ACIT Central-1 Indore, Indore V. Shri Ankit Patidar, Indore

ITSSA 103/Ind/2020

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3683 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 04-10-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 02-09-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN
• Assessee Lawyers: GIRISH AGRAWAL; NISHA LAHOTI A RS
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Search and seizure; Principle of natural justice; Source of fund; Question of law; Corroborative evidences; Accommodation entries; Block assessment
• Section: 143(3); 142(1); 153A; 205; 201; 274; 143(2); 73; 13; 22; 153C; 68; 263; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE HONBLE RAJPAL YADAV, VICE PRESIDENT AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING IT(SS)A NO.121/IND/2019 ASSESSMENT YEAR: 2015-16 & IT(SS)A NO.103/IND/2020 ASSESSMENT YEAR: 2014-15 ACIT(CENTRAL)-1 INDORE : APPELLANT V/S SHRI ANKIT PATIDAR INDORE PAN:AQIPP4362J : RESPONDENT REVENUE BY SHRI RAJIB JAIN, CIT - DR RESPONDENT BY SHRI GIRISH AGRAWAL & MS. NISHA LAHOTI, ARS DATE OF HEARING 0 4 .0 8 .2021 DATE OF PRONOUNCEMENT 04.10. 202 1 O R D E R PER MANISH BORAD, A.M THE ABOVE CAPTIONED APPEALS FILED AT THE INSTANCE OF THE REVENUE FOR A.Y. 2014-15 & 15-16 ARE DIRECTED AGAIN ST THE ORDERS OF LD. COMMISSIONER OF INCOME TAX(APPEALS) (IN SHOR T LD. CIT(A)- SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 2 III] BHOPAL & INDORE DATED 19.03.2020 & 15.03.2019 WHICH ARE ARISING OUT OF THE COMMON ORDER U/S 143(3) R.W.S. 1 53A OF THE INCOME TAX ACT 1961(IN SHORT THE ACT) DATED 29.12 .2017 FRAMED BY DCIT, CENTRAL-1, INDORE. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN IT(SS)A NO.121/IND/2019 (A.Y. 2015-16): 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,35,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 196 1 BY NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER. AND IN IT(SS)A NO.103/IND/2020 (A.Y. 2014-15): 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E LD. CIT(A) ERRED IN DELETING THE ADDITION OFRS.3,00,78,041/- M ADE BY THE ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT, 196 1 BY NOT APPRECIATING THE FINDINGS OF THE ASSESSING OFFICER WITH REGARD TO THE LENDER COMPANIES WHICH WERE PAPER ENTITIES CONT ROLLED BY THE ASSESSEE WITH DUMMY DIRECTORS. 2. FACTS AND CIRCUMSTANCES OF BOTH THE DEPARTMENTAL APPEALS ARE SIMILAR AND THE LEAD CASE RELATES TO ASSESSMENT YEAR 2015-16, THEREFORE, WE SHALL TAKE UP THE APPEAL FOR ASSESSME NT YEAR 2015- 16 AT FIRST. BRIEF FACTS OF THE AS CULLED OUT FROM THE RECORD ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND SON OF SHRI DINES H PATIDAR, WHO IS THE MANAGING DIRECTOR OF SHAKTI PUMPS (INDIA) LI MITED, THE FLAGSHIP COMPANY OF SHAKTI PUMPS GROUP. THE ASSESSE E IS HAVING SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 3 SOURCE OF INCOME AS SALARY RECEIVED FROM SHAKTI PUM PS (INDIA) LTD AND SHAKTI IRRIGATION INDIA LTD. HE IS ALSO HAV ING OTHER INCOME FROM INTEREST AND DIVIDEND ON HIS INVESTMENT ETC. SEARCH AND SEIZURE OPERATIONS U/S 132 WAS CARRIED OUT ON T HE BUSINESS AS WELL AS RESIDENTIAL PREMISES OF THE SHAKTI PUMPS GROUP INCLUDING THE ASSESSEE ALONG WITH OTHER CONCERNS/BU SINESS ASSOCIATES ON 21.01.2016. A PANCHNAMA WAS DRAWN FOR THE RESIDENTIAL PREMISES AT 354 SAKET NAGAR, INDORE WHI CH INCLUDED NAME OF THE ASSESSEE AS HE RESIDES AT THE SAID PREM ISES, JOINTLY WITH OTHER MEMBERS OF THE FAMILY. NOTICE U/S 153A W AS ISSUED TO THE ASSESSEE FOR A.Y. 2015-16 ON 06.01.2017 AND NOT ICE U/S 143(2) FOR A.Y. 2015-16 WAS ISSUED ON 10.08.2017. I N RESPONSE TO THE ABOVE NOTICES, THE ASSESSEE FILED RETURN OF INC OME FOR A.Y. 2015-16 ON 12.04.2017 DECLARING TOTAL INCOME OF RS. 22,94,790/-. THE AO DURING THE ASSESSMENT PROCEEDINGS OBSERVED T HAT THE ASSESSEE HAS APPLIED FOR SHARES OF SHAKTI PUMP (IND IA) LTD FOR RS. 12 CRORES. THUS, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF THE SHARE APPLICATION MONEY. IN REPLY, THE ASSESSEE HAD GIVEN DETAILS OF FUND WHICH HAD BEEN UTILIZED FOR MAKING THE SAID INVESTMENT BY HIM. FROM THE DETAILS SUBMITTED BY TH E ASSESSEE, SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 4 THE AO NOTED THAT ASSESSEE HAS TAKEN LOANS FROM THE FOLLOWING COMPANIES:- ASSESSMENT YEAR AMOUNT LOANS TAKEN FROM 2014 - 15 3,00,78,041/ - ML SECURITIES & FINANCE PVT LTD (MLSF) 2015 - 16 2,34,08,000/ - ML SECURITIES & FINANCE PVT LTD (MLSF) 2015 - 16 3,17,00,000/ - ROULEX INVESTMENT & FINANCE PVT LTD (ROULEX) THE AO FURTHER OBSERVED THAT BOTH THE COMPANIES I.E . ML SECURITIES & FINANCE PVT LTD & ROULEX INVESTMENT & FINANCE PVT LTD ARE PAPER COMPANIES AND THE CREDITWORTHINESS OF THESE COMPANIES ARE NOT PROVED BY THE APPELLANT. THE AO O BSERVED THAT BOTH THE COMPANIES DOES NOT HAVE ANY REAL BUSINESS ACTIVITY AND ARE NON-EXISTENT AND NON-FUNCTIONAL SHELL/PAPER COM PANY. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE ABOV E UNSECURED LOANS AS UNEXPLAINED CASH CREDITS U/S 68 OF THE I.T . ACT AND MADE ADDITION OF RS.3,17,00,000/- TAKEN FROM ROULEX INVESTMENT & FINANCE PVT LTD (ROULEX). THE ASSESSING OFFICER F URTHER NOTED THAT THE LOAN AMOUNT OF RS.2,34,08,000/- TAKEN FROM ML SECURITIES & FINANCE PVT LTD (MLSF) INCLUDES THE SU RRENDER AMOUNT OF RS.2,16,08,000/- BY ML SECURITIES & FINAN CE PVT LTD SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 5 (MLSF), THEREFORE, THE ADDITION OF RS.18,00,000/- I S BEING MADE IN THE HANDS OF THE ASSESSEE. 3. BEING AGGRIEVED, THE ASSESSEE APPROACHED THE LD. CIT(A) AND LD. CIT(A) HAVING GONE THROUGH THE FACTS AND SUBMIS SIONS THEREOF IN THE LIGHT OF THE CERTAIN JUDICIAL PRONOUNCEMENTS DELETED THE ADDITIONS. NOW, THE REVENUE IS IN APPEALS BEFORE TH IS TRIBUNAL. 4. BEFORE US, THE LD. CIT-DR DEFENDED THE ASSESSMEN T ORDER AND SUBMITTED THAT BOTH THE COMPANIES I.E. ML SECUR ITIES & FINANCE PVT. LTD & ROULEX INVESTMENT & FINANCE PVT. LTD ARE PAPER COMPANIES AND THE CREDITWORTHINESS OF THESE C OMPANIES WERE NOT PROVED BY THE ASSESSEE, THEREFORE, THE ASS ESSING OFFICER WAS JUSTIFIED IN MAKING THE ADDITIONS AS BOTH THE CO MPANIES DID NOT HAVE ANY REAL BUSINESS ACTIVITY AND WERE NON-EX ISTENT AND NON-FUNCTIONAL SHELL/PAPER COMPANY. ON THE OTHER HA ND, LEARNED COUNSEL FOR THE ASSESSEE REITERATING THE SUBMISSION S MADE BEFORE THE REVENUE AUTHORITIES RELIED UPON THE ORDER OF TH E LD. CIT(A) AND SUBMITTED THAT ON CONSIDERATION OF THE FACTS/CI RCUMSTANCES OF THE CASE, MATERIAL AVAILABLE ON RECORD AND SUBMI SSIONS THEREOF IN THE LIGHT OF THE JUDICIAL PRECEDENTS, THE LD. CIT (A) RIGHTLY DELETED THE ADDITION, THEREFORE, THE ORDER OF LD. C IT(A) DESERVES TO BE SUSTAINED. SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 6 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT THE LD. CIT(A) MADE DETAILED DISCUSSION O N FACTS, MATERIAL, SUBMISSIONS AND JUDICIAL PRONOUNCEMENTS AN D DELETED THE ADDITION ON THE GROUND THAT THE AO ERRED IN MAK ING ADDITIONS MERELY ON THE BASIS OF STATEMENTS OF DIRECTORS OF L ENDER COMPANIES AND WITHOUT PROVIDING OPPORTUNITY OF THEI R CROSS EXAMINATION BEFORE MAKING THE IMPUGNED ADDITION. LD . CIT(A) ALSO NOTED THAT PROVISIONS OF SECTION 68 ARE NOT AP PLICABLE IN THE CASE OF THE ASSESSEE WHEN NO BOOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTAINED BY THE ASSESSEE. THE LD. CIT(A) WAS O F THE VIEW THAT THE AO ERRED IN MAKING ADDITIONS ON SUSPICION, SURM ISE AND CONJECTURE BASIS AND WITHOUT HAVING ANY INCRIMINATI NG MATERIAL ON RECORD FOUND FROM THE RESIDENTIAL PREMISES OF TH E ASSESSEE RELATING TO THE YEAR IN WHICH ADDITIONS HAVE BEEN M ADE. FURTHER, LD. CIT(A) OBSERVED THAT THE AO ERRED IN NOT APPREC IATING THE DOCUMENTARY EVIDENCES FILED IN SUPPORT OF CREDITWOR THINESS OF THE LENDER AND GENUINENESS OF THE TRANSACTION INCLUDING EXPLAINING SOURCE OF SOURCE TO THE LAST LEG OF THE IMPUGNED TR ANSACTIONS. THE LD. CIT(A) DECIDED THE ISSUE AS UNDER: SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 7 4.2.6 I HAVE CONSIDERED THE FACTS OF THE CASE, MATE RIAL EVIDENCES ON RECORD & WRITTEN SUBMISSIONS FILED BY THE LD AR OF THE APPEL LANT. I HAVE ALSO GIVEN MY THOUGHTFUL CONSIDERATION TO THE FACTS AND FINDINGS OF THE AO INTER ALIA MATERIAL BROUGHT ON RECORD. AT THE OUTSET THERE IS NO DENYIN G OF THE FACT THAT APPELLANT HAS TAKEN LOAN FROM M/S ML SECURITIES FINANCE PRIVATE L IMITED AND M/S ROULEX INVESTMENT AND FINANCE PRIVATE LIMITED. THE LD AR H AS VEHEMENTLY CHALLENGED THE ARBITRARY APPROACH OF THE AO MAINLY ON FOUR MAJ OR COUNTS: (A) THE AO ERRED IN MAKING ADDITIONS MERELY ON THE BASI S OF STATEMENTS OF DIRECTORS OF LENDER COMPANIES AND WITHOUT PROVIDING OPPORTUNITY OF THEIR CROSS EXAMINATION BEFORE MAKING THE IMPUGNED ADDITION; (B) PROVISIONS OF SECTION 68 ARE NOT APPLICABLE IN THE CASE OF APPELLANT, WHEN NO BOOKS OF ACCOUNTS ARE REQUIRED TO BE MAINTA INED BY THE APPELLANT; (C) THE AO ERRED IN MAKING ADDITIONS ON SUSPICION, SURM ISE AND CONJECTURE BASIS AND WITHOUT HAVING ANY INCRIMINATI NG MATERIAL ON RECORD FOUND FROM THE RESIDENTIAL PREMISES OF THE APPELLANT RELA TING TO THE YEAR IN WHICH ADDITIONS HAVE BEEN MADE; (D) THE AO ERRED IN CONSIDERING THE DOCUMENTARY EVIDENC ES FILED IN SUPPORT OF CREDITWORTHINESS OF THE LENDER AND GENUI NENESS OF THE TRANSACTION INCLUDING EXPLAINING SOURCE OF SOURCE TO THE LAST L EG OF THE IMPUGNED TRANSACTIONS; (A) MAKING ADDITIONS MERELY ON THE BASIS OF STATEMENTS OF DIRECTORS OF LENDER COMPANIES AND WITHOUT PROVIDING OPPORTUNITY OF THEIR CROSS EXAMINATION:- DIRECTORS OF THE TWO LENDER COMPANIES WHOSE STATEME NTS WERE RECORDED DURING THE COURSE OF SEARCH ARE A. ML SECURITIES AND FINANCE PVT. LTD. : SHRI VIKAS PA TIDAR AND SHRI HARINARAYAN PATIDAR B. ROULEX INVESTMENT AND FINANCE PVT. LTD. : SHRI RAKE SH PATIDAR IN THE CASE OF ROULEX, THE AO RELIED ON THE STATEME NT OF ONE SHRI MUKESH PATIDAR WHO IN FACT IS NOT THE DIRECTOR OF ROULEX T HOUGH BEARING IDENTICAL NAME. IT IS AN ADMITTED FACT THAT ML SECURITIES AND FINAN CE PVT. LTD. WAS ALSO COVERED UNDER THE SEARCH OPERATIONS OF THE SHAKTI PUMP GROU P. BOTH THE DIRECTORS OF THIS LENDER COMPANY WERE ALSO COVERED UNDER THE SAME SEA RCH OPERATIONS AND WERE ASSESSED BY THE SAME AO UNDER SECTION 153A RWS 143( 3). THIS IS ALSO AN ADMITTED FACT THAT STATEMENT OF SHRI HARINARYAN PATIDAR AND SHRI VIKAS PATIDAR WAS RECORDED ON OATH DURING THE COURSE OF THEIR SEARCH ON 22.01.2016. SIMILARLY, ROULEX INVESTMENT AND FINANCE PVT. LTD. WAS ALSO ASSESSED U/S 153A INCLUDING ITS DIRECTOR SHRI RAKESH PATIDAR WHO WAS COVERED UNDER THE SAME SEARCH OPERATION. THE OTHER DIRECTOR OF ROULEX, SHR I MUKESH PATIDAR SON OF SHRI LAXMICHAND PATIDAR WAS NOT COVERED UNDER THE SEARCH OPERATIONS AND NO STATEMENTS UNDER OATH WERE RECORDED IN HIS CASE. THE AO VIDE PARA NO 8.3 OF THE ASSESSMENT ORDER STA TED THAT SHRI DINESH PATIDAR HAS CONFESSED THAT LOAN GIVEN TO SHRI ANKIT PATIDAR BY ML SECURITIES AND FINANCE PVT. LTD. HAS BEEN BROUGHT IN THE BOOKS OF ACCOUNT BY LAYERING OF FUNDS THROUGH BANKING CHANNELS AND THE SAME AMOUNT WAS PR OVIDE IN CASH BY SHRI DINESH PATIDAR. HOWEVER, APPELLANT HAS BROUGHT TO M Y NOTICE THAT NO SUCH SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 8 STATEMENT WAS GIVEN BY SHRI DINESH PATIDAR IN RELAT ION TO THE ADDITION MADE BY THE AO IN A.Y. 2015-16 IN THE HANDS OF THE APPELLAN T, WHICH IS ALSO EVIDENT FROM THE STATEMENT OF SHRI DINESH PATIDAR PLACED ON RECO RD. THE SAID STATEMENT OF SHRI DINESH PATIDAR IS IN RESPECT OF LOAN TAKEN IN MLSF WHICH WAS OFFERED TO TAX BY HIM IN THE HANDS OF MLSF I.E. THE LENDER COMPANY. FURTHER, STATEMENT OF SHRI HARINARYAN PATIDAR AND S HRI VIKAS PATIDAR WERE ALSO RECORDED ON 22.01.2016 BOTH OF THEM HAVE NEVER DENI ED TO THE FACTS THAT THEY WERE NOT THE DIRECTORS OF THE LENDER COMPANY. HOWEV ER, BOTH OF THEM HAS ADMITTED THAT THEY HAVE BEEN RECEIVING REMUNERATION OF RS.2,500/- P.M. AS DIRECTORS FOR SIGNING VARIOUS DOCUMENTS AND SHRI BR PATIDAR BEING CA ASSISTED THEM IN PROFESSIONAL AND FINANCIAL MATTERS OF THE C OMPANY. THE AO VIDE PARA NO 8.7 STATED THAT SHRI B R PATIDAR CA HAS BEEN PAYING SUM OF RS. 2,500/- AS DIRECTORS REMUNERATION, HOWEVER, IT IS AN IMPORTAN T FACT THAT SHRI HARINARYAN PATIDAR AND SHRI VIKAS PATIDAR ARE THE SIGNATORIES TO THE BANK ACCOUNT OF ML SECURITIES FINANCE PRIVATE LIMITED AND NOT SHRI BR PATIDAR. IT IS THE GENERAL PREVAILING PRACTICE FOR COMPLETING THE REGULATORY C OMPLIANCES THAT DOCUMENTS ARE PREPARED AND COMPLETED BY THE CA AND TAX PROFESSION ALS WHICH ARE THEN SENT TO THE CONCERNED AUTHORIZED SIGNATORIES FOR OBTAINING THEIR SIGNATURES FOR MEETING THE COMPLIANCE REQUIREMENTS. INCASE SIGNATORIES HAV E QUERIES, THEY CAN ALWAYS ASK THEIR PROFESSIONAL FOR PUTTING THEIR SIGNATURES . SUCH A PRACTICE IS PREVALENT OUT OF CONVENIENCE FOR THE CA AND TAX PROFESSIONALS . THE AO VIDE PARA NO 8.10 OF THE ASSESSMENT ORDER N OTED THAT SHRI VIKAS PARTIDAR DURING STATEMENT RECORDED ON OATH WAS ASKE D ABOUT INVESTMENT OF CRORES OF RUPEES IN THE SHARES OF SPIL IN FY 2011-12 & 201 2-13. IN REPLY SHRI VIKAS PARTIDAR SUBMITTED THAT HE IS UNAWARE OF THE TRANSA CTION AND NO SUCH INVESTMENT WAS MADE BY EITHER SHRI HARINARYAN PATIDAR OR SHRI VIKAS PATIDAR. INFACT, THE INVESTMENTS WERE MADE BY M/S ML SECURITIES FINANCE PRIVATE LIMITED AND NOT INDIVIDUALLY BY SHRI HARINARYAN PATIDAR OR BY SHRI VIKAS PATIDAR AS CORROBORATED FROM THE DULY AUDITED FINANCIAL STATEM ENTS OF ML SECURITIES AND FINANCE PVT. LTD. PLACED ON RECORD IN THE PAPER BOO K. APPELLANT HAS STRONGLY CONTENDED THAT IN THE CASE O F LENDER ROULEX STATEMENT OF SOME MUKESH PATIDAR S/O SHRI RAMESHWAR PATIDAR WAS RECORDED, WHEREIN, HE STATED THAT HE DOES NOT KNOW ANY SUCH COMPANY. HOWE VER, SHRI MUKESH PATIDAR S/O SHRI RAMESHWAR PATIDAR IS NOT THE DIRECTOR OF R OULEX BUT SHRI MUKESH PATIDAR S/O SHRI LAXMICHAND PATIDAR IS THE DIRECTOR OF ROULEX WHOSE STATEMENT WAS NEVER RECORDED DURING THE COURSE OF SEARCH OPER ATION. IT WAS SUBMITTED THAT LD. AO UNDER A MISTAKEN BELIEF RELIED ON STATEMENT OF A PERSON WHO WAS NOT CONNECTED WITH THE LENDER COMPANY ROULEX. IT WAS STATED BY THE APPELLANT THAT STATEMENTS OF S HRI RAKESH PATIDAR, DIRECTOR OF ROULEX WAS ALSO RECORDED UNDER OATH WHO WAS COVERED UNDER THE SAME SEARCH OPERATIONS AND WAS ASSESSED BY THE SAME AO. THESE S TATEMENTS OF SHRI RAKESH PATIDAR ALSO CONTAIN SIMILAR AVERMENTS AS IN THE CA SE OF MLSF, RELATING TO THE PROFESSIONAL ENGAGEMENT OF CA B.R. PATIDAR FOR THE LENDER COMPANY. APPELLANT IN THE COURSE OF APPELLANT PROCEEDINGS S TRONGLY OBJECTED ON THE MIS- QUOTE OF STATEMENT BY THE AO OF SHRI K C KANKARIYA, CA WHEREIN FACT ABOUT CARRYING OUT OF BUSINESS ACTIVITY OF THE LENDER COM PANY IN MUMBAI WAS STATED TO WHICH AO PRODUCED IN THE ORDER AS NO REAL BUSINESS ACTIVITY IS CARRIED OUT IN SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 9 MUMBAI. SUCH A MIS-QUOTE BY THE AO SHOWS HIS BIASED APPROACH PRE-CONCEIVED MINDSET IN DEALING WITH THE SUBJECT MATTER. APART FROM THE ABOVE, NO OPPORTUNITY OF CROSS EXA MINATION OF THE DIRECTORS OF THE LENDER COMPANIES WAS PROVIDED TO THE APPELLANT BEFORE MAKING THE IMPUGNED ADDITION. THIS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES VS. COMMISSIONER OF CENTR AL EXCISE KOLKATA IN CIVIL APPEAL NO.248 OF 2006 THAT IN ABSENCE OF CROSS-EXAMINATION OF PARTIES, T HE ASSESSMENT PROCEEDINGS TO BE QUASHED. FURTHER, THE HONBLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL VS. M.J. MAKWANA [236 ITR 832 (GUJ)] AND JCIT & ORS. VS. GEORGE WILLIMSON (ASSAM) LTD. [258 ITR 126 (GUJ)] HAS HELD THAT STATEMENT OF THIRD PARTY CANNOT BE RELIED UPON WITHOUT HAVING ANY CORROBORATIVE EVIDENCE. SIMILARLY, HONBLE SUPREME COURT IN THE CASE OF KISHANCHAND CHELLARAM V/S. CIT 125 ITR 713 (SC) HAS HELD THAT ADVERSE INFERENCE CANNOT BE DRAWN AGAINST THE ASSESSEE FROM THE STATEMENT OF THIRD PARTIES. SIMILARLY, LD. AR OF THE ASSESSEE HAS REL IED UPON THE DECISION OF HONBLE HIGH COURT IN THE CASE OF CIT V/S. INDRAJIT SINGH SURI (2013) 33 TAXMANN 281 (GUJ.) THAT WHERE ADDITIONS WERE MADE ON THE BASIS OF STA TEMENTS OF PERSONS WHO WERE NOT ALLOWED TO BE CROSS EXAMINED BY THE APPELL ANT, ADDITIONS WERE NOT SUSTAINABLE. IT IS A SERIOUS FLAW ON PRINCIPLES OF NATURAL JUSTICE WHICH RENDERS THE ORDER A NULLITY. (B) INVOKING PROVISIONS OF SECTION 68 OF THE ACT WHEN A PPELLANT IS NOT REQUIRED TO MAINTAIN THE BOOKS OF ACCOUNT:- THE ADDITIONS HAVE BEEN MADE BY THE AO U/S 68 OF TH E ACT. I FIND IT UTMOST IMPORTANT TO QUOTE THE PROVISIONS OF SECTION 68 OF THE ACT WHICH CLEARLY STATES THAT; WHEN ANY SUM IS FOUND CREDITED IN THE BOOKS OF AC COUNT OF AN ASSESSEE MAINTAINED FOR ANY PREVIOUS YEAR, AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANATION OF FERED BY HIM IS NOT, IN THE OPINION OF THE ASSESSING OFFICER, SATISFACTORY, THE SUM SO CREDITED MAY BE CHARGED TO INCOME TAX AS THE INCOME OF THE ASEESSEE OF THAT PREVIOUS YEAR. PROVISIONS OF SECTION 68 ARE APPLICABLE IN THE CASE WHERE ANY SUM IS CREDITED IN BOOKS OF ACCOUNTS WHICH IS NOT THE CASE OF THE APPELLANT. IN THE CASE OF APPELLANT THE MAIN SOURCE OF INCOME ARE SALARY, DIRECTORS RE MUNERATION, INTEREST AND DIVIDEND ON INVESTMENT, ACCORDING TO WHICH THE APPE LLANT IS NOT REQUIRED TO MAINTAIN THE BOOKS OF ACCOUNT AS PER PROVISIONS OF SECTION 44AA. THIS FACT WAS ALSO BROUGHT TO NOTICE OF THE ASSESSING OFFICER WHI LE REPLYING TO QUESTION NO A-17 AND A-27 OF QUESTIONNAIRE U/S 142(1) OF THE ACT. HO NBLE APEX COURT IN THE CASE OF BALADIN RAM VS CIT (1969) AIR 351, 1969 SCR (1) 800 HAS HELD THAT THE INCOME FROM UNDISCLOSED SOURCES CAN ONLY BE ASSESSE E U/S 68 IF IT IS FOUND CREDITED IN THE BOOKS OF ACCOUNT OF THAT PREVIOUS Y EAR. SIMILAR VIEW WAS ADOPTED BY HIGH COURT BOMBAY IN THE CASE OF BHAICHAND N GA NDHI [1982] 141 ITR 67 (BOM) WHICH WAS FOLLOWED BY ITAT MUMBAI IN THE CASE OF CIT VS MANASI MAHENDRA PITKAR (2016) 73 TAXMANN.COM 68 (MUMBAI). THE FOLLOWING CASE LAWS ALSO SUPPORT THE CASE OF THE APPELLANT:- CIT VS TAJ BORE WELLS 291 ITR 232 (MADRAS) SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 10 ITO VS NARENDRA KISHORE GOSWAMI ITA NO 249 & 250/AG RA/207 FOR AY 2003- 04 ITO VS SANYASI MAJHI 13 ITD 61 (CAL) IN A RECENT DECISION BY HONBLE DELHI ITAT IN THE C ASE OF VINESH MAHESHWARI 103 TAXMANN.COM 274 ORDER DATED 01.03.2019, THE ISS UE OF INVOKING SECTION 68 WHERE NO BOOKS OF ACCOUNTS ARE REQUIRED TO BE MAINT AINED AS PER SECTION 44AA AND ALSO THE ISSUE OF PROVIDING OPPORTUNITY OF CROS S EXAMINATION TO THE ASSESSEE HAS BEEN DEALT EXTENSIVELY ALONG WITH ANALYSIS OF V ARIOUS JUDICIAL PRECEDENTS IN FAVOR OF THE APPELLANT. THIS IS SETTLED LEGAL FACT THAT BANK ACCOUNT STATEM ENT ARE NOT BOOKS OF ACCOUNT BUT ONLY REPRESENT PART OF BOOKS OF ACCOUNT OF THE BANK ITSELF. THUS, THE AO WAS NOT JUSTIFIED IN TREATING BANK ACCOUNT STATEMENT OF APPELLANT AS BOOKS OF ACCOUNT AND SUBSEQUENTLY MADE ADDITIONS U/S 68 OF THE ACT F OR THE UNSECURED LOANS TAKEN BY THE APPELLANT FROM THE TWO LENDER COMPANIES. (C) ADDITIONS MADE ON CONJECTURE, SURMISES AND SUSPICIO N BASIS WITHOUT HAVING ANY INCRIMINATING MATERIAL ON RECORD IN RESP ECT OF ADDITIONS MADE:- THE AO HAS GROSSLY ERRED IN MAKING ADDITION SIMPLY ON THE BASIS OF GUESS WORK, ASSUMPTION AND PRESUMPTION. IT IS WELL SETTLED THAT NO ADDITION CAN BE MADE AS A LEAP IN THE DARK. THE AO IS NOT ENTITLED TO MAKE A GUESS WITHOUT EVIDENCE. THE ASSESSMENT OF ANY PARTICULAR YEAR CANNOT BE BASED O N MERE SUSPICION OR BARE GUESS, BUT ON A LEGITIMATE MATERIAL FROM WHICH A RE ASONABLE INFERENCE OF ANY UNEXPLAINED CASH CREDIT CAN BE MADE. HONBLE SUPREM E COURT IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. V/S CIT (1954) 26 ITR 775 (SC) HAS HELD THAT ALTHOUGH STRICT RULES OF EVIDENCE ACT DO NOT APPLY TO INCOME TAX PROCEEDINGS, STILL ASSESSMENT CANNOT BE MADE ON THE BASIS OF IMAGINATI ON AND GUESS WORK. IT HAS BEEN HELD IN THE CASE OF UMACHARAN SAHA & BROS CO. V/S CIT 37 ITR 21 (SC) THAT SUSPICION, HOWEVER STRONG CANNOT TAKE PLACE OF EVIDENCE. SIMILAR VIEWS HAVE BEEN EXPRESSED BY APEX COURT IN THE CASE OF DHIRAJ LAL GIRDHARILAL V/S CIT (1954) 26 ITR 736 (SC). ALSO, ONCE THE ASSESSEE HAS DISCHARGED ITS ONUS OF PROVING THAT THE PARTIES UNDER CONSIDERATION ARE GE NUINE, NOW THE BALL LIES IN THE COURT OF AO TO PROVE THAT THE CLAIM OF APPELLANT IS FALSE. THE STATEMENTS WHICH FORMS THE SOLE BASIS OF THE IMPUGNED ADDITIONS CONT AIN AVERMENTS WHICH ARE PREDOMINANTLY DIRECTED TO A PRACTICING CHARTERED AC COUNTANT SHRI B R PATIDAR WHO IS ALSO COVERED UNDER THE SAME SEARCH OPERATION S AND HAS BEEN ASSESSED BY THE SAME AO. MOREOVER, IT IS A FACT THAT BOTH THE L ENDER COMPANIES AND ITS DIRECTORS WERE ASSESSED BY THE SAME AO UNDER SECTIO N 153A RWS 143(3). CASES OF VARIOUS PERSONS COVERED UNDER A SEARCH OPERATION AR E CENTRALIZED UNDER ONE ASSESSING OFFICER WITH AN OBJECTIVE OF COORDINATED INVESTIGATION. IT IS SEEN THAT AO FAILED TO ACHIEVE THE OBJECTIVE OF SUCH A COORDI NATED APPROACH WHILE ASKING THE ASSESSEE TO PRODUCE THE DIRECTORS OF THE LENDER COMPANIES WHEN THEY ARE BEING ASSESSED BY HIMSELF INCLUDING THE TWO LENDER COMPANIES. NO INCRIMINATING MATERIAL RELEVANT TO THE ADDITIONS MADE HAS BEEN REFERRED BY THE AO WHICH PERTAINS TO THE LOANS AVAILED BY THE A SSESSEE FROM THE TWO LENDER COMPANIES. IT IS SEEN THAT DURING THE COURSE OF IMP UGNED ASSESSMENT PROCEEDINGS, THE AO CALLED FOR INFORMATION FROM THE ASSESSEE AND TOOK AN ADVERSE VIEW MERELY ON THE BASIS OF STATEMENTS RECORDED OF THE TWO DIRE CTORS OF MLSF AND ONE SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 11 INCORRECT PERSON IN THE CASE OF ROULEX. VARIOUS COU RTS HAVE VERY CATEGORICALLY HELD IN FAVOR OF THE ASSESSEE ON THE ISSUE OF ADDIT IONS MADE IN ABSENCE OF INCRIMINATING MATERIAL RELEVANT TO SUCH ADDITIONS. IT IS IMPORTANT TO NOTE THAT ASSESSEE IS COVERED UNDER THE SEARCH OPERATION BY W AY OF PANCHNAMA DRAWN FOR HIS RESIDENTIAL PREMISES AT 354 SAKET NAGAR, INDORE FROM WHERE NOTHING INCRIMINATING WAS FOUND DURING THE COURSE OF SAID S EARCH RELATING TO THE ADDITIONS MADE BY THE AO. THE AO OUGHT TO HAVE CONNECTED THE CASH CREDIT IN T HE FORM OF UNSECURED LOANS WITH INDEPENDENT COGENT EVIDENCE THAT THE MONEYS EM ANATED FROM THE COFFERS OF THE APPELLANT AND WHICH COULD PROVE THAT THE CLAIM OF APPELLANT IS INCORRECT, WHICH IS MISSING IN THE PRESENT CASE OF APPELLANT. THUS, THE AO HAS NO LOCUS STANDI TO ASSUME THAT THE LOAN AVAILED BY THE APPEL LANT IS NOT GENUINE. (D) CREDITWORTHINESS OF LENDER COMPANIES AND GENUINENES S OF THE TRANSACTION PROVED INCLUDING THE SOURCE OF SOURCE:- APPELLANT BEFORE THE AO AS WELL AS BEFORE ME HAS FI LED COPIES OF PAN, BANK ACCOUNT STATEMENT OF LENDERS, AUDITED BALANCE SHEET , PROFIT AND LOSS STATEMENT AND CONFIRMATIONS OF LENDERS. APPELLANT DURING APPELLAT E PROCEEDINGS SUBMITTED THAT MLSF IS A NON BANKING FINANCE COMPANY (NBFC) REGIST ERED WITH RESERVE BANK OF INDIA VIDE CERTIFICATE OF REGISTRATION NO B-03-0 0134 DATED 23.05.2013. FURTHER MLSF IS FINANCED BY IFCI LTD WHICH IS A RECOGNIZED GOVERNMENT UNDERTAKING. DURING THE YEAR UNDER CONSIDERATION APPELLANT HAS T AKEN LOAN OF RS. 2,34,08,000/- FROM MLSF OUT OF WHICH THE AO MADE AN ADDITION OF RS. 18,00,000/- AS NOTED IN PARA 8.41 OF HIS ORDER. APP ELLANT HAS ALSO FILED COPIES OF ITRS WITH COMPUTATION, PAN, MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFICATE OF INCORPORATION ISSUED BY ROC AND BANK ACCOUNT STATEMENT. ON PERUSAL OF THE SAME IT WAS OBSERVED THAT THE ENTIRE LOAN TAKEN FROM MLSF WAS TAKEN THROUGH CHEQUES. MLSF AND ITS DIRECTORS ARE ALSO COVERED UNDER THE S AME SEARCH OPERATIONS OF SHAKTI PUMPS GROUP AND THEIR CASES WERE CENTRALIZED BEFORE THE AO WHO COMPLETED THEIR ASSESSMENT FOR THE SAME SEVEN YEARS UNDER SECTION 153A RWS 143(3). FROM THE AUDITED PROFIT AND LOSS ACCOUNT OF MLSF AV AILABLE IN THE PAPER BOOK, ITS REVENUE FROM OPERATIONS IS TABULATED WHICH REFL ECTS ITS BUSINESS ACTIVITIES AND EARNINGS S. NO. A.Y. REVENUE FROM OPERATIONS & OTHER INCOME (RS.) 1 2010-11 9,28,158 2 2011-12 23,12,795 3 2012-13 25,91,657 4 2013-14 32,17,514 5 2014-15 65,67,248 6 2015-16 4,17,30,979 FURTHER, ROULEX IS COMPANY INCORPORATED ON 23.03.19 94 AND IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING, MAKING INVESTMEN T IN SHARES AND OTHER FINANCIAL ARRANGEMENTS. APPELLANT HAS ALSO FILED CO PIES OF ITRS WITH COMPUTATION, PAN, MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFI CATE OF INCORPORATION AND SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 12 BANK ACCOUNT STATEMENT. THE ENTIRE LOAN AVAILED FRO M ROULEX OF RS. 3,17,00,000/- IN A.Y. 2015-16 WAS TAKEN THROUGH CHEQUES. FROM THE AUDITED PROFIT AND LOSS ACCOUNT OF ROULEX AVAILABLE IN THE PAPER BOOK, ITS REVENUE FROM OPERATIONS IS TABULATED WHICH REFL ECTS ITS BUSINESS ACTIVITIES AND EARNINGS S. NO. A.Y. REVENUE FROM OPERATIONS & OTHER INCOME (RS.) 1 2010-11 3,24,718 2 2011-12 2,65,026 3 2012-13 4,69,649 4 2013-14 68,24,060 5 2014-15 1,45,49,195 6 2015-16 3,74,64,375 IT HAS BEEN CONTENDED BY THE APPELLANT THAT BOTH TH E COMPANIES HAVE BEEN ASSESSED BY THE SAME ASSESSING OFFICER U/S 143(3) R WS 153A. THE DIRECTORS OF MLSF I.E. SHRI HARINARAYAN PATIDAR AND SHRI VIKAS P ATIDAR AND THAT OF ROULEX I.E. SHRI RAKESH PATIDAR HAVE ALSO BEEN ASSESSED BY THE SAME AO FOR ALL THE SEVEN YEARS COVERED BY SEARCH OPERATIONS. THE LOANS GIVEN BY THESE LENDER COMPANIES ARE DULY RECORDED IN THEIR AUDITED BOOKS OF ACCOUN TS AND HAVE BEEN VERIFIED BY THE SAME AO AND ACCEPTED IN THEIR RESPECTIVE ASSESS MENTS. THE AO VIDE PARA 8.29 REQUIRED THE ASSESSEE TO PRODUCE THE DIRECTORS OF T HE LENDER COMPANIES FOR EXAMINATION, HOWEVER, THE AO FAILED TO NOTICE THAT BOTH THE LENDER COMPANIES AND THEIR DIRECTORS HAVE BEEN ASSESSED BY HIM U/S 143(3 ) RWS 153A. AS NOTED ABOVE, THE AO HAS FAILED IN UNDERSTANDING THE OBJECTIVE OF CENTRALIZATION OF CASES FOR COORDINATED INVESTIGATION FOR WHICH ORDERS ARE PASS ED UNDER SECTION 127 OF THE ACT. FURTHER, INTEREST INCOME EARNED BY THE LENDER COMPA NIES ON THE LOANS GIVEN BY THEM HAS BEEN ACCEPTED AND ASSESSED BY THE SAME AO IN THEIR ASSESSMENTS. THE LOAN PARTY FURNISHED THE LOAN CONFIRMATION, COP Y OF BANK ACCOUNT AND PROOF OF FILING OF THE RETURN. BY FILING THE ABOVE DOCUME NTS THE APPELLANT IS ABLE TO ESTABLISH THE I. IDENTITY OF THE CREDITORS - THE CREDITORS ARE INCOM E TAX PAYER AND FILED THE LOAN CONFIRMATIONS AND ARE ASSESSED BY TH E SAME AO. IT IS WORTH NOTING THE FACT THAT IN CASE OF LOAN FROM MLSF, ONLY PART OF THE LOAN OF RS. 18,00,000/- HAS BEEN ADDED IN THE HANDS OF THE APPELLANT. FOR T HE BALANCE AMOUNT, THE AO HAS ACCEPTED IT TO BE INCOME OF THE LENDER COMPANY WHICH IT HAS OFFERED IN ITS OWN HAND. WHEN SUCH AN ACCEPTANCE IS ACKNOWLEDGED BY TH E AO IN THE HANDS OF THE LENDER COMPANY AND ONLY A PART OF THE AMOUNT IS CON SIDERED BY HIM FOR THE PURPOSE OF MAKING THE ADDITION IN THE HANDS OF THE APPELLANT, THE LENDER COMPANY CANNOT BE HELD TO BE NON-EXISTENT. II. GENUINENESS OF THE TRANSACTION- THE APPELLANT HAS T AKEN THE LOAN THROUGH BANKING CHANNEL. THE APPELLANT IS IN THE RECEIPT OF LOAN BY CHEQUE. BANK STATEMENTS OF LENDER COMPANIES MLSF AND ROULEX ARE PLACED ON RECORD AND PERUSED. WHILE EXPLAINING THE SOURCE OF SOURCE, THE APPELLANT HAS FURNISHED BANK STATEMENTS OF SHAKTI IRRIGATION INDIA LTD, VINTEX T OOLS PVT. LTD. AND SHRI SUBHASH SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 13 PATIDAR WHICH ARE PLACED ON RECORD AND PERUSED. ALL THESE CORROBORATIVE EVIDENCES ESTABLISHES THE GENUINENESS OF THE LOANS TAKEN BY THE APPELLANT. APPELLANT HAS ALSO PAID INTEREST TO THE LENDER COMP ANIES ON THE LOANS BORROWED AND THE SAME HAVE BEEN OFFERED TO TAX BY THE RESPEC TIVE LENDER COMPANIES IN THEIR REGULAR INCOME TAX RETURN AND HAVE BEEN ACCEPTED AS WELL AS ASSESSED BY THE SAME ASSESSING OFFICER IN THEIR ASSESSMENT MADE UND ER SECTION 153A RWS 143(3). III. CREDITWORTHINESS OF THE CREDITORS - THE CREDITORS A RE INCOME TAX PAYER AND FILING THE INCOME TAX RETURN. THE COMPANI ES HAVE NOT ONLY GIVEN THE LOAN TO THE APPELLANT BUT TO OTHER PARTIES ALSO. ML SF IS A NBFC DULY REGISTERED WITH RBI AND IS FINANCED BY IFCI WHICH IS A GOVERNM ENT UNDERTAKING. ROULEX IS A COMPANY INCORPORATED IN 1994 AND DEALS IN INVESTMEN T IN SHARES AND SECURITIES. WHEN A GOVERNMENT UNDERTAKING OF THE STATURE IFCI L IMITED HAS FINANCED MLSF, I FAIL TO UNDERSTAND HOW IT CAN BE HELD BY THE AO A S NON-EXISTENT, NON-FUNCTIONAL AND A SHELL/PAPER COMPANY. SIMILARLY, IN THE CASE O F ROULEX, DURING THE COURSE OF SURVEY AT ITS OFFICE PREMISE IN MUMBAI, THE AUDITOR OF THIS COMPANY CA K.C. KANKARIYA EXPLAINED IN HIS STATEMENT RECORDED DURIN G THE COURSE OF SURVEY ABOUT ITS WHEREABOUTS, THERE IS NO CASE FOR THE AO TO HOL D IT AS NON-EXISTENT, NON- FUNCTIONAL AND A SHELL/PAPER COMPANY. FROM THE ABOVE IT IS CLEAR THAT THE APPELLANT HAS S ATISFIED ALL THE THREE CONDITIONS REQUIRED FOR GENUINENESS OF THE TRANSACTION. THE SA ME VIEW HAS BEEN UPHELD BY HONBLE ITAT IN THE FOLLOWING CASES:- I. UMESH ELECTRICALS V/S ASST. CIT(2011) 18 ITJ 635 (T RIB.-AGRA): (2011) 131 ITD 127 : (2011) 141 TTJ ESTABLISHMENT OF IDENTITY AND CREDIT-WORTHINESS PRO VED- ASSESSEE PRODUCED THE BANK ACCOUNT OF CREDITOR IN HIS BANK ACCOUNT ON THE SAME DAY ON WHICH LOAN WAS GIVEN- ASSESSEE FURNISHED THE CASH FLOW STATEMENT O F CREDITOR-BASED ON INQUIRY, AO NOTED THAT CREDITOR WAS ENGAGED IN PROVIDING ACC OMMODATION ENTRIES-HELD- IN GROUP CASES, IT HAS BEEN HELD THAT THERE WAS NO EVIDENCE AGAINST THE CREDITOR TO PROVE THAT HE WAS PROVIDING ACCOMMODATION ENTRIES-F URTHER, MERE DEPOSIT OF MONEY BY THE CREDITOR ON THE SAME DAY, DOES NOT EST ABLISH THAT THE LOAN IS NOT GENUINE-ASSESSEE HAS PROVED THE SOURCE OF CREDIT AN D ALSO THE SOURCE OF SOURCE - ADDITION CANNOT BE MADE. II. ASEEM SINGH V/S ASST. CIT (2012) 19 ITJ 52 (TRIB.-I NDORE) IDENTITY AND CREDIT-WORTHINESS PROVED-ASSESSEE TOOK LOAN OF RS.1,00,000/- CONFIRMATION OF CREDITOR WAS FILED-LOWER AUTHORITIE S MADE ADDITION U/S 68 HOLDING THAT AMOUNT WAS DEPOSITED IN CASH IN THE BA NK ACCOUNT OF LENDER IMMEDIATELY PRIOR TO DATE OF LOAN HELD- ASSESSEE HAS ESTABLISHED THE IDENTITY- THE PARTY HAS CONFIRMED THE TRANSACTION-IF AO DOUBT ED THE TRANSACTION, AO SHOULD HAVE CALLED CREDITOR U/S 131-ADDITION CANNOT BE MADE. THUS, APPELLANT HAS FURNISHED ALL THE REQUIRED DETA ILS IN ORDER TO PROVE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE CREDITOR. 4.2.7 NEVERTHELESS, APPELLANT HAS EXPLAINED SOURCE OF SO URCE TILL THE LAST LAYER. IN THE CASE OF ROULEX, THE LENDER COMPANY RO ULEX HAS TAKEN LOAN FROM SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 14 VINTEX TOOLS PVT LTD. THE SOURCE OF FUNDS FOR VINTE X TOOLS PVT LTD WAS OUT OF INCOME EARNED AND OFFERED TO TAX AND RESERVE AND SU RPLUS IN VARIOUS YEARS. HONBLE JURISDICTIONAL MP HIGH COURT IN THE CASE OF METACHEM INDUSTRIES (2001) 245 ITR 160 (MP) HAS HELD THAT LAW DOES NOT CAST AN Y OBLIGATION ON THE ASSESSEE TO EXPLAIN THE SOURCE OF SOURCE FOR THE AMOUNT BORR OWED. HOWEVER, APPELLANT HAS EXPLAINED THE SOURCE OF SOURCE ALSO. APPELLANT HAS EXPLAINED THE SOURCE OF SOURCE TO THE LAST LEG OF THE TRANSACTIONS BY PLACING ALL THE RELEVANT DOCUMENTARY EVIDENCES ON RECORD IN THE PAPER BOOK WHICH WERE PR ODUCED BEFORE THE AO. IT IS MOST IMPORTANT TO MENTION HERE THAT BOTH THE LENDER COMPANIES I.E. ML SECURITIES FINANCE PRIVATE LIMITED AND ROULEX INVES TMENT AND FINANCE PRIVATE LIMITED WERE ASSESSED WITH THE SAME ASSESSING OFFIC ER UNDER SECTION 153A RWS 143(3). EVEN THE DIRECTORS OF THESE LENDER COMPANIE S WERE COVERED UNDER THE SEARCH OPERATION AND WERE ASSESSED BY THE SAME AO U NDER SECTION 153A RWS 143(3). HENCE, THE AO HAD BEFORE HIM ALL THE RECORD S AND DOCUMENTS OF THE LENDER COMPANIES INCLUDING THOSE OF THE DIRECTORS F OR VERIFICATION OF THE FACTS AND DOCUMENTS PRESENTED IN SUPPORT OF HIS CONTENTION. T HUS, THE AO HAS ERRED TOTALLY, IN OVERLOOKING THE KEY FACTS AND DOCUMENTS ON RECOR D AND IN CONTINUOUSLY STRESSING MERELY ON THE STATEMENTS OF DIRECTORS REC ORDED BEHIND THE BACK OF THE APPELLANT. 4.2.8 AS FAR AS CASE LAWS RELIED UPON BY THE A.O. ARE CO NCERNED, ON PERUSAL IT IS SEEN THAT NONE OF THE CASE LAWS RELIED UPON B Y THE A.O. ARE APPLICABLE TO THE FACTS OF THIS CASE. THE CASE LAWS REFERRED BY AO AR E AS UNDER:- (A) ACIT VS NAKODA FASHION (P) LTD ITA NO 1716/AHD/ 2012. SECTION 68 , READ WITH SECTION 263 , OF THE INCOME-TAX ACT, 1961 - CASH CREDIT (SHARE APPLICATION MONEY) - ASSESSMENT YEAR 2009-10 - ASSESSING OFFICER TREATED SHARE CAPITAL AND SHARE PREMIUM RECEIVED BY ASSESSE E FROM 5 COMPANIES AS UNEXPLAINED CASH CREDIT - WHETHER SINCE THERE WERE MATERIALS TO SHOW THAT COMPANIES THROUGH WHICH SHARE CAPITAL AND SHARE PRE MIUM HAD BEEN RECEIVED WERE JUST PAPER COMPANIES AND WERE ENGAGED IN PROVI DING ACCOMMODATION ENTRIES, MERE FURNISHING OF PARTICULARS OR MERE FAC T OF PAYMENT BY ACCOUNT PAYEE CHEQUE OR SUBMISSION OF CONFIRMATION LETTER BY SHAR E APPLICANTS WOULD ONLY PROVE THEIR IDENTITY AND BY ITSELF, NOT ENOUGH TO ESTABLI SH THEIR CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS AND THEREFORE, ADDITION MADE UNDER SECTION 68 WAS TO BE CONFIRMED - HELD, YES IN THE PRESENT CASE, THE LENDER COMPANIES WERE ALSO COVERED BY SEARCH OPERATIONS AND WERE ASSESSED BY THE SAME AO IN WHOSE CASE THE AO HAS ACCEPTED INTEREST INCOME AND NO SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE AO. (B) CIT VS P MOHANKALA 291 ITR 278 (SC) SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDITS - ASSES SMENT YEARS 1993-94 TO 1996-97 - ASSESSING OFFICER REJECTED EXPLANATION OF ASSESSEES THAT AMOUNTS CREDITED IN THEIR RESPECTIVE ACCOUNTS WERE GIFTS FR OM NRI AND ADDED SAID AMOUNT TO INCOME OF ASSESSEES AS INCOME FROM UNDISCLOSED S OURCES, ON GROUND THAT SO CALLED GIFTS WERE NOT REAL AND GENUINE - ON APPEAL, COMMISSIONER (APPEALS) AS WELL AS TRIBUNAL DID NOT ACCEPT EXPLANATION OF ASSE SSEE AND CONFIRMED FINDING OF ASSESSING OFFICER - HIGH COURT, HOWEVER, REAPPRECIA TED EVIDENCE AVAILABLE ON RECORD AND SUBSTITUTED ITS OWN FINDINGS FOR THAT OF TRIBUNAL - HIGH COURT HELD THAT REASONS ASSIGNED BY TRIBUNAL AND OTHER AUTHORITIES WERE IN REALM OF SURMISES, SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 15 CONJECTURES AND SUSPICIONS - WHETHER SINCE FINDINGS OF FACT ARRIVED AT BY AUTHORITIES BELOW WERE BASED ON PROPER APPRECIATION OF FACTS, MATERIAL AVAILABLE ON RECORD AND SURROUNDING CIRCUMSTANCES, HIGH COURT COMMITTED ERROR IN DISTURBING CONCURRENT FINDINGS OF FACTS - HELD, YES IN THE ABOVE MENTIONED CASE, HONBLE APEX COURT HAS REJECTED THE PLEA OF ASSESSEE FOR GIFTS RECEIVED FROM NRI WHICH WERE NOT EXPLAINED BY THE ASSESSEE. HOWEVER, IN THE CASE OF APPELLANT NO SUCH ISSUE OF GIFTS FROM NRI PERTAINS AND THE APPELLANT HAS EXPLAINED AND PROVED THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE LENDERS. THEREFORE, FACTS O F BOTH THE CASE ARE ENTIRELY DIFFERENT TO EACH OTHER. (C) CIT VS DURGAPRASAD MORE 82 ITR 540 (SC) IN THE ABOVE MENTIONED CASE, SOURCE OF INVESTMENT WAS NOT EXPLAINED BY THE ASSESSEE. HOWEVER, IN THE CASE OF APPELLANT, APPELL ANT HAS EXPLAINED SOURCE OF SOURCE DULY SUPPORTED BY CORROBORATIVE DOCUMENTARY EVIDENCES. (D) SUMATI DAYAL VS CIT 214 ITR 801 (SC) SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI TS - ASSESSMENT YEARS 1971-72 AND 1972-73 - ASSESSEE HAD SHOWN CERTAIN AMOUNTS IN CAPITAL ACCOUNTS IN BOOKS CLAIMING SAME TO BE WINNINGS FROM HORSE RACES - SHE FILED SWORN STATEMENT TO EFFECT THAT SHE STARTED GOING FOR RACES ONLY TOWARD S END OF YEAR 1969 AND HAD NO EXPERIENCE IN RACES BUT SHE PURCHASED JACKPOT TICKE TS ON COMBINATION WORKED OUT BY HER ON BASIS OF ADVICE GIVEN BY HER HUSBAND - SH E HAD ALLEGEDLY WON 16 JACKPOTS BESIDES TREBLES - ASSESSING OFFICER DISBEL IEVED HER VERSION AND TAXED AMOUNT AS INCOME FROM UNDISCLOSED SOURCES - SETTLEM ENT COMMISSION BY ITS MAJORITY ORDER UPHELD ASSESSMENT ORDER HOLDING THAT IT WAS REASONABLE TO INFER, ON FACTS, THAT ASSESSEE DID NOT PARTICIPATE IN RACE S BUT PURCHASED WINNING TICKETS AFTER EVENTS WITH UNACCOUNTED MONEY - WHETHER MATTE R IN QUESTION HAD TO BE CONSIDERED IN LIGHT OF HUMAN PROBABILITIES - HELD, YES - WHETHER HAVING RECORD TO CONDUCT OF ASSESSEE AS DISCLOSED BY HER IN SWORN AF FIDAVIT AS WELL AS OTHER MATERIAL ON RECORD, AN INFERENCE COULD REASONABLY B E DRAWN THAT WINNING TICKETS WERE PURCHASED BY HER AFTER RACE EVENT - HELD, YES - WHETHER, THEREFORE, FINDING OF MAJORITY OF SETTLEMENT COMMISSION THAT AMOUNT IN QUESTION WAS NOT WINNINGS FROM HORSE RACES BUT INCOME FROM UNDISCLOSED SOURCE S WAS JUSTIFIED - HELD, YES IN THE ABOVE MENTIONED CASE, THE ASSESSEE HAS CLAIM ED CERTAIN AMOUNTS IN CAPITAL ACCOUNT FROM WINNINGS FROM HORSE RACES. BUT IN REAL ITY ASSESSEE HAS PURCHASED LOTTERY TICKETS OUT OF UNACCOUNTED MONEY. HOWEVER, FACTS OF THE CASE OF APPELLANT ARE ENTIRELY DIFFERENT FROM THE ABOVE CITED CASE. M OREOVER, WHEN THE PRIMARY AND DIRECT EVIDENCES PROVIDE ALL THE EXPLANATION, THE S URROUNDING CIRCUMSTANCES BEAR NO SIGNIFICANCE. (E) NR PORTFOLIO PVT LTD 9ITA NO 1019/2011DATED 22. 11.2013 SECTION 68 OF THE INCOME-TAX ACT, 1961 - CASH CREDI T [SHARE MONEY] - ASSESSMENT YEARS 2002-03 AND 2003-04 - WHETHER CREDITWORTHINES S OR GENUINENESS OF TRANSACTION DEPENDS ON WHETHER TWO PARTIES ARE RELA TED OR KNOWN TO EACH, MANNER OR MODE BY WHICH PARTIES APPROACHED EACH OTH ER, WHETHER TRANSACTION WAS ENTERED INTO THROUGH WRITTEN DOCUMENTATION TO P ROTECT INVESTMENT, WHETHER INVESTOR PROFESSES AND WAS AN ANGEL INVESTOR, QUANT UM OF MONEY, SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 16 CREDITWORTHINESS OF RECIPIENT, OBJECT AND PURPOSE F OR WHICH PAYMENT/INVESTMENT WAS MADE, ETC. - HELD, YES - WHETHER CERTIFICATE OF INCORPORATION OF COMPANY, PAYMENT BY BANKING CHANNEL, ETC. CANNOT IN ALL CASE S TANTAMOUNT TO SATISFACTORY DISCHARGE OF ONUS - HELD, YES - ASSESSEE WAS A PRIV ATE LIMITED COMPANY AND HAD RECEIVED FROM OTHER COMPANIES SUBSTANTIAL AMOUNT OF SHARE APPLICATION MONEY OF RS. 63.80 LAKHS AND RS. 75.60 LAKHS IN TWO CONSECUT IVE YEARS - OTHER THAN SHARE APPLICATION FORMS, NO OTHER AGREEMENT BETWEEN ASSES SEE-COMPANY AND THIRD COMPANIES HAD BEEN PLACED ON RECORD - PERSONS BEHIN D THESE COMPANIES WERE NOT PRODUCED BY ASSESSEE - ON OTHER HAND, ASSESSEE-COMP ANY ADOPTED NON- COOPERATIVE ATTITUDE BEFORE ASSESSING OFFICER ONCE THEY CAME TO KNOW ABOUT DIRECTED ENQUIRY AND INVESTIGATION BEING MADE - WHE THER EVASIVE AND TRANSIENT APPROACH BEFORE ASSESSING OFFICER WAS LIMPID AND PE RSPICUOUS AND, THEREFORE, ADDITION MADE IN RESPECT OF IMPUGNED AMOUNT WAS TO BE UPHELD - HELD, YES IN THE ABOVE MENTIONED CASE, THE ASSESSEE HAS ADOPT ED NON COOPERATIVE ATTITUDE BEFORE THE AO AND PERSON BEHIND THESE COMPANIES WER E NOT PRODUCED FOR EXAMINATION. HOWEVER, IN THE CASE OF APPELLANT, THE APPELLANT HAS PROVIDED ALL THE AVAILABLE DETAILS REGARDING THE LENDERS. IT IS ALSO IMPORTANT THAT THE AO OF THE LENDERS IS ALSO SAME AS THAT OF THE APPELLANT. THER EFORE, THE KEY PERSONS OF THE LENDER COMPANIES WERE DIRECTLY AND READILY AVAILABL E BEFORE THE AO WHO MADE THEIR ASSESSMENTS ALSO DURING THE SAME TIME. THUS, IT IS NOT THE CASE WERE APPELLANT HAS DELIBERATELY TRIED TO PUT THINGS OUT OF PICTURE. 4.2.9 THEREFORE, IN VIEW OF THE ABOVE DISCUSSION, THE AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS. 3,35,00,000/- IN AY 2015-16 ON ACCOUNT OF UNSECURED LOAN OF RS. 18,00,000/- FROM M L SECURITIES PVT LTD AND RS. 3,17,00,000/- FROM ROULEX INVESTMENT AND FINANCE PVT LTD. THUS, KEEPING IN VI EW FACTS OF THE CASE, THE DOCUMENTARY EVIDENCES FILED BY THE APPELLANT AND TH E CASE LAWS CITED ABOVE, THE ADDITION MADE BY THE AO AMOUNTING TO RS. 3,35,00,000/- IN AY 2015-16 IS DELETED. THEREFORE, THIS GROUND IN APPEAL IS ALLOWED. 6. ON CONSIDERATION OF ABOVE, WE FIND BOTH THE LEND ER COMPANIES, MLSF AND ROULEX WERE ALSO COVERED UNDER SEARCH PROCEEDINGS CONDUCTED IN THE CASE OF SHAKTI PUMPS G ROUP WITH ROULEX BY WAY OF SURVEY UNDER SECTION 133A. DIRECTO RS OF MLSF I.E. SHRI HARINARAYAN PATIDAR AND SHRI VIKAS PATIDA R AND FOR ROULEX I.E. SHRI RAKESH PATIDAR WERE ALSO COVERED U NDER THE SAID SEARCH OPERATIONS. BOTH THE LENDER COMPANIES AND TH E AFORESAID SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 17 DIRECTORS HAVE BEEN ASSESSED BY THE SAME AO UNDER S ECTION 143(3) R.W.S. 153A WHO HAD PASSED THE IMPUGNED ASSE SSMENT ORDERS FOR THE ASSESSEE. THUS, THE ASSESSING OFFICE R FAILED TO ACHIEVE THE OBJECTIVE OF SUCH A COORDINATED APPROAC H WHILE ASKING THE ASSESSEE TO PRODUCE THE DIRECTORS OF THE LENDER COMPANIES WHEN THEY ARE BEING ASSESSED BY HIMSELF I NCLUDING THE TWO LENDER COMPANIES. THE LD. CIT(A) ALSO NOTED THE SAME. FURTHER, THE ASSESSING OFFICER DID NOT APPRECIATE T HE FACT THAT THE COMPANIES HAVE NOT ONLY GIVEN THE LOAN TO THE ASSES SEE BUT TO OTHER PARTIES ALSO. MLSF IS A NBFC DULY REGISTERED WITH RBI AND IS FINANCED BY IFCI WHICH IS A GOVERNMENT UNDERTAKI NG. ROULEX IS A COMPANY INCORPORATED IN 1994 AND DEALS IN INVESTM ENT IN SHARES AND SECURITIES. WHEN A GOVERNMENT UNDERTAKIN G IFCI LIMITED HAS FINANCED MLSF, THEN HOW IT CAN BE HELD BY THE AO AS NON-EXISTENT, NON-FUNCTIONAL AND A SHELL/PAPER COMP ANY. SIMILARLY, IN THE CASE OF ROULEX, DURING THE COURSE OF SURVEY AT ITS OFFICE PREMISE IN MUMBAI, WHEN THE AUDITOR OF THIS COMPANY CA K.C. KANKARIYA EXPLAINED IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY ABOUT ITS WHEREABOUTS, THEN THERE IS NO CASE FOR THE AO TO HOLD IT AS NON-EXISTENT, NON-FUNCTIONAL A ND A SHELL/PAPER COMPANY. FURTHER, WE FIND THAT NO OPPOR TUNITY OF SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 18 CROSS EXAMINATION OF THE DIRECTORS OF THE LENDER CO MPANIES WAS PROVIDED TO THE ASSESSEE BEFORE MAKING THE IMPUGNED ADDITION. WE ALSO FIND THAT IN ABSENCE OF INCRIMINATING MATER IAL RELEVANT TO THE ADDITION MADE AND MAKING BASIS MERELY ON THE ST ATEMENTS RECORDED OF THE TWO DIRECTORS OF MLSF AND ONE INCOR RECT PERSON IN THE CASE OF ROULEX, IN THE LIGHT OF THE VARIOUS COU RTS WHICH HAVE HELD THAT IN ABSENCE OF INCRIMINATING MATERIAL RELE VANT, SUCH ADDITIONS ARE UNJUSTIFIED. IT IS IMPORTANT TO NOTE THAT ASSESSEE IS COVERED UNDER THE SEARCH OPERATION BY WAY OF PANCHN AMA DRAWN FOR HIS RESIDENTIAL PREMISES AT 354 SAKET NAGAR, IN DORE FROM WHERE NOTHING INCRIMINATING WAS FOUND DURING THE CO URSE OF SAID SEARCH RELATING TO THE ADDITIONS MADE BY THE AO. WE FIND THAT BOTH THE LENDER COMPANIES HAD SIGNIFICANT REVENUE F ROM THEIR OPERATIONS, FACT OF WHICH WAS TAKEN NOTE OF, BY THE LD. CIT(A) WHILE ADDRESSING THE CREDITWORTHINESS AND GENUINENE SS OF THE LOAN TRANSACTIONS. REPORTED REVENUE FROM OPERATIONS FOR AY 2015-16 OF ML SECURITIES & FINANCE PVT. LTD. WAS RS .4,17,30,979 AND FOR ROULEX INVESTMENT AND FINANCE PVT. LTD. WAS RS.3,74,64,375. BOOKS OF ACCOUNT OF BOTH THE COMPAN IES ARE AUDITED AND FINANCIAL STATEMENTS WERE PLACED ON REC ORD ALONG WITH THEIR BANK STATEMENTS AS FILED BEFORE US AT PA GE NOS. 157 & SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 19 205 OF THE PAPER BOOK. WE FIND THAT THE ASSESSEE BEFORE THE AO AS WELL AS LD. CIT(A) HAD FILED COPIES OF PAN, BANK AC COUNT STATEMENT OF LENDERS, AUDITED BALANCE SHEET, PROFIT AND LOSS STATEM ENT AND CONFIRMATIONS OF LENDERS AND ALSO COPIES OF ITRS WITH COMPUTATION, PAN, MEMORANDUM AND ARTICLE OF ASSOCIATION, CERTIFICATE OF INCORPORATION ISSUED BY ROC AND BANK ACCOUNT STATEMENT AS NOTED BY THE LD. CIT(A) AT PAGE 30 PARA (D) IN THE IMPUGNED ORD ER. WE FURTHER FIND THAT INTEREST INCOME EARNED BY THE LENDER COMPANIES ON T HE LOANS GIVEN BY THEM HAS BEEN ACCEPTED AND ASSESSED BY THE SAME AO IN THEIR ASSESSMENTS AS NOTED BY THE LD. CIT(A) AT PAGE 32 OF THE IMPUGNED ORDER. WE FIND THAT IN CASE OF LOAN FROM MLSF, ONLY PART OF THE LOAN OF RS. 18,00,000/- HAS BEEN ADDED IN THE HANDS OF THE ASSESSEE AND FOR THE BALANCE AMOUNT, THE AO HAS ACCEP TED IT TO BE INCOME OF THE LENDER COMPANY WHICH IT HAD OFFERED IN ITS OWN HAND. WHEN SUCH AN ACCEPTANCE WAS ACKNOWLEDGED BY THE AO IN THE HANDS OF THE LENDER COMPANY AND ONLY A PART OF THE AMOUNT WAS CONSIDERED BY HIM FOR THE PURPOSE OF MAKING THE ADDITION IN THE H ANDS OF THE ASSESSEE THEN THE LENDER COMPANY CANNOT BE HELD TO BE N ON-EXISTENT. THEREFORE, WE FIND THAT THE ASSESSEE WENT ON TO EXPLAIN THE SOURCE OF SOURCE TO THE LAST LEG OF THE LOAN TRANSACTION BY A LONG WITH FURNISHING ALL THE CORROBORATIVE DOCUMENTARY EVIDEN CES, WHICH ARE ALL PLACED IN THE PAPER BOOK. WE FIND THAT IN THE CASE OF ROULEX, SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 20 THE LENDER COMPANY ROULEX HAS TAKEN LOAN FROM VINTEX T OOLS PVT LTD. AND THE SOURCE OF FUNDS FOR VINTEX TOOLS PVT LTD WAS O UT OF INCOME EARNED AND OFFERED TO TAX AND RESERVE AND SURPLUS IN VARIOUS YEARS. HONBLE JURISDICTIONAL MP HIGH COURT IN THE CASE OF M ETACHEM INDUSTRIES (2001) 245 ITR 160 (MP) HAS HELD THAT LAW D OES NOT CAST ANY OBLIGATION ON THE ASSESSEE TO EXPLAIN THE SOURCE OF SOURCE FOR THE AMOUNT BORROWED. HOWEVER, IN THE PRESENT CASE, THE ASSE SSEE HAD EXPLAINED THE SOURCE OF SOURCE TO THE LAST LEG OF THE TRA NSACTIONS BY PLACING ALL THE RELEVANT DOCUMENTARY EVIDENCES ON REC ORD IN THE PAPER BOOK WHICH WERE ALSO PRODUCED BEFORE THE AO. WE FIND THAT HONBLE JURISDICTIONAL BENCH OF INDORE ITAT IN THE CASE OF AG8 VENTURES LIMITED IT(SS)A NO. 83, 84, 86, 87, 109, 110/IND/ 2019 VIDE ORDER DATED 16.02.2021 HELD AS UNDER: PARA 216 BEFORE MOVING FURTHER TO EXAMINE THE F ACTS WE WOULD LIKE TO GO THROUGH THE JUDICIAL PRECEDENTS WI TH REGARD TO THE ISSUE THAT WHERE IN CASE NO CORROBORATIVE MATERIAL IS FOUND DURING THE COURSE OF SEARCH HAVING ITS NEXUS WITH THE INCO ME SURRENDERED DURING THE COURSE OF SEARCH WHETHER THE ADDITION CAN BE MADE MERELY ON THE BASIS OF STATEMENT RECORDED D URING THE COURSE OF SEARCH .THOUGH LD. COUNSEL FOR THE ASSESSEE HAS REFERRED AND RELIED ON PLETHORA OF JUDGMENTS, WE FI ND THAT THIS TRIBUNAL HAS DEALT WITH THIS ISSUE. IN THE CASE OF ACIT VS SHRI SUDEEP MAHESHWARI, ITA 524/ IND/ 2013, VIDE ORDER D ATED 13.02.2019 , THIS TRIBUNAL OBSERVED AS UNDER:- . PARA 217 RECENTLY, IN AJIT SINGH MELHOTRA VS ACI T, IT(SS)A 63/ IND/ 2019 VIDE ORDER DATED 22.10.2020, THIS TRIBUNA L AFTER CONSIDERING VARIOUS JUDGMENTS INCLUDING THOSEOF HON 'BLE GUJARAT HIGH COURT AS WELL AS HON'BLE APEX COURT AND ALSO F OLLOWING ITS OWN DECISION IN THE CASE OF ACIT VS SHRI SUDEEP MAH ESHWARI (SUPRA) OBSERVED AS UNDER:-. SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 21 PARA 218 ON GOING THROUGH THE ABOVE JUDGMENTS IT IS JUDICIALLY SETTLED THAT AN ADDITION MADE ON THE BASIS OF MERE SURRENDER OF INCOME DURING THE COURSE OF SERACH WITHOUT REFERRIN G TO ANY OF THE INCRIMINATING DOCUMENTS IS NOT BINDING ON THE ASSES SEE AND THE SAME CANNOT BE USED AGAINST THE ASSESSEE AS AN EVID ENCE . PARA 221 WE THEREFORE IN THE LIGHT OF SETTLED JU DICIAL PRECEDENTS AND RESPECTFULLY FOLLOWING THE DECISION OF THIS TRI BUNAL IN THE CASE OF ACIT VS SHRI SUDEEP MAHESHWARI (SUPRA) AND AJIT SINGH MELHOTRA V/S ACIT (SUPRA) WHICH WERE DECIDED AFTER CONSIDERING THE SETTLED JUDICIAL PRECEDENCE BY THE HON'BLE COUR TS ARE OF THE CONSIDERED VIEW THAT LD. AO WAS NOT JUSTIFIED IN MA KING THE ADDITIONS MERELY ON THE BASIS OF STATEMENT GIVEN DU RING THE COURSE OF SEARCH WITHOUT REFERRING TO ANY INCRIMINA TING MATERIAL IN THE CASE OF ASSESSEE COMPANY, AND FURTHER LD. CIT(A ) WAS NOT JUSTIFIED IN ENHANCING THIS ADDITION 7. HONBLE DELHI HIGH COURT IN THE CASE OF ANAND K UMAR JAIN (HUF) ITA NO. 23/2021, ORDER DATED 12.02.2021 HEL D AS UNDER: PARA 8 NEXT, WE FIND THAT, THE ASSESSMENT HAS B EEN FRAMED UNDER SECTION 153A, CONSEQUENT TO THE SEARCH ACTION. THE SCOPE AND AMBIT OF SECTION 153A IS WELL DEFINED. THIS COURT, IN CIT V. KABUL CHAWLA ,1 CONCERNING THE SCOPE OF ASSESSMENT UNDER SECTION 153A, HAS LAID OUT AND SUM MARIZED THE LEGAL POSITION AFTER TAKING INTO ACCOUNT THE EARLIER DECI SIONS OF THIS COURT AS WELL AS THE DECISIONS OF OTHER HIGH COURTS AND TRIBUNALS. I N THE SAID CASE, IT WAS HELD THAT THE EXISTENCE OF INCRIMINATING MATERIAL FOUND DURING THE COURSE OF THE SEARCH IS A SINE QUA NON FOR MAKING ADDITIONS PURSU ANT TO A SEARCH AND SEIZURE OPERATION. IN THE EVENT NO INCRIMINATING MATERIAL I S FOUND DURING SEARCH, NO ADDITION COULD BE MADE IN RESPECT OF THE ASSESSMENT S THAT HAD BECOME FINAL. REVENUES CASE IS HINGED ON THE STATEMENT OF MR. JI NDAL, WHICH ACCORDING TO THEM IS THE INCRIMINATING MATERIAL DISCOVERED DURIN G THE SEARCH ACTION. THIS STATEMENT CERTAINLY HAS THE EVIDENTIARY VALUE AND R ELEVANCE AS CONTEMPLATED UNDER THE EXPLANATION TO SECTION 132(4) OF THE ACT. HOWEVER, THIS STATEMENT CANNOT, ON A STANDALONE BASIS, WITHOUT REFERENCE TO ANY OTHER MATERIAL DISCOVERED DURING SEARCH AND SEIZURE OPERATIONS, EM POWER THE AO TO FRAME THE BLOCK ASSESSMENT .. [EMPHASIS SUPPLIED] PARA 10 NOW, COMING TO THE ASPECT VIZ THE INVOCA TION OF SECTION 153A ON THE BASIS OF THE STATEMENT RECORDED IN SEARCH ACTIO N AGAINST A THIRD PERSON ...............HERE, THE ASSESSMENT HAS BEEN FRAMED UNDER SECTION 153A ON THE BASIS OF ALLEGED INCRIMINATING MATERIAL (BEING THE STATEMENT RECORDED UNDER 132(4) OF THE ACT). AS NOTED ABOVE, THE ASSES SEE HAD NO OPPORTUNITY TO CROSS-EXAMINE THE SAID WITNESS, BUT THAT APART, THE MANDATORY PROCEDURE UNDER SECTION 153C HAS NOT BEEN FOLLOWED. ON THIS C OUNT ALONE, WE FIND NO SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 22 PERVERSITY IN THE VIEW TAKEN BY THE ITAT. THEREFORE, WE DO NOT FIND ANY SUBSTANTIAL QUESTION OF LAW THAT REQUIRES OUR CONSI DERATION. 8. WE FIND THAT THE HONBLE JURISDICTIONAL INDORE I TAT BENCH IN THE CASE OF ARIBA FOODS PVT. LTD. & OTHERS IN ITA N O. 736/IND/2019, APPEAL BY THE DEPARTMENT, VIDE ORDER DATED 11.01.2021 DECIDED THE IDENTICAL ISSUE. IN THAT CAS E, WE FIND THAT THE LD. CIT(A) MADE IDENTICAL OBSERVATIONS AND GAVE SIMILAR FINDINGS ON THE FACTS DULY SUPPORTED BY RELEVANT CA SE LAWS ALL OF WHICH HAD BEEN UPHELD BY THE HONBLE BENCH IN FAVOU R OF THE ASSESSEE BY DISMISSING THE APPEAL OF THE DEPARTMENT . MOST OF THE FINDINGS AND OBSERVATIONS BY LD. CIT(A) AND THE AFF IRMATIONS THERETO BY THE HONBLE BENCH CARRY IDENTICAL VERBIA GE AS IN THE CASE OF THE PRESENT APPEAL BEFORE US. 9. WE ALSO FIND THAT IN ASSESSEES OWN CASE FOR AY 2014-15 WITH IDENTICAL ISSUE EXCEPT FOR DIFFERENCE IN THE Q UANTUM OF LOAN FROM ML SECURITIES AND FINANCE PVT LTD, THE LD. CIT (A)3, INDORE IN APPEAL NO. IT-11810/17-18, ORDER DATED 19.03.202 0 HAS RELIED ON THE DECISION OF LD. CIT(A) 3, BHOPAL IN THE PR ESENT APPEAL AND DELETED THE SIMILAR ADDITION TOWARDS UNSECURED LOAN U/S 68. EVEN BEFORE US, THE REVENUE COULD NOT CONTROVERT TH E FACTUAL FINDINGS RECORDED BY THE LD. CIT(A) BY BRINGING ANY CONTRARY MATERIAL ON RECORD, THEREFORE, N CONSIDERATION OF A BOVE FACTS, SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 23 SUBMISSIONS, MATERIAL AVAILABLE ON RECORD IN LIGHT OF THE AFORESAID JUDICIAL PRONOUNCEMENTS, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LD. CIT(A). THE SAME IS CONFIRMED. THU S, THE DELETION OF ADDITION OF RS. 3,35,00,000 MADE U/S 68 BY THE L D. AO TOWARDS UNSECURED LOANS IS CONFIRMED. ACCORDINGLY, THE ONLY GROUND RAISED IN THE DEPARTMENTAL APPEAL FOR THE AS SESSMENT YEAR 2015-16 IS DISMISSED. 10 SO FAR AS THE DEPARTMENTAL APPEAL FOR THE ASSESS MENT YEAR 2014-15 IS CONCERNED, WE FIND THAT THE FACTS AND CI RCUMSTANCES OF THIS CASE ARE SIMILAR TO THAT OF 2015-16, THEREF ORE, OUR DECISION TAKEN FOR THE ASSESSMENT YEAR 2015-16 SHALL PREVAIL IN THE ASSESSMENT YEAR 2014-15 TOO HAVING SIMILAR SET OF F ACTS AND CIRCUMSTANCES. BOTH THE PARTIES SUBMITTED THAT THE ARGUMENTS ADVANCED FOR THE ASSESSMENT YEAR 2015-16 ABOVE MAY ALSO BE CONSIDERED FOR THE ASSESSMENT YEAR 2014-15. FURTHER , FOR THE ASSESSMENT YEAR 2014-15 IN THE IMPUGNED ORDER, THE LD. CIT(A) 3, INDORE HAS ALSO RELIED UPON THE ORDER OF LD. CIT (A) 3, BHOPAL FOR THE ASSESSMENT YEAR 2015-16. THUS, FOLLOWING TH E SAME DETAILED DISCUSSION AND REASONING THEREOF AS NARRAT ED FOR THE ASSESSMENT YEAR 2015-16 ABOVE, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LD. CIT(A) FOR THE ASSESSMENT YEAR 2014-15 TOO. SHRI ANKIT PATIDAR IT(SS)A NO.121 & 103/IND/2019 & 2020. 24 ACCORDINGLY, THE ONLY GROUND RAISED IN THE DEPARTME NTAL APPEAL FOR THE ASSESSMENT YEAR 2014-15 IS ALSO DISMISSED. 11. IN THE RESULT, BOTH THE DEPARTMENTAL APPEALS I.E. IT(SS)A NO.121/IND/2019 FOR THE ASSESSMENT YEAR 201 5- 16 AND IT(SS)A NO.103/IND/2020 FOR THE ASSESSMENT Y EAR 2014-15 ARE DISMISSED. THE ORDER PRONOUNCED AS PER RULE 34 OF ITAT RULES, 1963 ON 04.10.2021. SD/- SD/- (RAJPAL YADAV) (MANISH BORAD) VICE PRESIDENT ACCOUNTANT ME MBER / DATED : 04.10.2021 !VYAS! COPY TO: THE APPELLANT/RESPONDENT/CIT CONCERNED/CIT(A) CONCERNED/ DR, ITAT, INDORE/GUARD FILE. BY ORDER, ASSTT.REGISTRAR, I.T.A.T., INDORE