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The ACIT, Central Circle-17, New Delhi Versus M/s. Garuda Imaging & Diagnostics Pvt. Ltd. Vice-Versa And The ACIT, Central Circle-17, New Delhi Versus M/s. Sindhu Holdings Ltd. Vice-Versa

2018 (1) TMI 332 - ITAT DELHI

Addition u/s 68 - Held that:- A.O. did not bring any evidence on record that the investments made by the investor companies were actually emanated from the coffers of the assessee company so as to enable it to be treated as undisclosed income of the assessee. The A.O. cannot ask the assessee to prove source of the source. Therefore, the facts and circumstances clearly proved that assessee discharged initial onus to prove identity of the investor companies, their creditworthiness and genuineness .....

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artmental appeal has no merit and is accordingly dismissed. - Assessment u/s 143(3)/153A - Held that:- Delhi High Court in the case of BDR Builders & Developers Pvt. Ltd. [2017 (8) TMI 42 - DELHI HIGH COURT] held that when assessee company ceases to exist from appointed date, was not liable for assessment under section 153A of the I.T. Act. The assessment under section 153A is void abinitio. The Hon’ble Delhi High Court similarly in the case of Maruti Suzuki Ltd. [2017 (9) TMI 387 - DELHI HI .....

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s below and quash the assessment order. In the result, ground No.1 of cross objection of assessee is allowed. - Disallowance under section 14A read with Rule 8D - Held that:- The working given by the assessee has not been disputed and further no satisfaction as required under section 14A have been recorded by the A.O. that assessee did incur any expenditure to earn exempt income. The Hon’ble Punjab & Haryana High Court in the case of Metalman Auto Ltd. [2011 (2) TMI 330 - PUNJAB AND HARYANA .....

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med dividend under section 2(22)(e) - Held that:- No interference is called for in the matter. The A.O. in the assessment order itself has recorded that in the original assessment completed under section 143(3), addition of ₹ 2.70 crore under section 2(22)(e) have been made but assessee did not provide any information, therefore, same addition was repeated in assessment year under appeal. Since, this similar addition has been deleted by the Ld. CIT(A) against the original assessment order, .....

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ar Tulsiyan, Advocate Ms. Nisha Rachh, C.A., Shri Karan Kumar, C.A. ORDER Per Bhavnesh Saini, J. M. This order shall dispose of all the above departmental appeals and cross objections filed in the case of two different assessees of the same group. Since issues are identical and are related to group concerns, therefore, all appeals are decided together. 2. We have heard the Learned Representatives of both the parties and perused the material on record. The Departmental Appeals as well as Cross Ob .....

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yan Sanik group at various residential and business premises. In pursuance to notice under section 153A of the Act issued on 23rd October, 2003, assessee filed return of income. The A.O. after giving opportunity of being heard to the assessee, completed the assessment under section 143(3) r.w.s.153A of the I.T. Act on 30th March, 2015. The A.O. made addition of ₹ 3.35 crores of unexplained share application money under section 68 of the I.T. Act, which was challenged before Ld. CIT(A). The .....

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ties, addresses of the parties, PAN of the parties, bank statement of the parties (except of party No.2), confirmation of all parties, ITR of all parties, but copy of audited accounts of the parties are not filed. The A.O. accordingly, treated the same as unexplained under section 68 of the I.T. Act, 1961 and made the addition accordingly. 5. The assessee submitted before Ld. CIT(A) that assessee has received share application money from the above parties which was supported by all the above doc .....

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everal decisions in support of the contention that assessee proved genuine share application money. 6. The Ld. CIT(A) noted that A.O. has made addition due to reason of non-submission of bank statement of M/s. Suvidha Stock Broking Services Pvt. Ltd., and in other cases since no audited accounts are filed, therefore, addition was made. Ld. CIT(A) on the basis of the material on record found that assessee has proved the identity, creditworthiness and genuineness of the share applicants, by submit .....

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returned in subsequent year. The Ld. CIT(A) accordingly, deleted the addition. The Department in appeal challenged the order of Ld. CIT(A) in deleting addition of ₹ 3.35 Crores under section 68 of the I.T. Act. 7. The Ld. D.R. relied upon the order of the A.O. and relied upon the following decisions : (i) CIT vs. Nipun Builders & Developers (P.) Ltd., (2013) 30 taxman.com 292. (ii) CIT vs. Nova Promoters Finlease (P.) Ltd., (2012) 18 taxman.com 217. (iii) CIT vs. N.R. Portfolio Pvt. Lt .....

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made the addition. Therefore, Ld. CIT(A), correctly deleted the addition. He has also submitted that CIT(A) has examined the balance-sheet of the investor company also. There were no adverse material found during the course of search to prove that share application money was bogus. He has relied upon the decision of the Hon ble Supreme Court in the case of CIT vs. Orissa Corporation P. Ltd., 159 ITR 78 and other decisions in the written submissions. 9. We have considered the rival submissions a .....

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s of the investors, addresses of the investors, PAN of the investors, bank statements of the investors except in one case, confirmation of the investors along with acknowledgment of filing of I.T. Return. The investors are therefore, assessed with the Income Tax Department. The A.O. did not make any further enquiry in the matter and just disbelieved the explanation of assessee because the balance sheet of the investors have not been filed. The A.O. noted that there were high value transactions c .....

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ve been doubted. The A.O. did not found if any cash have been deposited in the accounts of the investor before making investment in assessee company. The assessee produced sufficient evidence before A.O. to discharge the initial onus upon it to prove the identity, creditworthiness and genuineness of the transaction in the matter. Further, the A.O. did not make any investigation on the documentary evidences furnished by the assessee. The A.O. did not ask for the production of the investor company .....

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justified in making the addition under section 68 of the I.T. Act against the assessee. We may refer to following decisions in support of our findings. 9.1. Decision of the Hon ble Supreme Court CIT vs Lovely Exports P.Ltd. [2008] 216 CTR 0195 in which it was held as under : If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance .....

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d or it is proved that it has created evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable. 9.3. Judgment of Hon ble Delhi High Court in the case of CIT vs Vrindavan Farms P.Ltd. etc. in ITA No.71/2015 dated 12.08.2015 (Delhi) in which it was held as under : The sole ba .....

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A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon ble H .....

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e Supreme Court in the case of Earthmetal Electrical Pvt. Ltd., vs. CIT dated 30th July, 2010 in SLP.No.21073 of 1999, in which it was held as under : We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside. 9.6. Decision of Hon ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under : No adverse inference should be drawn if shar .....

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vidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented the company's own income from undisclosed sources. It was nobody's case that the non-resident Indian company was a bogus or non-existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and th .....

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13 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, .....

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. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of ₹ 71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an additi .....

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en able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified. 9.9. Decision of Hon ble Delhi High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603, in which it was held as under : Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-c .....

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tioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee. 9.10. Decision of Hon ble Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) (HC), in which it was held as under : Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, t .....

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. thus, failed to conduct any enquiry and scrutiny of the documents at assessment stage and merely suspected the transaction between investor companies and assessee because the investors company were from Kolkata. The A.O. thus, did not perform his duties at the assessment stage so as to make addition against the assessee. The A.O. did not bring any evidence on record that the investments made by the investor companies were actually emanated from the coffers of the assessee company so as to enab .....

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eted the addition of ₹ 3.35 crores under section 68 of the I.T. Act. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue in view of the fact that no enquiry have been taken by A.O. in this case to dispute the documentary evidences filed by the assessee. The departmental appeal has no merit and is accordingly dismissed. 11. The assessee in the cross-objections has raised several grounds. Ground Nos. 2, 3 and 4 are raised in support of the order of the Ld. CIT .....

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entity, which is no longer in existence. 13. Learned Counsel for the Assessee submitted that the assessee company M/s. Garuda Imaging and Diagnostics Pvt. Ltd., M/s. Sindhu Holdings Ltd., and other companies have merged with M/s. Bhandari Consultancy and Finance Ltd., vide judgment dated 19th January, 2011 passed by the Hon ble Delhi High Court in a Scheme of Amalgamation pursuant to Section 391 and 394 and other relevant provisions of the Companies Act. Copy of the judgment dated 19th January, .....

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f notice under section 153A of the I.T. Act on 23rd October, 2013, and also on the date of issue of notice under section 142(1) and 143(2) of the I.T. Act, and resultant assessment order passed under section 153A/143(3) on 30th March, 2015 on a non-existing entity, is void abinitio and bad in law. The A.O. passed the assessment order in the name of non- existing company (assessee). He has therefore, submitted that notices issued and assessment framed on a non-existing entity were illegal, null a .....

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any Petition 283/10 and Company Application No.74 of 2010. The appointed date is 1st April, 2009. The search is however, conducted on 12th April, 2012 and on the date of search i.e., on 12th April, 2012, the assessee-company did not exist because it has already merged with M/s. Bhandari Consultancy and Finance Ltd. Notice under section 153A was issued on 23rd October, 2013 and on that date also the assessee company did not exist as it has already merged with the above company. The A.O. passed th .....

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issue of notice under section 153A against the assessee, the assessee-company did not exist. Therefore, issue of notice under section 153A itself was void abinitio and bad in law. The Hon ble Delhi High Court in the case of BDR Builders & Developers Pvt. Ltd., 397 ITR 529 held that when assessee company ceases to exist from appointed date, was not liable for assessment under section 153A of the I.T. Act. The assessment under section 153A is void abinitio. The Hon ble Delhi High Court similar .....

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e set aside the orders of the authorities below and quash the assessment order. In the result, ground No.1 of cross objection of assessee is allowed. 16. On ground No.5 of the cross objection, assessee submitted that since no incriminating material was discovered during the course of search under section 132 and original assessment had been completed, in terms of the ratio of the decision of Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573, no addition was warranted in as .....

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duced or not already disclosed or made known in course of original assessment. 17.1. Similar view was taken by the Hon ble Delhi High Court in the case of Pr. CIT vs. Meeta Gut Gutia 395 ITR 526 in which it was held as under : 69. What weighed with the Court in the above decision was the habitual concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are abs .....

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l of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. Conclusion 72. To conclude : (i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 15 .....

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of the assessee. Therefore, issue is covered in favour of the assessee by the above judgments of the Hon ble Delhi High Court. The A.O. thus, cannot make any addition including under section 68 of the I.T. Act against the assessee. On this ground also, we set aside the orders of the authorities below and delete the entire addition. In the result, ground No.5 of the cross objection is allowed. 17.3. No other point have been argued or pressed by the parties. 18. In the result, Departmental Appeal .....

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on 68 of the I.T. Act, 1961. This issue is same as has been decided above in A.Y. 2007-2008. Therefore, following the order for A.Y. 2007-2008 (supra), we dismiss ground Nos. 1, 2 and 4 of the Revenue. 21. On Ground No.3, the Revenue challenged the reduction of addition of ₹ 7,85,336 on account of disallowance under section 14A read with Rule 8D of the I.T. Act to ₹ 86,792. 22. Briefly, the facts of the case are that during the year assessee had earned dividend income only on some in .....

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nsidered instead of investments attributable to exempt income. It was submitted that as per clause (iii) of Rule 8D, only investments which are attributable to exempted income must be considered for calculating average investments. During the course of assessment proceedings, assessee had claimed that assessee had not incurred any expenditure for earning any exempt income (although assessee had not earned any exempt income). The assessee challenged the action of the A.O. in exercising the powers .....

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il and Rs.Nil in respect of A.Ys. 2008-09 to 2010-2011 respectively. 23. The A.O. did not deal with explanation of assessee that no expenditure for earning exempt income was incurred. He has stated that assessee had made certain investments in equity shares, income on which i.e., dividend is exempt from tax. He took average of opening and closing amount of investment and calculated the disallowance @ ½ % in accordance with Rule 8D. The assessee did not give details of expenses attributabl .....

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ed under section 14A(2) of the I.T. Act. No incriminating material was found with regard to this issue. The assessee relied upon several decisions in support of the contention that addition is wholly unjustified. The assessee further prayed that in case the addition has to be made, then the calculation should be restricted to the amount of investment made in the listed company which was exempt. The assessee filed working according to which, disallowance under section 14A read with Rule 8D works .....

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iture for earning exempt income. The assessee has agreed before Ld. CIT(A) that in view of its having earned some exempt income, amount on such investment, from which exempt income was earned, should be included for the purpose of computing disallowance under section 14A read with Rule 8D. In the case of investment in Private Limited or Unlisted Companies, the dividend may be exempt but LTCG and STCG arising on sale of such investments is exempt. The Ld. CIT(A), accordingly, deleted the addition .....

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exempt income Section 14A do not apply. The Hon ble Delhi High Court in the case of I.P. Support Services India P. Ltd., 378 ITR 240 held that no disallowance under section 14A be made in the absence of satisfaction. In the case of Abhishek Industries Ltd., 380 ITR 652, the Hon ble Punjab & Haryana High Court held that onus is on the A.O. to record satisfaction that interest bearing funds used for investment to earn tax free income. In the present case, the A.O. did not deal with contention .....

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er section 14A read with Rule 8D of I.T. Rules. 26. Since, we have dismissed departmental appeal on these grounds, therefore, these grounds require no further finding. 27. On Ground Nos.1 and 4 of the cross objection, assessee challenged the orders of the authorities below to be bad in law and void abinitio as the same have been framed by the Revenue Department on merged entity and that since no incriminating material was discovered in the course of search under section 132 of the I.T. Act and o .....

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. 1 and 4 of the cross objection of the assessee are allowed. 29. In the result, ITA.No.450/Del./2016 of the Department is dismissed and C.O.No.164/Del./2016 of the Assessee is allowed. ITA.No.451/Del./2016 & CO.No.165/Del./2016 - A.Y. 2010-2011 : 30. The Departmental Appeal as well as Cross Objections by assessee are directed against the common order of the Ld. CIT(A)-27, New Delhi, dated 09.11.2015, for the A.Y. 2010-2011. 31. In Departmental Appeal, the Revenue challenged the deletion of .....

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both the additions. Therefore, no further finding is required on dismissing the departmental appeal. 33. On ground Nos. 1 and 4 of the cross objection, the assessee challenged the orders of the authorities below to be void abinitio and bad in law as assessment have been framed on merged entity and that since no incriminating material was recovered during the course of search, therefore, no addition under section 153A can be made in view of judgment of the Hon ble Delhi High Court in the case of .....

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eal as well as Cross Objections by assessee are directed against the common order of the Ld. CIT(A)-27, New Delhi, dated 09.11.2015, for the A.Y. 2008-2009. 36. In Departmental Appeal on ground No.1, the Revenue challenged the deletion of addition of ₹ 2,17,000 under section 14A read with Rule 8D of the I.T. Act. On Ground Nos. 2 and 3, the Revenue challenged the deletion of addition of ₹ 65 lakhs on account of unexplained share application money under section 68 of the I.T. Act, 196 .....

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he case of Kabul Chawla (supra). 38. All these issues are similar as have been decided in the case of M/s. Garuda Imaging and Diagnostic Pvt. Ltd., New Delhi (supra) in A.Ys. 2007-08, 2009-10 and 2010-2011. Following the reasons for decision of the same, we set aside the orders of the authorities below and quash the assessments. The department appeal fails on these ground. However, the cross objection of assessee are allowed. 39. In Departmental Appeal on ground No.4, Revenue challenged the dele .....

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ddition. It was, therefore, submitted that since similar addition was made in original assessment which have been deleted by Ld. CIT(A), therefore, no further addition be made. Ld. CIT(A) found the contention of assessee to be correct that similar addition made in original assessment has been deleted by Ld. CIT(A). therefore, the addition was deleted because no new facts have been brought on record. 41. After considering the rival contentions, we are of the view that no interference is called fo .....

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ection 153A of the I.T. Act against the assessee. The departmental appeal has no merit and the same is dismissed. In the result, cross objection of assessee has become infructuous. 42. In the result, ITA.No.448/Del./2016 of the Department dismissed and C.O.No.121/Del./2016 of the Assessee allowed. ITA.No.447/Del./2016 & C.O.No.122/Del./2016 - A.Y. 2010-2011 : 43. The Departmental Appeal as well as Cross Objections by assessee are directed against the common order of the Ld. CIT(A)-27, New De .....

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On ground Nos. 1 and 5 of the cross objection, the assessee challenged the orders of the authorities below to be bad in law and void abinitio as assessment have been framed by Revenue Department on merged entity and in making addition under section 153A without recovering any incriminating material as per decision of the Hon ble Delhi High Court in the case of Kabul Chawla (supra). 46. This issue is same as have been considered in the case of assessee for A.Y. 2008-2009 (supra). Following the r .....

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