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TMI Blog2021 (3) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... the Orders of the authorities below and delete the entire addition. All the grounds raised by the assessee are allowed. Deemed dividend u/s 2(22)(e) - HELD THAT:- Since the assessee is NBFC Company registered with RBI and as per assessment order itself the nature of business of assessee is financing and investment and the details submitted by Learned Counsel for the Assessee clearly show that assessee is mainly engaged in finance business for giving loans and advances and earn interest thereon, would clearly prove that assessee is mainly in the business of lending of money to others, therefore, business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act and as such the case of the assessee would fall to the exception provided in sub-clause-(ii) of Section 2(22)(e) of the I.T. Act, 1961. In view of the above, we set aside the Orders of the authorities below and delete the addition - Ground of the appeal of the Assessee is allowed. - ITA.Nos.3338 & 3339/Del./2017 - - - Dated:- 26-2-2021 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountant Member For the Assessee : Shri Gautam Jain, Advocate, Shri Lalit Mohan, C.A. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er share (Rs.) Date of allotment 1. BGS Credit P. Ltd., 1, Raj Ballab Saha Lane, Howrah 711 101 25000 2,50,000 (₹ 10 per share) 47,50,000 (₹ 190 per share) 30.03.2009 2. Kathleen Vyapar P. Ltd., 1, Raj Ballab Saha Lane, Howrah 711 101 22500 2,25,000 (₹ 10 per share) 42,75,000 (₹ 190 per share) 30.03.2009 3. Sahaj Tie UP P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata 700 001. 19000 1,90,000 (₹ 10 per share) 36,10,000 (₹ 190 per share) 30.03.2009 4. Hopewell Merchants P. Ltd., 10, Mullik Street, Kolkata-7. 25000 2,50,000 (₹ 10 per share) 47,50,000 (₹ 190 per share) 30.03.2009 5. Madson Agencies P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata 700 001. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25000 2,50,000 (₹ 10 per share) 47,50,000 (₹ 190 per share) 30.03.2009 4.2. Accordingly, a questionnaire Dated 31.08.2012 was issued and assessee was confronted with the result of investigation made by the Department in respect of share capital and assessee was also required to file certain details and the counter-foil of issue of share certificates and copies of the share application forms etc., The assessee was also required to produce the above shareholder companies through their Directors for verification of genuineness of the investment in shares by them in assessee company. The questionnaire is reproduced in the assessment order in which it was also brought to the notice of assessee that the Department has verified the existence of these companies, their creditworthiness of the and genuineness of the transaction by making survey under section 133A of the I.T. Act on certain shareholders above which are 07 in number and it was found that they do not exist at the given address. It was also found that they are not engaged in regular business. The Directorate of the Kolkata provided further opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting to F.Y. 2009-10)- on the back side of this page recording is made in the name of Shri Shyam Trexim Fincom P. Ltd. against which ₹ 50 lakhs is written. ii. Page No.1 of Annexure A-7 - on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari lal Aggarwal MLA is made. iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of ₹ 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008. iv. Page 1 of Annexure A-10 - it contains a hand written extract of cash book containing entry of ₹ 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of ₹ 3 lakhs in the name of Saratj Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page. v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A Singhal and M.L. Aggarwala dividing into ₹ 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. 4.6. During th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a requesting to send the final report which was submitted vide letter Dated 22.03.2013 confirming non-existence of the parties. 4.8. The A.O. also noted that during the course of assessment proceedings the assessee produced Shri Ajit Kumar, Director of M/s. Motorex Finance Pvt. Ltd., Kolkata and Vinay Kumar Shah, Director of Shri Sudarshan Casting Pvt. Ltd., Kolkata and M/s. Madson Agencies Pvt. Ltd., who had invested a sum of ₹ 75 lakhs, ₹ 25 lakhs and ₹ 85 lakhs respectively as share capital/share application money with the assessee company in assessment year under appeal. The A.O. also noted that statement of these persons were recorded, but, they have not been able to explain as to whom the share certificates were sold by them and for which amount and they were unable to produce the original share certificates and bank statements etc., The A.O, therefore, noted that assessee has failed to discharge its onus to prove the identity of the share applicants, their creditworthiness of the and genuineness of the transaction. Therefore, entire share application money of ₹ 6.70 crores was treated as unexplained in the hands of the assessee under section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct address as per reply. Learned Counsel for the Assessee submitted that A.O. was not justified in referring in the assessment order that reply of February have been considered by him in January, 2013. PB-19 onwards are the detailed evidences submitted before the authorities below as explained above along with worth of the Investor Companies to make investment in assessee company. PB-41 is reply Dated 19.03.2015 explaining each issue of creditworthiness and genuineness of the transaction of the Investors supported by documentary evidences. It was also explained that shares were actually allotted to the Investor Companies and complete details and their Certificate Nos. Etc., were also filed. Two Directors i.e., Shri Vinay Kumar Shah and Shri Ajit Kumar were produced before A.O. and their statements have been recorded in which they have confirmed the transaction with the assessee, but, later on no other data was fixed by the A.O. for producing the other Directors at the convenient time. No further examination have been done. PB-79 is the reply regarding Shri M.L. Agarwal, C.A. There is no objection raised for raising the premium amount per share in the assessment order. Learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, the Learned Counsel for the Assessee relied upon the Order of ITAT in the case of Pr. CIT vs., Goodview Trading Pvt. Ltd., in ITA.No.377/Del./2016 and Judgment of Hon ble Delhi High Court in the case of ITO vs., N.C. Cables Ltd., 391 ITR 11 (Del.). He has also relied upon Judgment of the Hon ble Delhi High Court in the case of Commissioner of Income Tax vs., Vrindavan Farms (P) Ltd., in ITA.No.71/Del./2015 on the proposition that low income of the share holder is not relevant consideration. Seized document was not considered as relevant to assessment year under appeal by ITAT in Group Appeals as mentioned above. The issue of non-compliance to the notice under section 133(6) have also been considered favourably by ITAT in the Group cases as mentioned above. Learned Counsel for the Assessee also relied upon following Judgments in support of the contention that assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction, therefore, initial onus upon assessee stood discharged to prove conditions of Section 68 of the I.T. Act and that assessee need not to prove source of the source. The Learned Counsel for the Assessee also relied upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineering (P.) Ltd., vs., DCIT [2018] 96 taxmann.com 255 (SC). 7. J.J. Development Pvt. Ltd., vs., CIT 2018-TIOL-395-SC-IT. 8. CIT vs., Nipun Builders Developers (P.) Ltd., 350 ITR 407 (Del.) (HC). 9. CIT vs., Nova Promoters Finlease (P) Ltd., 342 ITR 169 (Del.) (HC) 10. CIT vs., N.R. Portfolio Pvt. Ltd., [2014] 264 CTR 258 (Del.) 11. CIT vs., Ultra Modern Exports (P.) Ltd., 220 Taxman 165 (Del.) (HC) 12. CIT vs., Frostair (P.) Ltd., 210 Taxman 221 (Del.) (HC). 13. CIT vs., Empire Builtech (P.) Ltd., 366 ITR 110 (Del.) (HC) 14. CIT vs., Focus Exports (P.) Ltd., 228 Taxman 88 (Del.) (HC) 15. PCIT vs., Bikram Singh [2017] 399 ITR 407 (Del.) (HC) 16. Rick Lunsford Trade Investment Ltd., vs., CIT [2016] 385 ITR 399 (Cal.) (HC) 17. Rick Lunsford Trade Investment Ltd., vs., CIT 2016- TIOL-207-SC-IT. 7. We have considered the rival submissions and perused the material on record. It is not in dispute that whatever queries were raised by the A.O. time to time, have been replied by assessee along with documentary evidences. All the replies filed by assessee along with documentary evidences are filed in the paper book. The assessee explained each ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements recorded by the A.O. The A.O. later on did not fix any other date for recording the statements of remaining Directors of Investor Companies. The A.O. received report from the Investigation Wing at Kolkata, but, it is not clarified in the assessment order if the report of Investigation Wing, Kolkata was ever supplied to the assessee or confronted to the assessee so that assessee could rebut the same. Therefore, in the absence of any confrontation of the report of the Investigation Wing to the assessee, the same cannot be read in evidence against the assessee. Whatever the objections have been raised by the A.O. in the assessment order for disbelieving the explanation of assessee on the basis of some material found during the course of search, material found from the Chartered Accountant of the assessee, statement of Shri Sampath Sharma, Director of the assessee company etc., and low income declared by the Investor Companies have already been considered by the ITAT, Delhi Benches in Group cases on identical facts and entire addition have been deleted on merits as well as it was held that no addition could be made against the assessee because no incriminating material was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same documents. The matter in those cases travelled upto the Tribunal and the identical additions have been deleted by the Tribunal in both the above cases vide orders dated 29.12.2017 and 23.04.2018. It was next contended on behalf of the assessee that none of the documents/papers pointed out by the Assessing Officer in the assessment order belong to the assessee and therefore, the notice issued u/s. 153C itself is invalid. Reliance is placed on the following decisions: (i). Pr. CIT vs. Vinita Chaurasia, 394 ITR 758 (Del.) (ii). CIT vs. Arpit Land (P) Ltd., 393 ITR 276 (Bom) (iii). Canyon Financial Services Ltd. vs. ITO, 399 ITR 202 (Del) (iv). CIT vs. Renu Construction (P) Ltd., 399 ITR 262 (Del.) (v). Pepsi Foods Pvt. Ltd. vs. ITO, 367 ITR 112 (Del), SLP dismissed by Supreme Court in Appeal No. 4659/2015 dated 04.12.2017 (vi). M/s. Pepsico India Holding Pvt. Ltd. vs. ACIT, 370 ITR 295 (Del) (vii). CIT vs. Lavanya Land (P) Ltd., 397 ITR 246 (Bom) 4. It was next contended that none of the documents referred to by the Assessing Officer are the material, much less incriminating material, to denote any income or share capital and share premiu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition of ₹ 10,00,000/- u/s. 68 of the Act. We find considerable substance in the contention of the assessee that the above documents neither go to suggest any undisclosed income of the assessee nor any nexus with the share capital declared by the assessee. In fact, the Assessing Officer has derived inferences/presumptions on the basis of above papers found in the search without proving them as belonging to the assessee or their nature being incriminating to the assessee. Therefore, the assessment order confirmed by the ld. CIT(A) is not found fit to support, having been passed without proving the primary ingredients of section 153C of the Act. It is worthwhile to note that the very same papers, as listed above, were also taken against the other group companies, i.e., Brahmaputra Finlease (P) Ltd. and M/s. Brahmaputra Realtors (P) Ltd. for the assessment year 2007-08 and similar additions were made in those cases also based on the same search and same papers. However, the ITAT Delhi Bench in the case of Brahmaputa Finlease (P) Ltd. (ITA No. 3332/Del./2017) vide order dated 29.12.2017 has examined the same documents and deleted the addition by quashed the assessment order as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the Brahmaputra Group and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely M/s Brahmaputra Infrastructure Ltd in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade on account of unexplained share capital stood deleted in the identical facts and circumstances of the case. Therefore, respectfully following the above decisions of coordinate bench and there being no contrary material on record and further relying on the decision of Hon ble Delhi High Court in the case of Kabul Chawla and plethora of other decisions relied by the assessee, we find no justification to sustain the impugned order and the addition made against the assessee. Accordingly, the appeal of the assessee deserves to be allowed, being full of merits. 24. Similarly, in the case of M/s Brahmaputra Realtors (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3406/Del/2017 for the assessment year 2007-08, the relevant findings have been given in paras 3 to 9 of the order dated 23.04.2018which read as under: 3. It is the submission of the learned AR that though the learned AO made Annexures A-6, A-7 and A-10 as the basis for making the addition, he failed to substantiate how these documents are incriminating the assessee so as to make the addition in their hands. Nowhere learned AO brought on record to connect these documents to the additions under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given in this matter with the documents relied upon in the case of Brahmputras Finlease Co. (supra), we find that they are identical as demonstrated below: Reference to documents in the case of M/s Brahmputra Finlease P. Ltd. ITA No.3332/Del/2017 Reference to documents in the case M/s Brahmputra Realtors P. Ltd. ITA No.3406/Del/2017 Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5 i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009- 10)- on the back side\ of this page recording is made in the name of Shri Shyam Trexim Fincom P. Ltd. against which ₹ 50 lakhs is written. ii. Page No. 1 of Annexure A-7 - on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made ITA No. 3332/Del/2017 iii. The back side of the above page 1 of Annexure A-7 mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . A Singhal and M.L. Aggarwala dividing into ₹ 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted / undisclosed income in the guise of share capital/share application money. 7. On considering the above documents vide para 4.11, a coordinate bench of this Tribunal considered the relevance of these documents to the companies of Brahmputra group and also the incriminatory nature of these documents inasmuch as the names of Shri Shyam Trexim and Fincom P. Ltd., Shri Murari Lal Aggarwal, Shri Sarat Aggar5wal, and Shri A. Singhal are mentioned in these documents and nothing incriminating the assessee could be inferred from these documents. Relevant observations of the Tribunal are as follows: 4.11 We find that the Item No. (i) contains recording in the name of Shri Shyam Trexim Fincom Pvt. Ltd . The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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 addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. 9. On a consideration of the entire material in the light of the law laid down in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the coordinate Bench of this tribunal concluded that, - 4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed. 25. A similar view has been taken by the ITAT Delhi Bench A , New Delhi in the case of M/s Brahmaputra Finlease (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3332/Del/2017 for the assessment year 2007-08 wherein vide order dated 29.12.2017, the relevant findings have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed 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 made known in the course of original assessment. (emphasis supplied externally) 4.7.1 In view of the legal position summarized above, the Hon ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, theb in absence of incriminating material, no addition could have been made. The relevant paragraph of the decision is reproduced as under: Conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we reject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act. 4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under: Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5 i. Page No. 23 of Annexure A-6 (a diary relating to F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Infrastructure Ltd in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected. 4.12 The next argument of the Ld. CIT(DR) is that the statement recorded under section 132(4) of the Act of Sri Sampat Shrama is incriminating material found during the course of search. We have observed that said statement of Sh. Sampat Sharma was recorded at his residential premises during search proceeding carried out separately. In our opinion, the statement of Sh. Sampat Sharma was not recorded in search proceeding of the assessee and thus, it canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assumption of jurisdiction under section 153A of the Act. The Hon ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under: 38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained 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 assessee 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in those circumstances it was held that it could not be said that addition was based on no evidence. The relevant finding of the Hon ble Supreme Court is reproduced as under: 3. In the second round, the assessment order dated March 29, 2000, gave detailed reasons for arriving at the conclusion that the figures stated in the statement recorded were corroborated, in particular, by various loose sheets found at the premises of the assessee as well as vouchers, some of which related to the two films in question. In an appeal filed to the Tribunal, the Tribunal framed three issues, two of which were unnecessary for the reason that the statement recorded on August 25, 1995, was said to be relevant but not conclusive. Therefore, whether the statement was made under duress and whether it was retracted lawfully would have no relevance at this stage. However, the Tribunal went into these issues as well and ultimately, found that the statement could be used as evidence. Further, it examined other corroborative evidence referred to in the assessment order and arrived at a finding that the added income would be income which can be added under section 158BC for the block assessment pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e search took place simultaneously and the AO relied upon the similar five documents and the statements while making the additions. We, therefore, by respectfully following the aforesaid referred to orders in the case of the various assessees belonging to the same group delete the impugned addition. 27. The facts involved in other two assessment years i.e. 2007-08 and 2008-09 in ITA Nos. 3336 3337/Del/2017 are similar to the facts involved in ITA No. 3335/Del/2017 for the assessment year 2006-07 which we have already disposed off in the former part of this order, therefore, our findings given therein shall apply mutatis mutandis. 7.2. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Finlease (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi (supra), in paras 4.7 to 4.20 held as under : 4.7 We have heard the rival submission and perused the relevant material on record. Main issue in dispute in the grounds raised before us is whether any addition could have been made under section 153A of the Act in the case of the assessee. In the case of Kabul Chawla (supra) relied upon by the Ld. counsel of the assessee, the Hon ble High Court of D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed 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 made known in the course of original assessment. (emphasis supplied externally) 4.7.1 In view of the legal position summarized above, the Hon ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, theb in absence of incriminating material, no addition could have been made. The relevant paragraph of the decision is reproduced as under: Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 4.7.2 In view of above decision, we are required to examine the two conditions. The First condition is whether for the year under c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act. 4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under: Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5 i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side\ of this page recording is made in the name of Shri Shyam Trexim Fincom P. Ltd. against which ₹ 50 lakhs is written. ii. Page No. 1 of Annexure A-7 - on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected. 4.12 The next argument of the Ld. CIT(DR) is that the statement recorded under section 132(4) of the Act of Sri Sampat Shrama is incriminating material found during the course of search. We have observed that said statement of Sh. Sampat Sharma was recorded at his residential premises during search proceeding carried out separately. In our opinion, the statement of Sh. Sampat Sharma was not recorded in search proceeding of the assessee and thus, it cannot be considered as incriminating material found during the course of the search of the assessee. 4.13 Without prejudice to our observation, we do not find any mention of any incriminating material in the statement of Sh. Sampat Shrama recorded under section 132(4) of the Act. The Ld. counsel drawn our attention to copy of the statement available on page 427 to 450 of the paper book and engli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained 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 assessee 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 Assessee herein was not justified in law. 4.16 In the case of Harjeev Aggarwal (supra), the Hon ble High Court observed as under: 19 In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the premises of the assessee as well as vouchers, some of which related to the two films in question. In an appeal filed to the Tribunal, the Tribunal framed three issues, two of which were unnecessary for the reason that the statement recorded on August 25, 1995, was said to be relevant but not conclusive. Therefore, whether the statement was made under duress and whether it was retracted lawfully would have no relevance at this stage. However, the Tribunal went into these issues as well and ultimately, found that the statement could be used as evidence. Further, it examined other corroborative evidence referred to in the assessment order and arrived at a finding that the added income would be income which can be added under section 158BC for the block assessment period in question. In an appeal filed under section 260A to the Bombay High Court, the High Court found, after narrating the facts, that no substantial question of law arises. 4. We are of the view, in accordance with the view of the High Court, that no substantial question of law arises. Further, though it was vehemently argued by Shri Devansh A. Mohta, learned counsel appearing for the assessee, that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises of Brahmaputra group of cases, belonging to the assessee: i) Page No. 23 of Annexure A-6 (a diary relating to FY 2009-10)-on the back side of this page recording is made in the name of Shri Shyam Trexim Fincom (P) Ltd. against which ₹ 50 lakhs is written; ii) Page No. 1 of Annexure A-7-on this page a recording of funds mentioning debit as well as credit of ₹ 25 lakhs in the name of Murari Lal Aggarwal dated 31.5.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made; iii) The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of ₹ 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008; iv) Page 1 of Annexure A-10-it contains a hand written extracted of cash book containing entry of ₹ 5 lakhs in the name of M.L. Aggarwal. It also shows as debit of ₹ 3 lakhs in the name of Sarat Aggaral. The entries are for the date 28.05.2008, the date of writing of this page; and v) Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A. Singhal and M.L. Aggarwala dividing into ₹ 25 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of ₹ 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008. iv. Page 1 of Annexure A-10 - it contains a hand written extract of cash book containing entry of ₹ 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of ₹ 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page. v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into ₹ 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/ undisclosed income in the guise of share capital/sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. 4.20. In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed. 7. The above decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier occasion, confirmation could not be filed, the assessee filed copy of the assessment order u/s 143(3) of the Act for A.Y 2006-07. 17. In so far as the share certificates are concerned, it was explained clearly that the appellant company had issued share certificates to all the share applicants and at present these companies were not their share holders/members as they have sold their shares. Since the assessee had no access to the share certificates, therefore, the same could not be filed. 18. Regarding producing the shareholder companies through their directors/authorised representatives for verification of genuineness of the investment, it was explained that two directors, namely Shri Sarat Agarwal and Shri Vinay Kumar Shah were produced for verification /examination. It was further brought to the notice of the Assessing Officer that the directors waited for long hours and whole day was spent in recording the statement of only one director, namely, Shri Ajit Kumar Singh and it was requested that exact date and time may be given to produce the investor companies through their directors/authorised representatives for verification of genuineness of investment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,82,200 Reserve Surplus 10,09,29,025 7,99,52,678 Total 10,63,15,225 8,42,34,878 Application of Funds Current Assets Loans advances Stock of shares 8,25,30,300 7,85,85,000 Cash and bank balance 1,65,3549 4,23,164 Loans Advances 2,20,50,007 54,43,063 Less: Current Liabilities Provisions Liabilities 4,500 1,03,500 Provisions 5,545 2,19,965 Total 10,045 3,23,465 Net Current Assets 10,62,23,811 8,41,27,762 Miscellaneous expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net current Assets 24,01,43,311 111508019 Deferred Revenue Expenditure 38,000 16500 Total 24,01,81,311 11524519 M/S SPANDAN VAN1JA (P) LTD Address : 9/12, LAL BAZAAR STREET? BLOCK E,2nd FLOOR KOLKATA, WEST BENGAL 700001 No. of shares : 25,000 PAN: AAJCS5887K Sr. No. Cheque No./ RTGS Date Amount (Rs) i) 121780 13.08.2008 50,00,000 TOTAL 50,00,000 Return Filed on : 25.09.2009 Auditors of Company: Manabendra Bhattacharyya Co Particulars As on 31.03.2009 As on 31.03.2008 Shareholders Fund Share capital 85,02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Share capital 2,29,31,000 1,60,93,500 Reserve Surplus 22,78,93,579 9,79,58,325 Total 25,08,24,579 11,40,51,825 Application of Funds Current Assets Loans advances Stock of shares 21,61,06,516 8,92,31,400 Cash and bank balance 19,35,218 1220148 Loans Advances 1,95,87,189 2,08,98,545 Other Current Assets 1,31,70,875 27,00,000 Less: Current Liabilities Provisions Liabilities 2,021 2,020 Provisions 7,998 7,548 Total 10,019 9,568 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est that the assessee has purchased cheques by way of cash from these share applicant companies. Each of the shareholders from whom share capital was raised/received are duly identifiable corporate entities and assessed to tax as well. The entire share capital has been subscribed through banking channels and there was no material found during the search which proves that the money came from the coffers of the appellant company. Financial statements of each share holder company exceeds its net worth, thereby establishing the credit worthiness of the share applicant companies to make investment in shares of the applicant company. Further, each share holder has independently confirmed their investment in response to notices u/s 133(6) of the Act. 28. In our considered opinion, suspicion can be no basis to make addition. Moreover, the Revenue in the case of shareholder companies has accepted their independent identity, source of income and carrying on business of investments and disinvestments. Therefore, the ratio laid down by the Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd 319 ITR 5 squarely applies on the facts of the case in hand. In fact, in the case of St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e applicant companies and further corroborated the share transactions with master data filed with Registrar of Companies. 34. The other decisions relied upon by the ld. DR are also distinguishable on facts of the case in hand. 35. As mentioned at the beginning that the underlying facts in issues in A.Y 2010-11 are identical to those of A.Y 2009-10, for the sake of completeness we will extract the networth of share applicant companies for A.Y 2010-11 as under: SI. No. Name and address of the Company No. of Shares Nominal value of share (Rs.) Premium paid per share (Rs.) Dated of allotment 1. M/s Kokila Exports Pvt. Ltd., 9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 12,500 1,25,000 (₹ 10 per share) 23,75,000 (₹ 190 per share) 30.03.2009 2. M/s Abhilasha Exports Pvt. Ltd.,Saklat Palace, Kolkata-72 25,000 2,50,000 (₹ 10 per share) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock E-, 2nd floor, Kolkata-700 001 25,000 2,50,000 (₹ 10 per share) 47,50,000 (₹ 190 per share) 12. M/s Skylight Distributors Pvt. Ltd., 3, Saklat Palace, Kolkata- 700 072 25,000 2,50,000 (₹ 10 per share) 47,50,000 (₹ 190 per share) 13. M/s Tarakeshwar Commercial Pvt. Ltd.,9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 10,000 1,00,000 (₹ 10 per share) 19,00,000 (₹ 190 per share) Sr. No. M/s RANISATI STOCKISTS PRIVATE LIMITED Name of Entities Amount (Rs-) 25,00,000 Address: 1A, Grant Lane Kolkat-72 No. of Shares: 12,500 PAN No. AAECR1291D Payments made Via Sr. No. Cheque No./ RTGS Date Amount (Rs) i) 893862 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RTGS 05.09.2009 20,00,000 TOTAL 20,00,000 Bank Name: Axis Bank Auditors of the Company: Agrawal Singhania Co. PARTICULARS As on 31.03.2010 As on 31.03.2009 Shareholders Fund Share capital 1,38,15,000 1,38,15,000 Reserve Surplus 23,25,53,263 23,25,53,263 Total 24,63,68,263 24,63,68,263 Application of Funds Investment 24,03,00,000 - Current Assets Loans advances Stock of shares 21,96,50,000 Cash and bank balance 41,65,522 12,64,145 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock of shares 6,85,72,600 9,65,10,000 Cash and bank balance 279,188.23 1,00,039.66 Loans Advances 1,17,71,297 - Other Current Assets 5,00,000 - Less: Current Liabilities Provisions 3,073 1,55,12,000 Net Current Assets 8,11,20,012.23 8,10,98,039.66 Preliminarv Expenditure To the extent not written off or adjusted 5,320.20 7,093.60 Deferred Revenue Expenditure 53,400 71,200 Profit Loss Account 21,267.57 23,666.74 Total 8,12,00,000 8,12,00,000 M/s Skylight Distributors Pvt Ltd Address 9/12, Lal Bazar Stre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cheque No./ RTGS Date Amount (Rs) i) 894086 24.09.2009 2,000,000 Bank Name: Syndicate Bank Auditors of the Company: Pawan Maurya Co. Net Worth of the Company PARTICULARS As on 31.03.2010 As on 31.03.2009 Shareholders Fund Share capital 5,810,000 5,810,000 Reserve Surplus 108,490,000 108,490,000 Total 114,300,000 114,300,000 Application of Funds Current Assets Loans advances Stock of Shares 90,470,000 101,000,000 Cash Bank Balance 277,900.36 180,526 Loans Advances 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,104,666 - Cash Bank Balances 10,106,506.65 81,437 Loans Advances 41,210,007 - Total 177,071,179.65 81,437 Less: Current Liabilities Provisions Net Current Assets 559,937.50 501 176,511,242.15 80,936 Miscellaneous Expenditure (To the extent not written off or adjusted) Preliminary Expenditure 71,760 15,930 Profit Loss - 3,134 Total 176,583,002.15 100,000 M/S AMBIKA VINCOM PRIVATE LIMITED Address: 1, Mahendra Nath Roy Bye Lane, Howrah, West Bengal - 711101 No. of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Saha Lane, Howrah, West Bengal - 711101 No. of Shares: 15000 PAN No. AABCD7985M Sr. No. Cheque No./RTGS Date Amount (Rs) i) 894086 05.09.2009 30,00,000 TOTAL 30,00,000 Bank Name:Axis Bank Auditors of the Company: Agrawal Singhania Co. PARTICULARS As on 31.03.2010 As on 31.03.2009 Shareholders Fund Share capital 24,908,500 24,908,500 Reserve Surplus 443,501,525.39 443,496,297.59 Total 468,410,025.39 468,404,797.59 Application of Funds Current Assets Loans advances Stock of shares 444,282,971.97 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 654,810,000 Sundry Debtors 36,594,799 Cash Bank Balances 21,964,900.15 Loans Advances 191,811,281 Total 905 ,180980.15 Less: Current Liabilities Provisions 154,499,796 Net Current Assets 750 ,681 ,184.15 Miscellaneous Expenditure (To the extent not written off or adjusted) _____________________ Preliminary Expenses 166,680 Profit Loss Account Total 750 ,847 ,864.15 M/S PUSHPANJALI COMMQ TRADE PRIVATE LIMITED Address: 3 Saklat Place, Kolkata, West Bengal 700072 No. of Shares: 25000 PAN No. AAECP9727C Sr. No. Cheque No./RTGS Date Amount (Rs) i) 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Cheque No./ RTGS Date Amount (Rs) i) 08.07.2009 50,00,000 TOTAL 50,00,000 M/S SLDHARSHAN CASTING(P) LTD Address: 9/12, Lai Bazar Street, Block-E, 2nd Floor, Kolkata 70000 No. of Shares: 25000 PAN No. AADCS9429B Sr. No. Cheque No./ RTGS Date Amount (Rs) i) 08.07.2009 50,00,000 TOTAL 50,00,000 36. It can be seen from the aforementioned net worth of the share applicant companies, only net worth of three companies is not available, namely, Kokila Exports, M/s Madsan Agencies P. Ltd and M/s Sudharshan Casting [P] Ltd. However, we find that the directors of these companies, namely, Shri Ajit Singh for Kokila Exports and Shri Vinay Kumar Shah for Madsan Agencies and Sudharshan Casting appeared before the directors incompliance to summons u/s 131 of the Act. We are of the considered v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under : The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon ble High Court. 7.11. Decision of jurisdictional High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as under : The CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon ble High Court in view of the above findings noted that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source . The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of ₹ 71,75,000 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose. 7.18. Judgment of Hon ble Delhi High Court in the case of Pr. CIT vs., Kurele Paper Mills P. Ltd., 380 ITR 571 (Del.) in which Hon ble Delhi High Court held as under : Held, dismissing the appeal, that the order of the Commissioner (Appeals) revealed that there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search as was manifest from the Order of the Assessing Officer. Consequently, it was held that the Assessing Officer was not justified in invoking section 68 of the Income-tax Act, 1961, for the purposes of making additions on account of share capital. There was nothing to show that the factual determination was perverse. 7.19. Considering the above discussion in the light of Order of the Tribunal in the Group Cases and in case of assessee and the decisions of various High Courts referred to above and the decisions relied upon by the Learned Counsel for the Assessee, it is clear that assessee pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 20 lakhs in immovable property at Sarve Satyam Society, CGIIS Ltd., Plot No.12, Sector-4, Dwarka, New Delhi by Shri Sampat Kumar Sharma. During the course of assessment proceedings, it was submitted before A.O. that he has taken loan from assessee company on 02.04.2009 in which he is a Director. Photo copy of the Affidavit is also been filed which shows that assessee company has given loan of ₹ 20 lakhs through online transfer of fund on Dated 02.04.2009 drawn on IOB, Daryaganj, New Delhi. The A.O, therefore, noted that provisions of Section 2(22)(e) of the I.T. Act are attracted as the assessee has given loan to his Director. Therefore, addition of ₹ 20 lakhs was made against the assessee. The Ld. CIT(A) confirmed the addition and dismissed this ground of appeal of assessee. 12. Learned Counsel for the Assessee submitted that provisions of Section 2(22)(e) of the I.T. Act are not applicable in the case of assessee as the assessee is a NBFC Company registered with RBI and assessee company is mainly in the business of lending of money to different Companies. He has submitted that Exception-(ii) to Section 2(22)(e) of the I.T. Act, 1961 provides that divide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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