9911796707
TMI Blog2023 (10) TMI 1373X X X X Extracts X X X X X X X X Extracts X X X X ..... his Panchnama, the assessee company, i.e., M/s Evershine Resorts Private Limited has nowhere been named. However, despite the above discrepancies, it is seen that in the Search Warrant, which has been reproduced hereinabove, the name of the assessee company has been clearly mentioned. This being so, the ld. CIT(A) is correct in observing, that the Warrant of Authorization u/s 132(1) of the Act was issued in the name of the assessee on 16.02.2018. It was in view of this, that the ld. CIT(A) held the AO to be justified in initiating assessment proceedings u/s 153A of the Act, since the assessee was covered under the provisions of Section 132(1). Assessee has not been able to controvert the above factual position, which is patent on record. Therefore, finding no merit therein, Ground Nos. 2 and 3 raised by the assessee before us are rejected. Addition u/s 68 - Identity and credit worthiness of the persons from whom the amounts were received by the assessee and also the genuineness of the transactions - We find that despite the Deviation Note, it was only on the basis of the reiteration of the Appraisal Report by the DDIT on 27.12.2019, that the AO made the addition which has been conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to how this was so has not been delineated in the assessment order and the addition has been made simply as a part of the entire credit entries in the bank - CIT(A) also confirmed the addition by just observing, without proving as to how it was so, that the assessee was not able to establish the genuineness and credit worthiness. Here again, the documents furnished by the assessee were not even mentioned in the impugned order, what to talk of deliberating on the merits of each of these documents. AO has made addition without considering the merits of the documents furnished before him, just by observing that the purpose and utilization of the funds did not stand explained by the assessee. As to how this was so has not been delineated in the assessment order and the addition has been made simply as a part of the entire credit entries in the bank, Also seen that no doubt about either the credit worthiness of the lender, or the genuineness of the transaction, is evincible, either from the assessment order, or from the order passed by the ld. CIT(A) and not only this, no doubt with regard thereto stands raised, in as much as no enquiry/investigation was initiated by either of the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, is unsustainable in law and on facts. Therefore, the addition of Rs. 77 lacs is also deleted. Ground No.8 is accepted. Disallowance of loss - company had failed to produce bills and vouchers of the expenses claimed, due to which, the genuineness of the expenses claimed did not stand proved - HELD THAT:- Seen that as per computation loss of Rs.5000/- has been shown. The same is the position as per the Profit Loss Account (APB 4). In the notice (APB 20) dated 07.10.2019, at point No.12, the AO had mentioned that the books of account and other documents were seized during the search. The assessee company submitted the books of account before the AO vide letter dated 21.01.2022, as is available at APB 113. The same were also seized in the hard disk, as mentioned in the Panchnama. Therefore, it cannot be said that books of account and other documents were not produced. The issue of the company not being a shell company has been deliberated upon, in extenso, in the preceding paragraphs. However, it has not been disputed that the bills and vouchers of the expenses claimed had not been produced. Therefore, the addition made is hereby sustained. Ground No.9 is rejected. Enhancement of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it Goyal, CA Shri T.N. Singla, C.A. For the Revenue : Shri Chandrajit Singh, CIT DR. ORDER PER BENCH ITA No.33/CHD/2023 and ITA No.146/CHD/2023 are cross appeals filed by the assessee and the Revenue, respectively, against the order dated 19.12.2022 passed by the ld. CIT(A)-3, Gurgaon pertaining to Assessment Year 2017-18. 2. ITA No. 739/CHD/2022 is assessee's appeal against the order dated 30.11.2022 passed by the CIT(A)-3, Gurgaon pertaining to 2013-14 assessment year. ITA 33/CHD/2023 3. In ITA No. 33/CHD/2023, the assessee has raised the following Grounds of appeal : 1. That the order of Learned C.I.T. (Appeals) is bad and against the facts and Law. 2. That the assessment completed u/s 153A of the Income Tax Act, 1961 is against the provisions of the law as neither any search was conducted on the company nor any Panchnama was prepared in the name of the company. 3. That on the facts and in the circumstances of the case, the Order of assessment passed under Section 153A of the Act is wholly illegal and without jurisdiction as no search had been conducted under Section 132 of the Act in any of the business premises of the appellant - company. 4. That the learned CIT(A) has wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground No. 1 before the ld. CIT(A) contending that the assessment order passed u/s 153A of the Act was wholly illegal and without jurisdiction as no search had been conducted u/s 132 of the Act in any of the business premises of the assessee company. 6.2 Additional Ground No.2 was raised before the CIT(A) to the effect that the finding recorded in the assessment order to the effect that search seizure operations were carried out u/s 132 of the Act in the case of the assessee company, was perverse and wholly erroneous and, therefore, the order of the assessment passed u/s 153A of the Act was without jurisdiction. 6.3 Additional Ground No.3 before the CIT(A) was that the additions made in the assessment order were not based on any corroborative and relevant incriminating material stated to have been unearthed during the course of search by the AO, though no search had taken place and, therefore, the order of assessment was wholly illegal and without jurisdiction, in view of the judgement in case of Commissioner of Income Tax (Central)-III Vs Kabul Chawla , [2016] 380 ITR 573 (Del)/[2015] 281 CTR 45 (Del). 6.4 Additional Ground No.6 was to the effect that the AO had framed the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abul Chawla ; that from the facts of the case, it was observed that in this case, the return u/s 139 of the Act was filed on 31.08.2017; that therefore, as on the date of search, i.e., 16.02.2018, proceedings in this case were not completed as time to issue notice u/s 143(2) of the Act had not expired; that therefore, the ratio of the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla was not applicable to the facts of the case; that therefore, the AO was not to restrict the additions subject to the incriminating seized material; that moreover, it had been noted that in terms of the provisions of Section 153A(1)(b), the AO was required to assess/re-assess the total income in the year under consideration; that it has been held by the Hon'ble Kerala High Court in the case of CIT Vs K.P. Ummerthat that when a notice u/s 153A is issued, it enables the Department to carry out assessment/reassessment with respect to six immediate prior years and this does not require any incriminating material referred during search relating to those prior years in which there is no time left on the date of search for an assessment u/s 143(3); that the same view has been upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as present in person at the time of search in M/s Kansal Singla Associates, but his signatures were not taken on the Panchnama prepared in the name of M/s Kansal Singla Associates; that the ld. CIT(A) has observed that a letter dated 07.9.2022 was sent to the AO, requiring him to produce a copy of Search Warrant executed/Panchnama prepared, on the basis of which, proceedings u/s 153A were initiated on the company; that while reproducing copy of Search Warrant in his order, the ld. CIT(A) has observed that the AO was justified in initiating proceedings u/s 153A of the Act, as the warrant of authorization u/s 132(1) was executed in the name of the company on 16.02.2018, at SCO No. 80-81, 4th Floor, Sector 17-C, Chandigarh. 11. It has been contended on behalf of the assessee company that the AO has observed that during the search seizure operation conducted on the Punjab Sand Mining Group of Cases on 16.02.2018, it had been found that M/s TJR Properties Pvt. Ltd. and M/s Evershine Resorts Pvt. Ltd., on whom, search had been conducted at SCO Nos. 80-81, 4th Floor, Sector 17-C, Chandigarh, on 16.02.2018, were shell companies and existed only on paper and had no profit earning apparatus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsactions could not be established; that the same was confronted to the assessee vide Show Cause Notice dated 11.12.2019; that in response, the assessee had furnished the details of the persons from whom the said credit entries were received during the year under consideration; that however, the reply of the assessee was not found tenable by the AO and it was held that the assessee had not been able to explain the purpose and utilization of these credit entries to substantiate the genuineness of the transactions; and that it was, therefore, that, the addition of Rs.4,82,00,000/- had been made by the AO on account of unexplained credits in the books of account u/s 68 of the Act. 13. The ld. CIT(A) observed that the assessee had submitted during the proceedings before him that credits amounting to Rs.4,82,00,000/- were received in its bank account maintained with the Bank of Maharashtra during the year under consideration; that it had been contended that all the credits were received from genuine persons and the assessee had furnished necessary documentary evidence in respect of each credit entry as confirmation/affidavit, bank account statement, ledger account and Income Tax Return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acs, Rs.2.43 Cr and Rs. 1 Cr, during assessment years 2013-14, 2018-19 and 2019-20 respectively; that the assessee had declared corresponding capital gains in its ITRs for assessment years 2013-14, 2018-19 and 2019-20, which had been assessed by the AO; that it was, therefore, evident that the assessee was having income deviating apparatus; that the AO had relied on the statement of Shri Sant Ram Sharma, one of the Directors of the assessee company, recorded u/s 132(4) of the Act, by inferring that Shri Sant Ram Sharma clearly stated in his statement that he was not maintaining any company or business which requires upkeep and maintenance of books of account; that thus, Shri Sant Ram Sharma was not aware of any such company in the name of M/s Evershine Rersorts Pvt. Ltd., as mentioned by the AO in para 8.1 of the assessment order; that on going through the said statement of Shri Sant Ram Sharma, as reproduced by the AO in the assessment order, it had been observed that the Authorized Officer had put question No.11 to Shri Sant Ram Sharma in respect of maintenance of books of account in his own individual capacity, as evident from the word apni , which means own . 15. The ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t furnished documentary evidence in respect of the identity and credit worthiness of such persons and the genuineness of the transaction; that the documentary evidences furnished by the assessee had been examined independently, in the light of the findings of the AO recorded in the assessment order as well as the remand report. The ld. CIT(A) summarized the analysis of the credit entries appearing in the bank account by way of a Chart/Table, which finds place at pages 117 to 121 of the impugned order. 16.1 The CIT(A) observed that in view of the analysis made by him and looking into the factual matrix of the case, it had been observed that the assessee had explained the credits of Rs.4.05 Cr received in the bank account during the year under consideration, by furnishing necessary documentary evidences in support of the identity and credit worthiness of the persons and the genuineness of the transaction; that thus, the assessee had discharged its primary onus as required u/s 68 of the Act by furnishing names and addresses of the depositors, copies of their bank account statements reflecting transactions taking place through banking channels, their confirmations alongwith acknowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trength of the documentary evidence, it was observed that there was no justification in such addition made in the hands of the assessee u/s 68 of the Act. It was in this manner, that the ld. CIT(A) deleted the addition of Rs.4.05 Cr. 17.1 However, the ld. CIT(A) confirmed the addition of Rs.77 lacs, finding that the assessee could not explain the credits received in the bank account during the year under consideration, to this extent. 17.2 The ld. CIT(A), as such, partly allowed the original Ground Nos. 7 and 8 taken before him (wrongly mentioned as Ground Nos. 5 6 at page 123, para 9.6 of the impugned order and additional Ground No.4, whereas the original Ground No.4, though deliberated upon, as discussed above, was stated to be not separately adjudicated since quantum addition has been adjudicated. 17.3 On behalf of the assessee, it has been contended that apropos issue of shell company, the Assessing Officer observed that during the search and seizure operation under section 132(1) of the Income Tax Act, conducted on the Punjab Sand Mining Group of cases on 16.02.2018, it had been found that M/s TJR Properties Private Limited and M/s Evershine Resorts Private Limited, on whom, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions done by the company; that no transaction was ever done to rotate any undisclosed money or black money or to inflate the turnover or to divert the bank loans or to evade the tax during any year since its inception, except genuine transaction; that the company, after coming to know about the contents of Appraisal Report, submitted a detailed note of comparison of the appellant company with the general characteristics of a shell company before the AO on 23.12.2019 during the assessment proceedings; that the Assessing Officer was satisfied with the replies submitted by the company in response to various questionnaires issued by the AO during the assessment proceedings and he did not ask any query about the status of the company as shell or genuine company during the whole assessment proceeding; that the AO was fully satisfied with the status of the company as a genuine company upto 27.12.2019 ( the date of the ADIT s Reply to the AO s Deviation Note) and also the creditworthiness and genuinity of all the credit entries in the bank statements after verification of books of account, statements of its directors and documents or evidences submitted by the appellant and, accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company with a so called shell company; d) Submission of cogent and reliable documentary evidences. 17.5 The ld. Counsel has submitted that in this Deviation Note, the Assessing Officer has categorically admitted that there was no document or reasoning supplied to him by the Investigation Wing, due to which, the credit entries in the bank account of the assessee company could be treated as unexplained (Deviation Note-para 3/last); that further, he has also admitted (Deviation Note-para 4/last) that after going through the replies of the assessee company, he was satisfied that the amounts have been credited in the bank account of the assessee company from known sources, which have been duly accounted for by the assessee company in their books of account and shown in their audit report as well as ITR filed in due course on regular basis; that further, no question/explanation regarding the status/genuinity of the company was ever asked during the assessment proceedings and simply by distorting the statements of the Directors, i.e., Sh. Jagdish Gupta and Sh. Sant Ram Sharma and following the dictat of the third party in the Deviation Note, the company was declared as a Shell Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of 25% should be made to the income on account of such bogus purchases, may ultimately be detrimental to the interest of the revenue, if the sale is also to be treated as bogus. (iv) Reference was made to the transactions arrived at with three entities by the assessee in the financial year 2016- 2017. It was noticed that similar transactions made with the same or different parties that were bogus transactions, is something which obtained strength from the fact that stock worth Rs. 450 crores, was found short, although the same stood recorded in the books of accounts. In sum, the conclusion reached was that the books of accounts were not genuine and were liable to be rejected under section 145(3) of the Act and thereafter a gross profit rate had to be estimated on a reasonable basis keeping in mind the prevailing market trend. 4.6 As regards cash deposits made by the assessee during the demonetization period; against a proposal to add Rs. 180.53 crores, as suggested by the Investigation Wing, for the reasons given in the deviation report, the amount was pared down to Rs. 99.04 crores. Thus, the suggested addition on this score to the total income of the assessee concerning AY 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment orders, the appraisal report generated pursuant to the search and seizure action was called for by the Tribunal and perused. A perusal of the report by the Tribunal revealed that addition/disallowance concerning bogus purchase was made only to protect the interest of the revenue. (viii) Insofar as the abated AYs were concerned i.e., AYs 2015- 2016, 20162017 and 2017-2018, it was, as per the Tribunal, apparent that the assessee had purchased goods, which were in value less than the sum for which they were sold. Therefore, as held by the A.O. in the deviation report, if the purported bogus purchases were to be disallowed then necessarily the sales shown in the assessee's regular books of accounts would also have to be excluded which would result in the assessee's income falling below the returned/declared income. In this regard, the Tribunal recorded that for the AYs 2012-2013 to 2017-2018, the total sales recorded by the assessee was Rs. 36,20,60,89,783/-, as against purchases made from the same very parties amounting to Rs. 36,02,14,17,848/-. Resultantly, for the said period, the assessee had shown a profit of Rs. 18,46,71,935/-. 15.8 According to us, the obs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar. 17.10 The ld. Counsel has stated that during Financial Year 2017-18, part of the land was sold for Rs. 2,43,75,000/- through registered sale deeds, and advance tax of Rs. 30,00,000/- was paid by the company and also self-tax of Rs. 12,63,980/-was paid for the year; that during F.Y 2018-19, land of Rs. 1,00,00,000/- was sold through registered sale deeds and advance tax of Rs. 17,00,000/- was paid; that capital gain tax was paid by the company during AYs 2018-19 and 2019-20 on the sale of the balance land, as per the terms of agreement to sell, which was executed on 20/03/2012; that the assessee company reduced the advance of Rs. 40 lakhs received from Sh. Mohit Bhardwaj in A.Y 2012-13 and A.Y 2013-14 from the cost of land in A.Y 2018-19 and A.Y 2019-20 to calculate the Capital Gains Tax. 17.11 It has been submitted that further, there is no definition of 'Shell Company', either under the Income Tax Act, or under the Companies Act; that a detailed note on 'Shell Company' has been submitted with the AO and Id CIT(A) (Page 199-204 of Paperbook). 17.12 The AR contends that since its incorporation, the assessee company is regularly preparing its Profit and Loss Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the peculiar facts and circumstances to draw such inference and consequences out of the same as per the provisions of the Income Tax Act. 17.17 The assessee has contended that until 27.12.2019, the Assessing Officer had remained completely satisfied with regard to the fact that M/s Evershine Resorts Private Limited was not a shell company and the Assessing Officer had been satisfied that all transactions were through banking channels only and had agreed that these transactions were absolutely genuine transactions; that also, the AO had accepted that these transactions stood duly accounted for in the books of account of the company; that the Assessing Officer had himself proposed no addition of these credits in the case of the company, in the Deviation Note sent by him to the Deputy Director of Income Tax (Investigation), Mohali, on 16.12.2019; that this fact stands established beyond any shadow of doubt, by the fact that the said Deviation Note was prepared by the Assessing Officer on 24.12.2019 and was sent to the Deputy Director of Income Tax (Investigation), Mohali, on 26.12.2019, at 6.00 PM, vide letter No. 1733, in the case of M/s Evershine Resorts Private Limited; that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, irrespective of the merit of each such credit. 17.18 It has further been contended that the AO, in para 12.1 of his order, contends that the company did not produce books of account for verification during the assessment proceedings. The assessee has contended that search u/s 132 (1) was conducted at the business premises of M/s Kansal Singla and Associates, Chandigarh; and that during the course of search in the business premises of M/s Kansal Singla Associates, regular books of account, along with bank statements of the company, i.e., M/s Evershine Resorts Private Limited, were found from the premises of the said M/s Kansal Singla Associates mentioned on page 357 of the appraisal report (page 198 of the paper book). 17.19 It has been stated that as submitted, during the course of search in the business premises of M/s Kansal Singla Associates, regular books of account along with bank statements of the appellant company were found and copies of all these books of account were taken on CD by the department as per Panchnama of M/s Kansal Singla Associates; that the books of account were also examined by the AO before sending Deviation Note dated 24.12.2019 to the Investigation Wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 347, which is a continuation of the list/inventory. 23. The above apart, in this Panchnama, the assessee company, i.e., M/s Evershine Resorts Private Limited has nowhere been named. 24. However, despite the above discrepancies, it is seen that in the Search Warrant, which has been reproduced hereinabove, the name of the assessee company has been clearly mentioned. This being so, the ld. CIT(A) is correct in observing, at page 127 of the impugned order, that the Warrant of Authorization u/s 132(1) of the Act was issued in the name of the assessee on 16.02.2018. It was in view of this, that the ld. CIT(A) held the AO to be justified in initiating assessment proceedings u/s 153A of the Act, since the assessee was covered under the provisions of Section 132(1). 25. The ld. Counsel for the assessee has not been able to controvert the above factual position, which is patent on record. Therefore, finding no merit therein, Ground Nos. 2 and 3 raised by the assessee before us are rejected. 26. Coming to Ground No.4, while examining the identity and credit worthiness of the persons from whom the amounts were received by the assessee and also the genuineness of the transactions, the ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmation furnished are not legible and that the assessee has not been able to establish the genuineness of the transaction and the credit worthiness of the lender by failing to furnish copy of ITR of Bihari Lal Deshraj, the lender. As per the copy of account of the party, the amount is shown to have been received by the assessee on 13.11.2016. It was repaid on 24.03.2017. The bank account is at APB 64-70. The Balance Sheet and ITR is at APB 55-63. Besides, in the Deviation Note, on 24.12.2019, the AO has clearly mentioned that all the documents in support of the deposit had been received and they had been found to be from known sources and duly recorded in the books of the respective parties. This specific observation of the AO has nowhere been met by the ld. CIT(A). We find that despite the Deviation Note, it was only on the basis of the reiteration of the Appraisal Report by the DDIT on 27.12.2019, that the AO made the addition which has been confirmed by the ld. CIT(A). 30. In S.R. Cold Storage (supra), the Hon'ble Allahabad High Court has held that the quasi-judicial function provided under the Income Tax Act cannot be given a complete go-bye, rendering the participation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts submitted by the assessee during the assessment proceedings. It has been contended that the documents had been filed before the ld. CIT(A), vide reply dated 21.03.2020, as find mention at pages 58, 90, 99 and 119 of the CIT(A) s order. The ld. counsel has submitted that the ld. CIT(A) confirmed the addition without providing the assessee any opportunity to submit the ITR of the lender and that therefore, the assessee now seeks to file, as additional evidence, copy of ITR-V of Shri Rahul Kakkar, Proprietor of M/s Om Prakash Sons, for assessment year 2017-18 (APB-73), copy of computation of Shri Rahul Kakkar (Proprietor of M/s Om Prakash Sons), for assessment year 2017-18 (APB 74) and copy of audited Balance Sheet of M/s Om Prakash Sons as on 31.03.2017 (APB 75-77). It has been submitted that confirmation of copy of account of the assessee company in the books of M/s Om Prakash Sons for assessment year 2017-18 (APB 71), copy of account of M/s Om Prakash Sons in the books of the assessee company, for assessment year 2017-18 (APB 72), and copy of Account Statement of M/s Om Prakash Sons, for assessment year 2017-18 (Paper Book 78-79) had also been filed before the CIT(A). 32.2 It ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account of the assessee company and by the documentary evidence produced, and so, no addition was suggested. However, it was only after the letter was received from the DDIT (Investigation) (ADIT), Mohali, that the additions were made by the AO. So far as regards the ld. CIT(A), he confirmed the addition of Rs. 40 lacs by merely stating that the assessee had failed to furnish the copy of ITR of the lender. At the same time, the ld. CIT(A) did not deem it appropriate to make any observation about the aforesaid documents placed on record before him by the assessee. 34.1 Under the circumstances, we allow the copy of ITR-V of Shri Rohit Kakkar, Proprietor of M/s Om Prakash Sons, for assessment year 2017-18 (copy at APB 73), copy of computation of the said Shri Rahul Kakkar, for assessment year 2017-18 (copy at APB 74) and copy of audited Balance Sheet of M/s Om Prakash Sons, as on 31.03.2017 (copy at APB 75-77), as additional evidence. Infact, all this evidence undisputedly is already available on the record of the Department. Examination of such evidence is necessary for the just and proper decision of the issue at hand. Further, the Department has not opposed such admission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he documents furnished by the assessee during the assessment proceedings. It has been submitted that vide reply (pages 58,90,99 and 119 of the CIT(A) s order), dated 21.03.2020, that documents were submitted before the CIT(A) as well. It has been contended that it took a period of three years for the ld. CIT(A) to notice that one page of the bank account statement of Shri Baldev Singh was missing; that the assessee had filed copies of affidavit, ITR-V, confirmation and copy of account alongwith the bank account statement of Shri Baldev Singh, in order to prove his credit worthiness and genuinity; that however, one page from the bank statement of Shri Baldev Singh got misplaced from the reply submitted before the ld. CIT(A); that however, the ld. CIT(A), rather than asking the assessee company to provide the said page of the bank statement again, or to issue a Show Cause in this regard, wrongly upheld the addition of Rs.17 lacs, ignoring all the other documentary evidences submitted by the assessee. Attention has been drawn to all the said documents filed before the authorities below, copies whereof have been filed in the assessment proceedings, requesting the same to be admitted as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee, in the audited Balance Sheet of the company; that the same was submitted by the assessee company before both the taxing authorities alongwith all the other documents, such as ITR, copy of account, bank statement and confirmation; that while confirming the addition, the ld. CIT(A) merely made a vague observation that the assessee had not been able to establish the genuineness and credit worthiness; that as to how this was so, no reason, much less any cogent reason, has been given by the ld. CIT(A) in the impugned order; that the CIT(A) did not even ask the assessee to submit any other specific document to prove the credit worthiness and went on to merely confirm the addition without any basis. It has been contended that all the abovesaid documents have been filed at pages 88 to 112 and 377 of the APB. These documents are; Confirmation on copy of account of M/s Evershine Resorts Private Limited in the books of M/s Dharma Wires Private Limited for AY 2017-18 (paperbook page 88); Copy of account of M/s Dharma Wires Private Limited in the books of M/s Evershine Resorts Private Limited for AY 2017-18 (paperbook page 89); Copy of ITR-V of M/s Dharma Wires Private Limited for AY 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these documents. 37.4 On a consideration of these documents, as also the break-up of loans and advances as per the balance sheet of the lender company, we find the loan to be genuine, as stand disclosed in the audited balance sheet of the lender company. Further, it has remained undisputed that the funds were advanced from the routine operational bank account of the lender company, providing a clear trail/movement and thereby lending legitimacy to the transaction. The audited balance sheet of M/s Dharma Wires Pvt. Ltd., as on 31.03.2017, has not been disputed to be forming a part of the records of the Department. 37.5 It is also seen that no doubt about either the credit worthiness of the lender, or the genuineness of the transaction, is evincible, either from the assessment order, or from the order passed by the ld. CIT(A) and not only this, no doubt with regard thereto stands raised, in as much as no enquiry/investigation was initiated by either of the authorities below. Moreover, it also stands irrefuted that the advance was returned by the assessee company to the lender in the next year, through banking channels. 37.6 From the above, the irascible conclusion is that the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation), Mohali, on 26.12.2019, vide letter/Note No.1733, dated 24.12.2019, at the fag end of the assessment proceedings; that though she was not authorized to do so, the DDIT (Investigation), Mohali, without jurisdiction and without application of mind, rejected the said Deviation Note in less than 12 hours; that the Deviation Note was rejected by observing that the assessee company is a shell company and issuing a dictat to the AO, based on the Appraisal Report, vide letter No. 1763, dated 27.12.2019; that the ADIT (Investigation), Mohali, rejected the AO s proposal/Deviation Note for not proposing the additions, inspite of the ample, reliable and cogent documentary evidence produced by the assessee company on the record before the AO, and directed the AO to make additions by assigning flimsy reasons, as if it was her, i.e., the ADIT, and not the AO, who was the assessing authority, giving reference to CBDT Instruction No.FTS/194840/12 dated 20.11.2012, exceeding her powers in rejecting the Deviation Note. It has been contended that despite the Deviation Note issued by him, on the dictat of the ADIT (Investigation), Mohali, the AO, on part satisfaction, declared the assessee comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises, as also mentioned at page 357 of the Appraisal Report (APB 198); that during the search, copies of all the books of account so found were taken by the Department on CD, as per Panchnama (APB 344-347) of M/s Kansal Singla and Associates, Chandigarh; that the books of account were also examined by the AO before he sent his Deviation Note dated 24.12.2019 to the Investigation Wing, as per the contents of his letter (APB 348-350) dated 24.12.2019; and that the books of account were also submitted before the ACIT by the assessee during the remand proceedings, as available at APB 369. 38.6 It has been contended that by producing before the AO, all the said documentary evidences, in support of the credit worthiness of the lenders and the genuineness of the transactions, thereby, the assessee's onus stood amply discharged and shifted on to the AO, which onus of the AO was never discharged by the AO and the additions of all the credit entries in the bank account of the assessee company were made merely on bland, bald and specious pleas, without even mentioning the documentary evidences so filed by the assessee, what to talk of discussing the merits of such voluminous documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y this company; that he had further stated that this company had been incorporated with him by Shri Triloki Nath Singla, Chartered Accountant; that he had again submitted that he was not aware of any RTGS entries reflected in this bank statement; that similarly, in the case of M/s Evershine Resorts Pvt. Ltd. also, Shri Jagdish Rai Gupta had been confronted with the bank account statement of M/s Evershine Resorts Pvt. Ltd., that here also, Shri Jagdish Rai Gupta had not been able to furnish any explanation regarding the debit and credit entries reflected in the bank statement and he had simply denied any knowledge of the banking transactions of this company; and that in this case also, Shri Jagdish Rai Gupta had submitted that M/s Evershine Resorts Pvt. Ltd. had also been created by Shri Triloki Nath Singla and that he himself had never issued or received any cheque on behalf of the this company. 39.1 The ld. DR has contended that likewise, the AO also recorded that Shri Sant Ram Sharma, one of the Directors in M/s Evershine Resorts Pvt. Ltd., was also covered in this search action and his statement on oath was also taken during the search; that therein, he was specifically asked to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations made by the AO in the assessment order with regard to the statement recorded on oath during the search, of Shri Sant Ram Sharma, Director, observed that the relevant Question No.11 put to Shri Sant Ram Sharma in respect of maintenance of books of account, was with regard to maintenance of such books of account in his own individual capacity, and not that of the company, as evident from the use of the word apni . 39.5 The ld. CIT(A) observed that there is no definition of shell company given either under the provisions of the Income Tax Act, 1961, or those of the Companies Act, 1956 or those of the Companies Act, 2013, and that to arrive at the conclusion of a company being a shell company, the facts of each case are required to be examined independently, on merits, as per the provisions of the Income Tax Act. It was observed that in order to decide the merit of the addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it was required to examine the source and nature of the credits received by the assessee, in accordance with the provisions of Section 68 of the Act. It was observed that thus, it was required to examine the identity and credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding the source and nature of the credits received in the bank account, or if the explanation offered is not found satisfactory by the AO. It was observed that in the case at hand, the assessee has duly furnished its explanation in respect of the bank credits received during the year under consideration alongwith necessary documentary evidences, by explaining the source and nature of the same. It was observed that if the AO was not satisfied with the explanation of the assessee in respect of the source and nature of the credits received, he should have recorded such dissatisfaction in the assessment order by conducting further examination of the documents, or by conducting further enquiries and, thus, he should have shifted the onus back on to the assessee; that however, no adverse finding had been recorded in the assessment order in respect of the documentary evidences furnished by the assessee in support of the bank credits of Rs.4,05,00,000/-. It was observed that the submissions and documents furnished by the assessee during the appellate proceedings had also been forwarded to the AO for remand report; that in the Remand Report also, the AO had not even discussed the documenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss Account (APB 4). In the notice (APB 20) dated 07.10.2019, at point No.12, the AO had mentioned that the books of account and other documents were seized during the search. The assessee company submitted the books of account before the AO vide letter dated 21.01.2022, as is available at APB 113. The same were also seized in the hard disk, as mentioned in the Panchnama. Therefore, it cannot be said that books of account and other documents were not produced. The issue of the company not being a shell company has been deliberated upon, in extenso, in the preceding paragraphs. 40.3 However, it has not been disputed that the bills and vouchers of the expenses claimed had not been produced. Therefore, the addition made is hereby sustained. Ground No.9 is rejected. 41. Apropos Ground No.10, the ld. CIT(A) enhanced the income of the assessee company by an amount of Rs.40 lacs. While doing so, ld. CIT(A) observed that an Agreement to Sell was entered into on 20.03.2012, with Shri Mohit Bhardwaj, for the sale of land measuring 10 bighas and 3 biswas, situated at Pinjore, Panchkula, for a consideration of Rs. 3.80 Cr. The ld. CIT(A) found that the Sale Agreement with Shri Mohit Bhardwaj co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial Year 2012-13. It has been contended that the said advance of Rs.40 lacs assessed to be paid in assessment year 2012-13, when the stipulated period expired on 19.03.2013. It has been stated that the land was finally transferred during the Financial Year 2018-19. It has been contended that during assessment year 2017-18, i.e. the year under consideration, neither the time period under the original Agreement expired, nor was the final Sale Deed executed, and as such, there was no justification to tax the amount on the basis of a wrong entry posted in assessment year 2017-18. It has been contended that entries in books of account cannot determine the taxation, as per the settled law, as income tax is to be charged as per the applicable provisions of law and not on the basis of entries in the books of account. Reliance in this regard has been placed on Kedar Nath Jute Manufacturing Co. Ltd. , 82 ITR 363 (S.C). It has been contended that the land was finally transferred in Financial Years 2017-18 and 2018-19, to Shri Manoj Kumar and capital gain on transfer of this land was declared in assessment years 2018-19 and 2019-20. It has been contended that the land was sold for Rs.2,43,75, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, we find that as patent on record, as per the Agreement to Sell dated 20.03.2012, the last date of registration has been fixed as 19.03.2013. As per the recital in the Agreement to Sell, failure to execute the Sale Deed, was to result in forfeiture of the advance of Rs.40 lacs. Remarkably, the ld. CIT(A) has not made mention in the impugned order about the date of execution having been extended beyond the date originally fixed, i.e., 19.03.2013. The assessee has maintained that the advance of Rs.40 lacs was included in the sale consideration, as receipt, in assessment year 2018-19. This has nowhere been disputed on behalf of the Department. Further, it also remains unchallenged that in the year under consideration, i.e., assessment year 2017-18, no sale of the land in question took place. As such, the Agreement to Sell dated 20.03.2012 ceased to exist on 19.03.2013, the date fixed for execution. As per the express provisions made in the Agreement to Sell, the deemed date of forfeiture is 19.03.2013 and not beyond the same. As noted, there has been given no extension of the Agreement to Sell. The date of 19.03.2013 does not fall in the year under consideration, i.e., assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act as the assessee did not establish its genuineness during the course of assessment proceedings? ii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is right in partly allowing the appeal of the assessee by holding that identity and creditworthiness of the persons from whom such credits were received, were proved, and genuineness of the transaction was also established even though the purpose of such credit was not explained? iii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the appeal of the assessee on the issue of credit entries even when all three limbs of section 68 was not proved / established as the assessee itself is a shell company? 47. The deletion of the addition to the extent of Rs.4,05,00,000/- has been discussed by us while dealing with the assessee's appeal in ITA 33/CHD/2023. The ld. DR has contended that while wrongly deleting the addition to this extent, the ld. CIT(A) has erred in not appreciating that this amount was to be considered as unexplained cash credit, as the assessee did not establish its genuineness during the assessment proceedings. 48. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist (16537), Derived List (16739) and Suspect List (80670), ordered by SFIO. The AO claimed that the names of such companies were removed from the Register by the Registrar of Companies. It has been contended on behalf of the assessee, and not rebutted by the Department before us, that the name of the assessee did not figure in any of these lists, as the assessee is an active company and none of the Directors of this company have been barred. Also, the AO had not issued any Show Cause Notice to the assessee as to why the assessee company should not be treated as a shell company. 49. In view of the above, finding no merit whatsoever in the grounds raised by the Department, these grounds are rejected. 50. Accordingly, the Department s appeal is dismissed. 51. As such, the assessee's appeal in ITA 33/CHD/2023 is partly allowed, whereas, the Department s appeal in ITA 146/CHD/2023 is dismissed. ITA No.739/Chd/2022 52. ITA No. 739/CHD/2022 is assessee's appeal against the order dated 30.11.2022 passed by the CIT(A)-3, Gurgaon pertaining to 2013-14, taking the following Grounds of appeal:- 1. That the order of the learned CIT(A) is bad, against the facts and law. 2. That the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer observed that Assessee company had not shown any Revenue receipt or expenses during the year, and that however, the Assessee company had shown losses of Rs. 12,98,969/- during the year, in its ITR. The Assessing Officer observed that since the Assessee company had not taken out any business activity during the year under consideration and had failed to produce the bills and vouchers of the expenses claimed by it, the genuineness of the expenses claimed did not stand proved. The Assessing Officer observed that further, the Assessee company had failed to produce its books of account for verification and examination. The A.O. observed that furthermore, the Assessee company had been found to be a shell company managed and controlled by Shri T.N. Singha, having no genuine regular business. The Assessing Officer, on considering these facts, disallowed the losses of Rs. 12,98,669/- claimed by the Assessee in its Profit Loss account and ITR. 60. The A.O. observed that further, the bank account statement of the Assessee company regarding bank account No. 60086344592 with Bank of Maharashtra revealed credit entries of Rs. 48 lacs during the year, which were found to be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer held the amount of Rs. 48 lacs credited in the bank account of the Assessee company during the year under consideration, to be the unexplained cash credit of the Assessee company within the meaning of section 68 of the Act and added the same to the income of the Assessee company. 61. Before the ld. CIT(A), the Assessee raised Ground No. 5 against the disallowance of loss of Rs. 12,98,969/- and Ground Nos. 6 and 7 challenging the addition of Rs. 48 lacs made u/s 69 of the Act. Further, the Assessee also raised before the ld. CIT(A), an Additional Ground No.4, which was to the effect that the additions made in the hands of the appellant - company on the basis of its bank entries, regarding which entries sufficient and credible information including the source by way of evidence had been placed on the assessment records for discharging its burden, are not sustainable in law as no inquiry has been undertaken by the Assessing Officer and / or any material brought on record establishing the amount of bank entries as unexplained thereby inviting the application of provisions of Section 68 of the Act . 62. The ld. CIT(A) observed, inter alia, that the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same, as per the provisions of the Income Tax Act. The ld. CIT(A) examined the source and nature of the credits received by the Assessee in terms of the conditions laid down in the provisions of section 68 of the Act. The ld. CIT(A) observed that the documentary evidence furnished by the Assessee during the assessment proceedings, had been examined independently by him in the light of the findings of the Assessing Officer, as recorded in the assessment order, as well as the remand report. The ld. CIT(A) observed that it was noted that the amount of Rs. 20,00,000/- had been received by the Assessee from Shri Mohit Bhardwaj on account of advance for land vide Nos. 3232 dated 24.12.2012, in its bank account on 26.12.2012 and that the same was also corroborated from the copy of the cheque furnished and the bank account statement. The ld. CIT(A) observed that further, the Assessee had shown the earnest money received in the balance sheet as on 31.3.2013, as received from Shri Mohit Bharadwaj under the head of long term borrowings and advance for land. The ld. CIT(A) observed that if the A.O. was not satisfied with the explanation of the Assessee, he could have carried out independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat on that basis, the cost of land sold worked out to Rs. 13,34,134/-, on a proportionate basis. The ld. CIT(A) observed that accordingly, Long Term Capital Gain on this transaction should have been worked out by taking the cost of land at Rs. 13,34,134/-, instead of Rs. 28,00,000/-. The ld. CIT(A) observed that on this basis, the Long Term Capital Gain from the sale of the land was being computed at Rs. 2,11,350/-; and that, therefore, the taxable income from deposits of Rs. 28,00,000/- in the bank account of the Assessee worked out at Rs. 2,11,250/-. 64. In the above manner, the addition of Rs. 48,00,000/- made by the Assessing Officer was restricted by the ld. CIT(A) to Rs. 2,11,250/-. The ld. CIT(A) further observed that the Long Term Capital Gain of Rs. 12,98,969/- was not being allowed to be carried forward. 65. The ld. Counsel for the Assessee has contended that the Assessing Officer has wrongly stated that the sale of land has not been shown by the Assessee in its Income Tax return. It has been contended that the Assessing Officer has also wrongly observed that the Assessee company had not disclosed its sale in the books of account and the computation of profit / gain on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide any reasonable opportunity to the Assessee to show cause against the enhancement and it has been contended that though the ld. CIT(A) has accepted the sale of land as sale of long term assets eligible for Long Term Capital Gain or loss, he exceeded his power by reducing the cost of the asset sold, for calculation of the capital gain / loss from the sale of part of land during the year, without providing any reasonable opportunity to the Assessee before enhancement of liability / assessment and wrongly reduced the Long Term Capital Loss, claimed in the return at Rs. 12,98,969/-, to Rs. 2,11,250/-. 67. On the other hand, the ld. DR has placed strong reliance on the impugned order. It has been contended that since the Assessee had purchased 10 bighas and 3 biswas of land during the F.Y. 2008-09 for Rs. 1,11,73,376/-, and it had taken the cost of land at Rs. 28,00,000/- for the purpose of computing Long Term Capital Gain, on a proportionate basis, the cost of the land sold, i.e., the land measuring 1 bigha 4 biswas, was correctly worked out by the ld. CIT(A) to Rs. 13,34,134/- and that it was on this amount of Rs. 13,34,134/- that the Long Term Capital Gain ought to have been work ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
