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TMI Blog2021 (12) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... al Group, M/s More Group and M/s UFM Group for setting up cement factory at State of Meghalaya having a capacity of 2040 TPD. In connection therewith, these three (3) promoter groups had infused capital into the assessee company across all the years through the aegis of their group bodies corporate and individuals. The said cement plant was finally commissioned in July 2016 and the commercial production commenced in FY 2016-17. Search u/s 132 of the Income Tax Act 1961 (herein after referred to as the Act) was conducted against the M/s Goldstone Group, on 12-12-2017 (AY 2018-19). Ordinarily, having regard to the date of search, the AO was within his jurisdiction to issue notices u/s 153A of the Act in respect of six assessment years preceding the assessment year of search i.e. in the present case search took place in AY 2018-19, so, ordinarily the AO was empowered u/s. 153A of the Act to reopen six preceding assessment years preceding the searched assessment year and those AY's were AYs 201213 to 2017-18.However, in this case, the AO further in exercise of powers conferred under fourth proviso to Section 153A of the Act, which was inserted by Finance Act 2017 w.e.f. 01.04.2017, als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153A of the Act. The AO overruled the objection through the order sheet noting dated 04.11.2019, and evasively refused to provide the same. In the same order sheet noting dated 04-11-2019, a detailed common notice was issued by the AO to the assessee, which has been extensively reproduced at Pages 4 to 9 of the assessment orders for all the years that has been reopened u/s. 153A of the Act. The questionnaire inter alia included details/information sought for, regarding the share capital raised by the assessee across all these years. Pursuant thereto, the assessee filed details of the share subscribers to show their respective identity, creditworthiness as well as the genuineness of the share subscriptions received from them. The AO thereafter made independent enquiries from the share subscriber's u/s 133(6) of the Act. It is noted by the AO in the assessment order that, all the notices were complied with and that statements of key persons/directors were also recorded by him. The AO thereafter issued a show cause notice (SCN) dated 27-12-2019 requiring the assessee to explain as to why the following amounts of share capital and premium raised by the company in AYs 2011-12 to 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to him, in these unabated assessments, additions made by the AO u/s. 153A of the Act could have been made only if they were supported or backed-up by incriminating material found in the course of search, or otherwise these concluded assessments could not be disturbed. In support of this proposition, the Ld. CIT(A) relied on several decisions of the Hon'ble High Courts, viz., PCIT vs Kurule Paper Mills Pvt. Ltd. (380 ITR 571), PCIT vs Saumya Construction Pvt. Ltd. (387 ITR 529), Jai Steel (India) vs ACIT (259 ITR 281), CIT vs Kabul Chawla (380 ITR 573) and others. The Ld. CIT(A) thereafter examined the contents of GCL-HD-1, the image of which has been reproduced by him at Pages 144 to 145 of the First Appellate Order, and which according to the AO, constituted the purported 'incriminating material' found in the course of search. The Ld. CIT(A), after analyzing and examining the same, held that this document (GCL-HD-1) was a secretarial compliance report which was filed by the assessee with the Registrar of Companies along with Form MGT-7 (Annual Return) giving the shareholding pattern of the company. According to Ld. CIT(A), this report was a regular business document and the cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd are merely in the nature of surmises, suspicion and conjecture without appreciating the facts contained in the first proviso to Section 68 which is effective from AY 2013-14, clearly cast onus on the assessee, prove the source in the hand of investor - - - - - 3 Assessee's Grounds of Cross Objections Sl. No. Grounds 2011-12 2012-13 2013-14 2014-15 2015-16 2017-18 (i) Ld. CIT(A) should have held that conditions specified in fourth proviso to Section 153A(1) were not complied and notice dated 11.09.2019 issued u/s 153A along with order dated 30.12.2019 u/s 153A/143(3) were without jurisdiction and void ab initio. 1 - - - - - (ii) LdCIT(A) should have held that the provisions of Section 153D of the Act were not complied with and the order passed u/s 153A/143(3) is bad in law. 2 1 1 1 1 1 (iii) LdCIT(A) should have held that no interest can be charged u/s 234A of the Act. 3 2 2 2 2 5 (iv) Ld CIT(A) erred in rejecting the assessee's contention that the order u/s 153A read with 143(3) was not issued in the prescribed ITBA Module as notified by the Board was void ab initio. - - - - - 2 (v) LdCIT(A) erred in not granting set off of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xable at normal tax rates or at the higher tax rate prescribed u/s 115BBE of the Act? (I) Whether the lower authorities had erred in not granting the benefit for set-off of seized cash by way of self-assessment tax in AY 2017-18? 8. We first proceed to answer the Question (A). (A) Whether the AO had validly assumed jurisdiction to issue notice u/s 153A of the Act upon the assessee for AY 2011-12 in terms of fourth proviso to Section 153A of the Act read with Explanation 2 of the Act ? [Ground No. 1 of Cross Objection of Assessee for AY 2011-12] 8.1 This ground is pertaining to AY 2011-12 i.e., the seventh assessment year preceding the searched assessment year. In this ground, the assessee has challenged the usurpation of jurisdiction by the AO u/s 153A of the Act without first satisfying the essential condition precedent prescribed in the fourth proviso to Section 153A read with Explanation 2 of the Act. Referring to the fourth proviso to Section 153A of the Act, the Ld. AR Shri Dudhwewala pointed out that the notice for re-assessment of AY 2011-12 which was beyond the period of six assessment years could have been issued only when the AO had in his possession any incrimina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n rightly invoke the jurisdiction to re-open the said assessment years, or otherwise the AO cannot reopen the assessment. [Please note:- The contention of Ld. A.R. Shri Dudhwewala in respect of jurisdictional fact will be dealt in length (infra)].Shri Dudhwewela further argued that, it is implied from a reading of fourth proviso to section 153A of the Act is that, when the Parliament in its wisdom has prescribed the existence/discovery of undisclosed Asset valued Rs.50 lakhs or more, as condition precedent for invoking jurisdiction, the Parliament has excluded discovery of other income escaping assessment not represented in the form of 'Asset' to assume jurisdiction under fourth proviso to Section 153A of the Act as well as even the Asset valued less than Rs 50 lakhs. He gave an illustration to make us understand as to what he wants to say. According to Shri Dudhwewala, if any unexplained or undisclosed asset is found in the course of search, which can be added or assessed u/s 69 or 69A or 69B of the Act, then only can the AO validly initiate proceedings u/s 153A for such relevant assessment years (7-10 AY's). However, in an event, if no undisclosed asset valued Rs. 50 Lakh or more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12, being without any jurisdiction. 8.2 Per contra, the Ld. DR Shri Amit Kumar Pandey vehemently opposed the submission made by the Ld. A.R. of the assessee and contended that there was no requirement in law for the AO to have pointed out the 'asset' to the assessee for which the relevant assessment year 2011-12being re-assessed u/s 153A read with fourth proviso to Section 153A of the Act. According to him, the phrase "income represented in the form of asset" was vast enough to encompass addition on account of unexplained cash credits which was added by the AO. According to him therefore, the AO rightly assumed jurisdiction u/s 153A of the Act for AY 2011-12 when he had the seized material in his possession and so, we should not disturb the validity of the order. 8.3. In his rejoinder, the Ld. AR Shri Dudhwewala urged that since there was no undisclosed asset in the instant case for AY 2011-12 (7th year) the 4th proviso to Section 153A of the Act would not apply and hence, the AO did not get jurisdiction to reopen the AY 2011-12. Shri Dudhwewala contended that when the jurisdiction to reopen the assessment for the AY 2011-12 i.e. the seventh 7th year is bad for non-satisfaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us by raising Ground No.1/CO No. 1 (Reframed Ground "A" refer supra para 7), the assessee has challenged the validity of assumption of jurisdiction by the AO u/s 153A of the Act and the issuance of notice u/s 153A of the Act for AY 2011-12, which is the seventh (7) assessment year preceding the assessment year of search. To adjudicate this legal issue, we have to go through the fourth proviso of Section 153A of the Act which was inserted by the Finance Act, 2017 with effect from 01.04.2017, enabling an Assessing Officer (AO) of a searched person to issue notices u/s 153A of the Act for 'relevant assessment year or years' in terms of Explanation 1 of the fourth proviso to Section 153A of the Act i.e. assessment years beyond the six (6) assessment years till tenth (10) assessment year preceding the searched assessment year (i.e. 7th to 10th AY's preceding the searched AY), provided the AO satisfies the essential conditions specified therein. The relevant parts of Section 153A of the Act i.e. fourth proviso to Section 153A of the Act, which has a bearing on the controversy in hand is being reproduced below: "Provided also that no notice for assessment or reassessment shall be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on income represented in the form of 'asset' valued Rs. 50 Lakhs or more which has escaped assessment, which 'fact' according to Ld. A.R. Shri Dudhwewala is the 'jurisdictional fact', which if present/or in possession of AO will only enable the AO to assume jurisdiction u/s. 153A of the Act to issue notice for these extended AYs'. According to Shri Dudhwewala, the jurisdictional fact in this case for AY 201112 (7th AY preceding to searched year) is the existence of fact relating to the undisclosed 'asset' valued Rs.50 lakh or more that has been discovered in the search qua the assessee qua the AY in question i.e. AY 2011-12. According to him, in the present case, not only when the AO issued notice u/s 153A for AY 2011-12, did he not have in his possession this essential jurisdictional fact, but even when he completed the assessment, there was no addition in respect of any undisclosed asset, rather the addition was in respect of purported un-explained credit u/s 68 of the Act, which according to him, lend credence to his argument that the jurisdictional fact was indeed absent and hence, the action of AO was bad in law for want of jurisdiction. 8.6. So, first let us examine whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Raja Anand Brahma Shah v. State of U.P. &Ors., AIR 1967 SC 1081 : (1967) 1 SCR 362, the Hon'ble Supreme Court had an occasion to look into the jurisdiction of the District Collector to acquire land under sub-section (1) of Section 17 of the Land Acquisition Act, 1894 which enabled the State Government to empower the District Collector to take possession of 'any waste or arable land' needed for public purpose even in absence of award. The possession of the land belonged to the appellant had been taken away in the purported exercise of power under Section 17(1) of the Act. The appellant objected against the action inter alia contending that the land was mainly used for ploughing and for raising crops and was not 'waste land', unfit for cultivation or habitation. It was urged that since the jurisdiction of the authority depended upon a preliminary finding of fact that the land was 'waste land', the High Court was entitled in a proceeding for a certiorari to determine whether or not the finding of fact by the District Collector, that land was waste land, was correct or not. It is noted that the Hon'ble Supreme Court while upholding the contention and dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Minister and setting aside the order, the Court of Appeal stated; "The first and the most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact; for, unless the land can be held not to be part of a park or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. In such a case it seems almost selfevident that the Court which has to consider whether there is jurisdiction to make or confirm the order must be entitled to review the vital finding on which the existence of the jurisdiction relied upon depends. If this were not so, the right to apply to the Court would be illusory."[See also Rex v. Shoredich Assessment Committee; (1910) 2 KB 859 : 80 LJ KB 185]. 8.9. A question under the Income Tax Act, 1922 arose in Raza Textiles Ltd. v. Income Tax Officer, Rampur, (1973) 1 SCC 633 : AIR 1973 SC 1362. In that case, the ITO directed X to pay certain amount of tax rejecting the contention of X that it was not a non-resident firm. The Tribunal confirmed the order. A single Judge of the High Court of Allahabad held X as non-resident firm and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal fact as to existence of jurisdiction is present. Thus, we understand that jurisdiction fact is the fact which is required to exist, as insisted by the Parliament/Legislature, for a quasi judicial/ authority to exercise jurisdiction over a particular matter. So in this present case, we have to examine whether the Parliament has specified in the fourth proviso to Section 153A of the Act any such facts which can be termed as jurisdictional fact. On a reading of the fourth proviso to Section 153A of the Act along with Explanation 2 to it which defines 'Asset', we find considerable merit in the contention of Shri Dudhwewala that in order to invoke jurisdiction u/s 153A of the Act for the seventh to tenth AY preceding the searched year, the AO should have in his possession the jurisdictional fact i.e. existence/possession of undisclosed/unaccounted assets valued at Rs. 50 lakhs or more as defined in Explanation 2 to fourth proviso of Section 153A qua the assessee qua the 7th to 10th AY un-earthed from search, without which the AO cannot issue notice u/s 153A of the Act for these extended AY's. It is only when there exists this jurisdictional fact the AO can validly reopen those exten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at, express mention of one is the exclusion of other and this maxim has been accepted by the Hon'ble Supreme Court in GVK Industries Ltd. Vs. ITO [197 Taxman 337] (Constitution bench of 5 Supreme Court Judges). By express mention of 'Assets' and definition given to it specifically, it is implied that the Parliament silently excluded the items of 'revenue', 'expenditure' & 'liabilities' from its jurisdictional fact for invoking/assumption/usurpation of jurisdiction u/s. 153A of the Act for the seventh to tenth assessment year preceding the searched assessment year. 8.12 It is a rudimentary accounting concept, that "debit" denotes "asset" and "credit" denotes "liability". An asset represents an economic resource, either immovable or movable, having value, such as immovable property viz., land or building, investment held in shares and securities, loans & advances given and deposits in bank account. On the other hand, 'Liability' includes items such as share capital, reserves, loans obtained (secured as well as unsecured) etc. which cannot be characterized or classified as 'Asset'. Similarly, items of 'expenses' or revenues in form of 'sales' / 'turnover' does not constitute 'asset'. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search. It does not suggest or include any or all credits in bank accounts, which is disclosed and forms part of the regular books of accounts. To say, if any credits in a regular bank account, like sale proceeds/ loan / share capital etc. is found to be unexplained, then it may be a case of discovery of undisclosed 'income' / 'cash credit' but it does not suggest discovery of an undisclosed 'asset' by the Revenue so as to bring it within the teeth of the fourth proviso to Section 153A of the Act for invoking jurisdiction u/s 153A for the extended period. 8.15 Hence, from the above discussion, it is thus clear that Section 153A of the Act can be invoked only if the AO comes to a positive conclusion that he has in his possession documents or information revealing an undisclosed asset of the assessee qua the assessment year (7th to 10th) which is valued Rs. 50 lakhs or more. This, in our judgment is a foundational, fundamental or jurisdictional fact. 8.16. Having clarified the position of law regarding the jurisdictional fact (supra), now let us examine whether the jurisdictional fact existed before the AO when he issued notice u/s 153A of the Act dated 11.09.2019 (refer page 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company on 12/12/2017 and the documents and materials seized therein. The A/R is requested to furnish return of income for AY 2011-12 electronically as called for u/s 153A without further delay.(emphasis supplied) 8.17. Conjoint reading of the above order sheet noting with the objection raised by the assessee before the AO, shows that the assessee had specifically challenged the usurpation of jurisdiction by the AO under the fourth proviso to Section 153A of the Act and also requested him to spell out the details of the undisclosed/unaccounted "asset" found from the books of accounts/documents seized in the course of search, for which the assessment for AY 2011-12 was being re-opened. The AO however not only turned down the request to provide the details of the 'assets' (jurisdictional fact) but instead told the assessee that the final assessment order would contain the details of such "asset". It is noted that the AO did not stop at this, but went on to give a ludicrous advice to the assessee that in case the assessee is not satisfied with the assessment order, then he may seek recourse to appellate remedy. We do not countenance such an action of AO. According to us, when the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial. From this assertion/averment/admission, it is clear that AO did not have in his possession the jurisdictional fact [on or prior to 11.09.2019] to invoke and issue notice u/s. 153A of the Act. Here, one should bear in mind that the fourth proviso was inserted by the Parliament w.e.f. 1.04.2017 by Finance Act, 2017, thereby extending the jurisdiction of the AO to assess/re-assess beyond six AY's to ten AY preceding the searched year. And as discussed at para 8.5, the fourth proviso clearly bars the AO to issue notice for the extended period (7th - 10th AY) unless the AO is in possession of the jurisdictional fact of undisclosed asset valued Rs. 50 lakh or more qua the assessee qua the extended assessment year. So the Legislative intent is very clear that AO would be empowered to issue notice u/s 153A only if he is in possession of the jurisdictional fact otherwise he cannot issue notice u/s 153A of the Act. No such bar can be seen in the case of six AY's preceding the searched AY. So the Parliament while extending the jurisdiction of AO by Finance Act, 2017, for 7th - 10th AY has prescribed this particular safe guard against arbitrary exercise of power by the AO u/s 153A of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 153A of the Act show that issuance of notice can be resorted to by the AO only after he is in possession of the jurisdictional fact, which is found to be absent in the present case. Therefore according to us, the AO only after having in his possession the jurisdictional fact could have assumed jurisdiction and issued notice u/s. 153A of the Act or else he could not have issued notice, as done in this case. For the reasons elaborately discussed by us in the foregoing, we thus hold that the notice u/s. 153A dated 11.09.2019 was issued by the AO without authority of law and without satisfying the essential jurisdictional fact, and hence the issuance of notice u/s. 153A is held to be bad in law. 8.19. Even though we are fortified with our above view, that prior to issuance of notice u/s 153A for the 7th - 10th AY, the AO should be in possession of the jurisdictional fact, we deem it fit to further examine the facts as to whether ultimately the AO, while addressing the request of the assessee to provide the details of the undisclosed assets qua the assessee for AY 2011-12, did at all make any endeavour to discover any undisclosed asset qua assessee for AY 2011-12. It is noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case. In our considered view therefore, the AO's failure to do so, rendered the very act of usurpation of jurisdiction and issuance of notice dated 11.09.2019 under the fourth proviso to Section 153A of the Act for AY 2011-12 to be null in the eyes of law. 8.20. Thus according to us, the pre-requisite condition for conferment of jurisdiction under section 153A for the assessment of AY's falling from seventh (7th) to tenth (10th) assessment years preceding the searched assessment year being the jurisdictional fact in this case is absent and the AO without fulfilling this essential jurisdictional fact erroneously invoked jurisdiction u/s 153A of the Act for AY 2011-12, which is a serious flaw and a jurisdictional defect, that cannot be cured. 8.21. The Ld. A.R Shri Dudhwewala in the alternate also pointed out that, even in the assessment order, the AO had singularly failed to identify and spell out such "asset", as defined in Explanation 2 to the fourth proviso to Section 153A of the Act, which had escaped assessment for AY 2011-12 and did not make any addition to the income of the assessee u/s. 69, 69A or 69B of the Act. So, therefore, according to Shri Dudhwewala, since the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he key used for opening the lock for the concluded 7th to 10th AY is the most appropriate key to unlock and thereby reopen the proceedings for bringing to charge any other items of escaped/unexplained income unearthed in the course of search. However in a case where, either the assessee demonstrates that the key used by the AO for reopening the assessment is either incorrect or where the AO himself abandons the jurisdictional fact in the course of assessment proceedings, then as a corollary, it has to be held that the key used by the AO for opening the lock was incorrect and thereby the lock placed earlier on the concluded assessment remained unopened and therefore the AO could not enter upon the arena of reassessing the income of the assessee. So, when the AO fails to make any addition for the 'undisclosed asset', then it tantamount to admission that there was no jurisdictional fact present before the AO in the first place, and the necessary corollary is that he has wrongly assumed jurisdiction u/s. 153A for AY 2011-12 and therefore AO cannot proceed further to make other items of additions/disallowances. In such a scenario, the AO has no other option but to drop the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is found to be bad in law for want of jurisdiction, the AO was precluded from making any other addition in the assessment for AY 2011-12. Hence, the AO's action of making addition u/s 68 of the Act in the relevant AY 2011-12 is held to be unsustainable for want of jurisdiction and is therefore is quashed. The assessee thus succeeds on this ground raised in the cross objections and the same is allowed. 9. Now we proceed to answer Question (B). (B) Whether in absence of any incriminating material found in the course of search at the premises of the assessee, the additions/disallowances made in the assessments of the assessee, which were unabated/ non-pending on the date of search, could be held to be sustainable on facts and in law? Ground No. 3 of Revenue's appeal for AY 2011-12 Ground No. 3 of Revenue's appeal for AY 2012-13 Ground No. 3 of Revenue's appeal for AY 2013-14 Ground No. 3 of Revenue's appeal for AY 2014-15 Ground No. 3 of Revenue's appeal for AY 2015-16 9.1 In light of the facts narrated in Para 2 above, it is noted that, on the date of search i.e. 12-12-2017, income tax assessments for AYs 2011-12 to 2015-16 were unabated. The provisions of Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise. The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporation (NhavaSheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that Revenue's SLP against the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla (Supra) was dismissed by the Hon'ble Apex Court which is reported in 380 ITR (St.) 4 (SC). 9.3 The Hon'ble Delhi High Court in the case of Pr.CIT. Vs. Kurele Paper Mills (P) Ltd. (280 ITR 571) at Page 572held as follows:- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs.89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT (Appeals) reveals that there is a factual finding that "no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. JayabenRatilalSorathia (supra) wherein it has been held that while it cannot be disputed that considering section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lters Pvt Ltd (ITA No.91, 69, 76 & 77/Gau/17) dated 06.09.2019 wherein it held as under: "7. Next comes Revenue's appeal ITA No.69/Gau/2017 for assessment year 2007-08. The CIT(A)'s order under challenge has deleted share capitals share premium and share application money addition of Rs.6, 69, 71, 870/-, 11, 95, 78, 050/- and Rs.7, 24, 50, 080/-; respectively vide following detailed discussion:- "5.2 I have considered the submissions made by the appellant before me. I have also perused the assessment order as well as the remand report sent by the Assessing Officer on this issue. In his remand report the Assessing Officer has simply stated that the addition was made on the basis of findings recorded in the assessment order. He has further stated that he has no objection to the admission of any fresh or additional evidence if it is considered to be relevant for disposal of the issue. Apart from this, the Assessing Officer has not given any comment on certain legal issues raised by the appellant in its written submissions. 5.3 In its written submissions the appellant has raised a legal issue regarding the nature of additions that could be made in an assessment that is to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers/applicants, No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN Nos. of the applicant companies. (ii) Copies of the appellants statements with the following banks showing the receipt of share capital/application money: (a) HDFC Bank, H.B. Road, Guwahati (b) HDFC Bank, Guwahati (c) Standard Chartered Bank, Guwahati (iii) Copies of Memorandum & Articles of Association and audited balance sheet in respect of corporate shareholders/applicants. (iv) Copies of returns of allotment filed by the appellant in respect of shares allotted during the previous year relevant to the assessment year under appeal. The appellant has also pointed out that out of the total share capital Rs.6, 69, 71, 870/-, which was added in the total income of the appellant, an amount of Rs.5, 40, 00, 000/- was received by the appellant in the earlier year, as will be evident from the details submitted. Hence, the Assessing Officer erred in law as well as on facts in making the addition of this amount of Rs.5, 40, 00, 000/- in the assessment year under appeal. 5.5 A perusal of the case laws relied upon by the appellant show that in the case of a non-abated asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of share capital/premium as these were not readily traceable at the time of assessment proceedings. The appellant has further contended that it was not given proper and meaningful opportunity of being heard to produce the documents in support of share capital/premium. The appellant has submitted before me the following details/documents in support of the share capital /premium: - (i) Chart showing name & address of the shareholders/applicants, No. of shares applied for/allotted face value of shares, premium paid, mode of payment, PAN No., CIN Nos. of the applicant companies. (ii) Copies of the appellant's statements with the following banks showing the receipt of share capita [/application money: - (a) HDFC Bank, Guwahati (b) HDFC Bank, Guwahati (c) Standard Chartered Bank, Guwahati (iii) Copies of Memorandum & Articles of Association and audited balance sheets in respect of corporate shareholders/applicants, bank statements etc. (iv) Copies of returns of allotment filed by the appellant in respect of shares allotted during the previous year relevant to the assessment year under appeal. A prayer under Rule 46A of the Income Tax Rules, 1961 was made by the appellant for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of search in issue. Various high court(s) in CIT vs Kabul Chawla (2016) 380 ITR 573 (del), PCIT vs. M/s Salasar Stock Broking Ltd in GA No. 1929/2016 ITAT No.264 of 2016 dated 24.08.2016 (Cal), PCIT vs Dipak J Panchal (2017) 397 ITR 153 (Guj) support the assessee's case qua the instant legal aspect. Mr. Singh has quoted E.N. Gopakumar vs. CIT (2017) 390 ITR 131 (Ker) and CIT vs. KesarwaniZardaBhander Income-tax Appeals No.270/2014 dated 06.09.2016 (Allahabad) that the purpose of the impugned sec. 153A proceedings is to assess total income of the searched taxpayer rather than that based on incriminating material only. Hon'ble jurisdictional high court has admittedly not adjudicated upon the instant legal issue as informed by the learned senior counsel as well as the department. We therefore quote hon'ble apex court's decision in CIT vs. M/s Vegetable Products Ltd. (1973) 88 ITR 192 (SC) that the view favouring the assessee / taxpayer has to be adopted in such a backdrop involving conflicting judicial opinions of various hon'ble high courts and accordingly hold that the CIT(A) has rightly quashed the impugned assessment since not based on any incriminating material foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the possession of the assessee in form of land, building, jewellery, deposits or other valuable assets etc. do not corroborate with his returned income (which includes earlier AY's return also) and/or there is a material difference in the actual valuation of such assets and the value declared in the books of accounts. Further, incriminating evidence may also constitute of information, tangible or intangible, which suggests or leads to an inference that the assessee is conducting transactions outside the regular books of account which are not disclosed to the Department. Incriminating material may also comprise of document or evidence found in search which demonstrates or proves that what is apparent is not real or what is real is not apparent. In other words, let us assume that an assessee has recorded transactions in his books or other documents maintained in the ordinary course of business, then it is discovered in the search from certain material or evidence which states the contrary.In such an event then, the discovered material or evidence can be held to be incriminating in nature, only when it is found to affect the veracity of the entries made in the books of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, scribbling or rough notings found on loose papers cannot be straightaway classified as 'incriminating material' unless the AO establishes nexus or connect of such notings with unearthing of undisclosed income of the assessee. This nexus or connect has to be brought out in explicit terms with corroborative material or evidence which any prudent man properly instructed in law must be able to understand or correlate so as to justify the AO's inference of undisclosed income from such seized incriminating material. This exercise is therefore found to be essentially a question of fact. 9.10 Useful reference in this regard may be made to the decision of the Hon'ble Delhi High Court in the case of PCIT Vs Index Securities Ltd (86 taxmann.com 84). In the decided case, search was conducted u/s 132 of the Act upon Jagat Group wherein documents comprising of trial balance and balance sheet of the assessee company was found & seized by the Revenue. According to AO, since these documents pertained to the assessee, he proceeded to reopen the assessments of the assessee u/s 153C of the Act and added the share application monies received by the assessee u/s 68 of the Act. On appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were seized in the course of search and hence urged that the AO had rightly made the impugned addition. Upon examining the contents of the seized material referred to by the Revenue, this Tribunal noted that it comprised of bank account statements which formed part of the regular books of the assessee and these accounts were disclosed to the Department prior to the search. The Tribunal observed that indeed these documents were found during the course of search and seizure operation but for such reason alone these could not be held as incriminating in nature justifying the impugned addition. It was noted that all the entries of deposits and withdrawals of the said bank account statement formed part of the regular books of account and therefore these documents did not constitute incriminating evidence which could be linked to the impugned additions. The Tribunal therefore, in absence of any incriminating material found in the course of search, deleted the additions made in the orders u/s 153A in the unabated assessments for AY 2011-12 & AY 2012-13. For arriving at this conclusion, this Tribunal relied on the following observations of the co-ordinate Bench in the case of M/s A ONE In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order impugned to justify the addition i.e. GCL-HD-1.The image of this material is extracted below: 9.14 We note that the Ld. CIT(A) had examined in detail the contents of the above document and concluded that this document was not an incriminating document and that the it was a shareholding pattern of the assessee which was duly verifiable from the books of accounts and other secretarial records filed by the assessee with ROC, prior to the date of search. For the sake of convenience, the relevant findings recorded by the Ld. CIT(A) in this regard, at Pages 145 to 147 of his order, is extracted below: "The Appellant has further submitted that the purported incriminating material/documents referred to and relied upon by the AO was in-fact a Secretarial Compliance Report which was filed by the Appellant, on 28/11/2017 with the Registrar of Companies along with Form MGT7(i.e. the Annual Return of the Appellant filed in the ROC). It has been further submitted by the Appellant that the office of the Registrar of Companies is a Public Office and any document or return filed in such à public office is a "public document" and, thereby, upon filing of the document with the ROC, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not find mention in Section 132 or in Section 153A or even in Section 153C of the Act. Nor has the said word been defined in the Act. Further, as per Section 153A of the Act, the jurisdiction of the AO was clearly to assess the true and correct "total income" of the Appellant, and, which was to be necessarily based on some material. Also, what is incriminating could itself be a matter of dispute. What is incriminating for one may not be so for the other, so that the same, imbued with subjectivity, cannot decide the jurisdictional aspect. Yet, again, the same, though relevant and incriminating, may get wholly or partly explained in assessment, i.e. on the basis of the additional materials gathered or called for or produced by the assessee itself or otherwise explained by it during assessment proceedings. At the same time, there could be times when some material maybe found during the course of a search but the said material is not seized. So, can the same be declared as non-incriminating? These are questions essentially of fact and not of law. As is evident, the aforesaid form MGT-7, along-with its annexure(s), showing the purported shareholding pattern of the Appellant was fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o are holding the shares of the company. It is further noted, from the "shareholding pattern" alleged by the AO as "incriminating", that the aforesaid "shareholding pattern" indeed refers to the share capital of the Appellant organized by the respective groups and, in any case, the entries related to the receipt of share capital subscription as well as allotment of share capital was duly disclosed in the regular books of accounts of the Appellant and therefore are part of the regular records of the Appellant. It is further noted that the increase in the share capital was being reflected by the Appellant in the Appellant's audited Annul Accounts filed by the Appellant with the ROC and that the details of Increase in share capital subscription was also being reflected in the Income Tax Returns of the Appellant filed with the Department. It is further noted that the Appellant was duly declaring the shareholding pattern (i.e. the names and number of share held by each shareholder) with ROC regularly and further the details of the shareholder were also being stated in the audited Annual Accounts of the Appellant in accordance with the requirements of the governing law. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 at 11:00 am. Notwithstanding the fact that the time permitted to the Appellant to respond was too short, it is noted that in this case the relevant assessment folders were also perused and it is evident that the AO had not conducted any enquiry qua the purported shareholding pattern from any of the aforesaid 3(three) groups. Thus, it is clear that in this case, the AO was swayed by merely coining the purported share holding pattern as an incriminating material and, thereafter, the AO resorted to additions under Section 68 of the Act. In view of the above discussion and for the reasons stated above and respectfully following the judgments of various authorities, discussed above including those relied upon by the Appellant, it is held that the purported shareholding pattern of the Appellant was not an incriminating document and that the said shareholding pattern of the Appellant was duly verifiable from the books of accounts and other records, including returns and forms filed by the Appellant with ROC, prior to the date of search." 9.15 Having examined the contents of GCL-HD-1, we find ourselves in agreement with the above findings of the Ld. CIT(A) that this document was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Ld. JCIT/Addl. CIT in a casual and mechanical manner, which according to the assessee, rendered all the orders impugned before us to be a nullity. 10.2 It is noted that, the AO had issued a detailed questionnaire enquiring about the details of share capital only on 04-11-2019. The AO thereafter made enquiries from the shareholders by issue of notices u/s 133(6) of the Act dated 27-11-2019. The Ld. AR pointed out that, the Director of the assessee was personally examined u/s 131 of the Act on 28-11-2019. After making these necessary enquiries, the AO finally issued the show cause notice requiring the assessee to explain as to why the share application monies received in these years should not be assessed by way of unexplained cash credit on 27-12-2019, which was a Friday. In response, the appellant had furnished a detailed explanation along with supporting on Saturday, 28-12-2019. According to Ld. AR, the AO forwarded the draft assessment orders, each running in 44 pages, for all the seven assessment years together, seeking approval of the Joint Commissioner of Income-tax Range-3, Guwahati, only on 3012-2019. The said Official gave his administrative approval u/s 153D of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal for AY 2017-18 11.1 It is noted that the reasoning/findings recorded by the AO in the orders for AYs 2011-12 to 2015-16 & 2017-18 for making addition/s u/s 68 of the Act is verbatim same. The AO had drawn up a common summary statement in all the assessment orders setting out the details of the share application monies received by the assessee in the AYs 2011-12 to 2015-16 & 2017-18, whose source of source, according to him was not properly explained. The statement giving investor wise and assessment year wise details of the addition/s made by the AO u/s 68 of the Act in these AYs are as follows: A.Y. Particulars Amount 2011-12 Hari TrafinPvt Ltd 5, 38, 35, 000 2012-13 Hari TrafinPvt Ltd 50, 00, 000 Southern Resources & Holdings Pvt Ltd 2, 51, 00, 000 2013-14 Prefer Infrastructure Pvt Ltd 6, 12, 00, 000 Capital Steel Trading Pvt Ltd 5, 18, 00, 000 Consistent Constructions Pvt Ltd 55, 00, 000 2014-15 Prefer Infrastructure Pvt Ltd 6, 38, 50, 000 Capital Steel Trading Pvt Ltd 8, 88, 00, 000 Consistent Constructions Pvt Ltd 2, 44, 49, 990 Transparent Tie Up Pvt Ltd 4, 51, 99, 980 2015-16 Remote Marketing Pvt Ltd 49, 99, 995 Bonus Dealers Pvt Ltd 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & circumstances, the AO had accepted these shareholders and their source of funds to be genuine in preceding/subsequent years and/or partially in the same year, the AO's action of disputing their genuineness only qua the additions made in the orders impugned before us, were ex-facie perverse and untenable. He further brought to our notice the assessment orders passed u/s 143(3) in the matters of some of these shareholders/share applicants to show that even the AOs of the shareholders also did not doubt or question the genuineness of the investments made by them in the assessee. He also pointed out that the Director/s of the assessee had also been personally examined u/s 131 of the Act who had affirmed the transactions with the shareholders. He took us through the statement of Director, Shri Vishal Jain, which is placed at Pages 199 to 206 of paper book, to show that nothing adverse came out from his examination, which suggested that the share capital/share application received from these entities were not genuine. The Ld. AR thereafter pointed out several defects and factual infirmities in the statement of Shri S.K. Agarwal, relied upon by the Revenue. He further submitted that, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 11.6 The phraseology of Section 68 is clear. The Legislature has laid down that in the absence of a satisfactory explanation, the unexplained cash credit may be charged to income-tax as the income of the assessee of that previous year. In this case, the Legislative mandate is not in terms of the words 'shall' be charged to income-tax as the income of the assessee of that previous year. The Supreme Court while interpreting similar phraseology used in Section 69 of the Act has held that in creating the legal fiction the phraseology used therein employs the word "may" and not "shall". Thus the un-satisfactoriness of the explanation does not and need not automatically result in deeming the amount credited in the books as the income of the assessee as also held by the Supreme Court in the case of CIT v. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall have to be necessarily treated as prospective in nature. 11.10 We may also gainfully refer to the following decisions wherein the Hon'ble Constitutional Courts have held that the proviso to Section 68 of the Act, introduced by the Finance Act, 2012 with effect from 01-04-2013 will not have retrospective effect. (i) CIT Vs Gagandeep Infrastructure Private Limited (394 ITR 680) [Bom HC]: "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 basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is a settled position of law that 'satisfaction' contemplated in Section 68 of the Act is that of a reasonable prudent person (AO) and not that of an unreasonable person. So, when the AO calls upon the assessee to explain the nature and source of the credit found in assessee's books, then initial burden is on the assessee to bring material on record to show the nature and source of the credit i.e. identity, creditworthiness and genuineness of the transaction in question. Once an assessee is able to discharge its initial burden, then the onus shifts to the AO to disprove/rebut the material adduced by the assessee to substantiate the nature and source of the credit transaction. And if the AO is not able to disprove/rebut the evidence brought on record by the assessee to prove the nature and source of the credit entry, then Section 68 of the Act cannot be applied by the AO. This position of law, we note remains the same even after the insertion of the proviso in Section 68 by the Finance Act, 2012, wherein additional requirement/burden is brought in by the Parliament in the cases of an assessee which is a corporate entity (not being a company in which the public are su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers impugned before us in light of the documents furnished by the shareholders, we find that the AO only looked with suspicious the "source of source" brought to his notice and other than making a bald statement that "source of source" was not fully explained, the AO failed to bring any material or evidence on record, which suggested that the amount credited in the books of the assessee did not belong to the shareholder but that of the assessee. For this, let us now into the relevant facts of each investor/s which invested money in the company in the form of share capital along with share premium. (A) M/s Hari TrafinPvt Ltd (AY 2011-12& 2012-13 - Rs.5, 38, 35, 000/-& Rs.50, 00, 000/-) (i) It is noted that during AY 2011-12, the assessee had received share application monies of Rs.20, 65, 00, 000/-from M/s Hari TrafinPvt Ltd. Qua the application monies aggregating to Rs.15, 26, 65, 000/-, it is interesting to note that the AO accepted the identity, creditworthiness & genuineness of the transaction but chose to dispute sum to the extent of only Rs.5, 38, 35, 000/-.Similarly in AY 2012-13, the assessee had received share application of Rs.75, 00, 000/- from this shareholder and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d ITR. 4. In case the source of funds is loan/share capital & premium, please furnish the name, PAN, address and bank account number of the lender/share applicant. 5. In case the source of funds is by sales/turnover please specify what was the item traded, please furnish the name, PAN, address and bank account number of each buyer, Please furnish purchase and sales ledgers, along with supporting bills/vouchers. 6. Shareholding pattern of the company for the financial years 2010-11 to 2017-18. 7. Name, Pan, Address of each directors date of appointment of each present director. (iii) It is noted that, in response to the said notice, the shareholder company submitted its reply along with relevant evidences, copy of the letter is available at Pages 367-368 of the Paper-book. After perusing the details, we find that assessee had furnished all the requisitioned documents including audited financial statements, Income Tax returns, extracts of bank account, details of source of funds as well as the share-holding pattern and director details for all the above FYs as sought for by the AO. The shareholder company is found to hold PAN-AAACH6716P and is assessed under the jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the receipt of funds in form of share capital/share application. Hence, we find that the source of source of funds in both AYs 2011-12 & 2012-13 stood explained. (iv). It is also noted that shareholder was subjected to income-tax scrutiny u/s 143(3) of the Act in AYs 2012-13 and 2017-18, and during these years it had infused fresh sum of Rs.75, 00, 000/- and Rs.22, 32, 00, 000/- towards the share capital of the assessee company. It is noted that in none of the assessment orders, copies of which are found placed at Pages 604-608 of paperbook, did the AO of the shareholder draw any adverse inference regarding the source of investments made by the shareholder in the assessee company. In the circumstances when the source of funds of the investor had been accepted to be genuine by the AO of the investor, we hold that the AO, in the present case, was unjustified in holding that the source of source of funds remained unexplained. (v) Shri Dudhwewala pointed out that M/s Hari TrafinPvt Ltd was an associate concern and that the director of the said shareholder company and the assessee were common. He invited our attention to the statement of the director of the assessee, Shri Visha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to draw adverse inference against the assessee. (vii) For the reasons discussed in the foregoing, it is held that the assessee had discharged its burden of substantiating the identity, creditworthiness and genuineness of the transaction involving receipt of share application monies from M/s Hari TrafinPvt Ltd. and the AO could not rebut or find any infirmity in the documents to substantiate the identity, creditworthiness and genuineness of the share transaction other than cash deposit at the 5th or 6th layer of transaction which also the AO failed to show any material/nexus of the assessee to the cash deposited, we hold that preponderance of probability is in favour of assessee and no adverse view can be taken against the assessee in the facts and circumstances discussed supra. (B) Southern Resources & Holdings Pvt. Ltd. (AY 2012-13 - Rs.2, 51, 00, 000) (i) We note that at pages 610-645 of the paper book, the details of M/s. Southern Resources & Holdings Pvt Ltd are set out. From the reply furnished by this shareholder in response to the notice u/s 133(6), it is noted that this shareholder is a private limited company having PAN AAECS8302A and CIN: U65999WB1995PTC075240, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only did the assessee discharge its burden of proving the identity, creditworthiness and genuineness of the transaction but even the source of source of funds was explained. (ii) We further note that, this shareholder had paid aggregate sum of Rs.3, 38, 00, 000/- towards share capital of the assessee in the relevant AY 2012-13, and the AO had accepted the identity & creditworthiness of this shareholder and genuineness of the transactions to the extent of Rs.87, 00, 000/- but doubted the genuineness of balance sum of Rs.2, 51, 00, 000/-. It is noted that similar documentation in as much as even the explanation regarding source of source of funds for the entire sum of Rs.3, 38, 00, 000/- was furnished by the shareholder in the same manner as sought for by the AO under the cover of the same letter furnished in response to the AO's notice u/s 133(6) of the Act. We find that no reasons were given by the AO for adopting two different yardsticks in relation to the same shareholder. Even the Ld. CIT, DR was unable to shed light on this cherry picking action of the AO. In such a scenario, when the A.O is found to be satisfied with the identity, creditworthiness and genuineness of the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 650 of the Paper book. Perusal of the same shows that the immediate source of funds of the shareholder was primarily refund of advances made earlier (proceeds from sale of investments was comparatively lower), details of which along with name, PAN & address are found to be set out in Pages 649 to 650 of the paperbook. Moreover, even in relation to the proceeds received on sale of investments, which were invested by this shareholder in the assessee company, it is noted that complete details of the respective buyer/s were provided by the shareholder, in the manner as sought for by the AO in the notice u/s 133(6) of the Act. Neither the AO nor the Ld. CIT, DR was able to pin-point out as to what was the defect therein based on which these sale proceeds had been held to be non-genuine or for that matter which detail/document had not been submitted by the shareholder, which otherwise would have discharged the genuineness of the source of source of funds. Having regard to the aforesaid facts therefore, we find that not only did the assessee discharge its burden of proving the identity, creditworthiness and genuineness of the transaction but even the source of source of funds was expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and free reserves to the tune of Rs.1253 lacs which is sufficient to make the investment. From a perusal of the MCA Master Data of the company it is evident that the company is 'Active' till date. As regards the source of source of funds, it is noted that the shareholder company had placed on record the copy of the bank statement for the relevant period, which is found placed at Page 688 to 697 of the Paper book. On examination of the bank statement it is taken note that there is no deposit of cash and all transfer have been made through proper banking channels. The shareholder is noted to have also provided the details of source of source of funds in the exact manner as sought for in the notice of AO u/s 133(6) of the Act, which is found placed at Pages 685 to 687 of the Paper book. Perusal of the same shows that the source of funds of the shareholder was primarily refund of loans advanced earlier and/or sale of investment holdings, details of which are available on record. Neither the AO nor the Ld. CIT, DR was able to pin-point out as to what was the defect therein based on which these source of source of funds had been sweepingly held to be non-genuine or for that matter which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was primarily refund of loans advanced earlier and/or sale of investment holdings, details of which are available on record. Both the AO and even the Ld. CIT, DR was unable to pin-point out the specific defect in the details provided by the shareholder qua its source of funds, for which it was being alleged to be non-genuine. We are thus unable to countenance the action of the AO. Having regard to the aforesaid facts, we find that not only did the assessee discharge its onus of establishing the identity, creditworthiness and genuineness of the transaction but even the source of source of funds was explained. (ii) As regards the alleged cash trail of Rs.35 lacs in relation to M/s Captain Steel Trading Pvt Ltd., a perusal of the flow chart, shows that the AO himself had identified the source of the monies credited to the assessee's account. The AO was not only able to identify the names of the payer companies but was also able to identify and establish the bank accounts of the source as well as source of source from which payments were received by the assessee. Both the source as well as the source of source was within the banking system only and there is no cash deposit found. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establishing the identity, creditworthiness and genuineness of the transaction but even the source of source of funds was explained. (G) Remote Marketing Pvt. Ltd. (AY 2015-16 - Rs.49, 99, 995) (i) We note from pages 761-802 of the paper book, the details of M/s. Remote Marketing Pvt. Ltd. are set out. Perusal of the reply furnished by this shareholder in response to the notice of AO u/s 133(6) of the Act, shows that this shareholder is a private limited company having PAN AADCR1140G and CIN: U51109WB2005PTC102287, which regularly filed its return of income and is assessed under the jurisdiction of ITO, Ward 4(1), Kolkata. In the last return of income filed for AY 2019-20, the shareholder had declared total income of Rs.18.45 lacs. From the audited financial statements, which is found placed at Pages 772 to 782 of the paperbook, it is noted that the company was having sufficient own funds in the form of capital and free reserves to the tune of Rs.682.79 lacs which more than sufficient to make investment with the shareholder. The MCA Master Data of the company is also available on record from which it is evident that the company is 'Active' till date. As regards the sour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e identity, creditworthiness and genuineness of the shareholder by his action of accepting the share application to the tune of Rs.1, 72, 00, 000/- paid by them, his action of not accepting the balance sum of Rs.1, 30, 00, 000/-, is held to be arbitrary/un-reasonable/irrational. (ii) Further, we note that at pages 803-966 of the paper book, the details of M/s. Bonus Dealers Pvt. Ltd. are given therein. This company is having PAN: AAECB2227R and having CIN : U52390AS2010PTC01704. It is noted that, in response to the notice issued by the AO u/s 133(6) of the Act, the company submitted its reply along with relevant evidences, copy of the letter is found placed at Pages 806 & 807 of the Paperbook. After perusing the details, it is noted that assessee had furnished all the requisitioned documents including audited financial statements, Income Tax returns, extracts of bank account, details of source of funds as well as the share-holding pattern and director details as sought for by the AO. On examination of the audited financial statements for FY 2014-15 which is found placed at Pages 827-859 of the Paperbook, it is noted that the company had sufficient funds to the tune of Rs.16, 48, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the identity, creditworthiness and genuineness of the transaction involving receipt of share application monies from M/s Bonus Dealers Pvt Ltd. and also the source of source of funds. And the AO could neither rebut the same nor bring any contrary evidence to shift the onus. So, we accept the share transaction with this share holder. (I) Orchid Finlease Pvt. Ltd. (AY 2017-18 - Rs.1, 75, 54, 848) (i) We note from pages 1057-1144 of the paper book, the details of M/s. Orchid FinleasePvt Ltd are set out. Perusal of the reply furnished by this shareholder in response to the notice issued u/s 133(6) of the Act, shows that the shareholder is a registered non banking finance company (NBFC) holding certificate of registration No. B.08.00108, having PAN AABCG9438Q and CIN: U65929AS1996PTC004898, which regularly filed its return of income and is assessed under the jurisdiction of ITO Ward 3(1), Guwahati. It is noted that this shareholder had actually advanced loan to the assessee of Rs.2, 55, 00, 000/- in the earlier FY 2015-16 pursuant to a loan cum share purchase agreement dated 11-01-2016. Copy of the said agreement and board resolution approving the same is found placed at Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act in relation to the conversion of loan into equity to the extent of Rs.1, 75, 54, 848/- in AY 2017-18. (iii). Even otherwise, it is noted that the explanation regarding source of source of funds to the extent of Rs.1, 95, 50, 000/- was payments received from M/s Darkwell Dealers Pvt. Ltd. It is noted that the AO chose to believe this source of source to the extent of Rs.19, 95, 152/-and disbelieved sum of Rs.1, 75, 54, 848/-.We find that no reasons were given by the AO for believing some sums and disbelieving some sums in relation to the same source of source of funds. Even the Ld. CIT, DR was unable to throw light on this apparent irrational action of the AO. In such a scenario, when the A.O is found to be satisfied with the source of source to the extent of Rs.19, 95, 152/- paid by them, his action of not accepting the balance sum of Rs.1, 75, 54, 848/- cannot be countenanced. (iv) Perusal of alleged cash trail prepared by the AO in relation to M/s Orchid FinleasePvt Ltd, shows that it was the source of source of M/s Darkwell Dealers Pvt. Ltd. where cash deposits in the account of the payers to the extent of Rs.97, 67, 000/- were found. Hence, going by this chart, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gating to Rs.22, 68, 50, 814/-, the AO has accepted the identity, creditworthiness & genuineness of the transaction but chose to dispute sum to the extent of Rs.32, 94, 00, 000/-. We find that no reasons were ascribed by the AO for believing some sums are correct and disbelieving some part of share transactions from the same shareholder, particularly when similar documentation in as much as even the explanation regarding source of source of funds were furnished by the shareholder in the same manner as sought for by the AO under the cover of the same letter furnished in response to AO's notice u/s 133(6) of the Act. The AO has instead made a bald assertion that some of the source of source of funds remained unexplained without giving any cogent basis or reasoning whatsoever. When confronted with this fact, even the Ld. CIT, DR was unable to explain this irrational action of the AO. In such a scenario, when the A.O is found to be satisfied with the identity, creditworthiness and genuineness of the shareholder by his action of accepting the share application of Rs.22, 68, 50, 814/- paid by them, his action of not accepting the balance sum of Rs.32, 94, 00, 000/-, is held to be un tena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes invoices, bank statements as well as confirmations from the payers of the shareholders in support of source of source of funds under the cover of his letter dated 21.12.2019, which is found placed at Pages 1267 to 1507 of the paperbook. Having perused the same, we find that the assessee had furnished relevant evidences in support of the source of source of funds and that even the AO was unable to point out any defect nor any falsity or infirmity in the documents submitted before him. (v) It is also noted that this shareholder was also subjected to income-tax scrutiny u/s 143(3) of the Act in AY 2017-18. Perusal of the assessment order, copy of which is at Pages 1265-1266 of paper book, shows that the AO of the shareholder did not draw any adverse inference regarding the source of investments made by the shareholder in the assessee company. In the circumstances when the source of funds of the investor had been accepted to be genuine by the AO of the investor, we hold that the AO, in the present case, was unjustified in holding that the source of source of funds remained unexplained. Having regard to the aforesaid facts, we find that not only did the assessee discharge its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor did they produce their bank statements to substantiate the alleged investments. c. Guwahati companies - Ispat Sheet Ltd. and Novelty Traders Ltd., were found non-existent at the given address. d. None of the investor-companies appeared before the A.O. 11.15 It was in light of the above conspectus of facts that it was held by the Hon'ble Apex Court, that the Assessee-Company failed to discharge the onus required under Section 68 of the Act. However in the case on hand, we find that, the assessee and all the shareholders had discharged the onus casted upon them under the provisions of Section 68 of the Act which has been elaborated in the preceding paragraph. 11.16 In our humble understanding therefore, we note that the decision in the case of NRA Iron & Steel (P.) Ltd. (supra) is based on facts. Hence, this judgment can be applied only on those cases having similar facts and circumstances and not other cases having different facts and circumstances. In this regard, we draw support and guidance from the judgment of Hon'ble Calcutta High court in the case of CIT v. Peerless General Finance & Investment Co. Ltd (282 ITR 209) wherein it was observed that, the bindi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplication form etc. First appellate authority also noted that there was no requirement under section 68 of the Act to explain source of source. It was not necessary that share application money should be invested out of taxable income only. It may be brought out of borrowed funds. It was further held that non-responding to notice would not ipso facto mean that the creditors had no credit worthiness. In such circumstances, the first appellate authority held that where all material evidence in support of explanation of credits in terms of identity, genuineness of the transaction and credit-worthiness of the creditors were available, without any infirmity in such evidence and the explanation required under section 68 of the Act having been discharged, Assessing Officer was not justified in making the additions. Therefore, the additions were deleted. 19. In appeal, Tribunal noted that before the Assessing Officer, assessee had submitted the following documents of the three creditors:- (a) PAN number of the companies; (b) Copies of Income-tax return filed by these three companies for assessment year 2010-11; (c) Confirmation Letter in respect of share application money paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital represent company's own income from undisclosed sources. Accordingly, no addition can be made u/s.68 of the Act. In view of above reasoned factual finding of CIT(A) needs no interference from our side. We uphold the same." 21. From the above, it is seen that identity of the creditors were not in doubt. Assessee had furnished PAN, copies of the income tax returns of the creditors as well as copy of bank accounts of the three creditors in which the share application money was deposited in order to prove genuineness of the transactions. In so far credit worthiness of the creditors were concerned, Tribunal recorded that bank accounts of the creditors showed that the creditors had funds to make payments for share application money and in this regard, resolutions were also passed by the Board of Directors of the three creditors. Though, assessee was not required to prove source of the source, nonetheless, Tribunal took the view that Assessing Officer had made inquiries through the investigation wing of the department at Kolkata and collected all the materials which proved source of the source. 22. In NRAIron& Steel (P.) Ltd. (supra), the Assessing Officer had m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd and established that most of the investor companies were non-existent and that some of the investor companies did not produce their bank statements which was imperative to prove the source of funds for making investments. On the facts of the decided case, this Tribunal notes that not only had the shareholders furnished all relevant documentary evidences, but even the details of source of monies were provided and both the enquiries u/s 133(6) & 131 of the Act were met by the shareholders. This Tribunal accordingly deleted the addition made u/s 68 of the Act. The relevant findings are as under: "6.17. Finally the ld DR placed reliance on the recent decision of the Hon'ble Apex Court in the case of Principal CIT vs. NRA Iron & Steel (P) Ltd reported in 103 taxmann.com 48 (SC) wherein the decision on addition made towards cash credit was rendered in favour of the revenue. We have gone through the said judgement and we find in that case, the ldAO had made extensive enquiries and from that he had found that some of the investor companies were nonexistent which is not the case before us. Certain investor companies did not produce their bank statements proving the source for makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the statements dated 13-12-2017&06-05-2018 of alleged entry operator, Shri S.K. Agarwal. According to the AO, he had admitted to being engaged in the business of providing accommodation entries to various beneficiaries inter alia including the assessee. This according to AO further substantiated the addition made by him u/s 68 of the Act. On appeal, the Ld. CIT(A) discarded the AO's reliance on these statements since he had denied the assessee the opportunity to cross examine them. 11.22 After careful analysis of the documents placed before us and after examining the statements of the so-called entry operator, which the AO had selectively extracted in the assessment order, we find that the adverse view taken by the AO bereft of any merit because, our examination of statements showed nowhere had he admitted of receiving any unaccounted cash from the assessee and in lieu thereof the cheques were issued. However, certain facts brought to our notice, which we will discuss infra, will show that his statement cannot be relied upon.It was brought to our notice that the so-called entry operator was not even a shareholder or director in any of these share applicant companies. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o cross examine him. Shri Dudhewewala took us through the statement of the Director of the assessee recorded under oath before the AO on 28-11-2019 and showed that even when the Director had personally appeared before the AO, he was never confronted with these statements nor was he afforded any opportunity to cross examine Shri Agarwal. It is also noted that the assessee in their response to the SCN had sought cross-examination of Shri Agarwal, whose statements the AO was choosing to rely upon. The AO however at Para 18 of his order rejected this plea holding it to be a peripheral issue. This act of the AO, denying the assessee an opportunity to cross examine Shri Agarwal was a serious infirmity which rendered the addition/s made by the AO, by relying on such statements collected at the back of the assessee, to be null and void. In this regard, we refer to the following findings recorded by the Hon'ble Apex Court in the case of Andaman Timber Industries Ltd vs Commissioner of Central Excise in Civil Appeal No. 4228 of 2006 reported in (2015) 62 Taxman 3 (SC), which reads as under: "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed the appeal of the Revenue. On further appeal, the Hon'ble Supreme Court also concurred with the findings of the Ld. CIT(A) and did not find any infirmity in the orders passed by the lower appellate authorities and accordingly dismissed the appeal of the Revenue. The relevant portion of the judgment of the Hon'ble Supreme Court reads as under: "3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19, 39, 60, 866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer by disallowing expenditure of the said sum incurred by the respondent-assessee in form of payments to one Shri S.K. Gupta. The Assessing Officer on the basis of statement of said Shri Gupta recorded during search operations held that the said person had not rendered any service to the assessee-company so as to receive such payments. CIT (Appeals) however deleted the addition inter-alia on the grounds that Shri S.K.Gupta had retracted the statement recorded during search, that the assessee-company had pointed out range of services provided by Shri Gupta and that the Assessing Officer had no other material to disallow the expenditure. The Tribunal in further appeal by the revenue confirmed the view of the CIT (Appeals) independently coming to the conclusion that the Assessing Officer was not justified in making the addition. It was noted that Shri Gupta retracted his statements within a short time by filing an affidavit. Subsequently, his further statement was recorded in which he also reiterated the stand taken in affidavit. The Tribunal also referred to the decision in case of the Dy. CIT v. Link Engineers (P.) Ltd. [IT Appeal No. 968 & 2248 (Delhi) of 2011] in whose case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." 6. It is required to be noted that the order passed by the ITAT in the case of the co-purchaserAbhalbhai Arjanbhai Jadeja was further carried before this Court by way of Tax Appeal No. 233/2013 and other allied appeals and it is reported that vide order dated 03/04/2013, the Division Bench of this Court has dismissed the said appeal confirming the order of deletion of similar addition in the case of Abhalbhai Arjanbhai Jadeja-co- purchaser. 7. In view of the above, when in the case of the co-purchaser, similar addition came to be deleted by the CIT(A), which came to be confirmed up to this Court, it cannot be said that the tribunal1 has committed any error in dismissing the appeal preferred by the revenue and consequently confirming the order passed by the CIT(A) deleting the addition of Rs.92, 00, 000/- made on account of unaccounted investment. No question of law, much less substantial question of law arises in the present Tax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed." 11.29 We also rely on the following observations of the Hon'ble Rajasthan High Court in the case of CIT Vs A L Lalpuria Construction Pvt. Ltd (32 taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered to be one of the group member. However, it was further observed that summons issued U/s 131 of the Act were served upon all such applicant/ creditors and their confirmation letters were filed and the companies were assessed to tax being the private limited companies, the existence of their separate legal entity ordinarily could not have been doubted. However on the basis of statement of KripaShanker Sharma which was recorded by the search authorities as regards accommodation entries, a sum of Rs.5 Lacs was assessed in the hands of present assessee alone and as regards other income, it was not considered to be in the hands of the present assessee. Obviously the department being aggrieved preferred appeal before the Tribunal and at the same time, the present assessee filed cross objection regarding part of the income, to the extent of a sum of Rs.5 Lacs, as being recorded in the hands of present assessee on the basis of statement of KripaShanker Sharma. The Tribunal while appreciating the factual matrix came on record observed that after the summons were issued U/s 131 of the Act, 1961 to the applicant/creditors and their confirmation letters were filed and the companies were as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s 234A of the Act. According to Ld. AR Shri Dudhwewala, the AO had grossly erred in levying interest u/s 234A of the Act with reference to the original due date of filing of return of income u/s 139(1) of the Act as opposed to the due date in terms of notice u/s 153A of the Act. We note that the dates of issuance of notices u/s 153A and filing of return of income in response thereto were as follows: Asst Year Notice u/s 153A Filing of ROI 2011-12 11.09.2019 15.11.2019 2012-13 11.09.2019 11.10.2019 2013-14 11.09.2019 11.10.2019 2014-15 11.09.2019 17.10.2019 2015-16 11.09.2019 11.10.2019 2016-17 11.09.2019 11.10.2019 12.2 Under Sub Section (3) of Section 234A of the Act, an assessee is required to pay interest under Section 234A only when the return of income is filed after the expiry of the time limit set out in notice issued under Section 153A of the Act and even in such circumstance the interest is levied only for the period commencing on the day following the expiry of the time prescribed in notice under Section 153A of the Act upto the date of filing of return of income. We find that the AO had wrongly taken the due date of filing of return in r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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