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TMI Blog2021 (11) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... from a common order of CIT(A), all the captioned Revenue's appeals in respect of the captioned assessee have been heard together and are being disposed of by this common order. 3. As per its grounds of appeal, the Revenue has broadly challenged the relief granted by the CIT(A) on; (1) additions of Rs. 1,25,00,000/- (A.Y. 2006-07), Rs. 3,75,00,000/- (A.Y. 2009-10), (3) Rs. 5,45,00,000/- (A.Y.2010-11) & Rs. 70,00,000/- (A.Y. 2011-12) carried out by the AO under the provisions of Section 68 of the Act in respect of receipt of share application/share capital. 4. As per its cross objections for the various assessment years in question spanning over A.Ys. 2006-07, 2009-10 to 2011-12, the assessee has assailed the order of CIT(A) on the point of jurisdiction and primarily raised a legal objection that the jurisdiction of the AO gets ousted under s.153A of the Act in so far as the addition unconnected to the incriminating material in respect of unabated and concluded assessments concerning A.Ys. 2006-07 to 2009-10 are concerned. Additionally, the assessee has also simultaneously supported the action of the CIT(A) in reversing the additions made by the AO while adjudicating on merits. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards allegation of the A. O. regarding non- maintenance of Statutory Records, the appellant was asked to furnish the copy of statements recorded during the course of proceedings u/ s 132, it has been submitted by the appellant that the statement of none of the appellant company' s representative was recorded and it has also been submitted by the appellant that none of the Officer of Search Team ever visited the Registered Office premises of the appellant company. With a view to ascertain the facts, during the course of appellate proceedings of other companies covered in the Mahamaya Group of cases and in appeal before the undersigned, namely (1) Mahamaya Steel Industries Limited, (2) Abhishek Steel Industries Limited, (3) Devi Iron & Power Private Limited and (4) Shree Shyam Sponge & Power Limited, were asked to furnish copy of statements of all the persons recorded by the Search Team during the proceedings u/ s 132. The statements were furnished by the said companies. I have carefully gone through all the statements of all the persons recorded during the proceedings u/ s 132 on 21/ 22. 06. 2011. I am in agreement with the submissions of the appellant company that no statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque, the appellant submitted the ledger of said company to substantiate its submission. I have verified the factum of refund from the ledger placed in Page No. 15 of Volume 3 of the Paper book, I am convinced that the appellant did refund the said sum to Escort Fivnest Private Limited was refunded in the F. Y 2012- 13. I find that in Commissioner of Income- tax, Rajkot- I v. Ayachi Chandrashekhar Narsangji. [2014] 42 taxmann. com 251 (Gujarat), it was held that " It is required to note that as such an amount of Rs. 1,00,00,000 vide cheque No. 102110 and an amount of Rs. 60 lakhs vide cheque No. 102111 was given to the assessee and out of the total loan of Rs. 1.60 crores, Rs. 15 lakhs vide cheque no. 196107 was repaid and therefore, an amount of Rs. 1,45,00,000 remained outstanding to be paid to IA. It has also come on record that the said loan amount has been repaid by the assessee to ' IA' in the immediately next year and the Department had accepted the repayment of loan without probing into it. In the aforesaid facts and circumstances of the case, when the Tribunal has held that the matter is not required to be remanded as no other view would be possible, there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to the period covered under the present search assessment proceedings, therefore, even assuming without accepting the contention of the A. O., no undisclosed income can be added in the present search assessment proceedings as the same are beyond the period covered under the present search assessment proceedings. 5.4 It is also seen that the appellant was assessed in the past and case of assessment year 2006- 07 and 2007- 08 was under scrutiny assessment u/ s 143(3) and in the said assessment proceedings, the addition to share application/share capital was duly accepted as genuine. 5.5 It is seen that the addition to share application and capital was duly accepted in the scrutiny assessment proceedings, the present action of the A. O is not culminating from any specific finding against the appellant that it was a beneficiary of any racket which has been unearthed as a result of search proceedings nor has the A. O brought on record any other evidence to indicate that the appellant did make undisclosed income and such evidence came on the surface as a result of search proceedings. The A. O has not rebutted the details of tangible net worth submitted by the appellant to demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions distinguishing the facts, I am convinced with the explanation of the appellant that the decisions relied upon by the A. O are not applicable in the facts of the present case as there is nothing on record which can indicate that the receipt of share application money was by way of accommodation entries only. It is also not the case of the A. O that the investors have accepted by way of statement that the sums paid to the appellant was in fact received from the appellant and investors merely routed the undisclosed income of the appellant through money laundering process in the form of share application money. On the contrary, the A. O himself has stated in the assessment order that the investors have sent confirmatory letters, I have gone through the confirmatory letters, it is seen that the letters were sent through registered/ speed post which cannot be said to be unauthentic mode, secondly, the investors have confirmed having made the investment by way of affidavits which are duly notarized, the investors have also furnished the copies of share application forms, their audited financial statements, ITR, bank statement. In the backdrop of these facts and documentary evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 319 ITR 393 for the reason that the facts in such cases are entirely same, particularly, when no differentiation could be effectively demonstrated and brought on to the record by the A. O. The submissions of the AO that the decision of the Hon'ble Supreme Court in the case of Lovely Exports (P) Limited was rendered in the light of different facts inasmuch as the said judgement was rendered by the Hon'ble Supreme Court in the context of public issue, is devoid of merit because the decision was rendered by the Hon'ble Supreme Court in the case of Lovely Exports (P) Ltd. which is a Private Limited Company and which cannot bring public issue of shares. I find that the investments made by the share applicants were duly reflected in the audited financial statements of the corporate investors. It is a settled principle of law that reason for suspicion, however grave it may be, cannot be a basis for holding adversity against appellant. 5.10 The Assessing Officer has disregarded the documentary evidences adduced by the appellant such as confirmation from the share applicants, their PAN, certificate of incorporation of subscriber companies, records of the Registrars of Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish Investment (P.) Ltd. [ 2010] 194 TAXMAN 43 (DELHI); d) Commissioner of Income- tax v. Winstral Petrochemicals (P.) Ltd. [ 2011] 10 taxmann. com 137 (Delhi); e) Commissioner of Income- tax v. Arunananda Textiles (P.) Ltd. [ 2011] 15 taxmann. com 226 (Kar.); f) Commissioner of Income- tax v. Creative World Telefilms Ltd. [ 2011] 15 taxmann. com 183 (Bom.); 5.13 The A. O has relied upon the decision in CIT v. Nova Promoters & Finlease (P) Ltd. [ 2012] 342 ITR 169/ 206 Taxman 207/ 18 taxmann. com 217 (Delhi). However, on going through the said decision in Nova Promoters & Finlease (P) Ltd. (supra) I find that the facts are clearly distinguishable. In fact, in Nova Promoters & Finlease (P) Ltd. (supra) itself the Hon'ble Delhi High Court has observed, in the context of Lovely Exports (P) Ltd. (supra), as under:- " The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0] 2 DTLONLINE 136 (DELHI); (c) Commissioner of Income- tax v. Tania Investments (P.) Ltd. IT Appeal No. 15 OF 2009, Hi HHHigh Court of Mumbai; (d) Bhav Shakti Steel Mines (P.) Ltd. v. Commissioner of Income- tax [ 2009] 179 TAXMAN 25 (DELHI); (e) Commissioner of Income- tax v. Samir Bio- Tech (P.) Ltd. [ 2010] 325 ITR 294 (DELHI) (f) Commissioner of Income- tax- I v. Micro Melt (P.) Ltd. [ 2009] 177 TAXMAN 35 (GUJ.) (g) Commissioner of Income- tax- V v. Real Time Marketing (P.) Ltd. [ 2008] 173 TAXMAN 41 (DELHI) (h) Assistant Commissioner of Income- tax v. Mansarovar Urban Co- Operative Bank Ltd. [ 2009] 124 TTJ 269 (LUCKNOW); (i) Commissioner of Income- tax - IV v. Empire Buildtech (P.) Ltd. [ 2014] 43 taxmann. com 269 (Delhi); (j) Commissioner of Income- tax v. Mulberry Silk International Ltd. [ 2012] 19 taxmann. com 31 (Kar.); (k) Commissioner of Income- tax- III v. Nilchem Capital Ltd. [ 2012] 18 taxmann. com 350 (Guj.); (l) Commissioner of Income- tax v. Jay Dee Securities & Finance Ltd. [ 2013] 32 taxmann. com 91 (Allahabad); (m) Commissioner of Income- tax, Delhi- II v. Kinetic Capital Finance Ltd. [ 2011] 14 taxmann. com 150 (Delhi); (n) Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he CIT(A). 11. The Assessee, on the other hand, has also filed cross objections challenging the very legitimacy of additions/ disallowances dehors any reference to incriminating documents in unabated assessments i.e. AY 2006-07 to AY 2009-10. 12. When the matter was called for hearing, the learned CIT-DR for the Revenue, at the outset, strongly relied upon the factual matrix discussed in assessment order for various assessment years in question. However, the view of the CIT(A) on the legal objection of the Assessee was defended vociferously. It was contended by the Revenue that discovery of any incriminating document is not a condition precedent to make additions or disallowance under s.153A of the Act. It was thus contended that the AO and the CIT(A) rightly observed that the issue of warrant of search and seizure under s.132 of the Act sufficiently empowers the AO to initiate the proceedings under s.153A of the Act and to make all consequent additions regardless of presence of incriminating documents or otherwise. It was submitted that the only condition for initiation of proceedings under s.153A of the Act is occurrence of a valid search under s.132 of the Act. It was reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years in question were either found or seized which can be branded to be incriminating in nature indicating presence of any undisclosed income by way of share application in question. The cash found in search was meager having regard to the scale of operations. The documents found and seized were of routine nature maintained in the ordinary course of business which naturally will be found in the business premises. The documents found relates to the entries already recorded in the books. Hence, the assessments for AYs 2006-07 to 2009-10 which stood concluded and remained unabated is barred by principles of finality and could not be disturbed by the AO in the absence of the incriminating material. 13.2 To buttress the legal position that presence of incriminating material discovered in the course of search as a sine qua non for additions/disallowances in respect of unabated assessment, the learned counsel relied upon the decision rendered in the case of Kabul Chawla (2016) 380 ITR 573 (Del); Pr.CIT vs. Meeta Gutgutia (2018) 96 taxmann.com 468 (SC) and a long series of decisions governing the field. In the light of judicial view, it was thus asserted that in the absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled several documentary evidences of subscribers before the AO to support the nature and source of share application money: (a) PAN, Address, Name (b) COI, MOA, AOA (C) Audited Financial Statement (d) Income Tax Return (e) Bank Statement (f) Share Application Form (g) Payment received through banking channel (h) Details of payment received 13.4 Moving further, the learned counsel adverted to page nos. 243-245 of the paper book and submitted that the assessee has made several pro-active requests before the AO during the assessment proceedings some of which are noted hereunder as referred; "(a) To provide the assessee company with the copy of all the letters sent by the Ld. AO to the investors/share applicants regarding investment made in the shares of assessee company. (b) The assessee company may kindly be appraised with the cases i. e. the name of the company on whom letter sent by the Ld. AO remained un- served. (c) The assessee company may kindly be made known with the reason communicated by the Postal Department behind non- service of the letters sent by the Ld. AO. (d) The assessee company may also be confronted with the enquiry conducted by the Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed the legal ground of jurisdiction by observing as under: "8. I have carefully gone through the assessment order and submissions of the appellant. Where a search has been initiated u/ s 132 of the Act, the A. O. is entitled to issue notice for six assessment years immediately preceding the year in which search has been initiated. As such, the assessment for those six assessment years stands reopened. Once the assessment is reopened, the A. O. has full powers to assess the income which has escaped, whether found as a result of search or otherwise. Accordingly, the additions made by the A. O are within the powers assigned to him u/ s 153A and for this reason, this ground of appeal is hereby dismissed." 14.3 We have examined the legal objection on jurisdiction to make additions dehors reference to any incriminating material found in the course of search. The issue is no longer res integra and answered in favour of the assessee by large number of judicial precedents. As consistently echoed by the Hon'ble Courts of different jurisdiction, the scope of search assessments under s.153A of the Act in respect of concluded and unabated assessments is narrower in its sweep and restr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act that additions should be made strictly on the basis of evidence found during the course of search was not approved. The Hon'ble Gujarat High Court analyzed the position of law and took note of several judicial precedents and concluded that completed assessments can be interfered with by the AO while making the assessment under s.153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents etc. The Hon'ble Gujarat High Court noted that the trigger point for exercise of powers under s.153A of the Act is a valid search under s.132 of the Act or a requisition under s.132A of the Act. Once a search or requisition is made, the mandate is cast upon the AO to issue notice under s.153A of the Act and complete the assessment of 6 assessment years. The Hon'ble Gujarat High Court took note of the fact that object of scheme legislated for assessment in search cases is to bring to tax the undisclosed income which is found in the course of or pursuant to search or requisition and therefore additions/disallowances must be linked with search/requisition. It was noted by the Hon'ble Court that additions made on the basis of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation. We are governed by the schematic interpretation given to provisions of Section 153A of the Act by different Hon'ble Courts. In the light of judicial fiat reading down the scope and spectrum of assessment under s.153A of the Act in narrower compass, the position of law is explicitly clear. In the absence of any connection with the incriminating material unearthed in search proceedings of assessee, additions in respect of concluded assessment i.e. AYs. 2006-07 & 2009-10 in instant appeals, are not permissible in law. The burden of proof towards existence of undisclosed income discovered as a result of search is on the Revenue. No evidence has been referred to by AO or brought on record as claimed to be found at search of assessee to suggest existence of undisclosed income as perceived by the AO. The Revenue has failed to rebut the factual assertions made on behalf of the assessee towards non-discovery of incriminating material at the time of drastic action of search on assessee and reference thereto in assessment order. There is nothing on record that information contained in seized documents as per list of inventory in panchnama, were not recorded or reflected in the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the issue of share application money as summarized hereunder: " The A. O. did not pay any heed to the requests seeking supply of results of inquiry conducted if any for arriving at such conclusions. Furthermore, the Ld. ARs pointed out that assessments in the case of promoters/ directors and family members were made in most of the cases but no such view even to support his own passing remarks was offered. Detailed explanations were submitted with respect to the loose papers seized and not even a single document out of it relate to or suggest that any undisclosed income of these persons has been routed back in the form of share application money. (Para 4. 4 on page No. 7) The present action of the A. O is not culminating from any specific finding against the appellant that it was a beneficiary of any racket which has been unearthed as a result of search proceedings nor has the A. O brought on record any other evidence to indicate that the appellant did make undisclosed income and such evidence came on the surface as a result of search proceedings. In this background, in my considered view, there is no scope and reason to take a contrary view than that taken by the then A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts Finvest Pvt. Ltd.' for subscription in Pref. Share Capital. The CIT(A) essentially noted that a substantial part of application money has been received from Escorts (a group co.) which was subsequently refunded in FY 2012-13. The adverse inference drawn by the AO was found by the CIT(A) to be unsubstantiated and in the realm of suspicion, surmises and conjectures. On legal position, the CIT(A) has referred to large number of judicial pronouncements. 17.4 As pointed out, the share application money was refunded in A.Y. 2012-13 through banking channel. The Judicial precedents in CIT vs. Karaj Singh 203 Taxman 218 (P&H); Smt. Panna Devi Chowdhary vs CIT (1994) 208 ITR 849 (Bom.) & CIT vs. Ayachi Chandrashekhar Narsangji 42 Taxmann.com 251 (Guj.) have endorsed the view that where the amount stood repaid and accepted by the deptt., no addition under S. 68 is warranted. 18. It may also be pertinent to briefly deal with the arguments advanced on behalf of the Revenue in the light of decision of the Hon'ble Supreme Court in PCIT vs. NRA Iron & Steel P. Ltd. 412 ITR 161 (SC). The facts in NRA case were gross and peculiar and hardly bears any resemblance with the tell-tale facts of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The share applicant also offered for personal appearance before the AO and to give statement on oath before the AO which request however was not acted upon by AO. This apart, an affidavit was filed by the subscriber stating factum of investment. In short, it is asserted that the primary onus was discharged to explain the nature and source of the money received. Further, it is contended that no legal obligation is prescribed upon assessee in law to prove the 'source of source' of such receipts in view of the prospective insertion of proviso to s.68 of the Act from AY 2013-14 foisting such obligations. A reference has been made to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt. Ltd. 80 taxmann.com 272 (Bom.) in this regard. Besides, without prejudice to every attempt made before the AO to prove the bonafides to the hilt being a group company, a reference was also made to the decision of Lovely Exports Pvt. Ltd. 319 ITR 5 (SC) wherein it was held that in the case of alleged bogus share holders, the department is free to proceed to reopen the individual assessments of the subscribers in accordance with law. Reliance was placed on mul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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