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TMI Blog2017 (11) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the above discussion, we are of the view that initiation of proceeding under section 153C of the I.T. Act against the assessee-company is bad in law and is liable to be quashed. We, accordingly, set aside the orders of the authorities below and quash the initiation of proceedings under section 153C of the I.T. Act. Appeal of the assessee-company is allowed. - ITA. No. 2159/Del./2014 - - - Dated:- 31-10-2017 - Shri Bhavnesh Saini, Judicial Member And Shri L. P. Sahu, Accountant Member For the Assessee : Shri Ashwanikumar, C.A. Shri Adityakumar, C.A. For the Revenue : Smt.Shafali Swaroop, CIT-DR Ms. Renu Amitabh, CIT-DR ORDER Per Bhavnesh Saini, J. M. This appeal by assessee-company has been directed against the order of the Ld. CIT(A)-XII, New Delhi, dated 20th January, 2014 for the A.Y. 2007-2008. Earlier, this appeal was dismissed for default. However, the miscellaneous application filed by assessee-company was allowed. Accordingly, the earlier order was recalled and appeal was re-fixed for hearing on merits. 2. We have heard the Learned Representatives of both the parties and perused the material on record. 3. The assessee-company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted in the assessment order which includes the assessee-company as well. 4.2. The A.O. observed that the funds have been infused in these key companies in the form of share capital/share premium/ share application money/loans and advances against the properties or projects etc., from various paper companies which are controlled by Gambhir brothers through their trusted peoples/employees. These companies floated by Today Group of Cases or Gambhir brothers inturn received accommodation entries from various entry operations in lieu of cash given to them through the mediators and this is nothing but unaccounted income of the Today Group. The A.O. noted how the Today group was operating for providing the cash/unaccounted money. As per the evidence gathered during the course of investigation, the amount have been found to be transferred from various concerns of V.K. Jain and S.K. Jain (Jain Brothers) who are entry operators. The details of the amount received by the paper companies of Today group are noted in the assessment order. The A.O. on perusal of the record found that assessee-company is group concern of M/s. Today Homes and Infrastructure Pvt. Ltd., and during assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um/unsecured loans etc., in lieu of the commission etc., which are controlled by dummy persons and operated from the same address. The Jain brothers have provided accommodation entries to various persons of Today group. The summary of modus operandi of Jain brothers to provide entry to Today group is also mentioned in the assessment order. The A.O. therefore, observed that Today group received accommodation entries from Jain brothers in lieu of the consideration through mediator Mr. Chawla and ultimately, it was found that assessee-company has received ₹ 3.18 crores from M/s. Double Star Builders Pvt. Ltd., which is the group concern of M/s. Today group. The details of various documents/books of account seized during the course of search and seizure action at the residential and business premises of the Jain brothers showed the receipt of cash and providing accommodation entries to M/s. Double Star Builders Pvt. Ltd., which is an entry level company of Today Group and M/s. Double Star Builders Pvt. Ltd., later on gave loans/advances to the assessee-company through banking channel. 4.3. The A.O. in view of the above facts, issued show cause notices to the assessee-company a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee-company has already submitted copy of PAN, confirmations, bank statement of the creditor etc. in respect of the credit entries received in the books of account and claimed to have discharged its onus as per the provisions of Section 68 of the I.T. Act. The A.O. however, noted that the other evidences available on record do not support the explanation of the assessee-company. The A.O. noted that merely because amount in question have been returned is immaterial because it would not absolve the assessee-company of its responsibility of discharging its onus within the meaning of Section 68 of the I.T. Act. The A.O. also noted that the department is entitled to lift the corporate veil to bring out the real nature of series of transactions routed through different entities controlled by same set of people. The A.O. by referring to judicial pronouncements held that the transactions should stand the trust of human probability. The A.O. ultimately held that a sum of ₹ 3.18 crores has been found credited in the books of account of the assessee-company. The immediate source of this amount has been found to be from M/s. Double Star Builders Pvt. Ltd., Thereafter, the sum have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.3. The Assessing Officer has, in the order of assessment, stated that the notice u/s 153C/153A was issued after recording the necessary satisfaction for initiation of the proceedings u/s 153C of the Act. In view of this, the ground raised against recording of satisfaction does not stand. Ground raised in appeal is dismissed. 3. Ground No.5 : 3.1 I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant. 3.2 The appellant has raised ground against treating the amount of ₹ 3,18,00,000/- as accommodation entry. The appellant has vehemently contended against treating the amount as appellant's own money, earned through unaccounted transactions routed through a series of transactions. The appellant has raised ground stating that there is no evidence to support such appellant allegation. 3.3 The Assessing Officer has held that the amount of ₹ 3,18,00,000/- credited in the books of accounts of the assessee fails to pass the test of genuineness within the meaning of section 68 of the Act, hence the same is income of the assessee u/s 68 of the Act. 3.4 The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount of ₹ 3,18,00,000/- as assessee's income from undisclosed sources u/s 68 of the I.T. Act. The case laws relied upon by the appellant are distinguishable on facts. The same is upheld in appeal. Ground raised in appeal is dismissed. 4. Ground No. 6 : 4.1. I have considered the grounds raised in appeal and the facts of the case. I have also considered the submission filed by the AR of the appellant. 4.2. The appellant has raised ground against set off and carry forward of brought forward business loss and unabsorbed depreciation against the income of the current year. 4.3. Assessing Officer has stated in the order of assessment that the return of income filed in response to the notice u/s 153C/153A, was filed well after the time allowed u/s 153A/153C r.w.s. 139(1) of the Act. 4.4. Section 139(3) requires the filing of return within the time stipulated as per section 139(1) of the Act if any loss is sustained and is intended to be carried forward under sub section (1) of section 72. In the instant case, as per the provisions of section 153A/153B r.w.s. 139(1) of the Act, the appellant was required to file its return of income within 15 days of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material/documents were found during the course of search against the assessee-company and it is not proved that any incriminating material belong to the assessee- company, therefore, conditions of Section 153C of the I.T. Act are not satisfied in this case. He has submitted that additional ground is legal in nature and can be decided on the basis of the material already brought on record and therefore, the same may be admitted for hearing and disposal of the appeal. 9. On the other hand, Ld. D.R. relied upon the orders of the authorities below and objected to the admission of the additional ground at this stage. The Ld. D.R. contended that A.O. has already mentioned seized material found during the course of search which is sufficient to initiate the proceedings under section 153C of the I.T. Act against the assessee- company. The A.O. has also mentioned specifically that during the course of search of Today group of cases, many books of account or documents belonging to the assessee-company were found. Therefore, the A.O. was satisfied to initiate the proceedings under section 153C of the I.T. Act against the assessee-company. The Ld. D.R. therefore, submitted that additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri reported at (2003) 264 ITR 254 (Gauhati.) in which it has been held as under : Under section 68 of Income Tax Act creditor s creditworthiness has to be judged vis- -vis transactions, which have taken place between assessee and creditor, and it is not business of assessee to find out source of money of his creditor or genuineness of transactions, which took place between creditor and sub-creditor and/or creditworthiness of sub-creditors for these aspects may not be within special knowledge of assessee. 10.4. Decision of Hon ble Gujrat High Court in the case of DCIT vs. Rohini Builders (2002) 256 ITR 360 (Gujrat) in which it was held as under : Assessee had discharged initial onus by providing identity of the creditors by giving their complete address, GIR numbers/permanent account numbers and copies of assessment orders wherever readily available. Assessee had also proved capacity of creditors by showing that amounts were received by account payee cheques drawn from bank accounts of creditors. Repayment of loans and interest thereon was also made by account payee cheques by assessee and tax also had been deducted at source on interest payments and remitted. 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Empire Builtech (P.) Ltd., 366 ITR 110 (7) CIT vs. MAF Academy (P) Ltd., 361 ITR 258 (8) CIT vs. Focus Exports (P.) Ltd., 228 Taxman 88 (9) N.K. Proteins Ltd., vs. CIT 2017-TIOL-23-SC-IT (10) N.K. Proteins Ltd., vs. CIT 2016-TIOL-3165-HC-AHM-IT. 12. We have considered the rival contentions. The department has set-up a case against the assessee-company on the basis of search conducted in the case of Today group of cases on 26.11.2009 which was finally concluded on 25th January, 2010. It is mentioned by the A.O. that this Group is controlled by Gambhir brothers. The assessee-company is stated to be the Group concern of Today Group of cases. It is also mentioned in the assessment order that Today group is in real estate and hospitality business activities in NCR and other parts of the Country and made huge investments in hotel projects etc. These funds are invested in the Group Companies controlled by Gambhir Brothers. The Jain Brothers invested in Today Group of cases who have also made other investments in other concerns including the creditor M/s. Double Star Builder Pvt. Ltd. In this connection, it is relevant to reproduce the provisions of Section 153C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of such other person of such assessment year in the manner provided in section 153A.] 12.1. It is clear from the language of Section 153C of the I.T. Act that before issuing notice under section 153C of the I.T. Act, the primary condition that has to be fulfilled is that the money, bullion, documents etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken under section 153C of the I.T. Act. 12.2. In the present case, it is an admitted fact that since no search was conducted in the case of the assessee-company and the A.O. proceeded to make assessment under section 153C of the I.T. Act against the assessee-company and made the addition on the basis of the entries contained in the books of account of the assessee-company found during the course of search, it would have to be seen whether Revenue has brought on record any material to prove that any incriminating material found during the course of search belongs to the assessee- company or that whether A.O. is able to satisfy the conditions of Section 153C of the I.T. Act, in the present case. The additional ground is legal in nature and all the relevant facts and ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... light of above decisions, it is clear that additional ground being legal in nature and all material facts are available on record and it being the jurisdictional issue, we admit the additional ground for the purpose of hearing and disposal of appeal. 12.4. The Hon ble Gujrat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2011) 333 ITR 436 (Guj.) held as under : Sections 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom D's residence and ₹ 4 crores in addition, which was evidenced by loose documents in the form of cash receipts, were found during search and seizure proceedings. The assessee was called upon to explain and show cause why these amounts should not be treated as unexplained expenditure under section 69C of the Act, since the assessee did not provide any explanation with regard to the documents seized under section 132 of the Act for the assessment years from 2003 to 2009 and 2009-10. The assessment order was passed and the additions were made. The unexplained expenditure was apportioned to all the land companies floated by the JC- group. The Tribunal held that an entry in the hooks of account maintained in the regular course of business is relevant for the purpose of considering the nature and impact of a transaction, but notings on slips of paper or loose sheets of paper were required to be supported or corroborated by other evidence. There was a distinction between loose papers found from the possession of the assessee and similar documents found from a third person. The documents were not found from the possession of the assessee but from the possession of a third pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or books of account or documents seized or requisitioned belongs to or belong to a person other than the person referred to in section 153A. No material is produced before to show if any satisfaction was recorded by the Assessing Officer in that case that the material belongs to any person other than the person with respect to whom search was made under section 132. Department did not produce any material to show if any such satisfaction as required under section 153C was recorded by the Assessing Officer in the case of person searched. No material is produced in reference to above requirement. No material is also produced before to show that books of account or documents or assets seized had been handed over to the Assessing Officer having jurisdiction over such other person. In the absence of any adequate material produced by the department contention of the assessee was justified that in this case, the Assessing Officer had not recorded any satisfaction that any seized document or material belongs to any person other person searched. Since the revenue is in appeal, therefore, burden was upon them to prove that necessary ingredients of section 153C have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany to take any loan or credits or it actually emanated from the coffers of the assessee-company. In support of this proposition, we rely upon the decision of the Hon ble Delhi High Court in the case of CIT vs. Value Capital Shares Pvt. Ltd., 307 ITR 334. 12.9. In this case, the A.O. made addition for failure to explain source of the source i.e., the source of creditor M/s. Double Star Builders Pvt. Ltd., who allegedly took entry from Jain Brothers through Today Group of cases which is not permissible in Law. The Hon ble Delhi High Court in the case of CIT vs. Dwaradhish Investment (P.) Ltd., (2011) 330 ITR 298 (Del.) and Hon ble Allahabad High Court in the case of Zafa Ahmed Co. vs. CIT 30 Taxmann.com 269 held that assessee need not to prove the source of the source. Thus, the condition precedent for issuing notice under section 153C and assessing or re-assessing the income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such other person has not been satisfied. If the requirement is not satisfied, recourse cannot be had to the provisions of Section 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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