TMI Blog2019 (5) TMI 1893X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. GSD Trading and Financial Services Pvt. Ltd. In the statement of Mr Rajesh Daftary there is nothing contrary to the evidences produced by the assessee during the original assessment proceedings or during proceedings u/s 153A We are therefore not in agreement with the conclusion drawn by Ld. CIT(A) that the statement of Shri Rajesh Daftary is an incriminating material and accordingly the order of Ld. CIT(A) is set aside on this issue and AO is directed to delete the addition. The legal issue raised in ground no 1 to 5 by the assessee is allowed. Addition u/s 68 - creditworthiness and genuineness of the parties from whom share application money was received were not proved - assessee has submitted all the proof, documents and evidences in respect of said investment in the original assessment proceedings as well as the proceedings under section 153A of the Act in the form of share application, bank statement, audited financial statement and memorandum and article of association, ITRs, name of the bank from where the payments were made. The said investments were duly reflected in the books of GSD Trading and Financial Services Pvt. And were also shown in the schedule of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. incriminating material was found is erroneous and contrary to the facts of the case. 3. On the facts circumstances of the case the appellant prays that in the order passed by Ld. Commr. of Income Tax (Appeals) that there is a reference to incriminating material found during the course of search in respect of the transaction of investment by GSD Trading Financial Services Pvt. Ltd., is bad in law. In view of this the appellant prays that the order passed by Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 153A and confirming the additions made of ₹ 7,91,00,0007- is not justified and be deleted. 4. On the facts circumstances of the case the appellant prays that during the original assessment proceedings the complete information about the share capital received from GSD Trading Financial Pvt. Ltd. amounting to ₹ 7,91,00,0007- was submitted and the Ld. Assessing Officer has passed the order u/s 143(3) and has accepted the claim of the appellant after due verification. No new material is found during the course of search as regards the share capital issued by the appellant. In view of this the appellant prays that that the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant may be accepted and addition made by the Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 68, amounting to ₹ 7,91,00,000/- may be deleted. 10. On the facts circumstances of the case the appellant prays that the amount received towards share capital is in the nature of capital receipt and the provisions of Section 68 cannot be invoked while computing the total income of the appellant. The appellant prays that the addition made by the Ld. Commr. of Income Tax (Appeals) by invoking the provisions of Section 68 amounting to ₹ 7,91,00,000/- may be deleted. 11. The Ld. Commr. of Income Tax (Appeals) has erred in confirming the levy of interest u/s 234B. The appellant denies the liability of payment of interest u/s 234B. On the facts circumstances of the case the appellant submit that levy of interest u/s 234B is not justified and be deleted. 12. The appellant craves leave to add / withdraw or amend any ground(s) of appeal at the time of hearing. 3. Whereas the ground raised by the Revenue is as under: Whether on the facts and circumstances of the case, the CIT(A) was right in giving relief to the extent of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 139(1) of the Act. During the course of search, no incriminating material with regard to issue of share capital or investors was found or seized as is clear from the copies of panchnamas placed at page Nos.20-21 and 22-25 of the paper book respectively. In these panchnamas there was no reference to finding of any material relating to share capital/investors and on page No.24 there is a reference to certain loose papers. However, none of them were incriminating and relating to the issue of share capital. The AO on the basis of search operation observed that assessee had issued the share capital consisting of 24,18,400 equity shares of face value of ₹ 10/- at ₹ 115/- to 16 parties. The AO also noted that in the same year, the assessee allotted 14,77,600 shares to Gajipara family/Patel family at par. The AO noted that in the immediately succeeding assessment year i.e. 2011-12, the equity shares issued at a premium were purchased by two companies M/s. Sheenathji Organiser P. Ltd. M/s. Shantam Stock Trading Pvt. Ltd. which were under the control by Gajipara family at a paltry sum of ₹ 5/- per share. Thus the AO found that the share was initially issued to 16 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f share capital and share premium, the details whereof are given on page No.14 to 17 of the assessment order. According to the AO the assessee has failed to prove as to how the shares were issued at a premium of ₹ 115/- per share when the company was not having any substantial business to justify the charging of premium and ultimately the entire amount of ₹ 30,23,00,000/- was added to the income of the assessee as unexplained cash credit under section 68 of the Act by framing assessment under section 143(3) read with section 153A vide order dated 27.12.2016. 5. In the appellate proceedings, the Ld. CIT(A) partly allowed the appeal of the assessee by deleting the addition to the tune of ₹ 22,32,00,000/- by holding that the addition can not be made de hors incriminating material seized during the year qua said share capital/share premium raised by the assessee from 15 parties while the Ld. CIT(A) sustained the addition to the extent of ₹ 7,91,00,000/- by treating the statement of Shri Rajesh Daftary as incriminating material with respect to investment made by M/s. GSD Trading and Financial Services Pvt. Ltd. by observing and holding as under: 17.6 I hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Appellant company, which are placed at Page 254 to 256 of the Paper Book (Part-1) filed during the course of the appellate proceedings. 19.2 I have gone through the various Panchnamas drawn in the name of the Appellant Company, list of the books of accounts and other material seized during the course of the search operation. I am constrained to note that there is no reference to the share capital/share premium in any of the said seized documents. This particular observation is further reinforced by the fact that even in the showcause notice dated 23.11.2016 issued by the Assessing Officer, during the course of proceedings u/s. 153A of the Act, there is no reference to any seized material in relation to the issuance of shares. Even the assessment order passed by the AO u/s 153A r.w.s. 143(3) of the Act doesn't refer to any incriminating material found / seized, during the course of search operation. These facts clearly show that the contention of the appellant that no incriminating material was found during the course of search operation conducted on the Appellant Company is true. 19.3 The Appellant Company had vehemently contended that during the course of assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court 1-13 2. Anil Mahavir Gupta V/s Asst. Commissioner of Income-tax 182 TTJ 265 (2017) Mumbai ITAT 14-39 3. Balasore Alloys Lts. V/s Asst. Commissioner of Income-tax ITA No.1166/621/667/ Mum/2015 Mumbai ITAT 40-56 4. Commissioner Of Income-tax-II, Thane Vs continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 Bombay High court 57-84 5. M/s Dalwala Securities Ltd. V/s Dy. Commissioner of Income-tax ITA no. 5932 to 5934/M/2009 Mumbai ITAT 85-99 6. Commissioner of Income-tax-20 Vs Shri Deepak Kumar Agarwal IT A no. 1709 of 2014(2017) Bombay High court 100-115 7 PCIT Vs Desai Construction Private Limited 387 ITR 552 (2017) Gujrat High Court 116-122 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consequences of a search carried out u/s 132 are mentioned in clause {b), whereby the A.O. is required to assess or reassess the total income of those six years. As such, the AO has no option but to make an assessment in respect of all the concerned six years. He has to bring the proceedings to a logical conclusion by making an assessment of the returns filed for all the six years. 20.2 Having said so, the next question, which needs to be addressed is - what issues can be taken up for assessment u/s 153A of the Act, in a case where at the time of the search operation, the original assessment was already completed, 20.3 In such a scenario, the second proviso to Section 153A(1) specifies that any assessment or reassessment falling with the period of six assessment years pending on the date of initiation of search under section 132 or requisition of books under section 132A as the case may be, shall abate. In this regard, the relevant proviso is reproduced below:- S. 153A. .......Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be altered. 20.7 The Special Bench of Hon'ble Mumbai 1TAT in the case of All Cargo Global Logistics Ltd vs DCIT(2012) 147 TTJ 0513 (SB) : (2012) 74 DTK 0089 (SB) : (2012) 137 JTD 0287 (SB) : (2012) 18 ITR 0106 (SB) has observed as under: 52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. 20.8 It has been categorically observed in the above mentioned judgment that only the pending proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course of the proceedings u/s 132 of the Act establish that the reliefs granted under the finalized assessment/reassessment were contrary to the facts unearthed during the course of search operation. 20.14 In the case referred, supra, the Hon'ble Bombay High Court has upheld the following observations of Hon'ble ITAT:- i. On a plain reading of Section 153A of the Income-tax Act, it becomes clear that on initiation of the proceedings under Section 153A, it is only the assessment / reassessment proceedings that are pending on the date of conducting search under Section 132 or making requisition under Section 132A of the Act stand abated and not the assessments/reassessments already finalized for those assessment years covered under Section 153A of the Act. ii. By a circular No. 8 of 2003 dated 18-9-2003 (See 263 JTR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/ reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By a circular No.8 of 2003 dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under Section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalized assessment/reassessment shall not abate. It is only because, the finalized assessments/reassessments do not abate, the appeal, revision or rectification pending against finalized assessments/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under Section 153A, the assessments/reassessments finalized for the assessment years covered under Section 153A of the Income-tax Act stand abated cannot be accepted. Similarly on annulment of assessment made under Section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). 11. In the present case, as contended by Shri Mani, learned counsel for the assessee, the assessment for the assessment year 1998-99 was finalized on 29-12-2000 and search was conducted thereafter on 3-12- 2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is answered as under: a) In assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s 153A for which assessments shall be made for each of the six assessment years separately; b) In other cases, in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material which in the context of relevant provisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. 20.18 The Hon'ble Mumbai Tribunal in the case of Guruprerana Enterprises v. ACIT (57 DTR 465), has held that only the assessments pending before the AO for completion shall abate u/s. 153A and the issues decided in the assessment cannot be reconsidered and re-adjudicated, unless there is some fresh material found during the course of search in relation to such points. 20.19 The Hon'ble Ahmedabad Tribunal in the case of Meghmani Organics Ltd. vs. DCIT (129 TTJ 255)[2010], has held that where there are no pending assessments as on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding in appeal or in revision cannot be said to be complete and therefore assessment/re-assessment pending in appeal/revision could also to be considered as pending on the date of search but the CBDT in the circular No.7 of 2003 dated 5.9.2003 has clarified that appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 will not abate. In other words, only the assessments pending before the Assessing Officer for completion shall abate. In this case there is no dispute that on the date of search, the assessment in the case of assessee had already been completed by the AO and in terms of the circular of the CBDT, the regular assessment made in case of the assessee will not abate. Therefore in our view the points/ issues decided in the assessment cannot be re-considered in the proceedings under section 153A unless there is some fresh material found during the course of search in relation to such points/issues. 20.22 The Delhi Tribunal in the case of Sanjay Aggarwal v, DOT (47 taxmann.com 210) has after considering the decision of All Cargo Global Logistics Ltd. held, as under:- In view of provisions of section 153A, in respect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted and the AO gets a free hand to make the assessment. In circumstance (b), there is no question of abatement as the proceedings are not pending and the AO has to pass an assessment order u/s 153A to assess the undisclosed income. In circumstance (c), the AO has to pass an assessment order though as there is no incriminating material no income can be assessed. On facts, as the assessments were completed and there was no incriminating material found during the search, the AO was not entitled to make any addition. 20.27 In the case of Guruinder Singh Bawa v DCIT, (2012) (28 taxmann.com 328), the Hon'ble Mumbai IT AT has held that where in search assessment under section 15 3A, all assessments pertaining to six immediately preceding assessment years were complete, the AO can't make any addition there-under, unless there is any incriminating material recovered during search. 20.28 The Hon'ble Delhi High Court in a recent decision in the case of Pr. CIT vs. Meeta Gutgutia [2017-TIOL-1000HC-DEL-IT], has affirmed the view that no addition can be made for a particular assessment year without there being an incriminating material that relates to the said assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material is found during the course of search, the assessment u/s. 153Aof the Act is to be made on originally assessed income and no addition or disallowance can be made de hors the incriminating evidences recovered during the course of search. Whole Share Capital added by generalizing the statement of Mr. Raiesh Daftrv 21.0 The AO had in Para 3.6 of the assessment order passed u/s 153A of the Act arrived at certain conclusions and since, the same goes to the root of the matter, it is reproduced hereunder:- 3.6.......The survey u/s 133A conducted at one of such allottees, i.e. M/s GSD Trading Financial Services Pvt. Ltd., wherein detailed statement Mr. Rajesh Daftary was recorded, proved that they were engaged in the activity of providing accommodation entries in the garb of share capital/ share premium and unsecured loan etc. through a number of companies. Such companies need not be directly owned by such accommodation entry providers, as many a times they keep benamidars at the front while manage whole their affairs personally 21.1 The above observations of the AO clearly reveals that the AO had in his possession only the statement of Shri Rajesh Daftary and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which the learned AO has failed to furnish. There is a long mental distance between 'may be true' and 'must be true' and this basic and golden rule helps to maintain the vital distance between conjectures and sure conclusions to be arrived at, on the touchstone of a dispassionate judicial enquiry based upon a complete and comprehensive appreciation of all features of the case, as well as the quality and credibility of evidence brought on record. Reliance is placed on Ashish Batham v. State of MP, AIR 2002 SC 3206. 21.6 The act of raising of presumption itself does not amount to proof. Presumption however strong, cannot take the place of evidence. Reliance is placed on the decisions of Pooja Bhatt 66 TTJ (Mum) 817 D. M. Kamani (HUF) 65 TTJ (Pat) 504.lt is well settled by the Hon'ble Supreme Court in more than one decision that courts have to be watchful and avoid the danger of suspicion to take place of legal proof for some time, unconsciously it may happen to be a short step between moral certainty and legal proof. In this regard, reference may be made to the judgment in the case of Narendra Singh v. State ofMP, 2004 SCC 1893. 21.7 It is well settled pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any material at all There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. Commissioner of Income-tax, Punjab. 21.11 The Punjab Haryana High Court in C/T v. Anupam Kapoor [2008] 299 ITR 179did not believe on the allegation: A cheque had been taken by thelieneficiary i.e. by paying cash equivalent to the cheque amount and the premium thereon . The Hon'ble Court at page 182 observed: There was no material before the Assessing Officer, which could have led to a conclusion that the transaction was, simpliciter a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the Assessing Officer, merely on surmises and conjectures . 21.12 The Hon'ble Supreme Court in Parimisetti Seetharamatnma v. CIT [1965] 57-ITR-532 at 536-537observed: - 'By sections 3 and 4, the Indian Income-tax Act, 1922, imposes a general liability to tax upon all income. But the Act does not provide that whatever is received by a person must be regarded as income lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search operation conducted u/s 132 of the Act, the Appellant Company / directors / promoters had not been confronted at all with any material whatsoever regarding the so called bogus share capital / share premium. Complete Details furnished in the Proceedings u/s 153A of the Act 23.0 During the course of the assessment proceedings u/s 153A of the Act, the Appellant Company was asked to prove the identity and credit worthiness of the subscribers and the genuineness of the transaction. The Appellant company was also show caused as to why the amount received as share capital and share premium should not to be added back to the total income, as unexplained cash credit u/s 68 of the Act. 23.1 During the 153A proceedings, the Appellant Company had again furnished ledger account confirmation and bank statement of all the parties in which payments made to the Appellant Company on account of share capital / share premium are fully reflected. The Appellant Company had also furnished to the AO, copies of the Income Tax Return, Auditor's Report, Balance Sheet, Profit Loss Account alongwith schedules etc. The Financials of all the subscribers reflected the investment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153A of the Act and has added the entire share capital and share premium in a routine manner without making any effort to bring any material evidence on record. 24.3 It is the AO's duty to establish with evidences that the facts stated by the Appellant are not correct, since the law of burden is canonized in common law doctrine incumbitprobatio qui dicit non qui negat , i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. Nevertheless, the A.O. apart from raising suspicions about the credit worthiness of the parties based on pure assumptions has not brought on record any material to justify such suspicions and assumptions. In the instant case, the A.O. did not carry any of his doubts to a logical conclusion by converting them into hard facts on the basis of evidences during the assessment proceedings. 24.4 I have also taken note of the fact that there was enough time left for completing assessment but the Assessing Officer had passed the order without investigating in to the facts the appellant's case. The Assessing Officer had powers to issue summons to parties u/s 131 of the Act or could have called for information u/s 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder passed u/s 153A of the Act, the vital fact that the share capital / share premium had been held genuine by the AO in the original assessment proceedings. Thus, it had been contended that the assessment order passed by the AO is based on the appreciation of wrong facts. Survey conducted u/s 133A on M/s. GSD Trading Financial Services Pvt. Ltd. 25.0 I have noted that the Inv. Wing had conducted the survey operation only on one of the share subscriber viz. M/s. GSD Trading Financial Services Pvt. Ltd. In Para 3.6 of the assessment order passed by the Assessing Officer u/s 153A of the Act, it had been clearly stated that a survey u/s. 133A of Act had been conducted at one of the share allottee namely, M/s. GSD Trading Financial Services Pvt. Ltd.. It was during the course of this survey operation that a detailed statement of Mr. Rajesh Daftary was recorded. Though, the statement of Mr. Rajesh Daftary was recorded specifically in relation to the investment made by M/s. GSD Trading Financial Services Pvt. Ltd., it is noted that the Assessing Officer has generalized the statement of Mr. Rajesh Daftary for all the share subscribers. Analysis of the Statement of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as incriminating, then it should be restricted to the investment made by M/s GSD Trading Financial Services Pvt. Ltd. only and the statement of Mr. Rajesh Daftary should not be generalised on conjectures and surmises to cover all the shareholders. 26.4 I have gone through the statement of Mr. Rajesh Daftary, a copy of which had been filed during the course of appellate proceedings. The statement of Mr. Rajesh Daftary had been recorded U/s. 131(1A) of the Act on 28.01.2015 at M/s GSD Trading Financial Services Pvt. Ltd., Arihant , Shramjivi Society, Dhebar Road, Opp. AndhMahlla Vikas Gruh, Dhebar Road, Rajkot. The relevant portion of the statement of Mr. Rajesh Daftary is reproduced hereunder;- Q2 Please mention the name of business concerns in which you and your family members are interested. Ans. Sir, the list of business concerns in which me and my family members have interest: Sr. No. Name of Business Concern Name of the Family member Relation 1. D.S. Integrated Finsec Pvt, Ltd, Self and ila Rajesh Daftary, and Ami Rajesh Daftary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Financial Services Pvt. Ltd. The relevant Q.No.6 7 and the answer to the same is reproduced, hereunder:- *Q.6Kindty mention the business activities being carried out by your Group companies and concerns of your family. Ans. Sir, in this regard I would like to state that: Sr. No. Name of the Company Brief of Business Activity 1. M/s. D. S. Integrated Finsec Pvt. Ltd. This company was purchased from a party from Ahmedabad, the name of contact person named Chavda, who is a CA. I don't remember exact details of concerned person. The company is NBFC and into the business of finance. The Books of accounts are being maintained at our office at Arihant, Sharamjivi Society, Opp. AndhMahilaVikasGruh, Dhebar Road, Rajkot. 2. M/s. Samvedna Builders Pvt. Ltd. This company was purchased from a party from Ahmedabad, the name of contact person named Chavda, who is a CA. I don't remember exact details of concerned person. The company is engaged in the business of building and construction. The books of accounts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me also, Sh. Prakash Bagrecha was the director of the company. This investment was sold in the financial year 2010-11.At that time also Sh. Prakash Bagrecha was \ the director of the company. I do not have records as regards sale of these shares at this moment. I will contact Mr. Prakash Bagrecha and submit the required details later. Q.25. The amount of ₹ 7.91 Crores is a big amount. It does not appear to be credible that you don't know the sale of securities which were purchased for ₹ 7.91 Crores. Ans. Sir, this transaction was done when Mr. Prakash Bagrecha was I director of the company and when he controlled affairs of the company. I will contact Mr. Prakash Bagrecha and submit the required details in this regard later. Q26. A chart as under is prepared as under, of investments made in Geetanjali Space Pvt Ltd on the basis of records of your office. F.Y. 2009-2010 A.Y. 2010-2011 Date Corresponding Received Payment/Inv Amount immediate receipt in Kotak Mahindra Bank on account of cheque issued by Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5000000 19.03.2010 Daffodil Commotrade Pvt Ltd 5000000 19.03.2010 Geetanjali Space Pvt Ltd 5000000 22.03.2010 Damodar Tie Up Pvt Ltd 5000000 22.03.2010 Geetanjali Space Pvt Ltd 5000000 23.03.2010 Daffodil Commotrade Pvt Ltd 5000000 23.03.2010 Geetanjali Space Pvt Ltd 4450000 25.03.2010 Damodar Tie up Pvt ltd 4000000 25.03.2010 Geetanjali Space Pvt Ltd 3000000 29.03.2010 Damodar Tie Up PvtLtd 4900000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in the proceedings U/s. 153A of the Act. 26.9 In the case of Commissioner of Income-tax, Thichur Vs. ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala), the Hon'ble Kerala High court has held that neither under section 132 or under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153AoftheAct. 26.10 In the case of B. Kishore Kumar Vs CIT, 234 Taxman 771(SC), the Hon'ble Supreme Court has dismissed the SLP against High Court's order, wherein it was held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents. Further, it was held that it is not the case of the assessee that the admission made by him was incorrect or there is a mistake. When there is a clear and categorical admission of the undisclosed income by the assessee himself, there is no necessity to scrutinize the documents. 26.11 In the case of Dayawanti through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other shareholders are concerned, since there is no reference to them in the said statement of Mr. Rajesh Daftary, the same cannot be treated_as incriminating for other shareholders. Accordingly, the Ground Nos. 1 to 4 of the present appeal raising juris die tional issue relating to the scope of section 153A of the Act in a case of completed assessment is partly allowed. 6. Now the assessee is in appeal before us challenging the order of Ld. CIT(A) both on legal issue challenging the jurisdiction of the AO to make addition qua share capital and share premium de hors incriminating materials found during the search as well as on merit whereas the Revenue has challenged only the issue on merit and no jurisdictional issue was raised in Revenue s appeal. 7. The Ld. A.R. vehemently submitted before the Bench that the issue of share capital of issuing 2418400 equity shares whereby the assessee raised ₹ 30,23,00,000/- from 16 entities to whom the shares were issued at a face value of ₹ 10/- each at a premium of ₹ 115/- comprising ₹ 2,41,84,000/- as share capital and ₹ 27,81,16,000/- share premium account was examined thoroughly in the original asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. The Ld. A.R. argued that in the statement of Shri Rajesh Daftary there is no reference to the search which was carried out on the assessee and he never admitted that he was engaged in the business of providing accommodation entries. The Ld. A.R. argued that Shri Rajesh Daftary has only stated in answer to the question No.2 3 that he had control over M/s. GSD Trading and Financial Services Pvt. Ltd. when the investment was made and thereafter in reply to question No.11 he stated that share holding in M/s. GSD Trading and Financial Services Pvt. Ltd. he got control of the company only on 28.05.2010 whereas the transaction of issue of shares had taken place on 28.02.2010 and 31.03.2010. The Ld. A.R. further referred to the statement specifically query No.24 of the statement in reply to which Shri Rajesh Daftary has stated that M/s. GSD Trading and Financial Services Pvt. Ltd. had made investments in the assessee company when he was not a director/shareholder of the company and at that time Shri Prakash Barecha was the director and shareholder of the company. Thus the Ld. Counsel submitted that it is proved beyond doubt that statement of Shri Rajesh Daftary can not have any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld Counsel contended that in the present case also since there is no incriminating material seized by the search party during the course of search in respect of the investments by M/s. GSD Trading and Financial Services Pvt. Ltd. and whatever was found was only the form of share application form, copy of bank account, copy of audited financial statement, copy of memorandum of article of association, copy of ITRs etc. and therefore are in no way can be considered as incriminating material. The Ld. A.R., therefore, prayed that the addition ₹ 7,91,00,000/- may kindly be deleted on the ground that there is no incriminating material found during the course of search qua the said investment. 8. The Ld. D.R., on the other hand, relied heavily on the order of AO and Ld. CIT(A) to the extent that addition was made rightly on the basis of material found during the course of search and also on the basis of statement or Shri Rajesh Daftary who was a director, shareholder in the investor company that he was not a director/shareholder on the date of investment in the assessee company and only taken over the company on 28.05.2010 whereas the transaction of issue of shares had taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded on 27.03.2015. We have examined the copies of panchnamas, copies whereof are placed at page No.20 to 21 and 22 to 25 and find that there is nothing incriminating about the investments/issue of share capital raised by the assessee found by the search party during the course of search. We note that there are some loose papers found and seized during the course of search but none of them were incriminating in nature relating to the issue of share capital. Even in the order framed under section 153A read with section 143(3), there is no whisper about the material found during the course of search or any reference thereto while making the addition. In this case, we observe that the assessment proceedings were already completed vide order dated 18.03.2013 passed under section 143(3) and the assessment has not abated on the date of search and any addition could only be made on the basis of incriminating material found during the course of search. The Ld. CIT(A) has deleted the addition to the extent of ₹ 22,32,00,000/- on the ground that there is no incriminating material qua the said issue of share capital found during the course of search and the same was deleted by fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in agreement with the conclusion drawn by Ld. CIT(A) that the statement of Shri Rajesh Daftary is an incriminating material and accordingly the order of Ld. CIT(A) is set aside on this issue and AO is directed to delete the addition. The legal issue raised in ground no 1 to 5 by the assessee is allowed. 10. Even the assessee has a very strong case even on merit which has been challenged by the assessee in ground No.6 to 10. We find from the perusal of the order of AO that assessee was not provided the opportunity of cross examination of Shri Rajesh Daftary and relied on the statement of Shri Rajesh Daftary in the back of the assessee to make the addition by ignoring the fact that the said investment by M/s. GSD Trading and Financial Services Pvt. Ltd. stood verified during the course of original assessment proceedings. Moreover, Shri Rajesh Daftary has nowhere admitted that transaction entered into with the assessee company are not genuine. Shri Rajesh Daftary has only stated that at the time of making the investment in the assessee company he was not director and shareholder of the investor i.e. M/s. GSD Trading and Financial Services Pvt. Ltd. We further find that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers whose creditworthiness and genuineness were not proved. The Ld. D.R. while referring to the buy back of these shares in the subsequent financial year submitted that the said shares were bought back at a very small amount of ₹ 5/- per share and therefore it is clear that the own unaccounted money has been routed to channelize the same into the business of the assessee. The Ld. D.R. submitted that it is very strange that the share issued at a premium of ₹ 115/- of face value of ₹ 10/- were bought back at ₹ 5/-. The mere filing of the documents of the investors and confirmations of the investments from the investors do not prove the genuineness and creditworthiness of the investors. The Ld. D.R. argued that though the AO issued notices under section 133(6) of the Act which were responded by the investors by filing the necessary details but the fact remains that the whole arrangement in which the shares were issued to 16 parties and were bought back in subsequent year is shrouded with doubts and suspicion that whole arrangement was structured in order to plough back the unaccounted money into the business of the assessee. The Ld. D.R. relied on a series of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. A.R. submitted that any subsequent event can not be extrapolated into the current year to make the addition. In defence of his argument the Ld. A.R. relied on the decision of Chartered Motors Pvt. Ltd., Ahmedabad vs. ACIT ITSS(A)/26/Ahd/2012 A.Y. 2008-09 order dated 28.08.2014 wherein it has been held that the subsequent buy back can not be ground for making addition for issue of shares in earlier years. The Ld. A.R. also distinguished the facts of the case as relied upon by the Ld. D.R. and submitted that the ratio of these decisions is not applicable to the assessee s case. Even the ratio laid down by the Hon ble Supreme Court in the case of Pr. CIT Vs NRA Iron Steel (P) Ltd. ITA No.29855/ 2018 dated 05.03.2019 does not apply as in that case upon enquiry by the AO nobody responded and in some cases notices issued were returned unserved whereas in the present case the parties filed their confirmations along with other evidences to prove the investments in the assessee company. The Ld. A.R. relied on a series of decisions, mentioned below, in support of his contentions by submitting that no addition can be made under section 68 of the Act in the hands of the assessee if the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 3755/M/2017 ITA no 3756/M/2017 26. Shalimar Buildcon (P.) Ltd. Vs. Income Tax Officer, Ward-2(2), Jaipur 128 ITD 396 27. Deputy Commissioner Of Income Tax, 1(2) Raipur Vs. RCP Infratech (P.) Ltd., 95 taxmann.corn 163 28. Asstt. Commissioner Of Income Tax, Central Circle-IX, New Delhi Vs. Ravnet Solutions (P.) Ltd. 93 taxmann.corn 59 30. ITO v/s Wiz -Tech Solutions Pvt Ltd. ITA No. 1162 The Ld. A.R. also argued that the assessee is not required to prove the source of source of investment as has been held in the following cases: 1. PCIT vs. Veedhata Tower Pvt. Ltd. ITA No.819 of 2015(Bom) 2. S. Hastimal Vs. CIT 49 ITR 273(Mad) 3. Tolaram Daga vs. CIT 59 ITR 632(Assam) The Ld. A.R. further contended that proviso to section 68 as introduced w.e.f. 01.04.2013 is not applicable retrospectively and thus does not apply to the year under consideration as has been held in the following decisions namely Principal Commr. Of Income Tax Vs. Apeak Infotech 88 taxmann.com 695(Bom) and Commr. Of Income Tax - 1 Vs. Gagandeep Infrastructure (P.) Ltd. 80taxmann.com 272(Bom) The Ld. A.R. finally prayed before the Bench that the appeal of the Revenue may primarily be dism ..... X X X X Extracts X X X X X X X X Extracts X X X X
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