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TMI Blog2019 (2) TMI 1433X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant companies could not be found at the given addresses, was confronted to the assessee. The issue of share premium raised by the revenue in the assessment order to doubt the genuineness of share capital raised also cannot be held against the assessee as the assessee was never required to explain or justify this matter. No evidence was found in the search to establish that the share capital raised was not genuine. Unaccounted commission paid on the accommodation entry of share application - HELD THAT:- We note that there is no evidence to support the allegation of the revenue that commission was paid to raise share capital. The addition was without any basis, hence, Ld. CIT(A) has rightly deleted the addition on this ground. Even otherwise, we uphold the action of the Ld. CIT(A) on the deletion of addition of share capital u/s. 68. Disallowance of expense of forfeited advance for purchase of land - HELD THAT:- Real estate developers usually buy land stock from farmers at agreed rates. Cash advances are given to the prospective seller landowners to book the properties. Sometimes, dispute arise between farmers and developers as to the terms of the sale. In such circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which does not need any interference on our part, therefore, we uphold the action of the CIT(A) on the issue in dispute. Addition on account of difference between income being admitted by the assessee in his statement recorded at the time of search u/s. 132(4) and the income disclosed in the return - HELD THAT:- We note that the AO has himself accepted that the undisclosed income based on transactions recorded in seized documents came to ₹ 9,34,79,821/-. Thus, the question of any further addition with regard to the undisclosed income as per the seized documents does not arise. Hence, the addition made cannot be legally sustained and therefore, was rightly deleted by the CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground raised by the Revenue. Addition on account of unexplained sources - HELD THAT:- CIT(A) has rightly held that the addition made by the AO based on mere statement of the director of the assessee company is not backed by any evidence and the unaccounted income detected during search has already been offered to tax. Hence, he rightly held that the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) has erred in law and on facts of the case in deleting the addition of ₹ 73,06,000/- made on account of income from unexplained sources. 5) The CIT(A) has erred in law and on facts of the case in deleting the addition amount of ₹ 1,02,32,074/- made on account of income from unaccounted manufacture and sale of katha. 6) The CIT(A) has erred in law and on facts of the case in deleting the addition of ₹ 1,22,77,495/- made being the difference between income admitted by the assessee in his statement recorded at the time of search u/s. 132(4) and the income disclosed in the return. 7) (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The assessee craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. ITA NO. 4875/DEL/2014 (AY 2010-11) 1) The CIT(A) has erred in law and on facts of the case in deleting the amount of ₹ 70,00,000/- made on account of unexplained cash credit without examining and adjudicating upon on merits of the case. 2) The CIT(A) has erred in law and on facts of the case in deleting the amount of ₹ 18,87,931/- m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, she submitted that the addition in dispute was rightly made by the AO. In support of her contention, she stated that the following decisions may kindly be considered with regard to addition u/s. 68 of the I.T. Act and filed the copies thereof:- 1. Navodava Castle Pvt Ltd Vs CIT (2015-TIQL-314-SCIT) where Hon ble Supreme Court held that merely because the assessee has been able to show that the shareholder companies were duly incorporated and their identity genuineness stands established, there were deposits of cash in the bank accounts prior to issue of cheque or pay orders, the same would raise suspicion and addition can be made on such account 2. CIT Vs Navodava Castle Pvt Ltd T20141 367 ITR 306 (Del) where Hon ble Delhi High Court accepted that since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders as well as genuineness of the transactions. 3. CIT Vs MAF Academy (P.) Ltd (361 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 68. 9 CIT Vs Frostair (P.) Ltd (26 taxmann.com 11, 210 Taxman 221) where Hon ble Delhi High Court held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper 10 CIT Vs N R Portfolio Pvt Ltd f2013l 29 taxmann.com 291 (Delhi)[2013] 214 Taxman 408 (Delhi)/r2013l 263 CTR 456 (Delhi) where Hon ble Delhi High Court held that if AO doubts the documents produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. 11 CIT Vs Empire Builtech (P.) Ltd (366 ITR110) 12. where Hon ble Delhi High Court held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. 13. CIT Vs Focus Exports (P.) Ltd (51 taxmann.com 46 (Delhi)/2015/ 228 Taxman 88) where Hon ble Delhi High Court held that where in respect of share application money, assessee failed to provide complete address and PAN of certain share applicants whereas in case of some of share applicants, there were transactions of deposits and immediate withdrawals of money from bank, impugned addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegation of AO that inspector report was obtained during assessment proceedings showing that the parties did not exist. In the rejoinder, para 1.5.4 at page 22 of Ld. CIT(A) order, it was mentioned that the share applicant companies are actually working companies as evident from latest communication made by the Income Tax Department at the given address and MCA Master data. The AO failed to provide the inspector report even during the remand proceedings and fact remain uncontroverted about un-confrontation of the inspector report during assessment proceedings/remand proceedings. He further submitted that for failure to confront the inspector report, the Hon ble Rajasthan High Court in the case of Pr CIT vs Dhanlaxmi Equipments P Ltd in ITA No.189/2016 Dt: 23.10.2017 (PB 126-127) confirmed the finding of the ITAT that such a failure cannot be ground for rejecting the identity and existence of the share applicant companies and when there are ample evidences showing communication by the department with those companies. Without prejudice to above, it was submitted that the assessee has suffered due to causal handling of judicial matter like assessment. The post search assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s APT Properties Pvt Ltd On 13.08.2013, notice was served by AO, Coy Ward 2(1) (PB 86). Return for AY 2012-13 filed on 31.03.2013. (PB 89). 2. M/s Kay Buildwell Pvt Ltd Summon u/s 131 was served on 18.02.2013 by Dy CIT-14(1), New Delhi. (PB 103). Return for AY 2011-12 filed on 30.03.2012. (PB 106). 3. Multitech SemiConductorsPLtd. Summon u/s 131 was served on 18.02.2013 by Dy CIT-14(1), New Delhi. (PB 124). Return for AY 2012-13 filed on 31.03.2013. (PB 121). 4. Shweta Mehandi Products P Ltd Summon u/s 131 was served on 18.02.2013 by Dy CIT-14(1), New Delhi. (PB 151) Return for AY 2010- 11 filed on 26.09.2010. (PB 153). 5. M.s Skylink Softwares P Ltd Summon u/s 131 was served on 18.02.2013 by Dy CIT-14(1), New Delhi. (PB 167) Return for AY 2012- 13 filed on 31.03.2013. (PB 170). 4.1.2 It was further submitted that Ld. CIT(A) held that on basis of these material there cannot be dispute about the identity of these parties and there is no reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be taken as unexplained income in the hands of the recipient assessee. The above view was followed in plethora of judgments some of them are mentioned below: (1) Sofia Finance Ltd (205 ITR 98) (Del) (FB) (2) CIT vs Steller Investment Ltd (192 ITR 287) (Del) upheld in CIT vs Steller Investment Ltd (251 ITR 263) (SC) (3) CIT VS Vrindavan Farms (P) Ltd ITA No. 71 to 72 84/2015 (Del) dated 12.08.2015 (PB 1-2) (4) CIT vs Fair Invest P Ltd ITA No.232/2012 Dt:22.11.2012 (Del) (PB 75-78); (5) Pr. CIT vs. Goodview Trading Pvt. Ltd. ITA No.377 of 2016 (Del) dated 21.11.2016 (PB 93-95) (6) Pr. CIT vs Green Valley Plywood Ltd ITA 358/2016 Dt: 01.06.2016 (Del) (PB 22-23) (7) CIT vs Divine Leasing Finance Ltd. 299 ITR 268 (Del) (8) Achal Investment Ltd vs CIT (268 ITR 211) (Del) (9) CIT vs Dolphin Canpack Ltd (204 CTR 50) (Del) (10) CIT vs Glocom Impex (P) Ltd. (205 CTR 571) (Del) (11) CIT vs Gangaur Investment Ltd. (335 ITR 359) (Del) (12) CIT vs Dwarkadhish Investment (P)Ltd. (330 ITR 298) (Del). (13) CIT v. Winstral Petrochemicals Pvt Ltd [(2011) 330 ITR 603 (Del) (PB 123-125); (14) CITv. Value Capital Services (P) Ltd [(2008) 307 ITR 334 (Del.). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO vs Shreedham Construction P Ltd in ITA No. 3754- 3756/Mum/2017 Dt: 14.11.2017 (PB 41 -60) 4.1.8 It was further submitted that Ld. CIT(A) has taken objection to the premium of ₹ 900 per share on the face value of ₹ 100 per share charged by the assessee company considering the lack of proven track record. The identical issue came for consideration before Hon'ble Delhi High Court in the case Pr. CIT vs A.R. Leasing Pvt Ltd in ITA No.361/2017 Dated: 03.07.2017 wherein it was held that if the AO disregards the documents furnished by the assessee to discharge onus u/s 68 and comes to the conclusion that transaction of receiving money as share capital was not a genuine one primarily because the premium charged by the Assessee was much higher than the prevalent market trend, the action of the is not tenable unless AO had brought on record some material to show that confirmation and other evidence placed by the Assessee was not genuine, he could not have simply discarded the documents produced by the Assessee. The share premium of ₹ 900 per share in the present case cannot be reasoned for showing the receipt as unexplained cash credit. Since the provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scapable conclusion that can be reached is that the assessment was completed in a hurried manner, and therefore the defence of the assessee that it was not provided adequate opportunity appears correct. Further, we do not find from the record that the assessee was ever confronted with the Inspector s report based on which the adverse view was finally taken by the revenue. The revenue has also not commented on the replies received by post. Principles of natural justice are applicable to tax proceedings and, therefore, non-supply of the Inspector s report and failure to comment on the replies received from the parties adversely affected the right of the assessee to be heard. In these circumstances, the assessee cannot be prevented from adducing evidence in its favour. The revenue has also not rebutted or assailed the evidence filed. Therefore, Ld. CIT(A) has rightly admitted the additional evidences produced by the assessee under Rule 46A of the IT Rules. We further note from the evidence filed that the share applications were received through banking channel. All share applicant companies are duly assessed to tax and are existing companies with annual returns filed under the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted commission paid on the accommodation entry of share application is concerned, Ld. CIT(DR) has relied upon the order of the AO on this issue and stated that the AO has treated the share application money as a accommodation entries. She further submitted that AO calculated the commission of ₹ 75,000/- @ 0.5% on share application money of ₹ 1,50,00,000/-. 6.1 However, Ld. Counsel for the assessee has relied upon the order of the Ld. CIT(A) and stated that AO has not bring any material or evidence on record which basis above addition of ₹ 75,000/- was made and the AO has referred general practice of accommodation entry providers in para 7 of the assessment order. He further submitted that no live link found in support of such general practice with the assessee. It was further submitted that no material or evidence was found during course of search u/s 132 of the Act to support allegation of any commission was paid to accommodation entry providers. The addition of ₹ 75,000/- was made by calculating commission @0.5% which was based on presumption and without any basis. The above share application money of ₹ 1,50,00,000/- and the share applicant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led and has been treated as ex- gratia payments no allowed u/s 37(1) as not incurred wholly and exclusively for the purpose of business. Despite that detail has been submitted at the fag end of the proceedings and therefore there was no time available for making inquiries. Hence, the AO has rightly made the addition which needs to be upheld. 7.1 However, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and stated that the additional evidences were submitted before Ld. CIT(A) which consist of agreements with the five parties which could not be submitted before the AO during assessment proceedings. For admission of additional evidences, application under rule 46A were filed before Ld. CIT(A) and in rule 46A Application, the assessee explained the reason why the additional evidence could not be submitted during assessment proceedings and the reason was that the AO required the assessee to furnish exhaustive details to support the loss of ₹ 74,67,928/- claimed on account of forfeiture of advances. The assessee on random basis furnished some of the agreements to support the claim. Besides above, as has been mentioned by the AO, the time available for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also submitted in the present appeal and Copies of agreements to sell with the parties are enclosed in paper book at pages 24-48, the deletion of addition of ₹ 74,67,928/- need be upheld. 7.2 After hearing both the parties and perusing the records, we find that the assessee had carried on the business of sale of katha and real estate. Revenue from real estate business was shown at ₹ 2,93,91,700/-. Real estate developers usually buy land stock from farmers at agreed rates. Cash advances are given to the prospective seller landowners to book the properties. Sometimes, dispute arise between farmers and developers as to the terms of the sale. In such circumstances, the agreements fall through and the amounts of advances given are forfeited by the sellers. It is usual practice in the real estate business. The fact of payment is not disputed, at least there is no evidence that the payments were not made. Thus, the loss was made in the ordinary course of real estate business of assessee and was also incidental to the said business. In these circumstances, the claim is allowable loss/ expenditure u/s. 37(1) of the Act and hence, the disallowance made was rightly deleted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact. The assessee has given a detailed working which is reproduced by the AO on page 12 of the assessment order where unaccounted sales have been estimated at ₹ 36.80 Crore in the hands of the assessee out of total unaccounted sales of ₹ 44.80 Crore noted in annexure A-4/S2. He submitted that the AO does not dispute the above bifurcation as the other party namely M/s Raj Katha Products P Ltd has offered additional income of ₹ 80 lakh in its return of income. From the working of unaccounted sales of ₹ 36.80 Crore, the payment for coal amounting to ₹ 73,06,000/- cannot exceed the coal expenses to be incurred for making the above unaccounted sales. The coal consumption for sale of Katha ₹ 17.40 (PB 16 Schedule H of P L Account) Crore is ₹ 1.07 Crore(PB 17 Schedule J of P L Account) which comes to 6.16 %. The coal purchase for unaccounted sale of ₹ 36.80 Crore based on above percentage of coal consumption should have been ₹ 2.26 Crore which is much higher than the unaccounted coal of ₹ 73,06,000/- noted in the seized records. It is therefore important to note that when additional income for unaccounted sales are offered fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question in the statement was Q.No.8 You are requested to broadly workout the details of unaccounted receipts as recorded in BAHI A-1 to A-4 for F.Y.2008-09 and F.Y.2009-10. Ans. My accountant Sushil Sharma has worked out the gross unaccounted cash receipts recorded for F.Y.2008-09 are approximately ₹ 40 crore for sale of katta outside the books of accounts. It includes unaccounted sale of katta produced at both my factories i.e M/s Raj Kattha Product (P) Ltd. and M/s Mahesh Wood Products (P) Ltd. Bahalgarh, Sonepat. Further ₹ 20 crore (approximately) pertain to the cash receipt of real estate transactions undertaken by me which are not recorded in regular books of accounts. Similarly for F.Y.2009-10 (i.e. 01.04.2009 to 30.06.2009) unaccounted cash receipt from kattha sale is ₹ 10 crore and unaccounted cash receipt from real estate transactions is ₹ 0.40 crore. In view of above statement, she submitted that the AO is not justified in objecting to break up of unaccounted sale as per the seized records between the two entities. Thus the AO has prepared a chart on page 13 of the assessment order where he has computed the short declaration of income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional income of ₹ 6.80 Crore and additional income of Rs.l,97,22,505/- (Rs.73,06,000/- plus Rs.l,24,16,505/-) made by him and there remained shortage of Rs.l,22,77,495/-. She submitted that AO took the right view that the above short disclosure need be taxed as the same was made based on the incriminating documents found in the course of search. Hence, she requested not to interfere in the addition in dispute and cancel the order of the Ld. CIT(A) on the issue in dispute. 10.1 However, Ld. Counsel for the assessee relied upon the order of the Ld. CIT(A) and submitted that the statement recorded u/s 132(4) of the Act have no evidentiary value unless corroborating evidence found in respect of income offered to tax as recorded in statement. It was further submitted that the director of the assessee company Sh Mahesh Mehta at the time of statement u/s 132(4) of the Act has roughly disclosed income of ₹ 10 Crore from unaccounted sale of katha. However, the actual working given by assessee during assessment proceedings and also during first appeal proceeding indicate justification of computation of additional income at lower amount as per the chart reproduced in para 8. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on transactions recorded in seized documents came to ₹ 9,34,79,821/-. Thus, the question of any further addition with regard to the undisclosed income as per the seized documents does not arise. Hence, the addition made cannot be legally sustained and therefore, was rightly deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on the issue in dispute and reject the ground no. 6 raised by the Revenue. 11. In the result, the Revenue s Appeal No. 4874/Del/2014 (AY 2009- 10) stand dismissed. ITA NO. 4873/Del/2014 (AY 2008-09) 12. As regards ground no. 1 relating to addition of ₹ 1,50,00,000/- u/s. 68 of the Act on account of unexplained cash credit is concerned, Ld. CIT(DR) has relied upon the order of the AO and stated that AO made addition for failure of the assessee in furnishing copy of bank statements, copy of ITR of the lenders; there was report of inspector that the lenders does not exist at the address given; Opportunity was given to produce persons along with evidences of source of investment and the assessee failed to produce those persons and Non-compliance of the notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on 30.11.2011 the AO required assessee to file confirmations of unsecured loans and nothing else which was submitted. Thereafter, the AO vide notice u/s 142(1) dated 15.12.2011 (PB 32) required assessee in para 7 to provide proof of identity/creditworthiness and genuineness of the five parties only out of which four parties are the parties with addition of ₹ 1,20,00,000/- were the fresh cash credit for which addition of ₹ 1,50,00,000/- was made. He further submitted that the Ld. CIT(A) admitted the additional evidences on four grounds in para 5.2 at page 11 viz. (A) Adequate opportunity was not provided to furnish these evidences and first opportunity was given on 15.12.2011 to furnish evidences; (B) The reply to letters u/s 133(6)/summons by the revenue were independently tiled by the creditors and inspector was deputed to verify their addresses; (C) The assessment was completed in hurried manner in a month; (D) The inspector report was never confronted to the assessee and neither during assessment proceedings nor during remand proceedings. He further stated that Ld. CIT(A) took a note that the AO had not adversely commented on the evidences directly filed before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hands of assessee although it has been also been dealt in the assessment of M/s Raj Katha Products P Ltd. Hence, she requested to sustain the addition in dispute and cancel the order of the Ld. CIT(A) on this issue. We further note that Ld. Counsel for the assessee, on the other hand, submitted that the documents pertains to M/s Raj Katha Products P Ltd and there is a finding by the Ld. CIT(A) for AY 2008-09 that the document pertain to M/s Raj Katha Product P Ltd. Based on the above annexure, the above company had offered the additional income of ₹ 6 crore from unrecorded transactions. He further submitted that Ld. CIT in para 6.2, there is a finding that the Raj Katha Products P Ltd appeal was decided were unaccounted sales of Rs.l,00,004,952/- and unaccounted expenses of ₹ 85,00,698/- were considered to compute the additional income of ₹ 15,04,254/- and the same are subjected to tax in AY 2009-10 and not in AY 2008-09. In view of above, there is no justification to consider the same document in the case of the assessee. Hence, he requested to confirm the order of the Ld. CIT(A) on this issue. After hearing both the parties and perusing the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee relied upon the order of the Ld. CIT(A). After hearing both the sides and perusing the impugned order, we find that the assessee has included ₹ 2,20,00,000/- as income from unaccounted sales and ₹ 80,00,000/- as income from undisclosed sale of stock. Thus, total of ₹ 3,00,00,000/- has been offered for taxation as income from other sources. It is also noted that Ld. CIT(A) has already held that there is no basis to conclude that assessee had income of another ₹ 10 crore during this year also as the said statement of Sh. Mahesh Mehta, Director of assessee company, was not based on any documentary evidence and the total unaccounted sale, including unaccounted sale of stock, itself came to ₹ 9.70 core of which income of ₹ 6.90 crore has already been offered to tax in the hands of the assessee (remaining ₹ 2.80 crore has been offered in the case of RKT). Therefore, in these circumstances, Ld. CIT(A) has rightly held that the addition made by the AO based on mere statement of the director of the assessee company is not backed by any evidence and the unaccounted income detected during search has already been offered to tax. Hence, h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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