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2023 (10) TMI 1373 - ITAT CHANDIGARHAssessment u/s 153A - Addition u/s 68 - search conducted u/s 132 of the Act in any of the business premises of the assessee company or not? - main grievance of the assessee by way of these grounds is that since there was no search conducted on the assessee company, nor any Panchnama was prepared in its name, the order of assessment, passed u/s 153A of the Act, is bad in law - HELD THAT:- As per this Panchnama the warrant is in the case of M/s Kansal Singla & Associates. The details and ownership of the place of search are M/s Kansal Singla & Associates, SCO 80-81, 4th Floor, Sector 21-C, Chandigarh. It is seen that even at APB—346, which is a copy of the list/inventory of books of account/documents found and seized/impounded, the address has been shown as “SCO 80-81, 4th Floor, Sector 21-C, Chandigarh”. So is also the case at page 347, which is a continuation of the list/inventory. The above apart, in this Panchnama, the assessee company, i.e., M/s Evershine Resorts Private Limited has nowhere been named. However, despite the above discrepancies, it is seen that in the Search Warrant, which has been reproduced hereinabove, the name of the assessee company has been clearly mentioned. This being so, the ld. CIT(A) is correct in observing, that the Warrant of Authorization u/s 132(1) of the Act was issued in the name of the assessee on 16.02.2018. It was in view of this, that the ld. CIT(A) held the AO to be justified in initiating assessment proceedings u/s 153A of the Act, since the assessee was covered under the provisions of Section 132(1). Assessee has not been able to controvert the above factual position, which is patent on record. Therefore, finding no merit therein, Ground Nos. 2 and 3 raised by the assessee before us are rejected. Addition u/s 68 - Identity and credit worthiness of the persons from whom the amounts were received by the assessee and also the genuineness of the transactions - We find that despite the Deviation Note, it was only on the basis of the reiteration of the Appraisal Report by the DDIT on 27.12.2019, that the AO made the addition which has been confirmed by the ld. CIT(A). We find that the assessee is correct in contending that the ld. CIT(A) has erred in upholding the addition of Rs.10 lacs received by the assessee from Bihari Lal Deshraj. Accordingly Ground No.4 is accepted and the addition is deleted. Addition of sum received from M/s Om Prakash & Sons - AO had made the addition of all the credits in the bank account - As per the assessee, these additions were made without considering each credit separately on merits, on the plea that the purpose of utilization of the funds had not been explained by the assessee - HELD THAT:- Evidently, neither of the authorities below found the evidence furnished by the assessee in this regard to be unsatisfactory. Had it been otherwise, an investigation could have been ordered under Sections 133(6) or 131 of the Act. However, this was not done. Moreover, to begin with, the AO, as evident from the Deviation Note, did not intend to make any addition, having been satisfied as to the explanation of the sources and it was only on the directive of the third party that the addition was ordered - no merit in the confirmation of the addition of Rs.40 lacs, received by the assessee from M/s Om Prakash & Sons, the order of the ld. CIT(A) in this regard is reversed and the addition is deleted Addition of sum received from Shri Baldev Singh - AO made addition of the credit entries in the bank without considering each credit separately on merit and on the observation that the purpose and utilization of the funds was not explained by the assessee - HELD THAT:- CIT(A) did not afford any chance to the assessee to produce the complete bank account statement before him, these documents are necessary to decide the controversy regarding the sustainability of the addition sum received by the assessee from Shri Baldev Singh in a just and proper manner. The Department has also not controverted this. Accordingly, considering the said documents, which are allowed to be raised as additional evidence, we find that the addition of Rs.17 lacs has been wrongly confirmed by the ld. CIT(A). Accordingly, this addition is deleted and Ground No.6 is accepted. Loans and advances of M/s Dharma Wires Pvt. Ltd - AO has made addition without considering the merits of the documents furnished before him, just by observing that the purpose and utilization of the funds did not stand explained by the assessee. As to how this was so has not been delineated in the assessment order and the addition has been made simply as a part of the entire credit entries in the bank - CIT(A) also confirmed the addition by just observing, without proving as to how it was so, that the assessee was not able to establish the genuineness and credit worthiness. Here again, the documents furnished by the assessee were not even mentioned in the impugned order, what to talk of deliberating on the merits of each of these documents. AO has made addition without considering the merits of the documents furnished before him, just by observing that the purpose and utilization of the funds did not stand explained by the assessee. As to how this was so has not been delineated in the assessment order and the addition has been made simply as a part of the entire credit entries in the bank, Also seen that no doubt about either the credit worthiness of the lender, or the genuineness of the transaction, is evincible, either from the assessment order, or from the order passed by the ld. CIT(A) and not only this, no doubt with regard thereto stands raised, in as much as no enquiry/investigation was initiated by either of the authorities below. Moreover, it also stands irrefuted that the advance was returned by the assessee company to the lender in the next year, through banking channels. Thus the addition was but as a result of non-application of mind by the AO, rather on the mere dictat of a third party, i.e., the ADIT. Addition u/s 68 - AO, besides observing that the purpose and utilization of the funds was not explained by the assessee, held that the assessee was a shell company, as it does not have any profit earning apparatus and that the books of account were not produced for verification - CIT(A) deleted part addition - HELD THAT:- As observed that the submissions and documents furnished by the assessee during the appellate proceedings had also been forwarded to the AO for remand report; that in the Remand Report also, the AO had not even discussed the documentary evidences furnished by the assessee in support of the bank credits on merits, let alone pointing out any defect in the same. It was observed that in view of these facts and after making independent perusal of the documents furnished by the assessee, it had been noted that the assessment order was non speaking and mechanical in nature and had been passed without discussing the merits of the documents. It was observed that there was no direct or indirect evidence pointed out by the AO before making such addition. It was observed that therefore, after considering the merits of the case and analyzing the credits and the strength of the documentary evidence, it had been observed that there was no justification in such addition made in the hands of the assessee u/s 68 - It was, on these observations that the ld. CIT(A) deemed it appropriate to delete the addition to the extent of Rs.4,05,00,000/-. However, surprisingly, the above detailed discussion with regard to the addition to the extent of Rs.4,05,00,000/- was not found appropriate to be applicable to the remaining addition of Rs.77 lcs also, which addition was confirmed by the ld. CIT(A). This addition of Rs.77 lacs, as discussed in the preceding paragraphs, has been found by us also to be unsustainable. The discussion with regard thereto is not being repeated here. The assessee, to reiterate, has presented ample documentary evidence in support of the credits to the extent of Rs.77 lacs, which have not been considered by the ld. CIT(A). This, in our considered opinion, is unsustainable in law and on facts. Therefore, the addition of Rs. 77 lacs is also deleted. Ground No.8 is accepted. Disallowance of loss - company had failed to produce bills and vouchers of the expenses claimed, due to which, the genuineness of the expenses claimed did not stand proved - HELD THAT:- Seen that as per computation loss of Rs.5000/- has been shown. The same is the position as per the Profit & Loss Account (APB 4). In the notice (APB 20) dated 07.10.2019, at point No.12, the AO had mentioned that the books of account and other documents were seized during the search. The assessee company submitted the books of account before the AO vide letter dated 21.01.2022, as is available at APB 113. The same were also seized in the hard disk, as mentioned in the Panchnama. Therefore, it cannot be said that books of account and other documents were not produced. The issue of the company not being a shell company has been deliberated upon, in extenso, in the preceding paragraphs. However, it has not been disputed that the bills and vouchers of the expenses claimed had not been produced. Therefore, the addition made is hereby sustained. Ground No.9 is rejected. Enhancement of the income of the assessee company by CIT(A) - Addition u/s 251(1)(a) - HELD THAT:- The Explanation to Section 251(1) states, inter-alia, that in disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the appellant. Thus, it is evident that the ld. CIT(A), as per these provisions, has power to revise only those matters which were considered by the AO and which are arising out of the proceedings in which the order appealed against was passed. In the case at hand, the issue of forfeiture of advance amount was nowhere considered by the AO in the assessment order. As such, it was a new source of income which was brought to tax by the ld. CIT(A) by making enhancement of Rs.40 lacs and that too, without any prior notice to the assessee. This, evidently, in our considered opinion, is not countenanced u/s 251(1) of the Act. Therefore, the grievance of the assessee in this regard is justified. Unexplained cash credit - assessee did not establish its genuineness during the assessment proceedings - Assessee company treated as a shell company - As been stated before us on behalf of the assessee, that in reply to RTI applications to the CBDT, Ministry of Corporate Affairs and SEBI, it was admitted that there was no definition of ‘shell company’ in India. Further, apropos the AO’s Remand Report, where the AO referred to compilation of data base on shell companies, claiming three lists, i.e., Confirmed List (16537), Derived List (16739) and Suspect List (80670), ordered by SFIO. The AO claimed that the names of such companies were removed from the Register by the Registrar of Companies. It has been contended on behalf of the assessee, and not rebutted by the Department before us, that the name of the assessee did not figure in any of these lists, as the assessee is an active company and none of the Directors of this company have been barred. Also, the AO had not issued any Show Cause Notice to the assessee as to why the assessee company should not be treated as a shell company. Thus finding no merit whatsoever in the grounds raised by the Department, these grounds are rejected.
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