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TMI Blog2019 (9) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... already discharged its onus before the Assessing Officer. The mere fact that its investor is an exempt assessee u/s 10(36) does not give the impugned share application money the colour of unexplained cash credits - confirm the CIT(A) s action deleting the impugned unexplained share application money - Decided in favour of assessee Assessment u/s 153A - Share capitals share premium and share application money addition - HELD THAT:- Purpose of the impugned sec. 153A proceedings is to assess total income of the searched taxpayer rather than that based on incriminating material only. Hon ble jurisdictional high court has admittedly not adjudicated upon the instant legal issue as informed by the learned senior counsel as well as the department. We therefore quote hon ble apex court s decision in CIT vs. M/s Vegetable Products Ltd. [ 1973 (1) TMI 1 - SUPREME COURT] that the view favouring the assessee / taxpayer has to be adopted in such a backdrop involving conflicting judicial opinions of various hon'ble high courts and accordingly hold that the CIT(A) has rightly quashed the impugned assessment since not based on any incriminating material found or seized during the curse of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee M/s SMS Smelters Ltd. no more wishes to press for its four appeals ITA No..93- 96/Gau/2017 . The Revenue has not raised any objection. These four assessee s appeal(s) are dismissed as withdrawn therefore. 3. We now advert to Revenue s appeal(s) ITA No.91, 69, 76 and 77/Gau/2017 for assessment year(s) 2006-07, 2007-08, 2012-13 2013-14; respectively in first assessee s case. 4. Coming to assessment year 2006-07, we find that CIT(A) has deleted sec. 68 addition of share capital amounting to ₹1,02,50,000/- made by Assessing Officer vide following detailed discussion:- 5.1 The appellant, apart from relying upon the facts, has raised a legal contention stating that the addition of ₹ 1,02,50,000/- made on account of share capital was beyond the scope and ambit of section 147 of Income Tax Act, 1961. According to the appellant in the reasons recorded for re-opening of its case, the only reason given is that the appellant company received transport subsidy amounting to ₹ 6,97,84,511/- for the period from 01.04.2005 to 31.03.2016 which according to the assessing officer escaped the assessment. No other reason w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant. 5.3 As far as the legal contention raised by the appellant is concerned, I find that at the time when the appellant's case was re-opened u/s.147 of the Income Tax Act, 1961 as well as when the assessment was made u/s.143(3)/147 of the Income Tax Act, 1961 on 31.03.2013, the judgment of the Hon'ble Apex Court in the case of M/s. Meghalaya Steels Ltd (supra) was not available to the Assessing Officer. Therefore, in my view there was no bar for the Assessing Officer in making addition on any other issue apart from the issue of transport subsidy on the basis of which the appellant's case was re-opened u/s.147 of the Income Tax Act, 1961. Therefore, the ratio of the judgment of Jet Airways (I) Ltd. (supra) and Ranbaxy Ltd. (supra) are not applicable to the facts of the present case. 5.4 Coming to the facts of the case I find that Mr. C.N. Lyngdoh, from whom the appellant had received ₹ 1,02,50,000/- as share application money, had regular transactions with the appellant. All these transactions were made through bank and are duly recorded in the books of accounts of the appellant company. I also find that the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepted all other transactions in Mr. Lyngdoh s case. 6. Mr. Singh at this stage quotes hon be apex court s very recent decision in Pr.CIT vs. NRA Iron Steel Co. (2019) 412 ITR 161 (SC) restoring similar addition made by the Assessing Officer treating the concerned taxpayer s share application money as unexplained cash credits. We find that the said decision does not apply in the facts of the instant case since the assessee before us has already discharged its onus before the Assessing Officer. The mere fact that its investor is an exempt assessee u/s 110(36) does not give the impugned share application money the colour of unexplained cash credits. We accordingly confirm the CIT(A) s action deleting the impugned unexplained share application money of ₹ 1,02,50,000/-. The Revenue s instant first appeal ITA No.91/Gau/2017 is dismissed. 7. Next comes Revenue s appeal ITA No.69/Gau/2017 for assessment year 2007-08. The CIT(A) s order under challenge has deleted share capitals share premium and share application money addition of ₹ 6,69,71,870/-, 11,95,78,050/- and ₹ 7,24,50,080/-; respectively vide following detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gpur) (vii) C.I.T. Vs. Kabul Chawla (2016) 380 I.T.R. 573 (Del.) (viii) Jaipuria Infrastructure Developers (P) Ltd. V/s. A.C.I.T. I.T.A. Nos. 5522 5523/Del/2015 decided by Hon'ble ITAT, Delhi Bench B , Delhi on 27-06- 2016 (ix) Principal C.I.T. Vs. Kurele Paper Mills (P) Ltd. (2016) 380 I.T.R. 571 (Delhi) (SLP filed by the Department against this judgment dismissed (2016) 380 I.T.R. St.64) It is further submitted by the appellant that no incriminating document/material relating to the share capital/share premium was found and/or seized in the case of the appellant. The Assessing Officer has neither referred to nor relied upon any such document while making the assessment. 5.4 As far as merits of the case is concerned, the appellant has submitted the following documents with a prayer under Rule 46A of the Income Tax Rules 1962 for admission of these documents as additional evidences: (i) Chart showing name and address of the shareholders/applicants, No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN Nos. of the applicant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other postsearch material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued was found during the course of search as is manifest from the order of the AO. Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination. 4.The appeal is, accordingly, dismissed. Hon'ble Supreme Court has dismissed the special leave petition filed by the Department against this judgment as reported at (2016) 380 I.T.R. (St.) 64. 5.8 In the case of Jaipuria Infrastructure Developers (P) Ltd. V/s. ACIT (I.T.A. Nos. 5522 5523/Del/2015) which was decided by Hon'ble ITAT, Bench B Delhi on 27-06-2016, Hon'ble Tribunal has held as follows:- 21. However, in the backdrop of aforesaid undisputed facts discussed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompleted; (vi) that there is not an iota of material with the AO to initiate proceedings u/s 153A what to talk of incriminating seized material; (vii) that the Id. CIT (A) affirmed the assessment order by relying upon the decisions relied upon by Hon'ble jurisdictional High Court in the case cited as Filatex India Ltd. Vs. CIT-IV - (2014) 49 Taxman.com 465 (Delhi) which has been distinguished in the Kabul Chawla (supra) on the ground that in the said case, there was some material unearthed during the search whereas in the instant case there is admittedly no incriminating material unearthed during the search to proceed u/s 153A. In view of what has been discussed above, we are of the considered view that without entering into the merits of this case, addition made in both the cases u/s 153A read with section 143(3) is not sustainable in the eyes of law, hence deleted. Consequently, both the appeals filed by the assessee are hereby, allowed . 5.9 An analysis of the above case laws relied upon by the appellant clearly show that the completed assessments i.e. the non-abated assessments can be tinkered with only o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional evidences. Considering the facts and circumstances of the case, I admit the additional evidences now produced by the appellant as these are required to be admitted for doing substantial justice in the matter. 5.12 The appellant has filed complete details of shareholder companies viz. - their names addresses, No. of shares applied for/allotted, face value of shares, premium paid, mode of payment, their PAN No., CIN No., copies of Memorandum Articles of Association, audited balance sheets and copy of return of allotment. A perusal of the bank statements filed by the appellant show that all the transaction have taken place through banking channels. On examination of these details/documents, I do not find any reason to doubt the identity of the share holders, their credit worthiness and the genuineness of the transactions. It is settled law that once an assessee provides details regarding identity of the share applicants/holders, their permanent account numbers, bank details, balance sheets, A/D receipt in support of filing of income tax returns, copies of Memorandum Articles of Association etc., the share application mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search. That being the case, the Revenue s pleading on merits are rendered infructuous. Its appeal ITA No. 69/Gau/2017 is rejected. 9. Next come the last two assessment years 2012-13 and 2013-14 in Revenue s appeal(s) ITA No.76 77/Gau/2017. We notice that CIT(A) has granted telescoping benefit to the assessee regarding the income disclosed during the course of search whilst deleting the addition amount of ₹ 1,34,40,00/- to the extent of ₹ 76 lac in former and ₹ 89,60,000/- in the latter assessment year. The Revenue is fair enough in not disputing the fact that there is no evidence on record indicating this amount forming part of assessee s undisclosed income. The CIT(A) s detailed discussion qua the instant identical issue reads as under:- 7.1 Before me the appellant vide its written submission dated 02.02.2016 has contended as follows: 5. Ground No.5 (Addition on account of alleged undisclosed expenditure ₹ 1,34,40,000/-): (i) While making the assessment the Assessing Officer has added an amount of ₹ 1,34,40,000/- in the total income of the appellant on account of alleged u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s included the disclosure of additional income of ₹ 76,00,000/- in the total income of the appellant, he has not allowed the benefit of set off of this amount against the additions made by him in the total income of the appellant. It is a settled proposition that the income disclosed by an assessee is available to him for the purpose of explaining other additions/investment. This view has been taken by the Hon'ble ITAT Indore Bench in the case of Eagle Seeds Biotech ltd. V/s. ACIT - 100 ITD 300, by the Hon'ble ITAT (Pune Bench) in the case of Kantilal Brothers V/s. AC1T 52 ITD 412 and Hon'ble Madras High Court in the case of CIT V/s. K.S. Guruswamy Nadar Sons - 149 ITR 127 (Madras). I, therefore direct the Assessing Officer to allow the benefit of the set off of ₹ 76,00,000/- to the appellant against the addition of Rs,1,34,40,000/-. The appellant thus gets relief of ₹ 76,00,000/- and the balance addition of ₹ 54,40,000/- is sustained. This ground of appeal is, therefore, partly allowed . 10. We find no substance in Revenue s instant grievance as the purpose of telescoping is to avoid double addition qua the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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