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TMI Blog2018 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. Both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus,no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] - decided in favour of assessee. - ITA No. 3335/Del/2017, ITA No. 3336/Del/2017 And ITA No. 3337/Del/2017 - - - Dated:- 17-9-2018 - Sh. N. K. Saini, AM And Sh. Kuldip Singh, JM For The Assessee : Sh. Gautam Jain, Adv. And Sh. Piyush Kumar Kamal, Adv. For The Revenue : Smt. Shefali Swaroop, CIT DR And Sh. S. R. Senapati, Sr. DR ORDER Per N. K. Saini, AM: These three appeals by the assessee are directed against the separate orders each dated 27.03.2017 of ld. CIT(A)-35, New Delhi. 2. Since, the appeals relate to the same assessee, having common issues, were heard together, so, these are being disposed off by this consolidated order for the sake of conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the aforesaid share applicant had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of funds provided by the appellant company. 2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that all the shareholders were corporate entities, duly assessed to tax and, had subscribed to share-capital by account payee cheques and supported by necessary documents and therefore, once all such shareholders were identifiable companies, share capital received could not in law or on fact be brought to tax u/s 68 of the Act. 2.4 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences in the shape of audited financial statement, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2012 requiring the assessee to file the return of its income. In response, the assessee vide letter dated 13.03.2012 submitted that the original return filed by it may be treated to have been filed in this regard. However, the assessee filed objection against the issuance of notice u/s 153A of the Act which was disposed off by the AO vide letter dated 31.12.2013. 6. During the course of assessment proceedings, the AO noticed that during the financial year relevant to the assessment year under consideration, the assessee had raised share capital money to the tune of ₹ 87,00,000/- from the Kolkata/Howrah based companies as per following details: SI. No. Name and address of the Company No. of Shares Nominal value of share (Rs.) Premium paid per share (Rs.) Dated of allotment 1. SPA Stock Securities P. Ltd. 2A, Ganesh Chandra Avenue, 6th floor, R. No. 8E, Kolkata 8,00,000 80,00,000 (Rs. 10 per share) -------------- 07.11.2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee as share capital/share application money receipts. The AO also pointed out that during the course of search proceeding, statement of Sh. Sampat Sharma, Director in some of the companies of the Brahmputra Group was recorded in which he had stated that he had no idea about how this share capital/share application money was received and that he was just a dummy Director in the company and used to do the needful at the instruction of entrusted persons of Brahmaputra Group. The AO vide query No. 27 in the questionnaire dated 31.08.2012 confronted the assessee with the fact that certain documents including blank singed share transfer forms, blank money transfer receipts, blank signed power of attorney etc. were found at the premises No. M-3, N-5, Azadpur Commercial Complex, New Delhi during the course of action u/s 133A of the Act. In response to the above questionnaire, the assessee filed a reply dated 22.02.2013 alongwith confirmations, bank statements, copies of ITRs, balance sheets etc. of the investor companies based at Kolkata and Howrah which were not found to be satisfactory by the AO who observed that the assessee did not produce the companies through their Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces etc. The AO also observed that ADIT(Investigation), Unit-III(3), Kolkata vide his letter F.No. ACIT(Inv.)/Kol./10-11/7879 dated 28.02.2011 had submitted his report on the Investigation made in respect of the companies, list of the same is mentioned by the AO in the assessment order dated 22.03.2013, for the cost of repetition, the same is not reproduced herein. The AO on the basis of the correspondences with those companies and enquiry reports of the Inspectors of the department, the ADIT(Investigation), Unit-III(3), Kolkata, observed that the said companies were mere paper companies and they had no actual business activity. Therefore, the investment made by those companies in the share capital of Brahmaputra Group of cases, appeared to be non-genuine. The AO pointed out that the DDIT(Investigation), Unit-III(3), Kolkata vide his report dated 22.03.2013 stated as under: With reference to the above, it is kindly submitted that as most of the companies were found to be non-existent, therefore, further investigation did not bring any additional result and status of the report remains the same. So, on the basis of investigation done, it can be concluded that these companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to reveal that most of the companies which were shown as contributing to the share capital in Brahmaputra Group of companies including the assessee were paper companies, nonITA existing at the registered addresses. She also reproduced the remand report of the AO in para 4.5.2 of the impugned order which read as under: In Brahmaputra Group of companies wherein it has been stated that these companies are mere paper companies and they have no actual business activities. Further, these companies were not existing at the given address. Even after the search in the case, during post search period further spot verification were carried out by the Investigation Wing and then also it was confirmed that the above mentioned companies are not existing at the given address and others are mainly operational on paper just to provide entries in the form of share capital/share application money and loan/advances. It was further observed that the said companies are neither engaged in any regular business or trade nor have credit worthiness to forward such substantial amount of fund as share application/share capital money which were shown by the assessee company as share, capital/share ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g provided, are neither engaged in any business activity nor have sufficient funds to contribute towards share capital. 14. The ld. CIT(A) also observed that even if one takes into consideration that Sh. Sampat Sharma was a dummy director, then the assessee should have explained as to why he had been kept as a dummy purpose for such a measure and that if Sh. Sharma had the authority to sign documents of the company then how can he be taken only being a dummy director. She concluded that Sh. Sampat Sharma was a dummy only for the purpose of pleading ignorance for the modus operandi of the assessee s affairs and for not revealing the same to the tax authorities and in reality, he was fully aware of the assessee company s style of working and appeared as an important instrument in the network of routing undisclosed income as share capital. 15. The ld. CIT(A) held that the AO had rightly mentioned that merely the fact that transaction was through banking channels or that all the relevant documents had been submitted could not be enough to discharge the onus of the assessee to prove the genuineness of the transaction. The ld. CIT(A) also observed that the transaction came into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.09.2010 on Brahmaputra Group and the notice u/s 153A of the Act was issued to the assessee on 02.02.2012, in response to which, the assessee replied on 13.03.2012 and filed the return of income declaring the same income which was declared in the original return of income. However, the AO made the addition of ₹ 87,00,000/-. It was contended that the assessment framed by the AO u/s 143(3) of the Act was a non-abated assessment and that no incriminating material was found as a result of search. It was further contended that the AO referred in the assessment order at page no. 5, the following documents in support of the impugned addition: i) Page No. 23 of Annexure A-6 (a diary relating to FY 2009-10)-on the back side of this page recording is made in the name of Shri Shyam Trexim Fincom (P) Ltd. against which ₹ 50 lakhs is written; ii) Page No. 1 of Annexure A-7-on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lal Aggarwal dated 31.5.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made; iii) The back side of the above page 1 of Annexure A- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpired much before the initiation of the search proceedings and issuing of the notice u/s 153A of the Act on 02.02.2013. Therefore, the said assessments also attained finality and no addition was called for, those assessment years i.e. 2007-08 2008-09 also, in the absence of any incriminating material found during the course of search. 20. In her rival submissions, the ld. CIT DR reiterated the observations made by the authorities below and strongly supported the impugned order passed by the ld. CIT(A). It was further submitted that for the assessment u/s 153A of the Act, the addition need not be restricted or limited only to incriminating material found during the course of search. The reliance was placed on the judgment of the Hon ble Delhi High Court in the case of Filatex India Ltd. Vs CIT reported at 49 Taxmann.com 465. 21. The reliance was also placed on the following case laws: PCIT Vs Sheetal International Pvt. Ltd. (2017-TIOL- 1355-HC-DEL-IT) PCIT Vs Instronics Ltd. (2017) 82 Taxmann.com 357 (Del.) Ganpati Fincap Services (P.) Ltd. Vs CIT (2017) 82 Taxmann.com 408 (Del.) PCIT Vs Super Malls Pvt. Ltd. 393 ITR 557 (Del.) PCIT Vs M/s Nau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in those cases travelled upto the Tribunal and the identical additions have been deleted by the Tribunal in both the above cases vide orders dated 29.12.2017 and 23.04.2018. It was next contended on behalf of the assessee that none of the documents/papers pointed out by the Assessing Officer in the assessment order belong to the assessee and therefore, the notice issued u/s. 153C itself is invalid. Reliance is placed on the following decisions: ( i). Pr. CIT vs. Vinita Chaurasia, 394 ITR 758 (Del.) ( ii). CIT vs. Arpit Land (P) Ltd., 393 ITR 276 (Bom) ( iii). Canyon Financial Services Ltd. vs. ITO, 399 ITR 202 (Del) ( iv). CIT vs. Renu Construction (P) Ltd., 399 ITR 262 (Del.) ( v). Pepsi Foods Pvt. Ltd. vs. ITO, 367 ITR 112 (Del), SLP dismissed by Supreme Court in Appeal No. 4659/2015 dated 04.12.2017 ( vi). M/s. Pepsico India Holding Pvt. Ltd. vs. ACIT, 370 ITR 295 (Del) ( vii). CIT vs. Lavanya Land (P) Ltd., 397 ITR 246 (Bom) 4. It was next contended that none of the documents referred to by the Assessing Officer are the material, much less incriminating material, to denote any income or share capital and share premium a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to make addition of ₹ 10,00,000/- u/s. 68 of the Act. We find considerable substance in the contention of the assessee that the above documents neither go to suggest any undisclosed income of the assessee nor any nexus with the share capital declared by the assessee. In fact, the Assessing Officer has derived inferences/presumptions on the basis of above papers found in the search without proving them as belonging to the assessee or their nature being incriminating to the assessee. Therefore, the assessment order confirmed by the ld. CIT(A) is not found fit to support, having been passed without proving the primary ingredients of section 153C of the Act. It is worthwhile to note that the very same papers, as listed above, were also taken against the other group companies, i.e., Brahmaputra Finlease (P) Ltd. and M/s. Brahmaputra Realtors (P) Ltd. for the assessment year 2007-08 and similar additions were made in those cases also based on the same search and same papers. However, the ITAT Delhi Bench in the case of Brahmaputa Finlease (P) Ltd. (ITA No. 3332/Del./2017) vide order dated 29.12.2017 has examined the same documents and deleted the addition by quashed the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the Brahmaputra Group and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely M/s Brahmaputra Infrastructure Ltd in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 406/Del./2017) where vide order dated 23.04.2018, the addition made on account of unexplained share capital stood deleted in the identical facts and circumstances of the case. Therefore, respectfully following the above decisions of coordinate bench and there being no contrary material on record and further relying on the decision of Hon ble Delhi High Court in the case of Kabul Chawla and plethora of other decisions relied by the assessee, we find no justification to sustain the impugned order and the addition made against the assessee. Accordingly, the appeal of the assessee deserves to be allowed, being full of merits. 24. Similarly, in the case of M/s Brahmaputra Realtors (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3406/Del/2017 for the assessment year 2007-08, the relevant findings have been given in paras 3 to 9 of the order dated 23.04.2018which read as under: 3. It is the submission of the learned AR that though the learned AO made Annexures A-6, A-7 and A-10 as the basis for making the addition, he failed to substantiate how these documents are incriminating the assessee so as to make the addition in their hands. Nowhere learned AO brought o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommodation entries. On a careful perusal of the description of the documents given in this matter with the documents relied upon in the case of Brahmputras Finlease Co. (supra), we find that they are identical as demonstrated below: Reference to documents in the case of M/s Brahmputra Finlease P. Ltd. ITA No.3332/Del/2017 Reference to documents in the case M/s Brahmputra Realtors P. Ltd. ITA No.3406/Del/2017 Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5 i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009- 10)- on the back side\ of this page recording is made in the name of Shri Shyam Trexim Fincom P. Ltd. against which ₹ 50 lakhs is written. ii. Page No. 1 of Annexure A-7 - on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made ITA No. 3332/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into ₹ 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted / undisclosed income in the guise of share capital/share application money. 7. On considering the above documents vide para 4.11, a coordinate bench of this Tribunal considered the relevance of these documents to the companies of Brahmputra group and also the incriminatory nature of these documents inasmuch as the names of Shri Shyam Trexim and Fincom P. Ltd., Shri Murari Lal Aggarwal, Shri Sarat Aggar5wal, and Shri A. Singhal are mentioned in these documents and nothing incriminating the assessee could be inferred from these documents. Relevant observations of the Tribunal are as follows: 4.11 We find that the Item No. (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... frastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. 9. On a consideration of the entire material in the light of the law laid down in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the coordinate Bench of this tribunal concluded that, - 4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed. 25. A similar view has been taken by the ITAT Delhi Bench A , New Delhi in the case of M/s Brahmaputra Finlease (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3332/Del/2017 for the assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. ( emphasis supplied externally) 4.7.1 In view of the legal position summarized above, the Hon ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, theb in absence of incriminating material, no addition could have been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we reject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act. 4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under: Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions in respect of the amounts mentioned in the document has been made in the case of another company namely M/s Brahmaputra Infrastructure Ltd in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected. 4.12 The next argument of the Ld. CIT(DR) is that the statement recorded under section 132(4) of the Act of Sri Sampat Shrama is incriminating material found during the course of search. We have observed that said statement of Sh. Sampat Sharma was recorded at his residential premises during search proceeding carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The Hon ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under: 38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the assessee were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned, we agree with the argument of the Ld. counsel that in said case certain other materials like loose papers and vouchers were found which corroborated the statement and in those circumstances it was held that it could not be said that addition was based on no evidence. The relevant finding of the Hon ble Supreme Court is reproduced as under: 3. In the second round, the assessment order dated March 29, 2000, gave detailed reasons for arriving at the conclusion that the figures stated in the statement recorded were corroborated, in particular, by various loose sheets found at the premises of the assessee as well as vouchers, some of which related to the two films in question. In an appeal filed to the Tribunal, the Tribunal framed three issues, two of which were unnecessary for the reason that the statement recorded on August 25, 1995, was said to be relevant but not conclusive. Therefore, whether the statement was made under duress and whether it was retracted lawfully would have no relevance at this stage. However, the Tribunal went into these issues as well and ultimately, found that the statement could be used as evidence. Further, it examined other corroborat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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