9911796707
TMI Blog2024 (12) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... since merged with present assessee. Subsequently, on the basis of search and seizure operations conducted on 2nd January, 2020 in M/s Sushen Mohan Gupta and other group of cases at different business and residential premises of the group, the case of the assessee was also covered and was centralized with DCIT, Central Circle-15, New Delhi. After issuing notice u/s 153A, the assessee had responded by filing the return for the assessment year 2011-12 on 09.09.2021 declaring a loss of Rs. 2,74,57,310/-. Admittedly, during the year under consideration, the assessee was engaged in the business of providing financial and investment services. The case of the Revenue is that during the search conducted in the case of M/s Sushen Mohan Gupta and other group of cases to which the above named assessee company also belongs, incriminating documents in the form of share transfer forms bearing signatures and seals of certain companies were found and seized. Further, the original documents, i.e., application form for equity shares, receipt of shares, confirmation from investor companies, certified true copies of Board Resolutions passed, affidavit for application of shares and for allotment of shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r amount in FY 2013-14. The AO also observed from the list of shareholders of M/s Spiral E-Systems Pvt. Ltd.,the applicants for shares for this company were also shareholders who had subscribed to the share capital of M/s American Hotels and Restaurants Pvt. Ltd., which was another group company of Sushen Mohan Gupta group. The AO relied the statement of Shri Sushen Mohan Gupta that cash was brought into the books of M/s American Hotels and Restaurants Pvt. Ltd through the above transaction of share capital subscription. The documents found and seized referred at Annexure A-29 was also confronted to Shri Sushen Mohan Gupta and he had stated that his brother Sushant Mohan Gupta were aware of these transactions. Then, a similar set of documents was also seized from Narain Manzil premises and these documents were referred as Annexure A-32 and pertained to M/s American Hotels and Restaurants Pvt. Ltd. The ld. AO had drawn an inference that the shareholders/share capital subscribers of M/s Spiral E-Systems Pvt. Ltd., were same as M/s American Hotels and Restaurants Pvt. Ltd., and, thus, concluded that share application/share capital subscription received by M/s Spiral ESystems Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them. Hence, the creditworthiness/capacity remains unexplained and un-corroborated. b. The source of investment made by the investor companies was examined from the bank statements furnished by the assessee company as well as from the incriminating material contained in Annexure A-29 (total 341 pages). The perusal of the corresponding bank statements reveals back-to-back transactions of same amount, i.e. credit and debit of the same amount on the same date(s)/following date(s) with several other deposits and withdrawals. This observation, clubbed with the fact that the sales and income figures of the investor companies are negligible and don't justify such huge fund transfer transactions in their bank accounts, which along with other observations as mentioned above, clearly suggests that these accounts belong to various entry providing companies and the same were utilized to provide accommodation entries to the assessee company (being beneficiary). c. The investor companies were asked to provide the details of due diligence done by them before investing in assessee company. However, no reply/specific reply has been received from these investor companies. It may be noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? * Why these share applicants/ share capital subscribers invested their purported hard money in such manner which did not yield any return to them? * Why investments would be made with no return yielding entities when there are unlimited other return yield/ventures available? * As a prudent investor no one would like to invest the funds without security. * Investments in private limited companies are just like giving funds to a family concern. Why an investor would impart his investment to such entities? * As to how and from where the assessee company contacted the share applicants/ share capital subscribers about whom it does not know anything? * Whether these share applicants/ share capital subscribers knew the Assessee or any of its Directors? * Whether any meetings of the Assessee company were attended by these share applicants/ share capital subscribers? * Whether any negotiations took place between the share applicants/ share capital subscribers and the Directors of the Assessee company on the pricing of the shares? * Whether these share applicants/ share capital subscribers were in receipt of any annual accounts, either through e-mail or through any post f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be adduced on record by the assessee company or by these purported investors. As stated earlier, whether or not onus is discharged depends upon facts of each case. It depends on whether the two parties are related or known to each; the manner or mode by which the parties approached each other, whether the transaction was entered into through written documentation to protect the investment, whether the investor professes and was an angel investor, the quantum of money, creditworthiness of the recipient, the object and purpose for which payment/investment was made, etc. These facts are basically and primarily in knowledge of any assessee and it is difficult for revenue to prove and establish the negative. Certificate of incorporation of company, payment by banking channel etc. cannot in all cases tantamount to satisfactory discharge of onus. The facts of the present case noticed above speak and are obvious. Further even at the cost of repetition, it is noted that during the course of search original blank share transfer deeds/ original blank share transfer forms, original blank power of attorney to sell the shares bought, original blank money receipt, etc were found and sei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating the addition has made on the basis of seized material and seized material consists of incriminating documents in the form of original blank unexecuted share transfer forms bearing signature and seals of Investor companies, original blank power of attorney to shares of share capital subscribers signed by their directors, original blank receipts, original blank delivery note etc. 3) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering and giving the findings in respect of blank share transfer forms, blank delivery notes, blank receipt and blank power of attorney duly signed by the investor companies and found from the premises of assessee company during the course of search, making it clear that the investor companies were just a conduit to bring back unaccounted money in the books of the assessee company in the form of share capital. 4) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the blank share transfer forms, blank delivery notes, blank receipts and blank power of attorney as 'incriminating documents' clearly ignoring the fact that such signed blank docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income Tax Act, 1961 as to identity, genuineness and creditworthiness so far as the share application money received by Spiral E-Systems Pvt. Ltd., during A.Y. 2011-12, from five investor companies, additions were made (It is not in dispute that Spiral E-Systems had been merged with the assessee, by an order dated 20.12.2017, and hence, the addition was required to be made in the hands of the assessee). 2. In appeal, the Ld. CIT (A) did not even examine the contents of the seized documents. The short question he posed to himself was whether they were "...incriminating in nature or were merely statutory records/ documents mandatory under the Companies Act...". Once he confined himself to this question, the answer that followed was there was "nothing unusual" as to the seized documents under Annexure A-29 and they were not incriminating: "...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 takes place in the n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his, various other findings in the impugned order have also been returned on conjectures and surmises. For instance, after having held that the documents under Annexure A-29 are "...statutory records..." that had to be maintained by Spiral E-Systems as its shares were sold, and the said documents are related to the said sale, the Ld. CIT (A) proceeds to also observe that confirmations from investor companies "...had been obtained for the purposes of income tax and other proceedings...". This was not even the case of the Ld. AR for the assessee. 8. In ways more than one, as later detailed in this note, the Ld. CIT (A) proceeds to make out a better case for the assessee that even the Ld. AR had himself urged, and thereafter, relying on judgments of this Hon'ble Tribunal, as well as of the Hon'ble High Court of Delhi, cited by the Ld. AR for the assessee, he concludes that "...in view of the aforesaid, these documents do not constitute documents which are incriminating in nature..." 9. Perversity is writ large in the face of the impugned order given the predetermined manner in which the Ld. CIT(A)has proceeded, overlooking the fact that these very judgements the assessee had itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all genuine share application money, but money received from entry operators. The Ld. AO specifically points to bank statements seized during the search which reveal several back-to-back transactions of the amount(s) invested by the so-called investor companies in the shares of Spiral E-Systems, i.e. credit followed by debit transactions of the same amount on the same date(s)/following date(s), which gave rise to a belief in his mind that the source of investment never emanated from funds belonging to the said investor companies. (In this context, this Hon'ble Tribunal may bear in mind 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). b. At page 33 of his order, the Ld. AO once again observes on the basis of the seized documents that no prudent investor would provide them, but an accommodation entry provider would certainly do so, at the behest of the ultimate beneficiary. c. This observation has to be read with his remark at page 11 of the assessment order that the documents forming part of the seized material demonstrated that they were merely a smoke screen, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplies 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 discernible from the assessment order and the same criticism therefore cannot apply. 17. Be that as it may, if this Hon'ble Tribunal is still inclined to hold that the order of the Ld. AO is non-speaking, it is submitted that even then the instant appeal may not be dismissed. This Hon'ble Tribunal may, instead, consider laying down parameters on which the seized material ought to have been examined by the forums below and remand the matter to the Ld. AO, to enable him to apply these parameters to the seized material, and draw the necessary inferences as there is no dispute that satisfaction was reached on the basis of the seized documents under Annexure A-29. 18. The Revenue relies on the law laid down in Hukumchand Mills Ltd. v. CIT, (1967) 63 ITR 232, applying which the Hon'ble Supreme Court of India in CIT v. Assam Travels Shipping Service, (1993) 199 ITR 1 has held that this Hon'ble Tribunal is empowered under Section 254(1) of the Income Tax Act, 1961 to remand the matter back to the competent authority: "The expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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(supra) as set out below, and submits that the first ground of appeal is broad enough to cover all these aspects and enable this Hon'ble Tribunal to carry out this exercise, in view of the expression "thereon" in Section 254(1). In re: "Unusual" features discernible from the contents of the seized documents 22. At the final hearing, the Revenue had also invited this Hon'ble Tribunal to independently apply its mind to the seized material to form an opinion regarding its contents, to satisfy its conscience that it would be wholly unwarranted to give a clean chit in this appeal to the assessee, turning a blind eye to the contents of the seized material. The "unusual" features discernible from the seized documents under Annexure A-29, which render the findings of fact rendered by the Ld. CIT (A) in the impugned order wholly unsustainable in law are thus set out below. For the sake of convenience, the finding of the Ld. CIT (A) is set out in respect of the class of seized documents to which the finding pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 of Paper Book (Seized Material) Vol-II filed by the AR d) Pine View Investments - Pg. 59 of Paper Book (Seized Material) Vol-II filed by the AR e) Arrow Equity - Pg. 154 of Paper Book (Seized Material) Vol-II filed by the AR Confirmation upon allotment: a) Ladliji - Pg. 25 of Paper Book (Seized Material) Vol-I filed by the AR b) Madhav Fincap-Pg. 79 of Paper Book (Seized Material) Vol-I filed by the AR Share Transfer forms: a) Ladliji - Pg. 20/21, 43/44, 45/46 of Paper Book (Seized Material) Vol-I filed by the AR b) Madhav Fincap-Pg. 73/74 of Paper Book (Seized Material) Vol-I filed by the AR c) Top-Tech Cables - Pg. 2/3 of Paper Book (Seized Material) Vol-II filed by the AR d) Pine View Investments - Pg. 57/58, 68/69, 70/71 of Paper Book (Seized Material) Vol-II filed by the AR e) Arrow Equity - Pg. 152/153 of Paper Book (Seized Material) Vol-II filed by the AR Memorandum and Articles of Association: a) Ladliji - Pg. 50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought 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 forms at p. 20-21 of the Paper Book (Seized Material) Vol-I (including blank share transfer forms signed on behalf of the investor companies @Pg. 43-46 of Paper Book (Seized Material) Vol-I) and similar share transfer forms signed by other so-called investor companies could not have pertained to transfer of shares of Spiral by the so-called investor companies to the sister concern of Spiral, i.e. DMG Finance and Investment Pvt. Ltd., which as the Revenue has demonstrated, is a wholly perverse finding. * Having regard to the fact that transfer of the shares by the so-called investor companies was done only after F.Y. 2014-15, as contemporaneously held out by Spiral publicly, the share transfer forms for effecting the transfer ought to have been as per the provisions of the Companies Act, 2013. The seized share transfer forms being in terms of the Compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned 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 finding of the Ld. CIT(A) rests, i.e. every share application form, by itself, can constitute a part of a statutory record of a company, is perverse, inasmuch as: i. To the extent a document is treated as a statutory record of a company, it ought to be capable of being corroborated from the records of the concerned Registrar of Companies, or other statutory authorities. Documents filed with the jurisdictional Registrar of Companies are usually uploaded on the online portal of the Ministry of Corporate Affairs, and are easily accessible to the public, as well as the Revenue. The Revenue has placed on record all the documents available on the website of the statutory authorities in relation to Spiral in the paper book filed by it, to satisfy this Hon'ble Tribunal as to what all are actually the "statutory documents" and hence, the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mate 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 as the transferee holds the whole beneficial interest and transferor has none, the transferor has to comply with all reasonable directions that a transferee may give. In other words, if he becomes a trustee of dividends, he also becomes a trustee of the right to vote because the right to vote is a right to property annexed to the shares, and as such the beneficiary has a right to control the said exercise by the trustee of the right to vote. This is a proposition of law that squarely applies in the facts of the present case because this is precisely what would happen in a transaction with an entry operator whereas no bona fide investor would want to lose control over its investment by doing this. ii. This proposition of law stands affirmed by the Hon'ble Supreme Court of India in Mathalone vs Bombay Life Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. 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 could not be construed as a 'statutory document' of either the assessee or the investor company. Clearly, blank receipts were collected of the amount that would be recovered when the shares would eventually be sold later on, at the time of the share application money being remitted, when the Share Application form was also issued (at Pg. 22 of Paper Book (Seized Material) Vol-I)). The Revenue additionally also pointed out in response to an observation that fell from the bench that at no stage has the assessee itself made any such submission or even so much as an attempt, to contend that the document was taken from the investor companies for purposes of income tax or other proceedings, which the Ld. CIT (A) has held. This is clearly yet another improvement of its stand. f. Sixthly, the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 illustration, references are made to documents belonging to Ladliji): i. Certificate of investment at Pg. 23 of Paper Book (Seized Material) Vol-I ii. Receipt of shares at Pg. 25 of Paper Book (Seized Material) Vol- I iii. Bank statements of Spiral E-Systems at Pg. 28-30 of Paper Book (Seized Material) Vol-I iv. Affidavit of allotment by the representative of the investor company at Pg. 34 of Paper Book (Seized Material) Vol-I v. Blank but signed Power of Attorney belonging to the investor company at Pg. 36-38 of Paper Book (Seized Material) Vol-I vi. Blank but signed receipt/acknowledgment of sale proceeds for sale of shares by investor company at Pg. 39 of Paper Book (Seized Material) Vol-I vii. Blank but signed Delivery Note for transfer of shares by investor co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per 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 the AR e) Arrow Equity - Pg. 156, 162of Paper Book (Seized Material) Vol-II filed by the AR 28. Comments of the Revenue: a. First and foremost, it is submitted that the Ld. CIT (A) has again made out a better case for the assessee, that what it had itself contended, as borne out from the record. For instance, it was never the own case of the assessee that an affidavit for allotment of shares was obtained from the investor companies for any statutory proceedings. The finding returned by the Ld. CIT (A) is that this was "...kept by the company as a confirmation by the shareholders to be filed for statutory proceedings..." b. Secondly, finding above is more instance of the surmises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed 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-called investor companies [See for instance, the Certificate issued by Ladliji at p. 23 of Paper book (Seized Material) Vol-I filed by the AR.] 30. This documents is incriminating, inasmuch as: a. Even before allotment of shares by Spiral E-Systems Pvt. Ltd., a certificate had been issued by Ladliji confirming that an investment had been made in the shares of Spiral E-Systems. In a genuine transaction, this would have been issued after the allotment was completed, at which point of time, share certificate numbers would also have been filled in. b. No explanation is forthcoming from the assessee as to why a certificate issued by the so-called inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 been cited before the Ld. CIT(A) that the applicable standard cannot be of "suspicion" or "belief", but something far more substantial has to be established by the Revenue from the seized documents, to treat them as incriminating. It is submitted that not only Sunny Infraprojects (supra) but various other judgements cited by the assessee, hold otherwise. 34. The Hon'ble High Court of Delhi in CIT v. RRJ Securities Ltd., (2016) 380 ITR 612, cited by the assessee, has held that "...it is not disputed that the said hard disk also did not contain any incriminating material as the data on the hard disk only supported the return filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 against undisclosed income. In the face of the express language employed by Parliament in Section 153A and Section 148, there is no reason why the Revenue ought to be worse off, in proceedings under Section 153A so far as the threshold, vis-à-vis the threshold prescribed under Section 148, i.e. of belief, given the object and purpose of both provisions. Reading anything more in Section 153A which is not apparent from its plain language is to rewrite the provision altogether, which is impermissible as a matter of law. It would also create an artificial divide between Section 153A an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt 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 the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income... 42. Drawing sustenance from Anil Kumar Bhatia (supra) the Hon'ble High Court of Delhi has gone a step further in Filatex India Ltd. v. CIT, [2014] 49 taxmann.com 465 and held that: "...there is no condition in this Section that the additions should be strictly made on the basis of evidence found during the course of the search or other post search material or information available with the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irectorate, 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, (2020) 427 ITR 63, and in GTC Industries Ltd. v. ACIT, (1998) 65 ITD 380. In re: Identity, genuineness and creditworthiness not proved by assessee 49. The assessee has argued at length, on the merits of the addition made under Section 68. It is submitted that the Ld. CIT (A) has not returned any findings on that aspect and the appeal is confined only to findings returned by him. The Revenue beseeches this Hon'ble Tribunal not to travel into the merits of the addition while passing its order, but to the extent vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 capital receipts. 10. All that was attempted to be canvassed by the Ld. Spl. Counsel for the Department was to draw inferences after inferences, from the existence of these documents themselves and from the fact of having been found at the time of search and that as possibly these disputed documents were prepared contemporaneous to the application for subscribing to the share capital, in a way, that these disputed documents will enable the assessee company or its operators to subsequently deal with the allotte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licating 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 circumstances should first explore how the seized material reflects on total income for the search assessment. Thus, where the seized material is sought to be considered as incriminating material, it has to have in its body some narration or even omission of facts which lead to instant conclusion that there may be a source of undisclosed income of assessee and the incriminating document establishes the same without any necessity of an exercise of drawing inferences beyond the content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 of assessee has submitted that only two share subscribers are common l.e. Madhav Fincap Pvt. Ltd. and M/s Ladliji Enterprises Pvt. Ltd. which subscribed the share capital in M/s Spiral E Systems Pvt. Ltd. as well as American Hotels and Restaurants Pvt. Ltd. Thus, it cannot be said that share capital subscription in Spiral E Systems Pvt. Ltd. bears the same colour as that of American Hotels and Restaurant Pvt. Ltd. 18.2 It can be observed that infact Sh. Sushen Mohan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments 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 that there is no direct evidence of any cash given for share capital subscription. In this regard, I pose a question to myself as to whether a tax evader would ever keep evidence against himself. The fact that under civil law circumstantial evidence is vital alone is sufficient for making an addition. In the present case, even at the cost of repetition, it is stated that shares subscribed at Rs. 382/- per share (out of money received form the tainted shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lete 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 be considered real until it was shown that there were reasons to believe that the appellant was not the real, in a case where the party relied on self-serving recitals in the documents, it was for the party to establish the transfer of those recitals, the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals. Science has not yet invented any instrument to test the reliability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rue 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 necessary in exercise of powers granted by the Act, as held in Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 (SC). 27. On this aspect we are of the considered view that no doubt as a final factfinding body this Tribunal is supposed to thrash the facts but that does not include discretion wide enough to give the Department a fresh lease of life, though for ends of justice the assessee may be. The litigants before this Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cement. 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 considered view that in case of search assessments the subjective satisfaction of the Ld. AO, about the incriminating material, is of vital significance and consequence and in a manner of jurisdictional aspect. Therefore, too, the Ld. CIT(A) could not have introduced his subjective assessment of the disputed documents as incriminating material to improve the case of assessing officer. 33. Even otherwise we are of considered view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the purpose of section 153A of the Act available at page 107-112 of the paper book filed by the Department and, that primarily on the basis of statement of Shri Sushen Gupta, recorded on 04.01.2020 and for the reason that investors of Spiral E-Systems Pvt. Ltd. being common with American Hotels and Restaurants Pvt. Ltd., the seized record forming part of Annexure A-29 was relied. Here, reference to a question No.66 is ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel 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 then how such documents become incriminating. That somehow, only fortifies the findings of ld.CIT(A), as such documents turn out to be a dumb documents, having no legal sanctity on their own. 34.2 Here we find substance in the contention of Ld. Counsel of the assessee that the judicial decisions seems to be more in favour of the assessee to hold that Balance Sheets. Profit & Loss account, ITRs and ROC data and bla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders 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 Rs. 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 transaction initiated in AY 2011-12, of introducing undisclosed income of assessee, by way of capital receipts through alleged shell companies, while these alleged shell companies had sold the shares further to Mr. Sushant Gupta. 36.1 As a matter of fact, the scrutiny assessment of M/s Spiral E-Systems Pvt. Ltd., for AY 2013-14 has been completed u/s 143(3) of the Act on 18.03.2016 wherein income ..... X X X X Extracts X X X X X X X X Extracts X X X X
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