The ACIT Central-1, Indore V. Shri Dinesh Kumar Patidar, Indore

ITSSA 28/Ind/2021

AI Insights

The case involves appeals by the Revenue against the order of the Commissioner of Income-Tax (Appeals) which had deleted the additions made by the Assessing Officer under section 68 of the Income-tax Act, 1961. The additions pertained to unsecured loans taken by the assessee, Shri Dinesh Kumar Patidar, from two companies, MLSF and Roulex, which were alleged to be paper companies. The Tribunal examined the facts, including the search operations conducted on the Shakti Pump Group and the subsequent assessments, and found that the loans were genuine and the companies were not mere paper entities but engaged in substantial business activities.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 136019 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 11 month(s) 23 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-11-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 31-01-2021
• Other Referred Cases: ACIT-(Central)-1, Indore vs. Ankit Patidar, Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata, Praful Chunilal Patel Vs. M.J. Makwana, JCIT & Ors. Vs. George Willimson (Assam) Ltd., Kishanchand Chellaram V/s. CIT, CIT V/s. Indrajit Singh Suri, Dhakeshwari Cotton Mills Ltd. v/s CIT, Umacharan Saha & Bros co. v/s CIT, Dhiraj Lal Girdharilal v/s CIT, Baladin Ram vs CIT, Bhaichand N Gandhi, CIT vsManasi Mahendra Pitkar, Umesh Electricals v/s Asst. CIT, Aseem Singh v/s Asst. CIT, ACIT vs Nakoda Fashion (P) Ltd, CIT vs P Mohankala, CIT vs Durgaprasad More, Sumatidayal vs CIT, NR Portfolio Pvt Ltd vs ACIT, Metachem Industries, Kabul Chawla, Dharamdas Agarwal, Satish Nema, Meeta Gutgutia, Kamta Prasad Dwivedi, Kalani Brothers, Kamal Kishore Kotwani
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Income from undisclosed sources; Search and seizure; Principle of natural justice; Opportunity of cross examination; Earning of tax free income; Source of fund; Question of law; Corroborative evidences; Accommodation entries; Block assessment
• Section: 68; 132; 143(3); 142(1); 153A; 274; 73; 13; 22; 153C

Judgement Text

आयकरअपीलीयअिधकरण,इंदौर ायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE MS. MADHUMITA ROY, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.28 & 29/Ind/2021 Assessment Year: 2012-13 & 2015-16 ACIT(Central)-1 Indore बनाम/ Vs. Shri Dinesh Kumar Patidar, 354, Geeta Palace, Saket Nagar, Indore (Appellant / Revenue) (Respondent / Assessee) PAN: ADHPP 4950 A Assessee by Ms. Nisha Lahoti & Shri Vijay Bansal, ARs Revenue by Shri P.K. Mishra, CIT-DR Date of Hearing 22.11.2022 Date of Pronouncement 24.01.2023 आदेश/O R D E R Per B.M. Biyani, AM: Feeling aggrieved by appeal-order dated 13.07.2020 passed by learned Commissioner of Income-Tax (Appeals)-III, Indore[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 29.12.2017 passed by learned DCIT, Central Circle-1, Indore[“Ld. AO”] u/s 153A / 143(3) of Income-tax Act, 1961 [“the Act”]concerning the Assessment-Year[“AY”] 2012-13 and 2015-16, the Revenue has filed these appeals on following grounds: IT(SS)A No. 28/Ind/2021 – Revenue’s appeal for AY 2012-13: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 2,27,60,000/-made by the Assessing Officer u/s 68 of the Income-tax Act, 1961.” Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 2 of 27 IT(SS)A No. 29/Ind/2021 – Revenue’s appeal for AY 2015-16: “(1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 1,65,00,000/- made by the Assessing Officer u/s 68 of the Income-tax Act, 1961.” (2) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in deleting the addition of Rs. 2,71,00,000/- made by the Assessing Officer by overlooking the findings of the Assessing Officer mentioned in the assessment-order.” 2. Both of these appeals arise from the consolidated order of first-appeal; hence they were heard together and are being disposed by this common- order for the sake of convenience. 3. Briefly stated the facts are such that the assessee is an individual and director of “Shakti Pump” group. A search u/s 132 was conducted on Shakti Group as well as assessee on 21.01.2016 and in pursuance thereof, the cases of assesseewere assessed for the relevant AY 2012-13 and 2015-16 u/s 153A/143(3) vide a consolidated assessment-order dated 29.12.2017, wherein certain additions were made. Being aggrieved, the assessee went in first-appeals to Ld. CIT(A). The Ld. CIT(A) decided appeals vide a consolidated appellate-ordergiving relief to the assessee. Now being aggrieved by the order of first-appeal, the revenue has filed these appeals before us. IT(SS)A No. 28/Ind/2021 – Revenue’s appeal for AY 2012-13: Ground No. 1: 4. This ground relates to the addition of Rs. 2,27,60,000/- u/s 68 on account of unsecured loans. 5. During assessment proceedings, Ld. AO observed that the assesee had taken loan of Rs.90,00,000/- from M.L. Security and Finance Pvt. Ltd. (MLSF) and Rs.1,37,90,000/-from Roulex Investment and Finance Private Ltd.(Roulex). He further observed that both of the lending companies i.e. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 3 of 27 MLSF &Roulex are paper companies and the creditworthiness of these companies are not proved by the assessee. Ld. AO also observed that these companies do not have real business activity and are non-existent and non- functional paper companies. Accordingly, Ld. AO treated the unsecured loans as unproved u/s 68 and made addition. Ld. CIT(A), after having gone through the facts and documentary evidencessubmitted by assessee and considering the judicial pronouncements at length, deleted the addition. Now, the revenue is contesting the action of Ld. CIT(A). 6. Before us, Ld. DR defended the assessment-order passed by Ld. AO and submitted that the Ld. AO has proved that both of the companies, namely MLSF and Roulex were mere paper-companies, therefore the Ld. AO was justified in making additions. Ld. DR submitted that the addition made by Ld. AO ought to be upheld therefore. 7. Per contra, Ld. AR representing the assessee, straightaway invited our attention to the order of ITAT, Indore in IT(SS)A No.121/Ind/2019 for A.Y.2015-16 and IT(SS)ANo.103/Ind/2020 for A.Y. 2014-15 dated 04.10.2021 in the case of ACIT-(Central)-1, Indore vs. Ankit Patidar, wherein identical additions were made by assessing officer u/s 68 of the Act in respect of loans taken by Shri Ankit Patidar from MLSF &Roulex. In that case too, the additions were deleted by Ld. CIT(A) and when the matter reached the ITAT in further appeal, the ITAT was pleased to concur with the view of Ld. CIT(A) and thereby dismiss departmental appeals by observing and holding thus: “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 on facts, material, submissions and judicial pronouncements and deleted the addition on the ground that the AO erred in making additions merely on the basis of statements of directors of lender companies and without providing opportunity of their cross examination before making the impugned addition. Ld. CIT(A) also noted that provisions of section 68 are not applicable in the case of the assessee when no books of accounts are required to be maintained by the assessee. The ld. CIT(A) was of the view that the AO erred in making additions on suspicion, surmise and conjecture Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 4 of 27 basis and without having any incriminating material on record found from the residential premises of the assessee relating to the year in which additions have been made. Further, ld. CIT(A) observed that the AO erred in not appreciating the documentary evidences filed in support of creditworthiness of the lender and genuineness of the transaction including explaining source of source to the last leg of the impugned transactions. The ld. CIT(A) decided the issue as under: “4.2.6 I have considered the facts of the case, material evidences on record & written submissions filed by the ld AR of the appellant. 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 denying of the fact that appellant has taken loan from M/s ML Securities Finance Private Limited and M/s Roulex Investment and Finance Private Limited. The Ld AR has vehemently challenged the arbitrary approach of the AO mainly on four major Counts: (a) The AO erred in making additions merely on the basis 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 maintained by the appellant; (c) The AO erred in making additions on suspicion, surmise and conjecture basis and without having any incriminating material on record found from the residential premises of the appellant relating to the year in which additions have been made; (d) The AO erred in considering the documentary evidences filed in support of creditworthiness of the lender and genuineness of the transaction including explaining source of source to the last leg 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 statements were recorded during the course of search are – a. ML Securities and Finance Pvt. Ltd.: ShriVikasPatidar and ShriHarinarayanPatidar b. Roulex Investment and Finance Pvt. Ltd.: ShriRakeshPatidar In the case of Roulex, the AO relied on the statement of one ShriMukeshPatidar who in fact is not the director of Roulex though bearing identical name. It is an admitted fact that ML Securities and Finance Pvt. Ltd. was also covered under the search operations of the Shakti Pump Group. Both the directors of this lender company were also covered under the same search Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 5 of 27 operations and were assessed by the same AO under section 153A rws 143(3). This is also an admitted fact that statement of ShriHarinaryanPatidar and ShriVikasPatidar 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 ShriRakeshPatidar who was covered under the same search operation. The other director of Roulex, ShriMukeshPatidar son of ShriLaxmichandPatidar 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 stated that Shri Dinesh Patidar has confessed that loan given to ShriAnkitPatidar 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 provide in cash by Shri Dinesh Patidar. However, appellant has brought to my notice that no such statement was given by Shri Dinesh Patidar in relation to the addition made by the AO in A.Y. 2015-16 in the hands of the appellant, which is also evident from the statement of Shri Dinesh Patidar placed on record. 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 ShriHarinaryanPatidar and ShriVikasPatidar were also recorded on 22.01.2016 both of them have never denied to the facts that they were not the directors of the lender company. However, 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 company. The AO vide para no 8.7 stated that Shri B R Patidar CA has been paying sum of Rs. 2,500/- as director’s remuneration, however, it is an important fact that ShriHarinaryanPatidar and ShriVikasPatidar 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 compliances that documents are prepared and completed by the CA and Tax professionals which are then sent to the concerned authorized signatories for obtaining their signatures for meeting the compliance requirements. Incase signatories have 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 noted that Shri Vikas Partidar during statement recorded on oath was asked about investment of crores of rupees in the shares of SPIL in FY 2011-12 & 2012-13. In reply ShriVikas Partidar submitted that he is unaware of the transaction 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 ShriHarinaryanPatidar or by Shri Vikas Patidar as corroborated from the duly audited financial statements of ML Securities and Finance Pvt. Ltd. placed on record in the paper book. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 6 of 27 Appellant has strongly contended that in the case of lender Roulex statement of some MukeshPatidar s/o ShriRameshwarPatidar was recorded, wherein, he stated that he does not know any such company. However, ShriMukeshPatidar s/o ShriRameshwarPatidar is not the director of Roulex but ShriMukeshPatidar s/o ShriLaxmichandPatidar is the director of Roulex whose statement was never recorded during the course of search operation. 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 ShriRakeshPatidar, director of Roulex was also recorded under oath who was covered under the same search operations and was assessed by the same AO. These statements of ShriRakeshPatidar also contain similar averments as in the case of MLSF, relating to the professional engagement of CA B.R. Patidar for the lender company. Appellant in the course of appellant proceedings strongly 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 company in Mumbai was stated to which AO produced in the order as ‘no real business activity’ is carried out in 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 examination of the directors of the lender companies was provided to the appellant before making the impugned addition. This has been held by the Hon’ble Supreme Court in the case of Andaman Timber Industries Vs. Commissioner of Central Excise Kolkata in Civil Appeal No.248 of 2006 that in absence of cross- examination of parties, the assessment proceedings to be quashed. Further, the Hon’ble Gujarat High Court in the case of PrafulChunilal 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, Hon’ble Supreme Court in the case of KishanchandChellaram 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 relied upon the decision of Hon’ble 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 statements of persons who were not allowed to be cross examined by the appellant, 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 appellant is not required to maintain the books of account:- The additions have been made by the AO u/s 68 of the Act. I find it utmost important to quote the provisions of section 68 of the Act which clearly states that; Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 7 of 27 “when any sum is found credited in the books of account 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 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, director’s remuneration, interest and dividend on investment, according to which the appellant 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 while replying to question no A-17 and A-27 of questionnaire u/s 142(1) of the Act. Hon’ble 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 assessee u/s 68 if it is found credited in the books of account of that previous year. Similar view was adopted by High Court Bombay in the case of Bhaichand N Gandhi [1982] 141 ITR 67 (Bom) which was followed by ITAT Mumbai in the case of CIT vsManasiMahendraPitkar (2016) 73 taxmann.com 68 (Mumbai). The following case laws also support the case of the appellant:- • CIT vsTaj Bore Wells 291 ITR 232 (Madras) • ITO vsNarendra Kishore Goswami ITA No 249 & 250/Agra/207 for AY 2003-04 • ITO Vs. SanyasiMajhi 13 ITD 61 (Cal) In a recent decision by Hon’ble Delhi ITAT in the case of VineshMaheshwari 103 taxmann.com 274 order dated 01.03.2019, the issue of invoking section 68 where no books of accounts are required to be maintained as per section 44AA and also the issue of providing opportunity of cross examination to the assessee has been dealt extensively along with analysis of various judicial precedents in favor of the appellant. This is settled legal fact that bank account statement 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 for the unsecured loans taken by the appellant from the two lender companies. (c) Additions made on conjecture, surmises and suspicion basis without having any incriminating material on record in respect 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 on mere suspicion or bare guess, but on a legitimate material from which a reasonable inference of any unexplained cash credit can be made. Hon’ble Supreme Court in the case of Dhakeshwari Cotton Mills Ltd. v/s CIT (1954) 26 ITR 775 Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 8 of 27 (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 imagination and guess work. It has been held in the case of UmacharanSaha& 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 DhirajLalGirdharilal v/s CIT (1954) 26 ITR 736 (SC). Also, once the assessee has discharged its onus of proving that the parties under consideration are genuine, 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 contain averments which are predominantly directed to a practicing Chartered Accountant Shri B R Patidar who is also covered under the same search operations and has been assessed by the same AO. Moreover, it is a fact that both the lender companies and its directors were assessed by the same AO under section 153A rws 143(3). Cases of various persons covered under a search operation are centralized under one Assessing Officer with an objective of coordinated investigation. It is seen that AO failed to achieve the objective of such a coordinated 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 assessee from the two lender companies. It is seen that during the course of impugned 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 directors of MLSF and one incorrect person in the case of Roulex. Various courts have very categorically held in favor of the assessee on the issue of additions made in absence of incriminating material relevant to such additions. It is important to note that assessee is covered under the search operation by way of panchnama drawn for his residential premises at 354 Saket Nagar, Indore from where nothing incriminating was found during the course of said search relating to the additions made by the AO. The AO ought to have connected the cash credit in the form of unsecured loans with independent cogent evidence that the moneys emanated 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 appellant is not genuine. (d) Creditworthiness of lender companies and genuineness of the transaction proved including the source of source:- Appellant before the AO as well as before me has filed copies of PAN, bank account statement of lenders, audited balance sheet, profit and loss statement and confirmations of lenders. Appellant during appellate proceedings submitted that MLSF is a Non Banking Finance Company (NBFC) registered with Reserve Bank of India vide certificate of Registration No B-03-00134 dated 23.05.2013. Further MLSF is financed by IFCI Ltd which is a recognized government undertaking. During the year under consideration appellant has taken 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. Appellant has also filed copies of ITRs with computation, PAN, Memorandum and Article of Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 9 of 27 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 same 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 available in the paper book, its revenue from operations is tabulated which reflects 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 23.03.1994 and is engaged in the business of borrowing and lending, making investment in shares and other financial arrangements. Appellant has also filed copies of ITRs with computation, PAN, Memorandum and Article of Association, Certificate of Incorporation and bank account statement. The entire loan availed from 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 reflects 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 the companies have been assessed by the same Assessing Officer u/s 143(3) rws 153A. The directors of MLSF i.e. ShriHarinarayanPatidar and ShriVikasPatidar and that of Roulex i.e. ShriRakeshPatidar 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 accounts and have been verified by the same AO and accepted in their respective assessments. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 10 of 27 The AO vide para 8.29 required the assessee to produce the directors of the 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 passed under section 127 of the Act. Further, interest income earned by the lender companies 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, copy of bank account and proof of filing of the return. By filing the above documents the appellant is able to establish the – i. Identity of the creditors- the creditors are income tax payer and filed the loan confirmations and are assessed by the 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 the 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 the AO in the hands of the lender company and only a part of the amount is considered 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 taken 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 Tools Pvt. Ltd. and ShriSubhashPatidar 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 companies on the loans borrowed and the same have been offered to tax by the respective 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 under section 153A rws 143(3). iii. Creditworthiness of the creditors- the creditors are income tax payer and filing the income tax return. The companies have not only given the loan to the appellant but to other parties also. MLSF is a NBFC duly registered with RBI and is financed by IFCI which is a government undertaking. Roulex is a company incorporated in 1994 and deals in investment in shares and securities.When a government undertaking of the stature IFCI Limited has financed MLSF, I fail to understand how it can be held by the AO as non-existent, non-functional and a shell/paper company. Similarly, in the case of 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 during the course of Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 11 of 27 survey about its whereabouts, there is no case for the AO to hold it as non-existent, non-functional and a shell/paper company. From the above it is clear that the appellant has satisfied all the three conditions required for genuineness of the transaction. The same view has been upheld by Honb’le ITAT in the following cases:- i. Umesh Electricals v/s Asst. CIT(2011) 18 ITJ 635 (Trib.-Agra): (2011) 131 ITD 127 : (2011) 141 TTJ Establishment of identity and credit-worthiness proved- 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 of creditor-Based on inquiry, AO noted that creditor was engaged in providing accommodation 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-Further, mere deposit of money by the creditor on the same day, does not establish that the loan is not genuine-Assessee has proved the source of credit and also the source of source -Addition cannot be made. ii. Aseem Singh v/s Asst. CIT (2012) 19 ITJ 52 (Trib.-Indore) Identity and credit-worthiness proved-Assessee took loan of Rs.1,00,000/- confirmation of creditor was filed-Lower authorities made addition u/s 68 holding that amount was deposited in cash in the bank account of lender immediately prior to date of loan – HELD- Assessee has established the identity- The party has confirmed the transaction-If AO doubted the transaction, AO should have called creditor u/s 131- Addition cannot be made. Thus, appellant has furnished all the required details in order to prove genuineness of the transaction and creditworthiness of the creditor. 4.2.7 Nevertheless, appellant has explained source of source till the last layer. In the case of Roulex, the lender company Roulex has taken loan from Vintex Tools Pvt Ltd. The source of funds for Vintex Tools Pvt Ltd was out of income earned and offered to tax and reserve and surplus in various years. Hon’ble jurisdictional MP High Court in the case of Metachem Industries (2001) 245 ITR 160 (MP) has held that law does not cast any obligation on the assessee to explain the source of source for the amount borrowed. 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 produced before the AO. It is most important to mention here that both the lender companies i.e. ML Securities Finance Private Limited and Roulex Investment and Finance Private Limited were assessed with the same assessing officer under section 153A rws 143(3). Even the directors of these lender companies were covered under Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 12 of 27 the search operation and were assessed by the same AO under section 153A rws 143(3). Hence, the AO had before him all the records and documents of the lender companies including those of the directors for verification of the facts and documents presented in support of his contention. Thus, the AO has erred totally, in overlooking the key facts and documents on record and in continuously stressing merely on the statements of directors recorded behind the back of the appellant. 4.2.8 As far as case laws relied upon by the A.O. are concerned, on perusal it is seen that none of the case laws relied upon by the A.O. are applicable to the facts of this case. The case laws referred by AO are as under:- (a) ACIT vsNakoda 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 assessee from 5 companies as unexplained cash credit - Whether since there were materials to show that companies through which share capital and share premium had been received were just paper companies and were engaged in providing accommodation entries, mere furnishing of particulars or mere fact of payment by account payee cheque or submission of confirmation letter by share applicants would only prove their identity and by itself, not enough to establish 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 - Assessment years 1993-94 to 1996-97 - Assessing Officer rejected explanation of assessees that amounts credited in their respective accounts were gifts from NRI and added said amount to income of assessees as income from undisclosed sources, on ground that so called gifts were not real and genuine - On appeal, Commissioner (Appeals) as well as Tribunal did not accept explanation of assessee and confirmed finding of Assessing Officer - High Court, however, appreciated 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, 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, Hon’ble Apex Court has rejected the plea of assessee for gifts received from NRI which were not explained by the Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 13 of 27 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 of both the case are entirely different to each other. (c) CIT vsDurgaprasad 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, appellant has explained source of source duly supported by corroborative documentary evidences. (d) Sumatidayalvs CIT 214 ITR 801 (SC) Section 68 of the Income-tax Act, 1961 - Cash credits - 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 towards end of year 1969 and had no experience in races but she purchased jackpot tickets on combination worked out by her on basis of advice given by her husband - She had allegedly won 16 jackpots besides trebles - Assessing Officer disbelieved her version and taxed amount as income from undisclosed sources - Settlement Commission by its majority order upheld assessment order holding that it was reasonable to infer, on facts, that assessee did not participate in races but purchased winning tickets after events with unaccounted money - Whether matter 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 affidavit as well as other material on record, an inference could reasonably be 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 sources was justified - Held, yes In the above mentioned case, the assessee has claimed certain amounts in capital account from winnings from horse races. But in realityassessee has purchased lottery tickets out of unaccounted money. However, facts of the case of appellant are entirely different from the above cited case. Moreover, when the primary and direct evidences provide all the explanation, the surrounding 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 credit [Share money] - Assessment years 2002-03 and 2003-04 - Whether creditworthiness or genuineness of transaction depends on whether two parties are related or known to each, manner or mode by which parties approached each other, whether transaction was entered into through written documentation to protect investment, whether investor professes and was an angel investor, quantum of money, creditworthiness of recipient, object and purpose for which payment/investment was made, etc. - Held, yes - Whether certificate of Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 14 of 27 incorporation of company, payment by banking channel, etc. cannot in all cases tantamount to satisfactory discharge of onus - Held, yes - Assessee was a private 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 consecutive years - Other than share application forms, no other agreement between assessee-company and third companies had been placed on record - Persons behind these companies were not produced by assessee - On other hand, assessee-company adopted non-cooperative attitude before Assessing Officer once they came to know about directed enquiry and investigation being made - Whether evasive and transient approach before Assessing Officer was limpid and perspicuous and, therefore, addition made in respect of impugned amount was to be upheld - Held, yes In the above mentioned case, the assessee has adopted non cooperative attitude before the AO and person behind these companies were 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. Therefore, the key persons of the lender companies were directly and readily available 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 view facts of the case, the documentary evidences filed by the appellant and the 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 lender companies, MLSF and Roulex were also covered under search proceedings conducted in the case of Shakti Pumps Group with Roulex by way of survey under section 133A. Directors of MLSF i.e.ShriHarinarayanPatidar and ShriVikasPatidar and for Roulex i.e. ShriRakeshPatidar were also covered under the said search operations. Both the lender companies and the aforesaid directors have been assessed by the same AO under section 143(3) r.w.s. 153A who had passed the impugned assessment orders for the assessee. Thus, the Assessing Officer failed to achieve the objective of such a coordinated 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. The ld. CIT(A) also noted the same. Further, the Assessing Officer did not appreciate the fact that the companies have not only given the loan to the assessee but to other parties also. MLSF is a NBFC duly registered with RBI and is financed by IFCI which is a government undertaking. Roulex is a company incorporated in 1994 and deals in investment in shares and securities. When a government undertaking IFCI Limited has financed MLSF, then how it can be held by the AO as non-existent, non-functional and a shell/paper company. Similarly, in the case of Roulex, during the course of survey at its office premise in Mumbai, Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 15 of 27 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 and a shell/paper company. Further, we find that no opportunity of cross examination of the directors of the lender companies was provided to the assessee before making the impugned addition. We also find that in absence of incriminating material relevant to the addition made and making basis merely on the statements recorded of the two directors of MLSF and one incorrect person in the case of Roulex, in the light of the various courts which have held that in absence of incriminating material relevant, such additions are unjustified. It is important to note that assessee is covered under the search operation by way of panchnama drawn for his residential premises at 354 Saket Nagar, Indore from where nothing incriminating was found during the course of said search relating to the additions made by the AO.We find that both the lender companies had significant revenue from their operations, fact of which was taken note of, by the Ld. CIT(A) while addressing the creditworthiness and genuineness 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 companies are audited and financial statements were placed on record along with their bank statements as filed before us at page nos. 157 &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 account statement of lenders, audited balance sheet, profit and loss statement 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 order. We further find that interest income earned by the lender companies on the 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 accepted 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 hands of the assessee then the lender company cannot be held to be non-existent. Therefore, we find that the assessee went on to explain the source of source to the last leg of the loan transaction by along with furnishing all the corroborative documentary evidences, which are all placed in the paper book. We find that in the case of Roulex, the lender company Roulex has taken loan from Vintex Tools Pvt Ltd. and the source of funds for Vintex Tools Pvt Ltd was out of income earned and offered to tax and reserve and surplus in various years. Hon’ble jurisdictional MP High Court in the case of Metachem Industries (2001) 245 ITR 160 (MP) has held that law does not cast any obligation on the assessee to explain the source of source for the amount borrowed. However, in the present case, the assessee had 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 also produced before the AO. We find that Hon’bleJurisdictional Bench of Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 16 of 27 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 facts we would like to go through the judicial precedents with regard to the issue that where in case no corroborative material is found during the course of search having its nexus with the income surrendered during the course of search whether the addition can be made merely on the basis of statement recorded during the course of search.Though Ld. Counsel for the assessee has referred and relied on plethora of judgments, we find that this Tribunal has dealt with this issue. In the case of ACIT vsShriSudeepMaheshwari, ITA 524/ Ind/ 2013, vide order dated 13.02.2019, this Tribunal observed as under:-............................” Para 217 – “Recently, in Ajit Singh Melhotravs ACIT, IT(SS)A 63/ Ind/ 2019 vide order dated 22.10.2020, this Tribunal after considering various judgments including thoseofHon'ble Gujarat High Court as well as Hon'ble Apex Court and also following its own decision in the case of ACIT vsShriSudeepMaheshwari (supra) observed as under:- ...................” 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 referring to any of the incriminating documents is not binding on the assessee and the same cannot be used against the assessee as an evidence.” Para 221 – “We therefore in the light of settled judicial precedents and respectfully following the decision of this Tribunal in the case of ACIT vsShriSudeepMaheshwari (supra) and Ajit Singh Melhotra V/s ACIT (supra) which were decided after considering the settled judicial precedence by the Hon'ble courts are of the considered view that Ld. AO was not justified in making the additions merely on the basis of statement given during the course of search without referring to any incriminating material in the case of assessee company, and further Ld. CIT(A) was not justified in enhancing this addition” 7. Hon’ble Delhi High Court in the case of Anand Kumar Jain (HUF) – ITA No. 23/2021, order dated 12.02.2021 held as under: “Para 8 – “Next, we find that, the assessment has been 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 summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In 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 pursuant to a search and seizure Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 17 of 27 operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action. This statement certainly has the evidentiary value and relevance 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, empower the AO to frame the block assessment.....” [emphasis supplied] Para 10 – “Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person...............Here, theassessment 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 Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.” 8. We find that the Hon’ble jurisdictional Indore ITAT Bench in the case of Ariba Foods Pvt. Ltd. & Others in ITA No. 736/Ind/2019, appeal by the Department,vide order dated 11.01.2021 decided the identical issue. In that case, we find that the Ld. CIT(A) made identical observations and gave similar findings on the facts duly supported by relevant case laws all of which had been upheld by the Hon’ble Bench in favour of the assessee by dismissing the appeal of the Department. Most of the findings and observations by Ld. CIT(A) and the affirmations thereto by the Hon’ble Bench carry identical verbiage as in the case of the present appeal before us. 9. We also find that in assessee’s own case for AY 2014-15 with identical issue except for difference in the quantum of loan from ML Securities and Finance Pvt Ltd, the Ld. CIT(A)–3, Indore in appeal no. IT- 11810/17-18, order dated 19.03.2020 has relied on the decision of Ld. CIT(A) – 3, Bhopal in the present appeal and deleted the similar addition towards unsecured loan u/s 68. Even before us, the Revenue could not controvert the factual findings recorded by the ld. CIT(A) by bringing any contrary material on record, therefore, n consideration of above facts, submissions, material available on record in light of the aforesaid judicial pronouncements, we do not find any infirmity in the order of the ld. CIT(A). The same is confirmed. Thus, the deletion of addition of Rs. 3,35,00,000 made u/s 68 by the Ld. AO towards unsecured loans is confirmed. Accordingly, the only ground raised in the departmental appeal for the assessment year 2015-16 is dismissed. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 18 of 27 10 So far as the departmental appeal for the assessment year 2014- 15 is concerned, we find that the facts and circumstances of this case are similar to that of 2015-16, therefore, our decision taken for the assessment year 2015-16 shall prevail in the assessment year 2014-15 too having similar set of factsand 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 the same detailed discussion and reasoning thereof as narrated for the assessment year 2015-16 above, we do not find any infirmity in the order of the ld. CIT(A) for the assessment year 2014-15 too. Accordingly, the only ground raised in the departmental 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 2015-16 and IT(SS)A No.103/Ind/2020 for the assessment year 2014-15 are dismissed.” 8. Ld. AR strongly submitted that the assessee/respondent involved in the aforesaid Order of ITAT, Shri Ankit Patidar,was a part of the same search as conducted upon the present-assessee and the issue of loans taken from MLSF &Roulex, considered therein, was on the same set of facts and law and there is no change in the circumstance in present-assessee. Therefore, the decision pronounced by the Hon’ble Coordinate Bench in the case of Ankit Patidar (supra) is equally applicable with the same force to the present case of assessee. 9. We have considered rival contentions of both sides, perused the material held on record including the decision of Coordinate Bench as reproduced above. After a careful consideration, we find that exactly same issue has already been decided on the same facts and same law, in the case of Shri Ankit Patidar. Ld. DR representing the revenue could not rebut the applicability of the decision in present-appeal. Being so, we have no reason to devoid from the findings/decision of Hon’ble Coordinate Bench, therefore, respectfully following the same we too hold that the Ld. CIT(A) has rightly Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 19 of 27 deleted the addition made by the Ld. AO in the present case. Accordingly, we approve the action of Ld. CIT(A). This ground is thus dismissed. 10. With this, ITA No. 28/Ind/2021 is dismissed. IT(SS)A No. 29/Ind/2021 – Revenue’s appeal for AY 2015-16: Ground No. 1: 11. This ground relates to the addition of Rs. 1,65,00,000/- u/s 68 of on account of unsecured loans. 12. The addition has been made on account of loan taken by assesseefrom MLSF. The issue is identical to the issue involved in Ground No. 1 of IT(SS)A No. 28/Ind/2021 for AY 2012-13, adjudicated in foregoing paragraph. Hence the conclusion taken therein shall apply mutadis mutandis and,accordingly, this ground is also dismissed. Ground No. 2: 13. This ground relates to the addition of Rs. 2,71,00,000/- made by the Ld. AO on account of capital gain earnedfrom sale of shares. 14. Apropos to this ground the facts are such that during the assessment year 2012-13, one Mr. Subhash Patidar borrowed a sum of Rs.45,00,000/- from MujhSampada Pvt. Ltd. and invested in the shares of Shakti Pumps India Ltd. Subsequently, Shri Subhash Patidar sold those shares for a consideration of Rs.3,16,00,000/- during A.Y.2015-16 and earned Long Term Capital Gain of Rs.2,71,00,000/- (Rs. 3,16,00,000/- minus Rs. 45,00,000/-) exempted u/s 10(38) of the Act. Shri Subhash Patidar declared this exempted capital gain in his return for A.Y. 2015-16 and the same was accepted by authorities. Subsequently, on the basis of material found during the search, revenue authorities framed a view that the loan of Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 20 of 27 Rs.45,00,000/- taken by Shri Subhash Patidar from MujhSampada Pvt. Ltd. wasinfact a cash-loan of Rs.45,00,000/- given by assessee(routed through MujhSampada Pvt. Ltd.). The assessee too admitted that the loan was given by him and accordingly offered the cash-loan of Rs.45,00,000/- as his undisclosed income in the return filed u/s 153A on 29.11.2017 for AY 2012- 13. This way, the Ld. AO assessed the loan of Rs. 45,00,000/- in the hands of assessee and for that, there is no grievance to assessee. However, the Ld. AO went one step ahead and assessed the long term capital gain of Rs.2,71,00,000/- earned by Shri Subhash Patidar in the hands of assessee in AY 2015-16. Being aggrieved by this addition which had been wrongly and illegally made in the hands of assessee for the income earned by other person (Shri Subash Patidar), the assessee carried the matter in first- appeal. Duringfirst-appeal, the Ld.CIT(A) deleted the addition by observing as under: “12.4 During the course of appellant proceedings the appellant has filed written submission for both assessment years under consideration. Portion relevant to these additional grounds relating to addition of its 2,700,000 in AY. 2015-16 is reproduced as under: “17. In respect of addition made in AY 2015-16 of Rs. 2,71,00,000 as income from other sources, Ld. AD noted a fact that shares were not in the name of the assessee. Ld. AO also noted that Shri Subhash Patidar had invested in the shores of Shakti Pumps in AY 2012-13 by obtaining a loan of Rs. 45,00,000 from MujhSampada Pvt Ltd, which were sold in AY 2015-16 for a sale consideration of Rs. 3,16,00,000. 18. It is already on record that the sum of Rs. 45,00,000 has been subjected to its due tax in the hands of the assessee in AY 2012-13 which has been accepted and assessed in the assessment completed u/s 143(3) rws 153A by the same AO. Ld. AO proceeded to make an arbitrary addition of the difference of Rs. 3,16,00,000 and Rs. 45,00,000 i.e. [3,16,00,000 45,00,000 = 2,71,00,000] as income of the assessee which is unlawful, unreal and without any charging mechanism. 19.Ld. AO failed to ignore the most vital fact in respect of the instant transaction that long term capital gain arising on sale of shares of listed Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 21 of 27 company, viz. Shakti Pumps is exempted from tax u/s 10(38) which in fact has been duly offered and disclosed in the return of income of Shri Subhash Patidar for AY 2015-16. B. Apropos grounds relating to addition of Rs. 2,71,00,000 in AY 2015- 16 as income from other sources in respect of sale of shares by Shri Subhash Patidar: 1. Shri Subhash Patidar made an investment in shares of listed company Shakti Pumps (1) Ltd in AY 2012-13. For the purpose of making investment in shares, part of it was obtained by way of a loan of 45,00,000 from one finance company viz. MujhSampada Pvt. Ltd. 2. In AY 2015-16, i.e. after holding the investments for almost three years he sold the shares on the recognized stock exchange for a total consideration of Rs. 3,16,00,000. 3. The long term capital gain (LTCG) writing on the sale transaction was duly disclosed by Shri Subhash Petidar in his return of income filed on 23.03.2016 and claimed as exempt under section (38). Copy of this return along with computation is placed in the paper book at 568-571. 4. in Para 9.1 and 9.2, Ld. AO noted the fact that shores were not in the name of the assessee. Ld. AO also noted that Shri Subhash Patidar hod invested in the shares of Shakti Pumps in AY 2012-13 by obtaining a loan of Rs. 45,00,000 from MujhSampoda Pvt Ltd, which were sold in the market in AY 2015-16 for a sale consideration of Rs. 316,00,000. 5. Para 5.1 of the impugned order states the fact about the sum of Rs. 45,00,000 which has been subjected to its due tax in the hands of the assessee in AY 2012-13 which has been accepted and assessed in the assessment completed u/s 143(3) rws 153A by the same AO in the very same consolidated order. 6. Ld. AO failed to ignore the most vital fact in respect of the instant transaction that long term capital gain arising on sole of shares of listed company, viz. Shakti Pumps is exempted from tax u/s 10(38) which in fact has been duly offered and disclosed in the return of income of Shri Subhash Patidar for AY 2015-16. 7. Once the amount of Rs. 45,00,000 has suffered its due tax, the same became available for its application. The resultant application further led to earning of income in the hands of Shri Subhash Patidar in the form of long term capital gain which is an exempted income, there is no occasion to bring it to tax within the meaning of charging section 5 of the Act. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 22 of 27 8. Ld. AO proceeded to make an arbitrary addition of the difference of Rs. 3,16,00,000 and Rs. 45,00,000 Le. [3,16,00,000 45,00,000 = 2,71,00,000] as income of the assessee which is unlawful, unreal and without any charging mechanism. This amount is neither a receipt in the hands of the assessee nor accruing to him. Considering the above facts and circumstances of the cose, submissions and documents on record and applicable law, the assessee submits before your Honor to delete the addition of Rs. 2,71,00,000 for A.Y. 2015-16 made by the Ld. AO as income from other sources. 12.5 I have perused the material placed on record, detailed written submissions made by the counsel of the appellant along with oral explanations. It is an undisputed fact that in the answer to question number 5 in the statement of the appellant recorded under section 132(4) during the course of search, amount of Rs. 45,00,000/- was offered to tax. On perusing the facts stated in the answer given by the appellant, it is noted that appellant very categorically stated that he facilitated a loan of Rs. 45,00,000/- from a company named MujhSampada, out of his own undeclared income, for Shri Subhash Patidar. This amount of Rs. 45,00,000/- has been offered to tax in the return filed in response to notice under section 153A of the Act and accepted by the AO in the assessment so completed. 12.6 It is submitted by the appellant that once this amount of Rs. 45,00,000/- has suffered its due tax, the same became available for its subsequent application. The subsequent application further led to earning of income in the hands of Shri Subhash Patidar in the form of long term capital gain on sale of shares of public listed company which is an exempt income under section 10(38). 12.7 It is also stated that this subsequent income has been duly reported in the income tax return of Shri Subhash Patidar, claimed as exempt. Shri Subhash Patidar was not covered under the search proceedings and had filed his regular return of income for the relevant A.Y. 2015-16 on 23.03.2016. 12.8 I find force in the submissions made and explanations given in the course of appellate proceedings. I am convinced and derive force from the decision of Hon'ble Jurisdictional High Court of Madhya Pradesh in the case of Dharamdas Agarwal [1983] 144 ITR 143 (MP) which by following the decision of Hon'ble Supreme Court, has held in favor of the assessee- Held In AnantharamVeerasinghaiah& Co. v. CIT [1980] 123 ITR 457 (SC), it was held that secret profits or undisclosed income of an assessee earned in an earlier assessment year may constitute a fund, even though concealed, from which the assessee may draw subsequently for meeting expenditure or introducing amounts in his account books. Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 23 of 27 In the instant case, the Tribunal had pointed out that the additions made in previous years represented income from business outside the account books which the assessee was carrying on in the name of some benamidar as also income from undisclosed sources. The assessee had also made an application to the ITO wherein he had confessed to having done so and had expressed his willingness to be assessed there for in his own hands. The Tribunal had, in the circumstances, come to the conclusion that the impugned cash credits came out of income earned in the earlier years which had already borne tax. The finding so reached by the Tribunal was a finding of fact and could not be interfered with. Accordingly, the Tribunal was justified. 12.9 Placing reliance on the above decision, once the amount of Rs. 45,00,000/- has suffered its due tax in the hands of the appellant and has been accepted as such in the assessment so completed by the AO, the same was available for its application. It is an undisputed fact as noted in the statement of the appellant that this amount of Rs. 45,00,000/- represents the loan transaction from one company MujhSampada Pvt Ltd to Shri Subhash Patidar which was facilitated by the appellant. It is not a gift or gratuitous payment by the appellant to Shri Subhash Patidar. The loan in the hands of Shri Subhash Patidar was subsequently applied by him for his own benefits and in his own individual rights. The income he generated out of the subsequent application of this fund resulted into income in his own hands which has been duly reported in his own individual return on income. 12.10 The AO has proceeded to make an arbitrary addition of Rs. 2,71,00,000/- calculated on the difference in the sale proceeds of quoted and listed shares held by Shri Subhash Patidar of Rs. 3,16,00,000/- and Rs. 45,00,000/- which is unreal and without the charging section 5 of the Act. This figure of Rs. 2,71,00,000/- is baseless as it is neither a receipt in the hands of the appellant not it has accrued to him. The AO in para 9.2 has accepted the fact that the shares sold by Shri Subhash Patidar are not in the name of the appellant. Despite noting of this fact by the AO, he has proceeded to make an arbitrary addition of a figure which is nothing but a notion as income from other sources. 12.11 Further, there is no reference to any incriminating material by the AO in respect of the addition so made except for the disclosure made by the appellant in his statement recorded during the course of search relating to facilitation of loan amount of Rs. 45,00,000/-. There is nothing incriminating found during the search proceedings of the appellant based on which AO proceeded to make an arbitrary addition of Rs. 2,71,00,000/- by taking the sale consideration duly reported in the return of Shri Subhash Patidar. 12.12 It is a settled law that in search assessments, any undisclosed income, which can ultimately be added, is only to the extent of any unrecorded Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 24 of 27 assets/material found or any incriminating documents found during the course of search for each of the respective years as representing Undisclosed income earned by the appellant. 12.13 Reliance is placed on the following judicial precedents-no addition warranted in absence of incriminating material- a. Hon’ble Jurisdictional Indore Bench of ITAT in the case of Satish Nema–IT(SS)A No.149, 150 and 152/Ind/2016–order pronounced on 07.02.2020 para 19- “We therefore, respectfully following the decision referred above and also considering the latest judgment of Hon’ble High Court of Delhi in the case of Principal CIT &Ors vs. MeetaGutgutia (supra) come to the conclusion that since the assessment orders in question were concluded and non abated assessments no addition can be made in the assessment proceedings u/s 153A of the Act unless there is any incriminating material found during the course of search. We find no inconsistency in the findingsof Ld. CIT(A) quashing the assessment proceedings u/s 153A of theAct since the additions were not made on the basis of any incriminating material found during the course of search........”[emphasis supplied] b. Hon’ble Delhi High Court in the case of Meeta Gutgutia- ITANo.306/2017 to 310/2017 order pronounced on 25.05.2017-para - 62 “.... As far as Karnataka High Court is concerned , it has in CIT vs. IBC knowledge Park P. Ltd. (supra) followed the decision of this court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs is which additions were sought to be made pursuant to search and seizure operation.” Para 71-“ For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of section 153A by the revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs “ c. Hon’ble Jurisdictional Indore Bench of ITAT in the case of Kalani Brothers –IT(SS)A no.71/Ind/2014- order pronounced on 06.11.2015 page 96 “...... There was no abatement of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In a recent decision Hon’ble Delhi High court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessment scan be interfered with by the Assessing officer while making assessment u/s 153A of the Act only on the basis of some incriminating material unearned during the course of search or requisition of documents or undisclosed income or property discovered in the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 25 of 27 course of original assessment. In all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act......... Respectfully following the decision of the Hon’ble Apex Court, we dismissed the ground of appeals of the revenue. Departmental appeals are disposed accordingly. d. Hon’ble Jurisidictional Indore Bench of ITAT in the case of Omprakash Gupta (IT(SS)A No.277/Ind/2017 to 281/Ind/2017 order pronounced on 28.02.2019 PAGe -12 “Therefore in our opinion, all the assessment years from 2008-09 to 2012-13 are concluded assessments and non abated assessments and any addition has to be made in respect of those assessment years, there must be an incriminating material. In the present case, there is no incriminating material and therefore, the additions made by the AO cannot survive. e.Hon’ble Jurisdictional Indore Bench of ITAT in the case of Kamal Kishore Kotwani –IT(SS)A No.-186/Ind/2016 to 190/Ind/2016 –order pronounced on 04.07.2018 f. Hon’ble Jurisdictional Indore Bench of ITAT in the case of Kamta Prasad Dwivedi –IT(SS)ANo.182/Ind/2016 to 185/Ind/2016 order pronounced on 19.09.2018.” 12.14 Considering the facts and material on record, the Assessing Officer is directed to deleted the addition of Rs.2,71,00,000/- in A.Y. 2015-16 made as income from other sources on an arbitrary figure of difference between sale proceeds of Rs.3,16,00,000/- received by Shri Subhash Patidar and additional income of Rs.45,00,000/- offered by the appellant in his assessment in respect of loan facilitated by him to Shri subhash Patidar through one company called MujhSampada Pvt. Ltd. Accordingly, there grounds in appeal are allowed.” 15. Before us, the Ld. DR placed reliance in assessment order, as against which the Ld. AR placed supported the order of first appeal. 16. We have considered the submissions of both sides and perused the orders of lower authorities as well as the documents filed in Paper-Book. After a careful consideration, we find that the revenue authorities have clearly accepted and the assessee has also agreed that it was a loan given by assessee to Shri Subhash Patidar; based thereon the authorities have assessed the loan given by assessee to Shri Subhash Patidar as undisclosed income of assessee in AY 2012-13. To that extent, there was no fallacy in the Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 26 of 27 action of authorities. However, with that loan given by assessee to Shri Subhash Patidar, it is Shri Subash Patidar who made subsequent investment in the shares of Shakti Pumps India Ltd. and earned aforesaid long term capital gain of Rs.2,71,00,000/-, which he declared in his return for AY2015-16. We observe that on one hand the authorities have accepted that the assessee had given “loan” to Shri Subhash Patidar and still on other hand, they have assessed the capital-gain earned by Shri Subhash Patidar in assessee’s hands. This approach of authorities is self-contradictory in as much as once the assessee had given loan, how can assessee be said to have earned capital gain on subsequent investment? What the assessee has at his command, is only to recover the loan and not the income/loss earned by the borrower Shri Subhash Patidar from subsequent investment. Therefore, there can hardly be any dispute on the point that the capital gain was earned by and belonged to Shri Subhash Patidar and not to assessee at all. Being so, we agree to the view taken by Ld. CIT(A) that the capital gain cannot be taxed in the hands of assessee. Hence, we uphold the action of Ld. CIT(A). This ground is, therefore, dismissed. 17. With this, ITA No. 29/Ind/2021 is dismissed. 18. Resultantly, both of the appeals of revenue are dismissed. Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 24/01/2023. Order pronounced in the open court on ....../....../2023. Sd/- Sd/- (MADHUMITA ROY) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 24.01.2023 Patel/Sr. PS Shri Dinesh Kumar Patidar IT(SS)A No.28 & 29/Ind/2021 Assessment years 2012-13 & 2015-16 Page 27 of 27 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore 1. Date of taking dictation 18.1.23 2. Date of typing & draft order placed before the Dictating Member 18.1.23 3. Date on which the approved draft comes to the Sr. P.S./P.S. 18.1.23 4. Date on which the approved draft is placed before other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order