TMI Blog2016 (3) TMI 1125X X X X Extracts X X X X X X X X Extracts X X X X ..... e/2012 & 49/Del/2012 - - - Dated:- 21-3-2016 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER For The Assessee : Shri Ved Jain and Shri A.K. Aggarwal, Advocates. For The Revenue : Shri Sunil Chand Sharma, CIT-DR. ORDER PER G.D. AGRAWAL, VP :- The appeal by the assessee for the assessment year 2004-05 and the appeals by the Revenue for assessment years 2004-05 to 2009-10 are directed against the order of learned CIT(A)-III, New Delhi dated 21st October, 2011. ITA No.44/Del/2012 (Revenue s appeal) and ITA No.14/Del/2012 (Assessee s appeal) for AY 2004-05 :- 2. These cross-appeals are being taken up together for hearing and disposal because they involve some of the common issues. 3. The grounds raised in the Revenue s appeal i.e. ITA No.44/Del/2012 read as under:- 1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of ₹ 7,52,00,000/- made by the Assessing Officer on account of issue of bogus share application money. 2. The order of the ld.CIT(A) is erroneous and is not tenable on facts and in law. 3. The appellant cra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of the Act. 7.(i) On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in confirming the abovesaid disallowance in view of the fact that no incriminating material was found during the course of search. (ii) The disallowance is otherwise untenable as the reassessment proceedings under section 153A are to be restricted to the incriminating material found during the course of search. 8. On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in not appreciating the fact that the various additions made by the A.O. are otherwise untenable as the original assessment has been completed under Section 143(3) and the disallowance has been made in the reassessment proceedings merely on change of opinion without there being any adverse material found during the course of search. 9.(i) On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in not appreciating the fact that the original assessment order passed under Section 143(3) having merged with the order of appellate authorities, the A.O. was not justified in reappraising the same and tinkering with the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings. Therefore, the addition was rightly made by the Assessing Officer u/s 153A. 8. With regard to deletion of addition on merits also, he stated that the onus is upon the assessee to prove the credit in its books of account. To discharge such onus, assessee has to establish the identity of the shareholder, creditworthiness of the shareholder and genuineness of the transaction. From the various details given by the Assessing Officer in respect of the share applicants whose credits have not been accepted, it is evident that they had very meager business income and from such meager income, they cannot invest huge money in the form of share capital with the assessee company. That summons issued to those share applicants were not complied with. The assessee was informed of this position and was requested to produce the director of such share applicant company. The assessee did not produce the director of the said company. On these facts, the Assessing Officer rightly concluded that the assessee did not discharge the onus which lay upon it to prove the credit in the form of share capital. In support of his contention, he relied upon the decision of Hon'ble Delhi Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repared for each of the assessment year which shows the increase in share application money as well as the pattern of share application money in each year. 11. That none of the details mentioned above in paragraph 4 of the assessment order can be said to be incriminating material. The details Del/2012 6 othersfound by the Revenue authorities during the course of search were the documents relating to share application money which were duly disclosed by the assessee in its account. The document was only the group summary of the share application money because in the assessee company, persons from various groups viz. M/s Suncity Group, Essel Group, Action Group and Odeon Group of companies have applied for shares and the Assessing Officer himself, after analyzing all the share application money, has mentioned about the application by these groups of companies who have applied for the shares in the assessee company. That in the assessment order, the Assessing Officer has nowhere mentioned that any incriminating material was found at the time of search. Learned DR also, though argued at the time of hearing that various documents relating to share application money were found and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the total income of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. 16. Having discussed the legal position held by Hon'ble Jurisdictional High Court above, let us examine the facts of the case so as to ascertain whether any incriminating material was unearthed during the course of search or requisition of documents. For the year under consideration, the assessee had filed the return of income on 1st November, 2012 declaring total income of ₹ 3,05,04,140/-. The case was taken up for scrutiny by issuance of notice u/s 143(2). From page 1 to 62, there are the details and evidences produced by the assessee during the original assessment proceedings. Paragraph 3 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , i.e. the assessee company. The said document clarifies that the assessee company is basically controlled by four group of companies, viz., Essel Group, Action Group, Odean Group, Suncity Group and other miscellaneous companies. In our opinion, when the names of all the share applicants along with their addresses were already on record, merely because in a document those share applicants have been classified in some groups, does not mean that such document was an incriminating material indicative of any undisclosed income. For the year under consideration, the Assessing Officer has treated the share application money of M/s Anu Fashions Pvt.Ltd. ₹ 4,02,00,000/-, M/s Churu Trading Co. Pvt.Ltd. ₹ 3,00,00,000/- and M/s Daulat Finvest Pvt.Ltd. ₹ 50,00,000/-. The facts relating to M/s Anu Fashions Pvt.Ltd. are discussed at page 7 paragraph 4.9 of the assessment order. Main reason given by the Assessing Officer for not accepting creditworthiness of M/s Anu Fashions Pvt.Ltd. is the meager income shown by the said company. However, in the details discussed in the assessment order relating to M/s Anu Fashions Pvt.Ltd., there is no mention by the Assessing Officer with reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion that in view of the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), since no incriminating material relating to share capital money was found, the completed assessment for assessment year 2004-05 cannot be interfered with. In view of the above, we are not going into the merit of the argument of both the sides so as to record the finding whether the assessee has discharged the onus of proving the credit in the form of share application money or not but, we uphold the order of learned CIT(A) deleting the addition of ₹ 7,52,00,000/- on the limited ground that in view of the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), the completed assessment cannot be interfered with. With this remark, we dismiss the Revenue s appeal in ITA No.44/Del/2012. 19. The only other ground raised in the assessee s appeal is with regard to the disallowance of ₹ 60,00,000/- made by the Assessing Officer on account of interest on borrowed money. With regard to this ground also, it was stated by the learned counsel that in the assessment u/s 153A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) vide order dated 24th December, 2006 at the taxable income of ₹ 2,08,86,122/-. After the search, in response to notice u/s 153A, the assessee filed the return declaring income of ₹ 2,04,80,490/- i.e. the income declared in the original return. The assessment u/s 153A was completed on 30th December, 2010 at the total income of ₹ 5,87,86,122/- in which the Assessing Officer made the addition of ₹ 3,79,00,000/- in respect of share application money. The same was deleted by the learned CIT(A). Hence, this appeal by the Revenue. 25. At the time of hearing before us, learned DR stated that his arguments mainly remain the same as were advanced in assessment year 2004-05. In addition, he pointed out that for the year under consideration, the Assessing Officer made the addition in respect of share application money received from following two parties :- (i) Churu Trading Co. P.Ltd. : ₹ 2,52,00,000/- (ii) Vandana Laboratories P.Ltd. : ₹ 1,27,00,000/- 26. He stated that the issue of Churu Tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had challenged the deletion of various additions. That those additions were to the tune of ₹ 70,70,000/- by way of first ground, ₹ 56,00,000/- by way of second ground and ₹ 41,50,000/- by way of fifth ground. From a reading of the order of the ITAT, it would be clear that M/s Vandana Laboratories P.Ltd. is a genuine company which is carrying on the business and not an entry provider as alleged by the Assessing Officer in the assessment order. 28. We have carefully considered the submissions of both the sides and have perused the material placed before us. We have already discussed at length the scope of assessment u/s 153A specially when the original assessment was already completed u/s 143(3) while deciding the Revenue s appeal for assessment year 2004-05. In the light of the above legal position as already discussed by us, let us examine whether in respect of M/s Vandana Laboratories P.Ltd., it can be said that the Revenue has found any incriminating material in the course of search. Admittedly, no incriminating material relating to M/s Vandana Laboratories P.Ltd. was found at the time of search of the assessee s premises. The details mentioned by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the names of these companies. A comprehensive list of such companies from whom accommodation entries were obtained was provided by ADIT(Inv) during search and relevant portion of the list is given hereunder: S.No. Name and Address of the company/firm Name of directors Bank A/c details Bank A/c No. 67. Vandana Goyal Family Trust; 13/34, WEA, Arya Samaj Road, Karol Bagh Trustees : 1. Tarun Goyal 2. Vandana Goyal 1. Axis Bank, Karol Bagh 223010100074777 68. Vandana Laboratories Pvt.Ltd.; 13/34, WEA, Arya Samaj Road, Karol Bagh 1. Rajesh Prasad 2. Jitender Kumar 1. ABN Amro Bank, B.K. Road 2. Standard Chartered 751481 52205031591 69. Venus Insec Pvt.Ltd.; 13/34, WEA, Arya Samaj Road, Karol Bagh 1. Ritu Saxena 2. Pramod Kumar 1. Kotak Mahindra Bank, K.G. Marg 172200002779 From the above, it is also evident that a number of paper companies ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Laboratories P.Ltd. from whom the assessee had claimed to have received the share application money. However, the Assessing Officer has not mentioned whether the statement of director of M/s Vandana Laboratories P.Ltd. was recorded and if it was recorded, whether any enquiry was made with regard to share application money given by them to M/s Suncity Projects Pvt.Ltd. i.e., the assessee. The alleged report of ADIT, Investigation in the case of Best group of cases has not been produced on record. The statement, if any, of the director of M/s Vandana Laboratories P.Ltd., has also not been produced on record. Therefore, in our opinion, the details mentioned by the Assessing Officer in the assessment order are completely vague and on the basis of above, an opinion cannot be formed that M/s Vandana Laboratories P.Ltd. is providing accommodation entries. Moreover, during the course of assessment proceedings, the Assessing Officer issued summons to M/s Vandana Laboratories P.Ltd. which was duly responded by the said company. Therefore, if Assessing Officer had any doubt that M/s Vandana Laboratories P.Ltd. is entry provider, he could have verified the same from the said company. 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction between them and M/s Vertex Drugs in the year 1997-98. Thus, M/s Vandana Laboratories P.Ltd. is in the business at least from the year 1997-98. The appeal by the ITAT is decided on 19th February, 2010. Thus, the existence of M/s Vandana Laboratories P.Ltd. and carrying on of the business by it is proved beyond doubt. The allegations made by the Assessing Officer in the assessment order are not supported with any evidence, at least no evidence is confronted to the assessee or brought on record before us. In view of the above, we are of the opinion that even in respect of share application money from M/s Vandana Laboratories P.Ltd., the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable because no incriminating material relating to share application money from M/s Vandana Laboratories P.Ltd. was found during the course of search of the assessee s premises or during the course of post-search investigation in the case of the assessee. 33. Since, in our opinion, the addition of share application money amounting to ₹ 3,79,00,000/- is out of the purview of addition u/s 153A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 3,25,00,000/- made by the Assessing Officer on account of issue of bogus share application money. 39. The facts of the case are that for the year under consideration, the assessee filed the original return of income on 6th November, 2007 declaring net taxable income of ₹ 19,58,85,803/-. The same was accepted u/s 143(1). After the search, notice u/s 153A was issued, in response to which, the assessee filed the return of income on 9th March, 2010 declaring the same income i.e., ₹ 19,58,85,803/-. Assessment u/s 153A read with Section 14393) was completed by making the addition of ₹ 3,25,00,000/- in respect of share application money received from the following two parties:- (i) M/s Dauphin Cables (P) Ltd. : ₹ 3,00,00,000/- (ii) M/s Disha Impex (P) Ltd. : ₹ 25,00,000/- 40. Learned CIT(A) had deleted the addition. Hence, this appeal by the Revenue. 41. At the time of hearing before us, both the parties relied upon their arguments advanced while arguing the Revenue s appeal for assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn and balance sheets of Dauphin Cables Pvt.Ltd. for the year 31.03.2003 31.03.2004 are enclosed. It is submitted for the sake of argument that even if the assessee company will offer the above amount of share capital as its income, still no tax shall be payable by the company. This will be clear from the following : Asstt. Year Business Loss as per return Share Capital Net Loss 2003-04 30,52,451 2,30,000 28,22,451 2004-05 29,00,807 26,00,000 3,00,807 59,53,258 28,30,000 31,23,258 43. The above facts mentioned by the Assessing Officer cannot be said to be incriminating material found as a result of post-search enquiry in the case of the assessee because the above investigation is related to the share application money in the hands of Dauphin Cables (P) Ltd. In fact, the surrender of the share application money by Dauphin Cables (P) Ltd. in its hands only proves the genuineness of Dauphin Cables ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, this appeal by the Revenue. 48. At the time of hearing before us, both the parties fairly agreed that for the year under consideration, return of income was filed after the search and, therefore, examination of genuineness of share application money was well within the powers of the Assessing Officer while making the assessment u/s 153A and therefore, whether the assessee has discharged the onus to prove the credit in the form of share application money is to be examined on merits. Learned DR stated that the company has received huge amount of share application money from Churu Trading Co. P.Ltd. year after year beginning from assessment year 2004-05. In this year alone, the assessee has received huge sum of ₹ 10,50,00,000/- and the total sum received in all the six years under consideration is about ₹ 20,00,00,000/- from one party alone i.e., Churu Trading Co. P.Ltd. The Assessing Officer has issued notice u/s 133(6) to Churu Trading Co. P.Ltd. requiring it to furnish copies of income tax return, balance sheet, bank account etc. In response to the notice, the said company has neither furnished the documents nor gave any reply. Thereafter, the Assessing Officer as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention, the learned counsel relied upon the following decisions:- (i) CIT Vs. Rakam Money Matters Pvt.Ltd. ITA No.778 of 2015 dated 13.10.2015 (Delhi). (ii) CIT Vs. Vrindavan Farms (P) Limited ITA No.71/Del/2015 (Delhi). (iii) CIT Vs. Fair Finvest Ltd. [2013] 357 ITR 146 (Delhi). (iv) CIT Vs. Goel Sons Golden Estate P.Ltd. ITA No.212/2012 (Delhi). (v) CIT Vs. Gangeshwari Metal Pvt.Ltd. [2014] 361 ITR 10 (Delhi). (vi) CIT, Orissa Vs. Orissa Corporation P.Ltd. [1986] 159 ITR 78 (SC). 50. We have considered the rival submissions and perused relevant material placed before us. The Assessing Officer, at page 7 paragraph 4.9 of his order, has mentioned The assessee has filed its reply dated 15-12-2010 alongwith documents stated therein and the same has been duly examined and placed on records of each assessment year . Copy of the letter of the assessee dated 15th December, 2010 addressed to the Assessing Officer reads as under:- The DCIT Central Circle-1, New Delhi. Sub : In the case of M/s Suncity Projects (P) Ltd. Assessment Year : 2008-09 PAN : AABCS8906K. Sir, With reference to the discussions held at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. With this factual background, let us consider the cases relied upon by the learned counsel in support of his contention. Learned counsel for the assessee has relied upon the decision of Hon ble Apex Court in the case of Orissa Corporation P. Ltd. (supra). In the said case, the assessee furnished before the Assessing Officer letters of confirmation and gave the particulars of income tax number of the creditors. The Assessing Officer issued summons u/s 131 to the creditor which were returned unserved with the remark left . Therefore, the Assessing Officer made the addition of ₹ 1,50,000/- as unexplained cash credit. The Tribunal deleted the addition holding that merely because the assessee could not produce the parties, it did not follow automatically that an adverse inference should be drawn against the assessee. When the Revenue took up the matter to Hon'ble Supreme Court, Hon ble Apex Court held :- that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been rightly commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders. 4. The Court is of the view that the assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law. 5. In the facts and circumstances of the present appeals, the Court is satisfied that no substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and also affirming the details sent by them to DCIT Shri J.C. Bindra. The confirmation is reproduced below for ready reference:- To whomsoever it may concern This is to certify that on 16-12-2010 we have received documents from M/s Churu Trading Co.Pvt.Ltd., which is one of our Group Company having same office address 135, Continental Building, Dr. A.B. Road, Worli, Mumbai, and the same had been couriered to Mr. JC Bindra, DCIT, Central Circle-1, E-2, ARA Centre, Jhandewalan Ext, New Delhi through Blue Dart on 16-12-2010 vide Receipt No.13070323781. The Blue Dart had issued receipt no.13070323781 in the name of M/s Zee Entertainment, as we have a centralized agreement with the courier company for all our group companies at Continental Building. The said documents were delivered to Mr. J.C. Bindra, DCIT, Central Circle-1, E-2, ARA Centre, Jhandewalan Ext, New Delhi on 20-12-2010. For Zee Entertainment Enterprises Ltd. Authorized Signatory. 56. Similar details were furnished by the assessee with regard to Blue Line Motors P. Ltd. As per audited balance sheet of the said company, the share capital of the company including reserves and surplus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of ₹ 4,99,00,000/- made by the Assessing Officer on account of issue of bogus share application money. 61. At the time of hearing before us, both the parties fairly admitted that all the facts relating to this year are identical to the facts in the Revenue s appeal for assessment year 2008-09 with the only modification that as against the share capital of ₹ 10,63,00,000/- in assessment year 2008-09, this year, the share capital of ₹ 4,99,00,000/- was received. Both the parties stated that their arguments advance for assessment year 2008-09 would be squarely applicable. 62. We have already considered the arguments of both the sides and the legal position in the light of the case law relied upon before us. We find that in this year, the Assessing Officer has made the addition of ₹ 4,99,00,000/- in respect of share application money received from following three parties :- (i) Churu Trading Co. Pvt.Ltd. : ₹ 2,80,00,000/- (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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