Principal Commissioner Of Income Tax (Central), Ahmedabad v. Ganesh Plantation Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 251 of 2021 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL), AHMEDABAD Versus GANESH PLANTATION LTD. ==========================================================Appearance:M R BHATT & CO.(5953) for the Appellant(s) No. 1 ========================================================== CORAM: HONOURABLE MS. JUSTICE SONIA GOKANIand HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 22/11/2021 ORAL ORDER (PER : HONOURABLE MS. JUSTICE SONIA GOKANI) 1.Aggrieved by the order dated 13.04.2021 passed by theIncome Tax Appellate Tribunal, Ahmedabad (‘ITAT’hereinafter) in ITA No. 2295/Ahd/2018 for the assessmentyear 2011-12, the present Tax Appeal is preferred raising thefollowing questions of law for the determination of this Court:- “Whether in the facts and circumstances of the caseand in law, the Appellate Tribunal is right in deletingthe addition of Rs. 4,00,00,000/- made on account ofunexplained Credit under section 68 of the Act byignoring the overwhelming and strong evidencesdiscussed by the Assessing Officer in the assessmentorder relating to the unexplained transactions?” 2.The assessee had filed the return of income on12.07.2012 declaring its total income of Rs. 6,54,22,430/-. Its case was selected for scrutiny and income of Rs. 6,67,58,012/-was assessed on scrutiny assessment under Section 143(3) ofthe Income Tax Act (the ‘IT Act’ hereinafter). 2.1.The case was transferred to the DCIT,CC-1underSection 127 of the IT Act and it was reopened under Section147 of the IT Act after dully recording the reasons on gettingthe sanction of the CIT (Central), Ahmedabad under Section151 of the Act. 2.2.A notice under Section 148 was issued on 27.03.2017.The information had been received from the office of the CITin connection with the search and seizure action conducted inthe Venus Group of Company which had led to seizure ofvarious incriminating materials. According to the Revenue,unaccounted cash transactions of the Venus Group wererecorded on cash vouchers and thereafter on the strength ofthe recording made on cash voucher, entries were recordedon the Day Cash Book. This had led to not only the reopeningof the assessment but also addition of Rs. 4 Crores on accountof unexplained cash credit under Section 68 of the Act. 2.3.It was alleged that an amount of Rs. 4 Crores has beenreceived by the assessee from the Sunderdeep Builders ofVenus Group through banking channel on 24.01.2011 against the corresponding payment of unaccounted cash by theassessee to Sunderdeep Builders which was a concerned ofVenus Group. 2.4.The Assessing Officer considered this as a shamtransaction as also an accommodation entry against paymentof unaccounted income. He relied on the statement of theaccountant of the Venus Group where he deposed that theunaccounted cash books had been written by him as per thedirection of Ashok Sunderdas Vaswani and the documentswere linked by the Assessing Officer to the assessee.According to the assessing officer, the unaccounted daily cashbooks were found which had transactions since 01.01.2017.They were also maintained in a systematic manner on a dailybasis and they were also supported by the vouchers. He alsonoted the coding of dates, amounts and other descriptions inthe unaccounted day cash books. According to him, thevouchers kept in different colours indicated the receipt as wellas expenses and they too were arranged in a systematicmanner as per the nature of expense like land/person, etc. Hewas of the opinion that these transactions were related to thecash transactions and the bank transactions were exchange ofcash with the RTGS/EC. 2.5.By a detailed order, under the head of co-relationagainst EC entries with bank account of the assessee, he hadadded the amount of Rs. 4 Crores as an addition on account ofunexplained cash credit. 2.5.By a detailed order, under the head of co-relationagainst EC entries with bank account of the assessee, he hadadded the amount of Rs. 4 Crores as an addition on account ofunexplained cash credit. 2.6.The assessee, being aggrieved by this huge addition, hadpreferred the appeal before the CIT Appeals which confirmedthe reopening of the reassessment proceedings under Section147 of the IT Act however, it deleted the additions made bythe Assessing Officer predominantly on the ground that thedocuments were seized from the premise of the Venus Groupand not from the premise of the assessee. 2.7.After considering the detailed factual submissions madeby both the sides as also in extenso considering the legalsubmissions of the parties, it has chosen not to endorse theadditions made by the Assessing Officer. In the detailedreasoning given by the CIT Appeals, it has held that if thejotting on the seized loose papers are assumed to be amaterial, the burden would be always on the Assessing Officeras an assessing authority to bring it on record independentclinching evidence. It is also of the opinion that under the law,the Assessing Officer will need to consider his duty to bring onrecord such material information which is available outside the assessee’s control which the assessee asserts is existingand it is within the power of the Assessing Officer to call for. 2.8.He has extensively also considered the allegations of theAssessing Officer of accommodation entry transaction to holdthat the Assessing Officer in assessment order has notidentified any of the statements of main persons of the VenusGroup namely Shri Ashok Vaswani, Shri Deepak Vaswani andShri Rajesh Vaswani, proprietors of the Sunderdeep Buildersabout their admission that the Venus Group has indulged intoany accommodation entry transaction. Nothing has beenbrought on record against the company even from thesubmissions made by the Venus Group search case. Nostatement is recorded of Shri Ashok Vaswani, Shri RajeshVaswani and Shri Deepak Vaswani under Section 132(4) and131 in respect of the scanned copies of the seized loose pagesreproduced by the Assessing Officer in the assessment order. 2.9.The appellate authority also verified the ledger accountof M/s. Sunderdeep Builders from the books of accounts of theappellant company to note that there was an opening debitbalance of M/s. Sunderdeep Builders on 01.04.2008 for anamount of Rs. 1 Crore and thereafter on 26.05.2008 thecompany advanced Rs. 10 Crores to M/s. Sunderdeep Builders in financial year 2008-09 and in the same financial yearM/s.Sunderdeep Builders repaid back to the appellantcompany an amount of Rs. 7 Crores between the period29.09.2008 to 20.10.2008. 2.10. It was the case of the appellant company that theoutstanding payable of Rs. 4 Crores on 31.03.2009 by M/s.Sunderdeep Builders was repaid to the appellant company on24.01.2011 by an account-payee-cheque duly reflected in thebank account of the appellant company and therefore, the CITAppeals held that the allegation of any accommodation entrytransaction and alleged cash payment by the appellantcompany to M/s. Sunderdeep Builders for recovering back theadvance of Rs. 4 Crores from M/s. Sunderdeep Builders didnot arise at all. 2.11. The Assessing Officer’s stand in the assessment order ofmaking an observation about the alleged cash of Rs. 4 Croresby the appellant company in lieu of the cheque payment andalso of making an allegation of cash received against EC fromJayesh Kotak for Ganesh Plantations Ltd. was in detailconsidered by the CIT Appeals to hold that nothing had beennoted except the word cash and there was no signature orname of the Director of the appellant company or any 2.11. The Assessing Officer’s stand in the assessment order ofmaking an observation about the alleged cash of Rs. 4 Croresby the appellant company in lieu of the cheque payment andalso of making an allegation of cash received against EC fromJayesh Kotak for Ganesh Plantations Ltd. was in detailconsidered by the CIT Appeals to hold that nothing had beennoted except the word cash and there was no signature orname of the Director of the appellant company or any employee of the company and the name written is of JayeshKotak and the Assessing Officer has not brought on recordany evidence that this person is either a director of theappellant company or even the shareholder of the appellantcompany. 2.12. The Commissioner (Appeals) held that the case of theappellant company is squarely covered by the decision of theCBI vs. V.C.Shukla and Others [(1998) 3 SCC 410], whereloose paper vouchers or pages found and seized from the thirdparty were not considered as the evidence in the case of theappellant company. It further held that following the decisionin case of Prarthna Construction Pvt. Ltd., the ITAT haddecided the matter which had been upheld by this Court.Accordingly, addition by way of unexplained cash credit underSection 68 of the IT Act was not held justifiable. 3.This had been challenged by the Revenue before theITAT which has upheld the findings and observations made bythe CIT Appeals. It recognized that the challenge to theadditions towards the unexplained cash credit under Section68, on merit, has been dealt with by the CIT elaborately. Ithas also concurred with the CIT Appeals that the unaccountedcash transactions of the Venus Groups which were detected from the premises of the searched person were stated to befirst recorded by the searched person on a loose papers inencrypted form and then on the basis of the recording madeon these cash vouchers, the entries were recorded on a DayCash Book not forming part of the regular books of accountsmaintained in ordinary course. They were the transactions ina continuous manner without any gap from January, 2007 to07.03.2015. 3.1.It also considered the contention of the Revenue that thecoding was done to alibi and camouflage the real value ofunaccounted cash transactions and held that the allegation ofalleged accommodation entry of receipt/payment of existingloans receivable by assessee from M/s. Sunderdeep Builderslargely centered around the statement recorded underSection 131 of the Accountant Mr. Deepak Gajjar of the VenusGroup. It is a testimony where he deposed of the unaccountedcash books written by him as per the direction of Mr. AshokSunderdas Vaswani and the same had been handed over toone Vasibhai at Crystal Archade as per the direction of Mr.Vaswani. The signature also was stated to be of Mr. DeepakVaswani and of Mr. Ashok Vaswani of the Venus Group. Theywere linked by the Assessing Officer to the assessee with aidof statement of Mr. Gajjar and the additions were made. 3.2.The Tribunal noted significantly that the statement ofMr. Gajjar did not appear to say that he was privy to thesource of cash recorded by him in cash book. He simplyrecorded the entries in the unaccounted cash books under theinstructions of the Vaswani brothers. The person had noknowledge of the relevant facts towards receipt of cash fromthe assessee and hence, he would not be entitled to anyweight and it cannot be also considered pertinent so far as theassessee is concerned. 3.3.There was no inquiry made by the Assessing Officer fromeither Vaswani brothers to elicit the credible information andin absence of any examination of the key persons, the contestaccording to the tribunal by way of cross examination wasalso stonewalled. It therefore held 3.2.The Tribunal noted significantly that the statement ofMr. Gajjar did not appear to say that he was privy to thesource of cash recorded by him in cash book. He simplyrecorded the entries in the unaccounted cash books under theinstructions of the Vaswani brothers. The person had noknowledge of the relevant facts towards receipt of cash fromthe assessee and hence, he would not be entitled to anyweight and it cannot be also considered pertinent so far as theassessee is concerned. 3.3.There was no inquiry made by the Assessing Officer fromeither Vaswani brothers to elicit the credible information andin absence of any examination of the key persons, the contestaccording to the tribunal by way of cross examination wasalso stonewalled. It therefore held “The unilateral entries made by Venus Group (anoutside party) in their records and admittedlybelonging to them cannot, in our view, has anyrational basis to crucify a third party and fix taxliability on it. No live link/proximate nexus of allegeddubious transactions between searched person andthe assessee has been brought on record. Theinquiries made were directionless without quizzingthe key persons who needed to be. Nothing of thissort has been done. No acquiescence of receipt ofcash by searched person from assessee has been successfully established. Naturally, proprietydemanded the cross examination thereon in the eventany culpable statement roping the assesseesomewhere. The Assessing Officer has convenientlyimplicated the assessee without any cogent premiseon the basis of some aimless examinations. No doubt, the documents found possessed from thecustody of a searched person may possibly operate asan estoppel against that searched person, if thecircumstances so warrant, but it is unconceivable tobind a third party for such entries/diary withoutdemonstrating cogent nexus. The whole action is inthe realm of conjectures and surmises mainly on thebasis of some scanty and sketchy statement yeildedfrom the accountant of the searched person. Therevenue has alleged underhand cash transactions.Hence, the primary onus in the instant case, squarelylied upon the Revenue and that to justify it withdirect or circumstantial evidences. The onus restedupon the revenue has not been discharged at all andthus did not shift on to assessee. Consequently, in theabsence of any credible proof of receipt of cash fromassessee, the apparent has to be taken as real i.e.Sunderdeep Builders have repaid Rs. 4 Crore throughbanking channel in discharge of its existingoutstanding liability as a matter of course.” 4.Learned Senior Advocate Mr. Bhatt has extensivelyargued this matter and has also taken us through thestatement recorded of Mr. Deepak Gajjar and the cross- 4.Learned Senior Advocate Mr. Bhatt has extensivelyargued this matter and has also taken us through thestatement recorded of Mr. Deepak Gajjar and the cross- examination conducted of his by the respondent company. Thesame had been called for by this Court after examining theentire material on record. As could be also noticed from thestatement given by this person that he has no personalknowledge of any source of the cash. All that he has done is atthe instance of Mr. Ashok Vaswami. His nature of job was tonote down and jot down as per the directions of Mr. Vaswami.The initials were done either by Mr. Ashok Vaswani or Mr.Deepak Vaswani of Venus Group. He also had taken the cashon some occasions and has stated that without any coercion orinducement, he has given his version. However, in the cross-examination he admitted that he has no idea as to what wasthe source. He had been categorically inquired with regard tothe amount of Rs. 4 Crores that whether the said amount ofcash had been received from the Ganesh Plantations or any ofthe directors to which he had denied. He also had beencategorically questioned as to whether as a representative ofVenus Group, he received this amount of Rs. 4 Crores in cashfrom the company or its directors, he had no knowledge of asto who was Mr. Jayesh Kotak. He did not receive this amountalso from Mr. Jayesh Kotak. This man did not know anydirector of the Ganesh Plantations. He also had no clue wherethe respondent company existed. 5.Noticing the statement given by this person as well ashis detailed cross examination, in no manner the Court needsto interfere and intervene in the detailed concurrent findingsof both the CIT Appeals and the ITAT. The CIT Appeals andthe Tribunal both have reached to the rightful conclusion byholding that the additions were made without any legallysupported documents. Also it had noted from the materialwhich had been placed before it that there was an openingreceivable by the respondent from M/s. Sunderdeep Buildersat Rs. 1 Crore given as a loan in advance by the respondentcompany to regular books of accounts. Another advanceaggregating Rs. 10 Crores was given in the month of May,2008 against which in the very year M/s. Sunderdeep Buildershad repaid back the temporary loan in part to the respondentcompany to the tune of Rs. 7 Crores. The balance of Rs. 4Crores which remained as outstanding was receivable by therespondent as on 31.03.2009. The Tribunal also has noted thatthe loan of Rs. 7 Crores was squared of by way of repaymentin the financial year 2008-09. 6.Section 68 of the Income Tax Act was brought intopicture for making addition of Rs. 4 Crores which deserves tobe reproduced at this stage:- “68. Cash credits:- Where any sum is found credited in the books of anassessee maintained for any previous year, andassessee offers no explanation about the nature andsource thereof or the explanation offered by him isnot, in the opinion of the [1][Assessing] Officer,satisfactory, the sum so credited may be charged toincome-tax as the income of the assessee of thatprevious year. Provided that where the assessee is a company, (notbeing a company in which the public are substantiallyinterested) and the sum so credited consists of shareapplication money, share capital, share premium orany such amount by whatever name called, anyexplanation offered by such assessee-company shallbe deemed to be not satisfactory, unless — (a) the person, being a resident in whose name suchcredit is recorded in the books of such company alsooffers an explanation about the nature and source ofsuch sum so credited; and (b) such explanation in the opinion of the AssessingOfficer aforesaid has been found to be satisfactory : Provided that where the assessee is a company, (notbeing a company in which the public are substantiallyinterested) and the sum so credited consists of shareapplication money, share capital, share premium orany such amount by whatever name called, anyexplanation offered by such assessee-company shallbe deemed to be not satisfactory, unless — (a) the person, being a resident in whose name suchcredit is recorded in the books of such company alsooffers an explanation about the nature and source ofsuch sum so credited; and (b) such explanation in the opinion of the AssessingOfficer aforesaid has been found to be satisfactory : Provided further that nothing contained in the firstproviso shall apply if the person, in whose name thesum referred to therein is recorded, is a venturecapital fund or a venture capital company as referredto in clause (23FB) of section 10.” 6.1.Any sum which is found credited in the books of theassessee maintained for any previous years and he can formore explanation about the nature and source thereof or theexplanation offered by him is not satisfactory in the opinion ofthe Assessing Officer, such sum can be charged to income taxas the income of the assessee of that previous year. 7.On the strength of the suspicion, the Assessing Officer had added the sum and charged the amount to income tax asthe income of the assessee. Both the authorities have rightlyheld that to be an addition which is devoid of any rational. 8.Resultantly, we find no merit in the appeal and since thequestion raised is already with extensive facts and reasoningsanswered above, the appeal deserves no entertainment. (SONIA GOKANI, J) Bhoomi (NISHA M. THAKORE,J)