ACIT Vs Overtop Marketing Pvt. Ltd. (ITAT Kolkata)
when the assessee as well as the lenders had discharged the onus upon them to prove the identity, creditworthiness and genuineness of the loan transaction, the AO could have disbelieved the transaction only on the basis of reliable material to disprove the same. In this case the AO took the support of the statement given by both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania recorded in third party proceedings to take an adverse view against the assessee. In such a situation, the AO ought to have confronted the assessee with the entire statement of both Shri Raj Kumar Kothari as well as Shri Bijay Kumar Dokania or material against the assessee if any with him rather than giving only selective question and answer; and if the AO felt that these two persons, oral testimony is incriminating against the assessee, then in all seriousness he should have summoned them before him and elicited the direct oral evidence against the assessee and thereafter gave a copy of the recorded statement and then afforded an opportunity to assessee to cross-examine the makers of the incriminating oral testimony and thereafter the AO would be justified in using against the assessee, which in this case AO has not done, for reason best known to him; and so the selective questions and answers of the two persons with the legal infirmities discussed supra cannot be used against the assessee. Moreover the AO has not found any infirmity with the documents filed by the assessee to prove the loan transactions as discussed supra. So, other than the third party statements, which was not even examined by the AO and without providing the entire statements to assessee and the statement not tested on the touch-stone of cross-examination, cannot be the basis to draw adverse inference against the assessee. Therefore, no addition was warranted. To come to my aforesaid decision, I rely on the ratio of the decision of the Hon’ble Supreme Court in the case of CIT Vs. M/s. Odeon Builders Pvt. Ltd. in Review Petition (C) Diary No. 22394 of 2019 in Civil Appeal Nos.9604 & 9605 of 2018 dated 21.08.2019 wherein the Hon’ble Supreme court has held as under:
“We have perused the review petition and find that the tax effect in this case is above Rs.l crore, that is, Rs.6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs.1 crore.
However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating:
“Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted.”
The ITAT by its judgment dated 16th May, 2014 relied on the self same reasoning and dismissed the appeal of the revenue. Likewise, the High court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.”
So, the A.O in this case, erred in relying on the statement of two persons who were not allowed to be cross-examined as held by the Hon’ble Apex Court in Andaman Timber (supra) and Odeon Builders Pvt. Ltd. (supra). So from any angle, one looks, the statement of these two persons cannot be used against the assessee. And when we remove these two statements with the legal infirmities discussed supra, there is no material at all against the assessee and the AO having failed to find any infirmity with the documents filed by the assessee/lenders to prove the loan transactions as discussed supra, no adverse view was legally tenable. And having gone through the impugned order and the Paper Book filed before us, we fully concur with the finding of facts as rendered by Ld CIT(A) in respect of identity, creditworthiness and genuineness of the lenders/loan transaction and for the sake of brevity and to avoid repetition it is not again repeated. We agree with the judicial precedence relied upon by the Ld CIT(A) in support of his decision. And we don’t find any legal or factual infirmity in the impugned order of the Ld CIT(A), so we decline to interfere. So the impugned action of Ld. CIT(A) to delete the section 68 addition of Rs.4.51 crores and [the interest paid by assessee to lenders] Rs.53,70,163/- is confirmed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This is an appeal preferred by the Revenue against the order of the Ld. Commissioner of Income Tax(Appeals)-2, Kolkata dated 28.01.2019 for assessment year 2015-16. The Grounds of appeal of the Revenue are as under:
1. “whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in not appreciating the fact that the amount of Rs.4,51,00,000/- received by the assessee company as unsecured loan/advances during FY 2014-15 was considered to be unexplained cash credit u/s 68 of the Act.
2. “Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) erred in not appreciating the fact that the loan creditors of Rs.4,51,00,000/- whose identity and their creditworthiness for advancing of such huge amount of loan and the genuineness of transaction of loan creditors remain unexplained. As the entire loan was disallowed, the interest on such loan was also disallowed by the AO”.
3. “That the appellant craves for leave to add, delete and modify any of the grounds of appeal before or at the time of hearing.”
2. From a perusal of the aforesaid grounds of appeal raised by the Revenue, it is discerned that the sole issue on which the Revenue is aggrieved is against the action of the Ld.CIT(A) in deleting the addition of Rs.4,51,00,000/- which amount the assessee company has shown as unsecured loan.
3. Brief facts of the case as noted by the Assessing Officer are that during the course of assessment proceedings, he noted that the assessee company has taken unsecured loan from the following parties which according to him were shell companies:
