TMI Blog2019 (5) TMI 409X X X X Extracts X X X X X X X X Extracts X X X X ..... Since at the time of initiation of search action u/s 132 the assessment or reassessment was not abated and the additions made in the assessment order passed u/s 153A dated 29th March, 2016 are not based on any incriminating document/material seized, therefore, in view of the decision in the case of CIT vs. Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] , the addition made by the Assessing Officer cannot be sustained. Thus in absence of any incriminating material found during the course of search, no addition can be made u/s 153A of the Act in case of a non-abated assessment. So far as the loose papers seized and inventorised it is an admitted fact that these papers do not belong to the assessee and these papers belong to the six investor companies of the assessee. Further, these are all statutory combined registers which were required to be maintained as per Companies Act, 1956 and the transactions reflected in the registers pertained to the share issue and transfer in relation to those six investor companies of the assessee. Therefore, this cannot be called as incriminating material. - Decided against revenue. - ITA Nos.175 & 176/Del/2017, CO Nos.88 & 89/Del/2017, IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and share premium to the tune of ₹ 19,35,00,000/- and unsecured loan of ₹ 1,50,00,000/- during the year under consideration from the following investors:- 4. He noted that the assessee company is a private limited company having equity shares of face value of ₹ 10/- each. However, the assessee has shown receipt of huge premium of ₹ 90/- per share. All these six share applicants, i.e., the investors are also private limited companies incorporated in the preceding year only. He observed that the search action u/s 132 of the IT Act was conducted on 18th June, 2013 at the registered offices of all the aforesaid six companies situated at Shanti Niketan Building, 8, Camac Street, Kolkata. During the search, consequential survey action u/s 133A of the Act was conducted at 133, Canning Street, Kolkata where statements of the directors of some of the above mentioned companies were recorded u/s 131 of the Act on 18th June, 2013. He observed that in their statements, all of them have stated that the companies in which they are directors are solely jamakharchi/paper companies used for providing accommodation entries. They ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xiv) Copy of board resolution of assessee company; xv) Copy of Form 2 for allotment of shares filed by assessee company before ROC; xvi) Copy of Form 20B (Annual Return) filed by assessee company before ROC; and xvii) Copy of bank statement of assessee company. xviii) Details/information of source of fund for investment made. 2.1 It is also submitted that all the shareholders have independently confirmed their investment as well as unsecured loan g iven in response to notices u/s 133(6) of the Act. In view thereof the submission of assessee is that assessee has at its end furnished complete details and evidence in the shape of confirmation (both independent and otherwise) income tax particulars, bank statements and audited financial statements of shareholders to discharge the burden in respect of share capital subscribed and unsecured loan g iven by the shareholders of assessee company and also establish that such companies cannot in law be called to be paper companies havin g no business of their own except of providing accommodation entries. The assessee in support of the above also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not paper companies: when they independent sources of investment which sources are being independently examined in their hands. A not on lifting of corporate veil enclosed herewith (Pages 262-265 of this reply) 2.4 Having regard to the above, it ought to be held that the shareholders companies are not paper companies having no business of their own except providing accommodation entries. There is no material to support the aforesaid and therefore the submission is that allegation in the notices is legally and factually misconceived . 7. However, the Assessing Officer was not satisfied with the explanation given by the assessee. From the various details furnished by the assessee in the case of the aforementioned six companies, the Assessing Officer observed that the investors/shareholders which are private limited companies are not actively engaged in any business. From the documents furnished by the above mentioned investors u/s 133(6) of the IT Act, he noted that these companies have share capital and share premium running in crores of rupees whereas they have declared meager income. Further, some of the directors of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an afterthought and the person is making a false statement just to accommodate the assessee. He noted that in his reply to Question No.12 on 18th June, 2013, Shri Rajesh Kumar Surana in his own handwriting had written that he had given the statement without any threat or pressure. The Assessing Officer similarly recorded the statements of Shri Sanjay Kumar Singhi, Sandeep Kumar Singhi and Shri Jivendra Mishra who had given similar replies as by Shri Rajesh Kumar Surana. Rejecting the various explanations given by the assessee and observing that the assessee failed to substantiate the credit worthiness and genuineness of the six companies who have made investment in the shares of the assessee company, the Assessing Officer, invoking the provisions of section 68 of the IT Act, made addition of ₹ 20.85 crores to the total income of the assessee. The Assessing Officer further made addition of ₹ 10,42,500/- u/s 69C of the IT Act being the commission expenses incurred for obtaining accommodation entries which is 0.5% of the accommodation entry of ₹ 20.85 crores. Thus, the Assessing Officer accordingly determined the total income of the assessee at ₹ 23,65,85,8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court in the case of Kabul Chawla (supra). The relevant observation of the CIT(A) at para 6.4 read as under:- 6.4 I have carefully considered assessment order, written submissions, case laws relied upon and oral arguments of Ld.AR. The objections/arguments of the appellant are discussed as under:- (i) In the assessment order, the following additions have been made u/s 153A, without seizing any incriminating document/material during the search and seizure action u/s 132 on 18.6.2013: (a) Unexplained cash credit on account of share application/premium u/s 68 of the Act :₹ 20,85,00,000/- (b) Unexplained expenses u/s 69C of the Act :₹ 10,42,500/- Therefore, it is submitted by the appellant that in absence of any incriminating document/material, no addition can be made u/s 153 A of the Act, when the assessment is not abated at the time of initiation of the search action u/s 132 of the Act. Therefore, in these facts and circumstances, I agree with the arguments of the appellant. (ii) As, I have already held (supra), while deciding in ground no. 2, that no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tenable on facts and in law. 7 That the grounds of appeal are without prejudice to each other. 8. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. 12. The ld. DR strongly opposed the order of the CIT(A) deleting the addition by relying on the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra) . Referring to the decision of the coordinate Bench of the Tribunal in the case of ITO vs. M/s Synergy Finlease Pvt. Ltd. vide ITA No.4778/Del/2013, order dated 8th March, 2019 , he submitted that the Tribunal, following the decision of the Hon'ble Supreme Court in the case of Pr. CIT, Central-1 vs. NRA Iron Steel reported in 103 taxman.com 48, has allowed the appeal filed by the Revenue and upheld the addition made by the Assessing Officer u/s 68 of the Act on account of share capital and share premium. Referring to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. NDR Promoters, 102 taxman.com 182 , he submitted that the Hon'ble Delhi High Court has upheld the addition made by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minating material found as a result of the search, therefore, in view of the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the addition made by the Assessing Officer is not sustainable and the order of the CIT(A) should be upheld and the grounds raised by the Revenue should be dismissed. Merely because the Revenue has filed an appeal before the Hon'ble Supreme Court against the decision of the Delhi High Court, the same cannot be a ground to take a contrary view than the view taken by the Hon'ble Delhi High Court unless the same is reversed by the Hon'ble Supreme Court. He accordingly submitted that the appeal filed by the Revenue be dismissed. 14. We have considered the rival arguments made by both the sides and perused the orders of the authorities below. We find the assessee in the instant case filed the original return of income on 25th September, 2009 for the impugned assessment year. The return was duly accepted and intimation u/s 143(1) of the Act was issued. No assessment or reassessment was completed u/s 143(3) or 148 of the IT Act and no notice u/s 143(2) of the Act was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material. We, therefore, do not find any infirmity in the order of the CIT(A) in deleting the addition. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the Revenue are dismissed. CO No.88/Del/2017 (A.Y. 2009-10) 16. The ld. counsel for the assessee did not press the grounds of the Cross Objection filed by the assessee for which the ld. DR has no objection. Accordingly, the CO filed by the assessee is dismissed as not pressed. 17. In the result, the appeal filed by the Revenue and the CO raised by the assessee are dismissed. ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 39/Del/2017 18. In all the above appeals, the Revenue has raised identical grounds wherein addition made by the Assessing Officer u/s 68/69C have been deleted by the CIT(A) on the ground that no incriminating material was found and seized during the course of search and also subsequently and at the time of initiation of search action u/s 132 of the IT Act the assessment or reassessment was also not abated and the additions are not based on any incriminating document/material. We have alre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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