110 (DEL HC): CIT V. SFIL STOCK BROKING LTD. [2010] 325 ITR 285 (DEL HC) UNITED ELECTRICAL CO. P LTD VS. CIT: 258 ITR 317 (D EL HC) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 150 150 SIGNATURE HOTELS P. LTD. VS. ITO: 338 ITR 51 (DEL H C) CIT VS. ATUL JAIN AND VINITA JAIN: 299 ITR 383 (DEL ) - 148 IS INVALID WHEN OPENED ON BASIS OF INTRA DEPARTMENTAL INFORMATION ABOUT ACCOMMODATION ENTRY M/S. INITMATE JEWELS PVT. LTD. VS. ITO: ITA NO. 4498/DEL/2010 CIT VS. VINIYAS FINANCE & INVESTMENT PVT. LTD : ITA NO. 271/2012 (DEL HC) CIT VS. SMT PARAMJIT KAUR: 168 TAXMAN 39 (P&H HC) - 148 STERLITE INDUSTRIES (INDIA) LIMITED VS. ACIT: 305 I TR 339 (MAD) 148. IT IS RESPECTFULLY SUBMITTED THAT THE ENTIRE ATTEMP T ON THE PART OF THE ASSESSING OFFICER APPEARS TO BE TO REOP EN THE ASSESSMENT BY ALLEGING THAT THE ASSESSEE RECEIVED ACCOMMODATION ENTRY, MERELY TO UNDERTAKE VERIFICATI ON/ SCRUTINY, WHICH, IN OUR RESPECTFUL SUBMISSION, IS N OT PERMISSIBLE UNDER SECTION 147 OF THE ACT. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 151 151 IT IS TRITE LAW THAT THE ASSESSING OFFICER HAS NOT BEEN CONFERRED WITH ANY AUTHORITY UNDER THE PROVISIONS O F SECTION 147 OF THE ACT TO INITIATE PROCEEDINGS TO C ONDUCT FURTHER SCRUTINY/ INVESTIGATION. ARRIVING AT THE PR IMA FACIE SATISFACTION TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT IS, IN FACT, A STEP SUBSEQUENT TO CONDUCT OF IN ITIAL INVESTIGATION TO ARRIVE AT SUCH SATISFACTION. INVES TIGATION, IT HAS CONSISTENTLY BEEN HELD, MUST PRECEDE RECORDING OF SATISFACTION AND NOT THE OTHER WAY ROUND. REFERENCE, IN THIS REGARD, MAY BE MADE TO THE FOLLO WING DECISIONS :- CHHUGAMAL RAJPAL VS. S.P. CHALIHA: 79 ITR 603. AMITY HOTELS PVT. LTD. V. CIT: 272 ITR 75 (DEL.). SMT. MANIBEN GALJI SHAH: 283 ITR 453 (BOM.). BAKULBHAI RAMANLAL PATEL V. ITO: 56 DTR 212 (GUJ). CHUNNILAL SURAJMAL V. CIT: 160 ITR 141 @ 148, 151 ( PAT). ACIT V. HEERA LAL: [2007] 14 SOT 4 (JP.). RRB SECURITIES LIMITED V. JCIT: 91 TTJ 883 (DEL.) ACIT V. STAR FERRO ALLOYS (P) LIMITED: 90 ITD 63 (D EL.) (TM). CIT VS. RAYMOND WOOLENS MILLS: 236 ITR 34 (SC) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 152 152 ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD: 291 ITR 500 (SC). IN REBUTTAL, IT IS RESPECTFULLY SUBMITTED, THAT THE RE IS NO DISPUTE WITH THE AFORESAID SETTLED PROPOSITION OF L AW THAT AT THE STAGE OF INITIATION, THE ASSESSING OFFICER H AS TO FORM PRIMA FACIE BELIEF/ OPINION THAT ANY INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. IT WILL, HOWEVER, KINDLY BE APPRECIATED THAT IN THE PRESENT CASE, THE ASSESSING OFFICER HAS SIMPLY PROCEEDED ON CONJECTURES/ SURMISES/ SUSPICIONS AND NOT ON THE BA SIS OF ANY TANGIBLE/ RELIABLE MATERIAL. IN FACT, THE VERY FOUNDATION OF INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT IS INCORRECT PREMISE THAT THE THREE COMPANIES FROM WHO M THE ASSESSEE HAD RECEIVED LOAN WERE PART OF THE LUNKAD GROUP. THE VERY FACT THAT THE PROCEEDINGS WERE INIT IATED ON MERE SUSPICIONS/SURMISES IS EVIDENT THAT THE NAMES OF THE COMPANIES FROM WHOM LOANS WERE RECEIVED HAVE NOT BE EN MENTIONED IN THE REASONS RECORDED, MUCH LESS INDICT ING ANY BASIS OF THE SAID COMPANIES BEING LINKED TO THE SO- CALLED LUNKAD GROUP. EVEN THE FUNDAMENTAL FINDING/ DOCUMENTS FOUND DURING THE SO-CALLED SURVEY LEADING TO EVEN PRIMA FACIE CONCLUSION THAT THE SAID GROUP WAS ENGAGED IN GIVING ACCOMMODATION ENTRIES, ARE NOT MENTIONED IN THE REASONS RECORDED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 153 153 IN THE AFORESAID CIRCUMSTANCES, IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSING OFFICER PROCEEDED ON FACTUALLY I NCORRECT/ IRRELEVANT FACTS, WHICH COULD NOT LEAD HIM TO EVEN FORM A PRIMA FACIE OPINION OF ESCAPEMENT OF INCOME ON THE PART OF THE ASSESSEE. IT IS SUBMITTED THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT IS WITHOUT JURISDICTION, ILL EGAL AND BAD IN LAW, WITHOUT ANY REASON TO BELIEVE THAT AN Y INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, INASMUCH AS: THE REASONS RECORDED ARE VAGUE, NOT EVEN CONTAINING FUNDAMENTAL / BASIC INFORMATION; THE ASSESSING OFFI CER PROCEEDED ON FACTUALLY INCORRECT PREMISE THAT THE T HREE COMPANIES FROM WHOM THE ASSESSEE RECEIVED LOANS ARE PART OF THE LUNKAD GROUP; THERE IS NOTHING IN THE REASONS TO INDICATE HOW AND ON WHAT BASIS EVEN A PRIMA FACIE BELIEF COULD BE ARRIVED AT THAT THE THR EE COMPANIES, FROM WHOM UNSECURED LOANS WERE RECEIVED, WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES; THERE IS NOTHING TO INDICATE HOW AND ON WHAT BASIS A PRIMA FACIE CONCLUSION HAD BEEN ARRIVED AT THAT THE ASSESSEE ROUTED ITS UNACCOUNTED MONEY FOR RECEIVING ACCOMMODATION ENTRIES; THE OUTCOME OF THE SO-CALLED SURVEY PROCEEDINGS AND/OR INFORMATION GATHERED THER EIN IS NOT EVEN SPELT OUT/ SPECIFIED IN THE REASONS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 154 154 IT IS TRITE LAW THAT IN ORDER TO SUSTAIN REOPENING OF A CONCLUDED ASSESSMENT UNDER SECTION 148 OF THE ACT, FRESH/ EXTRANEOUS MATERIAL/ INFORMATION MUST COME TO THE POSSESSION OF THE ASSESSING OFFICER, SUBSEQUENT TO THE CONCLUSION OF THE ORIGINAL ASSESSMENT PROCEEDINGS L EADING THE ASSESSING OFFICER TO BELIEVE THAT INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN THE AB SENCE OF FRESH INFORMATION/ MATERIAL COMING TO THE POSSES SION OF THE ASSESSING OFFICER, REOPENING BY REAPPRAISING TH E EXISTING MATERIAL ON RECORD IS NOT PERMISSIBLE, BEI NG BASED ON A MERE CHANGE OF OPINION. REFERENCE, IN THIS REG ARD, MAY BE MADE TO THE DECISION OF THE FULL BENCH OF TH IS HONBLE COURT IN THE CASE OF CIT V. KELVINATOR OF I NDIA LTD.: 256 ITR 1 (FB) WHICH HAS BEEN AFFIRMED BY THE APEX COURT IN THE CASE REPORTED AS CIT V. KELVINATOR INDIA LTD .: 320 ITR 561 (SC). THE RELEVANT OBSERVATIONS OF THE APEX COURT ARE AS UNDER: THEREFORE, POST-1ST APRIL, 1989, POWER TO RE-OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAI LING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO RE-OPE N ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE-OPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 155 155 BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW; HE HA S THE POWER TO RE-ASSESS. BUT RE-ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAIN PRE-CONDITION AND I F THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF RE-OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE O F OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWE R BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, ASSESSING OFFICER HAS POWER TO RE-OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. TO THE SAME EFFECT ARE THE FOLLOWING DECISIONS: MOSER BAER INDIA LTD. V. DCIT: 212 TAXMAN 139 (DEL ) CIT V. MARUTI SUZUKI LTD.: 215 TAXMAN 495 (DEL) NITIN P. SHAH VS. DCIT: 146 TAXMAN 536 (GUJ.) PCIT VS TUPPERWARE INDIA PVT. LTD.: 236 TAXMA N 494; CIT VS. CHETAN GUPTA: JUDGMENT DATED 15.09.2015 IN ITA NO. 72 OF 2014; CIT VS. ORIENT CRAFT LTD: 354 ITR 536 (DEL) SARTHAK SECURITIES CO. PVT. LTD. V. ITO: 329 ITR 11 0 (DEL) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 156 156 CIT VS. BATRA BHATTA CO: 321 ITR 526 (DEL) SLP HAS BEEN DISMISSED BY THE SUPREME COURT AND IS REPORTED IN 320 ITR (ST.) 24. RELIANCE IS PLACED IN THIS REGARD ON THE DECISION O F THE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING COMPANY VS. CIT: 308 ITR 38. IN THAT CASE, THE ASSESSEE HAD, BY WAY OF A WRIT PETITION, CHALLE NGED THE VALIDITY OF PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT. QUASHING THE PROCEEDINGS, THEIR LORDSHIPS, INTER ALIA, HELD THAT IF REASONS ARE NOT SERVED WITHIN TH E LIMITATION PERIOD OF SIX YEARS, THE PROCEEDINGS INI TIATED WILL BE ILLEGAL. THE PERTINENT OBSERVATIONS OF THE COUR T ARE REPRODUCED HEREUNDER: THIRDLY, IT COULD BE ARGUED THAT THE REASONS SUPPL IED TO THE PETITIONER IN SEPTEMBER, 2004 BE DISREGARDED SO ALSO THE OBJECTIONS FILED BY IT AS ALSO THE IMPU GNED ORDER DATED 2-3-2005 AND THE REASONS NOTED IN THE SAID FORM BE NOW TAKEN AS THE REASONS FOR THE ISSUANCE OF THE NOTICE UNDER SECTION 148 AND THE PETITIONER MAY NOW PREFER HIS OBJECTIONS, IF ANY, A ND THEREUPON THE ASSESSING OFFICER BE DIRECTED TO PASS A SPEAKING ORDER. IN OTHER WORDS, SUCH AN ARGUMENT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 157 157 REQUIRES US TO SWEEP ALL THE PROCEEDINGS EMANATING FROM THE SUPPLY OF REASONS IN SEPTEMBER 2004 AND CULMINATING IN THE PASSING OF THE ORDER DATED 2-3- 2005 'UNDER THE CARPET', AS IT WERE. AND, STARTING THE PROCESS AS PER THE DIRECTIONS GIVEN IN GKN DRIVESHAFTS (INDIA) LTD.'S CASE AFRESH CONSIDERING THE REASONS NOTED IN THE SAID FORM TO BE THE ACTUAL REASONS FOR THE ISSUANCE OF THE NOTICE UNDER SECTIO N 148. IF WE WERE TO ACCEPT THIS ARGUMENT, WE WOULD HAVE TO IGNORE THE DIRECTIONS GIVEN BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD.'S CASE THAT T HE ASSESSING OFFICER IS BOUND TO FURNISH REASONS WITHI N A REASONABLE TIME. THE NOTICE UNDER SECTION 148 WAS ISSUED ON 29-3-2004. THE PETITIONER FILED THE RETUR N AND SOUGHT REASONS BY ITS LETTER DATED 11-5-2004. I F THE DATE OF FILING OF THE COUNTER-AFFIDAVIT IN THIS WRIT PETITION IS TAKEN AS THE DATE OF COMMUNICATION OF T HE REASONS WHICH FORMS PART OF THE SAID FORM, A COPY O F WHICH IS ANNEXURE-A TO THE COUNTER-AFFIDAVIT, THEN THE DATE OF SUPPLY OF REASONS, BASED ON THIS ARGUMENT, WOULD BE 5-11-2007. THIS IMMEDIATELY MAKES IT CLEAR THAT THE ASSESSING OFFICER, WHO WAS BOUND TO FURNIS H HIS REASONS WITHIN A REASONABLE TIME, DID NOT DO SO . THE PERIOD WHICH ELAPSED BETWEEN 11-5-2004, WHEN THE PETITIONER MADE THE REQUEST FOR COMMUNICATING I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 158 158 THE REASONS, AND 5-11-2007, THE DATE WHEN THE COUNTER-AFFIDAVIT WAS FILED, CAN CERTAINLY NOT BE REGARDED AS A REASONABLE PERIOD OF TIME. APART FROM THIS, WE MUST NOT FORGET THE PROVISIONS OF SECTION 149 WHICH PRESCRIBES THE TIME-LIMIT FOR A NOTICE UNDER SECTION 148. SECTION 149(1)(B) STIPULATES THE OUTER LIMIT OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WHERE THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO RUPEES ONE LAKH OR MORE FOR THA T YEAR. THIS MEANS THAT A NOTICE UNDER SECTION 148, I N THE PRESENT CASE, COULD NOT, IN ANY EVENT, HAVE BEE N ISSUED AFTER SIX YEARS FROM THE END OF THE ASSESSME NT YEAR 1998-99, I.E., AFTER 31-3-2005. IN WHICHEVER WAY WE LOOK AT IT, A NOTICE UNDER SECTION 148 WITHO UT THE COMMUNICATION OF THE REASONS THEREFORE IS MEANINGLESS INASMUCH AS THE ASSESSING OFFICER IS BOUND TO FURNISH THE REASONS WITHIN A REASONABLE TIME. IN A CASE, WHERE THE NOTICE HAS BEEN ISSUED WITHIN THE SAID PERIOD OF SIX YEARS, BUT THE REASON S HAVE NOT BEEN FURNISHED WITHIN THAT PERIOD, IN OUR VIEW, ANY PROCEEDINGS PURSUANT THERETO WOULD BE HIT BY THE BAR OF LIMITATION INASMUCH AS THE ISSUANCE O F THE NOTICE AND THE COMMUNICATION AND FURNISHING OF REASONS GO HAND-IN-HAND. THE EXPRESSION 'WITHIN A I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 159 159 REASONABLE PERIOD OF TIME' AS USED BY THE SUPREME COURT IN GKN DRIVESHAFTS (INDIA) LTD.'S CASE CANNOT BE STRETCHED TO SUCH AN EXTENT THAT IT EXTENDS EVEN BEYOND THE SIX YEARS STIPULATED IN SECTION 149. FOR THIS REASON ALSO, EVEN ASSUMING THAT WE OVERLOOK AL L THAT HAS HAPPENED BETWEEN 11-5-2004, WHEN THE PETITIONER SOUGHT THE REASONS, AND 5-11-2007, WHEN THE SAID FORM ANNEXED TO THE COUNTER-AFFIDAVIT WAS FILED IN THIS COURT, THE VALIDITY OF THE NOTICES UN DER SECTION 148 ISSUED ON 29-3-2004 AND ANY PROCEEDINGS PURSUANT THERETO CANNOT BE UPHELD. (EMPHASIS SUPPLIED) FOLLOWING THE AFORESAID DECISION OF THE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC (SUPRA), THE DELHI BENC H OF THE TRIBUNAL IN THE CASE OF SHRI BALWANT RAI WADHWA IN ITA NO. 4806/DEL/10 QUASHED THE REASSESSMENT PROCEEDING S UNDER SECTION 147 OF THE ACT. THE PERTINENT OBSERVA TIONS OF THE TRIBUNAL ARE AS UNDER: 5. A PLAIN READING OF THE ABOVE EXPOSITION OF LAW AT THE END OF HONBLE JURISDICTIONAL HIGH COURT MAKE I T CLEAR THAT ISSUANCE OF THE NOTICE AND THE COMMUNICATION AND FURNISHING OF REASONS WOULD GO HAND IN HAND. THE REASONS ARE TO BE SUPPLIED TO THE ASSESSEE BEFORE THE EXPIRY OF PERIOD OF 6 YEARS. IF IT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 160 160 HAS NOT BEEN DONE THEN VALIDITY U/S 148 COULD NOT B E UPHELD. IT IS NOT IN THE INCOME TAX PROCEEDING ALON E. IN ANY PROCEEDING SAY, CIVIL OR CRIMINAL, IF A SUMM ON IS ISSUED TO THE DEFENDANT /RESPONDENT, IS NOT ACCOMPANIED WITH THE COPY OF PLAINT OR COMPLAINT THEN IT IS TO BE CONSTRUED THAT NO VALID SERVICE OF NOTICE HAS BEEN EFFECTED UPON THE DEFENDANT OR THE RESPONDENTS WHICHEVER MAY BE THE CASE. THE NOTICE COULD BE SERVED AT ANY POINT OF TIME BEFORE THE EXP IRY OF 6 YEARS, IF AO HAS REASONS TO BELIEVE THAT INCOM E HAS ESCAPED ASSESSMENT BUT, SUCH REASONS ARE ALSO TO BE COMMUNICATED TO THE ASSESSEE BEFORE THE EXPIR Y OF THE LIMITATION OTHERWISE VALIDITY OF SUCH NOTICE COULD NOT BE SUSTAINABLE. BEING A SUBORDINATE AUTHORITY TO THE HONBLE HIGH COURT, WE ARE BOUND T O FOLLOW THE AUTHORITATIVE EXPOSITION OF LAW AT THE E ND OF HONBLE HIGH COURT. IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW GROUND NO. 2 OF THE ASSESSEE WHEREIN HE HAS PLEADED THAT NOTICE U/S 148 HAS NOT BEEN SERVED WITHIN THE PERIOD OF LIMITATION UPON TH E ASSESSEE. THE ASSESSMENT IS NOT SUSTAINABLE. IT IS QUASHED. THE AFORESAID DECISION OF THE DELHI HIGH COURT AND THE DELHI BENCH OF THE TRIBUNAL ARE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 161 161 92. THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FILED THE RETURN OF INCOME, BUT NO ASSESSMENT WAS MADE. WHEN THE ASSESSMENT IS NOT MADE, IT IS NOT AN ASSESSMENT ORDER AND IF THE SUBSEQUENT INFORMATION IS RECEIVED BY THE AO, THEN THE AO HAS RIGHT TO REOPEN THE SAME AS PER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PHOOLCHAND BAJRANG LIMITED VS. ITO , 203 ITR 456. H E ALSO RELIED UPON THE DECISION OF I.T.A.T. INDORE BENCH I N THE CASE OF SWASTIK SAMRIDHI TRADING AND INVESTMENT, NAGDA IN I. T.A.NO. 634/IND/2006, WHEREIN SIMILAR ISSUE IS DISCUSSED. MO REOVER, THIS IS ALSO COVERED BY THE DECISION OF APEX COURT IN THE CASE ACIT VS. RAJESH JHAVERI STOCK BROKERS, 291 ITR 500 ( 2007), 93. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE FACTS ON RECORD ARE CAREFULLY TAKEN IN TO CONSIDERATION. IT IS AN ADMITTED FACT THAT THE RETU RN FILED BY THE ASSESSEE WAS SIMPLY PROCESSED AND NO REGULAR ASSESSMENT WAS MADE AND NOTICE IN THE CASE OF THE ASSESSEE WAS ISSUED WITHIN SIX YEARS FROM TH E I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 162 162 END OF RELEVANT ASSESSMENT YEAR AFTER OBTAINING NECESSARY APPROVAL IN ACCORDANCE WITH LAW AND REASONS WERE RECORDED BY AO LEADING TO FORMATION OF BELIEF RELATING TO ESCAPEMENT OF INCOME. THE AO HAS FURTHER FOLLOWED THE PROCEDURE LAID DOWN IN THIS BEHALF, AS PER WHICH THE OBJECTION RAISED BY THE ASSESSEE HAVE BEEN DISPOSED OF BY PASSING THE SPEAKING ORDER. IT IS SETTLED POSITION OF LAW THAT AT THE TIME OF RECORDING OF REASONS A PRIMA FACIE CASE HAS TO BE ESTABLISHED AND THE APPELLATE AUTHORITY AND COUR T CANNOT EXAMINE SUFFICIENCY OR OTHERWISE OF THE REAS ONS RECORDED FOR ISSUE OF NOTICE U/S 148. REFERENCE CAN BE MADE TO THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF CIT RAYMOND WOOLLEN MILLS LTD. 236 ITR34 (SC). WHERE IN IT HAS BEEN HELD AS UNDER: ' IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS WAS VALID IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 163 163 DEPARTMENT COULD REOPEN THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS STAGE. HELD, THAT THE CASE OF THE REVENUE WAS THAT THE ASSESSEE WAS CHARGING TO ITS PROFIT AND LOSS ACCOUNT, FISCAL DUTIES PAID DURING THE YEAR AS WELL AS LABOUR CHARGES POWER, FUEL, WAGES , CHEMICALS, ETC. HOWEVER , WHILE VALUING ITS CLOSING STOCK, THE ELEMENTS OF FISCAL DUTY AND THE OTHER DIRECT MANUFACTURING COSTS WERE NOT INCLUDED. THIS RESULTED IN UNDERVALUATION OF INVENTORIES AND UNDERSTATEMENT OF PROFITS. THIS INFORMATION WAS OBTAINED BY THE REVENUE IN A SUBSEQUENT YEAR'S ASSESSMENT PROCEEDINGS. THE COMMENCEMENT OF REASSESSMENT PROCEEDINGS WAS VALID.' I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 164 164 94. THE AO'S ACTION IS FURTHER FOUND TO BE JUSTIFIED IN VIEW OF DISCUSSION MADE HEREINAFTER. IT MAY BE, HOWEVER, OBSERVED THAT WHAT HAPPENED IN OTHER GROUP CASES IS BROADLY IS OF NO CONSEQUENCE AS THAT WAS A SUBJECTIVE DECISION OF THE AO AFTER BEING SATISFIED ON THE FACTS OF THE CASE WHEREFROM NO ADDITION WAS CAL LED FOR AND THAT CANNOT BE CITED AS A GROUND OR REASON TO ARGUE THAT THE REASSESSMENT PROCEEDINGS WERE NOT VALIDLY INITIATED IN THE CASE OF THE ASSESSEE. 95. IT IS AN ADMITTED FACT THAT THE RETURN FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1)(A) AND NO ASSESSMENT WAS MADE THEREON. ACTION U/S 147 CAN BE INITIATED IN THE CASE OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX. AS PER EXPLANATION 2 TO SECTION 147, FOLLOWING CASES SHALL BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. - WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 165 165 THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX; WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES-SEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; WHERE AN ASSESSMENT HAS BEEN MADE, BUT - (1) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED ;OR SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 166 166 EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED. THE ASSESSEE'S CASE FALLS UNDER CLAUSE (B) ABOVE. 96. THOUGH THE ASSESSEE FILED THE RETURN OF INCOME BUT NO ASSESSMENT WAS MADE. IT HAS BEEN HELD IN PHOOL CHAND BAJARANG LAL V ITO [1993] 203 ITR 456(SC) THAT WHERE TRANSACTION ITSELF, ON THE BASIS OF SUBSEQUENT INFORMATION, IS FOUND TO BE BOGUS TRANSACTION, MERE DISCLOSURE OF THAT TRANSACTION AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS CANNOT BE SAID TO BE A DISCLOSURE OF THE 'TRUE' AND 'FULL' FA CTS IN THE CASE AND ITO WOULD HAVE JURISDICTION TO REOPEN EVEN CONCLUDED ASSESSMENT IN SUCH A CASE. THE CASE OF THE ASSESSEE IS STILL WEAKER AS NO ASSESSMENT HA S BEEN MADE IN HIS CASE. IN CIT V MOHALIRAM RAMJIDAS [1940] 8 ITR 442(PC) IT HAS BEEN HELD THAT THE ITO IS NOT REQUIRED TO CONVEY TO THE ASSESSEE OR TO INTIMA TE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 167 167 HIM THE NATURE OF THE ALLEGED ESCAPEMENT OR TO GIVE HIM AN OPPORTUNITY OF BEING HEARD, BEFORE HE DECIDE S TO OPERATE THE POWERS CONFERRED. 97. STILL FURTHER THIS ISSUE WAS EXAMINED IN GREAT DETAIL BY ITAT, INDORE BENCH IN THE CASE OF SWASTIK & SAMRADHI TRADING AND INVESTMENT LIMITED NAGDA, ITA NO. 635,636,634/IND/2006& 613/IND/2005 ORDER OF ACIT CIRCLE 2(1), UJJAIN, DECIDED ON 29.10.10 WHERE IN ISSUE OF REOPENING U/S 147 UNDER AMENDED LAW HAS BEEN EXAMINED IN GREAT DETAIL FROM PARA 5 ONWARDS O F THE ORDER AND DETAILED FINDINGS HAVE BEEN RECORDED IN PARA 15 TO 17 AS EXTRACTED HEREUNDER: 98. THUS AS PER THE AMENDED PROVISIONS OF SEC.147, FOR REOPENING OF AN ASSESSMENT THERE SHOULD BE A REASON TO BELIEVE THAT INCOME CHARGEABL E TO TAX HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. SUCH REASON TO BELIEVE CAN BE RAISED IN ANY MANNER AND IS NOT QUALIFIED BY A PRE-CONDITION OF F AITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY AN ASSESSE E I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 168 168 AS CONTEMPLATED IN PRE-AMENDED SECTION. 147(A) AND THE ASSESSING OFFICER CAN, UNDER THE AMENDED PROVISIONS, LEGITIMATELY RE-OPEN THE ASSESSMENT IN RESPECT OF INCOME WHICH HAD ESCAPED ASSESSMENT. VIEWED IN THAT ANGLE, POWER TO RE-ASSESSMENT IS MUCH WIDER UNDER THE AMENDED PROVISIONS AND CAN BE EXERCISED EVEN AFTER ASSESSEE HAS DISCLOSED FULL Y AND TRULY ALL MATERIAL FACTS. REASONS WHICH MAY WEI GH WITH THE ASSESSING OFFICER MAY BE THE RESULT OF HIS OWN. INVESTIGATION AND MAY ALSO COME FROM ANY SOURC E THAT HE CONSIDERS RELIABLE. FORMING OF THIS BELIEF IS AN ADMINISTRATIVE DECISION TO BE ARRIVED AT IN JUDICIA L MANNER. THE ASSESSING OFFICER IS REQUIRED TO ACT FAIRLY AND JUDICIOUSLY. HIS BELIEF MUST HAVE SUBSTA NCE AND MUST NOT BE A SHADOW. THERE IS NO DISPUTE TO THE WELL SETTLED LEGAL PROPOSITION THAT SUCH BELIEF SHOULD BE BONA FIDE AND SHOULD NOT BE BASED ON VAGU E, ARBITRARY AND NONSPECIFIC INFORMATION. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 169 169 99. IN THE CASE OF RAJESH JHAVERI (SUPRA) , HON'BLE SUPREME COURT CATEGORICALLY DEALT WITH RE- OPENING OF ASSESSMENT WITH REGARD TO MODE UNDER WHICH ASSESSMENT HAS BEEN DONE, EITHER BY WAY OF THE INTIMATION U/S 143(1) OR BY WAY OF SCRUTINY ASSESSMENT ORDER U/S 143(3). IT WAS OBSERVED THAT THERE IS A CONTEXTUAL DIFFERENCE BETWEEN THE TWO EXPRESSIONS IN THE CONTEXT THE EXPRESSIONS ARE USED . THE WORD 'ASSESSMENT' IS USED AS MEANING SOMETHING 'THE COMPUTATION OF INCOME', SOMETIMES 'DETERMINATION OF AMOUNT OF TAX PAYABLE' AND SOMETIMES THE WHOLE PROCEDURE LAID DOWN IN THE ACT FOR IMPOSING LIABILITY UPON THE TAX PAYERS. IT WAS FURTHER OBSERVED THAT IN THE SCHEME OF THINGS, THE INTIMATION U/S 143(1)(A) CANNOT BE TREATED TO BE AN ORDER OF ASSESSMENT . THIS DISTINCTION IS ALSO WELL BROUGHT OUT BY THE STATUTORY PROVISIONS AS THEY STO OD AT DIFFERENT POINTS OF TIME, PRIOR TO 1ST APRIL, 1989, U/S 143(1)(A), THE AO HAD TO PASS AN ASSESSMENT ORDER I F I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 170 170 HE DECIDED TO ACCEPT THE RETURN, BUT UNDER THE AMENDED PROVISIONS, THE REQUIREMENT OF PASSING OF AN ASSESSMENT ORDER HAS TO BE DISPENSED WITH AND INSTEAD OF IT AN INTIMATION IS REQUIRED TO BE SENT . IT WAS FURTHER ELABORATED THAT UNDER THE FIRST PROVISO TO THE NEWLY SUBSTITUTED SECTION 143(1) W.E.F. 1ST JUN E, 1999, EXCEPT AS PROVIDED IN THE PROVISION ITSELF, ACKNOWLEDGEMENT OF THE RETURN SHALL BE DEEMED TO BE INTIMATION U/S 143(1), WHERE NO SUM IS PAYABLE BY THE ASSESSEE OR WHERE NO REFUND IS DUE TO HIM. IT WAS CATEGORICALLY OBSERVED THAT ACKNOWLEDGEMENT IS NOT DONE BY THE ASSESSING OFFICER, BUT BY THE MINISTERIAL STAFF. UNDER THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSMENT HAS BEEN MADE BY THE MINISTERIAL STAFF. THE INTIMATION U/S 143(1)(A) IS DEEMED TO BE A NOTICE OF DEMAND U/S 156 FOR THE APPARENT PURPOSE OF MAKING MACHINERY PROVISION RELATING TO RECOVERY OF TAX APPLICABLE. BY SUCH APPLICATION ONLY RECOVERY INDICATED TO BE PAYABLE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 171 171 IN THE INTIMATION BECOMES PERMISSIBLE AND NOTHING MORE CAN BE INFERRED FROM THE DEEMING PROVISION. THUS, THERE IS NO ASSESSMENT U/S 143(1)(A) OF THE ACT. 100. IT IS CRYSTAL CLEAR FROM THE ABOVE DECISION OF THE HON'BLE SUPREME COURT WHICH IS HAVING BINDING EFFECT ON US UNDER CONSTITUTION OF INDIA THAT THE PROCESSING OF RETURN U/ S 143(1) DOES NOT AMOUNT TO ASSESSMENT ORDER. THEREFORE, NEITHER ANY OPINION IS FORMED NOR THERE IS A QUESTION OF CHANGE OF OPINION . SINCE INTIMATION U/S 143(1) IS NOT AN ASSESSMENT, THERE IS NO QUESTION OF ANY NEW MATERIAL TO EMPOWER THE AO TO REOPEN THE ASSESSMENT U/S 147, WHEN THERE IS A REASON TO BELIEVE THAT THERE IS ESCAPEMENT OF INCOME. IN THE INSTANT CASE BEFORE US, THE RETURN WAS PROCESSED U/S 143(1) AND NO ASSESSMENT WAS FRAMED BY ISSUE OF NOTICE U/S 143(2). UNDER THESE FACTS AND CIRCUMSTANCES, THE PROPOSITION OF L AW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 172 172 OF RAJESH JHAVERI IS CLEARLY APPLICABLE. IT IS PERTINENT TO MENTION HERE THAT SECTION 147 AUTHORIZES THE AO TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX, WHEN, HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. IN THE INSTANT CASE, THE OBSERVATION OF THE AO TO THE EFFECT THAT BY CLAIMING THE RETURNED INCOME UNDER WRONG HEAD, THE ASSESSEE HAS CLAIMED EXCESS DEPRECIATION, WHICH IS NOT PERMISSIBLE IN CA SE OF INCOME IS ASSESSABLE UNDER THE HEAD ' INCOME FROM HOUSE PROPERTY'. THIS IS SUFFICIENT REASON TO BELIE VE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT, WHICH IS SUFFICIENT TO EMPOWER THE AO TO REOPEN THE ASSESSMENT BY ISSUE OF NOTICE U/S 148. HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI HAS FURTHER OBSERVED THAT UNDER THE EARLIER PROVISIONS OF SECTION 147(A), TWO CONDITIONS WERE REQUIRED TO BE SATISFIED, FIRSTLY, THE AO MUST HAVE REASON TO BELI EVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO TAX HAV E I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 173 173 ESCAPED ASSESSMENT AND, SECONDLY, HE MUST ALSO HAVE A REASON TO BELIEVE THAT SUCH ESCAPEMENT HAS OCCURR ED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT. BOTH THESE CONDITIONS WERE REQUIRED TO BE SATISFIED BEFORE THE AO COULD HAVE JUSTIFICATION TO ISSUE NOTICE U/S 148 READ WITH SECTION 147(A), BUT UNDER THE SUBSTITUTED SECTION 147, EXISTENCE OF ONLY FIRST CONDITION SUFFICES, MEANING THEREBY IF THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONFERS THE VALID JURISDICTION TO RE OPEN THE ASSESSMENT. IT IS PERTINENT TO MENTION HERE THA T BOTH THE CONDITIONS MUST BE FULFILLED THE CASE WITH IN THE AMBIT OF PROVISO TO SECTION 147. THUS, IF MORE THAN FOUR YEARS HAVE BEEN PASSED AFTER COMPLETION OF ASSESSMENT U/S 143(3), NO REOPENING CAN BE MADE UNLESS THERE IS A FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS IN THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 174 174 RETURN OF INCOME. IT WAS CONCLUDED BY THE HON'BLE SUPREME COURT THAT SO LONG AS INGREDIENTS OF SECTIO N 147 ARE FULFILLED, THE AO IS FREE TO INITIATE PROCE EDINGS U/S 147 AND FAILURE TO TAKE STEPS U/S 143(3) WILL N OT RENDER THE AO POWERLESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION U/S 143(1) HAD BEEN ISSUED. 101. THEREFORE, THE CONTENTION OF THE ASSESSEE THAT THE AO HAD NO DEFINITE MATERIAL OR INFORMATION BEFO RE INVOKING PROVISIONS OF SECTION 147 IS NOT TENABLE. IT IS AN ADMITTED FACT THAT THE ORIGINAL RETURN OF THE ASSESSEE WAS PROCESSED U/S 143(1)(A) ONLY AT MINISTERIAL STAFF LEVEL AND NO FINDING HAD BEEN OR EVEN CAN BE RECORDED, BY THE AO DURING SUCH PROCESSING, ABOUT THE GENUINENESS OF LOAN TRANSACTIONS CONSTITUTING THE REASONS FOR ISSUE OF NOTICE U/S 148. THE AO WAS THEREFORE, FULLY JUSTIFI ED IN INVOKING PROVISIONS OF SECTION 147, AS HAS BEEN HEL D BY THE APEX COURT IN ACIT V RAJESH JHAVERI STOCK I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 175 175 BROKERS P LTD. 291 ITR 500 (2007). THERE IS THUS ABSOLUTELY NO MERIT IN THE ASSESSEE'S CONTENTION CHALLENGING THE REOPENING OF ASSESSMENT U/S 147 AND ISSUE OF NOTICE U/S 148 AND THE SAME ARE FOUND TO BE VALIDLY INITIATED AND IN ACCORDANCE WITH LAW. THUS IN VIEW OF AFORESAID CLEAR POSITION OF LAW AND DISCUSSION MADE ABOVE ASSESSEE CANNOT DRAW ANY SUPPORT FROM ANY OF THE VARIOUS CASES DECISION CITED. 102. WE FOUND THAT THE CASE OF THE ASSESSEE IS COVERED B Y THE DECISION OF ACIT VS. RAJESH JHAVERI STOCK BROK ERS PRIVATE LIMITED, 291 ITR 500. THEREFORE, WE ARE OF THE VIEW T HAT THE CASE RELIED UPON BY THE ASSESSEE IN THAT CASE THE F ACTS ARE DIFFERENT AND WHEN THE FACTS ARE DIFFERENT, THIS JUD GMENT WILL NOT HELPFUL TO THE ASSESSEE. IN CASE OF HON'BLE DEL HI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MFG. CO. VS. C IT, 308 ITR 38, THIS JUDGMENT PERTAINS TO WRIT PETITION. THEREFO RE, THIS WILL NOT HELPFUL TO THE ASSESSEE. SIMILARLY, HON'BLE DEL HI HIGH COURT IN THE CASE OF AMITY HOTEL, 272 ITR 75, HAS D ECIDED THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 176 176 APPEAL IN THE CONTEXT OF PROVISIONS OF SECTION 158 BD, THEREFORE, THIS WILL ALSO NOT BE HELPFUL TO THE ASSE SSEE. MOREOVER, IF CASE HAS TO BE DECIDED ON ITS OWN FACTS , THEREFORE, WE ARE OF THE VIEW THAT THE JUDGMENT RELIED UPON BY T HE ASSESSEE WILL NOT BE HELPFUL TO THE ASSESSEE. 103. IN THE RESULT, THE CROSS OBJECTION FILED BY THE ASS ESSEE IS DISMISSED. ITA NO. 389/IND/2012 FOR ASSESSMENT YEAR 2008-09 (ADMANUM FINANCE LTD. INDORE) : 104. THE REVENUE HAS TAKEN FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF THE CIT(APPEALS) IS CONTRARY TO THE FACTS AND LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 6,08,94,415/- MADE U/S 68 AS THE GENUINENESS OF THE CREDITORS WAS NOT ESTABLISHED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE INTEREST FOR RS. 23,40,000/- ON THE CREDITS THE GENUINENESS OF WHICH WAS NOT ESTABLISHED. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN RESTRICTING THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 177 177 DISALLOWANCE U/S 14A OF THE ACT FROM RS. 2,79,443/- TO RS. 19,770/- WITHOUT CONSIDERING THE FACTS THE ASSESSEE COULD NOT PROVE THAT THE INVESTMENT WERE NOT MADE OUT OF INTEREST BEARING FUNDS AS SUCH PROVISION OF RULE 8D IS CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 1,00,000/- OUT OF GENERAL EXPENSES AND RTO EXPENSES, WHEN THE AO HAS FOUND THAT THE VOUCHERS OF THESE EXPENSES WERE SELF-MADE AND SOME OF THEM NOT VERIFIABLE. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 1,50,000/- OUT OF COMMISSION AND BROKERAGE EXPENSES WHEN THERE WAS DISPROPORTIONATE INCREASE IN THE EXPENSES, REASONS WHICH COULD NOT EXPLAINED. 105. IN RESPECT OF GROUND NO. 2 REGARDING DELETION BY CI T(A) OF ADDITION OF RS. 6,08,94,415/- MADE BY THE AO U/S 68, WE FIND THAT THE ADDITION WAS MADE IN THIS CASE IN RESP ECT OF 9 KOLKATA BASED COMPANIES ON THE IDENTICAL FACTS, AS IT WAS MADE IN THE CASE OF M/S AGRAWAL COAL CORPORATION PV T. LTD. FOR THE SAME ASSESSMENT YEAR I.E. 2008-09. THE LOAN CRE DITORS IN THE INSTANT APPEAL ARE ALSO THE SAME. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 178 178 106. THIS ISSUE HAS ALREADY BEEN CONSIDERED BY US WHILE DECIDING GROUND NOS. 2 TO 4 IN ITA NO. 294/IND/2012 FOR THE ASSESSMENT YEAR 2008-09 IN THE CASE OF M/S AGRAWAL C OAL CORPORATION PVT. LTD., WHEREIN WE HAVE DEALT WITH THI S ISSUE IN DETAIL. THE ADDITION MADE BY THE AO U/S 68 IN RESPE CT OF CREDITS RECEIVED BY THE ASSESSEE FROM THE TWELVE KOL KATA BASED COMPANIES WAS DELETED BY THE LD. CIT(A) HOLDING THAT THEIR IDENTITY AND CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSACTIONS WAS ESTABLISHED. WE HAVE UPHELD THE DE CISION OF THE LD. CIT(A) AND DISMISSED THE SAID GROUND OF REV ENUE IN THAT APPEAL. FOLLOWING THE SAME REASONING, WE HOLD T HAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS. 6,08 ,94,415/- MADE BY THE AO IN THIS CASE ALSO. ACCORDINGLY, THIS GROUND OF APPEAL OF THE DEPARTMENTAL APPEAL IS DISMISSED. 107. GROUND NO. 3 HAS BEEN RAISED BY THE REVENUE AGAINST THE DELETION BY CIT(A) OF DISALLOWANCE OF INTEREST O F RS. 23,40,000/- MADE BY THE AO. IN THE SIMILAR FASHION AS MADE IN AGRAWAL COAL CORPORATION PVT. LTD. IN ASSESSMENT YEAR 2008-09. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 179 179 108. THIS ISSUE HAS ALREADY BEEN CONSIDERED BY US WHILE DECIDING GROUND NOS. 2 TO 4 IN ITA NO. 294/IND/2012 FOR THE ASSESSMENT YEAR 2008-09 IN THE CASE OF M/S AGRAWAL C OAL CORPORATION PVT. LTD., WHEREIN WE HAVE DEALT WITH THI S ISSUE IN DETAIL. THE DISALLOWANCE MADE BY THE AO IN RESPECT O F INTEREST PAID BY THE ASSESSEE WAS DELETED BY THE LD. CIT(A) H OLDING THAT THE STAND ALONE DISALLOWANCE OF INTEREST WITHOUT ESTA BLISHING SUCH LOANS TO BE UNEXPLAINED AND IN-GENUINE IN ASSE SSEE OWN CASE, DOES NOT HAVE SANCTITY AND APPROVAL OF LAW. WE HAVE UPHELD THE DECISION OF THE LD. CIT(A) AND DISMISSED THE SAID GROUND OF REVENUE IN THAT APPEAL. FOLLOWING THE SAME REASONING, WE HOLD THAT THE CIT(A) HAS RIGHTLY DELE TED THE DISALLOWANCE OF RS. 23,40,000/- MADE BY THE AO IN TH IS CASE ALSO. ACCORDINGLY, THIS GROUND OF APPEAL OF THE DEP ARTMENTAL APPEAL IS DISMISSED. 109. GROUND NO. 4 OF THE REVENUE IS AGAINST RESTRICTING THE DISALLOWANCE U/S 14A BY THE CIT(A) FROM RS. 2,79,443 /- TO RS. 19,970/-. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 180 180 110. THE SHORT FACTS OF THE CASE ARE THAT THE AO HAS VER IFIED THE AUDIT REPORT AND HE OBSERVED THAT DIVIDEND INCO ME WAS SHOWN AT RS. 59,793/- FROM THE TOTAL INVESTMENT OF E XEMPT INCOME ARISES AT THE OPENING OF THE YEAR BEING RS. 27,30,272/- AND THE INCOME AT THE CLOSING OF THE YEAR BEING RS. 52,57,614/-. THE ASSESSEE HAS TAKEN THE OBJECTION T HAT HE HAS NOT USED BORROWED FUNDS FOR THE PURPOSE OF INVESTME NT IN SHARES. THEREFORE, THE AO HAS VERIFIED THE CHART GI VEN BY THE ASSESSEE AND AFTER VERIFYING THIS, HE HAS WORKED OU T THE DISALLOWANCE OF RS. 2,59,473/- BY CALCULATING AS UN DER :- PARA OF RULE D PARTICULARS VALUES DISALLOWABLE 2(I) - - 2(II) A INTEREST PAID (A) 3,49,39,521 A*B/C 2,59,473/- INVESTMENT ON FIRST DAY 27,30,272 INVESTMENT ON LAST DAY 52,57,614 B AVERAGE OF INVESTMENT (B) 39,93,943 ASSETS ON FIRST DAY 49,38,46,384 ASSETS ON LAST DAY 58,17,66,989 C AVERAGE OF TOTAL ASSETS (C) 53,78,06,687 I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 181 181 2(III) INVESTMENT ON FIRST DAY 27,30,272 0.5% OF B 19,970 INVESTMENT ON LAST DAY 52,57,614 B AVERAGE OF INVESTMENT (B) 39,93,943 TOTAL 2,79,443/- 111. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS RESTRICTED THE ADDITION AT RS. 19,970/- BY OBSE RVING AS UNDER :- 4.8.4 ON A CAREFUL CONSIDERATION OF THE FACTS OF THE PRESENT CASE IN LIGHT OF THE ACTUALITY OF THE CASES RELIED BY THE APPELLANT AND ON THE BASIS OF THE DISCUSSION ABOVE THERE IS SUFFICIENT MERIT IN THE CONTENTION O F THE APPELLANT WHICHEVER WAY THE ISSUE IS EXAMINED THAT BY AND LARGE INVESTMENT CANNOT BE SAID TO BE MADE OUT OF INTEREST BEARING BORROWED FUNDS IN VIEW OF HUGE AMO UNT OF SHAREHOLDERS FUND EXCEEDING RS. 1215.31 LACS AND IN ALTERNATIVE THERE WERE NO NET INTEREST DEDUCTION CL AIMED WAS PRESSED BY THE APPELLANT WERE NO NET INTEREST DEDUCTION CLAIMED WAS PRESSED BY THE APPELLANT AS DEDUCTION FROM WHICH DISALLOWANCE U/S 14A COULD BE CONSIDERED MORE SO WHEN THE CORE BUSINESS OF APPELL ANT IS MONEYLENDING. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 182 182 THUS, IN THE PECULIAR FACTS AND CIRCUMSTANCES OF TH E CASE AND THE ABOVE DISCUSSION MADE BY AR, THE DISALLOWANCE U/S 14A IN RESPECT OF INTEREST, WORKED OUT AT RS. 2,59,473/- BY THE AO IS DIRECTED TO BE DELET ED AND THE DISALLOWANCE IN RESPECT OF EXPENSES WORKED OUT AT RS. 19,970/- @ 0.5% OF THE AVERAGE INVESTMENTS MAINTAINED. 112. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. FROM THE ORDER OF CIT(A) WE FIND THAT CIT(A ) HAS HELD THAT THE INTEREST RECEIPTS IN THIS CASE WERE MUCH H IGHER THAN INTEREST PAID AND SINCE THE INTEREST WAS MAINLY RECE IVED ON FDR WHICH ARE REQUIRED TO BE MADE FOR OBTAINING OVER DRAFT FACILITY, THE INTEREST RECEIPTS ARE INEXTRICABLY LI NKED TO INTEREST PAYMENTS AND THEREFORE INTEREST RECEIVED SHOULD BE NETTED OFF AGAINST INTEREST PAYMENTS. THE CIT(A) HAS GIVEN A F INDING THAT THE INVESTMENTS MADE BY THE ASSESSEE WERE MADE OUT OF OWN FUNDS AND NOT OUT OF INTEREST BEARING BORROWED FUND S. THUS IN THE PECULIAR FACTS OF THE CASE, THE CIT(A) DELETED THE DISALLOWANCE U/S 14A OF RS. 2,59,473/- MADE IN RESPE CT OF I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 183 183 INTEREST PAID AND RESTRICTED THE DISALLOWANCE IN RES PECT OF EXPENSES TO RS. 19,970/- @ .5% OF THE AVERAGE INVES TMENTS. THE ABOVE FINDINGS OF THE CIT(A) REMAINED UNCONTROV ERTED AND THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANYTHING CONTRARY ON RECORD. ACCORDINGLY, WE UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE AND THIS GROUND OF DEPARTMENTAL APPEA L IS DISMISSED. 113. GROUND NO. 5 & 6 OF THE REVENUE HAVE BEEN RAISED AGAINST DELETION BY CIT(A) OF AD HOC DISALLOWANCES M ADE BY THE AO OF RS. 1,00,000/- AND RS. 1,50,000/- OUT OF GENE RAL AND RTO EXPENSES AND COMMISSION AND BROKERAGE EXPENSES. 114. THE CIT(A) HAS DELETED THE DISALLOWANCES OBSERVING THAT THE DISALLOWANCE WAS MADE WITHOUT POINTING OUT AN Y DEFECT IN THE CLAIM OF THESE EXPENSES AND THAT ONLY OBSERVATION MADE IN THE ASSESSMENT ORDER WAS THAT THESE EXPENSES ARE NOT COVERED UNDER FBT AND ALSO SOME PAYMENTS ARE MADE I N CASH. THE CIT(A) HAS HELD THAT THE FINDING OF THE AO IS N OT PROPER AND SINCE NO DEFECT WAS POINTED OUT IN THE EXPENSES INCURRED I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 184 184 WITH RESPECT TO VERIFICATION AND ADMISSIBILITY, THER E WAS NO VALID CASE FOR SUSTAINING THE DISALLOWANCE. 115. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE AO. 116. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE ASSESSEE HAS SUBMITTED THE DETAILS OF EXPENSES AND COPY OF RTO EXPENSES AND GENERAL EXPENSES BEFOR E THE CIT(A). THE LD. CIT(A) HAS DELETED THIS DISALLOWANCE ON THE GROUND THAT WHEN DEFECTS ARE NOT POINTED OUT IN THES E EXPENSES AND WHEN THE ASSESSEE IS A PUBLIC LIMITED C OMPANY, THERE IS NO REASON TO DISALLOW THE SAME EXPENSES. TH EREFORE, THE LD. CIT(A) HAS DELETED THIS DISALLOWANCE. DURING THE COURSE OF HEARING, THE LD. AUTHORIZED REPRESENTATIVE FOR T HE ASSESSEE DID NOT POINT OUT ANY CONTRARY EVIDENCE AGAINST THE FINDING OF THE CIT(A). THEREFORE, WE ENDORSE THE ACTION OF THE CIT(A) AND WE DISMISS THE DEPARTMENTAL APPEAL ON THIS GROUND. ITA NO. 807/IND/2014 AND 808/IND/2014 FOR ASSESSMEN T YEAR 2010-11 AND ASSESSMENT YEAR 2011-12 (ADMANUM FINANCE LTD. INDORE) I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 185 185 ITA NO. 807/IND/2014 117. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A):- (I) ERRED IN DELETING THE ADDITION OF RS. 84,56,250/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED TO HAVE BEEN MADE TO CERTAIN PARTIES WHO WERE FOUND TO BE NON-EXISTENT / NON-GENUINE IN AY 2008- 09, WHICH HAS BEEN RIGHTLY DONE BY THE AO AS THE IDENTITY AND GENUINENESS OF TRANSACTION WERE NOT ESTABLISHED IN AY 2008-09, AND THE AFORESAID PAYMENT OF INTERESTS WERE THE EXTENSION OF THE SAME NON-GENUINE TRANSACTIONS. (II) ERRED IN DELETING THE ADDITION OF RS. 84,56,250/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST TO CERTAIN PARTIES WHOSE IDENTITY WAS NOT ESTABLISHED, WHILE IGNORING THAT THE JURISDICTIONAL ITAT IN THE CASE OF AGRAWAL COAL CORPORATION LTD. IN APPEAL NO. ITA 151/IND/2009 FOR THE AY 05-06 HELD THAT THE PRODUCTION OF DIRECTORS OF THE COMPANY FROM WHOM CREDITS HAVE BEEN RECEIVED SHALL BE ONE OF THE IMPORTANT CRITERIA FOR ACCEPTING THE TRANSACTION AN D IN THE INSTANT CASE DIRECTORS OF THE COMPANY FROM WHOM CREDITS WERE CLAIMED WERE NOT PRODUCED / APPEARED. (III) ERRED IN DELETING THE ADDITION OF RS. 3,32,954/- MADE U/S 14A AND RESTRICTED TO 0.5% OF AVERAGE INVESTMENT AT RS. 18,696/- WITHOUT APPRECIATING THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 186 186 FACT THAT THE AO HAS MADE THE CALCULATION BY APPLYING THE RULE 8D AND WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT PROVE THAT THE INVESTMENT WERE NOT MADE OUT OF INTEREST BEING FUNDS AND AS SUCH PROVISION OF RULE 8D IS CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE. (IV) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION OF RS. 11,90,575/- ON ACCOUNT OF BAD DEBTS WHERE THE ASSESSEE HAS NOT FILED REVISED RETURN BUT FILED ONL Y REVISED COMPUTATION AND CIT(A) HAS NOT FOLLOWED THE SETTLED LAW DESCRIBED BY APEX COURT IN THE CASE OF GOETZ INDIA. (V) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF CONVEYANCE EXPENSES AND REPAIR AND MAINTENANCE EXPENSES OF RS. 1,00,000/- EACH AND RESTRICTED THE SAME TO RS. 25,000/- EACH, WITHOUT CONSIDERING THAT THE AO HAS MADE ADDITION ON THE BASIS OF VERIFICATION OF BOOKS ACCOUNTS AND FOUND THAT SUPPORTING BILLS / VOUCHERS FOR SOME OF THE EXPENSES WERE MISSING. ITA NO. 808/IND/2014 (ADMANUM FINANCE LIMITED) A.Y. : 2011-12 : 118. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 187 187 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE CIT(A):- (I) ERRED IN DELETING THE ADDITION OF RS. 62,12,948/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST CLAIMED TO HAVE BEEN MADE TO CERTAIN PARTIES WHO WERE FOUND TO BE NON-EXISTENT / NON-GENUINE IN AY 2008- 09, WHICH HAS BEEN RIGHTLY DONE BY THE AO AS THE IDENTITY AND GENUINENESS OF TRANSACTION WERE NOT ESTABLISHED IN AY 2008-09, AND THE AFORESAID PAYMENT OF INTERESTS WERE THE EXTENSION OF THE SAME NON-GENUINE TRANSACTIONS. (II) ERRED IN DELETING THE ADDITION OF RS. 62,12,948/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST TO CERTAIN PARTIES WHOSE IDENTITY WAS NOT ESTABLISHED, WHILE IGNORING THAT THE JURISDICTIONAL ITAT IN THE CASE OF AGRAWAL COAL CORPORATION LTD. IN APPEAL NO. ITA 151/IND/2009 FOR THE AY 05-06 HELD THAT THE PRODUCTION OF DIRECTORS OF THE COMPANY FROM WHOM CREDITS HAVE BEEN RECEIVED SHALL BE ONE OF THE IMPORTANT CRITERIA FOR ACCEPTING THE TRANSACTION AN D IN THE INSTANT CASE DIRECTORS OF THE COMPANY FROM WHOM CREDITS WERE CLAIMED WERE NOT PRODUCED / APPEARED. (III) ERRED IN DELETING THE ADDITION OF RS. 3,25,039/- MADE U/S 14A AND RESTRICTED TO 0.5% OF AVERAGE INVESTMENT AT RS. 21,196/- WITHOUT APPRECIATING THE FACT THAT THE AO HAS MADE THE CALCULATION BY APPLYING THE RULE 8D AND WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE COULD NOT PROVE THAT THE INVESTMENT WERE NOT MADE OUT OF INTEREST BEING I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 188 188 FUNDS AND AS SUCH PROVISION OF RULE 8D IS CLEARLY APPLICABLE TO THE CASE OF THE ASSESSEE. (IV) ERRED IN DELETING THE DISALLOWANCE OF DEDUCTION OF RS. 11,90,575/- ON ACCOUNT OF BAD DEBTS WHERE THE ASSESSEE HAS NOT FILED REVISED RETURN BUT FILED ONL Y REVISED COMPUTATION AND CIT(A) HAS NOT FOLLOWED THE SETTLED LAW DESCRIBED BY APEX COURT IN THE CASE OF GOETZ INDIA. (V) ERRED IN DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF CONVEYANCE EXPENSES AND REPAIR AND MAINTENANCE EXPENSES OF RS. 1,00,000/- EACH AND RESTRICTED THE SAME TO RS. 25,000/- EACH, WITHOUT CONSIDERING THAT THE AO HAS MADE ADDITION ON THE BASIS OF VERIFICATION OF BOOKS ACCOUNTS AND FOUND THAT SUPPORTING BILLS / VOUCHERS FOR SOME OF THE EXPENSES WERE MISSING. 119. WE FIND THAT IN BOTH THE ABOVE APPEALS THE REVENUE HAS RAISED THE IDENTICAL GROUNDS EXCEPT THE CHANGE IN FIGURES. 120. GROUND NO. (I) AND (II) RELATE TO DELETION BY CIT(A ) OF DISALLOWANCE OF INTEREST MADE BY THE AO IN RESPECT O F LOAN CREDITORS WHICH WERE HELD TO BE IN-GENUINE IN ASSESS MENT YEAR 2008-09. SINCE IN ASSESSMENT YEAR 2008-09 THE AO MA DE THE ADDITION U/S 68 AS A CONSEQUENCE HE DISALLOWED THE INTEREST PAID BY THE ASSESSEE TO THESE PARTIES IN ASSESSMENT YEAR 2010- 11 AND 2011-12. THUS, THE DISALLOWANCE OF INTEREST I N THESE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 189 189 YEARS WAS CONSEQUENTIAL TO THE ADDITION MADE U/S 68 IN ASSESSMENT YEAR 2008-09. SINCE WE HAVE ALREADY UPHEL D THE ORDER OF CIT(A) DELETING THE ADDITION MADE U/S 68 I N ASSESSMENT YEAR 2008-09 IN THE ASSESSEES OWN CASE I N ITA NO. 389/IND/2012, WE UPHOLD THE ORDER OF THE CIT(A) IN THE INSTANT CASE ALSO FOR ASSESSMENT YEAR 2010-11 AND 2 011-12 DELETING THE DISALLOWANCE OF INTEREST. 121. ACCORDINGLY, GROUND NOS. (I) AND (II) IN BOTH THE A PPEALS ARE DECIDED AGAINST THE REVENUE. 122. GROUND NO. (III) IN BOTH THE APPEALS HAS BEEN RAISE D BY THE REVENUE AGAINST THE ACTION OF THE CIT(A) IN RES TRICTING THE DISALLOWANCE MADE BY THE AO MADE U/S 14A. THIS ISSUE HAS ALSO BEEN DECIDED BY US IN THE ASSESSEES OWN CASE I N ITA NO. 389/IND/2012 FOR ASSESSMENT YEAR 2008-09 AND WE DIRE CT ACCORDINGLY. AS A RESULT, THESE GROUNDS OF APPEAL O F THE REVENUE ARE DISMISSED. 123. GROUND NO. (IV) OF THE REVENUE HAS BEEN RAISED AGAINST THE ALLOWANCE OF THE CLAIM MADE BY THE ASSES SEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS CLAIMIN G I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 190 190 DEDUCTION OF RS. 11,90,575/- ON ACCOUNT OF BAD DEBT S ACTUALLY WRITTEN OFF IN ITS BOOKS OF ACCOUNTS. 124. THE CIT(A) HAS DISCUSSED THIS ISSUE IN APPEAL IN I.T.A.NO. 807/IND/2014 A.Y. 2010-11, WHICH READS AS UNDER: - 4. THE SECOND GROUND OF APPEAL IS AGAINST REJECTIO N OF THE CLAIM MADE BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS CLAIMING DEDUCTION OF RS. 11,90,575/- ON ACCOUNT OF BAD DEBTS ACTUALLY WRITTE N OFF IN ITS BOOKS OF ACCOUNTS IN THIS YEAR, WHICH WAS ADJUS TED AGAINST PROVISION FOR NON-PERFORMING ASSETS (NPA). 4.1 THE APPELLANT SUBMITTED THAT THE COMPANY IS ENG AGED IN THE BUSINESS OF FINANCE AND BEING REGISTERED NBF C HAS TO PROVIDE FOR NON-PERFORMING ASSETS (NPAS) AND THU S PROVISIONS FOR DOUBTFUL DEBTS IS MADE EVERY YEAR FO LLOWING THE PRUDENTIAL NORMS AND SUCH PROVISION IS DEBITED TO THE PROFIT AND LOSS ACCOUNT. HOWEVER, SUCH PROVISIONS A RE ALWAYS DISALLOWED BY THE APPELLANT IN THE COMPUTATI ON AND HAVE NEVER BEEN CLAIMED AS DEDUCTION. 4.2 IT HAS BEEN SUBMITTED THAT THE APPELLANT COMPAN Y DURING THE YEAR UNDER CONSIDERATION TREATED DEBTORS AMOUNTING TO RS. 35,24,407/- AS BAD AND IRRECOVERAB LE AND HAS ACTUALLY WRITTEN THEM OFF IN ITS BOOKS OF A CCOUNTS. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 191 191 HOWEVER SINCE A PROVISION FOR NPA OF RS. 11,90,575/ - IN RESPECT OF THESE DEBTORS WAS ALREADY CREATED EARLIE R, THE BALANCE NET AMOUNT OF RS. 23,33,832/- WAS ONLY DEBI TED TO PROFIT AND LOSS ACCOUNT AS BAD DEBTS WRITTEN OFF DURING THE YEAR. THE AMOUNT OF RS. 11,90,575/- ACTUALLY WR ITTEN OFF IN THE BOOKS IN THIS YEAR AS BAD DEBTS AND ADJU STED AGAINST PROVISION FOR NPA CREATED IN EARLIER YEARS, WAS ALSO REQUIRED TO BE ALLOWED IN THIS YEAR, AS THE NP A PROVISION CREATED EARLIER WAS ALWAYS DISALLOWED AND NEVER CLAIMED AS DEDUCTION. HOWEVER THE COMPANY INADVERTENTLY DID NOT CLAIMED THIS AMOUNT SEPARATEL Y IN THE COMPUTATION AT THE TIME OF FILING OF THE RETURN . 4.3 IT WAS SUBMITTED BEFORE ME THAT AS SOON AS THE MISTAKE BECAME KNOWN TO THE ASSESSEE A REVISED COMPUTATION OF INCOME WAS FILED DURING THE COURSE O F ASSESSMENT PROCEEDINGS BRINGING ALL THE RELEVANT FA CTS TO THE NOTICE OF THE AO AND REQUESTING THAT THIS FIGUR E OF RS. 11,90,575/- BE ALLOWED AS DEDUCTION AS BAD DEBTS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS IN TH IS YEAR AND BE REDUCED FROM THE INCOME TO ARRIVE AT CORRECT TAXABLE PROFIT FOR THE YEAR AND THE RETURN BE TREATED AS RE VISED TO THIS EXTENT. DETAILS OF BAD DEBTS ACTUALLY WRITTEN OFF, PROVISION MADE AND COPIES OF LEDGER ACCOUNTS OF ALL THE DEBTORS REFLECTING THE ACTUAL WRITE OFF IN THE BOOK S OF ACCOUNTS, AS WERE FILED BEFORE THE AO, HAS ALSO BEE N FILED I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 192 192 IN THE PAPER BOOK IN THESE APPELLATE PROCEEDINGS. C OPIES OF INCOME TAX RETURNS OF EARLIER YEARS HAVE ALSO BEEN FILED TO SUBSTANTIATE THAT NPA PROVISIONS WERE DISALLOWED BY THE APPELLANT IN THE RESPECTIVE YEARS. 4.4 THE AO REJECTED THIS CLAIM OF THE ASSESSEE SIMP LY ON THE PREMISE THAT CLAIMS MADE THROUGH A REVISED RETU RN COULD ONLY BE ENTERTAINED. HE RELIED ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF GOETZE INDIA L TD. 4.5 ON THE OTHER HAND THE LD. AR VEHEMENTLY ARGUED THAT IT IS INCUMBENT TO ARRIVE AT A CORRECT TAXABLE INCO ME. GOETZE INDIA MAY BE A CODE FOR THE ASSESSING OFFICERS BUT THE APPELLATE AUTHORITIES HAVE ALL THE POWER TO ENTERTA IN A CLAIM TO DEDUCE THE CORRECT TAXABLE INCOME. RELIANC E HAS BEEN PLACED ON THE FOLLOWING DECISIONS: I) CIT VS. RAMCO INTERNATIONAL (P&H) 332 ITR 306. II) CHICAGO PNEUMATIC INDIA LTD. VS. DCIT 15 SOT 25 2 4.6 IT WAS ALSO SUBMITTED THAT THE AO HAS NOT DOUBT ED THE CLAIM OF BAD DEBTS BUT HAS NOT ALLOWED THE SAME ONL Y FOR THE REASON THAT THE SAME WAS NOT CLAIMED BY FILING A REVISED RETURN. THE AR POINTED OUT THAT THE SAID MI STAKE OF NOT CLAIMING A PART OF THE BAD DEBTS, CAME TO NOTIC E ONLY DURING THE ASSESSMENT PROCEEDINGS WHEN THE AO HAD ASKED FOR THE DETAILS OF BAD DEBTS CLAIMED, BY WHIC H TIME I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 193 193 THE TIME LIMIT FOR FILING THE REVISED RETURN U/S 13 9(5) HAS ALREADY EXPIRED. THEREFORE, THE ASSESSEE HAD NO OPT ION BUT TO CLAIM THE SAME DURING THE ASSESSMENT PROCEEDINGS . THE AR ALSO SUBMITTED THAT THROUGH THE APPELLANT DID NO T FILE ANY REVISED RETURN, BUT HAS FILED A REVISED COMPUTA TION OF INCOME DURING ASSESSMENT PROCEEDINGS WHICH IS PLACE D AT PAGE 140 AND 141 OF THE PAPER BOOK. IT WAS ALSO CLA RIFIED BY THE AR THAT SIMILAR MISTAKE WAS NOTICED IN THE R ETURN OF INCOME FILED FOR THE SUBSEQUENT ASSESSMENT YEAR I.E . 2011- 2012 HAS BEEN COMPLETED U/S 143(3) AND THE SIMILAR CLAIM MADE IN THE REVISED RETURN HAS BEEN ACCEPTED IN THA T YEAR. 4.7 I HAVE GONE THROUGH THE SUBMISSIONS AND THE DOCUMENTS PLACED BEFORE ME. I HAVE ALSO PERUSED THE ASSESSMENT ORDER, WHEREIN THE ISSUE HAS BEEN DISCUS SED AT POINT NO. 1 ON PAGE 4. IT IS SEEN THAT THE AO HA S DISCUSSED THE CLAIM MADE BY THE APPELLANT DURING TH E ASSESSMENT PROCEEDINGS AT LENGTH AND HAS NOT OBJECT ED TO THE SAME ON MERITS, HOWEVER HE REJECTED THE CLAIM M ERELY STATING THAT SINCE THE CLAIM WAS NOT MADE BY FILING A REVISED RETURN U/S 139(5) IN VIEW OF THE DECISION O F THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA THE CLAIM CANNOT BE ACCEPTED. 4.8 WHEN THE BAD DEBTS ARE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS IRRECOVERABLE THE SAID CLAIM I S I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 194 194 ALLOWABLE TO THE APPELLANT U/S 36(1)(VII) READ WITH SECTION 36(2). SINCE THE AMOUNT OF RS. 11,90,575/- ACTUALLY WRITTEN OFF FROM THE DEBTORS ACCOUNT IN THIS YEAR, THE CLAIM MADE BY THE APPELLANT IS A LEGITIMATE CLAIM AND IS ALLOWABLE. THE AO IS BOUND TO ASSESS THE CORRECT IN COME AND FOR THIS PURPOSE THE AO MAY GRANT RELIEF SUO-MO TU OR ON BEING POINTED OUT BY THE ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT HAS BEEN TIME AND AGAIN HELD BY VARIOUS COURTS THAT LEGITIMATE CLAIMS OF THE ASS ESSEE SHOULD BE ALLOWED EVEN IF RAISED DURING THE ASSESSM ENT PROCEEDINGS. IN THE CASE OF CIT VS. RAMCO INTERNATI ONAL IN (2011) 332 ITR 306. THE HON'BLE PUNJAB AND HARYANA HIGH COURT HAS HELD THAT:- DEDUCTION UNDER SECTION 80-IB-ALLOWABILITY-CLAIM NOT MADE IN RETURN ASSESSEE HAVING DULY FURNISHED THE DOCUMENTS AND SUBMITTED FORM NO. 10CCB DURING THE ASSESSMENT PROCEEDINGS, CLAIM FOR DEDUCTION UNDER SECTION 80-IB BY WAY OF AN APPLICATION WAS ADMISSIBLE THERE WAS NO REQUIREMENT FOR FILING ANY REVISED RETURN NO SUBSTANTIAL QUESTION OF LAW ARISES - GOETZE INDIA L TD. VS. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) DISTINGUISHED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 195 195 4.9 IN VIEW OF THE ABOVE DISCUSSION AND ALSO CONSID ERING THE FACT THAT THE SIMILAR CLAIM OF BAD DEBTS MADE B Y FILING THE REVISED RETURN FOR IMMEDIATELY SUCCEEDING YEAR I.E. AY 2011-2012 HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS AND ALSO CONSIDERING THE LEGAL POSITION THE SAID CLAIM OF RS. 11,90,575/- IS THEREFORE DIRECTED TO BE ALLOWED. 125. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANYTHING CONTRARY ON RECORD TO REBUT THE FINDINGS O F THE CIT(A). 126. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE TREATED DEBTORS OF RS. 35,24,407/ - AS BAD DEBTS AND ACTUALLY WRITTEN THEM OFF IN THE BOOKS OF ACCOUNTS. HOWEVER SINCE A PROVISION FOR NPA OF RS. 11,90,575/ - IN RESPECT OF THESE DEBTORS WAS ALREADY CREATED EARLIER , THE BALANCE NET AMOUNT OF RS. 23,33,832/- WAS ONLY DEBIT ED TO PROFIT AND LOSS ACCOUNT AS BAD DEBTS WRITTEN OFF DUR ING THE YEAR. THE AMOUNT OF RS. 11,90,575/- ACTUALLY WRITTEN OFF IN THE BOOKS IN THIS YEAR AS BAD DEBTS AND ADJUSTED AGAINS T PROVISION FOR NPA CREATED IN EARLIER YEARS, WAS ALSO REQUIRED TO BE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 196 196 ALLOWED IN THIS YEAR, AS THE NPA PROVISION CREATED EARLIER WAS ALWAYS DISALLOWED AND NEVER CLAIMED AS DEDUCTION. HO WEVER, THE COMPANY INADVERTENTLY DID NOT CLAIM THIS AMOUNT SEPARATELY IN THE COMPUTATION AT THE TIME OF FILING OF THE RETURN. THE SAME WAS CLAIMED THROUGH A REVISED COMPU TATION OF INCOME WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BRINGING ALL THE RELEVANT FACTS TO THE NOTICE OF THE AO THAT THIS FIGURE OF RS. 11,90,575/- BE ALLOWED A S DEDUCTION AS BAD DEBTS ACTUALLY WRITTEN OFF IN THE BOOKS OF AC COUNTS IN THIS YEAR. DETAILS OF BAD DEBTS ACTUALLY WRITTEN OF F, PROVISION MADE AND COPIES OF LEDGER ACCOUNTS OF ALL THE DEBTO RS REFLECTING THE ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNTS, WERE A LSO FILED BEFORE THE AO. COPIES OF INCOME TAX RETURNS OF EARL IER YEARS WERE ALSO FILED TO SUBSTANTIATE THAT NPA PROVISIONS WERE DISALLOWED BY THE ASSESSEE IN THE RESPECTIVE YEARS. THE AO REJECTED THE SAME ON THE PREMISE THAT CLAIMS MADE T HROUGH A REVISED RETURN COULD ONLY BE ENTERTAINED. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE INDIA LTD. THE CIT(A) OBSERVED THAT THE AO REJECTED THE CLAIM I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 197 197 MERELY STATING THAT SINCE THE CLAIM WAS NOT MADE BY FILING A REVISED RETURN U/S 139(5) IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA THE CLAIM CA NNOT BE ACCEPTED. THE CIT(A) HAS ALSO STATED THAT WHEN THE B AD DEBTS ARE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS IRRECOVERABLE THE SAID CLAIM IS ALLOWABLE TO THE APP ELLANT U/S 36(1)(VII) READ WITH SECTION 36(2). SINCE THE AMOUNT OF RS. 11,90,575/- ACTUALLY WRITTEN OFF FROM THE DEBTORS AC COUNT IN THIS YEAR, THE CLAIM MADE BY THE APPELLANT IS A LEG ITIMATE CLAIM AND IS ALLOWABLE. THE AO IS BOUND TO ASSESS THE CORR ECT INCOME AND FOR THIS PURPOSE THE AO MAY GRANT RELIEF SUO-MOTU OR ON BEING POINTED OUT BY THE ASSESSEE IN THE COUR SE OF ASSESSMENT PROCEEDINGS. IT HAS BEEN TIME AND AGAIN HELD BY VARIOUS COURTS THAT LEGITIMATE CLAIMS OF THE ASSESS EE SHOULD BE ALLOWED EVEN IF RAISED DURING THE ASSESSMENT PROCEE DINGS. IN THE CASE OF COMMISSIONER OF INCOME VS. RAMCO INTERN ATIONAL IN (2011) 332 ITR 306. THE HON'BLE PUNJAB AND HARYA NA HIGH COURT HAS HELD THAT:- I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 198 198 DEDUCTION UNDER SECTION 80-IB-ALLOWABILITY- CLAIM NOT MADE IN RETURN ASSESSEE HAVING DULY FURNISHED THE DOCUMENTS AND SUBMITTED FORM NO. 10CCB DURING THE ASSESSMENT PROCEEDINGS, CLAIM FOR DEDUCTION UNDER SECTION 80-IB BY WAY OF AN APPLICATION WAS ADMISSIBLE THERE WAS NO REQUIREMENT FOR FILING ANY REVISED RETURN NO SUBSTANTIAL QUESTION OF LAW ARISES - GOETZE INDIA LTD. VS. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) DISTINGUISHED. 4.9 IN VIEW OF THE ABOVE DISCUSSION AND ALSO CONSID ERING THE FACT THAT THE SIMILAR CLAIM OF BAD DEBTS MADE B Y FILING THE REVISED RETURN FOR IMMEDIATELY SUCCEEDING YEAR I.E. AY 2011-2012 HAS BEEN ACCEPTED IN THE ASSESSMENT PROCEEDINGS AND ALSO CONSIDERING THE LEGAL POSITION THE SAID CLAIM OF RS. 11,90,575/- IS THEREFORE DIRECTED TO BE ALLOWED. 127. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT BRING ANYTHING CONTRARY ON RECORD TO REBUT THE FINDINGS O F THE CIT(A). 128. WE HAVE HEARD THE RIVAL CONTENTION OF BOTH THE PART IES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ASSESSEE TREATED DEBTORS OF RS. 35,24,407/ - AS BAD I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 199 199 DEBTS AND ACTUALLY WRITTEN THEM OFF IN THE BOOKS OF ACCOUNTS. HOWEVER SINCE A PROVISION FOR NPA OF RS. 11,90,575/ - IN RESPECT OF THESE DEBTORS WAS ALREADY CREATED EARLIER , THE BALANCE NET AMOUNT OF RS. 23,33,832/- WAS ONLY DEBIT ED TO PROFIT AND LOSS ACCOUNT AS BAD DEBTS WRITTEN OFF DUR ING THE YEAR. THE AMOUNT OF RS. 11,90,575/- ACTUALLY WRITTEN OFF IN THE BOOKS IN THIS YEAR AS BAD DEBTS AND WAS ADJUSTED AGA INST PROVISION FOR NPA CREATED IN EARLIER YEARS, WAS ALSO REQUIRED TO BE ALLOWED IN THIS YEAR, AS THE NPA PROVISION CREAT ED IN EARLIER YEARS WAS ALWAYS DISALLOWED AND NEVER CLAIMED AS DEDU CTION. HOWEVER THE COMPANY INADVERTENTLY DID NOT CLAIM THI S AMOUNT SEPARATELY IN THE COMPUTATION AT THE TIME OF FILING OF THE RETURN. THE SAME WAS CLAIMED THROUGH A REVISED COMPU TATION OF INCOME WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS BRINGING ALL THE RELEVANT FACTS TO THE NOTICE OF THE AO THAT THIS FIGURE OF RS. 11,90,575/- BE ALLOWED A S DEDUCTION AS BAD DEBTS ACTUALLY WRITTEN OFF IN THE BOOKS OF AC COUNTS IN THIS YEAR. DETAILS OF BAD DEBTS ACTUALLY WRITTEN OF F, PROVISION MADE AND COPIES OF LEDGER ACCOUNTS OF ALL THE DEBTO RS REFLECTING I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 200 200 THE ACTUAL WRITE OFF IN THE BOOKS OF ACCOUNTS, WERE A LSO FILED BEFORE THE AO. COPIES OF INCOME TAX RETURNS OF EARL IER YEARS WERE ALSO FILED TO SUBSTANTIATE THAT NPA PROVISIONS WERE DISALLOWED BY THE ASSESSEE IN THE RESPECTIVE YEARS. THE AO REJECTED THE SAME ON THE PREMISE THAT CLAIMS MADE T HROUGH A REVISED RETURN COULD ONLY BE ENTERTAINED. HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F GOETZE INDIA LTD. THE CIT(A) OBSERVED THAT THE AO REJECTED THE CLAIM MERELY STATING THAT SINCE THE CLAIM WAS NOT MADE BY FILING A REVISED RETURN U/S 139(5) IN VIEW OF THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF GOETZE INDIA THE CLAIM CA NNOT BE ACCEPTED. THE CIT(A) HAS ALSO STATED THAT WHEN THE B AD DEBTS ARE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS IRRECOVERABLE THE SAID CLAIM IS ALLOWABLE TO THE APP ELLANT U/S 36(1)(VII) READ WITH SECTION 36(2). SINCE THE AMOUNT OF RS. 11,90,575/- WAS ACTUALLY WRITTEN OFF FROM THE DEBTOR S ACCOUNT IN THIS YEAR, THE CLAIM MADE BY THE APPELLANT IS A LEGITIMATE CLAIM AND IS ALLOWABLE. THE AO IS BOUND TO ASSESS TH E CORRECT INCOME AND FOR THIS PURPOSE THE AO MAY GRANT RELIEF SUO-MOTU I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 201 201 OR ON BEING POINTED OUT BY THE ASSESSEE IN THE COUR SE OF ASSESSMENT PROCEEDINGS. 129. WE FIND THAT IT HAS BEEN TIME AND AGAIN HELD BY VARIOUS COURTS THAT LEGITIMATE CLAIMS OF THE ASSESS EE SHOULD BE ALLOWED EVEN IF RAISED DURING THE ASSESSMENT PROCEE DINGS. IN THE CASE OF CIT VS. RAMCO INTERNATIONAL IN (2011) 3 32 ITR 306. THE HON'BLE PUNJAB AND HARYANA HIGH COURT HAS HELD THAT:- DEDUCTION UNDER SECTION 80-IB-ALLOWABILITY-CLAIM NOT MADE IN RETURN ASSESSEE HAVING DULY FURNISHED THE DOCUMENTS AND SUBMITTED FORM NO. 10CCB DURING THE ASSESSMENT PROCEEDINGS, CLAIM FOR DEDUCTION UNDER SECTION 80-IB BY WAY OF AN APPLICATION WAS ADMISSIBLE THERE WAS NO REQUIREMENT FOR FILING ANY REVISED RETURN NO SUBSTANTIAL QUESTION OF LAW ARISES - GOETZE INDIA L TD. VS. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC) DISTINGUISHED. 130. IN VIEW OF THE ABOVE DISCUSSION AND ALSO CONSIDERING THE UNCONTROVERTED FINDING OF THE CIT(A) THAT THE S IMILAR CLAIM OF BAD DEBTS MADE BY FILING THE REVISED RETURN FOR IMMEDIATELY SUCCEEDING YEAR I.E. AY 2011-2012 HAS BEEN ACCEPTED IN THE I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 202 202 ASSESSMENT PROCEEDINGS FOR THAT YEAR AND ALSO CONSI DERING THE LEGAL POSITION, WE HOLD THAT THE CIT(A) HAS RIGHTLY ALLOWED THE SAID CLAIM OF RS. 11,90,575/-. 131. THIS GROUND OF APPEAL OF THE REVENUE FAILS. 132. GROUND NO. (V) IN BOTH THE APPEALS OF REVENUE HAS BEEN RAISED AGAINST THE ACTION OF CIT(A) OF RESTRIC TING THE AD HOC DISALLOWANCE MADE BY THE AO ON ACCOUNT OF CONVEY ANCE EXPENSES AND REPAIR AND MAINTENANCE EXPENSES OF RS. 1,00,000/-, RESTRICTED BY THE CIT(A) TO RS. 25,000/ - EACH. 133. WE FIND FROM THE ASSESSMENT ORDER THAT THE AO HAS MADE LUMP SUM DISALLOWANCE OF RS. 1,00,000/- EACH UN DER THE HEAD REPAIRS AND MAINTENANCE AND UNDER THE HEAD CONVEYANCE EXPENSES STATING THAT SOME OF THE VOUCHE RS WERE MISSING AND THAT THERE WERE SOME INSTANCES OF CASH PAYMENT ALSO. 134. THE MATTER WAS CARRIED TO CIT(A), WHO NOTED THAT THE DISALLOWANCE WAS MADE WITHOUT GIVING ANY SPECIFIC INST ANCE WHERE THE EXPENSES ARE NOT SUPPORTED BY VOUCHERS / B ILLS. HOWEVER, CIT(A) HAS ALSO OBSERVED THAT THE ASSESSEE HAS NOT I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 203 203 PRODUCED COMPLETE VOUCHERS / BILLS BEFORE HIM TO PR OVE THAT THE SAME WERE COMPLETELY AND PROPERLY MAINTAINED. K EEPING IN VIEW THE FACTS AND CIRCUMSTANCES AND THE WRITTEN SUBM ISSION OF THE ASSESSEE THE CIT(A) HELD THAT THE DISALLOWANC E MADE BY THE AO WAS EXCESSIVE AND UNREASONABLE AND HE RESTRI CTED THE DISALLOWANCE OF RS. 1,00,000/- EACH TO RS. 25,000/- EACH. 135. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. THE AO HAS NOT GIVEN ANY SPECIFIC INSTANCE WHERE THE EXPENSES ARE NOT SUPPORTED BY VOUCHERS OR BILLS, BU T AT THE SAME TIME, THE ASSESSEE HAS ALSO NOT PRODUCED ANY C OMPLETE VOUCHERS/BILLS TO PROVE THAT THE SAME ARE COMPLETEL Y AND PROPERLY MAINTAINED. THE ASSESSEE MAINTAINED REGULA R BOOKS OF ACCOUNTS AND ARE SUBJECTED TO AUDIT, BUT PERSONA L ELEMENT IN INCURRING THESE EXPENDITURE HAVE TO BE RULED OUT . THEREFORE, THE LD. CIT(A) HAS RESTRICTED TO RS. 25,000/- EACH FOR CONVEYANCE AND REPAIRS & MAINTENANCE EXPENDITURE. T HE CIT(A) HAS PARTLY ALLOWED THE APPEAL. THEREFORE, OUR INTERFERENCE IS NOT REQUIRED. I.T.A.NOS. 202 & 294/IND/2012 & C.O.NO.63/IND/2012 A.YS. 2003-04 & 2008-09 ACIT VS. M/S. AGRAWAL COAL CORPORATION PRIV ATE LIMITED, INDORE- I.T.A.NOS. 389/IND/2012,807 & 808/IND/2012 A.YS. 2008-09, 2010-11 & 2011-12 - ACIT,5(1), INDORE VS. M/S. ADMANUM FINAN CE LIMITED, INDORE. 204 204 136. IN THE RESULT, THE DEPARTMENTAL APPEALS NOS. 202 A ND 294/IND/2012 IN THE CASE OF M/S. AGRAWAL COAL CORPOR ATION PRIVATE LIMITED ARE DISMISSED AND CROSS OBJECTION N O. 63/IND/2012 FILED BY THE ASSESSEE IS ALSO DISMISSED , DEPARTMENTAL APPEALS IN I.T.A.NOS. 389/IND/2012, 80 7 & 808/IND/2014 IN THE CASE OF M/S. ADMANUM FINANCE LI MITED ARE ALSO DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 27 TH JUNE, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 27 TH JUNE, 2016. CPU*