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TMI Blog2015 (10) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... ain development rights from P group of companies. A satisfaction was recorded by the Assessing Officer in the case of the assessee u/s 153C. Thereafter, the proceedings were initiated against the assessee u/s 153A and the assessee was directed to file returns for the six assessment years. Assessments were completed u/s 143(3) read with section 153C. As the appeals were pending before the CIT(A), the assessee filed Writ petition before the Hon‘ble High Court contending that the AO had illegally assumed jurisdiction u/s 153C read with section 153A and that there was no undisclosed income to be assessed in the assessee‘s hands. Dismissing the petition, the Hon‘ble High Court held that the satisfaction that is required to be reached by the AO having jurisdiction of the person searched is that the valuable articles or books of account, etc., seized during the search belong to a person other than the person searched and there was no requirement in section 153C(1) that the AO should also be satisfied that such valuable articles or books of account, etc., belonging to the other person must conclusively reflect or disclose any undisclosed income. - Decided against assessee. Addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Gunjan Karun S/O. Shri J.K.Ray recorded on 21.12.2009, it has been stated that they have signed the cheque and given it to C.A. Mr Vinay Gandhi for share capital entry. The C.A. who is in practice is barred to carry on any other business as per the code of conduct formulated by the Institute of Chartered Accountants. Even in case the C.A. has accepted that he was engaged in such illegal action, the AO is directed to take action against the C.A. before the Institute of Chartered Accountants so that disciplinary action be taken as the C.A. who is holding certificate of practice cannot be engaged in the business of providing the entries - Decided in favour of assessee. - I.T.(SS)A Nos.206 to 211/Ind/2013, C. O.Nos.96 to 101/Ind/2013, IT (ss) A No.164 to 167/Ind/2003 - - - Dated:- 17-11-2014 - SHRI P.K.BANSAL (AM) AND SHRI MUKUL SRAWAT (JM) For The Assessee : Shri B.K.Nema/Shri K.P. Diwani For The Revenue : Shri Lalchand, CIT (DR) ORDER PER BENCH: All these appeals of the revenue and cross objections filed by the asessee arise out of common order of ld CIT(A), Bilaspur, camp at Bhopal dated 18.3.2013 for the assessment years 2002-03 to 2008-09. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000 Asst. yr. 2008-09 : ₹ 3,90,000 Total : ₹ 13,10,000 We find that the tax effect of this income for all the assessment years will come to ₹ 3,93,000/-. Thus, the total tax effect in all the appeals filed by the revenue in respect of ground of appeal taken, is less than ₹ 4 lakhs. It is an undisputed fact that the Board has issued instruction No.5/2014 F. No.279/Misc.142/2007-ITJ (Pt) dated 10.7.2014. The relevant instruction reads as under: Reference is invited to Board s instruction No 3/2011 dated 09/02/2011 wherein monetary limits and other conditions for filing departmental appeals (in income-tax matters) before Appellate Tribunal, High Courts and Supreme Court were specified. 2. In supersession of the above instruction, it has been decided by the Board that departmental appeals may be filed on merits before Appellate Tribunal, High Courts and Supreme Court keeping in view the monetary limits and conditions specified below. 3. Henceforth appeals shall not be filed in cases where the tax effect does not exceed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ‗tax effect is less than the prescribed monetary limits in any of the year, if it is decided to filed appeal in respect of the year(s) in which ‗tax effect exceeds the monetary limit prescribed. In case where a composite order / judgment involves more than one assessee, each assessee shall be dealt with separately. 6. In a case where appeal before a Tribunal or a Court is not filed only on account of the tax effect being less than the monetary limit specified above, the Commissioner of Income-tax shall specifically record that even though the decision is not acceptable, appeal is not being filed only on the consideration that the tax effect is less than the monetary limit specified in this instruction . Further, in such cases, there will be no presumption that the Income-tax Department has acquiesced in the decision on the disputed issues. The Income-tax Department shall not be precluded from filing an appeal against the disputed issues in the case of the same assessee for any other assessment year, or in the case of any other assessee for the same or any other assessment year, if the tax effect exceeds the specified monetary limits. 7. In the past, a nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961, shall not be governed by the limits specified in para 3 above and decision to file appeal in such cases may be taken on merits of a particular case. 11. This instruction will apply to appeals filed on or after 10th July, 2014. However, the cases where appeals have been filed before 10th July, 2014 will be governed by the instructions on this subject, operative at the time when such appeal was filed. 12. This issue under Section 268A (1) of the Income-tax Act 1961. 6. We noted that Hon ble Delhi High Court in the case of CIT Vs M/s. P. S. Jain Co. (supra) on the question as to whether Board circular will apply to the pending appeals, has held as under: This court can very well take judicial notice of the fact that by passage of time money value has gone down, the cost of litigation expenses has gone up, the assessees on the file of the Departments have been increased consequently, the burden on the Department has also increased to a tremendous extent. The corridors of the superior courts are chocked with huge pendency of cases. In this view of the matter, the Board has rightly taken a decision not to file references if the tax effect less than ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals filed on or after 15th May, 2008. It was further provided that in cases, where appeals were filed before 15th May, 2008, they would be governed by the instructions on this subject which were operative at the time when such appeals were filed. The instruction was issued under Section 268A(1) of the Act. The argument of the learned Counsel for the revenue in that case was, that the instruction issued on 15th May, 2008 did not preclude the department from continuing with the appeals and/or Petitions filed prior to 15th May, 2008, if they involved a substantial question of law of a recurring nature, notwithstanding the fact that the total cumulative tax effect involved in the appeals was less than ₹ 4 Lacs. It was submitted, such appeals which were filed prior to the issuance of Instruction and where substantial questions of law were raised, were required to be decided on merits. The Court, while considering the issue observed that paragraph 5 of the Circular made it clear that no appeals would be filed in the cases involving tax effect less than ₹ 4 Lacs notwithstanding the issue being of recurring nature. Relying on the judgement in CIT V/s Polycott Corporation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e when such appeals were filed. 11. In our opinion, when a similar clause has been interpreted by the Division Bench of this Court in CIT vs. Madhukar Inamdar (Supra), the same principles must apply in the present cases also, as we have found that the instructions of 15th May, 2008 is para- material with the instruction of 9th February, 2011. 14. Similarly, the Delhi High Court in the case of Commissioner of Income Tax V/s Delhi Race Club Ltd. , decided on March 03, 2011, by relying on its earlier Judgement Commissioner Income Tax Delhi-III V/s M/s P.S. Jain and Co. decided on 2nd August, 2010 has held that the CBDT circular raising the monetary limit of the tax effect to ₹ 10 Lacs would be applicable to pending cases also. 17. It is true that this judgement in Chhajer's case (supra) was not brought to the notice of the Division Bench, while deciding either Madhukar's case (supra) or the case of Polycot Corporation (supra). However, the instruction of 2005 which was considered in Chhajer's case has also been interpreted in Polycot Corporation (supra). The consistent view of the Court has been that the CBDT instruction would apply to pending cases ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR could not point out any of the exceptions as provided above. Accordingly, this being a low tax effect case, we dismiss the appeals of the revenue in limine without going into merits. 9. Coming to the cross objections filed by the assessee in each of the assessment years, ld A.R. was fair enough to concede that the cross objections filed are supportive to the order of ld CIT(A) in respect of ground of appeal taken by the revenue. Since we have already dismissed the appeals filed by the revenue in all he assessment years, therefore, cross objections filed by the assessee, in our opinion, have become infructuous. We, accordingly, dismiss the cross objections filed by the assessee in all the assessment years as infructuous. 10. In the result, appeals filed by the revenue and cross objections filed by the assessee are dismissed. 11. Now, we take up the appeals filed by the assessee for assessment years 2003-04 to 2006-07. 12. In all the assessment years, the assessee has taken following common grounds of appeal except change in figure in Ground No.4.. 13. Both parties agreed that these appeals be decided on the basis of facts relating to assessment year 2003-04. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are application money: Asst. year Amount 2003-04 ₹ 23,99,000 2004-05 ₹ 35,00,000 2005-06 ₹ 55,00,000 2006-07 ₹ 1,05,00,000 18. The details of the share capital issued as well as share premium were available in the audited balance sheet. Intimation under section 143(1) dated 7.1.2004 for assessment year 2003-04 was duly received by the assessee. Smt. Shashi Sharma and Shri Gaurav Sharma are the directors of the assessee company. Search action under section 132 was conducted in the residential and office premises of Dr. Yogiraj Sharma, Shri Ashok Nanda Others. During the course of search action, certain lose papers/documents belonging to the assessee were found and seized. On the basis of some of the seized papers, the Assessing Officer recorded the reasons and issued notice under section 153C r.w.s 153A of the Act on 10.7.2008. In response thereto, assessee filed returns showing the same income as has been shown in the original returns. After issui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of documents being of incriminating nature, no valid assumption of jurisdiction under section 153C of the Income tax Act, 1961 can be assumed by the Assessing Officer. In this regard, reliance was placed on the following decisions: 1) ITAT order in ITA No.4514 45l5/Del/2012 in the case of Therapeutic India (P) Ltd. vide order dated 31/5/2013. 2) ITAT order in ITA No.5460 to 5465/Del/2012 in the case of V.K. Fiscal Services Pvt. Ltd. vide order dated November 2013. 3) ITAT order in ITA No.1344/Del/2012 in the case of M/s. DSL Properties (P) Ltd. vide order dated 22/3/2013. 4) ITAT order in ITA No.917 to 922/PN/2010 in the case of Bharati Vidyapeeth vide order dated 28/4/2011. 5) ITAT order in ITA No.114 to 117!PN/2010 in the case of Sinhgad Technical Education Society vide order dated 28/1/2011. (The copies of decisions are placed before us in the paper book Vol-I) 21. It was contended that no addition has been made by the Assessing Officer on the basis of seized documents referred to assessment order on the basis of which notice under section 153C has been issued in the case of assessee. Therefore, the documents found and seized during the course of searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person in whose case search has been conducted, and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Therefore, he vehemently contended that section 153(1) give jurisdiction to the Assessing Officer to issue notice u/s.153C over the assessee. Ld D.R. submitted that this fact is not denied by the assessee that documents relating to the assessee were found and seized. Once the documents belonging to the assessee are found and seized at the places in whose case the search had taken place, the AO got the valid jurisdiction. Section does not talk of incriminating documents being found during the course of search. In respect of decisions relied by ld A.R, ld D.R. contended that these decisions are not applicable to the facts of the present case. 24. We have heard rival contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153A provides for an assessment in case of a person in whose case search is initiated u/s.132 of the Act or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003. Section 153B provides for time limit for completion of assessment under section 153A and Section 153C of the Act . Section 153C provides for assessment of income of person or other than person in respect of whom warrant or authorisation is issued u/s.132 of the Act. 27. Section 153A and Section 153C are extracted below: 153A. Assessment in case of search or requisition.- (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A : Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be incriminating documents. Section 153C gives the jurisdiction to the Assessing Officer once the documents belonging to the assessee are found in the case of the assessee in whose case the search had taken place. 30. We have gone through the various decisions, as has been relied upon by ld A.R. In this regard, we noted that in the case of ACIT vs. Therapeutic India (P) Ltd., (ITA No.4514 4515/Del/2012), Delhi ‗H Bench vide its order dated 31.5.2013 has, inter alia, held as under: Thus there is nothing incriminating in these documents which can lead to forming of the satisfaction on part of the AO to initiate proceedings u/s 153C of the Act. In the spirit of enactment of section 153C, it would be implicit and inherent requirement that there must be existence of prima facie unrecorded unaccounted transaction recorded in the documents belonging to the assessee before the said provision can be invoked in case of a third party, who has not been subjected to search u/s 132 of the IT Act. Any other interpretation of Section 153C would result in unintended consequences in case of third parties to the search, in any case the Audited Accounts, Balance Sheet P L Account/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 33. We have gone through the decision of ITAT Delhi ‗B Bench in the case of M/s. DSL Properties (P Ltd vs DCIT (supra), wherein, the Tribunal at para 17 held as under: At the time of hearing before us, the learned counsel for the assesee has vehemently contended that the photocopy of the audited profit loss account and balance sheet was belonging to the shareholder/director from whom the same was found and not to the assessee. We agree with this contention of the learned counsel. When a company supplies photocopy of its profit loss account and balance sheet to its shareholders/directors, such photocopy of the profit loss account and balance sheet belong to such shareholder/director and not to the assesse company. If the argument of the Revenue is accepted then, if during the course of search of any person the photocopy of the profit and loss account/balance sheet of any listed company, say, Reliance Industries, Tata Motors or Bajaj Auto is found, then, as per the interpretation of Section 153C by the Department, the Assessing Officer would be entitled to take action under section 153C in the case of such listed company. That interpretation would lead to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153A encompasses additions, not based on any incriminating material found during the course of search? Before the Special Bench, Ld Sr. Counsel relied on the decision of LMG International Ltd (supra) as is apparent from para 16 of that order. We noted that in the said judgment in para 52 of its order, the Tribunal has held that section 153A comes into operation if a search or requisition is initiated after 31.5.2003. On the satisfaction of this condition, the AO is under obligation to issue notice to the persons requiring him to furnish the return of income of six years immediately preceeding the year of search. This finding implied that the proceedings u/s.153A is not to be restricted to the years for which incriminating material is found during the search. Ultimately, in respect of question referred to the Special Bench, the Special Bench in para 58 of its order held as under: 8. Thus, question No.1 before us is answered as under : a) In assessments that are abated , the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of t he six assessment years separately. b) In other cases, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income. The facts of this case are that there had been a survey in P group of companies. In the course of search, certain documents were found showing that the assessee acquired certain development rights from P group of companies. A satisfaction was recorded by the Assessing Officer in the case of the assessee u/s 153C. Thereafter, the proceedings were initiated against the assessee u/s 153A and the assessee was directed to file returns for the six assessment years. Assessments were completed u/s 143(3) read with section 153C. As the appeals were pending before the CIT(A), the assessee filed Writ petition before the Hon ble High Court contending that the AO had illegally assumed jurisdiction u/s 153C read with section 153A and that there was no undisclosed income to be assessed in the assessee s hands. Dismissing the petition, the Hon ble High Court held that the satisfaction that is required to be reached by the AO having jurisdiction of the person searched is that the valuable articles or books of account, etc., seized during the search belong to a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entries provided by them for appellant M/s. Gajanan Developers and Distributors Pvt. Ltd. in exchange of commission they charged from the company for providing such services. The incriminating paper in LPS-5 is evidence of accommodation entries given through the bank account of Spectrum Chemicals Pvt. Ltd. and Optimate Textile Limited also working out of commission on the basis of amount, month and dates. M/s. Dazzal Confindive Limited is controlled by Shri Sunil Agrawal. The huge cash deposits found in the bank account of the company is utilized for providing accommodation entries, though Shri Agrawal failed to furnish the name of the beneficiaries who deposited cash in the bank account. On observing the trail, it is found that Shri Sunil Agrawal used to receive cash through Shri Vinay Gandhi from Shri Gaurav Sharma which were deposited in the bank accounts of his employees and acquaintance and their concerns namely Ashmit Sagar, Rakesh Sharma, Ribeka Garg, Satyam Kanungo, Vinisha Garg, etc.. The page No. 2, 3 and 6 of LPS-4 signifies the role of regulating and controlling the bank accounts of the employees. It can be seen in the trail that cash deposited in these accounts we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven their confirmation were produced for verification before the AO. It was noticed from the return of income of M/s. Jubilant that it had filed returns of negligible income compared to huge asset holdings (i.e., investments) which shows that the main business of the company was earning from investment but the company was not even earning income at the rate of bank interest of 5% on its investments. No genuine business concern would operate in such a manner over several years. A perusal of the balance sheet of appellant M/s. Gajanan Distributors Developers Pvt. Ltd. in the relevant assessment years shows that the company had invested in purchase of agricultural land of substantial which had no connection with any business activity of the company or as loans to the Directors, which makes it clear that the company has just been used to create a veil for investment in various assets out of undisclosed income. Since real estate has been purchased by the company, the amount appearing as share application must have originated somewhere. The AO had also given his findings that the assessee-company has earned income from interest and bus running and could not have generated the unac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the complete particulars of the share applicants such as their names and addresses, income-tax file numbers, their creditworthiness, share application forms and share holders register, share transfer register, etc., are furnished to the AO and the AO has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. I am afraid that I cannot apply the ratio to a case such as the present one, where the AO is in possession of material that dis-credits and impeaches the particulars furnished by the assessee company and also establishes the link between self-confessed accommodation entry providers , whose business it is to help assessees bring into their books of account, their unaccounted monies through the medium of share subscription, and the assessee. The ratio is inapplicable to a case, again such as the present one, where the involvement of the Dr.Yogiraj Singh in such modus operandi is clearly indicated by valid material made av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this reason the AO has ruled out any suspicion which would have warranted protective assessments of the alleged bogus share capital in his hands. On the other hand, it is seen that Dr. Yogiraj Sharma has unaccounted income which can be traced back to early years preceding the Asstt. Yr. 2007-08 and 2008-09. There are ample evidence of close connection of Dr. Yogiraj Sharma with the suppliers namely Shri Ashok Nanda and Shri Yogesh Patariya. There are various business concerns of Shri Ashok Nanda including Netam Industries and Shri Umesh Kajve whose name is landed in the case of Netam Industries was the Director of the Dimple Multitrade Pvt. Ltd.. Shri Nanda is the share holder of the companies of Shri Gaurav Sharma and also Managing Director. Shri Yogesh Patariya is a close family friend of the Dr. Yogiraj Sharma. He is proprietor of Radiation Image Communication, Global Enterprises and others. Both of them get huge supply orders from the Department of Health. The loose papers in page No. 81-84 of LPS-2/30 seized from A-70, Shakti Nagar, Bhopal are copies of DD No. 476319, 476320 dated 28-03-2007 for ₹ 2.20 lacs each, 476313, 476314 dated 28-03-2007 for ₹ 1.50 lakhs e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es wherein Smt. Shashi Sharma and Shri Gaurav Sharma are the directors with certain share holdings. (vi) The subscribing companies are found to be fictitious or non-existent, therefore, one fact is oozing out that M/s. Gajanan Distributors and Developers Pvt. Ltd. and M/s. Shree Vighnesh Warehouse and Distributors Pvt. Ltd., have to discharge the onus to establish the credits of amounts received from the alleged subscribing companies in their books of account to obviate the mischief of section 68 of Income Tax Act. The law is well settled that onus to prove the source of money found to have been received by an assessee is on him where the nature and source of a receipt whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source for which I am supported by the decision of Hon ble Apex Court Rashan Di Hatti v/s CIT reported in 107 ITR 938 and Kela Khan Mohd. Hanif reported in 50 ITR 1. In the present case in hand, the Companies receiving the accommodation entries have grossly fail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that the assessee has received share application during the year but all the share application money was not treated by the AO to be of undisclosed nature and taxed substantively in the hands of Dr. Yogiraj Sharma. It is only the share application money received from the following persons/concerns which were taken to be of undisclosed nature as detailed below: A.Y. 2003-04: Name of the shareholder Address Date of allotment No. of shares Face value Share application Total amount Jubilant Multitrade (P) Ltd. SAFEX Ghat Kopar Andheri Link Road Asalpha Sak Inoka, Andheri East, Mumbai 31-12-2002 10,00,000 10,00,000 Dimple Multitrade (P) Ltd. Room No. 5, 3rd Floor Hanuman Building 2 Picket Road, Mumbai 31-01-2003 10,00,000 10,00,000 A.Y. 2004-05: Name of the shareholder Address Date of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-03-2006 10,000 10 1.00,000 9,00,000 10,00,000 80,00,000 43. The additions have been made on account of share capital contributions from aforesaid parties on the basis of various observations made in the assessment order. The AO observed that various corporate shareholders have submitted income tax returns. The AO has also analysed the bank statements of such corporate shareholders and examined credits and withdrawals from bank accounts of corporate share-holders. The A.O. has referred to details obtained from the Registrar of Companies in respect to certain corporate share-holders. All the share capital contributions are through proper banking channel and all corporate share-holders are assessed to tax. Most of the share-holders had also contributed for share capital in the case of Flexi Tuff International Ltd. one of the assessee at Indore. The A.O. has also referred in the case of the assessee in the assessment order for the assessment year 2005-06, the assessment order made in the case of Flexi Tuff Int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004-05, it was submitted that M/s. JMPL has filed return of income and shown its registered office at 911, 9th floor, Navjeevan Laminatan Road, Mumbai and he is maintaining bank accounts from where cheques have been issued to the assessee. The AO observed that survey conducted by the ITO, Investigation Unit-III, Mumbai found that the aforesaid premises were used for receiving mail messaging facility. The AO further observed that return for assessment year 2008-09 for JMPL is signed by one Shri Rajendra Prasad Agarwal and the statement of Rajendra Prasad Agarwal was recorded by the AO on 4.12.2009. The AO has filed the details of filing of the return for the assessment years 2003-04 to 2007-08 and reflected same in the assessment order of the assessee indicating the income and investment. Conclusion of the AO is mere inference and there are no legal documents for record to show that JMPL has not made capital contribution with the assessee company or Dr. Yogiraj Sharma has any nexus or connection to these companies. The conclusion of the AO is on merely suspicion, conjecture and surmises. Similarly, in respect of capital contribution made by DMPL, the facts and observations of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r: As regards the claim of the assessee regarding inadequate opportunity provided during the course of assessment proceedings and also the denial of opportunity to cross examine the persons whose statement were recorded and used against the assessee, it is requested that since the Hon ble CIT(A) has the powers coterminous with the AO., it is requested that he may kindly grant such opportunity during the appellate proceedings or if deemed fit, direct the undersigned to provide such opportunity to the assessee. 44. Our attention was drawn towards page 26 of the order of ld CIT(A) and submitted that ld CIT(A) has referred to LPS -4 for concluding that it is incriminating paper which is evidence of accommodation entries given through bank accounts of the corporate shareholders. The said LPS -4 has been a scanned copy and referred to the assessment order for assessment year 2006-07 at pages 14 15. From this paper, it is evident that the entries stated therein dated 24.7.2007 and 1.9.2007 and these have been seized from the residence of Shri Sunil Agarwal during the course of search on 7.9.2007. These loose papers does not relate to period to which assessee company has received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n these grounds in all the assessment years is duly covered in favour of the assessee. It was contended that the Hon ble ITAT in the case of M/s. Rajshree Finsec Private Ld (supra) has followed the decision of Hon ble Apex Court in the case of Lovely Exports Ltd (supra) and has also considered the decision of Agrawal Coal Corporation of ITAT, Indore Bench in the aforesaid judgement. The discussion and enquiry made by A.O. amply demonstrated identity of corporate shareholders beyond doubt. A.O. has made addition as he was not satisfied about the creditworthiness of such companies and deposits in the bank account of such companies. The A.O. has examined bank account of all the corporate shareholders, ROC details, Directors and office of such companies. In view there of ample legal evidence is on record to demonstrate as to identity of shareholders. Attention was invited to proviso to sec. 68 introduced w.e.f. assessment year 2013-14 to discharge the onus to explain share capital. The provisions of sec. 68 clearly Demonstrates that prior to assessment year 2013-14 the assessee if not establishing the identity of shareholders, no addition in respect to share capital can be made at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jubilant Multitrade (P) Ltd. SAFEX Ghat Kopar Andheri Link Road Asalpha Sak Inoka, Andheri East, Mumbai 31-12-2002 10,00,000 10,00,000 Dimple Multitrade (P) Ltd. Room No. 5, 3rd Floor Hanuman Building 2 Picket Road, Mumbai 31-01-2003 10,00,000 10,00,000 A.Y. 2004-05: Name of the shareholder Address Date of allotment No. of shares Face value Share application Total amount Jubilant Multltrade (P) Ltd. SAFEX Ghat Kopar Andheri Link Road Asalpha Sak Inoka, Andheri East, Mumbai 06-09-2003 10,00,000 A.Y. 2005-06: Name of the shareholder Address Date of allotment No. of shares Face value Share premium Share application Total a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that notice under section 143(2) in each of the assessment years in respect of returns filed by the assessee u/s.139(1) could have been issued as per the proviso to section 143(2)(1) before the expiry of 12 months from the end of the month in which the return is furnished by the assessee as per the provision prevailing during the impugned assessment years. The returns for assessment years 2003-04, 2004-05, 2005-06 2006-07, respectively were filed in the month of October, 2003, October, 2004. September, 2005 and July, 2006. Therefore, notices u/s.143(2) could have been issued by the AO within 12 months by October, 2004, October, 2005, September, 2006 and July, 2007 for the assessment years 2003-04 to 2006-07, respectively. After the expiry of 12 months, the AO could not have issued notices u/s.143(2) after the aforesaid dates, and therefore the AO could not have taken the scrutiny assessment. It is an undisputed fact that share capital contribution towards share capital by these companies were duly shown by the assessee in the audited profit and loss account, balance and annexures thereto filed alongwith income tax returns u/s.139(1) of the Act prior to search had taken place in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en similar view. In para 11 of this judgement, the Hon ble High Court held that obviously an assessment has to be made under this section only on the basis of the seized material . Even we noted that the Hon ble Delhi High Court in the case of Anil Kumar Bhatia, 352 ITR 493 (Del), under para 20, it has been observed as under: even if assessment order had already been passed in respect of one or any of the six relevant assessment years either u/s143(1)(a) or 143(3)prior to the initiationof search, still the AO is empowered to reopen those proceedings u/s 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during the search. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found relating to the year in which the assessee company has received share capital. Therefore, in our opinion, no addition on account of the share capital can be sustained. Accordingly, on this basis itself, we delete the addition on account of share capital in each of the assessment years. 56. Even on merit, we note that the case of the assessee is duly covered by the decision of ITAT Indore Bench in the case of ACIT vs. Kalan Industries Ltd (supra) M/s. Flexi Tuff International Ltd (supra). We noted from page 172 of the order of the Tribunal that M/s Rapid Commercial Finlease Ltd., and M/s. Optimates Textiles Industries Ltd., are the same parties who have invested in the assessee company by making contribution towards the share capital which was treated by the AO to be non-genuine. We noted that this Tribunal deleted the addition made by the AO in the case of M/s. Flexi Tuff International Ltd (supra). The Assessing Officer herself has observed that similar parties have contributed the capital in the case of the assessee. Even we noted that the Assessing Officer while making the addition in the case of the assessee relying on the order in the case of M/s. Flexi Tuff Intern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital brought in by the shareholder is not genuine. Letters of manager, in the absence of same being supplied to the assessee, could not be used against the assessee. In this case, we noted that there was search seizure action in the case of Dr. Yogiraj Sharma but no material was found during the course of search, which may prove that Dr. Yogiraj Sharma, assessee or Gaurav Sharma has given cash or the funds in lieu of cheques for the purpose of contributing in the capital of the assessee. Merely, a third party has stated in their statement recorded at the bank of the assessee that they have issued cheques after receiving cash from Shri Gaurav Sharma, the addition cannot be sustained. Even, no evidence is brought on record that these parties were carrying on entry operation business and were filing returns showing the income from entry operation business to substantiate their statements. The case is duly covered by the decision of Hon ble Supreme Court in the case of CIT vs. Lovely Exports (supra), in which, the Hon ble Supreme Court took the view that if the share application money is received by the assessee company from the alleged bogus shareholders, whose names are given to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to take action in the hands of the companies/persons, who has contributed towards share capital in the case of the assessee in accordance with law in respect of which the addition has been made. 59. We may also observe that from the assessment order, we noted that the AO observed that Mr Vinay Gandhi, who was a Chartered Accountant, in his statement dated 14.2.2009 stated that his source of income is C.A. practice and he has arranged entries for the assessee company by introducing him to Sunil Agarwal. Even in the statement of Shri Gunjan Karun S/O. Shri J.K.Ray recorded on 21.12.2009, it has been stated that they have signed the cheque and given it to C.A. Mr Vinay Gandhi for share capital entry. The C.A. who is in practice is barred to carry on any other business as per the code of conduct formulated by the Institute of Chartered Accountants. Even in case the C.A. has accepted that he was engaged in such illegal action, the AO is directed to take action against the C.A. before the Institute of Chartered Accountants so that disciplinary action be taken as the C.A. who is holding certificate of practice cannot be engaged in the business of providing the entries. Thu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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