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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 ..... IGH COURT ] 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. Since in the instant case addition of ₹ 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 we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A - Decided in favour of assessee. Addition applying provisions of section 56(2)(viib) - Provisions under section 56(2)(viib) of the Act cannot be made applicable to the case of the assessee inasmuch as the amount was received in the years earlier to the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s from Rhone Sales (P) Ltd. And ₹ 15 lacs from Rapi Marketing (P) Ltd. And further observed that the pre-search enquiry revealed that the assessee group had received substantial amount of share capital from various nondescript and shell companies which did not have any factual identity and creditworthiness. It was further found that the investment by such entities with the assessee group was mainly in the form of share capital which was subscribed at an abnormally high premium which lacked genuineness on their part to have agreed to subscribe at such premium without having received any return either in the form of dividends or appreciation in the value of their investment till date. Further the Ld. Assessing Officer observed that search action further established beyond doubt that the assessee company like other group companies had received the impugned share capital from various non-descript and shell entities/companies which grossly lacked creditworthiness and were in the nature of accommodation entries to convert the undisclosed income of the assessee group having been received in the form of such share capital from the stated entities/companies. He further observed that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(1). Time for issuance of notice u/s 143(2) of the notice expired by 30.9.2014, whereas search u/s 132 was conducted in this case on 28.03.2015 and notice u/s 153A was issued on 10.05.2016. It is submitted that no incriminating material was detected as a result of search and the addition was made on the basis of post-search enquiries and statements recorded u/s 132(4) of the Act. Relying on various decisions, it was argued that since no assessment was pending on the date of search and the addition has been made on the basis of post-search enquiries and statements recorded u/s 132(4) on various persons, therefore, the Assessing Officer has no power to assume jurisdiction under the provisions of section 153A of the Act. 7. Insofar as the merits of the case are concerned, it was submitted that the assessee had filed all and complete details like the complete address and PAN number of the investor company along with the distinctive number of share certificates, the various cheques issued on different dates with the name of the bank, the name and address of the directors as on 31.03.2013, the complete copy of the income tax return for assessment year 2013-14, copy of Form No.2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rporate identity number, Copies of share certificates issued by the assessee company, chart showing details of director of the investor companies, chart showing details of shareholders of the investor companies, Copies of the acknowledgement of the Income tax return filed for AY 2009-10 by the investor companies along with their audited financials for the year ended 31st March 2009, but the assessee had neither produced the investor nor arranged to provide the requisite information and documents directly from it as such failed to substantiate its contention. He further recorded that the assessee has presented a whole series of jurisprudence without substantively discharging its primary onus due to which there was no substantive basis to accept the contentions of the assessee. On this premise, the addition was confirmed. 10. Ld. CIT(A) further observed that with effect from assessment year 2013-14 onwards, the provisions of section 56(2)(viib) are attracted to the case of the assessee. He observed that the share premium charged by the assessee clearly falls within the mischief of this section in absence of assessee furnishing a reliable and robust basis of valuation of such equity s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two components i.e. pertaining to assessment year 2008-09 and balance ₹ 57.74 crores. He submitted that Shri Sanjeev Aggarwal has retracted from his statement regarding surrender of income to the extent of ₹ 30.78 crores pertaining to assessment year 2008-09 which is evident from pages 30 to 35 of the Paper Book. 14 While placing reliance on the decision of the Delhi Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vs. DCIT vide ITA No.332/Del/2017 order dated 29.12.2017 for assessment year 2007-08, the decision of the Hon ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and the decision of the Hon ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263, he submitted that the statements recorded u/s 133(4) do not by themselves constitute incriminating material. 15. He placed reliance on the decision of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the decision in the case of Pr.CIT vs. Meeta Gutgutia reported in 395 ITR 526 and various other decisions, for the principle that that in absence of any incriminating material found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shareholder by issuing notice u/s 133(6) or enquiry from the Assessing Officer of the Investor Company or banker of investor or registrar of company. 19. In respect of the allegation leveled by the Assessing Officer that the investor company had low income, is concerned, he submitted that low income of shareholder is not a relevant consideration and only net worth is relevant to determine the creditworthiness of the shareholder. He submitted that since the assessment has been completed u/s 143(3) in the case of the investor company which is a group company and a listed company, therefore, the Assessing Officer, without making proper enquiry could not have made addition on flimsy ground. 20. Referring to the order of the ld. CIT(A) invoking the provisions of section 56(2)(viib) read with Rule 11UA(1)(cb) is concerned, he submitted that the ld. CIT(A) without giving any opportunity to the assessee held that the share premium charged by the assessee falls within the mischief of the said provisions. He submitted that the ld. CIT(A) cannot sustain an addition on the basis of new source of income which was not there in the assessment order. In any case he submitted that the book valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity and creditworthiness of shareholders as well as genuineness of the transactions. She submitted that the SLP filed by the assessee was dismissed by the Hon ble Supreme Court. 24. Referring to the decision of the Hon ble Bombay High Court in the case of Konark Structural Engineering (P.) Ltd. vs. DCIT reported in 90 taxmann.com 56, she submitted that the Hon'ble High Court in the said decision has 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, has to be confirmed. 25. On the basis of the decision in the case of Prem Castings (P.) Ltd. vs. CIT reported in 88 taxmann.com 189, she submitted that the Hon'ble High Court has held that where assessee company had received share capital from various contributors and admitted that alleged investors were close friends and business associates of its directors, burden was upon assessee to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the decisions reported in CIT vs. Focus Exports (P.) Ltd., 51 taxmann.com 46 (Delhi), PCIT vs. Bikram Singh, ITA No.55/2017 (Delhi), and Rick Lunsford Trade Investment Ltd. vs. CIT, 385 ITR 399 (Cal) for the same principle. 32. Ld. DR further submitted that in the case of Rick Lunsford Trade Investment Ltd. vs. CIT [2016-TIOL-207-SC-ITJ (Supreme Court), the Hon'ble Supreme Court has dismissed the SLP upholding the decision of the Hon ble High Court that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. A.O. has categorically after making necessary inquires after taking into consideration of investigation reports search seizure materials made the addition. 33. The sum and stance of the argument of the ld. DR is that, the investee companies are paper-existing only without physical existence, those were never produced for examination by A.O, such entities have no worthy business to advance such investment, such entities have no proper identity of existence without any creditworthiness, such entities only indulged to provide accommodation entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search. Ld. CIT(A) alternatively also held that the addition is sustainable on account of mischief of provisions of section 56(2)(viib) read with Rule 11UA(1)cb, the reasons for which have already been reproduced in the preceding paragraph. 38. It is the submission of the ld. AR that the original return was filed on 26.09.2013 declaring income at ₹ 1,84,981/- which was assessed u/s 143(1) of the Act. He further submitted that the period for issue of notice u/s 143(2) expired by 30.9.2014 since such notice cannot be served on the assessee after the expiry of six months from the end of the financial year in which the returns was furnished and thereby the assessment proceedings reached finality and there was no pending proceedings. It is not the case of the revenue that any notice u/s 143(2) of the Act was issued or served before the prescribed time limit and, therefore, the assessment on the date of search was not pending. Since the addition made by the Assessing Officer is not based on any incriminating material found during the course of search and addition has been ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 397 ITR 82 the Hon ble jurisdictional High Court has held that statements recorded u/s 132(4) of the Act do not by themselves constitute incriminating material, with the following observations:- 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 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 just ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act, 1961 cannot constitute as incriminating material. 45. In this context, it could be seen from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries. 46. As has been stated above, the addition of ₹ 39 lacs 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. We shall refer to the leading cases on this aspect. 47. The Hon ble Delhi High Court in the case of Kabul Chawl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted. 51. Inasmuch as the assessee succeeds on the legal ground, we deem it not necessary to delve deeper into the arguments made by the ld. counsel for the assessee on merit since such adjudication would be academic in nature. 52. The appeal filed by the assessee is accordingly allowed. ITA No.7532/Del/2017 53. After hearing both the sides, as stated above in the 1st paragraph, facts of this case and the grounds raise in this appeal are similar to the facts and grounds involved in ITA No. 7531/del/2017. We have already decided the issue and the appeal filed by the assessee has been allowed. Following similar reasoning, the appeal filed by the assessee is allowed. ITA 7530 of 2017: 54. This matter relates to the assessment year 2014-15 and the facts of this matter are slightly different from those involved in the earlier two matters. In this case the original return of income was filed on 25/09/2014 declaring a total income of ₹ 29, 655/-and it was processed under section 143(1) of the Act. Search conducted on 28/03/2015. Though the return of income was processe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 56 (2) read with rule 11 UA (1)cb of the Act. On this premise, Ld. CIT(A) confirmed the addition of share premium component. 57. The assessee is , therefore, in this appeal before us stating that in the absence of any incriminating material found in the search conducted, assumption of jurisdiction under section 153A of the Act is bad under law. The assessee further contended that the Ld. CIT(A) erroneously invoked the provisions under section 56(2)(viib) of the Act, and that too without affording any opportunity to bring to tax a credit duly recorded and explained. It is, therefore, clear that the entire dispute in this matter revolves around the issue of application of the provisions of section 56(2)(viib) of the Act to the facts of this case. 58. Argument of the Ld. AR is that the Ld. CIT(A) vide paragraph No. 5.11 of his order observed that the transaction was entered into during the financial year 2008-09 relevant to assessment year 2009-10, and though the assessee has not received the amount during the financial year 2013-14 (relevant to assessment year 2014-15), the quantum including the share premium was recognized only in the financial year 2013-14. Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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