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Facts
The Revenue filed appeals against the CIT(A)'s deletion of significant additions, including unexplained share application money and commission expenses, made by the Assessing Officer (AO) following search and seizure operations. The AO's additions were based on statements recorded under Section 132(4) and seized share certificates, which the assessee later retracted or argued were not 'incriminating material' for completed assessments.
Held
The Tribunal upheld the CIT(A)'s decision, ruling that the additions were unsustainable. It was held that statements recorded under Section 132(4) do not, by themselves, constitute incriminating material if not corroborated by other evidence found during the search, and share certificates already in public domain are not incriminating documents. Relying on Supreme Court and High Court precedents, the Tribunal affirmed that for completed assessments, no addition can be made under Section 153A in the absence of unearthed incriminating material.
Key Issues
Whether retracted statements and publicly available share certificates constitute 'incriminating material' to sustain additions under Section 153A of the Income Tax Act for completed assessments where no undisclosed income or property was discovered during search.
Sections Cited
Section 132(4), Section 153A, Section 68, Section 143(3), Section 154, Section 153C, Section 148, Section 40A(3), Section 139(1), Section 158BB(1), Section 245I, Section 132, Section 132A
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Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Dr. B. R. R. Kumar, Sh. Yogesh Kumar US
ORDER Per Bench: The present appeals have been filed by the Revenue against the orders of ld. CIT(A)-30, New Delhi dated 07.09.2021, 08.09.2021.
Since, the issue involved in & 1838/Del/2021 are similar, they were heard together and being adjudicated by 2 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. a common order. The only difference is in amount involved. In is taken as a lead case. Following grounds have been raised by the Revenue:
“1. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 49,63,00,000/- made by the AO on account of share application money received by the assessee company.
2. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 1,36,48,250/- made by the AO on account of commission expense incurred by the assessee.
3. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in law and on facts in deleting the addition relying on the decision of Kabul Chawla, without appreciating the fact that the Hon'ble Supreme Court of India has admitted SLP vide Diary No. 37848/2015 in the case of APAR Industries Ltd. decided by Hon'ble Bombay High Court in of 2013 dated 08.05.2015 which is a lead case tagged with more than 115 issues on the issue of restriction of additions only to incriminating materials found during search. The Hon'ble SC has dismissed the appeal on account of lower tax effect. Further on the same issue Hon'ble SC has admitted SLP vide diary no. 45823/2019 in the case of Pr. Commissioner of Income Tax Vs Gohai foods.
4. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.”
Since, the issue involved in ITA No. 1840 & 1841/Del/2021 are similar, they were heard together and being adjudicated by a common order. The only difference is in amount involved. In ITA No. 1840/Del/2021 is taken as a lead case. Following grounds have been raised by the Revenue:
“1. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of unexplained credits amounting to Rs. 14,83,00,000/-, received from Om Energy Limited on account of share capital/ share premium/ share application money.
3 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd.
2. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that Om Energy Limited is a shell company and the assessee failed to prove the identity and creditworthiness of the lender and to establish the genuineness of the transaction.
3. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring that the retraction of the statement of Shri Ashok Jain is legally invalid for the reasons that it was filed after lapse of considerable amount of time and it is not supported by any material evidence/ explanations (copy of retraction letter forms part of paper book).
4. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring that the retraction of statement made by Shri Ashok Jain was only a self-serving afterthought.
5. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law in ignoring the pronouncement of Hon’ble Supreme Court in the case of Pullan-gode Rubber Produce Co. Ltd. vs. State of Kerala, (1973) 91 ITR 18, wherein it was held that an admission is an extremely important piece of evidence.
6. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law in ignoring the pronouncement of Hon’ble Kerala High Court in the case of CIT vs. Abdul Razak [2012] 20 taxmann.com 48 (Ker.) wherein it was held that a self-serving retraction, without anything more cannot dispel statement made under oath under section 132(4). A Statement made under oath deemed and permitted to be used in evidence, by express statutory provision, has to be taken as true unless there is contra evidence to dispel such assumption.
7. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting addition of Rs. 14,83,00,000/- ignoring the decision of Hon’ble Delhi High Court in the case of Smt. Dayawanti vs. CIT(2017) 390 ITR 496 (Delhi), confirmed on 24.04.2023 by the Hon’ble Apex Court tagged with Abhishar Buildwell (P) Ltd. when the Principal officer of the group had surrendered income on the basis of documents found and seized at the time of search.
8. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring that the statement of Shri Ashok Jain stood corroborated by the statements of various other office bearers of the group (Shri S S Rawat, Shri Manoj Gupta, Shri Ankit Sharma, Shri Aman Jain and Shri Sameer Goyal) and Shri Shailesh Ghanshyam Parab, Director of Om Energy Limited (copy of statements form part of paper book).
4 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd.
9. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring that the statement of Shri Ashok Jain also stood corroborated by the share certificates, blank signed share transfer forms and other documents necessary for transfer of shares found and seized during the search operation, which indicate that the appellant kept such forms signed from the investor companies to keep control over them.
10. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law in ignoring that statement of Shri Ashok Jain, Shri Manoj Gupta and Shri Shaliesh Ghanshyam Parab, along with seized documents constitutes incriminating material, especially in view of the disclosure made by NV group before the Hon’ble Settlement Commission (copy of statements, copy of order of Hon’ble Settlement Commission and seized material form part of paper book).
11. Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring fact that the surrendered income in statement recorded u/s 132(4) at the time of search and seizure is incriminating material as held by the Hon’ble Delhi Court and confirmed by Hon’ble Apex Court in case of Dayawanti (decision dated 24.04.2023).
Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in concluding that the share certificates were found in possession of NV group for splitting the single share certificate into smaller denominations, as no communication was found during the search or submitted by the appellant in the post-search proceedings that it received the share certificates for the purpose of splitting of the shares.
Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the additions of unexplained commission expense amounting to Rs.40,78,250/-.
Whether in the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that Shri Ashok Jain admitted in his sworn statement u/s 132(4) that commission was paid in cash to entry operators and it was part of his unaccounted income, which is an evidence as held by Hon’ble Rajasthan High Court in the case of Pr. CIT vs. Roshan Lai Sancheti. The High Court held that admission in statement u/s 132(4) has a strong evidentiary value and they cannot be discarded summarily and encryptic manner by simply observing that the assessee retracted from his statement.
The incumbent Ld. CIT(A) in the case of the assessee for AY 2017-18 has held that the statement of Shri Ashok Jain recorded on oath on 22.04.2017 is inextricably linked to the statements of other office bearers of NV group and 5 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. incriminating material seized during the search (copy of order forms part of paper book).”
The Revenue aggrieved with the order of the ld. CIT(A) who held that the statement recorded of Sh. Ashok Jain during the search is invalid and that there was no incriminating material found and seized during the course of search.
The ld. DR argued at length relying on the judgment of Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. state of Kerala (91 ITR 18). It was argued that the Hon’ble Apex court held that an admission is an extremely important piece of evidence. Hence, the ld. DR argued that the statement of Sh. Ashok Jain has to be considered and the retraction made thereafter must not be considered. The ld. DR has also relied on the judgment of Hon’ble High Court of Kerala in CIT Vs. Abdul Razak (20 taxmann 48) and argued that the retraction of Sh. Ashok Jain was self serving without anything more to dispel the statement made under oath u/s 132(4) of the Income Tax Act, 1961. It was argued that the statement made under oath deemed and permitted to be used as evidence by express statutory provision and has to be taken as true unless there is contra evidence to dispel such assumption. With regard to seizure of incriminating material, the ld. DR relying on the judgment of jurisdictional High Court in the case of Dayawanti Vs. CIT (390 ITR 496) argued that when the principle officer of the assessee company had surrendered income on the basis of documents found and seized at the time of search, the same cannot be ignored. The ld. DR argued that statement of Sh. Ashok Jain stood corroborated by the statements of various other office
6 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. bearers of the assessee group namely, Shri S. S. Rawat, Shri Manoj Gupta, Shri Ankit Sharma, Shri Aman Jain and Shri Sameer Goyal and Shri Shailesh Ghanshyam Parab, Director of Om Energy Limited and hence the share application money received from the companies involved in all these appeals are bogus and hence the AO has rightly treated the amount as undisclosed income. The ld. DR argued that the statement of Sh. Ashok Jain also stood corroborated by the share certificates, blank signed share transfer form and other documents necessary for transfer of shares found and seized during the search operation clearly indicates that the assessee kept such form signed by the investor company to keep control over them. The ld. DR has argued that, coupled with the statement of Sh. Ashok Jain, Sh. Manoj Gupta and Sh. Parab along with seized documents constitute incriminating material especially in view of the disclosure made by the group before the Hon’ble Income Tax Settlement Commission. The ld. DR argued that that Shri Ashok Jain admitted in his sworn statement u/s 132(4) that commission was paid in cash to entry operators and it was part of his unaccounted income, which is an evidence by itself as held by Hon’ble Rajasthan High Court in the case of Pr. CIT vs. Roshan Lal Sancheti. The High Court held that admission in statement u/s 132(4) has a strong evidentiary value and they cannot be discarded summarily and in cryptic manner by simply observing that the assessee retracted from his statement. With regard to the explanation of the before the Ld. CIT(A) that the share certificates were found in possession of NV group for splitting the single share certificate into smaller denominations, the ld.
7 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. DR argued that no communication was found during the search or submitted by the appellant in the post-search proceedings that it received the share certificates for the purpose of splitting of the shares.
6. The ld. DR, thus relying on various judicial proposition argued that the retraction of Sh. Ashok Jain cannot be considered and the statement on oath recorded u/s 132(4) takes primacy over the retraction, the share certificates found and seized during the search operation must be treated as incriminating material seized during the search and hence, the decision of the ld. CIT(A) holding that there was no incriminating material found and seized during the search and accepting the retraction made by Sh. Ashok Jain who declared that the share capital received was bogus initially be reversed and that the order of the Assessing Officer be upheld.
7. On the other hand, the ld. AR relied on the order of the ld. CIT(A).
8. Heard the arguments of both the parties and perused the material available on record. We have gone in detail, the arguments of the Revenue and the order of the ld. CIT(A).
9. For the sake of ready reference and completeness, the operative portion of the order of the ld. CIT(A) on this issue is reproduced below:
“5. Seized Material in the form of share certificates
8 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. It has been stated in the remand report that during the search action on 20.04.2017, certain share certificates issued by the appellant company to investor companies were seized. On this basis it has been alleged that such investor companies were controlled directly or indirectly by the NV Group. The details of the seized share certificates referred to in the remand report is tabulated as under: Annexure Page Name of the shareholder as per share No. of shares Nos certificates issued by Realtime Marketing Pvt. Ltd. A-15 80 M/s Reliable Finance Corporation Pvt. Ltd. 80,000 A-15 81 M/ s Apoorva Leasing Finance and Investment 7,20,000 Co. Pvt. Ltd. A-15 82 M/s Metalrod Pvt. Ltd. Co Pvt. Ltd. 10,000 A-15 83 M/s RCI Industries & Technologies Pvt. Ltd. 47,500 A-12 24, 25 M/s Bon Lon Pvt. Ltd. 1,66,000 A-12 26, 27, M/s Smita Global Pvt. Ltd. 46,000 32, 33 (Cert. No.53) 1,11,200 (Cert. No. 64) 28, 29, 1,88,000 A-12 M/s Harshit Promoters Pvt. Ltd. 34, 35 (Cert. No. 52) 16,000 (Cert. No. 63) 30, 31, A-12 M/s Bon Lon Securities Pvt. Ltd. 40,000 38, 39 (Cert. No. 49) 60,000 (Cert. No.61) A-12 36, 37 M/s Harshit Finvest Pvt. Ltd. 1,40,000 A-12 40, 41 M/ s Harshit lnfratech Pvt. Ltd. 1,08,000 A-12 42, 43, M/s Vinco Metals Pvt. Ltd. 1,52,000 (Cert. No. 54) 46, 47 24,000 (Cert. No. 65) A-12 44, 45 M/s Bon Lon Steel Pvt. Ltd. 90,000 A-12 48, 49 M/ s Metalrod Pvt. Ltd. 3,08,000 A-12 50, 51 M/s Parbrahamlmpex Pvt. Ltd. 2,28,000 A-12 52, 53 M/s RCI Industries & Technologies Pvt. Ltd. 7,70,000 5.1 It is first of all clarified that the seized share certificates referred in the remand report were seized on 16.06.2017
9 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. during P.O. operation at 40, Babar Road, Bengali Market and not on 20.04.2017. A copy of Panchnama drawn on 16.06.2017 along with the list/ inventory of annexures seized containing the alleged seized documents is enclosed……..
5.2 The explanation regarding presence of these share certificates at the premises of the appellant has been furnished in the written submission already filed and placed on record. It is requested that the same may be considered and the appeals may be decided on merits.
5.3 The primary issue to be considered here is that whether share certificate issued by the appellant company to investor company can be considered as “incriminating material”? The term incriminating material is not defined under the Income Tax Act. In normal parlance, for the purpose of assessment of search cases, it would mean any material which reflects undisclosed income not forming part of regular books of accounts. In other words, incriminating material would be any fact/evidence which would suggest that the transactions (i.e. receipt of share capital) claimed in any earlier proceedings were not genuine, being only make believe based on non-existent facts or suppressed/misrepresented facts. The share certificates issued to the investor companies are not hidden or concealed documents. In fact the details of the shareholders and the shares held are filed every year by all companies electronically on the MCA website in the form of Annual Return of the company, which is a public document. Therefore, the share certificate is not an incriminating document. The share capital reflected by the share certificate is part of the annual audited Balance Sheet of the appellant company which is filed along with the Income Tax Return (ITR). Therefore, share certificate cannot be considered to be an incriminating document.
10 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 5.4 The reason for the share certificate having been found at the premises of the appellant has been explained in the written submissions earlier. It may be reiterated that these share certificates were received from the investor companies for splitting the share certificates. It may be elaborated that single share certificate representing the total no. of shares held had been issued to each investor company. A request was received from the investor companies that the single share certificate may be split into smaller denominations so that in case they wanted to further sell, pledge, mortgage or create any sort of encumbrance on a part of their total shareholding, they could do so. The explanation of the appellant clarifying the above reason for the share certificates having been found during search was available with the assessing officer. He was also having addresses and contact details of all the investor companies. In order to verify the veracity of the appellant’s explanation, the assessing officer could have carried out an enquiry with the investor companies, for which sufficient time was available. However, the assessing officer failed to conduct any such enquiry. Therefore, only on whims and fancies of the assessing officer the share certificates found during search cannot be termed as incriminating material.
5.5 It is not the case of the assessing officer that the share certificates issued to the investor companies which have been seized were accompanied by other documents such as blank transfer deeds executed in favour of the appellant company or its nominees. There is no material found in the form of rough jottings or diary indicating flow of unaccounted cash used for procuring share capital entries. No material was found during the course of search to prove that monies received in the form of share capital came from coffers of the appellant company.
11 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 5.6 It has been held by Delhi ITAT that share certificates issued to investor companies found during search will not qualify as incriminating material. In this regard reliance is placed on the following order of ITAT:
CIT Vs. Moon Beverages Ltd. (ITA No. 115 to 118/Del/2018) dated 27.11.2020 (Delhi ITAT) ACIT Vs. Hindustan Aqua Ltd. (ITA No. 122 & 123/Del/2018) dated 27.11.2020 (Delhi ITAT)
SECTION 68, READ WITH SECTION 153A OF THE INCOME TAX ACT - CASH CREDIT (BURDEN OF PROOF) - 2009-10 TO 2012- 13 - SHARE CAPITAL FROM NON DESCRIPT ENTITIES - SHARE CERTIFICATES,COUNTERFOILS FOUND - STATEMENT U/S 132(4) DO NOT CONSTITUTE INCRIMINATING MATERIAL 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,
12 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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 ITA Nos. 115 to 118, 122 & 123, 111 to 114,816, 119, 124 & 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.
5.7 The appellant also places reliance on the order of Delhi ITAT in the case of M/s. Brahmaputra Finlease (P) Ltd. vs. DCIT, 29.12.2017, ITAT-Delhi.
5.8 In the case of Pr.CIT Vs. Index Securities Pvt. Ltd. 86 taxmann.com 84 (Del), certain additions were made on the basis of Trial Balance and Balance Sheet found during search in an assessment carried out under section 153C. It was held by the court in para 32 as under:
“32. In the present case, the two seized documents referred to in the Satisfaction Note in the case of each Assessee are the trial balance and balance sheet for a period of five months in 2010. In the first place, they do not relate to the AYs for which the assessments were reopened in the case of both assessees. Secondly, they cannot be said to be incriminating. Even for the AY to which they related, i.e. AY 2011-12, the AO finalized the assessment at the returned
13 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. income qua each Assessee without making any additions on the basis of those documents. Consequently even the second essential requirement for assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees."
5.9 Similarly in the case of Sarvapriya Holdings Pvt. Ltd. Vs. DCIT in ITA No. 97&98/Kol./2018, addition towards share capital was made in an order passed u/s 153A. The assessee challenged the addition in the absence of any incriminating material. Before the ITAT it was urged that the share capital was received in the bank account of the assessee and the bank statement was forming part of the seized material and therefore the addition was based on incriminating material. It was held by ITAT that the bank account of the assessee was reflected in the regular books of accounts and therefore could not be held as incriminating material.
Statement of Sh. Ashok Jain recorded on 22.04.2017 6.1 It is submitted that the said statement of Mr. Ashok Jain dated 22.04.2017 recorded u/s 132(4), which has been relied upon in para 2.1(b) of remand report, for holding that assessee company had received unaccounted money in his entities through bogus share capital has been retracted vide letter dt. 10.07.2017 on account of the various reasons mentioned in the letter. Hence, cannot be relied upon to draw any inference as per settled law. The assessee company during the course of present appellate proceedings had filed written submission duly explaining the reasons for retraction of the alleged statement of Mr. Ashok Jain at the time of search along with the copy of retraction letter, it is requested that the same may be considered and the appeal may be decided on merits.
14 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 6.2 A copy of the statement of Sh. Ashok Jain recorded on 22.04.2017 is enclosed at Page_____ to_____ and the copy of retraction letter dated 10.07.2017 is enclosed at Page_____ to_____ . An examination of the statement of Sh. Ashok Jain would confirm the fact that the said statement has been recorded in the absence of any corroborating material. The admission made by him about the share capital being bogus is not corroborated by any other material/evidence. Further, the retraction letter dated 10.07.2017 highlights the factual inconsistencies and infirmities in the statement of Sh. Ashok Jain and brings out the reasons for retraction of the earlier statement in great detail.
6.3 Therefore, the submission of the appellant is that in the absence of any corroborating material the statement of Sh. Ashok Jain recorded u/s 132(4) cannot be considered as an incriminating material. From an examination of statement of Sh. Ashok Jain reproduced above it is apparent that the said statement with regard to receipt of share capital has been recorded in the absence of any material much less incriminating material. The Delhi High Court in the case of CIT vs. Harjeev Aggarwal 70 taxmann.com 95 has examined the above proposition and held in Para 20 & 21 of its order as under:
A plain reading of section 158BB(1) does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words ‘evidence found as a result of search’ would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the 15 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. Act as expressly mandated by virtue of the Explanation to section 132(4). However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation [Para 20] A plain reading of section 132(4) indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of account, documents, money, bullion, jewellery or any other valuable article or thing. The Explanation to section 132(4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.1989, further clarifies that a person may be examined not only in respect of the books of account or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceedings under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of account, documents, assets etc. Plainly, the intention of the Parliament is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of section 132(4) are read in the context of section 158BB(1), read with section 158B(b), it is at once clear that a statement recorded under section 132(4) can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during
16 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. search. The statement recorded under section 132(4) may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded. [Para 21] 6.4 Thus, the proposition laid down by Delhi High Court in the above referred decision is that there must be a nexus between the statement recorded and the evidence/material found during search, in order for an assessment to be based on the statement recorded. Whereas, in the present case the statement of Sh. Ashok Jain, as regards receipt of share capital, is not based on any material found during search much less incriminating material.
6.5 Similar view has been taken by the Hon’ble Delhi High Court in an earlier judgment in the case of CIT v. Sunil Aaaarwal237 Taxman 512. To the similar effect is an earlier decision of the Hon’ble Andhra Pradesh High Court in CIT vs. Shri Ramdas Motor Transport 102 Taxman 300, in which the Hon’ble High Court refused to give any evidentiary value to the statement made by the assessee u/s 132(4) as the Department could not find any unaccounted money, article or thing or incriminating document either at the premises of the company or at the .residence of managing director or other directors. In such circumstances, the finding of the Tribunal that the statement of managing director recorded patently under s. 132(4) did not have any evidentiary value, was upheld. The above discussion makes it patent that the surrendered income must be correlated with some incriminating material found during the search so as to justify the addition.
17 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 6.6 Similarly in the case of Pr. CIT Vs. Best Infrastructure (India) Pvt. Ltd. 84 taxmann.com 287 (Del), it was reiterated by the court that - “statements recorded under Section 132 (4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra). ”
6.7 It is an undisputed position that no incriminating material was found during the course of search qua the transaction of receipt of share capital, for which the surrender was made or obtained, therefore, the addition made solely on the basis of such admission (which was later retracted) is not sustainable.
As regards the comments in the remand report that during post search investigations it was found that most of investor companies have very low turnover and had shown meager/ nil income in their ITR which do not commensurate the huge investment made by these entities in NV group of companies, it is submitted that the same is not relevant. The limited point made by the appellant is that in the absence of incriminating material addition cannot be made u/s 153A assessment for non-abated assessment years. …………….”
8. Ground Nos. 1, 2, 5 & 6 : The appellant has not made any submissions with these grounds of appeal and merely stated that these are general in nature. In view of the same these grounds are hereby dismissed.
9. Ground No. 3 : I have carefully considered the assessment order, the facts of the case, the remand reports submitted by the AO, the submissions and the rejoinder of the appellant. Vide ground No.3 the appellant is aggrieved by the addition of Rs.49,63,00,000/- on account of ^hare
18 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. application money/share capital/ share premium received by treating the same as unexplained credits u/s 68 of the Act.
It is noted that the appellant company is a NV Group company. It is a holding company and is holding shares in other NV group of Companies. During the relevant assessment year, the appellant company has received share application/ share capital/ share premium amounting to Rs.49,63,00,000/-. The break-up of share application money/share capital/share premium received during the year under consideration is tabulated as under:
Name of the company Share application money received during the year (Rs.) MS Metalrod Private Ltd. 8,10,00,000/- Mekaster Finlease Ltd. 14,00,00,000/- Reliable Finance corporation Pvt. Ltd. 200,00,000/- Bon Lon Securities Limited 1,50,00,000/- Bon Lon Steels Private limited 2,25,00,000/- Harshit Promoters Pvt. Ltd. 40,00,000/- Smita Global Pvt. Ltd. 2,78,00,000/- Vinco Metals Private Ltd. 60,00,000/- Apoorva Leasing &Finance Investment 18,00,00,000/- Ltd. Total 49,63,00,000/- Based on the above factual matrix, a remand report was called upon from the office of DCIT, Central Circle -31. Before examining the other aspect pertaining to the seized material in the nature of share certificates found during search it would be important to first discuss the remand report furnished by the assessing officer and the rejoinder of the appellant. 9.1 Upon examination of the remand report and the rejoinder it emerges that during the course of search action at the 19 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. premises 40, Babar Road, Bengali Market, certain share certificates issued by the appellant to its shareholders were seized. On this basis it has been contended in the remand report that such investor companies were controlled directly or indirectly by the NV Group. The details of the seized material referred to in the remand report is as under:
Annexure Page Name of the shareholder as per share No. of shares Nos. certificates issued by Realtime Marketing Pvt. Ltd. A-15 80 M/s Reliable Finance Corporation Pvt. 80,000 Ltd. A-15 81 M/s Apoorva Leasing Finance and 7,20,000 Investment Co. Pvt. Ltd. A-15 82 M/s MetalrodPvt Ltd Co Pvt. Ltd. 10,000 A-15 83 M/s RCI Industries & Technologies 47,500 Pvt. Ltd. A-12 24, 25 M/s Bon Lon Pvt. Ltd. 1,66,000 A-12 26,27, M/s Smita Global Pvt. Ltd. 46,000 32,33 (Cert. No. 53) 1,11,200 (Cert. No. 64) A-12 28, 29, M/s Harshit Promoters Pvt. Ltd. 1,88,000 34, 35 (Cert. No. 52) 16,000 (Cert. No. 63) A-12 30, 31, M/s Bon Lon Securities Pvt. Ltd. 40,000 38, 39 (Cert. No. 49) 60,000 (Cert. No. 61) A-12 36, 37 M/s Harshit Finvest Pvt. Ltd. 1,40,000 A-12 40, 41 M/ s Harshit lnfratech Pvt. Ltd. 1,08,000 A-12 42, 43, M/s Vinco Metals Pvt. Ltd. 1,52,000 46, 47 (Cert. No. 54) 24,000 (Cert. No. 65) A-12 44, 45 M/s Bon Lon Steel Pvt. Ltd. 90,000 A-12 48, 49 M/s Metalrod Pvt. Ltd. 3,08,000 A-12 50, 51 M/s Parbraham lmpex Pvt. Ltd. 2,28,000 A-12 52, 53 M/s RCI Industries & Technologies 7,70,000 Pvt. Ltd. (i) That the above referred share certificates were seized during the course of P.O. operation on 16.06.2017 and not on the date of search i.e. 20.04.2017.
(ii) The reason for the share certificate having been found at the premises is that these share certificates were received from the investor companies for splitting the share certificates.
(iii) The assessing officer failed to conduct any enquiry to verify the veracity of justification furnished by the appellant from the investor companies.
(iv) The share certificates issued to the investor companies are not hidden or concealed documents. The details of the shareholders and the shares held are filed every year by all companies electronically on the MCA website in the form of Annual Return of the company, which is a public document. The share capital reflected by the share certificate is part of the annual audited Balance Sheet of the appellant company which is filed along with the Income Tax Return (ITR). Therefore, share certificate cannot be considered to be an incriminating document.
(v) It is not the case of the assessing officer that the share certificates issued to the investor companies which have been seized were accompanied by other documents such as blank transfer deeds executed in favour of the appellant company or its nominees. No material was found during the course of search to prove that monies received in the form of share capital came from coffers of the appellant company.
21 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 9.3 Now the issue regarding the evidentiary value of the share certificates issued by the appellant to its shareholders, found during the course of search at one of the premises of the appellant at 40, Babar Road, New Delhi is to be examined. It has been mentioned in the remand report of the AO that during the course of search on the appellant group, share certificates allotted by the appellant group to various entities/persons were found in the possession of the appellant companies. The AO has inferred in the remand report that the presence of the said share certificates in the premises of the appellant depicted that these entities/persons were controlled directly or indirectly by the appellant group.
9.4 It is a matter of fact that share certificates allotted by the appellant company to various entities were found in the possession of the appellant company during the course of search. The AO has presumed that since the share certificates were found in the premises of the appellant it reflected that these entities/persons were controlled directly or indirectly by the appellant group and concluded that unaccounted income of entities of the NV Group have been introduced in their books of accounts in the garb of share capital/ share premium. However, it is observed that in the assessment order and in the remand report that there is no mention of incriminating material being found during the course of search to suggest the flow of unaccounted income of the appellant being introduced in the books of the appellant in the garb of share capital/premium. Neither any trail of cash which had been routed back in the form of share capital/premium was found during the course of search nor was there any other document/evidence to suggest the same. In other words, no material was found during the course of search to prove that monies received in 9.5 The appellant further submitted that these share certificates were received from the shareholders with a request for splitting the single share certificate into smaller denominations.
9.6 The details of the share holders and the shares held by them are filed every year by the companies on the MCA website by way of annual return of the company. The share capital which is reflected by the share certificates is a part of the annual audited balance sheet of the company which is filed along with the income tax returns. Therefore, the share certificates issued to the shareholders are not concealed documents. The issue as to whether share certificates found during the course of search are incriminating in nature have been examined by the Judicial Authorities which have ruled that the share certificates in themselves do not constitute incriminating material. The judicial pronouncements laying down the proposition that Share Certificate is not an incriminating document are as under: i) CIT V. Moon Beverages Ltd. (ITA No. 115 to 118/Del/2018) dated 27.11.2020 (Delhi ITAT), ACIT Vs. Hindustan Aqua Ltd. (ITA No. 122 & 123/Del/2018) dated 27.11.2020 (Delhi ITAT)
SECTION 68, READ WITH SECTION 153A OF THE INCOME TAX ACT - CASH CREDIT (BURDEN OF PROOF) - 2009-10 TO 2012-13 - SHARE CAPITAL FROM NON DESCRIPT ENTITIES - SHARE CERTIFICATES, COUNTERFOILS FOUND - STATEMENT U/S 132(4) DO NOT CONSTITUTE INCRIMINATING MATERIAL Held, We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and 23 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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 Section 68 are clearly attracted. We find, in appeal, Id. 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.
It is the submission of the Id. 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 24 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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 Id. Counsel that in a corporate office the company is required to keep the share certificates and, therefore, the same cannot 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 Id. Counsel thatthe 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 statements 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. In the case of CIT vs. Sinhgad Technical Education Society reported in397 ITR 344 Hon’ble Supreme Court upheld the decision of Hon’ble Bombay High Court wherein the Hon'ble High Court
25 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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. 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/sl53A since the assessment was not abated in the instant case. In view of the above, we hold that the Id. CTT(A) was not justified in upholding the action of 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. CTT(A) in the 153A assessment proceedings being void ab-initio are deleted. Inasmuch as the assessee succeeds on the legal ground, we deem it not necessary to delve deeper into the arguments made by the Id. counsel for the assessee on merit since such adjudication would be academic in nature…… 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 26 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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-l 0 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 ITA Nos. 115 to 118, 122 & 123, 111 to 114, 816, 119, 124 & 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.
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 4thFebruary, 2020 wherein the Hon’ble
27 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 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 ITANo.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 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 Hon’ble Delhi High Court in CTT vs Kabul Chawla (supra) the above additions deserve to be deleted. Accordingly we direct the Assessing Officer to delete the disallowance of payment
28 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. in contravention is of provisions of section 40A (3) of the income tax act, disallowance of expenses on account of non- deduction and short deduction of tax at source and addition on account of personal expenditure. In the result, we reverse the order of the ld. 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.(Para 42-51) ii) dated 09.07.2021 DCIT vs. M/s. Godhuli Vaniiua Private Limited
Admittedly in this case search was conducted on another assessee i.e. M/s Akruti Hotels Limited. Therefore now it is required to be tested whether the documents found during the course of search on Akruti Hotels limited are pertaining to the assessee or not. In the present case the documents found are at page 49 on Annexure A-11 is share certificate in the name of Raj NandHela. Page no. 51 is share transfer
29 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. form of certificate No. 15 in the name of Raj NandHela. Both these documents are the property of Mr. Raj NandHela and therefore, there cannot be said to be the pertain to the assessee. Similarly page No. 51 and 52 the share certificate in the name of Response Overseas Ltd and share transfer form were found. These share transfer forms also did not belong to the assessee but to the shareholder. The share certificate shows that those investors are holding share in the assessee company. Therefore, the property of this share certificate does not remain with the assessee but with the shareholder whose name appears on those share certificates. Anyway, these shares are issued by the assessee in the name of those persons, which is part of the details of shareholders as well as the books of account of the assessee wherein share capital is shown. If it is to be believed that these documents found during the course of search on Akruti Hotels Limited pertain to the assessee, then natural corollary would be that whenever a share certificates are found during the course of search, the company whose shares are issued, would be covered u/s 153C of the act. The share certificates are owned by the person in whose name those were issued. This is not the case, where the share certificates along with the blank transfer forms duly signed by the shareholders along with some other materials such as blank receipts of consideration received of those shares as well as sale note issued by the shareholders are found together with. Therefore, in this case we do not agree with the contentions of the revenue that share certificates in the name of Response Overseas Private Limited and Raj NandHela along with the transfer forms pertains to the assessee company. …………………… 21. As we have already held that share certificates as well as the share transfer forms found during the course of 30 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. search on AKruti Hotels Ltd does not pertain to the assessee and therefore same can also not be an incriminating material, which has a bearing on the income of the assessee. Thus, there cannot be any addition in the hands of assessee on this count. In view of this, the ground raised by the assessee by invoking Rule 27 of ITAT Rules succeeds. In the result, on this issue the appeal of the department fails.
(iii) dated 29.11.2019 PKSS Infrastructure Pvt. Ltd. vs. DCIT
We have heard the rival contentions and gone through the facts and circumstances of the case. Admittedly, a search under section 132 of the Act was carried out on the premises of the assessee on 27.02.2014. The assessee filed its return of income originally on 27.09.2009 for AY 2009-10 and assessment was completed under section 143(3) of the Act dated 30.11.2011 during which the assessee filed complete details in regard to share application money received from various parties during the financial year 2008- 09 relevant to this AY 2009-10. On the date of the search on 27.02.2014, this assessment was unabated because no action was pending against this assessment. It is also a fact that during the course of search the shares certificates relating to these parties were not seized rather these are submitted by assessee before the investigation wing during inquiry proceedings carried out in lieu of search under section 132 of the Act vide letter dated 15.05.2014. These shares certificates were lying with the Secretary’s Office for Demat. Now, the question arises the statement recorded under section 132 of the Act of Shri Pravin Kumar Aggarwal and Ram Pal Soni during the course of search, which were later on retracted by the respective persons, can be considered as incriminating material for the purpose of framing under section 153A of the Act. This has been 31 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. answered by coordinate Bench of this Tribunal in the above cited two case laws namely; Agson Global Pvt. Ltd. Vs. ACIT in ITA No. 3741 to 3746/Del/2019 & Ors. dated 31.10.2019 & DCIT vs. Smt. Shivali Mahajan & Ors. in ITA No. 5585/Del/2015 vide order dated 19.03.2019. In both the judgments, the issues raised by the lower authorities that share certificates and the statement recorded during the course of search can be considered as incriminating material, has been answered and answered in favour of assessee that these two cannot be considered as incriminating material on standalone basis. Once, the assessment was completed and has not abated for relevant AY and there is no incriminating material found during the course of search, no assessment can be framed under section 153A of the Act in the absence of incriminating material and hence this issue is squarely covered by the decision of the Hon’ble Bombay High Court in the case of CIT vs. Continental Warehousing Corporation (NhavaSheva) Ltd. (2015) 374 ITR 645 (Bom).
iv) M/s. Brahmaputra Finlease (P) Ltd., vs. DCIT, 29.12.2017, ITAT-Delhi. (Sh. OP Kant & Sh. K.N. Cherry)
4.3 As regard to second condition related to incriminating material, the Ld. counsel referred to the impugned assessment order and submitted that there is no reference of any incriminating material in the assessment order, which was found during the course of search at the premises of the assessee.
4.4 The Ld. counsel submitted that only reference of five items of seized document found from the premises A-7, Mahipalpur, New Delhi has been made in the impugned assessment order. He further submitted that addition on the basis of item No. (ii) to (v) has been made in other cases of 32 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. the “Brahmaputra Group” and item No. (i) is not related to any of the parties from whom 'share capital has been invested in the assessee company. According to the Ld. counsel, there was no incriminating material qua the addition made for share capital of Rs. 55 Lacs.
4.4.2 In view of the arguments, the Ld. counsel submitted that since for the year under consideration assessment under section 143(3) of the Act was already completed, no addition could be made for undisclosed share capital in absence of any incriminating material qua the addition made.
4.5 On the contrary, Ld. CIT(DR) submitted that addition in dispute has been made on the basis of the incriminating material found during the course of search. She referred to page 5 of the assessment order and submitted that alongwith the search proceeding under section 132 of the Act at the premises of the assessee, a survey under section 133A of the Act was also carried out at the premises of Sh. M.L. Aggarwal, Chartered Accountant located at N-5, Azadpur, Commercial Complex New Delhi and documents including blank signed share transfer form, blank signed money receipts for transfer of shares, blank signed power of attorney, Memorandum and Articles of Association with some ROC papers and copy of bank statements etc. in relation to one of the share applicants, i.e., Edward Supply P. Ltd. were impounded from his premises. The Ld. CIT(DR) submitted that the survey proceedings at the premises of Mr. M.L. Aggarwal was part of the search proceeding at the premises of the assessee and the material impounded was in the nature of incriminating material and therefore the condition of incriminating material found during the course of search is satisfied.
33 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 4.5.1 Ld. CIT(DR) also referred to Item No.(i), which is mentioned on page 6 of the assessment order, seized from the premises of the assessee located at A-7, Mahipalpur, New Delhi, and submitted that the document reflected accommodation entry in respect of share capital and thus, it was in the nature of incriminating material found during the course of search.
4.5.2 She also submitted that the statement recorded under section 132(4) of the Act was in the nature of incriminating material and, therefore, the Assessing Officer was justified in making addition under section 153A of the Act. In support of her contention, she relied on the decision of the Hon’ble Supreme Court in the case of Video Master Vs. JCIT, (2015) 66 taxmann.com 361 (SC).
4.5.3 According to the Ld. CIT(DR), case of the assessee is not covered by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra). She also filed written submissions in support of the addition on merit and submitted that addition might be sustained.
4.7.1 In view of the legal position summarized above, the Hon’ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, then in absence of incriminating material, no addition could have been made. The relevant paragraph of the decision is reproduced as under:
“Conclusion
The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. ”
34 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 4.7.2 In view of above decision, we are required to examine the two conditions. The First condition is whether for the year under consideration, the assessment stood completed before the date of search or not. The second condition is that whether any incriminating material unearthed during the course of the search qua the addition made, which was not already disclosed or made known in the course of original assessment.
4.8 As regard the first condition, the Ld. counsel has already referred to page 105A of the paper book, which is a copy of the assessment order passed under section 143(3) of the Act on 24/11/2009. Since in the case of the assessee search was carried out on 28/09/2010, thus, it is undisputed that assessment was completed prior to the date of search.
4.9 Now regarding the second condition, the Ld. CIT(DR) has mentioned that documents impounded from the premises of Sh. M.L. Aggarwal, Chartered Accountant, during the course of survey proceeding are incriminating material found during the course of search. We do not agree with the contention of the Ld. CIT (DR) that these materials like blank shares transfer forms etc could be termed as found during the course of search at the premises of the assessee. The survey proceedings carried out at the premises of the Chartered Accountants, ML Aggarwal are separate from the search proceedings carried out at the premises of the assessee. There is no concept of group of assessee in Income-tax assessments. Each assessee is treated separately. If any material is found during the course of search from the premises of one assessee, it can be used against another assessee either under section 153C or under section 148 of the Act depending on material belonging to or pertaining to that another assessee but it cannot be termed as material found during the course of the search of another
35 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. assessee for making addition under section 153A of the Act. If any material impounded during the course the survey at the premises of one assessee and found to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we\eject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act. v) dated 08.02.2017 M/s Best Infrastructure India (Put) Ltd vs. DCIT.
Thus, their Lordships have clearly held that “Obviously an assessment has to be made under this Section only on the basis of seized material. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made”. Therefore, the basic question before us is to examine whether the pages 70 to 74 of Annexure A-l can be said to be incriminating material for the purpose of Section 153A. Admittedly, pages 70 to 74 of Annexure A-l are the list giving the details of transfer of shares during the financial year 2010-11. The assessee has filed before us the copy of annual return furnished by it before the Registrar of Companies on 10th March, 2011. In Part VI of the annual return, the assessee is required to furnish the details of shares/debentures transfers since the date of last AGM. In the return, the assessee mentioned “As per list attached”. Then, in the list, the assessee has given the required
36 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. details. The copy of the said list is annexed herewith as Annexure Annexure Annexure-A to this order. From this list, we find that it gives the details of date of share transfer, type of transfer, number of shares transferred, amount per share, ledger folio of transfer, transferor’s name and transferee’s name. At the outset, we find that this list pertains to shares transferred between financial year 2010- 11. Therefore, this document is relevant to financial year 2010- 11 i.e., assessment year 2011-12. Admittedly, the appeals before us are of assessment years 2005-06 to 2008- 09 and therefore, this document does not pertain to the year under appeal. On this ground alone, it can be said that no incriminating documents relevant to assessment year under consideration were found. However, we are also of the opinion that this document cannot be said to be incriminating document. A copy of an annexure to the annual return already furnished by the assessee with the Registrar of Companies before the date of search as a part of the annual return which is to be finished in the statutory form can never be said to be an incriminating document. Moreover, the shares are transferred by one person to another. The assessee is neither transferor nor the transferee. So far as the assessee is concerned, no financial transaction took place by the assessee even during the financial year 2010-11. In view of the above, we hold as under:
(i) Pages 70 to 74 of Annexure A-l cannot be said to be incriminating document. (ii) These papers are pertaining to financial year 2010-11 and therefore, not relevant to the assessment year under appeal. ”
9.7 The above judicial pronouncements have laid down the proposition that share certificates of the shareholders found
37 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. at the premises of the appellant are not incriminating in nature. Further, the Appellant has duly submitted the reasons for presence of share certificates, which appears to be justified. Thus on the basis of above discussion it can be said that no incriminating material regarding the transaction on which the addition has been made was found during the course of search.
10.9 On the basis of the above findings it is seen that addition of Rs. 49,63,00,000/- by treating the share capital and premium received during the year as unexplained cash credits u/s 68 of the Act is not based on any incriminating material found during the search action.
During the course of appellate proceedings, the appellant has challenged that no addition can be made in an assessment order u/s 153A of the Act, if it is not based on any incriminating material/document(s) found during the course of search action. The Return of Income in this case was filed u/s 139(1) on 28.09.2012.The date of search on the appellant was 20.04.2017. Accordingly the year under consideration i.e. A.Y. 2012-13 is an unabated assessment year. I find that the AO has not mentioned any documents or evidence found during the course of search which can be held to be incriminating document or material.
10.1 The appellant has also sought to place reliance upon the order of Delhi High Court in the case of CIT vs Kabul Chawla, 380 ITR 573. It has been held in that order by the Hon’ble Delhi High Court at para 37 as follows:
“37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:
38 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153A is relatable to abated
39 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed 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 made known in the course of original assessment. ”
10.2 The Hon’ble Delhi High Court has also held in the case of Pr. CIT vs Meeta Gutgutia, 395 ITR 526(Delhi), order dated 25.05.2017 at paras 58 till 63 as follows:
“58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under:
"31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two .decisions that they do not hold that 40 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search.
Recently by its order dated 6th July 2015 in of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with."
In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court inJai Steel (India) v. Asstt. CITf2013J 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under:
The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under:
22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and (a) the assessments or reassessments, which stand abated in terms of 11 proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made.
The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess”, which have been found at more than one place in Section 153A of the Act as under:
"26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or ’reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of 42 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents.”
In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn. (NhavaSheva) Ltd. 12015J 58 taxmann.com 78/232 Taxman 270/374ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under:
"37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of them aforementioned six years
43 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax”. iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the Jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed 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 made known in the course of original assessment."
It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under:
“15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers there under is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was 45 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding.”
Section 153A bears the heading 'Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no 46 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India)v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.
** ** ** 47 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd.
On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) vs. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT vs. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.
Subsequently, in Devangi Alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in IBC
48 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa (supra), the Bombay High Court held that:
6………..once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings.
Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015.
10.3 Further, the statement of Sh. Ashok Jain was recorded during the course of search on 22/04/2016 which was subsequently retracted. From a perusal of the statement, it is found that the statement was not corroborated by any incriminating material and therefore no credence can be given to the said statement, which has been subsequently retracted. Also the statement of Sh. Ankit Sharma, company secretary recorded during search on 21.04.2017 with regard to certain personal notes made by him in a diary is not found to be incriminating. Further the references made to statement of Sh. Shailesh Ghansham Parab, director of Om Energy Ltd., recorded on 28.05.2018 u/s 131 during post 10.4 In view of consideration of the judgment of Hon’ble Delhi High Court in case of CIT vs. Kabul Chawla reported as 380 ITR 573(Delhi) as referred above, it has been held that completed assessments can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search. Further, the Hon’ble Supreme Court in the case of Meeta Gutgutia reported as [2018] 96 taxmann.com 468(SC) upheld the decision of the Hon’ble High Court of Delhi in the case of Meeta Gutgutia, reported as 395 ITR 526 (Delhi), order dated 25.05.2017 on the same issue. The aforesaid judgements have lucidly pronounced that the case of completed assessment can be interfered only on the basis of some incriminating material found during the course of search. The case of the appellant for the assessment year 2012-13 is a completed assessment and there were no proceedings pending on the date of the search conducted i.e. 20.04.2017. This position of law that addition can be made only on the basis of incriminating material etc. found during search has been laid down by the Hon’ble jurisdictional High Court in unabated cases. In the case of the appellant, I find that the AO has not referred to any incriminating document which was seized during the course of search proceedings and the additions made in the assessment order are not based upon any incriminating material or documents found during the course of search. Respectfully following the judgments as elaborated above, I am of the considered opinion that no incriminating documents/material was found, during the course of search pertaining to the said additions made by the Assessing Officer, therefore the said additions are not sustainable. Accordingly, the additions made by the AO amounting to Rs.
50 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. 49,63,00,000/- on account of share capital / share premium is hereby deleted. As such, the appellant gets relief on this ground of appeal
.”
10. Having gone through the Assessment Order, order of the ld. CIT(A), arguments of both the parties and the order of the Income Tax Settlement Commission, we hold as under:
The ld. CIT(A) has duly called remand report from the Assessing Officer regarding the availability of the seized material found and seized during the search. The Annexture A-12 and A-15 are the seized share certificates referred in the remand report. The share certificates were not accompanied by any other document such as blank transfer deed executed in favour of the assessee company or its nominees. The share certificates pertaining to the 9 different companies are at the premises were seized on 16.06.2017 during the PO operation and a panchnama has been duly prepared. The date of initiation of the search was 20.04.2017. It was explained by the assessee that the share certificates were received from the investor companies for splitting the shares. The investor companies wanted that the share certificates may be split into smaller denomination to facilitate sales, pledge, mortgage, the required shares only. The share certificates per se cannot be treated as incriminating documents as the details are already in the public domain in MCA as well as in the balance sheet of the assessee. Hence, the reliance placed on this issue by the ld. CIT(A) on the judgments in the case of CIT Vs. V. Moon Beverages Ltd. (supra), M/s
51 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. Brahmaputra Finlease Pvt. Ltd. Vs. DCIT (supra), Survapriya Holdings Pvt. Ltd. Vs. DCIT (supra) cannot be faulted upon.
With regard to statement of Sh. Ashok Jain, the statement was recorded on 22.04.2017 and the retraction has been filed before the revenue authorities on 10.07.2017 and keeping into consideration, the operation of the PO on 16.06.2017, it can be said that the retraction has been filed within less than 30 days of the conduct of the search. The admission made by him about the share capital is not corroborated by any other material evidence. Hence, the reliance of the ld. CIT(A) on the judgments in the case of CIT Vs. Harjeev Aggarwal (supra), CIT Vs. Sunil Aggarwal (supra), CIT Vs. Ramdas Motor Transport (supra), PCIT Vs. Best Infrastructure India Pvt. Ltd. (supra) is held to be correct and hence we decline to interfere with the reasoning of the ld. CIT(A) on this issue.
Further, we find that the companies from which the share capital has been received as alleged by the AO as bogus has been subject matter of adjudication by the Hon’ble Income Tax Settlement Commission and were already examined by the ITSC as genuine and hence on that count also, no addition is called for. The proceedings inter-alia in the cases of M/s Realtime Marketing Pvt. Ltd. and Enn Vee Holdings Pvt. Ltd. were settled by the ITSC vide order dated 28.03.2014 upto A.Y. 2012-13. The order of the “245-I. Every order of settlement passed under sub-section (4) of Section 245D shall be conclusive as to the matters stated therein and no matter covered by such order shall, save as otherwise provided in this Chapter, be reopened in any proceeding under this Act or under any other law for the time being in force.”
From the above, it becomes clear that no incriminating material was found during the course of search qua the transaction of receipt of share capital for which surrender was made and the addition made solely on the basis of such admission which was also retracted is not sustainable.
The ld. CIT(A) held that the share certificates issued to the investors are neither hidden nor concealed documents. All the details of the shareholders and the shares held is a public document. Unless otherwise accompanied by any other material, the share certificates cannot be considered as incriminating material. The ld. CIT(A) has categorically held that no material was found during the course of search to prove that the monies received in the form of share capital came from the coffers of the assessee company.
Since, there were no incriminating material found and seized, the ld. CIT(A) has rightly held that no addition is called for in the case of unabated assessment.
On this issue, we have been guided by the established judgments of Hon’ble Jurisdictional High Court.
Reliance is placed on the following case laws:
CIT v. Kabul Chawla (2016] 380 ITR 573/(2015) 234 Taxman 300/61 taxmann.com 412 (Delhi), All Cargo Global Logistics Limited Vs. DCIT [2012] 18 ITR 106, ACIT, Central Circle-16, New Delhi vs. Vinita Chaurasia, dated 05.10.2018, ACIT, Central Circle-4, New Delhi vs. M/s. Moolchand Steels Pvt. Ltd., ITA No. 2544/DEL/2015 dated 10.10.2018 etc. The Hon’ble Delhi High Court in the case of CIT Vs Kabul Chawla (supra) held as under: “vii. Completed assessments can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed 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 made known in the course of original assessment” The Hon'ble Delhi High Court in the case of Pr. CIT vs. Meeta Gutgutia (2017) 395 ITR 526 in paras 69 to 72 has held as under:
“69. What weighed with the Court in the above decision was the “habitual concealing of income and indulging in clandestine operations” and that a person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long.” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.
The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal 54 1838, 1840 & 1841/Del/2021 Realtime Marketing & ENN VEE Holdings Pvt. Ltd. position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.
For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003- 04 was without any legal basis as there was no incriminating material qua each of those AYs. Conclusion 72. To conclude: (i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A. of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04.” The decisions of the Hon’ble Jurisdictional High Court are squarely applicable to the facts and circumstances of the case as no assessment was pending on the date of search and the addition has been made merely on the basis of the book entries already disclosed to the department. Further, reliance is also placed on the decision of the Hon’ble Jurisdictional High Court in the case of PCIT Vs. Subhash Khattar in ITA No. 60/2017 dated 25.07.2017.
The entire issue stands settled by the judgment of Hon’ble Apex Court in the case of M/s. Abhisar Buildwell P. Ltd. in Civil Appeal No. 6580 of 2021 dated 24.04.2023 wherein the Hon’ble Apex Court held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Hence, respectfully following the judgment of
In the result, the appeals of the Revenue are dismissed. Order Pronounced in the Open Court on 05/07/2024.