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TMI Blog2018 (10) TMI 1974X X X X Extracts X X X X X X X X Extracts X X X X ..... rded in a particular manner but from a reading of the assessment order as a whole such satisfaction should be clearly discernible. Therefore, the reliance by the Ld. Departmental Representative on the decision of Mak Data Pvt. Ltd. [ 2013 (11) TMI 14 - SUPREME COURT] in our opinion is misplaced and not applicable to the facts of the present case. This view of ours finds support from the decision of Kolkata Bench of the Tribunal in the case of Suvaprasanna Bhataacharya [ 2015 (12) TMI 43 - ITAT KOLKATA] for A.Y. 2006-07. In this view of the matter, we are of the considered opinion that since it is not clear from the notice u/s. 274 the reasons for levying of penalty as to whether it is for concealment of income or for furnishing of inaccurate particulars of income, therefore, the notice itself is bad in law and invalid. Therefore, the penalty order passed subsequently on the basis of such invalid notice also has to be held as bad in law. We accordingly cancel the penalty levied by the AO . In the instant cases before us the Assessing Officer had not made up his mind as to the specific charge to which the assessee was to be penalized. In the premises, as has been held in the rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010, of the Tribunal. Thus, considering the facts available on record, we find force in the argument of the Ld. counsel for the assessee. The crux of the arguments is that the profit margin earned by the assessee is somewhere between 0.26% to 0.30% as the purchases and sales are genuine, thus, the addition may be restricted to 0.30%. Though, we find force in the argument of the ld. counsel for the assessee as the same is based upon the facts, still to plug the leakage of Revenue and to safeguard the interest of the Revenue, we deem it appropriate to restrict the profit margin at the rate of 3% against 12.5% sustained by the Ld. Commissioner of Income Tax (Appeal), thus, the impugned ground is partly allowed. - ITA Nos. 7310 to 7313/Mum/2017 - - - Dated:- 15-10-2018 - Shri Joginder Singh, Judicial Member, and Shri N.K. Pradhan, Accountant Member For the Assessee : Shri D.V. Lakhani For the Revenue : Shri N.C. Mohanty Sr. Standing Counsel ORDER PER J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L. Agarwal and Shri Mukesh Chokshi, recorded during survey proceedings under section 133A of the Act in the case of Lloyds Group of cases . Our attention was invited to the statements available at pages 174 to 225 of the paper book. It was explained that the Ld. Assessing Officer relied upon the statement of Shri Mukesh Chokshi recorded on 16/01/2013, whereas, in the reasons recorded the Ld. Assessing Officer referred to the statements recorded on 25/11/2009 and 26/11/2009, therefore, the Ld. Assessing Officer cannot improve upon any aspects beyond the reasons recorded, for which reliance was placed upon certain decisions, which will be dealt with in succeeding paras of this order. In support, reliance was placed upon the decision from Hon'ble jurisdictional High Court in the case of Hindustan Lever Ltd. (268 ITR 332)(Bom.). 2.2. The ld. counsel further explained that the order passed under section 153C of the Act was quashed by the Tribunal for which our attention was invited to pages 2779 to 2786 (paper book no. 2) containing these orders. It was contended that the reassessment proceedings are in respect of order passed under section 153C of the Act and once that order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings are bad in law as there was no tangible material with the Assessing Officer with respect to the amounts received by the assessee from fourteen parties in respect of whom addition was made and thus it tantamounts to change of opinion. The ld. Counsel, in support, relied upon the decision from Hon'ble jurisdictional High Court in the case of Purity Techtextile Ltd. v. ACIT (325 ITR 459)(Bom.) and another decision from Hon'ble Apex Court in CIT v. Kelvinator India Ltd. (320 ITR 561)(Supreme Court). The ld. counsel further argued that the conditions of the proviso to section 147 of the Act are not satisfied as there are no allegations in the reasons to the effect that there was any failure on the part of the assessee to disclose all material facts fully and truly, which are necessary for assessment. In support of this proposition, reliance was placed upon the following decisions:- i. German Remedies Ltd. v. Dy. CIT 287 ITR 494 (Bom) ii. Balkrishna Hiralal Wani v. I. Tax Officer Others 321 ITR 519 (Bom) iii. Jashan Textile Mills P. Ltd. v. Dy. CIT Others 284 ITR 542 (Bom) iv. Commr. of I. Tax v. Foramer France 264 ITR 566 (SC) v. Shree R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant company. The Ld. Commissioner of Income Tax (Appeals) has given a categorical finding that the Additional Commissioner of Income Tax (Central Circle) has admitted before him that during investigations of the share capital, being the source in the hands of the companies who have invested in the share capital of the Appellant company, that there was no any evidence found of cash deposits in the hands of those companies three level below. This finding was never challenged by the Department. The ld. counsel also filed a facts sheet narrating the complete factual and legal position of the present matters. 2.7. On the other hand, the Ld. Sr. Standing Counsel, Shri N.C. Mohanty, strongly defended the issuance of notice under section 148 of the Act by contending that income chargeable to tax had escaped assessment, for which our attention was invited to the observation made in the assessment order as well as in the impugned order. It was pleaded that the statements of Shri B.L. Agarwal, Shri Om Hari Halan and Shri Mukesh Chokshi were recorded, wherein, they have tendered that the assessee is the beneficiary of bogus share capital and the income was rooted through various companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the three persons to conclude that income chargeable to tax has escaped assessment. There is no direct nexus between what's stated in the statements and escapement of income in the hands of the Appellant company. 2.8. The Ld. Sr. Standing Counsel also contended that the cases relied upon by the assessee are on different facts, therefore, may not be applicable to the facts of the present appeals. Similarly the Ld. Counsel of the Appellant also contended the facts of the case laws relied upon by the Ld. Sr. Standing Counsel are different from the facts of the present case and cannot be relied upon. 2.9. We have considered the rival submissions and perused the material available on record. Before adverting further, we are reproducing hereunder the notice issued under section 142(1) of the Act, by the Ld. Assessing Officer along with annexure for Assessment Years 2004-05 to 2010-11 in the proceedings initiated after issue of notice u/s. 153C in the case of the Appellant, which is reproduced hereunder:- ANNEXURE TO NOTICE U/S 142(1) Assessment Year: 2004-05 TO 2010-11 1. Letter of authority authorizing the person who is attending in connection with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Details of investments sold/made during the year along with the capital gain working and source of Investment. Explain the same. 10. Please file details of the shareholding as on year ending on 31.03.2004 to 31.03.2010 in the following format specifically mention about promoters share holdings: 11. Details of carry forward and brought forward losses and assessed losses in the following format: Sl. No. A.Y. Claimed loss Assessed loss 12. On perusal of profit and loss account for various years for AY 2004-05 to 2010-11, it appears the assessee company has debited loss on sale of shares. In this regard, you are required to provide details with all documentary support(copy of demat account, transaction cum holding statement, contract notes, source of purchase amount etc) in following format: Sr. No. Scrip/MF Opening balance Purchase Sale Holding period (day wise) Divd. Recv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, it will be understood that no explanation/details/evidence have been furnished in respect of the transactions referred to in the said queries. 22. You are requested to furnish the above details on 15.05.2011 at 11.30 AM. All the details should be submitted in the order in which they appear above preferably in type written form. Submission of details on floppy/CD alongwith the hard copy will be appreciated. Since sufficient time is given to you, all the details should be submitted in one go. In case you have already replied any of the above mentioned particulars, you may mention it in your reply. Please make sure that submission should be in same sequence as it appears in this questionnaire. 23. You are requested to explain the contents of the seized papers at times of hearing and further queries in this regard will be raised accordingly. Kindly note that non-compliance to the notice may attract penalty u/s. 271(1)(b) of the I.T. Act, 1961 of Rs. 10000/- for each such failure. Sd/- Assistant Commissioner of Income Tax Central Circle-32 Mumbai 2.10. The assessee filed original return of income on 23/10/2007 along with audited financial s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.03.2015 31.03.2015 31.03.2015 31.03.2015 12 Order of CIT(A) against which the present appeal is filed 17.11.2017 17.11.2017 17.11.2017 17.11.2017 If the aforesaid chart is analyzed for Assessment Year 2007-08, it is seen that the assessee filed return under section 139(1) of the Act on 23/10/2007 for Assessment Year 2008-09 on 25/09/2008, for Assessment Year 2008-09 on 09/10/2009 and for Assessment Year 2010-11 on 27/09/2010. Orders under section 143(3) of the Act, accepting the returned income were passed on the dates mentioned in the aforesaid chart. Thereafter, notices under section 153C were issued on the respective dates mentioned in the chart. The assessee filed the return in response to notice under section 153C, which are also summarized above. The Ld. Assessing Officer framed the assessment under section 153C r.w.s. 143(3) of the Act on the dates mentioned in the chart above. 2.11. We note that before framing the assessment/original assessment under section 143(3) of the Act, the assessee was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised. Ld. Assessing Officer has relied upon the statement recorded during the survey proceedings u/s. 133A in the case of Lloyds Group of cases. Reliance is placed on the statement of Shri B.L. Agarwal, Shri Mukesh Choksi and Shri Om Hari Halan. The copies of these statements are on pages 174 to 225. The Ld. Assessing Officer has relied upon the statement of Shri Mukesh Choksi which was recorded on 16/1/2013 whereas in the reasons he has referred to the statements recorded on 25/11/2009 and 26/11/2009. Ld. Assessing Officer cannot improve upon any aspects beyond the reasons recorded. The order passed u/s. 153C of the Act has been quashed by the Tribunal, the said orders are available at pages 2779 to 2786 of the paper book -2. The reassessment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed, there is no question of escapement of income in respect of that particular income determined in the order passed u/s. 153C of the Act. The statements of all the 3 persons do not have any direct relationship with escapement of income in the hands of the assessee company. In the statements there is a refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised. AO has relied upon the statement recorded during the survey proceedings u/s. 133A in the case of Lloyds Group of cases. Reliance is placed on the statement of Shri B.L. Agarwal, Shri Mukesh Choksi and Shri Om Hari Halan. The copies of these statements are on pages 174 to 225 of the paper book filed for A.Y. 2007-08. The AO has relied upon the statement of Shri Mukesh Choksi which was recorded on 16/1/2013 whereas in the reasons he has referred to the statements recorded on 25/11/2009 and 26/11/2009. AO cannot improve upon any aspects beyond the reasons recorded. The order passed u/s. 153C has been quashed by the Hon'ble Tribunal as per orders which are on pages 2779 to 2786 of the paper book 2 containing the order passed. The reassessment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed the question of escapement of income in respect of that particular income determined in the order passed u/s. 153C does not arise. The statements of all the 3 persons does not have any direct relationship with escapement of income in the hands of the appellant company. In the statements there is a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the reopening of assessments for assessment years 2003-04 and 2004-05 by notices dated 24-3-2009 and 31-3-2009 in purported exercise of powers under section 148 of the Income-tax Act, 1961. 3. The assessee claimed a deduction under section 80-IB of the Act commencing from assessment year 2001-02. The assessee claims to have set up an industrial undertaking in an industrially backward area at Nani Daman. Briefly stated, from the record of the Court it appears that the Maharashtra State Financial Corporation ('MSFC') had granted loan facilities to a company by the name of Innovative Plastics Private Limited. The company was in default of the payment of its dues, following which MSFC exercised its powers under section 29 of the State Financial Corporations Act and sold the land and building to Khosla Filters Private Limited under a Deed of Conveyance dated 24-12-1999 for consideration. The purchaser granted a lease of the property on 29-12-1999 to the Petitioner for a period of ten years. The Petitioner sought registration as a Small Scale Unit for manufacturing filter bags, filter panels, made ups of cotton and man-made fabrics. Provisional registration was granted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act for assessment years 2004-05, 2005-06 and 2006-07. On 24-3-2009 and 31-3-2009 the assessment for assessment years 2003-04 and 2004-05 was sought to be reopened in exercise of powers under section 148 of the Act. The reasons which have been recorded by the Assessing Officer note that the assessee had taken an industrial unit at Daman on rent from an associate concern and that a deduction had been allowed under section 80-IB for assessment years 2003-04 and 2004-05. However during the course of the assessment proceedings for a subsequent year, it was observed that the factory had been purchased by Khosla Investment Private Limited and was given on license to the assessee. The notices record that the plan of the factory premises was approved by the Sarpanch on 12-9-1988, which would show that the industrial unit was already in existence and in the use of some other person for the purpose of availing benefits provided under the Act. In the case of the assessee, it has been stated that the factory plan having been approved twelve years prior to the commencement of the business of the assessee, that would lead to an inference that the business/industrial unit of the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur years from the expiry of relevant assessment year. The case for assessment year 2004-05 will be considered separately in the later part of the judgment. 9. On behalf of the Petitioner, it was urged before the Court by learned counsel that : (i) There was no failure on the part of the assessee to disclose all material facts relevant to the assessment. The license was filed when assessment proceedings took place for assessment year 2003-04. A full enquiry was made and all relevant details were disclosed. The license contains a disclosure of the circumstance that plans had been approved on 12-9-1988; (ii) In any event, there was no connection between the alleged non-disclosure and the conclusion formed by the Assessing Officer. Even if it were to be assumed that a factory had been worked at the site by the person who was subjected to proceedings under State Financial Corporations Act, 1961 by MSFC, that would not disentitle the Petitioner to the benefit of a deduction under section 80-IB of the Act. The Petitioner who has set up a new industrial undertaking by purchasing plant and machinery would still be entitled to a deduction under section 80-IB of the Act; (iii) The reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strial unit was already in existence and was in use of some other person for the purposes of availing the benefit under section 80-IB of the Act. 12. Section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 163 assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. Under the first proviso, where an assessment has been made under sub-section (3) of section 143 or section 147 for the relevant assessment year, no action can be initiated under section 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment by reason of the failure of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, initially for assessment year 2001-02, which was allowed. The benefit of a deduction under section 80-IB was also granted for assessment year 2002-03. The assessment order for assessment year 2001-02 was passed under section 143(3) of the Act, upon scrutiny. During the course of assessment proceedings for assessment year 2003-04, the assessee filed an Audit Report in Form 10CCB in which relevant particulars of the license to work that was granted to the unit of the assessee was disclosed. The license to work dated 14-8-2000, copy of which was filed before the Assessing Officer, contains a disclosure of the fact the plans have been approved by the Sarpanch by his letter dated 12-9-1988. The basis on which the assessment for assessment years 2003-04 and 2004-05 has been sought to be reopened is that it was during the course of assessment proceedings for subsequent years that the revenue had obtained a copy of the license which showed that the plans have been approved as far back as on 12-9-1988. This statement which is contained in the reasons, on the basis of which the assessment is sought to be reopened, is belied by the record which shows that the Revenue was in possession o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns a specific recital that the machinery was not being sold. In these circumstances, it is apparent from the record before the Court that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment so as to justify the invocation of the powers under section 148 of the Act beyond the expiry of a period of four years from the end of the relevant assessment year. 15. We may also note in addition that the assessee has filed together with its affidavit in rejoinder, a copy of the information received during the course of a query under the Right to Information Act. The information included a letter by the Assessing Officer to the Commissioner of Income-tax dated 24-3-2009 seeking permission to the proposal for reopening the assessment under section 151(1) of the Act. The Assessing Officer has noted, while seeking approval of the Commissioner of Income-tax, that during the course of Revenue audit proceedings, an audit objection has been raised on the ground that the assessee was not eligible to a deduction under section 80-IB from assessment year 2002-03. The Assessing Officer notes that the audit objection was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accordingly. In the circumstances of the case, there shall be no order as to costs. 2.15. In the aforesaid case, the Hon'ble jurisdictional High Court held that the jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year. The reasons which are recorded by the Assessing Officer are crucial and it is on the basis of those reasons alone, that validity of the order reopening an assessment has to be decided. Where an assessment has been made under section 143(3), action can be initiated after the expiry of four years from the end of the relevant assessment year if the income chargeable to tax has escaped assessment because of the failure of the assessee to make fully and truly a disclosure of the material facts. [Para 12]. The Hon'ble High Court further observed that the basis on which the assessment for the assessment years 2003-04 and 2004-05 had been sought to be reopened was that during the course of assessment proceedings for the subsequent years, the revenue had obtained a copy of the license which showed that the plans had been approved as far back as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... veyance under which MSFC transferred the right of the defaulter only in respect of the land and building. The plant and machinery was not the subject-matter of the sale. The deed of conveyance contained a specific recital that the machinery was not being sold. In those circumstances, it was apparent from the record before the Court that there was no failure on part of the assessee to disclose fully and truly all the material facts necessary for its assessment so as to justify the invocation of the powers under section 148 beyond the expiry of a period of four years from the end of the assessment year 2003-04. [Para 14] 2.16. Importantly, the Hon'ble High Court observed that insofar as the assessment year 2004-05 was concerned, though the reopening of the assessment had taken place within a period of four years from the expiry of that assessment year, yet it was apparent that the Assessing Officer did not have before him any additional material at all to form a belief that income had escaped assessment. The assessee had, admittedly, placed on record before the Assessing Officer for the assessment year 2003-04 the circumstances under which the plans had been approved for the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfillment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. [Para 4] 2.18. If the afore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn was not an issue and the only question was with regard to the second portion of the proviso which related to failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Insofar as this precondition was concerned, there was not a whisper of it in the reasons recorded by the Assessing Officer. In fact, the Assessing Officer could not have made that as a ground, because he had required the assessee to furnish details with regard to loss occasioned by foreign exchange fluctuation which the assessee did by virtue of its reply. Since the assessee had fully and truly disclosed all the material facts necessary for the assessment, the precondition for invoking the proviso to section 147 had not been satisfied. [Para 9] Therefore, the impugned notice issued under section 148 as well as the proceedings pursuant thereto were all without jurisdiction and deserved to be quashed. 2.20. Likewise, Hon'ble jurisdictional High Court in the case of German Remedies Ltd. v. DCIT 287 ITR 494 (Bom.) held/observe as under:- These petitions, filed under article 226 of the Constitution of India, are directed against the notices dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (ii) Central excise duty and customs duty payable on finished goods for the year is not taken into account in valuing closing stock resulting into underassessment. 6. The objections to the reasons recorded were decided by the respondent No. 1 vide its order dated 18-2-2005; whereby objections raised came to be rejected. 7. Being aggrieved by the aforesaid action of respondent No. 1, petitioners have invoked writ jurisdiction of this Court to challenge their action. 8. On being noticed, respondents appeared in this petition and filed their counter-affidavit and tried to justify their action. Submissions: 9. The learned counsel appearing for the petitioners submits that notice issued under section 148 dated 15-9-2003 for assessment year 1998-99 by respondent No. 1 is barred by limitation since it has been issued beyond the statutory period of 4 years from the end of the relevant assessment year. According to the learned counsel for the petitioners, period of 4 years commences on 31-3-2003 and as such impugned notice issued under section 147 seeking to reopen for both the assessment years 1997-98 and 1998-99 is bad in law and without jurisdiction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock with Modvat (Excise and custom duty paid). The petitioners submit that this very issue was considered in detail in the assessment order dated 21-12-2000. Reference to provisions of section 145A is to be found also in the assessment order. He further submits that on this very same ground the petitioners had preferred an appeal for assessment year 1998-99; which was allowed by the First Appellate Authority and also the Tribunal based on the decision of this Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd. [2000] 245 ITR 3841 which was subsequently affirmed by the Apex Court in the judgment of CIT v. Indo Nippon Chemicals Co. Ltd. [2003] 261 ITR 2752. Petitioners have placed reliance on various judgments of this Court as well as of the Apex Court in the cases of (1) Caprihans India Ltd. v. Tarun Seem, Dy CIT [2004] 266 ITR 566 (Bom) (2) CIT v. Foramer France [2004] 264 ITR 566(SC) (3) Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. CIT (No. 2) [2004] 268 ITR 339 (Bom.) (4) Grindwell Norton Ltd. v. Jagdish Prasad Jangid, Asstt. CIT [2004] 267 ITR 673 (Bom.). Per Contra: 15. The learned counsel appearing for the revenue submits that notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention raised with respect of provisions of sections 149(1)(b) and 151 is not correct. He submits that the approval granted is without application of mind and the same appears to have been granted in routine and perfunctory manner. He further reiterated that respondent has not given any reply to the petitioner's specific submissions that during the course of original assessment the issue of valuation of closing stock was examined in detail in the light of the ratio laid down by the Apex Court in the case of CIT v. British Paints India Ltd. [1991] 188 ITR 441, as such the power to reopen exercised by the revenue is bad and illegal. Consideration: 19. Having heard rival parties and having examined averments made in the petition and the counter-affidavits, one has to reach to the conclusion that power to reopen has been exercised on unsustainable reasons. It is not in dispute that the return of income filed by the petitioner was accompanied by audit report, profit and loss accounts and tax audit report under section 44AB of the Act. The record reveals that true and full information with respect to TDS from the payments made to various parties towards expenditure wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relate. In the circumstances, the impugned notice having been issued beyond 4 years from the last date of the relevant assessment year without alleging any failure to disclose full and true material facts is liable to be set aside. 24. It is not in dispute that the Assessing Officer on 15-9-2003 had himself carried file to the Commissioner of Income-tax and on the very same day, rather same moment in the presence of the Assessing Officer, the Commissioner of Income-tax granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of 4 years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. In the above view of the matter, the impugned no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to new section, which bars issue of notice under section 148 after expiry of four years from end of relevant assessment year, squarely applied to facts of instant case, and, therefore, impugned notice was barred by limitation. Since notice under section 148 was without jurisdiction, there was no merit in plea that the petitioner was to be relegated to alternative remedy. It was also held that the provisions of section 153 are inapplicable to issue of notice under section 148 and refer to assessment. A 'direction' or 'finding' as contemplated by section 153(3)(ii), must be a finding necessary for disposal of a particular case, that is to say, in respect of a particular assessee and in relevance to a particular assessment year. To be a direction as contemplated by section 153(3)(ii), it must be an express direction necessary for disposal of case before authority or Court. Further, it could not be said that proposed reassessment was in consequence of, or to give effect to, any finding or direction of the Tribunal in case of petitioner's employee and, therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147(a) must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the ITO to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the ITO to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that, the ITO did not hold the belief that there had been such non-disclosure. The existence of the belief can be ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. The court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words definite information which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r above proposition is fortified by the decision from Hon'ble jurisdictional High Court in the case of Hindustan Lever Ltd. 268 ITR 332 (Bom.), wherein, it was held/observed as under:- 2. In this petition, the petitioners are challenging the notice dated 5th November, 2002, for reopening the assessment for assessment year 1996-97, issued by respondent No. 1, under section 148 of the Income-tax Act, 1961 ( Act for the short). 3. The petitioners are engaged in the business of manufacture of various consumer products in respect of which excise duty is payable. The petitioners also import certain raw materials for its manufacturing activities subject to payment of customs duty may be leviable under the provisions of the Customs Act, 1962. 4. The petitioners had filed its return of income for the assessment year 1996-97 on 30th November, 1996. The computation of income was accompanied by a specific note reading as under: ... in accordance with the practice followed for the earlier years, the company has not made a provision for excise duty and custom duty on stocks lying at the year ended in bonded warehouse estimated at Rs. 5,85,71,968 (1994-95) Rs. 112,502,53 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reason to believe that the petitioner's income chargeable to tax for assessment year 1996-97 had escaped assessment and he, therefore, called upon the petitioners to furnish its return of income within thirty days from the date of receipt of the said notice. The petitioners by its letter dated 12th November, 2002 requested respondent No. 1 to furnish to it the reasons recorded by him prior to the issuance of the said notice so as to enable them to comply with the same. 9. The petitioners filed their return under protest and, thereafter, they were served with the notice dated 3rd December, 2002 under section 142(1) of the Act, issued by respondent No. 2, by which the petitioners were called upon to show cause as to why the sum of Rs. 5,85,71,968 should not be added to the value of the closing stock and their income for the relevant year be not increased to that extent. The petitioners were also required to explain the deductions claimed by them under section 80HHC and 80IA as well as on account of the leave salary that was debited. 10. The petitioners finding failure on the part of the Assessing Officer to disclose the reasons in spite of specific request filed this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s escaped assessment on account of failure on the part of the petitioner to disclose all material facts. Learned counsel also relied upon the case of Hindustan Lever Ltd. v. V.K. Pandey, Joint CIT [2001] 251 ITR 209 and Caprihans India Ltd. v. Prakash Chandra [2002] 256 ITR 7211. Based on these two judgments he submitted that the facts of the present case are identical to those involved in the aforesaid cases. Hence the challenge set up in this petition is squarely covered by the judgment of this Court. 15. Mr. Desai, learned counsel for the Revenue tried to contend that so far as merits of the case are concerned the same can be dealt with by the Assessing Officer and the petitioners should be directed to appear before the Assessing Officer with liberty to raise all the contentions. 16. Mr. Desai, with respect to the contention that the notice under section 148 is barred by limitation and that the Assessing Officer has no jurisdiction to issue such notice, contends that even if the words failure to disclose fully and truly all material facts relevant for assessment for assessment year are absent in the reasons recorded, still such reasons can be inferred on the text of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the proceeding under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be for the concerned assessment year. However, where an assessment under sub-section (3) of section 143 has been made for relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reasons of the failure on the part of the assessee to disclose all material facts necessary for his assessment for that assessment year. [Emphasis supplied] 19. In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was 31st March, 1997 and from that date if four years are counted, the period of four years expired on 1st March, 2001. The notice issued is dated 5th November, 2002 and received by the assessee on 7th November, 2002. Under these circumstances, the notice is clearly beyond the period of four years. 20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside. 22. Since we are setting aside the impugned notice only on the first ground of challenge, in our opinion it is not necessary to go to the other question and record our findings in that behalf. 23. In the result, the impugned notice is quashed and set aside. Rule is made absolute in terms of prayer clause (a) with no order as to costs. 2.24. If the aforesaid ratio is analyze, it lays down that when statutory functionary makes an order, based on certain grounds, its validity or propriety must be judged by the reasons so mention/recorded and cannot, on challenge, by supplementing fresh reasons in the shape of an affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time, it comes to the court on account of a challenge get validated by additional grounds later brought out. Our this proposition is supported by the ratio laid down in following decisions:- i. Mohinder Singh Gill v. Chief Election Commissioner AIR 1978 Supreme Court 851, 858 ii. Commissioner of Police v. Gordhandas Bhanji AIR 1952 Supreme Court 16, 18 iii. Assam Fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax-5, Mumbai (hereinafter called as CIT) passed u/s. 263 dated 22-12-2015 for A.Y. 2011-12 on the following grounds: 1.(a) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax [CIT] erred in initiating proceedings u/s. 263 of the Income Tax Act, 1961 (the Act) vide show cause notice dated 20-04-2015 and passing an order u/s. 263 of the Act as the reasons assigned by him for doing so are wrong and contrary to the facts of the case, the provisions of the Act, and the Rules made thereunder. (b) On the facts and in the circumstances of the case and in law, the appellant prays that the order of the learned CIT passed u/s. 263 of the Income Tax Act, 1961 may be cancelled being void ab-initio and bad in law. 2. On the facts and in the circumstances of the case and in law, learned Commissioner of Income Tax erred in holding that assessment order dated 24-10-2013 passed by the Assessing Officer u/s. 143(3) of the Act with regard to issue of shares at premium was erroneous and prejudicial to the interest of the revenue despite the issues raised having been duly considered by the learned Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the Assessing Officer framed the assessment upon a non-existing entity. It was submitted by him that framing of an assessment upon a company which has already been amalgamated by way of an order of the High Court is nullity in the eyes of law and in support of his arguments he placed reliance upon the following judgments: 1. Judgment of Delhi High Court in the case of Spice Infotainment Ltd. v. Commissioner of Service Tax in ITA 475 476 of 2011, dated 03.08.2011 2. CIT v. Dimension Apparels P. Ltd. [370 ITR 288 (Del)] 3. I.K. Agencies P. Ltd. v CIT [347 ITR 664 (Cal)] 4. CIT v Express Newspapers Ltd. [40 ITR 38 (Mad)] 5. Judgment of Delhi High Court in the case of CIT v Micra India P. Ltd. (2015) 57 Taxmann.com 163 (Del) 6. Order of the Tribunal Mumbai Bench, in the case of Instant Holdings Ltd. ACIT in ITA no. 4593, 4748/Mum/2011 order dated 09.03.2016. 7. Order of the Tribunal Kolkata Bench, in the case of Emerald Company Ltd. in ITA no. 428/Kol/2015 order dated 13.01.2016 8. Judgment of Karnataka High Court in the case of CIT v Intel Techno India P. Ltd. (2015) 57 Taxmann.com 159 (Kar) 9. Order of the Tribunal Kolkata Bench, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e before dealing with any other issue, we shall first deal with all above three issues one by one, as under: 8. Challenging the jurisdictional defects of assessment order for assailing the jurisdictional validity of the revision order passed u/s. 263: The first issue that arises for our consideration is - whether the assessee can challenge the jurisdictional validity of order passed u/s. 143(3) in the appellate proceedings taken up for challenging the order passed u/s. 263? If we analyse the nature of both of these proceedings, which are under consideration before us, we find that the original assessment proceedings can be classified in a way as 'primary proceedings'. These are, in effect, basic/foundational proceedings and akin to a platform upon which any subsequent proceedings connected therewith can rest upon. The proceedings initiated u/s. 263 seeking to revise the original assessment order is off shoot of the primary proceedings and therefore, these may be termed as 'collateral proceedings' in the legal framework. The issue that arises here is whether any illegality/invalidity in the order passed in the 'primary proceedings' can be set up in the & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the primary proceedings can be examined in the collateral proceedings also. This issue is not res integra. This issue has been decided in many judgments by various courts, and some of them have been discussed by us in followings paragraphs. 8.2. In a matter that came up before Hon'ble Supreme Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors., [1955] 1 SCR 117 the facts were that the appellant in that case had undervalued the suit at Rs. 2,950 and laid it in the court of the Subordinate Judge, Monghyr for recovery of possession of the suit lands and mesne profits. The suit was dismissed and on appeal it was confirmed. In the second appeal in the High Court the Registry raised the object ion as to valuation under Section 11. The value of the appeal was fixed at Rs. 9,980. A contention then was raised by the plaintiff in the High Court that on account of the valuation fixed by the High Court the appeal against the decree of the court of the Subordinate Judge did not lie to the District Court, but to the High Court and on that account the decree of the District Court was a nullity. Alternatively, it was contended that it caused prejudice to the appellant. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein it was held that an issue of jurisdiction can be raised at any time even in appeal or execution. 8.5. The aforesaid principles, enunciated by the Apex Court in the case of Kiran Singh Ors. v. Chaman Paswan Ors, supra were reiterated by the Apex Court in the cases of Superintendent of Taxes v. Onkarmal Nathmal Trust (AIR 1975 SC 2065) and Dasa Muni Reddy v. Appa Rao (AIR 1974 SC 2089). In the first of these decisions it was pointed out that revenue statutes protect the public on the one hand and confer power upon the State on the other, and the fetter on the jurisdiction is one meant to protect the public on the broader ground of public policy and, therefore, jurisdiction to assess or reassess a person can never be waived or created by consent. This decision shows that the basic principle recognized in Kiran Singh (supra) is applicable even to revenue statutes such as the Income Tax Act. Dasa Muni Reddy (supra) is a judgment where the principle of 'coram non judice' was applied to rent control law. It was held that neither the rule of estoppel nor the principle of res judicata can confer the Court jurisdiction where none exists. Here also the principle that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter carried order of the Tribunal in reference before the Gujarat High Court. The High Court after considering various judgments of the Supreme Court on the point of jurisdiction to reopen the assessment and also after specifically discussing the judgment of the Supreme Court in Onkarmal Nathmal Trust (supra) and Dasa Muni Reddy (supra) held that the Tribunal was in error in holding that the question of jurisdiction became final when it passed the earlier remand order. It was held that neither the question of res judicata nor the rule of estoppel could be invoked where the jurisdiction of an authority was under challenge. According to Hon'ble Gujarat High Court, the rule of res judicative cannot be invoked where the question involved is the competence of the Court to assume jurisdiction, either pecuniary or territorial or over the subject matter of the dispute. Hon'ble High Court further held that since neither consent nor waiver can confer jurisdiction upon the Assessing Officer where it did not exist, no importance could be attached to the fact that the assessee, in the first round of proceedings, expressly gave up the plea against the erroneous assumption of jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bay High Court in the case of Jainaravan Babulal v. CIT. 170 ITR 399, the bench held as that if the block assessment itself is without jurisdiction then there is no question of levy of any penalty u/s. 158BFA(2) and therefore it is open to the assessee to set up the question of validity of the assessment in the appeal against the levy of penalty. 8.9. We also derive support from another judgement of Hon'ble Bombay High Court in the case of Inventors Industrial Corporation Ltd. v. CIT 194 ITR 548 (Bombay) wherein it was held that assessee was entitled to challenge the jurisdiction of the AO to initiate re-assessment proceedings before the CIT(A) in the second round of proceedings, even though he had not raised it in earlier proceedings before the Assessing Officer or in the earlier appeal. 8.10. Thus, on the basis of aforesaid discussion we can safely hold that as per law, the assessee should be permitted to challenge the validity of order passed u/s. 263 on the ground that the impugned assessment order was non est and we hold accordingly. 9. Whether the impugned assessment order passed u/s. 143(3) dated 24-10- 2013 was valid in the eyes of law or a nullity as has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he next date of hearing assessment records were produced and it was confirmed by Ld. CIT-DR that this letter was available in the assessment records. We also examined the records to cross verify this fact. We find it appropriate to reproduce the contents of the said letter as under:- Xxxxxxxxxxxxxxxxxxxx 9.3. It is also shown to us that this letter has been duly acknowledged by the office of the Income-tax Officer, Range 5(3)(4) (i.e. the AO) on 06-09- 2013. Our attention was also drawn on the copy of order of Hon'ble Bombay High Court dated 19th July, 2013 for effecting the amalgamation of two companies. Our attention was further drawn on the fact that the Permanent Account Number belonging to WDL was also brought to the notice of the Assessing Officer. Our attention was also drawn on subsequent letters filed before Assessing Officer. For example, letter dt 21-10-2013 (paper book page 107-108) showing that all subsequent replies were written by WDL and submitted to the AO on its letterhead. All these documentary evidences were shown to bring home the point that the factum of amalgamation was very much in the knowledge of Assessing Officer and thus Assessing Officer w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative remedy to file an appeal is available to the petitioners. However, prima facie, the impugned notice has been issued in respect of a non existing entity as M/s. Addler Security Systems Pvt. Ltd., which stands dissolved, having been struck off the Rolls of the Registrar of Companies much before its issue. Consequently, the assessment has been framed also in respect of the non-existing entity. This defect in issuing a reopening notice to a non-existing company and framing an assessment consequent thereto is an issue which goes to the root of the jurisdiction of the Assessing Officer to assess the non-existing company. Thus, prima fade, both the impugned notice dated 24th March, 2015 and the Assessment Order dated 28th March, 2016, are without jurisdiction. (emphasis supplied). 9.7. Further, recently, the co-ordinate bench of ITAT Mumbai decided identical issue in the case of M/s. Genesys Worldeye Ltd. in ITA No. 473/Mum/2012 order dated 03-06-2016 in which one of us (AM) was a party. The relevant part of this order is reproduced hereunder: 4.8. In our view, this argument of the Ld. DR is also not in accordance with law. The assessment is to be made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e omission to mention the name of amalgamated company alongwith the name of amalgamating company in the body of assessment against the item name of the assessee is not fatal to the validity of assessment but is a procedural defect covered by Section 292B of the Act. We hold accordingly. 7. The aforesaid line of reasoning adopted by the Tribunal is clearly blemished with legal loopholes and is contrary to law. No doubt, M/s. Spice was an assessee and as an incorporated company and was in existence when it filed the returns in respect of two assessment years in questions. However, before the case could be selected for scrutiny and assessment proceedings could be initiated, M/s. Spice got amalgamated with MCorp Pvt. Ltd. It was the result of the scheme of the amalgamation filed before the Company Judge of this Court which was dully sanctioned vide orders dated 11th February, 2004. With this amalgamation made effective from 1st July, 2003, M/s. Spice ceased to exist. That is the plain and simple effect in law. The scheme of amalgamation itself provided for this consequence, inasmuch as simultaneous with the sanctioning of the scheme, M/s. Spice was also stood dissolved by speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertakings. There may be amalgamation either by the transfer of two or more undertakings to a new Company, or by the transfer of one or more undertakings to an existing Company. Strictly amalgamation does not cover the mere acquisition by a Company of the share capital of other Company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsburys Laws of England 4th Edition Vol. 7 Para 1539. Two companies may join to form a new Company, but there may be absorption or blending of one by the other, both amounts to amalgamation. When two companies are merged and are so joined, as to form a third Company or one is absorbed into one or blended with another, the amalgamating Company loses its entity. 9. The Court referred to its earlier judgment in General Radio and Appliances Co. Ltd. v. M.A. Khader (1986) 60 Comp Case 1013. In view of the aforesaid clinching position in law, it is difficult to digest the circuitous route adopted by the Tribunal holding that the assessment was in fact in the name of amalgamated company and there was only a procedural defect. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. The Punjab Haryana High Court stated the effect of this provision in CIT v. Norton Motors, 275 ITR 595 in the following manner:- A reading of the above reproduced provision makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the provisions of the Act. To put it differently, Section 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting his/its jurisdiction, the same cannot be cured by having resort to Section 292B. 14. The issue again cropped up before the Court in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns condones the invalidity which arises merely by mistake, defect or omission in a notice, if in substance and effect it is in conformity with or according to the intent and purpose of this Act. Since no valid notice was served on the assessee to reassess the income, all the consequent proceedings were null and void and it was not a case of irregularity. Therefore, Section 292B of the Act had no application. 16. When we apply the ratio of aforesaid cases to the facts of this case, the irresistible conclusion would be provisions of Section 292B of the Act are not applicable in such a case. The framing of assessment against a non-existing entity/person goes to the root of the matter which is not a procedural irregularity but a jurisdictional defect as there cannot be any assessment against a dead person. 17. The order of the Tribunal is, therefore, clearly unsustainable. We, thus, decide the questions of law in favour of the assessee and against the Revenue and allow these appeals. 4.10. This judgment was subsequently followed by another detailed judgment by Hon'ble Delhi High Court in the case of CIT v. Dimension Apparels Pvt. Ltd. (supra) wherein all the argumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT had a valid jurisdiction to pass the impugned order u/s. 263 to revise the non est assessment order: Having decided the aforesaid two issues, the next issue that is to be decided by us is about the validity of order passed u/s. 263 by the Ld. CIT seeking to revise the assessment order which was nullity in the eyes of law. 10.1. We have discussed in detail in earlier part of our order that an invalid order cannot give birth to legally valid proceedings. It is further noticed by us that some of the judgments relied upon by the Ld. Counsel have already addressed this issue. This issue has also been decided by the co-ordinate bench (Delhi Bench of Tribunal) in the case of Krishna Kumar Saraf v. CIT (supra). The relevant part of the order is reproduced below: 17. There is no quarrel with the proposition advanced by ld. DR that the proceedings u/s. 263 are for the benefit of revenue and not for assessee. 18. However, u/s. 263 the ld. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act in relation to issue of shares by the assessee company and thus in view of amendment made w.e.f. Assessment Year 2013-14, section 68 cannot be invoked in respect of share capital received by the assessee, for which the assessee placed reliance upon the decision from Hon'ble Bombay High Court in the case of CIT v. M/s. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613 of 2014). However, the Ld. Sr. Senior Standing Counsel defended the addition made by the Ld. Assessing Officer. 2.28. We have considered the rival submissions and perused the material available on record. In view of the above submissions, we are reproducing hereunder the aforesaid order from Hon'ble jurisdictional High Court [Gagandeep Infrastructure Pvt. Ltd. (2017) 80 taxmann.com 272(Bom.)] for ready reference and analysis:- 1. This Appeal under section 260-A of the Income Tax Act, 1961 (the Act) challenges the order dated 23' April, 2014 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order is in respect of Assessment Year 2008-09. 2. Mr. Suresh Kumar, the learned counsel appearing for the Revenue urges the following re-framed questions of law for our consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that if the amounts have been subscribed by bogus shareholders it is for the Revenue to proceed against such shareholders. Therefore it held the Assessing Officer was not justified in adding the amount of share capital subscription including the share premium as unexplained credit tinder Section 68 of the Act. (c) Being aggrieved, the Revenue carried the issue in the appeal to the Tribunal. The impugned order of the Tribunal holds that the respondent-assessee had established the identity, genuineness and capacity of the shareholders who had subscribed to its shares. The identity was established by the very fact that the detailed names, addresses of the shareholders, PAN numbers, bank details and confirmatory letters were filed. The genuineness of the transaction was established by filing a copy of share application form, the form filed with the Registrar of Companies and as also bank details of the shareholders and their confirmations which would indicate both the genuineness as also the capacity of the shareholders to subscribe to the shares. Further the Tribunal while upholding the finding of CIT(A) also that the amount received on issue of share capital alongwith the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. 4.(a) Admit the substantial question of law at (ii) above. (b) The issue arising in question no. (ii) is essentially whether application of Rule 8D(2)(iii) of the Income Tax Rules would not permit the Revenue to disallow expenditure not claimed i.e. much larger than the expenditure/debited in earning its total income. The Counsel inform us that there is no decision on this issue of any Court available and it would effect a large number of cases whether similar issues arise. Therefore, this issue would require an early determination. In the above view, at the request of the Counsel, the appeal is kept for hearing on 17th April 2017 at 3.00P.M. subject to overnight part heard. 5. Registry is directed to communicate a copy of this order to the Tribunal. This would enable the Tribunal to keep the papers and proceedings relating to the present appeal available, to be produced when sought for by the Court. 2.29. In the aforesaid order, the Hon'ble juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble jurisdictional High Court in the case of Asian Paints Ltd. 296 ITR 90 (Bom.). The ld. Sr. Standing Counsel defended the impugned order. 3.1. Before adverting further, it is our bounded duty to examine section 147 of the Act. Section 114 of the Evidence Act, 1872, is permissive and not a mandatory provision. Nine situations by way of illustrations are stated. These are by way of example or guidelines. As a permissive provision it enables to judge to support his judgment but there is no scope of presumption when facts are known. Presumption of facts under section 114 is rebuttable. The presumption raised under illustration (e) to section 114 of the Act means that when an official act is proved to have been done, it will be presumed to have been regularly done but it does not raise any presumption that an act was done for which there is no evidence or proof. (i) Assessments cannot be validly reopened under section 147 of the Act even within four years, if an assessee had furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). So long as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 996 (SC) (paras 34, 35) Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) (para 17) 3i Infotech Ltd. v. Asst. CIT [2010] 329 ITR 257 (Bom) (para 26) International Woollen Mills v. Standard Wool (U. K) Ltd. [2001] 5 SCC 265 (para 30) Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) (paras 9, 33, 34, 35) KLM Royal Dutch Airlines v. Asst. Director of I.T. [2007] 292 ITR 49 (Delhi) (para 12) Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) (para 31) Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) (para 34) Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 (Ker) (para 9) New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi) (para 18) Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21) Snowcem India Ltd. v. Deputy CIT: [2009] 313 ITR 170 (Bom) (para 31) Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58) Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29) Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20) United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker) (para 9) (i) What is meant by the term 'change of opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the fore going proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a statement by a judge or a court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P. Ramanatha Aiyar (third edition) explains the term opinion to mean something more than mere retaining of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question... An opinion is a conviction based on testimony... they are as a result of reading, experience and reflection . 3.5. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Officer forms an opinion and decides not to make an addition or holds that the assessee is correct and accepts his position or stand. In Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P H), a Division Bench of the Hon'ble Punjab and Haryana High Court observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of opinion will not apply. The reason is that opinion is formed on facts. Opinion formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of change of opinion . Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression material facts means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer's proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be unconstitutional. We are, therefore, of the opinion that section 147 of the Act does not postulate conferment of unbridled power upon the Assessing Officer to initiate reassessment proceeding upon mere change of opinion . 3.13. The Hon'ble Apex Court thereafter referred to the subsequent decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) wherein it was observed that some of the observations made in Kalyanji Mavji (supra) were far too wide and the statute did not permit reappraisal of material considered by the Assessing Officer during the original assessment. The observations in Kalyanji Maviji (supra), relied upon by the Ld. Sr. Standing Counsel, that reopening would cover a case where income has escaped assessment due to the oversight, inadvertence or mistake was too broadly expressed and did not lay down the correct law. It was clarified and observed at page 1004 in Indian and Eastern Newspaper Society [1979] 119 ITR 996 (SC) as under: Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the petition that the Assessing Officer was informed at the hearing held on 10-12-2013 that the assessee is preparing a petition to challenge the reopening for the assessment year 2008-09 on identical grounds as done in earlier assessment year 2007-08 which is pending in the High Court and ad interim relief has also been granted restraining the revenue from proceeding with the assessment for the assessment year 2007-08. The passing of an order on 19-12-2013 by the Assessing Officer in undue haste and thereafter contending that in view of alternative remedy the writ petition should not be entertained does not appear bona fide. This undue haste in passing the impugned order dated 19-12-2013 is an attempt to overreach the Court and to thwart the assessee's challenge to the impugned order dated 20-11-2013 pending before the High Court. [Para 6] In the above circumstances, the order dated 19-12-2013 passed by the Assessing Officer under section 143(3) read with section 147 was liable to be set aside. [Para 7] The power of the Assessing Officer under sections 147 and 148 to reopen an assessment is classified into two: (a) Reopening of assessment within a peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oral submissions. Moreover the reasons for reopening an assessment should be that of the Assessing Officer alone, who is issuing the notice, and he cannot act merely on the dictates of any another person in issuing the notice. Moreover the tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source. However, the reasons for the reopening have to be only of the Assessing Officer issuing the notice. At the stage of issuing notice under section 148 to reopen a concluded assessment, the satisfaction of the Assessing Officer issuing the notice is of primary importance. This satisfaction must be prima facie satisfaction of having a reason to believe that income chargeable to tax has escaped assessment. At the stage of the issuing of the notice under section 148 it is not necessary for the Assessing Officer to establish beyond doubt that income indeed has escaped assessment. [Para 12] The parties proceeded on the basis that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the order dated 12-10-2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. [Para 14] It was contended by the revenue that this is not a case of change of opinion, as the reopening is based on fresh tangible material, namely, audit report furnished by the internal audit department of the revenue. Neither the reasons furnished to the assessee disclose the material obtained from the audit report of the internal audit department of the revenue as the basis for reopening assessment, nor the order dated 20-11-2013 rejecting the assessee's objection state that the ground for reopening is the tangible material disclosed by the internal audit department of the revenue. The Bombay High Court in the case of Hindustan Lever v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 has held that the challenge to reopening of an assessment can only be resisted on the basis of the reasons recorded at the time of issuance of notice and no further reasons either orally at the bar or by filing of an affidavit can be considered to meet the challenge to reopening of an assessment. Therefore, it would not be per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly considered the followed cases:- Asian Points Ltd. v. Dy. CIT [2008] 296 ITR 90 (Bom.) (para 6); CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) (para 11) and Hindustan Lever v. R.B. Wadkar [2004] 268 ITR 332/137 Taxman 479 (Bom.) (para 15) followed. CIT v. Gopal Purohit [2011] 336 ITR 287/[2010] 188 Taxman 140 (Bom.) (para 9), CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) (para 11) 3.15. In another case in CIT v. Amitabh Bachhan (2012) 349 ITR 76 (Bom.), the Hon'ble jurisdictional High Court observed/held as under:- This appeal by the Revenue under section 260A of the Income-tax Act, 1961 (hereinafter referred to as the said Act ) challenges the order March 19, 2010, passed by the Income-tax Appellate Tribunal (hereinafter referred to as the Tribunal ) in respect of the assessment year 2002-03. 2. Being aggrieved, the appellant has raised the following questions of law for consideration by this court. (a) Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the Assessing Officer was not justified in initiating p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. (ii) Personal element in respect of vehicle expenses claimed. (iii) Professional expenses claimed were exactly for the purpose of profession or not. (iv) Books of account maintained by the assessee were not examined. (v) The assessee maintained seven bank accounts, but details in respect of six bank accounts were furnished. Details in respect of S. B. A/c. No. 107456 with SBI were neither provided nor called for by the Assessing Officer which might have been maintained by the assessee for professional receipts from EEL/Star TV, etc. (vi) Receipts of dividend from Vithal Nagar Co-operative Society with reference to investment in house property. (vii) Sources of cash deposits in savings bank A/c. No. 11155 (viii) Distribution income from M/s. Ethnic Enterprises. (ix) Deposits in S. B. A/c. No. 11155 under the head Receipts on behalf of Mrs. Jaya Bachchan. 5. Consequent to the above notice by an order dated December 31, 2007, the respondent was assessed to a total income of Rs. 20.05 crores. This was arrived at after adding an amount of Rs. 6.31 crores as unexplained expenses under section 69C of the said Act for which notice under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be no basis for the Assessing Officers to form a belief that income has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. In the circumstances, we uphold the order of the Tribunal dated March 19, 2010. 9. In view of the above, no substantial question of law arises for consideration by this court. Appeal is dismissed. No order as to costs. 3.16. In A. L.A. Firm (supra), the Hon'ble Apex Court explained that there was no difference between the observations of the Supreme Court in Kalyanji Maviji [1976] 102 ITR 287 (SC) and Indian and Eastern Newspaper Society case: [1979] 119 ITR 996 (SC), as far as proposition (4) is concerned. It was held that (page 297 of 189 ITR): We have pointed out earlier that Kalyanji Maviji's case [1976] 102 ITR 287 (SC) outlines four situations in which action under section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has only indicated that proposition (2) outlined in this case and extracted earlier may have been somewhat widely stated; it has not cast any doubt on the other three propositions set out in K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC), it also ropes in cases of a 'bare or mere change of opinion' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ually there is difference in scope and ambit of reopening provisions incorporated with effect from April 1, 1989. However, it was observed by the Hon'ble Apex Court in Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) that the amended provisions are wider. What is important and relevant is that the principle of change of opinion was equally applicable under the un-amended provisions. The Supreme Court was, therefore, conscious of the said principle, when the observations mentioned above in A. L.A. Firm [1991] 189 ITR 285 were made. 3.18. Under the amended provisions of section 147, an assessment can be reopened if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment; but if he wants to do so after a period of four years from the end of the assessment year, he can do so only if the assessee has fallen short of his duty to disclose fully and truly all material facts necessary for his assessment. It does not follow that he cannot reopen the assessment even within the period of four years as aforesaid if he has reason to believe that the assessee has failed to make the requisite disclosure. All that the section says is that in a cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01) 247 ITR 436 (All.), affirmed in CIT v. Foramer Finance (2003) 264 ITR 566, 567 (SC), Ipica Laboratories v. DCIT (2001) 251 ITR 416 (Bom.), Ritu Investment Pvt. Ltd. (2012) 345 ITR 214 (Del.), Ketan B. Mehta v. ACIT (2012) 346 ITR 254 (Guj.), Ms. Praveen P. Bharucha v. DCIT (2012) 348 ITR 325 (Bom.), CIT v. Usha International Ltd. 348 ITR 485 (Del.), Agricultural Produce Market Committee v. ITO (2013) 355 ITR 348 (Guj.), B.B.C. World News Ltd. v. Asst. DIT (2014) 362 ITR 577 (Del.). Identical ratio was laid down in CIT v. Malayala Manorma Company Ltd. (2002) 253 ITR 378 (Ker.) We think this thread runs through the various provisions of the Act. But Explanation 1 to the section confines the duty to the disclosure of all primary and material facts necessary for the assessment, fully and truly. As to what are material or primary facts would depend upon the facts and circumstances of each case and no universal formula may be attempted. The legal or factual inferences from those primary or material facts are for the Assessing Officer to draw in order to complete the assessment and it is not for the assessee to advise him, for obvious reasons. The Explanation, however, cautions the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es Ltd. (1976) 105 ITR 212 held that errorless legally correct order cannot be reopened, therefore, it is settled law that without any new information and on the basis of mere change of opinion, reopening of assessment is not permissible. As was held in CIT v. TTK Prestige Ltd. (2010) 322 ITR 390 (Karn.) SLP dismissed in 2010 322 ITR (St.) 14 (SC). Reference also made to Asian Paints Ltd. v. DCIT (2009) 308 ITR 195 (Bom.), Andhra Bank Ltd. v. CIT (1997) 225 ITR 447 (SC). The observations of the Supreme Court are a protection against the abuse of power; they also protect the Revenue which can, in the light of subsequent coming into light of facts or law, reopen the assessment. In the light of the aforesaid discussion, since, there was no new tangible material available with the Assessing Officer while resorting to section 147/148 of the Act, more specifically, while framing original assessment u/s. 143(3) of the Act, there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s. 143(3) of the Act. 3.19. The Hon'ble jurisdictional High Court in a later decision dated 18/01/2016 in Nirmal Bang Securities Pvt. Ltd. v. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel also), therefore, it is not permissible. So far as, the Assessment Year 2009-10 and 2010-11 are concerned, since, the assessee made full disclosure of material facts which were necessary for framing the assessment and the original assessment was completed under section 143(3), therefore, there is no evidence that income chargeable to tax had escaped assessment on account of failure on the part of the assessee to disclose the material facts fully and truly then the reopening is illegal as the same as amounts to change of opinion on the same set of facts without having any tangible material. It is further observed that the condition of proviso to section 147 are not satisfied as there is no failure on the part of the assessee to disclose fully and truly all material facts, which were necessary for framing the assessment. The facts in all the Assessment Years are identical. The Ld. Assessing Officer merely relied upon the statement recorded during survey proceedings under section 133A in the case of Lloyd Group of cases and the statements of three persons (statements are available on pages 174 to 225 of the paper book) and further the Ld. Assessing Officer relied upon the stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in this case, the facts are altogether different, therefore, may not help the Revenue. Our attention was invited to the facts of this case and in that situation, the conclusion drawn by the Hon'ble High Court. We have gone through this order. The Hon'ble High Court held/observed as under:- The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has a cause or justification to think or to suppose that income has escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words 'reason to believe' cannot mean that the 'Assessing Officer' should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes and if he likes, from any information he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he has reason to believe that such an income has escaped assessment. The justification for his belief is not to be judged from the standards of proof required for coming to a final decision. A belief, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 and 148 was not tenable. The same does not come within the ambit and sweep of exercise of power under article 226 of the Constitution of India. It was open to the assessee to participate in the reassessment proceedings and to put forth its stand and stance in details to satisfy the Assessing Officer that there was no escapement of taxable income. [Para 23] Consequently, the writ petition was liable to be dismissed. 3.23. A division Bench of Hon'ble Delhi High Court in New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi), referred to the decision of the Hon'ble Apex Court in CIT v. P. V.S. Beedies P. Ltd. [1999] 237 ITR 13 (SC) and made following observations. (page 392): In the case of CIT v. P. V.S. Beedies P. Ltd. [1999] 237 ITR 13 (SC), the apex court held that the audit party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned notice 3.25. Another case relied upon by the Revenue is Aradhna Estates P. Ltd. v. DCIT (404 ITR 105)(Guj.), wherein the Hon'ble High Court held as under:- In reasons recorded by the Assessing Officer for reopening the assessment. He pointed out that the information was received from the investigation wing of the department at Calcutta regarding shell companies which had given accommodation entries for share premium to Surat based companies. A list of 114 Calcutta based companies was provided which had given accommodation entries to such Surat based companies. Statements of many entry operators and dummy Directors recorded during various search and seizure operation, survey operation and investigation were checked. The Assessing Officer thereupon proceeded to record that On perusal of data so provided by the Deputy Director (Investigation), it is noticed that during the period under consideration, the assessee company has accepted share capital/share premium from the following entries/parties which have been proved to be shell companies based on the investigation conducted by the Deputy Director (Investigation). Underneath, he provided a list of 17 companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. The Assessing Officer formed such a belief on the basis of such materials placed before him and upon perusal of such material. This is not a case where the Assessing Officer was reexamining the materials and the documents already on record filed by the assessee along with the return or subsequently, brought on record during the assessment proceedings. It was a case where entirely new set of documents and materials was placed for his consideration compiled in the form of report received from the investigation wing. Such material was perused by the Assessing Officer and upon examination thereof, he formed a belief that the assessee company had received share application and share premium money from as many as 20 different investor companies who were found to be shell companies and indulging in giving accommodation entries. From this view point, since the Assessing Officer had sufficient material at his command to form such a belief. Such materials did not form part of the original assessment proceedings and was placed before the Assessing Officer only after the assessment was completed. Since on the basis of such materials, Assessing Officer, came to a reasonable belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-4-2013, does not change this position. [Para 14] As per this proviso, where the assessee is a company and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, explanation offered by the assessee company shall be deemed to be not satisfactory, unless the person in whose name such credit is recorded in the books of the company also offers an explanation about the nature and source of sum so credited and such explanation in the opinion of the Assessing Officer has been found to be satisfactory. Essentially, this proviso eases the burden of proof on the revenue while making addition under section 168 with respect to non genuine share application money of the companies. Even in absence of such proviso as was the case governing the periods with which we are concerned in the present case, if facts noted by the Assessing Officer and recorded in reasons are ultimately established, invocation of section 68 would be called for. [Para 15] The contention that the Assessing Officer had merely and mechanically acted on the report of the investigation wing also cannot be accepted. One has reproduced the reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessment proceedings, cannot be said to be a disclosure of the 'true' and full facts in the case and the ITO would have the jurisdiction to reopen the concluded assessment in such a case. It is correct that the assessing authority could have deferred tie completion of the original assessment proceedings for further enquiry and investigation into the genuineness to the loan transaction but his failure to do so and complete the original assessment proceedings would, not take away his jurisdiction to act under section 147, on receipt of the information subsequently. In the instant case, the subsequent information on the basis of which the ITO acquired reasons to believe that income chargeable to tax had escaped assessment on account of the omission of the assessee to make a full and true disclosure of the primary facts was relevant, reliable and specific. It was not at all vague or nonspecific. From a combined review of the judgments of the Apex Court, it follows that an ITO acquires jurisdiction to reopen assessment under section 147(a) read with section 148 only if on the basis of specific, reliable and relevant information coming to his possession subsequentl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... One of the purposes of section 147 appears to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say 'you accepted my lie, now your hands are tied and you can do nothing'. It would, be travesty of Justice to allow the assessee that latitude. Therefore, in the facts of the present case the ITO, Azamgarh rightly initiated the reassessment proceedings on the basis of subsequent information, which was specific, relevant and reliable, and after recording the reasons for formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income chargeable to tax had escaped assessment. He therefore, correctly invoked the provisions of sections 147(a) and 148. The High Court was, thus, perfectly justified in dismissing the writ petition. 3.27. Another case relied upon by the Revenue is Sri Krishna Pvt. Ltd. v. Income Tax Officer 221 ITR 538 (Supreme Court), wherein, it was held as under:- The ITO can issue the notice under section 148 proposing to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1959-60 leading to escapement of income. It was not alleged by the assessee that the Assessing Officer had not checked up or tallied the names of the alleged lenders for both the assessment years and that he merely went by the fact that there were unsecured hundi loans for both the assessment years. In the absence of any such allegation which allegation, if made, could have afforded an opportunity to the Assessing Officer to answer the said averment, it must be presumed that the Assessing Officer did find that a large number of alleged lenders who were found to be bogus during the assessment year 1960-61 were also put forward as lenders during the assessment year 1959-60 as well Evidently, this was what he meant in the context, whence spoke of 'similar loans' being noticed for the year in question as well In such a situation, it was impossible to say that the Assessing Officer had no reasonable ground to believe that there had been no full and true disclosure of all material facts by the assessee during the relevant assessment year and that on that account, income chargeable to tax had escaped assessment. Every disclosure is not and cannot be treated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding relating to the subsequent assessment year. The dispute was at the stage of the validity of the notice under section 148/147. The enquiry at this stage k only to see whether there are reasonable grounds for the ITO to believe and not whether the omission/failure and the escapement of income is established. For the above reasons, the Assessing Officer was right in issuing notice under section 148. Therefore, the assessee's petition for quashing the validity of a notice issued under section 148 read with section 147 was dismissed. 3.28. We note that in the aforesaid orders, the facts are altogether different from the facts from the present case therefore, the aforesaid decisions, in our humble opinion, may not help the Revenue. However, the decision from Hon'ble jurisdictional High Court in Purity Techtextile Pvt. Ltd. ((supra)) and various other decisions including the decision in Kelvinator Of India Ltd. ((supra)) clearly comes to the rescue of the assessee. It is further noted that even in the reasons recorded by the Ld. Assessing Officer, neither he recorded any satisfaction nor made any allegations to the effect that there was a failure on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to tax has escaped assessment. The statements of all the 3 persons does not have any direct relationship with escapement of income in the hands of the appellant company. In the statements there is a reference to transactions between certain parties and fourteen companies. There is not a whisper in the statement of all the 3 parties to the effect that any transaction with the appellant company. In order to invoke the provisions of reassessment proceedings there has to be a direct and the live link between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped assessment. There should be a cogent material available with the Assessing Officer to come to conclusion that income chargeable to tax has escaped assessment. In the present case the Learned AO is trying to relate the information available with the conclusion that income chargeable to tax has escaped assessment and hence notice issued u/s. 148 is bad in law. There is not a single transaction with any of the parties which are alleged to have been managed by Mr. Mukesh Choksi with the appellant. In view of this no value can be attributed to the statement which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on pages 11 12 of the paper book. AO has relied upon the statement recorded during the survey proceedings u/s. 133A in the case of Lloyds Group of cases. Reliance is placed on the statement of Shri B.L. Agarwal, Shri Mukesh Choksi and Shri Om Hari Halan. The copies of these statements are on pages 174 to 225 of the paper book for A.Y. 2007-08. The AO has relied upon the statement of Shri Mukesh Choksi which was recorded on 16/1/2013 whereas in the reasons he has referred to the statements recorded on 25/11/2009 and 26/11/2009. AO cannot improve upon any aspects beyond the reasons recorded. The statements of all the 3 persons does not have any direct relationship with escapement of income in the hands of the appellant company. In the statements there is a reference to transactions between certain parties and fourteen companies. There is not a whisper in the statement of all the 3 parties to the effect that any transaction with the appellant company. In order to invoke the provisions of reassessment proceedings there has to be a direct and the live link between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or both the years and u/s. 153C r.w.s 143(3) of the Act for AY 2009-10. For both the years also no tangible material was available with the Ld. Assessing Officer as regards the amounts received by the assessee from various parties in respect of whom the additions were made in the aforesaid two assessment years. Based on the same facts, without having any evidence, the Ld. Assessing Officer issued notice under section 148, thus, this tantamount to change of opinion on the same set of facts without having any tangible material that income chargeable to tax escaped assessment. In the light of this factual finding the decision from Hon'ble jurisdictional High Court in Purity Techtextile Pvt. Ltd. ((supra)) and Kelvinator of India Ltd. ((supra)) from Hon'ble Apex Court clearly comes to the rescue of the assessee as the conditions of proviso to section 147 of the Act are not satisfied as even in the reasons there is no allegation to the effect that there was failure on the part of the assessee to disclose the material facts fully and truly. The cases in favour of the assessee has already been discussed by us from Hon'ble Apex Court, Hon'ble jurisdictional High Court and H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is not justified as the assessee has fulfilled all the conditions enshrined under section 68 of the Act and the assessee is not expected to prove the source of source. It was argued on behalf of the assessee that the assessee received funds from four parties during Assessment Years 2007-08 and the amount so received in Assessment Year 2007-08 was treated as share application money in Assessment Year 2010-11 and preference shares were issued, at par, in Assessment Year 2011-12 and no premium was received by the assessee against issuance of such preference share. It was explained that the assessee filed necessary declaration, details of issue of preference shares, at par, to the Registrar of the companies and in the books of accounts also, no premium was received against the issue of preference shares. It was argued that the assessee filed original return on 23/10/2007, annexed with audited financial statement and other relevant details and thus the order was passed under section 143(3) accepting the return income and thereafter notice under section 153C was issued to the assessee on 16/12/2011 and further notices under section 143(2) and 142 of the Act were issued asking the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oples General Hospital Ltd. 35 taxmann.com 444 (Madhya Pradesh) xii. Commr. of Income Tax, Chennai v. Pranav Foundations Ltd. 51 taxmann.com 198(Madras) xiii. Principal Commr. of Income Tax - 8 v. Softline Creations (P.) Ltd. 81 taxmann.com 269 (Delhi) xiv. Jadau Jewellers and Manufacturers (P.) Ltd. v. Asstt. Commr. of Income Tax Central Circle - 283 taxmann.com 249 (ITAT - Jaipur) xv. Lovely Exports Pvt. Ltd. -299 ITR (Delhi High Court) page 268 and SLP rejected by Supreme Court in 319 ITR (statute page 5) xvi. Commr. of Income Tax v. Creative World Telefilms Ltd. 333 ITR 100(Bombay) xvii. Asstt. Commr. of Income Tax v. Venketeshwar Ispat (P) Ltd. (Chhatisgarh) xviii. Commr. of Income Tax v. Gangour Investment Ltd. (2009) 179 Taxman 1 (Delhi) xix. Commr. of Income Tax v. STL Extursion Pvt. Ltd. (2011) 333 ITR p. 269 (MP) The crux of the argument is that the assessee has fulfilled all the conditions being - identity, creditworthiness and genuineness of the transaction- as required under section 68 of the Act and the assessee is not expected to prove the source of source. Plea was also raised that on earlier occasion, the matter travelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r particulars of the said parties are enclosed as Annexure - 1. The details are summarized as under: Name of the Co. Return filed u/s 139(1 ) Income declared Share Application Received Notice u/s. 153A /C Order u/s 153 A/ 153C Order of CIT(A) -41 Order of ITAT Order u/s 143(3) rws 147 Order of CIT(A) -53 Balance Addition dated Addition dated Addition deleted dated Deletion Confirmed dated Addition dated Addition deleted 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Jogia Properties Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.5. The assessee challenged the addition before the First Appellate Authority and filed necessary details as under:- PAGES Sr. No. Particulars Paper book No. Jogia Prop. Ltd. Karburi Prop. Ltd. Reva Prop. Ltd. Vedisa Prop. Ltd. 1 Balance Sheet profit Loss A/c 1 154-156 159-161 164-166 169-171 2 Copy of Income Tax Returns 1 22 26 30 34 3 Ledger account in books of SGTL 1 139 140 141 142 4 Ledger account confirmations 4 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer who has passed the assessment order in the case of assessee for A.Y. 2007-08. All the parties have filed all the details in support of their claim of receipt of money in their hands and investments made with the assessee during their assessment proceedings. The copies of the orders passed by the Assessing Officer in their cases are also made available by the assessee in the paper book filed before this Tribunal. The reference of the documents filed by each of the party is given in paperbooks filed during the course of appellate proceedings before the Tribunal. The written submissions were filed before the Ld. Commissioner of Income Tax (Appeal) and as annexure to the submission made before CIT (Appeals) all the documents refer to above were filed. 5.7. Now, we shall summarize the facts of Assessment Year 2008-09, which are as under:- 1. The assessee is a listed Public Limited Company, received funds from six parties during A.Y. 2008-09. The amount, received in A.Y. 2008-09 was treated as share application in A.Y. 2010-11 and the preference shares were issued in A.Y. 2011-12. 2. The preference shares were issued at par. No premium is received against issue of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted Addition dated Addition deleted 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Archive Realty Dev. Ltd. 16- 09- 08 Nil 247500 000 31- 12-10 26- 12- 11 500000 00 24- 07- 12 500000 00 18- 11- 16 500000 00 31- 03- 15 247500 000 17- 11- 17 247500 000 Nil Auster Prop. Ltd. 16- 09- 08 Nil 250000 00 31- 12-10 26- 12- 11 100000 00 25- 07- 12 100000 00 18- 11- 16 100000 00 31- 03- 15 250000 00 17- 11- 17 250000 00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Dev. Ltd. Auster Prop. Ltd. Jogia Prop. Ltd. Karburi Prop. Ltd. Reva Prop. Ltd. Vedisa Prop. Ltd. 1 Balance Sheet profit Loss A/c. 1 159-161 165-167 170-172 175-177 180-182 185-187 2 Copy of Income Tax Returns 1 22 26 30 35 39 43 3 Ledger account in books of SGTL 1 145 146 147 148 149 150 4 Ledger account confirmations 4 4 5 6 7 8 9 5 Pref. Shares Application forms 4 26 27 29 30 32 33 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are reflected. All the 6 parties are assessed to tax by the same Assessing Officer who has passed the assessment order in the case of assessee for A.Y. 2008-09. All the parties have filed all the details in support of their claim of receipt of money in their hands and investments made with the assessee during their assessment proceedings. The copies of the orders passed by the Assessing Officer in their case are also filed in the paper book. The reference of the documents filed by each of the party is given paper book which was filed during the course of appellate proceedings before the tribunal. 5.10. The submissions of the assessee for this Assessment Year are identical to Assessment Year 2007-08 and also the case laws, which we have discussed in earlier paras of this order. All the six parties received share application money from various corporate entities, which are summarized as under: Party-wise details of Share Application money received by six companies in A.Y. 2008-09 Amount (in Rs.) SR. NO. NAME OF THE COMPANY PAN NO. ARCHIVE REALTY DEV. LTD. AUSTE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,00,00,000 3,00,00,000 10 GYNESHWAR TRADING FINANCE PVT.LTD AACCG7998L - - - 2,00,00,000 1,00,00,000 3,00,00,000 11 HEMA TRADING COMPANY PVT.LTD. AABCH4279G - - 1,55,00,000 3,20,00,000 1,45,00,000 6,20,00,000 12 HINGORA FINVEST PVT LTD AAACH6694N - - 1,00,00,000 1,50,00,000 1,00,00,000 3,50,00,000 13 ISPAT SHEETS LTD. AAACI4429E 2,00,00,000 - 2,45,00,000 3,00,00,000 7,45,00,000 14 JAVDA INDIA IMPEX LTD AAACA7065L - - 2,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 TERRY TOWEL INDUSTRIES LTD. AACCT2642J 3,25,00,000 50,00,000 - - - 2,75,00,000 6,50,00,000 25 TRICON BUSINESS PVT LTD AAACT9466E - 1,00,00,000 - - - 2,00,00,000 3,00,00,000 26 WILCO FINEXIM PRIVATE LIMITED AAACW4586E - - - 25,00,000 75,00,000 - 1,00,00,000 27 YASH V. JEWELS LTD. AAACY1119P 1,55,00,000 1,55,00,000 Total 24,75,00,000 2,50,00,000 20,75,00,000 21,25,00,000 18,75,00,000 23,75,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of the funds being the amount received from six companies but also has proved the source of the source in the hands of the said six companies. In the hands of assessee in the earlier two proceedings the amount received from all the six parties is accepted and no additions were made. 5.12. It is further noted that the Assessing Officer has in the present reassessment proceedings, being the third round, has taxed the amount received from all the six companies without having any direct evidence contrary to what was available on record. The reassessment proceedings are initiated based on the statements of 3 parties. In their statement also there is no reference to the investment made by the 6 parties with the assessee. No evidence or proof is brought on record to prove contrary to what is established by the assessee as well as also by the 6 parties and what is concluded by the CIT (Appeals) and the Tribunal in their individual proceedings. One of the person on whose statement the reliance is placed for reopening is that of Shri B.L. Agarwal. He has offered the income in the hands of Lloyds Steel Industries Limited now known as Uttam Value Steels Limited for A.Y. 2007-08 to 2010- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing the genuine investments by fifty-four companies in to the share capital of fourteen companies and second being the investments made by the Lloyds Steel Industries Limited through the fifty-four companies in the fourteen companies. The department on one side is rejecting the explanation regarding the application of the income by Lloyds Steel Industries Limited and also simultaneously treating the investments by fifty-four companies as non-genuine investments in the fourteen companies. The department also levied penalty on Lloyds Steel Industries Limited u/s. 271(1)(c) of the Act. This penalty order was finally carried in appeal before this Tribunal, wherein, after having detailed discussion, the Tribunal vide order dated 22/05/2017 (ITA No. 3622, 3623, 3624 3625/Mum/2016) for various Assessment Years, deleted the penalty. The relevant portion of the order dated 22/05/2017 is reproduced hereunder for ready reference and analysis:- These are the appeals filed by assessee against the order of CIT(A)-48, Mumbai dated 31/03/2016 for the A.Y. 2007-08 to 2010-2011 in the matter of imposition of penalty u/s. 271(1)(c) of the IT Act. 2. We have heard the counsels for both th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. By the impugned order, CIT(A) confirmed the penalty so imposed by the AO against which assessee is in further appeal before us. 4. Common grounds have been raised in all the years under consideration. The ground taken by assessee in the A.Y. 2010-11 reads as under:- 1. The learned CIT(A) failed to appreciate that the Assessee has neither concealed its income nor furnished inaccurate particulars thereof. Therefore, the penalty of Rs. 36,98,42,950/- is liable to be deleted. 2. Without prejudice to the above, the learned CIT(A) failed to appreciate that the Assessee is a loss-making company and has brought forward losses which were entitled to be set off against income, if any, of the current year. This shows that the Assessee never had the intention to conceal its income or furnish inaccurate particulars thereof. 3. Without prejudice to the above, the learned CIT(A) failed to appreciate that the Assessee had suo motu included the income offered during survey in the return which was filed before issuance of notice under sec. 148 which was duly accepted by the AO. Since the returned income was accepted, there is no question of levying penalty on the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hery (ITA 1154, 953, 1097, 1226 / 2014, order dated January 5, 2017)(Bom HC) 5 M/s. Wadhwa Estate Developers India Pvt. Ltd., vs. ACIT ITA 2158/Mum/2016 order dated February 02, 2017 (TMum) 6 Dr. Sarita Milind Darave v. ACIT ITA No.2187/Mum/2014, order dated 21, 2016)(TMum) 7 Sejal P. Savla v. ACIT ITA 3282/Mum/2015 order dated August 10, 2016 (TMum) 8 ACIT v. Dipesh M. Panjwani ITA No.6330,5878,6328,6188/M/2012, order dated March 18, 2016)(TMum) 9 Sanghavi Savla Commodity Brokers P Ltd. vs ACIT ITA No. 1746/Mum/2011 10 Parinee Developers Pvt Ltd vs ACIT ITA No.6772/M/2013, order dated September 11, 2015)(T.Mum) 11 Shri Hafeez S Contractor vs ACIT ITA No. 6222/Mum/2013 12 H Lakshminarayana vs ITO 61 Taxmann.com 373 (Bang-Trib) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Notice under section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or not furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law . 7. On merits it was contended by learned AR that it was a voluntary disclosure and nothing incriminating was found either during the course of survey or thereafter. He invited our attention to the income assessed which was equal to the return income except in the A.Y. 2010-11. As per learned AR, there was addition of Rs. 4,38,93,410/- in the A.Y. 2010-11 as compared to the return income and the disclosure made by the assessee in the revised return. As per learned AR the said addition also does not call for levy of concealme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as filed at Rs. 1,19,10,300/- and assessment was completed at Rs. 1,19,11,555/- by making small addition of Rs. 1,235/- to the returned income filed in response of notice under section 148. On the additional income offered penalty of Rs. 11,80,489/- was levied. The AO rejected the objection of the assessee that penalty should not be levied as the assessment has been framed according to the returned income in which the additional income was offered. The AO observed that the returned of income was neither filed under section 139(1) nor it was a revised return as per provisions of section 139(5). This fact is mentioned in para 6 while reproducing the order passed by the CIT(A). It was further 'Observed by the AO that in consequent to survey action taken on November 20, 2012 the assessee filed letter dated January 14, 2013 and subsequently has filed return of income in response to notice under section 148 dated March 4, 2013 and assessment was framed vide order dated March 26, 2013. In these circumstances the levy of penalty was sustained by CIT(A) and his order was challenged before the ITAT. The ITAT taking note of all the above facts mentioning in para 24 of the order and taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the return filed by the assessee. This view gets supported by Explanations 4, 5 and 5A of section 271 (1). Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Section 271 (1)(c) has to be construed strictly. Unless it is found that there is actually a concealment or nondisclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax . This is an identical case, where survey operations had taken place and the assessment was reopened u/s. 148, the coordinate Bench deleted the penalty. 31. In the case of Vasavi Shelters v. ITO [2013] 32 taxmann.com 26, the coordinate Bench at Bangalore held, There can be no concealment or nondisclosure as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax and therefore no penalty under section 271(1)(c) could be levied. The words 'in the course of any proceedings under this Act' in section 271(1)(c) are prefaced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same income, namely, the amounts in the bank accounts along with interest there on, have been assessed in the hands of the assessee as well as different family members. Hence, even the Department is not certain as to the right person who is amenable to tax qua the said income. in the circumstances, the Tribunal rightly came to the conclusion that no penalty is exigible under the provisions of section 271 (1)(c) of the Act when the Tribunal has found that admittedly the family members have not been treated as benamidars of the assessee nor have the family members stated that they are the benamidars of the assessee. 13. In the view that the court has taken it has not been found necessary to enumerate and deal with more than a dozen authorities cited by both the sides. The question referred for the opinion of this court is, therefore, answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs . 34. In the case of Dilip Kedia v. Asstt. CIT [2013] 40 taxmann.com 102 (Hyd.) the coordinate Bench at Hyderabad held, considering all the aspects viz., the assessee had declared t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case, undisputedly no additions were made in the assessment for the assessment year 2004-05 as the Assessing Officer has accepted the revised return filed by the assessee without tinkering with accounts prepared by him and computed his income. Therefore, the Explanation 2 to section 271(1) cannot be invoked and the penalty under section 271 (1)(c) cannot be levied in assessment year 2004-05 for the additional income offered during the course of survey. We therefore, set aside the order of the CIT(A) and delete the penalty . 36. As it can be noted, that the in all the above cases extracted by us, either there was a search operation or there was a survey operation on the assessee and as a consequence thereof, the assessee filed its return/revised return/reassessment return including the amount offered for tax and which was accepted by the AO. In all these cases, the judicial fora was of the view that penalty was not exigible. CIT v Shankerlal Nebhumal Uttamchandani [2009] 311 ITR 327(Guj) In this case search was conducted on October 27, 1987 at the premises of firm and its partners. During the course of search various documents, loose papers, pass books, bank s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 11 to 13 from the above decision are being reproduced:- 11. As noted hereinbefore, the Tribunal has in terms found that though certain queries were raised and put to the assessee there was no specific pinpointing of particular items of income which have been concealed by the assessee. The Tribunal has found, as a matter of fact, that till March 31, 1989, the process of detection was not complete, the date March 31, 1989, being the date of filing of the revised returns. In face of these findings recorded on the basis of evidence appreciated by the Tribunal, the court does not find it necessary to deal with any other issues considering the question referred for the opinion of this court. In fact, there is no material on record to indicate that the aforesaid finding of the Tribunal is incorrect in any manner whatsoever. Furthermore, the Tribunal has also noted as a matter of fact that the very same amounts standing to the credit of the bank accounts of various family members had already been assessed by the Departmental authorities along with interest in the hands of the family members and it was also an admitted position that those family members have nowhere admitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary revised return is to be seen in the context of non-levy of penalty particularly whereas the reassessment itself has been done in accordance with the revised return so filed by the assessee. 9. It was also brought to our notice that the Assessing Officer has made several incorrect statement and allegations while levying the penalty. This was duly brought to the notice of the CIT(A) in the course of the hearing vide written submissions filed before him. However, the CIT(A) has completely ignored such vital factual discrepancies pointed out by the assessee. The relevant part of the written submissions filed before the CIT(A) as under:- 39. The Learned Assessing Officer while passing the older u/s. 271(l)(c) has made various wrong statements and false allegation. In para 2 the Learned Assessing Officer stated that large scale evasion of tax by Lloyds group by way of routing unaccounted cash through share application money was unearth during the search action conducted at the premises of Jog/a Properties on 04/03/2010 in consequence of other search action conducted on 25/11/2009 in case of Shri Mukesh Choksi who was engaged in the business of providing bogus bills, bogus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... failed to take any objection in that matter, assessee's declaration of income in revised returns and his explanation that he had done so to buy peace with department and to come out of vexed litigation could be treated as bona fide and no penalty could be levied for concealment of income. 13. It was submitted by learned AR that decision of the Bombay High Court in CIT v Smt. Kaushalya(Supra) is not applicable to the facts of the present case for following reasons: - The issue is now decided by the Apex Court in Commissioner of Income-tax v. SSA'S Emerald Meadows [2016] 73 taxmann.corn 248 (SC) wherein it is clearly held that there is no merit in the petition. The SLP was against the order of Karnataka High Court in -CIT v. SSA'S Emerald Meadows [2016] 73 taxmann.corn 241 (Kar.) wherein the High Court affirmed decision of Tribunal, relying on decision of CIT v Manjunath Cotton and Ginning Factory (2013) 359 ITR 565(Karn) holding that notice issued by Assessing Officer under section 274 read with section 271 (1)(c) was bad in law, as it did not specify under which limb of section 271 penalty proceedings had been initiated, i.e., whether for concealment of parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evy of penalty under both the charges and if the AO in the penalty order has levied the penalty on any one of the charge then also, it cannot be held that penalty order is bad in law. The substance and facts relating to levy of penalty has to be seen. On merits, she strongly relied upon the order of the CIT(A). 15. It was also contention of CIT DR that AO has properly recorded satisfaction while passing assessment as well as penalty order which clearly indicate proper application of mind by the Assessing Officer. She also relied on the decision of Bombay High Court in case of Smt. Kaushalya Ors. 216 ITR 660 (Bom) to canvass support for her plea that non-striking off the irrelevant portion of notice would not invalidate the imposition of penalty u/s. 271(1)(c) of the Act. 16. As per learned DR, the undisclosed income is unearthed as a result of survey u/s. 133A and investigations carried out by the department. Due to this, the assessee offered additional income of Rs. 557.5 cr. for the AYs 2007-08 to 2010-11. The assessee never intended to offer this income to the department and the assessee had guilty mind with all the elements of mens rea. That is why the assessee did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As a result letter dated December 27, 2012 addressed to DDIT(Inv.) Unit-IX(3) Mumbai was filed on January 7, 2013 wherein an additional income of Rs. 557.50 crores was offered and the same was included in the returns of income filed for the impugned assessment years and also formed part of the assessed income on which impugned penalty has been levied. 19. The additional income so offered was accepted and assessed by AO. Such income was bifurcated into various heads which have been accepted by the AO and additional income has been assessed accordingly. For sake of completeness of facts regarding additional income in respect of each of the year as offered by assessee and accepted by AO for making the addition are described under the head trading sales, Raw Materials purchases for manufacturing, purchases from other parties for manufacturing difference on account of yield. Year wise details are as under:- A.Y.2007-08 Sr. No. Nature of head Particulars Qty (MT) Gross Income 1 Trading Sales A Tradi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uine 0 0 0.23 4 Difference on a/c. of yield Difference in Yield as per Steel-Industrial norms(84.5%) and yield shown by assessee 0 0 118.00 TOTAL 125.98 2009-10 Sr. No. Nature of head Particulars Qty (MT) Gross Income 1 Trading Sales A Trading other than Ragni trading Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 118580 524.82 22.68 2 Trading Sales B Trading with Ragni trading Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 0 32.85 1.41 3 A. purchase from other parties for manufacturing Bogus purchases from 15 parties which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated December 27, 2012 was filed with the DDIT (Inv.) confirming the offer of additional income and immediately revised returns were also filed on January 15, 2013 before any detection was made by the Department. It is evident from the facts that notice u/s. 148 was issued not only after the offer was made but long after the return was filed by the assessee. Date wise events upto the date of issue of notice u/s. 143(2) in respect of AY 2007-08 are described as under:- LIST OF DATES AND EVENTS Sr. No. Date Particulars 1 30/10/2007 Original return of income filed 2 23/12/2009 Date of Assessment order u/s.143(3) 3 19/12/2012 Survey u/s.133A 4 20/12/2012 Statement of Sh. Babu Lal Agarwal, then the director of the assessee company recorded by the survey authorities wherein he offered the unaccounted income generated during AYs 2007-08 to 2010-11 of an amount of Rs.556,96,50,000/-. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income declared by the assessee which was then added by the AO while passing the reassessment orders under section 147 r.w.s 143(3) in para 4.3 he has reproduced the analysis of the AO in which it was stated by the AO that the submissions of the assessee with regards to non levy of penalty can be summarised which inter alia include that the disclosure has been made suo moto by the assessee and it was to buy peace and was conditional subject to non-levy of penalty. The AO observed that the action taken under section 133A and post survey investigation resulted in unearthing the concealment of additional income which was due to departmental action in 2010 and then in 2012; that the assessee was facing consistent and repeated investigation, therefore, was not left with any choice except to come clean and offered the suppressed income over the years as additional income. Therefore the AO has held that penalty was leviable. Such conclusion of the AO has been reproduced at pg. 23 of the impugned order. From the record we found that the assessee has had raised before CIT(A) manifold arguments that notice issued under section 271 (1)(c) is not justified and such contention is recorded at P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific answers to the queries raised by CIT(A). Therefore, it has been mentioned by him in para 6.3 at pg. 39 of the impugned order that the first remand report sent by the AO was cryptic and did not address the points on which the comments were sought. Therefore, Ld. CIT(A) provided second opportunity to the AO for which the second letter was submitted. In second reply too no reference was made to any evidence or material to substantiate the additions except the excerpt from the statements recorded during the course of survey regarding voluntary offer of the addition and reference can be made to the second remand report of the AO which has been reproduced in the impugned order at pgs. 39-62 of the order. The conclusion drawn by CIT(A) to uphold the addition are recorded in para 10.1 from pg. 63 of the impugned order. It can be seen from the impugned order that from para 10.1 to 11.11 Ld. CIT(A) has discussed the admission made by the then director of the assessee company who made the declaration of additional income which was duly reflected in the return filed immediately after the statement made during the survey, thereafter, in para 12.1 Ld. CIT(A) has discussed that whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er was made in statement dated January 15, 2013 which was followed by letter dated 27.12.2012 filed on 07.01.2013 and immediate filling of the revised return on 15.01.2013 all immediate and prompt actions taken by the assessee indicates not only the bonafide conduct of the assessee but also establish the fact that the impugned addition is on account of voluntary offer made by the assessee during the survey and till the date of filling of the voluntary returns i.e. on January 15, 2013 there was no detection by the Department. Such bonafide and voluntary action of the assessee is further strengthen by the fact that Ld. AO has accepted the offer and income has been determined according to returns of income filed on January 15, 2013 except an addition of Rs. 4,38,93,410/- in the AY 2010-11 on account of purchases made from Gupta Metallics as per para 6 of the assessment order for AY 2010-11. 28. Before proceeding to assail the penalty Order and the impugned order, it may be mentioned that while upholding the penalty Ld. CIT(A) and CIT DR has relied on some decisions, which have no application to the present case as these have been rendered in different context as follows. MAK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961. -The above view is also strengthened by the decision of the Hon'ble Jurisdictional High Court dated February 9, 2016 in the case of CIT v. Shri. Hiralal Doshi ITA No. 2331 of 2013 wherein their lordships have discussed the decision of the Supreme Court in the case of MAK Oata(supra) and observed that the said case would not be universally applicable as the said case was rendered on the facts which are completely disting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing India (P.) Ltd. v ACIT [2014] 151 ITD 454 - In this case also the assessee did not disallow entire marketing expenses in respect of international transaction and this issue was already referred by the AO to the TPO. Thereafter, the assessee revised its return and it was held that such action of the assessee was not voluntary and during the course of assessment proceeding. Thus, this case is also not applicable to the facts of the present case. A.M. Shah Co. v CIT [1999] 238 ITR 415(Guj.) The facts of the case are entirely different from the facts of the case of the assessee. The assessee challenged the levy of penalty on the ground inter alia including that the assessment was on estimate basis and' penalty could not be sustained. The fact was that serious discrepancies were found in the books of account and excess sales were shown while purchases were not shown, bogus purchases were claimed and purchases were not shown in sales or stock. The assessee never revised its return and serious discrepancies were noticed in the books of accounts itself. Therefore, facts of the said case do not match with the present case and the levy of concealment penalty in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it it is a fatal error which vitiates the entire initiation itself. If charge itself is vague and not clear, then the onus cast upon the assessee under Explanation itself gets vitiated as assessee is precluded from a chance to give a specific rebuttal on that charge. It is a trite law that circumstances and facts for levy of penalty under both the grounds operate in a different fields. The courts have held that in the notice under section 274 r.w.s. 271, the AO has to specify the charge on which he intends to levy penalty. This aspect of the matter has been consistently reiterated by the Hon'ble High Courts from time to time. 31. We found that Notice under section 271(1)(c) is issued on standard performa in which inappropriate words and paragraphs were neither struck off nor deleted. Reference is made to the copy of notice issued under section 274 r.w.s 271 of the Income Tax Act, 1961 on January 2, 2014 in respect of all the assessment years the copies of which are placed in the paper book. We found that the said notices have been issued on standard performa and in the notices the inappropriate words and paragraphs were neither struck off nor deleted. Thus, the assessing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hout specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal? 34. While answering the above in favour of the assessee, the following findings were recorded by the Hon'ble Court: 61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment furnishing inaccurate particulars of income are different Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering Works reported in [1980] 122 ITR 306 (GUJ) and the Delhi High Court in the case of CIT v. Virgo Marketing P Ltd. reported in [2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case? 39. The aforesaid question was dealt with by the Hon'ble Court in favour of the assessee in the following words: 3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with section 271(1)(c) of the Income-tax Act 1961 (for short 'the Act; to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act the penalty proceedings had been initiated le. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income-tax v. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565. 4. In our view since the matter is covered by judgment of the Division Bench of this Court we are of the opinion no substantial question of law arises in this appeal for determination by this Court. The appeal is accordingly dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Supreme Court in UOI v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v. Smt. Kaushalya Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. 43. In addition to the aforesaid binding judgments, there are several orders passed by co-ordinate Benches of he Tribunal on this very point. In all those orders also penalty levied u/s. 271(1)(c) of the Act on the basis of similar vague notice was cancelled. Relevant paragraphs from some such orders are extracted below: (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified' Respectfully following the above decisions, we hold that the notice dated 27.12.2011 issued by the AO u/s. 274 r. w. s. 271 of the Act for the A Y 2004-05 for initiating penalty proceeding u/s. 271(1)(c) of the Act in the present case is invalid In view of the above, the other grounds of appeal raised by the assessee against the levy of penalty u/s. 271 (1) (c) of the Act require no adjudication at this stage. The order of the ld. CIT(A) sustaining the penalty of the Act is thus set aside. (c) Chandru K. Mtrchandani v. ITO (ITA No. 5368/Mum/2014 dated 05.04.2017) 4.1.2 In this regard the learned A.R. of the assessee drew the attention of the Bench to the notice issued by the Assessing Officer to the ITO Ward 14(3)3), Mumbai under section 274 r.w.s. 271 (1)(c) of the Act dated 30.12.2011 (copy placed at pg 1 of paper book). It is submitted that the notice is a standard printed notice which does not indicate the required particulars, le. as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and also while issuing the notice initiating penalty proceedings u/s. 274 r.ws. 271(1)(c) of the Act. 11. We are therefore respectfully following the ratio laid down by the Hon'ble High Courts including the jurisdictional High Court and Supreme Court hold that the order of the CIT(A) upholding the imposition of penalty u/s. 271(1)(c) of the Act where the AO had not specified or mentioned the charge on which the penalty has been imposed is not correct and cannot be sustained In view of the foregoing discussion we set aside the order of CIT(A) and direct the AO to delete the penalty levied u/s. 271(1)(c) of the Act. (e) Dr. Santa Wind Davare v. ACIT vice versa (ITA No. 2187/Mum/2014 anr dated 21.12.2016) 12. A combined reading of the decision rendered by the Hon'ble Bombay High Court in the case of Smt. B. Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) would make it clear that there should be application of mind on the part of the AU at the time of issuing notice. Here, in the instant case, the assessing officer did not specify the charge for which the penalty proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Cotton Ginning Factory [2013] 359 ITR 5675 (Karn) held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated In the present case, neither the assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid......................... 44. In so far as the judgment of the Hon'ble Bombay High Court in the case of CIT v. Smt. Kaushalya and Ors 216 ITR 660, rendered on 14.01.1992, it may be noted that in their subsequent and recent decision in the case of CIT v. Shri Samson Perinchery (supra), discussed above, the issue was decided in favour of the taxpayer. It is well settled that when there are conflicting judgments, the latter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laying down the monetary limits for filing appeals are prospective and do not apply to pending matters. Patently there is a conflict of the opinion in the two judgments of the hon'ble jurisdictional High Court. Both these judgments have been rendered by the hon'ble Bombay High Court with the strength of two judges each. The question which looms large before us is to decide whether the later or the former judgment should be followed The Hon'ble Delhi High Court in the case of Bhika Ram v. Union of India [1999] 238 ITR 113 has held that a later decision by a Bench of equal strength is binding In view of this precedent, it is manifest that the judgment rendered in the case of Chhajer Packaging and Plastics P. Ltd. [2008] 300 ITR 180 (Born) is binding on us and accordingly only the monetary limit relevant at the time of filing the appeal is to be considered The instruction providing a different monetary ceiling of tax effect, prevailing at the time when appeal is taken up for hearing, is not germane 46. In fact, the co-ordinate Benches have already followed this precedent in Prakash H. Savia v. ACIT, Oleander Farms P. Ltd. V. DCIT, Dr. Santa Milind Davare v. ACIT vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- 83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty in such circumstances being bad, has been approved. 11. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s. 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under:- 12. A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on the par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid argument of the ld. CIT-DR. 13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s. 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s. 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s. 271(1)(c) of the Act ought to comply with the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory (Supra) which has been followed by the Coordinate Bench of the Tribunal in the case of Sanjog Tarachand Lodha (Supra) such penalty notice is bad in law where it is not clear from the notice u/s. 274 about the reasons for levying penalty. According to him, the penalty order passed on the basis of such invalid notice is not sustainable. 20. We find merit in the above submission of the Ld. Counsel for the assessee. Admittedly, the AO in the body of the assessment order at para 10 has initiated penalty proceedings for concealment of particulars of income and furnishing inaccurate particulars of income by the assessee. At the end of the assessment order the AO mentions issue notice u/s. 274 r.w.s. 271(1)(c) for concealment of income as discussed in the body of the order. The relevant para 10 and last part of the assessment order read as under: 10. The penalty proceedings u/s. 271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing inaccurate particulars of such income are separately initiated. .................... .................... Assessed u/s. 153A(b) r.w.s. 153C of the I.T. Act, 1961. Charge interest due as per sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these submissions, reliance has been placed on the decision of Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton Ginning Factory reported as: 359 ITR 565 (Karan). 6. A perusal of the order passed u/s. 271(1)(c) dated 28-06- 2012 levying penalty shows, that in para 2 the Assessing Officer has specifically mentioned that penal proceedings u/s. 271(1)(c) are initiated for concealing the income. The relevant extract of para 2 of the order levying penalty reads as under: 2. .......... Since assessee had originally concealed income to the extent of Rs. 7,92,190/-, penalty proceedings u/s. 271(1)(c) of the Act was initiated on finalization of assessment proceedings. In both the impugned assessment years, the order levying penalty are similarly worded. 7. In the concluding paragraph of the order, the Assessing Officer has observed that the penalty is levied for furnishing of inaccurate particulars of income and concealing income. The relevant extract of para 7 of the order reads as under: 7. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed his income to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 171 Taxmn 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind. 9. Thus, in the facts of the case and documents on record, we are of the considered view that the notice issued u/s. 271(1)(c) r.w.s. 274 is invalid and thus, the subsequent penalty proceedings arising there from are vitiated. The impugned orders are set aside and the appeals of the assessee are allowed. 23. So far as reliance on the decision of Mak Data Pvt. Ltd. by the Ld. Departmental Representative is concerned the same in our opinion is not applicable to the facts of the present case. The decision in the case of Mak Data Pvt. Ltd. has to be understood in the context of the facts of the said case. Therefore, before relying on a particular sentence or paragraph of the said deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case. This view of ours finds support from the decision of Kolkata Bench of the Tribunal in the case of Suvaprasanna Bhataacharya v. ACIT in ITA No. 1303/Kol/2010 order dated 06-11-2015 for A.Y. 2006-07. In this view of the matter, we are of the considered opinion that since it is not clear from the notice u/s. 274 the reasons for levying of penalty as to whether it is for concealment of income or for furnishing of inaccurate particulars of income, therefore, the notice itself is bad in law and invalid. Therefore, the penalty order passed subsequently on the basis of such invalid notice also has to be held as bad in law. We accordingly cancel the penalty levied by the AO. Since the assessee succeeds on this technical ground the arguments on merit is not being adjudicated being academic in nature. 25. In the result, the appeal filed by the assessee is allowed. 49. Recently ITAT Mumbai Bench in the case of Visaria Securities Pvt. Ltd., in ITA No. 7585/Mum/2016 vide order dated 08/05/2017 has held as under:- 13. We have heard arguments on this issue and a perusal of the notice issued under section 274 r.w.s. 271 of the Act dated 26.12.11 and 11.08.14 reveals t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conclusion drawn therein by their Lordships at para 63 thereof and particularly at p) to s) thereof are as under:- 63 ..................................... a) ..................................... p) Notice under section 274 of the Act should specifically state the ground mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law. 15. It may be mentioned that in this regard, no contrary decision of the Hon'ble Apex Court or the Hon'ble Bombay High Court has been brought to our notice or placed before us for consideration. Therefore, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Manjunath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed hereinabove, the levy of penalty u/s. 271(1)(c) of the Act was not justified. Accordingly on this legal ground we delete the penalty in all the years under consideration. 54. Although we have deleted the penalty on legal ground, but as both the parties had argued at length on merits of the levy or otherwise of penalty, for the sake of completeness we also decide the issue on merits. Even on merit the penalty levied cannot be sustained. The detailed reasons thereof are as under. On perusal of the orders passed by the lower authorities it is clear that there are two foundations set up against the assessee by the Department to levy the penalty. A. Alleged cash generation out of several activities like mis-declaring yield of steel, suppression of gross profit on trading turnover, bogus purchase, inflation of purchase etc. B. Alleged utilization of such cash generation for the purpose of introducing share application money in fourteen companies. 55. We found that none of the above allegations are either factually correct or established from the material on record. 56. Taking up the first foundation of levy of penalty it can be observed that there is no evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of survey, it was explained that the yield depends upon the process being carried out by the different companies and also on the type of the raw material, which Is being used for manufacturing steel There is no hard and fast rule or formula, which could be adopted as a benchmark for determining the ratio of raw material to finished goods, being the yield in the manufacturing process. We were informed at that time the data available In the public domain of a competitor viz., Ispat Industries Ltd. demonstrate that their yield was about 84%. The process undertaken by the Ispat Industries Ltd. is a different than the process adopted by us and also the type of raw material used by them was also different from the raw material It was also explained that due to poor quality of raw material, inefficiency of the old plant machinery, inappropriate compensation of different kind of raw mater/al and defect in the production required re-melting the average yield in all these four years was in the range of 7747961 to 80.56%. Based on all these facts and in order to buy peace the working of the Investigation Wing of the average yield was accepted 59. From the above, it is evident that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken any adverse view in the matter while giving his verdict. 62. The Assessing Officer ought to have brought on record the positive evidence to show that the actual yield of the steel has been concealed and the same was 84.5% for the years under consideration. Needless to say that the onus is on the Department to prove the existence of the income which has been alleged to be concealed. In the present case the same has not been done as the only evidence in possession of the Assessing Officer is survey statement whereas during the assessment proceedings the assessee has maintained that the yield was properly disclosed. 63. As regards the declaration made on account of bogus purchases and inflated purchases, we noticed that except the statement of Mr. Babulal Agarwal, Director of the company and others, recorded during the course of survey and the declaration made by him, there is nothing on the record to support the allegation of bogus or inflated purchases. There is a reference in the assessment order to some of the enquiry made by the investigation wing prior to the date of survey. However, the result of the enquiry has not been brought on record. In fact, while making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thesis that they could have been sundry loans in small amounts obtained from different parties. Therefore, the imposition of penalty was not justified. 66. The co-ordinate Bench in the case of ACIT v. VIP Industries Ltd. [30 SOT 254, 262-263 (Mum)] had also taken a similar view. In this case, the issue for consideration was the validity or otherwise of the levy u/s. 271(1)() of the Act with respect to additions sustained in quantum proceedings. In disagreeing with the levy made by the Assessing Officer and in-concurring with the findings of the CIT(A) for deleting penalty levied with respect to an addition sustained, the Tribunal held as under: 8. .................... A great deal of emphasis had been laid by the ld. DR on the fact that since the addition has been upheld by the Tribunal, then the penalty should also be confirmed In our considered opinion the mere fact of confirmation of addition cannot per se lead to the confirmation of the penalty. It is obvious that both the quantum and the penalty proceedings are independent of each other In the penalty proceedings the assessee is given chance to show that why the penalty be not imposed with reference to the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. It is important to note that in the entire assessment proceedings there is no mention about such utilization of cash in share application money. The assessment order merely talks about booking of various bogus expenses and the disallowance thereof. The Assessing Officer has not even alleged in the assessment order that the assessee has utilized the cash in share application money of fourteen companies. At the conclusion of the relevant discussion in the assessment order the Assessing Officer has initiated the penalty proceedings u/s. 271(1)(c) of the Act. Thus, the penalty has been initiated on the ground that the assessee had booked bogus expenditure. As discussed hereinabove, the levy of penalty on the above ground cannot be sustained as there is no evidence of booking of such bogus expenditure or misdeclaration of yield or profit. The question, therefore, now is whether the penalty which was initiated on account of alleged bogus expenditure, could be levied in respect of introduction of cash in fourteen companies. 69. It is a well-settled proposition in law that levy of penalty u/s. 271(1)(c) of the Act is permitted only on those counts on which the same was initiated an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imposed penalty on a new ground which was not the basis for initiation of penalty. The appeal before the CIT(A) was with regard to issue of penalty under Section 271(1)(c) of the Act only on the ground on which the penalty proceedings were initiated in the assessment order 70. There is an allegation that Shree Global Trade fin Ltd. (SGTL) and the fourteen companies detailed in paragraph 3.6 of the penalty order, from whom share application money was received, were not reliable as, according to the Assessing Officer, they were only paper companies. However, except making such bald allegation, AO had not brought on record any evidence in support. In any case, when the assessee had adduced corroboratory evidences in support of its cases, the onus had shifted and it was for the Assessing Officer to prove his case which he had miserably failed. 71. Most importantly, the additions made in most of the aforesaid companies were deleted by the CIT(A) and they were concurred with in the further proceedings. In the case of Jogia Properties Ltd., one of the fourteen companies, the additions on account of share application money were made by the Assessing Officer in assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e every transaction of the assessee has been accounted, documented and supported in such an event even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in the case styled as CIT v. Shri Mukesh R. Marolia in I/A No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transact/on, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon'ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court dismissed the SLP No. 20146/2012 styled as CIT v. Shri Mukesh R. Marolia vide order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts which holds a binding precedent on this Tribunal Even otherwise there is no evidence on record that the assessee had given its own money to the Investing company for the purpose of making investments. It may be observed that the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor In the case in hand also, the requisite details, proof, confirmation, evidences etc are produced The ratio of the decision of the Hon 'ble Supreme Court is directly applicable on the facts of the case. In view if the above discussion of the matter, we do not find any infirmity in the factual finding given by the CIT(A) after duly appreciation of evidence on the file and the same is accordingly upheld 72. In the appeals concerning Archive Realty Developers Ltd., Karburi Properties Development Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is regarding the search which took place on 25.11.2009 at the premises of Shri Mukesh Choksi and also a search on 04.03.2010 which took place at the premises of Jogia Properties Ltd. It has been repeatedly emphasized that Shri Mukesh Choksi is involved into accommodation transactions and the share application money of fourteen companies are bogus as the same has been routed through the companies controlled by Shri Mukesh Choksi. However, this allegation completely loses its relevance when we see that the Tribunal has passed the order in the case of Jogia Properties Ltd. and subsequently in the case of another eight companies wherein the share application money has been held to be genuine. It is also relevant to note that in the corresponding order of CIT(A) as well as in the order of Tribunal in all the above cases, there is a detailed discussion about the share application money and also reference to above searches and the enquiry in the case of Shri Mukesh Choksi. After considering the entire gamut of information and facts, the CIT(A) and the Tribunal have come to the conclusion that the share application money is genuine. 77. In light of this, the large part of the discussi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO or the Commissioner (Appeals) may direct payment of penalty by the Assessee. Thus, what is required to be judged is whether there has been a concealment of income in the return filed by the assessee. 15. Earlier decisions indicated a conflict of opinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mens rea, the Finance Act, 1964 deleted the word deliberately that preceded the words concealed the particulars of his income in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC) held that: The word 'concealment' inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sufficient to justify a levy of penalty. 18. The Punjab Haryana High Court in Commissioner of Income Tax v. Suraj Bhan, (2007) 294 ITR 481 (P H), held that when an assessee files a revised return showing higher income, penalty cannot be imposed merely on account of such higher income filed in the revised return. Similarly, the Karnataka High Court in the case of Bhadra Advancing Pvt. Limited v. Assistant Commissioner of Income Tax, (2008) 219 CTR 447, held that merely because the assessee has filed a revised return and withdrawn some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. The Calcutta High Court in the case of Commissioner of Income Tax v. Suresh Chand Bansal, (2010) 329 ITR 330 (Cal) held that where there was an offer of additional income in the revised return filed by the assessee and such offer is in consequence of a search action, then if the assessment order accepts the offer of the assessee, levy of penalty on such offer is not justified without detailed discussion of the documents and their explanation which compelled the offer of additional income. The Madr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the fourteen companies . This also clearly proves the inconsistent stand of the department as regards the investments by fifty-four companies is concerned in the share capital of fourteen companies. Even otherwise all these issues does not directly affect the assessee at all because the assessee has received the funds from the six companies which is amongst the fourteen companies. 5.14. So far as the statement of Mukesh Choksi, which was relied upon by the Ld. Assessing Officer, nowhere states any transaction entered into with the assessee. The names of the companies referred to in his statement have no transaction with the assessee. The statements were also recorded in 2009. In view of this no reliance can be placed on the statement of Mr. Mukesh Choksi. 5.15. So far as the statement of Shri Om Hari Halan, the reliance is placed by CIT(A) and Learned DR on the statement recorded on 19/12/2012. The recording of the statements started on 19/12/2012 and was continued in the night with little break and was completed on 20/12/2012. The statement is recorded on 19/12/2012 and in the morning of 20/12/2012 at 324, Mastermind IV, Royal Palm, Aarey Milk Colony, Goregaon East, Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Learned counsel for the assessee also stated that nowhere the CIT (Appeals) has brought on record any material which could prove that the finding of the tribunal does not hold good in the reassessment proceedings also. The facts of the case laws relied upon by the Learned Sr. Standing Counsel are different from the present facts. In those cases there were the statement of certain parties and there were transaction between those parties and the assesses which could give reason to believe that the transaction may not be genuine. In the present case none of the statements of all the 3 parties give any evidence or a reference to the amount received by the assesses from 6 parties. The ratio of these decisions is not applicable on the facts of the case. 5.18. Now, we shall summarize the facts of Assessment Year 2009-10, which are as under:- 1. As mentioned earlier, the assessee is a listed Public Limited Company, received funds from nine parties during A.Y. 2009-10, which was treated as share application in A.Y. 2010-11 and the preferential shares were issued in A.Y. 2011-12, issued at par an no premium was received against issuance of preferential shares. It is also noted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Archive Realty Dev.Ltd. 24- 09- 09 Nil 187500 000 16- 12-10 26- 12- 11 67500 000 24- 07- 12 675000 00 18- 11-16 675000 00 NA - NA - Nil Auster Prop. Ltd. 24- 09- 09 Nil 410000 000 31- 12-10 26- 12- 11 18750 0000 25- 07- 12 187500 000 18- 11-16 187500 000 NA - NA - Nil Cikura Prop. Ltd. 24- 09- 09 Nil 435000 000 31- 12-10 26- 12- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nil 123500 000 NA NA 0 NA 0 NA 0 30- 12-16 12350 0000 Pending before CIT(A) Nil Total 219,10,00,000 5.19. All the nine parties are separate legal entities, assessed to tax and filed their tax returns under their PAN No. regularly for all the years including for A.Y. 2009-10. All the transactions are reflected in their regular books of accounts which are audited and submitted to various authorities. The transactions are reflected in the regular bank account. The details of the cheque Nos., name of the bank, date and the branch were also submitted during all the assessment and appellate proceedings. The said transactions are also confirmed by all the nine parties. In their audited financial statements the said tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was not required to explain the source of the source of the funds. Without prejudice to the submission that the assessee is not required to prove the source of the source of the funds for A.Y. 2009-10, the assessee has also proved the source of the source of the funds in the hands of all the nine entities. Reference is made to the table below where the details of all the nine parties which received share application money from various corporate bodies have been reflected. These are summarized as under:- 5.22. It is further noted that in the assessment proceedings u/s. 143(3) rws 153C the department has accepted the source of the funds in the hands of eights companies. Wherever the Assessing Officer did not accept the source of the funds in the hands of the companies the Ld. Commissioner of Income Tax (Appeal) deleted the addition and on the 2nd appeal filed by the department the Hon'ble Tribunal confirmed the orders of the CIT(A). This clearly proves that all the companies had their independent source of funds which is also proved and established by each one of them in their own independent proceedings before the department. The Ld. Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 6107/Mum/2012), (pages 740 to 759 of paper book No. 2), wherein, the Tribunal examined the factual matrix and upheld the order of the First Appellate Authority by dismissing the appeals of the Revenue. The relevant portion of this order is reproduced hereunder for ready reference and analysis:- The above titled appeals have been preferred by the Revenue against the common order dated 27.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2008-09 and AY 2009-10. As the facts and issues involved in both the appeals are similar and the impugned order of the Ld. CIT(A) is also common in both the appeals, hence the same are taken together for disposal with this common order. 2. The brief facts of the case as drawn out from the impugned order and the available record on the file are that a search and seizure operation was carried out u/s. 132 of the I.T. Act at the business premises of assessee on 04.03.2010 situated at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search it was found that assessee had been maintaining its books of accounts at another premises situated at 20, Bha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Sh. Ajay Kumar however, retracted from their statements latter on. 5. The Assessing Officer (hereinafter referred to as the AO) issued notice u/s. 153A to the assessee. In the return filed in response to the notice u/s. 153A, the amount declared as undisclosed income in the statement of Shri Ajay Kumar, Director of the company during the search action had not been disclosed. The AO observed that all the above said 7 companies have been doing their business from the same place and that these concerns were also not well established companies. A total of ten companies (eight companies in AY 2008-09 2 companies in AY 2009-10), names of which have been mentioned in the assessment order, had subscribed to the shares of these companies including the assessee. The AO further noted that the above concerns were sister concerns and their nature and the modus operandi was same as that of the assessee company. The AO further observed that the search and seizure operation was also conducted on one Shri Mukesh Chokshi, who was operating many companies through which he was indulged in providing the bogus entries including long term capital gain, short term capital gain, losses, speculativ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve additions, the assessee filed appeal before the CIT(A). 5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating document relating to the share application money was found or seized during the course of search. Further in respect to the companies, M/s. Mihir Agencies P. Ltd. M/s. Talent Infoway Ltd. in which one Mr. Mukesh Choksi has been a director, the Ld. CIT(A) observed that these companies had been registered with the registrar of companies. These companies had subscribed to the shares of the assessee company in AY 2009-10. The Ld. CIT(A) in this respect observed that during assessment proceedings, the Ld. AR of the assessee had submitted all the details relating to these companies. All the compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . DR has been that during the search action, Sh Ajay kumar, one of the directors of the company had admitted that the money received as share application money was unexplained income of the assessee and he had offered it for taxation. He therefore has contended that subsequent retraction is nothing but an afterthought of the assessee. The Ld. DR has further contended that Sh. Mukesh Chokshi was a hawala dealer, hence the share application money received by the assessee was the result of a bogus transaction. The Ld. DR in this respect has relied upon the decision of the co-ordinate bench of the Tribunal in the case of Gold Star Finvest (p) Ltd. [2013] 33 Taxmann.com 129. The Ld. DR has also referred to the decisions of the Tribunal in the case of M/s. Richmand Securities Pvt. Ltd. in ITA No. 4624/Mum/2005 dated 29.8.2008 and further in the case M/s. Mihir Agencies Pvt. Ltd. in ITA No. 4912/Mum/2005 dated 30.5.2008 wherein the decision in the case of M/s. Gold Star Finvest (P) Ltd has been followed. 7. The Ld. A.R. on the other hand has relied upon the documents produced before the lower authorities and has reiterated the submissions as were made before the lower authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving cheque number, date, name of bank was submitted. The Ledger Account confirmation in the books of Investor company was also submitted. The board resolution was not available with assessee as the assessee has got no legal right to ask for copy of board resolution when complete information about the investments made was available. The evidence relating to the net worth of the investing companies was also submitted. The Ld. DR on the other hand, though, has fairly admitted that no direct incriminating material against the assessee was found during the search action, he, however, has contended that it is a case of circumstantial evidence which is corroborated with the admission of one of the directors of the assessee company. At this stage the Ld. AR has pointed to the question No. 15 in the statement of Sh. Ajay Kumar, Director of the company, wherein it was pointed out to him that one Mr. Jose Mathews had on 4.3.2010, during the course of survey in the case of Shree Global Trade fin. Ltd., had stated that the share application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these question were put to him, he agreed to offer the amount as unexplained income of the company. In view of this the Ld. AR has submitted that no reliance can be placed on the statement of Sh. Ajay Kumar who was neither in any way connected with the activities of the company when the transaction took place nor his admission was based on his personal knowledge, rather he agreed to admit the additions on the basis of facts presented to him i.e. the alleged unreliable statements of Mukesh Chokshi and Mr. Jose Mathews. 10. The Ld. AR has further explained that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this respect to the Instructions issued by CBDT bearing No. F. No. 286/2/2003-IT (Inv. II) dated 10/3/2003 wherein it has been stated that during the course of search/survey, no attempt should be made to obtain the confession as to the undisclosed income. Any action on the contrary shall be reviewed adversely. CBDT has also referred to the fact that if the confession statements are taken which are not based on credible evidence then later they are retracted. In the present case also, not a single incriminating material was found during the search action. The addition is made purely on the basis of declaration made by Sh Ajay Kumar, Director. The Ld. AR has relied upon the following decisions in this respect. (a) DCIT v. Pramukh Builders ITA No. 2170/Ahd./1999 A.Y. 1994-95 dated 6.7.2007 Reported in 115TTJ p. 330 (Third Member) (b) CIT v. K. Bhuvanendra and Others: 303 ITR p. 235 (Madras High Court) (c) S. Khader Khan Son Reported in 300 ITR p. 157 (Madras High Court) (d) Oriental Containers Ltd. v. ACIT (2010) 6 Taxmann.com 121 (Mum). (e) Prem Sons ITA No. 4698/MUM/2006 AY 2003-04 dt. 15/1/2009 (f) Kalashben Manharlal Chokshi 174 Taxmann pg. 466 (Guj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court) h) CIT v. HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court) 13. On the other hand the Ld. DR has relied upon one decision of Mumbai ITAT in the case of Gold Star Finvest Pvt. Ltd. (supra) wherein while determining the income of that assessee, the Tribunal has estimated the income at certain percentage. The Ld. AR has however submitted that the ratio of this decision cannot overrule the decisions of Bombay High Court and several Mumbai ITAT decisions as relied upon by him. He has further relied upon the following decisions wherein the additions made by the AO on the basis of general statement of Mukesh Chokshi have ultimately been deleted by the higher authorities. 1. Kataria Ketan Ishwarlal v. ITO - ITA No. 4304/M/2007 decided on 30.04.2010. 2. ACIT v. Shri Ravindrakumar Toshniwal - ITA No. 5302/M/2008 decided on 24.02.2010 3. ITO v. Truptic Shah - ITA No. 1442/M/2010 decided on 29.04.2011 4. Smt. Manjulaben L. Shah v. ITO - ITA No. 3112/M/2014 decided on 31.10.2014 5. M/s. SDB Estate private Ltd. v. ITO ITA No. 584/M/2015 decided on 15.04.2015 6. M/s. Yamuna Estate Pvt. Ltd. v. ITO ITA No. 2672/M/2012 decided on 09.09.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in the case styled as CIT v. Shri Mukesh R. Marolia in ITA No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon'ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court dismissed the SLP No. 20146/2012 styled as CIT v. Shri Mukesh R. Marolia vide order dated 27.01.14. Similarly in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on this Tribunal. Even otherwise there is no evidence on record that the assessee had given its own money to the investing company for the purpose of making investments. It may be observed that the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor. In the case in hand also, the requisite details, proof, confirmation, evidences etc. are produced. The ratio of the decision of the Hon'ble Supreme Court is directly applicable on the facts of the case. In view of the above discussion of the matter, we do not find any infirmity in the factual finding given by the CIT(A) after duly appreciation of evidence on the file and the same is accordingly upheld. 16. In the result, the above captioned appeals of the Revenue are hereby dismissed. 6. It is further noted that similarly, in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Assessing Officer has wrongly invoked the provisions of Section 153C. 2. The Respondent craves leave to add, alter or amend the grounds of appeal which are without prejudice to one other. 3. Rival contentions have been heard and record perused. Facts in brief are that search and seizure action u/s, 132 of the IT. Act was conducted on 04.03.2010 at the business premises of M/s. Jogia Properties Ltd., at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search it was found that M/s. Jogia Properties Ltd. is maintaining its books of accounts at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bundr, Mumbai - 400 009. Therefore, this premise was also covered u/s. 133A of the IT. Act wherein it was revealed that the following companies are operating from the said premises: S. No. Name of the party 1. Auster Properties Pvt. Ltd. 2. Reva properties Pvt. Ltd. 3. Archive Realty Developers Pvt. Ltd. 4. Vedisa Properties Pvt. Ltd. 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also proved from the income expenditure statement that no rent, electricity charges or any other expenditure is claimed which would show normal functioning of the concern. Therefore, from these facts and the material found during the course of search/survey and post search proceedings it is concluded by AO that the above concerns are sister concerns and the nature and the modus operandi is same as that of the assessee company. Hence, as the warrant has been issued in this name of M/s. Jogia Properties Pvt. Ltd., this company is covered u/s. 153A and the above concerns are co-related to.each other the other group concerns (i.e., other 7 companies mentioned above including the assessee company) are covered u/s. 153C of the IT. Act. The AO further observed that a search action was conducted on one Shri Mukesh Chokshi who was operating many companies through which indulged in providing bogus entries including long term capital gain, short term capital gain, F O losses, Speculative Losses, share application money, etc. The post survey/search proceedings in this case revealed that the Jogia Group companies have taken bogus share application money from Mukesh Chokshi's concerns v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 10000000 Total: 32,35,00,000 I am showing you the statement recorded from Shri Jose Mathew on 04-03-2010 during the course of survey in the premises of M/s. Shree Globle Tradefinn Ltd. in which he has stated that the share application received in the above companies have been obtained by paying cash in lieu of the cheques received as share capital. Ans. ......... Out of the total 18 parties mentioned in your question, we have reviewed the records and the documents. I have consulted my other two directors also. However, owing to the above facts mentioned by you and the circumstances today, I am offering the sum of Rs. 13.15 Crores, received as share capital recorded in the books of accounts from following 5 parties as unexplained credits in A.Y. 2009-10: Sl. No. Name of the company Share capital (Rs.) 1 M/s Hingora Finvest Pvt. Ltd. 17500000 2 M/s Oshin Investment Finance Pvt. Ltd. 37500000 3 M/s Sidh H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 10. In reply to the AO's query the assessee company vide their letter dated 30-11-2011 has submitted as under: 1. The correct status of our company is public limited company and the name of company is Cikura Properties Ltd. The registered office of the said company till the date of search action on Jogia Properties Ltd. was 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bunder, Mumbai-400003. Please refer to original return of income filed for A.Y. 2009-10 in which the said address is disclosed. 2. A search action was undertaken on M/s. Jogia Properties Ltd. on 4/3/2010. No search action u/s. 132 or survey action u/s. 133A is undertaken against our company. No summons were issued to us by the Investigation Wing in the search proceedings of Jogia Properties Ltd. We do not have any relationship with Jogia Properties Ltd. 3. We understand that the search proceedings started on 4/3/2010 continued in the case of Jogia Properties Ltd. and on 15/4/2010 the prohibitory order was lifted which was placed in the business premises of M/s. Jogia Properties Ltd. I was asked to be present at the premises of Jogia Properties Ltd. situated at 208, Ashirwad Building, Ahm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce issued u/s. 153C, the company did not include the income of Rs. 13,15,00,000/-. The Non inclusion of the income obtained on 15/4/2010 may be treated as retraction of income. Please refer to letter dt. 18/7/2011 submitted in your office on 22/7/2011 wherein also the fact of retraction has been mentioned. The real income as per the provisions of Income Tax Act, 1961 is only chargeable to tax. No evidence or documents was found to prove that we had paid cash and received share application. Mr. Jose Mathew is not a director or employee of our company. He is no way connected with our company. No reliance can be placed on statement of Mr. Jose Mathew. 5. I further state that all the five companies are independent existing corporate bodies. They are registered with Registrar of Companies. They are maintaining regular books of accounts. They have their own bank accounts. They have filed the return of income. They have filed a confirmation to the effect that they have made investments in the equity shares of the company from their bank account. They have submitted the details of their bank account from which the said investments are made. They all are assessed to tax having PAN. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk account, their balance sheet, PAN and other relevant information. The said company is in existence and has filed the return of income upto 31/3/2011. They are carrying on their business from 48/A New Alipore, Block -C, Kolkatta -700 053. With reference to your allegation that the notice issued to them was returned back with the remark 'Not Known' and the Inspector of Investigation Wing also failed to serve the notice. We are not in a position to make any comment on this aspect as we do not know as to in which period this particular event has happened. The said company is in existence at the above address and they are carrying on their business from the said premises. Without prejudice we submit that if for some reason the notices are not served or notices are returned back does not mean that our transaction with the said company is not genuine especially when we have submitted before you various documents and papers in support of the claim that they have invested into share capital of our company. We have discharged our burden by establishing the genuineness of the share capital. 13. We further state that we have produced sufficient evidence in support of the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also recorded u/s. 131 who has stated that Shri Jose Mathew is not aware about the business activity of the company. The statement made by Shri Jose Mathew is not correct because he was not an employee with these companies and was not aware about the share application money. But, Shri Ajay Kumar has declared this share application money as undisclosed income. However, in the return filed in response to notice u/s. 153A, this amount was not declared. Then, the AO issued show cause notice to the assessee to explain the same. In response to this show cause notice, the AR of the appellant has submitted that the statement of Shri Jose Mathew was retracted by an affidavit filed before the Dy. Director of Investigation and there was no discrepancy found in the share capital and no incriminating document was found and seized and the appellant also retracted the statement recorded u/s. 131 by not offering income in the return filed. Therefore, the undisclosed income declared in the statement has not been disclosed in the return of income filed. After considering the reply of the appellant, the AO has given his observation and inferences of each company-wise. In nutshell, the AO has rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , name of the bank was submitted. The confirmation of the parties was submitted before the AO. The objection of the AO that the investing companies are not generating significant income was reverted by the AR of the appellant by submitting that net worth of the companies was substantial as mentioned in the balance-sheet in each case. Regarding the presence of Directors of the investing company, the AR has submitted that it has, no authority to produce any director of the company and request was made to the AO but no summons were issued by the AO to the directors. Regarding the allegation of the AO that no documents were found during the search and survey operations, it was submitted that no search and survey was undertaken against the appellant and other 7 group of companies and nobody has asked for the documents during the search and survey operations. To strengthen the evidences submitted before the AO, the AR of the appellant has also relied on various decisions including the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra. Thus, the AR of the appellant has argued that since all the documents were submitted to prove the identity, creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share application money or functioning of these companies and the statement was recorded by putting undue pressure on him. Neither the DDI(Inv) nor the AO has given any comment on this affidavit in the assessment order except by writing that it was only an afterthought. A copy of the documents filed before the AO was also submitted before me from the perusal of which it was noticed that all the investing companies are assessed to income-tax which is clear from their PAN. During the appellate proceedings, the AR was also asked to submit the copy of acknowledgment of filing of return which was also filed and noticed that all the investing companies are assessed to tax. Secondly, from the perusal of bank details submitted, it is noticed that the date of cheque with cheque No. name of the bank, amount etc. all details were submitted before the AO. The copy of P L account and the balance-sheet of each company was submitted, from the perusal of which it shows that each company have reserves and surplus of substantial amount as disclosed in the balance-sheet. The confirmation certificate was also submitted before the AO duly signed by the director of the investing company to confirm t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has objected that directors of the company were not produced. In this regard, the AR of the appellant has shown his inability during the assessment proceedings and it was the duty of the AO to make investigation by issuing summons and commissions to his counterparts for the presence of the directors. The other objection that these papers were not found during the search is also without any reason because no search operation was carried out in the case of the assessee and other 7 group companies, therefore, the question of these papers does not arise. 4.9 During the appellate proceedings, an opportunity was given to the AO to represent his case and the submissions of the appellant were also given to the AO for his counter comments. Since the facts of the investing companies in all the cases is the same, therefore, to avoid repetition and for the sake of convenience, the submissions in the case of M/s. Martand Properties Ltd. was given to the AO. The gist of the AO's comments is reproduced as under: Para-wise reply on para-wise submission made by assessee is as follows: Para 1, 2, 3, 4, 5, 6 and 7 of the submission made by assessee As explained by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned by assessing officer does make the case in favour of revenue. The facts that copy of bank account of the investing company was not produced to support appellant's claim and not a single document regarding investment of existing companies in the appellant company was found definitely casts doubts over the genuineness of transaction. Assessee has further mentioned that for AY 2010-11, auditors were M/s. Sudhir Otlikar and company. Hence certificate issued by J 8 Associates in the capacity of the auditors of investing company on 12th March 2010 will not help assessee's cause. Also the fact that investing company is not generating any net profit indicates that it should not have surplus funds to invest in the appellant company. These contradictions tilt the case in favour of revenue following principle of preponderance of probability. Para 24, 25, 26 and 27 of the submission made by assessee. Assessee's claim that assessing officer has not contradicted material produced by the assessee company cannot be accepted. Assessing Officer has in detail brought upon the contradictions in the submission made by the assessee. Address of the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any did not discharge its onus of proving genuineness of transaction and creditworthiness of investing companies in view of various contradictions shown by the assessing officer in his order. Thus it Is clear that addition is not made purely and merely on the basis of declaration made. Para 43 and 44 of the submission made by assessee. Levy of the interest is as per provisions of the law. As brought upon by the assessing officer in his order share capital claimed by the assessee has been treated as assessee's own income under section 68 and hence assessee is liable to pay interest on the tax which he is not paid at the time of filing of return or at the stages of advance-tax payment. Para 45 of the submission made by assessee. No comments. In view of the above, it is requested that addition made by the assessing officer may be upheld . 4.10 The comments of the AD were also given to the AR of the appellant for further submission. The AR has made submissions and submitted that no new facts has been brought on record by the AO except the repetition as given in the assessment order. The submissions of the AR are also reproduced above. From the perusal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wrong because nowhere in the bank account investigation, it was found by the AO that in all cases any cash was deposited before issuing the cheques for share application money in these companies. In view of these facts, the statements recorded without any corroborative evidence cannot be adversely applied against the assessee. Besides, the facts of the case, the decisions of Hon'ble Courts relied on by the AR of the appellant are also in favour of the assessee, the gist of which is reproduced as under: COMMISSIONER OF INCOME TAX v. OASIS HOSPITALMES PVT. LTD. 333 ITR pg. 119 We may also usefully refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax v. P. Mohanakala [(2007) 291 ITB 278 (SC)]. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by Instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books Is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even If the explanation is not acceptable, the material and attending circumstances available on record do not ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 539 of 2008 Page 13 of 27 justify the sum found credited In the books being treated as a receipt of Income nature. We would like to refer to another judgment of the Division Bench of this Court in the case of Commissioner of Income Tax v. Value Capital Services P. Ltd. [ (2008) 307 ITR 334 (Delhi)]. The Court In that case held that the additional burden was on the Department to show that even if share application did not have the means to make investment, the Investment made by them actually emanated from the coffers of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t carrying on any real business activity and were rather engaged In the business of providing accommodations entries. They were, thus, entry operators of which the assessee was the beneficiary. According to the AO, the modus operandi Involved In such type of activity was like this: an entry operator operates a number of accounts In the same bank/branch or In different ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 539 of 2008 Page 15 of 27 branches in the name of companies, firms, proprietary concerns and individuals and for the operation of these bank accounts, filing Income tax returns etc., persons are hired. Most of these persons work on part-time basis and are called upon to sign documents, cheque books, etc. whenever required. Whenever any' beneficiary Is Interested In taking, an entry, he would approach the entry operator and handover the cash along with commission and take cheques, Demand Draft, Postal Order. The cash Is deposited by the Entry Operator In a bank account either In his name or In the name of relative/friends or other person hired by him for the purposes of opening the bank account. After the deposit of cash when there is sufficient balance, the Ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the following observations of this Court in the case of Commissioner of Income Tax v. K.C. Fibers Ltd. (2010) 187 TAXMAN 53 (Del.) are reproduced: It is strange that when the Assessing Officer is questioning the bona fides of M/s. Diamond Protein Ltd. for collecting money to subscribe to the share to the capital of the assessee, but it is the assessee who is fastened with the liability. The Assessing Officer did not question M/s. Diamond Protein Ltd. in this behalf. Insofar as Assessing Company is concerned, it is not disputed that money was paid to its towards the aforesaid share application money, by means of cheques. It is not for the Assessing Company to probe as to the source from where n/s Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 539 of 2008 Page 17 of 27 Officer, in these circumstances to inquire into the affairs of M/s. Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing Officer that the two companies are umbrella companies or have any relationship with each other. We are, therefore, of the opinion that there is no merit in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessed to Income tax and therefore under no circumstances, the share capital could be treated as undisclosed Income of the company. The Tribunal while confirming the aforesaid view of the CIT(A) has summarized the discussion as under: 9. We have carefully considered the rival submissions in the light of the material placed before us. The necessary details were filed be assessee with the AO to show the identity of the person who had applied for the shares. The shares also been allotted to respective persons in respect of which intimation was given to Registrar of Companies and necessary evidence has also been placed on record in the paper book which found place at page 23 and 24 of the paperbook. The assessee also had placed on record the evidence as well as copy of income-tax returns of the share applicants. Keeping in view all these evidences it cannot be held that the assessee did not establish the identity of the share applicants. If it is so, then the law as pronounced by the Hon'ble Supreme Court in the case of CIT v. Lovely Exports Pvt. Ltd. (supra) is clear that if the share application ITA, 2095 of 2010, 514 of 2007 539 of 2008 Page 19 of 27 money is receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en the documentary evidence was placed on record to prove the Identity of all the shareholders Including their PAN/GIR number and filing of other documentary evidence In the form of ration card etc., which had neither been controverted nor disapproved by the Assessing Officer, no interference was called for. The Tribunal has justified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some cases where summons issued were returned unserved and in some cases summons though served but there was no compliance. In this connection, it may be mentioned that In the case of CIT v. Orissa Corporation Ltd. [1986] 159 ITR 78 (SC) the Hon'ble Court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors, who are assessed to tax and full particulars' Is furnished then the assessee ahs discharged the duty. If the Revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68 . No question of law, far less any substantial q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer did nothing except issuing summons which were ultimately returned back with an endorsement not traceable . In our considered view, the Assessing officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. CIT v. STL Extrusion P. Ltd. (MP) [2011] 333 tm 269 The said order was challenged by the respondent before the Tribunal. The Tribunal by the impugned order dated May 10, 2010, allowed the appeal of the respondent by observing thus: 3. We have considered the rival submissions of learned representatives of both, sides and perused the material available on record. Ground No. 1 is, general in nature, therefore, requires no deliberation from our side. For ground No. 2 the brief facts are that the assessee company is engaged in the business of manufacturing and trading o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal, the learned appellate authority by following the decision of the hon'ble jurisdictional High Court in the case of CRR v. Rathi Finlease Limited [200B] 215 CTR (MP) 429 to the effect that the onus is on the assessee to establish the genuineness of the credits, affirmed the stand of the Assessing Officer which is under challenge before the Tribunal. We have found that the Impugned addition under section 68 of the Act has been made by the learned Assessing officer by suspecting that the share application money is bogus without appreciating the facts and the contents of the affidavit have not been disapproved. Thus, the undisputed fact is that the assessee has proved the Identity of the subscribers with the help of affidavits which were not found to be bogus or false. An affidavit Is not a mere piece of paper rather It carried Its authenticity as the contents of the same are duly sworn before a Magistrate or a Notary Public/Oath Commissioner, as the case may be. During the signing of these affidavits, the deponent, appears before the person before whom they are sworm and their signatures are duly taken on the register maintained by such Notary Public. If the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of the Act. The existence of subscribers to share application is not in doubt as the assessee duly furnished their names, age, address, date of filling the application, number of shares for which respective applications were made, amount given and the source of income of the applicant. In view of these facts, we are of the considered opinion that there is no justification for making the Impugned addition because once the existence of the investors/share subscribers is proved, the onus shifts on the Revenue to establish that either the share applicants are bogus or the impugned money belongs to the assessee company itself. Once the confirmation letters are filed, no addition can be made on account of the share application money in the hands of the company. Our view finds support from the decision in Shri Barkha Synthetics Limited v. Asst. CIT [2006]283 ITR 377; 155 Taxman 289 (Raj). The cases like CIT v. G.P. International Limited [2010] 325 ITR 25 (P H); 229 CTR (P H) 86, CIT v. Steller Investment Limited [1991] 192 ITR 287 and Sphla Finance Limited [1994] 205 ITR 98 (Delhi) support the case of the assessee . 4.13 In my knowledge there were two decisions in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the transaction by submitting documentary evidences during the course of assessment proceedings and before me. Moreover, the facts of the present case are covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra and the other decisions as discussed above where it is held that once the identity of the shareholder/subscriber is established, payment was made through account payee cheques, net worth of the subscriber is proved by filing balance-sheet and moreover, confirmation letters are filed, no addition can be made on account of share application money in the hands of the company. In totality of facts and circumstances, it is held.that the three conditions of section 68 are proved by submission of documentary evidences and no incriminating document was found and seized and nothing adverse was found in the investigation of the bank account by the AO in each case of the company, therefore, the addition made by the AO is not sustainable, hence deleted. 13. Similarly, addition made by AO on account of share capital in the case of M/s. Auster Properties Ltd., was deleted by CIT(A) after observing as under:- Since the appellant compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted before the AO. But the AO has not accepted these documents and relied on the statement of' Mr. Choksi only and added back the share application money by holding it as unexplained cash credit u/s. 68 of the LT. Act. 4.6 From the perusal and submission of the appellant and facts of the case, it is noticed that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. He has given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in the statement he has stated that he has received cash from the assessee company and issued cheque against this cash as share application money. There is no mention in the statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made for the bank account of these companies, the AO has not found any instance of cash deposit against issuing.of cheques. Now, it has to be examined whether these companies had fulfilled the conditions of section 68. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne Mr. Mukesh Choksi is a director in these companies: These companies had also subscribed shares of the assessee company. In the assessment order, the Assessing Officer has made reference that in one statement recorded in some other case, Mr. Choksi has stated that he was engaged in giving accommodation entries to the companies for creating bogus capital gain and was also issuing the bogus bills. From this statement, the AO has drawn inference that the share capital subscribed by these companies was bogus, i.e. cheques were issued against cash received from the assessee company. During assessment proceedings, the AR of the appellant has submitted details relating to these companies. It was submitted that all the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque No.,' date of cheque, bank a/c. share allotment letters giving detail of share certificate No., copy of bank account of the assessee was submitted before the AO. But the AO has not accepted these documents and relied on the statement of Mr. Choksi only and added back the share application money by holding it as unexplained cash credit u/s. 68 of the LT. Act. 4.6 F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re application money but in the present case there are six companies. All these companies are the same as discussed in the case of M/s. Reva Properties Ltd., On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. Therefore, it is held that the identity, creditworthiness and genuineness of the transaction has been proved and the addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted. 16. Addition made on account of share capital in case of M/s. Archieve Reality Developers Pvt. Ltd., was deleted by CIT(A) after observing as under:- Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were nine companies who have subscribed the share application money b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has filed the cross objection on 23rd December 2014 which is registered under CO. No. 264/M/2014. As per learned AR, assessee had received the intimation about filing of the appeal by the Department in Form 36 alongwith Grounds of Appeal on 7th October 2013. As per provisions of Section 253(4) of Income Tax Act, 1961, assessee was required to file the cross objections within 30 days from the receipt of the intimation of filing the appeal by the Department. The said cross objection was required to be filed on or before 6th November, 2013. The said cross objection is filed on 23/12/2014. There is a delay of 410 days. 22. Application for condonation of delay was filed on the following grounds:- We were under a bonafide belief that once the addition made by the Assessing Officer is deleted and no addition survives after the order of CIT (Appeal) which will result into Nil demand against us and hence we are not eligible to file the cross objections as our grievance regarding the tax liability is resolved by the order of the Commr. of Income Tax (Appeal). In the present case the addition made by the Learned Assessing Officer is totally deleted by the Learned Commr. of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the matter accordingly. 6. Based on the above legal matrix, we request your honour to kindly condone the delay in filing the cross objection and admit the legal ground regarding the validity of issue of notice u/s. 153C. 23. With regard to filing of cross objection under Rule 27 of ITAT Rules, reliance was placed on the following decisions:- a. The Asst. Commr. Of Income Tax Cir 18(3) v. M/s. Triace ITA No. 2827/M/04 (Mumbai ITAT) b. National Thermal Power Co. Ltd., v. Commissioner of Income Tax Reported in 229 ITR 383 (SC) c. Pratapsingh Ravindrajeet Singh v. Commissioner of Income Tax Reported in 218 ITR 536 (Madhya Pradesh High Court) 24. With regard to applicability of the provisions of Section 153 C, learned AR submitted that the conditions of Section 153C are not satisfied. The learned Assessing Officer has wrongly exercised the jurisdiction u/s. 153C. The provisions of Section 153C can only be invoked when the Assessing Officer, who is dealing with the case of a person against whom search has taken place, is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accounts or documents belongs to a person ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled before the ADI Investigation Wing. 25. Reliance was placed on the case of Vijaybhai Chandrani' Reported in 333 ITR P. 436, wherein the Hon'ble Gujarat High Court has held that during the course of search the document belonging to other person should be found to initiate proceedings u/s. 153C, it was also held that there may be a reference to a petitioner in the paper seized in as much as his name is reflected in the seized paper and certain details are given under different column but it does not mean that the document belong to the petitioner. 26. With regard to merit of addition, learned AR contended that assessee has produced all the necessary evidences and proof in support of the claim that the amount of share capital received from eight parties is genuine and supported with the documents and provisions of Section 68 cannot apply to the said transactions. As per learned A.R. during the course of search no incrementing material was found to prove that the transactions with eight parties are not genuine and the assessee has given cash and has received the cheque from these parties. The assessee has produced the documents such as the proof of existence of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allegation of the Department that assessee has given cash and has received cheques from the investing companies. 29. Learned AR also placed on record the order of the Co-ordinate Bench and contended that in the case of Jogia Properties Ltd., the Hon'ble J-Bench in appeal no. 6106 and 6107 for A.Y. 2008-09 and 2009-10 has approved the order of Ld. CIT(A) deleting the addition made by the Ld. Assessing Officer u/s. 68. The parties who have made investments in Jogia Properties Ltd. and the parties who have made investments in the share capital of the assessee company are same, except one party viz. Gyaneshwar Trading Finance Co Ltd. The details of the said party is submitted at pages 83 to 105 of paper book for A.Y. 2008-09. The ratio of decision of the Hon'ble Tribunal in the case of Jogia Properties Ltd. is also squarely applicable on the facts of the case. The Hon'ble Tribunal has also dealt with the issue of statement by Shri Jose Mathews, the directors of the company and also the statement of Mr. Mukesh Chokshi. The conclusion of the Hon'ble Tribunal on all these aspects also is applicable on the facts of the case. 30. On the other hand, learned CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us. We had also carefully gone through the order passed by Tribunal in case of Jogia Properties Ltd., wherein search was carried out u/s. 132 and assessment was framed u/s. 153A dated 18/12/2015, wherein the Tribunal have confirmed the action of the CIT(A) for deleting the addition made by AO on account of share capital. The precise observation of the Tribunal was as under:- The above titled appeals have been preferred by the Revenue against the common order dated 27.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2008-09 and AY 2009-10. As the facts and issues involved in both the appeals are similar and the impugned order of the Ld. CIT(A) is also common in both the appeals, hence the same are taken together for disposal with this common order. 2. The brief facts of the case as drawn out from the impugned order and the available record on the file a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further invested in his company 'M/s. Shree Global trade fin. Ltd.; This statement of Shri Jose Mathew was confronted to Shri Ajay Kumar, one of the Directors of the assessee company who in turn offered the amount received as share capital from the companies as mentioned in the assessment order as unexplained credits. Shri Jose Mathew and Sh. Ajay Kumar however, retracted from their statements latter on. 4. The Assessing Officer (hereinafter referred to as the AO) issued notice u/s. 153A to the assessee. In the return filed in response to the notice u/s. 153A, the amount declared as undisclosed income in the statement of Shri Ajay Kumar, Director of the company during the search action had not been disclosed. The AO observed that all the above said 7 companies have been doing their business from the same place and that these concerns were also not well established companies. A total of ten companies (eight companies in AY 2008-09 2 companies in AY 2009-10), names of which have been mentioned in the assessment order, had subscribed to the shares of these companies including the assessee. The AO further noted that the above concerns were sister concerns and their nature and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness and genuineness of the transaction of the above share holding companies, he therefore, treated the investment made by these companies amounting to Rs. 12,80,00,000/- and Rs. 3,90,00,000/- for the AYs. 2008-09 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A). 5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating document relating to the share application money was found or seized during the course of search. Further in respect to the companies, M/s. Mihir Agencies P. Ltd. M/s. Talent Infoway Ltd. in which one Mr. Mukesh Choksi has been a director, the Ld. CIT(A) observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the additions made by the AO, the Revenue has thus come in appeal before us. 6. We have heard the rival contentions of the Ld. Representatives of the parties at length and have also gone through the record. The contention of the Ld. DR has been that during the search action, Sh Ajay kumar, one of the directors of the company had admitted that the money received as share application money was unexplained income of the assessee and he had offered it for taxation. He therefore has contended that subsequent retraction is nothing but an afterthought of the assessee. The Ld. DR has further contended that Sh. Mukesh Chokshi was a hawala dealer, hence the share application money received by the assessee was the result of a bogus transaction. The Ld. DR in this respect has relied upon the decision of the co-ordinate bench of the Tribunal in the case of Gold Star Finvest (p) Ltd. [2013] 33 Taxmann.com 129. The Ld. DR has also referred to the decisions of the Tribunal in the case of M/s. Richmand Securities Pvt. Ltd. in ITA No. 4624/Mum/2005 dated 29.8.2008 and further in the case M/s. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised by the AO in respect of the evidences submitted in relation to each of the eight companies was duly replied and dealt with. It has been explained that the assessee had provided the complete details of the share application money received together with confirmations and that there was no statutory obligation to obtain the application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving cheque number, date, name of bank was submitted. The Ledger Account confirmation in the books of Investor company was also submitted. The board resolution was not available with assessee as the assessee has got no legal right to ask for copy of board resolution when complete information about the investments made was available. The evidence relating to the net worth of the investing companies was also submitted. The Ld. DR on the other hand, though, has fairly admitted that no direct incriminating material against the assessee was found during the search action, he, however, has contended that it is a case of circumstantial evidence which is corroborated with the admission of one of the directors of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that he was appointed as the director on 15.2.2010 only. That he was not the director in the previous year relevant to A.Y. 2009-10. He was also not the Director during the previous year from 1.4.2009 to 15.2.2010, during the time when the transaction had taken place. He was not the employee of the assessee company nor was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these question were put to him, he agreed to offer the amount as unexplained income of the company. In view of this the Ld. AR has submitted that no reliance can be placed on the statement of Sh. Ajay Kumar who was neither in any way connected with the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solely on the basis of retracted statement of the said Sh. Ajay Kumar, a perusal of which reveals that the same was not based on his own knowledge of the relevant facts/transaction in question, additions made by the AO cannot be held to be justified in any manner. The Ld. AR has further brought our attention in this respect to the Instructions issued by CBDT bearing No. F. No. 286/2/2003-IT (Inv.II) dated 10/3/2003 wherein it has been stated that during the course of search/survey, no attempt should be made to obtain the confession as to the undisclosed income. Any action on the contrary shall be reviewed adversely. CBDT has also referred to the fact that if the confession statements are taken which are not based on credible evidence then later they are retracted. In the present case also, not a single incriminating material was found during the search action. The addition is made purely on the basis of declaration made by Sh Ajay Kumar, Director. The Ld. AR has relied upon the following decisions in this respect. (a) DCIT v. Pramukh Builders ITA No. 2170/Ahd./1999 A.Y. 1994-95 dated 6.7.2007 Reported in 115TTJ p. 330 (Third Member) (b) CIT v. K. Bhuvanendra and Oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010) 41 DTR - 350 d) CIT v. Gangour Investments Ltd. (2009) 18 DTR (Delhi) - 242 e) CIT v. STL Extrusion Pvt. Ltd. (2011) 333 ITR - p. 269 (MP High Court) f) CIT v. G.P. International Limited (2010) 325 ITR p. 25 (P H) g) CIT v. Siri Ram Syal Hydro Power Pvt. Ltd. 196 Taxman p. 444 (Delhi High Court) h) CIT v. HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court) 13. On the other hand the Ld. DR has relied upon one decision of Mumbai ITAT in the case of Gold Star Finvest Pvt. Ltd. (supra) wherein while determining the income of that assessee, the Tribunal has estimated the income at certain percentage. The Ld. AR has however submitted that the ratio of this decision cannot overrule the decisions of Bombay High Court and several Mumbai ITAT decisions as relied upon by him. He has further relied upon the following decisions wherein the additions made by the AO on the basis of general statement of Mukesh Chokshi have ultimately been deleted by the higher authorities. 1. Kataria Ketan Ishwarlal v. ITO - ITA No. 4304/M/2007 decided on 30.04.2010. 2. ACIT v. Shri Ravindrakumar Toshniwal - ITA No. 5302/M/2008 decided on 24.02.2010 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. Where every transaction of the assessee has been accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in the case styled as CIT v. Shri Mukesh R. Marolia in ITA No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon'ble Bombay High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd M/s. Mihir Agencies, has upheld the findings of the Ld. CIT(A) deleting the additions. The other case laws relied upon by the Ld. DR are thus not applicable to the case of the assessee in the light of the direct decision of the Jurisdictional High Court on the identical facts which holds a binding precedent on this Tribunal. Even otherwise there is no evidence on record that the assessee had given its own money to the investing company for the purpose of making investments. It may be observed that the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor. In the case in hand also, the requisite details, proof, confirmation, evidences etc. are produced. The ratio of the decision of the Hon'ble Supreme Court is directly applicable on the facts of the case. In view of the above disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icient reason for delay in filing the cross objection. Since it is purely legal issue which goes to the root of the issue considering the reasons filed for condonation of delay, we are satisfied that there was sufficient reasons for delay in filing the cross objection, accordingly, in the interest of substantial justice, we condone the delay and decide the legal issue. The assessee has challenged the legality of the assessment framed u/s. 153C on the plea that no satisfaction was recorded by AO of the searched person so as to empower the concerned AO of these concerns to make addition u/s. 153C. Learned AR placed on record report on inspection taken of the records dated 28/08/2015 which reads as under:- Jogia Properties Ltd. A.Y. 2008-09 alld. 2009-10 ITA No. 6106/M/2012 and 6107/M/2012 Hearing fixed on 8th September, 2015 Report on the inspection taken of the records The appellant had made an application vide letter dated 05/08/2015 to the Assessing Officer requesting for inspection of the assessment records. The said assessment records were with the Hon'ble Commr. of Income Tax, DR, Smt. Neena Pandey, f-Bench, Mumbai ITAT. The Inspector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be' issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her person and that Ld. Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under section 132A in the second proviso to [Sub-section (1) of 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Ld. Assessing Officer having other person. Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Ld. Assessing Officer shall not be required to issue notice for assessing or reassessing the total assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment has abated. In Order to issue a valid notice u/s. 153C, the Ld. Assessing Officer of a person against whom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing proposition of law laid down in above judicial pronouncements, notice issued u/s. 153C is bad in law and consequently the order passed by the Ld. Assessing Officer u/s. 153C needs to be cancelled. 43. Now, coming to the statement of one Mr. Jose Mathews which was recorded during course of search. Subsequently Mr. Jose Mathews has retracted his statement. The fact of retraction was also intimated to the Ld. Assessing Officer during the assessment proceedings. The necessary proof for the same was also produced during the course of hearing. Mr. Jose Mathews was neither an employee nor a director nor a person anyway connected with the affairs of either Jogia Properties Ltd. or any of these 7 companies. His statement has no evidential value. During the course of search and post search investigation also not a single piece of evidence was found by the Investigation Wing or by the Ld. Assessing Officer to prove what was originally stated by Mr. Jose Mathews. This retraction of statement of Jose Mathews have also been dealt by the Tribunal elaborately in its decision dated 18/12/2015 and after considering the same Tribunal had uphold the deletion of addition in respect of share ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and no incriminating material is seized. No papers belonging to the assessee is seized and hence the question of confronting the same to the directors does not arise. There is no reference in the assessment order regarding confrontation of the documents to the directors and also in the satisfaction recorded there is no reference to this aspect. 49. The CIT(DR) has referred to the incriminating documents. We found that no document belonging to the assessee was found and hence the question of incrementing document may not arise/. 50. Learned DR placed reliance on the on the decision of the Hon'ble Chhatisgarh High Court in the case of Trilok Singh Dhillon. We found that facts of the case are distinguishable and not applicable to the facts of the instant case. Our above observation further fortified by the Circular No. 24 dated 31/12/2015 issued by Central Board of Direct Taxes wherein it has been clarified that even if the Ld. Assessing Officer of the assessee who is searched and the Ld. Assessing Officer of other person is the same, the Ld. Assessing Officer of the assessee who is searched has to record satisfaction. This Circular makes the position very clear and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The appellant prays that the condition of Section 153C is not satisfied and the Learned Assessing Officer has wrongly invoked the provisions of Section 153C. 3. Brief facts of the case are that a search and seizure action u/s. 132 of the Act was conducted on 04.03.2010 at the business premises of Jogia Properties Ltd., at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search proceeding, it was found that Jogia Properties Ltd. is maintaining books of account at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bunder, Mumbai. Therefore, this premises were also covered u/s. 133A of the Act. On search at Bhatia Niwas, it was revealed that the following companies are operating from the said premises. S. No. Name of the party 1 Auster Properties Pvt Ltd. 2 Reva Properties Pvt. Ltd. 3 Archive Realty Developers Pvt Ltd. 4 Vedisa Properties Pvt. Ltd. 5 Martand Properties Pvt. Ltd. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l details were supplied, the assessee further contended that identity of share holder is established, therefore, confirmation is filled with supported document. The assessee further vide its letter dated 30.11.2011 submitted another reply for AY 2009-10 and 2010-11 which is reproduced as under: 1. The correct status of our company is public limited company and the name of company is Martand Properties Ltd. The registered office of the said company till the date of search action on Jogia Properties Ltd. was 20, Bhatia Niwas, 233/235, Samuel Street, masjid Bunder, Mumbai 400003. Please refer to original return of income filed for A.Y. 2009-10 in which the said address is disclosed. 2. A search action was undertaken on M/s. Jogia Properties Ltd. on 4/3/2010. No search action u/s. 132 or survey action u/s. 133 A is undertaken against our company. No summons were issued to us by the Investigation Wing in the search proceedings of Jogia Properties Ltd. We do not have any relationship with Jogia Properties Ltd. 3. We understand that search proceedings started on 4/3/2010 continued in the case of Jogia properties Ltd. and on 15/04/2010 the prohibitory order was lifted which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestment by all 5 companies can be explained. Therefore while filing the return of income for A Y 2009-10 in response to the notice under section 153C, the company did not include the income of Rs. 5 crore. The noninclusion of income obtained on 15 April 2010 may be treated as a retraction of income. Please refer to letter dated 18 July 2011 submitted in your office on 22 July 2011 wherein also the fact of retraction has been mentioned. The real income as per the provision of income tax act 1961 is only chargeable to tax. No evidence or documents was found to prove that the head paid case of received share application. Mr. Jose Matthew is not director or employee of our company. He is no way connected with our company. No reliance can be placed on statement of Mr. Jose Matthew. 5. I further state that all the five companies are independent existing corporate bodies. They are registered with Registrar of Companies. They are maintaining regular books of accounts. They have their own bank accounts. They have filed the return of income. They have filed a confirmation to the effect that they have made investments in the equity shares of the company from their bank account. They ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. We further state that your have in para 7 of the proceeding sheet dt. 11.11.2011 have referred to the sum of Rs. 1,50,00,000/- received by us as share application money from M/s. Sidh Housing Deployment Co. Ltd. and Rs. 1,00,00,000/- from M/s. Oshin Investment in A.Y. 2010-11, aggregating to Rs. 2,50,00,000/-. In this regard we have to state that we have already filed details of share application money received issue of shares against share application, cheque No., name of the Bank, Branch and confirmation. These are the same parties from whom in A.Y. 2009-10 also the amount is received towards share application. We have established before you the identity and credit worthiness of both the parties which will also hold good for A.Y. 2010-11. The party who has made investment in A.Y. 2009-10 has made further investment in A.Y. 2010-11. 13. We further state that we have produced sufficient evidence in support of the claim that the shareholding companies have made investments in the share capital. Non production of the director should not be construed that the investments made by the shareholding company is not genuine. 14. We further state that there are no incriminator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mum/12 and C.O. No. 259 260/Mum/2012, wherein the similar delay in filing the Cross Objection on identical grounds was condoned by the Tribunal. On the other hand, ld. DR for the Revenue not disputed the contention of ld. AR of assessee and submitted that the delay was condoned by the Co-ordinate Bench. 7. We have considered the rival contention of the parties and gone through the order of Co-ordinate Bench in assessee's group case wherein the Tribunal in para 35 of its order condoned the delay in filing the Cross objections holding that assessee has raised purely a legal issue, which goes to the root of the issue and was allowed. We respectfully following the decision of Co-ordinate Bench on identical grounds in assessee's group case is inclined to condone the delay in filing the Cross Objection. 8. In support of C.O. the ld. AR of the assessee argued that the ground of Cross Objection raised by assessee is covered by the decision of Tribunal in assessee's group case in ITA No. 6104 6105/M/2012 with Cross Objection therein vide C.O. No. 259 260/M/2012 ACIT v. Archieve Realities Developers Ltd., ITA No. 6097 6098/M/2012 Cross Objection No. 264 265 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k the inspection of the assessment records and the findings of the said inspection are as under. 1. There is no proof or evidence on record to the effect that the Assessing Officer gave the copies of the statement recorded of Mr. Mukesh Chokshi on 25/11/2009 and 11/12/2009. 2. No proceeding sheet/order sheet was available for inspection, 3. No recording of any satisfaction for initiating proceedings u/s. 153C against 7 companies. Place: Mumbai Dilip V. Lakhani Viresh Sohoni Dated: 20/08/2015 Authorised Representative Representative of Appellant 36. It is clear from the above inspection report that no satisfaction has been recorded by the AO of the searched person i.e., M/s. Jogia Properties Ltd., for initiating proceedings u/s. 153C against these seven companies. 37. From the record we found that in the file of the company which was searched viz. Jogia Properties Ltd., the Ld. Assessing Officer has not recorded any satisfaction to comply with the provisions of Section 153C. A search seizure action was taken against M/s. Jogia Properties Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated. 39. Learned AR also invited our attention to page 3 of the paper book filed in cross objection proceedings. Page 3 is the copy of the satisfaction recorded u/s. 153C in the hands of Karburi Properties Ltd. The reference to years are 2004-05 to 2009-10. The Ld. Assessing Officer has relied upon page 1 of Annexure - A 1 of the seized panchnama dated 04.03.2010. The said page 1 is on page 4 of the paper book. The said page contains the details of 24 entities giving the name, account number and the persons who are authorised signatory. This paper does not belong to Karburi Properties. During the course of investigation, the assessee had filed detailed explanation on the contents of pages 1 to 126 and copy of the submissions made before the Ld. Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or documents or assets seized shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person. The recording of the satisfaction is a must and even if the Ld. Assessing Officer for the person searched and the 'other person' is the same, still the satisfaction has to be recorded by the Ld. Assessing Officer of the search person referred to in Section 153A. 41. of the proposition that for initiating proceedings u/s. 153C, satisfaction should be recorded in the file of searched person, reliance can be placed on the following judicial pronouncements. a. Vijaybhai N. Chandrani v. Asst. Commr. Of Income Tax Reported in 333 ITR 436 (Guj. HC) b. Pepsico India Holdings (P.) Ltd. v. Asst. Commr. Of Income Tax ITA No. 6104/12 11 other appeals CO No. 259/12 11 other cross objections Reported in 228 Taxmann 116 (Delhi HC) c. Beejay Securities Finance Ltd. ITA Nos. 4859 to 4865/MUM/2009 (A.Y. 2001-02 to A.Y. 2007-08) date of pronouncement 24/06/2011 d. M/s. Jindal Stainless Ltd. ITA Nos. 3480 3481 (Del) 2006 (A.Y. 2003-04 2004-05) Reported in 21 ITAT INDIA 812 (Delhi) e. LMJ International Ltd. ITA No. 2173/Kol/2006 (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ench in assessee's group case in the above referred decisions. The ld. DR for the revenue submitted that he has nothing to add in his submission except to rely on the order of Assessing Officer. 14. Considering the facts that the Co-ordinate Bench of the Tribunal has already dismissed the appeal of the Revenue in assessee's group case which was covered in search seizure action u/s. 132 conducted on 04.03.2010, the Revenue has raised identical grounds except the difference in the figure of additions in the present appeal. Thus, respectfully following the decision of Co-ordinate Bench wherein it was held that no satisfaction was recorded by Assessing Officer before initiating action u/s. 153C of the Act. Hence, the assessment order passed without recording satisfaction u/s. 153C of the Act is bad-in-law. In the result the appeal of the Revenue for AY 2010-11 is dismissed. 15. In the result appeal filed by Revenue vide ITA No. 6101 6103/M/2012 in ACIT v. M/s. Martand Properties Ltd. for AY 2009-10 2010-11 are dismissed and the Cross Objection No. 255/M/2014 filed by the assessee is allowed. 6.2. If the aforesaid decisions of the Tribunal are examined, one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is on para 6.14 of the order. On the subject of source of the funds in the hands of the fourteen companies the two different propositions arose. First being the genuine investments by fifty-four companies in to the share capital of fourteen companies and second being the investments made by the Lloyds Steel Industries Limited through the fifty-four companies in the fourteen companies. The department on one side is rejecting the explanation regarding the application of the income by Lloyds Steel Industries Limited and also simultaneously treating the investments by fifty-four companies as non-genuine investments in the fourteen companies. The department also levied penalty on Lloyds Steel Industries Limited u/s. 271(1)(c). In this background the Learned CIT (Appeals) has observed that the department has been inconsistent in making additions in fourteen investing companies by not accepting the claim that it is out of the income generated in the case of Uttam Value Steels Limited (formerly known as Lloyds Steel Industries Limited) and at the same time levying penalty on Uttam Value Steels Limited on the footing that it had introduced share application money in the fourteen compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statement of Shri Om Hari Halan that the transaction between nine parties of the assessee is not genuine. Similarly the statement of Shri BL Aggarwal recorded during the survey proceedings do not lead any evidence as regards the amounts received by the assessee company from nine investing companies and there is nothing to construe that any facts emerges which is contrary to the finding given by the Ld. CIT(A) and the Tribunal in the cases referred to hereinabove. 6.5. Before us, the Learned Sr. Standing Counsel, during the course of argument before us, invited our attention to paras 8.4, 8.5 8.6 of the impugned order. He argued that the investments made by fifty-four companies into fourteen companies are not genuine and tried to establish from the share capital and other data being who are the shareholders of those fifty-four companies. He also relied upon certain case laws in support of the claim that the action of the Assessing Officer and CIT(A) is justified. He relied upon the findings of the Assessing Officer as well as CIT(A) in general and supported both the orders. 6.6. We have perused the aforesaid paras in the impugned order and find that the reliance on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were issued asking the assessee for the complete details and the information about the amount received in A.Y. 2010-11 and issue of preference shares in the subsequent period. The Ld. Assessing Officer after examining the details and the audited financial statements/replies of the assessee framed assessment u/s. 143(3) and the claim of the assessee was accepted. No addition was made in this proceeding. Notice u/s. 143(2) was issued by the Central Circle - 32. 2. Thereafter the notice u/s. 148 was issued on 24/03/2014. In the assessment order the addition was made u/s. 68 amounting to Rs. 210,61,50,000/-. The Ld. CIT (Appeals) confirmed the addition, which is under challenge before this Tribunal. 3. Both the ld. representative took identical argument before us as was preferred for earlier Assessment Years and identical cases were relied upon. Considering the arguments advanced from both sides, we are summarizing hereunder the party-wise details of the additions made and the other particulars of the said parties are given here-below as Annexure -1. Against the name of each party the additions made by the Learned Assessing Officer amounting to Rs. 210,61,50,000/- is mentione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25 5 Pref. Shares Application forms 4 31 35 34 36 37 38 39 6 Pref. Shares Allottment Letters 4 47 54-55 52-53 56 57 58 59 7 Details of Money received giving complete bank details 4 71-72 79-80 78 81-82 83-84 85-86 87-88 8 Round (1) 9 Order Passed u/s. 143(3) 2 322-334 NA NA NA 853-854 855-856 878-879 10 order of the CIT (A) 2 636-668 NA NA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided on 17/4/2018, wherein, the Hon'ble High Court has held that during the A.Y. 2010-11 the assessee was not required to explain the source of the source of the funds. Without prejudice to the submission that A is not required to prove the source of the source of the funds for A.Y. 2010-11, the assessee has also proved the source of the source of the funds in the hands of all the seven entities. Reference is made to details given below. All the seven parties received share application money from various corporate bodies. 7.4. It was explained before us, by the Ld. counsel for the assessee, that in the hands of assessee in the earlier proceedings the amount received from all the seven parties is accepted and no additions were made and the Assessing Officer has in the present reassessment proceedings, being the second round, has taxed the amount received from all the seven companies without having any direct evidence contrary to what was available on record. The reassessment proceedings are initiated based on the statements of three parties. In their statement also there is no reference to the investment made by the seven parties with the assessee. No evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76,51,650 Total 99,80,000 99,10,500 2. In March, 1987 the assessee filed a revised return for assessment year 1984-85 and assessment year 1985-86 by taking advantage of the Amnesty Scheme and surrendered Rs. 62,500 and Rs. 1,87,000 in the respective years. In these fresh assessment proceedings the Assessing Officer issued summons under section 131 of the Income-tax Act and thereafter impounded the Shareholders' Register, Share Application Forms and Share Transfer Register. The assessee has contended that because these materials were in the custody of the Department the former was unable to furnish any further details pertaining to the subscribers. 3. Reliance has been placed on behalf of the assessee on CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) which has been repeatedly relied upon in several subsequent decisions. In our opinion this ruling has been misinterpreted and misconstrued. We, therefore, reproduce the entire Order verbatim for facility of reference: The petitioner seeks reference of the following question: 'Whether, on the facts and in the circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d observed firstly, that no question of law had arisen before it; secondly, that if some bogus shareholders had been detected their assessment could justifiably be reopened; and thirdly that the amount of increased share capital could not be assessed in the hands of the company. The later two aspects undeniably possess the character of question of fact. Reference to section 68 of the Income-tax Act (hereafter referred to as the 'IT Act') is conspicuous by its absence. The Stellar Investment ratio cannot be stretched to the extent that it partakes as a reflection on section 68, when the enquiry pertained only to section 263. In Mysore State Road Transport Corpn. v. Mysore Road Transport Appellate Tribunal AIR 1974 SC 1940, the Supreme Court had referred to an essay by Professor A.L. Goodhart for the proposition that the ratio decidendi of a case is determined by taking into account the facts treated by the Judge deciding the case as being material, and that his decision is based thereon. Mention should immediately be made of the view prevailing in the Gujarat High Court expressed in Nirma Industries Ltd. v. Dy. CIT [2006] 155 Taxman 330, to the effect that the dismissal of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l taking resort to section 263 in the case by ignoring the material fact that the Assessing Officer had failed to discharge his duties regarding the investigation with regard to the genuineness and creditworthiness of the shareholders, many of whom were found to be students and housewives. Rejection of an appeal under section 260A is similar to the dismissal in limine by the Supreme Court of Special Leave Petition. This is also the view of the Calcutta High Court. Authority for the proposition is available in Municipal Corpn. of Delhi v. Gurnam Kaur AIR 1989 SC 38 and more recently in Director of Settlements, AP. v. M.R. Apparao AIR 2002 SC 1598. The Full Bench of the Patna High Court in Smt. Tej Kumari v. CIT [2001] 247 ITR 210 has pithily made a distinction between the dismissal in limine of an SLP and the dismissal of a regular civil appeal by a non-speaking order. The view was that in the former it would not be possible to extract any expression on the legal position on the part of the Court. 5. This analysis, however, does not lead to the consequence that the conundrum indirectly covered by Stellar Investment remains unresolved. A perusal of the opinion of the Full Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orms and Bank transaction details to give some indication of the identity of these subscribers. It may not apply in circumstances where the shares are allotted directly by the company/assessee or to creditors of the assessee. This is why this Court has adopted a very strict approach to the burden being laid almost entirely on an assessee which receives a gift. 7. Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) a succinct yet complete precis on the essentials of income-tax liability can be discerned from these words - In all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if the receipt is in the nature of income, the burden of proving that it is not taxable because it falls within the exemption provided by the Act lies upon the assessee. This decision is adequate authority for the proposition that by virtue of section 68 of the Income-tax Act the assessee is obliged to establish that amounts credited in the accounts do not represent its income; in that case the assessee's version that she had won them through betting on horse racing in two consecutive years did not attract credibi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roneous not only because it contains some apparent error of reasoning or of law or of fact on the face of it but also because it is a stereo-typed order which simply accepts what the assessee has stated in his return and fails to make inquiries which are called for in the circumstances of the case . It was further observed that the Assessing Officer is both an adjudicator as well as an investigator, and it is his duty to ascertain the truth of the facts stated in the Return if such an exercise is 'provoked', or becomes 'prudent'. The Bench held that section 263 which deals with the Revision of orders prejudicial to the revenue by the Commissioner comes into operation wherever the Assessing Officer fails to make such an inquiry, because it renders the order of the Assessing Officer erroneous . It seems to us that if this duty pervades the normal functioning of the Assessing Officer, it becomes acute and essential in the special circumstances surrounding section 68 of the Income-tax Act. 10. Returning to Sophia Finance, the Full Bench which was now presided over by B.N. Kirpal, J. (as the Chief Justice of India then was) had enunciated that section 68 reposes in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er in the present case. In the course of the said inquiry, the assessee had disclosed to the Assessing Officer not only the names and the particulars of the subscribers of the shares but also their bank accounts and the PAN issued by the Income-tax Department. Super added to all this was the fact that the amount received by the company was all by way of cheques. This material was, in the opinion of the Tribunal, sufficient to discharge the onus that lay upon the assessee. This is evident from the passage extracted from the order passed by the Tribunal earlier. In the absence of any perversity in the view taken by the Tribunal or anything to establish conclusively that the finding regarding the genuineness of the subscribers and the transactions suffers from any irrationality, we see no substantial question of law arising for our consideration in this appeal to warrant interference. This appeal accordingly fails and is hereby dismissed. It seems clear to us that where moneys have been received in cash or even Demand Drafts, the standard of proof would be much more rigorous and stringent than where the transaction is by cheque where the date and source of the investment cannot be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pernicious practice of conversion of unaccounted money through the masquerade or channel of investment in the share capital of a company must be firmly excoriated by the revenue. Equally, where the preponderance of evidence indicates absence of culpability and complexity of the assessee it should not be harassed by the Revenue's insistence that it should prove the negative. In the case of a public issue, the Company concerned cannot be expected to know every detail pertaining to the identity as well as financial worth of each of its subscribers. The Company must, however, maintain and make available to the Assessing Officer for his perusal, all the information contained in the statutory share application documents. In the case of private placement the legal regime would not be the same. A delicate balance must be maintained while walking the tightrope of sections 68 and 69 of the IT Act. The burden of proof can seldom be discharged to the hilt by the assessee; if the Assessing Officer harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the Assessing Officer fails to unearth any wrong or illegal deal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s interests. Instead the Calcutta High Court observed that the ITO ought to have investigated the matter more thoroughly to controvert the claim of the assessee, and concurred with the conclusion of the Tribunal that the latter had discharged the initial burden that lay on it. The High Court set aside the decision of the Tribunal which had reversed the findings of the ITO as well as the CIT (Appeals) since the assessee had supplied the income-tax file number of the creditor before it. The High Court noted that the mere filing of the income-tax number was not sufficient to establish the identity and creditworthiness of the creditor and genuineness of the transaction. Although Orissa Corporation was referred to the decision of the Full Bench of this Court in Sophia Finance was not even cited. Korlay Trading as well as Sophia Finance was applied by the same Division Bench of the Calcutta High Court in four decisions delivered in March 2003. In Hindusthan Tea Trading Co. v. CIT [2003] 263 ITR 289 (Cal.), the Bench opined that in the case of a subscription to the share capital of a company, if section 68 of the Income-tax Act is to be resorted to, it is necessary for the assessee to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceipt constitutes taxable income. This decision was followed by the Apex Court in Anantharam Veerasinghaiah Co. v. CIT [1980] 123 ITR 457 opining that the mere falsity of the explanation given by the assessee is insufficient without there being, in addition, cogent material or evidence from which the necessary conclusion attracting a penalty can be drawn. However, as has been noted in Addl. CIT v. Jeevan Lal Sah 1995 Supp. (4) SCC 247 amendments were incorporated by Finance Act, 1964, into section 271 which had deleted the word deliberately in its sub-section 1(c), thereby shifting the onus of proof onto the assessee, rendering Anwar Ali's case (supra) ineffectual. Nevertheless, in CIT v. Mussadilal Ram Bharose [1987] 165 ITR 14 it has been enunciated by the Supreme Court that though the explanation shifts the burden to the assessee to show absence of fraud, this onus is a rebuttable one. The burden is not discharged by the assessee tendering an incredible or fantastic explanation; and every explanation does not have to be accepted. In our opinion, it is for Parliament to introduce legislation if the duty presently resting on the Department is thought to be too onerous. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning in respect of Ground No. 1 before it viz. deletion of the addition of Rs. 13,05,450 on account of unexplained shares subscription; whilst it has done so with regard to the other ground viz., deletion of addition of Rs. 9,95,000 made on account of unexplained loans. The ITAT has categorically held that the assessee has discharged its onus of proving the identity of the share subscribers . Had any suspicion still remained in the mind of the Assessing Officer he could have initiated 'coercive process' but this course of action has not been adopted. In view of the concurrent finding pertaining to the factual matrix we find no merit in these Appeals which we accordingly dismiss. ITA No. 880/2006 21. In respect of this assessee namely, General Exports Credits Ltd., the ITAT has reversed the decision of the CIT(A) on the subject with which we are presently concerned. It is trite that the decision of the ITAT should not be interfered with by the High Court unless it finds it perverse and totally unacceptable. This is especially so with regard to the factual aspects of any appeal where there are concurrent conclusions of the lower Authorities. The assessee as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effect that in case of share capital no additions could be made if it is established that the shareholders exist is not completely correct, and has not been so enunciated by this Court in Sophia Finance. 22. It has been contended on behalf of the revenue that the Rights Issue could not have been subscribed to by the aforementioned five Companies sans renunciation by the original shareholders. It has also be argued, and with merit, that the ITAT had not articulated the premise for arriving at the conclusion that the renunciation had taken place in a legal manner. We have also noticed that the Rights Issue were picked up only in 1989-90. These factors are not relevant in these proceedings, even if there have been transgressions to the Companies Act. Support for this approach can be found from the Coca-Cola Export Corpn. v. ITO [1998] 231 ITR 200. The Apex Court observed that - If any remittance of foreign exchange had been made in excess of the prescribed limit from January 1, 1969, that will be for the Reserve Bank or the Central Government to take action or to grant permission as may be provided under the Foreign Exchange Regulation Act, 1973. That, however, cannot be a grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the creditors, who are assessed to tax and full particulars is furnished then the assessee has discharged the duty. If the revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68. No question of law, far less any substantial question of law arises for our consideration. We may however briefly reflect upon a submission made by learned Counsel for the respondent to the effect that the assessee had, by its letter dated 8-3-1999 requested the Assessing Officer to examine the Assessment Records of the share applicants whose GR Nos. had been supplied. It is not controverted that action was not taken by the Assessing Officer, but it has justifiably been contended that this inaction was due to paucity of time left at that stage since the assessment had to be framed by 31-3-1999. It has been pointed out that several adjournments had been granted by the Assessing Officer on the asking of the assessee. The timing of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enketeshwar Ishpat Pvt. Ltd. 319 ITR 393 (Chhatishgarh), the Hon'ble High Court held as under:- 1. This appeal under section 260A of the Income-tax Act, 1961 (in short the Act ), has been admitted on the following substantial questions of law: 1.1 Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the order of the Commissioner of Income-tax (Appeals) and whether it was justified in confirming his views in deleting the addition made by the Assessing Officer on account of unexplained investment in share capital in spite of the respondent's failure to discharge the onus cast upon it as per the pro visions of the law. 1.2. Whether on the facts in the circumstances of the case, the Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) in respect of the share capital ignoring the fact that no verification pertaining to its source was ever carried out in the year in which it was introduced. 1.3. Whether, on the facts and circumstances of the case, the Tribunal was justified in confirming the order of the Commissioner of Income-tax (Appeals) deleting the addition of ignoring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eshwar Rao, learned counsel for the appellant, does not dispute their ratio of law laid down by the hon'ble Supreme Court in the aforesaid judgment. 8. We have heard learned counsel for the parties and perused the impugned order. 9. In the matter of Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5, the question before the hon'ble Supreme Court was-whether the amount of share money can be regarded as undisclosed income under section 68 of the Act? Answering the above question, the hon'ble Supreme Court has held that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of the assessee-company. 10. Thus, in view of the binding judgment of the hon'ble Supreme Court as also the findings recorded by the Commissioner of Income-tax (Appeals), which have been subsequently confirmed in appeal by the Appellate Tribunal, we are of the opinion that there is no question of law, much less a substantial question of law, arising f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavits of the said subscribers the revenue at no stage of the proceedings sought any opportunity to rebut the said affidavits. Therefore, no question of law much less substantial question of law arises in this appeal. [Paras 6 and 7] 8.5. In the case of CIT v. G.P. International Ltd. (2010) 186 Taxman 229 (P H), the Hon'ble High Court held as under:- The revenue has filed this appeal under section 260A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), against the order dated 12-2-2009, passed by the Income-tax Appellate Tribunal, Delhi Bench 'I' New Delhi (hereinafter referred to as 'the ITAT') in ITA No. 4346/Delhi/2005, pertaining to the assessment year 1996-97, while raising the following substantial questions of law: (1) Whether on the facts and in the circumstances of the case, the learned ITAT was right in law in upholding the order of the learned CIT(A) in deleting the addition of Rs. 3,30,000 made by the Assessing Officer on account of liability of M/s. Axis Chemicals Pharmaceuticals even though the assessee had failed to prove the existence and genuineness of the liability? (2) Whether on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was deleted by the ITAT. It is the admitted position that the said order of the ITAT passed in ITA Nos. 114 to 116/Delhi/2004 has become final. In view of these facts, in our opinion, the ITAT has rightly come to the conclusion that the aforesaid liability of the assessee cannot be said to have ceased to exist and the provision of section 41(1) and Explanation to this provision are not applicable, because the assessee is still showing it as a liability in its books and has not written off the same. 3. Regarding the addition of Rs. 15,00,000 on account of unexplained share capital, it has been held that at the time of the original assessment, the assessee had supplied the list of the persons along with their addresses to whom the shares were sold. The said list contained information, such as name, address and number of shares allotted. The Assessing Officer had issued enquiry letter under section 133(6) of the Act at random basis to 25 persons, out of whom some of the persons confirmed the genuineness of the transaction. However, some persons did not respond. In view of this fact, out of the total share capital of Rs. 54,28,500, the Assessing Officer made an addition of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Account Number (PAN). In fact, the CIT(A) in its order has observed as under:- 2.5 I have carefully considered the submissions made on behalf of appellant. It is true that in appeal proceedings, the appellant's AR himself attended and volunteered for producing Sh. Sujit Acharya before the Assessing Officer for examination which shows genuine intention of the appellant. On this specific request the remand order was passed. However the witness could be produced in the remand proceedings. The AR has explained the reasons for appellant's inability to produce him. However from the documents placed before the Assessing Officer and in appeal it is found that the identity of the share applicant is not in doubt. Copy of his PAN card, for No. 32 his consent letter to be a director of the company and bank account (although of subsequent period) do prove the existence and identity of the party. He is a director of the company. The PAN number has also been checked on the computer system of department and it shows the jurisdiction of Sh. Sujit Acharya with ITO ward 23(4) New Delhi. It is also seen that the signature of Sh. Sujit Acharya on various documents do tally with each oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted the addition by applying the ratio of decision of Hon'ble Supreme Court in the case of CIT v. Lovely Exports 216 CTR 195. It is also pertinent to note that it is not the case where certain investigation have been made by the department where from it has been revealed that this transaction of payment of share application money is bogus, and it is merely an accommodation entry. The department has also not been able to point out any material or evidence on the basis of which it could be said that money has been emanated from coffers of the assessee company so as to treat the share application money as undisclosed income of the assessee company. In case the department has any doubt about the source of payment made by Shri Sujit Acharya, the department is free to proceed against Shri Sujit Acharya for further action as so observed by the ld. CIT(A). 7. In this view of the matter, we don't find any material or basis to take a view other than the view taken by the CIT(A) in deleting the addition of Rs. 50 lakhs being share application money received by the assessee from Shri Sujit Acharya. We, therefore, not inclined to interfere with the order of the CIT(A), which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lower authorities. Our attention was drawn to Annexure I wherein with respect to each and every shareholder the assessee has furnished status of person, relationship with the company and the documents filed before the lower authorities. From this statement, we found that assessee has filed confirmation in respect of Shri N.R. Suri and Mrs. Harvinder Kaur. In respect of Shri M.P. Khanna and Shri J.P. Khanna, the assessee has filed capital account in the firm from where withdrawal for this investment was made and these two are the directors of the assessee company. The assessee has also filed copies of ledger account. In respect of three private limited companies, the assessee has filed copy of ledger account and in case of Hallmark Healthcare Limited, the assessee has also filed affidavit for advancing the money on account of share capital. In respect of all these three companies, the Assessing Officer has directly obtained the bank statement from where relevant cheques on account of share capital were issued. On the basis of these certificates as narrated by the Assessing Officer and CIT(A) we can safely conclude that identity of the shareholders was established and the only grieva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law. Hence, we find no infirmity with the impugned judgment...... 5. Keeping in view the aforesaid mandate of law, the share application money of Rs. 18,00,000 cannot be regarded as undisclosed income of assessee under section 68 of Act, 1961. Accordingly, present appeal is dismissed in limine. In favour of assessee. +Appeal arising from order of ITAT, Delhi in IT Appeal No. 2041 (Delhi) of 2006, dated 23-6-2009. 8.8. The Hon'ble Delhi High Court in CIT v. Oasis Hospitalities Pvt. Ltd. (333 ITR 119) (Del.) held as under:- As per the provisions of section 68, in case the assessee has not been able to give satisfactory explanation in respect of certain expenditure or where any sum is found credited in the books of account, the Assessing Officer can treat the same as undisclosed income and add it to the income of the assessee. The assessee is required to give satisfactory explanation about the 'nature and source' of such sum found credited in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction can be the copies of the shareholders' register, share application forms, share transfer register, etc. [Para 13] As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. [Para 14] The observations of the Supreme Court in the case of CIT v. Lovely Exports (P.) Ltd. [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cided on the application of aforesaid principles. [Para 24] IT Appeal Nos. 2093 and 2095 of 2010 Addition could not be sustained as the primary onus was discharged by the assessee by producing PAN, bank account, copies of the income-tax returns of the share applicants, etc. It was also found that the Assessing Officer was influenced by the information received by the investigating Wing and on that basis general modus operandi by such entry operators was discussed in details. However, whether suchmodus operandi existed in the instant case or not was not investigated by the Assessing Officer. The assessee was not confronted with the investigation carried out by the Investigating Wing nor was it given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing. [Para 28] As regards discrepancies found by the Assessing Officer in the bank statement, it was to be mentioned that the bank statements that were filed by the assessee were provided by the shareholders and were computer printed on the bank stationery. The same were filed by the assessee during the assessment proceedings without any suspicion of their being incorrect. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were filed and no steps were taken by the assessee which could establish the aforesaid three ingredients. [Para 43] Additional evidence in the form of bank statement, etc., was given, but the assessee had not done anything to prove those bank accounts. [Para 44] For all those reasons, the assessee had not been able to discharge the onus ptomaine and addition had been rightly made. [Para 46] 8.9. The Delhi Bench of the Tribunal in ACIT v. Adamine Construction Pvt. Ltd. (87 taxman.com 216)(Del.) held as under:- In the present case there were 11 investor companies claimed to have invested in the assessee-company. In support of their identity and creditworthiness as well as genuineness of the transactions, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements (except in the case of RGTC), bank accounts with this submission that entire amount had been received by the assessee-company through normal banking channels by account payee cheques/demand drafts. The confirmations filed revealed the source of funds, particulars of the bank account through which payments were received and the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estor companies, notices could not be served in case of 3 companies as they were not available on the given addresses. The remaining eight companies had responded and had filed their submissions. However, there is no dispute that in case of all the 11 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels, i.e., through account payee cheques and demand drafts. Thus, the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no dispute that all the investor companies were filing their returns of income and were being assessed by the Department. The Assessing Officer on the contrary remained suspicious on the claimed receipt from the investor companies on some other factors like some of them were not found on their given addresses, some of them had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/[2017] 81 taxmann.com 269 (Delhi) (para 16), xxiii. CIT v. Real Time Marketing (P.) Ltd. [2008] 306 ITR 35/173 Taxman 41 (Delhi) (para 16), and xxiv. CIT v. Kamdhenu Steel Alloys Ltd. [2014] 361 ITR 220/[2012] 206 Taxman 254/19 taxmann.com 26 (Delhi) (para 16). 8.10. Hon'ble Delhi High Court in CIT v. Anshika consultants Pvt. Ltd. 62 taxman.com 192 (Del.) held/observed as under:- Whether the assessee-company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed, the investigation report which was specifically called from the concerned department was available but not discussed by the Assessing Officer. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir balance sheets and also share certificates issued in order to prove that actual share money had been received and shares had been allotted to respective parties, addition made under section 68 in respect of said share money in assessee's hands was not justified [In favour of assessee] The assessee-company had received share application money from the three companies. The Assessing Officer observed that investments made by these three companies in shares of assessee-company were prima facie doubtful. On examination, he found that the share application money received by the assessee-company was prima facie an accommodation entry. The Assessing Officer also found that a director of company, from which assessee had received share application money had accepted the fact that the transactions were not genuine and it was merely accommodation entry. In view of these facts, the Assessing Officer made addition under section 68. The Commissioner (Appeals) sustained the addition. Held that certificate of incorporation of investor companies was placed on record. It means that they were registered companies under the Companies Act. PANs of all the three parties had been given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing addition under section 68 on account of share application money merely on general inference to be drawn from the reading of the investigation report. The least that Assessing Officer ought to have done was to enquire into matter by, if necessary, invoking his powers under section 131 summoning the share applicants or directors. While coming to the aforesaid conclusion, the Hon'ble Delhi High Court the following decisions:- i. CIT v. Nova Promoters Finlease (P.) Ltd. [IT Appeal No. 342 of 2011, dated 15-2-2012] (para 3) and ii. CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR (SC) 195 8.14. The Hon'ble Madhya Pradesh High Court in the case of Peoples General Hospital Ltd. 35 taxman.com 444 (M.P.), held as under:- In the case of CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008], the Apex Court specifically held that if the identity of the person providing share application money is established, then the burden is not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said company in accordance with law. [Para 16] The position of the present case is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case where any sum is found credited in the books of account and the assessee has not given satisfactory explanation in respect of the same, the Assessing Officer can treat the same as undisclosed income and add it to the income of the assessee. All that the said provision contemplates is that the assessee has to give satisfactory explanation about the 'nature and source' of such sum found credited in the books of account. [Para 5] In view of the fact that all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment. Thus, the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of section 68. When the nature and source of the amount so invested is known, it cannot be said to undisclosed income. Therefore, the addition of such subscriptions as unexplained credit under section 68 is unwarranted. [Para 6] That apart, a reading of the decision of the Supreme Court in CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 makes it clear that the department has a right to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors report, auditors report, copy of balance sheet, copy of profit and loss a/c, copy of bank account in all the cases to prove the identity, genuineness and creditworthiness of the cash creditors. The Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. Thus, addition made by the Assessing Officer was to be deleted. Section 153A of the Income-tax Act, 1961 - Search and seizure -Assessment in case of - Assessment year 2008-09 - Where time limit to issue notice under section 143(2) had expired in respect of return filed by assessee under section 139(1) and during course of search no incriminating documents were found in case of assessee, notice issued to assessee under section 153A read with section 143(3) was void ab initio [In favour of assessee] The assessee challenged notices issued to it under section 153A read with section 143 on the ground that same was invalid. Held that in this case the return under section 139(1) was filed on 30-9-2008 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT [IT Appeal Nos. 5888 to 5890 (Mum.) of 2009, dated 12-7-2013] (para 4.1), Vee Gee Industrial Enterprises v. ACIT [IT Appeal Nos. 1 2 (Delhi) of 2011, dated 12-7-2013] (para 4.1), Asstt. CIT v. Mir Mazharuddin [2013] 35 taxmann.com 541/59 SOT 9 (URO) (Hyd. - Trib.) (para 4.1), Asstt. CIT v. Ms. Asha Kataria [IT Appeal Nos. 3105 to 3107 (Delhi) of 2011, dated 20-5-2013] (para 4.1), Natvar Parikh Co. Ltd. v. Dy. CIT [IT Appeal Nos. 2143 to 2145 (Mum.) of 2009, dated 22-1-2014] (para 4.1), CIT v. Navodaya Castles (P.) Ltd. [2014] 367 ITR 306/50 taxmann.com 110/226 Taxman 190 (Mag.) (Delhi) (para 5), CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 (SC) (para 5) and CIT v. Vijay Power Generator Ltd. [IT Appeal No. 514 (Delhi) of 2007] (para 6.1). 8.18. The Hon'ble Assam High Court in Tolaram Daga v. CIT (59 ITR 632)(Assam) held as under:- The sources from which the money was realised by the third party were not within the special knowledge of the assessee as the depositor happened to be his wife. Whether he had knowledge at all of the source of the money deposited by the third-party was a matter which had to be decided on evidence. The mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mere fact that the assessee was unable to satisfy the monies which she deposited with the firm could not, be used against the assessee. The Tribunal, therefore, was not justified in either demanding proof or in drawing an adverse inference against the assessee on his failure to produce the same. The only other circumstance relied on by the Tribunal was that a similar sum of Rs. 10,000 was deposited on the same day by another partner's wife with the firm. This circumstance might have been a coincidence or might have been done by the two ladies agreeing to invest their respective monies with the firm. Whatever may be the reason, the fact that somebody else made a similar deposit on the same day was, totally irrelevant in deciding upon the nature of the deposit made by assessee's wife. The Tribunal, therefore, was not justified in relying on the circumstance as a price of evidence against the assessee. Undoubtedly, it was not a material at all on which the Tribunal could base its decision. On a careful consideration of the facts and circumstances of the case and the law applicable thereto, there was no justification for the conclusion reached by the Tribunal that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material to the assessee and allowed it various opportunities. However, the assessee did not produce even a single party. Accordingly, the Assessing Officer made addition of amount in question to the income of the assessee on account of unexplained share capital under section 68. On appeal, the Commissioner (Appeals), after recording the findings that necessary documents to prove the identity of investors, creditworthiness and genuineness of the transactions were produced by the assessee, concluded that the shareholders were identifiable who were assessed to income-tax and, therefore, the share capital could not be treated as undisclosed income of the assessee-company. Similar ratio was laid down by Hon'ble Apex Court in the case of Lovely exports Pvt. Ltd. [2008] 216 CTR 195 (SC), wherein, the Hon'ble Apex Court even went to the extent that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio laid down in Hon'ble Apex Court in P. Mohankala ((2007) 291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in Ganpati Mudaliar (1964) 53 ITR 623/A. Govinda Rajulu Mudaliar (34 ITR 807)(SC) and also CIT v. Durga Prasad More (72 ITR 807)(SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee, if found to be unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in Daulat Ram Rawatmal 87 ITR 349 (SC) throws light on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are themselves private limited companies. The assessee-company received the share monies; it even says that the communications sent by it at the addresses did not return unserved, yet when the Assessing Officer requested it that too only after trying to serve the summons unsuccessfully to produce the principal officer of the subscribing companies, the assessee developed cold feet and said it cannot help if those companies did not appear and that it was for the Assessing Officer to enforce their attendance. It was not open to the assessee, given the facts of this case, to direct the Assessing Officer to go to the website of the company law department/ROC and search for the addresses of the share-subscribers and then communicate with them for proof of the genuineness of the share-subscription. That is the onus of the assessee, not of the Assessing Officer. [Para 7] So far as creditworthiness of the share subscribers is concerned, difficulty may be faced by the assessee to unimpeachably establish the creditworthiness of the share-subscribers, but at the same time mere furnishing of the copies of the bank accounts of the subscribers is not sufficient to prove their creditworth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... praisal of the facts and circumstances of the case. [Para 12] In view of above, it has to be held that the Tribunal was not right in law in upholding the order of the Commissioner (Appeals) deleting the addition made under section 68 on the ground that the assessee had proved the nature and source of the share subscription money and had established the identity and creditworthiness of the share-subscribers and the genuineness of the transactions. [Para 13] 9.3. Another case relied upon by the Revenue is CIT v. Empire Builtech Pvt. Ltd. (2014) 366 ITR 110 (Del.), wherein, it was held as under:- In Lovely Exports (supra), the Supreme Court emphasized that the initial burden is upon the assessee to show as to the genuineness of the identity of the individuals or entities which seek to subscribe to the share capital. In the instant case, the Assessing Officer in his order, has produced the tabular statement describing the number of shares subscribed by the investors, the amounts paid by them, the individuals who paid the amount towards share capital and the gross income reported by each of such investors to the revenue. A look at that chart would show that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only did not submit confirmation but had concededly reported far less income than the amounts invested, the assessee could not, under the circumstances, be said to have discharged the burden which was upon it. It is not sufficient for the assessee to merely disclose the addresses or identities of the individuals concerned. However, in the present appeals, the facts are altogether different, as we have discussed in various paras of this order, therefore, this judicial pronouncement may not help the Revenue, being on different facts. 9.5. Another case relied upon by Ld., Sr. Standing Counsel is the decision from Hon'ble Apex Court in N.K. Proteins Ltd. v. DCIT in 84 taxman.com 195 (Supreme Court), wherein, the issue was with respect to addition made under section 69C of the Act for bogus purchases, which were shown on basis of fictitious invoices and were debited in trading account. In that situation, the Tribunal recorded a categorical factual finding that these purchases were from bogus suppliers and, thus, Tribunal made addition of 25 per cent of total purchases. The Hon'ble High Court upheld the finding of the Tribunal. Thus, the aforesaid decision may not help the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce. The assessee has already discharged the onus cast upon it. So far as, the genuineness of transaction of other parties and the onus cast upon them has to be discharged by them only. 9.9. As per mandate of section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon, satisfactorily to explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company v. CIT 241 ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s. 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in P. Mohankala ( (2007) 291 ITR 278)(SC). A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being ma/a Tide. In our view the ITAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the A.O if the Assessing Officer. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the A.O. In any event what both the A.O. and the ITAT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub- creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing Finance Ltd. (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter to the Assessing Officer for reconsideration. 4. The learned Tribunal in its order, in order to answer the said contention, observed as under: The learned Assessing Officer having any doubt with regard to capacity of the party to advance loan, no one prevented him to verify the capacity of the creditors. 5. In our opinion, the books of account were available to the Assessing Officer. The books of account itself would indicate the capacity of the party to advance loan. There was no further need on the part of the assessee to prove the capacity of the creditors. 6. In the instant case, it is not possible to hold that the reasoning adopted by the Tribunal is devoid of merit and/or unsustainable. In the light of that, there is no merit in the appeal, which is accordingly, dismissed. 9.12. In the aforesaid case, the Hon'ble High Court while dismissing the appeal observed/held that when the books of account were available to the Assessing Officer and the books themselves would indicate the capacity of the party to advance loan. There was no further need on the part of the assessee to prove the capacity of the creditors. Thus, the reasoning adopted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eness of the transactions. As such, the Tribunal confirmed the findings of the CIT(A) and deleted the addition which had been made by the AO. It is obvious that the findings returned by the CIT(A) as well as the Tribunal are pure findings of fact and no question of law arises on this issue. 9.15. It is noteworthy that Hon'ble jurisdictional High Court in a later order, dated 17/04/2018 in the case of Pr. CIT v. Veedhata Towers Pvt. Ltd. (ITA No. 819 of 2015) on the issue whether the Ld. Assessing Officer is entitled to enquire into source of source to come to a finding that the particular credit was not genuine in terms of section 68 of the Act, held as under:- This Appeal under Section 260-A of the Income Tax Act, 1961 (the Act), challenges the order dated 21st January, 2015 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order dated 21st January, 2015 is in respect of Assessment Year 2010-11. 2 The Revenue urges only the following question of law, for our consideration: (a) Whether on the facts and in the circumstance of the case and in law, the Tribunal is correct in interpreting Section 68 to hold that the AO was not entitled t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creditors. Therefore, the Revenue had all the details available with it to proceed against the persons whose source of funds were alleged to be not genuine as held by the Apex Court in Commissioner of Income Tax v. Lovely Exports (P.) Ltd. [2009] 319 ITR (St.) 5 (SC). 7. The grievance of the appellant is that, even in the absence of the amendment to Section 68 of the Act, it is for the respondent-assessee to explain the source of the source of the funds received by an assessee. It is submitted that the respondent has not able to explain the source of the funds in the hands of M/s. LFPL and therefore this Appeal needs to be admitted. 8. This Court in Commissioner of Income Tax v. Gangadeep Infrastructure Pvt. Ltd., 394 ITR 680 has held that the proviso to Section 68 of the Act has been introduced by the Finance Act, 2012 w.e.f. 1st April, 2013 and therefore it would be effective only from Assessment Year 2013-14 onwards and not for the earlier assessment years. In the above decision, reliance was placed upon the decision of the Apex Court in Lovely Exports (supra) in the context of the pre-amended Section 68 of the Act. In the above case, the Apex Court while dismissing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is not expected to prove the source of source. The payments were through account payee cheque and the identity, creditworthiness, genuineness of the transaction has been established. Thus, the addition so made under section 68 of the Act deserves to be deleted. We mention here that so far as the genuineness of transaction/source of funds in the hands of fourteen entities, is concerned, if the Department so chooses, it can be tested, in the hands of those investing entities in accordance with law, but certainly in the hands of the present assessee, it has to be deleted. This decision of ours will be applicable to identical ground raised in the respect of all four appeals before us. 10. The next common ground, raised by the assessee, for all the Assessment Years, is with respect to commission allegedly paid to the entities, who advanced funds to the assessee company amount added under section 68 of the Act treating the same as income of the assessee. We are summarizing hereunder the brief facts for Assessment Year 2007-08. 10.1. The Ld. Assessing Officer assumed that the assessee has made the payment of 3% by way of commission in respect of the amounts received towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has incurred any expenditure of the nature of commission to the extent of 3%. Thus, this addition made on presumptive basis deserves to be deleted. Identical are the facts/issue for remaining Assessment Years, therefore, our this conclusion will be applicable to identical ground in the respective appeal. The addition so made is therefore, directed to be deleted. 11. The next ground for Assessment Year 2009-10 (grounds no. 9 to 11) are with respect to addition made on account of bogus purchases @ 12.5% of the purchases from various parties. The ld. counsel for the assessee explained that the total purchases made from three parties are to the tune of Rs. 24,44,25,543/-, whereas, the Ld. Assessing Officer made addition of the equal amount and the Ld. Commissioner of Income Tax (Appeal) restricted the addition to 12.5% of the value of the purchases amounting to Rs. 3,05,53,190/- It was explained by the Ld. Counsel that the assessee is a trader dealing in steel on wholesale basis and clearly identified/explained every purchase with the corresponding sale. It was submitted that quantitative information about the transaction in steel trading were duly furnished before the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (2014) 366 ITR 110 (Del.) N.K. Industries Ltd. v. DCIT (2016) 72 taxmann.com 289 (Guj.) N.K. Proteins Ltd. v. DCIT (2017) 84 taxmann.com 195 (Supreme Court) 11.2. We have considered the rival submissions and perused the material available on record. Before adverting further, we deem it appropriate to deal with various case laws so that we can reach to a particular conclusion. Some of the decisions more specifically on section 69C of the Act with respect to bogus purchases are as under:- 11.3. The Hon'ble Gujarat High Court in Sanjay Oilcakes Industries v. CIT (2009) 316 ITR 274 (Guj.) held as under:- 11. Having heard the learned advocates appearing for the respective parties, it is apparent that no interference is called for in the impugned order of the Tribunal dated April 29, 1994, read with the order dated September 29, 1994, made in miscellaneous application. In the principal order the Tribunal has recorded the following findings:- 8.3. We have considered the rival submissions and perused the facts on record. In our opinion, the action of the Commissioner of Income-tax (Appeals) confirming 25 per cent of the amounts claimed is fair and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law. In the aforesaid case, the Hon'ble High Court accepted that the apparent sellers, who issued the said bills were not traceable and the goods received from parties other than the persons, who had issued the bills for such goods. The purchases were shown to have been made by making payments, through banking channel and thus the apparent sellers were not genuine or were acting as conduit between the assessee and the actual seller. In such a situation, the conclusion drawn by the Ld. Commissioner of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces of the present case. The Tribunal is justified in holding the same against the assessee and in favour of revenue. 11.5. In the case of N.K. Proteins Ltd. v. DCIT (2017) 84 taxmann.com 195 (Supreme Court) was held as under:- Entire purchases shown on basis of fictitious invoices were debited in trading account - Tribunal came to a categorical finding that there were purchases from bogus suppliers and, thus, Tribunal made addition of 25 per cent of total purchases -High Court by impugned order upheld Tribunal's finding -Whether SLP against said impugned order was to be dismissed. 11.6. The Hon'ble Gujarat High Court in CIT v. Bholanath Poly Fab. Pvt. Ltd. (2013) 355 ITR 290 (Guj.) held/observed as under:- 5. Having come to such a conclusion, however, the Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. The Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by the assessee. Therefore, the purchases of the ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This High Court in the case of Sanjay Oil Cake [2009] 316 ITR 274 (Guj) has held that whether an estimate should be at a particular sum or at a different sum can never be a question of law. 7. The apex court in the case of Kachwala Gems [2007] 288 ITR 10 (SC) has held that in a best judgment assessment there is always a certain degree of guess work. No doubt, the authorities should try to make an honest and fair estimate of the income even in a best judgment assessment and should not act totally arbitrarily but there is necessarily some amount of guess work involved in a best judgment assessment. 8. Examining the facts of the present case in the light of the aforesaid decisions, the decision of the Tribunal, being based on an estimate, does not give rise to any question of law so as to warrant interference. 9. In so far as the proposed questions (C), (D) and (E) are concerned, the same are similar to the proposed question (A) wherein the Tribunal has restricted the addition to 25 per cent on similar facts. In the circumstances, for the reasons stated hereinabove, the said grounds of appeal do not give rise to any question of law. 10. As regards the proposed qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the conclusion arrived at by the Tribunal is based on concurrent findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal. It is not the case of the Revenue that the Tribunal has taken into account any irrelevant material or that any relevant material has not been taken into consideration. In the absence of any material to the contrary being pointed out on behalf of the Revenue, the impugned order being based on concurrent findings of fact recorded by the Tribunal upon appreciation of the evidence on record, does not give rise to any question of law in so far as the present ground of appeal is concerned. 14. In relation to the proposed question (F) which relates to the deletion of addition of Rs. 44,54,426 made on account of purchase of crane and allowing depreciation on the same, the Assessing Officer observed that the assessee had purchased a crawler crane for an amount of Rs. 24,61,000 excluding the cost of spare parts of Rs. 14,98,490. The Assessing Officer after examining the evidence on record and considering the explanation given by the assessee, made addition of Rs. 44,54,426, Rs. 39,59,490 being the purchase price of the crane along with its s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation in respect of the same also would not arise. When the assessee had conclusively proved the purchase and existence of the crane, and had not debited the expenses to the profit and loss account, no addition could have been made in respect of the purchase price nor could have depreciation been disallowed in respect thereof. The Tribunal was, therefore, justified in deleting the addition as well as disallowance of depreciation. 17. In the light of the aforesaid discussion, it is not possible to state that there is any legal infirmity in the impugned order made by the Tribunal so as to warrant interference. In the absence of any question of law, much less, a substantial question of law, the appeal is dismissed. 11.8. The Hon'ble jurisdictional High Court in the case of CIT v. Ashish International Ltd. (ITA No. 4299/2009) order dated 22/02/2011, observed/held as under:- The question raised in this appeal is, whether the Tribunal was justified in deleting the addition on account of bogus purchases allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. Even the two statements do not implicate the transactions with the assessee in any way. With these observations, the Tribunal ultimately has observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the assessee from these parties were bogus. It may be stated that the assessee was given credit facilities for a short duration and the payments were given by cheques. When that is so, it cannot be said that the entries for the purchases of the goods made in the books of account were bogus entries. We, therefore, do not find that the conclusion arrived at by the Tribunal is against the weight of evidence. In that view of the matter, we answer the question in the affirmative, that is, in favour of the assessee and against the Revenue. Accordingly, the reference stands disposed of with no order as to costs. 11.10. The Mumbai Bench of the Tribunal in the case of DCIT v. Rajeev G. Kalathil (2015) 67 SOT 52 (Mum. Trib.)(URO), identically, held as under:- 2.2. Aggrieved by the order of the AO, assessee preferred an appeal before the First Appellate Authority(FAA).Before him it was argued that assessee had filed c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. (supra) is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash trial. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65) of the Hon Calcutta High Court and held that the AO had held that the accommodation entries were given in form of cheques/RTGS, that same were routed through bank accounts of various bogus entities of BJ Group, that BJ had admitted that his group was issuing bogus bills, that later on BJ had retracted his statement, that those evidences could not be overlooked, that the assessee had made purchases from some other parties probably in cash, that it had taken bills from the other parties to regularize the transactions. He referred to the case of Vijay Proteins Ltd. (: 58 ITD 428), Sanjay Oil Cakes (316 ITR 274) and Simit P Seth (356 ITR 451) and held that once the sales were accepted by the AO the very basis of purchases could not be questioned, that the entire purchase price could not be disallowed, that only the profit element embedded in such purchases could be added to the income of the assessee, that the estimation would vary with business to business. Finally, he held that in the case under consideration purchases were not beyond doubt, that the assessee had shown corresponding sales in the books of account, that what could be taxed was differential gross profit. He estimate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that there was no evidence of cash withdrawal, that the AO had not rejected the sales made by the assessee, that basic conditions for invoking the provisions of section 69C were not fulfilled. He referred to cases of Indo Unique Trading Pvt. Ltd.(ITAs/6341/Mum/2016 6721/Mum/2016-A.Y. 07-08, dtd. 16/8/2017); wherein the addition made by AO were deleted by the Tribunal. In that case statement made by BJ were considered(Pg. 118-124 of the Legal PB-II).He also relied upon the cases of Ronak Gems Pvt. Ltd.(ITA/3118/Mum/2017, A.Y. 2007-08, dated 04/10/2017); M/s. Vaman International Pvt. Ltd. (ITAs/1020 1041/Mum/2017, A.Y. 2007-08, 2008-09 appeals for other A.Y. s); Kaysons Agencies Private Ltd.(ITA/3812/Mum/2014, A.Y. 2005-06, dtd. 17/3/2017); M/s. Fancy Wear(ITA/1596/Mum/2016, A.Y. 2011-12). He also referred to VAT returns filed by DD, AJ and LD filed for the A.Y. 2007-08. Finally, he relied upon the order of the Tribunal in the case of M/s. Vama International(ITA.s/7315-7317/Mum/2016, AYs. 2013-14, 2012-13, 2011-12, dtd. 15/2/2018).In that case the Tribunal had deliberated upon identical issue i.e. alleged bogus purchases from BJ group. 6. Here, we would like to mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the delivery of goods have been actually made by the alleged suppliers to the assessee and since the Directors/Proprietors of the supplier companies/firms have deposed on oath that all the concerns controlled and managed by them are not doing any real trading in diamonds but indulged in paper transaction only, the Assessing Officer rejected the submissions of the assessee that the purchases made from these entities are genuine. The Assessing Officer stated that the statement recorded from Shri Bhanwarlal Jain clearly established that the concerns controlled and operated by them are not carrying out any genuine business activity. 4. It was also observed by the Assessing Officer that the report received from the office of the DGIT (Investigation) during the course of post search inquiries the modus-operandi followed by the group concerns have been accepted by the key persons in the group. Even during the post search enquires Shri Bhanwarlal Jain admitted the fact that they are engaged in paper transaction only without any physical stock of the goods in the name of their numerous concerns they import rough and cut and polished diamonds for the other clients who do not wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings and since the parties have confirmed that the transaction has entered into by the assessee are genuine the purchases cannot be treated as non-genuine, especially since sales are not disputed and they have accepted. Ld. Counsel for the assessee further submitted that, assessee submitted Copies of purchase invoices, Ledger confirmations, Copies of Bank Statements reflecting payments made to the suppliers and Stock register reflecting inward of goods purchased from them and corresponding sales in support of genuineness of its purchases. Learned Counsel for the assessee submitted that AO issued notices u/s. 133(6) calling for relevant details from the parties. Each of the party has replied and submitted Ledger A/c of the assessee in their books of accounts, Copies of Sales Invoices issued by them, Bank statements reflecting the payments made by the assessee to them, Copies of acknowledgement of Income-tax Returns filed by them, Audited Profit Loss A/c and Balance Sheet for all the years involved. Ld. Counsel for the assessee submitted that none of the submitted documents have been doubted by the lower authorities. The sales made by the assessee included exports as well and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Diamonds as it was not found available at the given address. However, Ld. Counsel for the assessee submitted that the fact is that the AO issued notices u/s. 133(6) to all the parties which were not only served upon them but were also responded by all of them. 12. Ld. Counsel for the assessee submitted that the Ld. CIT(A) agrees with the fact that the AO has merely relied upon the statement recorded by the Investigation wing and in-depth investigation was not carried out to the extent required. The Ld. CIT(A) ought to have made the investigation either on his own or through the AO which in his opinion was required before confirming any addition. The statements of Mr. Bhanwarlal Jain and others relied upon by the AO have been retracted by them. Learned 9 Counsel for the assessee submitted that the impugned parties have been engaged into imports as well which evident from the audited P L Account submitted by them. This fact has also been noted by the AO in his order. 13. The Ld. Counsel for the assessee further submitted that the GP margin earned by the assessee from sale of materials purchased from the impugned parties is comparable with the margin earned from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant. My observations are as under. 12. The AO has formed his view about the bogus nature of the purchase made by the appellant from M/s. Daksh Diamonds on the basis of various incriminating. documents and evidences seized during the course of search seizure action in the case of Bhanwarlal Jain Group, which has established that the said group was engaged in providing accommodation entries of bogus sales/purchases/loans to various beneficiaries. 13. In my opinion, simply relying upon the information received from the DGIT (Inv.) regarding the default committed by M/s. Daksh Diamonds cannot be taken as the sole basis to treat the entire purchases made from it as bogus or non-genuine. The Assessing Officer has primarily relied on the conclusions drawn by the Investigation Wing on the basis of the statement given before the Income tax authorities and heavy reliance on such statement to treat entire purchases made from the above party as bogus, cannot be held to be justified. The information received from the DGIT(Inv.) was a piece of evidence to initiate in-depth independent investigation on the issue, which the Assessing Officer has not fully carried out. Further full enq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain that the price paid for the materials purchased from M/s. Daksh Diamonds is not over invoiced. In the absence of any such verification of the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from M/s. Daksh Diamonds. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit, 'cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purchases and not to disallow the entire purchases from M/s. Daksh Diamonds. The disallowance of the entire amount of purchases from M/s. Daksh Diamonds would not be logical and would amount to travesty of justice. In my view either the purchases from above mentioned party are over invoiced or the purchases were actually made but not from the said party from which it was claimed to have been made and instead may have been purchased from grey m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax-I v. Bholanath Poly Fab Pvt. Ltd. vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. The view taken by the Tribunal in case of Vijay Proteins Pvt. Ltd. v. CIT reported in 58 ITD 428 came to be approved. (Emphasis supplied) 19. Similarly while dealing with an identical issue, in the case of CIT v. Bholanath Poly Fab (Purchase)Ltd. ITA. No. No. 63 of 2012, in the order dated 23/10/2012, the Hon'ble High Court of Gujarat has held as under:- We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion that the assesses did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax. This was the view of this court in the case of Sanjay Oilcake Industries v. CIT (2009] 316 ITR 274 (Guj). Such decision is also followed by this court in a judgment dated August 16, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available in the given address. However, we see that the parties have responded in these cases for the notices issued u/s. 133(6) of the Act, they have filed Ledger Account of the assessee in their books of accounts, Copies of Sales Invoices issued by them, their Bank statements reflecting the payments made by the assessee to them, Copies of acknowledgement of Income-tax Returns filed by them, Audited Profit Loss A/c and Balance Sheets to show that the transactions of sales made to the assessee are genuine. On a careful consideration of the submissions made by the assessee, we find considerable force in the submissions not to treat the purchases made by the assessee from the parties as non-genuine/bogus. 18. The reason for treating these purchases as non-genuine/bogus is the statements given by Bhanwarlal Jain group and non-submission of delivery invoices by the assessee. It is the submission of the assessee that the statements given by Bhanwarlal Jain group have been retracted by them subsequently and there is a practice of hand delivery of such precious and light weighing materials like Diamonds is prevailing in the industry. Therefore, no adverse conclusion can be drawn m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. We notice that the assessing officer has reopened the assessment for the second time after expiry of four years from the end of the assessment year, on the basis of information received from the investigation wing about the bogus nature of transactions entered by Shri Bhanwarlal Jain group. Even though the AO has mentioned the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, yet he has not specified the manner of failure. 11. On the contrary, we notice that the assessee has proved the genuineness of purchases by obtaining confirmation letters in the form of affidavits from all the suppliers. The AO has done independent enquiry during the course of assessment proceedings by issuing notices u/s. 133(6) of the Act to all the suppliers. We notice that the notices were duly served upon the suppliers and they have also responded by filing their replies duly confirming the transactions. The AO has rejected the replies by observing that the replies lacked details and they did not mention about the nature of transactions. In our view, the said observations are vague in nature. On the contrary, a perus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case under consideration are almost identical to the facts of Vama International(supra).In that case also the AO had added the entire purchases to the income of the assessee and the FAA had given part relief to the assessee. In the instant case, the assessee was denied the opportunity of cross examination though it had made a request to the AO during the assessment proceedings. By not allowing cross examination of the third party, whose statement was being used against the assessee, the AO had violated the basic principles of natural justice. Only on that count the order can be quashed. But, we are considering other factors. BJ has retracted his statement. So, the authenticity of the material relied upon by the AO reduces to a great extent. The supplier has admitted the transaction and the AO has not doubted the sales. It is also found that DD had filed VAT returns. Considering the all these facts and respectfully following the order of the Tribunal in the case of Vama International (supra), we decide the effective ground of appeal against the AO. We find that facts of the case under consideration are identical to the facts of Jitendra M Kitawat (HUF).Therefore, f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt year, that LD had admitted receiving back the money, that the assessee was one of the creditors of LD. He referred to the cases of Sanghavi Reality Pvt. Ltd.(ITAs/3018-20/Mum/2017 A.Y. 2008-09-2011-12), Vikram Muktilal Vora(ITA/842/Mum/2017, A.Y. 2007-08), Gujarat Construction(ITA/7040/Mum/2016, A.Y. 2007-08) 8.3. We have heard the rival submissions and perused the material before us. We find that the FAA had observed that the transaction with LD could not be considered genuine as it had advanced unsecured loans to the assessee. It is found that LD in its affidavit has admitted that it had advanced loan to the assessee. 8.4. We find that identical issue was decided by us, in the case of Jitendra M Kitawat(HUF) that was decided by us on 11.04.2018(supra).We are reproducing the order dealing with the issue and it reads as follow: 8.3. Here we would like to refer to the case of Reliance Corporation (ITA/1069-71/Mum/2017, A.Y. 2008-09 to 2010-11, dtd. 12/04/2017) wherein the similar issue was dealt with. In that case also, on the basis of search and seizure operations carried out in the case of BJ, additions u/s. 68 were made to the total income of the assessee. We a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the assessment as stated above. 5. Aggrieved by the order of the AO, the assessee preferred and appeal before the ld. CIT(A) who dismissed the appeal of the assessee ex-parte on the ground that the assessee failed to appear before the ld. CIT(A) by observing and holding as under: 4. Decision on grounds of appeal no. 1: 4.1 The relevant facts are like this. The assessee is a firm which is engaged in the business of builders developers. A search seizure action was conducted in the Bhanwarlal Jain group of cases by Investigation Wing Mumbai. As a result of search, it was found by the Investigation Wing that this group is a leading entry provider of Mumbai. There are many concerns floated by the group who provide accommodation entries of bogus loan The AO received an information that the appellant has also taken loan from concerns found in the list of entry providers related with Bhanwarlal Jain group of cases. The AO asked the appellant to show cause as to why loan taken from M/s. Laxmi Trading Company M/s. Rajan Diamonds should not be disallowed and added to the total income. As per the assessment order the appellant did not file any written submission on this i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... burden or responsibility of the assessee to find out the source of creditors or the capacity of the creditors in order to prove the genuineness of transactions as has been held by the Hon'ble Gauhati High Court in the case of CIT v. Smt. Sangmitra Bharali reported in 361 ITR 481). The ld. AR further submitted that the addition was made out of unsecured loans raised by the assessee from the group concern of Bhanwarilal Jain Group engaged in providing accommodation entries. On the contrary, there was no indication or proof that loans taken by the assessee were merely accommodation entries and the money actually gone back to the lenders. The ld. AR also submitted that the creditors appeared before the AO in response to the notice issued u/s. 133(6) and during the course of recording statements by the AO the lenders confirmed the loans having given to the assessee. Besides all the necessary details were submitted before the AO during the assessment proceedings. The assessee also provided the loan confirmation from the creditors, PAN of creditors ledger extract copy of Income tax return, profit and loss account, balance sheet and bank statement of the creditors and also of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the assessee has filed all the necessary information but since the assessee borrowing monies from the tainted parties who were provided accommodation entries, it is beyond doubt that money borrowed by the assessee was nothing but accommodation entries. Lastly, the ld. DR prayed that in view of the facts and the order of the FAA should be upheld by dismissing the appeal of the assessee. 8. We have heard the rival contentions perused the material placed before us including the orders of authorities below and orders relied upon by the parties. We find that undisputedly the assessee has borrowed money by way of loan from three aforesaid three parties i.e., M/s. Laxmi Trading Company, M/s. Rose Impex and Megha Gems from whom the assessee borrowed the money and total outstanding including the interest as on 31.3.2010 were amounting to Rs. 1,29,04,231/-. The case of the assessee was re-opened upon receiving the and other three appeals information from DGIT(Inv), Mumbai that the assessee was one of the beneficiary of the said accommodation entries provided by Mr. Bhanwarlal Jain and group. We find from the record that the assessee filed during the course of assessment proceedings a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1958-59 - Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer's notice and formation of his belief that there has been escapement of assessee's income from assessment in particular year because of his failure to disclose fully and truly all material facts - Held, yes - Whether duty cast upon assessee is to make true and full disclosure of primary facts at time original assessment, and it is for Income-tax Officer to draw correct inference from primary facts - Held, yes - Whether if Income-tax Officer draws inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment - Held, yes - ITO completed original assessment by allowing deduction of interest paid to certain creditors - Subsequently, he reopened assessment for reasons recorded in report submitted to Commissioner for and other three appeals obtaining sanction un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... established -Whether transaction could not be treated as bogus and impugned amount could not be treated as an undisclosed income of assessee - Held, yes [Para 64] [In favour of assessee] In the case of Gangeshwari Metal (P)Ltd (supra), the Hon'ble Delhi High Court has held as under : There are two types of cases, one in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer, after noting the facts, merely rejected the same. [Para 9] There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the relevant material. In such an eventuality no addition can be made under section 68. [Para 10] In view of above, impugned order passed by the Tribunal was to be upheld. [Para 11] In the case of Varinder Rawley (supra), the Hon'ble Punjab and Hariyana High Court has held as under: where the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Nemi Chand Kothari (supra), the Hon'ble High Court has held as under: 16. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the and other three appeals assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as well as the creditworthiness of a creditor have to be adjudged vis- -vis the transactions, which he has with the assessee. The reason why we have formed the opinion that it is not the business of the assessee to find out the actual source or sources from where the creditor has acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... worthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources. (ii) that no assessment could be made contrary to the provisions of law. In the instant case, the very basis for making the assessment was under challenge. If the assessment was based on a completely erroneous view of law, such findings could not be regarded as mere findings of facts, but must be treated as substantial questions of law. Therefore, the question raised in the appeal was a substantial question of law because it went ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), Gujarat Construction (supra), the order of the Reliance Corporation(supra) has been followed. As the fact of the case under consideration are similar to above referred cases, so, following those orders, we decide seventh ground of appeal, raised by the assessee, in its favour. Following the above referred order of the Jitendra M Kitawat-HUF(supra), we decide GOA 7 in favour of the assessee. ITA/7099/Mum/2016-A.Y. 2009-10: 9. Effective ground of appeal, raised by the AO, for the year under consideration, is not sustaining the addition of Rs. 1.03 crores made invoking the provisions of section 69C of the Act. We find that facts for the year are identical to the facts of 2007-08-the only difference is the names of suppliers. As per the AO the alleged bogus purchases were made from Kothari Co.(KC), LD, Megha Gems(MG) and Minal Gems(Minal).Following our order dtd. 11.04.2018 in the case of Jitendra M Kitawat(HUF), we dismiss the effective ground of appeal raised by the AO. ITA/7049/Mum/2016-A.Y. 2009-10: 10. First effective ground(GOA-6)raised by the assessee is about confirming the addition of Rs. 12.99 lakhs on account of purchases made from four pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x were found to have been sold and sales were also accepted by the Assessing Officer. The Revenue carried the matter in appeal before the Tribunal. The Tribunal dismissed the earlier making following observations: 31. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s. Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash. 32. It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid the taxes accordingly. Considering the facts in totality well appreciated by the First Appellate Authority, we do not find any error or infirmity in the findings of the First Appellate Authority. Ground No. 1 is accordingly dismissed. 3. It can thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010, of the Tribunal. 11.16. If the ratio laid down by Hon'ble jurisdictional High Court in the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was accepted by the Assessing Officer, whereas, the ld. Assessing Officer himself accepted the genuineness of transaction. The Hon'ble jurisdictional High Court in Nikunj Eximp Pvt. Ltd. clearly held that We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defense Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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