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TMI Blog2021 (11) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... rs are the undisclosed income of the assessee deposited in those bank accounts and, therefore, the receipt of share application from the aforesaid share applicants could not be assessed as a deemed income of the assessee u/s.68 - We find that all transactions are from the regular banking channel verifiable from the bank account of the assessee as well as the bank accounts of the share applicants It is not a case that the assessee had filed merely a confirmatory letters of share applicants but it is a case that the assessee had filed affidavit of the director, certification of incorporation of the share applicants, full particulars of directors of the share applicant companies, bank account of the share applicants, PAN of share applicants, tax returns of the share applicants, audited final accounts i.e. balance sheet profit loss account of the share applicants. All these documents proved the identity of the share applicants, creditworthiness of the share applicants and genuineness of the transactions - We also find that the assessee s case is on strong footing as by the Finance Act, 2012, the provision for source of source was inserted w.e.f. 1.4.2013 but the present matter p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which the identity, genuineness and creditworthiness could not be proved by the assessee to the satisfaction of the assessing officer during the assessment proceedings. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date. The appeal is finally heard for disposal.). The assessee has raised following grounds of appeal in IT(SS)A No.90/Ind/2020: 1. That on the facts and in the circumstance of the case, the decision of the learned lower authorities is contrary to law, materially incurred and unsustainable in law as well as facts. And that all the adverse findings recorded therein are opposed to facts, equity, and law. 2. That on the facts and in the circumstances of the case and in law the initiation of proceedings u/s 153C of the IT Act is without jurisdiction and the issue of notice do not satisfy the judicial requirements of the law and, therefore, the assessment is bad in law and without jurisdiction hence the same be kindly cancelled. 3. That on the facts and in the circumstances of the case and in law the Learned lower authorities does not considered the evidences and documents furnished in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing aggrieved, the assessee approached the ld. CIT(A) and ld. CIT(A) quashed the assessment on legal grounds. Now, the Revenue is in appeal before this Tribunal. 3. Before us, ld. CIT-DR defended the order of the Assessing Officer and submitted that since the assessee failed to offer satisfactory explanation in respect of the nature and source of the share application money credited in the books of account, the Assessing Officer was justified in making addition on account of undisclosed income u/s 68 of the I.T. Act. 4. Per contra, ld. Counsel for the assessee reiterating the submissions made before Revenue Authorities relied upon the order of the ld. CIT(A). 5. We have heard rival contentions of both the parties and perused material available on record. We find that before the Ld. Assessing Officer, the requisite details were filed by the assessee which included the confirmations, share application forms, affidavits of the Director, Bank statement, copy of Pan Card and balance sheets of the company. However, we find that the ld. CIT(A), having discussed the facts in detail in the light of the judicial pronouncements, quashed the assessment observing that that no sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... option but to respectfully follow the view, that in search cases recording of satisfaction by both the AOs. i.e. the AO of searched person and AO. of the assessee before issuing notice u/s 153C is a sinequa-non and in absence of the same proceedings u/s 153C are bad-in-low. Having decided that issue of notice cts 153C was without legal jurisdiction and consequently assessment orders passed u/s 153C r.w.s 143(3) ordered to be quashed, the additions made in the said assessment order are not sustainable as a matter of consequence. In view of this, ground # 2 3 and additional grounds #1 2 are hereby allowed. Ground # 4 raised by appellant' pertains to alternative plea of the appellant that additions made u/s 68 of the Act are also bad in law because in the course of search, no cogent material or incriminating material was found which suggested that the share application money represents unaccounted income of the assessee. Appellant has placed reliance on several case laws in support of this proposition that regular items of additions cannot be made in proceedings u/s 153C of the Act in absence of incriminating material. There are numerous case laws which supports this pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .153A 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. Decision of Kabul Chawla (Supra) has been followed in subsequent decisions in the cases of CIT V Is. Mahesh Kumar Gupta 2016- T10L-2994-HC-Del and CIT-9 V Is. Ram Avtar Verma in ITA No. 61/2017 62/2017 Dtd. 7.02.2017 and Pr.CIT vis Meeta Gutgutia in tTA No. 306/2017 dt.2S.0S.2017 (Del). In the case of Pr.CIT V Is, Meeta Gutgutia (supra) after considering a catena of judgments on the scope of search assessments u/s.153A, Hon'ble Delhi High Court has held that Section 153A of the Act is titled Assessment in case of search or requisition . It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to reopen at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application money from different concerns-Accordingly, show cause notice was issued requiring it to prove identity and creditworthiness of parties as well as genuineness of those transactions and in response to same assesse filed only share application forms-AO completed assessment on account of unexplained cash credit u/s 68 vide his Order passed u/s 153C r. w.s. section 143(3)-c/T(A), vide impugned Order dismissed appeal of osseseee=Assessee claimed that, CIT(A) had erred on facts and in law in confirming assessment of appel/ant passed without satisfying substantive and procedural requirements u/s 153C and CIT(A) erred in confirming additions which were not based on incriminating material found and seized during course of search-Assessee chal/enged assumption of jurisdiction u/s 153C besides scope of assessment u/s 153A/153CHeld, High Court upheld assumption of jurisdiction u/s 153C on account very compelling specific facts evidencing that documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income-Confessional statement that assets/document belonged to person in whose case action u/s 153C was taken was made by dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectfully following the binding precedent on this issue, in absence of any incriminating material found during the search and seizure operation and the impunged additions being purely based on material already available on record, additions of regular nature are not sustainable in the eyes of law and hence deserves to be deleted. Hence, on this count also additions of ₹ 1,00,00,000/- ₹ 68,00,000/- and ₹ 2,03,50,000/- made in A Y 2009-10, 2010- 11 2011- 12 respectively are directed to be deleted. Ground of appeal # 4 of all the appeals are allowed. 6. On consideration of above facts, we find that before the Ld. CIT(A) it was submitted that no satisfaction was recorded either in the case of the searched person or in the case of the assessee. It was also submitted that inspite of the repeated requests, the AO did not supply the certified copy of the satisfaction note. We find that the fact that no satisfaction was recorded either in the case of the searched person or in the case of the assessee has been confirmed by the Ld AO in the remand report dated 04/05/2018. Even in the reasons recorded for issuance of notice, there is no allegation about any undisclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elay in filing the appeal is due to country-wide lockdowns imposed by the government in wake of Covid-19 outbreak and taking cognizance of the same the government had introduced the taxation and other laws (Relaxation and Amendment of Certain Provisions) Act 2020 in order to relax/extend the statutory timelines for various compliance under various laws including the Income Tax Act 1961. Prayer was made to condone the delay. Ld. DR opposed the request. We, however, under the given facts and circumstances of the case, are satisfied with the reason giving rise to delay in filing the instant appeal. We condone the delay and admit the appeal for adjudication. Ground nos.1 2 were not pressed, therefore, same are dismissed as not pressed. So far as ground nos.3 4 relating to addition of ₹ 2,41,25,000/- made u/s 68 are concerned, the brief facts of the case as culled out from the records are that the assessee is a Private Limited Company engaged in the business of distribution work of MPMKVV, Pole factory and project work under the RGGSY scheme. A search action u/s 132 of the Act was conducted at various premises of the concern/business associates of Sagar Group on 21.10.2011. Du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi Nagar, Delhi 110092 AACCC7553R 5000000 (1) Share application form. (2) Confirmation letter from the company (3) Board Resolution (4) Receipt of share certificate (5) Affidavit of director (6) Bank statement of the company (7) Copy of Income Tax Return (8) Copy of audited final accounts (Balance sheer, P L A/c etc.). (9) Certification of incorporation (10) Memorandum Articles of Associations of the company. 2. R.J.Febtax Pvt Ltd 1/42, Gali No. 04, Vishwas Nagar, Delhi 110032 AADCR3947D 5000000 3. B.G.R. Fabrication 30/99A, Vishwas Nagar, Shahadara, Delhi 110032 AABCB8092K 5000000 4 Czar Hotel Pvt Ltd A-115, Bakil Chanmbers, Shakarpur, Delhi 110092. AAECC00898N 5000000 5. A.A. Ansari Plot No. 62-A, Hajrat Nizamuddin Colony, Bhopal. AAUPA6646E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. Dinesh Kumar Mudiya C-9, Surendra vihar, Bag Mugalia, Bhopal. ABIPM8184E 50000 (1) Form No. 16 19. Dr. Manoj Sharma 231-D, LIG, Nehru Nagar, Bhopal. AZOPS2709P 25000 (1) Form No. 16 20. Dr. N.K. Agarwal Dr. No. F-1, Staff Quarter SIRTS Campus, Ayodhya Bye Pass Road, Bhopal. AFCPA0841A 50000 (1) Form No. 16 21. Dr. R.B. Goswami 44, Kakda Abhinav Homes, Bhopal. AGWPG9556H 25000 (1) Form No. 16 22. Gaurav Goyanar D-132, New Minal residency, Bhopal. AQEPG1535C 25000 (1) Form No. 16 23. Jainendra Jain 22, Aakriti Garden, Nehru Nagar, Bhopal. ADYPJ9662J 25000 (1) Form No. 16 24. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 (1) Form No. 16 37. Sanjeev Sharma 99, BDA Complex, (-A, Saket Nagar, Bhopal. 50000 (1) Form No. 16 38. Sharad Salunke 188-A Park No.3, Panchwati, Airport Road, Bhopal. DHFPS8538Q 25000 (1) Form No. 16 39. Sheetal Singh B-6, Windsor, Narela Shankari, Pipalani, Huzur,. Bhopal. BHHPS03655B 25000 (1) Form No. 16 40. Sonal Sharma H.No. 7, Geetganesh Villas, Ayodhya Bye Pass Road, Bhopal. 25000 (1) Form No. 16 41. Sukhawant Singh B-34, Sagar Avenue, Ayodhya Bye Pass Road, Bhopal. CJYPS0404D 25000 (1) Form No. 16 42. Suresh Chandra Bhageria B-20, Alkapuri, Habibganj, Bhopal. 50000 (1) Form No. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is being submitted that the said address was the old address of the said company, the company had changed the address and the appellant had no knowledge of it, that is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 425 of paper book. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 2 Happening Motors (P) Ltd. Baar Baar Janne par Tala Band Mila It is submitted that this does not mean that the company does not exists at the said address. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 3 White Hat IT Services (P) Ltd. No Such Person It is being submitted that the said address was the old address of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. 4 Acumen Paper Binder No Such firm at such address It is submitted that the version of the inspector is not correct because MCA site which is a government record, shows that the company is active and be present at the said address, copy of the data downloaded from the MCA site, copy of the same is attached at page no 424 of paper book. 5 R.J. Febtex (P) Ltd. No Such firm at such address 6 Star Vision Media (P) Ltd. No Such firm at such address Address of the said party is correct as D-25 Laxmi Nagar, Delhi - 110092 and which is evident from the data downloaded from the MCA site, copy of the same is attached at page no 427 of paper book. 7 Shri Balaji Sainath Buildwell (P) Ltd. Reply not received till date This shows that the company existed at that place and the summons was properly delivered. 8 Bhagirathi Industries Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said address but it appears that the said person must have gone to the new address. The remark left shows that the person exists, but for some other reason left the premises. 16 Mayank Trivedi Left It is being submitted that the said person was present at the said address but it appears that the said person must have gone to the new address. The remark left shows that the person exists, but for some other reason left the premises. 17 Ragho Ji Gupta Reply not received till date This shows that the person existed at that place and the summons was properly delivered. Comments on Inspectors Report Sn Name of Company Comments of the Inspector Reply of Appellant 1 Bhagirathi Industries Ltd. Address of this company as per bank record is different from the address given by the Sagar Group. Both the addresses were verified. Given Office 201 belongs to Mr. Arun Kumar Jain CA c/o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Blue Star Impex (P) Ltd. No Such premises at the given address. Could not locate due improper address The assessee had no transaction with this company 6 Happening Motors (P) Ltd. Could not locate due to incomplete address. The assessee provided complete address and It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 7 White Hat IT Services (P) Ltd. No Such premises at the given address This shows that the notice was sent to the assessee served upon it, but there was a refusal to accept. The refusal was due to the reason that the company has changed the address and shifted to the new address, which is evident from the MCA record which is placed at page no. 432. 8 Shiv Om Sales Corp. Could not locate due to incomplete address. The asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen it could be served but if the summon issued in the case of non-living human being, then it is not possible to serve because the neighbors or nearby person does not know the trade name of the person who happens to be a director of the company. In such circumstances, the A.O. is wrong and not justified in holding that some of the share applicants did not found existed at the given address. We find that the income tax Inspector also in his report said that he visited the commercial complexes and there are many offices and shops and then he came to know from persons that there are no such companies. However, learned Counsel for the assessee submitted that the Inspector did not mention in his report that who was the person who gave this information. No identification of the person was given in his report. There is no statement of such person. The report of Inspector shows that he has only completed the rituals of the verification and, therefore, such report is not a reliable piece of evidence. We find that the Assessing Officer noted that he called the bank accounts of the investor companies directly for verification and on that basis he noted that the companies are not found involv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 348 (SC) wherein the Hon ble Court held that Strong suspicion, strange coincidence and grave doubts cannot take the place of legal proof. We find that the A.O. in his order has given the names of individual share applicants. However, the learned Counsel for the assessee explained that these persons are individual and due to fear psychosis, they were not prepared to come along the assessee before the A.O. and, therefore, at the request of the assessee, the summons were issued. The said summons were also duly served upon such persons but it appears that despite the summons, they did not appear and due to this reason, the A.O. has made the addition. But, if the person did not attend before the A.O. then the assessee should not be blamed and no addition on that basis would be justified as service of the summons, positively proves the identity of the person as per ratio laid down by the the Hon ble Allahabad High Court in the case of Nathuram Prechand Vs. CIT reported in 49 ITR 561 (All) wherein it was held that if despite the service of summon u/s.131, the person did not attend before the A.O. then the assessee should not be blamed and no addition on that basis would be justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings in case of assessee nor was he examined in presence of assessee company nor was he confronted with the documents of contemporary period showing investment in shares made by those five companies through regular banking channel. Therefore, the inference drawn by AO was not correct. The CIT(A) has already taken a recourse for taking action against the respective shareholders as the AO was directed to take necessary action against the purchaser company for such investment in purchase of shares.-CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR (SC) 308, CIT vs. Divine Leasing Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del), CIT vs. Shree Barkha Synthetics Ltd. (2003) 182 CTR (Raj) 175, Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432, CIT vs. Steller Investment Ltd. (1991) 99 CTR (Del) 40 : (1991) 192 ITR 287 (Del) and CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 : (2001) 251 ITR 263 (SC) relied on. (Para 9) There is a difference between cash creditor and shareholder. In case of cash creditor, the cash creditor has right to demand the money back from the assessee. However, in case of shareholder, there is no liability of the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in case of CIT Vs, Value Capital Service Pvt. Ltd 307 ITR 334 (Del) held : The court that case held that the additional burden was on the department to show that even if share applicants did not have the means to make investments, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of assessee u/s.68 of the I.T. Act. 15. Hon ble Jurisdictional MP High Court in case of CIT Vs. Peoples General Hospital Ltd. (2013) 356 ITR 65 held : Income-Cash credit-Share application money-Genuineness of transaction and creditworthiness of creditor-Discharge of burden of proof by assessee, effect of-AO observed that company A had made share subscription to capital of assessee-AO doubted creditworthiness of A and directed addition of amount of share subscription provided by A to assessee-CIT(A) and tribunal deleted addition made by AO-Held, if identity of person providing share application money is established then burden was not on assessee to prove creditworthiness of said person-Company A was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es regarding this have been brought on record by the AO. 17. Hon ble Delhi High Court in case of CIT Vs. Winstral Petrochemicals (P) Ltd (2011) 330 ITR 603 (Del) held : It has not been disputed that the share application money was received by the assessee company by way of account payee cheques, through normal banking channels. It is not the case of the Revenue that the payment of share application money was not made from the bank account of the applicant companies. Admittedly, copies of application for allotment of shares were also provided to the AO. It is not the case of the Revenue that the share applications were not signed on behalf of the applicant companies and were forged documents. It is also not the case of the Revenue that the shares were not actually allotted to the companies. Therefore, the CIT(A) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee. As regards identity of the subscribers, the assessee filed copies of certificate of incorporation, PAN cards, PAN details and company details, downloaded from the site of Department of Company Affairs besides written confirmation from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowed. (Para 10) The AO was not justified in adding the amount of share application money to the income of the assessee, merely because the applicants did not respond to the notices sent to them. If the AO so wanted, he could have found out the current address of those applicants, who, according to the report of the Inspector, were not found functioning at the address given to the AO, by summoning the directors, etc. of those companies and asking them to furnish the current address of the company. The names and addresses of directors, if not available with the assessee, could have been obtained from the office of RoC or from the banks on which the cheques were drawn. No such attempt, however, was made by the AO. In these circumstances, there is no reason found to disturb the finding of fact recorded by the Tribunal.-CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 relied on. (Para 11) 18. Hon ble Delhi High Court in case of CIT Vs. Dwarkadhish Investment (P) Ltd (2011) 330 ITR 298 (Del) held : Income-Cash credit-Share application money-Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of such capital be regarded as undisclosed income of assessee-company-If certain shareholders were bogus and money was provided by some other persons, reopening of assessment of such persons would be sensible-Tribunal, therefore, justified in setting aside revisional order and no question of law arises. 21. Hon'ble Supreme Court in case of CIT Vs. Orissa Corporation 159 ITR 78 (SC) held : Income-Cash credit-Burden of proof-Assessee had given the names and addresses of the creditors-It was in the knowledge of the Revenue that the said creditors were income-tax assessees-Their index number was in the file of the Revenue-Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further-Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the allowed loans-Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence-High Court was, therefore, right in refusing to refer the question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share applicants, full particulars of directors of the share applicant companies, bank account of the share applicants, PAN of share applicants, tax returns of the share applicants, audited final accounts i.e. balance sheet profit loss account of the share applicants. All these documents proved the identity of the share applicants, creditworthiness of the share applicants and genuineness of the transactions. Further, we also find that the assessee s case is on strong footing as by the Finance Act, 2012, the provision for source of source was inserted w.e.f. 1.4.2013 but the present matter pertains to the assessment year 2012-13. Hence, the insertion of that provision is also not applicable in the present matter. Thus, totality of facts clearly indicates that the assessee in these circumstances had duly discharged its burden lay upon it u/s.68 of the I.T. Act. The case-laws referred by the Revenue Authorities are distinguishable on facts and they are not applicable on the facts of the assessee s case. Therefore, the addition made u/s.68 in assessment year 2012-13 is bad in law and unjustified and, therefore, we delete the addition of ₹ 2,41,25,000/- in view of the facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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