ACIT, CENTRAL CIRCLE- 15, NEW DELHI vs. HINDUSTAN AQUA LTD., NEW DELHI

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 CO No.71, 72 & 70/Del/2018 (ITA Nos.124 & 125/Del/2018 & 815/Del/2018) Assessment Years: 2010-11, 2011-12 & 2009-10 Metbrass Plassim India Ltd., Vs. ACIT, 25, Bazar Lane, Central Circle-15, Bengali Market, New Delhi New Delhi. PAN: AADCM9501A & 129/Del/2018 Assessment Years : 2009-10 & 2010-11 ACIT, Vs. Competent Infoways Pvt. Ltd., Central Circle-15, 25, Bazar Lane, New Delhi Bengali Market, New Delhi. PAN: AADCC2681F CO Nos.84 & 85/Del/2018 (ITA Nos.128 & 129/Del/2018) Assessment Years : 2009-10 & 2010-11 Competent Infoways Pvt. Ltd., Vs. ACIT, 25, Bazar Lane, Central Circle-15, Bengali Market, New Delhi New Delhi. PAN: AADCC2681F (Appellant) (Respondent) Assessee by : Shri Gautam Jain, Advocate Revenue by : Ms Pramita M. Biswas, CIT-DR Date of Hearing : 18.11.2020 Date of Pronouncement : 27.11.2020 ORDER

PER R.K. PANDA, AM:

6. He observed that during the course of pre-search enquiries, it was gathered that the assessee group had received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and creditworthiness. It was also gathered that the investment by such entities with the assessee group was mainly in the form of share capital which was subscribed at an abnormally high premium which lacked genuineness on their part to have agreed to subscribe at such premium without having received any return either in the form of dividends or appreciation in the value of their investment till date. He observed that search action further established beyond doubt that the assessee company like other group companies had received the impugned share capital from 6 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 various non-descript and shell entities/companies which grossly lacked creditworthiness and were in the nature of accommodation entries to convert the undisclosed income of the assessee group having been received in the form of such share capital from the stated entities/companies. He further observed that search action revealed the modus operandi of the assessee group for converting their undisclosed income through the aid of various personnel/employees who categorically admitted having aided the group in such misdemeanor by facilitating the process of creating various bogus companies within the group and having received share capital from such outside non-descript/shell companies and thereafter making the same available in the operating companies of the group through a layered structure as per the instructions of the promoter and his other employees/office bearers.

6.1 The Assessing Officer analyzed the tax returns from the income-tax data base and referred to the enquiries conducted on Delhi and Kolkata based companies. He also referred to the statement of Shri Narender Kumar Jain, who is close confident and associate of the promoter of the MMG Group, Shri Sanjeev Agrawal and their CA, Shri Ashwani Verma, the statement of Shri Narinder Kumar Garg who is Director of M/s North Delhi Beverages Pvt. Ltd., the statement of Shri Sanjeev Aggarwal, who is director- cum-promoter of MM group companies, the statement of Shri Krishan Kumar Bajaj, General Manager-Finance of the assessee company. He further referred to the statement of various other to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 persons, the enquiries conducted u/s 133(6) of the I.T. Act and the summons issued to various directors of the non-descript companies u/s 131 of the I.T. Act which were either returned back or delivered but there was no response or only part compliance. Ultimately the Assessing Officer came to the conclusion that the assessee failed to establish the identity, creditworthiness and genuineness of the parties wherefrom funds were received by the investor of the assessee who are also group companies of the assessee group. Since the assessee has received an amount of Rs.6,46,20,000/- towards share capital and share premium and the assessee could not discharge the burden cast on it to the satisfaction of the Assessing Officer, he treated the same as unexplained cash credit u/s 68 of the I.T. Act as the income of the assessee for the relevant period under consideration.

7. Before the CIT(A), the assessee, apart from challenging the addition on merit, challenged the assumption of jurisdiction u/s 153A of the Act. It was submitted that original return in this case was filed on 30th September, 2009 declaring an income of Rs.10,21,50,894/- which was assessed at an income of rs.10,27,91,857/- u/s 143(3) of the Act. This assessment was subsequently rectified u/s 154 of the Act determining the total income at Rs.7,50,20,860/-. The search u/s 132 was conducted in this case on 28.03.2015 and notice u/s 153A was issued on 10.05.2016. It was argued that no incriminating material was detected as a result of search and the addition was made on the basis of post-search enquiries and statements recorded u/s 132(4) of the I.T. Act. Relying on various decisions, it to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 was argued that since no assessment was pending on the date of search and the addition has been made on the basis of post-search enquiries and statements recorded u/s 132(4) of various persons, therefore, the Assessing Officer has no power to assume jurisdiction under the provisions of section 153A of the I.T. Act.

8. So far as the merit of the case is concerned, it was submitted that the assessee had filed full details on account of the sum received from M/s Fortune Industrial Resources Ltd. (Rs.3,96,00,000/-), Sterling Foils Ltd. (Rs.2,00,10,000/-) and Mahesh Finese Pvt. Ltd. (Rs.50,10,000/-) towards share capital and share premium. It was submitted that the assessee has furnished the complete details including address and PAN of the investor companies along with the distinctive number of share certificates, the various cheques issued on different dates with the name of the bank, the name and address of the directors as on 31.03.2013, the complete copy of the income tax return for assessment year 2009-10, copy of Form No.2 of Moon Beverages Ltd. filed with ROC as 'Return of Allotment', copy of Board Resolution of the assessee company and various other details to substantiate the identity and creditworthiness of the investor companies and the genuineness of the transactions. Therefore, addition cannot be made u/s 68 of the I.T. Act. It was accordingly argued that the addition made by the Assessing Officer should be deleted.

9. However, the ld.CIT(A) was not satisfied with the arguments advanced by the assessee. So far as the legal ground challenging the validity of assumption of 9 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 jurisdiction u/s 153A is concerned, he dismissed the ground raised

by the assessee by observing as under:- “5.1.1 have considered the submission of the Ld. A.R.. assessment order and cases law cited in this regard. The AO invoked the process u/s 153A after the search on appellant group on 28.03.2015 and on receipt of appraisal report from the DI (Investigation) with the allegation that the appellant company had received unexplained credit in its books u/s 68 of the IT Act. All the grounds of appeal are dealt with together being of similar nature. 5.2.The basic facts are as follows: The basis of addition as taken by the AO was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he surrendered an amount of Rs. 88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09. The disclosure was non descriptive and vague and it was also contended that the appellant shall explain the transactions after examining the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. These being primary and basic the legal ground going to the root of the assessment, it is necessary to examine the nature of incrimination material conferring upon the AO necessary jurisdiction u/s 153 A to utilize such material arising consequent to the search operation. The material so found and seized and thereafter relied upon and utilized thereon in the assessment of the assessee leading the AO to conclude that the share application / capital received by the appellant are unexplained. But, It is undisputed fact that the department found information in respect of the share certificates and the counterfoils thereof and other significant related material during the course of search operations that upon collating with the information received by the department lead to specific inputs in respect of doubtful nature on genuineness of the equity infused in the companies of the group. The material so gathered is prima facie incriminating in its nature and substance so as to attract the provisions of S. 153 A of the Act in the case of the appellant. The overall schema that emerges there from indicates that there was prima facie material available in this regard to enable the AO to initiate proceedings u/s 153A. The assessee contentions in this regard as under- a)In respect of share certificate found during the course of search in respect of companies mentioned at serial no 1 & 2 It has also been submitted that companies JA Builders Ltd and JPM Automobiles Ltd was also assessed with the ACIT, Central Circle -13, New Delhi and the order have also been passed at the same time. In the order passed in the case of JA Builders Ltd and JPM Automobiles Ltd no addition towards share capital have been made. As 10 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 such the appellant contended that same Assessing officer while passing the order at the same time in respect of same issue has formed two different views. b) The shares certificates found in respect of companies mentioned at serial no 3 to 5 is related to investments made by group concerns of JPM group and does not pertain to outsiders 5.3. These merit examination of the case under 153 A of the IT Act 1961. The availability of such documents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of an independent entity in normal circumstances. Any such entity will surely expect due returns or capital appreciation in due course. The investor is surprisingly bereft of interest in the matter. The AO and this appellate forum too have to construe the incriminating material in a harmonious fashion. Hon’ble Delhi High court has also reiterated in many rulings that action u/s 153 A is bound to be initiated in such situations. Therefore, this action of the AO is in tune with judgment of Hon’ble Delhi High Court in CIT (C)-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412 (Delhi), 234 Taxman

30. The same is further strengthened by the judgment of Hon’ble Delhi High Court in the case of Dayawanti Gupta vs CIT in ‘ITA Nos 357,358.359/2015 and other’ dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record, I am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The AO was well within his powers to invoke section 153 A of the Act on prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground No.4(a) and 4(b) are therefore dismissed.”

10. He, however, deleted the addition made by the AO on merit by observing as under:- “5.4 Regarding the merits, as per ground of appeal No.3, I have gone through the assessment order passed by the AO and verified the material placed on paper book and was part, of the transaction and credit worthiness of the investors by issuing notices u/s 133(6) of the Act a) M/s Fortune Industrial Resources Limited, - b) Sterling Foils Limited v c) M/s Mahesh Finsec Pvt. Ltd. - to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 5.5. And information and documents requisitioned u/s 133(6) were as under: i) Relevant extracts Statements of bank account statement of the investors showing payments made towards share application money. ii) Copies of allotment letters. iii) Share Application form duly filled by the investor companies. iv) Confirmation in respect of allotment of equity shares to the investors. v) Copy of PAN card of the investor companies. vi) Memorandum & Articles of Association of the investor companies clearly depicting their corporate identity number. vii) Copies of share certificates issued by the assessee company, viii) A chart showing details of director of the investor companies. ix) A chart showing details of shareholders of the investor companies. i) Copies of the acknowledgement of the Income tax return filed for AY 2009- 10 by the investor companies along with their audited financials for the year ended 31st March 2009. 5.6. The notice u/s 133(6) of the act was complied with and the requisite Information and documents were furnished to the AO required information and documents were available according to text of order itself. The assessee has furnished the details of financials of the investing entities. After considering the identities and financials and credit worthiness of the investor companies and genuineness of transaction and source and availability of fund by investors, I am of the considered view that the AO has merely accepted the appraisal report of the Investigation Wing without meeting the touchstone tests of section 68 like - credit worthiness, identities and genuineness of transaction. Further A.O has made such addition stating that the income declared by the investors is lesser than the investment made by them which in my opinion has no criteria it is only source and availability of fund which remain the factor to observe accordingly the addition made by A.O. u/s 68 of the Act is deleted. 5.7. Ld AR also placed reliance on the judgments in CIT vs. Sophia finance Ltd. [1994] 205 ITR 98 (FB) (Delhi), CIT vs. Nipuan Auto (P) Ltd. {[2014] 49 taxmann.com 13 (Del.) 361 ITR 155 (Del.), Commissioner of Income-tax vs Winstral Petrochemicals P. Ltd. 2011 330 ITR 603 (Del.), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Stellar Investments Ltd 192 ITR 287 (Del.) & CIT v. Stellar Investment Ltd 2001 251 ITR 263 (SC) and contended that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the share application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR (ST.) 5 (SC), CIT v. Divine Leasing & Fiance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon’ble SC vide order dated 12 ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 21.01.2008], CT=It vs Five Vision Promoters Pvt Ltd 65 taxmann.con 71 (Dehli HC), CIT v. Vrindavan Farms Pvt Ltd (ITA 71/2015) (Delhi He), CIT V. Kamdhenu Steel & Alloys Ltd. [2004] 361 ITR 0220 (Del HC). 5.8. It is pertinent to refer to the recent judgment dated 01st August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt Ltd covers the case of the appellant on the facts. Relevant Para of the judgment is extracted below:- “31. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra), this Court had considered the entire gamut of case law on the assumption of jurisdiction under Section 153A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutipfsupra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the said decision in Smt. Dayawanti Gupta v. CIT (supra) is being again discussed herein.

32. In Smt. Dayawanti Gupta v. CIT (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that the papers recovered during the search contained "details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside books of accounts" and they were "actually unaccounted transactions made” by two of the firms of the Assessees. Thirdly, the Court found as a matter offact that the Assessees were "habitually concealing income" and that they were "indulging in clandestine operations" and that such persons "can hardly be expected to maintain meticulous books or records for long." As pointed out by this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) the decision in Smt. Dayawanti Gupta v. CIT (supra), therefore, turned on its own facts and did not dilute the law explained in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra).

33. At this stage, it requires to be noticed that the decision of this Court in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra) took note inter alia of the decision of the Bombay High Court in Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom), wherein it was held that if no incriminating material was found during the course of search, in respect of each issue, then no addition in respect of any such issue can be made to the assessment under Sections 153A and 153C of the Act. The decisions of this Court in CIT v. Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012] 254 CTR 392 (Del) were extensively discussed in Commissioner of Income Tax 13 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 (Central-Ill) v. Kabul Chawla (supra). The Court in Commissioner of Income Tax (Central-Ill) v. Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search "is a separate and distinct assessment." It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated."

38. Before the learned CIT (A), the assessee has produced the copy of bank account of all the share applicant companies. The CIT (A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no cash deposit in the bank account of any of the share applicant before the issue of cheque for share application money to the group companies of the assessee. On the other hand, the credit is by way of transaction. During remand proceedings, the Assessing Officer has made necessary verification from the bank of the share applicant and no adverse finding is recorded by him in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to Shri Tarun Goyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because: (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement. -- Conclusion – 44. Accordingly the question framed by the Court in IT A Nos. 11, 12 and 21 of 2017 by the order dated 21st March, 2017 is answered in the negative i.e. in favour of the Assessee and against the Revenue by holding that the additions made under Section 68 of the Act on account of the statements made by the Assessee's Directors in the course of search under Section 132 of the Act were rightly deleted by the ITAT. ” 5.9. Respectfully following the above judgment, which is on identical factual matrix, it can be reasonably inferred that material found during the 14 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 search in respect of the equity received by the assessee cannot lead to the conclusions drawn by the AO. No specific corroborative evidence has been brought on record by Assessing Officer to prove that the equity subscription is an accommodation entry. Besides, appellant has also discharged its onus and submitted all the documentary evidence in respect of the investment. The details submitted in this regard by the appellant have also been made part of order by Assessing officer. It is also undisputed fact that the director of the appellant companies have never made any statement regarding the share capital / share premium / share application money and no disclosure have been made with regard to share capital / share premium / share application money / unsecured loan. As such, the addition made by the Assessing officer is unsustainable on the various legal grounds and on facts of the case. The addition made in the case of the appellant is deleted. These grounds are- accordingly allowed.”

10.1 So far as M/s Moon Beverages Ltd. for A.Y. 2011-12 is concerned, the AO, apart from addition u/s 68, has made another addition of Rs.4,26,00,000/- being interest received on investments with Citi Bank, Gurgaon. The ld.CIT(A) deleted the same by observing as under:- “As per ground of appeal no. 4, the Appellant has raised objection on addition made by AO for Rs. 4,26,00,000/- on account of interest received from the Citi Bank. I have gone through the submission and facts of the case, the appellant has been victim of fraud committed by an authorized representative of the Citi Bank and had given deposits of Rs. 71.00 crores. Ultimately the appellant and bank had settlement which categorically mentioned that the depositor would get principal amount only and whatever paid earlier shall be appropriated toward the principal as such no interest payment either is paid or payable. In view of submission and citations given by the appellant in case of Rockwell Engineering Co. Ltd. Vs. CIT, (1989) 180 ITR 227 (Ker) that interest will be taxable only when the same is received after settlement of dispute. In the case of the assessee, since no interest was received, nothing was accordingly offered to tax as per the settlement of the dispute with Citi Bank. Similarly, where the income itself is subject matter of dispute, the law is now settled that the income cannot be treated as accruing or arising till such time as the dispute itself is finally settled as was decided in CIT vs. Hindustan Housing and Land Development Trust Ltd., [1986] 161 ITR 524 (SC). After considering the facts of the case, I am of opinion that the addition made of A.O. on account of notional interest of Rs. 4,26,00,000 is not sustainable as such the same is deleted.” to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018

11. Aggrieved with the order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds for A.Y. 2009-10:- “1. On the facts & circumstances of the case the CIT(A) has erred in deleting the addition of Rs. 6,46,20,000/- made by AO on account of unexplained Share Capital and Share Premium u/s 68 of the I.T.Act 1961.

2. On the facts & circumstances of the case the CIT(A) has erred in holding the source of share capital genuine when it was specifically established that investor companies are paper companies.

3. The CIT(A) has erred on facts and in law in observing that requisite details and evidences filed by the assessee were sufficient to prove the genuineness of the transaction related to share capital/premium where as the assessee failed to discharge the primary onus case upon it u/s 68 of the IT act 1961 of proving identity, satisfactorily explaining the creditworthiness and genuineness of these transactions.

4. The Ld. CIT(A) has erred on facts and in law in not even considering the statements of directors of the investing companies admitting that the investing companies in which they are directors, are actually paper companies meant for providing accommodation entries.

5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”

1. That the learned Commissioner of Income Tax (Appeals)-26, New Delhi has erred both in law and on facts in upholding the initiation of proceedings u/s 153 A of the Act and, framing of assessment u/s 153 A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made of Rs. 6,46,20,000/- is without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 and Pr. CIT vs. Meeta Gutgutia reported in 395 ITR 526.

2. That since approval obtained u/s 153D of the Act was a mechanical and, invalid approval having been granted without due application of mind to to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 the facts of the assessee company, order of assessment made u/s 153 A/143(3) is invalid and not in accordance with law. It is therefore, prayed that it be held that notice issued u/s 153A of the Act and also assessment framed u/s 153A/143(3) of the Act are without jurisdiction.”

13. Similarly, the additions made by the AO in respect of the assessee for other years and for other assessees for different assessment years are as under:-

Assessee A.Y. 2009-10 A.Y. 2010-11 A.Y. 2011-12 A.Y. 2012-13 Moon Beverages Ltd. 6,46,20,000 7,92,18,000 10,98,60,000 5,33,10,000 Hindustan Aqua Ltd. 4,25,00,000 - 4,25,00,000 - Hal offshore Ltd. 7,65,00,000 4,30,00,000 1,55,00,000 9,50,00,000 Sunstar Infra - - - 2,91,00,000 Developers Pvt. Ltd. Fortune Industrial - - 9,00,00,000 - Resources Ltd. Metbrass Plassim 5,24,00,000 1,50,00,000 6,30,00,000 - India Ltd. Competent Infoways 4,63,63,000 2,11,50,000 - - Pvt. Ltd.

16.1 Referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. SMC Power Generation Ltd. reported in ITA 406/2019, order dated 23rd July, 2019, copy of which is paced at pages 429 to 432 of the common paper book, the ld. Counsel drew the attention of the Bench to para 10 of the said order which reads as under:-

10. The requirement that the incriminating material to have the co-relation to the particular addition sought to be made is a logic that will hold good not only for Section 153 C of the Act but in relation to Section 153A of the Act as well. Consequently, this Court does not find any error having been committed by the ITAT in accepting the plea of the Assessee that there is no incriminating document which was seized in the course of search relating to the addition sought to be made on account of the share capital. Therefore, the jurisdictional requirement of Section 153 A of the Act was not satisfied.

23. The ld. Counsel for the assessee submitted that the seized document at page 59 of Annexure A-19 is seized from the corporate office of M/s Hindustan Aqua Ltd. which is evident from page 42 of the assessment order of Moon Beverages Ltd. for A.Y. 2009-10 which is a third party premises in respect of the below mentioned assessees:- Name of Cases Assessment Objection Year Appeal filed by No. Sr. No. Revenue Moon Beverages Ltd. i) 2009-10 115/D/18 73/ (25, Bazar Lane, Bengali Market, ii) 2010-11 116/D/ 8 74/D/2018 New Delhi-110001) iii) 2011-12 117/D 18 75/D/2018 iv) 2012-13 118D/18 76/D/2018 v) 2014-15 6955/D/18 6/D/2018 Vi) Metbrass Plassim India Ltd. 2009-10 815/D/18 70/D/2018 ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 vii) (25, Bazar Lane, Bengali Market, 124/D/l 8 71/D/2018 2010-11 New Delhi-110001) viii) 2011-12 125/D 18 72/D/2018 Hall Offshore Ltd. ix) 2009-10 1 ll/D/18 79/D/2018 (25, Bazar Lane, Bengali Market, x) 2010-11 112/D/18 80/D/2018 New Delhi-110001) xi) 113/D/18 81/D/2018 2011-12 xii) 2012-13 114/D/18 82/D/2018 xiii) 2015-16 6956/D/18 — xiv) 2009-10 128/D/18 84/D/2018 Competent Infoways (P) Ltd. (25, Bazar Lane, Bengali Market, xv) 2010-11 129/D/18 85/D/2018 New Delhi-110001) xvi) Sun Star Infra Developers (P) Ltd. 2012-13 816/D/l 8 88/D/2018 (25, Bazar Lane, Bengali Market, New Delhi-110001) xvii) 2011-12 119/D/18 90/D/2018 Fortune Industrial Resources Ltd. (153/1, Nirankari Colony, Delhi - 110009)

26.1 The ld. Counsel for the assessee submitted that approval envisaged u/s 153D of the Act is not merely an administrative approval but there is a statutory duty on the higher authorities to apply its mind before granting the approval. He submitted that this duty cannot be discharged mechanically by the officers as the inbuilt purpose to safeguard the interest of the citizens in that case cannot be fulfilled. He accordingly submitted that in view of the above decisions and various other decisions mentioned in the synopsis, the order passed by the AO is illegal and void ab-initio since the approval u/s 153D of the Act has been granted in a mechanical manner.

38. Referring to the decision in the case of CIT vs. N R Portfolio Pvt. Ltd. reported in 29 taxmann.com 291, she submitted that the Hon'ble Delhi High Court has held that if AO doubts the documents produced by assessee, the onus shifts on to the assessee to further substantiate the facts or produce the share applicant in assessment proceeding. to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 39. Referring to the decision in the case of CIT vs. Empire Builtech (P.) Ltd. reported in 366 ITR 110, she submitted that the Hon'ble Delhi High Court has held that u/s 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. She also relied on the following decisions :-

(i) CIT vs. Focus Exports (P.) Ltd., 51 taxmann.com 46 (Delhi). (ii) PCIT vs. Bikram Singh, (Delhi). (iii) Rick Lunsford Trade & Investment Ltd. vs. CIT, 385 ITR 399 (Cal).

40. Referring to the decision in the case of Rick Lunsford Trade & Investment Ltd. vs. CIT [2016-TIOL-207-SC-ITJ (Supreme Court), she submitted that the Hon'ble Supreme Court has dismissed the SLP upholding the decision of the Hon'ble High Court that it is open to the Revenue Department to make addition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. A.O. has categorically after making necessary inquires & after taking into consideration of investigation reports & search & seizure materials made the addition.

41. The ld. DR summarized the finding of the Assessing Officer and submitted that:

(i) Such entities who have invested are paper-existing only without physical existence (ii) Such entities were never produced for examination by A.O to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 (iii) Such entities have no worthy business to advance such investment (iv) Such entities have no proper identity of existence without any creditworthiness (v) Such entities only indulged to provide accommodation entries of unaccounted/undisclosed Money routed through banking channel creation of PAN & filing of Income Tax returns etc. , thus doing only non- genuine transaction / bogus transaction (vi) Significant deficiencies/discrepancies have been established by the A.O. to prove identity as non-existent/bogus only paper entities / Creditworthiness is absent due to negligible/loss Income of such Entities / Genuineness of Transaction is only Sham/non-genuine.

42. So far as the order of the ld. CIT(A) deleting the addition on merit is concerned, the ld. CIT-DR submitted that the ld.CIT(A) has incorrectly deleted the addition made by the AO holding that the assessee has proved the identity and credit worthiness of the shareholders and genuineness of the transaction. Referring to the decision of the Hon’ble Delhi High Court in the case of PCIT vs. NDR Promoters (P) Ltd., reported in 410 ITR 379 and the decision of the Hon’ble Supreme Court in the case of PCIT vs. NRA Iron & Steel (P) Ltd., reported in 103 taxman.com 48 she submitted that mere production of certain papers do not discharge the ingredients of section 68 of the Act. She accordingly submitted that the ld.CIT(A) is not justified in deleting the addition on merit.

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 42.1 So far as the order of the CIT(A) in upholding the validity of assessment framed u/s 153A/143(3) of the Act is concerned, she heavily relied on the order of the CIT(A). The ld. DR also drew the attention of the Bench to the written synopsis while deciding the appeal of the assessee in the case of Moon Beverages Ltd. for A.Y. 2013-14 in which reads as under:-

“32. So far as assessee company's grounds of Appeal regarding "no incriminating material is available she filed the written synopsis and submitted that it has no merit on facts & law for following reasons: i. Provision of section 153A of LT. Act 1961 inserted w.e.f 01.06.2003 is an OVERRIDING ( Notwithstanding) Provision if search & seizure is conducted after said date of insertion & in this case search & seizure was conducted at assesseee's business/different premises covered under section 132 of the I.T. Act 1961 wherein documents/data storage devices etc. were found & seized & on examination & further Investigation on such seized details/Information it was found regarding bogus/non-existent entities who had advanced investment in assessee' company proving that Identity of such entities is not established, genuineness of transaction has been found to be NON-GENUINE & creditworthiness was never proved & such entities were only existing on paper without any physical presence as none of such entities was produced before the said A.O. being of bogus existence and as such these details/ information seized which prove bogus existence / non-genuine transaction having no creditworthiness of such parties can be treated as INCRIMINATING EVIDENCE against the said Assessee proving routing of undisclosed/unaccounted money circulated through bogus share capital & share premium invested by bogus entities & so ratios in Kabul Chawla case of Delhi High Court in 380 ITR 573 & Meeta Gutgutia reported in 395 ITR 526 are NOT applicable in this case being DISTINGUSHABLE as In this case incriminating materials in terms of name & addresses, amounts of accommodation entries etc. which in inquiry by the A.O. during assessment proceedings ultimately proved bogus / non-genuine & paper-entities etc. ii. As search & seizure has been conducted in this case, question of assessment under other sections like 147 / 148 does not arise at all being prohibited under section 153A being OVERRIDING section under I.T. Act on the basis of materials found & seized u/s 132 of I.T. Act 1961. iii. Bare & plain reading of provisions of section 153A of I.T. Act 1961 does not directly state any word like 'Incriminating material' in said section, however without prejudice, spirit of said provision may indicate materials 40 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 found & seized during search under section 132 which would be utilized as basic information for such assessment u/s. 153A & if on further inquiry/investigation by A.O. during assessment proceedings on such seized materials, unaccounted/undisclosed income has been found & established for said assessment. The A.O. in the said case relied on seized documents/information on prima-facie bogus share capital & share premium (valuation of which NOT as per provision of Income Tax Act 1961 as stated by Ld CIT(A) in Appeal order) and after conducting further inquiry/investigation on said seized materials/information the A.O. finally established bogus/ accommodation entries in terms of share capital & share premium as assessee miserably failed to prove identity of such Entities , genuineness of transaction found to be NON- GENUINE & creditworthiness which was never proved as such Entities were only existing on paper without any physical presence as none of such entities were produced before said A.O. for examination being bogus/paper in existence. iv. In legal parlance, Incriminating material means materials which are used for wrongful / illegal act in violation of any law in existence. In this case the assessee company indulged in practice of avoiding genuine tax by routing undisclosed/unaccounted taxable income through bogus share capital & share premium investment by non- existent entities having no creditworthiness by non- genuine transaction thus falling under section 68 of Income Tax Act 1961. The basic information/materials obtained by seizure which were inquired/investigated further to establish by A.O. that Identity of such entities is not established, genuineness of transaction has been found to be NON- GENUINE & creditworthiness was never proved & such Entities were only existing without any physical presence as none of such entities was produced before said A.O. being bogus existence. v. Had there been no search & seizure of such paper- documents from said Assessee, then A.O. could not have obtained basis information/details that ultimately, on further inquiry/investigation by A.O., during assessment proceedings, resulted to establish bogus share capital/share premium money as accommodation entries only for routing taxable undisclosed/unaccounted income in a wrongful manner. vi. It is the wisdom of Legislation that no word/concept 'incriminating material' is directly incorporated in provision of section 153A of I.T. Act 1961, although spirit of said provision of section 153A indicate that search & seizure action u/s 132 has been done in the case of Assessee & panchnama has been drawn for said Assessee & that certain materials/information have been found/seized due to such search & that such found/seized materials/information have been utilized for purpose of assessment u/s 153A wherein A.O. has found or established undisclosed/unaccounted taxable income on further inquiry/investigation on such found/seized materials/information & thus such found & seized materials/information is to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 termed as 'Incriminating materials/information' against Assessee. Moreover A.O. is prohibited to take any action u/s 147/148 of LT. Act 1961 in case search & seizure u/s 132 has been done in the case of Assessee & certain materials/information have been found/seized in said assessee's case & assessment u/s 153A is mandated. Moreover, as on date said provision u/s 153A is valid law under Income Tax Act 1961. vii. Any material/information found / seized u/s 132 of LT. Act 1961 is 'incriminating material' if on further inquiry/investigation by A.O., certain undisclosed/unexplained taxable income is found / established ultimately in assessment u/s 153A of LT. Act 1961.

43. She accordingly submitted that considering all facts and the cited case laws, the addition made by the AO should be sustained and the order of the CIT(A) deleting the addition should be reversed.

44. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer on the basis of various post search enquiries conducted and statement recorded of various persons u/s 132(4) and 131 made addition of Rs.6,46,20,000/-/- in the hands of the assessee u/s 68 of the I.T. Act on the ground that the assessee failed to substantiate with cogent evidence to his satisfaction regarding the identity and creditworthiness of the investor and the genuineness of the transaction. According to the Assessing Officer, since the assessee could not produce the directors/principal officers of the investor companies and since the returned income is meager considering the huge investment made by them in the shares of the assessee company with huge premium, therefore, the provisions of to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 section 68 are clearly attracted. We find, in appeal, ld. CIT(A) deleted the addition made by the Assessing Officer on merit, the reasons for which have already been reproduced in the preceding paragraph. He however has dismissed the ground raised by the assessee challenging the validity of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search, reasons for which have already been reproduced in the preceding paragraphs.

45. It is the submission of the ld. counsel for the assessee that the original return was filed on 30th September, 2009 declaring income at Rs.10,21,50,894/- which was assessed u/s 143(3) at total income of Rs.10,27,91,857/-. This assessment was rectified u/s 154 of the Act determining the income at Rs.7,50,21,860/-. Thus, assessment was completed and the assessment was not pending on the date of search. Since the addition made by the Assessing Officer is not based on any incriminating material found during the course of search and addition has been made on the basis of post-search enquiry and on the basis of statements recorded u/s 132(4) of the I.T. Act, therefore, the same cannot constitute incriminating material so as to enable the Assessing Officer to assume jurisdiction u/s 153A of the I.T. Act.

45.1 So far as the finding given by the ld.CIT(A) that share certificates and counterfoils thereof were found which, according to him, is incriminating in nature, it is the submission of the ld. Counsel that in a corporate office the company is required to keep the share certificates and, therefore, the same cannot 43 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 be construed as incriminating in nature. So far as the seized document showing details of certain cash flow is concerned, it is the submission of the ld. Counsel that the said document was found and seized from the corporate office of M/s Hindustan Aqua Ltd., at 1010, Vijaya Building, Barakhamba Road, New Delhi, which is a flow chart and is not incriminating in nature. Further, it is also his submission that the said document was seized from third party premises in respect of other concerns/other assessees and, therefore, addition, if any, could have been made u/s 153C of the Act and not u/s 153A of the Act. In any case, it is his submission that the said document is not incriminating in nature since the said chart showing details of advance for purchase of shares or refund of share application money are duly recorded in the books of account, a statement submitted before the AO and not controverted by him, and, therefore, cannot be said as incriminating in nature. So far as the statements recorded u/s 132(4) of the Act is concerned, it is also his submission that statements recorded u/s 132(4) cannot be construed as incriminating in nature in view of the various decisions cited.

46.1 Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending. As mentioned earlier, the original return was filed on 30th September, 2009 declaring income at Rs.10,27,91,857/-. The assessment was completed u/s 143(3) determining the total income at Rs.10,27,91,857/-. This assessment was rectified u/s 154 of the IT Act determining the income at Rs.7,50,21,860/-. Thus, the assessment was completed and was not pending on the date of search. A perusal of the assessment order shows that the addition is not based on any incriminating material, but, based on post-search enquiries or statements recorded u/s 132(4) of the Act. The share certificates and counterfoils thereof found during the search, in our opinion, cannot be construed as incriminating in nature. Even the document appearing at page 59 of Annexure A-10 found and seized from the corporate office of M/s Hindustan Aqua Limited at 1010, Vijaya Building, Barakhamba Road, New Delhi, showing the details of advance for purchase of shares or refund of share application money in our opinion cannot be construed as incriminating since the entries are duly recorded in the books of account. The AO nowhere has disputed or challenged the above submission of the assessee before him as appears at page 43 of the to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 assessment order. Therefore, once the entries are recorded in the books of account, the same in our opinion cannot be construed as incriminating in nature. So far as statements u/s 132(4) is concerned, the same are also not incriminating in nature as held in various decisions. Under these circumstances, we are of the considered opinion that when the addition is not based on any incriminating material found as a result of search, no addition can be made u/s 153A/143(3) of the Act.

47. We find, identical issue had come up before the Tribunal in assessee’s own case for A.Y. 2013-14. We find, the Tribunal vide order dated 7th June, 2018 for A.Y. 2013-14, while deciding the validity of assessment u/s 153/143(3) in absence of any incriminating material has observed as under:-

“35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect.

36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and surrendered subject to cross checking of the facts and to explain 46 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected."

37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries.

38. The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 has held that statements recorded u/s 132(4) of the I.T. Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under :- "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law."

39. We find the Hon'ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263 has observed as under :- "

41. In the light of the above decisions, statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material.

42. As mentioned earlier, the addition of Rs.11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material.

43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings.

45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been ITA No.7567/Del/2017 made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.

46. Since the assessee succeeds on this legal ground, arguments made by the ld. counsel for the assessee on merit are not adjudicated being academic in nature.”

48. We find, the Hon’ble Delhi High Court in the case of PCIT vs. SMC Power Generation Ltd., ITA 406/2019, order dated 23rd July, 2019, copy of which is placed at pages 429 to 432 of the paper book, has observed as under:-

“3. The question sought to be raised by the Revenue is whether the ITAT was justified in quashing the assessment order framed under Section 153A of the Income Tax Act, 1961 (Act) on the ground that there is no incriminating 49 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 material found qua the addition made on account of share application money in the course of the search? 4. The facts in brief are that a search and seizure operation under Section 132 of the Act was initiated in the case of the SMC Group on 4th August, 2011. Thereafter a notice dated 11th January, 2013 under Section 153A of the Act was issued to the Assessee to file return of income for the relevant year. The allegation was that the Assessee had not established the genuineness, identity and creditworthiness of the three entities from whom it had received share premium in the sum of Rs.3.00 crore, Rs.35 lakhs and Rs.2.65 crores during the AY in consideration. In the assessment order dated 31st March, 2014 under Section 143 (3) read with Section 153A of the Act, the AO made an addition of Rs.3.00 crores to the income of the Assessee disbelieving the contentions of the Assessee.

5. The appeal by the Assessee was allowed by the Commissioner of Income Tax (Appeals) [CIT (A)] by an order dated 21st May, 2015. The CIT (A) once again examined the documents produced by the Assessee and came to the conclusion that in the assessment framed earlier under Section 143(3) of the Act, the Revenue had accepted the amount received by the Assessee as share capital. It was held that there was no evidence to take a different view in the matter.

49. We find, the coordinate Bench of the Tribunal in the case of ACIT vs. Versatile Polytech P. Ltd. vide and ITA No.1088/Del/2018 for A.Y.s 2009-10 and 2014-15 respectively, vide order dated 15th March, 2019, has held that no addition can be made u/s 153A in absence of any incriminating material found during the course of search. The relevant observation of the Tribunal from para 20 onwards read as under:- “20. We have considered the rival arguments made by both the sides and perused the relevant material available on record. We have also considered the various decisions cited before us. We find the original return of income in the instant case was filed on 29th September, 2009 and the assessment was completed u/s 143(3) on 26th December, 2011 at a loss of Rs.1,06,53,140/- and income u/s 115JB at Rs.1,19,22,760/-. We find the search took place in the instant case on 28th March, 2015 and on the date of search, the assessment was not pending. It is also an admitted fact that no incriminating material relating to the share application money was found during the course of search and the entire addition of Rs.3,66,00,200/- is based on pre-search verification or post- search enquiries and statements recorded u/s 132(4) of the Act. It is also pertinent to mention that the statements recorded u/s 132(4) relates to either MSG Finance India Pvt. Ltd. or Heritage Beverages Pvt. Ltd. and does not relate to the assessee, i.e., M/s Versatile Polytech P. Ltd. Therefore, the question that has to be answered is as to whether the addition u/s 153A in absence of any incriminating material found during the course of search can be sustained.

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 21. We find an identical issue had come up before the Tribunal in the case of the sister concern, namely, Moon Beverages Ltd. (supra). We find the Tribunal, relying on various decisions held that no addition could have been made u/s 153A since the assessment was not abated and the addition was made on the basis of statements recorded u/s 132(4) and post search enquiry and no incriminating material was found/seized during the course of search. While doing so, the Tribunal has relied on the decisions of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 (Del), CIT vs. Meeta Gutgutia reported in 395 ITR 526, CIT vs. Harjeev Aggarwal reported in 290 CTR 263, CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and various other decisions. The relevant observations of the Tribunal from para 35 onwards read as under:- “35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12.09.2013 which was accepted u/s 143(1) vide intimation dated 18.04.2014. The period for issue of notice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect.

36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was ITA No.7567/Del/2017 surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected."

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the ld. counsel for the assessee that the addition made by the Assessing Officer u/s 68 of the I.T. Act is not based on any incriminating material and is based on statements recorded during search u/s 132(4) and post-search enquiries.

39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law."

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 40. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide order dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under :- "4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and ITA No.7374/Del/2017 ITA No.7567/Del/2017 circumstances, respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search."

43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. Following the above decision, the Hon'ble Jurisdictional High Court in the case of CIT vs. Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has ITA No.7374/Del/2017 ITA No.7567/Del/2017 attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings.

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 44. The Hon'ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 has upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years.

45. Since in the instant case addition of Rs.11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been ITA No.7567/Del/2017 made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.”

49.1 We find, the coordinate Bench of the Tribunal in the case of M/s Metbrass Plassim India Ltd. vs. ACIT, order dated 17th September, 2018 (one of the group concerns and one of the assessees here) for A.Y. 2013-14, has observed as under:- to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 “36. We have considered the rival arguments made by both the sides in the light of the orders of the authorities below. We have also considered the case law that is brought to our notice. Ld. Assessing Officer made addition of Rs.39 lacs in the hands of the assessee u/s 68 of the Act basing on various enquiries conducted and statements recorded of various persons u/s 132(4) and 131, stating that the assessee failed to substantiate to his satisfaction the identity and creditworthiness of the investor and the genuineness of the transaction with cogent evidence. According to the Assessing Officer, since the assessee could not produce the investor company and since its returned income is meager considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted.

37. Ld. CIT(A) also upheld the action of the Assessing Officer on merit in the appeal preferred by the assessee. He has also dismissed the ground raised

by the assessee challenging the validity of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search. Ld. CIT(A) alternatively also held that the addition is sustainable on account of mischief of provisions of section 56(2)(viib) read with Rule 11UA(1)cb, the reasons for which have already been reproduced in the preceding paragraph.

38. It is the submission of the ld. AR that the original return was filed on 26.09.2013 declaring income at Rs.1,84,981/- which was assessed u/s 143(1) of the Act. He further submitted that the period for issue of notice u/s 143(2) expired by 30.9.2014 since such notice cannot be served on the assessee after the expiry of six months from the end of the financial year in which the returns was furnished and thereby the assessment proceedings reached finality and there was no pending proceedings. It is not the case of the revenue that any notice u/s 143(2) of the Act was issued or served before the prescribed time limit and, therefore, the assessment on the date of search was not pending. Since the addition made by the Assessing Officer is not based on any incriminating material found during the course of search and addition has been made on the basis of post-search enquiry and on the basis of statements recorded u/s 132(4) of the Act, therefore, the same cannot constitute incriminating material so as to enable the Assessing Officer to assume jurisdiction u/s 153A of the Act.

39. Before adverting to the merits of the case, we deem it necessary to deal with the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A of the Act, in absence of any incriminating material found during the course of search when the assessment was not pending. It is an admitted fact that the original return of income was filed on 26.09.2013 which was processed u/s 143(1) of the Act. The period for issue of notice u/s 143(2) expired by 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in 56 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect.

40. Para 5 page 11 of the impugned order reads that,- “The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs.88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected……”

41. At this juncture reference to the case law relied upon by the Ld. AR becomes necessary. In CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 the Hon’ble jurisdictional High Court has held that statements recorded u/s 132(4) of the Act do not by themselves constitute incriminating material, with the following observations:- “38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law.”

ITA Nos.115 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 42. Further in CIT vs. Harjeev Aggarwal reported in 290 CTR 263 (Del) Hon’ble Court observed that,- “23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment.”

44. In the light of the above decisions, statements recorded u/s 132(4) of the Act, 1961 cannot constitute as incriminating material.

46. As has been stated above, the addition of Rs.39 lacs was not made on the basis of any incriminating material, but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. We shall refer to the leading cases on this aspect.

50. Since in the instant case addition of Rs.39 lacs was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of 59 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 the Assessing Officer in assuming jurisdiction u/s 153A of the Act. Accordingly, the addition made by the Assessing Officer and upheld by the ld. CIT(A) in the 153A assessment proceedings being void ab-initio are deleted.

49.2 In view of the above discussion, we are of the considered opinion that since the addition is not based on any incriminating material found during the course of search, therefore, such assessments framed u/s 153A/143(3) is not in accordance with law and is liable to be quashed. Our above view is fortified by the recent decision of the Hon’ble Delhi High Court in the case of PCIT vs. M/s L.T. Foods Pvt. Ltd., vide and CM No.4576-77/2020, order dated 4th February, 2020 wherein the Hon’ble High Court has observed as under:- “ The Revenue appeals against the order dated 03.07.2019 passed by the Income Tax Appellate Tribunal, Delhi Bench ‘D’, New Delhi in ITA No.4162/Del/2013 and ITA No.4044/Del/2013. The first was an appeal preferred by the assessee and the second was an appeal preferred by the Revenue in relation to the Assessment Year 2005-06. The Tribunal allowed the appeal of the assessee and disallowed the appeal of the Revenue on the premise that the Revenue had not been able to establish that any of the additions made during the course of the assessment proceedings were premised on any incriminating material found during the search of the Dawat Group of Companies – to which the assessee belongs. The Tribunal has held in paragraph 40 of the impugned order as follows: “40. We have carefully considered the rival contention and perused the orders of the lower authorities. It is apparent that on the date of initiation of search on 10/2/2009 the assessment proceedings u/s 143 (3) of the income tax act was completed on 18/12/2007. Therefore on the date of search no assessment proceedings were pending for the impugned assessment year. Therefore if any addition is required to be made by the learned assessing officer should have been made on the basis of the seized material found during the course of search. We have perused the various additions/disallowances made by the learned assessing officer and found that there is no discretion of any seized material found during the course of search based on which these disallowances/additions have been made. The learned departmental 60 to 118, 122 & 123, 111 to 114, 816, 119, 124 &o 125, 128 & 129/Del/2018 CO Nos.73 to 76, 86 & 87, 79 to 82, 88, 90, 71, 72 & 70, 84 &85/Del/2018 representative also could not show us any seized material based on which the said additions have been made. Therefore, respectfully following the decision of the honourable Delhi High Court in CIT vs Kabul Chawla (supra) the above additions deserve to be deleted. Accordingly we direct the learned assessing officer to delete the disallowance of payment in contravention is of provisions of section 40A (3) of the income tax act, disallowance of expenses on account of nondeduction and short deduction of tax at source and addition on account of personal expenditure. In the result, we reverse the order of the learned CIT - A income from the above disallowances and allow the appeal of the assessee to these extent. ” The Assessing Officer, while passing the assessment order, has not clearly stated as to what is the incriminating material on the basis of which the additions were sought to be made. The co-relation between the so-called incriminating material – which has not even been disclosed, and the additions made, should have been established by the Assessing Officer, which had not been done. In these circumstances, in our view, no substantial question of law arises for our consideration. Dismissed.”

49.3 In view of the above discussion, we allow the ground of cross objection No.1 and hold that since no incriminating material was found as a result of the search conducted on the assessee, therefore, the notice issued for initiation of proceedings u/s 153A and the assessment framed subsequently are without jurisdiction and deserves to be quashed. We hold and direct accordingly.

51. Identical grounds have been taken by the Revenue in the remaining appeals and identical grounds have been raised by the assessee in the cross objections. Since the additions in the other appeals also are not based on any incriminating material found during the course of search and since we have already held that statements recorded u/s 132(4) are not incriminating in nature, therefore, the addition made by the AO being not based on any incriminating material, the addition cannot be sustained in the orders passed u/s 153A/143(3) of the Act. Therefore, the first legal ground in all these cross objections are allowed and all the appeals filed by the Revenue being academic in nature are dismissed.