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TMI Blog2018 (1) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for documents in the form of statutory records of this Company like Minutes of meeting Register, Share-holders register, Counter-foils of issued share-certificates etc. which are required to be maintained at the registered office of the company. However, no such documents were found. The persons present in the house also could not provide satisfactory explanation in this regard in their statements on oath. Further, the duly filled-in share application forms, supposed to be received from the share-applicants along with the share-application money were not found to be present at the registered office of the company or even at other premises of the group. The AO noted that during the course of assessment proceedings, in order to verify the identity, credit worthiness and genuineness of the transactions related to share application money, notices u/s 133(6) dated 06.11.2013 were issued to the following share applicants :- Name Shreevar Overseas Nandan Merchantiles Pvt. Ltd. Kamroop Vinimay Pvt. Adishwar Nirman P. Ltd. Mansarovar Dealers P. Ltd. Daha Engg. & Credit Pvt. Ltd. Display Commercial Pvt. Ltd. Shreevar Overseas Feeder Tie Up P. Ltd. Ganpati Vencom Pvt. Ltd Kamro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , identify and genuineness of the transaction. The AO also noted these arguments have been tested time and again in the ensuing years at various appellate levels in various cases. The issues are discussed in the following paragraphs and a conclusion drawn that these transactions are covered by section 68. In the light of above discussion, the AO observed that the identity, creditworthiness or genuineness of the transactions is not established by merely showing that the transaction was through banking channels or by account payee instrument. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Certificate of incorporation of company, payment by banking channels, etc. cannot in all cases tantamount to satisfactory discharge of onus. It has been elaborately established in the preceding paras that the assessee had failed to discharge its onus in proving the identity, creditworthiness and genuineness of the share applicants and hence the share application money credited in its books is treated as undisclosed income charged to tax u/s 68 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of applicants, final accounts, Certificate of Registration from ROC, details of investment made by the share applicants, etc. Summary of this has been filed for A.Y. 2006-07 at Page No. 63 to 86 and for A.Y. 2007-08 at Page No. 87 to 97 of the paper books. It was further submitted that the AO has not applied his mind and rejected the explanation summarily. The learned AR further objected the observation of the AO about keeping of share records by the assessee. It is submitted that it is not correct for the AO to say that. It is submitted that no question was raised to the director namely Shri Rajendra Agrawal about share records. Another Director, Shri Amar Agrawal was not present at the time of search operation. He was at Chennai to negotiate deal with Govt. of Tamil Nadu for sale of power by the assessee company. It was submitted that Shri Vijay Agrawal, who is Manager (Finance & Accounts) of the assessee company was present at the time of search operation. He has categorically replied to the question asked about share records. He has replied that share records have been sent to Raipur in connection with Income Tax proceedings taking place at Raipur. It is submitted that immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ITAT/CIT (A) 2,00,00,000/- 42,50,000/- Addition made by the AO in Order U/S 153A 12,71,00,000/- 6,51,50,000/- The AO accepted share applications received from group companies and directors. I find that the evidences filed by the learned ARs include Share Application Form, Acknowledgement of Income Tax Return, audited final accounts, bank statement from where the amount was withdrawn to invest into appellant company, PAN, Incorporation Certificate issued by the ROC, Memorandum & Articles of Association etc. After considering the above evidences in the original Assessment Order for these two years i.e. A.Y. 2006-07 & 2007-08, the AO made addition of Rs. 2 crores in A.Y. 2006-07. The AO made addition of Rs. 42,50,000/- for A.Y. 2007-08. I also find that operation u/s.132 of the Act took place in the case of the appellant company, other group companies, directors and relatives. However, there is no mention in the Assessment Order about any incriminating document found suggesting that the receipt of share application money in the above two years were not genuine or that there is no credit-worthiness of the applicant or the identity of the share applicant is in doubt. In the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts regarding maintenance or otherwise of Statutory records and registers, the A.O simply seems to have found it convenient to remain silent and sit back after making the observation without any pro-per basis. 13. The discharge or otherwise of the onus u/s 68 has been independently evaluated and examined. The present action of the A.O is not culminating from any specific finding against the appellant that it was a beneficiary of any racket which has been unearthed as a result of search proceedings nor has the A.0 brought on record any other evidence to indicate that the appellant did make undisclosed income and such evidence came on the surface as a result of search proceedings. The A.O has not rebutted the evidences submitted by the appellant to demonstrate that the subscribers had sufficient means to invest in the share application/capital of the appellant company, I have evaluated the creditworthiness of the subscribers with reference to the audited financial statements of the subscribers and found satisfactory. In this background, in my considered view, there is no scope and reason to take a contrary view than that taken by the then A.O without there being any documentary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the facts in those decisions with the facts in the case of the appellant. I am convinced that the decisions relied upon by the appellant are certainly applicable in the case of the appellant as the facts are not only similar but identical. The appellant has also relied upon the decision of the Hon'ble Supreme Court and jurisdictional High Court which cannot be ignored. The A.O has referred to the notices issued under section 133(6) which have been returned un-served in some of the cases. I have carefully perused the explanation submitted by the appellant in respect of cases where the notices remained unserved, the submissions of the appellant are found to be convincing. It is further observed that no further enquiry or investigation has been conducted by the AO to corroborate or support the conclusions drawn in the assessment order so as to assess the share capital money as the undisclosed income of the appellant company. In my considered opinion, apart from drawing presumptions, the AO has not brought any clinching material or evidence on record to prove that the said share capital money belongs to the appellant since no nexus has been established that the money for augment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it is also shown that the money did in fact come from them, it is not for the assessee to prove as to how the share applicants came to be in possession of the money. In the light of the above discussion, I am inclined to agree with the arguments and evidences provided by the appellant to substantiate that the transaction regarding Share Application Money received by it were genuine transactions and the same were not accommodation entries. I also do not find any evidence collected by the A.O which could prove otherwise. Accordingly, the AO was not justified in treating the amount of share application money received by the appellant as its undisclosed income. 19. The case of the appellant finds support from the decision in: 1. CIT vs. Kamdhenu Steel & Alloys Limited & Ors. (2012) 68 DTR (Del) 38. 2. In the case of Commissioner of Income-tax v. HLT Finance (P.) Ltd. [2011] 12 taxmann.com 247 (Delhi) 3. In the-case of Commissioner of Income-tax-1V v. Dwarkadhish Investment (P.) Ltd.[2010] 194 TAXMAN 43 (DELHI) 4. In the case of Commissioner of Income-tax v. Winstral Petrochemicals (P.) Ltd. [2011] 10taxmann.com 137 (Deihi) 5. In the case of Commissioner of Income-tax v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the asssssee 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." 21. The case of the appellant also finds support from the following judicial pronouncements:- (a) Commissioner of Income-tax-III v. Namastey Chemicals (P.) Ltd. [2013] 33 taxmann. corn 271 (Gujarat); (b) Commissioner of Income Tax v. Kuber Ploritech Ltd. [2010] 2 DTL ONLINE 136 (DELHI); (c) Commissioner of Income-tax v. Tania Investments (P.) Ltd. IT Appeal No. 15 OF 2009, High Court of Mumbai; (d) Bhav Shakti Steel Mines (P.) Ltd. v. Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as that of the Hon'ble Supreme Court in Lovely Exports has been rendered on identical facts. Hence it is impermissible to deviate from the ratio laid down therein and against the law of judicial precedents. In view of the above and respectfully following the ratio of the binding judgements, the addition of share application/capital money of Rs. 12,71,00,000/- in A.Y 2006-07 and Rs. 6,51,50,000/- in A.Y 2007-08 as unexplained cash credits under section 68 are uncalled for and hence, deleted. The appellant gets relief of Rs. 12,71,00,000/- in A.Y 2006-07 and Rs. 6,51,50,000/- in A.Y 2007-08 23. 10. Ground Nos.3 to 5 in appeals of Revenue for the assessment years 2006-07 and 2007-08 and ground Nos.1 to 4 in appeals for assessment years 2008-09 to 2012-2013 are directed against the order CIT(A) in deleting the additions of Rs. 10,00,000/- made by the AO on account of bogus purchase of husk. 11. Brief facts relating to the above grounds of Revenue in all the assessment years under consideration are that the AO in the assessment order has stated that the assessee company is a biomass based electricity producer in Chhattisgarh. It has generation capacity of 15 MW The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances of the case, the AO disallowed an amount of Rs. 10,00,000/- and added the same to the income of the assessee for each of the assessment years from 2006-07 to 2012-13 on account of inflation of purchases of rice husk. 13. The assessee carried the matter before the CIT(A) and submitted that the addition of Rs. 10,00,000/- on account of so called bogus purchase of husk made by the AO in each of the years i.e., A.Y. 2006-07 to 2012-13 was without any basis, under presumption & surmises and arbitrary. The AO suspected that the appellant who was enjoying biomass status used to inflate purchase of husk. In regard to Show Cause Notice dated 12/03/2014 issued by the AO and enclosed at Page No. 210 of Paper Book, the assessee submitted that there is no whisper of mind of the AO to make such addition in the above notice and no explanation was called from the assessee. The assessee further explained that the AO mentioned reasons to make the above estimate viz., stock of coal offered at Rs. 4.50 crore in each A.Y. 2011-12 & 2012-13, presumption of bogus bills for purchase of husk, letter to supplier of husk returned in some cases, blank bill book of M/s Mittal Enterprises found at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or during assessment proceeding. It was explained by the assessee that M/s Mittal Enterprises left a bill book by mistake in the premises of the assessee. None of the pages of the Bill Book were used. It was also explained by the assessee that no adverse presumption can be drawn. The above M/s Mittal Enterprises was assessed to commercial tax vide Tin 22984942328. The assessee further submitted that a compilation of purchases of husk above Rs. 25 Lakh in a year at Page No. 102 to 105 of Paper Book for all the years were filed as directed by the AO, giving details of Name of supplier, total purchase from the party, addresses of supplier, TIN, PAN and amount of purchases during the year. It was further submitted by the assessee that invoices & supporting of the purchases was produced during assessment proceeding and no discrepancy was found and the accounts are audited. 16. The assessee also filed confirmation from various suppliers placed in Paper Book at Page No. 106 to 182, however, no cognizance is being taken as neither these were filed during assessment proceedings before the AO nor any prayer has been made to admit u/r 46A. The assessee further submitted that compilation p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome or inflation of expenses have been found on the basis of incriminating material except for the period for which suppression of income or inflation of expenses has been unearthed based on cogent and documentary evidence, undisputedly, in the case of the appellant, nothing incriminating has been found, therefore, as held in Deputy Commissioner Of Income Tax Vs. Royal Marwar Tobacco Product (P) Ltd. (2009) 120 TTJ (Ahd) 387 : (2008) 16 DTK 129. The Hon'bie ITAT CHANDIGARH BENCH in Assistant Commissioner Of Income Tax Vs. A.K. Alloys P. Ltd. vide order dated 29th February, 2012 (2012) 17 ITR (Trib) 424 (Chandigarh) has decided in favour of assessee. The extrapolation of figures for estimation of income has been held to be unsustainable in Evergreen Bar & Restaurant Vs. Additional Commissioner Of Income Tax (2008) 6 DTR (Mumbai)(Trib) 56. 28. In my considered view, availability of blank bill book of M/s. Mittal Enterprises, husk supplier, per se, does not support the contention of the A.O that the purchases have been inflated. Purchases have been made from number of suppliers as indicated at Page No. 19 & 20 of the assessment order. The A.O has not rebutted the submission of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently during present proceedings u/s 153A before the AO. No inflation in purchase was observed by AO during original assessment proceeding. The accounts are audited, there is no adverse remark regarding correctness of accounts in the audit report. The A.O. has also not pointed out any defects in the books of accounts nor has any incriminating document been unearthed during operation u/s 132. If any defect in the system and record exists then the A.O. must record a clear finding as held in CITvs Margadarshi Chit Fund Pvt. Ltd. (1985) 155 ITR 442 (AP). In Yaggina Veera Ragha Vulu and Mavuleti Somaraju & Co. vs CIT 62 ITR 528, it was held that assessee is entitled to know the basis for estimation of Turnover and Gross profit. In Seth Nathuram Murmalai 25 ITR 216 (Nagpur), it has been held that ITO must disclose the basis of computation of order and make his order a speaking order to make higher percentage. The "Estimations must not be arbitrary, vague and fanciful, but must be legal and regular. This was held in Masoor Fertilizers Co. vs CIT 59 ITR 268 Madras. The ITAT Banglore bench in CIT vs Gajanand Traders (2006) 104 TTJ (Bang) 1030 observed that A.O. having not made out a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s purchase of husk. 22. We find that the above additions made by the AO in the impugned assessment years were not based on any incriminating material found during the course of the search. 23. The Revenue could not show any incriminating material, which was found during the course of the search on the basis of which above additions could have been made. It is a settled position of law that in an assessment made in pursuance to search in respective assessment years for which assessment proceedings were not abated, additions cannot be made de hors the incriminating materials found during the course of search. We, therefore, do not find any merit in these appeals of the Revenue. Accordingly, the appeals of Revenue for the assessment years 2006-07, 2007-08 and 2008-09 are dismissed. 24. With regard to the addition of Rs. 10,00,000/- each made in the assessment years 2009-10, 2010-11, 2011-12 and 2012-13, we find that the DR relied on the order of the AO and submitted that during the course of search from the residence of one of the Directors, blank bill book printed in the name of an alleged husk supplier, namely, M/s Mittal Traders was found. Further, during the course of search, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, 2011-12 and 2012-13 are dismissed. 29. Ground No.6 in appeals for assessment year 2006-07 and 2007-08 is general in nature hence, requires no separate adjudication by us. 30. In the result, appeals of Revenue for all the assessment years under consideration are dismissed. 31. In the cross objections filed by the assessee, in Ground No.1 for assessment year 2006-07 and in ground No.1 for assessment year 2007-08 and in ground No.1 for assessment year 2008-09, the assessee has challenged the order of CIT(A) in upholding the order of the AO even when on the date of initiation of search proceedings u/s.132 of the Act, no assessment or re-assessment proceedings were pending and no incriminating materials were found during the search operation. Therefore, the assessment made by the AO u/s.153A r.w.s.143(3) of the Act was not according to law and deserved to be annulled. 32. While adjudicating the appeals of Revenue, we have confirmed the order of the CIT(A) on the ground that the assessment for the assessment years 2006-07, 2007-08 and 2008-09 had not abated and, therefore, as no material was brought on record by the Revenue to show that the additions were made in an order passed u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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