TMI Blog2018 (9) TMI 959X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee that the incremental share capital was used for the purpose of working capital and, thereafter, allow the claim of the assessee if the assertion of the assessee is found to be correct, after giving proper opportunity to the assessee to present its case. Thus, this ground stands allowed for statistical purposes. - ITA No.2315/Del/2018 - - - Dated:- 10-9-2018 - Shri N. K. Billaiya, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Shri Repu Daman Thakur, Adv. For the Revenue : Shri Ravi Kant Gupta, Sr. DR ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : This appeal has been preferred by the assessee against order dated 22/01/2018 passed by the Ld. CIT (Appeals)-4, New Delhi for the assessment year 2013-14. 2. The brief facts of the case are that the return of income was filed declaring income at ₹ 14,95,810/- and the same was subsequently selected for scrutiny. During the course of assessment proceedings, the Assessing Officer noticed that the amount of ₹ 1,00,500/- was claimed as deduction on account of expenditure incurred on account of ROC fee paid to enhance the authorised share ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi, is arbitrary, fallacious and illegal on the following grounds and, therefore, merits to be quashed with directions for appropriate relief to the assessee:- 1) That CIT (A) failed to appreciate that the notice issued u/s. 143(2) and the assessment order passed u/s. 143(3) of Income-tax Act are illegal and void ab initio because : i) any material unearthed during search operations or any statement made during course of search, by Mr. R.S. Jain, Surat, is a valuable piece of evidence and therefore, Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess income u/s 153A of the I.T. Act; ii) assessment pending on the date of initiation of the search u/s. 132 shall abate in term of 2nd proviso to Sec. 153A(1) read with Sec. 153C of the I.T. Act; iii) Sec. 153C has been amended by the Finance Act, 2015 to substitute the words belongs to with relates to which indicates that even if the books of account do not belong to the person who has not been searched u/s. 132, he can still be proceeded with for block assessment if the books found during search reveal any income which has a bearing on him. 2) That CIT(A) failed to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oose diamonds [as per Books of M/s. Haryana Jewellers (P) Ltd. -Stock register for the Financial Year: 2012-13 -Quantitative Reconciliation of Stock -M/s. AVI Exports Ledger for the F.Y.: 2012-13 along with Union bank statement -M/s. AVI Exports Ledger for the F.Y.: 2013-14 along with Union bank statement -Affidavit of Rajendra Sohanlal Jain [R.S.Jain], Proprietor of M/s. AVI Exports, Surat, Gujarat as filed before the ITO, Ward-11(1), Delhi in response to requisition u/s. 133(6) of Act -Confirmation of balance of M/s. Haryana Jewellers Pvt. Ltd. as on 31-03-2014 -Sales Register regarding sales made to M/s. Haryana Jewellers Pvt. Ltd. for the period 01-04-2012 to 31-03-2013 -Copy of Ledger of M/s. Haryana Jewellers Pvt. Ltd. for the F.Y.: 2012-13 -Bank Statement of ING VYSYA BANK to substantiate receipt against sales made -Income-tax Return of Mr. R.S.Jain for A.Y.: 2013-14 along with PAN -Retraction of Statement by Mr. R.S.Jain regarding statement made during search and after search, as filed before the Dy. CIT, Surat -Affidavit containing comprehensive information regarding retraction of Statement by Mr. R.S.Jain. 3.1 The Ld. AR submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of search, no stock was found which could establish that the purchases had actually been made by the assessee. It was also submitted that Shri R.S. Jain had retracted the statement after more than one year from the recording of statement and the retraction is not supported by facts. It was also submitted that there was no proof of the alleged purchased diamonds having been transported which could establish the genuineness of the purchase transaction. Ld. Sr. DR also submitted that the assessee was duly confronted with the documents on which the department had placed reliance while making the addition with respect to the alleged bogus purchases. 4.1 With respect to the disallowance pertaining to ROC fees, the Ld. Sr. DR placed strong reliance upon the findings recorded by the ld. Commissioner of Income Tax (A). 5. We have heard the rival submissions and perused the material available on record. It is not in dispute that the statement of Shri Rajendra Jain, on which the department has relied while making the addition of ₹ 30,01,478/-, has been retracted by Shri Rajendra Jain. This fact has been duly noted by the Assessing Officer in the assessment order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich substantiate the genuineness of the purchases from M/s Avi Exports. Therefore, under the circumstances, we are unable to concur with the findings of the lower authorities and we deem it fit to set aside the order of the Ld. Commissioner of Income Tax (A) and direct the Assessing Officer to delete the addition with respect to the alleged bogus purchases. 5.1 Coming to the other issue which the assessee has challenged i.e. confirmation of addition of ₹ 1,00,500/- on account of ROC fee, it is seen that the ITAT Mumbai Bench in the case of Navi Mumbai SEZ (P) Ltd. vs. ACIT reported in (2015) 54 taxmann.com 259 (Mumbai-Trib.) has held that where an assessee incurred certain expenditure for increase in share capital, in view of the fact that entire incremental share capital was used for purchase of trading stock, expenditure in question was to be allowed as revenue expenditure. Ld. AR has drawn our attention to the working capital analysis placed at page 61 of the paper book and has submitted that since the incremental share capital was used for working capital requirements, the ROC fee was allowable as a deduction. In view of the order of the ITAT Mumbai Bench in the case ..... 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