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TMI Blog2024 (12) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... ence 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 DMGFI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions 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. - Shri M. Balaganesh, Accountant Member And Shri Anubhav Sharma, Judicial Member For the Assessee : Shri Ajay Wadhwa, Advocate And Ms Ragini Handa, Advocate For the Revenue : Shri Debesh Panda, Special Counsel, Shri Udbhav Gady, Advocate, Shri Ruchir Joshi, Advocate And Shri Vas Dev Verma, Advocate ORDER PER ANUBHAV SHARMA, JM: This appeal is preferred by the Revenue against the order dated 13.09.2023 of the Commissioner of Income Tax (Appeals)-28, New Delhi (hereinafter referred to as Ld. First Appellate Authority or in short Ld. FAA ) in Appeal No.26/10108/2010-11 arising out of the appeal before it against the order dated 30.09.2021 passed u/s 153A/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) by the Asstt. Commissioner of Income Tax, Central Circle 15, Delhi (hereinafter referred to as the Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 investor companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 companies is petty, nominal and almost negligib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vate 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 public listed companies instead and earn dividends? Why an investor woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscussed 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) without any due diligence. No security existed for them for their investments and the same were not freely tradable also. Further, creditworthiness of investors is not proved since the source of funds with these p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd 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. 3,82,00,000/- made by AO on account of share capital and share premium received from 05 investor companies. 2) Whether on the facts circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition without appreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss 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 the course of a search conducted from 02.01.2020 to 08.01.2020, marked as Annexure A-29 of the seized material, were found to be incriminating by the Ld. AO. The assessee having failed to satisfy the Ld. AO in terms of Section 68 of the Income Tax Act, 1961 as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized 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 found have to be considered from point of view of a shareholder who has sold the shares of the company and the records which the company required to maintain in relating to the said sale 7. This finding is also based entirely on conjectures and surmises. Not only this, various other findings in the impugned order have also been returned on conjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or purposes of Section 68 stands on a different footing vis- -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 very clearly discernible from the assessment order, inasmuch as: a. At page 20 of his order, the Ld. AO points out that while the assessee had at all times contemporaneously held out that it had received a genuine investment from five investor companies, the seized documents give rise to a belief that this is not at all genuine share application money, but money received from entry operators. The Ld. AO specifically points to bank statements seized d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led 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 without any cogent material. This is plainly impermissible as per the law declared by Hon ble Supreme Court in DhirajlalGirdharlal v. CIT, (1954) 26 ITR 736. 16. During the course of the hearing, an observation fell from this Hon ble Tribunal that the Revenue s criticism of the impugned order of the Ld. CIT (A) equally well applies to the order of the Ld. AO as well. With utmost respect, it is submitted that the belief created in the mind of the Ld. AO from the seized documents is discer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decide if it has a nexus to the addition sought to be sustained, and the relevance to the belief that income has escaped assessment, in terms of the law laid down in CIT v. Manohar Glass Works, (1998) 232 ITR 302 and Smt. Thakuri Devi v. CWT, (1983) 139 ITR 271. 21. The Revenue is also fortified by principles laid down by a Full Bench of the Hon ble High Court of Bombay in Ahmedabad Electricity Co. Ltd. v. CIT, (1993) 199 ITR 351, which has been subscribed to by this Hon ble Tribunal in Shahid Atiq(sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate 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 any undisclosed income. There is nothing unusual about these documents found with the company. In fact, these are statutory records which the company is obliged to maintain, particularly, when a share transfer place in the name of the investor, and thereafter from the investors to another person 24. The cross references of these documents from Annexure A-29, are as under: Application forms: a) Ladliji Pg. 22 of Paper Book (Seized Material) Vol-I filed by the AR b) Madhav Fincap Pg. 75-76of Paper Book (Seized Material) Vol-I filed by the AR c) Top-Tech Cables Pg. 4 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 companies as held the Ld. CIT (A). The attention of this Hon ble Tribunal was invited at the hearing to the fact that details of transfer of the subject shares from investor companies were sought by the Revenue in the course of the assessment proceedings for A.Y. 2011-12, but were neither furnished by the assessee, nor by the so-called investor companies. Details were again sought by the Revenue during the course of the assessment proceedings for AY 2016-17, under Section 153A. Yet again, there was complete silence as is a matter of record (See assessment order dated 30.09.2021 for A.Y. 2016-17 at Pg. 60-69 of Paper book Vol-II filed by the Department). A fortiori, the seized signed share transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 executed on the very same day. It was specifically urged that this Hon ble Tribunal may, if it considers it appropriate to do so, direct a forensic analysis into the entire bunch of documents, since that would leave no doubt that the paper on which all these documents are signed is of the same age and provenance, and even from the ink with which signatures have been affixed, it is clear that the same person signed each one of these documents in one go, on the same day at the same time. This is a complete response to the submission urged by the Ld. AR for the assessee, that the documents being undated, could very well have actually been given in AY 2016-17, making the Ld. CIT (A) s finding factually plausible. c. Thirdly, the very premise on which the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. 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 unusual in the seized documents flies in the face of settled law that beneficial interest in these shares stood duly transferred to the ultimate beneficiary by the investor companies, as borne out from their contents. The Ld. AO in the assessment order, had clearly held that this is something no prudent investor would do, but an accommodation entry provider would certainly do so at the behest of the ultimate beneficiary. The Ld. CIT (A) fails to appreciate that even though the register of the company may later have been rectified pursuant to allotment, still: i. As per E.D. Sassoon Co. Ltd. v. Patch, (1943) 45 Bom LR 46, in a situation such as the one at hand, the transferor holds shares for the benefit of the transferee to the extent necessary to satisfy its demands and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ji). 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 final sale proceeds of those shares, is incriminating as no genuine investor would issue such a document, but an entry provider would. This confirmation of receipt has to be appreciated with the Delivery Note (See p. 40of Paper Book (Seized Material) Vol-I) which no bona fide investor would issue, not knowing whether at all if he would ever be retransferring the shares, and if so, when, and at what consideration. An entry provider would however give a blank but signed form, with a seal, at the time of providing the share application money itself, as held by the Ld. AO. Leave aside the fact that no explanation is forthcoming as to why a blank but signed Receipt and Delivery Note belonging to the investor company was found in the premises of the assessee, such blank documents most certainly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cial 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 representative/director of the investor companies was found at its premises. This fact has to be appreciated with the seized share transfer forms as it clearly gives rise to a belief that right from the time of transfer of share application money, a beneficial interest had simultaneously been created in favour of the ultimate beneficiary, which an entry operator would have no reservations in creating, as was held by the Ld. AO. g. Seventhly, it is submitted that there is no statutory provision requiring an assessee to maintain the following documents that were seized, and neither the Ld. CIT (A) has identified any such provision, nor could the Ld. AR in the proceedings before this Hon ble Tribunal, identify/demonstrate any provision of law that requires any assessee to maintain with itself the following documents (as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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) Vol-II filed by the AR c) Pine View Investments Pg. 61, 144 of Paper Book (Seized Material) Vol-II filed by the AR d) Arrow Equity Pg. 157 of Paper Book (Seized Material) Vol-II filed by the AR Power of Attorney: a) Ladliji Pg. 36-38 of Paper Book (Seized Material) Vol-I filed by the AR b) Top-Tech Cables Pg. 9-11of Paper Book (Seized Material) Vol-II filed by the AR c) Pine View Investments Pg. 63-66, 146-148of Paper Book (Seized Material) Vol-II filed by the AR d) Arrow Equity Pg. 159-161 of Paper Book (Seized Material) Vol-II filed by the AR Abstract of Resolution: a) Ladliji Pg. 24 of Paper Book (Seized Material) Vol-I filed by the AR b) Madhav Fincap Pg. 78 of Paper Book (Seized Material) Vol-I filed by the AR c) Top-Tech Cables Pg. 6, 12of Paper Book (Seized Material) Vol-II filed by the AR d) Pine View Investments Pg. 60, 67, 143, 149of Paper Book (Seized Material) Vol-II filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled 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 person or persons or Corporation whether on sale or otherwise which cannot be unilaterally revoked, and thus does confirm the transfer of beneficial interest and securing of the interest of the beneficiary as explained above. This is to be appreciated in view of the fact that the assessee has failed to explain as to why the blank but signed power of attorney was unearthed in the premises of the assessee, when a board resolution was already passed by the investor companies authorizing the director to make the purported investment in Spiral E-Systems Pvt. Ltd. The Ld. CIT(A) does not even address himself to the other seized documents based on which the Ld. AO had returned a finding that they incriminated the assessee 29. Annexure A-29 contains documents outside the various classes of documents in respect of which findings as extracted above, have been rendered by the Ld. CIT (A) in the impugned order. The impugned order is silent as to the certificate issued by the so-cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestor 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(6), the true test of identify as held by the Hon ble High Court of Delhi in CIT v. NR Portfolio, [2014] 42 taxmann.com 339, is the real and actual business undertaken. It is submitted that till date, no material has been brought on record as to what was the real business undertaken by the so called five investor companies. Even if money was received through banking channels, it could not be taken to reflect any genuine business activity, as nothing has been brought on record to satisfy this Hon ble Tribunal as to the own profit making apparatus of the so called five investor companies and thus, it is nothing more than rotation of money through bank accounts. 32. For the sake of completeness, the tabular analysis of the contents of seized documents by the Revenue during the course of the hearing, is reiterated under Appendix B. In re: The Revenue cannot be worse off in proceedings under Section 153A 33. Submissions were made by the Ld. AR for the assessee, contradicting the judgements that had be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish on the basis of matters especially within his knowledge, the aspects of identity, genuineness and creditworthiness. 38. In appreciating the phraseology employed in Section 153A, due regard must also be had to the background/mischief for which purpose it was enacted. Till 1995, in respect of income that had escaped assessment, the one machinery provision was of Section 148. When the mechanism of block assessments in terms of Section 158BB was introduced, Section 148 was however retained. Section 153A which succeeded this framework, envisaged that the two streams of assessment get merged into one, and yet at the same time, it was mandated that the assessment or reassessment had to be of the total income. Section 148 continued to be retained, in parallel. Parliament thus made it clear that it had created two machinery provisions, both of which were relatable to total income. The dividing line between the two machineries is the non-obstante clause employed in Section 153A. 39. In other words, the object and purpose of Section 153A is to ensure that the Revenue does not have to go through the rigours of having to meet the preconditions under Section 148, while proceeding ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21 but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s being assumed on the basis of the incriminating documents under Annexure A-29 alone, to restrict the ability of the Revenue to rely on the pen drive material before the Ld. CIT (A), if it succeeds in this appeal, would tantamount to rewriting Section 153A by unnecessarily whittling down its ambit to make it coextensive with Section 158BB, contrary to the intention of Parliament. 47. It is borne out from the said extracts from the pen drive (belonging to Mr. Sushen Mohan Gupta) received by the Revenue from the Enforcement Directorate, that there is an excel sheet titled Inter company Balances 31Mar16Yogendra.xlsx (Pg. 170-180 of Paper book Vol-II filed by the Department). The pen drive extracts in respect of the share application money received by Spiral, recorded in that excel sheet, speak for themselves and ought to be considered by the Ld. CIT (A) in the event the Revenue succeeds in the instant appeal. 48. Without prejudice to the above, the pen drive extracts are corroborative of seized material under Annexure A-29, and are relevant/relatable to the addition sought to be made, it can be considered, in terms of the principle laid down in Sanjay Kaul v. PCIT, Delhi-8, New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for that we have carefully gone through the material before us and the submissions of learned representatives of both the sides. To be fair to the Shri. Debesh Panda, Ld. Spl. Counsel for the department, we have reproduced his written submissions, in totality. We find that the learned Spl. counsel for the Department has made strenuous efforts to defend the order of ld. AO and to point out the shortcomings in the order of ld. CIT(A), however, when the ld. Spl. Counsel for the Department was requested to explain as to how the disputed documents fall into that category of incriminating material , he was not able to, point out from the contents of the disputed documents itself, as to if there was anything in the form of any absolute admission against the interest of the assessee, that any of the investor companies or anyone operating these companies had received any funds, by any means, from the assessee company or anyone operating the assessee company. He was unable to cite from the disputed documents that there was any evidence emanating from the documents themselves which show that cash was given by the assessee company or anyone operating the assessee company in lieu of the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 153A of the Act, when the fact in issue, is established by the direct evidence from some of the content of the document itself. If it is a question of establishing the fact in issue by circumstantial evidence then the same can be only when the complete chain of events are independently established by direct evidence. Incriminating material for the purpose of 153A of the Act, has to be distinguished from inculpating material or any material that may implicate the assessee . Implicating circumstances surrounding a document are not sufficient to label it as incriminating material . The latter two material, inculpating or implicating, may be dependent or outcome of inferences drawn from the content of the document, surrounding circumstance or the existence of the document and may be relevant for forming a belief of escapement of income or for discrediting any claim of the assessee with regard to any income or expenses during any other form of assessment or reassessment, except where the assessment is supposed to be on the basis of incriminating material found during search. 14. In that case by drawing inferences or any process of reasoning, preponderance of probabilities or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upta recorded under section 132(4), but without actually bringing on record of assessment order as to what was incriminating against the assessee company. The relevant part is reproduced from Page No. 3 and 4 of the assessment order as follows; Thus, the shareholders/share capital subscribers of M/s Spiral E-Systems Private Limited being same as that of M/s American Hotels and Restaurants Pvt. Ltd, it is evident that the share application/ share capital subscription received by M/s Spiral E-Systems Private Limited from these very/same share capital applicants/subscribers bears the same color and nature as that of the share capital subscription received by American Hotels and Restaurants Pvt. Ltd. from these very/same share capital subscribers. During the course of search proceedings, the documents found and seized as Annexure A-29 (i.e. pertaining to share capital subscription in M/s Spiral E-Systems Private Limited), were also confronted to Sh. Sushen Mohan Gupta, who in his statement recorded on oath (as aforesaid) on 04.01.2020 had stated that his brother Sh. Sushant Mohan Gupta is aware about these transactions. 18.1 Regarding allegation of common share subscribers, Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is lack of prudence), answerless. As per para 4(b) of the above submissions, the assessee has contended that the documents seized as annexure A-29 contains the confirmations from the shareholders and therefore, the assessee need not give any further confirmations in the matter since all these copies, share capital documents, receipts etc are seized. In this regard, while there is no denial to the fact that the seized annexure A-29 contains the purported documents as aforesaid, yet the fact that neither the assessee could adduce these documents afresh, nor any of the purported share applicant furnished any details wrt notices issued under Section 133(6) of the Act itself proves that these documents were merely a smoke screen and there was a pre-arranged agreement/understanding under which these documents were provided to the assessee company at the time of Availment/receipt of bogus capital. Clearly, neither primary onus has been discharged, nor the assessee could ensure compliance of notices under Section 133(6) of the Act from these so called share applicants despite being specifically asked to do so. Lastly, as per para 4(c) of the above submissions, the assessee has contended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mined the veracity of the investment and then concluded that the seized material is incriminating material. 23. 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. The findings of Ld. AO in that regard on page No. 28 are required to be reproduced below:- The normal rule which governs civil proceedings is that a fact can be said to be established if it is proved by a preponderance of probabilities and not the one relating to beyond reasonable doubt. With respect to the circumstantial evidence and in the matter related to the discharge of onus of proof and the relevance of surrounding circumstances of the case, the relevant observations and findings of Hon'ble Supreme Court in the case of CIT vs. Durga Prasad More [82 ITR 540], are as under: That though an appellant s statement must b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering all the incriminating material seized in this case, in exercise of its jurisdiction under section 254(1) of the Act, as it is the last fact-finding body in the hierarchy of the forums under the Act. It was submitted that the bench should set aside the impugned order and remand the matter to either the ld. CIT(A) or the assessing officer with the direction to evaluate the contents of the seized documents, ascertain their true character, and decide if it has a nexus to the addition sought to be sustained and the relevance to the belief that income has escaped assessment in terms of the law laid down in Manohar Glass works case (supra)and Smt. Thakuri Devi case (supra). 26. We have also considered the proposition of law cited by the ld. Spl counsel that the process of appeal before ITAT is part of integrated process of assessment and, therefore, the powers of Tribunal are co-extensive with the powers of Assessing Officer and that of CIT(A) subject to the limitation that ITAT cannot enhance the assessed income as held in Hukamchand Mills Ltd. v. CIT [1967] 63 ITR 232 (SC). That the Tribunal has also incidental and ancillary powers for doing such acts as are reasonably necess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. However, this argument cannot be sustained for the reason as observed above that the grounds as raised do not question the lack of exercise of coterminous powers of learned 1st appellate authority. Further, in our considered opinion these powers being coterminous and coextensive with that of the Assessing Officer, CIT(A) should come for assistance of an assessee more often than for the revenue, unless it is case of enhancement. At least not in the case like the present, where the assessment order does not show as to if the Ld. AO had even gone through the disputed documents individually, as has been now done by the Ld. Spl. counsel appearing before us. 32. It is pertinent to mention that Section 254 (1) of the Act, restricts the jurisdiction of the Tribunal to the subject matter of the appeal and at the same time there is no doubt that the Tribunal has powers of remanding a case to the lower Appellate Authority or the Assessing Authority as the case may be, requiring him to hold further inquiry and to dispose of the case on the basis of such inquiry, but the jurisdiction of the Tribunal is confined only to the subject matter of the appeal. However, we are also of the considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the complaint the money laundering allegations in terms of placement, layering and integration of proceeds of crime invested in assets to project the same as untainted, were examined in respect to Sushen Gupta only and in the case of American Hotels and Restaurants Pvt. Ltd., the alleged proceeds of crime were found to be invested and there is no reference of Spiral E-Systems Pvt. Ltd. and only Sushen Mohan Gupta, DM South India Hotel and M/s American Hotels and Restaurants are booked as the accused. 33.3 Next, taking into consideration the copy of statement of Shri Sushen Gupta dated 02.01.2020 available at pages 1-6 of the paper book Volume-I filed by the Department, we find that in regard to Annexure A-29 by way of question No.68, Sushen Gupta was questioned about the equity investment of several entities in Spiral E-Systems Pvt. Ltd. for which he had replied that he is not involved in the working of Spiral E-Systems Pvt. Ltd. and Sushant Mohan Gupta, his brother would be able to answer this question. There is nothing on record to suggest that Shri Shushant Mohan Gupta was thereafter questioned for the same. 33.4 We also find that from the copy of satisfaction recorded for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here may be suspicion for having certain documents in the blank form or in pre-mediated arrangement, but in the absence of any material coming forth at the time of seizure showing there was any cash transacted in lieu of share capital receipt, merely on suspicion, an incriminating circumstance could not have been metamorphosed, by the intervention of learned 1st appellate authority. 34.1 We observe that ld. Spl. Counsel in written submissions has mentioned that 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, 1899and could not thus be the statutory record of the assessee or investor companies. Similarly the ld. Spl. Counsel has submitted that 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). We are of considered view the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee which were brushed aside by the assessing officer without any sound reasoning, but on his belief alone. 36. At the same time 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 DMGFI in AY 2016-17. However, the Ld. AO proceeded on the premises that the five shareholders had directly sold the shares to the DMGFI, so it was the money of assessee which was infused as capital receipt through shell companies. In fact, Ld. Spl. counsel appearing for the Department was not able to rebut the fact asserted by Ld. counsel of assessee that the Department has accepted the sale of shares at ₹ 10 each share in the hands of Mr. Shushant Gupta, and no addition is made under section 56 of the Act, to allege that there was bogus share premium at any stage earlier. Admittedly the search is of 02.1.2020, while the investor companies had sold the shares in AY 2014-15. Thus if any blank documents were found, in search in the year 2020, then the Ld. Assessing officer was supposed to establish as to how keeping any of these blank documents would have been part of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X
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