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TMI Blog2018 (12) TMI 1927X X X X Extracts X X X X X X X X Extracts X X X X ..... 140/Nag/2018 For Assessment Year 2009-10 1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 83,94,421/- made by the AO being gross profit on bogus purchases, without going into the merits of the case. 2. On the facts and circumstances of the case and in law, the learned CIT (A) erred in holding that during assessment u/s.153A r.w.s. 143(3), it vas not open to the AO to make additions without existences of any incriminating documents found and seized during the search u/s.132(1) overlooking the crucial fact that the original return filed by the assessee was only processed u/s.143(1) and no scrutiny assessment was made earlier. 3. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the scope of section 153(A) is limited assessing only search related income, thereby denying revenue the opportunity of taxing other escaped income that comes to the notice of the AO. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in limiting the scope of section 153A only to undisclosed income when as per the section, the AO has to assess or reassess the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) failed to appreciate that the word incriminating is neither used in section 153A nor defined in the statute and therefore, the deletion of addition on this account is not in consonance of law. 8. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 7,70,00,000/- made by the AO treating the share capital and the share premium received by the assessee as unexplained cash credit u/s.68 of the LT. Act without appreciating the fact that the assessee has failed to establish the creditworthiness of the creditors and the genuineness of the transactions to the satisfaction of the AO. 9. On the facts and circumstances of the case and in jaw, the learned CIT(A) failed to appreciate that the company from wham the share capital along with share premium was received did not have the creditworthiness to fund the share capital and premium and as such neither the creditworthiness nor the genuineness of the transaction is proved. 10. On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate the ground realities that the documents in the case of shell companies are always in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee as unexplained cash credit u/s.68 of the I.T. Act without appreciating the fact that the assessee has failed to establish the creditworthiness of the creditors and the genuineness of the transactions to the satisfaction of the AO. 8. On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate that the company from whom the share capital along with share premium was received did not have the creditworthiness to fund the share capital and premium and as such neither the creditworthiness nor the genuineness of the transaction is proved. 9. On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate the ground realities that the documents in the case of shell companies are always in order so that they can act as a conduit in aiding tax evasion. 10. On the facts and circumstances of the case and in law, the learned CIT(A) erred in relying on the judgment of Hon'ble Bombay High Court ITA No.1613 of 2014 (CIT Vs. Gagandeep Infrastructure Pvt. Ltd.) holding it to be concluded on 20/03/2017, overlooking the fact that the said judgment not admitting the question of law on the retrospectivity has been modif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash credit u/s.68 of the I.T. Act without appreciating the fact that the assessee has failed to establish the creditworthiness of the creditors and the genuineness of the transactions to the satisfaction of the AQ. 4. On the facts and circumstances of the case and in law, the learned CIT{A) failed to appreciate that the company from whom the share capital aiong with share premium was received did not have the creditworthiness to fund the share capital and premium and as such neither the creditworthiness nor the genuineness of the transaction is proved. 5. On the facts and circumstances of the case and in law, the learned CIT(A) failed to appreciate the ground realities that the documents in the case of shell companies are always in order so that they can act as a conduit in aiding tax evasion. 6. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 2,00,00,000/- made by the AO being unexplained cash credit from companies operated by one Kolkata based operator, without going into the merits of the case. 7. On the facts and circumstances of the case and in law, the learned CIT(A) erred in retying on the judgmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case and in law, the learned CIT(A) erred in holding that the AO has disregarded the valuation done by the approved vaiuer overlooking crucial fact that no such valuation was done by the approved valuer during the relevant previous year for the AY, 2012-13. 15. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the action of the AO has resulted in cherry picking ignoring the fact that the AO has culled from the data recorded in Jilaba software found in External Hard Disc Drive seized during the course of action u/s.132. Appeal No. 231/Nag/2018 For Assessment Year 2013-14 1. On the facts and circumstances of the case and in law, the learned CIT(A) erred in deleting the addition of Rs. 18,87,66,428/- made by the AO being unexpiained investment in closing stock, without going into the merits of the case. 2. In the facts and circumstances of the case and in law, the learned CIT(A) erred in holding the findings of the AO that the column in the Jilaba software represent purchase price of the assessee is misplaced and erroneous and without giving cogent reasons, 3. On the facts and circumstances of the case and in law, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tances of the case and in law, the learned CIT(A) erred in holding that the valuation of stock as arrived by the AO which forms the basis of addition u/s.69 is not based on any evidence and is merely based on presumption of the AQ overlooking the fact that the column in Jilaba software is purchase price to the assessee. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erted in holding that the action of the AO has resulted in cherry picking ignoring the fact that the AO has culled from the Data recorded in Jilaba software found in External Hard Disc Drive seized during the course of action u/s.132, Assessee's Appeal Appeal No. 234/Nag/2018 For Assessment Year 2012-13 1. The Hon. CIT{A) erred in confirming the Gross Profit addition of Rs. 2,93,633/- made by Ld. AO without appreciating the facts and circumstances of the case. Appeal No. 227/Nag/2018 For Assessment Year 2014-15 1. The Hon. CIT(A) erred in confirming the addition U/S 68 of the LT. Act of Rs. 1,32,00,000/- made by the Ld. A.O. in utter disregard of the evidences proving the genuineness of the loan submitted during assessment and appellate proceedings. 2. The Hon. CIT(A) wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years 2009-10 to 2014-15 on 22.11.2016. For A.Y., 2015-16 the assessee has filed return of income under Section 139(1) on 06-10-2016. The cases were selected for scrutiny and accordingly, notice u/s 143(2) and 142(1) of the Act, were issued. In response to notices, the authorized representative of the assessee appeared and filed various details, as called for, 5. The AO, on the basis of the statement recorded by the sales tax authorities as regards the bogus purchases and certain investigation carried out by the investigation wing as regards the share application money and loans received by the assessee, came to the conclusion that the purchases were bogus and the transaction of the share application money were not genuine and satisfactorily proved. The AO has added the Gross profit out of the bogus purchases on the ground. that the assessee failed to, prove purchases to the satisfaction of the 4O with necessary materials in the backdrop of clear findings of MVAT on certain parties and their modus operandi of doing hawala/suspicious transactions without any business activity. In so far as share application money and loans, the entire share application money received with premium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position by addressing a letter as per which the stand taken by the assessee has been confirmed. Moreover, the AO has not poined out any difference in quantity, therefore in absence of any discrepancies is quantity merely on the basis of price variation in jilaba software, that too when assessee explained such difference, addition cannot be made for unexplained investments in stock. In so far as unproved toans for assessment year 2014-15 and 2015-16, the Id. CIT(A) confirmed additions for the reason that the assessee did not satisfactorily proved identity, genuineness of transaction and credit worthiness of parties. The Id. CIT(A) also confirmed gross profit addition on alleged bogus purchases for A.Y. 2012-13. Aggrieved by the CIT(A) orders, the revenue as well as the assessee are in appeal before us. 7. The revenue and the assessee have taken several grounds for alt assessment years. From these grounds of appeal, primarily three issues are arises for our consideration. Therefore, we shall deal with the appeais of revenue and assessee on the basis of issues covered. 8. The first issue that came up for our consideration is gross profit addition on bogus purchases for A.Y." 2009- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon the decision of the ITAT Mumbai Special Bench in the case of All Cargo Global Logistics Ltd. vs. DCIT (2012) 137 ITD 287. The Id. CIT(A) without appreciating these fact deleted addition on the ground that the assessments have been unabated and 'no addition could be made in absence of in cri minating materials. 10. The learned A.R. strongly supporting the Id, CIT(A) order submitted that the additions made by the AO for A.Y., 2009-10 to A.Y. 2012-13 in the assessments framed under Section 153A, without any reference to seized material is bad in law as the assessments for A.Y, 2009-10 to 2012-13 have been unabated/concluded on the date of search. The A.R., with reference to the search, submitted that in this case the search took place on 10-09-2014 and by the time the assessments for A.Y. 2009-10 to A.Y. 2012-13 have been unabated and the time limit for issue of notice under Section 143(2) has been expired, therefore, in absence of any incriminating material found as a result of search no addition can be made in the assessment framed under Section 153A of the Act. In this regard he relied upon the decision of the Hon'ble Bombay High Court in the case of CIT vs. Contine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the pen drive contains sales details and cash collections from customers. The AO has made various additions towards gross profit on alleged bogus purchaes, unproved share capital including share premium, unproved loans and advances and unexplained investments in stock, If you go through additions made by the AO, the AO has not referred to any incriminating material found as a result of search in respect of additions made towards gross profit on alleged bogus purchases and share capital. In respect of unexplained investment in stock, he had relied upon documents recovered from hidden pen drive which contains 3 to 4 days sales report generated in Jilaba software which pertains to A.Y. 2015-16. The AO on the basis of said statement estimated unexplained investments in stock by extrapolating the figures, From the above facts, it is very clear that additions made by the AO towards gross profit on alleged bogus purchases, 'unsecured loans, are based on the return of income filed by the assessee without there being any incriminating material found as a result of search. It Ps is also an admitted fact that in the assessment framed under Section 153A, AO is not empowered to make any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. On a conspectus of Section 153A(L) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 155.4 (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise, iii. The AO will exercise normal assessment powers in respect of the six years Previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned she years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material to conclude some method against the assessee in events where the assessment is triggered by a notice under Section 153A(1)(a) of the Act. This means that even when such notice is triggered following a search, the assessment proceedings can be concluded in any manner known to aw, including under Section 143(3) or even Section 144 of the Act. if need be, Therefore, the assessment proceedings generated by the issuance of a notice under Section 193A (1}{a) of the Act can be concluded against the interest of the assessee including making additions even without any incriminating material being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A(1}(a) of the Act. We answer this issue accordingly." 17. The Id, AR on the other hand relied heavily on the Judgements of Kabul Chawla and Jurisdictional High Court's judgement in the case of Continental: Warehousing (Nav sheva). The AR also brought to our notice the judgements of Gujarath High Court in the case of Pr. CIT vs. Saumya Construction Pvt. Ltd. 2016 Tax Pub (DT) 3466 (Guj- HC) wherein it was held that "very purpose of the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid parties in lieu of payment made through banking channel. The Ld. AO has not rejected appellant's books of accounts. The AO has simply relied on information supplied by sales tax authority that the so-called sellers have provided bogus bills on commission. The addition is completely based on conjecture and surmise. Further when evidence clearly proves purchases as genuine, merely because the evidence of transportation is not available in case of jewellery which could easily be carried in person, it cannot be held that there is no evidence of transportation especially when the said goods have been held in closing stock and declared as such in the books of accounts. We further noticed that do discrepancies except the statement of the said supplier before the sales tax authorities were brought on record by the AO and that the said addition amounted to double addition as the said goods were already recorded in the regular books of accounts and were included in the closing stock which was considered for arriving at the gross profit offered for taxation. The AO, failed to bring on record any other evidences, except statements before the sales tax authorities to prove tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntinental Warehousing Corporation (Nava Sheva) Ltd. (2015), 374 ITR 645 and Division Bench judgement of the Hon'ble Bombay High Court in the case of CIT vs. Murli Agro Products Ltd. (2014) 49 taxmann.com 172 has no application. The DR further submitted that the AO has brought out clear facts to the effect that the purported share capital transactions with TMPL is a accommodation entry which is proved from the statements of persons involved in said transactions. He, further submitted that mere furnishing of certain documents to prove identity is not sufficient to explain the credit when genuineness of transaction is doubtful. 23. The AR on the other hand has forcefully argued that the assessee had submitted all the evidences not only of source but source of source by providing the details from which TMPL had received funds alongwith evidence and hence the said amount should not have been considered as unexplained cash credit. As regards the query raised by the bench regarding justification of the share premium charged, our attention was drawn to the para 1.2.7 of the CIT(A)'s order for Assessment year 2012-13, wherein the assessee has given justification for the premium cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon the decision of Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del). 25. We have heard both the parties, perused the material available on record and gone through the orders of the Authorities below. We have also carefully considered case laws relied upon by both counsels. In this case, the search and seizure action under Section 132 of the Act, was conducted on 10-09-2014. In search, certain documents for purchase of immovable property and ledgers of Taranya Merchandise Pvt. Ltd., were found and impounded. The CIT(A) at para 4.1.18 of Appellate Order for Assessment year 2011-12 has mentioned that "a perusal of the assessment order shows that the and document found during the course of search is related to purchase of property wherein TMPL is a party to it. The transaction shown in these documents were recorded transaction, No incriminating material relating to share capital was found during the course of search so as to suggest that the funds introduced by TMPL in Share Capital of the Appellant company has flown from the Appellant himself. it is also a matter of record that the return of income filed on 29/09/2011 was duly accepted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial was found in the case of assessee during the course of search proceedings which shows share transaction with TMPL was a accommodation entry. Since, addition made by the AO was not based on any incriminating material unearthed as a result of serach and also jurisdictional high court has held the said issue in favour of assessee and the Hon, Supreme Court has dismissed the SLP against the Delhi High Court's Judgement in the case of Kabul Chawla, we uphold the deletion of the addition made for the Assessment Years 2010-11 and 2011-12, as the Assessment of which stands unabated and aiso no incriminating document were found during the course of search. 28. As regards the deletion of addition for Assessment Year 2012-13, our attention was drawn to the facts that said amount was added In the hands of TMPL and the copy of Assessment order was also submitted during the Assessment proceedings. The AR has argued that the said addition once again in the hands of appellant amounts to double addition and hence has been rightly deleted by the CIT(A). We find that even on merits the assessee has filed enormous documents to prove identity, genuineness of transaction and credit worthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case where the sum so credited consists of share application money, share capital, share premium, by whatever name cailed and explanation offered by such assessee shall be deemed to be not satisfactory unless such person being a recipient in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited. As per the Proviso, if the assessee fails to explain the source of source of share capital or share application money, then the addition can be made towards share capital, and share application money in the hands of the assessee u/s 68 of the Income-tax Act, 1961. Whether Proviso inserted by the Finance Act w.e.f, 01-04-2013 is applicable prospectively or retrospectively, has been decided by various courts. According to the ratio laid down by the Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Ltd (2017) 394 ITR 680 (Bom) the Hon'ble Court observed that Proviso inserted to section 68 w.e-f. 01-04-2013 is considered to be prospective in nature and applicable from A.Y.2013-14 onwards. Therefore, we are of the view that no addition can be made u/s 68 of the Income-tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in respect of TMPL where the addition has been made for similar amount. The assessee also filed a certificate from a Chartered Accountant - certifying the active status of the company in the website of Ministry of Corporate Affairs. On going through various detailed filed by the assessee, we find that there is no reason for the AQ to doubt the genuineness of transactions and creditworthiness of the parties. All these evidences go to prove an undoubted fact that these companies are not paper companies and recognized with business activity. We further notice that the assessee has furnished bank statement of subscribers wherein we do not find any instance of cash deposits or transfer from other companies prior to the date of transfer to the assessee company. Even the assessee has proved source of source by filing various details. Therefore, we are of the view that the AO was incorrect in treating share capital alongwith share premium as unexplained cash credit u/s 68 of the Income-tax Act, 1961. 33. Coming to the observation of the AO with regard to the issue of shares at a premium. The AO has questioned the issue of shares at a huge premium on the ground that the assessee is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased to follow the judgment of the apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195. wherein the apex Court observed that if the share application money is rec eived by the assessee-company from alleged bogus shareholders, whose names are given to the AO, then the Department can always proceed against them and if necessary reopen their individual assessments, in the case in hand, it is not disputed. that the assessee had given the details of name and address of the shareholder, their PANIGIR number and had also given the cheque number, name of the bank, It was expected on the part of the AO to make proper investigation and reach the shareholders, The AO did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable In our considered view, the AO ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the AO, In the above circumstances, the view taken by the Tribunal cannot be faulted." CIT vs, Lovely Exports (P) Ltd (2008) 216 CTR 195 (SC) "If ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that if the assessee produces the names, addresses, PAN details of the share holders then the onus on the assessee to prove the source of share application money stands discharged. If the Assessing Authority was not satisfied with the creditworthiness of the shareholders, it was open to the Assessing Authority to verify the same in the hands of the shareholders concerned, The Tribunal has relied upon an order of the Supreme Court in case of CIT vs. Divine Leasing & Finance Ltd. In view of the decision 'of the Supreme Court, we dismiss the appeals with observations that the department is free to proceed to reopen their individual assessments of the shareholders whose names and details were given to the Assessing Officer." ACIT vs. Venkateshwarlspat Pvt. Ltd (2009) 319 ITR 393 (Chhattisgarh-High Court) "If the share applications are received by the assessee from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as the undisclosed income of the assessee."" Mod Creations Pvt Ltd vs, ITO (2013) 354 ITR 282 (Del-High Court) "H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med the or der of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants cand the share application money has been received by way of account payee cheques." CIT vs, Namastey Chemicals Pvt Ltd (2013) 33 Taxmann.com 271 (Guj-High Court) "In the present case also, the respondent assessee has received share application -money from different sub scribers. it was found that large number of subscribers had responded to the letters issued by the Assessing Officer or summons issued by him and submitted their affidavits, In some cases such replies were not received through posts. Rs, 9 lacs represented those assessees who denied having made any investment altogether. The issue thus would fall sqwarely within the ambit of the judgment of the Supreme court in the case of Lovely Exports (supra). No error of law can be stated ta have been committed by the Tribunal. Tax Appeal is therefore dismissed." CIT vs, Peoples General Hospital Led (2013) 356 ITR 65 (MP-High Court) "Held, dismissing the appeals, that it the assessee had received subscriptions to the public or rights issue through banking channels and furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A). one cannot conclude that the purchases were not made by the respondent-assesse" CIT vs, Samir Bio- Tech Put Ltd (2010) 325 ITR 294 (Del-High Court) "Identities of the subscribers are not in doubt, The transactions have also been undertaken through banking channels inasmuch as the application money for the shares was given through account payee cheques. The creditworthiness has also been established, as indicated by the Tribunal. The subscribers have given their complete details with regard to their tax returns and assessments. ln these circumstances, the Department could not draw an adverse inference against the assessee only because the sub scribers did not initially respond to the summons, The subscribers, however, subsequently gave their confirmation letters as would be apparent from the impugned order. The identity of the subscribers stands established and it is also a fact that they have shown the said amounts in their audited balance sheets and have also filed returns before the IT authorities. The decision of the Tribunal deleting the addition cannot befaulted." 35. Coming to the case laws relied upon by the Ld.DR. The Ld.DR relied upon the decision of Hon'ble Cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and dismiss the ground taken by the revenue. 37. The next issue that came up for our consideration is addition on account of closing stock u/s 69 of the Act, on the basis of difference price of gold and jewellery as per Jilaba Software and books of accounts maintained in tally software. The AO has added Rs. 16,02,64,572/-, Rs. 22,44,26,139/-, Rs. 18,87,66,428/-, Rs. 44,71,09,717/-, Rs. 5,14,21,709/- in the respective years, totaling to Rs. 107,19,96,565/- on account of un-explained closing stock' on the basis that the column in the Jilaba Software represent Purchase Price. The AO has based his theory of treating the Jilaba data column as purchase cost to the appellant mainly for the following two reasons : i) Whenever an item from inventory is sold, its sale price is more than the value assigned to it in Jilaba column therefore it is purchase price to the assessee. The relevant observation of the AO in para 38 on page 28 of the assessment order is as under: On verification it was found that the moment the Inventory item of closing stock (having 'Null' minus date) is sold, the price gets changed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y product was allotted a barcoded "Tag Key" which ptures details of products, viz. its weight, category, labels, location of * On generation of a Sale Invoice, the copy of Invoice from Jilaba is made available to the Accounts Department for recording the Sales in books of accounts i.e. in Tally ERP. *As a result of this, data beyond the Tag-keys and Sales Bills from Jilaba software, were never monitored or reconciled by the Assessee company. * There is an Internal Contro! system, in place, to track - fraud, errors or omissions in the system. * Tag Key generation is a manual activity and it is therefore subject to errors, omissions. * When product tag key require defect fixing or miner modification or remaking, the tags are deleted from the system, to avoid any fraud or further Errors. 40. The assessee has, further explained draw backs of the Software : * Sales Value entered in Jilaba software is an approximately inflated selling rate, which is subject to discounts to be given to Customers to their satisfaction and to make them feet privileged. * As a part of trade practice, sometimes discount on negotiations and/or discount during festive seasons, are required to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k and also the amount mentioned in Salevalue column in Jilaba software is not purchase price of the assessee. It is also worth noting that the final result or trial balance taken out 'from jilaba system shows very poor trading results ie. it shows purchases/sales much lower than actual purchases/sales shown in Tally ERP. It is pertinent to note that the assessee has maintained regular books of accounts in Tally ERP, but Assessing Officer could not found any defects. The books of accounts are audited and quantitative details have been given. Theré has been no rejection of books of accounts u/s 145 by the Assessing Officer and as such books results are accepted. Thus, Assessing Officer cannot resort to some other accounting method and cherry-pick certain data points from one source, another set of data from another source. Assessee's stock has been subject to verification and valuation by the bank, who has given loan and has appointed independent auditors for the said purpose. On one side the Ld. A.O. asks assessee to clarify the shortage of stock on the date of search and on other side he is making addition of Rs. 107,25,96,565/- in respect of stock in trade without the stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O." Our attention was drawn to the fact that the submission of the assessee alongwith the detailed working of all these figures were sent to the AO for remand report. However, the AO has refrained from making any comment on it in the remand report. The Jilaba data which was generated by the AO was called by the CIT(A) in pen drive and was test checked by him with the valuation as per the valuation report, detailed comparison of which were at Pages 249 to 275 of the paper book. On verification of the same on a test check basis, the CIT(A) found that the contention of the appellant was correct and it was clear that the value of items appearing in the Jilaba the valuation of the same items as per the valuation report, which value the items at cost. It was also pointed out by the AR that the AO has not pointed out any quantitative discrepancies in the stock found nor has pointed out any large scale purchases or sales that were found to be entered-in the Jilaba data but were not entered in the regular book of accounts, which were maintained in the tally software. 44. We further noticed that the CIT(A) in his order for assessment year 2012-13 has given a categorical finding that all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of CIT vs. Continental Warehousing Corporation (Nava Sheva) Ltd. (2015) 374 ITR 645 and Division Bench judgement of the Hon'ble Bombay High Court in the case of CIT vs. Murli Agro Products Ltd. (2014) 49 taxmann.com 172. This legal position is further strengthened by The decision of Hon'ble Delhi HC in case of CIT Vs. Kabul Chawla (2016) 380 ITR 573 (Del.) and the Hon'ble Gujarath High Court in the case of Pr. CIT Vs. Saumya Construction Pvt. Ltd. 2016 Tax Pub (DT) 3466 (Guj. HC). In this case, search took place on 10-09-2014 and by the time the assessment for A.Y. 2009-10 to A.Y. 2011-12 have been unabated and the time limit for AY. 2009-10 to A.Y. 2011-12 have been unabated and the time limit for issue of notice under Section 143(2) has been expired, therefore, in absence of any incriminating material found as a result of search no addition could be made in the assessment framed under Section 153A of the Act. 46. In this view of the matter and considering the case laws discussed herein above, we are of the view that the AO was erred in making additions towards unexplained stock u/s 69 of the Act. The Ld. CIT(A) after considering relevant facts has rightly deleted add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als with a case, where any sum found credited in the books of account of the assessee in the financial year in which the assessee, offers no explanation or explanation offered by the assessee, in the opinion of the AO is not satisfactory, then sum found credited may be created as income of the assessee of that previous year. A plain reading of section 68, makes it very clear that to fix any credit within the ambit of section 68 of the Act, the AO has to examine 3 ingredients, i.e. identity, busineness of transaction and creditworthiness of the parties. If, the assessee proves all 3 ingredients, then the onus shifts to the AO to prove otherwise. Having said so, let us examine whether the assessee has discharged the burden cast upon it under section 68 of the Income-tax Act, 1961 in respect of loans received from parties. The AO never disputed the fact that the assessee has furnished various evidences to prove identity of the subscribers. The AO categorically admitted in his assessment order that the assessee has filed various details including PAN, CIN master data, and IT acknowledgement receipt of subscribers to prove the identity. The AO has disputed genuineness of transactions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creditor companies had issued shares with huge premium raised from various Kolkata based companies relied upon the following judgments. The Hon. Delhi High Court in the case of CIT Vs. Dwarakadhish Investment P. Ltd. (ITA Nos. 911 of 2010) wherein and one Shri Rajendra. Bubna, in his statement before Investigation Wing at Kolkata, has stated that he is associated with few companies which are engaged in providing accommodation entries I do not find merit in the contentions of the AO. The appellant has explained the immediate source of unsecured loan with documentary evidences thereby discharging the onus cast upon him under the provision of section 68 of the Act. The legal position has been settled in so far as the appellant is not required to prove the 'source of source', as has been contented by the AO. The AO did not find if any cash have been deposited in the accounts of the creditor companies before providing loan to the Appellant. The appellant had produced sufficient evidence before 4.0. to discharge the initiate onus cast upon it to prove the identity, creditworthiness and genuineness of the transaction, I find that no adverse material was found during the course of search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion, of addition was justified." ii) Decision of the Hon'ble Supreme Court. CIT vs Lovely Exports P. Ltd. [2008] 216 CTR 0195, in which it was held as under: "If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given 10 the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company." iii) Decision of Delhi High Court in the case of CIT vs Karndhenu Steel & Alloys Ltd. &Ors. 361 ITR 0220 (Delhi), in which it was held as under: "Once adequate evidence/ material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has "created" evidence, the Revenue is supposed to make thorough. probe before it could nail the assessee and fasten the assessee with such a liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'declaratory". Therefore it is not open to give it retrospective effect, by Proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid clown by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied, Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders ie. they are bogus. The Apex court in Lovely Exports (P} Ltd. (supra) in the context to the pre-amended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revere to ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces to controvert the findings of Id. CIT(A). Hence, considering overall facts and by following the ratios of case laws discussed above, we uphold the deletion of said addition towards loan u/s 68 of the Act. 53. As regards the Loan taken from M/s. Haldaur Leasing Finance Private Limited (HLFPL), the assessee had submitted various details and explanations during the assessment and appellate proceedings as per which, the Company was incorporated in year 1990 in Bijnor, Uttar Pradesh. Its business was of financing, leasing of vehicle & sale of vehicle, Hire Purchase& commission income. This business was continued till 31,3.2009. The company changed its registered office from Bijnor to Kolkata on 12.06.2010. The Company is Non-Banking Financial Corporation registered with Reserve Bank of India under Certificate of Registration No. B.05.06956. The company M/s HLFCPL being a NBFC has to comply with very strict norms under RBI Rules and Regulations. M/s HLFCPL has duly complied with the RBI rules and regulation during its entire existence from the date of securing the NBFC Status. Further sometime in June 2009 M/s HLFCPL initiated the process: of shifting its registered Office from Bij ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment and efforts to make. 54. As regards the issue of noticés to 18 Share Applicants, the AO has observed that the statement of Shri Pradeep Kothari, Director, HLFCPL, was recorded under Sec.131 of the Act on 08/12/2016 and it was found from the information supplied that all the original investor-companies were Kolkata based. Notices u/s 133(6) were issued to them as per the addresses furnished by Shri Pradeep Kothari for making verifications regarding the source of their funds, Out of these in 16 cases, the Notices u/s 133(6) of the Act were not delivered and returned back and in 2 cases, though the Notices were received but no reply was furnished by the creditor. (Para No. 10 , Page No. 7 of A.Y, 2013-14), The assesses was confronted and also asked to furnish the latest address of the creditors, which was not given Neither by the assessee nor the above said company i.e. HLFCPL have produced the investor companies to substantiate their identity and the creditworthiness and genuineness of the transactions, But, fact remains that letter was submitted to Department on Date 09/10/2017 seeking information regarding all the 18 parties to whom summons u/s 133(6) have been issued, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also Proved the Source of source, by bringing on record the source of amount received by the said company along with the nature of transaction. The AR has vehemently argued that proviso to Section 68 is not applicable to assessee's case as the applicability of proviso to Section 68 Is for any such amount in the nature of Share Application Money, Share Premium and does not envisage the Loan Amount. Further, we find that just because the bank statement of M/s. Halduar showed numerous transactions, it could not be held that the said company did not have credit worthiness especially when the said company was an NBFC company and would not like to keep its funds blocked in the direct account, when it could easily utilize its funds for earning income as the Companies are compulsorily required to keep funds in current account on which no Interest is received. We further noted that just because the said company was taken over at much reduced price it cannot be said that the said company lacked credit worthiness especially when the company not only had proved the source of its fund but source of source also. There may be several reasons due to which the directors are forced to sale the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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