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TMI Blog2018 (9) TMI 2003X X X X Extracts X X X X X X X X Extracts X X X X ..... e business of preparation, manufacturing, packing and sale of soft drinks on the basis of concentrate and other raw material procured from Coca Cola in the capacity of bottler and distributor of Coca Cola procure in India. In addition, the MMG group has business interests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc. For the Asstt. Year 2013-14, they have filed their original return of income on 26.9.2013 declaring a total income of Rs. 1,84,981/-. It was processed u/s 143(1) of the Income Tax Act, 1961 (for short "the Act"). Subsequently, search & seizure operation u/s 132 of the Act was carried out on 28.03.2015 in the case of M.M. Aggarwal Group of compnies. The case of the assessee was also covered in the said search. During the course of such search carried out at different premises located in India relating to M.M. Aggarwal Group of companies, documents and data storage devices, etc. belonging to the assessee also were found and seized. Notice u/s 153A of the Act was issued to the assessee on 10.05.2016, and in response thereto, the assessee filed the return of income on 1.06.2016 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Aggarwal, who is director-cumpromoter of MM group companies, the statement of Shri Krishan Kumar Bajaj, General Manager-Finance of the assessee company. He also examined the statement of various other persons, the enquiries conducted u/s 133(6) of the Act and the summons issued to various directors of the non-descript companies u/s 131 of the Act which were either returned back or delivered but there was no response or only part compliance. 5. Ld. Assessing Officer finally reached the conclusion that the assessee failed to establish the identity, creditworthiness and genuineness of the parties wherefrom funds were received by the investor of the assessee who are also group companies of the assessee group. Since the assessee has received an amount of Rs. 39,00,000/- towards share capital and share premium and could not discharge the burden cast on it to his satisfaction, Ld. Assessing Officer treated the same as unexplained cash credit u/s 68 of the Act as the income of the assessee for the relevant period under consideration. 6. Assessee carried the matter in appeal before the ld. CIT(A). The assessee challenged the Assessment Order on two counts, on law and facts. On the quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material so gathered is prima facie incriminating in its nature and substance so as to attract the provisions of S. 153A of the Act. Having found so, he proceeded to observe that the A.O. proceeded to frame assessment u/s 153A after the search on appellant group on 28.03.2015 and on receipt of appraisal report from the DI (Investigation) that the appellant company has received an unexplained credit in its books u/s 68 of the IT Act, and, therefore, the legal ground that the assumption of jurisdiction to issue notice under Section 153A is bad under law, had no legs to stand. Thus, he dismissed the legal ground raised by the assessee challenging the validity of assumption of jurisdiction u/s 153A is concerned. 9. So far as the addition on merit is concerned, ld. CIT(A) dismissed the said grounds also by stating that besides the summon was issued but not delivered, notice u/s 133(6) of the Act was also issued requisitioning the relevant extracts of statements of bank account statement of the investors showing payments made towards share application money, Copies of allotment letters, Share Application form duly filled by the investor companies, Confirmation in respect of allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are corporate entities duly assessed to tax and had subscribed to share capital through banking channels and supported by necessary documents as such, in view of the material placed on record by the assessee to prove the genuineness of transactions and creditworthiness of the share creditors is beyond any doubt. Assessee further challenged the findings of the learned CIT(A) in respect of other applications of provisions u/s 56(2)(vii)(b) of the Act to the facts of the case. 12. Ld. AR, at the outset, strongly objected to the order of the ld. CIT(A) dismissing the appeal of the assessee. So far as ground relating to the validity of assumption of jurisdiction u/s 153A of the Act is concerned, he submitted that the addition made by the Assessing Officer and sustained by the ld. CIT(A) is illegal and beyond the scope of provisions of section 153A/143(3) of the Act. He submitted that on the date of search on 28.03.2015 no incriminating material was found in respect of the addition made by the Assessing Officer and the assessment was not pending. Neither the Assessing Officer nor the ld. CIT(A) has referred to any incriminating material found as a result of search while making/sustainin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors, distinct cheques numbers of different dates for purchase of shares, copy of confirmation of the investor company, their bank statement, copy of annual return of the said company, list of shareholders of the investor company, copy of company master data of the investor company and various other details to substantiate the identity and creditworthiness of the investor company and the genuineness of the transaction. 17. It is his further submission that the burden of the assessee was discharged since the investor is a listed group company and copy of audited financial statement, acknowledgement of return of income, confirmations of investor, bank statements, memorandum of article or association were filed. Further, assessment was completed u/s 143(3) of the Act in the case of the said investor company. There is no evidence on record to suggest that the money received as share capital and share premium has originated from the coffers of the assessee company. 18. Placing reliance on several decisions, Ld. AR argued that nonproduction of shareholder/director by the assessee cannot be a ground for making addition u/s 68 if assessee discharged the initial onus cast on it. He sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies/firms/companies are bogus, non-existent paper entities having no worthy business to advance such share capital & share application money. Thus said assessee company has miserably failed to prove all three ingredients required for provision of section 68 of Act. 22. Placing reliance the decision in the case of CIT vs. MAF Academy (P.) Ltd. reported in 361 ITR 258, she submitted that the Hon'ble Delhi High Court in the said case has 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 assesee's taxable income under section 68 of the Act. 23. Further, placing reliance on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Navodaya Castle Pvt. Ltd. reported in 367 ITR 306, she submitted that the Hon'ble High Court remitted the matter back to the Tribunal for fresh adjudication since the assessee was unable to produce the directors and the principal officers of the six shareholder comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to receipt of share application money, Assessing Officer sent notices to share applicants which were returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. 29. Referring to the decision in the case of CIT vs. Frostair (P.) Ltd. reported in 26 taxmann.com 11, she submitted that the Hon'ble Delhi High Court has held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper. 30. Referring to the decision in the case of CIT vs. N R Portfolio Pvt. Ltd. reported in 29 taxmann.com 291, she submitted that the Hon'ble Delhi High Court has 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 assessment proceeding. 31. Referring to the decision in the case of CIT vs. Empire Builtech (P.) Ltd. reported in 366 ITR 110, she submitted that the Hon'ble Delhi High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rictly as per Rule 11 UA(l)cb r.w.s. 56(2)(viib) & Ld. CIT(A) has dismissed the appeal of the Assessee which is justified under the facts and circumstances of the case. 35. She submitted that considering all facts and the cited case laws, the appeal of assessee is liable to be dismissed inasmuch as the grounds of appeal are devoid of any merit. 36. We have considered the rival arguments made by both the sides in the light of the orders of the authorities below. We have also considered the case law that is brought to our notice. Ld. Assessing Officer made addition of Rs. 39 lacs in the hands of the assessee u/s 68 of the Act basing on various enquiries conducted and statements recorded of various persons u/s 132(4) and 131, stating that the assessee failed to substantiate to his satisfaction the identity and creditworthiness of the investor and the genuineness of the transaction with cogent evidence. According to the Assessing Officer, since the assessee could not produce the investor company and since its returned income is meager considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 40. Para 5 page 11 of the impugned order reads that,- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs. 88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... block assessment." 43. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under :- "4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (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 addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings. 48. Again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 the Hon'ble Delhi High Court has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. 49. In the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 Hon'ble Supreme Court upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. 50. Since in the instant case addition of Rs. 39 lacs was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee failed to establish the identity, creditworthiness and genuineness of the parties where from funds were received by the investors of the assessee who are also the group companies for the assessee group and consequently the assessee being the beneficiary, an amount of Rs. 21, 84,000/-was treated as unexplained cash credit under section 68 of the Act to the assessable income of the assessee for the period under consideration. 56. When the assessee preferred appeal before the Learned Commissioner of Income Tax (Appeals), by way of impugned order, Ld. CIT(A) vide paragraph No. 5.9 inferred that the material found during the search in respect of equity received by the assessee cannot lead to the conclusion drawn by the AO, no specific corroborative evidence has been brought on record by assessing officer to prove that the equity subscription is an accommodation entry. Ld. CIT(A) further observed that the assessee had also discharged its onus and submitted all the documentary evidence in respect of the investment and the details are submitted in this regard by the assessee were also made part of the order of the Assessing Officer. Ld. CIT(A), however, dealt with this mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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