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TMI Blog2016 (5) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission. We have not accepted the Revenue’s contention that the assessee has taken the accommodation entry in the form of share capital. Therefore, the allegation of the Revenue that the assessee has paid commission for taking the accommodation entry cannot be accepted. Accordingly, the addition made for unexplained expenditure on alleged commission is deleted. - ITA Nos.1698/Del/2014, 1699/Del/2014, 1700/Del/2014, 1701/Del/2014 & 1753/Del/2014, ITA Nos.1702/Del/2014 & 1703/Del/2014, ITA Nos.1704/Del/2014 & 1705/Del/2014, ITA Nos.1706/Del/2014 & 1707/Del/2014, ITA Nos.1708/Del/2014 & 1709/Del/2014 - - - Dated:- 31-5-2016 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Appellants by : Shri Ved Jain, Advocate Shri Ashish Chadha, CA. Respondent by : Shri Ravi Jain, CIT-DR. ORDER PER G.D. AGRAWAL, VP :- ITA No.1698/Del/2014 Assessee s appeal in the case of M/s Best Infrastructure (India) Pvt.Ltd. for AY 2005-06 :- This appeal by the assessee for the assessment year 2005-06 is directed against the order of learned CIT(A)-XXXIII, New Delhi dated 11th November, 2013. 2. The assessee has raised the following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of share capital and for obtaining such accommodation entries, the assessee has paid commission at the rate of 2.25%. Accordingly, the Assessing Officer worked out the commission of ₹ 8,10,000/- which was added as unexplained expenditure. It is submitted by the learned counsel that during the course of search, no loose paper or other evidence was found which may indicate that the assessee had taken the accommodation entries in the form of share capital. Therefore, no incriminating material was found relating to share capital. He fairly admitted that various loose papers and documents were found and seized at the time of search. However, these documents contain the details of advance received for the sale of certain properties. In the statement recorded during the course of search, Shri Anu Aggarwal, director of the assessee company, had surrendered the sum of ₹ 8 crores. That later on, Shri Anu Aggarwal, vide letter dated 24th March, 2010, modified the earlier statement and the undisclosed income declared at ₹ 8 crores was reduced to ₹ 2 crores. However, the fact remains that no incriminating material relating to share capital was found during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated upon by the ITAT Delhi Bench vide ITA Nos.4527 to 4531/Del/2012. In the said case, on behalf of Shri Tarun Goyal and his group companies, it was claimed that Shri Tarun Goyal is entry provider and he received the cash from the beneficiary and the same cash is deposited in the company s bank account and therefore, the cash deposited in those companies should be treated as explained and no addition for unexplained cash credit u/s 68 should be made. He stated it was also claimed that only the commission income should be assessed. However, the ITAT rejected the contentions put forward on behalf of Tarun Goyal group of companies and held that the addition for peak credit at the first point should be made. Therefore, the contention of the learned CIT-DR, that Shri Tarun Goyal and his group companies are entry provider, is without any basis and has been impliedly disapproved by the ITAT. He further stated that the assessee was never allowed the opportunity for cross-examination. In fact, during the remand proceedings, learned CIT(A) specifically directed the Assessing Officer to allow cross-examination of Shri Tarun Goyal. The Assessing Officer did not allow cross-examination of Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the total income of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. 11. In the case of Harjeev Aggarwal (supra), Hon'ble Jurisdictional High Court considered the evidentiary value of the statement recorded during the course of search. The relevant portion is paragraph 19, 20 24, which are reproduced below for ready reference :- 19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words evidence found as a result of search wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment u/s 153A. 13. Having discussed the legal position held by Hon'ble Jurisdictional High Court above, let us examine the facts of the case so as to ascertain whether the addition for share capital can be made u/s 153A. Admittedly, for the year under consideration, the assessee had filed the return of income on 27th October, 2005. The returned income was accepted u/s 143(1) as no notice u/s 143(2) was issued. The search and seizure operation was carried out at the assessee s business premises on 15th September, 2008. During the search, various loose papers were found and seized. However, the seized documents were with regard to unaccounted receipt from sale of certain properties and unrecorded expenditure in the construction business. It would be evident from question No.15 and reply thereof in the statement of Shri Anu Aggarwal, director of the assessee company :- Q.No.15 I am showing you Annexure A-1 of party BO-1 page No.1 to 71, which gives details of cash received for sale of property not reflected in the books of accounts. Annexure A-4, pages 1 to 31 and Annexure A-11 pages 1 to 100 which give details of expenses made for construction work which are also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Shri Tarun Goyal was recorded behind the back of the assessee. Shri Tarun Goyal s statement was recorded during the course of search at his premises. It is the claim of the Revenue that Shri Tarun Goyal was taken to the assessee s premises for offering cross-examination of Shri Tarun Goyal to the assessee but assessee refused to avail such opportunity. However, there is no evidence to support this contention of the Assessing Officer except the statement of Shri Tarun Goyal vide question and answer No.4, which read as under:- Q.No.4 Please confirm that regarding your answer to Q.No.2 of this statement you were taken to the office of the Best Group of Companies at Plot No.H-8, Best Plaza, Netaji Subash Place, Pitampura, New Delhi to confront your statement with them. However they refused any such confrontation or cross examination. Ans. I confirm that I was taken to the office of Best Group of Companies for confrontation/cross examination by the directors of the company, however they refused any such cross examination/confrontation regarding transactions mentioned in my answer to Q.No.2 of this statement. 16. It is trite law that the statement of a third party recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is mentioned that directors/promoters of this group of companies has signed on any statement or document that they have refused cross-examination. Therefore, for the sake of clarity on this matter, I direct you to provide an opportunity to appellant company to crossexamine Sh. Tarun Goyal to settle the controversy forever. This may be treated as direction under section 250(4) of I.T. Act. 17. Despite the above specific direction, the Assessing Officer did not allow opportunity to cross-examine Shri Tarun Goyal. From the remand report submitted by the Assessing Officer dated 10th July, 2013, it is gathered that he did issue notice u/s 131 to Shri Tarun Goyal to attend his office twice. However, Shri Tarun Goyal did not appear in compliance to such notice. Thereafter, he asked the director of the assessee company to produce Shri Tarun Goyal for cross-examination, in response to which, the director of the assessee company replied that they are not aware about the whereabouts of Shri Tarun Goyal since long. Thus, the fact remains that the cross-examination of Shri Tarun Goyal could not be allowed to the assessee. It is settled law that the statement of a third party recorded be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2008 is concerned, the relevant portion of the same has already been reproduced by us in paragraph 13 above. The authorized officer asked the query with regard to certain loose papers found and seized. From a reading of the question, it is evident that as per authorized officer also, the loose papers were pertaining to some unaccounted receipt and unaccounted expenditure on construction. Shri Anu Aggarwal also admitted the similar position in his reply. Thus, admittedly, the question was not relating to issue of share capital, much less whether the share capital was taken as accommodation entry by the assessee. Another statement of Shri Anu Aggarwal was recorded on 24th October, 2008. Question Nos.3, 6 7 were relating to share capital, which are reproduced below for ready reference:- Q.No.3 Please provide the details of share premium of various companies of the Best Group of companies for the last 6 year. Ans. The required information is being produced/submitted today itself. Q.No.6 During the course of search on Sh. Tarun Goyal, he has stated in his statement that he has provided you accommodation entries. Please explain the same. Ans. I personally do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying the law as laid down by Hon'ble Jurisdictional High Court and Hon ble Apex Court to the facts of the assessee s case, the following position emerges. (i) No addition u/s 153A in respect of a completed assessment can be made unless some incriminating material was unearthed during the course of search. Admittedly, in the case of the assessee, no incriminating material with regard to issue of share capital has been found and seized during the course of search. (ii) Any statement recorded during the course of search cannot on a standalone basis without reference to any other material discovered during search and seizure operation would empower the Assessing Officer to make the addition. The words evidence found as a result of search would not take within its sweep statement recorded during search and seizure operations. Therefore, the Revenue s stand that the addition u/s 153A can be made in respect of share capital on account of statement of Shri Tarun Goyal and Shri Anu Aggarwal cannot be accepted. (iii) Even otherwise, the statement of Shri Tarun Goyal cannot be utilized against the assessee as his statement was recorded behind the back of the assessee and the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all these appeals by the assessees, the grounds raised are identical to the grounds raised by the assessee in the appeal in the case of M/s Best Infrastructure (India) Pvt.Ltd. for assessment year 2005-06 vide ITA No.1698/Del/2014. For ready reference, the details of the additions made and sustained by the learned CIT(A) in each case are summarized below :- M/s Best Infrastructure (India) Pvt.Ltd. :- ITA No. AY Addition for unexplained share capital Addition for alleged expenditure on commission 1699/Del/2014 2006-07 2,60,15,000/- 5,85,340/- 1700/Del/2014 2007-08 3,71,00,000/- 8,34,750/- M/s Best City Projects (India) Pvt.Ltd. :- ITA No. AY Addition for unexplained share capital Addition for alleged expenditure on commission 1702/Del/2014 2006-07 2,27,50,000/- 5,11,875/- 1703/Del/2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s India Pvt.Ltd. for AY 2008-09 and ITA No.1707/Del/2014 M/s Best City Realtors (India) Pvt.Ltd. for AY 2008-09 :- In all the above appeals, the grounds raised are identical. Ground No.2 in all the above cases is against the sustainability of addition u/s 153A. Learned counsel for the assessee has not pressed this ground of appeal and, therefore, ground No.2 in all the above appeals is rejected. Ground No.1 in all the above appeals is against the addition sustained for unexplained share capital while ground No.3 is against the addition sustained for alleged commission on the share capital. The same are summarized as under:- M/s Best Infrastructure (India) Pvt.Ltd. :- ITA No. AY Addition for unexplained share capital Addition for alleged expenditure on commission 1701/Del/2014 2008-09 5,00,000/- 11,250/- M/s Best City Developers India Pvt.Ltd. :- ITA No. AY Addition for unexplained share capital Addition for alleged expenditure on commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d.AO erred in making the assessment in view of the fact that the assessment was not pending as on the date of the search, which is incorrect, unjustified and bad in law. 3. The ld.CIT(A) has erred in law facts of the case in confirming the additions of ₹ 3,37,500/- on account of alleged commission paid for obtaining accommodation entries which is highly arbitrary, unjustified, bad in law, uncalled for and merely on presumption of the ld.A.O. 4. The ld.CIT(A) has erred in facts and law of the case in holding the validity of assessment u/s 153A which is bad in law, unjustified, uncalled for and needs to be quashed. 5. The assessee craves the right to add, amend or modify any ground of appeal. 31. Learned counsel for the assessee fairly conceded that on the date on which the Assessing Officer issued notice u/s 153A, the original assessment was pending inasmuch as the time limit for issue of notice u/s 143(2) did not expire. Therefore, on issue of notice u/s 153A, original pending assessment abated and the Assessing Officer had authority to consider all the issues, whether in respect of those issues, any incriminating material is found or not. In view of the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back of the assessee and the assessee was never allowed any opportunity to cross examine Shri Tarun Goyal. In the absence of his cross-examination having been allowed to the assessee, his statement cannot be utilized against the assessee. He further pointed out that even during remand proceedings, learned CIT(A) asked the Assessing Officer to allow cross-examination of Shri Tarun Goyal to the assessee. However, despite the specific direction of learned CIT(A), the assessee was not allowed the cross-examination of Shri Tarun Goyal and, therefore, his statement cannot be utilized against the assessee. He further submitted that as per the Assessing Officer, the assessee has taken the accommodation entry from Tarun Goyal group by paying cash to him and then obtaining the cheque in the form of share capital against such cash payment. He stated that from the bank account of the share applicant, it would be evident that in the bank account of none of the share applicants, cash has been deposited, therefore, the allegation of the Assessing Officer, that the assessee provided cash to Shri Tarun Goyal who deposited the same in his group company and issued cheques to the assessee is factu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer are the make-believe evidences and cannot be relied upon. He further submitted that the share application raised by the assessee was not by public offer but it is by private placement. Therefore, the burden is more upon the assessee to establish the identity of the shareholder, creditworthiness of the shareholder and genuineness of the transaction. He stated that the assessee despite repeated opportunities having been allowed by the Assessing Officer has not produced the director of any of the share applicant company. In view of the above, learned CIT(A) was fully justified in sustaining the addition for unexplained cash credit in the form of share capital. The same should be sustained. 35. In the rejoinder, it is fairly admitted by the learned counsel that the so-called affidavit of the share applicant furnished by the assessee before the Assessing Officer is not notarized and, therefore, technically, it cannot be called an affidavit. Nevertheless, it remains a self-declaration by the share applicant wherein he has confirmed having invested in the assessee company and has also disclosed his income tax number. He further submitted that even if the said affidavits a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mine the facts of the assessee s case and the stand of the Revenue in the light of the above decision of Hon'ble Jurisdictional High Court. The stand of the Revenue is that the assessee has taken the accommodation entry in the form of share capital from Tarun Goyal group of companies. In this regard, the assessee has paid cash against which Shri Tarun Goyal has issued cheque in the form of share capital from his group companies. The Revenue has further alleged that the assessee has also paid commission to Shri Tarun Goyal for availing accommodation entries. The Revenue has not pointed out any corroborative evidence in support of the above allegation except the statement of Shri Tarun Goyal. The search and seizure has taken place at the business premises of all the group companies of the assessee group. Various loose papers were found and seized. Those loose papers indicate the receipt of unrecorded money from the sale of properties as well as the expenditure incurred by the assessee in the construction work which is not recorded in the books of account. Admittedly, in none of the loose papers, there is mention of any cash payment by the assessee to Shri Tarun Goyal for obtainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt as well as ITAT Delhi Benches. Before going into the facts of the assessee s case, it would be appropriate to refer to those decisions relied upon by the learned counsel. 40. Learned counsel for the assessee has relied upon the decision of Hon ble Apex Court in the case of Orissa Corporation P. Ltd. (supra). In the said case, the assessee furnished before the Assessing Officer letters of confirmation and gave the particulars of income tax number of the creditors. The Assessing Officer issued summons u/s 131 to the creditor which were returned unserved with the remark left . Therefore, the Assessing Officer made the addition of ₹ 1,50,000/- as unexplained cash credit. The Tribunal deleted the addition holding that merely because the assessee could not produce the parties, it did not follow automatically that an adverse inference should be drawn against the assessee. When the Revenue took up the matter to Hon'ble Supreme Court, Hon ble Apex Court held :- that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer to summon the Directors of the applicant companies. The addresses of these companies must be available on the share applications, Memorandum and Articles of Association and their income tax returns. If the Assessing Officer had any doubt about identity of the share applicants, he could have summoned the Directors of the applicant companies. No such attempt was, however, made by him. Therefore, the Commission of Income Tax (Appeals) and the Income Tax Appellate Tribunal, in our view were justified in holding that the identity of share applicants and the genuineness of the transactions had been established by the assessee. 43. In the case of CIT Vs. Fair Finvest Ltd. [2013] 357 ITR 146 (Delhi), Hon'ble Jurisdictional High Court has held :- 6. This Court has considered the submissions of the parties. In this case the discussion by the CIT (Appeals) would reveal that the assessee has filed documents including certified copies issued by the Registrar of Companies in relation to the share application, affidavits of the Directors, Form 2 filed with the ROC by such applicants confirmations by the applicant for company s shares, certificates by auditors etc. Unfortuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back with folded hands till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - Investigation made by the Investigation Wing of the Department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of ₹ 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000/- and not ₹ 1,11,50,000/- as mentioned in the notice. The assessee has furnished details of such receipts and the contention of the assessee in respect of the amount is found correct. As such the unexplained amount is to be taken at ₹ 55,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by the director of share applicant company in which he has confirmed that the company has applied to M/s Best City Developers (India) Private Limited for 15 lakhs equity shares for which payment of ₹ 1,50,00,000/- has been made by cheque. The detail of cheque number and the name of the bank have also been provided. In paragraph 3, the permanent account number of the share applicant company has also been provided. In paragraph 2, it is mentioned that the share applicant company is registered with Registrar of Companies and registration number along with date of registration is also given. The assessee has furnished share application form for which also the address of the share applicant company, number of shares applied for, amount paid by cheque, details of cheque number as well as permanent account number of the company has been given. The confirmation has been filed by the share applicant company giving all necessary particulars and, for ready reference, we reproduce the same herein below :- Aries Crafts Private Limited 13/34, W.E.A., IVth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi 110005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urnished only the confirmation of the creditor which gave the particulars of income tax number of the creditor. The Assessing Officer issued summons u/s 131 to the creditors which were returned unserved with the remark left . Thereafter, the Assessing Officer did not make any further verification from the income tax files of those creditors and confirmed the addition. The Tribunal deleted the addition holding that merely because the assessee could not produce the creditors, an adverse inference cannot be drawn against the assessee. When the matter reached to Hon ble Apex Court, their Lordships held that on these facts, if the Tribunal came to the conclusion that the respondent had discharged the burden which lay upon it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. 48. In the case of Rakam Money Matters Pvt. Ltd. (supra), the facts before Hon'ble Jurisdictional High Court were that the assessee furnished income tax return and permanent account number details of the companies. The directors of those companies did not respond to summons issued by the Assessing Officer. Hon'ble Jurisdictional High Court upheld the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has duly discharged the onus which lay upon it to prove the credit in the form of share capital. Accordingly, the addition made for unexplained share capital is deleted. 49. The addition relating to unexplained expenditure on alleged commission on the share application money is made by the Assessing Officer on the presumption that the assessee has taken the accommodation entry and for availing such accommodation entry, the assessee paid the commission. We have not accepted the Revenue s contention that the assessee has taken the accommodation entry in the form of share capital. Therefore, the allegation of the Revenue that the assessee has paid commission for taking the accommodation entry cannot be accepted. Accordingly, the addition made for unexplained expenditure on alleged commission is deleted. ITA No.1753/Del/2014 Assessee s appeal in the case of M/s Best Infrastructure (India) Pvt.Ltd. for AY 2009-10 :- At the time of hearing before us, the learned counsel for the assessee has not pressed this appeal of the assessee. Accordingly, the same is dismissed as not pressed. 50. In the result, :- (i) the appeals of the assessee in ITA Nos.1698/Del/2014, 1699/De ..... X X X X Extracts X X X X X X X X Extracts X X X X
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