TMI Blog2015 (12) TMI 1795X X X X Extracts X X X X X X X X Extracts X X X X ..... essments were completed u/s 143(3) of the Act read with section 153A/153C of the Act after the search. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In view of this fact, there is no justification for action u/s 153C of the Act that too without recording satisfaction. In our considered view, the Assessing Officer must have some material to prima facie satisfy himself to record the satisfaction prior to issue of notice u/s 153C . Addition u/s 68 - It is not a simple case of taxing of share application money under section u/s 68 as the assessee has tried to project. It is a case of unaccounted income brought back into the books of accounts of the assessee company in a systematic organized manner which can be evidenced from the pattern of cash deposits in the bank accounts of the companies discussed above in detail from whom share application money were received by the assessee. These companies have been used as mere conduit companies for routing of unaccounted money into the business in the grab of share application money. During the assessment proceeding in Asst.Year 2005-06 in the case of the companies from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies without properly appreciating the facts of the case and submission made before him: S.No. Name of the Company Amount (Rs.) 1 Central Region Infrastructure Construction P. Ltd. 5,00,000 2 M/s. Neema Investment P. Ltd. 1,05,00,000 3 M/s. Money Penny Fincom P. Ltd. 60,00,000 1,70,00,000 2.2 That on the facts and in the circumstances of the case, ld. CIT(A) has erred in maintaining addition of ₹ 1,05,00,000 in respect of share application money as received from M/s. Neema Investment P. Ltd. even when ₹ 40 lacs was received during the previous year relevant to the AY 2005-06 and balance amount of ₹ 65 lacs only in the year under appeal. 3. Short facts of the case are as under: A search u/s 132 of the I.T. Act was executed on 21.11.2006 on the office and factory premises of the assessee. A notice u/s 153C was issued to the assessee on 5.10.2007 which served to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49000000 2.2] The assessee had filed confirmation letters in respect of share application money of ₹ 4900000/- as received it from all the above company. 2.3] That copy of share application money and Board resolution has also been filed where ever applicable. 2.4] That identity of the share holders and genuineness of the transactions have duly explained. 2.5.1] That in the case of M/s Sundrop Securities P Limited, Pramila Investment Finance Limited, Neema Investment P Limited, Money Penny Fincom P Limited, Pursuit Securities P Limited and Max touch Security P Limited, assessment for the Assessment Year 2005-06 was completed under scrutiny U/s 143(3) of the Income Tax Act by your office and by the office of ITO 5(1) and ITO 5(2), Indore. 2.5.2] That in the assessment of all these companies amount received by them on account of share application money, share capital and Sundry creditors not explained properly added U/s 68 of the Income Tax Act. Accordingly, investment made by all these companies accepted as genuine. 2.5.3] That once the amount of share application money, share capital and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Penny Fincom Pvt. Ltd. 6000000 6 Persuit Security P. Ltd. 16500000 7 Max Touch Security Ltd. 500000 8 Central Region Infrastructure Cont. Pvt. Ltd. 500000 Total 49000000 2.1] Copy of confirmations letter alongwith share application forms and following documents were found during the course of search listed as Page Nos 1 to 322 of LPS- 15. List of such documents are as under:- I] Memorandum and Article of Association II] Copy of Acknowledgement of Income Tax return filed III] Copy of PAN Card IV] Copy of Audited Final account V] Copy of share application form 2.2] That from the above papers as found during the course of search, existence, Identity and capacity of the share application money stand proved. 2.3] That additional papers as obtained by the assessee from the Registrar of Companies are enclosed. 2.4] That entire amount of share application money were received by the assessee through an account payee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny cannot be treated as properly explained. In fact these companies have became quite notorious for giving share application money to various entities in and around Indore. There modus operandi is to get the cash deposit in their bank accounts and then provide entry for share application money by Cheque. In fact there companies have no business what so ever and which companies have been opened only for providing entries for share application money. These companies are nothing but dummy companies closely held and acting on behalf of certain individuals, who are engaged in the business of providing entries for share application money to various parties. Reliance is placed on the decision of the Hon ble Madhya Pradesh High Court in the case of Commissioner of Income Tax V/s Rathi Finlease Ltd. reported in (2008) 2015 CTR 249 and decision of Hon ble Calcutta High Court in the case of Commissioner of Income Tax V/s Nividen Vanijya Niyojan Ltd. Reported in (2003) 182 CTR(Cal) 605 . Considering the facts of the case as discussed above, share application money of ₹ 4,90,00,000/- (Rupees Four Crores Ninety Lacs Only) as received by the assessee in the year under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant company. It was also claimed by the appellant that confirmation letter and share application forms were duly found and seized during the course of search itself at the premises of appellant. It was also clarified that most of the share holders were duly assessed to tax by the ITO 5 (1), ITO 5 (2) and ACIT 5 (1), Indore. Hence there was no reason for doubting the identity of the share applicants. 4.2.3) The appellant had filed the copies of the bank statements in respect of five companies. The appellant also provided the complete details of bank account of the share holders and requested to the undersigned to call copies of their bank statement directly. It was also claimed that in these accounts no cash were deposited prior to issuance of the cheque to the appellant that unsecured loans were received from M/s Money Penny Fincom P Limited and M/s Pramila Investment Finance Limited in the Asst Year 2004-05 and from M/s Neema Investment P Limited M/s Sundrop Securities P Limited and M/s Pursuit securities Limited in the Asst year 2005-06 and entire amounts of loans were accepted as genuine in these years by the AO. Copies of relevant assessment orders as passed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant from eight share holders for the reason that huge amount of cash were deposited in the bank account of the shareholders companies in the Asst Year 2005-06. It was clarified by the appellant that the share application money was received in the previous year relevant to the Asst year 2006-07 and not in the Asst Year 2005-06 as discussed by the AO. The Appellant Company had filed copy of bank statement of five of the share holder companies and also highlighted the amount as received by it from that share holders in the bank account. The bank account of other two companies Rifca Construction P. Ltd. and Max Touch Securities P. Ltd. were called by this office. The copy of bank account of last company Central Region Infrastructure and construction P. Ltd. were not furnished by appellant. I have examined the bank account of the share holders companies as to examine the version of the AO while making addition in respect of share application money but it was found that only in the bank account of Max Touch Securities P Limited huge cash was found deposited in the bank account of that share holder prior to issuance of cheque to appellant company and bank account of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Q. No. 25 to Q. No. 30. But answer to Q. No. 30 clinches the whole issue wherein Shri R.Kathod stated that all the cheques to all the parties issued by his two companies are accommodation cheques against receipt of cash. As the statement of Shri Rameshchand Kathod is detailed and self explanatory, a copy of which is provided to appellant, hence principles of natural justice are fulfilled. It is because statement is supported by lack of creditworthiness of these two companies arising from negligible income earned by them in last several years and also supported by deposit of cash directly in bank account of such two companies or as explained by Shri R. Kathod that cash is deposited in some other companies and thereafter brought in these two companies through transfer. Besides replies to Q. No. 18, 19 20 in the statement proves that no books of accounts were maintained by these two companies and their audit was done on the basic of loose papers which makes them paper companies meant to provide accommodation entries. In such circumstances when statement of witness is only secondary evidence there is no denial of natural justice if witness were not allowed to be cross examined as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- u/s 68 of the I.T. Act is upheld. 4.211) No adverse statement / material was there for other share applicant companies. The AO did not carry out any verification or enquiry into the material placed by appellant before him. Neither any enquiry letter nor any summons were issued to such shares holders. In this regard the appellant has rightly placed reliance on following case laws :- (i) Hon ble ITAT Indore bench in the case of STl Extrusion (P) Limited vide order dated 10.05.2010 being ITA no. (SS) 259.260/ Ind/2008 after considering the judgement of Hon ble MP High Court in the case of Rathi Finlease Ltd. reported in 215 CTR 429 (MP) held as under :- Page 7 In the present appeal, since the assessee has discharged its onus by proving the identity of subscribers and even otherwise had any suspicion still remained in his mind, nothing preventd him to initiate action as per the previsions of the Act. The existence of subscriber to share application is not in doubt as the assessee duly furnished their names, age, address, date of filing the application, number of shares for which respective applications were made, amount given and the source of income of the applicant. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25-05 2012 (Refer Para 3 of that order):- 3 We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their PAN number, copy of bank statements, affidavits and balance sheet. Thereafter the Assessing Officer had asked the assessee to produce the said Directors/Parties. Assessee expressed its inability to produce them The Assessing Office did not consequent thereto conduct any inquirty and closed the proceedings. This is a case where the Aessessing Office has failed to conduct necessary inquiry verification and deal with the matter in depth specially after the affidavit/confirmation along with the bank statement etc. were filed. In case the Assessing Officer had conducted the said enquiries and investigation probably the challenge made by the Revenue would be justified. In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse. The impugned order passed cannot be treated and regarded as perverse. The appeal is dismissed as no substantial question o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition sustained by the ld. CIT(A) and Department is in appeal against deleting the addition. The AR has filed the written submission which reads as under: 2.1] The assessee in the ground No 2 of its appeal has challenged the addition of ₹ 1,70,00,000/- asmaintained by the Ld CIT[A] and department has challenged the deletion of the addition of ₹ 3,15,00,000/- 2.2.1] The assessee company has received share application money from the following share applicant. Detail of the same is as under:- S.No Name of the Applicant PA No Opening Balance as on 0104-2005 Received during the year Total as on 31.03.2006 1 Sundrop security P. Ltd. AACCS5419C 15,00,000 70,00,000 85,00,000 2 Rifca Cost. P. Ltd.[ Now known as Saumya Infraventures P Limited ] AABCR2220B NIL 40,00,000 40,00,000 3 Pramila investment finance P Ltd AABCP8031A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Money Penny Fincom Pvt. Ltd. AADCM5417F 60,00,000 NIL 60,00,000 6 Persuit Security P. Ltd. AAACP3800E 1,65,00,000 1,65,00,000 NIL 7 Max Touch Security Ltd. AADCM4409R 5,00,000 NIL 5,00,000 8 Central Region Infrastructure Cont. Pvt. Ltd. AACCC5101D 5,00,000 NIL 5,00,000 4,90,00,000 3,15,00,000 1,75,00,000 2.2.4] The Ld CIT[A] grossly erred in maintaining addition of ₹ 1,05,00,000/- in respect of amount received from M/s Neema Investment P Limited even when in the year under consideration the appellant had received share application money of ₹ 65,00,000/- and balance amount of ₹ 40,00,000/- was received in the Asst Year 2005-06. 2.2.5] The appellant had not allotted sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceeding of the some of the share holders in the Assessment year 2005-06. However, the Assessing officer has not provided the name of the share holders in whose account cash were deposited. The income tax assessments in respect of the following shareholders were finalized for the Assessment Year 2005-06:- S.No Name of the Company PAN No 1 Pramila investment finance AABCP8031A 2 Neema Investment P Limited AABCN5299 3 Money Penny Fincom Pvt. Ltd. AADCM5417F 2.3.2] The assessee had filed copy of bank statements in respect of the following companies:- S.No Name of the Applicant PA No Addition Page Nos 1 Sundrop security P. Ltd. AACCS5419C 85,00,000 120-129 2 Rifca Cost. P. Ltd.[ Now known as Saumya Infraventures P Limited ] AABCR2220B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40,00,000 4 Sundrop Securities Private Limited AACCS5419C 15,00,000 5 Pursuit Securities Limited AAACP3800E 20,00,000 40,00,000 75,00,000 2.4.2] Confirmations of unsecured loans were filed during the course of assessment proceeding and the same was also accepted by the assessing officer in those years. That when the identity , genuineness in respect of loan creditors were accepted by the assessing officer in that case there was no reason to disbelieve regarding the identity of the share applicant. 2.5] The summary of papers as filed by the assessee in respect of the above companies as filed by the assessee before the AO and during the course of appeal proceeding are as under:- (i) Sundrop Securities P Limited- Share Application money of ₹ 8500000/- S.No Description Pg No of Compilation 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Copy of A/c of RIFCA Construction P. Ltd in the books of the assessee 146 2 Copy of resolution of the Minute of Meeting of Board of Directors of the share applicant company, authorizing Shri Amit Jha for investment in the share of the assessee company 147 3 Covering letter of the share applicant as addressed to the assessee 148-149 company along with the cheque as received for share application money 4 Copy of share application money form duly filled and signed by the share applicant 150-151 5 Copy of Confirmation of share application money of ₹ 4000000/- duly signed with PAN No 152 6 Copy of letter Dt. 29-11-2012 as written by the CIT (A) to the Branch Manager of IDBI Bank for Furnishing Bank Statements of the share applicant for the period from 01-04-2005 to 31-07-2005. 153 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he share application money was made in the assessee company. 186-189 9 Copy of Master Record as downloaded from the site of the Registrar of Companies. 190-191 10 Confirmation of loan duly signed with PAN No. in the A.Y. 05-06 duly accepted as genuine 192-193 11 Copy of Audited Balance Sheet of Share Holder as on 31.03.2006 194-204 (iv) Neema Investment P Limited Share Application Money of ₹ 1,05,00,000/- S.No Descripotion Pg No of Compilation 1 Copy of extract of Minutes of the Board Meeting of the Director authorizing Shri V K Jain for investment in the shares of the assessee company 205 2 Copy of Share application form duly filled and signed on behalf of the share holder 206-211 3 Copy of confirmation letter duly signed with PAN No in respect of share application money of ₹ 10500000/- [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and signed on behalf of the share holder. 249-254 5 Confirmation of share application money of ₹ 6000000/- duly signed with PAN No. for A.Y. 06-07. 255 6 Copy of Ack of Income Tax return as filed for the Assessment Year 2006-07. 256 7 Copy of Affidavit of Shri Ramesh Chand Khatod director of share applicant company duly sworn before the notary on 03-09-2010 accepting the investment in the share application of the assessee company 257-258 8 Copy of Affidavit of director of company Shri Ramesh Chand Khatod duly sworn before the notary on 31-03-2012 in the case of M/s Shivangi Estate Limited [Now known as M/s Shivangi Rolling Mills Limited] accepting the investment in the share application even after search in his premises. 259-261 9 Copy of Bank statement of the shareholder with Shubh Laxmi Mahila Co-op Bank Limited from which investment in the share application money of the assessee company was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curities P Limited 342 10 Copy of letter dt 24-06-2013 as filed before the Tax Recovery Officer in response to the notice as received from the TRO-4, Indore Dt. 21.06.2013. 343-344 (vii) Max Touch Securities P Limited- Share Application Money of ₹ 500000/- S.No Descripotion Pg No of Compilation 1 Copy of Share Application money form duly filled and signed 345 2 Copy of Certificate of Incorporation 346 3 Article of Association of the share holder company 347-354 4 Memorandum of Association of the share holder company 355-360 5 Form No 18 as filed with the Registrar of Companies i.e. an Intimation for change of address 361-363 6 Copy of Audited Balance Sheet of the share applicant company for 364-375 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.6] The assessee as to justify the identity of the share holders filed ample documents as mentioned above which also includes copy of Balance sheet, Income Tax return, affidavit of the directors, Bank statement. 2.7.1]That in the case of the above companies scrutiny order U/s 143(3) has also been passed by the office of the ACIT 5(1), ITO 5(1) and ITO 5(2), Indore. Since, income tax assessment order has already been passed in the case of the above companies. There is no justification for making separate additions in the case of the assessee again. More so when identity of the above companies were proved beyond doubt. 2.7.2]That in the assessment of all the shareholders companies the amount received by them on account of share application money, share capital and Sundry creditors which they failed to explain has already been added to the income of the assessee U/s 68 of the Income Tax Act. Accordingly, investment made by all these companies requires to be accepted as genuine. 2.7.3]That once the amount of share application money, share capital and sundry creditors added to the income of the shareholders. In that case there is no justification to disbelieve the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on record and surrounding facts and circumstances of the case. Ld. DR also relied on following decisions: S.No Reference of Decision Citation of the Decision 1 CIT vs Korlay Tradingn CO Ltd 232 ITR 820 [ Calcutta] 2 N Tarika Property Invest (P) Ltd 51 taxmann.com 387 [SC] 3 CIT vs N R Portfolio (P) Ltd 42 taxmann.com 339 [ Delhi] 4 Gayathri Associates 41 taxmann.com 526 [ AP 5 CIT vs Focus Exports (P) Ltd 51 taxmann.com 46 [Delhi] 6 CIT vs P Mohankala 291 ITR 278 [SC] 7 CIT vs MAF Academy (P) Ltd 42 taxmann.com 377 [Delhi] 8 Subhlakshmi Vanijya (P) Ltd 60 taxmann.com 60 [ Kolkata] 9 Agrawal Coal Corporation (P) Ltd 19 taxmann.com 209 [ Indore] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued to the assessee company. Copy of bank account highlighting the cash deposit and withdrawal has also been filed. The assessee from the following share applicants received unsecured loans in the AYs 2004-05 and 2005-06, detail of the same is as under:- S.No Name of the Companies PAN No 2004-05 [ Rs] 2005-06 [Rs] 1 Money Penny Fincom P Limited AABCM5417F 20,00,000 2 Pramila Investment Finance Limited AABCP8031A 20,00,000 3 Neema Investments (P) Ltd AABCN5299A 40,00,000 4 Sundrop Securities Private Limited AACCS5419C 15,00,000 5 Pursuit Securities Limited AAACP3800E 20,00,000 40,00,000 75,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copy of confirmation letter duly signed by the share holder with its PAN No in the A.Y. 05-06 which was accepted as genuine in that year. 141-142 11 Copy of Notice as received from Tax Recovery Officer-4, Indore Dt 21.06.2013 regarding the outstanding demand of the share holders in the name of the assessee company. 143 12 Copy of letter dt 24-06-2013 as filed in response to the notice as received from the TRO-4, Indore Dt.24.06.2013 144-145 (ii) Rifca Construction P Limited- [ Now known as Saumya Infraventures P Limited] Share application money of ₹ 4000000/- (iii) Pramila Investment Finance P Limited- Share Application money of ₹ 2500000/- (iv) Neema Investment P Limited Share Application Money of ₹ 1,05,00,000/- (v) Money Penny Fincom P Limited Share Application money of ₹ 6000000/- (vi ) Pursuit Securities P Limited Share Application money of ₹ 16500000/- (vii) Max Touch Securities P Limited- Share Application Money of ₹ 500000/- (viii) Central Region Infrastructure Const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 has maintained the addition in respect of amount received from M/s Neema Investment P Limited and also from M/s Money Penny Fincom P Limited. The Ld CIT[A] also maintained addition in respect of Central Region Infrastructure Construction P Limited for non- submission of the bank account and in respect of M/.s Max Touch Securities P Limited for cash deposit in its account prior to issuance of the cheque to the assessee company.The statement of Shri Ramesh Chand Khatod as relied by the Ld CIT[A] was not recorded in the case of the assessee and also in that statement he has not mentioned the name of the assessee company. The assessee also obtained affidavit in the case of its group company M/s Shivangi Estate P Limited in the year 2012 after the statement as referred by the Ld CIT[A]. It is also settled position of law that any statement recorded behind and back of the assessee cannot be relied against the assessee. We also get support from the decision of ITAT, Indore Bench in the case of STL Extrusion (P) Limited vide order dated 10.05.2010 being ITA no.(SS) 259, 260/Ind/2008 after considering the judgement of Hon ble MP High Court in the case of Rathi Finlease Ltd. repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity of the investor. The Delhi High Court also in Divine Leasing Finance Ltd. (supra), considering the similar question held that the assessee Company having received subscriptions to the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Ambitions Tie Up Private Limited was established, therefore, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra), this judicial decision from Hon'ble High Court may not help the revenue. 6.So far as the argument of the learned Sr. DR and the objections / observations of the learned Assessing Officer/learned Commissioner of Income Tax (Appeals) that these are paper companies only, the contention raised on behalf of the assessee is that the net worth (as on 31.3.2007) of such share subscribers is ₹ 317.31 lacs, ₹ 424.58 lacs, ₹ 385.71 lacs and ₹ 289.01 lacs. We are not going on the issue of worth of these share applicants because the Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra) held that even if such share applicants are bogus, but their identity is proved, then no addition is warranted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii)If the assessee has produced documents like PAN Card, bank account details or details from the bankers the onus shifts upon the AO and it is for him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned back with the endorsement not traceable (v) There is an additional burden on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such finding, addition cannot be made u/s 68 in the hands the assessee. (vi) The Department is free to reopen the individual assessment in case of alleged bogus shareholders in accordance with law and, thus, not remedy-less. Hon ble Delhi High Court vide order dt 21-01-2013 in the case of GANGESHWARI METAL PVT LTD [ Appeal No ITA No 597/2012] has discussed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Tribunal is correct in law. The appeal is dismissed. Hon ble Delhi High Court in the case of CIT (Central)-III vs Anshika Consultants P Limited [ Appeal No ITA 467/ 2014 dt 16-04-2015 ] has held that:- 6. Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concerned department in Kolkata was available but not discussed by the AO. Had he cared to do so, the identity of the investors, the genuineness of the transaction and the creditworthiness of the share applicants would have been apparent. Even otherwise, the share applicants particulars were available with the AO in the form of balance sheets income tax returns, PAN details etc. While ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguishable on the fact of the present case. In case of N Tarika Property Investment (P) Ltd , Hon ble Delhi High court as reported in 40 taxmann.com 525 and by the Hon ble Apex court as reported in 51 taxmann.com 387 has observed that the bank account as provided was forged and fabricated bank account. In the present appeal in hand the assessee has provided copy of bank statement, PA No and various other documents and the assessing officer failed to pointed out any defects in these documents. Hence, the facts of the case of N tarika Property Investment [P] Ltd is distinguishable with the facts of the present appeal in hand. In case of CIT vs N R Portoflio (P ) Limited as reported in 42 taxmann.com 339, Hon ble High Court has observed that mere providing the PA No by the appellant and not co-operated with the assessing officer in the assessment proceeding. In the present appeal, the assessee company not only provide the PA No but also provide ample documents to substantiate its claim of share application money. There was no allegation what so ever of the assessing officer about non- co-operation of the assessee during the course of assessment or appellate proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the share holders in the previous year relevant to the Asst Year 2006-07. Hence, fact of the case of MAF Academy (P) Limited was distinguishable with the fact of the present case of the assessee. In the case of Subhlakshmi Vanijya ( P) Ltd as reported in 60 taxmann.com 60 , Hon ble Kolkata Bench observed that insertion of the proviso to section 68 was retrospective in nature. That proviso to section 68 of the Income Tax Act was inserted by the Finance Act 2012 w.e.f 01-04-2013. Since, the date of applicability was clearly mentioned with this amendment, Hence, the said insertion of the proviso have prospective applicability. That Hon ble Mumbai Bench of ITAT in the case of Veedhata Tower P Limited [ ITA No 7070/ Mum/ 2014 ] dt 2101-2015 has discussed the issue of share application money in detail and held that the assessee prior to the amendment by the Finance Act, 2012 need to prove only identity of the share holders and the assessee also need not requires to be proved source of source. In the case of Agrawal Coal Corporation (P) Limited as reported in 19 taxmann.com 209, Hon ble Indore Bench of ITAT has categorically held that the assessee needs to prove the iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs was pending after filing the return of income, no notice issued u/s 143(2) of the I.T. Act. Hence, it was claimed by the assessee that as per second proviso to sec. 153A(1)(b) of the I.T. Act r.w.s. sub-sec. 2 of sec. 153 of the Act, no proceeding was pending as to abate as per second provision of clause b of sec. 1 of sec. 153 of the I.T. Act. 12.1 Matter carried to ld. CIT(A) and ld. CIT(A) has dismissed the appeal on this issue, therefore, assessee is in appeal before us. 12.2 Ld. AR has filed written submission which reads as under: 12.3 On the other hand, ld. DR relied upon the order of the Revenue Authorities and relied upon the decision of Special Bench in the case of Al Cargo Logistics Ltd. vs. DCIT, 20 ITJ 45 (Mum) (SB) and decision of Hon'ble Allahabad High Court in case of Shaila Agrawal, 346 ITR 130. 12.4 We have heard rival contentions of both the parties. We find that in the present case, the fact remains that before search assessment, no scrutiny was carried out even the return was filed later after issue of notice and intimation was issued u/s 143(1) after the search. We are of the view that Department had no occasion to examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding occurring in the second proviso to sec. 153A of the Act is qualified by the words on the date of initiation of the search , and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. 13. We, respectfully following the same, dismiss the ground no.1 of the appeal of the assessee. 14. Ground No.3 of the assessee s appeal is regarding disallowance of income of ₹ 4731772 u/s 40(ia) of the I.T. Act. We find that the Assessing Officer has disallowed fright payment of ₹ 4731772 on the ground that no TDS was deducted, therefore, Assessing Officer and ld. CIT(A) have dismissed the appeal of the assessee. 14.1 We have heard rival contentions of both the parties. The assessee has taken the ground that by virtue of Finance Act, 2008 w.e.f. 1.4.2005, the said sec. was amended. As per amended sec., if the amount so deducted is deposited by the assessee till due date of filing of return is allowable deduction prior to March in that case. In this case, TDS was deducted and payment was made prior to March, hence, assessee has paid the tax on time, therefore, he requested the Bench to allow this additional ground. It is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature even when no such interest was chargeable on the amount of income returned. 4. On the facts and in the circumstances of the case, the amount as disallowed by the appellant in the computation of income of ₹ 4731772 u/s 40(ia) of the I.T. Act is an allowable deduction in view of the amendment made in the provision of section 40(ia) of the Act. 17 In respect of ground no.1.1 1.2, we find from the ld. CIT(A) that ld. CIT(A) in his order has held that there is no denial fact that share application forms and other documents belonging to assessee firm were found and seized from, the premises of Anant Steel P. Ltd. and thereafter a valid and timely notice u/s 153C was issued and served on the Assessing Officer. There is no requirement u/s 153C that Assessing Officer should be satisfied that such valuable articles or books of account or documents belonging to other person must conclusively reflect or disclose any undisclosed income. We find that as per the decision of this Tribunal in the case of Mukesh Sangla HUF, wherein the similar issue has come up, wherein one of us has delivered the judgment and we have held that Assessing Officer is required to record the satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction has to proceed against such other person within his jurisdiction. Even for the purpose of Section 153C, the Assessing Officer before handing over the items to the Assessing Officer having jurisdiction must be satisfied that the items belongs or belong to the person other than the person referred to in Section 153A. That satisfaction of the concerned Assessing Officer is a sine qua non. The consequences flowing from the action to be taken on the basis of such information handed over to the Assessing Officer having jurisdiction, for the assesse, who is a person other than the person referred to in Section 153A, is drastic of assessment or reassessment of his income falling within six assessment years. 16. Suffice it to observe that the dissimilarity of the form of two provisions would make no difference to the purpose underlying. The power bestowed on the Assessing Officer having jurisdiction be it under Section 153C or Section 158BD is identical. 17. We are not inclined to accept the argument of the Department that the purpose underlying the two provisions is different. We also find that even the procedure is not different. The subject matter of the actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer having jurisdiction is expected to conduct enquiry and due verification of the relevant facts; before forming his prima facie satisfaction. The Assessing Officer having jurisdiction will be well within his rights to form an independent view before issuing notice to the other person (person other than the person referred to in Section 153A) under his jurisdiction on the basis of his own enquiry. In our opinion, the view formed by the Assessing Officer after his own enquiry does not entail in seating in appeal over the satisfaction of the first Assessing Officer, who had handed over the items to him. 20. As a result, we hold that there is no infirmity in the view taken by the Tribunal on the questions under consideration. The view taken by us is reinforced from the decisions of other High Courts in the cases of Commissioner of Income Tax (Central) Vs. Gopi Apartment (supra), Pepsi Foods P. Ltd. (supra), Pepsico India Holdings P. Ltd. (supra) and lastly CIT Vs. MadhiKeshwani (supra). The observations of the Delhi High Court in the case of SSP Aviation Ltd. (supra) have been explained in the subsequent case of Pepsico India Holdings P. Ltd. (supra). 21. We conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is same Assessing Officer for searched person and where 153C action is taken then also recording of satisaction in both the cases is necessary in view of decision of the Hon'ble jurisdictional High Court in the case of Mechman (supra). He further submitted that no addition can be made in nonabated assessments sans incriminating material. The assessment u/s.153A is made only in cases where a search is initiated u/s.132 or books of account, other documents or any assets are requisitioned u/s.132A after 31.05.2003. Therefore, Section 153A of the Act cannot be read in isolation. The requirement of assessment or reassessment of total income under the said section has to be read in the context of Sections 132 or 132A of the Act. Once notice u/s.153A is issued, the assessee is compulsorily required to file return of income for six assessment years notwithstanding discovery or otherwise of any incriminating material. All the assessment proceedings which are pending on the date of search abate in terms of second proviso to sec.153A. As a corollary, although but not expressly provided in section, the assessment proceedings which are not pending do not abate. If nothing incriminating is f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary corollary of the above second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee. 21. The argument raised by the counsel for the appellant to the effect that once a notice under Section 153A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o file returns for six AYsimmediately preceding the previous year relevant to the AY inwhich the search takes place. ii. Assessments and reassessments pending on the date of thesearch shall abate. The total income for such AYs will have tobe computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect ofthe six years previous to the relevant AY in which the searchtakes place. The AO has the power to assess and reassess the'total income' of the aforementioned six years in separateassessment orders for each of the six years. In other words therewill be only one assessment order in respect of each of the sixAYs in which both the disclosed and the undisclosed incomewould be brought to tax . iv. Although Section 153 A does not say that additions should bestrictly made on the basis of evidence found in the course of thesearch, or other post-search material or information availablewith the AO which can be related to the evidence found, it doesnot mean that the assessment can be arbitrary or made withoutany relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basisof s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. 40. On the issue of addition sans incriminating material, the learned counsel for the assessee submitted that there are two views of various judicial authorities. It is a settled legal position that if two views are possible on a particular issue, the view which isfavourableto the assessee should be followed. [C.I.T. vs. Vegetable Products Ltd. 88 ITR 192 (SC)]. 41. The learned counsel for the assessee further submitted that in the assessee s case, there are no incriminating material whatsoever in relation to investment in shares of Adroit Industries (India) Ltd. in assessment year 2007-08, transfer of these shares in assessment year 2008-09 and their re-acquisition subsequently in assessment year 2010-11. No proceedings in relation to assessments for these assessment years were pending and therefore no addition could have been made in assessment completed u/s.153A r.w.s. 143(3) of the Act in the absence of any incriminating material on account of unexplained cash credits in assessment year 2008-09 and unexplained investment in assessment year 2010-11.The addition made by the assessing officer by way of reassessment in relation to impugned concluded assessments amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and seizure action has taken place u/s 132 of the Act or a requisition has been made u/s 132A, the provisions of section 153A trigged and Assessing Officer is bound to issue notice u/s 153A of the Act. Once notices are issued u/s 153A of the Act then assessee is legally obliged to file return of income for six years. The assessment and reassessment for six years shall be finalised by the Assessing Officer. It is also held by various Courts that once notice u/s 153A of the Act issued, then assessment for six years shall be at large both for Assessing Officer and assessee have no warrant of law. It has been also held that in the assessment years where assessments have been abated in terms of second proviso to section 153A then Assessing Officer acts under original jurisdiction and one assessment is made for total income including the addition made on the basis of seized material. But where there is no abatement of assessments and assessments were completed on the date of search then addition can be made only on the basis of incriminating documents or undisclosed assets, etc. In these cases there was no incriminating document found and seized in relation to sale and repurchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard to the assessment made on the basis of notices issued u/s 153A of the Act, we would like to hold that in a recent decision Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act, only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which was not produced or not already disclosed or made known in the course of original assessment. In all these cases no assessments were pending on the date of search for both the assessment years 2008-09 and 2010-11. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCIT; Madugula vs. DCIT; CIT vs. Chetandas Laxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Marg, Indore(M.P) AADCM5417F 3000000 5 Persuit Security P. Ltd. 16-A,Amita Apartment First Floor ,Kastoorba Road no.5 Boribvali Mumbai AAACP3800E 5000000 19000000 2.2] The assessee had filed confirmation letters in respect of share application money of ₹ 1900000/- as received it from all the above company. 2.3] That copy of share application money and Board resolution has also been filed where ever applicable. 2.4] That identity of the share holders and genuineness of the transactions have duly explained. 2.5.1] That in the case of M/s Sundrop Securities P Limited, Pramila Investment Finance Limited, Neema Investment P Limited, Money Penny Fincom P Limited and Pursuit Securities P Limited assessment for the Assessment Year 2005-06 was completed under scrutiny U/s 143(3) of the Income Tax Act by your office and by the office of ITO 5(1) and ITO 5(2), Indore. 2.5.2] That in the assessment of all these companies amount received by them on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 Pramila investment finance 3000000 3 Neema Investment P Limited 5000000 4 Money Penny Fincom Pvt. Ltd. 3000000 5 Persuit Security P. Ltd. 5000000 Total 19000000 2.1] Copy of confirmations letter alongwith share application forms and following documents were found during the course of search listed as Page Nos 127 to 322 of LPS- 15. List of such documents are as under:- I] Memorandum and Article of Association II] Copy of Acknowledgement of Income Tax return filed III] Copy of PAN Card IV] Copy of Audited Final account V] Copy of share application form VI] Copy of Board resolution 2.2] That from the above papers as found during the course of search, existence, Identity and capacity of the share application money stand proved. 2.3] That additional papers as obtained by the assessee from the Registrar of Companies are enclosed. 2.4] That entire amount of share application money were received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare application money as received by the assessee company can not be treated as properly explained. In fact these companies have became quite notorious for giving share application money to various entities in and around Indore. There modus operandi is to get the cash deposit in their bank accounts and then provide entry for share application money by Cheque. In fact there companies have no business what so ever and which companies have been opened only for providing entries for share application money. These companies are nothing but dummy companies closely held and acting on behalf of certain individuals, who are engaged in the business of providing entries for share application money to various parties. Reliance is placed on the decision of the Hon ble Madhya Pradesh High Court in the case of Commissioner of Income Tax V/s Rathi Finlease Ltd. reported in (2008) 215 CTR (MP) 249 and decision of Hon ble Calcutta High Court in the case of Commissioner of Income Tax V/s Nividen Vanijya Niyojan Ltd. Reported in (2003) 182 CTR (Cal) 605. Considering the facts of the case as discussed above, share application money of ₹ 1,90,00,000/- (Rupees One Crore Ninety Lacs On ..... X X X X Extracts X X X X X X X X Extracts X X X X
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