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TMI Blog2019 (10) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. DR and case laws relied upon are not applicable to the facts and circumstances of the case. We are of the considered view that the assessment framed u/s 153C is not sustainable in the eyes of law being without jurisdiction and also being time barred, hence hereby quashed without going into the merits of the case. - Decided in favour of assessee. - ITA No.890/Del./2019 - - - Dated:- 21-10-2019 - Shri R.K. Panda, Accountant Member And Shri Kuldip Singh, Judicial Member For the Assessee : Shri P.C. Yadav, Advocate For the Revenue : Shri J.K. Mishra, CIT DR ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, M/s. Marudhara Marketing Pvt. Ltd. (hereinafter referred to as the assessee ) by filing the present appeal, sought to set aside the impugned order dated 28.12.2018 passed by the Commissioner of Income - tax (Appeals)-30, New Delhi qua the assessment year 2014-15 on the grounds inter alia that:- 1. On the facts and in the circumstances of the case Ld. CIT (A) has erred both on facts and in law in upholding the impugned order passed by the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as before CIT(A). 8 That the impugned assessment order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 2. Briefly stated the facts necessary for adjudication of the issue at hand are : Assessee company being a private limited company engaged in agricultural activities. Original assessment of the assessee was processed under section 143 (1) of the Income-tax Act, 1961 (for short the Act ) at the returned income but on the basis of search and seizure operation carried out u/s 132 of the Act at the various business and residential premises of Kuber Group of cases including premises of Shri Vikas Malu at 1/8, West Patel Nagar, New Delhi. From the searched premises, documents belonging to assessee were found and Assessing Officer (AO) of Vikas Malu recorded satisfaction note that certain documents were found pertaining to assessee, which were handed over to AO of the assessee on the basis of which satisfaction note was recorded and notice u/s 153A read with section 153C was issued. AO framed assessment u/s 153A r/w section 153C by making addition of ₹ 1,79,99,800/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, re-assessment cannot be made and relied upon on the decisions in CIT vs. Index Securities (2018) 304 CTR 0067 (Del.) and CIT vs. Singhad Technical Education 397 ITR 344 (SC). He also relied upon the decisions in CIT vs. RRJ Securities 380 ITR 612 (Del.) and CIT vs. Swar Agency 397 ITR 400 (Del.) . 7. As against this, ld. DR for the Revenue in order to repel the arguments addressed by the ld. AR for the assessee filed detailed submissions which are extracted for record and ready perusal as under :- As mentioned in para 5 of the assessment order, the assessee was asked to produce the directors of the companies from which share capital/share premium was received during the year. The assessee never produced those persons before the AO. Therefore, onus cast on the assessee was never discharged. Further, the share capital and share premium has been received from a company based in Kolkata. The profit shown by the said subscriber M/s Binapani Merchandise Pvt. Ltd. was only ₹ 16,437/-. On perusal of bank statement of M/s Binapani Merchandise Pvt. Ltd. submitted by the assessee befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additions on grounds that it did not have opportunity to cross-examine relevant witnesses. An assessee company cannot hide behind the shell of a corporate entity to feign ignorance regarding the identity of any person who invests in its share capital. Prem Castings (P.) Ltd. Vs CIT 2018-TIOL-274-SC-IT where Hon'ble Supreme Court held as follows: We do not find any merit in this petition. The Special Leave Petition is accordingly dismissed. 5. CIT Vs MAF Academy (P.) Ltd (361 ITR 258) where Hon'ble Delhi High Court held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assessee's taxable income under section 68 It was held as follows: 53 In contrast to the above judgments, in the present case, the Assessee is a private limited company and in the factual matrix, we have held that the Assessee has not been able to dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court 7. Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 96 taxmann.com 255 (SC)where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons to shareholders under section 131 could not be served as addresses were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, addition made by Assessing Officer under section 68 was to be confirmed; SLP dismissed Konark Structural Engineering (P.) Ltd. Vs DCIT [2018] 90 taxmann.com 56 (Bombay) where Hon'ble Bombay High Court held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available, and, moreover, those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by AO under sec. 68, was to be confirmed 8. Pratham Telecom India Pvt Ltd Vs DCIT (2018-TIOL- 1983-HC-MUM-IT) wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under Section 68. With respect, it appears to us that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. 13. We, therefore, answer the substantial question of law framed by us in the negative, in favour of the revenue and against the assessee. The appeal of the revenue is allowed with no order as to costs. 12. CIT Vs Nova Promoters Finlease (P) Ltd (18 taxmann.com 217, 206 Taxman 207, 342 ITR 169, 252 CTR 187) where Hon'ble Delhi High Court held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. It Was held as follows: 41. In the case before us, not only did the material before the Assessing Officer show the link between the entry providers and the assessee-company, but the Assessing Officer had also provided the statements of Mukesh Gupta and Rajan Jassal to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed through notices, the assessee was in a position to obtain documents from them. While there can be no doubt that in Lovely Exports (P.) Ltd. (supra), the Court indicated the rule of shifting onus i.e. the responsibility of the Revenue to prove that Section 68 could be invoked once the basic burden stood discharged by furnishing relevant and material particulars, at the same time, that judgment cannot be said to limit the inferences that can be logically and legitimately drawn by the Revenue in the natural course of assessment proceedings. The information that assessee furnishes would have to be credible and at the same time verifiable. In this case, 5 share applicants could not be served as the notices were returned unserved. In the backdrop of this circumstance, the assessee's ability to secure documents such as income tax returns of the share applicants as well as bank account particulars would itself give rise to a circumstance which the AO in this case proceeded to draw inferences from. Having regard to the totality of the facts, i.e., that the assessee commenced its business and immediately sought to infuse share capital at a premium ranging between ₹ 90-190 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in proceeding. It was held as follows: 30. What we perceive and regard as correct position of law is that the court or tribunal should be convinced about the identity, creditworthiness and genuineness of the transaction. The onus to prove the three factum is on the assessee as the facts are within the assessee's knowledge. Mere production of incorporation details, PAN Nos. or the fact that third persons or company had filed income tax details in case of a private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts indicate and reflect proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Companies no doubt are artificial or juristic persons but they are soulless and are dependent upon the individuals behind them who run and manage the said companies. It is the persons behind the company who take the decisions, controls and manage them. 16. CIT Vs Empire Builtech (P.) Ltd (3661TR 110) where Hon'ble Delhi High Court held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to unsecured loan of ₹ 80,00,000/- borrowed from M/s. Handsome Merchants Pvt. Ltd. Share received from Binapani Merchandise Pvt. Ltd. for ₹ 51,42,000/- and share premium for ₹ 1,28,57,000/-. 9. It is further mentioned in para 6(v) of satisfaction note that the seized documents, ledgers found in respect of share application amount and unsecured loan received from various parties and these documents belong to assessee and sought to initiate proceedings u/s 153C of the Act. However, when we examine reasons recorded by the AO of the assessee for initiating proceedings u/s 153C of the Act, there is not a passing reference even to the aforesaid information/documents allegedly seized from Vikas Malu rather in the column of information/details, it is mentioned that, Ledger accounts found of Green Valley Resorts. Trial Balance Journal entry in the Books of Blooming Dale Resorts purchase of shares amounting of ₹ 5,00,000/-. Amounting to ₹ 10,00,000/- given to Blooming Dale Resorts and ₹ 10,00,000/- to Kuber Breweries Ltd.. For ready perusal, reasons recorded by AO of the assessee for initiating proceedings u/s 153C are extracted as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a bearing on the determination of the total income M/s Marudhara Marketing Pvt. Ltd, PAN:AACCM8162GH for the relevant assessment years referred to in sub-section (1) of section 153A of the Act and that it is a fit case for initiating proceedings u/s 153C of the Act. Accordingly, notice u/s 153A r.w.s 153C of the I.T. Act, 1961, M/s Marudhara Marketing Pvt. Ltd. PAN:AACCM8162GH for A.Ys. 2009-10 to 2014-15 are being issued Place : New Delhi. Date : 06.9.16 sd/- (Rakesh Kumar) Assistant Commissioner of Income Tax Central Circle 31, New Delhi. 10. Again when we perused para 5.2 of the assessment order AO has lost sight of the information/details/documents referred rather proceeding to make the addition on the basis of information/documents referred to in para 6(iv) of the reasons recorded in case of searched person. 11. Now, the ld. AR for the assessee contended that the proceedings initiated by the AO in this case are invalid as no incriminating material has been unearthed during the course of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliminate such contradictory situations, it was made clear that the Assessing Authority while receiving such seized material belonging to the other person shall be satisfied that such material must be of incriminating nature , Thus, the Amending Act, in fact, explained the procedure to deal with a situation where incriminating materials found in course of a search belonged to a third person. The provision was amended to stop unintended consequences and to prevent undue hardship on the third party who is not beingsearched. The scheme that even a partnership deed or a disclosed bank statement or projected statement was enough to assume jurisdiction u/s. 153C of the Act was curtailed to the extent of incriminating materials found. In fact a logical conclusion was drawn to that effect. In fact, the interpretation of the existing provisions was defeating the object and purpose of the enactment and was leading to infructuous litigation without any rhyme or reason. By such interpretation, there were two assessment orders standing on the same issues raising identical tax demands for the same assessment years which is an absurd proposition. This ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in favour of the assessee by returning following findings :- Search and Seizure-New scheme of assessment in search cases- Validity of Proceeding u/s 153C-Assessee was educational institution registered under the Bombay Public Trusts Act, 1950 and Societies Registration Act, 1860-Assessee also got itself registered under Section 12AA and because of said registration under Section 12AA of the Act, Sections 11 and 12 of the Act apply to assessee as per which income earned by assessee from property held for charitable or religious purposes (Section 11) and income from contributions were exempt from taxation under certain circumstances- AO recorded his satisfaction to effect that assessee trust could not be considered as a genuine trust and issued notice u/s. 153C for initiation of Proceeding-CIT(A) partly allowed Assessee's appeal and sustained action of AO in initiating proceeding u/s. 153C-ITAT held that satisfaction was not properly recorded and notice under Section 153C was time barred in respect of Assessment ~ 2000-01 to 2003-04 ITAT quashed notice in respect of Assessment Years and High Court upheld odder of ITAT-Held, as per provisions of Section 1 ..... 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