TMI Blog2018 (6) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... rate orders of the CIT(A)- XXVI, New Delhi relating to assessment year 2013-14. Since identical grounds have been taken by the respective assessees in their appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order. ITA No.7374/Del/2017 (Moon Beverages Ltd.) : 2. Facts of the case, in brief, are that the assessee company is one of the group companies of MMG (MM Aggarwal) group and is engaged in the business of preparation, manufacturing, packing and sale of soft drinks on the basis of concentrate and other raw material procured from Coca Cola in the capacity of bottler and distributor of Coca Cola procure in India. In addition, the MMG group has business interests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc.. A search seizure operation u/s 132 of the I.T. Act, 1961 was carried out on 28.03.2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the said search. During the course of search carried out at the different premise located in India in M.M. Aggarwal Group of cases, document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He also referred to the statement of Shri Narender Kumar Jain, who is close confident and associate of the promoter of the MMG Group Shri Sanjeev Agrawal and their CA, Shri Ashwani Verma, the statement of Shri Narinder Kumar Garg who is Director of M/s North Delhi Beverages Pvt. Ltd., the statement of Shri Sanjeev Aggarwal, who is directorcum- promoter of MM group companies, the statement of Shri Krishan Kumar Bajaj, General Manager-Finance of the assessee company. He further referred to the statement of various other persons, the enquiries conducted u/s 133(6) of the I.T. Act and the summons issued to various directors of the non-descript companies u/s 131 of the I.T. Act which were either returned back or delivered but there was no response or only part compliance. Ultimately the Assessing Officer came to the conclusion that the assessee failed to establish the identity, creditworthiness and genuineness of the parties wherefrom funds were received by the investor of the assessee who are also group companies of the assessee group. Since the assessee has received an amount of ₹ 11,85,00,000/- towards share capital and share premium and the assessee could not discharge the bur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the ground raised by the assessee by observing as under :- I have carefully considered the submission of the Ld. AR., assessment order and cases law cited by him. I have also perused the assessment order and find that the A.O. proceeded to frame assessment u/s 153A after the search on appellant group on 28.03.2015 and on receipt of appraisal report from the DI (Investigation) that the appellant company has received an unexplained credit in its books u/s 68 of the IT Act. The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of ₹ 88.52 crore out of which a sum of ₹ 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of an independent entity in normal circumstances. Any such entity will surely expect due returns or capital appreciation in due course. The investor is surprisingly bereft of interest in the matter. The AO and this appellate forum too have to construe the incriminating material in a harmonious fashion. Hon'ble Delhi High court has also reiterated in many rulings that action u/s 153A is bound to be initiated in such situations. Therefore, this action of the AO is in tune with judgment of Hon'ble Delhi High Court in CIT (C)-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412 (Delhi), 234 Taxman 30. The same is further strengthened by the judgment of Hon'ble Delhi High Court in the case of Dayawanti Gupta vs CIT in 'ITA Nos 357,358.359/2015 and other' dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- ( a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and ( b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: The appellant has neither produced the investor nor arranged to provide the requisite information and documents directly from it as such failed to substantiate its contention. The onus to prove its contentions has not been discharged by the assessee appellant. Concept of Onus is dynamic no doubt, but the assessee is required to first discharge the onus cast upon by way of information in possession of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf. Explanation.-For the purposes of this clause,- ( a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed93; or (ii) as may be substantiated by the company to the satisfaction of the Assessing Officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher; (b) venture capital company , venture capital fund and venture capital undertaking shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 94[Explanation] to clause (23FB) of section 1O;] [emphasis supplied] C1. The share premium charged by the appellant clearly falls within the mischief of this section in absence of assessee furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 11,53,40,000/-) on account of sum received from M/s Superior Industrial Enterprises Ltd. as share capital and share premium and erroneously held as unexplained cash credits under section 68 of the Act particularly when no incriminating material either in the shape of unexplained cash or investment or document had been detected as a result of search on the appellant company or even gathered in the instant assessment proceedings: 2.1 That while sustaining the aforesaid addition the learned Commissioner of Income Tax (Appeals) has completely overlooked that there was no adverse material brought on record by the learned Assessing Officer to assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the aforesaid share holder had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the addition made by the Assessing Officer and the assessment was not pending. Neither the Assessing Officer nor the ld. CIT(A) has referred to any incriminating material found as a result of search while making/sustaining the addition. He submitted that the sum offered by Mr. Sanjeev Aggarwal in his statement recorded u/s 132(4) amounting to ₹ 88.52 crores comprised of two components i.e. pertaining to assessment year 2008-09 ₹ 30.78 crores and balance ₹ 57.74 crores. He submitted that Shri Sanjeev Aggarwal has retracted from his statement regarding surrender of income to the extent of 30.78 crores pertaining to assessment year 2008-09 which is evident from pages 30 to 35 of the Paper Book. 9.1 Referring to the decision of the Delhi Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vs. DCIT vide ITA No.332/Del/2017 order dated 29.12.2017 for assessment year 2007-08, the decision of the Hon ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and the decision of the Hon ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263, he submitted that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es issued by the Assessing Officer on various dates and replies filed by M/s Superior Industrial Enterprises Ltd. during the course of assessment proceedings. He submitted that during 143(3) assessment proceeding in the case of M/s Superior Industrial Enterprises Ltd., the Assessing Officer of the said company had issued notice u/s 133(6) to various persons who had purchased shares in the said company. Therefore, once the return of the said investor company has been accepted and no addition has been made on account issue of share capital by that company, addition cannot be made in the hands of the assessee company on account of purchase of shares by M/s Superior Industrial Enterprises Ltd. in the assessee company. Relying on various decisions, he submitted that source of source cannot be a basis to make the addition. 13. He submitted that the burden of the assessee was discharged since the investor is a listed group company and copy of audited financial statement, acknowledgement of return of income, confirmations of investor, bank statements, memorandum of article or association were filed. Further, assessment was completed u/s 143(3) in the case of the said investor company. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the ld. CIT(A) cannot sustain an addition on the basis of new source of income which was not there in the assessment order. In any case he submitted that the book value of the shares is much more than the share premium charged by the company. He accordingly submitted that in absence of any incriminating material, no addition could have been made by disturbing a completed assessment. Further, the assessee has discharged the initial burden cast on it by furnishing sufficient details to prove the identity and capacity of the investor company and genuineness of the transaction. Since the investor company has been assessed u/s 143(3) and since the investment of the assessee in the investor company has also not been doubted by the Assessing Officer, therefore, under the facts and circumstances of the case no addition is sustainable legally and factually. 18. Ld. DR on the other hand heavily relied on the order of the ld. CIT(A). She submitted that the A.O. has extensively and exhaustively proved that identities and creditworthiness of such parties genuineness of transactions regarding amount of ₹ 11.85 crores as share capital share application money paid to the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where assessee company had received share capital from various contributors and admitted that alleged investors were close friends and business associates of its directors, burden was upon assessee to disclose true and correct details of said investors and since identity of alleged investors was never established additions made under section 68 was justified 23. Referring to the decision in the case of CIT vs. Nipun Builders Developers (P.) Ltd. reported in 350 ITR 407, she submitted that the Hon'ble Delhi High Court has held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68. 24. Referring to the decision in the case of CIT vs. Nova Promoters Finlease (P) Ltd. reported in 342 ITR 169, she submitted that the Hon'ble Delhi High Court has held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. 25. Referring to the decision in the case of CIT vs. Ultra Modern Exports (P.) Ltd. reported in 40 taxmann.com 458, she submitted Hon'ble De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. Such entities who have invested are paper-existing only without physical existence ii. Such entities were never produced for examination by A.O iii. Such entities have no worthy business to advance such investment iv. Such entities have no proper identity of existence without any creditworthiness v. Such entities only indulged to provide accommodation entries of unaccounted/undisclosed Money routed through banking channell creation of PAN filing of Income Tax returns etc. , thus doing only non-genuine transaction / bogus transaction vi. Significant deficiencies/discrepancies have been established by said A.O. to prove identity as non-existent/bogus only paper entities / Creditworthiness is Absent due to negligible/loss Income of such Entities / Genuineness of Transaction is only Sham/non-genuine. 31. Referring to the order of the ld. CIT(A), she submitted that the ld. CIT(A) has correctly in fact in Law has dismissed the appeal of assessee holding that Assessee has failed to prove Identity, Creditworthiness genuineness of Transaction burden of proving such ingredients of provision of section 68 of I.T. Act was never discharged from Assessee due to ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of materials found seized u/s 132 of I.T. Act 1961. iii. Bare plain reading of provisions of section 153A of I.T. Act 1961 does not directly state any word like 'Incriminating material' in said section, however without prejudice, spirit of said provision may indicate materials found seized during search under section 132 which would be utilized as basic information for such assessment u/s. 153A if on further inquiry/investigation by A.O. during assessment proceedings on such seized materials, unaccounted/undisclosed income has been found established for said assessment. The A.O. in the said case relied on seized documents/information on prima-facie bogus share capital share premium (valuation of which NOT as per provision of Income Tax Act 1961 as stated by Ld CIT(A) in Appeal order) and after conducting further inquiry/investigation on said seized materials/information the A.O. finally established bogus/ accommodation entries in terms of share capital share premium as assessee miserably failed to prove identity of such Entities , genuineness of transaction found to be NONGENUINE creditworthiness which was never proved as such Entities were only existi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been found/seized in said assessee's case assessment u/s 153A is mandated. Moreover, as on date said provision u/s 153A is valid law under Income Tax Act 1961. vii. Any material/information found / seized u/s 132 of LT. Act 1961 is 'incriminating material' if on further inquiry/investigation by A.O., certain undisclosed/unexplained taxable income is found / established ultimately in assessment u/s 153A of LT. Act 1961. 33. She accordingly submitted that considering all facts and the cited case laws, the Appeal of assessee deserves to be dismissed since the grounds of appeal are devoid of any merit. 34. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of various enquiries conducted and statement recorded of various persons u/s 132(4) and 131 made addition of ₹ 11,85,00,000/- in the hands of the assessee u/s 68 of the I.T. Act on the ground that the assessee failed to substantiate with cogent evidence to his satisfaction regarding the identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares in the assessee company. 35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- The basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d documents reflected transactions of unaccounted sales and purchases, is nonexistent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law. 39. We find the Hon ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263 has observed as under :- 23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. Following the above decision, the Hon ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings. 44. The Hon ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of Income Tax (Appeals) that it is a case of abated assessment is also factually incorrect and, thus in absence of jurisdiction the action is entirely vitiated. 2 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining an addition made by learned Deputy Commissioner of Income of ₹ 13,10,00,000/- (Rs. 3,27,50,000/- + ₹ 9,82,50,000/-) on account of sum received from M/s Superior Industrial Enterprises Ltd. as share capital and share premium and erroneously held as unexplained cash credits under section 68 of the Act particularly when no incriminating material either in the shape of unexplained cash or investment or document had been detected as a result of search on the appellant company or even gathered in the instant assessment proceedings. 2.1 That while sustaining the aforesaid addition the learned Commissioner of Income Tax (Appeals) has completely overlooked that there was no adverse material brought on record by the learned Assessing Officer to assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not be ..... 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