RNB INFRASTRUCTURE PVT LTD,DELHI vs. DCIT, CENTRAL CIRCLE -32, DELHI

5. Aggrieved, the assessee preferred appeal before Tribunal.

6. When the matter was called for hearing, the Ld. Counsel for the assessee submitted at the outset that the captioned AYs 2012-13, 2013-14 & 2014-15 are liable to be challenged on three broad issues. Firstly, the additions made by the AO in the assessment framed under s. 153A are unconnected to any incriminating material found in the course of search as is self-evident from panchnama as well as the assessment orders. The assessment under s. 153A has been framed relying on statement of third to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -3- person, electronic data recovered from third person. Hence, such additions made are unsustainable under s. 153A in law insofar as assessment years 2012-13, 2013-14 & 2014-15 concerned owing to the fact that the aforesaid assessment years remained unabated at the time of search. The assessment being concluded and not pending at the time of search, the additions to be made under s. 153A is squarely dependent upon the discovery of incriminating documents found in the course of search as held in landmark judgement in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxman.com 399 (SC) followed in many other judgements delivered by Hon’ble Supreme Court. Consequently, the scope of assessment order under s. 153A is restricted to the incriminating material found in the course of search in the case of assessee. Secondly, the additions made in the proceedings under s. 153A based on material found in the course of search in case of third person is unsustainable in law and right course available to AO in law was to proceed against the assessee under s. 153C of the Act rather than s.153A of the Act. The additions under s. 153A of the Act are bad in law in this score too. This view has been expressed by the Co-ordinate Bench of the Tribunal in group cases in the case of Pushpa Devi Bajaj vs DCIT, Central ITA No.816/Del/2023 order dated 04.12.2013 wherein it was held that mandatory proceedings under s. 153C must be followed in such situation. Thirdly, the Ld. Counsel for the assessee also submitted on merits that in this case, the Ld.CIT(A) has called for a remand report from the AO on the evidences filed qua impugned transactions. The AO during the remand proceedings has undertaken verification and held that the explanation of the assessee stands substantiated by documentary evidences furnished in the course of remand proceedings and therefore, the additions are not sustainable even on merits. For such proposition, the Ld. Counsel for the assessee relied upon the decisions rendered by the Co-ordinate Bench of the Tribunal in group cases in Lalita Bajaj vs DCIT & Ors. in ITA Nos.2596 & 2598/Del/2022; ITA Nos.2593, 2600, 2597/Del/2022 and ITA No.2599/Del/2022 order ITA Nos. 2588 to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -4- dated 11.10.2023. Besides, these broad issues, the Ld. Counsel for the assessee also raised the issue of mechanical approval granted under s. 153D of the Act.

10. It is the case of the assessee that so-called incriminating material referred to in the assessment order are in the shape of statements recorded of third person i.e. Shri Pawan Agarwal much prior to search and material found in the case of other person. On perusal of the assessment orders and the first appellate order, it is observed that there does not appear to be any reference to any incriminating material found in the course of search of the assessee per se. The alleged incriminating material referred are primarily in the nature of statement of third person prior to search and material found in the course of search of the third person. This being so, the additions made in assessment years 2012-13, 2013-14 & 2014-15 are outside the ambit of jurisdiction under s. 153A of the Act. In view of the judgement rendered in the case of Pr. CIT v. Abhisar Buildwell (P.) Ltd. (supra) and plethora of judgements relied on behalf of the assessee, the additions made in unabated assessment are not permissible under s. 153A of the Act.

3. The appellant vide its application before the Ld. CIT(A) in the present case has filed following additional evidences: S.No. Particulars Page No.

6. Copy of return of income 264 Copy of audited financial statements 265-276 Copy of COI, MOA & AOA 277-293 Copy of PAN Card 294 Copy of confirmation filed by Simon Tie Up Pvt.Ltd. 295 Copy of bank statement 296 7. Manikrit Tie Up Pvt. Ltd. Copy of return of income 297 Copy of audited financial statements 298-312 Copy of MOA & AOA 313-332 Copy of PAN Card 333 Copy of confirmation filed by Manikrit Tie Up Pvt.Ltd. 334 Copy of bank statements 335-336 Copy of assessment order for AY 2016-17 337-338 8. Darshan Barter Pvt. Ltd. Copy of return of income 339 Copy of audited financial statements 340-348 Copy of MOA & AOA 349-364 Copy of PAN Card 365 Copy of confirmation filed by Darshan Barter Pvt.Ltd. 366 Copy of bank statement 367 Kashi Prayag Tradelink Pvt. Ltd.

9. Copy of return of income 368 Copy of audited financial statements 369-378 Copy of MOA & AOA 379-397 Copy of PAN Card 398 Copy of assessment order for AY 2013-14 399-403 Copy of VAT registration certificate 404-406 Copy of GST registration certificate 407-408 Copy of documents related to export 409-411 Copy of VAT returns 412-414 Copy of confirmation filed by Kashi Prayag Tradelinks Pvt.Ltd. 415 Copy of bank statement 416-418 Vijay Sanjay Tradecom Pvt. Ltd.

5. In order to verify the above documents and submissions made by the assessee, notice under section 133(6) were issued on 27.04.2022. In response to which documents pertaining to the parties from whom funds were received by the assessee were filed. The reply is further supported by the confirmations of the above parties that funds were given to the assessee on behalf of RNB Leasing and Financial Services on account of purchase of shares by them from RNB Leasing and Financial Services out of their disclosed sources of fund. Further, in support of their explanation they have submitted copy of their confirmation, bank statement, financial statements, ITR. The explanation given by assessee is substantiated by the documents submitted.

6. It is noticed that the explanation/submission now being made by the assessee was not made during the course of assessment proceedings. During the assessment proceedings ample opportunities were given to the assessee to discharge its onus to substantiate the genuineness of the transactions. However, no plausible explanation was given in this regard at that time. However, the documents now being filed before your good self and replies have also been received from various parties confirming the same. Hence, the decision of considering the additional evidence may be taken on merit by your good office.” to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -8- 13.2. The AO has thus given a favourable Remand Report on merits on the controversy arising from additions made. When the evidences were accepted by the AO as proper and genuine, that too after requisite enquiries and examination thereon, the allegations against the assessee in the course of assessment do not cut much ice any longer. The allegations initially made thus stood negated by the AO himself. The Ld.CIT(A) has not assigned any cogent reason to brush aside the categorical findings of the AO in the Remand Report. The Ld.CIT(A) has endorsed the additions based on the observations of the AO in the assessment order. In the wake of observations made by the AO in the Remand Report, the additions made is not justified on merits either.

16. In the result, all three captioned appeals of the assessee are allowed. ITA No.2591/Del/2022 & ITA No.2592/Del/2022 (Assessment Years : 2015-16, 2016-17 & 2017-18)

17. The assessment years 2015-16, 2016-17 & 2017-18 were stated to be pending at the time of search and therefore stood abated. The assessee however broadly contends that the additions have been made firstly, without any incriminating material found in the course of search and secondly, the Ld.CIT(A) had called for remand to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -9- report from the AO on the aspects of merits of the additions. The AO in his remand report undertook the requisite verifications and held that explanation of the assessee on the impugned additions towards alleged undisclosed income stands substantiated by documentary evidences. The assessee also contends that in the group cases in the case of Lalita Bajaj (ITA No.2596/Del/2022) & Namita Bajaj (ITA No.2598/D/2022) order dated 11.10.2023, the issue has been decided in favour of the assessee on similar facts.

18. The remand report filed by the AO before the Ld.CIT(A) concerning AY 2015- 16 is extracted hereunder for ready-reference:- “Kindly refer to the above cited subject wherein the remand report was called in the case of the above mentioned assessee for the AY 2015-16 in relation to the additional evidences filed by the appellant under Rule 46A.

2. The assessment in the case of the assessee was completed on 17.12.2019. Wherein addition of Rs. 17,84,58,500/- was made in the hands of the assessee on account of undisclosed income.

3. The appellant vide its application before the Ld. CIT (A) in the present case has filed following additional evidences: S.No. Particulars Page No. 1). Copy of replies dated 16.12.2019 along with acknowledgement 454-463 dated 19.12.2019 and 21.12.2019 filed in response to notice issued u/s 142(1) dated 19.10.2019 2. Copy of Form 2 i.e. return of allotment for year 2007 filed on 464-475 24.06.2010 with MCA by RNB Synthetics Pvt. Ltd.

3. Copy of Form 2 i.e. return of allotment for year 2007 filed on 476-487 01.06.2010 with MCA by RNB SEZ Bikaner Pvt. Ltd.

5. List of share transfer as on 31.03.2015 filed with the MCA by RNB 500-501 Synthetics Pvt. Ltd.

6. List of shareholders as on 31.03.2015 filed with the MCA by RNB 502 SEZ Bikaner Pvt. Ltd. filed with MCA 7. List of shareholders as on 31.03.2015 filed with the MCA (503 by 503 RNB SEZ Coimbatore Pvt. Ltd. filed with MCA For RNB Leasing and Financial Services 8. 504-505  Copy of affidavit  Copy of PAN card to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -10-  Copy of return of income 506 507 9. For Founder Properties Pvt. Ltd.  508 Copy of return of income 509-520  Copy of audited financial statements 521-536  Copy of COI, MOA & AOA 537  Copy of PAN card 538-539  Copy of confirmation 540-542  Copy of bank statements 543-544  Copy of assessment order for AY 2014-15 For Raachi Consultancy Pvt. Ltd. 10.  545 Copy of return of income  546-556 Copy of audited financial statements  557-568 Copy of COI, MOA & AOA  569 Copy of PAN card  570 Copy of confirmation  571-575 Copy of bank statements 576-577  Copy of assessment order for AY 2014-15 For Seva Infrastructure Pvt. Ltd. 11.  578 Copy of return of income  579-589 Copy of audited financial statements  590-604 Copy of COI, MOA & AOA  605 Copy of PAN card  606 Copy of confirmation  607-609 Copy of bank statements For Momentum Real Estate Pvt. Ltd. 12.  610 Copy of return of income  611-623 Copy of audited financial statements  624-643 Copy of MOA & AOA  644 Copy of PAN card  645 Copy of confirmation  646-647 Copy of bank statements  648-649 Copy of assessment order for AY 2014-15 For Substantial Consultancy Pvt. Ltd. 13.  Copy of return of income 650  Copy of audited financial statements 651-662  Copy of COI, MOA & AOA 663-678  Copy of PAN card 679  Copy of confirmation 680  Copy of bank statements 681  Copy of assessment order for AY 2012-13 682-685  Copy of assessment order for AY 2014-15 686-688 For Designline Mercantiles LLP 14.  Copy of return of income 689 ITA Nos. 2588 to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -11-  Copy of audited financial statements 690-694  Copy of LLP deed 695-704  705 Copy of PAN card  706-707 Copy of confirmation  708-717 Copy of bank statements  718-719 Copy of assessment order u/s143(3) of M/s Designline Mercantiles LLP for AY 2018-19 15. For Trendster Mercantile LLP  Copy of return of income 720  Copy of audited financial statements 721-722  Copy of LLP deed 723-727  Copy of confirmation 728-729  Copy of bank statements 730-734  Copy of MCA Data 735  Copy of assessment order u/s143(3) of M/s Trendster 736-737 Mercantile LLP for AY 2018-19 16. For Kashi Prayag Tradelink Pvt. Ltd.  738 Copy of return of income along with Computation of Income  Copy of audited financial statements  Copy of COI, ΜΟΑ & ΑOΑ 739-750  Copy of PAN card 751-769  770 Copy of assessment order for AY 2013-14  Copy of registration certificate under various indirect tax 771-772 laws 773-777  Copy of export related documents  Copy of VAT return 778-792  Copy of letter from Nagar Palika, Deshnoke 793  794- Copy of MCA Data  794.1 Copy of confirmation filed by M/s Kashi Prayag Tradelink Pvt Ltd. 795  Copy of bank statement 796 For Sanchar International 17.  Copy of return of income 797  Copy of balance sheet 798  799-804 Copy of joint venture agreement  805 Copy of PAN card  806 Copy of bank statements  807 Copy of confirmation filed by M/s. Sanchar International Vijay Sannjay Tradecom Pvt. Ltd. 18.  808 Copy of return of income  809-821 Copy of audited financial statements  822-840 Copy of COI, MOA & AOA  841-852 Copy of registration certificate under various indirect tax laws  853-854 Copy of letter from Nagar Palika, Deshnoke  855-858 Copy of assessment order for AY 2013-14 ITA Nos. 2588 to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -12-  Copy of letter from Nagar Palika, Deshnoke dated 859 27.10.2014  860 Copy of PAN card  861-865 Copy of record of survey proceedings in the case of Vijay Sanjay Tradecom Pvt. Ltd.  Copy of email dated 06.12.2019 from Radheyshyam 866-868 Upadhyay to ACIT, Central Circle 32  Copy of affidavit filed by Radheyshyam Upadhyay vide 869-874 letter dated 13.12.2019  Copy of assessment order u/s143(3) of M/s Vijay Sanjay 875-877 Tradecom Pvt. Ltd. for AY 2018-19  Copy of confirmation filed by M/s Vijay Sanjay Tradecom 878 Pvt. Ltd.  Copy of bank statements 879-880 For Promina Wealth Management Pvt. Ltd. 19. 881  Copy of return of income 882-887  Copy of audited financial statements 888-908  Copy of MOA & AOA 909-910  Copy of confirmation 911-916  Copy of bank statements 917  Copy of MCA Data  Copy of assessment order u/s143(3) of M/s Promina 918-919 Wealth Management LLP for AY 2018-19 For Panoramic Consultancy Pvt. Ltd. 20.  920 Copy of return of income  921-934 Copy of audited financial statements  935-944 Copy of MOA & AOA 945  Copy of PAN card 946  Copy of confirmation 947-948  Copy of bank statement of the assessee company  Copy of assessment order u/s143(3) of M/s Panoramic 949-950 Consultancy Pvt. Ltd. for AY 2018-19 21. Copy of reply dated 22.12.2019 filed by Shri Nirmal Sarda in 951-987 response to notice dated 17.10.2019 Encl:  Copy of retraction affidavit 988-999  Copy of Screenshot of MCA data of Aditi Import Export Pvt. 1000 Ltd.  Copy of correspondences from Vikarm Bajaj to Nirmal Sarda 1001-1006 4. In the application under rule 46A, the appellant has submitted that the credits/funds received in the bank account in the year under consideration are on account of sale of investment held by assessee in preference shares of RNB Synthetics Pvt. Ltd., RNB SEZ Bikaner Pvt. Ltd. and RNB SEZ Coimbatore Pvt. Ltd. to RNB Leasing and Financial Services. It is further submitted by the appellant that amount received by assessee from the alleged shell concern was merely on the ITA Nos. 2588 to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -13- instructions of RNB Leasing and Financial Services, however, it has no business relation with the alleged shell concerns. Further, the assessee has submitted that on perusal of the copy of Form 2 of RNB Synthetics Pvt. Ltd., RNB SEZ Bikaner Pvt. Ltd. and RNB SEZ Coimbatore Pvt. Ltd. i.e. return of allotment filed on 24.06.2010, 01.06.2010 and 01.06.2010 respectively, and list of share transfer submitted with MCA, it can be seen that investments held in shares of RNB Synthetics Pvt. Ltd., RNB SEZ Bikaner Pvt. Ltd. and RNB SEZ Coimbatore Pvt. Ltd. were sold by assessee @500, @400 and @400 per share respectively, which were acquired by it directly from RNB Synthetics Pvt. Ltd., RNB SEZ Bikaner Pvt. Ltd. and RNB SEZ Coimbatore Pvt. Ltd. @500, @400 and @400 per share respectively. Referring to the above mentioned additional evidences the assessee has stated that funds received by it in the year under consideration were only on account of sale of investments at par out of which no gain/profit has arisen to it and since, no surplus money being received by it except for the recovery of cost of investments, the transactions cannot be regarded as accommodation entries.

7. It is noticed that the explanation/submission now being made by the assessee was not made during the course of assessment proceedings. During the assessment proceedings ample opportunities were given to the assessee to discharge its onus to substantiate the genuineness of the transactions. However, no plausible explanation was given in this regard at that time. However, the documents now being filed before your good self and replies have also been received from various parties confirming the same. Hence, the decision of considering the additional evidence may be taken on merit by your good office.” to 2592/Del/2022 RNB Infrastructure Pvt. Ltd. -14- 19. In the re-joinder to the remand report the assessee reiterated before the Ld.CIT(A) that alleged funds received by the assessee in AY 2015-16 and other AYs under consideration were on account of sale of investments held by the assessee in preference shares of RNB Synthetics Pvt.Ltd., RNB SEZ Bikaner Pvt.Ltd., RNB SEZ Coimbatore Pvt.Ltd. etc. to RNB Leasing and Financial Services. Sale of investments were made by the assessee at par which is the same as the value at which the shares were purchased. Hence no surplus money was received by the assessee except recovery of cost of investments. Thus, the transaction cannot be regarded as accommodation entries. The AO in his remand report dated 29.04.2022 clearly observed that due verifications have been carried out under s. 133(6) of the Act. The assessee further pointed out that on the basis of documents submitted and verification carried out, the AO in his remand report has categorically stated that the explanation given by the assessee stands substantiated. The assessee also pointed out that amount to the extent of INR 3.76 crores relates to the transactions which are not pertaining to the year under consideration at all. The main plank of the assessee was that the remand report squarely vouches for substantiation of the transactions and therefore in the wake of such findings, the additions made by the AO even on merits do not continue to hold water any more. Similar plea on merits has been taken in respect of other AYs under consideration. The assessee thus contends that the Ld.CIT(A) was not justified in confirming the action of the AO despite categorical remand report obtained in the first appellate proceedings and without assigning any reason to depart from the view expressed in Remand Report.