DCIT, CC-VI, Kolkata, Kolkata v. M/s. Maithan Alloys Ltd., Kolkata

ITA 269/KOL/2011 | 2002-2003
Pronouncement Date: 29-11-2011 | Result: Dismissed

Appeal Details

RSA Number 26923514 RSA 2011
Assessee PAN AABCM7758B
Bench Kolkata
Appeal Number ITA 269/KOL/2011
Duration Of Justice 9 month(s) 11 day(s)
Appellant DCIT, CC-VI, Kolkata, Kolkata
Respondent M/s. Maithan Alloys Ltd., Kolkata
Appeal Type Income Tax Appeal
Pronouncement Date 29-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-11-2011
Assessment Year 2002-2003
Appeal Filed On 17-02-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL B BE NCH : KOLKATA [ . . . . . . . ] [BEFORE SHRI N. VIJAYA KUMARAN J.M. & SHRI C. D. RAO A.M.] / I.T.A NOS. 269 TO 273/KOL/ 2011 / // / ASSESSMENT YEARS : 2002-03 2003-04 2004-05 2005 -06 & 2006-07 DY. COMMISSIONER OF INCOME TAX -VS.- M/S. MAITHAN ALLOYS LIMITED CC-VI KOLKATA. KOLKATA [PAN : AABCM 7758 B] [ ( ( ( ( /APPELLANT ] ]] ] [ *+( *+( *+( *+(/ // / RESPONDENT ] ] ] ] ( ( ( ( / FOR THE APPELLANT : SHRI D.R. SINDHAL CIT DR *+( *+( *+( *+( / FOR THE RESPONDENT : SHRI S. K. TULSIYAN - - - - /DATE OF HEARING : 17. 11. 2011 - - - - /DATE OF PRONOUNCEMENT : 29.11.2011 [ /ORDER PER BENCH ALL THE FIVE APPEALS FILED BY THE DEPARTM ENT ARE DIRECTED AGAINST THE ORDER OF LD. CIT(A) CENTRAL-I KOLKATA DATED 08.11.2010 FOR AS SESSMENT YEARS 2002-03 2003-04 2004- 05 2005-06 & 2006-07. ALL THESE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 153A OF THE INCOME TAX ACT. SINCE GROUNDS ARE COMMON AND FA CTS ARE IDENTICAL WE DISPOSE OF THESE APPEALS BY THIS COMMON ORDER FOR THE SAKE OF CONVEN IENCE. 2. ALL THESE 5 APPEALS ARE THE ASSESSMENT ARISE BY CONSEQUENT TO SEARCH IN THE PREMISES OF MAITHAN GROUP OF CASES ON 20.09.2007 AND SUBSEQUENT DATES. IT IS SUBMITTED THAT THE ASSESSEE BELONGS TO THAT GROUP. FACTORY-CUM-BUSINESS PREMISE S OF THE COMPANY AT KALYANESWARI DIST. BURDWAN WAS SEARCHED ON 20.09.2007 AND SUBSEQUENT D ATES AND BOOKS OF ACCOUNTS WERE FOUND AND SEIZED UNDER IDENTIFICATION MARK ML-1 TO ML-5. THE ASSESSEE IS IN THE BUSINESS OF ITA NOS. 269 TO 273/KOL/20 11 2 MANUFACTURING OF FERRO ALLOYS. AS FACTS ARE IDENTIC AL LD. CIT DR BEFORE US FOR THE PURPOSE OF DISCUSSION HAS TAKEN ASSESSMENT YEAR 2002-03 IN IT A NO.269/KOL/2011. 3. THE FIRST ISSUE IS AGAINST THE DELETION OF ADDIT ION OF RS.1 16 00 000/- ON ACCOUNT OF ALLEGED BOGUS LOAN ON THE BASIS OF RETRACTION OF ST ATEMENT RECORDED UNDER SECTION 132(4) OF INCOME TAX ACT.. LD. CIT DR SUBMITTED THAT THE STA TEMENTS WERE RETRACTED AFTER A GAP OF TWO YEARS AND THE STATEMENTS WERE NOT RETRACTED BEFORE THE AUTHORITIES BELOW BEFORE WHOM ORIGINALLY 132 STATEMENTS WERE MADE. ORIGINALLY 132 STATEMENTS WERE RECORDED IN THE COURSE OF SEARCH. THEREFORE IT HAS MORE EVIDENTIARY VALUE. S EARCH REVEALED THAT UNACCOUNTED BLACK MONEY WITH MAITHAN GROUP HAS PLOUGHED BACK TO THE B USINESS OF THE ASSESSEE BY WAY OF BOGUS SHARE CAPITAL AND UNSECURED LOANS AND ALSO IN VARIO US GROUP CONCERNS. HUGE ENTRIES HAVE BEEN TAKEN FROM THE JAMA KHARCHI COMPANIES IN THE FORM O F SHARE APPLICATION MONEY PREFERENCE SHARE CAPITAL AND UNSECURED LOANS. ACCORDING TO DEP ARTMENT SOME OF THE SEIZED DOCUMENTS FOUND AND SEIZED DURING THE COURSE OF SEARCH OPERAT ION REVEALS THE MODUS OPERANDI OF THE GROUP CONCERN. CASH IS PAID TO THE JAMA KHARCHI ENTRY OPE RATORS AND IN LIEU OF THAT CHEQUE OF EQUAL AMOUNT WAS RECEIVED IN VARIOUS CONCERNS OF BENEFICI ARY GROUP IN THE FORM OF SHARE APPLICATION MONEY OR UNSECURED LOANS. FOR ALL THESE PLOUGH BACK OPERATION ACCOMMODATION COMMISSION WERE ALSO SAID TO BE PAID TO THE ENTRY OPERATOR. 4. SEARCH ACTION SEPARATELY ON 08.12.2006 AT THE OF FICE PREMISES OF M/S. GLOBE STOCK & SECURITIES LIMITED 13 G. C. AVENUE CALCUTTA IN C ONNECTION WITH THE MAIN SEARCH IN THE CASE OF M/S. R.S. ISPAT LIMITED IT WAS FOUND THAT VARIO US GROUP COMPANIES OF MAITHAN GROUP AND THE STATEMENTS WERE RECORDED UNDER SECTION 132(4) O F THE ACT WHEREIN IT WAS STATED BY SHRI ARUN KHEMKA THAT HE HAD GIVEN ACCOMMODATION ENTRIES OF SHARE CAPITAL AND UNSECURED LOANS TO DIFFERENT PERSONS AGAINST THE COMMISSION OF 1 TO 2% OF THE TOTAL AMOUNT OF ENTRY GIVEN. ASSESSING OFFICER FOUND THAT OTHER GROUP CONCERNS W ERE ALSO RECEIVED SHARE APPLICATION MONEY UNSECURED LOANS AND ONLY SHRI ARUN KHEMKA GAVE US A CCOMMODATION ENTRIES TO VARIOUS CONCERNS OF MAITHAN GROUP. ON 21.09.2007 SHRI SUBH AS CHANDRA AGARWALLA WAS ASKED SPECIFICALLY ABOUT THE ACTIVITIES OF SHRI ARUN KUMA R KHEMKA AND ON OATH UNDER SECTION 132(4) STATEMENTS WERE RECORDED WHEREIN HE ACCEPTED THE FA CT THAT ACCOMMODATION ENTRIES WAS PROVIDED BY SHRI ARUN KUMAR KHEMKA TO VARIOUS CONCE RNS OF MAITHAN GROUP. FOR THE PURPOSE ITA NOS. 269 TO 273/KOL/20 11 3 OF BETTER UNDERSTANDING WE REPRODUCE QUESTION NOS .4 & 5 AND ANSWER. Q.4 : DO YOU AND YOUR BROTHER SRI PRAHLAD RAI AGARWA LLA KNOW OR HEARD OF SRI ARUN KHEMKA AND THE VARIOUS COMPANIES RUN BY HIM AN D IN WHAT MANNER OR HOW HAVE YOUR HEARD OF HIM? ANS : YES WE HAVE HEARD AND DO KNOW SRI ARUN KHEMKA WH O HAS DONE SOME WORK FOR US BY WAY OF ACCOMMODATION ENTRIES. Q. 5 : SO YOU ARE AWARE OF SHRI ARUN KHEMKA WHO IS P RIMARILY AN ENTRY OPERATOR WHO BOOKS BOGUS L.T.C.G. UNSECURED LOANS SHARES CAPITAL ETC. BY WAY OF FURNISHING ACCOMMODATION / BOOK ENTRIES TO VARIOUS PARTIES INCLUDING YOUR FAMILY MEMBERS AND GROUP CONCERNS IN THE LAST FEW YEARS IN CLUDING CURRENT YEAR. ANS YES. DURING THE YEAR THE ASSESSEE HAS TAKEN SUCH ACCOMMO DATION ENTRIES IN RESPECT OF THE FOLLOWING FRESH LOANS :- SL.NO. NAME OF LOAN CREDITOR LOAN AMOUNT INTEREST CLAIMED ON LOAN (RS.) (RS.) 01 M/S BHAGAWATI SYNDICATE P. LTD. 16 LAKH 11 047 02 M/S SUMMIT PACKAGING P. LTD. 100 LAKH 8 31 452 116 LAKH 8 42 499 THIS STATEMENT WAS CONFRONTED TO THE ASSESSEE. IT W AS SUBMITTED THAT SHRI ARUN KUMAR KHEMKA WAS NOT DIRECTOR OF SUCH CREDITOR COMPANIES. HE HAD NO CONTROL OVER THE CREDITORS COMPANIES. HENCE NO WEIGHTAGE SHOULD BE GIVEN ON HIS STATEMEN T. IT IS ALSO EXPLAINED BEFORE THE ASSESSING OFFICER THAT SHRI ARUN KUMAR KHEMKA & SHR I SUBHAS CHANDRA AGARWALLA BOTH HAVE FILED RETRACTION AFFIDAVIT BEFORE THE ASSESSING OFF ICER ON 07.12.2007. BY THIS RETRACTION AFFIDAVIT SHRI SUBHAS CHANDRA AGARWALLA DIRECTOR OF THE COMPANY RETRACTING THE 132(4) STATEMENT GIVEN AT THE TIME OF SEARCH PROCEEDINGS W HEREIN HE CLEARLY STATED THAT STATEMENTS WERE RECORDED BY THE SEARCH PARTY UNDER DURESS AND COERCION AND THAT HE WAS SIMPLY ASKED TO SIGN ON THE DOTTED LINE WITHOUT BEING GIVEN ANY OPP ORTUNITY TO VERIFY THE CONTENTS OF THE STATEMENT. THE STATEMENTS WERE RIGHTLY RETRACTED AN D THE OPPORTUNITY TO CROSS EXAMINE SHRI ARUN KUMAR KHEMKA WHO ALSO RETRACTED ORIGINAL STAT EMENT WAS ALSO NOT GIVEN TO THE ASSESSEE AS THE ASSESSING OFFICER FELT THAT THE CLAIM OF CRO SS EXAMINATION IS NOT REQUIRED. ASSESSING OFFICER THUS ADDED THIS BOGUS LOAN AS UNDISCLOSED I NCOME OF THE ASSESSEE. ITA NOS. 269 TO 273/KOL/20 11 4 5. ON APPEAL TO THE LD. CIT(A) IT IS CONTENDED THA T DURING THE ASSESSMENT PROCEEDINGS ITSELF ASSESSEE BESIDES FILING COPIES OF RETURN OF INCOME PROFIT AND LOSS ACCOUNT BANK STATEMENT AND THE SOURCE OF FUND OF THE LOAN CREDITOR WERE FI LED. THE SOURCE OF THE SAID INVESTMENT IN LOANS WERE TO THE SATISFACTION OF THE ASSESSING OFF ICER. THE ASSESSEE EXPLAINED THAT IT IS THE SOURCE BEING OUT OF SALE OF SHARE REFUND OF LOANS ENCASHMENT OF FIXED DEPOSITS. ASSESSING OFFICER WITHOUT VERIFYING ALL THE COMPANIES MEMORAN DUM TREATED THOSE COMPANIES AS BOGUS COMPANIES OF SHRI ARUN KHEMKA. IN FACT THEY WERE A SSESSEE COMPANIES GROUP CONCERN. IN THE ASSESSES GROUP CONCERN THERE IS NO ACCOMMODATION E NTRIES SO AS USED BY SHRI ARUN KHEMKA. TO EXPLAIN THE GENUINENESS SOURCE OF FUND OF THE L OAN CREDITOR DETAILS OF SHARE HOLDING OF THE LOAN CREDITORS OF THE COMPANIES WERE ALSO FILED BEF ORE THE ASSESSING OFFICER WHICH WILL CORROBORATE THAT MAJORITY OF THE SHARES IN THE SAID GROUP CONCERNS WERE ALSO HELD BY INDIVIDUALS OR OTHER CONCERNS OF THE GROUP. THESE EVIDENCES WER E NEVER CONSIDERED AT THE LEVEL OF THE ASSESSING OFFICER. IN OTHER WORDS ASSESSING OFFICE R WENT ON THE STATEMENT OF SHRI ARUN KHEMKA AND SHRI SUBASH CHANDERA AGARWALLA WHICH WER E LATER RETRACTED BASED ON THE SUFFICIENT MATERIAL TO SHOW THAT THE ORIGINAL STATE MENT IS NOT IN ACCORDANCE WITH LAW AND STATEMENT WAS GIVEN UNDER THE MISTAKEN BELIEF OF FA CTS. THIS WAS SO AS THE ASSESSEE UNDER DURESS AND COERCION AND MORE SO WAS ASKED BY THE AU THORITY TO SIGN ON THE DOTTED LINE WITHOUT BEING GIVEN ANY OPPORTUNITY TO VERIFY THE CONTENTS OF THE STATEMENT. THE LD. CIT(A) FOUND THE CBDT CIRCULAR NO.286/2/2003/IT(INV) DATED 11.03.200 3 THE SAME IS EXTRACTED FROM PAGE 6 OF THE ORDER OF LD. CIT(A) :- INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE THE ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE U NDISCLOSED INCOME DURING COURSE OF SEARCH AND SEIZURE AND SURVEY. SUC H CONFESSION IF NOT BASED ON CREDIBLE EVIDENCE ARE ALTERED/RETRACTED B Y THE CONCERNED ASSESSES WHILE FILING RETURNS OF INCOME. IN SUCH CIRCUMSTANC ES CONFESSIONS IN THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS THEREFORE ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME W HICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NO T LIKELY TO BE DISCLOSED BEFORE INCOME TAX DEPARTMENT. SIMILARLY WHILE RECOR DING STATEMENTS DURING COURSE OF SEARCH AND SEIZURES AND SURVEY OPE RATIONS NO ATTEMPT SHOULD HE MADE TO OBTAIN CONFESSION AS TO UNDISCLOS ED INCOME. ANY ACTION ON THE CONTRARY WILL BE VIEWED ADVERSELY. LD. CIT(A) WAS OF THE VIEW THAT THERE IS NO SUCH MA TERIAL AND MERELY BELIEVING THE STATEMENT OF ITA NOS. 269 TO 273/KOL/20 11 5 SHRI ARUN KHEMKA ASSESSING OFFICER CAME TO THE CONC LUSION THAT UNACCOUNTED BLACK MONEY EARNED BY MAITHAN GROUP HAS PLOUGHED BACK AS BOGUS SHARE CAPITAL AND AS UNSECURED LOAN. THE LD. CIT(A) GIVEN OPPORTUNITY TO THE ASSESSING OFFI CER VIDE LETTER DATED 30.04.2010 WHEREBY ASSESSING OFFICER WAS ASKED ASSESSING OFFICER TO SP ECIFY THE DETAILS OF THE SEIZED DOCUMENTS REVEALING THE MODUS OPERANDI DISCUSSED IN THE ORDER . HE THEREFORE WAS REQUESTED TO FURNISH THE DETAILS OF SUCH SEIZED DOCUMENTS. THE EVIDENCES FOU ND DURING THE COURSE OF SEARCH AND THE EVIDENCES GATHERED POST SEARCH ENQUIRY WERE ALSO CA LLED FOR. FURTHER CLARIFICATION WAS ALSO ASKED WHETHER SHRI ARUN KHEMKA FROM WHOM 132(4) STA TEMENT WAS RECORDED THEN STATED TO HAVE BEEN RETRACTED HAS BEEN CROSS EXAMINED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN RELATION TO THE AFFIDAVIT FILED AND SPECIFIC DIRECT ION ENUNCIATED FROM THE ORDER OF THE LD. CIT(A) TO THE ASSESSING OFFICER WHO WAS DIRECTED T O ALLOW CROSS EXAMINE SHRI ARUN KHEMKA IN RELATION TO HIS EARLIER STATEMENT VIS--VIS SUBS EQUENT AFFIDAVIT FILED AND COMMUNICATE THE ADVERSE FINDINGS IF ANY TO THE ASSESSEE AND ALSO PROVIDE OPPORTUNITY FOR CROSS EXAMINATION OF SHRI ARUN KHEMKA. 6. VIDE LETTER DATED 02.07.2010 ASSESSING OFFICER SUBMITTED THE REPORTS. HE RELIED TOTALLY ON THE STATEMENT OF SHRI ARUN KHEMKA & SHRI SUBHAS CHANDRA AGARWALLA. THE STATEMENT OF SHRI ARUN KHEMKA WAS BROUGHT TO THE KNOWLEDGE OF SH RI SUBHAS CHANDRA AGARAWALLA IN TURN SHRI SUBHAS CHANDRA AGARAWALLA HAS ADMITTED THE CON TENTS OF SHRI ARUN KHEMKA TRUE ACCORDING TO THE REPORT SUBMITTED BY THE ASSESSING OFFICER THEREFORE ASSESSING OFFICER REITERATED IT THAT IS NOT A FACT THAT THE STATEMENT OF SHRI ARUN KHEMKA WAS NOT BROUGHT TO THE KNOWLEDGE OF THE ASSESSEE. IN OTHER WORDS ASSESSIN G OFFICERS STATEMENT IS THAT ASSESSEE WAS CONFRONTED WITH SHRI ARUN KHEMKAS STATEMENT. DURIN G SEARCH AND SURVEY STATEMENT OF SHRI ARUN KHEMKA DIRECTOR OF M/S. GLOBE STOCK & SECURIT IES WAS RECORDED ON 20.09.2007 I.E. THE DATE OF SEARCH. THE NEXT IMMEDIATE DAY THE STATEMEN T OF SHRI SUBHAS CHANDRA AGARWALLA WAS RECORDED. THEY NEVER RETRACTED THE STATEMENT AT THE EARLIEST POINT OF TIME. ACCORDING TO ASSESSING OFFICER AFTER A LAPSE OF TWO YEARS THEY WERE RETRACTING FROM THE STATEMENT BY AFFIDAVIT BEFORE NOTARY PUBLIC TO FURNISH THE SAME BEFORE THE ASSESSING OFFICER. IT IS AN AFTER THOUGHT ACCORDING TO ASSESSING OFFICER HENCE NOT ACCEPTABLE. 7. HOWEVER NEITHER ANY SEIZED OR IMPOUNDED MATER IAL WERE AVAILABLE ON THE BASIS OF ITA NOS. 269 TO 273/KOL/20 11 6 WHICH THE SPECIFIC STATEMENT OF SHRI ARUN KHEMKA WA S RECORDED AND FINALLY CONCLUSION WAS DRAWN THAT UNACCOUNTED BLACK MONEY EARNED BY MAITHA N GROUP HAS PLOUGHED BACK TO THE BUSINESS BY WAY OF BOGUS UNSECURED LOANS. THERE IS NO SEIZED MATERIAL NOR ANY DIRECT OR CIRCUMSTANTIAL EVIDENCES FOUND DURING THE COURSE OF SEARCH. TO SUGGEST THE LOAN AS BOGUS LOAN THE POST SEARCH ENQUIRY IF ANY NEVER MENTIONED AB OUT ANY MATERIAL FOUND TO ARRIVE AT THE CONCLUSION WITH THE ALLEGED LOAN IS A BOGUS LOAN. L D. CIT(A) THEREFORE CAME TO THE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BURDEN UNDER S ECTION 68 OF THE ACT TO EXPLAIN THE CAPACITY OF THE PARTIES AND DULY DISCHARGED THE CREDIT OF TH E LOAN CREDITORS WERE EXPLAINED SATISFACTORILY. HENCE LOAN CONFIRMATION LEDGER ACCOUNTS OF LOAN C REDITORS AND THE LOAN CREDITOR COMPANY ASSESSED TO INCOME-TAX AND ALL THESE EXPLANATORY EV IDENCES FOUND ACCEPTED TO THE LD. CIT(A). UNDER THE ABOVE FACTS AND CIRCUMSTANCES LD. CIT(A) PLEASED TO DELETE THE DISALLOWANCE. WHILE DOING SO HE HAS DELETED THE CONSEQUENTIAL IN TEREST ON THE ALLEGED LOANS AND THE COMMISSION DISALLOWANCE WAS ALSO DELETED. AGGRIEVED ON THIS DEPARTMENT IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. 9. LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND 132(4) STATEMENT AND THE GROUNDS OF APPEAL BEFO RE US. LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT RETRACTION IS NOT A VALID ON E AS THAT IS ONLY AN AFTER THOUGHT AFTER SUFFICIENT LAPSE OF TIME. THE MODUS OPERANDI OF THE ASSESSEE HAS BEEN EXPLAINED AS PER THE ARGUMENT OF THE LD. CIT DR. LD. CIT DR ARGUED THAT ASSESSEES OWN MONEY PLOUGHED BACK TO THE BUSINESS OF THE ASSESSEE. UNDER THE ACCOMMODATION ENTRY CAS H ADMITTED IN THE STATEMENT OF SHRI ARUN KHEMKA TOGETHER WITH ADMISSION MADE BY SHRI SUBHAS CHANDRA AGARWALLA DIRECTOR OF THE ASSESSEE-COMPANY WHERE HE HAS GIVEN STATEMENT ON OA TH UNDER SECTION 132(4) RECORDED ON 21.09.2007 BY THE SEARCH PARTY. LD. CIT DR SUBMITTE D THAT SEARCH AND SEIZURE OPERATION UNDER SECTION 132 CONDUCTED ON THE MAITHAN GROUP ON 20.09 .2007 AND IN THE STATEMENT RECORDED SHRI SUBHAS CHANDRA AGARWALLA ACCEPTED THAT ACCOMMODATIO N ENTRIES IN THE FORM OF BOGUS LONG TERM CAPITAL GAIN AND UNSECURED LOANS SHARE CAPITA L ETC. TO HIS GROUP CONCERNS AND FAMILY MEMBERS THROUGH VARIOUS CONCERNS OWNED AND CONTROLL ED BY SHRI ARUN KHEMKA AND OFFERED ITA NOS. 269 TO 273/KOL/20 11 7 RS.23.00 CRORES BEFORE SEARCH PARTY AS UNDISCLOSED INCOME ON BEHALF OF HIMSELF AND HIS FAMILY MEMBERS. LD. DR RELIED THE ASSESSING OFFICERS FIN DINGS ON THIS ISSUE. 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE PRECEDENTS. THE ADDITION HAS TO BE BA SED ON SEARCH MATERIAL. 132(4) STATEMENT OBTAINED FROM THE ASSESSEES ONE OF THE DIRECTOR SH RI SUBHAS AGARWALLA. HE STATED THAT ON 21.09.2007 THE SEARCH IS ON 20.09.2007 AND ON SUBS EQUENT DATES. AS EXPLAINED BY THE LD. COUNSEL ASSESSING OFFICER ASSESSEE ASKED THE ASSES SING OFFICER TO GIVE COPY OF THE ADMISSION MADE BY SHRI ARUN KHEMKA AND ASKED FOR OPPORTUNITY TO GO THROUGH THE SAME AND TO GIVE OPPORTUNITY TO CROSS EXAMINE THE SAME. ASSESSING OF FICER WAS OF THE VIEW THAT IT IS NOT REQUIRED AS NO CREDENCE CAN BE GIVEN TO THE RETRACTION OF TH E ORIGINAL STATEMENT MADE BY SHRI ARUN KHEMKA AND ASSESSEES DIRECTOR SHRI SUBHAS CHANDRA AGARWALLA. ASSESSING OFFICER FURTHER FOUND THAT CROSS EXAMINATION OPPORTUNITY WAS NOT AT ALL REQUIRED AS IT IS A CLEAR CASE OF ACCOMMODATION ENTRY AS ADMITTED BY THE PARTIES WHO DEPOSED BEFORE THE SEARCH PARTY. THIS ITSELF IS A FLAW IN THE INVESTIGATION. SHRI SUBHAS CHANDRA AGARWALLAS STATEMENT WAS TAKEN ON 21.09.2007 AS HE EXPLAINED THAT THIS STATEMENT WAS RECORDED BY THE SEARCH PARTY UNDER DURESS AND COERCION AND HE WAS ASKED SIMPLY TO SIGN ON THE DOTTED LINE WITHOUT GIVING ANY OPPORTUNITY TO VERIFY THE CONTENTS OF STATEMENT IN THE ABSENCE OF SEARCH MATERIAL. TO SUPPORT THE FACTS THAT THERE WAS ACCOMMODATION ENTRY THE UNCORROBORATED T ESTIMONY IS NOT A RELIABLE PIECE OF EVIDENCE EXCEPT THERE IS MATERIAL TO SUPPORT THE SA ME. THE ASSESSEE AFTER MEETING SHRI ARUN KHEMKA GOT THE COPY OF THE STATEMENT FROM SHRI ARUN KHEMKA WHICH WAS THE STATEMENT OBTAINED BY PREVIOUS SEARCH CONDUCTED ON 08.12.2006 AT THE OFFICE PREMISES OF M/S. GLOBE STOCK & SECURITIES IN CONNECTION WITH THE MAIN SEAR CH IN THE CASE OF M/S. R.S. ISPAT (P) LIMITED. THE ASSESSEE-COMPANY AFTER RECEIVING THE S HOW CAUSE NOTICE FROM THE ASSESSING OFFICER GOT IN TOUCH WITH SHRI ARUN KHEMKA IN PURSU ANCE OF WHICH SHRI ARUN KHEMKA HANDED OVER THE SWORN AFFIDAVIT IN WHICH HE RETRACTED THE STATEMENT MADE BEFORE THE SURVEY PARTY STATING THEREIN THAT THE SAID STATEMENT HAD BEEN RE CORDED BY THE SURVEY PARTY AND THAT SURVEY OPERATION BEING CARRIED OUT AT HIS PREMISES ON 20.0 9.2007 IN THE CASE OF M/S. GLOBE STOCK & SECURITIES WHICH SHALL BE CONVERTED INTO SEARCH AND SEIZURE OPERATION WHICH ACCORDING TO SHRI ARUN KHEMKA WILL ADVERSELY AFFECT HIS BUSINESS. AFT ER PERUSING THE AFFIDAVIT OF SHRI ARUN KHEMKA THE ASSSESSEE-COMPANY ALSO FILED A COPY OF AFFIDAVIT DULY FRAMED BY SHRI SUBHAS ITA NOS. 269 TO 273/KOL/20 11 8 CHANDRA AGARWALLA DIRECTOR OF THE COMPANY RETRACTI NG THE STATEMENT AT THE TIME OF SEARCH PROCEEDINGS AS THE STATEMENT WAS RECORDED BY SEARCH PARTY UNDER DURESS AND COERCION. HE SIGNED THE 132(4) STATEMENT ON THE DOTTED LINE AND THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO VERIFY THE STATEMENT UNDER SECTION 132(4). 11. SECTION 132(4) STATEMENT IS NOT A CONCLUSIVE PR OVE OF FACTS WHICH CAN BE REBUTTED. THE REBUTTAL IS PERMISSIBLE AND THE BURDEN ON THE ASSES SEE TO SHOW THAT THE STATEMENT WAS GIVEN UNDER DURESS AND COERCION THE STATEMENT IS GIVEN A GAINST FACTS AND LAW AND IT IS FOR THE ASSESSEE TO PROVE THAT THE FACTS WERE MISTAKENLY STATED IN 1 32(4) STATEMENT AND IF IT IS PROVED THAT IT IS A MISTAKEN FACTS AS PER RECORDS AVAILABLE THEN THE ST ATEMENT CAN BE RETRACTED AND SUCH RETRACTION CAN BE ACCEPTED BY LAW. HERE IN THIS CASE THE ASS ESSEE-COMPANY DURING ORIGINAL ASSESSMENT ITSELF FILED COPIES OF RETURN OF INCOME PROFIT AND LOSS ACCOUNT BANK STATEMENT SOURCE OF FUNDS OF THE LOAN CREDITORS AND SHARE APPLICANT COMPANIES BEFORE THE ASSESSING OFFICER. THE SOURCE OF SUCH INVESTMENT IN LOANS WAS CLEARLY EXPLAINED BEFO RE THE ASSESSING OFFICER THAT THEY ARE OUT OF SALE OF SHARES REFUND OF LOANS AND ENCASHMENT OF F IXED DEPOSIT ETC. FURTHER THE ASSESSING OFFICER WENT ON THE ASSUMPTION THAT ALL THE ASSESSE E-COMPANIES WHICH THE ASSESSING OFFICER PRESUMED AS BOGUS COMPANIES OF SHRI ARUN KHEMKA WER E NOT THE BOGUS COMPANIES BUT THEY ARE THE GROUP CONCERNS OF THE ASSESSEE-COMPANY ITSE LF. TO PROVE THAT THEY ARE OF GENUINE COMPANIES THE DETAILS OF SHARE HOLDING OF LOAN CRE DITORS COMPANIES WERE ALSO FILED BEFORE THE ASSESSING OFFICER TO SUBSTANTIATE THAT MAJORITY OF THE SHARES IN THE SAID CONCERNS WERE HELD BY INDIVIDUAL OR OTHER CONCERNS OF THE GROUP. IN THAT WAY REGULAR ASSESSMENTS WERE COMPLETED AND ON 12.10.2004 FOR ASSESSMENT YEAR 2002-03 FOR ASSE SSMENT YEAR 2003-04 UNDER SECTION 143(3) ASSESSMENT ON 02.02.2005 AND FOR ASSESSMENT YEAR 20 04-05 FIRST IT IS UNDER SECTION 143(1) AND THEN IT IS UNDER SECTION 143(3) COMPLETED THEN FO R ASSESSMENT YEAR 2005-06 ON 20.06.2006 IT IS UNDER SECTION 143(1) AND UNDER SECTION 143(3) REGULAR ASSESSMENT ON 29.12.2006 FOR 2006- 07 UNDER SECTION 143(1) INTIMATION IS ON 29.09.200 7 AS IT IS INTERESTING TO NOTE THAT IT IS EVEN AFTER SEARCH DATE. THIS WILL GO TO SHOW THAT ASSESS EE HAS FILED ALL THE DETAILS WITH RESPECT TO THE LOAN CREDITORS COMPANIES AS WELL AS THE DETAILS OF SHARE HOLDING AND THE SOURCES OF FUNDS OF THE LOAN CREDITORS ALONGWITH THE RETURN OF INCOME PROF IT & LOSS ACCOUNT. THIS BEING THE CASE ONCE THE ASSESSEE ABLE TO ESTABLISH THAT THERE IS A MIST AKEN ADMISSION OF FACT IN 132(4) STATEMENT AND IT IS DUTY BOUND AS THE ASSESSEE HAS TO EXPLAIN THE FACTUAL MATRIX. HENCE THE DIRECTOR OF THE ITA NOS. 269 TO 273/KOL/20 11 9 ASSESSEE-COMPANY SHRI SUBHAS CHANDRA AGARWALLA RET RACTED THE SAME. THE TIME TAKEN FOR RETRACTION MAY BE DUE TO NON-SUPPLIES OF COPIES OF DEPOSITION OF SHRI ARUN KHEMKA AND THE DENIAL OF CROSS EXAMINATION OPPORTUNITY THAT ACCEPT ED UNDER THE PRINCIPLE OF NATURAL JUSTICE MAY BE THE REASON FOR THE DELAY IN RETRACTION AND T HE ASSESSEE IS PURSUING REMEDY. HENCE THAT DELAY IS NOT MATERIAL WHEN THE FACTS ARE CLEARLY ES TABLISHING THE GENUINENESS AND BONAFIDE TRANSACTIONS OF THE ASSESSEE-COMPANIES. HENCE THE RETRACTION HAS TO BE VALID IN THE EYES OF LAW AND WE ACCEPT THE SAME AS IT IS A VALID RETRACTION. 12. AS WE HAVE ALREADY ACCEPTED THE RETRACTION AND IT IS BASED ON THE MISUNDERSTANDING OF THE FACTS AS WELL AS IN LAW. NOW WE WILL PROCEED W HATEVER THE MATERIAL AVAILABLE TO SUSTAIN THE POSITION. IT IS SETTLED LAW THAT THE BURDEN IS ON T HE ASSESSEE TO PROVE THE IDENTITY CREDITWORTHINESS AND CAPACITY OF THE AUTHORITIES. T HE ASSESSEE HAS TO PROVE THE GENUINENESS OF THE TRANSACTION. THE BURDEN IS ON THE ASSESSEE AND IT IS ALSO SETTLED THAT THE ASSESSEE HAS TO DISCHARGE THE INITIAL BURDEN. THE IDENTITY OF THE P ARTY IS NOT DISPUTED AS THE COMPANIES WERE PRIVATE LIMITED COMPANIES REGULAR RETURNS WERE FIL ED UNDER THE REGISTRAR OF COMPANIES AND BOTH M/S. BHAGWATI SYNDICATE (P) LTD. & M/S. SUMMIT PACKAGING (P) LTD. WERE ASSESSED TO INCOME-TAX HAVING THEIR PAN. THE SAID LOAN CREDITOR COMPANIES WERE REGULARLY TAXED ON THEIR INCOME PARTICULARLY THEY HAVE SHOWN THE INTEREST IN COME AS ACCRUED TO THEM. IT IS ALSO ARGUED BY LD. COUNSEL THAT THE LOAN CREDITOR COMPANIES FIL ED THEIR RETURN OF INCOME FOR THIS UNDER DISCUSSION FOR ASSESSMENT YEAR 2002-03 ALONGWITH AU DITORS BALANCE SHEET AND PROFIT AND LOSS ACCOUNT WHICH WERE EXAMINED BY THE ASSESSING OFFICE R AND NOTHING TO THE CONTRARY WAS FOUND. FURTHER THE CONFIRMATION OF TRANSACTIONS OF ALL TH E PARTIES BEING FOR THE LOAN EXTENDED AND FOR THE SHARE APPLICATION MADE WERE ALSO DULY FILED BEF ORE THE ASSESSING OFFICER. THE COPY OF THE BANK STATEMENT AS AVAILABLE IN ASSESSEES PAPER BOO K AT PAGES 4 & 26 WERE ALSO DULY FILED BEFORE THE ASSESSING OFFICER TO SUPPORT THAT THE AB OVE EVIDENCES DULY REFLECTED THE PAYMENT OF THE LOAN AND ALSO THE SHARE APPLICATION MONEY. THE SOURCE IS THEREFORE EXPLAINED FOR SUCH LOANS AND SHARE APPLICATION MONEY MADE BY THE VARIO US PARTIES TO THE ASSESSEE-COMPANY. ONCE ASSESSEE HAS EXPLAINED THE SOURCE TO THE SATISFACTI ON BY PRODUCING ALL THE RELEVANT MATERIAL IT IS NOT PERMITTED ON THE PART OF THE DEPARTMENT TO ASK FOR SOURCE OF THE SOURCE. THE LETTER FROM VARIOUS CREDITORS AND SHARE APPLICANT COMPANIES DUL Y CERTIFYING THE SOURCE OF LOAN AND SHARE APPLICATION PARTICULARS WERE ALSO MADE AVAILABLE BE FORE THE ASSESSING OFFICER. THE DECISION OF ITA NOS. 269 TO 273/KOL/20 11 10 THE LD. CIT(A) WHO PERUSED THE ENTIRE MATERIALS HAS ACCEPTED THE EXPLANATION ON BEHALF OF THE ASSESSEE TO PROVE THE GENUINENESS CAPACITY AND THE IDENTITY OF THE PARTIES WERE FOUND DISCHARGED. 13. ALL THE PROVISIONS OF INCOME TAX ACT. ARE APPLI CABLE TO SECTION 153A/143(3) ASSESSMENT AS PER EXPLANATION SUB-CLAUSE (II) TO SE CTION 153A. (A) ACCORDING TO SECTION 68 OF THE ACT WHERE ANY SU M IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE MAINTAINED FOR ANY PREVIOUS Y EAR AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT THE NATURE AND SOURCE THEREOF OR THE EXPLANAT ION OFFERED BY HIM IS NOT SATISFACTORY IN THE OPINION OF THE ASSESSING OFFICER THE SUM SO CREDIT ED MAY BE CHARGED TO INCOME-TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR. (B) IN THE CASE OF SECTION 68 - CASH CREDIT IT IS A MATTER ENTIRELY WITHIN THE ASSESSEES KNOWLEDGE AS TO HOW THE CASH CREDITS TO BE INTRODUCED AND ONCE IT IS POSTULATED THAT SUCH CASH CREDIT BELONGS TO THE ASSESSEE THEN HIS F AILURE TO EXPLAIN THE SAME OR TO EXPLAIN IT SATISFACTORILY CAN CONSTITUTE A REASONABLE GROUND F OR AN INFERENCE THAT THE SOURCE THEREOF MUST BE AN ITEM TAXABLE TO TAX. THEREFORE IT IS THE BURDEN OF THE ASSESSEE TO EXPLAIN THE SAME BY DISCHARGING THE ONUS TO PRIMA FACIE PROVE THE IDENT ITY CREDITWORTHINESS OF THE LOAN CREDITOR AND THE GENUINENESS OF THE TRANSACTION. (C) THE SECTION 68 OF INCOME TAX ACT EMPOWERS THE A SSESSING OFFICER TO MAKE ENQUIRY REGARDING CASH CREDIT. IF HE IS SATISFIED T HAT THESE ENTRIES ARE NOT GENUINE HE HAS EVERY RIGHT TO ADD THESE AS INCOME FROM OTHER SOURCES. BU T BEFORE REJECTING THE ASSESSEES EXPLANATION ASSESSING OFFICER MUST MAKE PROPER ENQUIRY AND IN T HE ABSENCE OF PROPER ENQUIRIES ADDITION IS JUSTIFIED. (D) THE ASSESSEE IS ALSO ENTITLED TO CROSS EXAMINE THE PERSON WHOSE STATEMENT HAS BEEN RELIED BY THE ASSESSING OFFICER AND SUCH STATE MENT IS PROPOSED TO BE USED BY THE ASSESSING OFFICER. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. EASTERN COMMERCIAL ENTERPRISES [1994] 210 ITR 103 (CAL.) H ELD THAT ASSESSEE SHOULD HAVE BEEN GIVEN WITH AN OPPORTUNITY TO CROSS EXAMINE THAT PERSON. A PPLYING THE ABOVE RATIO THE ASSESSING OFFICERS INDEPENDENT DECISION THAT CROSS-EXAMINE N OT AT ALL REQUIRED IS FATAL TO THE CASE OF ITA NOS. 269 TO 273/KOL/20 11 11 DEPARTMENT. THE SAME VIEW WAS THE DECISION OF HONB LE MADRAS HIGH COURT IN THE CASE OF CIT VS. GANI SILK PALACE [1988] 171 ITR 373 (MAD.) (E) AS SOON AS THE ASSESSEE DISCHARGED THE INITIAL BURDEN OF PROOF THE ASSESSING OFFICER IS NOT ENTITLED TO REJECT THE ASSESSEES EX PLANATION WITHOUT SOME OTHER POSITIVE EVIDENCE FALSIFYING THE ASSESSEES CASE. IN OTHER WORDS THE EXPLANATION OFFERED BY THE ASSESSEE CAN BE REJECTED BY THE INCOME TAX OFFICER ON COGENT GROUND S. WHEN SUCH GROUNDS ARE THEMSELVES BASED ON NO EVIDENCE THE QUESTION OF PRESUMPTION DO ES NOT ARISE AS HELD BY HONBLE DELHI HIGH COURT IN THE CASE OF SONA ELECTRIC CO. VS. CIT [198 5] 152 ITR 507 (DELHI). IN THE APPEALS PRESENT BEFORE US THE INCOME TAX OFFICER HAS NO EVI DENCE TO FALSIFY THE ASSESSEES SATISFACTORY PLAUSIBLE EXPLANATION. (F) THE ASSESSING OFFICER HAS ACCEPTED THE RETURNS OF THE LOAN CREDITORS IT SHOULD GO TO MEAN THAT THE AMOUNTS GIVEN BY THESE CREDITORS W ERE ALSO GENUINE AS THE CONCERNED ASSESSING OFFICER ACCEPTED ALL THE TWO LOAN CREDITO RS RETURN WHEREIN THE INTEREST HAS BEEN SHOWN AS INTEREST INCOME. (G) THE HONBLE JURISDICTIONAL HIGH COURT IN THE CA SE OF HINDUSTHAN TEA TRADING CO. LTD. VS. CIT [2003] 263 ITR 289 (CAL.) HAS HELD THE POWER OF ASSESSING OFFICER UNDER SECTION 68 IS NOT AN ABSOLUTE ONE. IT IS SUBJECT TO HIS SATISFACTION WHERE AN EXPLANATION IS OFFERED. THE POWER IS ABSOLUTE ONLY WHERE THERE IS NO EXPLANATION. THE SATISFACTION WITH REGARD TO THE EXPLANATION IS IN EFFECT AN IN BUILT SAFE-GU ARD IN SECTION 68 PROTECTING THE INTEREST OF THE ASSESSEE. IT PROVIDES FOR AN OPPORTUNITY TO THE ASS ESSEE TO EXPLAIN THE NATURE AND SOURCE OF THE LOAN. ONCE IT IS EXPLAINED IT IS INCUMBENT ON THE ASSESSING OFFICER TO CONSIDER THE SAME AND FORM AN OPINION WHETHER THE EXPLANATION IS SATISFAC TORY OR NOT. (H) THIS POWER WAS NOT EXERCISED BY THE ASSESSING O FFICER. ON APPEAL BY THE ASSESSEE THE LD. CIT(A) IN THE APPEALS UNDER OUR C ONSIDERATION HAS ASSUMED THE CO-TERMINUS POWER OF THE ASSESSING OFFICER AND WEIGHED THE EVID ENCE WITH GREAT CARE AND CAUTION. THE LD. CIT(A) FOUND THAT THE ASSESSING OFFICER SHOULD HAVE AFFORD THE OPPORTUNITY TO THE ASSESSEE TO CROSS EXAMINE THE DEPONENT MR. ARUN KHEMKA. THIS WA S DENIED INSPITE OF LD. CIT(A)S DIRECTION. THE CONFIRMATION LETTER FROM THE LOAN CR EDITORS WERE BRUSHED ASIDE BY THE ASSESSING ITA NOS. 269 TO 273/KOL/20 11 12 OFFICER. THE LD. CIT(A) CONSIDERED THE SAME. THE NA TURE AND SOURCE OF THE LOANS WERE ALSO DULY CONSIDERED BY THE LD. CIT(A). THE CREDITWORTHI NESS OF THE LOAN CREDITORS WERE ALSO SATISFACTORILY EXPLAINED BY THE ASSESSEE WITH REGAR D TO VARIOUS PARTIES WHICH HAD INVESTMENTS IN THE SHARE CAPITAL OF THE ASSESSEE-COMPANY AND WHICH EXTENDED THE UNSECURED LOANS TO THE ASSESSEE-COMPANY. THE LOAN CREDITORS HAVE IN THEIR RETURN SHOWN INTEREST INCOME AS INCOME OF THE LOAN CREDITORS WERE ALSO DULY CONSIDERED BY THE LD. CIT(A). THE EXPLANATION OF THE ASSESSEE THAT THE ALLEGED GROUP COMPANIES ARE THE SISTER CON CERN OF THE ASSESSEE-GROUP AND THEY WERE NOT SHAM COMPANIES AND IT WAS ESTABLISHED WITH RELE VANT SHARE HOLDING DETAILS SOME SHARES WERE HELD BY GROUP COMPANIES AND SOME BY THE INDIVI DUALS WHO ARE THE DIRECTORS IN THE GROUP COMPANIES. 14. THE AUDITED BOOKS OF ACCOUNTS AND INCOME-TAX RE TURNS FOR ALL THE YEARS FOR ALL THE PARTIES I.E. LOAN CREDITORS AND SHARE APPLICANT COM PANIES WERE ALSO DULY FILED BEFORE THE ASSESSING OFFICER IN WHICH THE ABOVE SUBJECT LOAN T RANSACTION AND SHARE APPLICATION INCLUDING ALLOTMENTS WERE DISCLOSED. THE ASSESSING OFFICER HA S NOT FOUND ANY CONTRARY MATERIAL TO THE EXPLANATION AND AS PER THE DETAILS AVAILABLE IN THE BOOKS OF ACCOUNTS AND INCOME TAX RETURNS OF THE PARTIES. FURTHER FOR ALLOTMENT OF SHARES FO RM NO.2 WHICH IS THE REQUIREMENT TO BE FILED BY THE ASSESSEE-COMPANY WITH REGISTRAR OF COMPANIES IS ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. THE LIST OF ALLOTTEES DETAILS WERE ALSO AV AILABLE THAT BEING THE CASE THE LD. CIT(A)S FINDINGS THAT ASSESSEE HAS DISCHARGED THE BURDEN IS QUITE JUSTIFIED. 15. COMING TO THE RETRACTION OF THE STATEMENT AS W E HAVE HELD THAT THE RETRACTION OF THE STATEMENT CAN BE PERMITTED IF IT IS SATISFACTORILY PROVED THAT THE ORIGINAL ADMISSION IS NOT BASED ON THE FACTS AVAILABLE ON RECORD. THE MISTAKEN IMPR ESSION OF FACTS OR LAW CAN BE RETRACTED AND THE RETRACTION IS FOUND PERMISSIBLE IF THE DEPONENT SATISFACTORILY EXPLAINS THAT THE ORIGINAL ADMISSION IS A MISTAKEN BELIEF OF FACTS OR LAW. HER E IN THIS CASE THE ASSESSEE HAS DISCHARGED THE BURDEN AS WE HAVE ALREADY FOUND THAT THE CREDITWORT HINESS GENUINENESS OF THE TRANSACTION AND THE IDENTITY OF THE PARTIES HAVE BEEN SUFFICIENTLY PROVED. THE ASSESSING OFFICER NEVER ALLOWED THE ASSESSEE TO CROSS EXAMINE MR. ARUN KHEMKA PARTI CULARLY WHEN ASSESSEE WAS ASKED FOR COPIES OF STATEMENT OF SHRI ARUN KHEMKA AND OPPORTU NITY TO CROSS EXAMINE. THE ASSESSING OFFICER DECIDED THAT IT IS NOT REQUIRED FOR CROSS E XAMINATION. IT IS VERY FATAL TO THE CASE OF THE ITA NOS. 269 TO 273/KOL/20 11 13 DEPARTMENT. NATURAL JUSTICE DEMANDS THAT OPPORTUNIT Y OF BEING HEARD TO BE GIVEN PARTICULARLY WHEN THE STATEMENT IS GOING TO BE USED AGAINST THE ASSESSEE IN THE PROCEEDINGS. THIS WAS RIGHTLY APPRECIATED BY THE LD. CIT DR AND THE DENIAL OF OPP ORTUNITY HAS BEEN FOUND UNTENABLE BY THE LD. CIT(A). THE ONLY EVIDENCE AVAILABLE FOR SUSTAIN ING THE ADDITION BY THE ASSESSING OFFICER IS THE STATEMENT OF SHRI ARUN KHEMKA DIRECTOR OF M/S. GLOBE STOCK & SECURITIES DATED 20.09.2007 AND THE STATEMENT OF SHRI SUBHAS CHANDRA AGARWALLA WHICH WERE RECORDED IN THE COURSE OF SURVEY/SEARCH. THE STATEMENTS OF SHRI SUB HAS AGARWALLA AND SHRI ARUN KHEMKA WERE SUBSEQUENTLY RETRACTED AS STATED IN FOREGOING PARAGRAPHS. HENCE THERE IS NO MATERIAL TO SUSTAIN THE ADDITION AS THE RETRACTION IS HELD TO B E VALID. IT IS SETTLED LAW THAT THE ADDITION SHOULD BE BASED ON SEARCH MATERIAL AS HELD BY HONBLE DELH I HIGH COURT IN THE CASE OF CIT VS. OASIS HOSPITALITIES (P) LIMITED AND OTHERS [2011] 333 ITR 119 (DELHI). 15.1 FURTHER THE DECISION OF CBDT CIRCULAR NO. F. NO.286/2/2003/IT(INV) DATED 11.03.2003 HAS DIRECTED ITS OFFICES TO FOCUS ON COLLECTION OF EVIDENCE ON UNDISCLOSED INCOME AND NOT ON OBTAINING CONFESSION OF UNDISCLOSED INCOME. THIS CB DT CIRCULAR HAS NOT BEEN FOLLOWED BY THE ASSESSING OFFICER AND THE ASSESSING OFFICER SIMPLY WENT ON THE CONFESSION STATEMENT MADE BY ONE SHRI ARUN KHEMKA AND WITHOUT BEING OPPORTUNITY TO CROSS EXAMINE SHRI ARUN KHEMKA. THE ASSESSING OFFICER FURTHER RELIED THE DEPOSITION OF THE ASSESSEE-COMPANIES DIRECTOR SHRI SUBHAS CHANDRA AGARWALLA WHICH IS TOTALLY ON A WEEK FOUNDATION. HENCE ALSO THEIR CONFESSION IS NOT AN ADMISSIBLE EVIDENCE UNDER THE GIVEN SET O F FACTS AND CIRCUMSTANCES AS IT WAS RIGHTLY RETRACTED SUBSEQUENTLY ESTABLISHING THE FACT THAT T HE CONFESSION WAS MADE UNDER DURESS AND CONFESSION AND THE ASSESSEE WAS ASKED TO SIGN ON DO TTED LINES WITHOUT VERIFYING THE CONTENTS OF THE STATEMENT AND AFTER HAVING KNOWLEDGE THAT HE HA D MADE WRONG ADMISSION OF FACTS WITH RELEVANT DETAILS THAT CONFESSION WAS RETRACTED VALI DLY AS THE ADMISSION WAS A WRONG AND CONTRARY TO THE FACT. HENCE WE ACCEPT THE ORDER OF THE LD. CIT(A) WHO RIGHTLY DELETED THE ADDITION. FURTHER THE DECISION OF HONBLE MADRAS H IGH COURT IN THE CASE OF CIT VS. J.K. NARAYANAN [2007] 293 ITR 179 (MAD.) WHILE DECIDING THE BLOCK ASSESSMENT IN THE ORIGINAL BLOCK ASSESSMENT PROCEEDINGS UNDER SECTION 158B HAS HELD THAT THE ADDITION HAS TO BE MADE ON THE BASIS OF SEARCH MATERIAL AND IN THE ABSENCE OF SEARCH MATERIAL THE ADDITIONS WILL NOT SURVIVE. THIS CASE LAW ALSO RELIED BY THE LD. COUNSEL WHICH SUPPORTS THE CASE OF THE ASSESSEE. SIMILAR DECISION HAS ALSO BEEN TAKEN IN THE CASE OF CIT VS. G.K. SENNIAPPAN [2006] 284 ITR 220 ITA NOS. 269 TO 273/KOL/20 11 14 (MAD.). HAVING CONSIDERED THE ABOVE MATERIAL AND UN DER THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THAT THE ORDER OF THE LD. CIT(A) IS PERFECTLY JUSTIFIED AND WE HAVE NO HESITATION IN CONFIRMING THE ORDER OF THE LD. CIT(A ) FOR THE DISCUSSED YEAR 2002-03 AS WELL AS FOR THE OTHER YEARS UNDER APPEAL 2003-04 2004-05 2005-06 & 2006-07. HENCE THIS ISSUE IS DECIDED AGAINST THE REVENUE AND IN FAVOUR OF THE AS SESSEE FOR ALL THE FIVE YEARS OF APPEAL BEFORE US. 16. COMING TO THE OTHER CONSEQUENTIAL ISSUE ONE OF DELETION OF ADDITION OF INTEREST PAID ON THE ALLEGED BOGUS LOAN AS WELL AS COMMISSION PAID O N ALLEGED BOGUS LOAN. WE HAVE ACCEPTED THAT IT IS NOT A BOGUS LOAN AND IT IS FOR THE BUSIN ESS AS WE HAVE ALREADY DECIDED THE ISSUE OF ADDITION ON ACCOUNT OF ALLEGED BOGUS LOAN AGAINST T HE DEPARTMENT AND IN FAVOUR OF ASSESSEE. THIS INTEREST WHICH WAS PAID ON THE ABOVE LOAN AND THE COMMISSION PAID ON THE ALLEGED LOAN WHICH ARE OF CONSEQUENT IN NATURE AND HAS TO BE DEC IDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT. THEREFORE THIS INTEREST CAN NOT BE TAKEN AS UNDISCLOSED INCOME OF THE ASSESSEE SO OF THE COMMISSION PAYMENT SHOULD ALSO BE DELETED ACCORDINGLY. IN VIEW OF THE ABOVE FOREGOING FINDINGS WE HAVE NO HESITATION IN CONFIR MING THE ORDER OF THE LD. CIT(A) FOR THE ABOVE CAPTIONED 5 APPEALS I.E. FOR THE ASSESSMENT Y EARS 2002-03 2003-04 2004-05 2005-06 & 2006-07. 17. IN THE RESULT ALL THE APPEALS OF THE DEPARTMEN T ARE DISMISSED. 2 2 2 2 ORDER PRONOUNCED IN THE COURT ON 29.11.2011. SD/- SD/- [ . . . ] [ . . . . ] [ C. D. RAO ] [ N. VIJAYAKUMARAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER D ATED : 29TH NOVEMBER 2011. ITA NOS. 269 TO 273/KOL/20 11 15 COPY FORWARDED TO THE - 1. DY. COMMISSIONER OF INCOME TAX CC-VI 18 RABINDRA SARANI PODDAR COURT 5 TH FLOOR KOLKATA. 2. M/S.MAITHAN ALLOYS LIMITED 7/1A HAZRA ROAD KOLKA TA-700 026. 3. CIT(A)- (4) CIT- 4. D.R. I.T.A.T. KOLKATA. [TRUE COPY] BY ORDER DEPUTY/ASSISTANT REGISTRAR (KKC) I .T.A.T. KOLKATA.