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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 ..... o.2525/Del/2015 as under:- ITA No.2525/Del/2015 (PRABHATAM INVESTMENT PVT.LTD.) 4. In the present appeal, the assessee challenged the order of Ld. CIT(A) in upholding the initiation of proceedings u/s 153A of the I.T.Act, 1961 (in short "Act") and framing of assessment u/s 153A/143(3) since no incriminating material was found as a result of search conducted in the case of the assessee and has also challenged the upholding of the addition of Rs. 5.75 crores on account of unexplained share application money. 5. Briefly the facts of the case are that the original return was filed on 30.03.2012 declaring loss at Rs. 3,54,378/-. Action u/s 132 of the Act was carried out by the department on 19.03.2012 in Prabhatam Group of cases at their business and residential premises of the Directors. During the course of search various books of accounts and documents etc. were found and seized. Notice u/s 153A of the Act was issued on 08.05.2013 and the assessee in response filed letter stating that it had already filed return of income u/s 139(1) of the Act and same may be treated as filed in response to notice u/s 153A of the Act. The AO issued questionnaire time to time and asked the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that search action was also conducted at the residence of Mr. Suresh Kumar Jain, Kolkata and during his search action, his statement was recorded on oath wherein he categorically admitted that he had provided accommodation entries to KJS Group through the above said three Kolkata companies. The modus operandi of receiving cash through Mr. Amit Goyal and in turn issuance of cheques/RTGS to various entities of KJS Group and their affiliates/joint venture partners in the form of share capital and loans etc. He has agreed that accommodation entries were provided by him to KJS Group during the F.Ys. 2010-11 & 2011-12. The relevant extract of statement of Mr. Suresh Kumar Jain is reproduced in the assessment order in which he has explained that he is related to KJS Group of companies and the Directors of the lender and the other companies and how the transaction had taken place have been explained. He has explained that all the accommodation entries were provided to KJS Group of companies through Mr.Amit Goyal through cheques/RTGS. The AO noted that these three companies including M/s Puneet Oils & Chemicals Pvt. Ltd. & M/s Tanish Tale Tradecom Pvt. Ltd. are the paper companies which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of N.R. Portfolio Pvt. Ltd. and noted that the investor had no income at all to make investment in assessee company. The assessee failed to produce the main Director of these companies. Therefore, the amount of Rs. 5.75 crores was treated as unexplained cash credit in the books of accounts of the assessee and addition was made u/s 68 of the Act. 10. The assessee challenged the addition before the Ld.CIT(A). The assessee produced copies of the assessment orders u/s 143(3) in the cases of both the share applicant companies M/s Puneet Oil & Chemicals Pvt.Ltd. and M/s Tanish Tale Tradecon Pvt. Ltd. for A.Y. 2012-13 with copies of acknowledgement of their income for A.Ys. 2011-12, 2012-13 & 2013-14. It was also submitted that no incriminating material was found during the course of search and no assessment was pending, therefore, it did not abate and as such the addition is wholly unjustified. The Ld. CIT(A) however, noted that during the course of search, Number of incriminating materials and unaccounted income were found which have been admitted in statements u/s 132(4) of the Act, therefore, legal ground was dismissed. 11. The assessee on merit submitted that the assessee filed su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s below. He has submitted that no incriminating material was found during the course of search that the assessee received accommodation entries on account of share application, therefore, assessment u/s 153A of the Act is bad in law. No addition is based on any material found during the course of search. The addition is made on the account of share application money received which is recorded in the books of accounts of the assessee, therefore, assessment u/s 153A is illegal and unjustified. No assessment proceedings were pending before search. He has relied upon the decision of Delhi High Court in the case of CIT vs Kabul Chawla (Del) 380 ITR 573. He has further submitted that the assessee produced sufficient evidences before the AO to prove identity of the investor, their creditworthiness and genuineness of the transaction in the matter. The investors had admitted to make investment in the assessee company in the shape of share application money. The assessee filed complete details to show net worth of the lender company with their source to prove their creditworthiness. The copies of their assessment orders u/s 143(3) have also been filed to show that they are assessed by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable." (iii) Decision of Delhi High Court in the case of CIT vs Wellwoth Construction Udyog Ltd. [2015] 92 CCH 0081 in which it was held "Once the initial onus is discharged, the Revenue is not absolved of its duty to collect further material which should assist it in coming to the correct conclusion." (iv) Decision of Delhi High Court in the case of Principal CIT vs M/s Goodview Trading Pvt.Ltd. in ITA No.377/2016 dated 21.11.2016 in which the CIT(A) noticed the details of share applicants such as their income tax returns as well as net worth available on the file of assessment record and CIT(A) deleted the addition by holding share applicants had sufficient net worth and finance to invest in assessee. Hon'ble High Court dismiss the appeal of the Revenue by following judgement in the case of CIT vs Lovely Exports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Resources Pvt.Ltd. in ITA No.169 of 2017 dated 14.03.2017 in which the CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon'ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon'ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed. 16. The Ld. Counsel for the assessee also relied upon the decision of the Hon'ble Supreme Court in the case of Earthmetal Electrical Pvt.Ltd. vs CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies as well as assessed to income tax. No material is produced on record that during course of search in the case of the assessee or other parties as referred to above, any material was found to prove that the assessee received any accommodation entries from these investors companies. Therefore, the AO did not object to the material evidence furnished and did not undertake any verification. The AO also failed to conduct any scrutiny of the documents and merely relied upon the statement of Mr. Suresh Kumar Jain and others for the purpose of making the addition. The decision of Hon'ble Delhi High Court in the case of Pr.CIT vs Laxman Industrial Resources Ltd. (supra) clearly apply to the facts of the case of the assessee that the assessee received genuine share application money from both the investor companies. The assessee on the basis of these documentary evidences have been able to establish that both the shareholders are genuine parties and they are not bogus and fictitious. The decision of the Hon'ble Supreme Court in the case of M/s. Earthmetal Electrical P.Ltd. (supra) clearly support the case of the assessee. It may also be noted that the facts considered in this case by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any was also recorded in which he has confirmed that KJS Group of companies made investment in assessee company as reflected in the books of accounts but no share certificates have been issued because it was mutually agreed that investment made by them shall be refunded by paying minimum 24% p.a. of such investment. The authorities below did not make the above addition on the basis of statement of Sh. Dinesh Gupta. The authorities below however, inferred from these statements that accommodation entries would have been received by the assessee company despite Sh.Dinesh Gupta and Sh.K.J.Ahluwalia confirmed the genuineness of the transaction in the matter. As noted above, the statement of Sh.K.J.Ahluwalia cannot be read in evidence against the assessee. Therefore, there was no other material available on record to prove that the investors have no creditworthiness or they have not genuinely made investment in assessee company. 18. The AO doubted the genuineness of the transaction because notice u/s 133(6) could not be served upon the investors and that the assessee was directed to produce both the parties by 19.03.2014. The Ld. Counsel for the assessee however, referred to Paper Book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of Rs. 71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isting parties. As noted above, the KJS Group of cases and Mr. Suresh Kumar Jain were subjected to search, therefore, the investor companies were existing companies. They are also assessed to tax u/s 143(3). Copies of the assessment orders in their cases are filed on record. They have also net worth to make investment in assessee company, therefore, low income earned by investors company by itself is no ground to treat the share application money received by the assessee as not genuine. The decision of the Delhi High Court in the case of CIT vs Vrindawan Farms Pvt.Ltd. (supra) squarely apply to the facts of the case. The authorities below, therefore, should not have drawn adverse inference against the assessee. The authorities below have also did not produce any material on record that such investments made in the assessee company was made from coffers of the assessee. We rely upon the decision of the Delhi High Court in the case of CIT vs Value Capital Services P.Ltd. [2008] 307 ITR 334 (Delhi High Court) in which it was held that "dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to CIT(A) in the impugned order to show various documents were found during the course of search in the case of the assessee. Therefore, it is not a case where no incriminating material found during the course of search. May be, this may not be relevant to the ultimate addition made on account of unexplained share application money received of Rs. 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. Similarly, in the remaining cases i.e. ITA No.2523/Del/2015, the original return was filed on 23.09.2011 and in ITA No.2524/Del/2015 the original return was filed on 30.09.2011. In these cases, even if the return was filed prior to search but no assessment was completed and no material have been provided by the assessee to prove that the assessments were completed in their cases prior to the search. In these cases also, material was recovered during the course of search. Therefore, the decision in the case of CIT vs Kabul Chawla (supra) would not apply to the facts of ..... 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