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TMI Blog2017 (5) TMI 1356X X X X Extracts X X X X X X X X Extracts X X X X ..... ived of ₹ 5.75 crores. Further, the search is conducted in the case of the assessee on 19.03.2012 and original return of income has been filed by the assessee after search on 30.03.2012. Therefore, there is no question of assessment already stood completed on the date of search. In view of the above sole reliance of the assessee on the decision Delhi High Court in the case of CIT vs Kabul Chawla (2015 (9) TMI 80 - DELHI HIGH COURT ) is clearly misplaced. This ground of appeal of the assessee has no merit, the same is accordingly dismissed - Decided partly in favour of assessee. - I.T.A. No. 2525, 2523, 2524/Del/2015 - - - Dated:- 17-4-2017 - Sh. Bhavnesh Saini, Judicial Member And Sh. L. P. Sahu, Accountant Member Assessee by Sh. Gautam Jain, Adv. Revenue by Sh.S.S.Rana, CIT DR ORDER Per Bhavnesh Saini, Judicial Member This appeal shall disposed off all the above appeals filed by different assessees against different orders of CIT(A)-XXVI, New Delhi dated 27.03.2015 and 30.03.2015 for AY. 2011-12. 2. Since identical issues are involved in all the group appeals, therefore, Ld. representatives of both the parties mainly argued in ITA No.2525/Del/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... post-search proceedings on the KJS Group group, it was found that companies of KJS received huge amount of share capital/application money with premium from various entities including entities of Kolkata. These companies were inclusive of the above two companies and M/s Pankaj Infotech Pvt. Ltd. when inquired about the history of these companies, it was gathered that these three companies were incorporated in FY 2007-08. During the first year of incorporation of the three entities allotted shares at unwarranted and unjustifiable premium against the common business sense of investor. The original shareholders remained unchanged for more than one and half year and later on other shareholders have taken the shares from the original shareholders at face value without paying premium. The AO, therefore, noticed that all the shareholders of the aforesaid three companies which were allotted shares initially or held the same through transfers till the emergence of KJS Group were close associates/affiliates of Mr. Suresh Kumar Jain of Kolkata. He created a web of companies wherein common set of shareholders and directors existed. None of the companies carried out any business except receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investment made by them. He has explained how many investment made by KJS Group companies and explained the entities from which investments have been received in answer to question No.23 of his statement. The AO, therefore, noted that the assessee company has raised share application money from all these three companies of Kolkata. The statement of Sh.K.J.Ahluwalia in search was also recorded in which he has explained his relationship with M/s Prabhatam Group of companies. He admitted to have invested various funds in the M/s Prabhatam Group of companies from his own companies including three companies of Kolkata. The AO noted that it indicates towards the creation of web of companies to provide accommodation entries. 9. The AO in order to examine the genuineness of the share application money received, issued notice u/s 133(6) to both the companies namely M/s Puneet Oil Chemicals Pvt. Ltd. and M/s Tanish Tele Tradecon Pvt. Ltd. which have been received unserved. The AO also asked the assessee to produce these parties alongwith required information vide letters dated 10.03.2014 by 19.03.2014. The assessee objected to the observation of the AO. The assessee also submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in the case of the assessee. The investors company have confirmed giving share application money to the assessee. The evidences and material have been reproduced to show net worth of M/s Puneet Oil Chemicals Pvt.Ltd. at ₹ 99 crores and M/s Tanish Tale Tradecon Pvt. Ltd. at ₹ 135.82 crores which are sufficient to explain the investment in assessee company that the investors are corporate entities duly assessed to tax and made investment in assessee company through banking channel from their own sources which have not been rebutted by the AO through any material or evidence on record. Merely because the investors had not replied to the notice u/s 133(6), no adverse inference should be drawn against the assessee. The assessee relied upon the decision of the Apex Court in the case of CIT vs Lovely Exports Pvt. Ltd.[2008] 319 ITR 5 (SC) and other decisions. It was further submitted that KJS Group had made investment of ₹ 44.70 crores in the assessee company as share application money from various entities in different years and sufficient amount is refunded to KJS Group, therefore, no addition should be made against the assessee, therefore, findings of AO are inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded in the case of the assessee. The statement of Sh. Dinesh Gutpa, Director of the assessee was recorded in which he has confirmed taking genuine share application money from both the above companies. No addition has been made on the statement of Sh. Dinesh Gupta. Both shareholders are assessed to tax and have also been searched, therefore, they are existing parties. All the proceedings have been conducted by the AO at the fag end of the assessment. Since no proceedings were pending against the assessee, therefore, there is no abatement of any proceedings so as to make assessment u/s 153A of the Act. Though, original return was filed late on 30.03.2012 but no notice u/s 143(2) have been issued. As such there is no abatement in the case of the assessee. Ld. Counsel for the assessee relied upon the following decisions:- (i) Decision of Supreme Court in the case of CIT vs Lovely Exports P.Ltd. [2008] 216 CTR 0195 in which it was held If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded on oath u/s 132(4) and also filed details of seized papers recovered during the course of search as has been highlighted by the CIT(A) to show that incriminating material was found during the course of search, therefore, assessment u/s 153A is valid. Ld. DR relied upon the decision of the Kerala High Court in the case of E.N. Gopakumar vs CIT [2016] 75 taxmann.com 215 (Kerala High Court); decision in the case of Smt. Dayawanti vs CIT 75 taxmann.com 308 (Delhi High Court); decision of Allahabad High Court in the case of CIT vs Raj Kumar Arora [2014] 367 ITR 517 and CIT vs Kesarwani Zarda Bhandar Sahson Alld in ITA No.270 of 2014. Ld. DR also submitted that since the assessee did not file return of income prior to search, therefore, no assessment is completed, therefore, decision in the case of CIT vs Kabul Chawla (supra) would not apply. Ld. DR further submitted that the investors had not responded to the notice u/s 133(6) as well as did not appear before the AO. They were having low income, therefore, additions on merit have been correctly made. Ld. DR relied upon the decision of Delhi High Court in the case of CIT vs Nipun Builders Developers P.Ltd. 350 ITR 407; CIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. The assessee company is engaged in the business of investment and it had received share application money to the tune of ₹ 5.75 crores from Puneet Oil Chemicals Pvt. Ltd. and M/s Tanish Tale Tradecom P.Ltd. The AO asked the assessee to file confirmation and other documents of the share applicants in order to prove identity, creditworthiness and genuineness of the transaction. The assessee admittedly produced several documentary evidence before the AO in order to prove the above ingredients of section 68 of the Act i.e. the assessee furnished address of the share applicants, CIN No., Incorporation date of company, PAN, Authorized capital, paid up capital, names of Directors, certificate issued by Registrar of Companies and return filed before ROC, net worth of both the companies, confirmation of accounts, copy of bank statement with reconciliation statement, copy of acknowledgement of filing of income tax return for AY under appeal 2011-12 with audited accounts, affidavits of Directors and copies of assessment orders u/s 143(3) for both the investors companies for AYs 2011-12 to 2013-14. The AO did not verify any of these documentary evidences in order to find out the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17.1. The authorities below heavily relied upon the statement of Mr. Suresh Kumar Jain who is stated to be associate of KJS Group of cases whereas the assessee company was distinct from the KJS Group. The statement of Mr. Suresh Kumar Jain recorded u/s 132(4) referred to accommodation entry provided to the KJS Group. The statement of Mr. Suresh Kumar Jain was not recorded during the course of search in the case of the assessee. The statement of Mr. Suresh Kumar Jain have not been confronted to the assessee during the assessment proceedings. He was not produced at assessment stage to allow cross-examination by the assessee. No right to cross-examination have been given to assessee to cross-examine the statement of Mr.Suresh Kumar Jain, therefore, his statement cannot be read any evidence against the assessee. We rely upon the decision of the Hon ble Supreme Court in the case of Kishanchand Chellaram vs CIT 125 ITR 713 (SC) in which it was held that any material collected at the back of the assessee and not confronted and no opportunity given to cross-examine, such material cannot be relied upon against the assessee. It may also noted here that Mr. Suresh Kumar Jain has later on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e drawn if shareholders failed to respond to the notice by AO. The duty of the AO to investigate creditworthiness of shareholders. It was further held in the case of CIT vs Peoples General Hospital Ltd. [2013] 356 ITR 65 (M.P. High Court) that dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or nonexistent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee's contention was that the creditworthiness of the creditor was also established, in this case, the estab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified. 18.2. Hon ble Delhi High Court in the case of CIT vs Winstral Petrochemicals P. Ltd. 330 ITR 603 (Del.) held that dismissing the appeal, that it had not been disputed that the share application money was received by the assesseecompany by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheques, they could not be said to be non-existent, even if they, after submitting the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee. 18.3. It may also be noted here that the AO at the fag end of assessment directed the assessee to produce the investor companies by 19.03.2014. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses, the gist of the findings are that the assessee failed to prove identity and capacity of the subscriber companies to pay share application money or that amount was received as accommodation entries or that when assessee managed to secured documents like income tax return and bank account of the subscribers in such circumstances, the AO was justified in drawing adverse inference against the assessee and that the AO has doubt on the documents produced by the assessee. The facts of these decisions are clearly distinguishable from the facts of the case because in the present case, the assessee has been able to prove identity of the investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, the authorities below should not have made or confirmed the addition of ₹ 5.75 crores in the hands of the assessee. In view of the above discussion, we set aside the orders of the authorities below and delete the addition of ₹ 5.75 crores. This ground of appeal of the assessee is allowed. 19. In view of the above findings, whereby we have deleted the addition on merit, there is no need to consider the issue of initiation of proceedings u/s 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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