TMI Blog2015 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... d the addition made under section 68 of the Act. - Decided against revenue. Violation of Rule 46A of the Income Tax Rules, 1962 - Held that:- No new evidence was adduced before the Ld. CIT(A). He only took note of the already existing documents in the public domain. i.e. the remand report of the AO in a sister concern’s case of assessee wherein, the AO candidly accepts the identity, creditworthiness and genuineness of the share holders company (M/s Caplin For AY 2006-07 i.e. in the same assessment year under consideration). Therefore, question of admission of additional evidence does not arise. The Ld. CIT(A) while discharging his appellate jurisdiction can take judicial notice of these documents and found the contention of the assessee was right and so there is nothing illegal or perverse in it and so there is no violation of Rule 46A. Moreover, the learned DR could not point out any additional evidence which has been adduced before the ld. CIT(A) for the first time to invoke Rule 46A. Hence, the contention raised by the Department regarding violation of Rule 46A, has no merits, therefore, we reject the ground - Decided against revenue. - ITA No. 2290/Del/2013,C.O. No.140/Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d both in law and on facts in confirming the action and procedure followed by the AO during the proceeding u/s. 153A of the I.T. Act, which is invalid in eyes of law being based on incorrect postulate that search assessment u/s. 153A is denovo in nature whereas the same is to be based and confined to incriminating material unearthed during search operations. 4. The facts in brief are that the original return in this case was filed on 15.11.2006 declaring net taxable income ₹ 2,24,430/-. The return was processed u/s. 143(1) of the Act. Subsequently, a search and seizure operation was carried out against the unity group of companies (Unity Group) and individuals on 20.8.2009, and the assessee company was also covered in the said search u/s. 132 of the Act. After the search, proceedings u/s. 153A of the Act were initiated and notice u/s. 153A of the Act dated 25.5.2010 was issued to the assessee requiring it to file the return of income. In response thereto, the assessee filed return of income on 11.6.2010 declaring a net taxable income of ₹ 2,24,430/-. In this case regular proceedings were initiated and notice u/s. 143(2) and 142(1) of the Act, along with the questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal 7. Ld. DR relied upon the order of the AO and reiterated the contention raised in the grounds of appeal raised by the Revenue. 8. On the contrary, Ld. AR of the assessee has relied upon the order of the Ld. CIT(A) and defended that the same and does not want us to interfere in the impugned order. 9. We have heard both the parties and perused the records available on record. With regard to ground no. 1 relating to addition of ₹ 2,20,00,000/- made by the AO u/s 68 of the Act, raised in Revenue s Appeal is concerned, we find that in the year under consideration the assessee had received share application/share capital from 20 entities. After the search proceeding on the assessee's group was over, during the 153A proceedings, we find that the AO summoned those investors who had subscribed to share capital of the assessee company invoking his powers under section 133(6)/131 to 12 investors. Out of which, the 9 entities responded and AO was satisfied with their identity, creditworthiness and genuineness of the transactions with the assessee by them and there is no dispute with regard to those 9 companies. However, in respect of 3 entities namely M/s Caplin Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted balance sheet but also its bank statement and other documents vide letters dated 30.11.2011 and 29.12.2011 {refer P.B. Page No 89 to 108} therefore the allegation of the AO is patently wrong and against the material on record. In fact we find that M/s Caplin Commercial Pvt Ltd. has also furnished the details directly to AO on 29.11.2011 (PB Page 81) and the receipt of the same acknowledged by the AO on 14.12.2011 (Para 3 of AO, and at Page 28 of CIT(A)) along with a copy of the same to the assessee. 9.3 We take note that during the course of the reassessment, proceedings u/s. 153A, the assessee filed the following documents vide its letters dated 29.12.2011 (Page 89 90 of PB) to prove the identity and creditworthiness and genuineness of the transaction in respect of M/s Caplin Commercial Pvt. Ltd.:- M/s Caplin Commercial Pvt Ltd. (PB Page No. 92 to 128) - Share Application Forms (PB- Page 92-94) - Copy of Confirmations {3 Nos} (PB- Page 96-98) - Copy of ITR for the A.Y. 2004-05 (PB page 103) - Copy of letter dated 29.12.2011 in which Assessee informed the AO that name and Address of Mls Caplin Commercial Pvt Ltd has changed alongwith follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131/133(6) Present address of the assessee furnished to AO from ROC Documents to prove identity. M/s Caplin Commercial Pvt. Ltd, 863, Marshal House, 33/1 NS Road, Kolkata-700001 M/s Samvijay Power and allied Industries Ltd., 3A, Hare Street, Ashoka House, 5th floor, Room No. 505, Kolkata 700001. Certificate of Incorporation issued by the NCT of Delhi Haryana. Company Master data obtained from the official website of Ministry of Corporate Affairs. Certificate of change in the name issued by ROC Copy of letter dated 26.12.2011 of Caplin Commercial Pvt. Ltd. address to the appellant. 9.7 It was brought to the knowledge of the AO by M/s Capline Commercial by letter dated 26.12.2011 the change in address (PB page 91). Further, a purpose of the aforesaid document will reveal that from the aforesaid documents, it is evident that M/s Caplin Commercial Pvt. Ltd. was incorporated with Registrar of Companies, Kolkata on 22.2.1995 having company identification Number (CIN) U4012WB1995PLC068579. Name of the company has changed from M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 156 Cr, which is sufficient to pay ₹ 2 Cr to subscribe the shares of the assessee company. We take note that in the audited balance sheet of M/s Capiin Commercial Pvt Ltd. Investment in the shares of assessee company as well as in other group companies of the assessee has been described and elaborated. On perusal of the schedule A of the aforesaid audited balance sheet, it is seen that M/s Caplin Commercial Pvt Ltd. has made the investment of ₹ 200 lac in the share capital of appellant company. Relevant extracts of the aforesaid schedule 'A' of the aforesaid audited balance sheet are reproduced hereunder:- Caplin Commercial Pvt Ltd. -Detail of Investment for the year ended 31.03.2006 Schedule-A Equity Shares(At Cost) As at 31.03.2006 Qty. Value Qty. As at 31.03.2005 Value Aggarwal Entertainment Pvt. Ltd. (Pending Allotment) ₹ 2,00,00,000/- Nil M/s Raf Stee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Companies Act 1956, scrutinized and certified by the statutory auditors, approved by the company in its annual general meeting and filed before the Registrar of the companies who has a statutory obligation to examine 'and satisfy himself that the account of the companies are maintained in accordance with the requirements of Companies Act 1956, cannot be lightly discarded by AO as observed by the Hon ble Supreme Court of India in Apollo Tyres Ltd Vs ClT (SC) 174 ITR 521. 9.9 In order to prove the genuineness of the transactions. We take note that the transaction entered by the assessee with said entities were through proper banking channel. The assessee company has filed the following document to prove the genuineness of the transaction a. Share Application Forms. b. Confirmation from the Share Subscriber entities. 9.10 On the strength of the aforesaid evidences / documents filed before the AO, the assessee contended that the identity, creditworthiness and genuineness of transactions were proved and that the assessee has discharged its onus u/s 68 of Act and pleaded before the Ld. CIT(A) that the addition made by discarding the aforesaid evidence nee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal of the assessee and deleted ₹ 2 crores. 9.14 Coming to the other 2 entities namely M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd, the Ld. CIT(A) take note that the AO in his assessment order has observed that no enquiries could be done because notices sent to them were not complied with. However, the Ld. CIT(A) took note of the fact that the AO acknowledges in para 5.4(i) of the assessment order that confirmations in respect of M/s Raf Steel Pvt. Ltd. and ITR of A.Y. 2005-06 copy was received by him, and in para 5.4 (iii) also the AO has stated that M/s Universal Electrique Motors Pvt. Ltd. has also filed confirmations and filed ITR for AY 2005-06 before him. It was noticed by the Ld. CIT(A) that during the search proceedings no incriminating documents/evidences have been unearthed which indicated or pointed to the effect that the shareholders namely these two companies M/s Raf Steel Pvt Ltd and M/s Universal Electrique Motors Pvt Ltd are dummy entities or engaged in accommodation entry business or their creditworthiness is doubtful or transaction with them is not a genuine. 9.15 The Ld. CIT(A) has also taken note that in the original assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he new addresses collected from the banks where the assessee has accounts or in the alternate could have found their existence from Ministry of Corporate Affair's website. 9.17 Ld. CIT(A) further observes that the AO in his reassessment order u/s. 153A has not brought any material on record to show that the confirmation filed by the investor company was not genuine. Ld. CIT(A), rightly notes that just because the notice sent under Section 131, was uncomplied with, cannot be the only ground for drawing adverse inference without appreciating the other documents viz. ITR, Balance Sheet etc. which were before him. The Ld. CIT(A) has further taken note of an important fact, that is the shares under question has been sold by these companies in the year 2008, and these companies no longer holds any share of the assessee company. So the Ld. CIT(A) is correct in observing that it is difficult to keep a track of all the shareholders to whom all the shares have been issued which they have in turn sold later. So in such a scenario, to know the addresses of all the share holders and their last address in case of changes to it is very difficult. Ld. CIT(A) has rightly noted that if due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de, then the onus of proof would shift to the Revenue. Just because the creditors / share applicants could not be found at the address given, it would not give the Revenue the right to invoke Section 68.One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the source of source (unquote) 9.21 Ld. CIT(A) has taken note of the judgment of the Apex Court in the case of CIT Vs. Lovely Export 299 ITR 268 (SC) which has confirmed the order of the Delhi High Court. It has been held by the Hon'ble Court that once the identity of the share holders have been established, even if there is a case of bogus share capital, it cannot be added in the hands of the company unless any adverse evidence is not on record. In the instant case, the assessee has provided evidence in the form of PAN, ROC details, copy of IT return filed and copy of confirmation and affidavit to establish the genuineness of the transaction. 9.22 Ld. CIT(A) has noted that the AO has not brought any material on record to show that the information filed by the assessee is not genuine. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed income because there was no material in the hands of the AO which was collected during the search/enquiry conducted by him. Therefore, Ld. CIT(A), has rightly deleted the addition of ₹ 2,20,00,000 made under section 68 of the Act. 9.26 We take note that in the case of CIT vs. Gangeshwari Metal P.Ltd. in ITA no. 597/2012 judgement dated 21.1.2013, the Hon'ble High Court after considering the decisions in the case of Nova Promoters and Finlease Pvt. Ltd. 342 ITR 169 and judgement in the case of CIT Vs. Lovely Exports (supra) held as follows:- As can be seen from the above extract, two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck of enquiry on the part of the A.O. as in the case of Ganjeshwari Metals (supra). In the case of Finlease Pvt Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgment dt. 22.11.2012 at para 6 to 8/ it was held as follows. 6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee has filed documents including certified copies issued by the ROC in relation to the share application affidavits of the directors, form 2 filed with the ROC by such applicants confirmations by the applicant for company's shares, certificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahesh Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the department in public domain, in which M/s Caplin Commercial P Ltd. has given ₹ 1.50 crore to M/s Basant Project. In that Remand Report dated 14.12.2012 filed by the AO during the appellate proceedings of Basant Projects Ltd. (A.Y. 2006-07), the AO has admitted the identity and creditworthiness and genuineness of the transaction with M/s Caplin Commercial P Ltd. and also admitted that the requisite documents has been filed by the M/s Caplin Commercial Pvt. Ltd. and from the examination of the document the identity, creditworthiness and genuineness of transaction with M/s Caplin Commercial P Ltd. stands established. In view of the above, facts we find that no new evidence was adduced before the Ld. CIT(A). He only took note of the already existing documents in the public domain. i.e. the remand report of the AO in a sister concern s case of assessee wherein, the AO candidly accepts the identity, creditworthiness and genuineness of the share holders company (M/s Caplin For AY 2006-07 i.e. in the same assessment year under consideration). Therefore, question of admission of additional evidence does not arise. The Ld. CIT(A) while discharging his appellate jurisdiction can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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