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TMI Blog2018 (10) TMI 1974X X X X Extracts X X X X X X X X Extracts X X X X ..... nished the audited financial statements, all schedules and other relevant documents, along with the return wherein no addition was made and thereafter the assessment was completed under section 143(3) of the Act on 15/12/2009. It was explained that notice under section 153C of the Act was issued on 26/12/2011, to which also, it was claimed that during these proceedings, complete information along with necessary details/evidences were filed and there also no addition was made while passing the order under section 143(3) r.w.s. 153C of the Act. It was further explained that notice under section 148 of the Act was issued on 21/03/2014 for which our attention was invited "to the reasons recorded" by the Ld. Assessing Officer (pages 5 & 6 of the paper book). The ld. counsel invited our further attention to the objections filed by the assessee (page-7 to 9 of the paper book). The Ld. Assessing Officer rejected the objections for which our attention was invited to page-10 & 11 of the paper book). The ld. counsel also explained that in the rejection order, the ld. Assessing Officer mentioned wrong date of issuance of notice under section 148 as 16/12/2013, whereas, in fact notice under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve link" between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped assessment. In support, the assessee relied upon the decision from Hon'ble Apex Court in the case of Income Tax Officer v. Lakhmani Mewal Das (103 ITR 437) (Supreme Court). 2.3. The ld. counsel for the assessee also took another plea that notice issued to the assessee is beyond four years from the end of the assessment year and thus proviso of section 147 is applicable as original assessment was completed under section 143(3) of the Act. The Ld. counsel empathetically argued that for a valid notice under section 147 of the Act, in the reasons so recorded, there must be a finding to the effect that income chargeable to tax has escaped assessment and there should be a failure on account of the assessee to disclose fully and truly all material facts which are necessary for assessment. The ld. counsel again invited to our attention to the reasons recorded (page -5 & 6 of the paper book), wherein, even there is no whisper in the reasons that in fact there is a failure on the part of the assessee to disclose fully and truly all material facts, which are nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel further contended that addition has been made under section 68 of the Act and this section is invoked in relation to issue of shares by the assessee company, therefore, in view of the amendment, made in section 68 of the Act w.e.f. Assessment Year 2013-14, no addition can be made for earlier Assessment years. Reliance was placed upon the decision from Hon'ble jurisdictional High Court in CIT v. M/s. Gagandeep Infrastructure Pvt. Ltd. (ITA No. 1613/2014) (Bom.). The Ld. counsel also invited our attention to the objections of the assessee, which were rejected on 20/01/2015 and issuance of notice under section 142(1) of the Act. It was contended that the notice was issued within 30 days of the rejection of the objections and therefore the notice issued is bad in law. Reliance was placed upon the decision in GKN Driveshafts Ltd. (259 ITR 19)(Supreme Court) and in the case of Asian Paints (296 ITR 90)(Bom.). It was also explained that all these companies are assessed by the same Assessing Officer and consequent assessment orders were passed. Our attention was invited to page-60, wherein, the details of cheque, bank name, branch name and amount is mentioned. Our attention was fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded on 19/12/2012, wherein, he admitted that he was looking after the affairs of fourteen companies, thus, on the basis of statement of these three persons, notice under section 148 of the Act was rightly issued in March 2014 and thus the consequent addition under section 68 of the Act was rightly made. At this stage, the Bench asked the ld. Sr. Standing Counsel whether any tangible material came in the possession of the ld. Assessing Officer at the later stage, for which it was explained that statements were recorded from these three persons. These statements were claimed to be tangible material. However, the Ld. counsel for the assessee, in rejoinder argued that as far as statements of Shri Mukesh Choksi is concerned there is no whisper about any transaction with the Appellant Company. As regards the statement of Shri Om Hari Hallan, recorded on 19.12.2012, the statement was continued overnight and on 20.12.2012 when the statement was recorded he has clarified certain recording of wrong facts in the statement on 19.12.2012 and confirmed that all the transactions are genuine and there are evidences supporting the source of the funds and also the appellate authorities have dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerns where directors are interested directly or indirectly and also those concerns which are under the same management, in the following format Sl. No. Name of residential address of the Directors PAN Place of Assessment 1 2 3 4 7. Please furnish details of your all bank accounts giving the branch addresses and account number in the following format: Sl. No. Name of residential address of the Bank Branch A/c. No. Type of Account Name of the person(s) acuhorized to operate the account 1 2 3 4 5 8. Name and addresses of the parties(along with PAN and the designation of the Assessing officer where presently assessed to tax) to whom loans and advances have been given and reasons for not earning any interest on the same, in following format: Sl. No. Name and address of the party Opening balance Addition during the year Repayments during the year Balance outstanding on year ending 9. Details of investments sold/made during the year along with the capital gain working and source of Investment. Explain the same. 10. Please file details of the shareholding as on year ending on 31.03.2004 to 31.03.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n alongwith all relevant supporting documents on all the transactions recorded in the same, showing that the same are duly reflected in your books of accounts for income tax purposes. 21. Kindly, go through all the statements given, on various dates u/s. 132 and 131 of the I.T. Act 1961, and furnish explanation, statement-wise, on the compliance made for all the commitments with respect to furnishing of details/explanations/evidence on specific queries posed. If you have still not complied with the same, you are requested to do so, failing which, it will be understood that no explanation/details/evidence have been furnished in respect of the transactions referred to in the said queries. 22. You are requested to furnish the above details on 15.05.2011 at 11.30 AM. All the details should be submitted in the order in which they appear above preferably in type written form. Submission of details on floppy/CD alongwith the hard copy will be appreciated. Since sufficient time is given to you, all the details should be submitted in one go. In case you have already replied any of the above mentioned particulars, you may mention it in your reply. Please make sure that submission should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces under section 153C were issued on the respective dates mentioned in the chart. The assessee filed the return in response to notice under section 153C, which are also summarized above. The Ld. Assessing Officer framed the assessment under section 153C r.w.s. 143(3) of the Act on the dates mentioned in the chart above. 2.11. We note that before framing the assessment/original assessment under section 143(3) of the Act, the assessee was issued a detailed questionnaire with respect to issue in hand. All these documents/reply, analysis were duly filed by the assessee during original assessment. This factual matrix is part of record and not even denied by the Revenue. Thus, we note that the original assessment was framed after examination of facts, due application of mind and thereafter the assessment was framed under section 143(3) and also under 143(3) rws 153C of the Act. The Ld. AO accepted the claim of the Appellant regarding the genuineness of the share capital received from all the four parties in AY 2007-08. We further note that the assessee filed necessary declaration and details of issue of preference shares with the Registrar of the companies. No premium was received agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * The reassessment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed, there is no question of escapement of income in respect of that particular income determined in the order passed u/s. 153C of the Act. * The statements of all the 3 persons do not have any direct relationship with escapement of income in the hands of the assessee company. In the statements there is a reference to transactions between certain parties and fourteen companies. There is not a whisper in the statement of all the 3 parties to the effect that any transaction with the assessee company. In order to invoke the provisions of reassessment proceedings under section 147/148 of the Act, there has to be a direct and live link between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped assessment. * The notice is issued beyond 4 years from the end of the assessment year. Proviso of Section 147 is applicable as original assessment was completed in 143(3) of the Act. In order to issue a valid notice, in the reasons there must be a finding to the effect that the income chargeable to tax has escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed the question of escapement of income in respect of that particular income determined in the order passed u/s. 153C does not arise. * The statements of all the 3 persons does not have any direct relationship with escapement of income in the hands of the appellant company. In the statements there is a reference to transactions between certain parties and fourteen companies. There is not a whisper in the statement of all the 3 parties to the effect that any transaction with the appellant company. In order to invoke the provisions of reassessment proceedings there has to be a direct and live link between the material available with the Assessing Officer and his conclusion that income chargeable to tax has escaped assessment. * The notice is issued beyond 4 years from the end of the assessment year. Proviso of Section 147 is applicable as original assessment was completed in 143(3). In order to issue a valid notice, in the reasons there must be a finding to the effect that the income chargeable to tax has escaped assessment on account of failure on the part of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the land and building to Khosla Filters Private Limited under a Deed of Conveyance dated 24-12-1999 for consideration. The purchaser granted a lease of the property on 29-12-1999 to the Petitioner for a period of ten years. The Petitioner sought registration as a Small Scale Unit for manufacturing filter bags, filter panels, made ups of cotton and man-made fabrics. Provisional registration was granted to the Petitioner by the Director of Industries on 3-3-2000. The Petitioner made an investment of Rs. 7,19,447/- for the purchase of plant and machinery and set up an industrial undertaking on the property. Industrial production commenced from 6-4-2000 and a permanent license was received on 19-2-2001. 4. The Petitioner made its claim for the first time in respect of the profits derived from the industrial undertaking under section 80-IB of the Act for assessment year 2001-02. The case of the Petitioner for assessment year 2001-02 was selected for scrutiny and during the course of the assessment proceedings, queries were raised with respect to the entitlement of the Petitioner to claim a deduction under section 80-IB. By its letter dated 3-12-2002, the Petitioner submitted details a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld show that the industrial unit was already in existence and in the use of some other person for the purpose of availing benefits provided under the Act. In the case of the assessee, it has been stated that the factory plan having been approved twelve years prior to the commencement of the business of the assessee, that would lead to an inference that the business/industrial unit of the assessee had come into existence at the place where the business of someone else was already in existence and that the other party had availed of the benefit provided in the Act. A reference has been made to the provisions of section 80-IB of the Act to suggest that one of the conditions for claiming a deduction is that the business should not be formed either by splitting up or by reconstruction of a business already in existence. 6. The assessee filed objections to the reasons recorded by the Assessing Officer. While disputing that there was reason to believe that income had escaped assessment within the meaning of section 147, the assessee submitted that : (i) The sale by MSFC was only of the land and building and that it was the assessee which had installed the plant and machinery; (ii) Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the site by the person who was subjected to proceedings under State Financial Corporations Act, 1961 by MSFC, that would not disentitle the Petitioner to the benefit of a deduction under section 80-IB of the Act. The Petitioner who has set up a new industrial undertaking by purchasing plant and machinery would still be entitled to a deduction under section 80-IB of the Act; (iii) The reasons for reopening an assessment must indicate both a failure to disclose all material facts and what circumstance constitutes the failure to disclose. In the present case, that requirement has not been fulfilled; (iv) In the present case, the Assessing Officer had not formed the belief that income had escaped assessment. The information which has been obtained under the Right to Information Act would reveal that the action had been instituted merely on the basis of an Audit Report; (v) The benefit of a deduction under section 80-IB was granted for assessment years 2001-02 and 2002-03, where the assessment orders have attained finality. Unless the deduction for the first year was withdrawn in accordance with law, the relief for the subsequent years cannot be withheld. 10. Insofar as the companion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year unless the income chargeable to tax has escaped assessment by reason of the failure of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The jurisdictional condition under section 147 is the formation of belief by the Assessing Officer that income chargeable to tax has escaped assessment for any assessment year. The reasons which are recorded by the Assessing Officer are crucial and it is on the basis of those reasons alone that the validity of the order reopening an assessment has to be decided. Where an assessment has been made under section 143(3), action can be initiated after the expiry of four years from the end of the relevant assessment year if the income chargeable to tax has escaped assessment because of the failure of the assessee to make fully and truly a disclosure of the material facts. The provisions of section 147 have been interpreted in a recent judgment of the Supreme Court in CIT v. Kelvinator of India Ltd. [2001] 320 ITR 561. The Supreme Court noted that after 1-4-1989 the power to reopen is much wider than earlier since the substantive part of section 147 only imposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of assessment proceedings for subsequent years that the revenue had obtained a copy of the license which showed that the plans have been approved as far back as on 12-9-1988. This statement which is contained in the reasons, on the basis of which the assessment is sought to be reopened, is belied by the record which shows that the Revenue was in possession of the material produced by the assessee during the course of the assessment proceedings for assessment year 2003-04 which showed that the plans had been approved in the year 1988. Therefore, the basis on which the assessment has been sought to be reopened is factually incorrect. The Assessing Officer granted the assessee a deduction under section 80-IB after being appraised of all the relevant details, including those in Form 10CCB which showed that plans had been approved in 1988. 14. Moreover, the fact that plans for the building were approved in the year 1988 would make no difference to the claim of the assessee to a deduction under section 80-IB of the Act. Both in the notice reopening the assessment and in the order disposing of the objections of the assessee, reliance has been sought to be placed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51(1) of the Act. The Assessing Officer has noted, while seeking approval of the Commissioner of Income-tax, that during the course of Revenue audit proceedings, an audit objection has been raised on the ground that the assessee was not eligible to a deduction under section 80-IB from assessment year 2002-03. The Assessing Officer notes that the audit objection was not accepted but that as a precautionary measure the assessment was reopened under section 147. There is merit in the submission urged on the part of the assessee that the Assessing Officer had no reason to believe that income had escaped assessment. We clarify that we have not regarded this circumstance namely, the information which was divulged during the course of a query and the Right to Information Act as the only and exclusive circumstance for coming to a conclusion that the power has not been validly exercised. Basically, the validity of the exercise of the powers to reopen an assessment has to be decided with reference to the reasons recorded while re-opening the assessment. The reasons recorded while reopening the assessment do not justify the exercise of the power in the facts of this case. 16. Insofar as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts. [Para 12]. The Hon'ble High Court further observed that the basis on which the assessment for the assessment years 2003-04 and 2004-05 had been sought to be reopened was that during the course of assessment proceedings for the subsequent years, the revenue had obtained a copy of the license which showed that the plans had been approved as far back as on 12/09/1988. That statement, which was contained in the reasons and on the basis of which the assessment was sought to be reopened, was belied by the record which showed that the revenue was in possession of material produced by the assessee during the course of the assessment proceedings for the assessment year 2003-04, which showed that plans had been approved in the year 1988. Therefore, the basis on which the assessment had been sought to be re-opened was factually incorrect. The Assessing Officer granted the assessee deduction under section 80-IB after being appraised of all the relevant details including those in Form 10CCB which showed that plans had been approved in 1988. [Para 13] It was also observed that the fact that plans for the building were approved in the year 1988 would make no difference to the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iry of that assessment year, yet it was apparent that the Assessing Officer did not have before him any additional material at all to form a belief that income had escaped assessment. The assessee had, admittedly, placed on record before the Assessing Officer for the assessment year 2003-04 the circumstances under which the plans had been approved for the building on 12-9-1988. There was no material before the Assessing Officer that would lead to a formation of belief that income chargeable to tax had escaped assessment. There was, hence, a total absence of 'tangible material' to justify the conclusion that income had escaped assessment. Finally, it would be necessary to note that mere existence of the land and building since 1988 was not a circumstance which would disentitle the assessee to the benefit of a deduction under section 80-IB once other requirements of the provisions were fulfilled. [Para 16]. Finally, the Hon'ble High Court quashed/set-aside the notices dated 24/03/2009 and 31/03/2009. While coming to the aforesaid conclusion, the Hon'ble jurisdictional High Court considered/followed the decision from Hon'ble Apex Court in the case of Commr. Of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he word 'opinion' in section 147. However, on receipt of representations from the companies against omission of the words 'reason to believe', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. [Para 4]" 2.18. If the aforesaid decisions from Hon'ble jurisdictional High Court as well as from Hon'ble Apex Court are analyzed with the facts of the present appeals, we find that the conditions of the proviso to section 147 of the Act are not satisfied as there is no allegation in the reasons to the effect that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. This view of ours is further fortified by various decisions, some of which are as under:- a. Commr. of I. Tax v. Foramer France. 264 ITR 566 (SC) b. German Remedies Ltd. v. Dy. CIT 287 ITR 494 (Bom) c. Shree Ram Foundry Ltd. v. Dy. Commr. of Income Tax 250 CTR 116 (Bombay HC) d. Titanor Components Limited v. Asstt. Commr. of Income Tax, Circle -2 Writ Petition No. 71 of 2005 (Bombay) e. Jashan Textile Mills P. Ltd. v. Dy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reto were all without jurisdiction and deserved to be quashed." 2.20. Likewise, Hon'ble jurisdictional High Court in the case of German Remedies Ltd. v. DCIT 287 ITR 494 (Bom.) held/observe as under:- "These petitions, filed under article 226 of the Constitution of India, are directed against the notices dated 15-9-2003, issued under section 148 of the Income-tax Act, 1961 ('Act' for short), seeking to reopen completed assessments of the petitioner-assessee for the assessment years 1997-98 and 1998-99, along with order dated 18-2-2005 passed by the Deputy Commissioner of Income-tax, Range 6(3), Mumbai, rejecting the objections taken by the petitioners to reopening their completed assessments. 2. Parties to the petition are same; issue involved is identical; challenges to the impugned orders are common; so this common judgment shall dispose of both petitions. The facts necessary to appreciate rival contentions are taken from Writ Petition No. 619/2005, wherein assessment year involved is 1998-99. The Facts: 3. The petitioners are the Public Limited Company engaged in the business of manufacturing pharmaceutical products and other formulations. The return of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relevant assessment year. According to the learned counsel for the petitioners, period of 4 years commences on 31-3-2003 and as such impugned notice issued under section 147 seeking to reopen for both the assessment years 1997-98 and 1998-99 is bad in law and without jurisdiction. 10. The learned counsel further submits that returns were subject to scrutiny and the assessment under section 143(3) as such notice under section 148(1) cannot be issued merely on change of opinion. No fresh facts have been brought on record to issue the notice in question, as such, impugned notice issued under section 148 seeking to reopen the assessment for years 1998-99 is without jurisdiction and bad in law. 11. The learned counsel for the petitioners further submits that the approval granted by the CIT, Mumbai, suffers from non-application of mind. According to him, approval was granted in a most casual manner. He placed reliance on the judgment of the Delhi High Court in the case of United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 3171, wherein the Delhi High Court held that the power vested in the Commissioner under section 151 to grant or not to grant approval to the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. CIT (No. 2) [2004] 268 ITR 339 (Bom.) (4) Grindwell Norton Ltd. v. Jagdish Prasad Jangid, Asstt. CIT [2004] 267 ITR 673 (Bom.). Per Contra: 15. The learned counsel appearing for the revenue submits that notice under section 148 of the Act was issued after recording reasons for reopening of the assessment. He further submits that section 149(1)(b) empowers the respondents to reopen the assessment with prior approval of the Commissioner of Income-tax under section 151(1) of the Act. He further submits that there was no evidence on record to show that TDS had been deducted after making payment under section 40(a) of the Act. He further submits that since the assessee had failed to make full and true disclosure of relevant material the assessment remained under section 147 of the Act. He further submits that the respondent applied provisions of section 147 which empowers reopening of assessment completed under section 142(3) after recording reasons. The reasons recorded for re-opening assessment were already furnished and, therefore, action of the respondent was in accordance with law. He further submits that the reasons furnished we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner was accompanied by audit report, profit and loss accounts and tax audit report under section 44AB of the Act. The record reveals that true and full information with respect to TDS from the payments made to various parties towards expenditure was disclosed in the return for TDS in Form No. 27 on 22nd June, 1998, which is produced on record at Ex. J. along with Challan at page 155. Details of the various parties and payments were enclosed to the return of income which clearly showed that all obligations with respect to TDS were properly complied with. Petitioner vide letter dated 27-11-1998 had also submitted statement of TDS and certificate as such, according to the petitioners, the first reason pressed into service to reopen is unsustainable. 20. So far as second reason for issuing notice under section 148(1) with respect to valuation of closing stock with Modvat (excise and custom duty paid) is concerned, it may be noted that the inventory is required to be valued either at cost or market price whichever is lower. According to this principle, assessee had valued its closing stuck at cost. The cost of purchase consists of purchase price including duties and taxes, freig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. In the above view of the matter, the impugned notices and consequently the order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside. 25. In the result, the petitions are allowed. Rule made absolute in each petition with no order as to costs." 2.21. In another case, the Hon'ble Apex Court in CIT v. Foramer France 264 ITR 566 (Supreme Court) held/observed as under:- The petitioner-assessee, a foreign company incorporated in France, was engaged in the business of oil exploration and providing expertise and assistance in the said field throughout the world. During the assessment year 1988-89, the petitioner-company was operating under three contracts with the ONGC, for drilling operation by employing its own rig and also for manning and management services for supervision of drilling activities carried on by the ONGC on its own rigs. In the assessment year 1988-89, the assessee's rig was sold to a party with the result that the operations on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of case before authority or Court. Further, it could not be said that proposed reassessment was in consequence of, or to give effect to, any finding or direction of the Tribunal in case of petitioner's employee and, therefore, provisions of section 153(3)(ii) would not apply to facts of the instant case." 2.22. If the ratio laid down in the aforesaid cases is analyzed, it has been clearly held by Hon'ble Apex Court and Hon'ble High various high courts that there has to be a live link and direct relationship between the information available with the Assessing Officer and the conclusion that income chargeable to tax has escaped assessment. There is no live link as regards the statement of Shri Mukesh Choksi as no transaction have taken place with any of the company alleged to be managed by Shri Mukesh Choksi. In support of this proposition reliance can be placed upon the decision from Hon'ble Apex Court in the case of Income Tax Officer v. Lakhmani Mewal Das 103 ITR 437, wherein, it was observed as under:- "Two conditions have to be satisfied before an ITO acquires jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ITO to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that, the ITO did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the ITO. The reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the ITO in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law. Reference to the names of 'N', 'D' 'S' in the report of the ITO to the Commissioner of in the instant case did not stand on a better footing than the reference to the three names in the report made by the ITO in the case of Chhugamal Rajpal v. S.P. Challita [1971] 79 ITR 603 (SC). Therefore, it was tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the ITO to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier years, the company has not made a provision for excise duty and custom duty on stocks lying at the year ended in bonded warehouse estimated at Rs. 5,85,71,968 (1994-95) Rs. 112,502,531) and accordingly not included the said amount in the valuation of inventories. This has no effect on the profits for the year." The accounts which accompanied the return of income also made a specific reference to this accounting policy which was followed. The audit report which was furnished in accordance with the provisions of section 44AB also made a specific reference to the method of accounting adopted by the petitioners in respect of the goods lying in bonded warehouse. The petitioners submit that it had made a full disclosure of all the material facts along with the return of income that was filed with the department. 5. The aforesaid return of income was revised on 31st March, 1998 as a result of amalgamation of M/s. Brooke Bond Lipton India Ltd. into the petitioners. The disclosures made in the original return were reiterated in the revised return that was filed. The respondent No. 2 completed the assessment of the petitioners income under section 143(3) of the Act vide his order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve salary that was debited. 10. The petitioners finding failure on the part of the Assessing Officer to disclose the reasons in spite of specific request filed this petition under article 226 of the Constitution of India to challenge notice dated 5th November, 2002 issued under section 148 of the Act. 11. On being noticed, respondents appeared and filed their counter affidavit disclosing the reasons recorded prior to issuance of the notice under section 148. The said reasons recorded read as under: "From the Notes to the audited accounts, it is seen that while valuing closing stock, Central Excise and Customs Duty leviable on stock lying in godown was not considered as forming part of cost of the closing stock. Although no such duty was paid during the relevant previous year, liability to pay such duty arises immediately on manufacture of excisable goods. Also, Boards Instruction No. 1389, dated 24-3-1981 provides for inclusion of Central Excise and Custom duty in Valuation of inventory. In view of this position, I have reason to believe that income chargeable to tax has escaped assessment inasmuch as excise and custom duty leviable, Rs. 5.85 crores has not been added to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts relevant for assessment for assessment year" are absent in the reasons recorded, still such reasons can be inferred on the text of the reasons recorded. He, therefore, submits that the notice under challenge is well within the scope of section 147 as such this petition is liable to be dismissed being without any substance. Consideration: 17. Having heard the parties at length, we are of the opinion that the petitioner can be disposed of on the first contention raised by the petitioner, wherein the petitioner has contended that the notice issued under section 148 is without jurisdiction being hit by the proviso to section 147 of the Act as such not within the prescribed period provided under proviso to section 147 of the Act. In the circumstances, it would be necessary to turn to section 147 of the Act, which reads as under: "147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years. 20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 851, 858 ii. Commissioner of Police v. Gordhandas Bhanji AIR 1952 Supreme Court 16, 18 iii. Assam Frontier Tea Ltd. v. IAC (1987) 164 ITR 253, 262 (Gauh) iv. General Electric Technical Service Company v. State of Bihar (1990) 76 STC 134, 142 (pat.) v. Leukoplast (India) Ltd. v. State of goa (1988) 71 STC 180, 198-99 (Bom.) vi. N. Subhakaran v. CIT (1992) 198 ITR 720, 723-24 (Ker.) vii. Abhiyaman Educational And Research Institutions v. State of Tamilnadu AIR 1991 Mad 246, 268-69. viii. Chunnilal Onkarmal Pvt. Ltd. v. CIT (1997) 224 ITR 233, 236 (MP) ix. Kakarla Krishnamurthy v. CIT (1995) 216 ITR 2016, 214-15 (AP) 2.25. If the ratio laid down in the aforesaid cases is analyzed with the facts of the present appeal and the issue in hand, it can be concluded that a quasi judicial order has to stand on its own legs; it has to sustain itself on its own reasoning. Its validity has to be judged by the reasons so mentioned/recorded and fresh reasons cannot be allowed to supplement and buttress the same. In other words a lame order cannot be propped up by adventitious crutches of new facts and reasons (Dayal Industries v. CCT (1996) 100 STC 215, 222 (WBBT)], thus, the lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es raised having been duly considered by the learned Assessing Officer while framing the assessment u/s. 143(3) of the Act. 3. On the facts and in the circumstances of the case and in law, the learned CIT erred in not himself conducting necessary/proper enquiry and verification of issues mentioned in the notice issued u/s. 263 of the Act and setting aside the assessment order for a de-novo adjudication on issues mentioned therein which is wrong and contrary to the provisions of the Act, and the Rules made thereunder. 4. On the facts and in the circumstances of the case and in law, the learned CIT erred in issuing notice dated 20-04-2015 u/s. 263 of the Act in the name Westpoint Leisure parks Pvt. Ltd., a company which had already become non-existent on the date of issuance of the said notice on account of its merger with the appellant company (West life Development Ltd.) despite the fact regarding amalgamation been specifically brought to notice of the Income Department vide appellant's letter dated 03-09-2013. As such, the entire proceedings u/s. 263 are void ab initio, illegal, bad in law and deserve quashed. 2. During the course of hearing, arguments were made by CA Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal Kolkata Bench, in the case of Gestener (India) ACIT in ITA no. 275/Kol/2007 " 4. It was further argued by him that the impugned assessment order was non est in the eyes of law and, therefore, the same could not have been revised by the ld. CIT. In this regard, he relied upon the judgment of Hon'ble Delhi High in CIT v. Escorts Farms Pvt. Ltd. 180 ITR 80 (Del) and upon the decision of the co-ordinate bench in the case of Krishna Kumar Saraf v. CIT ITA No. 4562/Del/2011 dated 24-09-3-2015 and Steel Strips Ltd. v ACIT 53 ITD 553 (Chd). He thus requested that the impugned revision order passed by the ld. CIT is illegal on this primary jurisdictional ground itself. 5. Per contra, Ld. Departmental Representative for the Revenue vehemently opposed the arguments of the ld. Counsel. It was submitted by the ld. CIT-DR that even if the original assessment order was framed in the name of an erstwhile company, the same was only a mere irregularity and that does not make the assessment as nullity in the eyes of law. It was submitted that such lapses were protected u/s. 292B of the Act. 6. In addition to the above, it was further submitted by him that the issue with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 'collateral proceedings' and if yes, then of what nature? 8.1. We have analysed this issue carefully. There is no doubt that after passing of the original assessment order, the primary (i.e. original proceedings) had come to an end and attained finality and, therefore, outcome of the same cannot be disturbed, and therefore, the original assessment order framed to conclude the primary proceedings had also attained finality and it also cannot be disturbed at the instance of the assessee, except as permitted under the law and by following the due process of law. Under these circumstances, it can be said that effect of the original assessment order cannot be erased or modified subsequently. In other words, whatever tax liability had been determined in the original assessment order that had already become final and that cannot be sought to be disturbed by the assessee. But, the issue that arises here is that if the original assessment order is illegal in terms of its jurisdiction or if the same is null & void in the eyes of law on any jurisdictional grounds, then, whether it can give rise to initiation of further proceedings and whether such subsequent proceedings would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidering that contention at page 121, a four Judge Bench of Hon'ble Supreme Court speaking through Vankatarama Ayyar, J. held that: "It is a fundamental principle well-established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." 8.3. This judgment was subsequently followed by Hon'ble Supreme Court in the landmark case of Sushil Kumar Mehta v. Gobind Ram Bohra, (1990) 1 SCC 193, wherein an issue arose whether a decree can be challenged at the stage of execution and whether a decree which remained uncontested operates as res-judicata qua the parties affected by it. Hon'ble apex court, taking support from aforesaid judgment, observed as under: "In the light of this position in law the question for determination is whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was that jurisdiction cannot be conferred by consent or agreement where it did not exist, nor can the lack of jurisdiction be waived. 8.6. These judgments were subsequently noticed by Hon'ble Gujarat High Court in the case of P.V. Doshi 113 ITR 22(Gujrat). This case arose under the Income Tax Act with reference to the provisions of Section 147 dealing with re-assessment. The facts were that the assessment was sought to be reopened under Section 147 and notice under section 148 was issued. Validity of reopening was not challenged upto Tribunal and additions were challenged on merits only. The Tribunal restored the matter to the Assessing Officer with some directions to reexamine the issue on merits. When the matter came back to the assessing officer the assessee specifically raised the point of jurisdiction to reopen the assessment, contending that the notice of reopening was prompted by a mere change of opinion. The AO rejected plea of the assessee but the AAC accepted this ground and also held the reassessment to be bad in law on jurisdictional ground. Against the order of the AAC the Revenue went in appeal before the Tribunal and specifically raised the plea that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority. According to the Hon'ble Court, the "finality or conclusiveness could only arise in respect of orders which are competent orders with jurisdiction and if the proceedings of reassessment are not validly initiated at all, the order would be a void order as per the settled legal position which could never have any finality or conclusiveness. If the original order is without jurisdiction, it would be only a nullity confirmed in further appeals'. In this view of the matter, Hon'ble High Court finally answered the reference in favour of the assessee. 8.7. It is further noted that many of these judgments were discussed and followed by the co-ordinate bench of the Tribunal in the case of Indian Farmers Fertilizers Co-operative Ltd. v. KIT 105 ITD 33 (Del), wherein a similar issue had arisen. In this case, the issue raised before the bench was whether it is open to the assessee, not having appealed against the reassessment order, to set up or canvass its correctness in collateral proceedings taken for rectification thereof u/s. 154. The bench minutely analysed law in this regard and applying the principle of 'coram non judice' and following aforesaid judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round that it was framed in the hands of a non-existing company. 9.1 Now we proceed to decide the issue raised by the assessee that the impugned assessment order dated 24-10-2013 on the ground that the same was non est for the reason that it has been framed in the hands of a non est entity, since WLPL had got amalgamated into WDL at the time of framing of the assessment order by the Assessing Officer. The requisite facts and chronology of events brought out by the assessee before us are as under: S. No. Date Particulars (1) 22.01.2008 Westpoint Realtors Pvt. Ltd., incorporated. (2) 30.06.2011 Name of the company changed from Westpoint Realtors Pvt. Ltd. to Westpoint Leisureparks Pvt. Ltd. referred to as WLPL). (3) 23.07.2013 Westpoint Leisureparks Pvt. Ltd., amalgamated with Westlife Development Ltd.( referred to as WDL). (4) 03.09.2013 Assessee intimated to the Assessing Officer the fact of amalgamation. Copy of Scheme as well as High Court order submitted to the Assessing Officer (enclosed at page number 57 of P.B). (5) 24.10.2013 Assessment order passed by the Assessing Officer in the name of erstwhile company West point Leisureparks Pvt. Ltd. (6) 22.12.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was further argued by the Ld. CIT-DR that the same was curable u/s. 292BB and since the assessee had participated in the proceedings, therefore, the assessee could not challenge the resultant assessment order as nullity in the eyes of law. 9.5. We have carefully gone through the facts of the case and submissions made by both the sides before us. We have also gone through the legal position in this regard. It is noted by us that this issue is no more res integra. All the arguments made by the Ld. CIT-DR have already been addressed by many Courts. The judgements relied upon by Ld. Counsel are directly on this issue and squarely covers these issues. 9.6. In addition to that, it is noted that interestingly, Hon'ble Bombay High Court recently decided identical issue in its judgment in the case of Jitendra Chandralal Navlani Chandralal Navlani & Anr v. UOI Anr v. UOI in writ petition No. 1069 of 2016 vide order 8th June, 2016 as under: "On receipt of the reopening notice, the Chartered Accountant of the erstwhile M/s. Addler Security Systems Pvt. Ltd., had originally accepted the some but immediately thereafter by letter dated 5th May, 2015 pointed out that the company M/s. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it would give rise to a chaotic situation. Thus, it is for the AO to carefully determine his jurisdiction to make an assessment in a lawful manner upon the appropriate person and the obligation to do so rest solely upon the shoulders of the AO which he is obliged to fulfil by following due process of law. There is no estoppel against law. If an assessment order is framed without the authority of law, then, the same would be nullity in the eyes of law, as no tax can be collected without the authority of law, as has been clearly laid down in Article 265 of our constitution. 4.9. It is noted by us that all these issues and arguments have already been dealt with and this entire controversy has already been put to rest by various courts in their judgments. Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. (Supra) has analysed this entire controversy in detail and held that assessment order passed under such circumstances would be nullity in the eyes of law. The relevant observations of the Hon'ble High Court in the said case are very useful to deal with this controversy and the same are reproduced hereunder for the sake of ready reference: " 6. On the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eyes of law. This position is even accepted by the Tribunal in para-14 of its order extracted above. Having regard this consequence provided in law, in number of cases, the Supreme Court held that assessment upon a dissolved company is impermissible as there is no provision in Income-Tax to make an assessment thereupon. In the case of Saraswati Industrial Syndicate Ltd. v. CIT,: 186 ITR 278 the legal position is explained in the following terms: "The question is whether on the amalgamation of the Indian Sugar Company with the appellant Company, the Indian Sugar Company continued to have its entity and was alive for the purposes of Section 41 (1) of the Act. The amalgamation of the two companies was effected under the order of the High Court in proceedings under Section 391 read with Section 394 of the Companies Act. The Saraswati Industrial Syndicate, the trans free Company was a subsidiary of the Indian Sugar Company, namely, the transferor Company. Under the scheme of amalgamation the Indian Sugar Company stood dissolved on 29th October, 1962 and it ceased to be in existence thereafter. Though the scheme provided that the transferee Company the Saraswati Industrial Syndicate Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therefore no action can be brought in its name. Thus an insurance company which was subrogated to the rights of another insured company was held not to be entitled to maintain an action in the name of the company after the latter had been dissolved". 11. After the sanction of the scheme on 11th April, 2004, the Spice ceases to exit w.e.f. 1st July, 2003. Even if Spice had filed the returns, it became incumbent upon the Income tax authorities to substitute the successor in place of the said, dead person. When notice under Section 143 (2) was sent, the appellant/amalgamated company appeared and brought this fact to the knowledge of the AO. He, however, did not substitute the name of the appellant on record. Instead, the Assessing Officer made the assessment in the name of M/s. Spice which was non existing entity on that day. In such proceedings and assessment order passed in the name of M/s. Spice would clearly be void. Such a defect cannot be treated as procedural defect. Mere participation by the appellant would be of no effect as there is no estoppel against law. 12. Once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be made on a invalid return. In the process, the Court observed as under:- "Having given our thoughtful consideration to the submission advanced by the learned Counsel for the appellant, we are of the view that the provisions of Section 292B of the 1961 Act do not authorize the AO to ignore a defect of a substantive nature and it is, therefore, that the aforesaid provision categorically records that a return would not be treated as invalid, if the same "in substance and effect is in conformity with or according to the intent and purpose of this Act". Insofar as the return under reference is concerned, in terms of Section 140 of the 1961 Act, the same cannot be treated to be even a return filed by the respondent assessee, as the same does not even bear her signatures and had not even been verified by her. In the aforesaid view of the matter, it is not possible for us to accept that the return allegedly filed by the assessee was in substance and effect in conformity with or according to the intent and purpose of this Act. Thus viewed, it is not possible for us to accept the contention advanced by the learned Counsel for the appellant on the basis of Section 292B of the 1961 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nullity in the eyes of law and the same is herby quashed, and thus additional grounds raised by the assessee are allowed. Since we have allowed the appeal of the assessee on the additional grounds, we do not find it necessary to go into grounds raised on merits and therefore, these are treated as infructuous." 9.8. It is also noted that Hon'ble Calcutta High Court in the case of I.K. Agencies Pvt. Ltd., supra as well as Hon'ble Karnataka High Court in the case of CIT v. Intel Technology Pvt. Ltd. 380 ITR 272 (Karnataka) also followed the view taken by Hon'ble Delhi High Court in the case of Spice Infotainment Ltd. 247 CTR 500 (Delhi) and held that framing of assessment against non-existing entity/person would go to root of matter and was not mere procedural irregularity, but a jurisdictional defect and there could not be any assessment against a dead person. Thus, apparently, assessment proceedings having been initiated against non-existing company even after amalgamation of assessee company with another company were illegal, and thus order passed under such proceedings without jurisdiction and null & void. 9.9. During the course of hearing, no contrary judgement wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which is non est in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If ld. Commissioner revises such an assessment order, then it would imply extending/granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended, because the provisions of limitation are provided in the same. 20. In view of above discussion, ground no. 3 is allowed and revision order passed u/s. 263 is quashed." 10.2. It is further noticed by us that similar view has been taken by Chandigarh Bench of the Tribunal in the case of Steel Strips Ltd. (supra). 11. Thus, after taking into account all the facts and circumstances of the case, we find that in this case, the original assessment order passed u/s. 143(3) dt 24-10-2013 was null & void in the eyes of law as the same was passed upon a non-existing entity and, therefore, the Ld. CIT could not have assumed jurisdiction under the law to make revision of a non est order and, therefore, the impugned order passed u/s. 263 by the Ld. CIT is also nullity in the eyes of law and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any such restriction under Section 14A and/or Rule SD?" 3. Regarding question no. (i):- (a) During the previous relevant to the subject Assessment Year the respondent-assessee had increased its share capital from Rs. 2,50,000/- to Rs. 83.75 lakhs. During the assessment proceedings, the Assessing Officer noticed that the respondent had collected share premium to the extent of Rs. 6.69 crores. Consequently he called upon the respondent to justify the charging of share premium at Rs. 190/- per share. The respondent furnished the list of its shareholders, copy of the share application form, copy of share certificate and Form no. 2 filed with the Registrar of Companies. The justification for charging share premium was on the basis of the future prospects of the business of the respondent-assessee. The Assessing Officer did not accept the explanation/justification of the respondent and invoked Section 68 of the Act to treat the amount of Rs. 7.53 crores i.e. the aggregate of the issue price and the premium on the shares issued as unexplained cash credit within the meaning of Section 68 of the Act. (b) Being aggrieved, the respondent carried the issue in appeal. By an order date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e requirements as set out therein would have to be satisfied. (e) We find that the proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "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 down by the Courts namely the genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act with retrospective effect nor does the proviso so introduced states that it was introduced "for removal of doubts" or that it is "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 down 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 i.e. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. The ratio laid down in the following cases usefully throw lights on the issue in hand:- * L.A. Firm v. CIT [1976] 102 ITR 622 (Mad) (para 9) * A. L.A. Firm v. CIT [1991] 189 ITR 285 (SC) (paras 32, 60, 61) * Anandji Haridas and Co. P. Ltd. v. Kushare (S. P.), STO: [1968] 21 STC 326 (SC) (para 35) * Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) (para 34) * Barium Chemicals Ltd. v. CLB [1966] 36 Comp Cas 639 (SC) (para 56) * BLB Ltd. v. Asst. CIT [2012] 343 ITR 129 (Delhi) (para 14) * Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 45) * CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) (paras 9, 34) * CIT v. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 (Bom) (para 21) * CIT v. DLF Power Ltd. [2012] 345 ITR 446 (Delhi) (para 14) * CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) (paras 10, 28) * CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] (paras 2, 12, 20, 48) * CIT v. Kelvinator of India Ltd. 2010 : [2010] 320 ITR 561 (SC) (paras 2, 28) * CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC) (para 50) * CIT v. P. V.S. Beedie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects? (iv) Whether and in what circumstances section 114(e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion?" 3.2. To explain the aforementioned position of the law, we are reproducing hereunder the relevant provision of section 147 of the Act. "147. Income escaping assessment.-If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer must form a tentative or prima facie opinion on the basis of material that there is underassessment or escapement of income; (ii) he must record the prima facie opinion into writing; (iii) the opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (iv) reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. The Explanation to the section stipulates that mere production of books of account or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts" (the proviso is not applicable where reasons to believe for issue of notice are recorded and notice is issued within four years from the end of assessment year). 3.4. The exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied his mind to that material and accepted/rejected the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of his lapses. 3.6. The Hon'ble Delhi High Court in Consolidated Photo and Finvest Ltd. [2006] 281 ITR 394 (Delhi) held as under: "In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 3.8. Thus, where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort may be made through section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it & loss account, balance sheet, etc. Thus, it is clear that the original assessment was framed after due application of mind, consequently, it can be said the reassessment framed by the Assessing Officer in the second category is a case of "change of opinion" and cannot be reopened for the reason that the assessee, as required, has placed on record primary material facts but on the basis of legal understanding, the Assessing Officer has taken a particular view. 3.10. If the totality of facts is analyzed, it brings us to the observations of the Delhi High Court in Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] which read as under (page 18): "The Board in exercise of its jurisdiction under the aforementioned provisions had issued the circular on October 31, 1989. The said circular admittedly is binding on the Revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular." 3.11. From a perusal of clause 7.2 of the said circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out, i.e., only with a view to allay the fears that the omission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law." 3.14. The Hon'ble jurisdictional High Court in the case Aroni Commercials Ltd. v. DCIT (2014) 362 ITR 403 (Bom.) held as under:- * * The Bombay High Court in the case of Asian Paints Ltd. v. Dy. CIT [2008] 296 ITR 90 has clearly laid down that when an assessment is sought to be reopened under section 148 and the objections of the assessee have been over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings. Thus the primary requirement to reopen any assessment is a reason to believe that income chargeable to tax has escaped assessment. However, as observed by the Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 in the context of sections 147 and 148 that reason to believe found therein does not give arbitrary powers to reopen an assessment. The concept of change of opinion is excluded/omitted from the words reason to believe. Thus a change of opinion would not be reason to believe that income chargeable to tax has escaped assessment. Besides the power to reassess is not a power to review. Further reopening must be on the basis of tangible material. [Para 11] * Therefore, the power to reassess cannot be exercised on the basis of mere change of opinion. If all facts are available on record and a particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer notice under sections 147 and 148 is not permissible. The powers under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention, the assessee had also relied upon CBDT Circular No. 4/2007 dated 15-6-2007. It would, therefore, be noticed that the very ground on which the notice dated 28-3-2013 seeks to reopen the assessment was considered by the Assessing Officer while originally passing assessment order dated 12-10-2010. This by itself demonstrates the fact that notice dated 28-3-2013 under section 148 seeking to reopen assessment is based on mere change of opinion. * However, according to the revenue, the aforesaid issue now raised has not been considered earlier, as the same is not referred to in the assessment order dated 12-10-2010 passed for the assessment year 2008-09. Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. There can be no doubt in the instant case that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the grounds for reopening assessment disclose any tangible material for the purpose of reopening the assessment but relies upon opinion/inferences drawn by the internal audit department on existing material and these inferences/opinion differ from the one drawn by the Assessing Officer while passing assessment order dated 12-10-2010. This is not a case of any new fact being available by virtue of internal audit which could lead to a reasonable belief that income chargeable to tax has escaped assessment. [Para 16] * One of the grounds set out in the order dated 20-11-2013 for rejecting the assessee's objection on reopening the assessment was that the assessee had failed to furnish sample contract note, Demat account and shareholding pattern of the companies to whom loans were advanced. This ground is factually incorrect. In fact, the assessee by its letter dated 13-9-2010 had supplied the Assessing Officer with sample of contract note, Demat account statement and also share holding pattern of the companies to whom the loans were advanced. [Para 17] * Therefore, the entire proceeding for reopening the assessment had emanated only on account of change of opinion on the part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -assessee filed a revised return of income declaring his total income for the assessment year 2002-03 wherein he claimed expenses at 30 per cent ad hoc amounting to Rs. 6.31 crores and determining his income at Rs. 8.11 crores. However, before the assessment for the assessment year 2002-03 could be completed, the respondent-assessee by a letter dated March 13, 2004, withdrew the revised return along with his claim of deduction of 30 per cent ad hoc expenses from his total income. On March 29, 2005, the Assessing Officer completed the assessment for the assessment year 2002-03 determining the respondent's income at Rs. 56.41 crores. 4. On April 5, 2006, a notice under section 148 of the said Act was issued to the respondent-assessee seeking to reopen the assessment proceedings for the assessment year 2002-03. The reasons recorded for reopening the assessment were as under: "3. On a perusal of the records, it is seen that the assessee filed the revised return claiming estimated expenses at 30 per cent on the professional receipts, based on ad hoc estimated expenses claimed by the insurance agents because they cannot prove certain expenses being incurred to persuade the insure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an appeal to the Tribunal. 7. On appeal, the Tribunal held that the reasons recorded for initiating reassessment proceeding under section 147 of the said Act clearly indicates that there was no new material which had come to the notice of the Assessing Officer so as to lead to a reasonable belief that income assessable to tax has escaped assessment. The ad hoc expenses of 30 per cent from the receipts was the subject-matter of consideration of the Assessing Officer when he passed the assessment order on March, 29, 2005, under section 143(3) of the said Act. Consequently, there was no fresh tangible material for the Assessing Officer to initiate reassessment proceeding under section 147 of the said Act. 8. Both the Commissioner of Income-tax (Appeals) and the Tribunal have correctly come to the conclusion that there was no fresh tangible material before the Assessing Officer to reach a reasonable belief that the income liable to tax has escaped assessment. The order passed originally on March 29, 2005, under section 143(3) of the said Act was passed after the respondent had made ad hoc claim for expenditure at 30 per cent of the professional receipts in the revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation of such opinion is consequent on 'information' in the shape of some light thrown on aspects of facts or law which the Income-tax Officer had not earlier been conscious of. To give a couple of illustrations; suppose an Income-tax Officer, in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the Income-tax Officer derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose the Income-tax Officer accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas 21 STC 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) : The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax has escaped assessment for such year by the reason of failure on the part of the assessee to make a return u/s. 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose truly and fully all material facts necessary for his assessment for that assessment year. It is also noted that the scope of newly substituted (w.e.f. 01/04/1989) section 147 has been elaborated in department circular number 549 dated 31st October, 1989, meaning thereby, on or after 01/04/1989, initiation of reassessment proceedings has to be governed by the provisions of section 147 to 151 as substituted (amended) w.e.f. 01/04/1989. Still, power u/s. 147 of the Act, though very wide but not plenary. We are aware that Hon'ble Gujarat High Court in Praful Chunilal Patel: Vasant Chunilal Patel v. ACIT (1999) 236 ITR 82, 840 (Guj.) even went to the extent that action under main section 147 is possible in spite of complete disclosure of material facts. The primary condition of reasonable belief having nexus with the material on record is still operative. However, we are of the view, that mere fresh application of mind to the same set of facts or "mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid down. It was observed by the Hon'ble Apex Court, in various cases that there should be some "tangible material" coming into the possession of the Assessing Officer in such cases to enable him to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlier, by the assessing authority; he can with justification change it, but that would not be a case of a "mere change of opinion" unguided by new facts or change in the legal position. It will be a case of the assessing authority having "reason to believe", notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him. There was a divergence of opinion amongst various High Courts as to what constitute "Information" for the purposes of section 34(1)(b) of the 1922 Act (which corresponds to section 147(b) of the 1961 Act) the Hon'ble Apex Court in CWT v. Imperial Tobacco Company Ltd. (1966) 61 ITR 461 has noted such divergence of op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act. In all the above cases, the petitioners have filed their respective objections on January 15, 2007, with regard to reopening of the assessment. 3. The learned senior counsel for the petitioner pointed out that in some of the cases as soon as the objections were rejected by the concerned Income-tax Officer, even the assessment order has been passed within a very short time whereby the assessee is left without any remedy to challenge such an order of rejection. 4. Hence we make it clear that if the Assessing Officer does not accept the objections so filed, he shall not proceed further in the matter within a period of four weeks from the date of receipt of service of the said order on objections, on the assessee. 5. Accordingly, rule is made absolute. 6. We also direct that the Income-tax Officer concerned shall follow the above procedure strictly in all such cases of reopening of assessment. 7. All the petitions stand disposed of accordingly." 3.21. In the aforesaid order, the Hon'ble High Court has clearly held that that if the Assessing Officer does not accept the objections filed to notice under section 148, he shall not proceed further in the matter f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered by all the three persons to the effect that any transaction was made with the assessee company. In order to invoke the provisions of section 147 of the Act, there should be a direct and live link between the material available with the Ld. Assessing Officer and his conclusion that income chargeable to tax had escaped assessment. It is further noted that there was not a single transaction with any of the parties which are alleged to manage by Shri Mukesh Chokshi with the assessee, thus, no value can be attributed to the statement tendered by Shri Mukesh Chokshi. Similarly the statements of Shri BL Aggarwal and Shri Om Hari Hallan also does not relate to any direct material or information which could be construed as escapement of income by the present Assessee. It is further noticed that the assessee made full disclosure in the proceedings under section 143(3) and 153C r.w.s. 143(3) and there was no tangible material with the Ld. Assessing Officer with regard to amount received by the assessee from four parties in respect of whom the additions were made. Based on the same facts, without having any evidence, the Ld. Assessing Officer issued notices under section 148 and thus t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that transactions involving Rs. 27 lakhs mentioned in the report of the Directorate of Investigation constituted fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represented the undisclosed income. The Assessing Officer had referred to the subsequent information and adverted to the concept of true and full disclosure of facts. There was specific information received from the office of the Directorate of Investigation as regards the transactions entered into by the assessee-company with a number of concerns which had made accommodation entries and they were not genuine transactions. It was neither a change of opinion nor did it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and was sought to be done in a different manner in the proceeding under section 147. The reason to believe had been appropriately understood by the Assessing Officer and there was material on the basis of which the notice was issued. The Court, in exercise of jurisdiction under article 226 of the Constitution of India pertaining to sufficiency of reasons for formation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment." 3.24. The Ld. Sr. Standing Counsel relied upon the decision in the case of Om Venyls Pvt. Ltd. ((supra)), wherein, it was held as under:- "The information received by the Assessing Officer on which basis the impugned notice is issued is specific. There is no ambiguity in the information which would require investigation. The information of accommodation entries has been given by a participant and this is reason enough to believe that income chargeable to tax has escaped assessment. At this stage, the Assessing Officer is not required to conclusively prove that the reasons in support of the impugned notice establish that the petitioner has taken accommodation entries. This is a matter which would be subject of further investigation during the reassessment proceedings. At that stage it would be open to the petitioner to raise all permissible defences and also to insist on cross examination of the persons who have made a statement implicating the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent and that this was due to the assessee having failed to disclose truly and fully all facts. [Para 7] * Section 147 provides inter alia that if the Assessing Officer has the reason to believe that any income chargeable to tax has escaped assessment, he may subject to the provisions of sections 148 to 153, assess or reassess such income. Proviso to section 147 of course requires that where the assessment under subsection (3) of section 143 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of the four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on part of the assessee to make return under section 139 or in response to a notice issued under sub-section (1) of section 142 or 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. In this context, it is well settled that the requirement of full and true disclosure on part of the assessee is not confined to filing of return alone but would continue all throughout during the assessment proceedings also. In this context, the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of disclosures made and materials supplied by the assessee. Such material is found to be prima facie untrue and disclosures not truthful. Earlier scrutiny or examination on the basis of such disclosures or materials would not debar a fresh assessment. Each individual case of this nature is bound to have slight difference in facts. [Para 11] * The next contention that the Assessing Officer did not demonstrate any material enabling him to form a belief that income chargeable to tax has escaped assessment is fallacious. The Assessing Officer recorded detailed reasons pointing out the material available which had a live link with formation of belief that the income chargeable to tax had escaped assessment. At this stage, as is often repeated, one would not go into sufficiency of such reasons. [Para 13] * Section 68 as is well known, provides that where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the end of the relevant year, are: (a) that the ITO must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment, and (b) that the ITO must have reason to believe that such escapement or under-assessment was occasioned by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co-exist in order to confer jurisdiction on the ITO. The ITO is obliged before initiating proceedings under section 148 to record the reasons for the formation of his belief to reopen the assessment. In the instant case the ITO did not seek to draw any fresh inference which could have been raised at the time of original assessment on the basis of the material placed before him by the assessee relating to the loan from the Calcutta company and which he failed to draw at that time. Acquiring fresh information, specific in nature and reliable in character, relating to the concluded assessment which goes to expose the falsity of the statement made by the assessee at the time of original assessment is different from drawing afresh in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and nonspecific information. To that limited extent, the Court may look into the conclusion arrived at by the ITO and examine whether there was any material available on the record from which the requisite belief could be formed by the ITO and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the ITO at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the ITO arrives at a conclusion, after satisfying the twin conditions prescribed in section 147(a) that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. The argument that the question regarding truthfulness or falsehood of the transactions reflected in the return c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by sections 147 and 148 is thus not an umbridled one. It is hedged in with several safeguards conceived in the interest of eliminating room for abuse of this power by the Assessing Officers. The idea was to save the assessees from harassment resulting from mechanical reopening of assessment but this protection avails only those assessees who disclose all material facts truly and fully. In the instant case, the Assessing Officer had submitted a chart showing that out of the unsecured hundi loans of Rs. 8,53,298 claimed by the assessee, ten persons who were said to have lent a total amount of Rs. 30,80,000 were common to both the assessment years 1959-60 and 1960-61. In other words, these very ten persons were said to have advanced loans again during the next year and all ten were found to be bogus lenders as recorded in the assessment proceedings relating to assessment year 1960-61. In the reasons recorded by the ITO (as required by section 148(2), he had, stated clearly that in the course of assessment proceedings for the succeeding assessment year, it was found that out of the unsecured hundi loans put forward by the assessee, a larger number were found to be bogus and that many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investigations and enquiries made during the assessment proceeding relating to the subsequent assessment year, he had come in to possession of material, on the basis of which he had reasons to believe that the assessee had put forward certain bogus and fake unsecured hundi loans said to have been taken by him from nonexistent persons or his dummies, as the case may be, and that on that account income chargeable to tax had escaped assessment. According to him, this was a fake assertion to the knowledge of the assessee. The ITO said that during the assessment relating to subsequent assessment year, similar loans (from some of these very persons) were found to be bogus. On that basis, he sought to reopen the assessment. Having created and recorded bogus entries of loans, the assessee could not say that he had truly and fully disclosed all material facts necessary for his assessment for that year. True it was that ITO could have investigated the truth of the said assertion-which he actually did in the subsequent assessment year-but that did not relieve the assessee of his obligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the statement recorded during the survey proceedings u/s. 133A in the case of Lloyds Group of cases. Reliance is placed on the statement of Shri B.L. Agarwal, Shri Mukesh Choksi and Shri Om Hari Halan. The copies of these statements are on pages 174 to 225 of the paper book for A.Y. 2007-08. * The AO has relied upon the statement of Shri Mukesh Choksi which was recorded on 16/1/2013 whereas in the reasons he has referred to the statements recorded on 25/11/2009 and 26/11/2009. AO cannot improve upon any aspects beyond the reasons recorded. * The order passed u/s. 153C has been quashed by the Hon'ble Tribunal as per orders which are on pages 2779 to 2786 of the paper book 2 containing the order passed. * The reassessment proceedings are in respect of the order passed u/s. 153C. Once the order passed u/s. 153C itself is quashed the question of escapement of income in respect of that particular income determined in the order passed u/s. 153C does not arise. * As regards the bogus purchases referred to in para 6 of the reasons, there is a reference to the purchases made by M/s. Halan International and M/s. Halan International being the beneficiary of the transactions. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see, wherein, the assessee was directed to file return of income within seven days from the receipt of this notice. The assessee filed the return on 09/05/2011 declaring business loss at the same figure of Rs. 2,93,79,768/- and Short Term Loss of Rs. 76,68,122/- (as originally filed) under normal provisions of the Act and declared book profit of Rs. 8,81,542/- under section 115JB of the Act. Subsequently, notices under section 143(2) and 142(1) along with questionnaire were issued to the assessee. The assessee attended the proceedings and filed details from time to time as has been accepted by the Ld. Assessing Officer himself in para-4 (page-22 of the paper book). The Ld. Assessing Officer has made an elaborate discussion with business activities of the assessee, expenses attributable to the earning exempt income under section 14A r.w.r 8D and notification no. 45/2008 dated 24/03/2008. Meaning thereby, the assessment order was passed after due application of mind and after examination of material facts. 4.2. Identical are the facts for Assessment Year 2010-11 which are summarized as under:- * Notice u/s. 142(1) was issued and order u/s. 143(3) was passed on 26/12/2011. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of under section 115JB and the said return was processed under section 143(1) of the Act. The case of the assessee was selected for scrutiny, therefore notices under section 143(2) and 142(1) along with questionnaire were issued to the assessee. The Ld. Assessing Officer himself mentioned that the assessee filed the details from time to time and an elaborate discussion has been made by the Assessing Officer and thereafter the assessment order was passed after due application of mind and considering/examining the details. It is not the case that the assessment were framed either under section 143(1) or without due application of mind or without examining the material facts. We observe that the assessments were framed after examining the material facts, filed by the assessee from time to time and on due application of mind and that too under section 143(3) of the Act, thus, there is no material on record, brought by the Revenue indicating that any new tangible material was gathered by the Revenue. The Ld. Assessing Officer reopened the assessment merely on the basis of statement of three persons that too without bringing on record any incriminating material which can lead to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer is not permitted to improve upon the reasons recorded by the Ld. Assessing Officer as was held by Hon'ble jurisdictional High Court in Hindustan Lever Ltd. 268 ITR 332 (Bom.) and various cases discussed by us in various paras of this order. Similarly the statement of Shri BL Aggarwal and Shri Om Hari Hallan also does not educe any evidence which could tantamount to escapement of income for AY 2009-10 and 2010-11 also. For AY 2009-10, it is further observed that once the original proceedings are quashed by the Tribunal under section 153C of the Act then nothing survives in respect of which it could be construed that income chargeable to tax has escaped assessment. Thus, being on identical facts, the reassessment for Assessment Year 2009-10 and 2010-11 also, cannot be said to be valid. Thus, the identical grounds of all the appeals with respect to validity of reassessment proceedings under section 148 of the Act are held to be invalid, consequently, the impugned grounds are allowed. 5. Since, we have held the reassessment proceeding under section 148 to be invalid, there is no need to go into the merits, still and we deem it appropriate to examine the issues in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the transactions are duly reflected in the regular books of accounts, the details of cheque no., name of the bank and other details were submitted before the authority. It was contended that the same transactions were confirmed by all the four parties and in their audited financial statements and all the four parties are assessed by the same Assessing Officer who has passed the assessment order in the case of the assessee for Assessment Year 2007-08. The Ld. Counsel also relied upon the following cases:- i. Commr. of Income Tax v. G.P. International Ltd. (2010) 186 Taxman 229 (P & H) ii. Commr. of Income Tax v. Siri Ram Syal Hydro Power Pvt. Ltd. 196 Taxman 441 (Delhi) iii. Commr of Income Tax v. HLT Finance Pvt. Ltd. (2011) 12 Taxman p. 247 (Delhi) iv. Commr. of Income Tax v. Oasis Hospitalities P. Ltd. 333 ITR 119 (Delhi) v. Asstt. Commr. of Income Tax, Central Circle 13 v. Adamine Construction (P) Ltd. 87 taxmann.com 216 (ITAT - Delhi) vi. Commr. of Income Tax, Central - III v. Anshika Consultants (P.) Ltd. 62 taxmann.com 192 (Delhi) vii. Asstt. Commr. of Income Tax v. Bahubali Dyes Ltd. 55 taxmann.com 357 (ITAT - Delhi) viii. Bharti Syntex Ltd. v. Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich no premium was received. The assessee filed the necessary declarations and the details of issue of preferential shares issued at par to the Registrar of Companies and in the books of accounts of the assessee also, no premium was received against issue of the preference shares. c) The assessee had filed original return of income on 23/10/2007. Alongwith the return of income the audited financial statements and the details were submitted. The order was passed u/s. 143(3) accepting the returned income. Thereafter notice u/s. 153C was issued on 16/12/2010. Notices u/s. 143(2) & 142(1) of the Act were issued asking for the complete details and the information about the amount received in A.Y. 2007-08 and issue of preferential shares in the subsequent period. After examining the replies and other details filed by the assessee, the assessment was framed under section 143(3) rws 153C and the claim of the assessee was accepted. No addition was made even in this proceeding. Notice u/s. 153C was issued by the Central Circle - 32. The order is passed with the approval of the Addl. Commr. of Income Tax, Central Circle. d) Thereafter the notice u/s. 148 was issued to the assessee on 21/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 Ledger account confirmations 4 1 2 3 NA 5 Pref. Shares Application forms 4 29 30 32 33 6 Pref. Shares Allottment Letters 4 45 46 48-49 50-51 6 Details of Money received giving complete bank details 4 66-68 69-70 73-75 76-77 7 Round (1) 8 Order Passed u/s. 153A/C 2 167-170 232-235 335-357 412-415 9 order of the CIT (A) 2 NA NA 669-706 NA 10 Order of ITAT 2 NA NA 760-839 NA 11 Round (2) 12 Order Passed u/s. 143(3) r.w.s147 2 928-942 970-983 1034-1047 1076-1089 13 order of the CIT (A) 2 1705-1919 1920-2133 2339-2548 2549-2765 5.6. We have analyzed the assessment order, impugned order and submissions from both sides carefully and found that all the four parties are separate legal entities, they are assessed to tax and filed the tax returns under their PAN No. regularly for all the years including for A.Y. 2007-08. All the transactions are reflected by them in their regular books of accounts which are audited and were submitted before various authorities. The details of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws 153C and the claim of the assessee was accepted. No addition was made even in this proceeding. Notice u/s. 153C was issued by the Central Circle - 32. The order is passed with the approval of the Addl. Commr. of Income Tax, Central Circle. 4. Thereafter the notice u/s. 148 was issued on 21/3/2014. In the assessment order the addition is made u/s. 68 amounting to Rs. 1,11,75,00,000/-. The CIT (Appeals) confirmed the additions. The issue before the tribunal is regarding the said additions of Rs. 1,11,75,00,000/-. 5. The party-wise details of additions made and the other particulars of the said parties are given here-below as Annexure -1. Against the name of each party the additions made by the Learned AO amounting to Rs. 1,11,75,00,000/- is mentioned in column No. 4. The total addition made is Rs. 1,11,75,00,000/-. The details of the same is as under: Name of the Co. Return filed u/s 139( 1) Income declared Share Application Received Notice u/s. 153A/ C Order u/s 153 C Order of CIT(A)-41 Order of ITAT Order u/s 143(3) rws 147 Order of CIT(A) -53 Balance Addition dated Addition dated Addition deleted dated Deletion Confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp;76-77 8 Round (1) 9 Order Passed u/s. 153A/C 2 27-52 79-104 171-208 236-266 358-384 416-442 10 order of the CIT (A) 2 471-502 503-537 569-601 602-635 669-706 707-739 11 Order of ITAT 2 760-839 760-839 740-759 760-839 760-839 760-839 12 Round (2) 13 Order Passed u/s. 143(3) r.w.s147 2 887-900 901-913 943-956 984-998 1048-1061 1090-1103 14 order of the CIT (A) 2 1118-1314 1315-1511 1705-1919 1920-2133 2339-2548 2549-2765 5.9. All the six parties are separate legal entities. They are assessed to tax. They have filed the tax returns under their PAN No. regularly for all the years including for A.Y. 2008-09. All the transactions are reflected in their regular books of accounts which are audited and submitted to various authorities. The transactions are reflected in the regular bank account. The details of the cheque Nos., name of the bank, date and the branch were also submitted during all the assessment and appellate proceedings. The said trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TRADING & FINANCE PVT.LTD AACCG7998L - - - 2,00,00,000 1,00,00,000 3,00,00,000 11 HEMA TRADING COMPANY PVT.LTD. AABCH4279G - - 1,55,00,000 3,20,00,000 1,45,00,000 6,20,00,000 12 HINGORA FINVEST PVT LTD AAACH6694N - - 1,00,00,000 1,50,00,000 1,00,00,000 3,50,00,000 13 ISPAT SHEETS LTD. AAACI4429E 2,00,00,000 - 2,45,00,000 3,00,00,000 7,45,00,000 14 JAVDA INDIA IMPEX LTD AAACA7065L - - 2,00,00,000 2,00,00,000 4,00,00,000 15 KIRTI ELECTRO SYSTEM PVT. LTD. AACCK0083G 1,00,00,000 - 1,00,00,000 2,20,00,000 1,00,00,000 5,20,00,000 16 MANGALAM EXPORTS PVT LTD AAECM2069A 1,00,00,000 - - 1,00,00,000 17 NOVELTY TRADERS LTD AABCN8817E 2,00,00,000 - 2,50,00,000 2,00,00,000 6,50,00,000 18 OSHIN INVESTMENT & FINANCE PVT LTD AAACO9051G 1,50,00,000 50,00,000 2,25,00,000 1,50,00,000 2,00,00,000 1,00,00,000 8,75,00,000 19 REALGOLD TRADING COMPANY PVT.LTD AACCR4512K - - 1,50,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is case. The Addl. CIT has fairly admitted that complete bank enquires were made in case of all investing companies on the basis of details submitted by the assessee up to third down layer but nowhere it was found that cash was deposited in any account before issuing the cheques for investments made in the purchase of shares of the assessee company. He has further stated that since no adverse finding was recorded during the bank account investigation, therefore it was not mentioned in the assessment order". The Hon'ble Tribunal also confirmed the deletion of the addition by the CIT (Appeal) and has categorically observed that "once the assessee has given the complete details and information of the investors who have made investments in the share capital of the company and proved the identity then no addition can be made in the hands of the assessee company in respect of such investments". This fact clearly proves that even in the hands of six companies the source of the funds is explained meaning that the Assessee has not only explained the source of the funds being the amount received from six companies but also has proved the source of the source in the hands of the said six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Tribunal passed in some of the cases out of the fourteen companies clearly establish that the share application money received by those companies are genuine and proved. Thus, there is no involvement of the present assessee in introduction of share capital, much less in cash, in those companies. Therefore, the other foundation of the Assessing Officer in levying the penalty i.e. utilization of cash in introduction of share application money in fourteen companies also fails". This also proves that the money received by the fourteen companies is genuine and is proved by them. The six companies involved in A.Y. 2008-09 is out of the fourteen companies and hence this fact clearly establishes not only the source but the source of the source also. 5.13. During hearing, the ld. counsel for the assessee invited out attention to the observation made by First Appellate Authority, which is in para 6.14 of the impugned order. On the subject of source of the funds in the hands of the fourteen companies the two different propositions arose. First being the genuine investments by fifty-four companies in to the share capital of fourteen companies and second being the investments made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offering the income of Rs. 557.50 crores for A.V. 2007-08 to 2010-11. As no incrementing material/document was found, the assessee was left with no choice but to state that the said income was generated on account of difference in yield, when in fact and in substance there was no defect or error in the yield which is disclosed by the assessee in the regular books of accounts. The assessee thereafter filed the return of income disclosing the income offered in the letter dated 27/12/2012 on 15/01/2013 and filed a copy of the same with the Investigation Wing. Notice u/s. 148 was issued on 25/11/2013 received by the assessee on 27/11/2013. The assessee filed a letter stating that the return filed voluntarily on 15/01/2013 may be treated as return in response to notice u/s. 148. The assessments for the impugned assessment years were framed u/s. 147 r.w. S. 143(3) of the Income Tax Act("the Act"). The impugned penalty in respect of impugned assessment years were imposed by the ACIT, Central Circle-41, Mumbai("AO") u/s.271(1)(c) of the IT Act. 3. By the impugned order, CIT(A) confirmed the penalty so imposed by the AO against which assessee is in further appeal before us. 4. Common gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submitted that such a levy of penalty is not tenable in view of law laid down in catena of decisions including that of the Karnataka High Court in the case of CIT v. Manjunatha Cotton and Ginning Factory, reported in [2013] 359 ITR 565. This decision, he submitted has been followed by various benches of the Tribunal and later on reiterated by the Karnataka High Court again in the case of Steel Industries, reported in [2014] 51 taxmann.com 127. The lists of all the decisions filed before us in the form of separate compilation are as under:- Sr.No. Case Law ITA / Citation 1 CIT v. Manjunatha Cotton & Ginning Factory 359 ITR 565) (Kar) 2 CIT v. SSA's Emerald Meadows 73 taxmann.com 241 (Kar)(HC) 3 CIT v. SSA's Emerald Meadows (73 taxmann.com 248)(SC) 4 CIT v. Samson Perinchery (ITA 1154, 953, 1097, 1226 / 2014, order dated January 5, 2017)(Bom HC) 5 M/s. Wadhwa Estate & Developers India Pvt. Ltd., vs. ACIT ITA 2158/Mum/2016 order dated February 02, 2017 (TMum) 6 Dr. Sarita Milind Darave v. ACIT ITA No.2187/Mum/2014, order dated 21, 2016)(TMum) 7 Sejal P. Savla v. ACIT ITA 3282/Mum/2015 order dated August 10, 2016 (TMum) 8 ACIT v. Dipesh M. Panjwani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s will lead to an inference as to non-application of mind". P) Notice under section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or not furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law". 7. On merits it was contended by learned AR that it was a voluntary disclosure and nothing incriminating was found either during the course of survey or thereafter. He invited our attention to the income assessed which was equal to the return income except in the A.Y. 2010-11. As per learned AR, there was addition of Rs. 4,38,93,410/- in the A.Y. 2010-11 as compared to the return income and the disclosure made by the assessee in the revised return. As per learned AR the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice under section 148 return of income was filed at Rs. 1,19,10,300/- and assessment was completed at Rs. 1,19,11,555/- by making small addition of Rs. 1,235/- to the returned income filed in response of notice under section 148. On the additional income offered penalty of Rs. 11,80,489/- was levied. The AO rejected the objection of the assessee that penalty should not be levied as the assessment has been framed according to the returned income in which the additional income was offered. The AO observed that the returned of income was neither filed under section 139(1) nor it was a revised return as per provisions of section 139(5). This fact is mentioned in para 6 while reproducing the order passed by the CIT(A). It was further 'Observed by the AO that in consequent to survey action taken on November 20, 2012 the assessee filed letter dated January 14, 2013 and subsequently has filed return of income in response to notice under section 148 dated March 4, 2013 and assessment was framed vide order dated March 26, 2013. In these circumstances the levy of penalty was sustained by CIT(A) and his order was challenged before the ITAT. The ITAT taking note of all the above facts ment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn and everything would depend upon the return filed by the assessee. This view gets supported by Explanations 4, 5 and 5A of section 271 (1). Obviously no penalty can be imposed unless the conditions stipulated in the said provisions are duly and unambiguously satisfied. Section 271 (1)(c) has to be construed strictly. Unless it is found that there is actually a concealment or nondisclosure of the particulars of income, penalty cannot be imposed. There is no such concealment or non disclosure, as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax". This is an identical case, where survey operations had taken place and the assessment was reopened u/s. 148, the coordinate Bench deleted the penalty. 31. In the case of Vasavi Shelters v. ITO [2013] 32 taxmann.com 26, the coordinate Bench at Bangalore held, "There can be no concealment or nondisclosure as the assessee had made a complete disclosure in the return and offered the surrendered amount for the purposes of tax and therefore no penalty under section 271(1)(c) could be levied. The words 'in the course of any proceedings under this Act' in section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same income, namely, the amounts in the bank accounts along with interest there on, have been assessed in the hands of the assessee as well as different family members. Hence, even the Department is not certain as to the right person who is amenable to tax qua the said income. in the circumstances, the Tribunal rightly came to the conclusion that no penalty is exigible under the provisions of section 271 (1)(c) of the Act when the Tribunal has found that admittedly the family members have not been treated as benamidars of the assessee nor have the family members stated that they are the benamidars of the assessee. 13. In the view that the court has taken it has not been found necessary to enumerate and deal with more than a dozen authorities cited by both the sides. The question referred for the opinion of this court is, therefore, answered in the affirmative, i.e., in favour of the assessee and against the Revenue. The reference stands disposed of accordingly with no order as to costs". 34. In the case of Dilip Kedia v. Asstt. CIT [2013] 40 taxmann.com 102 (Hyd.) the coordinate Bench at Hyderabad held, "considering all the aspects viz., the assessee had declared the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , undisputedly no additions were made in the assessment for the assessment year 2004-05 as the Assessing Officer has accepted the revised return filed by the assessee without tinkering with accounts prepared by him and computed his income. Therefore, the Explanation 2 to section 271(1) cannot be invoked and the penalty under section 271 (1)(c) cannot be levied in assessment year 2004-05 for the additional income offered during the course of survey. We therefore, set aside the order of the CIT(A) and delete the penalty". 36. As it can be noted, that the in all the above cases extracted by us, either there was a search operation or there was a survey operation on the assessee and as a consequence thereof, the assessee filed its return/revised return/reassessment return including the amount offered for tax and which was accepted by the AO. In all these cases, the judicial fora was of the view that penalty was not exigible." CIT v Shankerlal Nebhumal Uttamchandani [2009] 311 ITR 327(Guj) In this case search was conducted on October 27, 1987 at the premises of firm and its partners. During the course of search various documents, loose papers, pass books, bank statements, etc. were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove decision are being reproduced:- "11. As noted hereinbefore, the Tribunal has in terms found that though certain queries were raised and put to the assessee there was no specific pinpointing of particular items of income which have been concealed by the assessee. The Tribunal has found, as a matter of fact, that till March 31, 1989, the process of detection was not complete, the date March 31, 1989, being the date of filing of the revised returns. In face of these findings recorded on the basis of evidence appreciated by the Tribunal, the court does not find it necessary to deal with any other issues considering the question referred for the opinion of this court. In fact, there is no material on record to indicate that the aforesaid finding of the Tribunal is incorrect in any manner whatsoever. Furthermore, the Tribunal has also noted as a matter of fact that the very same amounts standing to the credit of the bank accounts of various family members had already been assessed by the Departmental authorities along with interest in the hands of the family members and it was also an admitted position that those family members have nowhere admitted that the family members were be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the context of non-levy of penalty particularly whereas the reassessment itself has been done in accordance with the revised return so filed by the assessee. 9. It was also brought to our notice that the Assessing Officer has made several incorrect statement and allegations while levying the penalty. This was duly brought to the notice of the CIT(A) in the course of the hearing vide written submissions filed before him. However, the CIT(A) has completely ignored such vital factual discrepancies pointed out by the assessee. The relevant part of the written submissions filed before the CIT(A) as under:- "39. The Learned Assessing Officer while passing the older u/s. 271(l)(c) has made various wrong statements and false allegation. In para 2 the Learned Assessing Officer stated that large scale evasion of tax by Lloyds group by way of routing unaccounted cash through share application money was unearth during the search action conducted at the premises of Jog/a Properties on 04/03/2010 in consequence of other search action conducted on 25/11/2009 in case of Shri Mukesh Choksi who was engaged in the business of providing bogus bills, bogus tong term, short term gains, speculation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;s declaration of income in revised returns and his explanation that he had done so to buy peace with department and to come out of vexed litigation could be treated as bona fide and no penalty could be levied for concealment of income." 13. It was submitted by learned AR that decision of the Bombay High Court in CIT v Smt. Kaushalya(Supra) is not applicable to the facts of the present case for following reasons: - The issue is now decided by the Apex Court in Commissioner of Income-tax v. SSA'S Emerald Meadows [2016] 73 taxmann.corn 248 (SC) wherein it is clearly held that there is no merit in the petition. The SLP was against the order of Karnataka High Court in -CIT v. SSA'S Emerald Meadows [2016] 73 taxmann.corn 241 (Kar.) wherein the High Court affirmed decision of Tribunal, relying on decision of CIT v Manjunath Cotton and Ginning Factory (2013) 359 ITR 565(Karn) holding that notice issued by Assessing Officer under section 274 read with section 271 (1)(c) was bad in law, as it did not specify under which limb of section 271 penalty proceedings had been initiated, i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied the penalty on any one of the charge then also, it cannot be held that penalty order is bad in law. The substance and facts relating to levy of penalty has to be seen. On merits, she strongly relied upon the order of the CIT(A). 15. It was also contention of CIT DR that AO has properly recorded satisfaction while passing assessment as well as penalty order which clearly indicate proper application of mind by the Assessing Officer. She also relied on the decision of Bombay High Court in case of Smt. Kaushalya & Ors. 216 ITR 660 (Bom) to canvass support for her plea that non-striking off the irrelevant portion of notice would not invalidate the imposition of penalty u/s. 271(1)(c) of the Act. 16. As per learned DR, the undisclosed income is unearthed as a result of survey u/s. 133A and investigations carried out by the department. Due to this, the assessee offered additional income of Rs. 557.5 cr. for the AYs 2007-08 to 2010-11. The assessee never intended to offer this income to the department and the assessee had guilty mind with all the elements of mens rea. That is why the assessee did not offer this income in the original returns filed u/s. '139(1) for the AYs 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s filed on January 7, 2013 wherein an additional income of Rs. 557.50 crores was offered and the same was included in the returns of income filed for the impugned assessment years and also formed part of the assessed income on which impugned penalty has been levied. 19. The additional income so offered was accepted and assessed by AO. Such income was bifurcated into various heads which have been accepted by the AO and additional income has been assessed accordingly. For sake of completeness of facts regarding additional income in respect of each of the year as offered by assessee and accepted by AO for making the addition are described under the head trading sales, Raw Materials purchases for manufacturing, purchases from other parties for manufacturing difference on account of yield. Year wise details are as under:- A.Y.2007-08 Sr. No. Nature of head Particulars Qty (MT) Gross Income 1 Trading Sales A Trading other than "Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 14616 44.94 0.88 2 Trading Sales B "Trading with Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 0 4.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross Income 1 Trading Sales A Trading other than "Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 189238 793.96 22.55 2 Trading Sales B "Trading with Ragni trading & Investment Ltd., and Shree Global Tradefin Ltd., (assessee sister concern) 0 0 0.7 3 A. purchase from other parties for manufacturing Bogus purchases from 15 parties which were identified by Sales Tax authorities as nongenuine 0 0 0.7 4 Capex Addition to P & M worth 2.91 cr in A.Y.2009-10 not fully supported with evidence & vouchers 0 0 0.4 5 Difference on a/c. of Difference in "Yield as yield per Steel-Industrial norms(84.5%)" and yield shown by assessee 0 0 80.00 TOTAL 104.42 20. In this manner, the additional income has been assessed as per offer made by the assessee in pursuance to survey conducted by the department on December 19, 2012 for which statement of the then Director was recorded on December 20, 2012 and offer was made. Immediately on January 7, 2013 letter dated December 27, 2012 was filed with the DDIT (Inv.) confirming the offer of additional income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the AO in the penalty order in respect of AY 2007-08 and in para 4.2 it has been specifically stated by the CIT(A) that the facts relevant to all the assessment years are identical with the facts of AY 2007-08 except of quantum of additional income declared by the assessee which was then added by the AO while passing the reassessment orders under section 147 r.w.s 143(3) in para 4.3 he has reproduced the analysis of the AO in which it was stated by the AO that the submissions of the assessee with regards to non levy of penalty can be summarised which inter alia include that the disclosure has been made suo moto by the assessee and it was to buy peace and was conditional subject to non-levy of penalty. The AO observed that the action taken under section 133A and post survey investigation resulted in unearthing the concealment of additional income which was due to departmental action in 2010 and then in 2012; that the assessee was facing consistent and repeated investigation, therefore, was not left with any choice except to come clean and offered the suppressed income over the years as additional income. Therefore the AO has held that penalty was leviable. Such conclusion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y CIT(A) to AO is reproduced. 25. In reply to CIT(A) calling the remand report, the AO submitted two letters dated April 29, 2015 and May 18, 2015. From the letter dated April 29, 2015 it was noted by the CIT(A) that AO did not give specific answers to the queries raised by CIT(A). Therefore, it has been mentioned by him in para 6.3 at pg. 39 of the impugned order that the first remand report sent by the AO was cryptic and did not address the points on which the comments were sought. Therefore, Ld. CIT(A) provided second opportunity to the AO for which the second letter was submitted. In second reply too no reference was made to any evidence or material to substantiate the additions except the excerpt from the statements recorded during the course of survey regarding voluntary offer of the addition and reference can be made to the second remand report of the AO which has been reproduced in the impugned order at pgs. 39-62 of the order. The conclusion drawn by CIT(A) to uphold the addition are recorded in para 10.1 from pg. 63 of the impugned order. It can be seen from the impugned order that from para 10.1 to 11.11 Ld. CIT(A) has discussed the admission made by the then director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortant to determine the issue that whether or not the assessment of the impugned addition is on account of detection by the Department or the question that the offer is voluntary and bonafide. In view of the facts that voluntary offer was made in statement dated January 15, 2013 which was followed by letter dated 27.12.2012 filed on 07.01.2013 and immediate filling of the revised return on 15.01.2013 all immediate and prompt actions taken by the assessee indicates not only the bonafide conduct of the assessee but also establish the fact that the impugned addition is on account of voluntary offer made by the assessee during the survey and till the date of filling of the voluntary returns i.e. on January 15, 2013 there was no detection by the Department. Such bonafide and voluntary action of the assessee is further strengthen by the fact that Ld. AO has accepted the offer and income has been determined according to returns of income filed on January 15, 2013 except an addition of Rs. 4,38,93,410/- in the AY 2010-11 on account of purchases made from Gupta Metallics as per para 6 of the assessment order for AY 2010-11. 28. Before proceeding to assail the penalty Order and the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year. The AO, in our view, has recorded a categorical finding that he was satisfied that the assessee had concealed true particulars of income and is liable for penalty proceedings under Section 271 read with Section 274 of the Income Tax Act, 1961." -The above view is also strengthened by the decision of the Hon'ble Jurisdictional High Court dated February 9, 2016 in the case of CIT v. Shri. Hiralal Doshi ITA No. 2331 of 2013 wherein their lordships ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd can be considered as a factor for non-levy of concealment penalty. Thus, the reliance by Ld. CIT(A) on decision in the case of MAK Data(supra) is incorrect and not sustainable in law. Deloitte Consulting India (P.) Ltd. v ACIT [2014] 151 ITD 454 - In this case also the assessee did not disallow entire marketing expenses in respect of international transaction and this issue was already referred by the AO to the TPO. Thereafter, the assessee revised its return and it was held that such action of the assessee was not voluntary and during the course of assessment proceeding. Thus, this case is also not applicable to the facts of the present case. A.M. Shah & Co. v CIT [1999] 238 ITR 415(Guj.) The facts of the case are entirely different from the facts of the case of the assessee. The assessee challenged the levy of penalty on the ground inter alia including that the assessment was on estimate basis and' penalty could not be sustained. The fact was that serious discrepancies were found in the books of account and excess sales were shown while purchases were not shown, bogus purchases were claimed and purchases were not shown in sales or stock. The assessee never revised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot to be reckoned as any casual remark, which can be interchanged by the AO at any stage on his whims and fancies. It is not an error which is rectifiable or to be ignored, albeit it is a fatal error which vitiates the entire initiation itself. If charge itself is vague and not clear, then the onus cast upon the assessee under Explanation itself gets vitiated as assessee is precluded from a chance to give a specific rebuttal on that charge. It is a trite law that circumstances and facts for levy of penalty under both the grounds operate in a different fields. The courts have held that in the notice under section 274 r.w.s. 271, the AO has to specify the charge on which he intends to levy penalty. This aspect of the matter has been consistently reiterated by the Hon'ble High Courts from time to time. 31. We found that Notice under section 271(1)(c) is issued on standard performa in which inappropriate words and paragraphs were neither struck off nor deleted. Reference is made to the copy of notice issued under section 274 r.w.s 271 of the Income Tax Act, 1961 on January 2, 2014 in respect of all the assessment years the copies of which are placed in the paper book. We found th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned, one of the substantial questions on which the appeal was filed by the revenue was: "Whether the notice issued under section 271(1)(c) in the printed form without specifically mentioning whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars is valid and legal?" 34. While answering the above in favour of the assessee, the following findings were recorded by the Hon'ble Court: "61. The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment furnishing inaccurate particulars of income are different Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai reported in [2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lty proceedings are being initiated for furnishing of inaccurate particulars or that for concealment of income makes the penalty order liable for cancellation even when it has been proved beyond reasonable doubt that the assessee had concealed income in the facts and circumstances of the case?" 39. The aforesaid question was dealt with by the Hon'ble Court in favour of the assessee in the following words: "3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with section 271(1)(c) of the Income-tax Act 1961 (for short 'the Act; to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act the penalty proceedings had been initiated le. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of Commissioner of Income-tax v. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565. 4. In our view since the matter is covered by judgment of the Division Bench of this Court we are of the opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the aforesaid principle laid in Dilip N. Shroff (supra) still holds good in spite of the decision of the Hon'ble Supreme Court in UOI v. Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v. Smt. Kaushalya & Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. 43. In addition to the aforesaid binding judgments, there are several orders passed by co-ordinate Benches of he Tribunal on this very point. In all those orders also penalty levied u/s. 271(1)(c) of the Act on the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that 'The vagueness and ambiguity in the notice had also prejudiced the right of reasonable opportunity of the assessee since he did not know what exact charges he had to face. In this background, quashing of the penalty proceedings for the assessment year 1967-68 seems to be fully justified' Respectfully following the above decisions, we hold that the notice dated 27.12.2011 issued by the AO u/s. 274 r. w. s. 271 of the Act for the A Y 2004-05 for initiating penalty proceeding u/s. 271(1)(c) of the Act in the present case is invalid In view of the above, the other grounds of appeal raised by the assessee against the levy of penalty u/s. 271 (1) (c) of the Act require no adjudication at this stage. The order of the ld. CIT(A) sustaining the penalty of the Act is thus set aside." (c) Chandru K. Mtrchandani v. ITO (ITA No. 5368/Mum/2014 dated 05.04.2017) "4.1.2 In this regard the learned A.R. of the assessee drew the attention of the Bench to the notice issued by the Assessing Officer to the ITO Ward 14(3)3), Mumbai under section 274 r.w.s. 271 (1)(c) of the Act dated 30.12.2011 (copy placed at pg 1 of paper book). It is submitted that the notice is a standard print ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked application of mind in initiating penalty proceedings while framing assessment and also while issuing the notice initiating penalty proceedings u/s. 274 r.ws. 271(1)(c) of the Act. 11. We are therefore respectfully following the ratio laid down by the Hon'ble High Courts including the jurisdictional High Court and Supreme Court hold that the order of the CIT(A) upholding the imposition of penalty u/s. 271(1)(c) of the Act where the AO had not specified or mentioned the charge on which the penalty has been imposed is not correct and cannot be sustained In view of the foregoing discussion we set aside the order of CIT(A) and direct the AO to delete the penalty levied u/s. 271(1)(c) of the Act." (e) Dr. Santa Wind Davare v. ACIT & vice versa (ITA No. 2187/Mum/2014 & anr dated 21.12.2016) "12. A combined reading of the decision rendered by the Hon'ble Bombay High Court in the case of Smt. B. Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) would make it clear that there should be application of mind on the part of the AU at the time of issuing notice. Here, in the instant case, the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;ble Karnataka High Court in CIT v. Manjunatha Cotton & Ginning Factory [2013] 359 ITR 5675 (Karn) held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated In the present case, neither the assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid......................... 44. In so far as the judgment of the Hon'ble Bombay High Court in the case of CIT v. Smt. Kaushalya and Ors 216 ITR 660, rendered on 14.01.1992, it may be noted that in their subsequent and recent decision in the case of CIT v. Shri Samson Perinchery (supra), discussed above, the issue was decided in favour of the taxpayer. It is well settled that when th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 007 rules that the instructions laying down the monetary limits for filing appeals are prospective and do not apply to pending matters. Patently there is a conflict of the opinion in the two judgments of the hon'ble jurisdictional High Court. Both these judgments have been rendered by the hon'ble Bombay High Court with the strength of two judges each. The question which looms large before us is to decide whether the later or the former judgment should be followed The Hon'ble Delhi High Court in the case of Bhika Ram v. Union of India [1999] 238 ITR 113 has held that a later decision by a Bench of equal strength is binding In view of this precedent, it is manifest that the judgment rendered in the case of Chhajer Packaging and Plastics P. Ltd. [2008] 300 ITR 180 (Born) is binding on us and accordingly only the monetary limit relevant at the time of filing the appeal is to be considered The instruction providing a different monetary ceiling of tax effect, prevailing at the time when appeal is taken up for hearing, is not germane" 46. In fact, the co-ordinate Benches have already followed this precedent in Prakash H. Savia v. ACIT, Oleander Farms P. Ltd. V. DCIT, Dr. San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said notice has been placed on record and the learned representative canvassed that the same has been issued by the Assessing Officer in a standard proforma, without striking out the irrelevant clause. In other words, the notice refers to both the limbs of Sec. 271(1)(c) of the Act, namely concealment of the particulars of income as well as furnishing of inaccurate particulars of income. Quite clearly, non-striking-off of the irrelevant limb in the said notice does not convey to the assessee as to which of the two charges it has to respond. The aforesaid infirmity in the notice has been sought to be demonstrated as a reflection of non-application of mind by the Assessing Officer, and in support, reference has been made to the following specific discussion in the order of Hon'ble Supreme Court in the case of Dilip N. Shroff (supra):- "83. It is of some significance that in the standard proforma used by the Assessing Officer in issuing a notice despite the fact that the same postulates that inappropriate words and paragraphs were to be deleted, but the same had not been done. Thus, the Assessing Officer himself was not sure as to whether he had proceeded on the basis th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty in such circumstances being bad, has been approved. 11. Apart from the aforesaid, the ld. CIT-DR made an argument based on the decision of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Others, 216 ITR 660 (Bom.) to canvass support for his plea that non-striking off of the irrelevant portion of notice would not invalidate the imposition of penalty u/s. 271(1)(c) of the Act. We have carefully considered the said argument set-up by the ld. CIT-DR and find that a similar issue had come up before our coordinate Bench in the case of Dr. Sarita Milind Davare (supra). Our coordinate Bench, after considering the judgment of the Hon'ble Bombay High Court in the case of Smt. Kaushalya & Ors., (supra) as also the judgments of the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra) and Dharmendra Textile Processors, 306 ITR 277 (SC) deduced as under:- "12. A combined reading of the decision rendered by Hon'ble Bombay High Court in the case of Smt. B Kaushalya and Others (supra) and the decision rendered by Hon'ble Supreme Court in the case of Dilip N Shroff (supra) would make it clear that there should be application of mind on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resaid argument of the ld. CIT-DR. 13. Apart from the aforesaid discussion, we may also refer to the one more seminal feature of this case which would demonstrate the importance of non-striking off of irrelevant clause in the notice by the Assessing Officer. As noted earlier, in the assessment order dated 10.12.2010 the Assessing Officer records that the penalty proceedings u/s. 271(1)(c) of the Act are to be initiated for furnishing of inaccurate particulars of income. However, in the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act of even date, both the limbs of Sec. 271(1)(c) of the Act are reproduced in the proforma notice and the irrelevant clause has not been struck-off. Quite clearly, the observation of the Assessing Officer in the assessment order and non-striking off of the irrelevant clause in the notice clearly brings out the diffidence on the part of Assessing Officer and there is no clear and crystallised charge being conveyed to the assessee u/s. 271(1)(c), which has to be met by him. As noted by the Hon'ble Supreme Court in the case of Dilip N. Shroff (supra), the quasi-criminal proceedings u/s. 271(1)(c) of the Act ought to comply with the principles of nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been followed by the Coordinate Bench of the Tribunal in the case of Sanjog Tarachand Lodha (Supra) such penalty notice is bad in law where it is not clear from the notice u/s. 274 about the reasons for levying penalty. According to him, the penalty order passed on the basis of such invalid notice is not sustainable. 20. We find merit in the above submission of the Ld. Counsel for the assessee. Admittedly, the AO in the body of the assessment order at para 10 has initiated penalty proceedings for concealment of particulars of income and furnishing inaccurate particulars of income by the assessee. At the end of the assessment order the AO mentions issue notice u/s. 274 r.w.s. 271(1)(c) for concealment of income as discussed in the body of the order. The relevant para 10 and last part of the assessment order read as under: "10. The penalty proceedings u/s. 271(1)(c) of the I.T. Act, 1961 for concealing the particulars of income and furnishing inaccurate particulars of such income are separately initiated." .................... .................... "Assessed u/s. 153A(b) r.w.s. 153C of the I.T. Act, 1961. Charge interest due as per section 234A, 234B & 234C of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced on the decision of Hon'ble Karnataka High Court in the case of CIT v. Manjunatha Cotton & Ginning Factory reported as: 359 ITR 565 (Karan). 6. A perusal of the order passed u/s. 271(1)(c) dated 28-06- 2012 levying penalty shows, that in para 2 the Assessing Officer has specifically mentioned that penal proceedings u/s. 271(1)(c) are initiated for concealing the income. The relevant extract of para 2 of the order levying penalty reads as under: "2. .......... Since assessee had originally concealed income to the extent of Rs. 7,92,190/-, penalty proceedings u/s. 271(1)(c) of the Act was initiated on finalization of assessment proceedings." In both the impugned assessment years, the order levying penalty are similarly worded. 7. In the concluding paragraph of the order, the Assessing Officer has observed that the penalty is levied for furnishing of inaccurate particulars of income and concealing income. The relevant extract of para 7 of the order reads as under: "7. I am satisfied that the assessee has without any reasonable cause, furnished an inaccurate particulars of income and thereby concealed his income to the extent of............................ " Furnishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to pay penalty. The practice of the Department sending a printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind." 9. Thus, in the facts of the case and documents on record, we are of the considered view that the notice issued u/s. 271(1)(c) r.w.s. 274 is invalid and thus, the subsequent penalty proceedings arising there from are vitiated. The impugned orders are set aside and the appeals of the assessee are allowed." 23. So far as reliance on the decision of Mak Data Pvt. Ltd. by the Ld. Departmental Representative is concerned the same in our opinion is not applicable to the facts of the present case. The decision in the case of Mak Data Pvt. Ltd. has to be understood in the context of the facts of the said case. Therefore, before relying on a particular sentence or paragraph of the said decision one has to read the preceding paragraph of the said decision which read as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal in the case of Suvaprasanna Bhataacharya v. ACIT in ITA No. 1303/Kol/2010 order dated 06-11-2015 for A.Y. 2006-07. In this view of the matter, we are of the considered opinion that since it is not clear from the notice u/s. 274 the reasons for levying of penalty as to whether it is for concealment of income or for furnishing of inaccurate particulars of income, therefore, the notice itself is bad in law and invalid. Therefore, the penalty order passed subsequently on the basis of such invalid notice also has to be held as bad in law. We accordingly cancel the penalty levied by the AO. Since the assessee succeeds on this technical ground the arguments on merit is not being adjudicated being academic in nature. 25. In the result, the appeal filed by the assessee is allowed. 49. Recently ITAT Mumbai Bench in the case of Visaria Securities Pvt. Ltd., in ITA No. 7585/Mum/2016 vide order dated 08/05/2017 has held as under:- 13. We have heard arguments on this issue and a perusal of the notice issued under section 274 r.w.s. 271 of the Act dated 26.12.11 and 11.08.14 reveals that the AO has not deleted the inappropriate words and parts of the notice, whereby it is not clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee. 60. Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out satisfaction of the existence of the grounds mentioned in Section 271(1)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- "63 ..................................... a) ..................................... p) Notice under section 274 of the Act should specifically state the ground mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. s) Taking up of penalty proceedings on the limb and finding the assessee guilty of another limb is bad in law." 15. It may be mentioned that in this regard, no contrary decision of the Hon'ble Apex Court or the Hon'ble Bombay High Court has been brought to our notice or placed before us for consideration. Therefore, respectfully following the decision of the Hon'ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory reported in (2013) 359 ITR 565 (Kar), decision of Hon'ble Bombay High Court in the case of CIT v. Sams ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he years under consideration. 54. Although we have deleted the penalty on legal ground, but as both the parties had argued at length on merits of the levy or otherwise of penalty, for the sake of completeness we also decide the issue on merits. Even on merit the penalty levied cannot be sustained. The detailed reasons thereof are as under. On perusal of the orders passed by the lower authorities it is clear that there are two foundations set up against the assessee by the Department to levy the penalty. A. Alleged cash generation out of several activities like mis-declaring yield of steel, suppression of gross profit on trading turnover, bogus purchase, inflation of purchase etc. B. Alleged utilization of such cash generation for the purpose of introducing share application money in fourteen companies. 55. We found that none of the above allegations are either factually correct or established from the material on record. 56. Taking up the first foundation of levy of penalty it can be observed that there is no evidence whatsoever, except the survey statement, to support the allegation of cash generation. As explained in detail before the lower authorities the statements we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used for manufacturing steel There is no hard and fast rule or formula, which could be adopted as a benchmark for determining the ratio of raw material to finished goods, being the yield in the manufacturing process. We were informed at that time the data available In the public domain of a competitor viz., Ispat Industries Ltd. demonstrate that their yield was about 84%. The process undertaken by the Ispat Industries Ltd. is a different than the process adopted by us and also the type of raw material used by them was also different from the raw material It was also explained that due to poor quality of raw material, inefficiency of the old plant & machinery, inappropriate compensation of different kind of raw mater/al and defect in the production required re-melting the average yield in all these four years was in the range of 7747961 to 80.56%. Based on all these facts and in order to buy peace the working of the Investigation Wing of the average yield was accepted" 59. From the above, it is evident that during the course of the assessment proceedings, the assessee took a categorical stand that the declaration on account of yield was based on ad hoc working suggested by the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e steel has been concealed and the same was 84.5% for the years under consideration. Needless to say that the onus is on the Department to prove the existence of the income which has been alleged to be concealed. In the present case the same has not been done as the only evidence in possession of the Assessing Officer is survey statement whereas during the assessment proceedings the assessee has maintained that the yield was properly disclosed. 63. As regards the declaration made on account of bogus purchases and inflated purchases, we noticed that except the statement of Mr. Babulal Agarwal, Director of the company and others, recorded during the course of survey and the declaration made by him, there is nothing on the record to support the allegation of bogus or inflated purchases. There is a reference in the assessment order to some of the enquiry made by the investigation wing prior to the date of survey. However, the result of the enquiry has not been brought on record. In fact, while making an addition, and also at the time of levying the penalty, the Assessing Officer has completely relied upon the statement of the director and not on any hard evidence. In these circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT v. VIP Industries Ltd. [30 SOT 254, 262-263 (Mum)] had also taken a similar view. In this case, the issue for consideration was the validity or otherwise of the levy u/s. 271(1)() of the Act with respect to additions sustained in quantum proceedings. In disagreeing with the levy made by the Assessing Officer and in-concurring with the findings of the CIT(A) for deleting penalty levied with respect to an addition sustained, the Tribunal held as under: "8. .................... A great deal of emphasis had been laid by the ld. DR on the fact that since the addition has been upheld by the Tribunal, then the penalty should also be confirmed In our considered opinion the mere fact of confirmation of addition cannot per se lead to the confirmation of the penalty. It is obvious that both the quantum and the penalty proceedings are independent of each other In the penalty proceedings the assessee is given chance to show that why the penalty be not imposed with reference to the addition made or confirmed in the quantum proceedings. If the assessee succeeds in explaining his case then no penalty can follow and vice versa. It is, therefore, amply clear that the confirmation of the addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenses and the disallowance thereof. The Assessing Officer has not even alleged in the assessment order that the assessee has utilized the cash in share application money of fourteen companies. At the conclusion of the relevant discussion in the assessment order the Assessing Officer has initiated the penalty proceedings u/s. 271(1)(c) of the Act. Thus, the penalty has been initiated on the ground that the assessee had booked bogus expenditure. As discussed hereinabove, the levy of penalty on the above ground cannot be sustained as there is no evidence of booking of such bogus expenditure or misdeclaration of yield or profit. The question, therefore, now is whether the penalty which was initiated on account of alleged bogus expenditure, could be levied in respect of introduction of cash in fourteen companies. 69. It is a well-settled proposition in law that levy of penalty u/s. 271(1)(c) of the Act is permitted only on those counts on which the same was initiated and satisfaction was recorded. In other words, penalty cannot be levied on a ground which is not specified in the assessment order while initiating the penalty and for which satisfaction has not been recorded. In sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the penalty proceedings were initiated in the assessment order" 70. There is an allegation that Shree Global Trade fin Ltd. (SGTL) and the fourteen companies detailed in paragraph 3.6 of the penalty order, from whom share application money was received, were not reliable as, according to the Assessing Officer, they were only paper companies. However, except making such bald allegation, AO had not brought on record any evidence in support. In any case, when the assessee had adduced corroboratory evidences in support of its cases, the onus had shifted and it was for the Assessing Officer to prove his case which he had miserably failed. 71. Most importantly, the additions made in most of the aforesaid companies were deleted by the CIT(A) and they were concurred with in the further proceedings. In the case of Jogia Properties Ltd., one of the fourteen companies, the additions on account of share application money were made by the Assessing Officer in assessment years 2008-09 and 2009-10 and when his orders were carried in appeals, they were deleted by the CIT(A) holding that such additions were not warranted. Feeling aggrieved, the dispute was carried by the revenue in further pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in the case styled as "CIT v. Shri Mukesh R. Marolia" in I/A No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transact/on, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon'ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon'ble Supreme Court. The Hon'ble Supreme Court dismissed the SLP No. 20146/2012 styled as "CIT v. Shri Mukesh R. Marolia vide order dated 27.01.14 Similarly in the case of "CIT v. M/s. Kesar A. Gada in ITA No. 300 of 2013 decided on 21.01.15 wherein the AO, while making the additions under section 68 of the Act, had relied upon the statement of Mr. Mukesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor In the case in hand also, the requisite details, proof, confirmation, evidences etc are produced The ratio of the decision of the Hon 'ble Supreme Court is directly applicable on the facts of the case. In view if the above discussion of the matter, we do not find any infirmity in the factual finding given by the CIT(A) after duly appreciation of evidence on the file and the same is accordingly upheld" 72. In the appeals concerning Archive Realty Developers Ltd., Karburi Properties Development Ltd., Vedisa Properties Developers Ltd., Auster Properties Developers Ltd. and Reve Properties Developers Ltd. for A.Ys. 2008-09 and 2009-10, and Chikura Properties Ltd. for A.Y. 2009-10, which are other six entities appearing in the list giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved into accommodation transactions and the share application money of fourteen companies are bogus as the same has been routed through the companies controlled by Shri Mukesh Choksi. However, this allegation completely loses its relevance when we see that the Tribunal has passed the order in the case of Jogia Properties Ltd. and subsequently in the case of another eight companies wherein the share application money has been held to be genuine. It is also relevant to note that in the corresponding order of CIT(A) as well as in the order of Tribunal in all the above cases, there is a detailed discussion about the share application money and also reference to above searches and the enquiry in the case of Shri Mukesh Choksi. After considering the entire gamut of information and facts, the CIT(A) and the Tribunal have come to the conclusion that the share application money is genuine. 77. In light of this, the large part of the discussion made by the Assessing Officer and the CIT(A) in their respective orders becomes irrelevant and without base. The penalty levied on such incorrect base deserves to be quashed. 78. Recently Hon'ble Delhi High Court in the case of Neeraj Jindal I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mens rea, the Finance Act, 1964 deleted the word "deliberately" that preceded the words "concealed the particulars of his income" in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC) held that: "The word 'concealment' inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such higher income filed in the revised return. Similarly, the Karnataka High Court in the case of Bhadra Advancing Pvt. Limited v. Assistant Commissioner of Income Tax, (2008) 219 CTR 447, held that merely because the assessee has filed a revised return and withdrawn some claim of depreciation penalty is not leviable. The additions in assessment proceedings will not automatically lead to inference of levying penalty. The Calcutta High Court in the case of Commissioner of Income Tax v. Suresh Chand Bansal, (2010) 329 ITR 330 (Cal) held that where there was an offer of additional income in the revised return filed by the assessee and such offer is in consequence of a search action, then if the assessment order accepts the offer of the assessee, levy of penalty on such offer is not justified without detailed discussion of the documents and their explanation which compelled the offer of additional income. The Madras High Court in the case of S.M.J. Housing v. Commissioner of Income Tax, (2013) 357 ITR 698 held that where after a search was conducted, the assessee filed the return of his income and the Department had accepted such return, then levy of penalty under Section 271 was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has received the funds from the six companies which is amongst the fourteen companies. 5.14. So far as the statement of Mukesh Choksi, which was relied upon by the Ld. Assessing Officer, nowhere states any transaction entered into with the assessee. The names of the companies referred to in his statement have no transaction with the assessee. The statements were also recorded in 2009. In view of this no reliance can be placed on the statement of Mr. Mukesh Choksi. 5.15. So far as the statement of Shri Om Hari Halan, the reliance is placed by CIT(A) and Learned DR on the statement recorded on 19/12/2012. The recording of the statements started on 19/12/2012 and was continued in the night with little break and was completed on 20/12/2012. The statement is recorded on 19/12/2012 and in the morning of 20/12/2012 at 324, Mastermind IV, Royal Palm, Aarey Milk Colony, Goregaon East, Mumbai - 400 065 at the office of Jogia Properties Ltd. Then he was brought to the office of Lloyds Steel Industries Limited on 20/12/2012 situated at 16th floor, C-Wing, Kamala City, Lower Parel, Mumbai and the statement continued. During recording of this statement he has clearly stated that in ans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different from the present facts. In those cases there were the statement of certain parties and there were transaction between those parties and the assesses which could give reason to believe that the transaction may not be genuine. In the present case none of the statements of all the 3 parties give any evidence or a reference to the amount received by the assesses from 6 parties. The ratio of these decisions is not applicable on the facts of the case. 5.18. Now, we shall summarize the facts of Assessment Year 2009-10, which are as under:- 1. As mentioned earlier, the assessee is a listed Public Limited Company, received funds from nine parties during A.Y. 2009-10, which was treated as share application in A.Y. 2010-11 and the preferential shares were issued in A.Y. 2011-12, issued at par an no premium was received against issuance of preferential shares. It is also noted that the assessee filed the necessary declarations and the details of issue of preference shares, issued at par, to the Registrar of Companies. In the books of accounts of the assessee also no premium is received against issue of the preference shares. 2. It is also noted that the assessee had filed origin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11 39000 000 27- 07- 12 390000 00 18- 12-15 390000 00 31- 03-15 18750 0000 17- 11- 17 18750 0000 Nil Karburi Prop. Ltd. 24- 09- 09 Nil 187500 000 29- 12-10 26- 12- 11 25000 000 26- 07- 12 250000 00 18- 11-16 250000 00 31- 03-15 18750 0000 17- 11- 17 18750 0000 Nil Martand Prop. Ltd. 24- 09- 09 Nil 295000 000 16- 12-10 26- 12- 11 70000 000 23- 07- 12 700000 00 26- 05-17 700000 00 31- 03-15 29500 0000 17- 11- 17 29500 0000 Nil Reva Prop. Ltd. 26- 09- 09 Nil 187500 000 31- 12-10 26- 12- 11 77500 000 20- 07- 12 775000 00 18- 11-16 775000 00 31- 03-15 18750 0000 17- 11- 17 18750 0000 Nil Vedisa Prop. Ltd. 24- 09- 09 Nil 177500 000 31- 12-10 26- 12- 11 77500 000 24- 07- 12 775000 00 18- 11-16 775000 00 3 1- 03-15 17750 0000 17- 11- 17 17750 0000 Nil Prasoon Prop. Ltd. 24- 09- 09 Nil 123500 000 NA NA 0 NA 0 NA 0 30- 12-16 12350 0000 Pending before CIT(A) Nil Total 219,10,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to support the receipt of the amount no addition can be made in the hands of the assessee for A.Y. 2009-10. 5.21. Having established the identity and genuineness of the transaction and the supporting evidences the source of the funds is explained. It is an accepted proposition of law that the assessee cannot be asked to prove the source of the source of the funds. For this proposition, reliance can be placed upon the decision of the Hon'ble Bombay High Court in the case of Principal CIT v. Vidhatha Towers Pvt. Ltd. ITA No. 819 of 2015 decided on 17/4/2018. The Hon'ble High Court has held that during the A.Y. 2010-11 the assessee was not required to explain the source of the source of the funds. Without prejudice to the submission that the assessee is not required to prove the source of the source of the funds for A.Y. 2009-10, the assessee has also proved the source of the source of the funds in the hands of all the nine entities. Reference is made to the table below where the details of all the nine parties which received share application money from various corporate bodies have been reflected. These are summarized as under:- 5.22. It is further noted that in the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties is accepted and no additions were made. The tribunal while deleting the penalty levied u/s. 271(1)(c) in the hands of Lloyd Steel Industries has given finding which is reproduced in earlier paras and the facts being the same for AY 2009-10, the same will be applicable to the present Assessment Year also. 5.24. It is noteworthy that in the case of Jogia Properties Ltd., the addition made by the ld. Assessing Officer were deleted by the First Appellate Authority against which the Revenue carried the matter in appeal before the Tribunal, there also, the Tribunal, vide order dated 18/12/2015, (ITA No. 6106 & 6107/Mum/2012), (pages 740 to 759 of paper book No. 2), wherein, the Tribunal examined the factual matrix and upheld the order of the First Appellate Authority by dismissing the appeals of the Revenue. The relevant portion of this order is reproduced hereunder for ready reference and analysis:- "The above titled appeals have been preferred by the Revenue against the common order dated 27.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2008-09 and AY 2009-10. As the facts and issues involved in both the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the share application money received in the assessee company and other group companies have been obtained by paying cash in lieu of the cheques received as share capital. The said money received as share capital by the assessee company and other group companies was further invested in his company 'M/s. Shree Global trade fin. Ltd.; This statement of Shri Jose Mathew was confronted to Shri Ajay Kumar, one of the Directors of the assessee company who in turn offered the amount received as share capital from the companies as mentioned in the assessment order as unexplained credits. Shri Jose Mathew and Sh. Ajay Kumar however, retracted from their statements latter on. 5. The Assessing Officer (hereinafter referred to as the AO) issued notice u/s. 153A to the assessee. In the return filed in response to the notice u/s. 153A, the amount declared as undisclosed income in the statement of Shri Ajay Kumar, Director of the company during the search action had not been disclosed. The AO observed that all the above said 7 companies have been doing their business from the same place and that these concerns were also not well established companies. A total of ten companies (eight compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same cannot be relied or considered as supporting documentary evidences for receiving share application money and retracting the declaration made. In view of all these facts and circumstances, the AO held that the assessee had failed to prove the identity, credit worthiness and genuineness of the transaction of the above share holding companies, he therefore, treated the investment made by these companies amounting to Rs. 12,80,00,000/- and Rs. 3,90,00,000/- for the AYs. 2008-09 & 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A). 5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not corroborated by any documentary evidence. He therefore held that in totality of facts & circumstances, the case was covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd.[ 216 CTR 195 (SC)].He therefore deleted the additions so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the additions made by the AO, the Revenue has thus come in appeal before us. 6. We have heard the rival contentions of the Ld. Representatives of the parties at length and have also gone through the record. The contention of the Ld. DR has been that during the search action, Sh Ajay kumar, one of the directors of the company had admitted that the money received as share application money was unexplained income of the assessee and he had offered it for taxation. He therefore has contended that subsequent retraction is nothing but an afterthought of the assessee. The Ld. DR has further contended that Sh. Mukesh Chokshi was a hawala dealer, hence the share application money received by the assessee was the result of a bogus transaction. The Ld. DR in this respect has relied upon the decision of the co-ordinate bench of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminating found either during the search action or otherwise on the record warranting such additions in the case of assessee. The Ld. AR has further invited our attention to the written submissions filed before the Ld. CIT(A), wherein, each of the objections raised by the AO in respect of the evidences submitted in relation to each of the eight companies was duly replied and dealt with. It has been explained that the assessee had provided the complete details of the share application money received together with confirmations and that there was no statutory obligation to obtain the application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving cheque number, date, name of bank was submitted. The Ledger Account confirmation in the books of Investor company was also submitted. The board resolution was not available with assessee as the assessee has got no legal right to ask for copy of board resolution when complete information about the investments made was available. The evidence relating to the net worth of the investing companies was also submitted. The Ld. DR on the other hand, though, has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt transaction. He was not in any manner connected to the transactions in question before us. As regards the statement of Shri Ajay Kumar Halan, the Ld. AR while inviting our attention to answer to question No. 3 of the statement has submitted that he was appointed as the director on 15.2.2010 only. That he was not the director in the previous year relevant to A.Y. 2009-10. He was also not the Director during the previous year from 1.4.2009 to 15.2.2010, during the time when the transaction had taken place. He was not the employee of the assessee company nor was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share application money received as unexplained. The Ld. AR has duly brought on the file that he was not connected to the company when the transactions took place. Under such circumstances, in the absence of any corroborating evidence and solely on the basis of retracted statement of the said Sh. Ajay Kumar, a perusal of which reveals that the same was not based on his own knowledge of the relevant facts/transaction in question, additions made by the AO cannot be held to be justified in any manner. The Ld. AR has further brought our attention in this respect to the Instructions issued by CBDT bearing No. F. No. 286/2/2003-IT (Inv. II) dated 10/3/2003 wherein it has been stated that during the course of search/survey, no attempt should be made to obtain the confession as to the undisclosed income. Any action on the contrary shall be reviewed adversely. CBDT has also referred to the fact that if the confession statements are taken which are not based on credible evidence then later they are retracted. In the present case also, not a single incriminating material was found during the search action. The addition is made purely on the basis of declaration made by Sh Ajay Kumar, Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Supreme Court in 319 ITR (statute page 5). b) CIT v. Creative World Telefilms Limited 333 ITR p. 100 (Bombay High Court) c) ACIT v. Venketeshwar Ispat (P) Ltd. (Chhatisgarh High Court) (2010) 41 DTR - 350 d) CIT v. Gangour Investments Ltd. (2009) 18 DTR (Delhi) - 242 e) CIT v. STL Extrusion Pvt. Ltd. (2011) 333 ITR - p. 269 (MP High Court) f) CIT v. G.P. International Limited (2010) 325 ITR p. 25 (P&H) g) CIT v. Siri Ram Syal Hydro Power Pvt. Ltd. 196 Taxman p. 444 (Delhi High Court) h) CIT v. HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court) 13. On the other hand the Ld. DR has relied upon one decision of Mumbai ITAT in the case of Gold Star Finvest Pvt. Ltd. (supra) wherein while determining the income of that assessee, the Tribunal has estimated the income at certain percentage. The Ld. AR has however submitted that the ratio of this decision cannot overrule the decisions of Bombay High Court and several Mumbai ITAT decisions as relied upon by him. He has further relied upon the following decisions wherein the additions made by the AO on the basis of general statement of Mukesh Chokshi have ultimately been deleted by the higher authorities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the case, observed inter-alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. Where every transaction of the assessee has been accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon'ble Bombay High Court. The Hon'ble Bombay High Court, while adjudicating the above issue in the case styled as "CIT v. Shri Mukesh R. Marolia" in ITA No. 456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stments by way of share application money invested by the same companies as in the case of an assessee i.e. M/s. Talent Infoways and M/s. Mihir Agencies, has upheld the findings of the Ld. CIT(A) deleting the additions. The other case laws relied upon by the Ld. DR are thus not applicable to the case of the assessee in the light of the direct decision of the Jurisdictional High Court on the identical facts which holds a binding precedent on this Tribunal. Even otherwise there is no evidence on record that the assessee had given its own money to the investing company for the purpose of making investments. It may be observed that the Hon'ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor. In the case in hand also, the requisite details, proof, confirmation, evidences etc. are produced. The ratio o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the assessment order was framed after due verification. Grounds raised by assessee in ITA No. 6104/Mum/2012 are as under:- 1. On the facts & circumstances of the case the Learned CIT has erred in concluding that the action of the Learned Assessing Officer in invoking the provisions of Section 153C is justified. The appellant prays that the condition of Section 153C is not satisfied and the Learned Assessing Officer has wrongly invoked the provisions of Section 153C. 2. The Respondent craves leave to add, alter or amend the grounds of appeal which are without prejudice to one other. 3. Rival contentions have been heard and record perused. Facts in brief are that search and seizure action u/s, 132 of the IT. Act was conducted on 04.03.2010 at the business premises of M/s. Jogia Properties Ltd., at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search it was found that M/s. Jogia Properties Ltd. is maintaining its books of accounts at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bundr, Mumbai - 400 009. Therefore, this premise was also covered u/s. 133A of the IT. Act wherein it was revealed that the following companies are ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee company. Hence, as the warrant has been issued in this name of M/s. Jogia Properties Pvt. Ltd., this company is covered u/s. 153A and the above concerns are co-related to.each other the other group concerns (i.e., other 7 companies mentioned above including the assessee company) are covered u/s. 153C of the IT. Act. The AO further observed that a search action was conducted on one Shri Mukesh Chokshi who was operating many companies through which indulged in providing bogus entries including long term capital gain, short term capital gain, F&O losses, Speculative Losses, share application money, etc. The post survey/search proceedings in this case revealed that the Jogia Group companies have taken bogus share application money from Mukesh Chokshi's concerns viz., M/s. Talent Infoway, M/s. Mihir Agencies & M/s. Alpha Chemie Trade Agencies. 7. AO further stated that during the post search/survey operations in the case of M/s. Jogia Properties Pvt. Ltd., statement on oath u/s. 131(1) of the IT Act, 1961 of Shri Narayan Hari Halan, one director of the assessee company was recorded and in reply to question No. 12, he has submitted as under: Q.12. It is seen that your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reply to the AO's query, the assessee, vide their letter dated 01-11-2011 has submitted as under: 1. All the six shareholding companies who have made investments in our company are independent existing corporate bodies. They are registered with Registrar of Companies. They are maintaining regular books of accounts. They have their own bank accounts. They have filed the return of income. They have filed a confirmation to the effect that they have made investments in the equity shares of the company from their bank account. They have submitted the full details of their bank account from which the said investments are made. They all are assessed to tax having PAN. Copies of their audited accounts is also submitted. 2. We submit that once the identity of the shareholder is established and their confirmation is filed which is supported with various papers, documents etc. then the burden is discharged by the company. The shareholders have also confirmed the said investments which further supports our claim that they have made the investments in the share capital of our company. 3. We further state that you have asked us to produce the directors of the above companies. We woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence was made to the statement of one Mr. Jose Mathew wherein he has stated that share application money is received by paying cash. I am not conversant with the provisions of Income Tax Act. I was not the director of the company during the financial year relevant to A.V. 2009-10. I did not have all the books of accounts or records. I had stated that Mr. Jose Mathew is not aware about the business activity of our company. The statement made by Mr. Jose Mathew is not true. No evidence was found that share application is received from five companies by paying cash in lieu of the cheques received. In this background and based on the information given to me by the officials of the Income tax department I had admitted that the investments made by five companies into the share capital of our company is not explainable and made a disclosure of income of Rs. 13,15,00,000/-. I state that the disclosure was made purely on mistaken belief that the transaction of share investments by five companies cannot be explained and the taxable income of the company will be to the extent of Rs. 13,15,00,000/- pertaining to A.Y. 2009-10 and 2010-11. 4. However subsequently I gathered the information, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholding companies are not associates or group companies of our company. We do not have any other relationship with them except that they are shareholders of our company. We have not entered into any other transaction with them. None of the directors of our company is either the director or shareholder of all the five shareholding companies. None of the directors of give shareholding companies are directors or shareholders of our company. 9. I submit that just on the basis of the statement recorded u/s. 131 no amount can be brought to tax IA the absence of any other evidence or material. 10. In response to your questionnaire dated 5/5/2011, we have submitted before you the name and address of the shareholding company, the PAN No., the details of share application money received, issue of shares against share application, cheque No., name of the Bank, Branch and confirmation. We established the identity and credit worthiness of the companies who have made investments in the share capital of the company. We have submitted all the details called for in your questionnaire. 11. We have also proved before you that we have issued the shares to all the five shareholding companies. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income. They have filed the confirmations for their shareholding in our company and also supported the same with the documents. In view of this we submit that the sum of Rs. 13,15,00,000/- should not be added as income for A.V. 2009-10 and 2010-11. 16. We also submit that M/s. Delton Exim Pvt. Ltd. is a genuine independent corporate body which has invested Rs. 1,00,00,000/- at the share capital in A.Y. 2009-10 should not be added as income for A.Y. 2009-10. 11. The AO considered the detailed reply of the assessee in the documents filed by him with regard to the share applicants, their bank account, PAN details etc., However, not being satisfied with these documents and the explanation given by the assessee, AO made addition on account of share capital u/s. 68 of the IT Act. Before the CIT(A), assessee challenged legality/validity of assessment framed u/s. 153C and also merit of addition so made. 12. Addition made by the AO on account of share capital in the case of M/s. Reva Properties Ltd., Mumbai was deleted by CIT(A) after observing as under:- I have considered the submissions of the appellant, order of the AO and facts of the case in brief are that a search and seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments submitted by the AR of the appellant were not found during the course of survey and search operation. In view of these Facts, the AO has treated the investment made by the above said nine companies as unexplained u/s. 68 of the IT. Act and added back Rs. 6,00,00,000/- Rs. 7,20,00,000/- and Rs. 7,75,00,000/- to the taxable income for the AYs. 2007-08, 2008-09 & 2009-10 respectively. 4.6 On the other hand, the AR of the appellant has submitted that during the course of search and survey operation in case of M/s. Jogia Group of companies, no incriminating document was found and seized relating to eight companies including the assessee. The statement recorded of Shri Jose Mathew was retracted by submitting an affidavit that he was not acting as Jt. General Manager of these companies but he was working as Jt. General manager with other group companies and he do not know anything about these companies and moreover, the statement was recorded by using undue influence on him which are narrated in the affidavit filed before the Dy. Director of Investigation. To rebut the objections of the AO, the appellant has submitted that complete details of share application money received along ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and for the sake of convenience, a combined discussion has been made for all the above said investing companies. As per the provisions of section 68, the AO is empowered to call for the details to prove the identity, creditworthiness and genuineness of the transaction. During the assessment proceedings, the AO has given show cause notice to the assessee company to submit complete details regarding the share application money received from the above said investing companies. The AR of the appellant has submitted the PAN, complete details of cheque No., date and name of the bank of each company, confirmation certificate of each company duly signed by the directors to confirm that investment has been made, P&L account and balance-sheet of each company were submitted and moreover, no incriminating document was found and seized during the course of search in case of M/s. Jogia Properties Ltd. relating to these companies. The main objection of the AO was that in the post search enquiries, the statement of Shri Ajay Kumar, Director of the company was recorded who has declared the share application money as undisclosed income and promised to declare in the return to be filed in respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch operation in case of M/s. Jogia Properties Ltd. 4.8 Now, the conditions of section 68 are to be examined on the basis of the papers submitted during the assessment proceedings and appellate proceedings. To prove the identity, the appellant has submitted the PAN and acknowledgment page of each investing company which proves that the assessee is an existing company. The details of bank account giving the cheque No., the date and name of the bank proves the creditworthiness of each company and the amount of crores of rupees shown as reserve and surplus in the balance-sheet of each company further strengthens the argument of the appellant. Regarding the genuineness of the transaction, there is no doubt that all the payments were made through account payee cheques and duly reflected in the accounts of the investing companies which is evidenced by the date of cheque, cheque No. and name of the bank of each company. Further, the confirmation certificates of each investing company duly signed by the director itself confirm that the investment was made by account payee cheques only. In view of these facts, the three conditions laid down u/s. 68, i.e. identity, creditworthiness and genu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me group. Para 11, 12, 13, 14, 15 and 16 of the submission made by assessee. Assessee has mentioned in these paragraphs basically documents submitted by the assessee to support its claim. However merely submitting some documents will not suffice for the purpose of the assessee. Assessing Officer In his order in para 22 sub para 1, 2, 3, 4, 5 and 6 has mentioned in detail flaws, contradictions and shortcomings in the submission of documents made by the assessee. In view of this it cannot be said that the assessee has fully discharged its onus. Para 17, 18, 19, 20, 21, 22 and 23 of the submission made by assessee. Assessee has given its response to the objections raised by assessing officer in his order regarding various documents submitted by the assessee to support its claim. Share application form is one of the very important document to support claim of investment. The same is not provided by the assessee. In case of Oshin Investments and Finance Pvt. Ltd., assessee has mentioned that confirmation letter taken from investing company dated 5th February 2009 was having its date as 5/2/2009 due to mistake. Assessee has not substantiated that it was mistake only and not a a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the record by the assessing officer. Since appellant company has not fully discharged its basic onus, additions made under section 68 are fully justifiable. All the case laws relied upon by the assessee presume that assessee has discharged its primary onus completely. However this is not the case with the appellant company.. Para 36, 37, 38 and 39 of the submission made by assessee 'Statement given by one of the director of the appellant company has evidentiary value. The statement is not taken under coercion or force. The statement is given voluntarily. In view of this retraction of the statement cannot be accepted. Mr. John Mathews having no relation to business activity of the appellant company is not the relevant point here. His statement is to be considered with reference to claim of investment made by investing companies. In this context statement by Mr. John Mathews has evidentiary value. Shri Heri Narayan Halan, director of the appellant company is responsible dignitary of the company and is in the knowledge of affairs of the company. Hence, assessee's contention that no reliance should be made upon statement of the director of appellant company is not accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted by the assessee upto third down layer but nowhere it was found that cash was' deposited in any account before issuing the cheques for investment made in the purchase of shares of assessee company. He has further stated that since no adverse finding was recorded during the bank account investigation, therefore, it was not mentioned in the assessment order. 4.12 From the fact that the AO has made enquiries in all the bank accounts upto third down layer and nowhere it was found that the cash was deposited against issuing of cheques for investment of shares in these companies, therefore, the statement recorded of Shri Jose Mathew itself proves wrong in which he has stated that the cash was given and cheques were received for the investment of shares in these companies. The statement of Shri Ajay Kumar, Director, automatically goes wrong on the basis of the fact that nowhere in any account it was found that.cash was deposited before issuing cheques for investing in the share application money of these companies and moreover, no incriminating document was found and seized and no statement was given by any director of the investing company that cash was received against chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court held that the findings of the AO, CIT(A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 12 of 27 of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in Section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of Section 68 of the Act suggests that (i) here has to be credit of amounts in the books maintained by the assessee; (if) such credit has to be sum of money during the previous year; and (ii) either (a) the assessee offers no explanation about the nature and source of such credits found In the books or (b) the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the Apex Court in CIT v. Stellar Investment Ltd. [: (2001) 251 ITR 263 (SC)]. ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 14 of 27 Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of aforesaid principles. ITA No. 2093 of 2010 & ITA No. 2095 of 2010. In both these appeals, the assessee Is the same. Since these appeals pertain to two assessment years, viz., Assessment Year 2003-04 and Assessment Year 2004-05, that Is the reason for two appeals though common issue is based on Identical facts. While making the assessment In respect of return filed for Assessment Year 2004-05, the AO noticed that the assessee had received share application money of 3 lacs each from Six private limited companies during the year relevant Assessment Year 2003-04. It Is for this reason notice under Section 148 of the Act was Issued in respect of Assessment Year 2003-04 and reassessment done. The AO made addition of 18 lacs to the Income of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n could not be sustained as the primary onus was discharged by the assessee by producing PAN number, bank account, copies of. income tax returns of the share applicants, etc. We also find that the ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 16 of 27 Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by such Entry Operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the AO. The assessee was not confronted with the investigation carried out by the Investigating Wing or was given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing. As regards discrepancies found by the AO in the bank statement, suffice is to mention that the bank statements that were filed by the assessee were provided by the shareholders and were computer printed on the bank stationery. The same were filed by the assessee during the assessment proceedings without any suspicion of their being incorrect. During the assessment proceedings, the assessee was never confronted by the AO that there a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by the bank and the statement produced by the assessee. Even some of the names given by the assessee were not the same as In the bank records. The AO confronted entire material to the assessee and allowed various opportunities. However, the assessee did not produce even a single party. Accordingly, the AO made an addition of '99.18 lacs to the Income of assessee on account of unexplained share capital under Section 68 of the Act. Similarly, the AO also made addition of 3.10 lacs on account of unexplained credit under Section 68 of the Act. ITA Nos. 2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 18 of 27 The CIT(A) allowed the appeal and deleted the addition. After recording the findings that necessary documents to prove the identity of Investors, creditworthiness and genuineness of the transactions were produced by the assessee, he was of the opinion that even when some discrepancies were found in the bank statement of these Investors produced by the assessee, facts remain that the AO had himself obtained the copies of the bank statement of some of the share applicants and the perusal of those statements reveals that there was a debit entry in support of demand dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O should have made further probe which he failed to do. Moreover, remedy with the Department lies in reopening the case of these Investors and the addition cannot be made in the hands of assessee. We accordingly dismiss this appeal". CIT v. Divine Leasing & Finance Ltd., General Exports & Credits Ltd. & Lovely Exports P. Ltd. IT A No. 953/2006 The Income-tax Appellate Tribunal has dismissed the Revenue's appeal and thus there are concurrent findings pertaining to the factual matrix following paragraph from the impugned decision adequately highlight the necessary details: "Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants, In question did not exist. It is seen that the assessee company has furnished the necessary details such as PAN No./Income-tax Ward No./PAN card of the share applicants and some of them are assessed to tax. No share application money has been received through banking charges. In some cases, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , while granting adjournments, In such a manner that he does not run out of time for discharging the duties cast on him by the statute. In the present case, the details had been furnished to the Assessing Officer much before March 1999, but he failed to react to the shifting of the burden to Investigate Into the creditworthiness of the share applicants. Therefore, the appeal is dismissed. CIT v. Lovely Exports P. Ltd. [2009]319 ITR (St.) 5 (SC) (para 2) - ITA (L) No. 2182 of 2009 Heard learned counsel for the Revenue. Office objections are overruled. Registry is directed to register the appeal. At the instance of the Revenue, the appeal is taken up for admission. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal and the Tribunal was pleased to follow the judgment of the apex court in the case of CIT v. Lovely Exports P. Ltd. [2008] 21, CTR 195; [2009] 319 ITR (St.) 5 wherein the apex court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing officer, then the Department can always proceed against them and if necessary reopen the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of application of share tendered, number of shares purchased alongwith the amount given by subscribers. On receipt of these confirmations, neither anything was asked from the assessee nor any inquiry was made. The addition of Rs. 1,59,300 was made by the Assessing Officer by observing as under: 'On a perusal of the submission made by the assessee In respect of share application money received by the assessee during the year. It is seen that In respect of the following persons the assessee has received share application money In cash. These persons are not assessed to Income-tax and PAN are not mentioned. On a perusal of the affidavits filed, it is seen that all the affidavits are In the handwriting of one person. It is also noticed that even on the same page the signatures of the deponent differs. It is quite unlikely that when a person is applying for huge amounts such as Rs. 5,00,000/- ore more Is not assessed to tax. Hence considering the above, the names of the persons are not genuine and it Is the unexplained money of the assessee, which Is Introduced by the assessee company under the name of share application money. These persons appear to be dummy person and henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y established the Identity, source of the credits. Even It Is not the case that the shares have been Issued to non-existing persons. Broadly we are of the view that once the Identity and source of the subscribers is established for making share application, no addition can be made under section 68 of the Act because even the Hon'ble apex court in the case of CIT v. Lovely Exports Limited even stepped ahead by concluding as under (2008) 216 CTR (SC) 195; (2009) 319 ITR (St.)5: 'If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to tie Assessing Officer then the Department is free to proceed to reopen their individual assessments in accordance with law, but is cannot be regarded as undisclosed income of the assessee company'. Our view is further fortified by the decision of the Hon'ble Delhi High Court in CIT v. Divine Leasing and Finance Limited, general Exports and Credit Limited and Lovely Exports Private Limited [2008] 299 ITR 268 (Delhi) wherein it was held that it Is the duty of the Assessing Officer to investigate the creditworthiness of the shareholders and in view of the finding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal in case of Agrawal Coal Corporation Ltd. (135 ITD 27.0), the AR has submitted that complete submissions from the investing companies, details of cheque No., name of the bank and date of cheques were submitted before the AO. The confirmation from the auditors of the company were also submitted. The balance-sheet and P&L account of the investing company which had shown substantial net worth were also submitted. The proof of filing statutory returns by the companies for the current period were also submitted. The proof of filing statutory returns by the companies for the current period were also submitted. The proof of issue of notice to the 'shareholders were also filed. The appellant had also already issued shares and the detail of distinctive No., share certificate No., intimation to ROC about issue of shares, payment of stamp duty, interest and statutory reserves maintained under the Companies Act were submitted and no summons were issued by the AO to prove that the companies were not existing. In view of these facts, it is observed that the facts given in the decision of Hon'ble Delhi High Court and the Tribunal are distinguishable to the facts of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess and genuineness of the transaction relating to these companies were also the same as submitted and discussed in the case of other companies. On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. M/s. Alpha Chemi Trade Agency Pvt. Ltd., M/s. Alembic Securities Pvt. Ltd., M/s. Mihir Agencies P. Ltd. &. M/s. Talent Infoway Ltd. are the companies. One Mr. Mukesh Choksi is a director in these companies. These companies had also subscribed shares of the assessee company. In the assessment order, the Assessing Officer has made reference that in one statement recorded in some other case, Mr. Choksi has stated that he was engaged in giving accommodation entries to the companies for creating bogus capital gain and was also issuing the bogus bills. From this statement, the AO has drawn inference that the share capital subscribed by these companies was bogus, i.e. cheques were issued against cash received from the assessee company. During assessment proceedings, the AR of the appellant has submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made on account of share capital in case of M/s. Karburi Properties Ltd., was deleted by CIT(A) after observing as under:- Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were nine companies who have subscribed the share application money but In the present case there are eight companies. Out of these eight companies, 7 companies are the same as discussed in the case of M/s. Reva Properties Ltd. and only M/s. Mihir Agencies P. Ltd. is new company in this case who have subscribed the share capital in AY 2009-10 amounting to Rs. 1,50,000/-.The papers relating to the identity, creditworthiness and genuineness of the transaction relating to this company were also the same as submitted and discussed in the case of other companies. On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether these companies had fulfilled the conditions of section 68. For identity, the each company has PAN and regularly 'assessed to tax. For creditworthiness, each' company has independent bank account and details were submitted to the AO. For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, Le. identity, creditworthiness and genuineness of transaction are fulfilled, Thus reliance cannot be placed on a general statement of Mr. Choksi alone which is not corroborated' by any documentary evidence. In totality of facts & circumstances, it is held that the case is covered by the decision of Hon'ble Supreme Court in case of Lovely Exports (supra). Thus, addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted and the ground of appeal is allowed. 15. Similar addition made on account of share capital in case of Vedisa Properties Ltd., was deleted by CIT(A) after observing as under: Since the appellant company is a group company and the modus operandi for collecting the share application money an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and documentary evidence in each company are the same. Therefore, to avoid repetition and for the sake of convenience, all these grounds are discussed in a cumulative manner in the above grounds. Therefore, these grounds have become infructuous, hence dismissed. 18. However, the CIT(A) dismissed the legal ground taken by assessee with regard to validity of assessment framed u/s. 153C. 19. Against the above, orders of CIT(A) revenue is in further appeal before us whereas assessee had filed cross objection wherein legality of assessment framed u/s. 153C was challenged. 20. Learned AR has drawn our attention to the share capital received by the following assessee and disallowed by the AO. Our attention was invited to the detailed finding given by CIT(A) as quoted above, wherein the CIT(A) has deleted the same. As per learned AR, Hon'ble Tribunal vide its order dated 18/12/2015 in ITA No. 6106 & 6107/Mum/2012 for assessment year 2008-2009, 2009-2010 had confirmed the action of the CIT(A) for deleting these additions. The details of name of company, assessment year and the relevant pages of the Tribunal are as under:- 21. With regard to the filing of cross objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on the facts of the case. We also rely upon the decision in the case of Pratap Singh Ravinderjeet Singh 218 ITR pg. 536 (M.P. High Court), wherein it has been held that legal issue which goes to the root of the matter then it should be admitted. 5. We also submit that under Rle 27 of Income Tax Appellate Tribunal Rules, the Respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. The Hon'ble Commr. Of Income Tax (Appeals) has decided the issue of the validity of issue of notice u/s. 153C against us. According to us, we are eligible to defend ourselves on the issue of validity of notice u/s. 153C. We rely upon the decision of Hon'ble Mumbai Tribunal in the case of ACIT v. Triace, ITA No. 2827/MUM/04 (A.Y. 1995-96) wherein the issue was identical. The assessee challenged the validity of notice u/s. 148 of Income Tax Act, 1961. The Learned CIT(Appeal) held the said issue against the assessee, but gave relief on merits. The assessee did not filed the appeal to the Hon'ble Tribunal on the issue of validity of notice u/s. 148. The Department filed the appeal against the relief given on merits. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action applicable to A.Y. 2008-09. Our attention was invited to the satisfaction which is on page 7 of the paper book. The Assessing Officer has recorded a noting for A.Y. 2004-05 to A.Y. 2009-10. There is no recording of the satisfaction as applicable to A.Y. 2008-09. He has referred to page 1 of Annexure A-1 seized in the case of Jogia Properties Ltd., he has referred to page No. 1 as the document. As per learned A.R. this paper cannot be considered as document. Page No. 1 is on page No. 8 of the paper book. This page contains the details of various companies giving the details of their bank account with Union Bank of India, Nariman Point branch with the name of the persons who are authorized to operate the said" bank account. The name of the assessee company is appearing at Sr. No. 13. These details must have been prepared by Jogia Properties Pvt. Ltd. Page No. 1 by no stretch of imagination can be construed as a document belonging to the assessee. This is a piece of paper wherein details of bank account of 24 companies are mentioned and the name of the assessee is appearing at Sr. No. 13. It was submitted that no document belonging to the assessee was found during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies, the AO has not found any instance of cash deposit against issue of cheques". This finding is not challenged by the Department. There are total six assesses and the Ld. CIT(A) has treated the case of M/s. Reva Properties Ltd., as the lead case. He has given a finding on internal page 29 giving a reference to the case of Reva Properties Ltd., and also has stated that the facts are the same in all cases. During the hearing the Ld. Counsel for the appellant has produced the order passed by Ld. CIT(A) in the case of Reva Properties Ltd. and in para 4.11 internal page 27, he has given a finding that during appellate proceedings he had discussed the matter with the Ld. AO and the Ld. Addl. Commr. and asked whether any investigation regarding bank details have been made. He has stated that the Ld. Commr. has fairly admitted that complete bank enquiries were made in case of all Investing companies on the basis of the details submitted by the assessee upto third down layer but nowhere it was found that cash was deposited in any account before issuing the cheque for investments made in the purchase of shares of the assessee company. He further stated that since no adverse finding w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each other person and issue notice and assess or re-assess his income in accordance with the provisions of section 153A. 32. It was vehemently argued by learned CIT(DR) that nowhere in the language of section 153C is mentioned the words 'incriminating' or 'undisclosed'. Therefore, the intention is very clear that if the documents belonging to the other person are found in the search and seizure operation, then the AO has the jurisdiction to issue notice u/s. 153C r.w.s. 153A after recording the reasons. In the present case, the documents which were found and seized belonging to the assessee. Secondly, the statement of Shri Jose Mathew was recorded on the date of search and a consequent statement of Shri Ajay Kumar was recorded on 15/04/2010 who has made a disclosure on account of share application money in case of companies mentioned in the assessment order in respective years. On the basis of the seized papers and the statements recorded, the AO has reason to believe and he has recorded the reasons as per the provisions of section 153A. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vealed that there was one common director in some of the above stated seven companies e.g. Shri Ajay Kumar has been the director of M/s. Jogia Properties Pvt. Ltd., M/s. Auster Properties Pvt. Ltd. and M/s. Reva Properties Pvt. Ltd. Similarly Shri Om Hari Halan has been a director in M/s. Archive Realty Developers Pvt. Ltd. and M/s. Vedisa Properties Pvt. Ltd.; Similarly Sh. Narayan Hari Halan was director in M/s. Martand Properties Pvt. Ltd., M/s. Karburi Properties Pvt. Ltd. and M/s. Cikura Properties Pvt. Ltd. Further, it was also revealed that all the above said Directors were closely related to each other. The case of the assessee was thus covered under section 153A and the other seven companies were covered u/s. 153C of the I.T. Act. 3. During the course of another separate survey action in the case of 'M/s. Shree Global trade fin. Ltd.' i.e. the company in which the assessee company had made investment, statement of one Shri Jose Mathew, Jt. General Manager in the said company 'M/s. Shree Global trade fin. Ltd.' was also recorded on 04.03.2010. In his statement, he stated that the share application money received in the assessee company and other group comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and utilized. The AO also asked the assessee to submit the complete evidences to prove the identity, credit worthiness and genuineness of the transaction of the share holding companies. In response to the show cause notice, the Ld. AR of the assessee submitted its reply along with relevant details, confirmations and evidences etc.; The AO however was not satisfied with the reply of the assessee and noted certain discrepancies in the evidences submitted by the assessee viz. the assessee had not provided share application form; No Board resolution was provided; Bank statements were not provided in some cases or that the directors of the company were not produced for cross examination. The AO thereafter discussed the issue of retraction of statement given by the Director of the company, Shri Ajay Kumar and observed that the statement recorded by the income-tax authorities u/s. 131 has evidentiary value even after its retraction and that the same can be used against the assessee. The AO further held that the documents filed relating to share application money were all result of an afterthought and the same cannot be relied or considered as supporting documentary evidences for receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . There was no mention in the said statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made in respect of the bank accounts of these companies, the AO could not find any instance of cash deposit against issuing of cheques. The Ld. CIT(A) thereafter examined the applicability of section 68 of the Act to the set of facts of the case of the assessee and concluded that for the establishment of identity, each company was having PAN and regularly assessed to tax; For creditworthiness, each company had independent bank account and details were submitted to the AO; For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, i.e. identity, creditworthiness and genuineness of transaction were fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which was not corroborated by any documentary evidence. He therefore held that in totalit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly reflected in their regular books of accounts. The details of allotment of shares, the complete details giving cheque number, name of the bank, date, amount, address, PAN Number, ROC Number etc. in respect of each of the eight companies from whom the assessee had received the share application money in the AY 2008-09 was filed. The details of the notice issued by the assessee company for holding the meetings of the shareholders and the proof of dispatch of the notice to the shareholder were also submitted. The Ld. AR has further submitted that even in respect the 2 companies which belonged to Sh. Mukesh Chokshi, who had invested in the assessee company in the AY 2009-10, the assessee had submitted all the requisite details such as the name, address, PAN number, Registration number with Registrar of Companies, details of the bank account, details of shares allotted, intimation to ROC about issue of shares, issue of notices by the assessee company for holding, the meetings of the shareholders and proof of dispatch of notice to the shareholder. 8. He has further contended that there was nothing incriminating found either during the search action or otherwise on the record warra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted that no reliance can be placed in the statement of Mr. Jose Mathews. 8. We have considered the above submissions of the Ld. AR of the assessee. We have also gone through the statement of Sh. Ajay Kumar Halan, recorded under section 131 of the Act. The relevant part of his statement for the purpose of proper analysis is reproduced as under: We find force in the above submissions of the Ld. AR. of the assessee. Mr. Jose Mathews was the employee of Shree Global Trade fin. Ltd. and not of the assessee company neither of the alleged seven Group companies of the assessee. The said Mr. Jose Mathews was even in no way related to the investing companies who made investments in the assessee company, the transactions relating to which have been treated bogus by the AO. When the said person was neither the employee of the assessee company nor was in any way related to the investing companies, his statement in the circumstances could not be said to have any evidentiary value. Mr. Jose Mathews was the employee of the company in which the assessee had made the investments, which was a totally different transaction. He was not in any manner connected to the transactions in question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. No confessional statement was given by any of the nine shareholding company before the Investigation Wing. 11. We find force in this contention also of the Ld. AR. A perusal of the statement of Sh. Ajay Kumar, recorded under section 131 of the Act, as reproduced above, reveals that the acceptance or offer of the unexplained income was not based on his own knowledge or admission of facts but on the basis of facts and statements presented by the revenue before him. He has never admitted that the transactions were not genuine or the same were bogus. In answer to question No. 13 put to him, he has stated to the investigation wing that he did not know Mr. Mukesh Choksi, neither he was aware of his group concerns. The shares were allotted to M/s. Talent Infoways and M/s. Mihir Agencies in due course after duly complying with all the legal provisions. Similarly in the case of other companies as is revealed from the answer to question No. 15, that owing to the facts mentioned by the investigation wing and the facts and circumstances which were available to him on that date, he had agreed to disclose the share application money received as unexplained. The Ld. AR has duly brought on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i relied upon by the revenue, the Ld. AR has submitted that he had never stated that assessee had given any cash to him or any accommodation entry was provided by him to the assessee. No name of the assessee figured in his statement recorded in any other case. During the course of survey/search on assessee also, not a single evidence was found to suggest that cash was given to Mr. Mukesh Choksi and accommodation entries were taken. The ld. AR has relied upon the decisions of the Hon'ble Bombay High Court as well as various decisions of the Mumbai Tribunal wherein it has been held that no reliance can be placed on the statement of Mr. Mukesh Choksi when the assessee has independently established the genuineness of the transaction. The Ld. AR has further relied upon the following decisions wherein it has been held that once the assessee submits the basic information about the investor company and substantiates the same no addition can be made by invoking the provisions of Section 68 of the Income Tax Act, 1961. a) Lovely Exports Pvt. Ltd. - 299 ITR (Delhi High Court) page 268 and SLP rejected by the Supreme Court in 319 ITR (statute page 5). b) CIT v. Creative World Telefil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old Star Finvest Pvt. Ltd. run by Mukesh Chokshi, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of the Hon'ble Jurisdictional High Court Of Bombay. We further find that the issue, relating to the investments made by the companies relating to the said Mr. Mukesh Chokshi in some other cases, has travelled up to the level of Hon'ble Supreme Court. In the case of "Shri Mukesh R. Marolia v. Additional CIT" (2006) 6 SOT 247 (Mum), the assessee had made share transaction through the companies M/s. Richmond Securities Pvt. Ltd. and M/s. Scorpio Management. Mr. Mukesh Chokshi has been the director of M/s. Richmond Securities Pvt. Ltd. The Tribunal, after considering the overall facts and circumstances of the case, observed inter-alia that on the basis of evidence available and there bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of "CIT v. Kasturben H. Gada" in ITA No. 299 of 2013 decided on 21.01.15. In CIT v. M/s. Sharda Credit Pvt. Ltd. (supra), the Hon'ble High Court has dismissed the appeal of the revenue on identical facts. The Hon'ble Bombay High Court while upholding the order of the Tribunal in the above stated appeals has also relied upon the decision of the Hon'ble Bombay High Court in the case of "Shri Mukesh R. Marolia" (supra). Even in the case of "Smt. Rajni S Chowdhry" (supra), the Hon'ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding, accepting the transaction carried carries through broker M/s. Gold Star Finvest (P) Ltd. as genuine. 15. We further find that the issue is squarely covered by the various decisions of the Tribunal on the basis of same facts. Recently the Tribunal, in the case of "ITO v. Superline Construction Pvt. Ltd. & Others" in ITA No. 3645/M/2014 & Others vide common order dated 30.11.2015 in identical facts and circumstances while dealing with the issue of making investments by way of share application money invested by the same companies as in the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authorities have given the concurrent finding with regard to the identity, genuineness and creditworthiness of all the share applicants, therefore, no addition was warranted on account of these share applicants. Respectfully following the order of the Tribunal in case of Jogia Properties Ltd., wherein also from the very same applicants, share capital was received except Gyaneshwar Trading & Finance Co. Ltd., We had also gone through the documentary evidences filed in case of Gyaneshwar Trading to prove the identity, genuineness and creditworthiness. As per the documents placed at page 83 to 105 of paper book for A.Y. 2008-09, all the three conditions have been satisfied and no addition u/s. 68 is warranted for the amount invested by Gyaneshwar Trading & Finance Co. Ltd., Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition so made on account of share capital. 35. With regard to the legal issue taken by the assessee in the cross objection, as per our considered view, the same can be taken at any time as per the verdict of Hon'ble Supreme Court in case of National Thermal Power Co. Ltd., 229 ITR pg. 383. We also found t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecorded any satisfaction to comply with the provisions of Section 153C. A search & seizure action was taken against M/s. Jogia Properties Ltd. and pages 1 to 126 which are a part of Annexure- A 1 were seized in the hands of Jogia Properties Ltd.,. The search took place on 4th and 5th March 2010. The Ld. Assessing Officer of Jogia Properties Ltd. did not record any satisfaction as per the provisions of Section 153C. The assessee has produced the copy of the inspection report which was obtained in the proceedings of Jogia Properties Ltd. In the inspection report it is clearly stated that the Ld. Assessing Officer of Jogia Properties Ltd. has not recorded any satisfaction. The Ld. CIT (DR) also has not produced any evidence during the course of hearing to prove that the Ld. Assessing Officer of Jogia Properties Ltd. has recorded the satisfaction. 38. Hon'ble Gujarat High Court in the case of Vijaybhai N Chandrani 333 ITR 436 held as under:- Sections 153A, 153B and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d filed detailed explanation on the contents of pages 1 to 126 and copy of the submissions made before the Ld. Assessing Officer. The said explanation was accepted and there is not a whisper about the contents of any of the pages from 1 to 126 in the assessment order. 40. For understanding of legal requirement of initiating proceeding u/s. 153C, we here below reproduce provision of Section 153C. Assessment of income of any other person. Section 153C reads as under. Assessment of Income of any other person. 153C. Notwithstanding anything contained in section 139, section 147, section 148, section 149, Section 151 and section 153, where the Ld. Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person and that Ld. Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006 (A.Y. 1999-2000) Reported in 119 TTJ (Kol) 214. f. Right Development & Estate Pvt. Ltd. ITA Nos. 4616 to 4619/MUM/2009 (A.Y. 2004-05 to A.Y. 2007-08) date of pronouncement 23/09/2011. g. Asst. Commr. Of Income Tax v. Inlay Marketing Pvt. Ltd. (ITAT Delhi) h Tanvir Collections Pvt. Ltd. v. Asst. Commr. Of Income Tax (ITAT Delhi) i V.K. Fiscal Services Pvt. Ltd. v. Dy. Commr. Of Income Tax (ITAT Delhi) j. Dy. Commr. Of Income Tax, Central Circle-5 New Delhi v. Qualtron Commodities Pvt. Ltd. 54 Taxmann.com 295 (Delhi Tribunal) k. Dy. Commr. Of Income Tax v. Aakash Arogya Mindir P. Ltd. 58 Taxmann.com 293 (Delhi Tribunal) l. CIT v. Sinhgad Technical Education Society, 378 ITR pg. 84 (Bombay High Court) m. CIT v. Mechmen (2015) 280 CTR 198 (Madhya Pradesh High Court) n. CIT v. IBC Knowledge Park Pvt. Ltd., (2016) Taxmann.com, 108 (Karnataka High Court) o. Cit v. Shettys Pharmaceuticals & Biologicals Ltd., (2015) 230 Taxman 268 (Andhra Pradesh High Court) 42. Applying proposition of law laid down in above judicial pronouncements, notice issued u/s. 153C is bad in law and consequently the order passed by the Ld. Assessing Officer u/s. 153C needs to be cancelled. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he cash and received the Cheque by way of share application. The statement of Mr. Mukesh Chokshi cannot be base for acquiring jurisdiction by issue of notice u/s. 153C is concerned. The Tribunal have also dealt threadbare with the statement of Shri Mukesh Chokshi in its order dated 18/12/2015. 47. In view of the above, we can conclude that no document belonging to the assessee was found during the course of search and also none of the statements of Mr. Jose Mathews, Mr. Narayan Hari Halan or Mr. Mukesh Chokshi can be construed as a document belonging to the assessee for issue of notice u/s. 153C. 48. Now, coming to the contention of CIT (DR) during the course of hearing with respect to the cross objection so filed by the assessee. The CIT(DR) referred the document seized during the course of search were confronted with the director of the company. This is not a correct statement of fact. The documents which were seized were explained in the assessment proceedings and no incriminating material is seized. No papers belonging to the assessee is seized and hence the question of confronting the same to the directors does not arise. There is no reference in the assessment order regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1. Whether on facts and in the circumstances of the case and in law. The Ld. CIT(A) is justified in allowing the addition made of Rs. 5,00,00,000/- u/s. 68 on account of unexplained investment in share capital of various companies. Without appreciating the fact that the assessment order framed after due verification. 2. Whether on facts and in the circumstances of the case and in law. The Ld. CIT(A) is justified in allowing the addition made of Rs. 2,00,00,000/- u/s. 68 on account of unexplained investment in share capital of various companies, without appreciating the fact that the assessment order framed after due verification. 2. The assessee in its C.O. No. 255/M/2014 in ITA No. 6101/M/2012 raised the following grounds of objection/appeal: 1. Whether on facts & circumstances of the case the Ld. CIT has erred in concluding that the action of the Learned Assessing Officer in invoking the provisions of Section 153C is justified. The appellant prays that the condition of Section 153C is not satisfied and the Learned Assessing Officer has wrongly invoked the provisions of Section 153C. 3. Brief facts of the case are that a search and seizure action u/s. 132 of the Act wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not disclosed the income of Rs. 5.00 Crore as disclosed in the statement recorded u/s. 131 on 15.04.2010. The AO served the notice u/s. 142(1) dated 05.05.2011 and asked to give the details of share application money and utilization thereon in respect of share application money of Rs. 2.00 Crore received from M/s. Delton Exim Pvt. Ltd. The assessee filed its reply dated 01.11.2011 and contended that all share holding of company who have made investment in assessee-company are independent existing corporate bodies, they are maintaining their regular books of account, having their own bank account, filed separate return of income, all details were supplied, the assessee further contended that identity of share holder is established, therefore, confirmation is filled with supported document. The assessee further vide its letter dated 30.11.2011 submitted another reply for AY 2009-10 and 2010-11 which is reproduced as under: 1. The correct status of our company is public limited company and the name of company is Martand Properties Ltd. The registered office of the said company till the date of search action on Jogia Properties Ltd. was 20, Bhatia Niwas, 233/235, Samuel Street, ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of share investments by 5 companies cannot be explained and the taxable income of company will not be to the extent of Rs. 5 crore pertaining to AY 2009-10. 4. However subsequently I gathered the information, the papers, the documents, the confirmation, bank statement, balance sheet and other records of all the 5 companies. Based on the information and documents I had observed that all the 5 companies are genuine and they have invested in the share capital of the company. No confessional statement is given by any of 5 shareholding company before the investigating wing Mumbai or anywhere else. The transaction of share investment by all 5 companies can be explained. Therefore while filing the return of income for A Y 2009-10 in response to the notice under section 153C, the company did not include the income of Rs. 5 crore. The noninclusion of income obtained on 15 April 2010 may be treated as a retraction of income. Please refer to letter dated 18 July 2011 submitted in your office on 22 July 2011 wherein also the fact of retraction has been mentioned. The real income as per the provision of income tax act 1961 is only chargeable to tax. No evidence or documents was found to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted all the details called for in your questionnaire. 11. We have also proved before you that we have issued the shares to all the five shareholding companies. The details of distinctive number of shares, share certificate numbers and number of shares issued have been submitted to you. We had intimated the Registrar of Companies of issue of shares by filing the requisite forms. We had filed the annual return in which year after year their names are reflected as shareholders. All these events happened much prior to 4/3/2010 when the search action is taken against M/s. Jogia Properties Ltd. 12. We further state that your have in para 7 of the proceeding sheet dt. 11.11.2011 have referred to the sum of Rs. 1,50,00,000/- received by us as share application money from M/s. Sidh Housing Deployment Co. Ltd. and Rs. 1,00,00,000/- from M/s. Oshin Investment in A.Y. 2010-11, aggregating to Rs. 2,50,00,000/-. In this regard we have to state that we have already filed details of share application money received issue of shares against share application, cheque No., name of the Bank, Branch and confirmation. These are the same parties from whom in A.Y. 2009-10 also the amount is rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dditions were made in cases of group concerned which was covered by the search and seizure action u/s. 132 conducted on 04.03.2010. We have noticed that the C.O. of the assessee is barred by 390 days of limitation period. The ld. AR of the assessee during the course of hearing was asked to explain the cause of delay. The ld. AR of the assessee argued that assessee has raised legal ground of objection in its C.O. which goes to the root of the case. The ld. AR of assessee further invited our attention to the order of Coordinate Bench of this Tribunal in group cases in ITA No. 6104, 6105/Mum/12 and C.O. No. 259 & 260/Mum/2012, wherein the similar delay in filing the Cross Objection on identical grounds was condoned by the Tribunal. On the other hand, ld. DR for the Revenue not disputed the contention of ld. AR of assessee and submitted that the delay was condoned by the Co-ordinate Bench. 7. We have considered the rival contention of the parties and gone through the order of Co-ordinate Bench in assessee's group case wherein the Tribunal in para 35 of its order condoned the delay in filing the Cross objections holding that assessee has raised purely a legal issue, which goes to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the records The appellant had made an application vide letter dated 05/08/2015 to the Assessing Officer requesting for inspection of the assessment records. The said assessment records were with the Hon'ble Commr. of Income Tax, DR, Smt. Neena Pandey, f-Bench, Mumbai ITAT. The Inspector Ms. Ambika Shashidharan, attached to f-Bench, Mumbai ITAT, gave the inspection of the records on 20/08/2015 at 3 pm. Shri Dilip V. Lakhani, Chartered Accountant, the authorised representative and Shri Viresh Sohoni, the representative of the appellant, took the inspection of the assessment records and the findings of the said inspection are as under. 1. There is no proof or evidence on record to the effect that the Assessing Officer gave the copies of the statement recorded of Mr. Mukesh Chokshi on 25/11/2009 and 11/12/2009. 2. No proceeding sheet/order sheet was available for inspection, 3. No recording of any satisfaction for initiating proceedings u/s. 153C against 7 companies. Place: Mumbai Dilip V. Lakhani Viresh Sohoni Dated: 20/08/2015 Authorised Representative Representative of Appellant 36. It is clear from the above inspection report that no satisfaction has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated. 39. Learned AR also invited our attention to page 3 of the paper book filed in cross objection proceedings. Page 3 is the copy of the satisfaction recorded u/s. 153C in the hands of Karburi Properties Ltd. The reference to years are 2004-05 to 2009-10. The Ld. Assessing Officer has relied upon page 1 of Annexure - A 1 of the seized panchnama da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in cases where any assessment has abated." In Order to issue a valid notice u/s. 153C, the Ld. Assessing Officer of a person against whom search action is taken, records a satisfaction that any money, bullion, jewellery or other valuable article or thing, or books of account or documents seized, belong to a person, other than a person referred to in Section 153A, then the such books of account or documents or assets seized shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person. The recording of the satisfaction is a must and even if the Ld. Assessing Officer for the person searched and the 'other person' is the same, still the satisfaction has to be recorded by the Ld. Assessing Officer of the search person referred to in Section 153A. 41. of the proposition that for initiating proceedings u/s. 153C, satisfaction should be recorded in the file of searched person, reliance can be placed on the following judicial pronouncements. a. Vijaybhai N. Chandrani v. Asst. Commr. Of Income Tax Reported in 333 ITR 436 (Guj. HC) b. Pepsico India Holdings (P.) Ltd. v. Asst. Commr. Of Income Tax ITA No. 6104/12 & 11 other appeals CO No. 259/12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disa Properties v. ACIT, ITA No. 6109 & 6110/M/2012 M/s. Auster Properties v. ACIT, ITA No. 6108, 6112 & 6113/M/2012 M/s. Reva Properties v. ACIT, ITA No. 6096/M/2012 M/s. Cikura Properties v. ACIT.. The ld. AR of the assessee argued that the grounds of appeal raised by Revenue are also covered by the decision of Co-ordinate Bench in assessee's group case in the above referred decisions. The ld. DR for the revenue submitted that he has nothing to add in his submission except to rely on the order of Assessing Officer. 14. Considering the facts that the Co-ordinate Bench of the Tribunal has already dismissed the appeal of the Revenue in assessee's group case which was covered in search & seizure action u/s. 132 conducted on 04.03.2010, the Revenue has raised identical grounds except the difference in the figure of additions in the present appeal. Thus, respectfully following the decision of Co-ordinate Bench wherein it was held that no satisfaction was recorded by Assessing Officer before initiating action u/s. 153C of the Act. Hence, the assessment order passed without recording satisfaction u/s. 153C of the Act is bad-in-law. In the result the appeal of the Revenue for AY ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record to prove contrary to what is established by the assessee as well as also by the nine parties and what is concluded by the Ld. Commissioner of Income Tax (Appeal) and the Tribunal in their cases. 6.4. The Learned counsel for the assessee also relied upon the observation of the Learned CIT (Appeals) which is on para 6.14 of the order. On the subject of source of the funds in the hands of the fourteen companies the two different propositions arose. First being the genuine investments by fifty-four companies in to the share capital of fourteen companies and second being the investments made by the Lloyds Steel Industries Limited through the fifty-four companies in the fourteen companies. The department on one side is rejecting the explanation regarding the application of the income by Lloyds Steel Industries Limited and also simultaneously treating the investments by fifty-four companies as non-genuine investments in the fourteen companies. The department also levied penalty on Lloyds Steel Industries Limited u/s. 271(1)(c). In this background the Learned CIT (Appeals) has observed that "the department has been inconsistent in making additions in fourteen investing companie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He confirmed that in the Appellate proceedings the identity, genuineness and credit worthiness has been proved. The Learned Assessing Officer and CIT(A) has conveniently omitted to refer to the statement recorded on 20/12/2012 and has only relied upon what is stated on 19/12/2012. There is not a whisper in the statement of Shri Om Hari Halan that the transaction between nine parties of the assessee is not genuine. Similarly the statement of Shri BL Aggarwal recorded during the survey proceedings do not lead any evidence as regards the amounts received by the assessee company from nine investing companies and there is nothing to construe that any facts emerges which is contrary to the finding given by the Ld. CIT(A) and the Tribunal in the cases referred to hereinabove. 6.5. Before us, the Learned Sr. Standing Counsel, during the course of argument before us, invited our attention to paras 8.4, 8.5 & 8.6 of the impugned order. He argued that the investments made by fifty-four companies into fourteen companies are not genuine and tried to establish from the share capital and other data being who are the shareholders of those fifty-four companies. He also relied upon certain case l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies. In the books of accounts of the assessee also no premium is received against issue of the preference shares. The assessee had filed original return of income on 27/09/2010, attached with the audited financial statements and other necessary details. Thereafter Notices u/s. 143(2) & 142(1) were issued asking the assessee for the complete details and the information about the amount received in A.Y. 2010-11 and issue of preference shares in the subsequent period. The Ld. Assessing Officer after examining the details and the audited financial statements/replies of the assessee framed assessment u/s. 143(3) and the claim of the assessee was accepted. No addition was made in this proceeding. Notice u/s. 143(2) was issued by the Central Circle - 32. 2. Thereafter the notice u/s. 148 was issued on 24/03/2014. In the assessment order the addition was made u/s. 68 amounting to Rs. 210,61,50,000/-. The Ld. CIT (Appeals) confirmed the addition, which is under challenge before this Tribunal. 3. Both the ld. representative took identical argument before us as was preferred for earlier Assessment Years and identical cases were relied upon. Considering the arguments advanced from both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-856 878-879 10 order of the CIT (A) 2 636-668 NA NA NA NA NA NA 11 Order of ITAT 2 840-852 NA NA NA NA NA NA 12 Round (2) 13 Order Passed u/s. 143(3) r.w.s. 147 2 1023- 1033 NA NA NA NA NA 880-886 14 order of the CIT (A) 2 2134- 2338 NA NA NA NA NA NA 7.2. Before us, it was submitted by the Ld. counsel for the assessee, that the assessee has proved the identity, genuineness and capacity of the all the seven parties giving the complete information about the transactions and the burden cast upon the assessee is discharged. Once the parties who are regularly assessed to tax have confirmed the transactions and have recorded the said transactions in their regular books of accounts and the tax department has assessed the said parties, no further obligation is left to be discharged by the assessee. For the present Assessment Year also, the assessee has relied upon same cases, which we have mentioned in earlier paras of this order, therefore, the same are not being repeated and will be discussed in the later paras, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited for A.Y. 2007-08 to 2010-11 amounting to Rs. 556 crores. Lloyds Steel Industries Limited filed the revised return of income for all the 4 years and offered the income. During survey u/s. 133A on Lloyds Steel Industries Limited when this disclosure was made, no corresponding unaccounted assets to the extent of Rs. 556 crores were found. When inquired about the application of the income Shri B.L. Agarwal stated that these funds are routed through fifty-four companies who have made investments in fourteen companies. 8. Now, we shall deal with the cases relied upon by the assessee. The first decision is Devine Leasing Ltd. (299 ITR 268)(Del.). It was held as under:- "This batch of Appeals has been filed by the revenue seeking to reverse the concurrent findings of the Commissioner of Income-tax Appeals ['CIT(A)' for brevity] as well as the Income-tax Appellate Tribunal ('ITAT' for short) adverse to the revenue. Succinctly stated, in January, 1984 the assessee had commenced its business of extending finance to industrial enterprises. The total issued, subscribed and paid up capital in the assessment years 1984-85, 1985-86 and 1986-87 was Rs. 99,80,000 received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled investigation inasmuch as there had been a device of converting black money into white by issuing shares with the help of formation of an investment company. The Commissioner of Income-tax further held that the Assessing Officer did not make enquiries with regard to the genuineness of the subscribers of the share capital. He thereupon set aside the order of assessment. The Tribunal reversed this decision for reasons which we need not go into. It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names shares had been issued and the money may have been provided by some other persons. If the assessment of the persons who are alleged to have really advanced the money is sought to be reopened, that, would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself. In our opinion, no question of law arises and the petition is, therefore, dismissed." (p. 288) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the facts as well as to the interpretation of the law. When the High Court dismisses an appeal filed under section 260A of the Act it does not ignore the factual matrix pertaining to the particular assessee; and it also does not interpret the law in abstraction or in its generality. If the High Court considers it necessary to speak broadly on the law it invariably frames a substantial question of law and thereafter decides it by a judgment in contradistinction to an order. The question before the Bench in Nirma Industries Ltd.'s case (supra) was whether the ITAT could assume a question being open to discussion despite the fact that the High Court had declined to admit the appeal on that question in respect of that assessee, for a previous assessment year. We are in the agreement with the Bench of the Gujarat High Court that the rejection of the appeal on certain grounds would operate as res judicata, but in our understanding it would operate between the litigating parties. We are unable to concur with the argument of Mr. Aggarwal, learned counsel for the assessee that the dismissal of an appeal under section 260A constitutes an expression of a judicial view on the questions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gedly received as loans from three individual creditors under hundis. Letters of confirmation as well as the discharged hundis were produced; but notices/summons sent to them remained unserved because they had reportedly 'left' that address. The view of the Tribunal was that merely because the assessee could not produce these three parties, there was nevertheless no justification to draw an adverse inference. This approach as accorded approval by the Supreme Court in these words: "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discharged the burden of proof that had shifted to it, since it did nothing more than issue notices under section 131 of the Income-tax Act. Therefore, the Department ought to have made efforts to pursue these notices/creditors to determine their creditworthiness. These observations sound the death-knell for the contentions raised on behalf of the Department in the present batch of appeals. 8. Justice B.N. Kirpal (as the learned Chief Justice of India then was) had authored the Order/Judgment both in Stellar Investment and in Sophia Finance. Justice Kirpal's extraordinary experience as the Advocate for the revenue spanning two decades, and the platitude of precedents established by him in this realm of law may be paralleled only by his Lordship D.K. Jain and in this respect their Judgments can be viewed as exceptional and incomparable. In the latter Judgment it has been specifically recorded that section 68 and its implications had not been analyzed in the former Order. Therefore, for a detailed discussion on section 68 one should first turn to Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 (Delhi) and thence finally to the decision of the Full Bench of this Court in Soph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be issued in the name of non-existing persons..... If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt but if the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of section 68 may be invoked." It will at once become obvious that the Court had not reflected upon the question of whether the burden of proof rested entirely on the assessee, and at which point, if any, this burden could justifiably be shifted to the Assessing Officer. The Full Bench in fact clarified that they were "not deciding as to whom and to what extent is the onus to show that an amount credited in the books of account is share capital and when does that onus stand discharged. This will depend on the facts of each case." It has been argued, but without substance, that the Full Bench did not go further than holding that the only responsibility on the assessee is to identify the subscriber; or that the Assessing Officer was not required to delve into the creditworthiness of the subscriber; or that the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrive at the opposite conclusion in CIT v. R.S. Sibal [2004] 269 ITR 429 (Delhi). In CIT v. Makhani & Tyagi (P.) Ltd. [2004] 267 ITR 433 (Delhi), this Court has not given its imprimatur to the inaction of the Assessing Officer in doing nothing further after the issuance of summons under section 131 of the Income-tax Act. It did not condone the Assessing Officer, failing to issue coercive process, and in this manner attempting incorrectly to shift the burden on the assessee to establish the legitimacy of the transaction. In CIT v. Antarctica Investment (P.) Ltd. [2003] 262 ITR 493(Delhi), the Court was satisfied that no interference was justified since the assessee had produced the Share Application Forms along with confirmation letters and copies of their accounts, copies of their bank accounts of cheque payments and their Auditor's Report. The Assessing Officer's conclusion that the genuineness of the transaction had not been made good was not upheld. This conclusion was reached despite the fact that notices received by one of the common Directors of the two subscribing companies had been ignored and no information was forthcoming from the latter. However, the Under Secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at this transaction was not genuine. The High Court did not act on the confession since it had not been made available to the assessee. The Bench observed that since the correct name and address, and the GIR number of the creditor had been supplied by the assessee the initial onus under section 68 of the Income-tax Act had been "completely discharged" by the assessee. It would not be sanguine to conceive of a possibility of a genuine contributor abandoning his investment for diverse reasons. That would not lead to the conclusion that the assessee is automatically guilty of attempt of converting its income into capital. 15. In Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Cal.) where notices to these alleged creditors had come back unserved, the Division Bench affirmed that the mere filing of confirmatory letters by the assessee did not discharge the onus that lay on the assessee. Different Division Benches of the same High Court have opined that the assessee must prove (a) the identity, (b) the capacity of the creditors to advance money, (c) the genuineness of the transaction. (See Shankar Industries v. CIT [1978] 114 ITR 689 (Cal.); C. Kant & Co. v. CIT: [1980] 126 ITR 63 (Cal.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of section 68 of the Income-tax Act. The assessee has to prima facie prove (1) the identity of the creditor/sub-scriber; (2) the genuineness of the transaction, namely: whether it has been transmitted through banking or other indisputable channels; (3) the creditworthiness or financial strength of the creditor/subscriber; (4) If relevant details of the address or PAN identity of the creditor/subscriber are furnished to the Department along with copies of the Shareholders Register, Share Application Forms, Share Transfer Register etc. it would constitute acceptable proof or acceptable explanation by the assessee. (5) The Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices; (6) the onus would not stand discharged if the creditor/subscriber denies or repudiates the transaction set up by the assessee nor should the Assessing Officer take such repudiation at face value and construe it, without more, against the assessee. (7) The Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d details of the present appeals. The appeal of the revenue in respect of assessment years 1984-85 and 1986-87 was rejected on 4-9-2003 by the ITAT Bench comprising Shri R.M. Mehta and Shri Ram Bahadur. With regard to the in between assessment year 1985-86 another Bench comprising Shri H.L. Karwa and Shri B.R. Jain dismissed the Revenue's appeal on 12-8-2005. 19. As would be evident from a perusal of the Table (supra) for the assessment year 1984-85 the assessee had filed a return declaring a loss of Rs. 25,090 and consequent upon the addition of Rs. 9,53,500 made under section 68 the assessment was made on this sum. The ITAT noted that the assessee was a Public Limited Company which had received sub-scriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of the Securities Contract Regulation Act, 1956 as also the Rules & Regulations of the Delhi Stock Exchange. Complete details appear to have been furnished. The ITAT has further recorded that the Assessing Officer had not brought any positive material or evidence which would indicate that the shareholders were (a) benamidars or (b) fictitious persons or (c) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Sikkim and remarkably at the same address, namely, Dorjee Building, Nam Nang Road, Gangtok. All of them had replied to the Department asking for further time to provide details. The CIT(A) has noted that (a) the stridently adverse findings of the Assessing Officer at Calcutta had been struck down in Appeal; (b) Notices under section 143(6) of the Income-tax Act sent to the five Companies were replied to by them; (c) these Companies were duly incorporated under the Sikkimese Companies Act; (d) assessment of these Companies had been framed under the Sikkimese Taxation Manual; (e) their share subscriptions or capital were received through Banking channels. The CIT(A) deleted the addition for the reason that the identity of the shareholders had been established on the strength of Steller Investment, which approach may not be entirely correct in the light of the discussion above. We have already concluded that this merely shifts the burden of proving the illegal or illegitimate nature of the transaction onto the Department. The investigations carried out by the Assessing Officer in Calcutta cannot be relied upon by the Assessing Officer, Bulandshahar consequent on those proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case, the Assessing Officer had material to conclude that the share applicants in questions did not exist. It is seen that the assessee-company has furnished the necessary details such as PAN No./Income-tax Ward No./ration card of the share applicants and some of them are assessed to tax. The share application money has been received through banking channel. In some case, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who have given the PAN No./Ward No. in order to ascertain the non-existence of the share applicants in question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhani & Tyagi (P.) Ltd. [2004] 267 ITR 433 (Delhi), the jurisdictional High Court has held that when the documentary evidence was placed on record to prove the identity of all the shareholders including their PAN/GIR numbers and filing of other documentary evidence in the form of ration card etc. which had neither been controverted nor disapproved by the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... register the appeal. At the instance of the Revenue, the appeal is taken up for admission. 2. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal was pleased to follow the judgment of the apex court in the case of CIT v. Lovely Exports (P.) Ltd. Application No. 11993 of 2007, dated 11-1-2008, wherein the apex court observed that if the share application money is received by the assessee-company from alleged bogus shareholders, whose names are given to the Assessing Officer, 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 PAN/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing Officer to make proper investigation and reach the shareholders. The Assessing Officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". In our considered view, the Assessing Officer ought to have found out their details through PAN cards, bank account details or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to confirm the investment, notices were issued to the shareholders in their given addresses and in 29 cases, the letters sent were returned unserved with the remark that the address is not complete or other similar reason. The Assessing Officer, not satisfied with the explanation of the assessee, added Rs. 13,36,000 towards holdings of the shareholders, whose confirmation could not be adduced. 4. Before the Commissioner of Income-tax (Appeals), the assessee sought permission for adducing additional evidence under rule 46A of the Income-tax Rules, 1962, which was accepted and appeal of the assessee was allowed on the basis of additional evidence adduced by the assessee as also keeping in view of the fact that for subsequent assessment year, the share holders investment was confirmed during the assessment proceedings. 5. The appeal preferred by the Revenue was further dismissed by the impugned order. 6. Mr. Dubey, learned senior advocate appearing for the respondent submits that apart from the reasons assigned by the respondent, the Tribunal, wherein it has been held that the investment has been verified on the basis of the additional evidence adduced by the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of fact in respect of those ingredients had been returned both by the Commissioner (Appeals) as well as the Tribunal. [Para 4.1] 'TT' Ltd. was a widely held company having its own paid-up share capital amounting to Rs. 3.4 crores. The assessee was a member of NSE and was involved in sale and purchase of shares. In those circumstances, it could be said that the assessee had discharged its onus in respect of the veracity of transactions. [Para 4.2] In the circumstances, the revenue's appeal was to be dismissed." While coming to the aforesaid conclusion, the Hon'ble High Court duly considered the following decisions:- i. CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi) [Para 4.2], ii. CIT v. Sofia Finance Ltd. [1994] 205 ITR 98/[1993] 70 Taxman 69 (Delhi) (FB) [Para 4.2] and iii. CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR (SC) 195 [Para 4.2]. 8.4. The Hon'ble Madhya Pradesh High Court in the case of CIT v. STL Extrusion Pvt. Ltd. (2011) 333 ITR 269 (M.P.) held as under:- "The assessee having duly furnished the names, age, address, date of filing the application of share, number of shares of each subscriber th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer to frame the assessment afresh after providing full opportunity of being heard to the assessee. Thereafter, the Assessing Officer completed the assessment under section 143(3) read with section 250 of the Act and again made the aforesaid two additions. The assessee again filed appeal against the order of the Assessing Officer. The CIT(A) deleted both the aforesaid additions. The appeal filed by the revenue against the order of the CIT(A) has been dismissed by the ITAT. Hence, this appeal. We have heard learned counsel for the appellant-revenue. As far as the addition of Rs. 3,30,000 is concerned, it has been held that during the proceedings under section 143(3) read with section 250 of the Act, the assessee furnished a confirmation certificate from M/s. Axis Chemicals & Pharmaceuticals Ltd., Faridabad along with PAN. On asking of the Assessing Officer, the assessee has confirmed that the said liability is still outstanding. In spite of that material, the Assessing Officer made the addition of the amount on the basis that this liability has ceased to exist and the same is not payable by the assessee, and treated the said liability as income by invoking provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in accordance with law. But the said amount cannot be taken as unexplained income in the hands of the assessee. 4. In view of the above, we do not find any illegality in the impugned order passed by the ITAT and in our opinion, no substantial questions of law, as raised by the revenue in this appeal, arise from the order of the ITAT. Dismissed." 8.6. The Hon'ble Delhi High Court in CIT v. Siri Ram Hydor Power Pvt. Ltd. (196 taxman 441)(Del.) held/observed as under:- "The present appeal has been filed under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "Act, 1961") challenging the order dated 22-1-2010 passed by the Income-tax Appellate Tribunal (for brevity "Tribunal") in ITA No. 3497/Delhi/2009 for the assessment year 2006-07. 2. Ms. Suruchii Aggarwal, learned counsel for the Revenue submitted that the Tribunal had erred in law in deleting the addition on account of unexplained share application money under section 68 of the Act, 1961. Ms. Aggarwal also submitted that the Tribunal had deleted the said addition even though the genuineness of transaction, creditworthiness and identity of the creditor had not been proved by the respondent-asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary action. In view of this addition of Rs. 50 lakhs is deleted." 4. The Tribunal in its impugned order has also observed as under:- "6. In the present case, it is not in dispute that the assessee has received share application money from its Director Shri Sujit Acharya, who has filed confirmation letter before the Assessing Officer. The existence of Shri Sujit Acharya was not in dispute inasmuch as his identity and existence is established by fact that he was having Permanent Account Number as well as he is maintaining bank account with Axis Bank, a copy of which was filed before the Assessing Officer. His existence is also established from the fact that in Form No. 22, filed with the Registrar of Companies, Shri Sujit Acharya has been shown as a Director and he has given his consent to act as a Director of the Company. It is, thus, a case where identity of the shareholder has been established, and it is the case where the shareholder has confirmed that he has made investment of Rs. 50 lakhs towards share capital in the assessee company. The CIT(A) has also made his own enquiry and found that PAN has been allotted to Shri Sujit Acharya having jurisdiction with Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation money cannot be regarded as undisclosed income of assessee under section 68 of Act, 1961. 7. Accordingly, present appeal is dismissed in limine." 8.7. In the case of CIT v. HLT Finance Pvt. Ltd. (2011) 12 taxman 247 (Del.), the Hon'ble High Court held as under:- "The present appeal has been filed under section 260A of Income-tax Act, 1961 (for brevity "Act, 1961") challenging the order dated 23-6-2009 passed by the Income-tax Appellate Tribunal (in short "ITAT") in ITA No. 2041/Delhi/2006, for the assessment year 1998-99. 2. Ms. Prem Lata Bansal, learned counsel for the revenue submitted that ITAT had erred in law in deleting the addition of Rs. 18,00,000 made by the Assessing Officer (in short 'AO') on account of unexplained share application money under section 68 of Act, 1961. She further submitted that ITAT had deleted the said addition even though the primary onus had not been discharged by the respondent-assessee with regard to the identity, creditworthiness and genuineness of the transaction. 3. However, upon a perusal of the file, we find that the said addition was deleted by the ITAT on the ground that the share applicants were identified and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he department is free to proceed to reopen their individual assessments in accordance with law. Similar was the finding of Hon'ble Supreme Court in the case of Shipra Retailers (P.) Ltd. In SLP No. 451/08 dated 21-1-2008 as also in the case of Divine Leasing & Finance Ltd. In SLP No. 375/08 dated 21-1-2008. 4. The various judgments relied on by the learned AR and placed on record clearly lay down the ratio to the effect that in respect of money introduced by way of share capital, and the assessee-company furnished the names and particulars of shareholders for establishing their identity, the department may proceed to reopen the assessments of all such alleged bogus shareholders whose investment in the share capital is found to be unexplained. 5. In view of the above, we allow the appeal of the assessee with the similar direction to the effect that department is at liberty to reopen the individual assessment as alleged shareholders, as per provisions of law." 4. In our considered opinion, the approach adopted by CIT(A) and ITAT is in consonance with the decision of Supreme Court in CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008] wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application money. These amounts received from such shareholders would, naturally, be the sums credited in the books of account of the assessee. If the Assessing Officer doubts the genuineness of the investors, who had purportedly subscribed to the share capital, he may ask the assessee to explain the nature and source of those sums received by it on account of share capital. It is in this scenario, the question arises about the genuineness of the transactions. The plain language of section 68 suggests that when the assessee is to give satisfactory explanation about receipts, burden of proof is on the assessee to provide nature and source of those receipts. [Para 5] In order to discharge this burden, the assessee is required to prove: (a) identity of the shareholder; (b) genuineness of the transaction; and (c) creditworthiness of the shareholders. [Para 11] In case the investor/shareholder is an individual, some documents will have to be filed or the said shareholder will have to be produced before the Assessing Officer to prove his identity. If the creditor/subscriber is a company, then the details in the form of its registered address or PAN identity, etc., can be furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. P. Mohanakala [2007] 291 ITR 278/161 Taxman 169, held that the expression 'the assessee offers no explanation' means that the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by it. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory, there is, prima facie, evidence against it, viz., the receipt of money. The burden is on the assessee to rebut the same, and if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even if the explanation is not acceptable, the material and attending circumstances availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed which he had failed to do. Moreover, remedy with the department lay in reopening the cases of those investors and, therefore, the addition could not be made in the hands of the assessee. [Para 34] Therefore, the revenue's appeal was to be dismissed. [Para 35] IT Appeal No. 514 of 2007 Insofar as the statements of the five persons produced were concerned, they were gone into and analyzed by the three authorities below on the basis of which finding of fact was arrived at that neither their identity was established nor their capacity to invest that kind of money was proved. They were all agriculturists and had not produced a single document to support their version. That was a finding of fact and there was no reason to interfere with the same. [Para 42] The findings of the authorities below could not be treated as perverse as those were on the basis of proper analysis of the statements of those persons which were recorded by the Assessing Officer. The initial onus is upon the assessee to establish three things necessary to obviate the mischief of section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/investments; and (iii) genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded for initiation of reopening of assessment proceedings based on the report relating to survey conducted at the premises of the assessee that the business premises of the assessee actually belong to BSL and several other companies were having their Registered offices in the same premises. * The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that business raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change and, sometimes in quick succession. This is the normal formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. * It was submitted that all the companies having Registered office at the premises undisputedly belonged to one, 'B' Group. The sources of capital introduced in these companies were established during the respective assessment proceedings. It was further contended that no ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... viii. Ganga Prasad Maheshwari v. CIT [1983] 139 ITR 1043/[1981] 6 Taxman 363 (All.) (para 7), ix. Sheo Nath Singh v. Appellate Asstt. CIT [1971] 82 ITR 147 (SC) (para 7), x. Ajit Jain v. Union of India [2000] 242 ITR 302/[2001] 117 Taxman 295 (Delhi) (para 7), xi. VXL India v. Asstt. CIT [1995] 215 ITR 295/83 Taxman 582 (Guj.) (para 7), xii. Surat City Gymkhana v. Asstt. CIT [2001] 76 ITD 327(Ahd.) (para 7), xiii. Ram Bai v. CIT [1999] 236 ITR 696/103 Taxman 121 (SC) (para 7), xiv. Bagsu Devi Bafna v. CIT [1966] 62 ITR 506 (Cal.) (para 7), xv. Kishinchand Chellaram v. CIT [1980] 125 ITR 713/4 Taxman 29 (SC) (para 7), xvi. R.B. Shreeram Durga Prasad & Fatechand Nursing Das v. Settlement Commission [1989] 176 ITR 169/43 Taxman 34 (SC) (para 7), xvii. Rajesh Kumar v. Dy CIT [2006] 287 ITR 91/157 Taxman 168 (SC) (para 7), xviii. C.B. Gautam v. Union of India [1993] 199 ITR 530/[1992] 65 Taxman 440 (SC) (para 7), xix. Prakash Chand Nahta v. CIT [2008] 301 ITR 134/170 Taxman 520 (MP.) (para 7), xx. CIT v. Gangeshwari Metal (P.) Ltd. [2013] 30 taxmann.com 328/214 Taxman 423/[2014] 361 ITR 10 (Delhi) (para 16), xxi. Pr. CIT v. N.C. Cables Ltd. [2017] 391 ITR 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law arises. The appeals are dismissed. [Para 7] 8.11. The Delhi Bench of the Tribunal in ACIT v. Bahubali Dyes Ltd. (55 taxman.com 357)(Del.) held as under:- "Where assessee established identity, genuineness and creditworthiness of shareholder companies by submitting all essential evidence, no addition could be made on account of unexplained cash credit [In favour of assessee] The assessee received share capital and share premium from six companies. Assessee established identity, genuineness and creditworthiness of shareholder companies by submitting all essential evidence. Shareholder companies affirmed investment made by them in shares of assessee-company and also produced necessary evidence in support of such investment. Held that share capital as well as share premium/reserve of all companies was several times more than amount invested by them in share capital of assessee company proving their creditworthiness. Thus, no addition could be made on account of unexplained cash credit." 8.12. In the case of Bharti Syntex Ltd. v. DCIT 19 taxman.com 361(Trib.), the Jaipur Bench of the Tribunal held as under:- "Assessee having filed necessary details like certificate of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax and, therefore, the addition sustained by the Commissioner (Appeals) was not justified." 8.13. The Hon'ble Delhi High Court in the case of CIT v. Fair Finvest Ltd. 44 taxman 356 (Del.) order dated 22/11/2012, held as under:- "Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application and affidavits of directors, Assessing Officer could not make addition on account of share application money solely on basis of investigation report [In favour of assessee] Where assessee adduces evidence in support of share application monies, it is open to Assessing Officer to examine it and reject it on tenable grounds. In case he wishes to rely on report of investigation authorities, some meaningful enquiry ought to be conducted by him to establish a link between assessee and alleged hawala operators. Where assessee had filed documents including certified copies issued by Registrar of Companies in relation to share application, affidavits of directors, Form 2 filed with Registrar of Companies by such applicants, confirmations by applicants for company's shares, certificates by auditors, etc., Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hare capital represented company's own income from undisclosed sources. [Para 16] * In view of law laid down by the Apex Court, the substantial questions framed in these appeals do not arise for consideration. Accordingly, all these appeals are dismissed with no order as to costs. [Para 17] While coming to the aforesaid conclusion, the Hon'ble High Court also considered the following decisions: (i) CIT v. Divine Leasing & Finance Ltd. [2008] 299 ITR 268/[2007] 158 Taxman 440 (Delhi) (para 9), (ii) Bhav Shakti Steel Mines (P.) Ltd. v. CIT [2010] 320 ITR 619/[2009] 179 Taxman 25 (Delhi) (para 9), (iii) Amines Plasticizers Ltd. v. CIT [1997] 223 ITR 173 (Gauhati) (para 9), (iv) CIT v. G.M. Mittal Stainless Steel Ltd. [2004] 271 ITR 219/[2005] 142 Taxman 349 (MP) (para 9), (v) CIT v. Ruby Traders & Exporters Ltd. [2003] 263 ITR 300/[2004] 134 Taxman 29 (Cal.) (para 9) and (vi) CIT v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008](para 10). 8.15. The Hon'ble Madras High Court in CIT v. Pranav Foundations Ltd. 51 taxman.com 198 (Madras) held as under:- * * A bare reading of section 68 makes it clear that in a case where any sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicants too had been provided, it was held that the assessee had established the identity of the share applicants, the genuineness of transactions and their creditworthiness and, therefore, addition made by the Assessing Officer under section 68 merely because of the failure of the directors to physically present themselves before him was not justified." 8.17. The Jaipur Bench of the Tribunal in Jadau Jewellers & Manufacturers Pvt. Ltd. (83 taxman.com 249) held as under:- "Where assessee produced before Assessing Officer copy of share application, copy of PAN and bank accounts to prove identity, genuineness and creditworthiness of cash creditor, share application money could not be added under section 68 [In favour of assessee] The assessee claimed to have received share application money from certain companies. The Assessing Officer, however, held that amount received from said companies in the form of share capital was only accommodation entries. Held that the assessee has produced before the Assessing Officer copy of share application, confirmation of the cash creditors, copy of PAN, copy of Board resolution, copy of directors report, auditors report, copy of balance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Winstral Petrochemicals (P.) Ltd. [2011] 330 ITR 603/10 taxmann.com 137/199 Taxman 135 (Mag.) (Delhi) (para 4), * CIT v. Samir Bio-Tech (P.) Ltd. [2010] 325 ITR 294 (Delhi) (para 4), * Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC) (para 4), * Umacharan Shaw & Bros. v. CIT [1959] 37 ITR 271 (SC) (para 4), * CIT v. Anupam Kapoor [2008] 299 ITR 179/166 Taxman 178 (Punj. & Har.) (para 4), * All Cargo Global Logistics Ltd. v. Dy. CIT [2012] 137 ITD 287/23 taxmann.com 103 (Mum.) (SB) (para 4.1), * CIT v. Smt. Shaila Agarwal [2012] 346 ITR 130/204 Taxman 276/[2011] 16 taxmann.com 232 (All.) (para 4.1), * Vishal Dembla v. Dy. CIT [2013] 40 taxmann.com 134/[2014] 61 SOT 10 (URO) (Jodh. - Trib.) (para 4.1), * Marigold Merchandise (P.) Ltd. v. Dy. CIT [2015] 55 taxmann.com 358 (Delhi - Trib.) (para 4.1), * Gurinder Singh Bawa v. Dy. CIT [2012] 28 taxmann.com 328 (Mum. - Trib.) (para 4.1), * Kusum Gupta v. Dy. CIT [IT Appeal Nos. 4873 (Delhi) of 2009, dated 28-3-2013] (para 4.1), * MGF Automobiles Ltd. v. ACIT [IT Appeal Nos. 4212 & 4213 (Delhi) of 2011, dated 28-6-2013] (para 4.1), * Tarannum Zafar Khan v. ACIT [IT Appeal Nos. 5888 to 5890 (Mum.) of 2009, da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s deposited by the person in whose name the deposit stood. To require the firm or the individual partners to go further and adduce proof of the sources from which the deposits in question appearing in the accounts in the name of third parties were derived by them, would be placing a burden on the firm as well as the partners, which was not required or justified by law. In most cases it may be imposable for the firm or the partners to determine the sources from which the money deposited with them had been realised by the depositors. In the instant case, there were not only the accounts of the firm showed that the deposit stood in the name of assessee's wife but also, in addition, the declaration made by her that the money belonged to her and the deposit was made by her. It was also significant that lady was also assessed to income-tax on the basis of a return made by her. The enquiry as to the source from which this amount was acquired or obtained by her might perhaps, be relevant in an investigation into the assessment to be made regarding her income and when determining the correctness of the return submitted by her. But the mere fact that the assessee was unable to satisfy th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal could not be held to be faulted. No substantial question of law was involved in the appeal. In the result, the revenue's appeal was to be dismissed in limine. In the case of Oasis Hospitalities ((supra)), the Hon'ble Delhi High Court observed that the assessee had shown certain receipts on account of share application money. In order to prove the genuineness of the transactions and identity of the share applicants and their creditworthiness, it had filed confirmation from those parties and their income-tax particulars. The Assessing Officer issued notices under section 133(6), which remained unserved on 22 out of 30 parties. Even the remaining 8 persons did not respond. Local inquiries made through Inspector revealed that the parties did not exist at the given addresses. On inquiries from the bank, the Assessing Officer found various discrepancies in the bank statement sent by the bank and the statement produced by the assessee. He confronted entire material to the assessee and allowed it various opportunities. How ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident 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; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory: Provided further that nothing contained in the first proviso shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10." 9.1. As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Company v. CIT ITR 497 (Kerala.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s. 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in P. Mohankala ((2007) 291 ITR 278)(SC). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness of subscribers and the genuineness of transactions under section 68 * * Under section 68 the onus is on the assessee to prove the three ingredients, i.e., identity and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction. As to how the onus can be discharged would depend on the facts and circumstances of each case. It is expected of both the sides - The assessee and the assessing authority - to adopt a reasonable approach. * The assessee was a private limited company, which cannot issue shares in the same manner in which a public limited company does. It has to generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once the monies are received and shares are issued, it is not as if the share-subscribers and the assessee-company lose touch with each other and become incommunicado. It is a continuing relationship. * The share-subscribers in the present case have each invested substantial amounts in the assessee's shares. Most of them, barring two or three, are themselves private limited companies. The assessee-company received the share monies; it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer and has held that in the light of those documents, it can be said that the assessee has established the identity of the parties. It has further been observed that the report of the investigation wing cannot conclusively prove that the assessee's own monies were brought back in the form of share application money. * It is not the burden of the Assessing Officer to prove that connection. There has been no examination by the Tribunal of the assessment proceedings in any detail in order to demonstrate that the assessee has discharged its onus to prove not only the identity of the share applicants, but also their creditworthiness and the genuineness of the transactions. * No attempt was made by the Tribunal to scratch the surface and probe the documentary evidence in some depth, in the light of the conduct of the assessee and other surrounding circumstances in order to see whether the assessee has discharged its onus under section 68. * With respect, it appears that there has only been a mechanical reference to the case-law on the subject without any serious appraisal of the facts and circumstances of the case. [Para 12] * In view of above, it has to be held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year, and there is no further information, or anything to indicate why its mark up of the share premium thousand fold in respect of the shares which were of the face value of Rs. 10 lakhs was justified. [Para 8] * The impugned order is, accordingly, set aside to the extent it deleted the addition pertaining to 11 subscribers/investors whose particulars could not be verified and who did not respond to the notices issued by the Assessing Officer. [Para 10] 9.4. We note that in the aforesaid decision, the Hon'ble High Court held that under section 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. Furthermore, the Assessing Officer had, during the course of assessment, issued notices under section 133(6) to the investors - 28 of them responded; 2 did not receive the notice and 9 of them received the notices and responded but did not submit any confirmation. Having regard to the circumstances, particularly, the fact that these investors not only did not submit confirmation but had concededly reported far less income than the amounts invested, the assessee could not, under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de with the assessee during their assessment proceedings. The copies of the assessment orders passed by the ld. Assessing Officer in their cases are available on record in the paper books filed by the assessee. The tribunal in the their orders have also given clear findings that the parties who have invested in the Assessee company are genuine and the additions made in the hands of the investing companies were deleted. 9.8 Now, question arises whether addition can be made in the hands of the assessee under section 68 of the Act. In the present appeals, the identity of the parties is not in dispute, the source of amount in the hands of the assessee is established and thirdly so far as genuineness of transaction is concerned, in earlier proceedings, the matter travelled up to the Tribunal in the cases of investing parties, wherein, it was held to be genuine, therefore, how the same amounts, which was invested in the present assessee company can be non-genuine. However, we observe here that the assessee is not expected to prove the source of source. The assessee has already discharged the onus cast upon it. So far as, the genuineness of transaction of other parties and the onus cast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under:- 'What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assessee to the extent of his proving the source from which he has received the cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor, though routed through the sub- creditors, actually belongs to, or was of, the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee to prove the creditworthiness of the sub-creditors 14. In Mod. Creations (P.) Ltd. (supra) this Court negatived the case of the Revenue that the onus was on the Assessee to prove the source of the sub-creditor. It was observed as under: "14. With this material on record in our view as far as the Assessee was concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have had to discharge the onus which had shifted on to it. A bald assertion by the AO. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed income into its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based on assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The ITAT, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer. The Assessing Officer on remand in his report admitted that the identity of the parties and also that there was corresponding entries in the books of account. The Commissioner of Income-tax (Appeals) consequently allowed the appeal. The Revenue came in appeal before the Income-tax Appellate Tribunal which was dismissed and consequently, the present appeal. 3. At the hearing on behalf of the Revenue, the learned counsel submits that in the case of entries in books of account pertaining to cash credit, the assessee has to establish (i) the identity of the party, (ii) capacity, and (iii) the genuineness of the transaction. In the instant case, the learned counsel admits that so far as identity is concerned, the parties have been identified and similarly in the books of account produced by them corresponding entries were found. The learned counsel submits that one of the predicate, namely, capacity to advance loan was not established, and the Income-tax Appellate Tribunal ought to have restored the matter to the Assessing Officer for reconsideration. 4. The learned Tribunal in its order, in order to answer the said contention, observed as under: "The learned Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion stood satisfactorily explained. In the absence of any credible material with the Revenue to disprove the findings of the CIT(A), we hereby affirm the same. Thus, on this aspect the Revenue fails." 9.14. Likewise, Hon'ble Delhi High Court affirmed the order of the Tribunal in the case of CIT v. Tulip Finance Ltd. (2009) 178 taxman 182 (Delhi) held/observed as under:- "3. ......... As regards the remaining shareholder, that is S, it was noted that he was an NRI and the share capital of Rs. 15 lees received from him was through his NRE account. The remittances were through three separate cheques, of which details were available. The assessee had also filed bank certificates submitted to the RBI presumably for the purpose of remittance of dividend to said S. In the light of such evidence, the CIT(A) as also the Tribunal had come to a conclusion of fact that the assessee had discharged the burden which lay upon it for establishing the identity of the shareholders as well as the genuineness of the transactions. As such, the Tribunal confirmed the findings of the CIT(A) and deleted the addition which had been made by the AO. It is obvious that the findings returned by the CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance outstanding was Rs. 1 crore and 75 lakhs. Besides, it records that the source of source also stands explained by the fact that the director of the creditor had accepted his giving a loan to the respondent's lender. In face of the above fact, it is the Revenue's case that the source of source, the respondent is unable to explain. In law, the impugned order notes that, the subject assessment year is 2010-11. The requirement of explaining the source of the source of receipts came into the statute book by amendment to Section 68 of the Act on 1st April, 2013 i.e. effective from Assessment Year 2013-14 onwards. Therefore, during the subject assessment year, there was no requirement to explain the source of the source. Be that as it may, the impugned order of the Tribunal held that the respondent-assessee had discharged the onus placed upon it under Section 68 of the Act by filing confirmation letters, the Affidavits, the full address and pan numbers of the creditors. Therefore, the Revenue had all the details available with it to proceed against the persons whose source of funds were alleged to be not genuine as held by the Apex Court in Commissioner of Income Tax v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Hon'ble Bombay High Court itself in the case of CIT v. Gangandeep Infrastructure Pvt. Ltd. 394 ITR 680 (Bom.) held that proviso to section 68 of the Act was introduced by the Finance Act, 2012, w.e.f. 01st April 2013, therefore, it will be effective only from Assessment Year 2013-14 onwards and not for earlier Assessment Years. The Hon'ble High Court considered the plea of the Revenue that money was received from bogus share holders, then it is for the revenue to proceed against them in accordance with law but this would not entitle the Revenue to invoke section 68 of the Act, while assessing the respondent for not examining the source of the source. This later order from Hon'ble jurisdictional High Court squarely comes to the rescue of the assessee. However, we find that the assessee has fulfilled the conditions enshrined in section 68 of the Act and has discharged the onus cast upon it. Thus, in view of the above decisions, the assessee is not expected to prove the source of source. The payments were through account payee cheque and the identity, creditworthiness, genuineness of the transaction has been established. Thus, the addition so made under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn from assessee in the range of 12% to 15% and he was expected to give return to the investors who has invested in fourteen companies at the rate of 12%. However, in answer to question No. 82 he has clarified no returns have been received by him till the date of recording the statements. Further in his statements which were recorded in the later part at the office of Lloyds Steel Industries Limited in answer to question no. 3 he further clarified that the investments are made in the preference shares of the appellant company and hence no return is received. This clearly proves that there was no question of giving any return by assessee. Even his statement does not any way prove that the appellant has made a payment of 3% by way of commission. Even otherwise, we are of the view that real income can only be taxed. There is no scope for presumption or estimation of income when there is no evidence available with the department to prove that the assessee has incurred any expenditure of the nature of commission to the extent of 3%. Thus, this addition made on presumptive basis deserves to be deleted. Identical are the facts/issue for remaining Assessment Years, therefore, our this co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann 17 HC Guj. * Commr. Of Income tax-I Mumbai v. Nikunj Eximp Enterprises P. Ltd. 372 ITR 619 (Bom HC) * Sagar Bose v. Income Tax Officer ITAT, Calcutta 56 ITD 561 (CAL.) 11.1. On the other hand, the ld. Sr. Standing Counsel defended the addition made on account of bogus purchases by placing strong reliance upon the decision of the Ld. Commissioner of Income Tax (Appeal). Reliance was placed upon the following decisions.: * * Om Vinyls (P) Ltd. v. Income Tax Officer (Writ Petition (L) No. 114 of 2014 (Bombay) * Aradhna Estate (P) Ltd. v. DCIT (2018) 404 105 (Guj.) * Phool Chang Bajrang Lal & Anr. v. Income Tax Officer 203 ITR 456 (Supreme Court) * Sri Krishna (P) Ltd. v. Income Tax Officer & Ors. 221 ITR 538 (Supreme Court) * Nikunj Eximp Enterprises (P) Ltd. v. ACIT (2014) 48 taxmann.com 20 (Bom.) * CIT v. Nipun Builders & Developers Pvt. Ltd. (2013) 350 ITR 407 (Del.) * CIT v. Empire Builtech (P.) Ltd. (2014) 366 ITR 110 (Del.) * N.K. Industries Ltd. v. DCIT (2016) 72 taxmann.com 289 (Guj.) * N.K. Proteins Ltd. v. DCIT (2017) 84 taxmann.com 195 (Supreme Court) 11.2. We have considered the rival submissions and perused the material available on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus suppliers it was not incumbent on it to restrict the disallowance to only Rs. 73,23,322/-. 6.1 In the case of NR Paper & Boards Ltd. (supra), this Court has discussed the issue as to whether after making of block assessment, regular assessment is barred or prohibited by law. This court has held that there would be no overlapping in the nature of assessment made under this Chapter of undisclosed income and the regular assessment made u/s. 143. However, if the said decision is read in context of questions raised in the present appeal, it cannot be read as having held that even if the material found during the course of search expose the falsity of the entries made in the regular books of accounts, the consequent concealed income cannot be assessed as undisclosed income in the block assessment under Chapter XIV-B. The said decision shall therefore not be applicable on the facts and circumstances of the present case. The Tribunal is justified in holding the same against the assessee and in favour of revenue." 11.5. In the case of N.K. Proteins Ltd. v. DCIT (2017) 84 taxmann.com 195 (Supreme Court) was held as under:- "Entire purchases shown on basis of fictitious invoices wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Gujarat High Court in CIT v. Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj.) held/observed as under:- "6. As is apparent from the facts noted hereinabove, the Commissioner (Appeals) after appreciating the evidence on record has found that the assessee had in fact made the purchases and, hence, the Assessing Officer was not justified in disallowing the entire amount. He, however, was of the view that the assessee had inflated the purchases and, accordingly, by placing reliance on the decision of the Tribunal in the case of Vijay Proteins (supra) restricted the disallowance to 20 per cent. The Tribunal in the impugned order has followed its earlier order in the case of Vijay Proteins to the letter and enhanced the disallowance to 25 per cent. Thus, in both cases, the decision of the Commissioner (Appeals) as well as that of the Tribunal is based on estimate. This High Court in the case of Sanjay Oil Cake [2009] 316 ITR 274 (Guj) has held that whether an estimate should be at a particular sum or at a different sum can never be a question of law. 7. The apex court in the case of Kachwala Gems [2007] 288 ITR 10 (SC) has held that in a best judgment assessment the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directly from MMTC; the difference could not be the net profit in the hands of MMTC; and that while conducting the entire exercise MMTC would have to incur certain expenditure in transportation, in engaging personnel in the office and other operations and was accordingly of the view that there was no case of actual inflation of rates and deleted the addition. 12. The Tribunal, in the impugned order, has concurred with the findings recorded by the Commissioner (Appeals) and has found that the assessee had made purchases from MMTC at the prevailing market rates and that MMTC had incurred certain expenditure in engaging personnel in the office and other operations and would make some income from the entire exercise. In the circumstances, the purchases made by the assessee from MMTC would not be hit by the provisions of section 40A(2) of the Act. 13. Thus, the conclusion arrived at by the Tribunal is based on concurrent findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal. It is not the case of the Revenue that the Tribunal has taken into account any irrelevant material or that any relevant material has not been taken into consideration. In the absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee in the return of income. Before the Tribunal, the assessee produced the evidence that the crane in question was registered with the RTO and the same was wholly and exclusively used for the purposes of its business. The Tribunal, therefore, held that the Commissioner (Appeals) was legally and factually correct in deleting the disallowance of cost of crane as well as depreciation thereon. 16. From the facts emerging from the record, it is apparent that the assessee had never claimed the cost of the crane in the return nor had it debited the expenses to the profit and loss account, and as such the question of disallowing the same and adding the same to the income would not arise. Moreover, in the absence of any evidence to indicate that the purchase was bogus or that the crane in fact did not exist, the question of disallowing the deprecation in respect of the same also would not arise. When the assessee had conclusively proved the purchase and existence of the crane, and had not debited the expenses to the profit and loss account, no addition could have been made in respect of the purchase price nor could have depreciation been disallowed in respect thereof. The Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogus vouchers to the assessee. No doubt, there were certain doubtful features, but the evidence was not adequate to conclude that the purchases made by the assessee from the said parties were bogus. The Tribunal accordingly, did not sustain the addition retained by the Appellate Assistant Commissioner. Hence, at the instance of the Revenue, the aforesaid question has been referred to this court for opinion. On a perusal of the order of the Tribunal, it clearly appears that whether the said transactions were bogus or not was a question of fact. The Tribunal has also pointed out that nothing is shown to indicate that any part of the fund given by the assessee to these parties came back to the assessee in any form. It is further observed by the Tribunal that there is no evidence anywhere that these concerns gave vouchers to the assessee. Even the two statements do not implicate the transactions with the assessee in any way. With these observations, the Tribunal ultimately has observed that there are certain doubtful features, but the evidence is not adequate to conclude that the purchases made by the assessee from these parties were bogus. It may be stated that the assessee was give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler by VAT department, that because of cheque payment made to the supplier transaction cannot be taken as genuine. He relied upon the order of the G Bench of Mumbai Tribunal delivered in the case of Western Extrusion Industries. (ITA/6579/Mum/2010-dated 13.11.2013). Authrorised representative (AR) contended that payments made by the assessee were supported by the banker's statement, that goods received by the assessee from the supplied was part of closing stock, that the transporter had admitted the transportation of goods to the site. He relied upon the case of Babula Borana (282 ITR 251), Nikunj Eximp Enterprises (P) Ltd. (216Taxman 171) delivered by the Hon'ble Bombay High Court. 2.4. We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of section 69 C of the Act. The AO further observed that BJ had explained the modus operandi and had confessed that the group was issuing bogus bills and was providing accommodation entries. 4. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA) and made detailed submissions. After considering the available material, he observed that mere payment by account-payee-cheques would not be sacrosanct. He referred to the case of Precision Finance(P)Ltd. (208 ITR 465) of the Hon Calcutta High Court and held that the AO had held that the accommodation entries were given in form of cheques/RTGS, that same were routed through bank accounts of various bogus entities of BJ Group, that BJ had admitted that his group was issuing bogus bills, that later on BJ had retracted his statement, that those evidences could not be overlooked, that the assessee had made purchases from some other parties probably in cash, that it had taken bills from the other parties to regularize the transactions. He referred to the case of Vijay Proteins Ltd. (: 58 ITD 428), Sanjay Oil Cakes (316 ITR 274) and Simit P Seth (356 ITR 451) and held that once the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the suppliers were assessed to tax, that copies of their returns of income and balance sheets were furnished during the assessment proceedings, that the AO had not proved that the returns of incomes of the suppliers were non genuine, that in response to the notices issued u/s. 133(6) of the Act the suppliers had admitted to have supplied goods to the assessee, that the AO deliberately did not mention said fact while completing assessment order, that regular stock registers were maintained by all the suppliers, that there was no evidence of cash withdrawal, that the AO had not rejected the sales made by the assessee, that basic conditions for invoking the provisions of section 69C were not fulfilled. He referred to cases of Indo Unique Trading Pvt. Ltd.(ITAs/6341/Mum/2016 & 6721/Mum/2016-A.Y. 07-08, dtd. 16/8/2017); wherein the addition made by AO were deleted by the Tribunal. In that case statement made by BJ were considered(Pg. 118-124 of the Legal PB-II).He also relied upon the cases of Ronak Gems Pvt. Ltd.(ITA/3118/Mum/2017, A.Y. 2007-08, dated 04/10/2017); M/s. Vaman International Pvt. Ltd. (ITAs/1020 & 1041/Mum/2017, A.Y. 2007-08, 2008-09 & appeals for other A.Y. s); Kaysons A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of the purchases. The Assessing Officer issued notices u/s. 133(6) of the Act to the parties and some of the parties have confirmed that the transactions from the assessee was genuine. Parties have filed their acknowledgment of Income-tax return filed, copy of invoice, ledger account of the assessee firm in their books showing payments received from the assessee. However, the Assessing Officer not convinced with the submissions of the assessee and since no delivery challans were furnished to prove the delivery of goods have been actually made by the alleged suppliers to the assessee and since the Directors/Proprietors of the supplier companies/firms have deposed on oath that all the concerns controlled and managed by them are not doing any real trading in diamonds but indulged in paper transaction only, the Assessing Officer rejected the submissions of the assessee that the purchases made from these entities are genuine. The Assessing Officer stated that the statement recorded from Shri Bhanwarlal Jain clearly established that the concerns controlled and operated by them are not carrying out any genuine business activity. 4. It was also observed by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Gujarat High Court in the case of CIT v. Bholanath Polyfab Pvt. Ltd. [355 ITR 290] and CIT v. Simit P. Seth [356 ITR 451] and accordingly he estimated the profit element in the purchases at 12.5% for all the Assessment Years 2011-12 to 2013-14. 6. Before us the Learned Counsel for the assessee submits that assessee is into trading and export of diamonds and the disallowances were made only based on the admission of Shri Bhanwarlal Jain in the course of search and seizure proceedings and since the parties have confirmed that the transaction has entered into by the assessee are genuine the purchases cannot be treated as non-genuine, especially since sales are not disputed and they have accepted. Ld. Counsel for the assessee further submitted that, assessee submitted Copies of purchase invoices, Ledger confirmations, Copies of Bank Statements reflecting payments made to the suppliers and Stock register reflecting inward of goods purchased from them and corresponding sales in support of genuineness of its purchases. Learned Counsel for the assessee submitted that AO issued notices u/s. 133(6) calling for relevant details from the parties. Each of the party has replied and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties without appreciating the fact that it was beyond the control of the assessee. The AO ought to have invoked the powers given to him under the Act by issuing summons to them requiring their personal attendance. 11. The facts and circumstances as outlined above, clearly suggest that the purchases by the assessee from M/s. Daksh Diamonds cannot be doubted but a major flaw in these transactions is the unverifiable nature of transactions of these purchases from M/s. Daksh Diamonds as it was not found available at the given address." However, Ld. Counsel for the assessee submitted that the fact is that the AO issued notices u/s. 133(6) to all the parties which were not only served upon them but were also responded by all of them. 12. Ld. Counsel for the assessee submitted that the Ld. CIT(A) agrees with the fact that the AO has merely relied upon the statement recorded by the Investigation wing and in-depth investigation was not carried out to the extent required. The Ld. CIT(A) ought to have made the investigation either on his own or through the AO which in his opinion was required before confirming any addition. The statements of Mr. Bhanwarlal Jain and others relied up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee as well as the averments of the Assessing Officer and various case laws estimated the profit element from these purchases at 12.5% for all the Assessment Years 2011-12 to 2013-14. The Ld. CIT(A) in his order observed as under: "11. I have carefully gone through the assessment order passed by the Assessing Officer and the written submissions of the appellant on the issue. I have also considered various case laws relied upon by the appellant. My observations are as under. 12. The AO has formed his view about the bogus nature of the purchase made by the appellant from M/s. Daksh Diamonds on the basis of various incriminating. documents and evidences seized during the course of search & seizure action in the case of Bhanwarlal Jain Group, which has established that the said group was engaged in providing accommodation entries of bogus sales/purchases/loans to various beneficiaries. 13. In my opinion, simply relying upon the information received from the DGIT (Inv.) regarding the default committed by M/s. Daksh Diamonds cannot be taken as the sole basis to treat the entire purchases made from it as bogus or non-genuine. The Assessing Officer has primarily relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the purchase prices paid for the materials purchased from them. Such verification of the sale price shown on the invoices/bills was necessary to ascertain the correctness of the profits shown by the appellant for the period under consideration. This verification was also vital to determine as to whether the purchase prices shown on the bills/invoices, are as per prevailing market prices of the materials purchased and to ascertain that the price paid for the materials purchased from M/s. Daksh Diamonds is not over invoiced. In the absence of any such verification of the correctness of the price paid for the materials purchased by the appellant, the purchase price paid as mentioned on the invoices/bills cannot be accepted as the correct price paid for the goods purchased from M/s. Daksh Diamonds. In view of the same, the possibility of over-invoicing of the materials purchased to reduce the profit, 'cannot be ruled out. Therefore, the gross profit rate shown by the appellant for the year under consideration cannot be relied upon. In the circumstances, the correct approach in such transactions would be to estimate the additional benefit or profit earned on these purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of the assessee. So much is clear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of Income Tax-IV v. Vijay M Mistry Construction Ltd. vide order dated 10.01.2011 passed in Tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I v. Bholanath Poly Fab Pvt. Ltd. vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. The view taken by the Tribunal in case of Vijay Proteins Pvt. Ltd. v. CIT reported in 58 ITD 428 came to be approved." (Emphasis supplied) 19. Similarly while dealing with an identical issue, in the case of CIT v. Bholanath Poly Fab (Purchase)Ltd. ITA. No. No. 63 of 2012, in the order dated 23/10/2012, the Hon'ble High Court of Gujarat has held as under:- "We are of the opinion that the Tribunal committed no error. Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal having examined the evidence on record came to the conclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed accordingly. Hence, grounds no. 1 & 2 are partly allowed." 17. As could be seen from the above the Ld. CIT(A) did not agree with the Assessing Officer that the purchases by the assessee are bogus/non genuine. However, the Ld. CIT(A) observed that purchases made cannot be doubted and there is a major flaw in these transactions is the unverifiable nature of transactions as the parities are not found available in the given address. However, we see that the parties have responded in these cases for the notices issued u/s. 133(6) of the Act, they have filed Ledger Account of the assessee in their books of accounts, Copies of Sales Invoices issued by them, their Bank statements reflecting the payments made by the assessee to them, Copies of acknowledgement of Income-tax Returns filed by them, Audited Profit & Loss A/c and Balance Sheets to show that the transactions of sales made to the assessee are genuine. On a careful consideration of the submissions made by the assessee, we find considerable force in the submissions not to treat the purchases made by the assessee from the parties as non-genuine/bogus. 18. The reason for treating these purchases as non-genuine/bogus i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and confirmed the transaction by filing various details before the Assessing Officer, in such circumstances the Coordinate Bench accepted the contentions of the assessee that the purchases cannot be treated as bogus simply relying on the statements in the case of Bhanwarlal Jain group. While holding so the Coordinate Bench observed as under:- "10. We have heard rival contentions and perused the record. We notice that the assessing officer has reopened the assessment for the second time after expiry of four years from the end of the assessment year, on the basis of information received from the investigation wing about the bogus nature of transactions entered by Shri Bhanwarlal Jain group. Even though the AO has mentioned the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, yet he has not specified the manner of failure. 11. On the contrary, we notice that the assessee has proved the genuineness of purchases by obtaining confirmation letters in the form of affidavits from all the suppliers. The AO has done independent enquiry during the course of assessment proceedings by issuing notices u/s. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and delete the disallowance made towards bogus purchases for all these Assessment Years i.e. 2011-12 to 2013-14 which are under appeal before us. 21. In the result, appeals of the assessee are allowed. Considering the above, we are of the opinion that the issue of bogus purchase of diamonds from BJ group has been already been deliberated upon by the Tribunal and it stands decided. Facts of the case under consideration are almost identical to the facts of Vama International(supra).In that case also the AO had added the entire purchases to the income of the assessee and the FAA had given part relief to the assessee. In the instant case, the assessee was denied the opportunity of cross examination though it had made a request to the AO during the assessment proceedings. By not allowing cross examination of the third party, whose statement was being used against the assessee, the AO had violated the basic principles of natural justice. Only on that count the order can be quashed. But, we are considering other factors. BJ has retracted his statement. So, the authenticity of the material relied upon by the AO reduces to a great extent. The supplier has admitted the transaction and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, confirmation letter, purchase bill, copy of return of income filed by LD for the year under appeal-were submitted before the departmental authorities, that in its affidavit LD had admitted of advancing loans, that identity, creditworthiness and genuineness of the transactions were proved beyond doubt, that money was returned back to the lender in the subsequent year, that LD had admitted receiving back the money, that the assessee was one of the creditors of LD. He referred to the cases of Sanghavi Reality Pvt. Ltd.(ITAs/3018-20/Mum/2017 A.Y. 2008-09-2011-12), Vikram Muktilal Vora(ITA/842/Mum/2017, A.Y. 2007-08), Gujarat Construction(ITA/7040/Mum/2016, A.Y. 2007-08) 8.3. We have heard the rival submissions and perused the material before us. We find that the FAA had observed that the transaction with LD could not be considered genuine as it had advanced unsecured loans to the assessee. It is found that LD in its affidavit has admitted that it had advanced loan to the assessee. 8.4. We find that identical issue was decided by us, in the case of Jitendra M Kitawat(HUF) that was decided by us on 11.04.2018(supra).We are reproducing the order dealing with the issue and it rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of money through banking channel and form No. 16 qua the TDS deducted. The lenders confirmed the loans having been given to the assessee during personal appearance before the AO in response to notice u/s. 133(6) of the Act However, the AO acting solely on the information received from DGIT(Inv), Mumbai rejected the contentions of the assessee and framed the assessment as stated above. 5. Aggrieved by the order of the AO, the assessee preferred and appeal before the ld. CIT(A) who dismissed the appeal of the assessee ex-parte on the ground that the assessee failed to appear before the ld. CIT(A) by observing and holding as under: "4. Decision on grounds of appeal no. 1: 4.1 The relevant facts are like this. The assessee is a firm which is engaged in the business of builders & developers. A search & seizure action was conducted in the Bhanwarlal Jain group of cases by Investigation Wing Mumbai. As a result of search, it was found by the Investigation Wing that this group is a leading entry provider of Mumbai. There are many concerns floated by the group who provide accommodation entries of bogus loan The AO received an information that the appellant has also taken loan from c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The ld. AR submitted that the onus is cast upon the assessee to explain the sources from which he has received the cash credit and the creditworthiness of the creditors is to be gauged vis-à-vis the transactions and other three appeals which occurred between the assessee and the creditors. The ld. AR submitted that it was not the burden or responsibility of the assessee to find out the source of creditors or the capacity of the creditors in order to prove the genuineness of transactions as has been held by the Hon'ble Gauhati High Court in the case of CIT v. Smt. Sangmitra Bharali reported in 361 ITR 481). The ld. AR further submitted that the addition was made out of unsecured loans raised by the assessee from the group concern of Bhanwarilal Jain Group engaged in providing accommodation entries. On the contrary, there was no indication or proof that loans taken by the assessee were merely accommodation entries and the money actually gone back to the lenders. The ld. AR also submitted that the creditors appeared before the AO in response to the notice issued u/s. 133(6) and during the course of recording statements by the AO the lenders confirmed the loans having giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitting that the loan creditors M/s. Bhanvarilal Jain group was found to be engaged in the business of providing accommodation entries during the search and seizure action his group and the assessee was found to be the one of the beneficiaries of the said accommodation entries. The ld. DR submitted that in the present case though the assessee has filed all the necessary information but since the assessee borrowing monies from the tainted parties who were provided accommodation entries, it is beyond doubt that money borrowed by the assessee was nothing but accommodation entries. Lastly, the ld. DR prayed that in view of the facts and the order of the FAA should be upheld by dismissing the appeal of the assessee. 8. We have heard the rival contentions perused the material placed before us including the orders of authorities below and orders relied upon by the parties. We find that undisputedly the assessee has borrowed money by way of loan from three aforesaid three parties i.e., M/s. Laxmi Trading Company, M/s. Rose Impex and Megha Gems from whom the assessee borrowed the money and total outstanding including the interest as on 31.3.2010 were amounting to Rs. 1,29,04,231/-. The ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal of the assessee ex parte for non attendance of the ld. AR. In the case of Lakhmani Mewal (supra) the Hon'ble Supreme Court has held as under: "Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of Indian Income-tax Act, 1922] - Income escaping assessment - Illustrations - Assessment year 1958-59 - Whether reasons for formation of belief contemplated by section 147(a) for reopening of assessment must have rational connection with or relevant bearing on formation of belief, and rational connection postulates that there must be direct nexus or live link between material coming to Income-tax Officer's notice and formation of his belief that there has been escapement of assessee's income from assessment in particular year because of his failure to disclose fully and truly all material facts - Held, yes - Whether duty cast upon assessee is to make true and full disclosure of primary facts at time original assessment, and it is for Income-tax Officer to draw correct inference from primary facts - Held, yes - Whether if Income-tax Officer draws inference which appears subsequently to be erroneous, mere change of opinion with regard to that infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance sheets, etc. - Whether no addition could be made in hands of assessee - Held, yes [Para 59] [In favour of assessee] III. Section 68 of the Income-tax Act, 1961 -Cash credits (Advance by purchaser) - Purchaser of car advanced certain sum to assessee - Identity of purchaser and genuineness of transaction was established -Whether transaction could not be treated as bogus and impugned amount could not be treated as an undisclosed income of assessee - Held, yes [Para 64] [In favour of assessee] " In the case of Gangeshwari Metal (P)Ltd (supra), the Hon'ble Delhi High Court has held as under : " There are two types of cases, one in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer, after noting the facts, merely rejected the same. [Para 9] There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 131 of the Income-tax Act, 1961, were also recorded on oath. There was no clinching evidence nor had the Assessing Officer been able to prove that the money actually belonged to none but the assessee. The addition of Rs. 17,27,250/- under section 68 was not justified." In the case of Nemi Chand Kothari (supra), the Hon'ble High Court has held as under: "16. A person may have funds from any source and an assessee, on such information received, may take loan from such a person. It is not the business of the assessee to find out whether the source or sources from which the creditor had agreed to advance the amounts were genuine or not. If a creditor has, by any undisclosed source, a particular amount of money in the bank, there is no limitation under the law on the part of the and other three appeals assessee to obtain such amount of money or part thereof from the creditor, by way of cheque in the form of loan and in such a case, if the creditor fails to satisfy as to how he had actually received the said amount and happened to keep the same in the bank, the said amount cannot be treated as income of the assessee from undisclosed source. In other words, the genuineness as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee must be taken to have proved that the creditor had the creditworthiness to advance the loans. Thereafter, the burden had shifted and other three appeals to the Assessing Office to prove the contrary. The failure on the part of the creditors to show that their Sub-creditors had creditworthiness to advance the said loan amounts to the assessee, could not, under the law be treated as the income by the appellant from undisclosed sources merely on the failure of the sub-creditors to prove their creditworthiness from undisclosed sources of the assessee himself, when there was neither direct nor circumstantial evidence on record that the said loan amounts actually belonged to, or where owned by, the assessee. The Assessing Officer failed to show that the amounts, which had come to the hands of the creditors from the hands of the sub-creditors, had actually been received by the sub-creditors from the assessee. Therefore, the Assessing Officer could not have treated the said amounts as income derived by the assessee from undisclosed sources." (ii) that no assessment could be made contrary to the provisions of law. In the instant case, the very basis for making the assessment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition as sustained by the ld. CIT(A) u/s. 69C of the Act of Rs. 3,45,000/- is also ordered to be deleted. In result the appeal of the assessee is allowed." We find that in the cases relied upon by the assessee i.e. Sanghavi Reality Pvt. Ltd.(supra), Vikram Muktilal Vora(supra), Gujarat Construction (supra), the order of the Reliance Corporation(supra) has been followed. As the fact of the case under consideration are similar to above referred cases, so, following those orders, we decide seventh ground of appeal, raised by the assessee, in its favour. Following the above referred order of the Jitendra M Kitawat-HUF(supra), we decide GOA 7 in favour of the assessee. ITA/7099/Mum/2016-A.Y. 2009-10: 9. Effective ground of appeal, raised by the AO, for the year under consideration, is not sustaining the addition of Rs. 1.03 crores made invoking the provisions of section 69C of the Act. We find that facts for the year are identical to the facts of 2007-08-the only difference is the names of suppliers. As per the AO the alleged bogus purchases were made from Kothari & Co.(KC), LD, Megha Gems(MG) and Minal Gems(Minal).Following our order dtd. 11.04.2018 in the case of Jitendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus. The assessee carried the matter in appeal. CIT(Appeals) allowed the appeal inter alia on the ground that all payments were made by the assessee by Account Payee cheque. The assessee was in fact, a trader. All purchases made from M/s. Raj Impex were found to have been sold and sales were also accepted by the Assessing Officer. The Revenue carried the matter in appeal before the Tribunal. The Tribunal dismissed the earlier making following observations: "31. We have given a thoughtful consideration to the orders of the authorities below. There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s. Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash. 32. It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue, wherein, the assessee earned margin of about 0.30% on steel trading transactions (page 285 of the paper book) and further in respect of trading transactions with three parties, the assessee earned 0.26% profit. The profit so earned was accepted by the Assessing Officer, whereas, the ld. Assessing Officer himself accepted the genuineness of transaction. The Hon'ble jurisdictional High Court in Nikunj Eximp Pvt. Ltd. clearly held that "We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement, i.e., reconciliation statement but also in view of the other facts. The Tribunal records that the books of account of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department, i.e., Defense Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank stat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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