TMI Blog2018 (1) TMI 1652X X X X Extracts X X X X X X X X Extracts X X X X ..... aw 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. Bogus bill of husk - CIT(A) observed that in the assessment order the AO has not brought any incriminating material based on which the addition was made on account of bogus purchase of husk - No finding that the assessee has used coal in place of husk and obtained bogus bill of husk. No such material has been found during operation u/s 132 of the Act which even remotely suggests suppression of purchase of coal. CIT(A), therefore, observed that he was convinced that addition on account of inflated purchases has been made by the A.O on estimate basis in all the years without bringing any evidence on record in support of his contention. These findings of CIT(A) has not been rebutted by the Revenue by bringing any positive material on record. In absence of the same, we find no good r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 Kamroop Viminay P. Ltd. Kshatriya Commodities Pvt. Ltd, Mansarovar Dealors P. Ltd. Mateshwari Mercantile Pvt. Ltd. Mysol Engineering Pvt. Ltd. Sanket Sales Pvt. Ltd. In case of following share applicants, the notices were returned unserved. Name Shreevar Overseas Nandan Merchantiles Pvt. Ltd. Kamroop Vinimay Pvt. Adishwar Nirman P. Ltd. Mansarovar Dealors P. Ltd. Daha Engg. Credit Pvt. Ltd. Display Commercial Pvt. Ltd. Feeder Tie Up P. Ltd. Ganpati Vencom Pvt. Ltd. Kamroop Vinimay P. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthiness 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 the Act. 5. The AO was not convinced with the submission of the assessee and noted that the legal proposition based on the case laws cited (supra), is clear that the onus lies with the assessee to establish the identity, creditworthiness and genuineness of the cash creditors. The department does not have to establish that the said cash credit was routed through the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... marily. 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 immediately prior to search, Appeal before CIT (Appeals) for A.Y. 2007-08 and preparation for case before ITAT was in progress. The date on Order of CIT (Appeals) for A.Y. 2007-08 is 27/07/2011 and the case before the Hon'ble ITAT for A.Y. 2006-07 was fixed for 17/10/2011. There were voluminous records of share application money received, and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 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 ₹ 2 crores in A.Y. 2006-07. The AO made addition of ₹ 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 original assessment, the AO applied his mind and made the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 evidence against the appellant to demonstrate that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 augmenting the investment in the business has flown from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome 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. Arunananda Textiles (P.) Ltd. [2011] 15 ia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Commissioner of Income-tax [2009] 179 TAXMA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 ₹ 12,71,00,000/- in A.Y 2006-07 and ₹ 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 ₹ 12,71,00,000/- in A.Y 2006-07 and ₹ 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and circumstances of the case, the AO disallowed an amount of ₹ 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 ₹ 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 ₹ 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 Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not availed for 31 months and the Biomass status does not play any role to presume bogus purchases of husk in absence of any cogent material. The assessee objected the observation of the AO that assessee introduced bogus bill of purchase of husk to show production of electricity. No supporting for such belief was found during operation u/s 132 by the department 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 ₹ 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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ling in trade circles. 27. It is not the case of the A.O that the husk purchases debited to Profit Loss A/c remained unsubstantiated. There must be some cogent evidence suggesting that purchases have been inflated. I find that no margin for estimation of suppressed income or inflation of expenses has been allowed even in those cases where instances of suppression of income 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 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) 98.35% 85.77% 82.71% 65.63% 75.09% Power Generated (in Mwh) (d) 21312.00 117694.53 113860.28 108706 95401.08 Consumption in MT for generation of one MWH 1.15 1.37 1.21 1.19 1.23 (*) Plant run for 1 months only. Production started from A.Y. 2007-08. In my considered view, there does not appear any anomaly in the above trading results. I am convinced that the addition on account of inflated purchases has been made by the A.O on estimate basis in all years, however, the A.O has not brought on record any evidence support of his contention. The books of accounts with supporting were produced on two occasions before the AO. It was produced for assessment year 2006-07, 2007-08 2008-09 during original assessment proceedings before the AO as referred supra and subsequently during present proceedings u/s 153A before the AO. No inflation in purchase was observed by AO during original assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave heard rival submissions and perused the orders of lower authorities and materials available on record. The assessee is engaged in the business of power generation. A search and seizure operation was conducted in the case of the assessee on 24th and 25th May, 2011. In pursuance to the same, notice u/s.153A of the Act was issued and impugned orders of assessments were passed. It is not in dispute that assessment for the assessment years 2006-07, 2007-08 and 2008-09 were completed prior to the date of search. In other words, the assessments for these assessment years were not abated. 19. In the present appeals the Revenue has challenged the deletion of addition in assessment year 2006-07, ₹ 12,81,57,130/- on account of share application u/s.68 of the Act and ₹ 10,00,000/- on account of bogus purchase of husk. 20. In the assessment year 2007-08, ₹ 6,61,50,000/- on account of share application money u/s.68 of the Act and ₹ 10,00,000/- on account of bogus purchase of husk. 21. In the assessment year 2008-09, ₹ 10,00,000/- on account of bogus purchase of husk. 22. We find that the above additions made by the AO in the impugned assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al at ₹ 9 Crores was offered by the assessee as its income and it has been contended that the coal surrendered did not pertain to power generation but was meant for trading purpose and also sold subsequently. Therefore, he was convinced that the surrender of excess stock of coal of ₹ 9 Crores has no relation to purchase of husk. He has further observed that there is no finding that the assessee has used coal in place of husk and obtained bogus bill of husk. No such material has been found during operation u/s 132 of the Act which even remotely suggests suppression of purchase of coal. The CIT(A), therefore, observed that he was convinced that addition on account of inflated purchases has been made by the A.O on estimate basis in all the years without bringing any evidence on record in support of his contention. These findings of CIT(A) has not been rebutted by the Revenue by brining any positive material on record. In absence of the same, we find no good reason to interfere with the findings of the CIT(A), which are confirmed and the grounds of appeal of the Revenue for assessment years 2009-10, 2010-11, 2011-12 and 2012-13 are dismissed. 29. Ground No.6 in appeals f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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