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TMI Blog2019 (5) TMI 1893X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of survey is not and can not be treated as incriminating material qua the investment in shares of the assessee company by M/s. GSD Trading and Financial Services Pvt. Ltd. In the statement of Mr Rajesh Daftary there is nothing contrary to the evidences produced by the assessee during the original assessment proceedings or during proceedings u/s 153A We are therefore not in agreement with the conclusion drawn by Ld. CIT(A) that the statement of Shri Rajesh Daftary is an incriminating material and accordingly the order of Ld. CIT(A) is set aside on this issue and AO is directed to delete the addition. The legal issue raised in ground no 1 to 5 by the assessee is allowed. Addition u/s 68 - creditworthiness and genuineness of the parties from whom share application money was received were not proved - assessee has submitted all the proof, documents and evidences in respect of said investment in the original assessment proceedings as well as the proceedings under section 153A of the Act in the form of share application, bank statement, audited financial statement and memorandum and article of association, ITRs, name of the bank from where the payments were made. The said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Services Pvt. Ltd. incriminating material was found is erroneous and contrary to the facts of the case. 3. On the facts & circumstances of the case the appellant prays that in the order passed by Ld. Commr. of Income Tax (Appeals) that there is a reference to incriminating material found during the course of search in respect of the transaction of investment by GSD Trading & Financial Services Pvt. Ltd., is bad in law. In view of this the appellant prays that the order passed by Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 153A and confirming the additions made of ₹ 7,91,00,0007- is not justified and be deleted. 4. On the facts & circumstances of the case the appellant prays that during the original assessment proceedings the complete information about the share capital received from GSD Trading & Financial Pvt. Ltd. amounting to ₹ 7,91,00,0007- was submitted and the Ld. Assessing Officer has passed the order u/s 143(3) and has accepted the claim of the appellant after due verification. No new material is found during the course of search as regards the share capital issued by the appellant. In view of this the appellant prays that that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant may be accepted and addition made by the Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 68, amounting to ₹ 7,91,00,000/- may be deleted. 10. On the facts & circumstances of the case the appellant prays that the amount received towards share capital is in the nature of capital receipt and the provisions of Section 68 cannot be invoked while computing the total income of the appellant. The appellant prays that the addition made by the Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 68 amounting to ₹ 7,91,00,000/- may be deleted. 11. The Ld. Commr. of Income Tax (Appeals) has erred in confirming the levy of interest u/s 234B. The appellant denies the liability of payment of interest u/s 234B. On the facts & circumstances of the case the appellant submit that levy of interest u/s 234B is not justified and be deleted. 12. The appellant craves leave to add / withdraw or amend any ground(s) of appeal at the time of hearing." 3. Whereas the ground raised by the Revenue is as under: "Whether on the facts and circumstances of the case, the CIT(A) was right in giving relief to the extent of ₹ 22.32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of the Act. During the course of search, no incriminating material with regard to issue of share capital or investors was found or seized as is clear from the copies of panchnamas placed at page Nos.20-21 and 22-25 of the paper book respectively. In these panchnamas there was no reference to finding of any material relating to share capital/investors and on page No.24 there is a reference to certain loose papers. However, none of them were incriminating and relating to the issue of share capital. The AO on the basis of search operation observed that assessee had issued the share capital consisting of 24,18,400 equity shares of face value of ₹ 10/- at ₹ 115/- to 16 parties. The AO also noted that in the same year, the assessee allotted 14,77,600 shares to Gajipara family/Patel family at par. The AO noted that in the immediately succeeding assessment year i.e. 2011-12, the equity shares issued at a premium were purchased by two companies M/s. Sheenathji Organiser P. Ltd. & M/s. Shantam Stock Trading Pvt. Ltd. which were under the control by Gajipara family at a paltry sum of ₹ 5/- per share. Thus the AO found that the share was initially issued to 16 parties at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital and share premium, the details whereof are given on page No.14 to 17 of the assessment order. According to the AO the assessee has failed to prove as to how the shares were issued at a premium of ₹ 115/- per share when the company was not having any substantial business to justify the charging of premium and ultimately the entire amount of ₹ 30,23,00,000/- was added to the income of the assessee as unexplained cash credit under section 68 of the Act by framing assessment under section 143(3) read with section 153A vide order dated 27.12.2016. 5. In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by deleting the addition to the tune of ₹ 22,32,00,000/- by holding that the addition can not be made de hors incriminating material seized during the year qua said share capital/share premium raised by the assessee from 15 parties while the Ld. CIT(A) sustained the addition to the extent of ₹ 7,91,00,000/- by treating the statement of Shri Rajesh Daftary as incriminating material with respect to investment made by M/s. GSD Trading and Financial Services Pvt. Ltd. by observing and holding as under: "17.6 I have noted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, which are placed at Page 254 to 256 of the Paper Book (Part-1) filed during the course of the appellate proceedings. 19.2 I have gone through the various Panchnamas drawn in the name of the Appellant Company, list of the books of accounts and other material seized during the course of the search operation. I am constrained to note that there is no reference to the share capital/share premium in any of the said seized documents. This particular observation is further reinforced by the fact that even in the showcause notice dated 23.11.2016 issued by the Assessing Officer, during the course of proceedings u/s. 153A of the Act, there is no reference to any seized material in relation to the issuance of shares. Even the assessment order passed by the AO u/s 153A r.w.s. 143(3) of the Act doesn't refer to any incriminating material found / seized, during the course of search operation. These facts clearly show that the contention of the appellant that no incriminating material was found during the course of search operation conducted on the Appellant Company is true. 19.3 The Appellant Company had vehemently contended that during the course of assessment proceedings u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax ITA No.1166/621/667/ Mum/2015 Mumbai ITAT 40-56 4. Commissioner Of Income-tax-II, Thane Vs continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 Bombay High court 57-84 5. M/s Dalwala Securities Ltd. V/s Dy. Commissioner of Income-tax ITA no. 5932 to 5934/M/2009 Mumbai ITAT 85-99 6. Commissioner of Income-tax-20 Vs Shri Deepak Kumar Agarwal IT A no. 1709 of 2014(2017) Bombay High court 100-115 7 PCIT Vs Desai Construction Private Limited 387 ITR 552 (2017) Gujrat High Court 116-122 8. Gurinaer singh Bawa VsAsst. Commr, Of Income 150ITD40 Mumbai ITAT 123-129 9. Jai Lokenath Oil Extractions (P) Ltd Vs Deputy Commr. Of Income-tax, Central Circle - XXVII, Kolkata 83 Taxmann.com 369(2017) Kolkata ITAT 130-138 10. Asst. Commr. Of Income Vs Jayendra P. Jhaveri. 65SOT118 Mumbai ITAT 139-146 11. Commr. Of Income-tax Vs Kabul Chawla 380ITR573 Delhi High Court 147-159 12. PCIT Vs Meeta Gutgutia 395 ITR 526(2017) Delhi High Conn 160-186 13. PCIT - 18 Vs Ms. Lata jain 384 ITR 543 (201 7) Delhi High Court 187-188 14. Commr. Of Income-tax Vs. MurliAgro Products Ltd. 49 Taxmann.com 172 Bombay Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t taxes in the Finance Act, 2003, the CBDT has clarified as under:- "65.5 The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years vending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the anneal revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate. Save as otherwise provided in the proposed section 153A, section 153B and section 153C, all other provisions of this Act shall apply to the assessment or reassessment made under section 153A. It is also clarified that assessment or reassessment made under section 153A shall be subject to interest, penalty and prosecution, if applicable. In the assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year." 20.5 The word 'abate' means to stop or to put an end. The objecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts/reassessments which have abated and those which have attained finality ? 20.10 The use of the phrase 'so far as may be'in section 153A{l)(a) implies that all the provisions of the Act as contained under Chapter XIV prescribing the procedure for assessment or under any other Chapter of the Act with respect to the return of income filed U/s. 139 shall be applicable to the returns filed pursuant to notice issued U/s. 153A/153C of the Act. The applicability of those provisions which are inconsistent with the provisions of section 153A are restricted by the use of the phrase 'so far as may be'. 20.11 As such, for the assessments proceedings which are abated, the AO gets all the powers prescribed under the law, as if the assessment is being made for the first time. Thus, if the assessment is made for the first time, all the provisions of assessment, relevant for making of an assessment u/s. 143(3) shall be applicable. In the case of re-assessment, the principles pertaining to assessment u/s 147/148 of the Act shall become applicable. 20.12 As far as the assessments/reassessments, which do not abate or which have attained finality, the principle of time barring r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abated cannot be accepted. Similarly on annulment of assessment made under Section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1)." 20.15 A similar view has been taken by the Hon'ble Bombay High Court (Nagpur Bench) in case of Murli Agro Products Ltd Vs. CIT 49 Taxman.com 172in ITA No 36 of 2009, wherein it has been held that on initiation of proceedings U/s. 153A, it is only the assessment proceedings that are pending on the date of conducting search U/s. 132 or making requisition U/s. 132A of the Act that stand abated and not the assessments already finalized. The relevant excerpts of the judgment are reproduced hereunder:- "9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/ reassessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31/5/2003 in the case of any person, the Assessing Officer shall issue notice to such person requiring him to furnish return of income within the time stipulated therein, in respect of six assessment years immediately preceding the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80 HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80 HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act." 20.16 In the above mentioned judgment, the Hon'ble Bombay High Court has held that no addition can be made in respect of assessments which have become final, if no incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce section 153A overrides provisions of section 147 and 148, can it be the intention of the legislature to give enormous powers on the Assessing Officer for opening a completed assessment time and again? In our opinion, the legal restrictions and conditions prescribed for reopening the assessment still applies to the cases reopened u/s 153A. The intention of the legislature could not have been otherwise lest it should lead to unnecessary harassment upon the assessees. Though the completed assessments can be reopened under Section 153, the issues which have already been concluded in the earlier assessments should not be subject matter of reassessment unless some incriminating material concerning those issues were found during the course of search. Otherwise, in the concluded assessments which have been reopened u/s 153A, the assessing officer should restrict himself with the additions arising out of the incriminating materials found during the course of search." 20.21 In the case of Viraj Forgings Ltd. vs. DOT [ITA No. 1948/M/2008] and Viraj Impoexpo Ltd. vs. DOT in [ITA No. 1949/M/2008], the Hon'ble Mumbai HAT has held as follows:- "4.2 We have perused the records ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments pending on date of search are concerned, those assessments would abate in terms of second proviso to section 153A(1) and total income shall be computed afresh uninfluenced by fact whether or not there is any incriminating material found in course of search." 20.23 The Hon'ble Delhi High Court in the case of CIT vs. RRJ Securities [2016] 380 ITR 612, has clearly held that in the absence of any incriminating material, the concluded assessments could not be interfered U/s. 153A of the Act. In the facts of that case, it was held that the documents seized have no reference to the income of the assessee for relevant assessment year and, thus, the AO has no jurisdiction to make the re-assessment U/s. 153A. 20.24 The Hon'ble Delhi High Court in the case of Pr. CIT vs. Laia Jain (ITA 274 and 276 of 2016), considering the ratio laid down in the case of CIT vs. Kabul Chawla [2016] 380 ITR 573, has held that section 153A assessment cannot be made for the assessment years in which incriminating material is not recovered even though incriminating material may be recovered for other years in the block of 6 years. 20.25 The Hon'ble Kolkata Tribunal in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus upheld the decision of Hon'ble Delhi High Court that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year. 20.29 The Memorandum explaining the provisions of Finance Bill 2003, stated I that the then existing provisions contained in Chapter XIVB relating to block assessment prescribing single assessment of undisclosed income for block period, were introduced for avoidance of disputes, early finalization of such, assessments and reduction in multiplicity of proceedings. However, there were parallel proceedings carried on namely regular assessment proceedings as well as block assessments for undisclosed income resulting into multiplicity of proceedings. In order to rectify this anomaly, a scheme of single assessment was introduced by inserting section 153A to Section 153D in the IT Act. 20.30 The purpose behind the introduction of section 153A/153C of the Act will get defeated, if the AO is allowed to assess/reassess the total income again in respect of completed assessments, in contradiction with the second ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial Services Pvt. Ltd., but the A.O. had generalized the statement to all the share subscribers and held the entire share capital to be bogus in the proceedings u/s 153A of the Act. 21.2 Thus, the AO had without bringing any material on record concluded in a vague and generalized manner in Para 3.6 of the assessment order passed u/s 153A of the Act that the entire share capital is in the nature of accommodation entries, which is both factually and legally wrong. I am of the considered opinion that these conclusions drawn by the AO are purely based on conjectures and surmises and are not based on any cogent material or tangible evidence on record. 21.3 Another vague and unsubstantiated observation made by the AO is that the investing companies need not be directly owned by such accommodation entry providers, as many a times they keep benamidars at the front. The assessment order fails to throw any light on several vital queries viz. Which companies are benami concerns and who are the benamidars ? Who are the dummy owners of such companies ? What is the evidence on record to hold them to be dummy ? Who are the real owners of the said benami companies ? 21.4 Further, the AO ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n legal grounds established by legal testimony. Mere suspicion, however strong, cannot take the place of proof. Reliance is placed upon State v. Gulzari Lal Tandon AIR 1979 S.C. 1382 and JA, Naidu v. State of Maharashtra AIR 1979 S.C, 1537. 21.8 The above stated principles of the Indian Evidence Act are equally applicable and have been applied with full force in Income-tax proceedings. The Hon'ble Supreme Court in Chuharmal v. CIT [1988] 172-ITR-250 stated:- "what was meant by saying that the Evidence Act did not apply to proceedings under the Income-tax Act, 1961, was that the rigour of the rules of evidence contained in the evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of the Evidence Act in proceedings before them, they were prevented from doing so." 21.9 It is settled law that suspicion, howsoever, strong cannot take the place of legal proof, as has been held by the Hon'ble Supreme Court in the case of Umacharan Shaw and Bros. v. CIT [1959] 37-ITR-271. Further reliance is placed upon: Krishnand v. State ofMadhya Pradesh:AIR 1977 SC 796 Jayadayal Poddar v. Mst. Bibi Haz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the burden of proving that it is not taxable, because it falls within an exemption provided by the Act, lies upon the assessee'. No Confession / Surrender of Income 22.0 A survey has been conducted on M/s GSD Trading & Financial Services Pvt. Ltd. and statement of Rajesh Daftary was recorded on 28.01.2015. Though the AO had relied very heavily on the statement of Shri Rajesh Daftary, but a perusal of the statement of Shri Rajesh Daftary reveals that there is no confession in the said statement for providing any accommodation entry to the Appellant Company. Thus, according to the Appellant Company, the contention of the AO in the assessment order that Shri Rajesh Daftary had provided accommodation entries is factually incorrect. 22.1 I have also noted that as per the data from the ROC website, it is clear that Shri. Rajesh Daftary was appointed as director on 24.06.2011 after the receipt of share application money from M/s GSD Trading & Financial Services Pvt. Ltd. on 28.02.2010 & 31.03.2010. In fact, the entire share capital and share premium had been raised by the appellant Company before 31.03.2010 and Shri. Rajesh Daftary had become a director M/s GSD Trading & Financial Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the share subscribers, immediately before the payments had been made to the Appellant Company. Further, the parties have substantial net worth, taxable income and high bank balances. 23.2 To summarize, it was stated that by submitting the above documentation, the Appellant Company had discharged its onus to prove the identity and credit worthiness of the subscribers and genuineness of the transaction in the proceedings u/s 153A of the Act. Therefore, it was submitted by the Appellant Company that no addition u/s 68 of the Act is warranted. 23.3 The above submissions made in the proceedings u/s 153A of the Act before the AO were also made by the Appellant Company during the course of the appellate proceedings before the undersigned. No Investigation / Enquiries conducted by AO u/s 153A of the Act 24.0 The Appellant Company had also contended that if the AO had any doubt about the genuineness of the share capital / share premium, he should have issued fresh notices u/s 131/133(6) of the Act for investigation and verification of the same. I have taken note of the fact that during the course of the original assessment proceedings, the AO had held the share capital / share p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of CIT v. Orissa Corporation P. Ltd. 159 JTR 78 had held, as under:- "Held, that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices u/s 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they -were creditworthy. There was no effort made to pursue the so called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion can be arrived at, no question of law as such arose. The High Court was right in refusing to state a case." 24.6 The decision of Hon. Bombay High Court in the case of CIT v. Creative World Telefilm L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 131(1A) of the Act on 28th January, 2015 at Rajkot. It had also been contended that in the statement of Mr. Rajesh Daftary, there was not a single piece of evidence to prove that the entire share application money received by the Appellant Company was not genuine. Further, it is contended that Mr. Rajesh Daftary had never admitted that he is engaged in the business of providing accommodation entries. 26.1 It is also stated by the Appellant Company that Mr. Rajesh Daftary has clearly stated in reply to Q.No.27 that the transaction of investment in M/s GSD Trading & Financial Services Pvt. Ltd., was done by Mr, Prakash Baghrecha, who was the director of the Appellant Company, at the relevant point of time. It had been contended by the Appellant Company that statement of Mr. Rajesh Daftary does not have any evidentiary value, as he was not the Director of the appellant company at the time when the impugned shares were subscribed at premium. 26.2 On these contentions, 1 have noted that as per the Table No. 2 on the Page 3 of the assessment order, the share capital / premium had been introduced on 31.12.2009, 28.02.2010 and 31.03.2010 i.e. the share capital had been introduced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Self Q.3 Please mention the name of business concerns which are controlled by you. Ans. The only concerns controlled by me or my family members are as under: Sr. No. Name of Business Concern Name of the Family member Relation 1. D.S. Integrated Finsec Pvt. Ltd. Self and ila Rajesh Daftary, and Ami Rajesh Daftary Wife and Daughter 2. Samvedn Builders Pvt. Ltd. Self and ila Rajesh Daftary Selt and Wife 3. GSD Trading & Financial Services Pvt. Ltd. Self, ila R. Daftary Self and Wife 4. Arihant Software Pvt. Ltd. Self Self 5. Arihant Enterprise Self Self 6. Ami Investment Ila R. Daftary wife 7. Rajesh J. Daftary HUF Karta Self 26.5 As per the reply to Q. No, 2 & 3, it is evident that out of the abovementioned several entities, there is only one company, namely M/s GSD Trading & Financial Services Pvt. Ltd., which had subscribed to the share capital of the appellant company. In this regard, reference may also be made to the various business activities carried out by the group companies of Mr. Rajesh Daftary, which also refers to only one of the share subscriber namely M/s GSD Trading & Financial Services Pvt. Ltd. The relevant Q.No.6 & 7 and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment, Prop. Ilaben Rajeshbhai Daftary Recording of the statement is adjourned for lunch break. Recording of the statement resumed on 28-01-2015 at 3:30 P.M." 26.6 A perusal of the reply to Q. No. 6 & 7 of above statement reveals that M/s GSD Trading & Financial Services Pvt. Ltd., had been purchased by Mr. Rajesh Daftary through a party from Ahmedabad. The Question No. 24, 25 and 26 are directly related to the appellant company and being important are reproduced along-with the relevant replies, hereunder.:- "Q.24 Please furnish details of investment by your company in Geetanjali Space Pvt Ltd. Ans. Sir, I do not have complete details at the moment. Though the company M/s. GSD Trading & Financial Services Pvt ltd had investment was mad when I was not director of the company. This investment was sold in the financial year 2010-11. At that time also, Sh. Prakash Bagrecha was the director of the company. This investment was sold in the financial year 2010-11.At that time also Sh. Prakash Bagrecha was \ the director of the company. I do not have records as regards sale of these shares at this moment. I will contact Mr. Prakash Bagrecha and submit the required details l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company and when he controlled affairs of the company. I will contact Mr. Prakash Bagrecha and submit the required details in this Plater". 26.7 In reply to the query on investment made by M/s GSD Trading & Financial Services Pvt. Ltd. in the Appellant Company, it is clearly stated by Shri. Rajesh Daftary that he does not have the complete details. In fact, Shri. Rajesh Daftary had failed to submit any details regarding the investment made in the appellant company. He has shifted the entire onus on Mr. Prakash Baghrecha by claiming that these transactions were done by him and he controlled the affairs of the company. A perusal of the chart reproduced in Q. No. 26 clearly reveals that Mr. Rajesh Daftary had been duly confronted with the adverse material that cheques had been received by M/s GSD Trading & Financial Services Pvt. Ltd. and the amounts were immediately transferred to the Appellant Company. 26.8 I have gone through the statement of Mr. Rajesh Daftary and noted that it is only about one shareholder, namely M/s GSD Trading & Financial Services Pvt. Ltd., about which Shri. Rajesh Daftary had been questioned and he had failed to submit any plausible explanati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission. The search was conducted on 22-03-2006. Various materials: documents, agreements, invoices and statements in the form of accounts and calculations were seized. On 18 April 2006 and 3 May 2006, the assessee's sons (including one of the appellants, Abhay Gupta) recorded statements under oath; the assessee too made her statement under oath, admitting that though returns were filed ostensibly on her behalf, she was not in control of the business. She and all other family members made short statements and endorsed the statements under oath, of those who elaborated the trading and business operations relating to clandestine income. These statements under oath were part of the record and continued to be so. They were never explained in any reasonable manner. Their probative value is undeniable; the occasion for making them arose because of the search and seizure that occurred and the seizure of various documents, etc. that pointed to undeclared income. In these circumstances, the assessee's argument that they could not be acted upon or given any weight is insubstantial and meritless. This court also notices that the decision in CIT Vs. Anil Bhatia 352 ITR 493 (Del) which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor stood examined by the AO in the original assessment proceedings which culminated in framing the order under section 143(3) of the Act dated 18.03.2013. The Ld. A.R. submitted that on the date of search the assessment has already attained finality and thus has not abated on the date of search. Therefore, any addition to be made in the assessment framed under section 143(3) read with section 153A of the Act has to be on the basis of incriminating material as found and seized during the course of search and not otherwise. The Ld. A.R. vehemently supported the order of Ld. CIT(A) on this ground that Ld. CIT(A) has accepted this legal issue that any addition in the assessment framed under section 143(3) read with section 153A can only be made on the basis of incriminating material seized during the course of search and thus deleted the addition to the extent of ₹ 22,32,00,000/-, however, strongly opposed the order of Ld. CIT(A) in treating the statement of Shri Rajesh Daftary recorded during the course of survey proceedings on oath that the said statement constituted an incriminating material. The Ld. A.R. contended that the AO has made the addition in respect of entire shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h could be construed as incriminating material found during the course of search. The Ld. Counsel drew the attention to the Bench to page No.64 to 83 the documents in the form of application for allotment of equity shares, payment details, copies of bank statements, audited annual accounts, memorandum of article of association and ITR of M/s. GSD Trading and Financial Services Pvt. Ltd. and also the details of the bank account from where the payments were made. The Ld. A.R. also submitted that in A.Y. 2010-11 the case of the investor M/s. GSD Trading and Financial Services Pvt. Ltd. was completed under section 143(3) and the investor had a net worth of ₹ 23.55 crores and investments of ₹ 321.77 crores which clearly proved the genuineness of the transaction. The Ld. A.R. finally summing up his arguments submitted that there is no evidence/material in the possession of the AO which is contrary to the material produced the during the original assessment proceedings or during the proceedings under section 153A of the Act. Finally, the Ld. A.R. submitted before the Bench that the addition as sustained by Ld. CIT(A) to the tune of ₹ 7,91,00,000/- qua investment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition qua investment by M/s. GSD Trading and Financial Services Pvt. Ltd. as the same is based upon incriminating material and the appeal of the assessee deserves dismissal. 9. We have heard the rival submissions of both the parties and perused the material on record including the impugned order and decisions cited by the Ld. A.R. The undisputed facts are that during the year the assessee raised share capital of ₹ 30,23,00,000/- comprising ₹ 2,41,84,000/- towards share capital and ₹ 27,81,16,000/- qua share premium which the assessee raised by issuing 24,84,400 equity shares of face value of ₹ 10/- at a premium of ₹ 115/- from 16 parties. The case of the assessee was done under scrutiny and the order was passed under section 143(3) dated 18.03.2013. During the course of the original assessment proceedings, the AO raised specific queries on this issue of share capital which was responded to by the assessee by filing the necessary details such as share application forms, bank statements, ITRs ,confirmations along with bank and financial statements of the investors. The assessee had also justified the issue of shares at premium by submitting valuatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading and Financial Services Pvt. Ltd. We observe that investigation wing of the department conducted a survey operation on M/s. GSD Trading and Financial Services Pvt. Ltd. and during the course of such survey a detailed statement of Shri Rajesh Daftary was recorded in relation to the investment made by M/s. GSD Trading and Financial Services Pvt. Ltd. under section 131(IA) of the Act on 28.01.2015. We have carefully perused the statement of Shri Rajesh Daftary and find that nowhere Shri Rajesh Daftary has stated anything about the investment by M/s. GSD Trading and Financial Services Pvt. Ltd. in the assessee company. He has only stated that the investment was made prior to taking over the said company as director/shareholder on 28.05.2010 when Shri Prakash Bagrecha was director/shareholder of the said company. We further find that it was never admitted by Shri Rajesh Daftary that he or the investor company M/s. GSD Trading and Financial Services Pvt. Ltd. is ever engaged in providing accommodation entries. In our opinion, the statement of Shri Rajesh Daftary recorded during the course of survey is not and can not be treated as incriminating material qua the investment in share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfirming the investment and by filing all the necessary details and thus the AO accepted the genuineness and creditworthiness of the transactions in the original assessment proceedings. We find merit in the submissions of the Ld. A.R. that amendment in section 68 covering the share capital is applicable from A.Y. 2013-14 and is not applicable to the year under consideration. The case of the assessee is supported by the various decisions of the Hon'ble Bombay High Court in the case of Pr. CIT Vs Apeak Infotech 88 taxmann.com 695 (Bom) and CIT Vs Gagandeep Infrastructure (P) Ltd.80 taxmann.com 272(Bom) .We, therefore, are of the view that assessee has satisfied three tests of capacity , identity and genuineness of the investor and has a very strong case and no addition is called for. 11. The appeal of the assessee is allowed. ITA No.1969/M/2019 (Revenue's appeal) 12. The only issue raised by the Revenue is against the deletion of addition of ₹ 22,32,00,000/- by Ld. CIT(A) as made by the AO in respect of share capital issued by the assessee from 15 shareholder on the ground that genuineness and creditworthiness of the parties were not proved. The facts of the case have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f share capital De hors the incriminating material found during the course of search. The Ld. A.R. submitted that this legal aspect/jurisdictional issue has not been challenged by the Department so far as investments made by 15 investors are concerned qua absence of incriminating material during search. The Ld. A.R. submitted that once it is established that there is no incriminating material no addition can be made while passing the order under section 153A of the Act and nothing would survive thereafter and therefore the ground raised by the Revenue is infructuous. Without prejudice the Ld. A.R. submitted that during the course of original assessment proceedings the assessee has filed all the necessary evidences about the identities of the investors, their confirmations and financial statements, ROC returns, application forms, ITRs to substantiate the genuineness of these transactions and creditworthiness of the investing entities during the original assessment proceedings as well as proceedings under section 153 of the Act. The Ld. A.R. submitted that in the original assessment proceedings, the AO even issued notices under section 133(6) to all 16 parties and called upon them to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome tax v/s Gangour Investment Ltd. 335 ITR 359 7. Commr. Of Income tax v/s Siri Ram Syal Hydro Power Private Limited 196Taxman 441 8. Comrnr. Of Income tax v/s HLT Finance Pvt. Ltd. 12 Taxmann.com 247 9. Commr, Of Income Tax, Central-Ill Vs Anshika Consultants (P) Ltd. 62 Taxmann.com 192 10.Commr. of Income tax v/s STL Extrusion P. Ltd. 333 ITR 269 11. Commr. Of Income tax v/s GP International Limited 325 ITR 25 12. Asst. Commr. Of Income tax v/s Venkateshwar Ispat (P) Ltd 319 ITR 393 13. Commr. Of Income Tax Vs Fair finvest Ltd. 44 taxmann.com 356 14. Commr. Of Income Tax, Bhopal (M.P.) Vs. Peoples General Hospital Ltd. 35 taxmann.com 444 15. Commr. Of Income Tax, Chennai Vs. Pranav Foundations Ltd. 51 taxmann.com 198 16. Principle Cornmr. Of Income Tax - 8 Vs. Softline Creations (P.) Ltd. 81 taxmann.corn 269 17. M/s Baba Bhoothnath Trade & Commerce v/s ITO ITA No 1494/Kol/2017 18. Asstt. Commr. Of Income Tax, Central Circle 13 Vs Adamine Construction (P) Ltd. 87 Taxmann.com 216 19. Flourish Builders & Developers Pvt Ltd v/s Dy. CIT 3342/DEL/2015 20. Jayneer infrapower & Multiventures P Ltd v/s Dy CIT 103 taxmann.com 118 21. Asstt. Commr. Of Income Tax Vs Bahubali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) read with section 143A of the Act de hors the incriminating material found during the course of search as the assessment has already been attained finality on the date of search. We find merit in the argument of the Ld. A.R. that since the Revenue has not challenged the jurisdictional issue, the appeal on merit becomes infructuous. Even on merit, the assessee has a very strong case in its favour as the assessee has filed all the evidences in the form of share application form, bank statements of the investor, audited annual statement confirmations, PAN etc. before the AO and even the notices issued under section 133(6) of the Act by the AO in order to carry out the verification independently were duly responded by the parties and filed all the necessary evidences to the satisfaction of the AO along with confirmation. Even in the assessment framed under section 143(3) the AO has examined these details in great depth the shares bought in the subsequent year and accepted these investments in the assessment framed under section 143(3) vide order dated 18.03.2013. Even in the proceedings under section 153A the assessee has filed all the necessary evidences before the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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