9911796707
TMI Blog2021 (12) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... ndisclosed asset [based on which AO initiated section 153A proceedings] then the AO has to drop the section 153A proceedings because, he has assumed jurisdiction on a wrong/non-existing undisclosed asset and can resume only u/s 153A only on satisfaction of new/fresh undisclosed asset/jurisdictional fact, which principle will discuss separately. Pre-requisite condition to issuance of notice u/s 153A for the 7th 10th AY - The extended jurisdiction to invoke/assess 7th 10th AY is conferred on the AO by authority of law and the AO cannot confer to himself the jurisdiction in a casual manner by stating/substituting the specific jurisdictional fact to encompass all seized material. It is common knowledge that, seized material may contain both disclosed undisclosed assets, liabilities, expenses income. So, it is imperative that before issuance of notice u/s 153A [for the extended period], the AO sets out his objective satisfaction from the seized material, the details of the specified/undisclosed assets in his possession qua the assessee for AY 2011-12 valued Rs. 50 lakhs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore is quashed. Whether in absence of any incriminating material found in the course of search at the premises of the assessee, the additions/disallowances made in the assessments of the assessee, which were unabated/ non-pending on the date of search, could be held to be sustainable on facts and in law? - We find ourselves in agreement with the above findings of the Ld. CIT(A) that this document was a share-holding pattern document prepared by way of secretarial compliance report, which as the assessee has shown, was filed along with the company s annual return in Form MGT-7 on 28-11-2017 with the Registrar of Companies and was therefore available in the public domain (much prior to the date of search). It is found to contain the details of the name of shareholders, their amount and percentage of shareholdings. In our considered view, this document was a regular business document having no incriminating content whatsoever. Nothing whatsoever has been brought on record by the Revenue to correlate or link as to how the contents of this statement led to unearthing of unexplained cash credit by the AO and therefore the aforesaid factual finding of the Ld. CIT(A) remains unco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 for AY 2011-12, 30.09.2012 for AY 2012-13 and so on, rather than the day following the expiry of the time limit prescribed in notice u/s 153A of the Act, resulting in erroneous and excessive levy of interest u/s 234A of the Act. The AO is accordingly directed to re-compute the levy of interest u/s 234A of the Act in terms of sub-section (3) of Section 234A of the Act i.e. from the date on which the time limit for filing of return of income in response to notices u/s 153A of the Act dated 11.09.2019 had expired. This ground therefore stands allowed for statistical purposes. Adjustment of seized cash by way of self-assessment tax in the hands of the assessee in AY 2017-18 - HELD THAT:- AR as brought to our notice that the assessee had filed a petition dated 28-02-2020 before the AO requesting him to adjust this seized cash against their tax liability for AY 2017-18. Having regard to the provisions of Section 132B(iii) of the Act, the AO is accordingly directed to grant the credit of seized cash by way of self-assessment tax in accordance with law. - Shri P.M. Jagtap, Vice President (KZ) And Shri A. T. Varkey, JM For the Revenue : Shri Amit Kumar Pandey, JCIT, Sr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search, did not abate consequent to the search as per second proviso to section 153A of the Act. And also, since the returns of income for these assessment years (hereinafter in short AYs ) AYs 2012-13, 2013-14, 2014-15 2015-16 were filed on 30-03-2013, 24-10-2013, 22-11-2014 29-03-2016 respectively, and undisputedly the time limit for issuance of notices u/s 143(2) of the Act for all these years had expired as on the date of search on 12.12.2017. Accordingly, these AY s i.e. AY 2012-13 to AY 2015-16 were also unabated, since they were not pending before the Income Tax Authority on the date of search. With regard to AY 2017-18, it was pointed out that, the return of income was filed on 31-10-2017 and therefore, the time limit for issuance of notice u/s 143(2) of the Act had not expired on the date of search i.e. 12-12-2017.Hence, AY 2017-18 was pending before the AO on the date of search and consequently, AY 2017-18 was an abated assessment year. Therefore, except AY 2017-18, all the other AYs 2011-12, 2012-13, 2013-14, 2014-15 2015-16 were unabated assessments. 3. The AO issued identical questionnaire u/s 142(1) of the Act on 29-09-2019 for all these AY s, inter alia, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2015-16 1, 79, 99, 995 2016-17 1, 01, 99, 989 2017-18 34, 69, 54, 848 4. In response, the assessee furnished detailed explanation along with supporting documents which are available at Pages 207 to 335 of the paper-book. The AO however was not agreeable to the submissions made by the assessee. According to the AO, the electronic seized material marked as GCL-HD-1 revealed that the share capital of the assessee company were subscribed to by three major promoter groups viz., UFM Group, Mayur Ply (More) Group and M.P. Jain (Gangwal) Group. The AO stated that the very mention of group-wise capital in this material was itself incriminating, which showed that the monies were routed by these groups through shell entities to invest in the assessee company. The AO in the assessment orders also relied on certain selective portions of the statements given by alleged entry operator, Mr. S.K. Agarwal dated 13-12-2017 06-05-2018 to conclude that few of the companies, which had subscribed to the share capital of the assessee, were shell entities. The AO also set out three flow charts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions made in the AYs 2011-12 to 2016-17 were not based on any material which can be stated to be incriminating material and therefore deleted the additions made in these unabated assessments on the strength of the case laws referred (supra). As regards AY 2017-18, [unabated assessment year being pending on the date of search] the Ld. CIT(A) examined in detail, the information and documents furnished by the two shareholders, M/s Orchid FinleasePvt. Ltd. M/s Shantidham Marketing Pvt. Ltd. and also the Assessee company and thereafter concluded that both these shareholders were genuine and they had substantiated their respective source of source of funds. According to Ld. CIT(A), all the three ingredients viz., identity, creditworthiness and genuineness of these two shareholders were established and therefore he deleted the addition made in AY 2017-18 on its merits. 6. Aggrieved by the order of Ld. CIT(A), the Revenue is in now in appeal before us in all the AY s except AY 2016-17.The assessee has also filed Cross Objections in all these AY s. The grounds taken by the assessee and Revenue are summarized below: Revenue s Grounds of Appeal Sl. No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not complied and notice dated 11.09.2019 issued u/s 153A along with order dated 30.12.2019 u/s 153A/143(3) were without jurisdiction and void ab initio. 1 - - - - - (ii) LdCIT(A) should have held that the provisions of Section 153D of the Act were not complied with and the order passed u/s 153A/143(3) is bad in law. 2 1 1 1 1 1 (iii) LdCIT(A) should have held that no interest can be charged u/s 234A of the Act. 3 2 2 2 2 5 (iv) Ld CIT(A) erred in rejecting the assessee's contention that the order u/s 153A read with 143(3) was not issued in the prescribed ITBA Module as notified by the Board was void ab initio. - - - - - 2 (v) LdCIT(A) erred in not granting set off of busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Module but under the erstwhile ITD Module, the impugned order could be held to be ab-inito-void? (G) Whether the addition/s made u/s 68 of the Act in AY 2017-18, if upheld, was eligible to be set off against current year s business loss of AY 2017-18 ? (H) Whether the addition/s made u/s 68 of the Act in AY 2017-18, if upheld, was taxable at normal tax rates or at the higher tax rate prescribed u/s 115BBE of the Act? (I) Whether the lower authorities had erred in not granting the benefit for set-off of seized cash by way of self-assessment tax in AY 2017-18? 8. We first proceed to answer the Question (A). (A) Whether the AO had validly assumed jurisdiction to issue notice u/s 153A of the Act upon the assessee for AY 2011-12 in terms of fourth proviso to Section 153A of the Act read with Explanation 2 of the Act ? [Ground No. 1 of Cross Objection of Assessee for AY 2011-12] 8.1 This ground is pertaining to AY 2011-12 i.e., the seventh assessment year preceding the searched assessment year. In this ground, the assessee has challenged the usurpation of jurisdiction by the AO u/s 153A of the Act without first satisfying the essential condition precedent pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g evidence/material which could reveal that income valued Rs. 50 lakhs or more represented in form of asset had escaped assessment. Only if, the AO had in his possession this jurisdictional fact i.e. undisclosed/unaccounted asset valued Rs. 50 lakhs or more, which was discovered during search, relating to seventh to tenth assessment years, that he can rightly invoke the jurisdiction to re-open the said assessment years, or otherwise the AO cannot reopen the assessment. [Please note:- The contention of Ld. A.R. Shri Dudhwewala in respect of jurisdictional fact will be dealt in length (infra)].Shri Dudhwewela further argued that, it is implied from a reading of fourth proviso to section 153A of the Act is that, when the Parliament in its wisdom has prescribed the existence/discovery of undisclosed Asset valued Rs.50 lakhs or more, as condition precedent for invoking jurisdiction, the Parliament has excluded discovery of other income escaping assessment not represented in the form of Asset to assume jurisdiction under fourth proviso to Section 153A of the Act as well as even the Asset valued less than Rs 50 lakhs. He gave an illustration to make us understand as to what he wants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounted asset , which according to him, further fortifies that the AO did not had in his possession the jurisdictional fact when he issued notice u/s 153A on 11.09.2019 (refer page 106 of PB) for AY 2011-12, either at the time of initiation or upon completion of the proceedings. So he wants us to quash the assessment order framed by the AO for AY 2011-12, being without any jurisdiction. 8.2 Per contra, the Ld. DR Shri Amit Kumar Pandey vehemently opposed the submission made by the Ld. A.R. of the assessee and contended that there was no requirement in law for the AO to have pointed out the asset to the assessee for which the relevant assessment year 2011-12being re-assessed u/s 153A read with fourth proviso to Section 153A of the Act. According to him, the phrase income represented in the form of asset was vast enough to encompass addition on account of unexplained cash credits which was added by the AO. According to him therefore, the AO rightly assumed jurisdiction u/s 153A of the Act for AY 2011-12 when he had the seized material in his possession and so, we should not disturb the validity of the order. 8.3. In his rejoinder, the Ld. AR Shri Dudhwewala urged that sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case i.e. 12-12-2017, the AO was well within his jurisdiction to issue notices u/s 153Aof the Act in respect of six (6) assessment years preceding the assessment year of search, which in the present case took place in AY 2018-19. Therefore, in terms thereof, the AO was competent to issue notices u/s 153A of the Act for the AYs 2012-13 to 2017-18. Now before us by raising Ground No.1/CO No. 1 (Reframed Ground A refer supra para 7), the assessee has challenged the validity of assumption of jurisdiction by the AO u/s 153A of the Act and the issuance of notice u/s 153A of the Act for AY 2011-12, which is the seventh (7) assessment year preceding the assessment year of search. To adjudicate this legal issue, we have to go through the fourth proviso of Section 153A of the Act which was inserted by the Finance Act, 2017 with effect from 01.04.2017, enabling an Assessing Officer (AO) of a searched person to issue notices u/s 153A of the Act for relevant assessment year or years in terms of Explanation 1 of the fourth proviso to Section 153A of the Act i.e. assessment years beyond the six (6) assessment years till tenth (10) assessment year preceding the searched assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act for the assessment or reassessment of the 7th 10th AY s unless he has in his possession evidence/material which revealed that income represented in the form of asset valued Rs. 50 lakhs or more has escaped assessment. So, the AO, in order to assume jurisdiction for the extended period (i.e. 7th to 10th AY preceding the searched year) should have in his possession income represented in the form of asset valued Rs. 50 Lakhs or more which has escaped assessment, which fact according to Ld. A.R. Shri Dudhwewala is the jurisdictional fact , which if present/or in possession of AO will only enable the AO to assume jurisdiction u/s. 153A of the Act to issue notice for these extended AYs . According to Shri Dudhwewala, the jurisdictional fact in this case for AY 201112 (7th AY preceding to searched year) is the existence of fact relating to the undisclosed asset valued Rs.50 lakh or more that has been discovered in the search qua the assessee qua the AY in question i.e. AY 2011-12. According to him, in the present case, not only when the AO issued notice u/s 153A for AY 2011-12, did he not have in his possession this essential jurisdictional fact, but even when he com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an authority has jurisdiction in the matter on existence of jurisdictional fact , it can decide the fact in issue or adjudicatory fact . A wrong decision on fact in issue or on adjudicatory fact would not make the decision of the authority without jurisdiction or vulnerable provided essential or fundamental fact as to existence of jurisdiction is present. 8.7. In the case of Raja Anand Brahma Shah v. State of U.P. Ors., AIR 1967 SC 1081 : (1967) 1 SCR 362, the Hon ble Supreme Court had an occasion to look into the jurisdiction of the District Collector to acquire land under sub-section (1) of Section 17 of the Land Acquisition Act, 1894 which enabled the State Government to empower the District Collector to take possession of 'any waste or arable land' needed for public purpose even in absence of award. The possession of the land belonged to the appellant had been taken away in the purported exercise of power under Section 17(1) of the Act. The appellant objected against the action inter alia contending that the land was mainly used for ploughing and for raising crops and was not 'waste land', unfit for cultivation or habitation. It was urged that since ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essly provided that no land could be acquired which at the date of compulsory purchase formed part of park, garden or pleasure-ground. An order of compulsory purchase was made which was challenged by the owner contending that the land was part of park. The Minister directed public enquiry and on the basis of the report submitted, confirmed the order. Interfering with the finding of the Minister and setting aside the order, the Court of Appeal stated; The first and the most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact; for, unless the land can be held not to be part of a park or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. In such a case it seems almost selfevident that the Court which has to consider whether there is jurisdiction to make or confirm the order must be entitled to review the vital finding on which the existence of the jurisdiction relied upon depends. If this were not so, the right to apply to the Court would be illusory. [See also Rex v. Shoredich Assessment Committee; (1910) 2 KB 859 : 80 LJ KB 185]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n accordance with law. Once the authority has jurisdiction in the matter upon the existence of 'jurisdictional fact', then it can decide the 'fact in issue' or 'adjudicatory fact'. A wrong decision on 'fact in issue' or on 'adjudicatory fact' would not make the decision of the authority without jurisdiction or vulnerable, provided essential or fundamental fact as to existence of jurisdiction is present. Thus, we understand that jurisdiction fact is the fact which is required to exist, as insisted by the Parliament/Legislature, for a quasi judicial/ authority to exercise jurisdiction over a particular matter. So in this present case, we have to examine whether the Parliament has specified in the fourth proviso to Section 153A of the Act any such facts which can be termed as jurisdictional fact. On a reading of the fourth proviso to Section 153A of the Act along with Explanation 2 to it which defines Asset , we find considerable merit in the contention of Shri Dudhwewala that in order to invoke jurisdiction u/s 153A of the Act for the seventh to tenth AY preceding the searched year, the AO should have in his possession the jurisdictional fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Parliament has used the expression income in the form of asset and the definition of asset has been spelled out in the fourth proviso, this itself necessarily implies that the liability/items falling in the left side of the Balance Sheet stands excluded. For this view of ours, we rely on the legal Maxim for interpretation Expressio Unius Est Exlcusio Alterius which principle states that, express mention of one is the exclusion of other and this maxim has been accepted by the Hon ble Supreme Court in GVK Industries Ltd. Vs. ITO [197 Taxman 337] (Constitution bench of 5 Supreme Court Judges). By express mention of Assets and definition given to it specifically, it is implied that the Parliament silently excluded the items of revenue , expenditure liabilities from its jurisdictional fact for invoking/assumption/usurpation of jurisdiction u/s. 153A of the Act for the seventh to tenth assessment year preceding the searched assessment year. 8.12 It is a rudimentary accounting concept, that debit denotes asset and credit denotes liability . An asset represents an economic resource, either immovable or movable, having value, such as immovable property viz., land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our discussion, is to be kept in mind that, the term deposits in bank account has to be considered with the term asset . The term deposits in bank account and asset are to be understood in their cognate sense, as it takes their colour from each other, i.e., the more general is restricted to a sense analogous to the less general. Hence, the term deposits in bank account denotes discovery of an asset in the form undisclosed bank deposits, say fixed deposit bank a/c, savings deposit bank a/c, foreign deposit bank a/c etc. which is found to have escaped assessment in the 7th-10th AY preceding the search. It does not suggest or include any or all credits in bank accounts, which is disclosed and forms part of the regular books of accounts. To say, if any credits in a regular bank account, like sale proceeds/ loan / share capital etc. is found to be unexplained, then it may be a case of discovery of undisclosed income / cash credit but it does not suggest discovery of an undisclosed asset by the Revenue so as to bring it within the teeth of the fourth proviso to Section 153A of the Act for invoking jurisdiction u/s 153A for the extended period. 8.15 Hence, from the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been conveyed to the assessee that primarily the issue pertains to the assessee company allotting shares to jamakharchi companies by taking share capital and premium for issue of shares to them. The sums so received are further invested by the assessee company either in fixed assets or extended as loans and advances or invested in shares further. It is explained to the A/R that this is a matter of investigation and assessment, that is why the case of the assessee for AY 2011-12 has been covered u/s 15A so that this issue can be assessed in the light of the search and seizure action conducted on the assessee company on 12/12/2017 and the documents and materials seized therein. The A/R is requested to furnish return of income for AY 2011-12 electronically as called for u/s 153A without further delay.(emphasis supplied) 8.17. Conjoint reading of the above order sheet noting with the objection raised by the assessee before the AO, shows that the assessee had specifically challenged the usurpation of jurisdiction by the AO under the fourth proviso to Section 153A of the Act and also requested him to spell out the details of the undisclosed/unaccounted asset found from the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is seized material available on the basis of which the case of assessee for AY 2011-12 has been covered u/s 153A , This factual assertion made by the AO while making the order-sheet entry dated 04.11.2019 shows that, he had not recorded his satisfaction prior to issuance of notice dated 11.09.2019 in terms of the fourth proviso to Section 153A of the Act, but did so only subsequent to reopening of the assessment on 04.11.2019. His own admission in the noting sheet reveals that he has recorded satisfaction only on 04.11.2019 to cover the case of assessee in respect of AY 2011-12 on the strength of the seized material. From this assertion/averment/admission, it is clear that AO did not have in his possession the jurisdictional fact [on or prior to 11.09.2019] to invoke and issue notice u/s. 153A of the Act. Here, one should bear in mind that the fourth proviso was inserted by the Parliament w.e.f. 1.04.2017 by Finance Act, 2017, thereby extending the jurisdiction of the AO to assess/re-assess beyond six AY s to ten AY preceding the searched year. And as discussed at para 8.5, the fourth proviso clearly bars the AO to issue notice for the extended period (7th 10th AY) unless the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied/undisclosed assets in his possession qua the assessee for AY 2011-12 valued Rs. 50 lakhs or more. If this essential requirement of law is not satisfied, the AO does not get the authority of law to invoke the jurisdiction u/s 153A for 7th to 10th AY. For this, we rely upon the dictum of the Privy Council in Nazir Ahmed Vs. King Emperor AIR 1936 PC 253(which has since been accepted and later followed by Hon ble Supreme Court), that when a statute requires a thing to be done in a particular manner, it must be done in that manner or not at all. As discussed at Para 8.5 (supra), the language of the fourth proviso to section 153A of the Act show that issuance of notice can be resorted to by the AO only after he is in possession of the jurisdictional fact, which is found to be absent in the present case. Therefore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153A of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153A dated 11.09.2019 was issued by the AO without authority of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2011-12 and therefore he could not have conferred upon himself the jurisdiction under section 153A of the Act. Thus, on these admitted facts as discussed (supra), and for other defects and contention noted (infra), we find merit in the submission of Shri Dudhwewala that, the notice u/s 153A for AY 2011-12 had been issued by the AO in an arbitrary and casual manner, without first satisfying himself that he was in possession of incriminating material which revealed that income represented in form of asset had escaped assessment for AY 2011-12 which was the essential jurisdictional fact found to be absent in this case. In our considered view therefore, the AO s failure to do so, rendered the very act of usurpation of jurisdiction and issuance of notice dated 11.09.2019 under the fourth proviso to Section 153A of the Act for AY 2011-12 to be null in the eyes of law. 8.20. Thus according to us, the pre-requisite condition for conferment of jurisdiction under section 153A for the assessment of AY s falling from seventh (7th) to tenth (10th) assessment years preceding the searched assessment year being the jurisdictional fact in this case is absent and the AO without fulfilling ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewala that, unless the AO made addition/s of Rs. 50 Lakhs or more in relation to escaped/undisclosed asset, he could not assume jurisdiction to make addition/s on other items (viz. liabilities like credit entry etc.) The reason is simple, because in such a scenario, it bellies the claim of the AO in issuing notice u/s 153A of the Act, that he is in possession of the jurisdictional fact i.e. undisclosed asset valued Rs. 50 lakhs or more has escaped assessment, which constitutes the key to open the lock and then re-assess the income of the assessee for the 7th to 10th AY. It is therefore incumbent upon the AO to show that the key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped/unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the AO for reopening the assessment is either incorrect or where the AO himself abandons the jurisdictional fact in the course of assessment proceedings, then as a corollary, it has to be held that the key used by the AO for opening the lock was inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was added as unexplained cash credit u/s 68 of the Act. As noted above, the additions on account of unexplained cash credit and that too share capital, which is in the nature of liability could not have been made by AO, unless he first made an addition of undisclosed asset valued at Rs. 50 Lakhs or more. So in this case, as there was no addition made by AO on account of undisclosed asset, we can safely infer that there was no jurisdictional fact in the AO s hand or in his possession when he assumed jurisdiction u/s 153A for AY 2011-12 in the first place itself. As, the very usurpation of jurisdiction u/s. 153A of the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO s action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed. The assessee thus succeeds on this ground raised in the cross objections and the same is allowed. 9. Now we proceed to answer Question (B). (B) Whether in absence of any incriminating material found in the course of search at the premises of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and determine the correct taxable income for the relevant year inter alia including the undisclosed income, having regard to the provisions of the Act. However, in relation to unabated assessments, which were not pending on the date of search, there is an embargo on the powers of the AO. In case of unabated assessments, the AO can re-assess the income only to the extent and with reference to any incriminating material which the Revenue has unearthed in the course of search. Considering these aspects the Hon'ble Delhi High Court in the case CIT vs Kabul Chawla reported in 380 ITR 573 held as under:- 37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal in the case of CIT vs Kabul Chawla (2016) 380 ITR 573 had taken judicial note of host of the earlier decisions in the cases of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT vs Chetan Das Lachman Das reported in (2012) 211 Taxman 61 (Del HC) ; MadugulaVenu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) ; Filatex India Ltd vs CIT reported in (2014) 229 Taxman 555 (Del HC) ; Jai Steel (India) vs ACIT reported in (2013) 219 Taxman 223 (Del HC) ; CIT vs Murli Agro Products Ltd reported in (2014) 49 taxmann.com 172 (Bom HC) ; CIT vs Continental Warehousing Corporation (NhavaSheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that Revenue s SLP against the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (Supra) was dismissed by the Hon'ble Apex Court which is reported in 380 ITR (St.) 4 (SC). 9.3 The Hon ble Delhi High Court in the case of Pr.CIT. Vs. Kurele Paper Mills (P) Ltd. (280 ITR 571) at Page 572held as follows:- 1. The Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time limit for issuance of notice u/s 143(2) had also expired prior to the date of search, and therefore the assessments for these years did not abate. It was accordingly held that the AO could have made addition only if any incriminating material was found in the course of search. Having regard to the facts of the case, the Tribunal upheld the order of the CIT(A) deleting the additions made towards share application monies in unabated assessments of AYs 2006-07 2007-08, for want of any corroborative incriminating material found in the course of search. 9.6 We find that similar view was also expressed by the Guwahati Bench of this Tribunal in another case of DCIT Vs SMS Smelters Pvt Ltd (ITA No.91, 69, 76 77/Gau/17) dated 06.09.2019 wherein it held as under: 7. Next comes Revenue s appeal ITA No.69/Gau/2017 for assessment year 2007-08. The CIT(A) s order under challenge has deleted share capitals share premium and share application money addition of Rs.6, 69, 71, 870/-, 11, 95, 78, 050/- and Rs.7, 24, 50, 080/-; respectively vide following detailed discussion:- 5.2 I have considered the submissions made by the appellant before me. I have also perused the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v) Principal C.I.T. Vs. Kurele Paper Mills (P) Ltd. (2016) 380 I.T.R. 571 (Delhi) (SLP filed by the Department against this judgment dismissed (2016) 380 I.T.R. St.64) It is further submitted by the appellant that no incriminating document/material relating to the share capital/share premium was found and/or seized in the case of the appellant. The Assessing Officer has neither referred to nor relied upon any such document while making the assessment. 5.4 As far as merits of the case is concerned, the appellant has submitted the following documents with a prayer under Rule 46A of the Income Tax Rules 1962 for admission of these documents as additional evidences: (i) Chart showing name and address of the shareholders/applicants, No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN Nos. of the applicant companies. (ii) Copies of the appellants statements with the following banks showing the receipt of share capital/application money: (a) HDFC Bank, H.B. Road, Guwahati (b) HDFC Bank, Guwahati (c) Standard Chartered Bank, Guwahati (iii) Copies of Memorandum Articles of Association and audited balance sheet in respect of corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of search and not otherwise. In view of what has been discussed above, I am of the considered view that the additions of Rs.6, 69, 71, 870/-, Rs.11, 95, 78, 050/- and Rs.7, 24, 50, 080/- made on account of share capital, share premium and share application respectively are not sustainable in the eyes of law. Hence, these are deleted. 5.10 Even on the merits also, I find that the addition made by the Assessing Officer is not sustainable. 5.11 I find that the appellant had submitted the details of share capital and share premium in course of the assessment proceedings vide its letter dated 18.02.2015. This fact has been noted by the Assessing Officer in para 11(a) of his order. The appellant could not submit the documents in support of share capital/premium as these were not readily traceable at the time of assessment proceedings. The appellant has further contended that it was not given proper and meaningful opportunity of being heard to produce the documents in support of share capital/premium. The appellant has submitted before me the following details/documents in support of the share capital /premium: - (i) Chart showing name address of the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14) 361 ITR 220 (Delhi) (iii) C.I.T. V/s. Lovely Exports Pvt. Ltd. (2009) 319 ITR (St.) 5 (S.C.) (iv) C.I.T. V/s. Sameer Bio-Tech Pvt. Ltd. (2010) 325 ITR 294 (Delhi) (v) C.I.T. V/s. Five Vision Promoters Pvt. Ltd. (2016) 380 ITR 289 (Delhi) (vi) C.I.T. V/s. Dwarkadhish Investment Pvt. Ltd. (2011) 330 ITR 298 (Delhi) (vii) C.I.T. V/s. Divine Leasing Finance Ltd. (2008) 299 ITR 268 (Delhi) In view of the above also, the addition made in respect of share capital and share premium cannot be sustained. This ground of appeal is, therefore, allowed. 8. It is therefore clear that the CIT(A) has quashed the impugned assessment(s) on the ground that the department had not found or seized any incriminating material against the assessee during the course of search in issue. Various high court(s) in CIT vs Kabul Chawla (2016) 380 ITR 573 (del), PCIT vs. M/s Salasar Stock Broking Ltd in GA No. 1929/2016 ITAT No.264 of 2016 dated 24.08.2016 (Cal), PCIT vs Dipak J Panchal (2017) 397 ITR 153 (Guj) support the assessee s case qua the instant legal aspect. Mr. Singh has quoted E.N. Gopakumar vs. CIT (2017) 390 ITR 131 (Ker) and CIT vs. KesarwaniZardaBhand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the seized document GCL-HD-1, referred to by the AO, was incriminating in nature or not. Before we proceed to examine the contents of the seized document GCLHD-1, it is first relevant to understand as to the meaning of the expression incriminating material or evidence. There can be several forms of incriminating material or evidence. In order to constitute an incriminating material or evidence, it is necessary for the AO to establish that the information, document or material, whether tangible or intangible, is of such nature, which incriminates or militates against the person from whom it is found. Some common forms of incriminating material, inter alia, are for instance, where the search action u/s. 132 of the Act reveals information (oral or documentary) that the assets found from the possession of the assessee in form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income (which includes earlier AY's return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs and rather that can be the starting point of inquiry to un-earth further material or evidence to transform his suspicion to belief and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document found in the course of search as incriminating in nature qua the assessee justifying the additions in unabated assessments. In other words, any and every seized material, which comes in AO's possession cannot be construed as 'incriminating material' straightaway. For instance, scribbling or rough notings found on loose papers cannot be straightaway classified as 'incriminating material' unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order of the CIT (A). 9.11 We may, in this regard, gainfully refer to the decision of the Kolkata Bench of this Tribunal in the case of Daffodil VincomPvt Ltd Vs DCIT in ITA (SS) Nos. 95 96/Kol/2018 dated 28.06.2019. In the decided case the AO had added the share capital raised by the assessee in AYs 2011-12 2012-13 by way of unexplained cash credit u/s 68 of the Act in the assessments framed u/s 153A of the Act. Before the Tribunal the assessee contended that the addition u/s 68 was not based on any incriminating material found in the course of search and therefore the additions made in unabated assessments of AYs 2011-12 2012-13 were unsustainable. Per contra, the Revenue contended that the additions were made with reference to documents ID Marked SFA/01 and SFA/02 which were seized in the course of search and hence urged that the AO had rightly made the impugned addition. Upon examining the contents of the seized material referred to by the Revenue, this Tribunal noted that it comprised of bank account statements which formed part of the regular books of the assessee and these accounts were disclosed to the Department prior to the search. The Tribunal obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered as incriminating material. It is also not the case of the Revenue that the bank accounts were unearthed during the search operation. On these facts, the ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla [supra], squarely apply wherein the Hon'ble High Court of Delhi held as under: .. Respectfully following the ratio laid down by the Hon'ble High Court of Delhi and Hon'ble Supreme Court [supra], we are of the considered view that the assessment framed u/s 153A of the Act for both the Assessment Years under appeal deserves to be set aside. We, accordingly direct the Assessing Officer to delete the impugned additions from both the Assessment Years. 9.13 In view of the above, let us now examine the only material referred to by the AO in the order impugned to justify the addition i.e. GCL-HD-1.The image of this material is extracted below: 9.14 We note that the Ld. CIT(A) had examined in detail the contents of the above document and concluded that this document was not an incriminating document and that the it was a shareholding pattern of the assessee which was duly verifiable from the books of accounts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a regular business document duly recorded in the books of accounts as well as the corporate records and information contained therein was also available in the public office of the ROC. In order to bring home its contentions, the Appellant has also referred to rationes of certain judicial pronouncements which have been considered and would be referred at relevant places in this order. Be that as it may be, in this case, a shareholding pattern of the Appellant company was purportedly discovered during the course of search and the AO had treated the aforesaid share holding pattern as an incriminating document. On the other hand, the Appellant has submitted that the aforesaid shareholding pattern of the Appellant is not an incriminating document. In this regard, it is noted that the word incriminating does not find mention in Section 132 or in Section 153A or even in Section 153C of the Act. Nor has the said word been defined in the Act. Further, as per Section 153A of the Act, the jurisdiction of the AO was clearly to assess the true and correct total income of the Appellant, and, which was to be necessarily based on some material. Also, what is incriminating could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant as well as other records and documents and registers maintained by the Appellant in accordance with the various provisions of the Companies Act, 1956/Companies Act 2013. It is needless to state that in-case the purported shareholding pattern would have been incriminating or would not have been in consonance with the records and books of accounts of the Appellant, then, In that eventuality, a competent Company Secretary would not have risked his/her career by digitally certifying the aforesaid shareholding pattern, coined by the AO as an incriminating material. It is noted that the material referred by the AO as incriminating material is not incriminating in nature as it is rather a declaration of the facts pertaining to the Appellant. The shareholding pattern merely contains the details of the persons who are holding the shares of the company. It is further noted, from the shareholding pattern alleged by the AO as incriminating , that the aforesaid shareholding pattern indeed refers to the share capital of the Appellant organized by the respective groups and, in any case, the entries related to the receipt of share capital subscription as well as allotmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contained in the show-cause, as aforesaid, is being reproduced hereunder: In the electronic seized material marked as GCL-HD-1, it is seen that the capital in the company Goldstone Cements Ltd has been brought in by three major promoter groups, i.e., UFM Group headed by Sh. Mahabir Prasad Jain (Silchar), More Group headed by Sh. Prakash Kumar More and thirdly, Sh. Mahavir Prasad Jain of Guwahati. However, these individuals have not brought in all the capital in their own names but through a number of shell companies, The mention of group-wise share capital and share premium introduction into the assessee company is itself incriminating material that money was routed through multiple shell companies and invested into the assessee company. The aforesaid show-cause notice was fixed for final hearing / opportunity on 28/12/2019 at 11:00 am. Notwithstanding the fact that the time permitted to the Appellant to respond was too short, it is noted that in this case the relevant assessment folders were also perused and it is evident that the AO had not conducted any enquiry qua the purported shareholding pattern from any of the aforesaid 3(three) groups. Thus, it is clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Accordingly Ground No. 3 of the Revenue s appeal for AYs 2011-12 to 2015-16 thus stands dismissed. 10. Now we proceed to adjudicate Question (C). (C) Whether the Joint Commissioner of Income-tax, Guwahati had validly granted approval u/s 153D of the Act and therefore whether the consequent order passed u/s 153A/143(3) was sustainable in law or not ? Ground No. 2 of Cross Objection for AY 2011-12 Ground No.1 of Cross Objection for AY 2012-13 Ground No.1 of Cross Objection for AY 2013-14 Ground No.1 of Cross Objection for AY 2014-15 Ground No.1 of Cross Objection for AY 2015-16 Ground No.1 of Cross Objection for AY 2017-18 10.1 In this ground, the assessee has challenged the validity of the assessments framed u/s 153A/143(3) of the Act for AYs 2011-12 to 2015-16 2017-18 on the ground that the approval u/s 153D of the Act was granted the Ld. JCIT/Addl. CIT in a casual and mechanical manner, which according to the assessee, rendered all the orders impugned before us to be a nullity. 10.2 It is noted that, the AO had issued a detailed questionnaire enquiring about the details of share capital only on 04-11-2019. The AO thereafter ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in the cross objections as the same has now become academic in nature. So this issue is left open without our finding on it. Accordingly, Ground No. 2 of all the cross objections are dismissed as infructuous. 11. Now we proceed to decide the issue (D). (D) Whether the assessee had discharged its onus of establishing the identity and creditworthiness of the share subscribers and substantiating genuineness of the transactions and therefore whether the additions made u/s 68 of the Act on account of share application monies received by the appellant was tenable on facts and in law ? Ground No. 1 2 of Revenue s appeal for AY 2011-12 Ground No. 1 2 of Revenue s appeal for AY 2012-13 Ground No. 1 2 of Revenue s appeal for AY 2013-14 Ground No. 1 2 of Revenue s appeal for AY 2014-15 Ground No. 1 2 of Revenue s appeal for AY 2015-16 Ground No. 1, 2 3 of Revenue s appeal for AY 2017-18 11.1 It is noted that the reasoning/findings recorded by the AO in the orders for AYs 2011-12 to 2015-16 2017-18 for making addition/s u/s 68 of the Act is verbatim same. The AO had drawn up a common summary statement in all the assessment orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions u/s 68 of the Act on account of share capital received by the assessee. 11.3 At the time of hearing, Shri Dudhwewala pointed out that the AO had made independent enquiries from each of the shareholders, named in the above table, and all of them had complied with the AO s requisition u/s 133(6) of the Act. Taking us through the documents filed by them inter alia including IT acknowledgments, audited financial statements, bank statements etc., he pointed out that each of the shareholders held valid PAN and had sufficient own surplus funds and therefore, their identity creditworthiness stood substantiated. He also showed that each of the shareholder/share applicants had provided the details of their respective sources of funds in the manner as desired by the AO, and therefore it could not be said that the proviso to Section 68 remained un-satisfied. He further submitted all the shareholders belonged to the same promoter group, who had invested in the capital of the assessee across several year/s and therefore the genuineness of the transactions and rationale for making investment also stood proved. He also furnished a summary chart giving the details of funds infused by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dey appearing on behalf of the Revenue relied on the order of the AO. He laid much emphasis on the statement of Shri S.K. Agarwal, which according to him, showed that the share application monies received by the assessee were in the nature of accommodation entries. He also relied on the flow charts, which according to him, showed that, in some instances, the AO was able to find the source of introduction of unaccounted monies of the assessee. 11.5 We have heard both the parties. Before examining the facts pertaining to each year, it is first relevant to understand the provision of Section 68 of the Act under which, the addition has been made by the AO. The said provision reads as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year. Provided that where the assessee is a company (not being a company in which the public are substantially interested), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ineness of the transaction and the creditworthiness of the creditor is also established by supporting relevant material/documentary evidences. If the assessee presents all these details during the assessment proceeding before the AO, the onus shifts to the AO to prove it wrong. If the AO accepts such evidences without finding anything wrong after enquiry, it can be said that assessee has discharged its onus. On the other hand if the AO presents some contrary evidences and finds fault with the evidence submitted by the assessee, then the onus again shifts upon the assessee to rebut such contrary evidences. 11.9 The next aspect that is to be considered in this case is regarding the proviso to Section 68 of the Act, which was inserted by the Finance Act, 2012 putting further burden upon the assessees to substantiate the source of source of funds. We note that the proviso to Section 68 of the Act was inserted by the Finance Act, 2012 and it was made effective from 01-04-2013 i.e. AY 2013-14 and onwards. For this, reference may be made to the Memorandum as well as the Notes to Clauses of the Finance Bill, 2012 which makes explicitly clear that the Parliament had introduced the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive effect and would be effective only from the assessment year 2013-14. 11.11 We thus find that the Ld. CIT(A) had rightly held that the proviso to Section 68 of the Act, introduced by the Finance Act, 2012, was applicable only from AY 2013-14 and onwards, and therefore the said proviso cannot be held applicable in AYs 2011-12 201213. Meaning thereby, the assessee was under no obligation to substantiate the source of funds of its shareholders in AYs 2011-12 2012-13 and to that extent, the AO s reasoning justifying the addition/s u/s 68 of the Act in these two AYs for want of explanation regarding source of source of funds is held to be erroneous. 11.12 As regards AYs 2013-14 to 2015-16 2017-18, we note that even though the Parliament has inserted the proviso in Section 68 by the Finance Act 2012 with effect from 01-04-2013, it should be borne in mind that, there is no change or amendment in the substantive provision of Section 68 of the Act in terms of which, if any sum is found by the AO to have been credited in the books of an assessee in the relevant financial year, then when called upon by him (AO) to explain the nature and source of the credit; and pursuant to whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to show the source from which it was able to invest in the assessee company. And if the 'source of source' of share application/capital/premium is shown to AO and if he is unable to rebut or disprove the same, then the deeming fiction set out in Section 68 will not apply. 11.13 Having regard to the above legal position, we now proceed to examine the facts of the case on hand. We note that the assessee, when called upon by the AO to explain the nature and source of the credit entries for the respective AYs, has discharged its burden by furnishing the necessary details inter alia including the name, PAN, address of the share subscribers, details of share application monies received, shares allotted along with bank statements evidencing that all payments were received through banking channel. After going through the details submitted the AO had made verification/enquiries u/s 133(6) of the Act from the shareholders, who in response had filed copies of their Income-tax Acknowledgments, financial statements, bank statements, explanation regarding source of their funds, copies of assessment orders etc. in support of their identity, creditworthiness and genuineness of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by the AO under the cover of the same letter furnished in response to AO s notice u/s 133(6) of the Act].We note that in all these subsequent AYs (supra), the identity and creditworthiness of the same share subscriber and genuineness of the transactions with this shareholder have been accepted by the AO. Even the Ld. DR was unable to refute this fact. Hence, we hold that when on the same set of facts/documents, the AO had accepted the identity creditworthiness of same shareholder and also the genuineness of the transactions in the subsequent years, the action of the AO in disputing the genuineness of the transaction with the same shareholder, that too partly, in the relevant AYs 2011-12 2012-13 is held to be conspicuously perverse. (ii) We further note that at pages 365 609 of the paper book, the details of M/s. Hari Trafin Pvt. Ltd. are set out. This company is a registered Non-Banking Financial Company (NBFC) with the Reserve Bank of India (RBI) having CIN: U67120WB1995PTC068649. The AO had issued notice u/s 133(6) dated 27.11.2019 upon this shareholder requiring it to provide the following details of the shares subscribed in the assessee in the FYs 2008-09, 2010-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans Advances of FYs 2010-11 2011-12 to show that this shareholder was the core investment company of UFM Group [promoter of the assessee] and it had advanced loans only to the entities, which belonged to the UFM Group. The bank statement of the shareholder is found placed in the paper book at Page 411-413 440-441, which reveals that there is no deposit of cash and all transfers have been made through proper banking channels. Although we note that there was no obligation for the assessee to discharge the source of source of funds in AYs 2011-12 2012-13, but it is noted that the shareholder had provided the explanation regarding the source of source of funds received by the assessee, in the exact manner as sought for by the AO in the notice u/s 133(6) of the Act, which is available at Page 414 442 of the Paper book. It is noted from the explanation provided that the source of funds of the shareholder was primarily share application monies received by this company and/or loans received earlier, details of which along with name, PAN address are found to be set out in Pages 414 442of the paper-book. Sri Dudhwewala has rightly pointed out that the AO did not doubt the source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that, the cash trail to the extent of Rs.50 lacs viz., Rs.25 lacs, Rs.5 lacs and Rs.20 lacs received by the assessee from M/s. Hari TrafinPvt Ltd on 26.12.2012, 27.12.2012 28.12.2012 respectively, which pertained to FY 201213 i.e. AY 2013-14 and did not pertain to the relevant AYs 2011-12 2012-13 and therefore this particular trail was irrelevant in as much as the AO has accepted the genuineness of the share application monies received from M/s. Hari Trafin Pvt Ltd in AY 2013-14 and thereby himself disregarded this cash trail in the facts of the present case. With regard to the balance trail of Rs.105 lacs viz., Rs.80 lacs Rs.25 lacs received by the assessee from M/s Hari TrafinPvt Ltd on 26.09.2010 and 16.11.2010, perusal of the flow chart, shows that the AO himself had traced the source of the monies credited to the assessee s account. The AO was not only able to identify the names of the payer companies but was also able to identify and establish the bank accounts of the source as well as source of source from which payments were received by the assessee. Both the source as well as the source of source is noted to be within the banking system only and there is no ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder had also reported turnover from trading in shares securities and interest income, which was in excess of Rs.493 lacs. Accordingly, the creditworthiness cannot be doubted. The MCA Master Data of the company is also available on record from which it is evident that the company is Active till date and is not struck-off or non-existent. To substantiate the source of source of funds, it is noted that the shareholder had furnished the bank statement for the relevant period, which is found placed at Page 613-619 of the Paper book. On examination of the same, it is taken note that there is no deposit of cash and all transfer have been made through proper banking channels. The details of source of source of funds received by the assessee were provided by the shareholder, in the manner as requisitioned in the notice u/s 133(6) of the Act viz., name, PAN address of the payer i.e. the share applicant/lender/ borrower who had paid the sum, along with the specified dates of receipt and the corresponding bank statements evidencing bank account details of the said payers, which is available at Page 611-612 of the Paper book. We thus find merit in the contention of the Ld. AR that, whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 770, which regularly files its return of income and is assessed under the jurisdiction of ITO Ward 9(3), Kolkata. The shareholding pattern of the company shows that it belonged to one of the promoter group i.e. More Group of the assessee. The director of the shareholder is also the promoter-director of the assessee. Hence, the rationale behind making of investment made by this shareholder stands explained. From the audited financial statements, which is available at Pages 667 to 676 of the paperbook, it is noted that the company was having sufficient own funds in the form of capital and free reserves to the tune of Rs.14, 19, 91, 122/- which corroborates with the investment made by the shareholder. The MCA Master Data of the company is also available on record from which it is evident that the company is Active till date. (ii) As regards the source of source of funds, Sri Dudhwewala pointed out that not only the AO s averment disputing its genuineness viz., by stating that, sale proceeds of shares were not established, was factually erroneous but accordingly to him, the same was a sweeping remark in as much as AO did not point out the specific instance/item whose genuinenes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 990/- in the assessee company in AYs 2013-14 2014-15. Having regard to these background facts, we find that when the source of source in respect of the original payment of Rs.4, 00, 00, 000/- had been accepted by the AO, then its subsequent repayment and receipt back by the assessee again in AYs 2013-14 2014-15 could not be doubted or be said to be unexplained. This action of AO thus cannot be countenanced being irrational. So, we are of the view that assessee has discharged its primary burden to establish the nature and source of source of credit and there being no evidence or material to rebut the same in the hands of AO, we are inclined to accept the identity, creditworthiness and genuineness of the share transaction. (D) Prefer Infrastructure Pvt. Ltd. (AY 2013-14 2014-15 Rs.6, 12, 00, 000/ Rs.6, 38, 50, 000/-) (i) We find from pages 682-709 of the paper book, the details of M/s. Prefer Infrastructure Pvt. Ltd. are set out. From the reply furnished by this shareholder in response to the notice of AO u/s 133(6) of the Act, it is noted that this shareholder is a private limited company having PAN AAECP2657B and CIN: U45400WB2007PTC115882, which regularly fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m pages 710-735of the paper book, the details of M/s. Captain Steel Trading Pvt. Ltd. which are set out therein. From the reply furnished by this shareholder in response to the notice of AO u/s 133(6), it is noted that this shareholder is a private limited company having PAN AADCC0752B and CIN: U51109WB2007PTC115933, which regularly files its return of income. The shareholding pattern of the company shows that it belonged to one of the promoter group i.e. More Group of the assessee. The director of the shareholder is also the promoter-director of the assessee. Hence, the rationale behind making of investment made by this shareholder need not be doubted. From the audited financial statements, which is found placed at Pages 724 to 733 of the paperbook, it is noted that the company was having sufficient own funds in the form of capital and free reserves to the tune of Rs.1420.83 lacs which corroborates with the investment made by the shareholder. The MCA Master Data of the company, which is also available on record from which it is evident that the company is Active till date. As regards the source of source of funds, it is noted that the company had placed on record the copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee s or the depositor had nexus with the assessee. Since there is no infirmity in the documents produced by the assessee to prove the nature and source of credit entry no adverse view is legally sustainable. (F) Transparent Tie Up Pvt. Ltd. (AY 2014-15- Rs.4, 51, 99, 980/-) (i) We note from pages 736-760 of the paper book, the details of M/s. Transparent Tie Up Pvt. Ltd. are set out. Perusal of the reply furnished by this shareholder in response to the notice of the AO u/s 133(6) of the Act, shows that this shareholder is a private limited company having PAN AACCT7185L and CIN: U52100WB2007PTC116798, which regularly filed its return of income and is assessed under the jurisdiction of ITO, Ward 9(1), Kolkata. The shareholding pattern of the company shows that it belonged to one of the promoter group i.e. More Group of the assessee. Hence, the rationale behind making of investment made by this shareholder need not be doubted. From the audited financial statements, which is found placed at Pages 724 to 733 of the paperbook, it is noted that the company was having sufficient own funds in the form of capital and free reserves to the tune of Rs.1807 lacs which corro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be available at Page 763 of paper book. Having regard to the aforesaid facts, we find that not only did the assessee discharge its onus of establishing the identity, creditworthiness and genuineness of the transaction but even the source of source of funds was explained. The AO has not been able to rebut the evidence/material placed by the assessee to prove the identity creditworthiness and genuineness of the share transaction. So, in the absence of any material to the contrary applying the principle of preponderance of probability the assessee s claim needs to be accepted. (H) Bonus Dealers Pvt. Ltd. (AY 2015-16 Rs.1, 30, 00, 000/-) (i) It is noted that during AY 2015-16, the assessee had received share application monies of Rs.3, 02, 00, 000/- from M/s Bonus Dealers Pvt Ltd. qua the application monies aggregating to Rs.1, 72, 00, 000/-, and the AO has accepted the identity, creditworthiness genuineness of the transaction but chose to dispute sum to the extent of only Rs.1, 30, 00, 000/-. It is noted that similar documentation in as much as even the explanation regarding source of source of funds for the entire sum of Rs.3, 02, 00, 000/- was furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of profit received from its partnership firm M/s LalitPolyweave LLP, which belonged to the UFM Group. It is further noted that some of the sources of funds were the proceeds received on redemption of fixed deposits held with banks. Even where the source of funds were the proceeds received on sale of investment holdings, it is noted that the shareholder had provided complete details along with name, PAN address of the payer. We thus find that even the source of source of funds stood explained. (iii). It is also noted that shareholder was subjected to income-tax scrutiny u/s 143(3) of the Act in 2017-18, a copy of the assessment order is found placed at Pages 951 to 956 of the Paper book. This proves the genuine and bona fide existence of the shareholder and also establishes the veracity of the investments held by it in the assessee company. (iv). Shri Dudhewewalapointed out that M/s Bonus DealersPvt Ltd was an associate concern and that the director of the said shareholder company and the assessee were common. He invited our attention to the details of the directors of the shareholder, which is available at Page 966 of the paper book, from which it is noted that Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rce of funds of the shareholder for advancement of such loan was mainly the proceeds of Rs.1, 95, 50, 000/- received on sale of investment holdings in M/s VRC Technologies Pvt. and M/s Parasmani Planning Development Pvt. Ltd. to M/s Darkwell Dealers Pvt. Ltd., details of which along with copies of sale bills are found placed at Pages 1074-1080 of the paperbook. (ii) In the relevant FY 2016-17, M/s Orchid Finlease Pvt. Ltd. did not pay any fresh sum to the assessee company. From the documents available on record, it is noted that the assessee vide Board Resolution dated 04-05-2016 had exercised their right available under the loan agreement to convert the unsecured loan into equity shares. Having regard to the fair market value of the shares determined in accordance with Rule 11UA, the company allotted 4, 04, 761 equity shares at Rs.63 per share to this shareholder. Copy of the allotment letters issued by the assessee are found placed at Pages 1063 1064 of the Paperbook. Having regard to these facts, we therefore note that there was no fresh credit received by the assessee in the relevant AY 2017-18 from M/s Orchid Finlease Pvt. Ltd. It was a case where the unsecured loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is held that the assessee had discharged its onus of substantiating the identity, creditworthiness and genuineness of the transaction with M/s Orchid FinleasePvt Ltd. and also the source of source of funds. (J) Shantidham Marketing Pvt. Ltd. (AY 2017-18 Rs.32, 94, 00, 000) (i) We note from pages 1145-1266 of the paper book, the details of M/s. Shantidham Marketing Pvt. Ltd. are set out. It is observed that the AO had issued notice u/s 133(6) dated 27.11.2019 upon this shareholder requisitioning several details and inter alia requiring it to substantiate its source of funds out of which it paid the share application monies to the assessee. Perusal of their response reveals that the shareholder belongs to the UFM Group of companies (promoter of the assessee) and is engaged in the business of promoting and marketing of cement and trading of poly weave bags. The shareholder is a GST registered entity having PAN AAOCS2874F and CIN: U51909AS2010PTC012266, which regularly filed its return of income and is assessed under the jurisdiction of ITO, Ward 2(1), Kolkata. The shareholder had explained the strategic business objective behind infusion of share capital into the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the bank statement it is taken note that there is no deposit of cash and all transfer have been made through proper banking channels. The details of source of source of funds received by the assessee were also provided by the shareholder, in the manner as prescribed in the notice u/s 133(6) of the Act, which is found placed at Page 1157 to 1160 1245 to 1254 of the Paper book. It is noted that the source of funds of the shareholder was primarily deposits from channel partners and/or sale of investment holdings, details of which along with name, PAN address are found placed at Pages 1245 to 1254 of the paperbook. (iv) Shri Dudhewewala pointed out that M/s Shantidham MarketingPvt Ltd was an associate concern and that the director of the said shareholder company and the assessee were common. He invited our attention to the details of the directors of the shareholder, which is available at Page 1155 of the paper book, from which it is noted that Shri Vishal Jain, who is also the director of the assessee. Perusal of the statement of Shri Vishal Jain, which was recorded under oath by the AO on 28-11-2019, shows that the director had also affirmed the transactions between M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he decided case, the assessee-company received share capital and premium of Rs.17.60 crores in all from nineteen parties (six from Mumbai, eleven from Kolkata and two from Guwahati). The shares had a face value of Rs.10/- and were subscribed by the investor-companies at a premium of Rs. 190 per share. The AO made the addition of Rs. 17.60 crores after carrying out various inquiries as under- (i) To verify the veracity of the transactions, the notices were served on three investorcompanies namely Clifton Securities Pvt. Ltd.-Mumbai, Lexus Infotech Ltd.-Mumbai, Nicco Securities Pvt. Ltd. Mumbai but no reply was received. (ii) The address with respect to a company namely Real Gold Trading Co. Pvt. Ltd.Mumbai was not correct. (iii) The notice could not be served on two investor-companies, namely Hema Trading Co. Pvt. Ltd.-Mumbai, Eternity Multi Trade Pvt. Ltd.-Mumbai. (iv) Submissions from nine companies were received (Neha Cassetes Pvt. Ltd.-Kolkata, Warner Multimedia Ltd. Kolkata, Gopikar Supply Pvt. Ltd. Kolkata, Gromore Fund Management Ltd. Kolkata, Bayanwala Brothers Pvt. Ltd. Kolkata, Shivlaxmi Export Ltd. Kolkata, NatrajVinimay Pvt. Ltd. Kolkata, Neelkanth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of the shareholders has been proved. They were regular Income-tax assessee and the shareholders long after investment, has been continued to be assessed by the Income Tax Department. The shareholders details DIN of directors of are available on record which shows that the all investees are family-held group entities, share premium charged is support by valuation reports, adequate creditworthiness on the basis of assets, income streams etc. along with source of source of the funds for investment have also been substantiated, etc., therefore, the ratio laid down in the decision in NRA Iron Steel (P.) Ltd. (supra) cannot be applied in the facts of the present appeal. 11.17 In this regard, we draw support and guidance form the judgment of Hon'ble Bombay High Court in case of Pr. CIT v. Ami Industries (India) (P.) Ltd. (424 ITR 219) where it was held as under: 17. In so far order passed by the Assessing Officer is concerned, he came to the conclusion that the three companies who provided share application money to the assessee were mere entities on paper without proper addresses. The three companies had no funds of their own and that the companies had not resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation wing, it was mentioned that the companies were in existence and had filed income tax returns for the previous year under consideration but the Assessing Officer recorded that these creditors had very meager income as disclosed in their returns of income and therefore, doubted credit worthiness of the three creditors. Finally, Tribunal held as under: 5.7 As per the provisions of Section 68 of the Act, for any cash credit appearing in the books of assessee, the assessee is required to prove the following- (a) Identity of the creditor (b)Genuineness of the transaction (c)Credit-worthiness of the party (i) In this case, the assessee has already proved the identity of the share applicant by furnishing their PAN, copy of IT return filed for asst. year 2010-11. (ii) Regarding the genuineness of the transaction, assessee has already filed the copy of the bank account of these three share applicants from which the share application money was paid and the copy of account of the assessee in which the said amount was deposited, which was received by RTGS. (iii) Regarding credit-worthiness of the party, it has been proved from the bank accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate authority had returned a clear finding of fact that assessee had discharged its onus of proving identity of the creditors, genuineness of the transactions and credit-worthiness of the creditors which finding of fact stood affirmed by the Tribunal. There is, thus, concurrent findings of fact by the two lower appellate authorities. Appellant has not been able to show any perversity in the aforesaid findings of fact by the authorities below. 24. Under these circumstances, we find no error or infirmity in the view taken by the Tribunal. No question of law, much less any substantial question of law, arises from the order of the Tribunal. Consequently, the appeal is dismissed. However, there shall be no order as to cost. 11.18 We find similar facts and circumstances were involved before the Kolkata Bench of this Tribunal in the case of Baba Bhootnath Trade Commerce Ltd in ITA No. 1914/Kol/2017 dated 1st April 2019. In the decided case the assessee had raised share subscription monies of Rs.2.04 crores. Complete details were furnished in the course of assessment. Notices u/s 133(6) 131 of the Act were also complied with by the respective shareholders. The AO, how ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not advance the case of the revenue. 11.19 Gainful reference may also made to the following findings of this Tribunal in the case of M/S. Blue Lotus Designers Pvt. Ltd. vs ITO in ITA No.941/Kol/2017 which involved somewhat similar facts as involved in the present case. 5. Learned departmental representative at this stage quoted hon'ble apex court's decision in PCIT vs. NRA Iron Steel Pvt. Ltd. in Civil Appeal No. 2463 of 2019 dated 05.03.2019 restoring such unexplained cash credits addition in the nature of the share capital / premium invoking accommodation entry providers. We note that their lordships had come across an instance of the concerned assessee having failed to satisfy the above stated three parameters (supra) whereas the facts in the instant case sufficiently reveal that this taxpayer had duly discharged its onus and also responded to section 131 summons. We therefore reject the Revenue's arguments supporting lower authorities' action and delete the impugned un-explained cash credits addition of 2, 01, 50, 000/-. The assessee succeeds in its sole substantive grievance. 11.20 For the reasons as aforesaid and on the given facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eved some shareholders against whom Shri Agarwal made statement and how the AO drew adverse inference against few others on the strength of statement of Shri Agarwal. No cogent reason has been given by AO for his action of finding fault with/cherry picking of some share holders on the strength of same statement. Moreover, in the answer given by Shri Agarwal in the statement dated 06-05-2018, he names Mayur Ply Group to be the beneficiary of the accommodation entries and not the assessee. Accordingly, for the reasons aforesaid, this statement of Shri Agarwal does not inspire confidence to take a view against the shareholders company in the light of the documentary evidence and for the reasons stated infra. 11.23 Coming to the selective extracts of the statement dated 13-12-2017, it is noted that the AO himself has observed that Mr. Agarwal in this statement had stated on oath that Gangwal Group had made investments through his entities and not the assessee. Further, in this statement, Shri Agarwal allegedly names two (2) shareholders of the assessee company viz., M/s DhawanVinimayPvt Ltd, in which he himself was a Director, and M/s Transparent Tie Up Pvt Ltd in which Mr. Ritesh M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his role as an investigator, he was under obligation to investigate fully and truly the relevant facts; and as an adjudicator he was required to be fair, just and to ensure that the principles of natural justice are implemented by granting opportunity of examining/furnishing, the adverse material/evidence gathered by him to the affected party and facilitate an opportunity to cross examine the maker of the adverse oral testimony. Unless the oral evidence is tested on the touch-stone of crossexamination, the veracity of the evidence cannot be believed and it cannot be acted upon to the disadvantage of assessee. Failure of AO to give opportunity to the assessee to cross examine renders his reliance on the statement of Shri Aggarwal a nullity, as held by Hon ble Supreme Court in Andaman Timber (supra). We thus note that before passing the assessment order, the AO failed to perform his twin duties, that of the investigator and adjudicator, resulting in the addition/s being vitiated in law. 11.26 We may in this regard, gainfully refer to the decision of Hon ble Apex Court in the case of CIT Vs Odeon Builders Pvt Ltd reported in 418 ITR 315 involving similar facts as involved in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. 11.27 It is by now a settled proposition of law that where in the revenue proceedings any inference is drawn against the assessee on the basis of statements of any third person then such inference is legally unsustainable if opportunity of cross examining the Departmental Witness is not granted to the affected person. In this regard, we may make useful reference to the decision of the Hon ble Bombay High Court in the case of CIT Vs Reliance Industries Ltd (102 taxmann.com 372). In this case the assessee had claimed deduction for consultancy charges paid to one S, a Consultant. On the basis of statement recorded from S. in the course of search conducted u/s 132, the AO held that S did not render any service to the assessee and therefore the deduction claimed for consultancy charges paid was not allowable. The Tribunal held that the disallowance; based solely r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Shri S.K.Gupta, a Consultant and that the Assessing Officer other than relying upon the retracted statements of Shri Gupta recorded in search, had no independent material to make the additions. No question of law arises. 11.28 Similar view was expressed by the Hon ble Gujarat High Court in the case of CIT Vs Kanti Bhai Ravidas Patel (42 taxmann.com 128), wherein it was observed as follows: 5. We have heard rival contentions and gone through the material on record. Ld. A.O. has used third party statement of Vikas A. Shah in framing the assessment. The statement of Shri Vikas A. Shah recorded under Section 131(1A) not under Section 132 of the IT Act on 14/03/2005 and 19/04/2005. The ld. A.O. had used this statement without allowing cross examination of Vikas A. Shah which is against the principle of natural justice. This land had registered document and the value has been accepted as to correct by registering authority to the charge of stamp duty. There was no material or evidence that any on money was paid by the appellant on the transaction. Ld. A.O. had not referred this land to the DVO for determining the market value on date of registration. The statement given by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o documentary evidence was supplied to the assessee, in absence whereof the income in the hands of the assessee on the basis of statement of KripaShanker Sharma deserves deletion. 3. The assessee as alleged carried out construction activities and disclosed income from subcontract and investment in building construction. After the search U/s 132 of the Act, 1961 was carried out on 12.04.2005 in the case of another assessee M/s. B.C. Purohit Company at Jaipur Kolkata, evidence was gathered and from the investigation it revealed that in the garb of tax consultation the owners and employees of this group were running the racket of providing accommodation entries of gifts, loans, share application money, share investment and long term capital gains in shares. It will be relevant to record that the present assessee might have been in consultation with M/s. B.C. Purohit Company and a member of the group and has drawn inference regarding providing accommodation entries and the assessing officer was of the view that details made available by the assessee as regards unsecured loans and share application money, reference of which has been made in para-4 of its order, appears to be t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries was not sufficient for the income to be assessed for a sum of Rs.5 Lacs in the hands of the assessee and while allowing the cross objection filed by the assessee dismissed the appeal preferred by the revenue under order impugned. 4. We have heard the parties at length and of the view that what has been observed by the Commissioner (Appeals) the Tribunal appears to be based on factual matrix and there appears no substantial question of law arises which may require interference by this Court to be examined in the instant appeal. 5. Consequently, the instant appeals are wholly devoid of merit and accordingly stand dismissed. 11.30 In view of the above judicial precedents (supra), we are of the considered view that the AO s failure to personally examine the witness and his denial to allow the assessee opportunity to cross examine the Departmental witness on whose statements he was relying upon was a serious fundamental flaw which resulted in the additions made u/s 68 of the Act to be a nullity as held by the Hon ble Supreme Court in Andaman Timber (supra). 11.31 For the elaborate reasons as discussed in the foregoing, we therefore hold that the all add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices issued under Section 153A of the Act dated 11.09.2019 to be the original due date u/s 139 of the Act i.e. 30.09.2011 for AY 2011-12, 30.09.2012 for AY 2012-13 and so on, rather than the day following the expiry of the time limit prescribed in notice under Section 153A of the Act, resulting in erroneous and excessive levy of interest u/s 234A of the Act. The AO is accordingly directed to re-compute the levy of interest u/s 234A of the Act in terms of sub-section (3) of Section 234A of the Act i.e. from the date on which the time limit for filing of return of income in response to notices u/s 153A of the Act dated 11.09.2019 had expired. This ground therefore stands allowed for statistical purposes 13. Question (F) i.e. Ground No. 2 of the assessee s Cross Objection for AY 2017-18 was not pressed at the time of hearing and therefore the same is hereby dismissed. 14. Having regard to our above findings deleting the addition of Rs.34, 69, 54, 848/- made u/s 68 of the Act in AY 2017-18, Questions (G) (H) i.e. Ground Nos. 3 4 of assessee s Cross Objection for AY 2017-18 has become academic in nature and is therefore dismissed as infructuous. 15. Question (H) i.e. Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
