SQUARE FOUR HOUSING & INFRASTRUCTURE DEVELOPMENT PVT. LTD.,KOLKATA V. DCIT, CC-2(3), KOLKATA, KOLKATA

ITSSA 42/KOL/2022

AI Insights

The case involves multiple appeals by Square Four Assets Management and Reconstruction Company Pvt. Ltd., Square Four Housing & Infrastructure Development Pvt. Ltd., and Ganesh Kumar Singhania against the orders of the Commissioner of Income Tax (Appeals)-20, Kolkata, for the assessment years 2016-17 and 2017-18. The primary issues revolved around the additions made by the Assessing Officer under sections 68 and 69C of the Income Tax Act, concerning alleged unexplained cash credits and bogus loans. The Tribunal examined the procedural validity of the additions, the nature of the evidence presented, and the compliance with legal standards for such assessments. The Tribunal found that the additions were not substantiated by adequate incriminating material and that the procedural rights of the appellants were not fully honored, particularly regarding the right to cross-examine and the handling of evidence.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 39609 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 08-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 21-06-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Unexplained expenditure; Documents seized; TDS; Search and seizure; Accommodation entries; Loose papers; Bogus loan; Bogus
• Section: 143(3); 142(1); 143(2); 153A; 68; 69C; 133A

Judgement Text

" आयकर अपीलȣय अͬधकरण, कोलकाता पीठ “बी’’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH: KOLKATA Įी राजपाल यादव, उपाÚय¢ एबं Įी राजेश क ुमार, लेखा सदèय क े सम¢ [Before Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member ] I.T.(SS)A. No. 18/Kol/2022 Assessment Year: 2016-17 Square Four Assets Management and Reconstruction Company Pvt. Ltd. (PAN: AAFCA 5966 P) Vs. DCIT, CC-2(3), Kolkata Appellant / ) अपीलाथȸ ( Respondent / (Ĥ×यथȸ) I.T.(SS)A. No. 42/Kol/2022 Assessment Year: 2017-18 Square Four Housing & Infrastructure Development Pvt. Ltd. (PAN: AABCO 4154 H) Vs. DCIT, CC-2(3), Kolkata Appellant / ) अपीलाथȸ ( Respondent / (Ĥ×यथȸ) I.T.(SS)A. No. 106 & 107/Kol/2022 Assessment Year: 2016-17 & 2017-18 Ganesh Kumar Singhania (PAN: AKTPS 7277 C) Vs. DCIT, CC-2(3), Kolkata Appellant / ) अपीलाथȸ ( Respondent / (Ĥ×यथȸ) 2 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania Date of Hearing / सुनवाई कȧ Ǔतͬथ 26.09.2024 Date of Pronouncement/ आदेश उɮघोषणा कȧ Ǔतͬथ 08.10.2024 For the Appellant/ Ǔनधा[ǐरती कȧ ओर से Shri Miraj D Shah, A.R For the Respondent/ राजèव कȧ ओर से Shri Abhijit Kundu, CITDR ORDER / आदेश Per Rajesh Kumar, AM: These are the appeals preferred by the different assesses against the separate orders of the Ld. Commissioner of Income Tax (Appeals)-20, Kolkata (hereinafter referred to as the Ld. CIT(A)”] for AY 2016-17 & 2017-18. First of all we shall adjudicate in IT(SS)A No. 18/Kol/2022 for AY 2016-17. IT(SS)A No. 18/Kol/2022 for AY 2016-17 2. The only issue raised by the assessee in the various grounds of appeal is against the confirmation of addition of Rs. 9,02,467/- as made by the AO u/s 69C of the Act. 3. The facts in brief are that the assessee filed its return of income electronically on 30.03.2017 declaring total income at ‘NIL’. The case was processed under section 143(1) of the Act accepting returned income on 19.06.2017. A search and seizure operation under section 132(1) of the Act as well as survey under section 133A of the Act were conducted on 03.02.2017 and subsequent dates, in the office premises of “Square Four Group of Companies” at 238A, A.J.C. Bose Road, 2nd Floor, Suit No. 2B, 3 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania Flat No. 2D, Kolkata-700020 as well as at the residential address of the Directors and key persons connected with this group. Shri Ganesh Kumar Singhania is the key person of the group. According to the Investigation Wing, Shri Ganesh Kumar Singhania is managing the affairs of 50 companies. During the course of search on the residential premises of Shri Ganesh Kumar Singhania, Smt. Anita Singhania and Shri Arun Kumar Singh, cash, valuables and voluminous documents were found and seized. Consequently notice under section 153A of the Act was issued to the assessee on 10.07.2018, which was complied with by filing a letter dated 19.07.2018 objecting to issuance of notice under section 153A of the Act. The assessee also complied with the notice by filing a return of income on 17.07.2018 declaring ‘nil’ income. Thereafter, statutory notices under section 143(2) and 142(1) of the Act were issued and duly served upon the assessee. The ld. Assessing Officer on perusal of the balance-sheet, details of unsecured loans taken and bank statements filed during the course of search assessment proceedings observed that the assessee has taken Rs.70,00,000/- from two entities, namely Sunghandha Nirman Pvt. Limited and Sagar Vinimay Pvt. Limited during financial year 2011-12. It was also noted that the loan was squared off during the same F.Y. in the case of Sagar Vinimay Pvt. Limited. It was also observed by the ld AO that interest of Rs.3,65,499/- excluding TDS was paid to Superior Vanijya Pvt. Limited on the unsecured loan. The ld. Assessing Officer made the addition of Rs.70,00,000/- on the ground that the loans taken from two entities were bogus loans and were in the nature of accommodation entries and accordingly added the same to the income of the assessee in the assessment framed under section 143(3) read with section 153A of the Act dated 31.12.2018. Similarly the AO also made additions of Rs. 35,000/- on account of commission for arranging these accommodation entries, 3,65,499/- towards bogus interest expenses, 38,11,401/-bogus commodity profits and Rs. 3,811/- brokerage charges for commodity profits on the basis of books of accounts of the assessee. It is pertinent to mention that this being an unabated assessment on the date of search as the it has attained finality on that date and no proceedings were pending on the date of 4 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania search. The AO upon perusal of the balance sheet, details of unsecured loan and bank statement filed during the course of assessment proceedings noticed that the sum of Rs. 1,00,00,000/- was taken from M/s Swarnapriya Vanijya Pvt. Ltd. during the FY 2014- 15 relevant to AY 2015-16. The AO noted that during the instant financial year 2015- 16 relevant to AY 2016-17 the assessee has paid a sum of Rs. 10, 02,741/- by way of interest. According to AO, the said lender company was a shell/paper entity having no real business or income during the year and accordingly the same was treated as non- genuine in the earlier assessment year and added to the income of the assessee. In the assessment framed u/s 143(3) read with Section 153A of the Act order dated………. 4. In the appellate proceedings, the Ld. CIT(A) confirmed the addition as made by the Ao towards interest on the above said loan by observing that the loan was taken from M/s Swarnapriya Vanijya Pvt. Ltd. which is a shell company and accordingly upheld the finding of AO that the interest paid is also not genuine. 5. After hearing the rival contentions and perusing the material on record, we note that the issue of loan raised in AY 2015-16 i.e. the preceding assessment year has already been decided by us in favour of the assessee on the ground that no incriminating material found during the course of search in respect of the said unsecured loan. Therefore, the addition has been deleted on the ground that the AO has no jurisdiction to make the addition in the current year. Since the issue of interest is consequential to the issue as decided by us in earlier assessment year which, as has been stated above, has been allowed in favour of the assessee. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly, the appeal is allowed. IT(SS)A No. 42/Kol/2022 for AY 2017-18. 6. Issue raised in ground no. 1 is general in nature and need no specific adjudication. 5 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania 7. Issue raised in ground no. 2 and 3 is against the confirmation of addition of Rs. 2,55,00,000/- by the Ld. CIT(A) as made by the AO u/s 68 of the Act being unexplained cash credit. 8. Facts in brief are that the assessee raised an aggregate of unsecured loans of Rs. 2,55,00,000/- from four parties, the details whereof are given in para 4.1 of the assessment order. The said loans were raised by the assessee from four entities through account payee cheques received in the bank account of the assessee and the interest was duly provided and paid to the lenders after deduction of tax at source which was duly deposited in the Government Exchequer. The loans were duly repaid either during the year or in the subsequent assessment year. The AO during the course of assessment proceedings called for the details/evidences from the assessee which the assessee has duly furnished before the AO. It is also pertinent to state that the loans were raised from the four parties from whom the money was raised in the earlier assessment year as well which were unabated and were decided in favour of the assessee in the earlier assessment years. The AO has stated these unsecured loans to be non-genuine merely on the basis of Investigation Wing Report wherein the statement of Shri Pawan Agarwal was recorded on 31.03.2014 on the basis of which these lenders were treated as shell companies in the instant assessment year 2017-18. The statement was recorded on 31.1.2014 which was an old statement. The cross-examination sought by the assessee from the AO was also not given to the assessee. Finally the AO merely by relying on the report of Investigation Wing and the Inspector’s Report, added the entire amount of unsecured loans u/s 68 of the Act as non-genuine in the assessment framed u/s 143(3) of the Act dated 31.12.2018. 9. In the appellate proceedings, the Ld. CIT(A) has confirmed the addition by simply upholding the findings given by the AO without taking into account the facts on record and contentions made by the assessee. 6 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania 10. After hearing the rival contention and perusing the material on record, we find that the unsecured loans were raised from the parties from whom the unsecured loans were also raised in the earlier assessment years as well. Thus, the money has been raised from the parties which were old lenders which had also lent in the earlier assessment years and which were added in those assessment years but the Tribunal has allowed the appeals which arose out to the assessments which in turn out of the same search u/s 132(1) of the Act. The undisputed facts are that the assessee raised loans from four parties which were apparently the parties from the loans were raised in the earlier assessment years also. We note that the money was received through banking channel, interest on these loans was duly provided in the books of account and paid to the lender after deduction of tax at source which was duly deposited in the Government of Exchequer. We note that the loans borrowed from four parties were either repaid during the current assessment year or in the subsequent years. We further note that the assessee has based his conclusion on the basis of Investigation Wing Report which in turn based on the statement dated 31.01.2014 of Shri Pawan Agarwal which was recorded much prior to the date of search the instant assessment year. We are in unable to understand as to how the statement given long back was applied to the subsequent assessment years without giving any substantive findings or bringing any adverse material on record. We also note that the cross-examination sought by the assessee of the third party whose statement was recorded by the Investigation Wing was also rejected by the AO the findings of which were given by the AO at page 16 of assessment order in para 4.1.8(b)(ii) wherein the AO stated that the AO must place before the assessee all evidences gathered from private sources but he is not required by law to give to the assessee the right to cross-examine the parties from whom the evidences were gathered by citing reasons that if the name was disclosed in that event confidentiality of the names of the parties would not be maintained. We have also perused the Inspector’s report which noted that there was no such companies existed at addresses given. However, as a matter of fact the loans were received through banking channel from these 7 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania entities to whom the interest was also duly paid after deduction of tax at source. Therefore, the considering the facts and circumstances of the case, the addition u/s 68 of the Act cannot be sustained. Accordingly, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. 11. The common issue raised in ground nos. 4 and 5 is against the confirmation of addition of Rs. 1,27,500/- as made by the AO on account of commission for arranging unsecured loans and the issue raised in ground nos. 6 and 7 is against the confirmation of addition of Rs. 48,41,774/- as made by the AO u/s 69C of the Act. 12. Since we have deleted the addition as made by the AO u/s 68 of the Act, issue raised in ground nos. 4 to 7 are consequential and therefore the order passed by the Ld. CIT(A) is set aside on these issues and the AO is directed to delete the additions. Accordingly, the appeal is allowed. IT(SS)A Nos. 106/Kol/2022 for AY 2016-17. 13. The only issue raised by the assessee in the various grounds of appeal is against the confirmation of addition of Rs. 1,18,00,000/- as made by the AO towards cash payment made out of books. 14. Facts in brief are that the AO on perusal of the books of account being ID marked as SFGO/2 (Page nos. 7 to 10) seized during the course of survey observed that the assessee has incurred huge expenses in cash towards construction works at 4A, Doverpark, Kolkata. The details of said expenditure as per the said documents were also given in para 4.1 of assessment order. Thereafter, the AO finally added the amount as unaccounted income out of which the unaccounted expenditure incurred by the assessee out of undisclosed sources and made addition of Rs. 1,18,00,000/-. 15. In the appellate proceedings, the Ld. CIT(A) confirmed the addition as made by the AO on the ground that the details were contained in the books of account seized 8 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania during the course of search action and therefore, the onus is on the assessee to explain the same failing which the addition was rightly made by the AO. The Ld. CIT(A) also referred to the documents seized, print outs of e-mails sent by the key person of entry operator Mr. Sujit Kumar. Finally, the Ld. CIT(A) noted that the mere disputing the documents about contents would not help the assessee as these were clearly indicated the expenses incurred by the assessee in cash. 16. After hearing the rival contentions and perusing the material on record, we note that the documents marked as SFGO/2 page 7 -10 contained the details of cash incurred towards construction at 4A, Doverpark, Kolkata. All these pages basically printout of e- mails sent by Mr. Arun Singh on 21.07.2016. These documents contained the date wise details of payments from 20.02.2015 to 29.07.2015. The AO on the perusal of these documents concluded that the assessee has incurred the cash expenses in respect of interior work carried out at the residence of director at 4A, Doverpark, Kolkata and accordingly held this has been unaccounted expenditure out of undisclosed sources. The assessee submitted before the appellate authority that the loose papers marked as SFGO/2 is basically contained the rough notings and the assessee has denied any knowledge of these notings and also any knowledge of the person who have made these notings. It was also submitted that the said documents contained the rough notings of the payments, however, nowhere mentioned the payments were related to 4A, Doverpark, Kolkata. The assessee submitted before the appellate authority as well as before us that construction expenditure were duly accounted in the books of account and all the bills, vouchers along with copy of ledger account produced before the AO. Ld. CIT(A) as well as before us. We have examined these loose documents and find that the assessee has replied the show cause notice before the AO vide letter dated 19.12.2018 wherein it has stated that the details and evidences relating to source of expenses incurred on interiors, exteriors, consultancy, architect fee, interior designer fees have already been submitted in response to notice issued u/s 142(1) of the Act. It was further submitted that the bills, vouchers and deeds in relation to the property at 4A, 9 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania Doverpark, Kolkata were being furnished besides stating that this was submitted before the DDIT(Inv), Unit-4(1), Kolkata as well. Considering all the facts and circumstances, we are of the view that the addition has been made by the AO merely on the basis of loose sheets which are no more than a dump documents and did not mention as to where the expenditure was incurred whereas on the other hand the assessee has fully disclosed the expenditure incurred on the interior and exterior work at 4A, Doverpark , Kolkata which has been duly accounted in the books of account and the copies of bills, vouchers, purchase deeds were duly furnished before the authorities below. Therefore, we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition. Accordingly, the appeal of the assessee is allowed. IT(SS)A No. 107/Kol/2022 for AY 2017-18. 17. The only issue raised by the assessee is against confirmation of addition of Rs. 42,00,000/- on account of cash payment made out of books which is similar to one as decided by us in IT(SS)A No. 106/Kol/2022 for AY 2016-17. Therefore, our decision would, mutatis mutandis, apply to this appeal as well. Accordingly, the appeal of the assessee is allowed. 18. In the result, all the appeals of the different assesses are allowed. Order is pronounced in the open court on 8th October, 2024 Sd/- Sd/- (Rajpal Yadav /राजपाल यादव) (Rajesh Kumar/राजेश क ुमार) Vice-President/उपाÚय¢ Accountant Member/लेखा सदèय Dated: 8th October, 2024 SM, Sr. PS 10 I.T.(SS).A. Nos.18 & 42/Kol/2022 I.T.(SS).A Nos. 106 & 107/Kol/2022 Assessment Years: 2016-17 & 2017-18 Square Four Assets Management and Reconstruction Company Pvt. Ltd. Square Four Housing & Infrastructure Development Pvt. Ltd. Ganesh Kumar Singhania Copy of the order forwarded to: 1. Appellant- Square Four Assets Management & Reconstruction Company Pvt. Limited, Square Four Housing & Infrastructure Development Pvt. Ltd & Ganesh Kumar Singhania All are residing at 238A, A.J.C. Bose Road, Kolkata-700020 2. Respondent – DCIT, CC-2(3), Kolkata 3. Ld. CIT(A)-20, Kolkata 4. Ld. PCIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata "