9911796707
TMI Blog2018 (1) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... t based on any incriminating material found during the course of the search. Revenue could not show any incriminating material, which was found during the course of the search on the basis of which above additions could have been made. It is a settled position of law that in an assessment made in pursuance to search in respective assessment years for which assessment proceedings were not abated, additions cannot be made de hors the incriminating materials found during the course of search. We, therefore, do not find any merit in these appeals of the Revenue. Accordingly, the appeals of Revenue for the assessment years 2006-07, 2007-08 and 2008-09 are dismissed. Bogus bill of husk - CIT(A) observed that in the assessment order the AO has not brought any incriminating material based on which the addition was made on account of bogus purchase of husk - No finding that the assessee has used coal in place of husk and obtained bogus bill of husk. No such material has been found during operation u/s 132 of the Act which even remotely suggests suppression of purchase of coal. CIT(A), therefore, observed that he was convinced that addition on account of inflated purchases has been made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hreevar Overseas Feeder Tie Up P. Ltd. Ganpati Vencom Pvt. Ltd Kamroop Viminay P. Ltd. Kshatriya Commodities Pvt. Ltd, Mansarovar Dealors P. Ltd. Mateshwari Mercantile Pvt. Ltd. Mysol Engineering Pvt. Ltd. Sanket Sales Pvt. Ltd. In case of following share applicants, the notices were returned unserved. Name Shreevar Overseas Nandan Merchantiles Pvt. Ltd. Kamroop Vinimay Pvt. Adishwar Nirman P. Ltd. Mansarovar Dealors P. Ltd. Daha Engg. & Credit Pvt. Ltd. Display Commercial Pvt. Ltd. Feeder Tie Up P. Ltd. Ganpati Vencom Pvt. Ltd. Kamroop Vinimay P. Ltd. Kshatriya Commodities Pvt. Ltd. Mansarovar Dealers P. Ltd. Mateshwari Mercantiles Pvt. Ltd. Mysol Engineering Pvt. Ltd. Sanket Sales Pvt. Ltd. On perusal of Balance Sheet of the share-holders of the assesses company, the AO found that these do not possess the credit worthiness to invest the amounts shown in their names. In fact, the inflow of share-application money into the books of assessee company has to be seen in the perspective of money-laundering through Share-capital route in which unaccounted money available with the promoters/directors/family members and their associates is routed back into the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its books is treated as undisclosed income charged to tax u/s 68 of the Act. 5. The AO was not convinced with the submission of the assessee and noted that the legal proposition based on the case laws cited (supra), is clear that the onus lies with the assessee to establish the identity, creditworthiness and genuineness of the cash creditors. The department does not have to establish that the said cash credit was routed through the assessee and ploughed back in its books of accounts. Therefore, the AO held that the assessee had failed to offer satisfactory explanation on the nature and source of the share application money credited in its books book of accounts for the relevant assessment year in question and hence he treated the same as undisclosed income of the assessee u/s 68 of the Act. The further held that the assessee had failed to discharge its onus in proving the identity, creditworthiness and genuineness of the share applicants and the inquiries conducted by this office also cements the findings that the identify and creditworthiness of the creditors were not established due to non-existence of their office or business premises on the given address and they were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur in connection with Income Tax proceedings taking place at Raipur. It is submitted that immediately prior to search, Appeal before CIT (Appeals) for A.Y. 2007-08 and preparation for case before ITAT was in progress. The date on Order of CIT (Appeals) for A.Y. 2007-08 is 27/07/2011 and the case before the Hon'ble ITAT for A.Y. 2006-07 was fixed for 17/10/2011. There were voluminous records of share application money received, and therefore, to prepare representation before the Hon'ble CIT (Appeals), Raipur as well as before the Hon'ble ITAT, Bilaspur Bench, the records were sent to Raipur for compilation. Therefore, the assessee submitted that it is not correct to say that the assessee has not kept the share records. It was submitted that share records were produced during assessment proceedings. It was argued that these records are compulsorily required to be kept as per the Companies Act. 8. The AR of the assessee further submitted that the AO made enquiries from some share applicants at the back of the assessee and a letter was filed on 04/03/2014 dated 28/02/2014 before the AO that in case of some companies the addresses have changed and in case of some companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no credit-worthiness of the applicant or the identity of the share applicant is in doubt. In the original assessment, the AO applied his mind and made the addition as above. 11. The addition of ₹ 2,00,00,000/- in A.Y. 2006-07 was deleted by the Hon'ble ITAT, as stated supra, and the addition of ₹ 42,50,000/- for A.Y. 2007-08 was deleted by CIT (Appeals). The AO made enquiry by sending letters to as many as 15 share applicants which have been returned un-served. It is seen that the appellant had submitted a letter before the AO on 04/03/2014 and informed about the change of address of various share applicants and change in name in some cases. It is seen that out of 15 share applicants mentioned at Page No. 8 & 9 of the Order, where notices were returned back, name of "Kamroop Vinimay Pvt. Ltd." and "Mansarovar Dealers Pvt. Ltd." have been mentioned twice by the AO. In case of "Feeder Tie-up Pvt. Ltd." and "Ganpati Vincom Pvt. Ltd." the name as well as address has changed as per the details furnished by the appellant. In the case of other share applicants, only the addresses have changed. It appears that notices w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his background, in my considered view, there is no scope and reason to take a contrary view than that taken by the then A.O without there being any documentary evidence against the appellant to demonstrate that the share application money was nothing but undisclosed income of the appellant. 14. It is an undisputed fact that the names, addresses and assessment particulars of the investors, certificate of registration from the ROC and bank statement of the applicants had been furnished by the appellant before the AO. It is further observed that the share application/capital money has been received by way of account payee cheques from the investors most of whom are companies and is duly reflected in the bank account of the appellant. I have perused the bank statements of the investors, their audited financial statements and confirmation for making such investments, which clearly establishes the factum of making investments. These facts are clearly establishing the identity of the investors and the genuineness of the impugned transactions. 15. It is observed from the records and assessment order that for the purpose of making addition as unexplained cash credits, the AO has heavily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial or evidence on record to prove that the said share capital money belongs to the appellant since no nexus has been established that the money for augmenting the investment in the business has flown from appellant's own money which is an essential pre-requisite for making addition in such cases. I am convinced that the case of the appellant is squarely covered by the decisions rendered by the Hon'ble Apex Court in the case of the CIT vs. Lovely Exports (P) Ltd. reported in 216 CTR 195 and the jurisdictional High Court viz. the Chhattisgarh High Court in the case of the ACIT vs. Venkateshwar Ispat (P) Ltd. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Commissioner of Income-tax v. Winstral Petrochemicals (P.) Ltd. [2011] 10taxmann.com 137 (Deihi) 5. In the case of Commissioner of Income-tax v. Arunananda Textiles (P.) Ltd. [2011] 15 iaxmann.com 226 (Kar.), 6. In the case of Commissioner of Income-tax v. Creative World Telefilms Ltd. [2011] 15 taxmann.com 183 (Bom.) 20. The A.O has relied upon the decision in CIT v. Nova Promoters & Finlease (P) Lid, [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 sham holders' register, share transfer register etc. are furnished to the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTL ONLINE 136 (DELHI); (c) Commissioner of Income-tax v. Tania Investments (P.) Ltd. IT Appeal No. 15 OF 2009, High 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-1 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 tax mann.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) Commissioner' of Income-tax v. VLS Foods (P.) Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years under consideration are that the AO in the assessment order has stated that the assessee company is a biomass based electricity producer in Chhattisgarh. It has generation capacity of 15 MW The assessee company claims that it employs fuels other that fossil fuels for generation of electricity. The company claims to be using Rice Husk as Biomass. The installed plant & machinery can be fired either by burning of rice husk or by burning of coal. Regulations require that the assessee should not utilize more than 15% coal to be categorized as biomass-based producer of electricity. Excess stock of coal at ₹ 9 Crores was found at the time of search which was admitted by the assessee. This evidence suggests that the assessee is using coal instead of husk in its power plant. The assessee has been using coal for generation of electricity and utilizing the bogus bills of husk purchase for the purpose of entry in the books of accounts. Enquiries conducted to trace the suppliers of husk during the course of search and seizure proved futile. Moreover a blank bill book printed in the name of an alleged husk supplier was seized from the residence of one of the directors. During the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock of coal offered at ₹ 4.50 crore in each A.Y. 2011-12 & 2012-13, presumption of bogus bills for purchase of husk, letter to supplier of husk returned in some cases, blank bill book of M/s Mittal Enterprises found at the residence of one of the director. The assessee further submitted that none of the reason mentioned by the AO supports the addition made by the AO and the AO misunderstood the stock of coal for trading purpose with that of coal for manufacturing. The assessee offered coal valued at ₹ 4.50 Crores each in assessment year 2011-12 & 2012-13 as below: Particulars A.Y. 2011-12 A.Y. 2012-13 Total (MT) Rom Coal 8,391.80 MT 19,673.06 MT 28064.86 Reject Coal 16,165.30 MT 4,288.64 MT 20453.93 48518.79 Value (Rs.) 4,50,00,000/- 4,50,00,000/- 9,00,00,000/- 14. With regard to the statement of Shri Rajendra Agrawal on 15th /24th June, 2011 wherein it is stated that the excess stock of ₹ 9 crores of coal pertains to the coal trading business and it was a trading stock. The assessee vehemently submitted that this stock was not related with stock of the coal found at other site in the factory premises weighing 6135.80 MT. It was explained that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Page No. 106 to 182, however, no cognizance is being taken as neither these were filed during assessment proceedings before the AO nor any prayer has been made to admit u/r 46A. The assessee further submitted that compilation produced at Page No. 19 & 20 of the order gives addresses and PAN of the suppliers. From the compilation it appears that some suppliers have confirmed the transactions, in some cases notices were not served and in some cases replies were not received. The assessee supplied the addresses as available on the record. The matter being old one and there may be change in addresses of the suppliers. The assessee has made payment to them for purchase of husk by cheque. The husk was consumed in the plant and power was generated. Hence, the assessee submitted that the addition for all the assessment years under consideration should be deleted. 17. The CIT(A) after considering the submissions of assessee deleted the additions made by the AO by observing as under :- 26. I have carefully gone through the assessment order and submissions of the appellant. It is seen that the AO has made lumpsum addition of ₹ 10 Lakh in each year on account of alleged bogus purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, does not support the contention of the A.O that the purchases have been inflated. Purchases have been made from number of suppliers as indicated at Page No. 19 & 20 of the assessment order. The A.O has not rebutted the submission of the appellant that the payments were made through banking channel. Accounts are audited and quantitative details with day to day production record have been maintained. No discrepancy has been observed in the production and consumption. It is noticed that the biomass status was available for about 50% of entire period of production. Power can be generated by coal fire or husk fire. When there is biomass status as per norms, the coal should not be more than 15%. It is seen that the excess stock of coal at ₹ 9 Crores was offered by the appellant as its income and it has been contended that the coal surrendered did not pertain to power generation but was meant for trading purpose and also sold subsequently. I am convinced that the surrender of excess stock of coal of ₹ 9 Crores has no relation to purchase of husk. There is no finding that appellant has used coal in place of husk and obtained bogus bill of husk. No such material has been fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtilizers Co. vs CIT 59 ITR 268 Madras. The ITAT Banglore bench in CIT vs Gajanand Traders (2006) 104 TTJ (Bang) 1030 observed that A.O. having not made out a case that the accounts of the assessee are incorrect or incomplete or that the method of accounting followed by it is not an accepted method, book results could not be rejected and addition could not be made on the ground that there was a fall in GP rate in the relevant year or that day-to-day stock register was not maintained. For rejection of accounts books, cogent reasons are to have been assigned by A.O. as held in Mahakushal Poultries vs CIT (2013) 21 TTJ 740 (MP). Hon'ble Patna High Court in Md. Umer vs CIT 101 ITR 525 and Hon'ble Guwahati High Court in Alluminium Industries Pvt. Ltd 80 Taxman 184 have held that once the profit could properly deduce from the method of accounting which have been regularly employed that is the end of the matter. The Hon'ble Jabalpur Bench of ITAT in ITO vs Kanha Construction Co. Pvt. Ltd reported in (2014) 23 ITJ 355 held that in absence of finding by the A.O. that profit cannot be deduced from the books of accounts maintained, rejection of books was not justified. 29. Looking t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the residence of one of the Directors, blank bill book printed in the name of an alleged husk supplier, namely, M/s Mittal Traders was found. Further, during the course of search, the assessee had made disclosure of ₹ 9 crores on account of excess stock of coal, based on these, the AO made estimated addition of ₹ 10,00,000/- on account of bogus purchases made by the assessee for husk. 25. The AR, on the other hand, supported the order of CIT(A). 26. We find that the CIT(A) has observed that in the assessment order the AO has not brought any incriminating material based on which the addition of ₹ 10,00,000/- was made on account of bogus purchase of husk. The CIT(A) has further observed that the AO has not rebutted the submission of the assessee that the payments for purchase of husk were made through banking channels and accounts were audited and quantitative details with day to day production record were maintained. No discrepancy has been observed in the production and consumption. 27. The DR could not bring any positive material on record to controvert the above finding of the CIT(A). 28. The CIT(A) has also observed that the biomass status was available ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment for the assessment years 2006-07, 2007-08 and 2008-09 had not abated and, therefore, as no material was brought on record by the Revenue to show that the additions were made in an order passed u/s.153A of the Act on the basis of any seized material, the additions made were not sustainable, thus, we allow these grounds of cross objections of the assessee. Accordingly, Ground No.1 in assessment years 2006-07, 2007-08 & 2008-09 of the cross objections filed by the assessee are allowed. 33. In the assessment years 2009-10, 2010-11, 2011-12 and 2012-13, the grounds of cross objections taken by the assessee are in support of the order of the CIT(A). As there is no grievance of the assessee against the order of the CIT(A), the cross objections filed by the assessee for the above assessment years under consideration are infructuous and accordingly dismissed. 34. In the result, cross objections filed by the assessee for assessment years 2006-07, 2007-08 and 2008-09 are allowed and cross objections filed for the assessment years 2009-10, 2010-11, 2011-12 and 2012-13 are dismissed. 35. In the result, appeals filed by Revenue for all the assessment years and cross objections filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
