TaxTMI 
TaxTMI 
2022 (1) TMI 824
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....nterests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc. 3. A search & seizure operation u/s 132 of the I.T. Act, 1961 was carried out on 28.03.2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the said search. During the course of search carried out at the different premise located in India in M.M. Aggarwal Group of cases, documents and data storage devices, etc. belonging to the assessee were found and seized. In response to notice u/s 153A of the IT Act, 1961 issued to the assessee on 10th May, 2016, the assessee filed the return of income on 29th June, 2016 declaring total income at Rs. 1,19,27,480/-. 4. During the course of assessment proceedings, the AO noted that the assessee company is shown to have received share capital at substantial premium from the following parties:- S. No. Name of Subscriber No. of shares subscribed Face value of share Paid up value Premium received Total Financial Year 2008-09 1. Veneet Capital Services (P) Ltd. 1,52,750 10/- 15,27,500 5,95,72,500 6,11,00,000 2. Lakhotia Impex Pvt. L....
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....tate the accommodation entry. Revenue from operations is Nil which clearly establishes that no business whatsoever is being run by these companies. From the financials of Lakhotia Impex Pvt. Ltd, it is evident that fixed assets held are NIL as on 31.3.2014 and gross total income for AY 2014-15 is of only Rs. 6,529 which establishes beyond doubt that this company does not operate any business and is only a conduit for routing of unaccounted money.' In view of the above, it has been crystalised that assessee company has received its own group unaccounted fund in the garb of share capital and share premium, through numerous non descript shell companies. During the year under consideration, assessee company has received total sum of Rs. 10.33 crores as share capital and share premium from following group companies and shell companies. 1. Veneet Capital Services Pvt. Ltd. 2. Lakhotia Impex Pvt. Ltd. ............................" 7. Before the CIT(A), the assessee challenged the validity of assessment proceedings u/s 153A in absence of any incriminating material found during the course of search and the addition on merit. It was submitted that the assessee has filed the requ....
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....o the statement of Sh. Mukesh Aggarwal, but the statement does not have any relevance to the case of assessee because the person has not stated anything against the assessee in his statement. Therefore, reference to this statement is infructuous. Various decisions were brought to the notice of the CIT(A) for the proposition that when every detail is given before the AO establishing the identity and creditworthiness of the investor companies and genuineness of the transactions, merely because the Director of the said company could not be produced cannot be a ground to make the addition. 10. Based on the arguments advanced by the assessee, the ld.CIT(A) upheld the validity of assessment proceedings u/s 153A. He, however, deleted the addition made by the AO u/s 68 of the IT Act, 1961 by observing as under:- "5. Findings: I have considered the submission of Ld. A.R., assessment order and cases law cited in this regard. The AO invoked the process u/s 153A after the search on appellant group on 28.03.2015 and on receipt of appraisal report from Directorate of Investigations) with the allegation that the appellant company had received unexplained credit in its books u/s 68 of the IT ....
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....ial no.1 & 2. It has also been submitted that companies JA Builders Ltd and JPM Automobiles Ltd was also assessed with the AC1T, Central Circle -13, New Delhi and the order have also been passed at the same time. In the order passed in the case of JA Builders Ltd and JPM Automobiles Ltd no addition towards share capital have been made. As such the appellant contended that same Assessing officer while passing the order at the same time in respect of same issue has formed two different views. b) The shares certificates found in respect of companies mentioned at serial no 3 to 5 is related to investments made by group concerns of JPM group and does not pertain to outsiders 5.2 These merit examination of the case under 153A of the I T Act 1961. The availability of such documents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of an independent entity in normal circumstances. Any such entity will surely expect due returns....
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....urt in the case of Dayawanti Gupta vs CIT in 'ITA Nos 357,358,359/2015 and other' dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record, 1 am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The AO was well within his powers to invoke section 153 A of the Act on prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground no. 4(a) and 4(b) are therefore dismissed. 5.4 Regarding the merit, as per grounds of appeal no.3, I have gone through the assessment order passed by and A.O. and verified the material placed on paper book and was part of the assessment records also. Necessary information and documents were requisitioned to verify the identity, genuineness of the transaction and credit worthiness of the investors by issuing notices u/s 133(6) of the Act which were duly submitted by the respective investors. The notice u/s 133(6) was given to:- a) M/s Vineet Capi....
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.... Finance Ltd. [1994] 205 ITR 98 (FB) (Delhi), CIT vs. Nipuan Auto (P) Ltd. {[2014] 49 taxmann.com 13 (Del.) 361 ITR 155 (Del.)}, Commissioner of Income-Tax vs Winstral Petrochemicals p. Ltd. 2011 330 ITR 603 (Del.), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Stellar Investments Ltd 192 ITR 287 (Del.) & CIT v. Stellar Investment Ltd 2001 251 ITR 263 (SC) and contented that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the shares application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR (ST.) 5 (SC), CIT v. Divine Leasing & Finance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon'ble SC vide order dated 21.01.2008], CTT vs Five Vision Promoters Pvt. Ltd 65 taxmann.com 71 (Delhi HC), CIT v. Vrindavan Farms Pvt. Ltd (ITA 71/2015) (Delhi HC), CIT V. Kamdhenu Steel & Alloys Ltd. [2004] 361 ITR 0220 (Del HC). 5.8. It is pertinent to refer to the recent judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt. Ltd. ITA No 13/2....
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....ssessment under Section I53A and 153C of the Act. The decisions of this court in CIT v Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012J254 CTR 392 (Del) were extensively discussed in Commissioner of Income Tax (Central-III) v Kabul Chawla (supra). The Court in Commissioner of Income Tax (Central-Ill) v Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search "is a separate and distinct assessment. "It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of power under section 153A of the Act and the earlier assessment shall have to be reiterated." 38. Before the learned CIT (A), the assesse had produced the copy of bank account of all share applicant companies. The CIT(A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no ca....
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....t the Director of appellant companies have never made any statement regarding the share capital/share premium/share application money and no disclosure have been made with regard to share capital/share premium/share application money/unsecured loan. As such the addition made by the Assessing officer is unsustainable on the various legal grounds and on facts of the case. The addition made in the case of the appellant is deleted. These grounds are accordingly allowed." 10. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- "1 The Ld. CIT(A) has erred on facts and in law in deleting the addition made on account of unexplained cash credit u/s 68 of Rs. 11,33,00,000/-. 2. The Ld. CIT(A) has erred on facts and in law by stating that the Director of the appellant companies have never made any statement regarding the share capital/share premium/share application money and no disclosure have been made as the statement of the Sh. Sanjeev Agarwal was recorded u/s 132(4) on 29.03.2015 and he admitted that his group companies have received share premium amounting to Rs. 88.52 Crores from various non-descript entities. ....
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....ound raised by the Revenue, he submitted that as per the said ground, the ld.CIT(A) has erred in law and on facts by stating that the director of the assessee company has never made any statement/surrender regarding the receipt of share capital/share premium of Rs. 88.52 crores from various nondescript companies. The ld. Counsel for the assessee drew the attention of the Bench to the chronological sequence of events which are as under:- Sr. No. Date Sub particulars Page No of common paper book 1 29.03.2015 Surrender made in response to Q. 25 of Statement recorded u/s 132(4) of the Act. 77-82 2 29.03.2015 Filed surrender letter, stating details of surrender. 83 3 18.05.2015 Surrender made on 29.03.2015' by statement and letter retracted. 84-91 4 25.05.2015 Statement recorded u/s 132(4) of the Act. 73-76 5 29.03.2016 Affidavit confirming retraction of surrender made on 29.03.2015 96A-96C 14. He submitted that neither the ld. CIT(A) nor the AO has referred to any incriminating material found as a result of search. He submitted that the sum of Rs. 88.52 crore offered by Shri Sanjeev Agarwal comprised of two components, the details of which....
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....t recorded u/s 132(4) has certain evidentiary value, however, the statement cannot be on a stand alone basis and without reference to any other material discovered during the search and seizure operation, empowers the AO to frame the block assessment:- a) PCIT vs. Anand Kumar Jain (HUF), 432 ITR 384 (Del); b) CIT vs. Best Infrastructure (India) (P) Ltd., 397 ITR 82 (Del); c) CIT vs. Harjeev Agarwal, 290 CTR 263 (Del); d) M.S. Aggarwal vs. CIT, 406 ITR 609 (Del); e) Smt. Shivali Mahajan vs. ACIT, ITA No.5585/Del/2015, order dated 19th March, 2019 for AY 2006-07 Delhi ITAT). f) M/s Brahmaputra Finlease (P) Ltd. vs. DCIT, ITA No.3332/Del/2017, order dated 29.12.2017 (Delhi ITAT). 18. The ld. Counsel for the assessee submitted that there was no corroborative evidences found, gathered or seized to support such an inference against the assessee company. Referring to the CBDT Instructions No.F. No.286/2/2013-IT (Inv.II) dated 10th March, 2003, he submitted that the Board has given clear instruction that confessions, if any, not based upon reliable evidence which are later on retracted by the concerned assessees while filing the return of income do not serve any useful purpose....
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....d.CIT(A) deleted the addition the reasons of which are already given in the preceding paragraphs. We do not find any infirmity in the order of the CIT(A) on this issue. We find, the AO, in the instant case, has issued summons u/s 131 of the Act for the purpose of verification of identity, credit worthiness of the share applicants and the replies were received which is evident from pages 48 to 49 of the assessment order. We find, in page 53 of the assessment order the AO has prepared the table and at item Nos.22 and 23, the AO in the remark column has categorically mentioned that replies were received in compliance to summons u/s 131 of the IT Act in the case of Veneet Capital Services Limited and Lakhtia Impex Private Limited. Further, it is also an admitted fact that the AO had called for the following details u/s 133(6) of the Act which were complied with by furnishing the requisite information and documents before the AO:- i) Relevant extracts Statement of bank account statement of the investors showing payments made towards share application money. ii) Copies of allotment letters. iii) Share Application form duly filled by the investor companies. iv) Confirmation in res....
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....mpanies and all transactions are through proper banking channel. 24. We further find from the various details furnished by the assessee in the paper book that Shri Narendra Kumar and Shri Deepak Kumar are Directors of M/s. Veneet Capital Services Pvt. Ltd., and Shri Kishore Kargeti and Shri Pawan Kumar Bagri are the Directors of M/s. Lakhotia Impex (P) Ltd. It is seen from the assessment order that no enquiries have been conducted by issue of notice u/s. 131 or u/s.133(6) of the I.T. Act, 1961 in respect of the above Directors. So far as the source of Rs. 10,33,00,000/- is concerned which was received on account of share application money and share premium we find an amount of Rs. 6,11,00,000/- was received from M/s. Veneet Capital Services (P) Ltd., which was received by it from M/s. Link Point Commercial (P) Ltd. on account of sale of shares. Similarly, an amount of Rs. 4,22,00,000/- was received from M/s. Lakhotia Impex (P) Ltd., which they received from M/s. Intercity Finvest Pvt. Ltd., M/s. Dark Well Distributor (P) Ltd., and M/s. Nextel Suppliers (P) Ltd. on account of sale of shares. As mentioned earlier, these are all group companies and no incriminating material was found....
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....asis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the AO by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been righty commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the shareholders." 26. Further, in the instant case, it is an admitted fact that the investors are group companies and no incriminating material was found as a result of search to support the allegation that money invested by the investor is unaccounted money of the assessee. The Hon'ble Delhi High Court in the case of CIT vs. Nipun Auto (P) Ltd., 361 ITR 155, has held that the addition is not tenable where investment has been made by group Companies. The relevant observations of the....
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....ing channels and bank statement of all the investors/lenders company have been filed which prove conclusively that the assessee companies had received the funds from the said investors, who in turn have received money from the same group companies; and they have not only corroborated this fact in their confirmation along with copies of income tax return but also from their audited balance sheets filed alongwith their Income Tax Returns. [Para 62] 63. Again, in so far as the creditworthiness is concerned, these companies have made investments through banking channels duly reflected in the bank statement and have also filed balance sheets and detailed explanation thereafter showing their availability of funds for making the investments. The case of the Department before us has been that these companies had very meager income however the Revenue from the operations did not justify such an investment. First of all, what is required to be seen is whether the lender/investor companies had sufficient funds available with them in the books/ balance sheets and it is not necessary that loan or advances or shares are subscribed, should be out of taxable income only. Either it could be from ....
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....then mere non production of directors loses its significance when all the statutory records and sources of funds have been duly explained, on which no adverse material has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental. 67. Thus, it is quite evident that in various chains of links and the flow of the funds, nowhere there are any unaccounted funds of any of the lender companies or if any of the assessee companies which can be said to have been introduced either by the assessee company or by the lender company. The source of the source has been proved at all levels, right from origin of the funds to the final destination stands substantiated and neither there is unaccounted money nor there is any outside entry operator to route the unaccounted funds for making such investments. Although looking to the peculiarity of the facts and circumstances of the case where these companies can be reckoned as conduit entities for rotation of money, but nowhere can it be said that any of the entities have routed their own unaccounted money. This is the precise reason that in most of the cases Ld. CIT....
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....74/Del/2017 and 7567/Del/2017 for AY 2013-14, order dated 7th June, 2018 where the Tribunal has observed as under:- "37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries. 38. The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 has held that statements recorded u/s 132(4) of the I.T. Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under :- "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves ....