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TMI Blog2015 (12) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... that any search took place at its registered office, the written submissions filed by the Assessee in this case, does not indicate that any such dispute was raised. Even before us it has not been contended that no search took place at the declared registered office of the Assessee. In the circumstances, we find it is necessary to remand the matter to the Tribunal to examine the facts relevant to the Assessee for determining whether an addition under Section 68A of the Act was sustainable. Needless to mention that it would also be open for the ITAT to remand the matter for further enquiries if it is so considered necessary. It is not open for the Assessee to challenge the validity of the search under Section 132 of the Act or the assumption of jurisdiction under Section 153A of the Act, as those issues had not been pressed by the Assessee before the ITAT - Decided in favour of the Revenue - ITA 727/2015, ITA 729/2015 , ITA 760/2015 , ITA 718/2015, ITA 345/2015 , ITA 355/2015 , ITA 356/2015 , ITA 362/2015 , ITA 364/2015 , ITA 399/2015 , ITA 612/2015 , ITA 633/2015 - - - Dated:- 18-12-2015 - S. Muralidhar And Vibhu Bakhru, JJ. For the Appellant : Ms. Suruchi Aggarwal, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions made by the AO under Section 68 of the Act. In the circumstances, the only question that arises is whether the ITAT has erred in holding that additions under section 68 of the Act were invalid. 4. Since the issues involved and the questions of law projected by the Revenue are common, these appeals were heard together. 5. The above proceedings emanate from the search and seizure operations under Section 132 of the Act, which commenced on 14th October, 2008 in respect of SVP Group of companies . 6. According to the Revenue, the core of SVP Group of companies consisted of four companies, namely, SVP Builders India Ltd., SVP Developers (India) Pvt. Ltd., SVP Liquors India Limited and Five Vision Promoters Pvt. Ltd, which were engaged in the business of construction of residential, commercial and business complexes as well as in the sale and purchase of land. It was found that the aforesaid four companies had received share capital from 106 companies during the AYs 2003-04 to 2009-10. It is the case of the Revenue that the aforesaid four companies forming core of the SVP Group had been charging on-money on sale of flats and shops which was not accounted for in the regul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Flat', which was used for residential purposes. During the search operations, a statement of one Sh. Bhajarang Bahadur Dubey, who was present at the said premises, was recorded and he denied the existence of an office of any company at the premises. It was also noted that in addition to the Assessee Company, there were six other companies that were declared to be located at the same address - B-4/71A, Lawrence Road, Delhi that had subscribed to the share capital of the core operational companies of the SVP Group. None of the aforesaid companies were also found to be functioning at the said address. The name of the companies was also not displayed. The AO concluded that the activities carried on by the Assessee were genuine activities and it had merely received share application money and had shown the same to be invested in share capital of unquoted companies. The AO, thus, concluded that all receipts reflected by the Assessee were unexplained credits taxable under the provisions of Section 68 of the Act. However, the AO deleted the investments made in share capital of SVP Group as the same were taxed as unexplained credits in the hands of the investee companies of the SVP Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter, CIT(A) issued a letter of enquiry under Section 250(4) of the Act dated 10th January, 2012 / 24th January, 2012 calling upon the Assessee to explain entries in respect of cash transaction along with necessary documents. The CIT(A) also called for a remand report on the submissions made by the Assessee. In the meantime, the Assessee once again provided the books of accounts and sought to explain the sources of receipts with reference to the books of accounts. The Assessee also filed affidavits of several persons in respect of funds received by the Assessee. 13. The CIT(A) considered the remand report of the AO and observed that companies stated to have invested in the Assessee were having similar features: most of the investor companies had two Directors whose stake in the initial capital of the company was very small; that the disclosed address of the directors was the Janta Flat thus inferring that the said directors belonged to lower middle strata of the society; each director was also a director in several other similar companies; that all companies had made investment in shares of unlisted companies, which were not saleable in the open market and were thus not a trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch as well as the assumption of jurisdiction under Section 153A of the Act are concerned, the Assessee did not press those grounds. The ITAT recorded that the issues pressed before it related to the merits of the addition made by the AO under Section 68 of the Act and both the Revenue and the Assessee agreed that the facts and issues were identical to the appeal in the case of Pranjul Overseas (P) Ltd. and, therefore, there was no necessity to hear the appeals pertaining to the Assessee separately. 17. In view of the above, the ITAT reproduced its findings arrived at in the case of Pranjul Overseas (P) Ltd. and held that the additions made under Section 68 of the Act were not in accordance with law. The grounds pressed by the Assessee were, accordingly, allowed while the grounds urged by the Revenue were dismissed. Submissions of the counsel 18. Ms Suruchi Aggarwal, the learned counsel appearing for the Revenue supported the observations made by the CIT(A). She submitted that the Assessee was merely a paper company. She emphasized that the office of the Assessee was shown to be located in a Janta Flat and in an onspot examination it was found to be non-existent. She rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs before the authorities was contradictory; whilst, on one hand the Revenue claimed that the Assessee was merely conduit for laundering the money for the beneficiaries (recipients), on the other hand, the Revenue was seeking to tax the income of the Assessee as income from business. He stated that not only the Assessee but the persons (including companies) from whom the Assessee had received funds had been taxed on their income. He argued that once having accepted the persons from whom the Assessee had received money were assessable to tax, it was not open for the Revenue to now contest their identity or the genuineness of the transactions, which had been accepted by the Revenue while making assessments in respect of those persons. Reasoning and Conclusion 22. The law relating to Section 68 of the Act has been a subject matter of several decisions and the legal position is now well settled. An addition under Section 68 of the Act can be made only where the Assessee either offers no explanation for the credit in its books or the explanation offered by it, is unsatisfactory. In cases where the identity of the source of the funds as well as the creditworthiness of the payer is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o treat such a sum as income of the assessee which is liable to be taxed in the previous year in which the entry is made in the books of account of the assessee. 23. This Court in a recent decision in the case of Commissioner of Income Tax - 3 vs. Five Vision Promoters Pvt. Ltd.: ITA 234/2015, decided on 27th November, 2015 examined and reiterated the law relating to Section 68 of the Act. It is now well established that the AO has jurisdiction to undertake enquiries with regard to the amount credited in the books of the accounts of an Assessee . 24. In the aforesaid circumstances, the only issue that needs to be examined is whether the findings of the ITAT are in consonance with the settled law relating to Section 68 of the Act. A perusal of the order passed by the ITAT, insofar as the present Assessee is concerned, indicates that the appeals filed by the Revenue in respect of the Assessee were not taken up for hearing in view of the statement made by the parties that the facts and the issues involved were identical to that in the case of Pranjul Overseas (P) Ltd. Thus, it is apparent that the ITAT did not examine whether the Assessee had established the identity, genuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 6th November, 2006 as share application money to the Assessee. The registered office of Lawrence Distributors (P) Ltd. was also shown as B-4/71A, Lawrence Road, Delhi. Vijay Kumar affirmed another affidavit as a Director of Sharwan Advertising (P) Ltd. affirming that the said company had paid ₹ 5 lacs in cash to the Assessee as share application money. The registered office of Sharwan Advertising (P) Ltd. was also reflected at B- 4/71A, Lawrence Road, Delhi-35. One Ghanshyam Dass who was a Director of the Assessee Company at the material time, also furnished affidavits on behalf of the M/s Broad Traders Finances Pvt. Ltd, M/s Busy Traders and Finances Pvt. Ltd. and Aggarwal Plasto Chem Pvt. Ltd. affirming that the said companies had made cash payments of ₹ 5 lacs each to the Assessee Company as share application money. It is also relevant to note that the registered office of all the three said companies was reflected at B-4/71A, Lawrence Road, Delhi. Mr Ghanshyam Dass and Vijay Kumar also affirmed affidavits in their individual capacity of having made large cash payments to the Assessee Company. In addition to the above, one Jasoud Singh and one Manoj Kumar also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of the persons who are stated to have made payments to the Assessee as well as to the genuineness of the transactions. 27. At this stage, we must also observe that the stand of the Revenue is somewhat unclear; while the Revenue is contending that the Assessee is liable to pay tax on the amount credited in its books as under Section 68 of the Act. It is also deleted the amount invested by the Assessee in shares of SVP Group companies on the ground that the Assessee is only a conduit. The AO has been influenced by the fact that several companies who had subscribed to share capital of SVP Group aggregating a sum of ₹ 85,48,50,000/- out of which shares subscribed/purchased at an aggregate value of ₹ 81,19,32,000/- had subsequently been sold/transferred to other SVP concerns/promoters for a sum of ₹ 10,38,65,200/-. Resultantly, the shareholders of SVP group had acquired shares corresponding to funds of ₹ 81,19,32,000/- infused in SVP Group of companies for an aggregate consideration of ₹ 10,38,65,200/-. Thus, acquiring hidden capital of 70,80,66,800/- without payment of corresponding taxes required to generate that wealth. This fact had led the AO to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities to finally examine the evidence on record and determine whether the Assessee could satisfactorily explain the credit entry in its books and could establish the genuineness of the transactions claimed to have been entered into by it. Clearly, the ITAT has not examined the facts relating to the Assessee. The ITAT had simply proceeded on the basis of the facts obtaining in the case of Pranjul Overseas (P) Ltd. on the statement of the parties that the facts of that case were similar to the facts in the case of the Assessee. However, an examination of the documents filed before us, it does not appear that the facts in the case of Pranjul Overseas (P) Ltd. were similar to that as obtaining in the present case. While it appears that in the case of Pranjul Overseas (P) Ltd., the Assessee disputed that any search took place at its registered office, the written submissions filed by the Assessee in this case, does not indicate that any such dispute was raised. Even before us it has not been contended that no search took place at the declared registered office of the Assessee. 28. In the circumstances, we find it is necessary to remand the matter to the Tribunal to examine the f ..... 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