Case Law Details
Modern Malleables Limited Vs DCIT (ITAT Kolkata)
Conclusion: Addition made u/s. 68 only on the basis of two statements which could not stand the scrutiny of law, was not justified and therefore, the addition could not be sustained as per law.
Held: AO got information from the Investigation Wing pursuant to search operation conducted at the premises of one, Mr. A and Mr. J at Kolkata. A had confessed that he and Mr. J were entry operators who control penny/shell companies, which were engaged in giving one time entry of bogus share capital or expense or unsecured loans/advances in lieu of small commission. According to the AO, M/s. NCPL was also a shell company, wherein assessee had taken the benefit of accommodation entry. AO had summoned the director of M/s. NCPL, Shri S and recorded his statement, wherein AO noted that though, Shri S brought the JV agreement signed by him but he denied knowing the contents of the JV agreement. According to AO, S did not even know about the amount being returned back to M/s. NCPL. Assessee contended that AO disbelieved the “JV agreement” to fasten the addition simply believing the statements of S and A, which action of AO was erroneous. It was held that neither AO had summoned A and independently recorded his statement nor allowed assessee to cross examine A which vitiated the statements of A and, therefore, the statement could not be relied upon. From a perusal of the JV agreement, it was notice that if AO had any doubts about the veracity of the JV agreement, then the AO had powers to investigate and find out the truth which could have come to light but this exercise had not been carried out and Ao based his adverse finding on the basis of conjectures & surmises. One of the director of the assessee company, Shri A.N. Chowdhury had brought an investor, M/s. NCPL, which had funded of Rs. 17. 46 crs to the assessee company for which an equitable mortgage of industrial land situated at Silvassa in Dadra & Haveli (Union Territory) was given to M/s. NCPL. Later when the JV project could not materialize , M/s. NCPL cancelled the JV and as such the money was returned back to M/s. NCPL by assessee and the mortgage was released. Assessee produced documents to prove the identity, creditworthiness and genuineness of the transaction with M/s. NCPL, M/s. NCPL’s PAN is AACCN5258J and that M/s. NCPL was a regular income tax assessee, the director of M/s. NCPL had filed an affidavit sworn before the Judicial 1st class Magistrate wherein he had admitted that M/s. NCPL provided Rs.17.46 cr. to set up manufacturing unit at Silvasa along with the assessee and that the JV had been terminated and that the assessee had refunded the full amount of Rs.17.46 cr. back to M/s. NCPL. These documents were filed before the authorities below and the documents could not be controverted, therefore, the addition made u/s. 68 only on the basis of two statements which could not stand the scrutiny of law, was warranted and therefore, the addition could not be sustained as per law.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
This is an appeal preferred by the assessee against the order of Ld. CIT(A)-5, Kolkata dated 07-11-2019 for AY 2013-14.
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