9911796707
TMI Blog2024 (12) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... inference that existence of the disputed documents and the possession with the assessee makes these disputed documents incriminating material for purpose of section 68 of the Act. We are of considered view that it is only after establishing that seized material is incriminating the same can be relied for the purpose of seeking an explanation from an assessee for the purpose of section 68 of the Act. However, here in the case in hand the assessing officer has first examined the veracity of the investment and then concluded that the seized material is incriminating material. Thus, whatever submissions the learned spl. counsel for the Department has made bringing forth as to how the disputed documents have in themselves certain contents which make them incriminating material has not at all been examined and brought on record in the assessment order. On the contrary the assessing officer has preferred to complete the search assessment on the basis of principles of preponderance of probabilities and circumstantial evidence. We find that the five shareholders had sold all their shares in the company to Mr. Shushant Gupta in AY 2014-15 and Mr Shushant Gupta had further sold the shares to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansactions are generally effected. We are of the firm view that the impugned order before us requires no interference by way of either reversal of findings or setting aside the issue to the files of either of the two of the learned tax authorities below. The grounds raised cannot be sustained. Consequently the appeal of revenue fails and same is dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... ived by the assessee company during the AY 2011-12 was in the form of 1 lakh equity shares of the face value of Rs. 10/- each with a premium of Rs. 372/- per share aggregating to Rs. 382/- per share were issued by the assessee company to five different companies where allotment made during FY 2012-13. The ld. AO was of the view that these five companies without any economic or financial rationale has sold/transferred their shares which was allotted to them at Rs. 382/- per share to M/s DMG Finance & Investment Private Limited, another group company of SMG group during FY 2015-16 relevant to AY 2016-17. The ld. AO relied the statement Shri Sushen Mohan Gupta, brother of the director of the assessee company, i.e., Shri Sushant Mohan Gupta, recorded u/s 132(4) of the Act on 04.01.2020. The ld. AO observed that in this statement Shri Sushen Mohan Gupta was confronted with equity investment made by several entities in M/s Spiral E-Systems Private Limited which was a group company of M/s Sushen Mohan Gupta and his family members and which had since amalgamated with M/s DMG Finance & Investment Pvt. Ltd. He was questioned with regard to the fact as to how the shares purchased by the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found as part of the seized material. The ld. AO had issued notices u/s 133(6) of the Act to the investors seeking certain details which, as per the assessment order, were not complied with completely. The ld. AO observed that the replies received from the investors do not disclose the following:- • Whether any due diligence was carried out by you before investing in shares of M/s Spiral E-Systems Private Limited. If yes, please provide details of the same. • Whether any agreement/MOU was executed for purchase/subscription of shares. Please provide the copy of the same. Also provide copies/ details of communication entered into with M/s Spiral E-Systems Private Limited with respect to purchase of shares, if any 4. The ld. AO observes in the assessment order that again on 17.09.2021, the assessee was given an opportunity through a note sheet entry for filing the latest addresses of the investor companies and explain the circumstances, but, the latest addresses of the investor companies were not furnished and the following conclusions were drawn:- "a. On perusal of the ITRs of the investor companies, it was seen that the returned total income of the investor companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -per share to M/s DMG Finance and Investments Private Limited which company is a family-controlled concern. There is neither any rationale of such transaction of selling the shares at abysmally low value nor there is any apparent prudence. This further proves that the share capital subscription received during the above assessment year was received from fly by night entry operators and accommodation entry providers and not from any genuine, bonafide or angel investor. It is settled and clear that a prudent investor would never invest his fund in such a company when there are unlimited other opportunities available to him in the market. Therefore, the funds received by the assessee company on account of fresh share capital cannot be accepted as genuine transaction of raising capital in normal course of business as all the questions below remained unanswered; • Who are the shareholders of the Assessee company and who are the real persons behind and in control of these investor companies? • Why did these share applicants/ share capital subscribers make investments in the Assessee company when they could have made investments of such significant amounts in the known pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auditors are hand-in-glove in the whole scheming of bogus share capital. It is further clear that the share applicants/ share capital subscriber companies are a shell companies on account of the reasons discussed earlier and subsequently. From the ITRs, Balance Sheets & Audit Reports of these such share applicants/ share capital subscriber companies, it is mostly seen that the total incomes of these share applicants/ share capital subscriber companies are extremely meager" 5. Thus, considering the subscribers to the share capital as shell companies doing no business and on the basis of preponderance of probabilities, concluded that the assessee has not discharged its primary onus as to the nature and source of share capital subscription received by it and considering it to be a cash credit entry, made addition u/s 68 of the Act. It will be relevant here to reproduce the conclusions of the ld. AO as follows:- "From the above discussions, judicial pronouncements as well as the provisions of law, in the present case on hand, it is im-believable as to why the purported investor Companies have invested their crores of rupees in the shares of Assessee Company (a non-listed company) wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investor companies and the assessee company or the directors of the assessee company. In view of the above discussion, it is held that investor companies are paper/shell companies which are not doing any business and as such genuineness of transactions and creditworthiness of the investor companies are not proved and have been used for giving accommodation entries to the assessee company. This makes the transaction of these entities with the assessee as bogus, spurious and non- genuine. Therefore, share application money aggregating to Rs. 3,82,00,000/- during the AY 2011-12 and of Rs. 46,60,400/- received during AY 2012-13 by the above named assessee company is treated as cash credit under Section 68 of the Act of the assessee company. [Addition of Rs. 3,82,00,000/- under Section 68 of the Act for AY 2011-12 received by M/s Spiral E-Systems Private Limited which has since merged into M/s DMG Finance & Investment Pvt. Ltd.]" 6. In appeal before the CIT(A), the assessee got relief and for which the Revenue is in appeal raising the following grounds:- "Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,82, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & CIT Vs NR Portfolio Pvt. Ltd. (Delhi) in IT A No. 1018/2011. 7) Whether on the facts & circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition ignoring the fact that assessee has failed to prove the identity, genuineness and creditworthiness of 05 investor companies and notices(s) issued by the department to those companies remain un-complied with. 8) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal." 7. Ld. Counsels appearing for both the sides were heard. On conclusion of extensive hearing the Ld. Spl Counsel was requested to summaries his contentions in the form of written submissions and we consider it worthy to reproduce the same below, though at the cost of making the order a bit lengthy; "The essential facts are not in dispute. In terms of the directions issued by the Hon'ble Tribunal on November 6, 2024 upon the mentioning of the instant matter by the Appellant/Revenue, a separate Note on facts is being submitted, which is marked as Appendix A. 1. In the subject proceedings under Section 153A, the Respondent was assessed to tax as the documents seized during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this issue. In re: Findings returned by the Ld. CIT (A) in the impugned order are perverse 5. It is submitted that the impugned order is perverse, inasmuch the Ld. CIT (A), despite being aware of the belief formed in the mind of the Ld. AO from the assessment order, on the basis of the contents of the seized documents, that the monies received from five so called investor companies is not genuine share application money but money from entry operators, has turned a blind eye to the contents of the seized material simply because "…these five shareholders admittedly have sold their shares in F.Y 2015- 16 (AY 2016-17) i.e. much prior to the date of search…" 6. In light of the factum of sale in AY 2016-17, the Ld. CIT (A)proceeds on a predetermined notion that there can be "nothing unusual" about such documents, and they could never be incriminating, and they are instead, according to him, "statutory documents": "…these five shareholders admittedly have sold their shares in F.Y 2015- 16 (AY 2016-17) i.e. much prior to the date of search and would have completed all the formalities relating to the said sale under the Companies Act. Hence, the documents fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the present case ought to be appreciated, in light of the fact that the addition made is in terms of Section 68 of the Income Tax Act, 1961. For purposes of Section 68, once the seized material gives rise to a belief in the mind of the Ld. AO, the initial burden under the provision stands discharged, and it then shifts to the assessee to satisfy the Revenue on identity, genuineness and creditworthiness. A fortiori, incrimination for purposes of Section 68 stands on a different footing vis-à-vis incrimination for purposes of other provisions in the Income Tax Act, 1961that do not involve a reversal of the burden of proof. c. Incrimination is an inference that has to be drawn by examining the content of the seized documents and juxtaposing it with the picture contemporaneously held out by the assessee, to the Revenue. The perversity in the approach of the Ld. CIT (A) is the presupposition that a unless a document carries a stamp of incrimination on its forehead, its contents need not be examined and the belief created thereby, is wholly irrelevant. 11. It is submitted that the belief formed in the mind of the Ld. AO from the seized material under Annexure A29, is ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are subscription money received by American Hotels. In point of fact, this is one of the reasons why the Revenue sought consolidation of the instant appeal with the appeal it has filed before this Hon'ble Tribunal in the case of American Hotels, which was declined. 13. There is also no dispute, as borne out from the Satisfaction Note, that jurisdiction stands assumed by the Ld. AO based on these very seized documents under Annexure A-29. (See p. 107-112 of the paper book filed by the Ld. AR for the assessee). 14. The insistence of the Ld. CIT (A)that there is "nothing unusual" as to these documents and they could never at all be incriminating being so called "statutory documents", even after having noticed the belief formed in the mind of the Ld. AO, on a consideration of the contents of the seized documents that this is not genuine share application money, but money from an entry operator, is thus manifestly perverse, in terms of the legal test for perversity laid down in K. Ravindranathan Nair v. CIT,(2001) 1 SCC 135 by the Hon'ble Supreme Court of India. 15. There is no gainsaying that the findings returned by the Ld. CIT (A) are also on conjectures and surmises, and witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the seized material and form an opinion as to its contents at the hearing, and submits in terms thereof, that it would be inapposite to give a clean chit to the assessee, in this appeal as the contents of the seized material are plainly incriminating. In urging so it is fortified by the judgement of this Hon'ble Tribunal in Shahid Atiq v. ITO, (2005) 97 ITD 22 which, in turn, draws sustenance from a judgment of the Hon'ble Supreme Court of India in KapurchandShrimal v. CIT, (1981) 131 ITR 451) which, in turn, cites with approval Hukumchand (supra). 20. It is reiterated that this Hon'ble Tribunal is empowered to rectify the errors/deficiencies/ lacunae in orders passed by the forums below after independently examining/considering all the incriminating material seized in this case, in exercise of its jurisdiction under Section 254(1), as the last fact-finding body in the hierarchy of forums in the Income Tax Act, 1961. This Hon'ble Tribunal may therefore set aside the impugned order and remand the matter to either the Ld. CIT (A) or the Ld. AO, as it considers appropriate, with a direction to evaluate the contents of the seized documents, ascertain their true character, and deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence is also a matter of statutory record…" "…As already stated, the shareholders have sold their shares and, therefore in order to sale the shares, Share Transfer Form needs to be signed by the shareholders and the said share transfer form are thereafter acted upon and transfer is acted upon by the company in favour of the new shareholders. Hence, the share transfer form have necessarily to be in original, and so also the original share certificates. Many a times, the share transfer forms are not filled up in the case of Private Limited Company, and particularly, when the shares have been transferred in the favour of a sister concern which is the case here…" "…Likewise, Memorandum and Article of Association of investor companies, bank statement of investors companies are a set of confirmation documents which are required for Income Tax proceedings. The assessee has already stated that its assessment was made in the past and therefore all the confirmations may have been obtained then for the purpose of the said assessment proceedings. From the above discussion, quite clearly it comes out that these documents cannot be said to be indicative of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranspired. This is also, as a matter of fact, wholly incorrect and the correct position as demonstrated at the time of hearing [See p. 59/Vol. II of the Revenue's paper book], is set out below: • It is nobody's case that the shares were directly transferred by the five investor companies to DMG Finance and Investment Pvt. Ltd. (five investor companies were portrayed as shareholders of Spiral as of 31.03.2015 - See p. 43 of Paper book Vol. II filed by the Revenue). • The shares of Spiral as held by investor companies were transferred to Sushant Gupta, a director of Spiral itself, as per public records available on the website of the Ministry of Corporate Affairs. These were later transferred to DMG Finance and Investment Pvt. Ltd. in AY 2016-17 (at p. 58 of Paper book Vol. II filed by the Revenue).Attention is invited to Form No. MGT-7 filed by Spiral for AY 2016-17 (See p. 44 of Paper book Vol. II filed by the Department). • It follows that transfer of shares by Sushant Gupta in favour of DMG Finance and Investment Pvt. Ltd. was done sometime prior to 31.03.2016 (at Pg. 59 of Paper book Vol. II filed by the Department), and not by the so-called investor compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessment records of Spiral that these documents were actually produced by Spiral in the course of assessment proceedings. Nothing to that effect has been done. The perverse inference drawn to benefit the assessee, which is on conjectures and surmises anyways, is thus wholly unsustainable. (This Hon'ble Tribunal may also recall that no assessment order under Section 143(3) of the Income Tax Act, 1961, in respect of Spiral E-Systems Pvt. Ltd. for A.Y. 2011-12, has been produced before it). iii. The finding returned that share transfer forms are not usually filled up by private companies is yet another instance of the Ld. CIT (A) making out a case for the assessee beyond what it has itself contended. The finding is unsustainable in law as a higher onus is cast on an assessee under Section 68 in matters of private placement to demonstrate the genuineness of the transaction under consideration, inter alia, as per the Memorandum to the Finance Act, 2012. b. Secondly, the Revenue handed over the entire bunch of seized documents across the bar to this Hon'ble Tribunal and demonstrated that it was apparent on the face of it that all these seized documents were signed and execu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nline Kar 7, before a share transfer form can be acted upon, stamp duty thereon must be fully paid as per Entry 62(a) of Schedule-I to the Indian Stamp Act, 1899 as applicable to the National Capital Territory of Delhi. All the share certificates must also be enclosed with the same, for purposes of Section 108 of the Companies Act, 2013. iv. The seized share transfer forms admittedly do not carry any endorsement reflecting the payment of stamp duty. These could not thus have been acted upon by any statutory authority, given the statutory bar under the Indian Stamp Act, 1899 and could not thus be the "statutory record" of the assessee or investor companies. v. In terms of Section 33 of the Indian Stamp Act, 1899 unstamped share applications are impounded on presentation. Section 35 of the Indian Stamp Act, 1899 debars any statutory authority from even "acting upon" such an instrument, till deficit stamp duty and penalty, as assessed thereon, is recovered. This bar cannot even indirectly be circumvented, as emphatically held by the Hon'ble Supreme Court of India in Jupudi Kesava Rao v. Pulavarthi Venkata Subbarao, (1971) 1 SCC 545. d. Fourthly, the Ld. CIT (A) there is "nothing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat these so called investors were entry providers, in the mind of the Ld. AO was fortified by the seized bank statements that showed credit and debit entries on a back-to-back basis, on repeated occasions, as is borne out from the assessment orders. To turn a blind eye to this aspect discernible from the contents of the bank statements of the investor companies, by treating them as "statutory documents"is utterly perverse, to say the least. e. Fifthly, yet again the finding of the Ld. CIT (A) that there is "nothing unusual"in these seized documents flies in the face of the fact that the Ld. CIT (A) does not even notice that the seized documents included the confirmation of receipts from sale of shares (for instance, at Pg. 25 of Paper Book (Seized Material) Vol-I in the case of Ladliji). This is again something no prudent investor would do, but an accommodation entry provider would certainly do so, at the behest of the ultimate beneficiary, as held by the Ld. AO.The fact that Ladliji, for instance, is giving a signed blank receipt (at Pg. 39 of Paper book (Seized Material) Vol-I filed by the AR) at the time of applying for the shares quathe amounts to be received for full and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank power of attorney that it was an irrevocable power of attorney, which as is settled law, creates an interest in property in terms of Section 202 of the Indian Contract Act, 1872, and cannot unilaterally be revoked by either party, as held by the Hon'ble High Court of Delhi in Harbans Singh v. Shanti Devi, 1977 SCC Online Del 102. The blank power of attorney duly signed by an authorized representative/director of the investor company, unearthed from the premises of the assessee during the search, confirms that the investor company has already appointed Spiral as its agent from the outset, and had authorised it "to transfer any of the said shares to any person or persons or Corporation whether on sale or otherwise…"which cannot be unilaterally revoked, and therefore does confirm the transfer of beneficial interest and securing of the interest of the beneficiary as explained above. This further demonstrates the unsustainability of the finding of the Ld. CIT (A). In contrast, at page 33 of the assessment order, the AO has clearly observed that the assessee could not provide any explanation as to why blank but signed irrevocable power of attorney of the authorized represent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surrounding circumstances to find out the reality of the recitals made in those documents…Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities…" Affidavit for allotment of shares, power of attorney, abstract of resolution 26. The Ld. CIT (A) extends a similar treatment to the other seized documents by once again characterizing them as records pertaining to the company "…Similarly, an affidavit for allotment of shares; power of attorney, abstract of resolution passed, list of directors are all records pertaining to the company and an affidavit for allotment of shares can even be for the purpose of the shareholders which can be kept by the company as a confirmation by the shareholders to be filed for statutory proceeding…" 27. The cross references of these documents from Annexure A-29, are as under: Affidavit for allotment of shares: a) Ladliji -Pg. 34 of Paper Book (Seized Material) Vol-I filed by the AR b) Top-Tech Cables - Pg. 7 of Paper Book (Seized Material) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contemplation even in the Department. We find it strange that an Assessee along with share application money would obtain affidavits from the investors to confirm genuineness of the transaction. In a normal business transaction, no such certificate/affidavit would be obtained by any company from persons investing in its share capital. The fact that the Assessee felt the necessity of obtaining such affidavits raises a suspicion on the genuineness of the very transaction." d. Fourthly, to the extent the Affidavit (for instance, at Pg. 34 of Paper Book (Seized Material) Vol-I) is shorn of material particulars, such as Share Certificate No./Distinctive No., etc.,it could not have been used for any statutory proceedings, which demonstrates yet again, the utter perversity of the impugned order passed by the Ld. CIT (A). e. As far as the fact that blank but signed irrevocable power of attorney belonging to, and signed by the authorized representative/director of the so-called investor companies is concerned, it has been demonstrated hereinabove that investor company has already appointed Spiral as its agent from the outset, and authorised it "to transfer any of the said shares to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate confirming allotment and receipt of an additional 14,600 shares, for which share application money was received, the said document is plainly incriminating. The said additional shares were never even allotted, to begin with. Only an entry operator would issues a certificate for shares, it has never even received, that too at a stage when that were never even allotted. This further begs the question - were 14,600 additional fresh shares ever issued by Spiral, so as to be capable of being allotted to any person, much less Ladliji? From the records that are publicly available, this does not seem to be the case. Only an entry operator will issue a certificate reflecting allotment of shares that do not even exist, in law. 31. Nowhere in the impugned order does the Ld. CIT(A) even advert to this seized document which is incriminating in nature. This document yet again gave rise to a belief in the mind of the Ld. AO that the source of investment never emanated from funds belonging to the said investor companies. Contrary to the submission of the Ld. AR for the assessee that the test identity was proved as soon as the five investor companies were served for purposes of Section 133 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nn.com 435, where it was held that: "…any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute an 'incriminating material' sufficient to make assessment for the purposes of the Act…" 37. It is submitted that Section 153A does not employ the expression "incriminate". In point of fact, this expression is not defined anywhere in the Income Tax Act, 1961. The question as to whether a document "incriminates" has to be considered in the facts of every single case, contextually, having regard to the income disclosed by the assessee in its return, and the belief to the contrary created by the seized material. For the purpose of Section 68, "incrimination" has to be appreciated from the lens of the belief created by the seized material which dislodges the initial burden of proof and shifts the burden on the assessee to establish on the basis of matters especially within his knowledge, the aspects of identity, genuineness and cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s something more into Section 153A that goes beyond its plain language. 41. The Revenue is fortified by the judgement of the Hon'ble High Court of Delhi in CIT v. Anil Kumar Bhatia, (2013) 352 ITR 493,holding that once incriminating material is found, Section 153A is triggered, and an assessing officer is under a bounden duty to assess the total income of the assessee, even when the return filed, was processed in terms of Section 143(1), or when an order of assessment was actually passed in terms of Section 143(3): "20…A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3). If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the restrictions imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgements cited by the assessee, such as Sunny Infra projects (supra) themselves hold that the Ld. CIT (A) ought to have applied his mind as to whether "…the seized material must have some nexus or relevance to the additions sought to be made and must be relevant for the belief formed regarding income having escaped assessment…". In re: Extracts from the pen drive placed on record in terms of Rule 29 44. The Revenue is not relying on the extracts from the pen drivei, produced in terms of Rule 29, to establish/make out jurisdiction for purposes of Section 153A. It is submitted that the 341 pages of seized documents is more than sufficient for that purpose. 45. Once the door of Section 153A however opens, the Revenue, while assessing total income, cannot be precluded from considering any other material that is otherwise available on the record, to substantiate any addition sought to be made/sustained. 46. The Revenue has placed on the record the extracts from the pen drive, and respectfully submits that this would have to be considered by the Ld. CIT (A), in the event it succeeds in the present appeal. It is submitted that even though jurisdiction is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lace on record documents/material allegedly relevant for adjudication of the issues arising in this appeal. Learned special counsel, has contended that assessing officer had relied upon 341 pages under annexure A-29 of the seized material, which the learned 1st appellate authority, has not found to be incriminating material. Therefore, by way of this application revenue intends to file pendrive that was received from the directorate of enforcement subsequent to search action and which will help establishing certain incriminating facts. Learned special counsel has submitted that the learned AO had found annexure A-29 sufficiently in committing and did not refer to other material which was otherwise available and need to refer to the said material has a reason only after the impugned order of Ld. 1st appellate authority. We find that 2 separate paper books have also been filed which have certain documents including which were part of seized material as annexure A-32. 8.1 The merits of this application can be conveniently discussed at later stage having considered the rival submissions in regard to the issues before this bench. 9. Accordingly, we first take up the merits of the grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income or undisclosed income, merely the circumstances surrounding the existence of certain documents found during search, alone can be considered as 'incriminating material'. 12. In regard to this controversy, we find that the learned Spl. counsel for the Department has relied the ratio of Hon'ble jurisdictional High Court, in the case of Dayawanti v. CIT (2017)390 ITR 496, to argue that once the seized material gives rise to 'belief' in the mind of the assessing officer, then that is sufficient to consider the 'seized material' to be 'incriminating material' and that CIT(A) was wrong in the approach having presuppositions that unless a document carries a stamp of incrimination on its forehead, its contents need not be examined and the belief created thereby, is wholly irrelevant. 13. In this context only, it was argued, that this 'belief', was sufficient to transfer the onus of rebuttal of this 'belief' on the assessee for the purpose of section 68 of the Act. Despite being very generous to all the contentions of ld. Spl. Counsel for the Department, we fail to agree with the same. We are of the considered view that the 'seized material' can be considered to be 'incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of transaction which is of incriminating nature so as to constitute incriminating material. However, as we go through the assessment order we find that the ld. AO has not spelt out any information of incriminating nature spilling out of the disputed documents. The assessing officer seems to have been convinced himself on his understanding of the seized documents that as the seized documents are generally used for transactions of bogus share capital receipt so they are incriminating material for the purpose of search assessment. 17. It can be observed from the impugned assessment order that same is marred by use of language which in no manner would suggest that any document was specifically examined in its nature or contents to give the finding that as to how that seized document is 'incriminating material'. Except for inferences and presumptions, drawn on assessing officer's own prudence, the conclusion was arrived. 18. In this context we note that the assessing officer has drawn an inference on the basis of some shareholders being common with another company to make it 'evident' that both the company's investments bear the same colour and nature. Ld. AO has also half heartedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved from the assessment order that the assessee's submission that seized material as Annexure A-29 are not of incriminating nature and there was no evidence of any cash given for share capital subscription was outrightly discarded by the assessing officer by following observations at the concluding part of page No. 10 and beginning of page No. 11 as follows:- "As per para 4(a) of the above submissions, the assessee has contended that the documents seized as annexure A-29 are not incriminating in nature and there was no evidence of any cash given for share capital subscription. In this regard, the issue is being elaborately discussed in subsequent paras. However, to give a quietus to the aforesaid contention of the assessee, the very fact that original blank unexecuted share transfer deeds/share transfer forms, original blank power of attorney to sell shares of share capital subscribers signed by their directors were found as part of the seized annexure A-32. If, these are not incriminating, what else is incriminating In the present case, as already and subsequently discussed, there were specific and clear incriminating material which in light of circumstantial evidence and hu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct by discussion of disputed documents. Merely posing questions to oneself without reference to facts does not form a belief. The foundation of belief is acceptance of something which is true or correct. Else it is merely surmises and conjectures which cannot be basis to hold the seized material be incriminating and which fails to pass the rigour of tests for completing a search assessment on basis of incriminating material. 21. It can be observed from the impugned assessment order that assessing officer has laid more emphasis on the examination of the reasons for investment, financials of the investor companies, their assets, taxable income etc., for drawing a conclusion that investor companies were shell companies and based upon this conclusion a backward flip is taken to draw an inference that existence of the disputed documents and the possession with the assessee makes these disputed documents 'incriminating material' for purpose of section 68 of the Act. 22. We are of considered view that it is only after establishing that seized material is incriminating the same can be relied for the purpose of seeking an explanation from an assessee for the purpose of section 68 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same to such transactions in the real market situation." 24. Here we would like to observe that the judgement of Hon'ble Supreme Court of India in Sumati Dayal Case(supra), as relied by Ld. AO, was not in regard to search assessment. Similarly the assessing officer has relied on judgement of Hon'ble Supreme Court of India in Pr. CIT v. NRA Iron and Steel Pvt. Ltd. (supra) and same is also not in an assessment under section 153A of the Act. This helps us to also take up the proposition of ld. Spl. Counsel for the Department, that the scope of search assessment cannot be narrower but is in fact wider than the case of reopening assessment. This proposition has no legs to stand as without doubt the scope of search assessment is narrower and for that reason Hon'ble Supreme Court of India in the judgement of PCIT vs Abhisar Buildwell P. Ltd. [Civil Appeal No. 6580 of 2021] dated 24.04.2023 has left the revenue with an alternate remedy of reopening assessments in cases where there is no incriminating material to conclude the search assessment. 25. The ld. Spl. Counsel for the Department has also strenuously argued that on the facts of the case, this Tribunal is empowered to rectify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellate authority leading to committing an error. 29. As discussed above we have concluded that the assessing officer has not applied its mind to any of the contents or the specific nature of the disputed documents and there consequences for building a case based on incriminating material. The learned assessing officer seems to have been driven more on doctrine of Res Ipsa Loquitur, which is a latin phrase that means the 'facts speaks for themselves'. No attempt was made to examine the disputed documents individually to bring forth a case as has been casted before us by the learned spl. counsel for the Department. 30. Now if the Department wants to succeed before us on the grounds as raised the burden was to show that though the learned assessing officer had done his work but the ld. 1st Appellate authority has fallen in error in not appreciating the contents of the disputed documents in right prospective as was done by the learned assessing officer. However, that seems to be not the case of the Department and the learned counsel for the Department asserts that even if assessing officer had erred the learned CIT(A) should have examined the disputed documents independently to esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be alleged to be an erroneous finding of fact. We cannot thus justify giving a fresh opportunity to make further enquiry into questions of fact which touch the question of assumption of jurisdiction under particular sections of the Act. 33.1 The attempt of Department to now improve the case further by bringing on record certain part of seized material not at all relied by the learned assessing officer or which was subsequently received from enforcement directorate cannot be sustained and this material cannot be considered additional evidences so as to be admitted and considered or to be sent back for verification. The additional evidences can only be accepted from and Appellant in support of the claim or defence already on record or additional plea accepted to be considered. However, the revenue cannot come up with the plea of examining the issue of incriminating material afresh on pretext of relying additional evidences. 33.2 Taking a call upon the contentions of ld. Special Counsel about the seriousness of the issues involved due to the background of the search operations, we also considered the contents of the complaint filed by the Directorate of Enforcement made avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce they only confirmed transaction of share capital with the assessee company and nowhere demonstrated in undisclosed income of the assessee company. 33.5 This establishes that the assessing officer seems to have been driven by a 'borrowed belief' arising out of the examination of transactions by the Enforcement Directorate. Nothing was found specifically implicating the Spiral E-Systems Pvt. Ltd. or any investor company or Shri Susant Mohan Gupta. The fundamental principle of assessment being of taxing real income even if under the deeming provisions seems to have been ignored and on a principles of alchemy, all the transactions around Shri Sushen Gupta and M/s American Hotels and Restaurants Pvt. Ltd. were considered tainted. 33.6 Accordingly we also find no merit in application dated 18.10.2024, filed under section 254(1) of the Act on 18.10.2024, by the appellant department and same is hereby dismissed. 34. We are equally inclined to accept that the seized materials which included the alleged incriminating material were primarily statutory records required to be maintained under the relevant Companies law provisions. These alleged incriminating material were also of the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 712 e) Sunny Infraprojects Ltd. - ITA No. 502 of f) Index Securities Pvt. Ltd. (86 taxmann.com 84) g) Therapeutic India Pvt. Ltd. (ITA No. 4515/Del/2012 h) M/S. Brahamputra Finlease (P) Ltd. V DCIT, ITA No. 3332/Del/2017 59 35. There is no substance to allege that the learned CIT (A) proceeded on a predetermined notion to hold their was nothing unusual about the documents. Learned sr. counsel for the Department has vehemently stressed that on the point that on the basis of seized material a belief had formed in the mind of assessing officer, however, when such belief is not exhibited in the form of reasoning such belief is of no consequence and learned 1st appellate authority was justified to hold that merely because of possession these disputed documents will not become incriminating material. The findings of learned 1st appellate authority cannot be said to be on conjectures and surmises rather the same applies to the assessment order as framed. There is no substance in the contention of learned counsel appearing for the Department that the learned 1st appellate authority has proceeded to make out a better case for the assessee and for that reason the impugned order sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by it in an additional 14,600 equity shares of Spiral E-Systems, however, in the public domain, it was always held out by Spiral E-Systems that only 22,000 equity shares had been allotted by it to Ladliji. To the extent the seized material contains a certificate confirming allotment and receipt of an additional 14,600 shares, for which share application money was received, the said document is plainly incriminating. The said additional shares were never even allotted, to begin with. Only an entry operator would issues a certificate for shares, it has never even received, that too at a stage when that were never even allotted. This further begs the question - were 14,600 additional fresh shares ever issued by Spiral, so as to be capable of being allotted to any person, much less Ladliji? But, for this the AO could have verified from the records of Spiral E Systems, which AO was having which was not done. This only indicates that AO had only approached the issue with pre-conceived notion in order to reach a predetermined finding and destination, so for that reason the assessment order is not a speaking order but parrot like version of how bogus transactions are generally effected. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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