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TMI Blog2019 (3) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... academic in nature. - Decided in favour of assessee. Scope of CIT's powers u/s 251(1)(a) - Addition u/s 56(2)(viib)- AO made addition in respect of share capital including share premium u/s 68 - CIT(A) deleted addition related to share capital but hold that share premium is taxable u/s 56(2)(viib) - HELD THAT:- Assessing Officer in the body of the assessment order has neither discussed this issue nor made any addition on this account. Under these circumstances, it has to be seen as to whether the ld.CIT(A) has jurisdiction to make such addition on an issue which was never considered by the Assessing Officer. Considering all AO in the assessment order has neither discussed this issue nor made any addition u/s 56(2)(viib), therefore, respectfully following CIT VERSUS SARDARI LAL & CO [2001 (9) TMI 1130 - DELHI HIGH COURT] and SH. VIKRANT PURI VERSUS ACIT, CENTRAL CIRCLE-13 NEW DELHI [2016 (4) TMI 419 - ITAT DELHI] we are of the considered opinion that the ld.CIT(A) has no power to adjudicate the issue by introducing a new source of income and his order has to be confined to those items of income which is subject matter of original assessment. We accordingly set aside the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and credit worthiness. The search action established beyond doubt that the assessee company like other group companies had received share capital from various non-descript and shell companies/entities which grossly lacked credit worthiness and were in the nature of accommodation entries. He observed that during pre-search verification spot enquiries were made at the registered address of M/s MSG Finance India Pvt. Ltd. at 201H, Gautam Nagar, New Delhi from whom ₹ 3.50 crores were shown to have been received by M/s Heritage Beverages Pvt. Ltd. It was found that no company is being run from the stated address. He observed that Kandhari group also had received bogus share premium from Indogulf Infrastructure Investment Pvt. Ltd. who had also provided share premium to M.M. Agrawal group of companies. 3. During the course of search action conducted at the office premises of Sh, Varinder Pal Singh Kandhari at Plot no. 237-238, Udyog Vihar, Gurgaon on 28/03/2015, the above facts were confronted to Mr. Pradeep Kumar Shastri, Director in Kandhari group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Moon Beverages Ltd. 70385 18300100 250 17596250 2. Enrich Agro Food Products Pvt. Ltd. 70385 18300100 250 17596250 A.Y. 2014-15 1. Moon Beverages Ltd. 71731 18650060 250 17932750 2. Enrich Agro Food Products Pvt. Ltd. 53655 13950300 250 13413750 3. Focus Buildwell Pvt. Ltd. 9807 2549820 250 2451750 4. MSG Finance India Pvt. Ltd. 8269 2149940 250 2067250 7. He observed that the company M/s Versatile Polytech Pvt. Ltd. has shown to have received share capital in each of the previous year relevant to assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,000 31,110 1,86,08,250 (3,576) (1,15,772) 9. From the above, the Assessing Officer noted that the profit declared by the above mentioned so-called investor companies over the years is negligible. Even the turnover declared by the investor companies is not very significant in most of the cases. The financials of these companies are typically of accommodation entry providing companies in whose accounts only huge share capital/premium and investments are reflected without any worthwhile turnover and profits. The Assessing Officer, in order to further verify the issue, examined the bank statements of some of these companies and observed that the statements shows back to back transactions of same amount, i.e., credit and debit of the same amount on the same date(s) or following date(s) with no other deposits and transactions. This observation, clubbed with the fact that the sales and income figures of these investor entities as per their ITD database details depict too meek a balance sheet to justify such huge fund transfer transactions in their bank accounts, along with other observations as mentioned clearl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee as unexplained cash credit u/s 68 of the Act. 11. Before the CIT(A), apart from challenging the addition on merit, it was argued that during the course of search no incriminating material/documents was found regarding the share application money. As on the date of search, no assessment proceeding was pending as assessment u/s 143(3) was already completed. Relying on various decisions, it was argued that no addition could have been made on this issue. 12. So far as the merit of the case is concerned, it was argued that all the necessary documents from the stated investors were filed before the Assessing Officer in order to prove the identity, genuineness and the creditworthiness of the investors. The Assessing Officer did not find any fault with these documents which clearly proved the identity and creditworthiness of the investors and the genuineness of the transactions. Otherwise also, the Assessing Officer has not brought any material on record to indicate that the investment is unexplained. It was argued that the investors are incorporated companies, accounts of which are duly audited. The accounts of the investors clearly show that the investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e source and availability of funds which remains the factor to be observed. In view of the above and distinguishing the decisions relied on by the Assessing Officer, the CIT(A) deleted the addition made by the Assessing Officer u/s 68 of the IT Act on merit. 15. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal raising the following grounds:- 1. On the facts circumstances of the case the CIT(A) has erred in deleting the addition of ₹ 3,66,00,200/- made by AO on account of unexplained Share Capital and Share Premium u/s 68 of the I. T. Act 1961. 2. On the facts circumstances of the case the CIT(A) has erred in holding the source of share capital genuine when it was specifically established that investor companies are paper companies. 3. The CIT(A) has erred on facts and in law in observing that requisite details and evidences filed by the assessee were sufficient to prove the genuineness of the transaction related to share capital/ premium where as the assessee failed to discharge the primary onus cast upon it u/s 68 of the IT act 1961 of proving identity, satisfactory explaining the creditworthiness and genuineness of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the Tribunal is superficial and adopts a perfunctory approach and ignores evidence and material referred to in the assessment order. The reasoning given is contrary to human probabilities , for in the normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment. She submitted that the ratio laid down by the Hon'ble Delhi High Court is clearly applicable to the facts of the present case, therefore, the order of the CIT(A) should be reversed and that of the Assessing Officer be restored. The ld. CIT, DR also relied on the following decisions:- (i) Bhagirath Aggarwal vs. CIT, 31 Taxmann.com 274 (Del) (ii) Hiralal and Maganlal Co. vs. DCIT 96 ITD 113 (Mum) (iii) Dewan Bahadur Seth Gopal Das Mohta vs. UOI 26 ITR 722 (SC) (iv) Kishore Kumar vs. CIT, 62 taxmann.com 215, 234 Taxman 771; (v) Smt. Dayawanti vs. CIT (2016) 75 taxmann.com 308 (Del) (vi) M/s Pebble Investment Finance Ltd. vs. ITO, 2017-TIOL-238-SC-IT (vii) Raj Hans Towers (P) Ltd. vs. CIT, 56 taxmann.com 67 (viii) PCIT vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Del) 18. The ld. coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enrich Agro Food Products Pvt. Ltd., the turnover for F.Y. 2012-13 is ₹ 145.40 crores and for F.Y. 2013-14 it was ₹ 154.52 crores. Similarly, the profit before tax for F.Y. 2012-13 was ₹ 5.05 crores and for F.Y. 2013-14 it was ₹ 6.24 crores. Therefore, it is wrong on the part of the Assessing Officer to say that these companies do not have good financials. Further, all these companies are group companies and are assessed to tax and they are not Calcutta based companies. He submitted that the payments are also not back to back transactions as alleged by the Assessing Officer and the Departmental Representative. Referring to various pages of the paper book containing the bank account of the assessee, he submitted that either there were sufficient funds available before the cheques were issued or the amount is out of overdraft and the investor companies have not invested on the basis of obtaining entries in the previous day or on the same day and thereafter making the investment in the assessee company. Relying on various decisions, he submitted that the assessee in the instant case has clearly proved the identity and credit worthiness of the investors and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch enquiry and no incriminating material was found/seized during the course of search. While doing so, the Tribunal has relied on the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 (Del), CIT vs. Meeta Gutgutia reported in 395 ITR 526, CIT vs. Harjeev Aggarwal reported in 290 CTR 263, CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and various other decisions. The relevant observations of the Tribunal from para 35 onwards read as under:- 35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court reads as under :- 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts ITA No.7374/Del/2017 ITA No.7567/Del/2017 in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain 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 Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1961 cannot constitute as incriminating material. 42. As mentioned earlier, the addition of ₹ 11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or 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 not known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has ITA No.7374/Del/2017 ITA No.7567/Del/2017 attained finality for a particular year i.e. it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search. Therefore, the order of the CIT(A) is upheld on the legal ground. Since the order of the CIT(A) deleting the addition on legal ground is upheld, therefore, the grounds raised by the Revenue on merit become infructuous being merely academic in nature. The appeal filed by the Revenue is accordingly dismissed. ITA No.1088/Del/2018 (A.Y. 2014-15) 23. Facts of the case, in brief, are that the Assessing Officer during the course of assessment proceedings observed that the assessee, during the year under consideration has received share application money of ₹ 3,73,00,120/- the details of which are given at para No. 6 of this order. The Assessing Officer, following identically worded reasoning for assessment year 2009-10, made the addition of ₹ 3,73,00,120/- u/s 68 of the Act on the ground that the assessee failed to establish the identity and credit worthiness of the parties from whom the funds were received by the investors of the assessee and the genuineness of the transaction. 24. In appeal, the ld.CIT(A) deleted the share application money to the extent of ₹ 14,34,620/- by observing as under:- Findings 5.1 1 have considered the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B) (Delhi), CIT vs. Nipuan Auto (P) Ltd. ((2014) 49 taxmann.com 13 (Del.) 361 ITR 155 (Del.), Commissioner of Income-tax vs Winstral Petrochemicals P. Ltd. 2011330 lTR603(Det,),CIT v. Divine Leasing and Finance Ltd. (2008) 299 ITR 268(Delhi), CIT v. Stellar Investments Ltd 192 ITR 287(Del.) CIT v. Stellar Investment Ltd (2001)251 ITR. 263(SC) and contended that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the share application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR(ST)5(SC), CIT v. Divine Leasing Finance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon ble SC vide order dated 21.01.2008), CIT vs Five Vision Promoters Pvt. Ltd 65taxmann.con71(DelhiHC), CIT v. Vrindavan Farms Pvt. Ltd.(ITA 71/2015)(Delhi HC),CIT V. Kamdhenu Steel Alloys Ltd. [2004]361 ITR0220(Delhi HC). 5.5 It is pertinent to refer to the recent judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt Ltd ITA No.l3/2017 covers the case of the appellant on the facts. Rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 153A and I53C of the Act. The decisions of this Court in CIT v. Anil Kumar Bhalia (supra) and CIT v. Chetan Das LachmanDas [2012] 254CTO392 (Del) were extensively discussed in Commissioner of Income Tax (Ceniral- Ill)v.KabulChawla(supra). The Court in Commissioner of Income Tax(Central-Ill) v. Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACCT (2013) 36 taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search is a separate and distinct assessment. It was further held in the said decision that If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. 34. Before the learned CIT (A), the assessee has produced the copy of bank account of all the share applicant companies. The CIT (A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no cash d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed fact that the director of the appellant companies have never made any statement regarding the share capital / share premium / share application money and no disclosure have been made with regard to share capital / share premium / share application money / unsecured loan. Therefore, the investment stands explained u/s 68. However, the premium of ₹ 250/- per share has to be considered u/s 56(2)(viib). Since, 1,43,462 shares were issued having face value of ₹ 10/- each, the addition u/s 68 to the extent of ₹ 14,34,620/- is hereby deleted. 25. He, however, observed that the assessee has issued share at a premium of ₹ 250/- per share. He asked the assessee to produce the basis of valuation of premium of ₹ 250/- per share u/s 56(2)(viib) read with Rule 11UA. The assessee filed the valuation report from M/s Harpal Associates, a qualified Chartered Accountant, wherein value of shares is calculated at ₹ 261 per share by following Discounted Free Cash Flow Method. The valuation was done on the basis of the projected sales of the assessee for next five years and this projected figures were supplied by the management to the valuer. According to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plicable for this year also on account of addition made u/s 68 by the Assessing Officer. He submitted that in the instant year also, the original return was filed on 17th October, 2014 declaring income of ₹ 1,90,86,700/- which was processed u/s 143(1). The search in this case was conducted on 28th March, 2015 and the notice u/s 153A was issued on 10th May, 2016. He submitted that during this year also no incriminating material was found during the course of search and on the alleged date of search no assessment proceeding was pending. Therefore, the provisions of section 153A could not have been invoked for the impugned assessment year. Relying on various decisions which were cited while arguing the appeal for assessment year 2009-10, he submitted that the same arguments are clearly applicable for this year also. So far as the merit of the case is concerned, he submitted that the share applicants are group concerns only whose turnover and net profit has already been reproduced by the Assessing Officer in the body of the assessment order which shows that these companies are having sufficient funds and these are not paper companies. He submitted that the addition on merit wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been alleged that the projected figures used for valuation of shares are applied by the management to the valuation and neither the management nor the valuer has given any basis for the projected figures is concerned, he submitted that the same is not correct. The basis of projections made by the management was duly submitted before the CIT(A), vide letter dated 22nd December, 2015 which was not considered by the CIT(A). He submitted that the valuation of equity shares of the assessee was done by M/s Harpal Associates during F.Y. 2008-09 and 2014-15 by following the Discounted Free Cash Flow Method after considering the following documents which were provided by the assessee to the valuer:- i) Copy of audited accounts for the relevant Financial Years. ii) Copy of project report consisting of:- a) Industry outlook position for PET Preforms. b) Position of installed capacity. c) List of company s customers and their projected orders. d) CMA data depicting profitability projection for next 5 years. 30. He submitted that there is no whisper in the order of the CIT(A) as to which figure was found incorrect and what should be the correct figure. He has compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. She accordingly submitted that the addition deleted by the CIT(A) should be reversed and the addition made by him u/s 56(2)(viib) should be sustained. 34. We have considered the rival arguments made by both the sides and perused the material available on record and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of ₹ 3,73,00,120/- u/s 68 of the Act on account of share application money received by the assessee on the ground that the assessee failed to establish the identity, credit worthiness and genuineness of the parties wherever funds received by the investors of the assessee who are also group companies of the assessee group. He, therefore, treated the amount of ₹ 3,73,00,120/- as unexplained cash credit u/s 68 treating the assessee as the beneficiary. We find the ld.CIT(A) deleted the addition of ₹ 14,34,620/- on the ground that no incriminating material was found during the course of search and, therefore, addition of the same cannot be made u/s 153A. He further held that the assessee has discharged the onus cast on it by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A) are co-terminus with that of the powers of the Assessing Officer, yet, he has jurisdiction only on those items which have been considered by the Assessing Officer irrespective of the fact whether the issue is subject matter of appeal or not. However, in our opinion, he does not have any jurisdiction over an issue which has not been considered by the Assessing Officer. In case it is accepted that the ld.CIT(A) has power to consider an issue which was not considered by the Assessing Officer, then, the provisions of section 263 or 147 will become otiose. 35. We find an identical issue had come up before the Hon'ble Delhi High Court in the case of CIT vs. Union Tyres reported in 240 ITR 556 (Del) wherein it was held as under:- 11. Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first Appellate Authority is invested with very wide powers under s. 251(l)(a) of the Act and once an assessment order is brought before the authority, his competence is not restricted to examining only those aspects of the assessment about which the assessee makes a grievance and ranges over the whole assessment to correct the AO not only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re co-terminus with the powers of the AO, yet the Ld. CIT(A) has jurisdiction only on those issues which have been considered by the AO irrespective of the fact that whether the issue is subject matter of the Appeal or not. The Ld. CIT(A) does not have any jurisdiction over those issues which have not been considered by the AO. This may be subject matter of revision u/s. 263 of the I.T. Act or reassessment u/s. 148 of the I.T. Act. If the Ld. CIT(A) tries to examine those issues which have not been considered by the AO, then the provisions of section 147 as well as section 263 of the I.T. Act will become redundant and the condition for their operation will be nullified. Our view is supported by the following judgments passed by the Apex Court as well as Hon ble High Court. a) CIT vs. Union Tyres 250 ITR 556 (Del. ) b) CIT vs. Sardari Lal Co. 251 ITR 864 (Del.) (FB) c) CIT vs. Rai Bahadur Hardutroy Motilal Chamaria, (1967) 66 ITR 443 (SC) d) Holcim (India) Pvt. Ltd. vs. DCIT 2013 TIOL 903 ITAT- Del. 9.3 9.3 Respectfully following the aforesaid decisions rendered by the Hon ble Supreme Court as well as Hon ble High Court, we hold that Ld. CIT(A) did not have any juri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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