ACIT(Central)-1, Indore V. Global Powernet Pvt. Ltd., Indore

ITSSA 66/Ind/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4616 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Appeal Filed On: 09-03-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained expenditure; Search and seizure; Loose papers; Principle of natural justice; Opportunity of cross examination; Additional evidence; Question of law; Tangible material; Accommodation entries; Retraction; TDS; Bogus
• Section: 131; 68; 132; 69C; 139; 143(3); 133A; 153A; 133(6); 195; 69B; 201; 191; 207; 192; 64; 142(2A); 43; 48; 2(A); 73; 72; 13; 22; 101; 20

Judgement Text

आयकरअपील यअ धकरण,इंदौर यायपीठ,इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER VIRTUAL HEARING IT(SS)A No.158 to 160/Ind/2020 Assessment Years: 2015-16 to 2017-18 M/s. Global Powernet Pvt. Ltd. Mumbai बनाम/ Vs. ACIT(Central)-1 Indore (Appellant) (Respondent ) P.A. No.AAECG0047J IT(SS)A No.66/Ind/2021 Assessment Year: 2016-17 ACIT(Central)-1 Indore बनाम/ Vs. M/s. Global Powernet Pvt. Ltd. Mumbai (Appellant) (Respondent ) P.A. No.AAECG0047J Appellant by S/Shri Anil Kamal Garg & Arpit Gaur, CAs Respondent by Shri P.K. Mitra, CIT-DR Date of Hearing: 27.01.2022 Date of Pronouncement: 26.04.2022 आदेश / O R D E R PER BENCH: The above captioned appeals filed at the instance of the Assessee and cross appeals filed by the Revenue are directed against the Common Order IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 2 of 69 of the Ld. Commissioner of Income Tax (Appeals)-3, Bhopal (in short ‘CIT(A)’), dated 23.09.2020, which is arising out of the Common Assessment Order u/s. 143(3) r.w.s. 153A of the Income-Tax Act, 1961 (in short, ‘the Act’) dated 16.08.2019 passed by the ACIT (Central) -I, Indore. 2.1 Grounds of appeal raised by the Assessee for AY 2015-16 in IT(SS)A No.158/Ind/2020: “1. That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the entire additions aggregating to a sum of Rs.33,89,197/- made by the AO in the appellant’s income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2a). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition to the extent of Rs.26,89,197/- on account of alleged unexplained unsecured loans by invoking the provisions of s.68 of the Act and payment of interest thereon, without confronting the appellant with any information as regard to the creditors allegedly gathered behind the back of the appellant either in the case of the appellant itself or in the cases of some other assessees and as also, without giving any opportunity of cross- examination to the appellant. 2b). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition to the extent of Rs.26,89,197/- without considering the material fact that the appellant had duly discharged its initial onus of proving the identity of the loan creditors, the genuineness of the transactions and creditworthiness of loan creditors beyond all doubts by producing all the necessary documentary evidences. 2c). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the AO’s action of making the impugned addition without adhering to the appellant’s prayer to issue either summons under s.131 or letters under s.133(6) of the Act to the loan creditors. 2d). That, the learned CIT(A) grossly erred in confirming the addition of Rs.1,89,197/- made by the AO in the appellant’s income on account of disallowance of interest on unsecured loans, claimed by the appellant, by invoking the provisions of s. 69C r.w.s. 115BBE of the Act, without considering the material fact that the interest expenditure so claimed by the appellant, were duly recorded in its regular books of account, and the same have been incurred out of the explained sources and therefore, the provisions of s. 69C could not have been invoked in the instant case. 2e). That, the learned CIT(A) grossly erred in confirming the addition of Rs.1,89,197/- on account of disallowance of interest on unsecured loans without considering the material fact that the interest expenditure so claimed by the appellant were genuinely incurred by it on the genuine borrowings of the loans made for the purpose of its business. 3a). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.7,00,000/- made by the AO in the appellant’s income by holding the receipt of unsecured loan amounting to Rs. 7,00,000/- IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 3 of 69 by the appellant from M/s. Sumeet and Sumeet Sales, as non-genuine, by invoking the provisions of s.68 of the Act, without giving the appellant an opportunity to cross-examine Mr. Sumeet Garg, Proprietor of M/s. Sumeet and Sumeet Sales, on whose statement the AO has placed reliance. 3b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition of Rs.7,00,000/- without considering the material fact that the appellant had duly discharged its initial onus of proving the identity of the loan creditor, the genuineness of the transaction and creditworthiness of loan creditor beyond all doubts by producing all the necessary documentary evidences. 4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary.” 2.2 Grounds of appeal raised by the Assessee for AY 2016-17 in IT(SS)A No. 159/Ind/2020: “1. That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the additions to the extent of Rs.1,82,28,499/- made by the AO in the appellant’s income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2a). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition to the extent of Rs.1,82,28,499/- on account of alleged unexplained unsecured loans by invoking the provisions of s.68 of the Act and payment of interest thereon, without confronting the appellant with any information as regard to the creditors allegedly gathered behind the back of the appellant either in the case of the appellant itself or in the cases of some other assessees and as also, without giving any opportunity of cross- examination to the appellant. 2b). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition to the extent of Rs.1,82,28,499/- without considering the material fact that the appellant had duly discharged its initial onus of proving the identity of the loan creditors, the genuineness of the transactions and creditworthiness of loan creditors beyond all doubts by producing all the necessary documentary evidences. 2c). That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the AO’s action of making the impugned addition without adhering to the appellant’s prayer to issue either summons under s.131 or letters under s.133(6) of the Act to the loan creditors. 2d). That, the learned CIT(A) grossly erred in confirming the addition of Rs.12,58,499/- made by the AO in the appellant’s income on account of disallowance of interest on unsecured loans, claimed by the appellant, by invoking the provisions of s. 69C r.w.s. 115BBE of the Act, without considering the material fact that the interest expenditure so claimed by the appellant, were duly recorded in its regular books of account, and the same have been incurred out of the explained sources and therefore, the provisions of s. 69C could not have been invoked in the instant case. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 4 of 69 2e). That, the learned CIT(A) grossly erred in confirming the addition of Rs.12,58,499/- on account of disallowance of interest on unsecured loans without considering the material fact that the interest expenditure so claimed by the appellant were genuinely incurred by it on the genuine borrowings of the loans made for the purpose of its business. 3. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary.” 2.3 Grounds of appeal raised by the Assessee for AY 2017-18 in IT(SS)A No. 160/Ind/2020: “1. That, on the facts and in the circumstances of the case, the action of the learned CIT(A) in confirming the additions to the extent of Rs.16,29,238/- made by the AO in the appellant’s income, is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 2a). That, the learned CIT(A) grossly erred in confirming the addition of Rs.16,29,238/- made by the AO in the appellant’s income on account of disallowance of interest on unsecured loans, claimed by the appellant, by invoking the provisions of s. 69C r.w.s. 115BBE of the Act, without considering the material fact that the interest expenditure so claimed by the appellant, were duly recorded in its regular books of account, and the same have been incurred out of the explained sources and therefore, the provisions of s. 69C could not have been invoked in the instant case. 2b). That, the learned CIT(A) grossly erred in confirming the addition of Rs.16,29,238/- on account of disallowance of interest on unsecured loans without considering the material fact that the interest expenditure so claimed by the appellant were genuinely incurred by it on the genuine borrowings of the loans made for the purpose of its business. 3. That, the learned CIT(A) grossly erred, in law, in confirming the action of the AO in invoking the provisions of section 115BBE of the Act in respect of disallowance of interest made without considering the material fact that in the appellant’s case, the nature of addition to the income was not falling in any of the deeming provisions of the Act and therefore, the provisions of section 115BBE of the Act could not have been invoked in the appellant’s case. 4. That, the appellant further craves leave to add, alter and/or amend any of the foregoing grounds of appeal as and when considered necessary.” 2.4 Grounds of appeal raised by the Revenue for AY 2016-17 in IT(SS)A No. 66/Ind/2021: “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. 1,82,28,499/- made by the Assessing Officer on account of unexplained cash credits u/s 68 of the Income Tax Act,1961. 2. On the facts and in circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs.8.5 Cr. made by the Assessing Officer on IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 5 of 69 account of amount received from Inox Wind Ltd. as unexplained cash credits u/s 68 of the Income Tax Act, 1961.” 3.1 The brief facts of the case as culled out from the records are that theassessee is a private limited company said to be mainly engaged in the business of electricity generation and transmission. The assessee furnished its original returns of income for the various years u/s. 139 of the I.T. Act, 1961. Search and seizure operations u/s. 132 were carried out at various premises of Global group and the assessee on 12/07/2016. Consequently, notices u/s. 153A were issued to the assessee for A.Y. 2015-16& A.Y. 2016- 17 on 09/10/2017. In response to the above notices, the assessee filed returns of income for A.Y. 2015-16 & A.Y. 2016-17 on 15/11/2018. The assessee furnished its regular return of income for A.Y. 2017-18 on 30/03/2018. The details of returns of income for A.Y. 2015-16, A.Y. 2016- 17&A.Y. 2017-18 are as under: A.Y. Date of filing of Return u/s. 139 Returned income (in Rs.) Date of filing of Return in response to the notice u/s. 153A Income declared in Return u/s. 153A (In Rs.) Additional Income offered, if any (In Rs.) 2015-16 30/10/2015 Nil 15/11/2018 Nil Nil 2016-17 31/03/2017 Nil 15/11/2018 Nil Nil 2017-18 30/03/2018 2,68,050 NA NA Nil 3.2 In the case of the assessee, a reference was made for special audit u/s. 142(2A) of the Act and accordingly, the special auditors submitted their report on 20.06.2019. The report of the special auditors, as produced by the assessee, was duly perused and considered by the AO and as also, by the CIT(A). A copy of the Special Auditors Report was also filed by the assessee before this Bench which has been perused and placed on record. 3.3 Finally, the AO made additions of Rs.26,89,197/- in A.Y. 2015-16, Rs.2,62,42,926/- in A.Y. 2016-17 and Rs.16,51,738/- in A.Y. 2017-18 on account of unexplained cash credits u/s. 68and unexplained expenditure u/s. 69C respectively in context of some of the unsecured loans obtained by the assessee and interest expenses thereon (Para 8); addition of Rs.7,00,000/- in A.Y. 2015-16 on account of receipt made by the assessee from M/s. Sumeet & Sumeet Sales treated as unexplained cash credit u/s. 68 (para 9); addition of Rs.8,50,00,000/- in A.Y. 2016-17 on account of unexplained cash credit u/s. 68 in respect of unsecured loan obtained by the assessee from M/s. Inox Wind Ltd. (para 10). 4. Aggrieved assessee preferred separate appeals for all the assessment years under consideration before Ld. CIT(A). Before the ld. CIT(A), the assessee filed additional evidences for A.Y. 2015-16& AY 2016-17 in respect of the sole issue of unexplained cash credits u/s. 68 in the form of IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 6 of 69 unsecured loans. The additional evidences furnished by the assessee were admitted by the ld. CIT(A) and the additional evidences were forwarded to the AO for his comments. The AO submitted the common remand report vide his letter dated 16/09/2020, which is placed at page no. 203 to 214 of the Paper Book of the assessee for A.Y. 2015-16. A copy of the Remand Report was provided to the assessee for making its counter comments and accordingly, the assessee vide its letter dated 22/09/2020, as placed at page no. 215 to 222 of the assessee’s Paper Book for A.Y. 2015-16, made its counter comments before the ld. CIT(A). The ld. CIT(A), after taking into consideration the AOs findings, report of the special auditors, assessee’s oral and written submissions made in the course of the hearing, remand report submitted by the AO and comments thereon by the assessee as well as the facts of the case, vide his common Order dated 23.09.2020 adjudicated the appeals of the assessee thereby giving certain relief and also confirming certain additions for the assessment years under consideration. 5. Now, aggrieved by the additions confirmed by the ld. CIT(A), the assessee is in appeal before this Tribunal for the assessment years under consideration. Against the relief granted by the ld. CIT(A) to the assessee, the revenue has preferred an appeal before us for A.Y. 2016-17. 6. As all the appeals relate to the same assessee and the issues raised are common, they were heard together and are being disposed off by this common order for sake of convenience and brevity. 7. Ground No. 1 of the Assessee common for all the assessment years under consideration 7.1 Through this ground of appeal, the assessee has challenged the additions confirmed by the ld. CIT(A). In the written submissions, the assessee itself has submitted that in the Appeal Memos, it has taken separate grounds of appeal in respect of each and every addition confirmed by the ld. CIT(A) and therefore, no separate adjudication on this Ground is warranted. Accordingly, this ground of appeal for A.Y. 2015-16, A.Y. 2016- 17& A.Y. 2017-18 is hereby Dismissed. 8. Ground Nos. 2(a) to 2(e) of the Assessee for A.Y. 2015-16& A.Y. 2016- 17;Ground Nos. 2(a) &2(b) of the Assessee for A.Y. 2017-18; and Ground No. 1 of the Revenue for A.Y. 2016-17 8.1 Through the ground nos. 2(a) to 2(e) for A.Y. 2015-16& A.Y. 2016-17 and ground nos. 2(a) & 2(b) for A.Y. 2017-18, the assessee has challenged the action of the ld. CIT(A) in upholding the additions to the tune of Rs.25,00,000/- (A.Y. 2015-16) & Rs.1,69,70,000/- (A.Y. 2016-17), made by the AO on account of unsecured loans obtained by the assessee company from various entities and additions to the extent of Rs.1,89,197/- (A.Y. 2015-16), Rs.12,58,499/- (A.Y. 2016-17) & Rs.16,29,238/- (A.Y. 2017-18) on account of interest payments thereon. Further, through Ground No. 1 for IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 7 of 69 A.Y. 2016-17, the Revenue has challenged the action of the ld. CIT(A) in deleting the additions to the extent of Rs.75,00,000/-, made by the AO on account of unsecured loans and additions to the extent of Rs.5,14,427/- on account of interest payments thereon. Since the issues in respect of the aforesaid grounds are inter-connected to each other, these grounds of appeals of the assessee and the revenue are adjudicated together. 8.2 Briefly stated facts of the issue, as culled out from the records, are that during the search and post search proceedings, it was found by the AO that the assessee had accepted unsecured loans from certain dubious/ shell entities/ companies. According to the AO, some of such entities/ companies were found to be managed/ controlled directly/ indirectly by a well-known entry provider of Indore namely Shri Sharad Darak and some of the loan creditor companies were self-managed shell companies of the group itself which were used for routing of unaccounted funds, while some of these loans were shown as accepted from employees/ others. Accordingly, the AO issued show-cause notices dated 31/10/2018 and 19/07/2019 to the assessee before as well as after the receipt of Special Audit Report.In reply, the assessee, vide its letters dated 07.12.2018 and 30.07.2019, furnished its detailed explanation along with documentary evidences in support of establishing the identity & creditworthiness of loan creditors and genuineness of loan transactions. The AO, while framing the assessment order, averted that the assessee had accepted unsecured loans from shell/ paper companies and employees. Finally, the AO made an addition of Rs.26,89,197/- in A.Y. 2015-16, Rs.2,62,42,926/- in A.Y. 2016-17 and Rs.16,51,738/- in A.Y. 2017-18 by holding the unsecured loans obtained by the assessee and interest paid thereon as unexplained cash credits u/s. 68 and unexplained expenditure u/s. 69C respectively. 8.3 Aggrieved with the Order of Assessment, the assessee preferred separate appeals for the subject assessment years before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. Before the ld. CIT(A), the assessee also furnished certain additional evidences, under Rule 46A, to substantiate the identity & creditworthiness of the lenders and genuineness of loan transactions which were forwarded to the Assessing Officer for comments. The copy of the Remand Report of the AO was provided by the ld. CIT(A) to the assessee and in response, the assessee filed its rejoinder. The Ld. CIT(A), after considering the remand report of the AO as well as the rejoinder of the assessee, deleted the substantial additions made by the AO in respect of the unsecured loans obtained from certain entities/ persons and the ld. CIT(A) also confirmed certain additions made in respect of the certain lender entities. The ld. CIT(A) has given the relevant findings in respect of the unsecured loans obtained from various entities at paras (4.3.4) & (4.3.5) of his order. The relevant findings of the ld. CIT(A) are reproduced as under: IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 8 of 69 “4.3.4 I have considered the facts of the case, the assessment order, the written as well as oral submissions of the appellant, the Special Audit Report of the Special Auditors, the remand report of the AO and the counter comments of the appellant. My findings in respect of each of the loan creditors qua which the additions u/s. 68 and u/s. 69C have been made by the AO, are given as under: A. M/s. Brain Masters Classes Pvt. Ltd. (‘BMCPL’) [Rs.15,00,000/-] [A.Y.2016-17] [Interest Rs.90,000/- for A.Y. 2016-17 and Rs. 22,500/- for A.Y. 2017-18] I find that for the assessment year under consideration, the AO has made addition u/s. 68 of the Act, in respect of the loan creditor without giving any specific finding. I find that the subject addition in respect of the unsecured loan from BMCPL has got made by the AO by presuming the same to be a company controlled by Mr. Sharad Darak. I find that during the course of the appellate proceedings, the appellant has stated that the lender company was not belonging or in any way having any direct or indirect connection with Mr. Sharad Darak. I find that the above named loan creditor is a private limited company, duly incorporated by the Registrar of Companies, Gujarat, under the Companies Act, 1956, with Company Identification No. U80903MP2011PTC025907on 03/05/2011. From the abstract of the master data of the company as abstracted from the official website of the Ministry of Corporate Affairs, Government of India. I find that in the ROC records, such company has been shown as an Active company, having its registered office at ‘Victory Chamber, 4A Ratlam Kothi, Geeta Bhavan Square, Indore (M.P.)’. Further, I found that in such company, there are two directors namely Shri Parag Kumar Guptaand Pankaj Gupta, who have been shown to be holding such position since 03/05/2011. I find that during the course of the assessment proceedings, the appellant has furnished numerous documentary evidences for establishing the genuineness of the loan transactions carried out by the appellant with such company. I find that the appellant has furnished a copy of certificate of incorporation of the BMCPL, its copy of Memorandum and Articles of Association, copy of the master data downloaded from the official website of the MCA, copy of letter of confirmation duly signed by one of the director of the company, a copy of the relevant abstract of the bank account of the appellant and a copy of the audited financial statements of BMCPL. Thus, in my considered view, by furnishing all the necessary documents, such as the certificate of incorporation of the BMCPL, its copy of Memorandum and Articles of Association, copy of the master data downloaded from the official website of the MCA, the appellant could be able to establish the statutory as well as the physical identity and existence of the BMCPL. I further find that from the copy of letter of confirmation duly signed by one of the directors of the company, copy of the relevant abstract of the bank account of the appellant and further, considering that all the loan transactions have been carried out through banking channels which were duly found in the bank statements of the appellant as well as the lender company, in my view, the appellant could be able to establish the genuineness of the loan transactions claimed by it with BMCPL. Further, I find that by furnishing the copy of the audited financial statements of BMCPL for the year ended 31/03/2016, showing the sufficient net owned funds of BMCPL at Rs.4,73,16,557/-, in my view, the appellant IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 9 of 69 company could be able to discharge its onus of even proving the creditworthiness of the BMCPL. I also find that the BMCPL is one of the most renowned coaching classes of Central India. Further, on a perusal of the audited statement of Profit and Loss of BMCPL for the F.Y. 2015-16, I find that the BMCPL has shown a substantial amount of revenue from operations of coaching at Rs. 11.33 crores, which also proves the existence and the genuineness of the loan creditor company. Thus, I find that in the instant case, the appellant has duly established the sources of cash credits. I find that during the course of the search, no incriminating material in respect of the BMCPL was found or seized. I further find that various case laws relied upon by the AO are not applicable to the appellant’s case. Thus, relying upon the decision of the Hon’ble Jurisdictional High Court in the case of Metachem Industries (2000) 245 ITR 0160 (MP), in my considered view, no adverse view in respect of the loan shown to have been received by the appellant from BMCPL could have been drawn. Accordingly, in my considered view, the addition of Rs.15,00,000/- made by the AO in the name of BMCPL for A.Y. 2016-17 is not sustainable. Further, the additions on account of interest of Rs.90,000/- for A.Y. 2016-17 and Rs. 22,500/- for A.Y. 2017-18, paid by the appellant towards such loan are also not sustainable. B. M/s. Rishabh International [loan Rs. 60,00,000/-] [A.Y.2016-17] [Interest Rs.4,24,427/- for A.Y. 2016-17] I find that the above named loan creditor is a proprietorship concern of Shri Avinash Kumar Jain. I find that during the course of the assessment proceedings, the appellant had duly furnished the copy of the Pan Card of the loan creditor, the copy of the loan confirmation letter, copy of the relevant bank statements of the appellant, copy of the relevant bank statement of M/s. Rishabh International. The copies of all such documents have been furnished by the appellant before me. From the copy of the PAN Card, I find that Shri Avinash Kumar Jain, Prop. of M/s. Rishabh Enterprises, aged 24 years, is regularly assessed to Income-Tax under PAN: BAUPJ7965A. The appellant has also furnished a signed copy of the loan confirmation letter of the loan creditor before me. Further, from the bank statement of M/s. Rishabh Enterprises, as placed at page no. 324 & 325 of the Paper Book for A.Y. 2016- 17, I find that in such bank statement, remittance of funds with the clear mention of the name of the appellant, on as many as two occasions, for a sum of Rs.40,00,000/- and Rs.20,00,000/-respectively, on 17/06/2015 and 18/06/2015 are getting reflected. From such bank statement, I also noted that before issuance of the cheques, M/s. Rishabh International had received remittance from various entities through bank channels only and in none of the cases, cash deposits were made before issuance of the loan. Furthermore, on perusal of the confirmation letter and bank statements, I find that the entire loan of Rs. 60,00,000/- along with the interest payments net of TDS, has been repaid by the appellant to the aforesaid M/s. Rishabh International in subsequent years. Thus, in my considered view, by furnishing all the aforesaid documents, the appellant could be able to discharge its onus of establishing the identity of the loan creditor, genuineness of the transaction and the creditworthiness of the loan creditor beyond all doubts. I further find that various case laws relied upon by the AO are not applicable to the appellant’s case. I also find that the AO has not found any specific IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 10 of 69 discrepancy or defect in the various documentary evidences furnished by the appellant. I also find that unlike a charge against Sharad Darak’s controlled companies, there is no charge against the above named loan creditor that he was also an entry provider. I find that in respect of the above loan, the appellant could be able to discharge its burden of proving the identity of the creditor, genuineness of the transactions and as also, the creditworthiness of the loan creditor. Thus, relying upon the decision of the Hon’ble Jurisdictional High Court in the case of Metachem Industries (2000) 245 ITR 0160 (MP), in my considered view, no adverse view in respect of the loan amounting to Rs. 60,00,000/- for A.Y. 2016-17 shown to have been received by the appellant from M/s. Rishabh International could have been drawn. Further, the addition on account of interest of Rs.4,24,427/- for A.Y. 2016-17, paid by the appellant towards such loan is also not sustainable and is directed to be deleted. C] (i) M/s. Jay Jyoti India Pvt. Ltd.[loan - Rs.25,00,000/- for A.Y. 2015-16] [Interest – Rs. 1,89,197/- for A.Y. 2015-16] ; (ii) M/s. Rajwadi Retail Trade Systems Pvt. Ltd.[loan - Rs.1,60,70,000/- in A.Y. 2016-17] [Interest – Rs.11,90,370/- in A.Y. 2016-17 and Rs.15,42,720/- in A.Y. 2017-18]; (iii) M/s. East West Finvest India Ltd.[loan - Rs.9,00,000/- in A.Y. 2016-17] [Interest – Rs.68,129/- in A.Y. 2016-17 & Rs.86,518/- in A.Y. 2017-18] I find that as per the details given by the AO, at para (8.13) of the impugned Order, all the aforesaid companies are controlled/ managed companies and associated concerns of Shri Sharad Darak, a well known accommodation entry provider. Since the findings in respect of all the aforesaid companies have been commonly given by the AO at para (8.3) to para (8.26) of the impugned Order, the cash credits in respect of all such cash creditor companies are being dealt with together. I find that in respect of all these companies, the written as well as oral submissions made by the appellant before me are also on the similar lines. I find that the main grounds of contention of the appellant are that (i) during the course of the assessment proceedings, it had furnished all the necessary documents to establish the identity of the loan creditors, the genuineness of the loan transactions and the creditworthiness of the loan creditors, as contemplated under the provisions of s.68 of the Act; (ii) after having discharged its initial onus of proving during the course of the assessment proceedings, the appellant had specifically requested the AO to issue the summons u/s. 131 / notices u/s. 133(6) to the loan creditors but despite making such specific request, the AO did not do the same and made the addition; (iii) the entire additions have been made by the AO only on the basis of findings given by the Special Auditors which were not factually correct without applying his own mind; (iv) the AO except relying upon some information gathered behind the back of the appellant by some other authorities in some other proceedings did not bring on record any adverse material against the appellant; (v) during the course of the assessment proceedings, no incriminating material or document was found wherefrom it could have been inferred that the unsecured loan transactions recorded in the regular books of account of the appellant were not genuine; (vi) in respect of some of the lender companies, allegedly controlled by Shri Sharad Darak, the Income Tax Department has duly framed assessments u/s. 143(3) of the Act IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 11 of 69 which fact establishes the actual existence and identity of such companies; (vii) in respect of some of the lender companies allegedly belonging to Shri Sharad Darak, even during the course of the income tax appeals, before the Hon’ble Income Tax Appellate Tribunal, genuineness of the transactions have been approved by the Hon’ble ITAT; (viii) the AO has relied upon only hearsays and some information without confronting the same to the appellant and without giving the opportunity of any cross examination; (ix) the transactions carried out by the appellant were of the nature of loan and not of the nature of share capital or share premium and therefore, it was not required to prove the source of the source as contemplated under the proviso to section 68 of the Act; and (x) since the interest expenditure were fully recorded in the books, the provisions of section 69C could not have been invoked. I have carefully considered the findings of the AO, written as well as oral submissions made by the appellant, Special Audit Report, remand report of the AO and the rejoinder of the appellant thereon. I find that during the course of the appellate proceedings, the appellant has furnished numerous documents for establishing its claim regarding the identity of the loan creditors, genuineness of the transactions and creditworthiness of the loan creditors. I find that the appellant has furnished the documents relating to each of the above named lender companies such as copies of certificates of incorporation, memorandum & articles of association, copies of income-tax returns, copies of master data downloaded from website of MCA, copies of loan confirmation letters duly given by the lender companies, copies of relevant bank statements of the lender companies, copies of the relevant bank statements of the appellant, copies of the audited financial statements of the lender companies, copies of the Affidavits duly sworn by Shri Sharad Darak confirming the loan transactions and in some cases, copies of the assessment orders passed u/s. 143(3) of the Act. However, in my considered opinion, the furnishing of all these documents by themselves cannot establish the genuineness of the loan transactions which goes to the root of section 68 of the Act. I find that from the various enquiries conducted by the Investigation Wing and various income-tax authorities, now it has got established beyond all doubts that Sharad Darak is a defamous entry provider of Indore. I find that in many of the cases, the genuineness of the loans provided by the companies of Shri Sharad Darak have not been accepted. Once it is proved that the assessee has taken any loan from any entry provider company then, furnishing of any documentary evidences cannot establish the loan transactions as contemplated u/s 68 of the Act. I find that the AO has rightly placed his reliance on the various judicial pronouncements mentioned in the body of the assessment order. In view of above, I find no infirmity in the action of the AO in making the additions u/s. 68 as well as u/s. 69C in respect of the unsecured loans shown to have been taken by the appellant from the above named three companies. Accordingly, the additions of Rs.25,00,000/- for A.Y. 2015-16 and Rs.1,69,70,000/- for A.Y. 2016-17, made by the AO u/s. 68 of the Act on account of unsecured loans taken from aforesaid three companies are confirmed. Correspondingly, the additions of Rs.1,89,197/- for A.Y. 2015- 16, Rs.12,58,499/- for A.Y. 2016-17, Rs.16,29,238/- for A.Y. 2017-18, made by the AO u/s. 69C of the Act on account of disallowance of interest claimed to have been paid by the appellant on aforesaid loans from three companies are also hereby confirmed. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 12 of 69 4.4.3.5 Accordingly, out of the various additions made by the AO vide para (8.28) of the Order, for A.Y. 2015-16, A.Y. 2016-17 and A.Y. 2017-18, on account of unsecured loans u/s. 68 and interest expenditure u/s. 69C, respectively at Rs. 26,89,197/- in A.Y. 2015-16, Rs. 2,62,42,926/- in A.Y. 2016-17 and Rs.16,51,738/- in A.Y. 2017-18, the appellant would get relief of Rs. 80,14,427/- for A.Y. 2016-17 and Rs.22,500/- for A.Y. 2017-18. Accordingly, such additions are hereby Deleted. Consequently, the additions to the extent of Rs.26,89,197/- for A.Y. 2015-16, Rs. 1,82,28,499/- for A.Y. 2016-17, Rs. 16,29,238/- for A.Y. 2017-18 are hereby Confirmed. Therefore, appeal on these grounds is Partly Allowed.” 8.4 Aggrieved with the Order of the ld. CIT(A), both the assessee as well as the Revenue are in appeal before us. 8.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO as well as of the ld. CIT(A) on this issue. 8.6 Per Contra, Learned Counsel for the assessee has filed written submission before us. The relevant portion of such written submission is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Books: 1.01 During the course of the assessment proceedings, the learned AO, vide his show-cause notice dated 19-07-2019 [kindly refer Page No. 105 to 108 of the Paper Book] had required the assessee to furnish its explanation on the subject issue. In response to the aforesaid query, the assessee vide its letter dated 30-07-2019 [kindly refer Page No. 109 to 141 of the Paper Book], made its very elaborative explanation on the subject issue along with ample of documentary evidences, filed by way of furnishing a separate Volume marked as ‘Volume –UL’. By tendering the explanations which were duly supported by all the necessary documentary evidences, the assessee had discharged its initial onus of proving the identity of the loan creditors, the genuineness of the transactions and creditworthiness of loan creditors beyond all doubts and in accordance with the provisions of s.68 of the Act. Consequently, no addition in the hands of the assessee was warranted under s. 68 of the Act, in respect of the subject loan amounts. 1.02 Despite making the explanation as aforesaid, the learned AO made the impugned addition of Rs.26,89,197/- merely on his whims, surmises, presumptions, assumptions and extraneous considerations and also without bringing any positive material on record to substantiate his allegation that the assessee was engaged in routing its own unaccounted funds into its books of account in form of cash credits, by making its employees and other persons/ concerns as conduit for the same. 1.03 The learned AO, at page no. 21 of the impugned assessment order, has given the break-up of the various additions in respect of the unsecured loans IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 13 of 69 and as also the interest expenditure thereupon. For the sake of convenience, the break-up so given is summarized, in a tabular form, as under: A.Y. 2015-16 S. No. Name of the loan creditor Loan Amount U/s. 68 Interest Amount u/s. 69C Remakrs 1. M/s. Jay Jyoti India Pvt. Ltd. 25,00,000 1,89,197 Addition confirmed by CIT(A) TOTAL 25,00,000 1,89,197 A.Y. 2016-17 A.Y. 2017-18 2.00 During the course of assessment proceedings, the assessee, vide its letter dated 30-07-2019 [kindly refer Page No 109 to 141 of our paper book], had furnished the necessary documentary evidences to establish the identity S. No. Name of the loan creditor Loan Amount U/s. 68 Interest Amount u/s. 69C Remarks 1. M/s. Brain Masters Classes Pvt. Ltd. 15,00,000 90,000 Addition Deleted by the CIT(A) 2. M/s. East West Finvest India Ltd. 9,00,000 68,129 Addition Confrimed by the CIT(A) 3. M/s. Rajwadi Retails Trade Systems Pvt. Ltd. 1,60,70,000 11,90,370 Addition Confirmed by the CIT(A) 4. M/s. Rishabh International Pvt. Ltd. 60,00,000 4,24,427 Addition Deleted by the CIT(A) TOTAL 2,44,70,000 17,72,926 S. No. Name of the loan creditor Loan Amount U/s. 68 Interest Amount u/s. 69C Remarks 1. M/s. Brain Masters Classes Pvt. Ltd. - 22,500 Addition Deleted by the CIT(A) 2. M/s. East West Finvest India Ltd. - 86,518 Addition Confrimed by the CIT(A) 3. M/s. Rajwadi Retails Trade Systems Pvt. Ltd. - 15,42,720 Addition Confirmed by the CIT(A) TOTAL - 16,51,738 IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 14 of 69 of the loan creditor, the genuineness of the loan transactions and the creditworthiness of the loan creditor, as contemplated under the provisions of s.68 of the Act. 3.00 It is submitted that the assessee by furnishing the necessary documents had duly discharged its initial onus of proving the identity of the loan creditor, the genuineness of the transactions and creditworthiness of loan creditor beyond all doubts and in accordance with the provisions of s.68 of the Act. It is further submitted that during the course of assessment proceedings the assessee, vide para (A-16(ii)) of its letter dated 20-11-2018 [kindly refer PB Page No. 88], again vide para (2.02) of its letter dated 07-12-2018 [kindly refer PB Page No. 97] and vide para (9.00) of letter dated 30-07-2019[kindly refer PB Page No. 122], had specifically requested the learned AO that if he wish to make further verifcation or investigation in the matter, then a summons under s.131 or letters under s.133(6) of the Act to the loan creditors may be issued in order to further substantiate the claim of the assessee. Not only this, the assessee had further requested that the assessee was willing to produce Mr. Sharad Darak, the alleged entry operator, before the ld. AO, on any date as might be designated by the ld. AO on this behalf. However, despite making such specific request, the learned AO did not carry out any enquiry by himself and proceeded further in regarding the impugned unsecured loan as unexplained credits of the assessee. Such a failure on the part of the learned AO was not permissible and is bad-in-law. For such proposition, reliance is placed on the following judicial pronouncements : i) CIT vs. Shri Sai Vihar (2016) 28 ITJ 158 (Trib. - Raipur) ii) CIT V Ramesh Chander Shukla 10 ITJ 286 (Madhya Pradesh HC) iii) Manna Lal Murlidhar79 ITR 540 iv) Radhe Sham Jagdish Prashad 117 ITR 186 v) G. Shubha Devi vs. ITO (2019) 307 CTR 0536 (Kar.) vi) Anil Kumar Midha (HU1F) vs. ITO (2006) 100 TTJ 0644 vii) ITO vs. Sanjay Kumar Goel (2007) 108 TTJ 0823 (Del.) viii) Mass Con (India) Pvt. Ltd. vs. ITO (2013) 37 CCH 0143 (Del.) ix) CIT vs. Rajeev Shukla (2007) 207 CTR 0253 (MP HC) 4.00 It is submitted that once the initial onus has been discharged by the assessee, the burden to prove the credits as unexplained shifts from the shoulder of the assessee to the taxing authorities. It is submitted that, in the instant case, the learned AO has failed to discharge his onus to substantiate his assertion with the aid of corroborative evidences and thus, there was absolutely no justification for the learned AO to make the impugned addition merely on the basis of some hearsay allegations against the loan creditors and information gathered behind the back of the assessee. 5.00 The ld. AO, for making the impugned addition, relied on the reports submitted by the Special Auditors u/s. 142(2A) of the Act. However, during the course of assessment proceedings, the assessee had got its preliminary objection registered against the observation made by the ld. AO as well as by the Special Auditors appointed under s.142(2A) of the Act, that the scope of the Special Auditors had to be restricted to the examination, verification and IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 15 of 69 audit of books of account and other documents, pertaining to the assessee or as found and seized during the course of the search. The scope would not include an investigation into the affairs of the auditee or for that matter, to occupy the judgment seat of an Assessing Officer. The scheme of the Special Audit nowhere contemplates satisfaction of the Special Auditors as regard to the genuineness of the loan transactions which have duly been recorded in the books of account. The Assessing Officer who is competent to examine the ingredients of the cash credits such as identity of the loan creditor, genuineness of the transactions and creditworthiness of the loan creditor as contemplated under the provisions of s.68 of the Act and it is his satisfaction only, which matters for invocation of provisions of s.68 of the Act. It is submitted that in the instant case, the ld. AO is heavily harping on the comments given by the Special Auditors in their Report without even going through the various documentary evidences already placed by the assessee company on his record for establishing the genuineness of the loan transactions as claimed by the assessee. 5.01 It has been averted by the ld. AO in para (8) of the impugned Order that during search and post search proceedings, it was found that the assessee has accepted unsecured loans from certain dubious/ shell entities/ companies. Some of such entities/ companies were found to be managed/ controlled by Shri Sharad Darak, a well known accommodation entry provider. It is submitted that the assessee or any of its functionaries do not know any entry provider and have never made any transaction with any entry provider. 5.02 The ld. Assessing Officer, at paras (8.12) to (8.20) of the impugned Assessment Order, has given a finding related to entities/ companies allegedly managed/ controlled by Shri Sharad Darak. In the aforesaid paras, the ld. AO has alleged that Shri Sharad Darak through his companies had been involved in providing the accommodation entries to the assessee and to its group companies. It is submitted that the assessee had genuinely borrowed unsecured loans from certain companies and had never got indulged in routing of its unaccounted money, as alleged by the learned AO. It is submitted that during the course of the assessment proceedings, the assessee had duly furnished all the necessary documents for establishing the identity and creditworthiness of the lender companies and as also, the genuineness of the loan transactions carried out by it during the periods under assessment. 5.03 In nutshell, during the course of the assessment proceedings, the assessee had duly discharged its onus of proving the credit entries found recorded in its books of account, as contemplated under the provisions of s.68 of the Act, by furnishing all the necessary documentary evidences. Further, the learned AO could not find any specific discrepancy or defect in the documentary evidences so furnished by the assessee. Instead, the learned AO, merely on his own surmises and conjectures, without bringing any cogent material on record, disbelieved the loan transactions genuinely carried out by the assessee with various companies and made the addition under s.68 of the Act which was not so warranted. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 16 of 69 6.00 Without prejudice to the above, now, on the merits of the case, we will be dealing with each and every ingredients of s. 68 of the Income-Tax Act, 1961 in respect of the subject loan creditors in the ensuing paras. 6.01 LOAN FROM M/s. JAY JYOTI INDIA PVT. LTD. [‘JJIPL’]– Rs.25,00,000/- & INTEREST PAID- Rs. 1,89,197/- [A.Y. 2015-16] – ASSESSEE’S APPEAL [Presently Known as M/s. Jayganga Exim India Pvt. Ltd.] [AO’s Findings at para (8.28) at page no. 21] [CIT(A)’s Findings at para (4.3.4) (C) at page no. 52 to 56] (A) IDENTITY: (i) The JJIPL, originally incorporated with the name of “Jay Jyoti India Pvt. Ltd.”, is a private limited company, duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Maharashtra, on 06-12-1999 vide Registration No.11- 122929 of 1999. Subsequent to the loan transactions carried out by the assessee company, the JJIPL has got its name changed from ‘Jay Jyoti India Pvt. Ltd.’ to ‘Jayganga Exim India Pvt. Ltd.’ having Unique Corporate Identification Number i.e. CIN as U51900WB1999PTC231394. A copy of certificate of incorporation of the company is placed at Page No. 142 of the Paper Book for A.Y. 2015-16. (ii) The JJIPL was incorporated with the objects of carrying out the business of trading in various commodities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 143 to 169 of the Paper Book for A.Y. 2015-16. (iii) The registered office of the JJIPL, at the relevant time, was situated at 26, Col Biswas Road, Ground Floor, West Side Flat, Kolkata (W.B.). (iv) The JJIPL, since its inception, is regularly assessed to income-tax under PAN-AAACJ8822E. The JJIPL had also furnished its return of income for the relevant assessment year. In evidence of such fact, a copy of acknowledgement of return of JJIPL, for A.Y. 2015-16, is placed at Page No. 170 of the Paper Book for A.Y. 2015-16. (v) The JJIPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In evidence of such fact, a copy of the Master Data downloaded from the official website of the MCA is placed at Page No. 171 of the Paper Book for A.Y. 2015- 16. (vi) The JJIPL has been maintaining its bank accounts with various banks. During the relevant previous year, the JJIPL was maintaining its current account with Indusind Bank at its Branch at Indore vide account No. 200001124518. (B) GENUINENESS OF THE TRANSACTIONS: IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 17 of 69 (i) As regard the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with JJIPL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the JJIPL to the assessee, is placed at Page No. 172 of the Paper Book for A.Y. 2015-16. (ii) The assessee’s claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from JJIPL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 173 of the Paper Book for A.Y. 2015-16. (iii) Further, to establish the fact that unsecured loan was genuinely given by JJIPL through their bank accounts, a copy of relevant bank statement of JJIPL for the relevant period, is placed at Page No. 174 of the Paper Book for A.Y. 2015-16. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the loan creditor JJIPL in its return of income for the relevant assessment year. (v) The genuineness of the loan transaction also gets fortified from a very vital fact that the director of the JJIPL namely Shri Sharad Darak, through his Affidavit, duly sworn before Notary Public, has duly affirmed the transaction of loan of Rs.25,00,000/- given by his company JJIPL to the assessee company. Shri Sharad Darak, at paras (4) & (7) of the Affidavit, has stated that the subject loan was given by JJIPL out of its own funds only. A copy of the Affidavit of Shri Sharad Darak is placed at Page No. 175 to 177 of the Paper Book for A.Y. 2015-16. The Affidavit so furnished by a director of the lender company also establishes the genuineness of the borrowing made by the assessee from JJIPL. For such proposition, reliance is placed on the decision of the Hon’ble High Court of Karnataka in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (2007) 291 ITR 44 (Kar.). (C) CREDITWORTHINESS OF JJIPL: (i) For establishing capacity and creditworthiness of JJIPL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of JJIPL along with Auditors’ Report, in respect of the financial year ended 31 st March 2015. A copy of such audited financial statements is placed at Page No. 178 to 193 of the Paper Book for A.Y. 2015-16. (ii) On a perusal of the audited financial statements of JJIPL, it shall be observed by Your Honours that as on 31-03-2015 [kindly refer PB Page No. 182 for A.Y. 2015-16], the JJIPL was having huge net owned funds to the extent of Rs. 89.97 Crores by way of share capital and reserves & surplus. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 18 of 69 (iii) Your Honours, on a perusal of the copy of the bank statement in respect of the bank account maintained by the loan creditor, JJIPL, with Indusind Bank [kindly refer PB Page no. 174 for A.Y. 2015-16], it shall be observed by Your Honours that in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iv) On a further perusal of the bank statement of the JJIPL, it would be observed by Your Honours that JJIPL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with JJIPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by JJIPL cannot be doubted. It is submitted that JJIPL before providing loan to the assessee company, had procured funds from its sister company namely M/s. Trimurthi Finvest Limited and such company has been held to be a genuine company by this Hon’ble Bench in the case of ACIT vs. Pramod Kumar Sethi as reported in (2019)34 ITJ 39 (Trib. Indore). A copy of the said decision is placed at page no. 244 to 252 of the Paper Book for A.Y. 2016-17. (v) During the course of the appellate proceedings, the assessee had furnished the following documentary evidences before the ld. CIT(A): (a) Acknowledgement of Income Tax Return of JJIPL for A.Y. 2015-16 [kindly refer PB Page No 170 for A.Y. 2015-16]. (b) Relevant abstract of bank statements of JJIPL [kindly refer PB Page No 174 for A.Y. 2015-16]. (c) A copy of Affidavit of Shri Sharad Darak, a director of JJIPL, duly sworn before Notary Public [kindly refer PB Page No. 175 to 177 for A.Y. 2015-16] (d) Audited Financial Statements of JJIPL for the F.Y. 2014-15 [kindly refer PB Page No 178 to 193 for A.Y. 2015-16]. (D) GENUINENESS OF THE LOAN TRANSACTIONS FROM JJIPL ACCEPTED BY THE HON’BLE ITAT ‘G’ BENCH – ORDER DATED 01-06-2021 Your Honours, the Hon’ble Coordinate ‘G’ Bench of Mumbai, in the case of JCIT vs.Shalimar Housing and Finance Limited vide its recent pronouncement on 1-06-2021 in Appeal No. ITA 4079/Mum/2019 for A.Y. 2013-14 was pleased to hold the genuineness of the loan transactions carried out by the assessee with JJIPL 7.01 LOAN FROM M/s. BRAIN MASTERS CLASSES PVT. LTD. [‘BMCPL’]– Rs.15,90,000/- [A.Y. 2016-17] – DEPARTMENTAL APPEAL [AO’s Findings at para (8.28) at page no. 21] IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 19 of 69 [CIT(A)’s Findings at para (4.3.4) (A) at page no. 48 to 50] At the outset, it is submitted that the BMCPL is not controlled/ managed by Shri Sharad Darak. It is further submitted that the BMCPL, in respect of which an allegation has been made by the ld. AO by treating it as dummy/ shell company, has no direct or indirect association with Mr. Sharad Darak or any of his companies. Now, in the above background, we wish to submit as under: (A) IDENTITY: (i) The BMCPL was incorporated, as a private company, duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Madhya Pradesh, on 03- 05-2011 vide Unique Corporate Identification Number i.e. CIN as U80903MP2011PTC025907. A copy of certificate of incorporation of the company is placed at Page No. 71 of the Paper Book for A.Y. 2016-17. (ii) The BMCPL was incorporated with the objects of carrying out the business of providing education services through coaching institutes, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 72 to 88 of the Paper Book for A.Y. 2016-17. The BMCPL is one of the most renowned coaching institutions of Central India. (iii) The registered office of the BMCPL is presently situated at Victory Chamber, 4A Ratlam Kothi, Geeta Bhavan Square, Indore (M.P.) (iv) The BMCPL, since its inception, is regularly assessed to income-tax. The BMCPL had also furnished its return of income for the relevant assessment year. (v) The BMCPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In evidence of such fact, a copy of the Master Data downloaded from the official website of the MCA is placed at Page No. 89 of the Paper Book for A.Y. 2016- 17. (B) GENUINENESS OF THE TRANSACTIONS: (i) As regard the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with BMCPL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the BMCPL to the assessee, is placed at Page No. 90 of the Paper Book for A.Y. 2016-17. (ii) The assessee’s claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 20 of 69 relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from BMCPL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 91 & 92 of the Paper Book for A.Y. 2016-17. (iii) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the SSPL in its return of income for the relevant assessment year. (C) CREDITWORTHINESS OF BMCPL: (i) For establishing capacity and creditworthiness of BMCPL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of BMCPL along with Auditors’ Report, in respect of the financial year ended 31 st March 2016. A copy of such audited financial statements is placed at Page No. 93 to 127 of the Paper Book for A.Y. 2016-17. (ii) On a perusal of the audited financial statements of BMCPL, it shall be observed by Your Honours that as on 31-03-2016 [kindly refer PB Page No. 93 to 127 for A.Y. 2016-17], the BMCPL was having its net owned funds to the extent of Rs. 73.17 Lakhs by way of share capital and reserves & surplus. Further, on a perusal of the audited Statement of Profit & Loss of the lender company, it would be appreciated by Your Honours that the said company had shown gross receipts from coaching (tution) to the extent of Rs.11.35 crores and Rs.15.28 crores respectively for the financial years ended on 31- 03-2016 and 31-03-2015 [kindly refer PB Page No. 93 to 127 for A.Y. 2016- 17]. (iii) Your Honours, it would be pertinent to note that the BMCPL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be appreciated by Your Honours that such bank balance in its turn had not got accumulated with BMCPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by BMCPL cannot be doubted. (iv) It is thus submitted that in respect of the loan transactions with BMCPL, the assessee had fully established the credibility of the loan creditor and as also the genuineness of the transactions, and therefore, the action of the ld. CIT(A) in deleting the addition, being fully justified, deserves to be upheld. 7.02 LOAN FROM M/S. EAST WEST FINVEST INDIA LTD. [‘EWFIL’]– Rs.9,68,129/- [A.Y. 2016-17] – ASSESSEE’S APPEAL [AO’s Findings at para (8.28) at page no. 21] [CIT(A)’s Findings at para (4.3.4) (C) at page no. 52 to 56] (A) IDENTITY: (i) The EWFIL was incorporated, as a private company, duly registered under the erstwhile Companies Act, 1956, under the Certificate of IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 21 of 69 Incorporation granted by the Registrar of Companies, Madhya Pradesh, on 01- 04-1999 vide Unique Corporate Identification Number i.e. CIN as U65921CT1999PLC020108. A copy of certificate of incorporation of the company is placed at Page No. 128 of the Paper Book for A.Y. 2016-17. (ii) The EWFIL was incorporated with the objects of carrying out the business of finance, hire purchase transactions, as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 129 to 185 of the Paper Book for A.Y. 2016-17. (iii) The registered office of the EWFIL is presently situated at Sanjay Heights in front of Rajaswa Colony, Flat No. A/102, Sarkanda, Bilaspur (CT) - 495001. (iv) The EWFIL, since its inception, is regularly assessed to income-tax under PAN-AADCE1236G. The EWFIL had also furnished its return of income for the relevant assessment year. In evidence of such fact, a copy of acknowledgement of return of EWFIL, for A.Y. 2016-17, is placed at Page No. 186 of the Paper Book for A.Y. 2016-17. (v) The EWFIL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In evidence of such fact, a copy of the Master Data downloaded from the official website of the MCA is placed at Page No. 187 of the Paper Book for A.Y. 2016- 17. (vi) The EWFIL has been maintaining its bank accounts with various banks. During the relevant previous year, the EWFIL was maintaining its current account with Indusind Bank at its Branch at Indore vide account No. 200007892305. (B) GENUINENESS OF THE TRANSACTIONS: (i) As regard the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with EWFIL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the EWFIL to the assessee is placed at Page No. 188 of the Paper Book for A.Y. 2016-17. (ii) The assessee’s claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from EWFIL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 189 & 190 of the Paper Book for A.Y. 2016-17. (iii) Further, to establish the fact that unsecured loan was genuinely given by EWFIL through their bank accounts, a copy of relevant bank statement of IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 22 of 69 EWFIL for the relevant period, is placed at Page No. 191 of the Paper Book for A.Y. 2016-17. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loans after making necessary TDS which has duly been incorporated by the EWFIL in its return of income for the relevant assessment year. (v) The genuineness of the loan transaction also gets fortified from a very vital fact that the director of the EWFIL namely Shri Sharad Darak, through his Affidavit, duly sworn before Notary Public, has duly affirmed the transaction of loan of Rs.9,00,000/- given by his company EWFIL to the assessee company. Shri Sharad Darak, at paras (4) & (7) of the Affidavit, has stated that the subject loan was given by EWFIL out of its own funds only. A copy of the Affidavit of Shri Sharad Darak is placed at Page No. 192 & 193 of the Paper Book for A.Y. 2016-17. The Affidavit so furnished by a director of the lender company also establishes the genuineness of the borrowing made by the assessee from JSFL. For such proposition, reliance is placed on the decision of the Hon’ble High Court of Karnataka in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (2007) 291 ITR 44 (Kar.). (C) CREDITWORTHINESS OF EWFIL: (i) For establishing capacity and creditworthiness of EWFIL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of EWFIL along with Auditors’ Report, in respect of the financial year ended 31 st March 2016. A copy of such audited financial statements are placed at Page No. 194 to 216 of the Paper Book for A.Y. 2016-17. (ii) On a perusal of the audited financial statements of EWFIL, it shall be observed by Your Honours that as on 31-03-2016 [kindly refer PB Page No. 194 to 216 for A.Y. 2016-17], the EWFIL was having its net owned funds to the extent of Rs. 241.93 Crores by way of share capital and reserves & surplus. (iii) Your Honours, on a perusal of the copy of the bank statement in respect of the bank account maintained by the loan creditor, EWFIL, with Indusind Bank [kindly refer PB Page no. 191 for A.Y. 2016-17], it shall be observed by Your Honours that, in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iv) Your Honours, on a further perusal of the bank statement of the EWFIL, it would be observed by Your Honours that EWFIL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with EWFIL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by EWFIL cannot be doubted. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 23 of 69 (v) Your Honours, the creditworthiness of the EWFIL also gets substantiated from the Affidavit of Shri Sharad Darak, director of EWFIL, wherein he has stated on oath that the unsecured loan of Rs.9,00,000/- has been given by EWFIL out of its own funds only [kindly refer PB Page No. 192 & 193 for A.Y. 2016-17]. (vi) Your Honours, all the documentary evidences which have been filed by the assessee in its Paper Book were also furnished before the ld. CIT(A). It is submitted that in respect of some of the evidences which could not be furnished before the learned AO during the course of the assessment proceedings, were also furnished before the ld. CIT(A) with a specific prayer for admission thereof under Rule 46A of the Income-Tax Rules, 1962. The ld. CIT(A) considering the prayer of the assessee had accepted the fresh documents as additional evidences under the Rule 46A and had forwarded a copy of such additional evidences to the then ld. AO for his comments. The concerning AO, submitted his remand report which is placed in our Paper Book at Page No. 202 to 214 For A.Y. 2015-16. It is further submitted that upon the Remand Report so submitted, the assessee had filed its counter comments before the ld. CIT(A) which are placed at Page no. 215 To 222 of our Paper Book for A.Y. 2015-16. It is submitted that neither the ld. AO nor the ld. CIT(A) found any defect or discrepancy in the documentary evidences furnished by the assessee for establishing the genuineness of the loans. The AO, even during the course of the Remand proceedings, did not conduct any independent inquiry either under s. 131 or s. 133(6). The ld. AO also did not examined Shri Sharad Darak, who had given his Affidavit on oath in support of the genuineness of the loan transactions. However, merely on the extraneous considerations, not german to the issue in hand, in respect of the aforesaid loan from EWFIL, the ld. CIT(A) confirmed the action of the ld. AO in making the addition which is neither justified nor warranted in the facts and circumstances of the case. (D) JUDICIAL PRONOUNCEMENTS BY THE JURISDICTIONAL INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH IN CASE OF CASH CREDITS FROM EWFIL: (i) Your Honours, in the similar facts and circumstances, the Hon’ble Jurisdictional ITAT, Indore Bench in the case of M/s. Tirupati Construction, Ujjain vs. DCIT-2(1), Ujjain [ITA No. 522/Ind/2014; Order dated 14-07-2016] has held the transactions of procuring of unsecured loans by the above named assessee from M/s. East West Finvest India Ltd. (EWFIL) to be as genuine. The Hon’ble Bench, while upholding the identity of EWFIL, has also allowed interest paid on borrowings made from such company. A copy of the said judgment is placed at Page No. 217 to 243 of the Paper Book for A.Y. 2016-17. It is submitted that in this case too, the assessee had taken certain loan from EWFIL [kindly refer para (18) of the Order on Page No. 233 of the Paper Book for A.Y. 2016-17] and this Hon’ble Bench after considering all the facts and circumstances held the EWFIL as a genuine company and deleted the entire addition made under s. 68 of the Act. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 24 of 69 (ii) Your Honours, the Hon’ble ITAT, Indore Bench, again, in the case of ACIT vs. Shri Pramod Kumar Sethi (2019) 34 ITJ 39 (Trib.-Indore), by following its earlier decision in the case of ACIT vs. Shri Girish Kumar Sharda (2014) 23 ITJ 701 (Trib.-Indore), vide para 16 & 17 of its Order, has held that the two companies namely 'M/s. Trimurti Finvest Ltd.' and ‘M/s. East West Finvest India Ltd.’ [also belonging to Mr. Sharad Darak] were genuine companies and unsecured loans obtained from these companies cannot be held to be unexplained under s.68 of the Act. A copy of the aforesaid judgment is placed at Page No. 244 to 252 of the Paper Book for A.Y. 2016-17. In the said decision, the aforesaid two companies were also held by the AO to be accommodation entry provider companies. It is submitted that in the instant case too, the subject creditor company M/s. East West Finvest India Ltd. has been alleged to be an accommodation entry provider company of Shri Sharad Darak. In such circumstances, the ratio laid down by the Hon’ble Jurisdictional Tribunal in the aforesaid case shall be applicable to the case of the assessee company as well. It is thus respectfully submitted that the case of the assessee is covered, in its favour, by the earlier decisions of this Hon’ble Bench itself. (E) RECENT JUDICIAL PRONOUNCEMENT BY THE HON’BLE ITAT, ‘G’ BENCH, MUMBAI : Your Honours, the Hon’ble Coordinate ‘G’ Bench of Mumbai, in the case of JCIT vs.Shalimar Housing and Finance Limited vide its recent pronouncement on 1-06-2021 in Appeal No. ITA 4079/Mum/2019 for A.Y. 2013-14 was pleased to hold the genuineness of the loan transactions carried out by the assessee with EWFIL. (F) Reliance is also placed on the following judicial pronouncements: i) Shri Rajendra Prasad Agrawal vs. Addl. CIT, Range-1, Indore [ITA No. 327/Ind/2015; Order dated 20-05-2016] ii) M/s. Vajdi Education Society vs. ACIT-2(1), Indore [ITA No. 653/Ind/2013; Order dated 09-02-2018] iii) Chhatrachhaya Nirman Pvt. Ltd. vs. ACIT-2(1), Indore [ITA No. 508/Ind/2018; Order dated 23-01-2020] 7.03 LOAN FROM M/S. RAJWADI RETAILS TRADE SYSTEM PVT. LTD. [‘RRTSPL’]–Rs.1,72,60,370/- [A.Y. 2016-17] – ASSESSEE’S APPEAL [Presently Known as ‘Rajyeshwar Retail Trade Systems Pvt. Ltd.’] [AO’s Findings at para (8.28) at page no. 21] [CIT(A)’s Findings at para (4.3.4) (C) at page no. 52 to 56] (A) IDENTITY: (i) The RRTSPL is a private limited company duly registered under the erstwhile Companies Act, 1956, under the Certificate of Incorporation granted by the Registrar of Companies, Gujrat, on 07-08-2009, vide registration No.U52190MH2009PTC194744 of 2009-10. A copy of certificate of incorporation of the company is placed at Page No. 253 & 254 of the Paper Book for A.Y. 2016-17. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 25 of 69 (ii) The RRTSPL was incorporated with the objects of carrying out the business of trading in various commodities, financing and investment as per the objects contained in its Memorandum of Association, under which it has got incorporated. A copy of the Memorandum and Articles of Association of the company is placed at Page No. 255 to 284 of the Paper Book for A.Y. 2016-17. (iii) The registered office of the RRTSPL, at the relevant time, was situated at C-39, Rajnigandha, CH SOC, Ram Mandir Road, Goregaon (W), Near Movie Star Theater, Mumbai (M.H.). Presently, the registered office of RRTSPL is situated at GR-76, Harmony Commercial, C-Wing, Near Motilal Nagar, Link Road, Goregaon (W), Mumbai. (iv) The RRTSPL, since its inception, is regularly assessed to income-tax under PAN-AAECR4394M. The RRTSPL had also furnished its return of income for the relevant assessment year. A copy of the income-tax return of RRTSPL for the A.Y. 2016-17 is placed at Page No. 285 of the Paper Book for A.Y. 2016-17. (v) The RRTSPL is an active and functionary company as per the records and data of the Ministry of Corporate Affairs (MCA), Government of India. In evidence of such fact, a copy of the Master Data downloaded from the official website of the MCA is placed at Page No. 286 of the Paper Book for A.Y. 2016- 17. (vi) The RRTSPL has been maintaining its bank accounts with various banks. During the relevant previous year, the RRTSPL was maintaining its current account with Indusind Bank at its Branch at Mumbai vide account No. 200999046861 and with Indore Swayamsiddh Mahila Co-Operative Bank at its Branch at Indore vide account no. 1001014001207. (B) GENUINENESS OF THE TRANSACTIONS: (i) As regard the genuineness of the transactions, it is submitted that all the transactions entered into by the assessee with RRTSPL had taken place through account payee cheques/ banking channels only and none of the transactions had taken place in the form of cash. In evidence of such fact, a copy of loan confirmation letter duly signed by the authorized signatory of the lender company, confirming the transactions of loan given by the RRTSPL to the assessee, is placed at Page No. 287 of the Paper Book for A.Y. 2016-17. (ii) The assessee’s claim to the effect that all the loan transactions had taken place through banking channels can be verified from the copies of the relevant statements maintained with the banks in which the transactions relating to receipt of loan by the assessee from RRTSPL are clearly getting reflected. Copies of abstracts of the relevant bank statements of the assessee are placed at Page No. 288 & 289 of the Paper Book for A.Y. 2016-17. (iii) Further, to establish the fact that loans were genuinely given by RRTSPL through their bank account, a copy of relevant bank statement of IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 26 of 69 RRTSPL for the relevant period is placed at Page No. 290 to 294 of the Paper Book for A.Y. 2016-17. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loan after making necessary TDS which has been duly incorporated by the RRTSPL in its return of income for the relevant assessment year. (v) The genuineness of the loan transaction also gets fortified from a very vital fact that the director of the RRTSPL namely Shri Sharad Darak, through his Affidavit, duly sworn before Notary Public, has duly affirmed the transaction of loan of Rs.1,60,70,000/- given by his company RRTSPL to the assessee company. Shri Sharad Darak, at paras (4) & (7) of the Affidavit, has stated that the subject loan was given by RRTSPL out of its own funds only. A copy of the Affidavit of Shri Sharad Darak is placed at Page No. 295 to 297 of the Paper Book for A.Y. 2016-17]. The Affidavit so furnished by a director of the lender company also establishes the genuineness of the borrowing made by the assessee from JSFL. For such proposition, reliance is placed on the decision of the Hon’ble High Court of Karnataka in the case of Tam Tam Pedda Guruva Reddy vs. JCIT (2007) 291 ITR 44 (Kar.). (C) CREDITWORTHINESS OF RRTSPL: (i) For establishing capacity and creditworthiness of RRTSPL to provide loan to the assessee, during the course of the assessment proceedings, the assessee had duly furnished a copy of the audited financial statements of RRTSPL along with Auditors’ Report, in respect of the financial year ended 31 st March 2016. A copy of such audited financial statements is placed at Page No. 298 to 319 of the Paper Book for A.Y. 2016-17. (ii) On a perusal of the audited financial statements of RRTSPL, it shall be observed by Your Honours that as on 31-03-2016 [kindly refer PB Page No. 298 to 319 for A.Y. 2016-17], the RRTSPL was having its net owned funds to the extent of Rs. 2.25 crores by way of share capital and reserves & surplus. (iii) Your Honours, on a perusal of the copy of the bank statement in respect of the bank account maintained by the loan creditor, RRTSPL [kindly refer PB Page no. 290 to 294 for A.Y. 2016-17], it shall be observed by Your Honours that, in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iv) Your Honours, on a further perusal of the bank statement of the RRTSPL, it would be observed by Your Honours that RRTSPL was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with RRTSPL by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by RRTSPL cannot be doubted. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 27 of 69 (v) Your Honours, the creditworthiness of the RRTSPL also gets substantiated from the Affidavit of Shri Sharad Darak, director of RRTSPL, wherein he has stated on oath that the unsecured loan of Rs.1,60,70,000/- has been given by RRTSPL out of its own funds only [kindly refer PB Page No. 295 to 297 for A.Y. 2016-17]. (vi) Your Honours, all the documentary evidences which have been filed by the assessee in its Paper Book were also furnished before the ld. CIT(A). It is submitted that in respect of some of the evidences which could not be furnished before the learned AO during the course of the assessment proceedings, were also furnished before the ld. CIT(A) with a specific prayer for admission thereof under Rule 46A of the Income-Tax Rules, 1962. The ld. CIT(A) considering the prayer of the assessee had accepted the fresh documents as additional evidences under the Rule 46A and had forwarded a copy of such additional evidences to the then ld. AO for his comments. The concerning AO, submitted his remand report which is placed in our Paper Book at Page No. 202 to 214. For A.Y. 2015-16. It is further submitted that upon the Remand Report so submitted, the assessee had filed its counter comments before the ld. CIT(A) which are placed at Page no. 215 To 222 of our Paper Book for A.Y. 2015-16. It is submitted that neither the ld. AO nor the ld. CIT(A) found any defect or discrepancy in the documentary evidences furnished by the assessee for establishing the genuineness of the loans. The AO, even during the course of the Remand proceedings, did not conduct any independent inquiry either under s. 131 or s. 133(6). The ld. AO also did not examined Shri Sharad Darak, who had given his Affidavit on oath in support of the genuineness of the loan transactions. However, merely on the extraneous considerations, not german to the issue in hand, in respect of the aforesaid loan from RRTSPL, the ld. CIT(A) confirmed the action of the ld. AO in making the addition which is neither justified nor warranted in the facts and circumstances of the case. 7.04 LOAN FROM M/S. RISHABH INTERNATIONAL–Rs.64,24,427/- [A.Y. 2016-17] – DEPARTMENTAL APPEAL [AO’s Findings at para (8.28) at page no. 21] [CIT(A)’s Findings at para (4.3.4) (B) at page no.51&52] At the outset, it is submitted that M/s. Rishabh International is not controlled/ managed by Shri Sharad Darak. It is further submitted that M/s. Rishabh International, in respect of which an allegation has been made by the ld. AO by treating it as dummy/ shell company, has no direct or indirect association with Mr. Sharad Darak or any of his companies. Now, in the above background, we wish to submit as under: (i) That, M/s. Rishabh International is a proprietorship concern of Shri Avinash Kumar Jain, aged nearly 24 years, is regularly assessed to Income- Tax, under PAN – BAUPJ7965A, for the last many years. It is submitted that during the course of the assessment proceedings, the assessee, in order to establish the identity of the loan creditor, had furnished a copy of his PAN card. Further, in order to establish the genuineness of the transactions, the assessee had furnished a copy of letter of confirmation duly given by the creditor and as also, a copy of relevant bank statement of the assessee IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 28 of 69 reflecting the receipts of such loans and bank statement of the loan creditor. A copy of such PAN Card, a copy of letter of confirmation and a copy of relevant bank statement of the assessee and that of the loan creditor, are placed at Page no. 320 to 325 of the Paper Book for A.Y. 2016-17. (ii) That, on a perusal of the copy of bank statement in respect of the bank account maintained by the loan creditor, with Kotak Mahindra Bank [kindly refer PB Page no. 324 & 325 for A.Y. 2016-17], it shall be observed by Your Honours that, in such bank statement, entries regarding issuance of cheques for the purpose of providing the subject unsecured loan to the assessee are getting clearly reflected. Such entries by themselves, speak in volume, regarding the identity of the loan creditor, genuineness of the loan transaction and as also, creditworthiness of the loan creditor. (iii) That, on a further perusal of the bank statement of the Rishabh International, it would be observed by Your Honours that Rishabh International was having sufficient balance in its bank statement before providing the subject loan to the assessee. It shall further be observed by Your Honours that such bank balance in its turn had not got accumulated with Rishabh International by making cash deposits in bank account. Thus, in such circumstances, the sources of providing loan by Rishabh International cannot be doubted. (iv) Furthermore, it is also submitted that the assessee has paid interest on such loan after making necessary TDS which has duly been incorporated by M/s. Rishabh International in its return of income for the relevant assessment year. (v) It shall be pertinent to note that the assessee company has repaid the entire loan of Rs.60,00,000/- to M/s. Rishabh International through banking channel in the immediately succeeding previous year relevant to A.Y. 2017-18. In support of such assertion, a copy of relevant bank statement of the assessee company, is placed at Page No. 326 & 327 of the Paper Book for A.Y. 2016-17. The repayment of loan by the assessee in the succeeding year itself proves the genuineness of the loan transaction from M/s. Rishabh International. 8.00 During the course of the search proceedings carried out under s.132(1) of the Act in the various business premises of the assessee company and as also, in the residential premises of the directors of the assessee company, no incriminating document or data was found or recovered from the assessee company which could have given an iota of indulgement of the assessee in procuring any accommodation entries from anyone. It is submitted that in the body of the assessment order, at para (8.10) on page no. 10, the learned AO has made reference of some excel sheets which were allegedly found from the computer system of some Mr. Anuj Agrawal, Company Secretary. It is submitted that first of all, such datas were not recovered from any of the authorized persons of the assessee company and secondly, from the subject excel sheets, no adverse inference against the assessee company can be drawn. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 29 of 69 8.01 In the case of the assessee, the learned AO has proceeded with his pre- conceived notions only and it was therefore, at various places in the body of the assessment order, he has leveled the charge of accommodation entry provider on Mr. Sharad Darak and has further alleged the assessee company to have procured accommodation entries and not the genuine loans from the companies controlled by the above named Shri Sharad Darak. However, for leveling such a serious charge, the learned AO has relied solely on the hearsays without bringing any single evidence on record. 8.02 At para (8.13) of the Order, the learned AO has alleged that during the assessment proceedings, search and survey actions of the Income Tax Department, it has come to the light that Shri Sharad Darak is a full time entry provider. However, the learned AO has not given the basis of such assumption. 8.03 The learned AO, at paras (8.14) & (8.15) of the assessment order, has made a reference of some survey proceedings u/s. 133A carried out in the business premises of some of the companies namely M/s. East West Finvest Pvt. Ltd., M/s. Purvi Finvest Ltd. and M/s. Trimurti Finvest Ltd., having a common address at Kamla Hari Villa, Besides Apollo Pharmacy, Main Road, Vidhya Nagar, Bilaspur, allegedly controlled by Shri Sharad Darak. At para (8.15), the learned AO has made a reference of some statement given by some Mr. Dinesh Agrawal, Auditor of the companies controlled by Shri Sharad Darak, who was found the occupant of the premises where the survey proceedings were carried out. The learned AO has also given the gist of the statement given by such Mr. Dinesh Agrawal. In this regard, at the outset, it is submitted that during the previous year under consideration, the assessee had not carried out any loan transaction with any of the companies in respect of which the above said survey proceedings were allegedly carried out. Secondly, it shall be appreciated that Mr. Dinesh Agrawal whose statements have been referred to by the learned AO had not admitted that the companies run by Mr. Sharad Darak were accommodation entry provider companies. In any case, during the course of the survey proceedings referred to by the learned AO, not a single evidence was found which could have put the slightest doubt on the various financial transactions carried out by the assessee with the so-called Sharad Darak’s controlled companies. 8.04 At para (8.16), the learned AO has made a reference of some statement, allegedly given by Shri Sharad Darak, on 21-02-2014, under s.131 of the Act, in some other proceedings not related to the assessee or any of its associates. In this regard, at the outset, it is submitted that such statement of Shri Sharad Darak, given way back in the year 2014 and that too, in some other proceedings not related to the assessee, has no evidentiary value. Even otherwise, the copy of the statement of Shri Sharad Darak so referred to by the learned AO was never provided to the assessee. Further, even from the gist of the statement of Shri Sharad Darak, as mentioned by the learned AO in the aforesaid para, it cannot be inferred that the loans genuinely borrowed by the assessee company were not the genuine loans. It is submitted that Mr. Sharad Darak has given an Affidavit to the effect that his companies had genuinely given loans to the assessee company. It is further submitted that the affidavit so given, in the case of the assessee company, would supercede the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 30 of 69 alleged statement of Shri Sharad Darak given at some different point of time and in some different proceedings, the outcome whereof have not been disclosed to the assessee. 8.05 At the cost of the repetition, it is submitted that in the instant case, neither the learned AO himself nor even the officios of the Investigation Wing has ever conducted any independent enquiry from Shri Sharad Darak, to unearth the truthfulness of the loan transactions claimed to have been carried out by the assessee, in various assessment years, with the various companies controlled by such Sharad Darak. The learned AO has completely harped upon the non-credible borrowed information and that too, without confronting the basis of such information to the assessee. 8.06 Your Honours, without prejudice to the above, it is submitted that if the claim of the learned AO is accepted that some survey in the business premises of the lender companies were carried out under s.133A of the Act and further, the statements of auditors/ directors were recorded either during the course of such survey or under s.131 of the Act, then, the identity of the lender companies cannot be doubted for the reason that without there being existence of any such company or directors thereof, there could not have been any occasion for the Department to conduct the survey and to record the statements. 9.00 Without prejudice to the above, it is submitted that learned AO has made the impugned addition merely on the basis of some information available with him as regard to the loan creditors allegedly gathered behind the back of the assessee in the cases of some other assesses. The learned AO in the Assessment Order has referred to the statements of Shri Dinesh Agrawal and Shri Sharad Darak. But while doing so, the learned AO committed gross violation of principles of natural law and justice, firstly, by not confronting the assessee with the copies of all statements, documents and materials which he was intending to use against the assessee and secondly, by not affording any opportunity of cross examination to the assessee of the persons on whose statements the learned AO placed the reliance. In such circumstances, in view of the settled judicial position, the learned AO was not justified in drawing any adverse inference against the assessee merely on the basis of evidences collected behind his back. 8.01 On the issue of cross-examination, the Hon’ble Supreme Court in the case of M/s. Kishinchand Chellaram vs. CIT (1980) 125 ITR 713 (SC) was pleased to hold that the assessing officer is duty bound to confront the material collected by him to the assessee. The Hon’ble Supreme Court again in the case of M/s. Andaman Timber Industries V/s. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC) was pleased to hold as under: “5. According to us, not allowing the Assessee to cross examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the order of the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 31 of 69 Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to cross examine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross examination of the said dealers could not have brought out any material which would not be in possession of the Assessee themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Assessee wanted to cross-examine those dealers and what extraction the Assessee wanted from them. 6. As mentioned above, the Assessee had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross- examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.” 8.02 The Hon’ble Supreme Court, again, in the case of Ayaaubkhan Noorkhan Pathan vs. The State of Maharashtra and Ors., 2013 AIR 58 (SC) was pleased to hold as under: “ 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross- examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 32 of 69 previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful cross examination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held: 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective cross examination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice.” [Emphasis supplied] 8.03 Your Honours, the Hon’ble Rajasthan High Court in the case of theCIT vs. Smt. Sunita Dhadda 2017 (7) TMI 1164 (Raj.), by taking into consideration the relevant case laws pronounced in various parts of the country, has also allowed the appeal of the assessee on the ground that the assessee was not given any opportunity of cross-examination of the persons whose statements were recorded and relied upon. Such an Order of the Hon’ble Rajasthan High Court has been upheld by the Hon’ble Supreme Court in CIT vs. Smt. Sunita Dhadda 2018 (3) TMI 1610 (SC) by dismissing the SLP of the Department. 9.00 Your Honours, merely on the presumption that since one of the directors of a lender company is an entry provider, all the transactions carried out by all the companies in which such director was a common director, with all the persons cannot be regarded to be bogus transactions. For such proposition, reliance is placed on the decision of the Hon’ble Apex Court in the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC). 10.00 Your Honours, a similar case for adjudication arose before the Hon’ble ITAT Mumbai in the case of ITO vs. Smt. Pratima Ashar 2019 (7) TMI 1313 (ITAT Mumbai). In such case, the AO made addition on the allegation that some Mr. Praveen Jain was an accommodation entry provider and the assessee had claimed to have taken loans controlled by such Mr. Praveen Jain. The addition was entirely deleted by the CIT(A) and against the Order of the CIT(A), the Department preferred appeal before the ITAT. The ITAT confirmed the action of the CIT(A) in deleting the addition and held that merely on the basis of a statement given by some person, all the transactions carried out by various companies controlled by such person cannot be held to be non- genuine in a circumstance when the assessee had furnished ample of documentary evidences. 11.00 In the body of the assessment order, the learned AO has made reference of various judicial pronouncements but, none of the pronouncements so referred by the learned AO are applicable in the case of the assessee for the reason that the facts of the assessee’s case are quite distinguishable from those referred in the aforesaid pronouncements. 12.00 Your Honours, in the instant appeals, the ld. CIT(A) has confirmed certain additions made by the ld. AO under s. 68 of the Act by way of giving IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 33 of 69 his findings at para (4.3.4)(C) from page no. 52 to 56 of the impugned appellate order. It is submitted that the ld. CIT(A) has although acknowledged furnishing all the necessary documents by the assessee for establishing the genuiness of the loans. However, the ld. CIT(A) without assigning any cogent reason, chose to brush aside all these documentary evidences and rather, placed reliance upon the so called inquiries conducted by the Investigation Wing and various other Income-Tax Authorities. The ld. CIT(A) has not assigned any basis for his drawing the conclusion that Shri Sharad Darak is a de-famous entry provider of Indore. The ld. CIT(A) hinges his findings on the fact that in certain other cases too, the genuineness of the loans provided by the companies of Shri Sharad Darak were not accepted. It is submitted that such an assumption or even a finding could not have been a basis for disbelieving the genuine transactions, backed by all the necessary documentary evidences, carried out by the assessee specially in a circumstance when the ld. AO did not conduct any independent inquiry at his own and nothing adverse was brought on record. It is a settled law that a suspicion, howsoever strong it might be, cannot substitute legal evidences. 13.00 Your Honours, there are plethora of judgments including those of the Hon’ble Jurisdictional High Court in favour of the assessee which have held that once the identity & creditworthiness of the loan creditors and genuineness of loan transactions are established, no addition can be made in the hands of the loan recipient. The brief notes of such judgments are given below: i) CIT vs. ORISSA CORPORATION P. LTD. (1986) 159 ITR 0078 (SC) Decision in favour of: Assessee Income—Cash credit—Burden of proof—Assessee had given the names and addresses of the creditors—It was in the knowledge of the Revenue that the said creditors were income-tax assessees—Their index number was in the file of the Revenue—Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further—Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the allowed loans— Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence—High Court was, therefore, right in refusing to refer the questions sought for Held : Sec. 68 of 1961 Act was introduced for the first time in the Act. There was no provision in 1922 Act corresponding to this section. The section only gives statutory recognition to the principle that cash credits which are not satisfactorily explained might be assessed as income. The cash credit might be assessed either as business profits or as income from other sources. (Para 7) IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 34 of 69 It is not in all cases that by mere rejection of the explanation of the assessee, the character of a particular receipt as income could be said to have been established; but where the circumstances of the rejection were such that the only proper inference was that the receipt must be treated as income in the hands of the assessee, there is no reason why the assessing authority should not draw such an inference. Such an inference is an inference of fact and not of law. (Para 10) The assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit- worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for. (Paras 13 & 15) Reference—Question of fact—Cash Credit—High Court has no power to call upon the Tribunal to state a case if there was some evidence to support the finding recorded by the Tribunal, even if it appears to the High Court that on reappreciation of the evidence, it might arrive at a conclusion different from that of the Tribunal—Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence—High Court was, therefore, right in refusing to refer the questions sought for Held : The High Court has no power to call upon the Tribunal to state a case if there was some evidence to support the finding recorded by the Tribunal, even if it appears to the High Court that on reappreciation of the evidence, it might arrive at a conclusion different from that of the Tribunal.—CIT vs. Daulatram Rawatmull (1964) 53 ITR 574 (SC) : TC 54R.233 followed. The assessee had given t he names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notice under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors. There was no effort made to pursue the so- called alleged creditors. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 35 of 69 If the conclusion is based on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for. ii) ORIENT TRADING CO. LTD. vs. CIT (1963) 49 ITR 0723 (BOM) Conclusion : On the facts and circumstances of the case, assessee's initial burden stood discharged and there being no material to show that Revenue discharged its burden, cash credit could not be treated assessee's suppressed income. iii) ASHOK PAL DAGA vs. CIT (1996) 220 ITR 0452 (MP) Decision in favour of:Assessee Reference—Question of law—Assessee having satisfied the IT authority as to the identity of the third party and also supplied the relevant evidence showing prima facie that the entries were not fictitious, the initial burden can be said to be discharged by the assessee—Treating the cash credits and interest thereon as undisclosed income of assessee gave rise to question of law.—Orient Trading Co. Ltd. vs. CIT (1963) 49 ITR 723 (Bom) : TC 42R.1039 applied iv) ADDL. CIT vs. BAHRI BROTHERS (P) LTD. (1985) 154 ITR 0244 (PAT) Decision in favour of: Assessee 11. The assessee was asked to explain the nature and the source of the deposit and the asssessee filed details of loans stating the nature and the mode of transactions. In the instant case, the transactions were completed through account payee cheques. The creditors gave the amount in question to the assessee by account payee cheques which were encashed by the assessee through his own bank. Not only this, the assessee has also submitted the copy of a certificate of the bankto the effect that the cheques in question, given by the creditors, were Honoursed in favour of the assessee. Even the brokerage amount on the transaction was also paid through cheques. When the assessee disclosed the names of the creditors and the names of the banks on which the cheques were drawn, the assessee discharged the primary onus and the assessee not only disclosed the identity of the creditors but also the sources of income. Then the onus shifted on the Department to verify. The creditors were having bank accounts. Hence, not that they were known only to the bank but they were introduced by a third person to the bank. In view of these facts, it could not be said that the creditors were fictitious persons. As I have already held above that the assessee discharged his primary onus and the onus shifted upon the Department, the Department, on getting materials in hand could proceed to verify whether the creditors were genuine or not. They could also examine the other transactions of the creditors in their respective bank accounts and could have also examined the person IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 36 of 69 who introduced them to the bank and such an examination/verification would have given a correct picture and then if any adverse material was available, the same could have been passed on to the assessee. In my opinion, the assessee having discharged the primary onus, the Department without resorting to verification, could not add the amount as income from undisclosed sorces. v) Ariba Foods Pvt. Ltd. vs. Asstt. Commissiner of Income Tax (2021) 9 TTJ Online 9 (Trib – Indore) CashCredit—Section68oftheIncome-taxAct,1961—A.Y.2015-16— AOmadeadditionsof Rs.8.80lacsu/s68—CIT(A)deletedtheadditions—HELD— Assesseehasfurnishedcopyof PAN, bank account statement of lender company, audited financial statement, profit and loss account statement, certificate of incorporation, copy of MOA and AOA, etc. — Assessee had discharged its onus of providing the genuineness of the sum credits — ITAT satisfied with the identity and creditworthiness of cash creditor — Thus, ITAT does not find any infirmity in the finding of CIT(A) in deleting the addition. [Refer Para 72, 73 &74] vi) Great Galleon Ventures ltd. vs DCIT Central-2, Indore in Appeal No. IT(SS)A Nos. 114 to 116/Ind/2020 16.8 In the aforesaid facts and circumstances of the case and the various judicial pronouncements as referred to by the assessee in its Synopsis and as also in the light of our detailed findings made in the preceding paras, we are of the considered opinion that the assessee could successfully establish the identity of all the loan creditor companies, the genuineness of the loan transactions carried out with such companies, and as also, the creditworthiness of such loan creditor companies beyond all doubts, by furnishing all the necessary documentary evidences. Further, it is also an undisputed fact that the AO, except relying upon the retracted statements and some list of so-called shell companies, has not brought any positive material on record to discredit the explanation and various documentary evidences furnished by the assessee. In such eventuality, in our view, the ld. CIT(A) was fully justified in deleting the additions. 14.00 Now, in respect of the addition made by the ld. AO under s. 69C of the Act, in respect of the alleged unexplained expenditure of the assessee towards payment of interest to various loan creditors, it is submitted that the learned AO was not justified in invoking the provisions of section 69C of the Income- Tax Act, 1961. Before delving with the issue in hand, it shall be appropriate to have a look at the provisions of section 69C of the Income-Tax Act, 1961, which, for a ready reference, is reproduced as under: "Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 37 of 69 thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." 14.01 It is submitted that the provisions of section 69C can be invoked if an assessee is found to have incurred any expenditure and the sources of such expenditure are not explained by the assessee. However, in the instant case, the assessee has not only explained the interest payments made by it but has also explained the sources of the funds in respect of which such interest payments have been made. 14.02 It is submitted that the assessee company has incurred the interest expenditure for the purposes of its business only and therefore, the entire interest expenditure deserved to be allowed under the provisions of s.36(1)(iii) of the Act. 14.03 It is submitted that since the assessee has duly established the identity and creditworthiness of the lender companies/entities, and genuineness of the loan transactions in the preceding paras, the interest expenditure so incurred by the assessee company towards such borrowing, no addition ought to have been made by the ld. AO on this count.” 9.1 We have heard rival contentions, perused the records placed before us, duly considered the facts and circumstances, carefully gone through the orders of the authorities below, Special Auditors Report, written and oral submissions made from both the sides, Remand Report of the AO, Rejoinder of the assessee and also gone through the judgments and decisions referred to and relied upon by both the sides. Now, in the ensuing paras, we shall first deal with those additions which have been deleted by the ld. CIT(A) against which the Revenue is in Appeal and then, we shall deal with those additions which have been sustained by the ld. CIT(A) and against which, the assessee is in appeal before us. 9.2 We find that the ld. CIT(A) at para (4.3.4) of his Order from page no. 48 to 55 has elaborately dealt with each and every unsecured loan in respect of which the AO has made addition in various assessment years. In order to analyse the facts of each of the loan creditors, we have also considered it necessary to give our findings, for all such creditors in the paras set out below. 9.3 M/s. Brain Masters Classes Pvt. Ltd. (‘BMCPL’) (A.Y. 2016-17) 9.3.1 We find that the AO has made addition u/s. 68 of the Act, in respect of the aforesaid loan creditor without giving any specific finding. We find that the subject addition in respect of the unsecured loan from BMCPL has IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 38 of 69 got made by the AO by presuming the same to be a company controlled by Mr. Sharad Darak. We find that during the course of the appellate proceedings before the ld. CIT(A), the assessee had contended that the lender company was not belonging to or in any way having any direct or indirect connection with Mr. Sharad Darak. We find that the AO has given the names of the companies directly or indirectly controlled by Shri Sharad Darak at para (8.12) and again at para (8.13) of the assessment order and from such paras, we noted that the AO himself has not shown the above named company as belonging to Shri Sharad Darak. 9.3.2 We further find that in order to establish the genuineness of the loans claimed to have been received by the assessee company from the above named loan creditor, the assessee company had furnished various documentary evidences before the ld. AO and as also, before the ld. CIT(A). We find that before us also, in its Paper Book for A.Y. 2016-17, the assessee has furnished various documentary evidences such as copy of certificate of incorporation of the creditor, copy of Memorandum and Articles of Association of the creditor, copy of acknowledgement of income tax return of the creditor, copy of the master data downloaded from the official website of the MCA of the creditor, copy of duly signed letter of confirmation of the creditor, copy of the relevant abstract of the bank account of the creditor and copy of the audited financial statements of the creditor. On a perusal of the aforesaid documents, we find that the aforesaid lender is a private limited company, duly incorporated under the Companies Act, 1956 by the concerning Registrar of Companies. From the abstract of the master data of BMCPL, as abstracted from the official website of the Ministry of Corporate Affairs, Government of India, we find that in the ROC records, the lender company has been shown as Active company. Thus, in our considered view, by furnishing all the necessary documents, such as the certificate of incorporation, copy of Memorandum and Articles of Association, copy of acknowledgement of income tax return, copy of the master data downloaded from the official website of the MCA, copy of the PAN Card, the assessee could be able to establish the statutory as well as the physical identity and existence of the aforesaid loan creditor. We further find from the copy of duly signed letter of confirmation, copy of the relevant abstract of the bank account of the loan creditor that the loan transactions have been carried out through banking channels which were found duly reflected in the bank statement of the assessee as well as the loan creditor. Further, from a perusal of the copy of the lender’s bank statement placed in the Paper Book for A.Y. 2016-17, we find that before making remittance to the assessee towards loan transactions, no cash was deposited by the lender. We have also perused the audited financial statements of the lender and from such financial statements, we found that such lender company was having sufficient funds available for providing loans to the assessee company. We also find that BMCPL has shown a substantial amount of revenue from operations of coaching at Rs.11.33 crores in its financial statements for F.Y. 2015-16 which also proves the existence and the genuineness of the loan IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 39 of 69 creditor company. We find that although all the documentary evidences for establishing the genuineness of the loans, as aforesaid, were also filed by the assessee before the AO, but the AO could not find any specific defect or discrepancy in any of such documentary evidences. We find that even before us, the ld. CIT(DR) could not point out any single defect or discrepancy in such documents. 9.3.3 Thus, in our considered view, in respect of the aforesaid loan creditor, by furnishing the documentary evidences as discussed hereinabove, the assessee could be able to fully discharge its onus of proving all the three ingredients as contemplated u/s. 68 of the Act viz. (i) identity of the creditor; (ii) genuineness of the loan transactions; and (iii) creditworthiness of the loan creditor beyond all doubts. We also find that during the course of the search u/s. 132 of the Act, in the premises of the assessee company and its directors, no incriminating material or any evidence raising any doubt regarding the genuineness of the loan transactions was found or seized. We further find that during the course of the assessment proceedings, despite making a specific request to this effect by the assessee, the AO did not make any independent inquiry either by way of issuance of summons u/s. 131 or by way of issuance of letters u/s. 133(6) of the Act to the aforesaid lenders. We also find that the various case laws relied upon by the AO are not applicable to the assessee’s case. Thus, relying upon the decisions of the Hon’ble Jurisdictional High Court in the cases of CIT vs.Metachem Industries (2000) 245 ITR 0160 (MP), CIT vs. STL Extrusions Pvt. Ltd. (2011) 333 ITR 269 (MP), PCIT vs. Chain House Internationatioal (P) Ltd. & Ors. (2018) 408 ITR 0561 (MP), Ashok Pal Daga vs. CIT (1996) 220 ITR 0452 (MP), CIT vs. Mehrotra Brothers (2004) 270 ITR 0157 (MP), the decision of the Hon’ble High Court of Gujarat in the case of DCIT vs. Rohini Builders (2002) 256 ITR 360 (Guj.), the decisions of the Hon’ble High Court of Delhi in the cases of CIT vs. Kamdhenu Steel and Alloys Ltd. & Ors. (2014) 361 ITR 0220 (Del.) and CIT vs. Dalmia Resorts International (2007) 290 ITR 508 (Del.), the decision of the Hon’ble High Court of Patna in the cases of CIT vs. Hanuman Agrawal (1985) 151 ITR 150 (Patna) and again in the case of Add. CIT vs. Bahari Brothers (P) Ltd. (1985) 154 ITR 0244 (Patna) andthe decision of the Hon’ble Apex Court in the case of CIT vs. Orissa Corporation P. Ltd. (1986) 159 ITR 0078 (SC) we find absolutely no justification in the AO’s making the addition in respect of the aforesaid loan creditor, namely M/s. Brain Masters Classes Pvt. Ltd., in the income of the assessee either u/s. 68 of the Act or u/s. 69C of the Act for A.Y. 2016-17. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the addition made by the AO in the A.Y. 2016-17, on account of unsecured loan and unexplained interest payment relating to the above named lender company. 9.4 M/s. Rishabh International (A.Y. 2016-17) 9.4.1 We find that the AO has made addition u/s. 68 of the Act, in respect of the aforesaid loan creditor without giving any specific finding. We find IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 40 of 69 that the subject addition in respect of the unsecured loan from M/s. Rishabh International has got made by the AO by presuming the same to be a company controlled by Mr. Sharad Darak. We find that during the course of the appellate proceedings before the ld. CIT(A), the assessee had contended that first of all, the lender is not a company but is a proprietorship concern of Shri Avinash Kumar Jain who was not having any direct or indirect connection with Mr. Sharad Darak. We find that the AO has given the names of the companies directly or indirectly controlled by Shri Sharad Darak at para (8.12) and again at para (8.13) of the assessment order and from such paras, we noted that the AO himself has not shown the above named concern as belonging to Shri Sharad Darak. 9.4.2 We further find that in order to establish the genuineness of the loan claimed to have been received by the assessee company from the above named loan creditor, the assessee company had furnished various documentary evidences before the ld. AO and as also, before the ld. CIT(A). We find that before us also, in its Paper Book for A.Y. 2016-17, the assessee has furnished various documentary evidences such as copy of PAN Card of Shri Avinash Jumar Jain, copy of duly signed confirmation letter from the loan creditor, copy of the relevant abstract of the bank statement of M/s. Rishabh International, copy of relevant abstract of bank statement of the assessee company.The copies of such documents are placed at page no. 320 to 327 of assessee’s Paper Book for A.Y. 2016-17 filed before us. On perusal of the aforesaid documents, we find that Shri Avinash Kumar Jain, Proprietor of M/s. Rishabh International is regularly assessed to Income-Tax under PAN: BAUPJ7965A. Thus, in our considered view, the assessee could be able to establish the identity and existence of the aforesaid loan creditor. We further find from the copy of duly signed letter of confirmation, copy of the relevant abstract of the bank account of the loan creditor that the loan transactions have been carried out through banking channels which were found duly reflected in the bank statements of the assessee as well as the loan creditor. Further, from a perusal of the copy of the lender’s bank statement placed in the assessee’s Paper Book for A.Y. 2016-17, we find that before making remittance to the assessee towards loan transactions, no cash was deposited by the lender. We further find that the entire loan of Rs.60,00,000/- along with interest payment has been repaid by the assessee to the aforesaid lender in the subsequent years which is evident from the copy of the bank statement of the assessee company as placed at page no. 326 & 327 of its Paper Book for A.Y. 2016-17. We find that before us, the ld. CIT(DR) could not point out any single defect or discrepancy in any of the documentary evidences referred hereinabove. Thus, in our considered view, by furnishing all the aforesaid documents, the assessee could be able to fully discharge its onus of proving all the three ingredients as contemplated u/s. 68 of the Act viz. (i) identity of the creditor; (ii) genuineness of the loan transactions; and (iii) creditworthiness of the loan creditor beyond all doubts. We also find that during the course of the search u/s. 132 of the Act, in the premises of the assessee company and its IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 41 of 69 directors, no incriminating material or any evidence raising any doubt regarding the genuineness of the loan transactions was found or seized. We further find that during the course of the assessment proceedings, despite making a specific request to this effect by the assessee, the AO did not make any independent inquiry either by way of issuance of summons u/s. 131 or by way of issuance of letter u/s. 133(6) of the Act to the aforesaid lender. We also find that the various case laws relied upon by the AO are not applicable to the assessee’s case. In the preceding paras, we have already cited various judicial authorities for the proposition that once the identity and creditworthiness of the loan creditors and genuineness of loan transactions are established, no addition can be made in the hands of the loan recipient and therefore, in respect of the present loan creditor, we refrain ourselves to make the same discussions again. Thus, in our considered view, there was absolutely no justification for the AO to make any addition in the income of the assessee, for the assessment year 2016-17, under any of the provisions of the Act either u/s. 68 of the Act or u/s. 69C of the Act in respect of the aforesaid loan creditor with whom in our considered view, the assessee had genuinely carried out the loan transactions. Accordingly, we find no infirmity in the action of the ld. CIT(A) in deleting the addition made by the AO in the A.Y. 2016-17, on account of unsecured loan and unexplained interest payment relating to the above named M/s. Rishabh International. 9.5 Loan From (i) M/s. Jay Jyoti India Pvt. Ltd.; (ii) M/s. East West Finvest India Pvt. Ltd.; and (iii) M/s. Rajwadi Retails Trade Systems Pvt. Ltd. 9.5.1 We find that in respect of the above named three lender companies, the AO has given his findings at para (8.12) to para (8.20) of his Order. We find that at para (8.12), the AO has alleged that during the course of the search and post search proceedings, it was found that the assessee had received huge unsecured loans from certain suspicious companies which were directly/indirectly controlled by a well known accommodation entry provider of Indore Shri Sharad Darak, who used to facilitate his clients by routing of unaccounted funds by providing accommodation entries through his companies. At the same para, the AO has given the list of the companies controlled by Shri Sharad Darak, which inter alia, includes the above named three lender companies. At para (8.13), without giving any specific details, the AO further made a finding that during the assessment proceedings and search & survey actions of the Income Tax Department in the case of Shri Sharad Darak, it was noted that Shri Sharad Darak is a full time entry provider. At para (8.14), the AO averted that a survey u/s. 133A of the Act was conducted by the Raipur Investigation Wing at the premises of East West Finvest Private Limited, Purvi Finvest Limited and Trimurthy Finvest Limited and during the course of such survey, it was found that the registered office of these companies were actually belonging to some Shri Dinesh Agrawal, Auditor of the Companies. According to the AO, during the course of the survey proceedings, no books of account of the above named three companies were found and further, in the premises of the companies IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 42 of 69 surveyed, no staff was found working. The AO further at para (8.16) of his Order found that during the course of the assessment proceedings, in the case of some Krishna Oils and Proteins Private Limited for A.Y. 2011-12, the DCIT-5(1), Indore had conducted certain inquires and had also recorded the statement of Shri Sharad Darak. As per the AO, from the statement of Shri Sharad Darak recorded u/s. 131 on 21/02/2014, it was proved that the companies run by Sharad Darak such as Jayant Security and Finance Limited was a bogus company and used for providing of accommodation entries. The AO at para (8.19) also commented that two companies of Shri Sharad Darak namely Jayant Security and Finance Limited and East West Finvest India Limited were also featuring in the investigation report of the Directorate of Income-Tax (Inv.) Kolkata, as bogus loss/ exempted income providing paper companies. Finally, the AO reached to the conclusion that the subject three lender companies were bogus/paper companies controlled by the accommodation entry provider Shri Sharad Darak. Accordingly, he made the addition u/s. 68 of the Act in the income of the assessee for various assessment years in respect of the loans taken from the above named three lender companies and further made addition u/s. 69C of the Act for various assessment years, by holding the interest expenditure as unexplained expenditure. 9.5.2 We find that before the ld. CIT(A), the assessee had made a detailed explanation on the subject issue along with the various documentary evidences. We find that copies of the written submission made by the assessee before the ld. CIT(A) have also been furnished by the assessee before us in its Paper Books for various assessment years. 9.5.3 We find that the main grounds of contention of the assessee before the ld. CIT(A) was that (i) during the course of the assessment proceedings, it had furnished all the necessary documents to establish the identity of the loan creditors, the genuineness of the loan transactions and the creditworthiness of the loan creditors, as contemplated under the provisions of s.68 of the Act; (ii) after having discharged its initial onus of proving during the course of the assessment proceedings, the assessee had specifically requested the AO to issue the summons u/s. 131 / notices u/s. 133(6) to the loan creditors but despite making such specific request, the AO did not do the same and made the addition; (iii) the entire additions have been made by the AO only on the basis of findings given by the Special Auditors which were not factually correct without applying his own mind; (iv) the AO except relying upon some information gathered behind the back of the assessee by some other authorities in some other proceedings did not bring on record any adverse material against the assessee; (v) during the course of the assessment proceedings, no incriminating material or document was found wherefrom it could have been inferred that the unsecured loan transactions recorded in the regular books of account of the assessee were not genuine; (vi) in respect of some of the lender companies, allegedly controlled by Shri Sharad Darak, the Income Tax Department has IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 43 of 69 duly framed assessments u/s. 143(3) of the Act which fact establishes the actual existence and identity of such companies; (vii) in respect of some of the lender companies allegedly belonging to Shri Sharad Darak, even during the course of the income tax appeals, before the Hon’ble Income Tax Appellate Tribunal, genuineness of the transactions have been approved by the Hon’ble ITAT; (viii) the AO has relied upon only hearsays and some information without confronting the same to the assessee and without giving the opportunity of any cross examination; (ix) the transactions carried out by the assessee were of the nature of loan and not of the nature of share capital or share premium and therefore, it was not required to prove the source of the source as contemplated under the proviso to section 68 of the Act; and (x) since the interest expenditure were fully recorded in the books, the provisions of section 69C could not have been invoked. 9.5.4 We find that the ld. CIT(A) has dealt with the additions made by the AO in respect of the aforesaid loan creditors at para (4.3.4.C) of his Order. We find that the ld. CIT (A) has given a categorical finding that before him, the assessee had furnished numerous documents for establishing its claim regarding the identity of the loan creditors, genuineness of the loan transactions and creditworthiness of the loan creditors. However, we find that having given such categorical findings, the ld. CIT(A) held that from the various inquiries conducted by the Investigation Wing and the Income-Tax Authorities, it had got established that Shri Sharad Darak was a defamous entry provider of Indore. The ld. CIT(A) further held that in many of the cases, the genuineness of the loans provided by the companies of Sharad Darak have not been accepted. Finally, with the above findings, the ld. CIT(A) concluded that once it is proved that the assessee has taken any loan from any entry provider, then, furnishing of any documentary evidences could not establish the loan transactions as contemplated u/s. 68 of the Act and accordingly, confirmed the various additions for various assessment years, made by the AO on this count. 9.5.5 We find that before us, in respect of the subject loan transactions, the assessee has placed his reliance on the written submissions made before the ld. CIT(A) which are duly placed in the Paper Books of the assessee filed before us for the concerning assessment years. The counsel of the assessee also placed reliance on the various documentary evidences furnished by it before both the authorities below which have also been furnished in the Paper Books for concerning assessment years filed before us. In addition to that, the assessee has also made a written synopsis which has already been reproduced by us in the preceding paras. In particular, the counsel of the assessee has invited our attention to the decision of the Coordinate ‘G’ Bench Mumbai, pronounced on 01/06/2021 in the case of JCIT vs. M/s. Shalimar Housing and Finance Limited in Appeal No. ITA- 4079/Mum/2019, in which the similar issue of cash credits accepted by the assessee from various companies of Shri Sharad Darak such as East West Finvest India Limited, Jayant Security and Finance Ltd., Jay Jyoti India Pvt. Ltd., Octagon IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 44 of 69 Media Matrix Pvt. Ltd. and Purvi Finvest Ltd. was before the Hon’ble Bench. In this case, the Hon’ble Bench after considering all the aspects held that the lending companies were existing companies and were having capacity to grant the loan to the assessee. The counsel of the assessee further relied upon the decision of this Bench in the case of M/s. Tirupati Construction, Ujjain vs. DCIT, Ujjainin AppealNo. ITA/522/Ind/2014 pronounced on 14/07/2016 in which this Bench had held the loan transactions carried out by the assessee with East West Finvest India Limited, Jayant Securities and Finance Ltd. and KK Patel Finance Limited, companies controlled by Shri Sharad Darak as genuine. The counsel of the assessee also placed the reliance on the decision of this Bench in the case of ACIT vs. Pramod Kumar Sethi as reported in (2019) 34 ITJ 39 (Trib.Indore) in which case too, the loans taken by the assessee from various companies of Shri Sharad Darak were held to be genuine. 9.5.6 We find that in the instant case, the assessee has furnished all the necessary documents relating to each of the above named lender companies such as copies of certificates of incorporation, memorandum & articles of association, copies of income-tax returns, copies of master data downloaded from website of MCA, copies of loan confirmation letters duly given by the lender companies, copies of relevant bank statements of the lender companies, copies of the relevant bank statements of the assessee, copies of the audited financial statements of the lender companies, copies of the Affidavits duly sworn by Shri Sharad Darak confirming the loan transactions etc.. We also find that in respect of the loan transactions, the assessee has made the payment of interest and has also made the necessary TDS thereon. Thus, in our considered view, by furnishing all the necessary documents, such as the certificates of incorporation, copies of Memorandum and Articles of Association, copies of acknowledgement of income tax returns, copies of the master datas downloaded from the official website of the MCA, copies of the PAN Cards, the assessee could be able to establish the statutory as well as the physical identity and existence of all the aforesaid three loan creditors. We further find from the copies of duly signed letters of confirmation, copy of the relevant abstracts of the bank accounts of the loan creditors that all the loan transactions have been carried out through banking channels which were found duly reflected in the bank statements of the assessee as well as the loan creditors and the copies of the Affidavits given by Shri Sharad Darak, the assessee could be able to establish the genuineness of the loan transactions. Further, from a perusal of the copies of the lender’s bank statements placed in the concerning Paper Books for A.Y. 2015-16 & A.Y. 2016-17, we find that in none of the cases, before making remittance to the assessee towards loan transactions, any cash was deposited by the lenders. We have also perused the audited financial statements of the lenders and from such financial statements, we found that such lenders were having sufficient funds available for providing loans to the assessee company. From the copies of the audited financial statements of the lender companies, we further find that all the aforesaid IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 45 of 69 three lender companies were having ample of funds which were available to them for providing loans to the assessee. We find that although all the documentary evidences for establishing the genuineness of the loans, as aforesaid, were also filed by the assessee before the AO, but the AO could not find any specific defect or discrepancy in any of such documentary evidences. We find that even before us, the ld. CIT(DR) could not point out any single defect or discrepancy in such documents.We find that by furnishing all the necessary documentary evidences, as discussed hereinabove, the assessee could be able to discharge its initial onus of proving the nature and sources of credit entries relating to the aforesaid loan creditors, as contemplated u/s. 68 of the Act. 9.5.7 However, we find that in the instant case, both, the AO as well as the ld. CIT(A) have discarded and brushed aside such documentary evidences merely on the hearsays and inquiries conducted by some other Income Tax Authorities in some other cases without confronting the assessee with such inquiries. We find that the AO has made the additions with preconceived notions about the lender companies without having any corroborative evidence or tangible material on his record. We find that the AO has made reference of some survey conducted in some of the concerns of Shri Sharad Darak and that too, in the year 2014. We further find that at para (8.15), the AO has made reference of some statement given by Shri Dinesh Agrawal who was found during the course of the survey conducted. We find that the AO has not provided the assessee the copy of statement of Shri Dinesh Agrawal on whose statement, he has placed reliance for making the subject additions. Even from the abstracts of the statement of Shri Dinesh Agrawal, which was only an Auditor of some of the companies of Shri Sharad Darak, it cannot be inferred that the above named three lender companies were merely paper companies or for that matter, the transactions carried out by the assessee with such companies were not genuine. We find that the AO has also made a reference of some statement u/s. 131 of Shri Sharad Darak recorded by some other assessing officer in the case of some other assessee but again, the copy of such statement was not provided by the AO to the assessee. We find that before the ld. CIT(A), the assessee had duly furnished the copies of Affidavits duly sworn by Shri Sharad Darak before Notary Public. We also find that copies of such Affidavits were also provided by the ld. CIT(A) to the AO under Rule 46A of the Income Tax Rules, 1962, but the AO did not make any further examination or inquiry from Shri Sharad Darak. From the copy of the Remand Report dated 16/09/2020 submitted by the AO to the ld. CIT(A), as placed at page no. 203 to 214 of the assessee’s Paper Book for A.Y. 2015-16, we noted that the Affidavits filed by Shri Sharad Darak have been discarded by the AO on the extraneous grounds such as timing of the filing of the Affidavits, generic nature of the Affidavits, without taking any pain to cross-examine Shri Sharad Darak on the Affidavits so furnished. We find that copies of such Affidavits of Shri Sharad Darak in respect of each and every subject lender company have duly been filed by the assessee before us in his Paper Book for A.Y. 2015-16 IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 46 of 69 at page no. 175 to 177 and for A.Y. 2016-17 at page no. 192 to 193 & 295 to 297. We find that in all these Affidavits, Shri Sharad Darak has furnished the complete details of the identity of the concerning company and has also furnished the details of transactions carried out by his companies with the assessee company. In such Affidavits, Shri Sharad Darak in unequivocal terms has confirmed the loan transactions carried out by his various companies with the assessee company. 9.5.8 We find full substance in the contention of the assessee that in the instant case, the AO was not only duty bound to provide copies of the statements of Shri Dinesh Agrawal and Shri Sharad Darak which were recorded by some other authorities in some other proceedings, and which were intended to be used against the assessee as an evidence, but, was also required to afford opportunity of cross examination of such witnesses to the assessee, which he miserably failed to do. In such circumstances, in our considered view, merely on the basis of unconfronted statements, the AO was not legally justified in making the additions in respect of the aforesaid loan creditors. 9.5.9 We find that on the issue of cross-examination, the Hon’ble Supreme Court in the case of M/s. KishinchandChellaram vs. CIT (1980) 125 ITR 713 (SC)was pleased to hold that the assessing officer is duty bound to confront the material collected by him to the assessee. The Hon’ble Supreme Court again in the case of M/s. Andaman Timber Industries V/s. Commissioner of Central Excise, Kolkatta-II 2016 (15) SCC 785 (SC) was pleased to hold as under: “5. According to us, not allowing the Assessee to crossexamine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the Assessee was adversely affected. It is to be borne in mind that the orderof the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the Assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the Assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the Assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the Assessee themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the Assessee wanted to cross-examine those dealers and what extraction the Assessee wanted from them. 6. As mentioned above, the Assessee had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 47 of 69 which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the crossexamination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17-3-2005 [2005 (187) E.L.T. A33 (S.C.)] was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 7. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show cause notice.” 9.5.10 Their Lordships of the Hon’ble Supreme Court, again, in the case of AyaaubkhanNoorkhan Pathan vs. The State of Maharashtra and Ors., 2013 AIR 58 (SC) was pleased to hold as under: 28. The meaning of providing a reasonable opportunity to show cause against an action proposed to be taken by the government, is that the government servant is afforded a reasonable opportunity to defend himself against the charges, on the basis of which an inquiry is held. The government servant should be given an opportunity to deny his guilt and establish his innocence. He can do so only when he is told what the charges against him are. He can therefore, do so by cross-examining the witnesses produced against him. The object of supplying statements is that, the government servant will be able to refer to the previous statements of the witnesses proposed to be examined against him. Unless the said statements are provided to the government servant, he will not be able to conduct an effective and useful crossexamination. 29. In Rajiv Arora v. Union of India and Ors. AIR 2009 SC 1100, this Court held: 30. The aforesaid discussion makes it evident that, not only should the opportunity of cross-examination be made available, but it should be one of effective crossexamination, so as to meet the requirement of the principles of natural justice. In the absence of such an opportunity, it cannot be held that the matter has been decided in accordance with law, as cross-examination is an integral part and parcel of the principles of natural justice.” 9.5.11 The Hon’ble Gujarat High Court in the case of the Principal Commissioner of Income Tax Ahmedabad and Ors.vs. KanubhaiMaganlal Patel 2017 (3) TMI 271 (Guj.)has held as under: “12. We have heard Shri Varun K Patel, learned counsel appearing on behalf of the Revenue at length. It emerges from the impugned orders and even the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 48 of 69 order passed by the Assessing Officer that the Assessing Officer made additions under Section 69B of the Act, relying upon the statements of two farmers [i.e., two sellers of the land] in which, according to the Department, they admitted of having received on-money in cash. However, it is required to be noted and it is an admitted position that the statements of those two farmers upon which reliance was placed by the Department were not furnished/given to the assessee to controvert the same. Not only that when a specific request was made before the Assessing Officer to permit them to cross examine the aforesaid two farmers, the same was rejected by the Assessing Officer. Under the circumstances, as rightly observed by the learned Tribunal, the Assessing Officer was not justified in making addition under Section 69B of the Act solely relying upon the statements of those two farmers. 13. We see no reason to interfere with the findings recorded by the learned Tribunal. We are in complete agreement with the view taken by the learned Tribunal while deleting the addition made by the Assessing Officer made under Section 69B of the Act. No substantial question of law arises.” 9.5.12 The Hon’ble Rajasthan High Court in the case of the CIT vs. S.C. Sethi (2007) 295 ITR 351 (Raj.) has held as under: “10. The facts stated above clearly indicate that no question of law arises in this appeal. The findings recorded by the Tribunal are findings of fact affirming the earlier finding of fact recorded by the Commissioner of Income- Tax (Appeals). Apparently when the loose papers by itself did not indicate receipt of the alleged undisclosed income by the assessee and peripheral reliance on the document was not earlier countenanced in absence of opportunity of cross examination of the person from whose possession the loose papers were recovered. The fact that the Assessing Officer has not made any efforts to serve the said Sh. A.K. Chhajer and secure his presence by invoking powers under the Income-tax Act for securing presence of any witness also goes to show that the Assessing Officer has not really made efforts to give effect to the directions of the Commissioner of Income-tax (Appeals) for making available opportunity of cross-examining Sh. A.K. Chhajer by the assessee.” 9.5.13 The Hon’ble Rajasthan High Court in the case of the CIT vs. Smt. Sunita Dhadda 2017 (7) TMI 1164 (Raj.), by taking into consideration the relevant case laws pronounced in various parts of the country, has also allowed the appeal of the assessee on the ground that the assessee was not given any opportunity of cross-examination of the persons whose statements were recorded and relied upon. Such an Order of the Hon’ble Rajasthan High Court has been upheld by the Hon’ble Supreme Court in CIT vs. Smt. Sunita Dhadda 2018 (3) TMI 1610 (SC) by dismissing the SLP of the Department. 9.5.14 We also find that during the course of the search u/s. 132 of the Act, in the premises of the assessee company and its directors, no incriminating material or any evidence raising any doubt regarding the genuineness of the loan transactions with the above named creditors was IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 49 of 69 found or seized. We further find that during the course of the assessment proceedings, despite making a specific request to this effect by the assessee, the AO did not make any independent inquiry either by way of issuance of summons u/s. 131 or by way of issuance of letters u/s. 133(6) of the Act to the aforesaid lenders. We find that the sole basis for making the addition by the AO was some statements of Shri Dinesh Agrawal and Shri Sharad Darak recorded by some of the Income Tax Authorities in some other cases, but since, neither the copies of such statements were provided to the assessee nor the assessee was given an opportunity of cross examination of such persons making the statements, in our considered view, such statements have no evidentiary value in the eyes of law against the assessee. We also find that neither during the course of the search any evidence was found that the assessee company itself provided cash to the lender companies for procuring cheques under the garb of loans nor the AO could bring any single material to this effect on record. In our considered view, except leveling a bald charge against the lending companies, the AO by himself has not conducted any independent inquiry to substantiate his allegation that the lender companies were mere accommodation entry provider companies. We find that in the similar circumstances, the Hon’ble High Court of Delhi in the case of Pr. CIT vs. Oriental International Company Pvt. Ltd. (2018) 401 ITR 0083 (Delhi) has dismissed the appeal of the Revenue by holding that the AO did not conduct his task diligently and had not brought on record that whether the amounts were infused in the shareholders account in cash. We also find that the various case laws relied upon by the AO are not applicable to the assessee’s case. 9.5.15 We also find that in the similar circumstances, the additions made by some assessing officers in the case of the respective assesses, in respect of the loans taken by such assesses from various companies of Shri Sharad Darak, u/s. 68 of the Act, have been deleted by this Coordinate Bench itself and as also, by the Coordinate ‘G’ Bench of Mumbai. We find that Coordinate ‘G’ Bench Mumbai, in its Order pronounced on 01/06/2021 in the case of JCIT vs. M/s. Shalimar Housing and Finance Limited in Appeal No. ITA- 4079/Mum/2019, in which the similar issue of cash credits accepted by the assessee from various companies of Shri Sharad Darak such as East West Finvest India Limited, Jayant Security and Finance Ltd., Jay Jyoti India Pvt. Ltd., Octagon Media Matrix Pvt. Ltd. and Purvi Finvest Ltd. was before the Hon’ble Bench has held that all these lending companies were existing companies and were having capacity to grant the loan to the assessee. We also find that this Bench in the case of M/s. Tirupati Construction, Ujjain vs. DCIT, Ujjain in AppealNo. ITA/522/Ind/2014 vide is Order dated 14/07/2016 has held that the loan transactions carried out by the assessee with East West Finvest India Limited, Jayant Securities and Finance Ltd. and KK Patel Finance Limited, companies controlled by Shri Sharad Darak were genuine. Further, this Bench in the case of ACIT vs. Pramod Kumar Sethi as reported in (2019) 34 ITJ 39 (Trib.Indore) and again in the case of Shri Sanjay Shukla, Indore vs. ACIT, Central Circle-2, Indore as IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 50 of 69 reported in 2022 (4) TMI 385-ITAT, Indore has also upheld the action of the CIT(A) in deleting the additions made by the AO in the assessee’s income on account of loans taken by the respective assessees from the various companies controlled by Shri Sharad Darak. In the case of Shri Pramod Kumar Sethi (supra) this Bench has held the loan transactions carried out by the assessee in that appeal with Trimurti Finvest Pvt. Ltd., Purvi Finvest Pvt. Ltd., KK Patel Finance Ltd. and East West Finvest India Ltd. as genuine loan transactions whereas, in the case of Shri Sanjay Shukla (supra), this Bench has held the loan transactions carried out by that assessee with M/s. Jayant Securities and Finance Limited and M/s. Jay Jyoti India Pvt. Ltd. as genuine. 9.5.16 Thus, in terms of the findings given above and as also, the legal authorities cited by us at para (9.3.3) and para (9.5.23) supra, we are of the considered view that in respect of all the above named three loan creditors, by furnishing the documentary evidences as discussed hereinabove, the assessee could be able to fully discharge its onus of proving all the three ingredients as contemplated u/s. 68 of the Act viz. (i) identity of the creditor; (ii) genuineness of the loan transactions; and (iii) creditworthiness of the loan creditor beyond all doubts. Accordingly, in our considered view, the entire additions u/s. 68 as well as u/s. 69C of the Act, made by the AO, vide para (8) of his Order, in respect of all the loan transactions carried out by the assessee company with (i) M/s. Jay Jyoti India Pvt. Ltd.; (ii) M/s. East West Finvest India Pvt. Ltd.; and (iii) M/s. Rajwadi Retails Trade Systems Pvt. Ltd. for A.Y. 2015-16, A.Y. 2016-17 and A.Y. 2017-18 are not justified and consequently, the AO is hereby directed to delete the same. 9.5.17 In the result, we affirm the findings of the ld. CIT(A) to the extent he deleted the various additions made by the AO, vide his para (8) in the income of the assessee for various assessment years by invoking the provisions of section 68 and 69C of the Act in respect of various loans shown by the assessee in its books of accounts and as also, in respect of interest thereon. However, to the extent the ld. CIT(A) has confirmed the additions made by the AO vide para (8) of his Order, we hereby set-aside the findings given by the ld. CIT(A). In our considered view, none of the additions made by the AO vide para (8) of his assessment order are sustainable. Consequently, the Assessee’s Ground Nos. 2(a) to 2(e) for A.Y. 2015-16 & A.Y. 2016-17 and Ground Nos. 2(a) & 2(b) for A.Y. 2017-18 are Allowed whereas the Revenue’s Ground No. 1 for A.Y. 2016-17 isDismissed. 10. Ground Nos. 3(a) & 3(b) of the Assessee for A.Y. 2015-16 10.1 Through the ground nos. 3(a) & 3(b) taken for A.Y. 2015-16, the assessee has challenged the action of the ld. CIT(A) in upholding the addition of Rs.7,00,000/- made by the AO on account of unsecured loan obtained by the assessee company from M/s. Sumeet & Sumeet Sales. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 51 of 69 10.2 Briefly stated facts of the issue, as culled out from the records, are that during the course of search/post search proceedings, it was found that the assessee has shown certain transactions with one concern called Sumeet & Sumeet Sales. As per the AO, this is a namesake proprietary concernof Shri Sumeet Garg who is an ordinary person who has no connection with the assessee’s business. Accordingly, the AO, vide show- cause notices dated 19/11/2018 and 19/07/2019, required the assessee to furnish its explanation on the said issue. In reply, the assessee, vide its letters dated 07.12.2018 and 31.07.2019, furnished its detailed explanation. The AO, while framing the assessment order, averted thatcash was introduced in the bank account of M/s. Sumeet & Sumeet Sales which was then transferred to various companies of Global group including the assessee. Finally, the AO made an addition of Rs.7,00,000/- in A.Y. 2015-16 on account of receipts from bank account of M/s. Sumeet & Sumeet Sales by treating the same as unexplained cash credit u/s. 68 r.w.s. 115BBE of the Act. 10.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. Before the ld. CIT(A), the assessee also furnished certain additional evidences, under Rule 46A, to substantiate the identity &creditworthiness of the lender and genuineness of loan transactions which were forwarded to the Assessing Officer for comments. The copy of the Remand Report of the AO was provided by the ld. CIT(A) to the assessee and in response, the assessee filed its rejoinder. The Ld. CIT(A), after considering the remand report of the AO as well as the rejoinder of the assessee, confirmed the entire addition so made by the AO. The ld. CIT(A) has given the relevant findings at para (4.4.2) of his order. The relevant findings of the ld. CIT(A) are reproduced as under: “4.4.2 I have considered the facts of the case, the assessment order, the written as well as oral submissions of the appellant and the Special Audit Report of the Special Auditors. I find that the main grounds of contention of the appellant are that (i) during the course of the assessment proceedings, it had furnished all the necessary documents to establish the identity of the loan creditor, the genuineness of the loan transactions and the creditworthiness of the loan creditor, as contemplated under the provisions of s.68 of the Act; (ii) after having discharged its initial onus of proving during the course of the assessment proceedings, the appellant had specifically requested the AO to issue the summons u/s. 131 / notices u/s. 133(6) to the loan creditor but despite making such specific request, the AO did not do the same and made the addition; (iii) the entire additions have been made by the AO only on the basis of statement of Shri Sumeet Garg recorded u/s. 131(1A) of the Act before the Investigation Wing; (iv) the AO has not given any credence and even made a reference of an Affidavit of retraction duly given by Shri Sumeet Garg before him; (v) during the course of the assessment proceedings, it was duly explained that cash were deposited by Shri Sumeet Garg, Proprietor of M/s. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 52 of 69 Sumeet & Sumeet Sales from his own sources claimed to have been out of sale of some property; (vi) during the course of the assessment proceedings, no incriminating material or document was found wherefrom it could have been inferred that the unsecured loan transactions carried out by the appellant with M/s. Sumeet & Sumeet Sales recorded in the regular books of account of the appellant were not genuine. I have carefully considered the findings of the AO, written as well as oral submissions made by the appellant and the Special Audit Report. I find that during the course of the appellate proceedings, the appellant has furnished numerous documents for establishing its claim regarding the identity of the loan creditor, genuineness of the transactions and creditworthiness of the loan creditor and as also, an Affidavit of Shri Sumeet Garg retracting his own statement given earlier. I find that although all these documents were also furnished by the appellant before the AO but, for the two reasons viz. (i) finding of huge cash deposits in the bank accounts of M/s. Sumeet & Sumeet Sales; and (ii) admission of non-genuineness of the transactions by the proprietor of the concern in the statement recorded u/s. 131(1A) of the Act, and in my view, for taking both the reasons, the AO was having evidences on his record. In such view of the facts, the addition made by the AO amounting to Rs. 7,00,000/- is Confirmed. Therefore, appeal on these grounds is Dismissed.” 10.4 Aggrieved with the Order of the ld. CIT(A), the assessee is in appeal before us. 10.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO as well as of the ld. CIT(A) on this issue. 10.6 Per Contra, Learned Counsel for the assessee has filed written submission before us. The relevant portion of such written submission is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Books: 1.01 In the instant case, during the course of the assessment proceedings, the learned AO vide his show-cause notice dated 31-10-2018 [kindly refer Page No. 74 to 76 of our Paper Book for A.Y. 2015-16] had required the assessee to furnish its explanation on the subject issue. In response to the aforesaid query, the assessee vide its letter dated 07-12-2018 [kindly refer Page No. 94 to 98 of our Paper Book for A.Y. 2015-16], made its very elaborative explanation on the subject issue along with necessary documentary evidences.For a ready reference, the relevant abstract of the reply of the assessee made before the ld. AO, vide letter dated 07-12-2018, is being reproduced as under : I.EXPLANATION ON THE ISSUE OF CREDIT ENTRIES FOUND RELATING TO M/S. SUMEET AND SUMEET SALES RELEVANT TO ASSESSMENT YEAR 2015-16 IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 53 of 69 1.01 In this context, at the outset, it is submitted that except carrying out certain financial transactions during the financial year 2014-15, relevant to A.Y. 2015-16 during the period under assessment, we have NOT carried out any financial transaction either with Shri Sumeet Garg or with his proprietorship concern M/s. Sumeet & Sumeet Sales. It is submitted that during the financial year 2014-15 relevant to A.Y. 2015-16, we had genuinely taken unsecured loans aggregating to a sum of Rs.7,00,000/- through RTGS from M/s. Sumeet & Sumeet Sales Corporation. The entire deposits have been repaid by our company, in one trench, again through RTGS during the financial year 2015-16 relevant to A.Y. 2016-17, thereby squaring-off its account completely in our books of account. In evidence of such assertion, we are submitting herewith a copy of account of M/s. Sumeet & Sumeet Sales in our books of account for the period from 01-04-2010 to 31-03-2017 as Annexure B-1.01. 1.02 Sir, it is submitted that the transactions carried out by our company with Shri Sumeet Garg, as recorded in our books of account, are correct and our company never provided any cash to Shri Sumeet Garg or anyone else for issuing cheques in our favour. In order to establish the genuineness of the transactions carried out by our company, we are also submitting herewith a copy of letter of confirmation duly given by Shri Sumeet Garg as Annexure B- 1.02 1.03 In view of the above facts, it is submitted that no adverse inference deserves to be drawn at your end in respect of genuine transactions carried out by our company with M/s. Sumeet & Sumeet Sales through its proprietor Shri Sumeet Garg. 1.02 The learned AO, by discarding and disregarding the explanation of the assessee, made the impugned addition of Rs.7,00,000/- in the assessment year under consideration, merely on his whims, surmises, presumptions, assumptions and extraneous considerations and also without bringing any positive material on record to substantiate his allegation that the assessee was engaged in routing his own unaccounted funds into his books of account in form of cash credits, by making M/s. Sumeet & Sumeet Sales as conduit for the same. 2.00 Before delving with the issue, it shall be pertinent to note that the learned AO has made the impugned addition merely on the basis of some information available with him as regard to the loan creditor allegedly gathered behind the back of the assessee. The learned AO in the Assessment Order has referred to one statement of Shri Sumeet Garg Prop. of M/s. Sumeet & Sumeet Sales allegedly recorded under s.131(1A) of the Act by the Investigation Wing. Besides relying on such statement, the learned AO also made a reference of the bank statement of Shri Sumeet Garg. It is submitted that during the course of the assessment proceedings, the assessee company, vide its letter dated 07-12-2018 [kindly refer PB Page No. 94 to 98 of our Paper Book for A.Y. 2015-16], requested the learned AO to provide it an opportunity of cross examination of Shri Sumeet Garg on whose statement the learned AO has placed his reliance. However, the learned AO has not afforded any opportunity of cross examination to the assessee company and straight IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 54 of 69 forward, ventured into making the impugned addition in the hands of the assessee. It is a settled law that without giving any opportunity of cross examination of third persons, on whose statements the ld. AO relied upon, no addition can be made. 2.00 Your Honours, on the issue of cross-examination, reliance is placed on the various judicial pronocuments referred to hereinabove while dealing with the Ground Nos. 2(a) to 2(e) supra. 3.00 Your Honours, on merits of the case, it is submitted that during the course of assessment proceedings, the assessee, vide its letter dated 07-08- 2019 [kindly refer Page No 94 to 98 of our Paper Book for A.Y. 2015-16], had furnished the necessary documentary evidences to establish the identity of the loan creditors, the genuineness of the loan transactions and the creditworthiness of the loan creditors, inter alia including the subject loan creditor M/s. Sumeet & Sumeet Sales, as contemplated under the provisions of s.68 of the Act. 4.01 Your Honours, during the financial year 2014-15 relevant to A.Y. 2015- 16, the assessee had genuinely taken unsecured loan of a sum of Rs.7,00,000/- through RTGS, on 11-10-2014, from M/s. Sumeet & Sumeet Sales Corporation. However, due to a clerical mistake, the loan from the aforesaid concern had got shown in the financial statements of the assessee company in the name of ‘M/s. ACIL Cotton Industries Ltd.’. It is submitted that the entire deposit had been repaid by the assessee, on 14-12-2015, again through RTGS during the financial year 2015-16 relevant to A.Y. 2016-17, thereby squaring-off its account completely in the books of account. In evidence of the aforesaid assertion, a copy of account of M/s. Sumeet & Sumeet Sales in the assessee’s books of account is placed at Page No.194 of our Paper Book for A.Y. 2015-16. 4.02 It is submitted that the entire loan of Rs.7,00,000/- had been obtained by the assessee company through banking channels only, which can very well be verified from the copy of the relevant bank statement of M/s. Sumeet & Sumeet Sales which is also being reproduced by the ld. AO at para (9.6) on page no. 30 to 34 of the AO’s Order. 4.02.1The fact of repayment of loan by the assessee to the lender Shri Sumeet Garg in itself speaks about the genuineness of the loan transactions as claimed by the assessee. It is submitted that had the assessee not taken any genuine loan, the question of repayment thereof and that too, through the banking channel would not have arisen. It is submitted that it is not the case of the learned AO that the sum of repayment routed back to the assessee by the lender. In such circumstances, by any stretch of imagination, the genuineness of the loan transaction ought not to have been disbelieved by the learned AO. For such proposition, reliance is placed on the following judicial pronouncements: i) Gujarat Television Pvt. Ltd. vs. ACIT (2018) 101 CCH 451 (GujHC) ii) ITO vs. Satyanarayan Agrawal (2007) 112 TTJ 717 (JodhTrib.) iii) ITO vs. Gouri Shankar Singhal (2013) 38 CCH 24 (JodhTrib.) IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 55 of 69 iv) Kundles Loh Udyog vs. ITO (2016) 45 ITR (Trib.) 11 (Chd.) v) ACIT vs. H.K. Pujara Builders (2019) 198 TTJ 981 (MumTrib.) 4.03 The learned AO, while making the impugned addition, has alleged that before the subject loan transaction, cash was deposited by the Global group itself in the bank account of Shri Sumeet Garg. In this regard, it is submitted that undisputedly, the immediate source of the loan given by the loan creditor is the deposition of cash in his bank account. However, it is strongly objected that such cash was not deposited by the assessee company or any of its employee/associates but the cash was actually deposited by Shri Sumeet Garg himself out of the receipt of certain cash amount against sale of a property, in which he had vested interest under an agreement to purchase, from some farmer. 5.00 It is submitted that the assessee by furnishing the necessary documents had duly discharged its initial onus of proving the identity of the loan creditors, the genuineness of the transactions and creditworthiness of loan creditors beyond all doubts and in accordance with the provisions of s.68 of the Act. It is further submitted that during the course of assessment proceedings, the assessee, vide its letter dated 07-12-2018 [kindly refer PB Page No. 94 to 98 of our Paper Book for A.Y. 2015-16], had specifically requested the learned AO that if he wish to make further verification or investigation in the matter, then a summons under s.131 or letters under s.133(6) of the Act to the loan creditors may be issued in order to further substantiate the claim of the assessee. However, despite making such specific request, the learned AO did not carry out any independent enquiry by himself and proceeded further by solely relying upon the statement of the loan creditor recorded by the Investigation Wing. Such a failure on the part of the learned AO is not permissible and is bad-in-law. For such proposition, reliance is placed on the following judicial pronouncements : i) CIT vs. Shri Sai Vihar (2016) 28 ITJ 158 (Trib. - Raipur) ii) CIT V Ramesh Chander Shukla 10 ITJ 286 (Madhya Pradesh HC) iii) Manna Lal Murlidhar79 ITR 540 iv) Radhe Sham Jagdish Prashad 117 ITR 186 v) G. Shubha Devi vs. ITO (2019) 307 CTR 0536 (Kar.) vi) Anil Kumar Midha (HUF) vs. ITO (2006) 100 TTJ 0644 vii) ITO vs. Sanjay Kumar Goel (2007) 108 TTJ 0823 (Del.) viii) Mass Con (India) Pvt. Ltd. vs. ITO (2013) 37 CCH 0143 (Del.) ix) CIT vs. Rajeev Shukla (2007) 207 CTR 0253 (MP HC) 6.00 In the assessment order at para (9.4) the ld. AO has made reference of a statement given by Shri Sumeet Garg (Proprietor, Sumeet & Sumeet Sales). On a perusal of such statement, it would be observed that the statement of Shri Sumeet Garg is not hand written but it is in a computerized form. Upon enquiry from Shri Sumeet Garg by the assessee, Shri Sumeet Garg intimated the assessee that the contents of this computerized statement are not factually correct. It has been apprised to the assessee that originally his statement was recorded by one of the inspectors of the Investigation Wing in hand written IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 56 of 69 form and such statement was duly shown to him. It has been further averted by Shri Sumeet Garg that in the originally recorded hand written statement, those contents were not there as he found in the computerized statement. Shri Sumeet Garg affirmed that he had never stated that any cash in any of his bank accounts was deposited by any of the persons of Global group. On the contrary, he asserted that before the officer recording the statement he had categorically stated that he was in receipt of certain cash amount against sale of a property, in which he had vested interest under an agreement to purchase, from some farmer. It was stated that out of cash so received, from time to time, he had, voluntarily, deposited cash in his bank account. Shri Sumeet Garg also confirmed that he had apprised before the officer recording the statement that the funds to various entities of the Global group were genuinely given by him and also confirmed that within a short span of time, the entire funds so given have got refunded to him. He categorically denied to have stated that cash for making deposits in his bank accounts were provided either by Shri Ashok Choudhary or anyone else of the Global group. Shri Sumeet Garg, firmly confirmed that he was detained in the office of the Investigation Officer till 8 PM and after taking the print out of computerized statement he was compelled, rather pressurized to put his signatures on the statement without even allowing him to read the same. In such circumstances, Shri Sumeet Garg completely denied the contents of the computerized statement referred to by the ld. AO. In support of his retraction of the computerized statement, Shri Sumeet Garg had given an affidavit duly sworn before the Notary Public and a copy of such Affidavit was duly furnished by the assessee along with its written submission dated 07-12-2018 made before the learned AO during the course of the assessment proceedings. A copy of such Affidavit is also placed at Page No 195 to 201 of our Paper Book for A.Y. 2015-16. 6.01 Your Honours, in the present case, it is reiterated that the learned AO himself neither conducted any independent enquiry nor recorded statement of the lender Shri Sumeet Garg. Despite making specific request, the learned AO stucked to the statement of the lender, allegedly recorded by the Investigation Wing. The learned AO did not give any attention to the subsequent Affidavit furnished by the lender in which he had unequivocally, confirmed the loan transactions and had also denied the veracity of the typed statement purported to be given by him before the Investigation Wing. It is submitted that it is a settled law that a statement taken under influence and coercion has no evidentiary value if subsequently the person giving the statement denies the same and also show the circumstances under which such statement came to be prepared. It is submitted that in the light of the denial of the contents of the purported statement by Shri Sumeet Garg, it was incumbent upon the learned AO to record the fresh statement of Shri Sumeet Garg to unearth the truth, which he miserably failed to do so. 7.00 Your Honours, on the facts and circumstances of the case, it shall be appreciated that the assessee had fully discharged its onus of proving the genuineness of the loan transactions by furnishing all the necessary documentary evidences. It shall also be appreciated that the learned AO neither could find any defect or discrepancy in the documentary evidences so furnished by the assessee nor could conduct any independent enquiry on his IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 57 of 69 own to rebut the documentary evidences so furnished. The learned AO also failed to appreciate that the subject loan was subsequently repaid by the assessee through banking channels. The learned AO also could not rebut or controvert or make any adverse comment on the Affidavit given by the lender despite assessee’s furnishing a copy of the same before him during the course of the assessment proceedings. 8.01 Your Honours, it is a settled law that merely for the reason that the cash creditor has deposited cash in his bank account before giving loan to an assessee, it is not a sine-qua-non that such loan transactions should be disbelieved. If the cash creditor is able to demonstrate the sources of availability of cash with him, then, the utilization of such cash by him for making deposit in his own bank account and advancing such funds, through banking channels, need not to be doubted per se. It is submitted that during the course of the entire search proceedings in the premises of the assessee and its directors, not a single evidence was found from which it could have been inferred that the assessee had provided any cash to the lender for procuring the subject loan. 9.00 Your Honours, the ld. CIT(A) has confirmed the subject addition made by the ld. AO under s. 68 of the Act by way of giving his findings at para (4.4.2) from page no. 67 to 69 of the impugned appellate order. It is submitted that the ld. CIT(A) has although acknowledged furnishing all the necessary documents by the assessee for establishing the genuiness of the loans. However, the ld. CIT(A) without assigning any cogent reason, chose to brush aside all these documentary evidences. The ld. CIT(A) has confirmed the impugned addition merely for two reasons viz. (i) the cash deposits were found made in the bank accounts of the lender and (ii) the lender in his statement given under s. 131(1A) of the Act, before the investigation wing, had admitted the non-genuinness of transactions. In this regard, it is submitted that the genuineness of the loan transactions, specially of a meager amount, cannot be disbelieved merely for the reason that the lender had advanced the money by way of making the deposit in his bank account. It is submitted that in the instant case, the assessee had established that the lender was in receipt of some cash proceeds against sale of some of his properties to some farmers and out of such cash proceeds, he had advanced loan to the assessee company. The assessee had also furnished an Affidavit of the proprietor of M/s. Sumeet & Sumeet to this effect which remained uncontroverted or unrebuted. As regard the placing of the reliance on the statement of Shri Sumeet Garg, by the Investigation Wing, it is reiterated that subsequently, by way of an Affidavit, Shri Sumeet Garg has retracted his earlier statement by way of an Affidavit sworn before Notary public which was duly furnished before the AO as well as the ld. CIT(A). In the Affidavit, Shri Sumeet Garg has clearly denied to have given any adverse statement accepting non genuineness of the loan transactions with the assessee. Shri Sumeet Garg further stated that under what circumstances his signatures were obtained forcefully on the statement recorded by the Investigation Wing. It is submitted that after having the Affidavit of Shri Sumeet Garg on record, it was incumbent upon the ld. AO to record a fresh statement of Shri Sumeet Garg to unearth the truth for which he miserably failed to. In such circumstances, it is submitted that the ld. CIT(A) was not justified in upholding the addition of Rs. 7,00,000/- IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 58 of 69 so confirmed by the ld. AO under s. 68 of the Act in respect of loan from M/s. Sumeet & Sumeet Sales.” 11.1 We have heard rival contentions and perused the records placed before us and duly considered the facts and circumstances and oral submissions made from both the sides. 11.2 We find that the AO, vide para (9) of his Order has made an addition of Rs.7,00,000/- in the assessee’s income for A.Y. 2015-16 u/s. 68 of the Act in respect of credit entries found in the books of account of the assessee, for the relevant previous year, in the name of some ‘M/s. Sumeet & Sumeet Sales’. The brief facts relating to the issue, as emerging out from the assessment order, are that during the course of search/post search proceedings, it was found that the assessee has shown certain transactions with one concern called Sumeet & Sumeet Sales. As per the AO, this is a namesake proprietary concern of Shri Sumeet Garg who is an ordinary person who has no connection with the assessee’s business. Accordingly, the AO, vide show-cause notice dated 31/10/2018, required the assessee to furnish its explanation on the said issue. The AO also made a reference of statement of Shri Sumeet Garg recorded by the Investigation Wing. In reply, the assessee, vide its letters dated 07.12.2018 &30.07.2019, furnished its detailed explanation. The AO, while framing the assessment order, averted that cash was introduced in the bank account of M/s. Sumeet & Sumeet Sales which was then transferred to various companies of Global group including the assessee. Finally, the AO, made an addition of Rs.7,00,000/- in A.Y. 2015-16 in the assessee’s income on account of receipts from bank account of M/s. Sumeet & Sumeet Sales by treating the same as unexplained cash credit u/s. 68 r.w.s. 115BBE of the Act. 11.3 We find that the ld. CIT(A) while adjudicating the appeal of the assessee on this issue for A.Y. 2015-16, has confirmed the addition of Rs.7,00,000/- so made by the AO on account of receipts made by the assessee from the bank account of M/s. Sumeet & Sumeet Sales against which the assessee is in appeal before us. The ld. CIT(A) has given the necessary findings at para (4.4.2) from page no.67 to 69 of his Order. Before us, the assessee has placed reliance upon his written submissions made before the ld. CIT(A) which has been reproduced by the ld. CIT(A) at page no. 57 to 67 of his Order. 11.4 We find that the main grounds of contention of the assessee, on the subject addition of Rs. 7,00,000/-, are that(i) during the course of the assessment proceedings, it had furnished all the necessary documents to establish the identity of the loan creditor, the genuineness of the loan transactions and the creditworthiness of the loan creditor, as contemplated under the provisions of s.68 of the Act; (ii) the entire loan so taken was repaid by it through banking channel during the financial year relevant to A.Y. 2016-17 along with the amount of interest; (iii) after having discharged its initial onus of proving during the course of the assessment proceedings, IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 59 of 69 the assessee had specifically requested the AO to issue the summons u/s. 131 / notices u/s. 133(6) to the loan creditor but despite making such specific request, the AO did not do the same and made the addition; (iv) the entire additions have been made by the AO only on the basis of statement of Shri Sumeet Garg recorded u/s. 131(1A) of the Act before the Investigation Wing; (v) the AO has not given any credence and even made a reference of an Affidavit of retraction duly given by Shri Sumeet Garg before him, a copy whereof is placed on record; (vi) during the course of the assessment proceedings, it was duly explained that cash were deposited by Shri Sumeet Garg, Proprietor of M/s. Sumeet & Sumeet Sales from his own sources; (vii) during the course of the assessment proceedings, no incriminating material or document was found wherefrom it could have been inferred that the unsecured loan transactions carried out by the assessee with M/s. Sumeet & Sumeet Sales recorded in the regular books of account of the assessee were not genuine and finally, (viii) the AO relied upon the statement of Shri Sumeet Garg, but, no opportunity of cross-examination was afforded to the assessee. 11.5 We have carefully considered the findings of the AO, written as well as oral submissions made by the assessee, Special Audit Report, remand report of the AO and the rejoinder of the assessee thereon. We find that, before both the authorities below, the assessee had furnished the various documents relating to the above named lender and furnishing of such documents by the assessee has also been noted by the ld. CIT(A) in the body of his Order itself. 11.6 We find that the ld. CIT(A) has confirmed the addition made by the AO in the assessee’s income in respect of the loan transaction claimed to have been carried out by the assessee with the above named M/s Sumeet and Sumeet Sales Corporation. We find that the relevant findings have been given by the ld. CIT(A) at para (4.4.2) of his Order. We find that the ld. CIT (A) has duly given a finding that before him, the assessee had furnished numerous documents for establishing its claim regarding the identity of the loan creditors, genuineness of the loan transactions and creditworthiness of the loan creditors and as also, a copy of an Affidavit of Shri Sumeet Garg retracting his own statement given earlier. However, the ld. CIT(A) discarded the assessee’s claim only on two counts viz. (i) finding of huge cash deposits in the bank accounts of M/s. Sumeet & Sumeet Sales and (ii) admission of non-genuineness of the transactions by the proprietor of the concern in the statement recorded u/s. 131(1A) of the Act. 11.7 We find that in the instant case, undisputedly, the identity of the loan creditor cannot be doubted as according to the AO himself, in response to the summons issued by the Investigation Wing, the proprietor of the loan creditor concern i.e. Shri Sumeet Garg had got appeared before the Investigation Wing and had given his statements u/s. 131(1A) of the Act. We further find that undisputedly, the subject loan transaction was carried out IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 60 of 69 through banking channels and the AO in the body of the assessment order itself at page nos. 30 to 34 has scanned the copies of bank statements of the loan creditor. From the copy of the bank statement of the loan creditor, we find that in such bank statement, clearance of a cheque of Rs.7,00,000/- in the name of the assessee company is getting clearly reflected. However, we find that before clearance of the cheque, entries of deposition of cash are also getting reflected. We find that before the authorities below, the assessee had submitted that the very source of cash in the hands of the loan creditor was sales proceed from some of his agricultural lands. We find that the AO has not made any further enquiry on the explanation of the assessee. In our considered view, merely for the reason that immediately before issuance of the cheques, equivalent amount of cash was found deposited in the bank account of the lender, could not be the sole reason for disbelieving the genuineness of any loan transaction. 11.8 We further find that before the authorities below, the assessee had furnished a copy of Declaration duly signed by Shri Sumeet Garg Proprietor of M/s.Sumeet & Sumeet Sales dated 03/10/2018. A copy of such Declaration has also been furnished by the assessee before us in his Paper Book for A.Y. 2015-16 at page no. 195 to 201. From such declaration, we find that at para (4) of the Declaration, Shri Sumeet Garg has clearly stated to have given loan of Rs. 7,00,000/- to the assessee company. At para (5) of the Declaration, Shri Sumeet Garg has stated to have given the loans out of his explained sources only. At para (8) of the Declaration, Shri Sumeet Garg has clearly denied to have made any statement before any authority admitting the non-genuineness of the transactions. At para (9), Shri Sumeet Garg has clearly stated that his statement was obtained under duress and pressure and finally, at para (10), Shri Sumeet Garg has retracted his statement recorded on 26/12/2016. In our considered view, a statement given by a third party, behind the back of an assessee, which is subsequently retracted by specifying the circumstances in which the original statement was given, has no evidentiary value by itself. We also find that Shri Sumeet Garg has clearly stated that cash deposits in his bank account were made by him only out of his own resources only. We find that during the course of the search proceedings in the various premises of the assessee company and its directors, no incriminating material or evidence was found or recovered which could have given a slightest idea regarding the non- genuineness of the loan transactions carried out by the assessee with M/s. Sumeet & Sumeet. We also find that in the instant case, the ld. AO himself has not conducted any independent enquiry either by way of issuance of summons u/s. 131 or letters u/s. 133(6) of the Act to the lender, despite the assessee’s making a specific request to this effect. We find that the ld. AO sticked only to the statement given by the lender before the Investigation Wing which got subsequently retracted. 11.9 We also find full substance in the contention of the assessee that in the instant case, the AO was not only duty bound to provide a copy of the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 61 of 69 statement of Shri Sumeet Garg, which was intended to be used against the assessee as an evidence, but, was also required to afford opportunity of cross examination of his witnesses to the assessee, which he miserably failed to do. In such circumstances, in our considered view, merely on the basis of one unconfronted statement, the AO was not legally justified in making the additions in respect of the aforesaid loan creditor i.e. M/s. Sumeet & Sumeet Sales. In the preceding paras, we have already cited various judicial authorities for the proposition that without giving an opportunity of cross examination of the person making the statement, merely on the basis of the statement of a third party, no adverse inference can be drawn against an assessee and therefore, in respect of the present lender, we refrain ourselves to make the same discussions again. 11.10 In the light of the aforesaid findings, we find no substance in the action of the AO in making the addition of Rs. 7,00,000/- in the assessee’s income for A.Y. 2015-16 on account of unexplained receipts from bank account of M/s. Sumeet & Sumeet Sales and accordingly, the same is hereby directed to be Deleted. Accordingly, the Ground No. 3(a) & 3(b) of the Assessee for the A.Y. 2015-16 are hereby allowed. 12. Ground No. 2 of the Revenue for A.Y. 2016-17 12.1 Through the Ground No. 2 for A.Y. 2016-17, the Revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs.8,50,00,000/- made by the AO on account of unsecured loan obtained by the assessee company from M/s. Inox Wind Ltd.. 12.2 Briefly stated facts of the issue, as emerging out from the assessment order, are that the AO, noticed that the assessee had received an amount of Rs.8.50 crores from a company called Inox Wind Ltd. in the form of interest free unsecured loans during F.Y. 2015-16 (AY 2016-17). The AO further noted that at the same time, a group company had purchased wind turbine generator from the same company for which payments were made during FY 2015-16. Accordingly, the AO, vide show-cause notice dated 19-07-2019, required the assessee to furnish its explanation on the said issue. In reply, the assessee, vide its letter dated 30.07.2019, furnished its explanation. The assessee claimed that there is no nexus of the loan taken by it from Inox Wind Ltd. with the purchase of wind mill turbine generator by its group concern. The AO, while framing the assessment order, averted that the amount of Rs.8,50,00,000/- received by the assessee during FY 2015-16 from Inox Wind Ltd. is actually a payback from the purchase amount of Wind Mill Turbine Generator purchased by Global Metal &Energy Pvt. Ltd..The AO further stated that the unsecured loan received by the assessee is therefore not a genuine loan but a colorable device. Finally, the AO made an addition of Rs.8,50,00,000/- in the assessee’s income for A.Y. 2016-17on account of unexplained cash credit u/s. 68 in respect of unsecured loan obtained by the assessee from M/s. Inox Wind Ltd. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 62 of 69 12.3 Aggrieved with the Order of Assessment, the assessee preferred an appeal for the subject assessment year before the ld. CIT(A). During the course of the first appellate proceedings, the assessee made detailed written submissions along with the documentary evidences which were also furnished by it before the AO. Before the ld. CIT(A), the assessee also furnished certain additional evidences, under Rule 46A, to substantiate the identity & creditworthiness of the lender company and genuineness of loan transactions which were forwarded to the Assessing Officer for comments. The copy of the Remand Report of the AO was provided by the ld. CIT(A) to the assessee and in response, the assessee filed its rejoinder. The Ld. CIT(A), after considering the remand report of the AO as well as the rejoinder of the assessee, deleted the entire addition so made by the AO in respect of the unsecured loan obtained by the assessee from M/s. Inox Wind Ltd.. The ld. CIT(A) has given the relevant findings in respect of this issue at paras (4.5.3) to (4.5.6) of his order. 12.4 Aggrieved with the Order of the ld. CIT(A), the Revenue is in appeal before us. 12.5 Before us, learned CIT(DR) vehemently argued supporting the observations of the AO on this issue. 12.6 Per Contra, Learned Counsel for the assessee has filed written submission before us. The relevant portion of such written submission is being reproduced as under: “D. Key Points of Assessee’s Submission and Relevant Pages of the Paper Books: 1.00 The brief facts relating to the issue, which emerge from the Assessment Order itself, are that during the previous year relevant to the assessment year under consideration, the assessee company (as abbreviated in the Order of the Assessment as ‘GPPL’), had received certain funds, in four trenches, aggregating to a sum of Rs.8,50,00,000/- from a company called as ‘M/s. Inox Wind Ltd.’ [in short, ‘IWL’] which is engaged in the business of manufacturing and supply of Wind Mill Turbines and Generators. The AO, on the basis of the Report of the Special Auditors, has given the findings that the very source of providing funds by IWL to the assessee company was payment made by one other group company of the assessee namely Global Metal & Energy Pvt. Ltd. [in short, ‘GMEPL’] to IWL against the purchase consideration of Wind Mill Generators made by such GMEPL from IWL. Finally, the AO reached to the conclusion that the so-called unsecured loan shown by the assessee company in its books of account is nothing but a payback by IWL to GMEPL through the assessee company. 2.00 During the course of the assessment proceedings, the learned AO vide his show-cause notice dated 19-07-2019 [kindly refer Page No. 105 to 108 of our Paper Book for A.Y. 2016-17] had required the assessee to furnish its explanation on the subject issue. In response to the aforesaid query, the assessee vide its letter dated 30-07-2019 [kindly refer Page No. 109 to 141 of IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 63 of 69 our Paper Book for A.Y. 2016-17], made its very elaborative explanation on the subject issue.For a ready reference, the relevant abstract of the reply of the assessee made before the ld. AO, vide letter dated 30-07-2019, is being reproduced as under : “xi). EXPLANATION AS TO WHY THE INTEREST FREE UNSECURED LOAN OF RS.8,50,00,000/- RECEIVED FROM INOX WIND LTD. FOR PURCHASE OF WIND WILL NOT BE TREATED AS SALES COMMISSION In this context, it is submitted that both the inferences drawn by the Special Auditors and your good self are not supported by any documentary evidences. Merely because one of the sister concerns of our company had purchased some equipments from Inox Wind Ltd. by itself cannot be a ground for presumption that the genuine loan given by the Inox Wind Ltd. to our company was either refund of the part of the sales consideration or payment of any sales commission by Inox Wind Ltd. to our company. The sum has genuinely been taken as a loan which is refundable in due course of time. It is submitted that neither our company is in the business of commission agent nor we carried out any such business during the relevant previous year. Our company has got no nexus with the wind mill turbine generator purchased by our group company from Inox Wind Ltd.. Our company has not rendered any service relating to the aforesaid transaction of purchase. In such circumstances, the question of getting any commission by our company from Inox Ltd. does not arise. It is submitted that during the course of the search operations in our premises, not a single document was found or seized from which it could have been inferred that our company received any commission from Inox Wind Ltd.. It is further submitted that the entire amount has been received by our company from Inox Wind Ltd. as unsecured loan only and the same is refundable in due course of time. It would be appreciated that a refundable loan can never partake the character of an income and therefore, the question of making any addition on this count does not arise.” 3.00 In the instant case, the subject addition has been made by the learned AO under the provisions of section 68 of the Act. It is submitted that the action of the learned AO in making addition under s.68 is in contradiction to the findings given by the learned AO himself in the body of the assessment order. In the instant case, the learned AO has not doubted the identity of the creditor namely M/s. Inox Wind Ltd. (IWL) in respect of whom the assessee had shown credit (receipts of funds) in its books of account. The learned AO has also not disputed the actual receipts of funds by the assessee from the IWL, in four trenches, aggregating to a sum of Rs.8,50,00,000/- through banking channels. The learned AO has also not doubted or disputed capacity or creditworthiness or for that matter, the immediate sources of availability of funds in the hands of the creditor namely IWL for providing funds to the assessee company. It would thus be appreciated that having accepted the identity of the creditor, the fact of actual receipts of funds by the assessee from the IWL and the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 64 of 69 creditworthiness of the IWL, there was absolutely no justification for the learned AO to invoke the provisions of s.68 of the Act in the hands of the assessee merely on presumptions and assumptions. 4.00 As stated by the learned AO himself at para (10.2) of the assessment order, it is an undisputed fact that one of the associate companies of the assessee namely Global Metal & Energy Pvt. Ltd. (GMEPL), who is engaged in the business of generation and transmission of power through Wind Mill Generators, had purchased certain equipments from IWL during the financial year 2015-16 relevant to the assessment year under consideration. It is also an undisputed fact that against the purchase consideration for equipments, the GMEPL had made payments to IWL. It is also an admitted and undisputed fact that the IWL had provided funds to the extent of Rs.8.50 crores to the assessee company during the previous year under consideration which is the subject matter of dispute. However, it is submitted that both the transactions are two different transactions carried out by two separate legal entities but this fact alone cannot give rise to a presumption that whatever funds were provided by IWL to the assessee company were in the nature of payback against the purchase consideration paid by GMEPL to IWL for purchase of Wind Mill Generators. 4.01 It is submitted that as per contractual agreement between GMEPL and IWL, the IWL, which is a renowned manufacturers of Wind Mill Generators, had agreed to supply five numbers of Renewable/ Non-Conventional Energy Devices Wind Operated Electricity Generators to GMEPL with a capacity of 2 MW each, on turnkey basis. Accordingly, during the relevant previous year, the IWL supplied such equipments to GMEPL after raising excisable commercial invoices. Needless to say that on such supply, the IWL had charged and paid the applicable excise duties and central sales tax to the exchequer. It shall be appreciated that Rural Electricity Corporation Ltd. (REC), one of the Enterprises of the Government of India, after vetting the project cost in depth and after making a comparison of the competitive prices of the equipments, had sanctioned a term loan of Rs.47.09 crores to GMEPL. A copy of the Sanction Letter dated 24-02-2015 duly issued by REC to GMEPL is placed at Page No. 328 to 355 of our Paper Book for A.Y. 2016-17. 4.02 In the light of the facts that (i) the prevailing market prices of the Wind Mill Generators were the same at which the GMEPL made the purchases from IWL; (ii) the GMEPL had made the payments to IWL at the contractual rates only; (iii) the entire project of the GMEPL was deeply scrutinized by a Government Enterprise which after in-depth scrutiny, had provided credit facilities to GMEPL; and (iv) the IWL had recognized the sales in its books of account only as per the commercial excisable invoices raised to GMEPL and had also paid the due excise duties and commercial taxes; there cannot remain any room for any doubt regarding the genuineness of the purchase transactions made by GMEPL with IWL. 4.03 The entire theory of the learned AO in making the impugned addition is based upon the comments of the Special Auditors only without making any single enquiry in the matter. It shall be appreciated that during the course of the entire search proceedings, not even a single document or agreement or any IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 65 of 69 other evidence was found from which it could have been inferred that there was any provision for giving any payback to anyone in any form by IWL to GMEPL. In such circumstances, merely on the basis of a coincidence of providing loan by a company to the assessee company, who also happened to supply certain goods to another group company of the assessee, no presumption as regard to the payback ought to have been drawn by the learned AO. 4.04 It shall be appreciated that there is no embargo in any of the laws of the land that a person who has sold goods to someone cannot provide loan to any associate of such person. Likewise, there was no prohibition or restriction for the assessee company to accept the loan from the IWL who had genuinely supplied goods to GMEPL, a sister concern of the assessee. 5.01 It is reiterated that in the instant case, the learned AO has not doubted the identity of IWL, fact of providing funds by IWL to the assessee company and as also, the sources of availability of funds in the hands of IWL to provide funds to assessee company, still, in order to dispel any doubt, the following documentary evidences of the aforesaid company are placed in our Paper Book for A.Y. 2016-17, from Page No. 356 to 417: (i) A copy of certificate of incorporation of the company (ii) A copy of the Memorandum and Articles of Association of the company (iii) A copy of the Master Data downloaded from the official website of the MCA (iv) A copy of the loan confirmation letter duly signed by the authorized signatory of the IWL (v) Copies of abstracts of the relevant bank statements of the assessee (vi) A copy of relevant bank statement of IWL (vii) A copy of audited financial statements of IWL (viii) Copy of the Sanction Letter dated 24-02-2015 duly issued by REC to GMEPL (ix) Copy of the loan confirmation letter duly signed by the authorized signatory of the IWL (x) Relevant abstract of bank statements of IWL 6.00 On a perusal of the bank statements of IWL, it shall be observed that the necessary transactions regarding giving of funds by such IWL to the assessee company are getting clearly reflected. Further, on a perusal of the audited balance sheet of the IWL, it shall be observed that even such IWL has shown a sum of Rs.8,50,00,000/- as Inter-Corporate Deposits to the assessee IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 66 of 69 company. In such circumstances, by any stretch of imagination, no adverse inference ought to have been drawn against the assessee company. 7.00 Your Honours, during the course of appellate proceedings, it was also submitted before the ld. CIT(A) that even if the theory of the Special Auditors as well as the learned AO to the effect that the funds received by the assessee company from IWL were in the nature of payback of the sales consideration paid by GMEPL to IWL, even then, since as per the AO himself such payback has eventually reached in the hands of GMEPL, no adverse inference, whatsoever, can be drawn against the assessee company. In any case, such a theory cannot give rise to a case in which the assessee failed to explain the nature and source of credit entries in its books of account and consequently, under any canon of law, no addition under s.68 of the Act could have been made in the hands of the assessee. It is submitted that ld. CIT(A) considering the facts and circumstances of the case and as also the alternative submission of the assessee, has rightly deleted the addition of Rs. 8,50,00,000/- made by the ld. AO, which deserves to be upheld by this Hon’ble Bench.” 13.1 We have heard rival contentions, perused the records placed before us and duly considered the facts and circumstances and carefully gone through written and oral submissions made from both the sides. 13.2 We find that, in the instant case, the subject addition has been made by the AO under the provisions of section 68 of the Act. We find substance in the contention of the assessee that the action of the AO in making addition under s.68 is in contradiction to the findings given by the AO himself in the body of the assessment order. In the instant case, the AO has not doubted the identity of the creditor namely M/s. Inox Wind Ltd. (IWL) in respect of whom the assessee had shown credit (receipts of funds) in its books of account. The AO has also not disputed the actual receipts of funds by the assessee from the IWL, in four trenches, aggregating to a sum of Rs.8,50,00,000/- through banking channels. The AO has also not doubted or disputed capacity or creditworthiness or for that matter, the immediate sources of availability of funds in the hands of the creditor namely IWL for providing funds to the assessee company. The AO himself at para (10.2) of the assessment order has given a finding that one of the associate companies of the assessee namely Global Metal & Energy Pvt. Ltd. (GMEPL), who is engaged in the business of generation and transmission of power through Wind Mill Generators, had purchased certain equipments from IWL during the financial year 2015-16 relevant to the assessment year under consideration. The AO also observed that against the purchase consideration for equipments, the GMEPL had made payments to IWL and the IWL had provided funds to the extent of Rs.8.50 crores to the assessee company during the previous year under consideration. We find substance in the contention of the assessee that both the transactions are two different transactions carried out by two separate legal entities and merely for the reason that some supplier of some equipments to one company has also provided unsecured loan to a separate company, though associated with the IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 67 of 69 purchasing company, no adverse inference in the hands of the loan recipient company can be drawn. In our considered view, this fact alone could not have given rise to a presumption that whatever funds were provided by IWL to the assessee company were in the nature of payback against the purchase consideration paid by GMEPL to IWL for purchase of Wind Mill Generators. 13.3 We find sufficient merit in the contention of the assessee that (i) the GMEPL had made the payments to IWL at the contractual rates only; (ii) the entire project of the GMEPL was deeply scrutinized by a Government Enterprise which after in-depth scrutiny, had provided credit facilities to GMEPL; and (iii) the IWL had recognized the sales in its books of account only as per the commercial excisable invoices raised to GMEPL and had also paid the due excise duties and commercial taxes; there cannot remain any room for any doubt regarding the genuineness of the purchase transactions made by GMEPL with IWL. The entire theory of the AO in making the impugned addition is based upon the comments of the Special Auditors only without making any single enquiry in the matter. We also find that during the course of the entire search proceedings, not even a single document or agreement or any other evidence was found from which it could have been inferred that there was any provision for giving any payback to anyone in any form by IWL to GMEPL. In such circumstances, merely on the basis of a coincidence of providing loan by a company to the assessee company, who also happened to supply certain goods to another group company of the assessee, no presumption as regard to the payback ought to have been drawn by the AO. We also find substance in the contention of the assessee that there is no embargo in any of the laws of the land that a person who has sold goods to someone cannot provide loan to any associate of such person. Likewise, there was no prohibition or restriction for the assessee company to accept the loan from the IWL who had genuinely supplied goods to GMEPL, a sister concern of the assessee. 13.4 Thus, in nutshell, we find that the AO has not doubted the identity of IWL, fact of providing funds by IWL to the assessee company and as also, the sources of availability of funds in the hands of IWL to provide funds to assessee company. We find that during the course of the assessee proceedings, for establishing the genuineness of the loan transactions the assessee has furnished numerous documentary evidences. The assessee furnished before us, a copy of certificate of incorporation of the IWL, a copy of the Memorandum and Articles of Association of the IWL, a copy of the Master Data downloaded from the official website of the MCA, a copy of the loan confirmation letter duly signed by the authorized signatory of the IWL, copies of abstracts of the relevant bank statements of the assessee, a copy of relevant bank statement of IWL and a copy of audited financial statements of IWL showing the subject amount as a loan and not a payback to the assessee at page no. 356 to 417 of its Paper Book for A.Y. 2016-17. On a perusal of the audited balance sheet of the IWL as of 31-03-2016, we find IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 68 of 69 that in such Balance Sheet, at Note No. 22, placed at page no. 403 of the Paper Book for A.Y. 2016-17, an amount of Rs.850 lakhs has been shown as Inter corporate Deposit and in the Disclosure part of such Inter-Corporate Deposit, under Note 51(a), placed at page no. 416 of the Paper Book for A.Y. 2016-17, the IWL has clearly shown making of inter-corporate deposit amounting to Rs.8,50,00,000/- with the assessee company as on 31-03- 2016 which perfectly gets tallied with the amount shown to have received by the assessee company from IWL in its books of account. We further find that it is not the case of the AO that the IWL has claimed to have granted any discount of the subject sum of Rs.8.50 croresin its books of account to the GMEPL in respect of the sales transactions, otherwise, the same amount would not have got appeared by the IWL from the assessee company in its books of account on 31-03-2016. We also find substance in the contention of the assessee that it is also not the case of the AO that the IWL has claimed any payment of commission to the assessee or anyone in respect of the subject deal. 13.5 We also find substance in the contention of the assessee that even if the theory of the Special Auditors as well as the AO to the effect that the funds received by the assessee company from IWL were in the nature of payback of the sales consideration paid by GMEPL to IWL, even then, since as per the AO himself such payback has eventually reached in the hands of GMEPL, no adverse inference, whatsoever, can be drawn against the assessee company. In any case, such a theory cannot give rise to a case in which the assessee failed to explain the nature and source of credit entries in its books of account and consequently no addition under s.68 of the Act could have been made in the hands of the assessee. We therefore do not find any infirmity in the action of the ld. CIT(A) in deleting the addition of Rs.8,50,00,000/- so made by the AO on account of unexplained unsecured loan from Inox Wind Ltd.. Accordingly, the action of the ld. CIT(A) in deleting the addition of Rs. 8,50,00,000/- is confirmed. Resultantly, the Ground No. 1 of the Revenue for the A.Y. 2016-17 is hereby dismissed. 14. Ground No. 3 of the Assessee for A.Y. 2017-18 14.1 Through the Ground No.3 taken for A.Y. 2017-18, the assessee has challenged the action of the ld. CIT(A) in upholding the AO’s action for invoking the provisions of s.115BBE of the Act in respect of disallowance of interest on unsecured loans. 14.2 Before us, the counsel of the assessee has not pressed this Ground and therefore, the same is hereby Dismissed. IT(SS)A No.158 to 160/Ind/2020 IT(SS)A No.66/Ind/2021 AYs: 2015-16 to 2017-18 Assessment Year: 2016-17 M/s. Global Powernet Pvt. Ltd. Page 69 of 69 15. In the result, the appeals of the assessee are partly allowed and the appeal of the Revenue is dismissed. The order pronounced as per Rule 34 of ITAT Rules, 1963 on 26.04.2022. Sd/- Sd/- (MAHAVIR PRASAD) (MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER दनांक /Dated : 26.04.2022 Patel/Sr. PS Copy to: The Appellant/Respondent/CIT concerned/CIT(A) concerned/ DR, ITAT, Indore/Guard file. By Order, Asstt.Registrar, I.T.A.T., Indore