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Income Tax Appellate Tribunal, “C”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
4 & 11 other appeals CO No.259/12 & 11 other cross objections Mumbai-400065 स्थामी रेखा सं./ जीआइआय सं./ PAN/GIR No. : AAGCA 5453 Q (अऩीराथी /Appellant) (प्रत्मथी / Respondent) .. याजस्व की ओर से /Revenue by : Shri Subachan ननधाारयती की ओर से /Assessee by : Shri D.V.Lakhani सुनवाई की तायीख / Date of Hearing : 19/08/2016 घोषणा की तायीख/Date of Pronouncement 18/11/2016 आदेश / O R D E R PER BENCH: These are the appeals filed by the revenue and cross objections by the assessee against the order of CIT(A), Mumbai, for the assessment years 2008-09 & 2009-2010, in the matter of order passed u/s.143(3) r.w.s. 153C of I.T.Act.
2. As the issues involved in all the appeals as well as cross objections are same, therefore, all the appeals and cross objections were heard together and are being disposed off by this common order. For the sake of convenience, the grounds raised
in Cross Objection No.259/Mum/2014 are reproduced hereunder :- Grounds raised by revenue in ITA No.6104/Mum/2012 are as under :-
1. Whether on facts and in the circumstances of the case and in law. The Ld.CIT(A) is justified in allowing the addition made of Rs.3,00,00,000/- u/s.68 on account of unexplained investment in share capital of various companies. Without appreciating the fact that the assessment order framed after due verification.
2. Whether on facts and in the circumstances of the case and in law,. The Ld.CIT(A) is justified in allowing the addition made of Rs.2,00,00,000/- u/s.68 on account of unexplained investment as share application money from Delton Exim P.Ltd. without
1. On the facts & circumstances of the case the Learned CIT has erred in concluding that the action of the Learned Assessing Officer in invoking the provisions of Section 153C is justified. The appellant prays that the condition of Section 153C is not satisfied and the Learned Assessing Officer has wrongly invoked the provisions of Section 153C.
2. The Respondent craves leave to add, alter or amend the grounds of appeal
which are without prejudice to one other.
3. Rival contentions have been heard and record perused. Facts in brief are that search and seizure action u/s, 132 of the IT. Act was conducted on 04.03.2010 at the business premises of M/s. Jogia Properties Ltd., at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search it was found that M/s. Jogia Properties Ltd. is maintaining its books of accounts at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bundr, Mumbai - 400 009. Therefore, this premise was also covered u/s. 133A of the IT. Act wherein it was revealed that the following companies are operating from the said premises : S.No. Name of the party
1. Auster Properties Pvt. Ltd. 2. Reva properties Pvt. Ltd. 3. Archive Realty Developers Pvt. Ltd. 4. Vedisa Properties Pvt. Ltd. 5. Martand Properties Pvt. Ltd. 6. Karburi Pronrties Pvt. Ltd. 7. Cikura Properties Pvt. Ltd.
4. All the above said companies were found to be engaged in investment activities and have made investments in equity shares of various companies. The investments are made out of the share capital of the company, which consists of the share application money received from various other concerns. During the course of search action on M/s. Jogia 6 & 11 other appeals CO No.259/12 & 11 other cross objections Properties Pvt. Ltd., it was revealed that the above mentioned group companies, which operates at the same address i.e., 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bundr, Mumbai - 400 009 also received share application money and are also investing In M/s. Shree Global Tradefin Ltd.
5. During the course of post search operation, it was revealed that the Director in one company is also the Directors in other company for eg., S. No. Name of the Director Name of the Company 1. Shri Ajay Kumar Joola Properties Pvt. Ltd. 2. Shri Ajay Kumar Auster Properties Pvt. Ltd. 3. Shri Ajay Kumar Reva Properties Pvt. Ltd. 4. Shri Om Hari Halan Archive Realty Developers Pvt. Ltd. 5. Shri Om Hari Halan Vedisa Properties Pvt. Ltd.
6. Shri Narayan Hari Halan Martand Properties Pvt. Ltd. 7. Shri Naravan Hari Halan Karburi Proprties Pvt. Ltd. 8. Shri Narayan Hari Halan Cikura Properties Pvt. Ltd.
6. Further, it was also revealed that all the above said Directors are brothers and are from the same family. As all the above said 7 companies including the Jogia Properties Ltd., were doing their business from the same place, i.e. 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bundr, Mumbai - 400 009, the AO observed that all these concerns are not well established companies, which is also proved from the income & expenditure statement that no rent, electricity charges or any other expenditure is claimed which would show normal functioning of 7 & 11 other appeals CO No.259/12 & 11 other cross objections the concern. Therefore, from these facts and the material found during the course of search / survey and post search proceedings it is concluded by AO that the above concerns are sister concerns and the nature and the modus operandi is same as that of the assessee company. Hence, as the warrant has been issued in this name of M/s. Jogia Properties Pvt. Ltd., this company is covered u/s. 153A and the above concerns are co-related to .each other the other group concerns (i.e., other 7 companies mentioned above including the assessee company) are covered u/s. 153C of the IT. Act. The AO further observed that a search action was conducted on one Shri Mukesh Chokshi who was operating many companies through which indulged in providing bogus entries including long term capital gain, short term capital gain, F&O losses, Speculative Losses, share application money, etc. The post survey / search proceedings in this case revealed that the Jogia Group companies have taken bogus share application money from Mukesh Chokshi's concerns viz., M/s.Talent Infoway, M/s.Mihir Agencies & M/s.Alpha Chemie Trade Agencies.
7. AO further stated that during the post search/survey operations in the case of M/s. Jogia Properties Pvt. Ltd., statement on oath u/s. 131(1) of the I TAct, 1961 of Shri Narayan Hari Halan, one director of the assessee company was recorded and in reply to question No.12, he has submitted as under:
8 & 11 other appeals CO No.259/12 & 11 other cross objections Q,12. It is seen that your company has taken money against allotment of shares from the following other concerns also. The details of the same are as under:
Sl. Name of the company Share capital No. (Rs.) 1 M/s Cliftons Securities Pvt. Ltd. 20000000 2 M/s New Outlook Securities Pvt. 12000000 Ltd. 3 M/s Hingora Finvest Pvt. Ltd. 17500000 4 M/s Delton Exim Pvt. Ltd. 10000000 5 M/s Ispat Sheets Ltd. 35000000 6 M/s Growmore Fund Management 10000000 Co. Ltd. 7 M/s Bhasker Fund Management 20000000 Ltd. 8 M/s Shaqti Ispat products Pvt. Ltd. 10000000 9 M/s Gateway Computers Pvt. Ltd. 10000000 10 M/s Nicco Securities Pvt. Ltd. 15000000 11 M/s Oshin Investment & Finance 37500000 Pvt. Ltd. 12 M/s Sidh Housing Development 17500000 Co. Ltd. 13 M/s Gyaneshwar Trading & 21500000 Finance Pvt. Ltd. 14 M/s Doldrum Investment & Finance 37500000 Pvt. Ltd. 15 M/s Cliftons Peersons Export Pvt. 10000000 Ltd. 16 M/s Micro Technology Pvt. Ltd. 10000000 17 M/s Olympus Vision Pvt. Ltd. 20000000 18 M/s Pentium Hitech Pvt. Ltd. 10000000 Total: 32,35,00,000 I am showing you the statement recorded from Shri Jose Mathew on 04-03-2010 during the course of survey in the premises of M/s. Shree Globle Tradefinn Ltd in which he has stated that the share application received in the above companies have been obtained by paying cash in lieu of the cheques received as share capital.
Ans. ... ... ... Out of the total 18 parties mentioned in your question, we have reviewed the records and the documents. I have consulted my other two directors also. However, owing to the above facts mentioned by you and the circumstances today, I am offering the sum of Rs. 13.15 Crores, received as share capital recorded in the books of accounts from following 5 parties as unexplained credits in A. Y. 2009-10:
Sl. Name of the company Share capital No. (Rs.) 1 M/s Hingora Finvest Pvt. Ltd. 17500000 2 M/s Oshin Investment & Finance 37500000 Pvt. Ltd. 9 & 11 other appeals CO No.259/12 & 11 other cross objections 3 M/s Sidh Housing Development 17500000 Co. Ltd. 4 M/s Gyaneshwar Trading & 21500000 Finance Pvt. Ltd. 5 M/s Doldrum Investment & Finance 37500000 Pvt. Ltd. Total: 13,15,00,000
In response to the AO‟s query, the assessee had filed various submissions in respect of return of income filed along with confirmations with various financial statements in respect of share application money and the share capital.
9. In reply to the AO‟s query, the assessee, vide their letter dated 01-11- 2011 has submitted as under:
1.
All the six shareholding companies who have made investments in our company are independent existing corporate bodies. They are registered with Registrar of Companies. They are maintaining regular books of accounts. They have their own bank accounts. They have filed the return of income. They have filed a confirmation to the effect that they have made investments in the equity shares of the company from their bank account. They have submitted the full details of their bank account from which the said investments are made. They all are assessed to tax having PAN. Copies of their audited accounts is also submitted.
2. We submit that once the identity of the shareholder is established and their confirmation is filed which is supported with various papers, documents etc. then the burden is discharged by the company. The shareholders have also confirmed the said investments which further supports our claim that they have made the investments in the share capital of our company.
3. We further state that you have asked us to produce the directors of the above companies. We would like to place on record that we have discharged the burden by establishing the identity and genuineness of the shareholding company. We have filed before you their confirmations, the details of bank accounts, their balance sheets, proof of filing the return with ROC, their PAN etc. We do not have any authority or power to 10 & 11 other appeals CO No.259/12 & 11 other cross objections produce any director of all the above shareholding companies, who have made investments in share capital of our company. 19) subsequently, vide this office letter dated 11-11-2011, the assessee company was again given a show cause letter to submit its detailed explanation. 10. In reply to the AO‟s query the assessee company vide their letter dated 30-11-2011 has submitted as under:
1. 1. The correct status of our company is public limited company and the name of company is Cikura Properties Ltd. The registered office of the said company till the date of search action on Jogia Properties Ltd. was 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bunder, Mumbai-400003. Please refer to original return of income filed for A.Y.2009-10 in which the said address is disclosed.
2. A search action was undertaken on M/s. Jogia Properties Ltd. on 4/3/2010. No search action u/s 132 or survey action u/s 133 A is undertaken against our company. No summons were issued to us by the Investigation Wing in the search proceedings of Jogia Properties Ltd. We do not have any relationship with Jogia Properties Ltd.
3. We understand that the search proceedings started on 4/3/2010 continued in the case of Jogia Properties Ltd. and on 15/4/2010 the prohibitory order was lifted which was placed in the business premises of M/s. Jogia Properties Ltd. I was asked to be present at the premises of Jogia Properties Ltd. situated at 208, Ashirwad Building, Ahmedabad Street, Masjid Bunder, Mumbai - 400 009 to explain the papers belonging to the company found from the premises of Jogia Properties Ltd. Statement u/s. 132 was recorded by the Income tax officials. At that point of time I did not have all books of account or records of our company. I was informed that transaction of share application with the five parties viz. Oshin Investments & Finance Pvt. Ltd., Sidh Housing Development Co. Ltd., Gyaneshwar Trading & Finance Pvt. Ltd., Hingora Finvest Pvt. Ltd. and Doldrum Investment & Finance Pvt. Ltd. who are the shareholders of our company are not genuine. Reference was made to the statement of one Mr. Jose Mathew wherein he has stated that share application money is received by paying cash. I am not conversant with the provisions of Income Tax Act. I was not the director of the company during the financial year relevant to A.V. 2009-10. I did not have all the books of accounts or 11 & 11 other appeals CO No.259/12 & 11 other cross objections records. I had stated that Mr. Jose Mathew is not aware about the business activity of our company. The statement made by Mr. Jose Mathew is not true. No evidence was found that share application is received from five companies by paying cash in lieu of the cheques received. In this background and based on the information given to me by the officials of the Income tax department I had admitted that the investments made by five companies into the share capital of our company is not explainable and made a disclosure of income of Rs. 13,15,00,000/-. I state that the disclosure was made purely on mistaken belief that the transaction of share investments by five companies cannot be explained and the taxable income of the company will be to the extent of Rs. 13,15,00,000/- pertaining to A.Y. 2009-10 and 2010-11.
However subsequently I gathered the information, the papers, the documents, the confirmations, bank statements, balance sheets and other records of all the five companies. Based on the information and documents I had observed that all the five companies are genuine and they have invested in the share capital of the company. No confessional statement is given by any of the five shareholding company before the Investigation Wing Mumbai or anywhere else. The transactions of share investments by all the five companies can be explained. Therefore while filing the return of income for A.Y. 2009-10 and 2010-11 in response to the notice issued u/s 153 C, the company did not include the income of Rs. 13,15,00,000/-. The Non inclusion of the income obtained on 15/4/2010 may be treated as retraction of income. Please refer to letter dt.18/7/2011 submitted in your office on 22/7/2011 wherein also the fact of retraction has been mentioned. The real income as per the provisions of Income Tax Act, 1961 is only chargeable to tax. No evidence or documents was found to prove that we had paid cash and received share application. Mr. Jose Mathew is not a director or employee of our company. He is no way connected with our company. No reliance can be placed on statement of Mr. Jose Mathew.
I further state that all the five companies are independent existing corporate bodies. They are registered with Registrar of Companies. They are maintaining regular books of accounts. They have their own bank accounts. They have filed the return of income. They have filed a confirmation to the effect that they have made investments in the equity shares of the company from their bank account. They have submitted the details of their bank account from which the said investments are made. They all are assessed to tax having PAN.
6. I submit that once the identity of the shareholder is established and their confirmation is filed which is supported with various papers, documents etc. then the burden is discharged by the company. The shareholders have also confirmed the said investments which further supports our claim that they have made the investments in the share capital of our company.
7. I would further like to point out that there is nothing on record to suggest that our company has made the cash payments to all the five shareholders for the purpose of making investments into the share capital of the company. 8. All the five shareholding companies are not associates or group companies of our company. We do not have any other relationship with them except that they are shareholders of our company. We have not entered into any other transaction with them. None of the directors of our company is either the director or shareholder of all the five shareholding companies. None of the directors of give shareholding companies are directors or shareholders of our company. 9. I submit that just on the basis of the statement recorded u/s 131 no amount can be brought to tax iA the absence of any other evidence or material. 10. In response to your questionnaire dated 5/5/2011, we have submitted before you the name and address of the shareholding company, the PAN No., the details of share application money received, issue of shares against share application, cheque No., name of the Bank, Branch and confirmation. We established the identity and credit worthiness of the companies who have made investments in the share capital of the company. We have submitted all the details called for in your questionnaire. 11. We have also proved before you that we have issued the shares to all the five shareholding companies. The details of distinctive number of shares, share certificate numbers and number of shares issued have been submitted to you. We had intimated the Registrar of Companies of issue of shares by filing the requisite forms. We had filed the annual return in which year after year their names are reflected as shareholders. All these events happened much prior to 4/3/2010 when the search action is taken against M/s. Jogia Properties Ltd. 12. As regards the transaction with M/s. Delton Exim Pvt. Ltd. we have produced before you their confirmation, details of bank 13 & 11 other appeals CO No.259/12 & 11 other cross objections account, their balance sheet, PAN and other relevant information. The said company is in existence and has filed the return of income upto 31/3/2011. They are carrying on their business from 48/A New Alipore, Block -C, Kolkatta - 700 053. With reference to your allegation that the notice issued to them was returned back with the remark 'Not Known' and the Inspector of Investigation Wing also failed to serve the notice. We are not in a position to make any comment on this aspect as we do not know as to in which period this particular event has happened. The said company is in existence at the above address and they are carrying on their business from the said premises. Without prejudice we submit that if for some reason the notices are not served or notices are returned back does not mean that our transaction with the said company is not genuine especially when we have submitted before you various documents and papers in support of the claim that they have invested into share capital of our company. We have discharged our burden by establishing the genuineness of the share capital.
We further state that we have produced sufficient evidence in support of the claim that the shareholding companies have made investments in the share capital. Non production of the director should not be construed that the investments made by the shareholding company is not genuine.
We further state that there is no incriminatory documents or papers which are contrary to the facts submitted to you.
15. I would like to state that whatever is required to be produced in support of the share capital introduced by the five shareholding companies, we have submitted the same before you. All the five shareholding companies are in existence, having their separate independent identity and having their separate source of income. They have filed the confirmations for their shareholding in our company and also supported the same with the documents. In view of this we submit that the sum of Rs.13,15,00,000/- should not be added as income for A.V. 2009- 10 and 2010-11.
We also submit that M/s. Delton Exim Pvt. Ltd. is a genuine independent corporate body which has invested Rs.1,00,00,000/- at the share capital in A.Y.2009-10 should not be added as income for A.Y.2009-10.
11. The AO considered the detailed reply of the assessee in the documents filed by him with regard to the share applicants, their bank 14 ITA No.6104/12 & 11 other appeals CO No.259/12 & 11 other cross objections account, PAN details etc., However, not being satisfied with these documents and the explanation given by the assessee, AO made addition on account of share capital u/s.68 of the IT Act. Before the CIT(A), assessee challenged legality / validity of assessment framed u/s.153C and also merit of addition so made.
Addition made by the AO on account of share capital in the case of M/s. Reva Properties Ltd., Mumbai was deleted by CIT(A) after observing as under:- I have considered the submissions of the appellant, order of the AO and facts of the case in brief are that a search and seizure operation was carried out in case of M/s. Jogia Properties Pvt. Ltd. Certain loose papers were found and seized relating to the 8 group companies including the assessee. During the course of search, a statement of Shri Jose Mathew, Jt. General Manager of the group company was recorded who has submitted that the share capital received in these companies is collected through cheques from different companies against the cash given back to the share holders. In the post search enquiries, the statement of Shri Ajay Kumar, Director was also recorded u/s. 131 who has stated that Shri Jose Mathew is not aware about the business activity of the company. The statement made by Shri Jose Mathew is not correct because he was not an employee with these companies and was not aware about the share application money. But, Shri Ajay Kumar has declared this share application money as undisclosed income. However, in the return filed in response to notice u/s. 153A, this amount was not declared. Then, the AO issued show cause notice to the assessee to explain the same. In response to this show cause notice, the AR of the appellant has submitted that the statement of Shri Jose Mathew was retracted by an affidavit filed before the Dy. Director of Investigation and there was no discrepancy found in the share capital and no incriminating document was found and seized and the appellant also retracted the statement recorded u/s. 131 by not offering income in the return filed. Therefore, the undisclosed income declared in the statement has not been disclosed in the return of income filed. After considering the reply of the appellant, the AO has given his observation and inferences of each company-wise. In nutshell, the AO has raised objection that the equity share of Rs.10/- of the assessee is issued at a premium of Rs.240/- per share and the assessee has not provided share application form. Secondly, it was alleged that no board resolution was provided. Thirdly, no bank account statement was submitted. Fourthly, the confirmation certificate submitted was signed only by one Director. Next, the AO has 15 & 11 other appeals CO No.259/12 & 11 other cross objections raised the 'objection that P & L account and Balance-sheet submitted were not certified by the Chartered Accountant. Finally, the AO, objected that the Directors of the company were not produced to prove the identity, creditworthiness and genuineness of the investors and the documents submitted by the AR of the appellant were not found during the course of survey and search operation. In view of these Facts, the AO has treated the investment made by the above said 9 companies as unexplained u/s. 68 of the IT. Act and added back Rs.6,00,00,000/- Rs.7,20,00,000/- and Rs.7,75,00,000/- to the taxable income for the AYs. 2007-08, 2008-09 & 2009-10 respectively. 4.6 On the other hand, the AR of the appellant has submitted that during the course of search and survey operation in case of M/s. Jogia Group of companies, no incriminating document was found and seized relating to 8 companies including the assessee. The statement recorded of Shri Jose Mathew was retracted by submitting an affidavit that he was not acting as Jt. General Manager of these companies but he was working as Jt. General manager with other group companies and he do not know anything about these companies and moreover, the statement was recorded by using undue influence on him which are narrated in the affidavit filed before the Dy. Director of Investigation. To rebut the objections of the AO, the appellant has submitted that complete details of share application money received alongwith confirmation from the respective companies was furnished before the AO. The complete details about payment towards share application money giving cheque No., date, name of the bank was also submitted. The Board resolution was not available with the appellant as the appellant has no legal right to ask for the Board resolution when complete information about the investments is made available by the investing company. Regarding the bank statement, the AR of the appellant has submitted that complete details of cheque No., date, name of the bank was submitted. The confirmation of the parties was submitted before the AO. The objection of the AO that the investing companies are not generating significant income was reverted by the AR of the appellant by submitting that net worth of the companies was substantial as mentioned in the balance- sheet in each case. Regarding the presence of Directors of the investing company, the AR has submitted that it has, no authority to produce any director of the company and request was made to the AO but no summons were issued by the AO to the directors. Regarding the allegation of the AO that no documents were found during the search and survey operations, it was submitted that no search and survey was undertaken against the appellant and other 7 group of companies and nobody has asked for the documents during the search and survey operations. To strengthen the evidences submitted before the AO, the AR of the appellant has also relied on various decisions including the 16 & 11 other appeals CO No.259/12 & 11 other cross objections decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra. Thus, the AR of the appellant has argued that since all the documents were submitted to prove the identity, creditworthiness and genuineness of the transaction of the investing companies, no addition is called for. 4.7 From the perusal of the submissions and the arguments of the AO, it is observed that in the present case 9 investing companies supra has made investment in the shares at a premium of Rs.240/- per share. The AO has raised objections regarding the submissions filed by the appellant during the assessment proceedings each company-wise and the AR of the appellant has also rebut the objections of the AO each company-wise in the submissions filed during the appellate proceedings. Since the facts and documents in all the companies are the same, therefore, to avoid repetition and for the sake of convenience, a combined discussion has been made for all the above said investing companies. As per the provisions of section 68, the AO is empowered to call for the details to prove the identity, creditworthiness and genuineness of the transaction. During the assessment proceedings, the AO has given show cause notice to the assessee company to submit complete details regarding the share application money received from the above said investing companies. The AR of the appellant has submitted the PAN, complete details of cheque No., date and name of the bank of each company, confirmation certificate of each company duly signed by the directors to confirm that investment has been made, P&L account and balance-sheet of each company were submitted and moreover, no incriminating document was found and seized during the course of search in case of M/s. Jogia Properties Ltd. relating to these companies. The main objection of the AO was that in the post search enquiries, the statement of Shri Ajay Kumar, Director of the company was recorded who has declared the share application money as undisclosed income and promised to declare in the return to be filed in response to notice u/s. 153A. In the return filed, the assessee has not declared the undisclosed income on account of share application money as admitted in the statement recorded u/s. 131 of the I.T. Act. The AO has made a lengthy discussion on the retraction of the statement recorded of Shri Jose Mathew and Shri Ajay Kumar, Director of the company. Shri Jose Mathew has submitted an affidavit before the DDI (Inv.)two days after the search by explaining that he is not an employee of the companies and he do not know anything about the. share 17 & 11 other appeals CO No.259/12 & 11 other cross objections application money or functioning of these companies and the statement was recorded by putting undue pressure on him. Neither the DDI(lnv) nor the AO has given any comment on this affidavit in the assessment order except by writing that it was only an afterthought. A copy of the documents filed before the AO was also submitted before me from the perusal of which it was . noticed that all the investing companies are assessed to income-tax which is clear from their PAN. During the appellate proceedings, the AR was also asked to submit the copy of acknowledgment of filing of return which was also filed and noticed that all the investing companies are assessed to tax. Secondly, from the perusal of bank details submitted, it is noticed that the date of cheque with cheque No. name of the bank, amount etc. all details were submitted before the AO. The copy of P&L account and the balance-sheet of each company was submitted, from the perusal of which it shows that each company have reserves and surplus of substantial amount as disclosed in the balance-sheet. The confirmation certificate was also submitted before the AO duly signed by the director of the investing company to confirm that investment was made for the purchase of shares of this company. The objection of the AO that investing companies are showing very low income cannot determine the investments made by. these companies because the balance-sheet shows the reserves and surplus worth crores of rupees in all cases. The other objection of the AO that documents submitted during the course of assessment proceedings were not found during the course of search is not based on any reasoning and substance because no search operation was carried out in case of the assessee and other 7 group companies. Further, the AR has also submitted that nobody had asked for the documents during the search operation in case of M/s. Jogia Properties Itd. 4.8 Now, the conditions of section 68 are to be examined on the basis of the papers submitted during the assessment proceedings and appellate proceedings. To prove the identity, the appellant has submitted the PAN and acknowledgment page of each investing company which proves that the assessee is an existing company. The details of bank account giving the cheque No., the date and name of the bank proves the creditworthiness of each company and the amount of crores of rupees shown as reserve and surplus in the balance-sheet of each company further strengthens the argument of the appellant. Regarding the genuineness of the transaction, there is no 18 & 11 other appeals CO No.259/12 & 11 other cross objections doubt that all the payments were made through account payee cheques and duly reflected in the accounts of the investing companies which is evidenced by the date of cheque, cheque No. and name of the bank of each company. Further, the confirmation certificates of each investing company duly signed by the director itself confirm that the investment was made by account payee cheques only. In view of these facts, the three conditions laid down u/s. 68, i.e. identity, creditworthiness and genuineness of the transaction are duly proved by the documentary evidences filed during the assessment proceedings and appellate proceedings. The other objection of the AO that the income shown by these companies is very small cannot be accepted because the investment made in the shares is not from the current year income but it is from the reserves and surplus shown in the balance-sheet of each company which are duly reflected in the bank account from where the cheques have been issued by each investing company. Further, the AO has objected that directors of the company were not produced. In this regard, the AR of the appellant has shown his inability during the assessment proceedings and it was the duty of the AO to make investigation by issuing summons and commissions to his counterparts for the presence of the directors. The other objection that these papers were not found during the search is also without any reason because no search operation was carried out in the case of the assessee and other 7 group companies, therefore, the question of these papers does not arise. 4.9 During the appellate proceedings, an opportunity was given to the AO to represent his case and the submissions of the appellant were also given to the AO for his counter comments. Since the facts of the investing companies in all the cases is the same, therefore, to avoid repetition and for the sake of convenience, the submissions in the case of M/s. Martand Properties Ltd. was given to the AO. The gist of the AO's comments is reproduced as under: “Para-wise reply on para-wise submission made by assessee is as follows: Para 1,2,3,4,5,6 and 7 of the submission made by assessee As explained by the Assessing Officer in his order in para number 2,3,4,5,6 and 7 and specially 8, the assessee’s case is covered under Section 153C and notice issued to assessee and order passed by the assessing officer is not bad in law.
19 & 11 other appeals CO No.259/12 & 11 other cross objections Para 8 and 9 of the submission made by assessee. Claim of the assessee that the all investing companies in the appellant company are independent companies cannot be accepted. All four companies i.e., Oshin, Sidh Housing, Doldrum Gyaneshwar have same registered address. All these companies are running the so-called business from the same place and have a common director viz. Mr. Jha. This clearly indicates that all these companies are managed by the same group. Para 11. 12. 13. 14, 15 and 16 of the submission made by assessee. Assessee has mentioned in these paragraphs basically documents submitted by the assessee to support its claim. However merely submitting some documents will not suffice for the purpose of the assessee. Assessing Officer In his order in para 22 sub para 1, 2, 3, 4, 5 and 6 has mentioned in detail flaws, contradictions and shortcomings in the submission of documents made by the assessee. In view of this it cannot be said that the assessee has fully discharged its onus. Para 17. 18. 19.20, 21,22 and 23 of the submission made by assessee. Assessee has given its response to the objections raised by assessing officer in his order regarding various documents submitted by the assessee to support its claim. Share application form is one of the very important document to support claim of investment. The same is not provided by the assessee. In case of Oshin Investments and Finance Pvt. Ltd., assessee has mentioned that confirmation letter taken from investing company dated 5th February 2009 was having its date as 5/2/2009 due to mistake. Assessee has not substantiated that it was mistake only and not a afterthought of preparing documents to support its claim. Assessee has also mentioned that no adverse inference can be drawn with respect to place of registered office is of the company and place of residence of directors that is Mumbai and Kolkata respectively. However, these contradictions definitely cast doubts over genuineness of transaction. Hence even if no definite conclusive adverse inference can be drawn but 20 & 11 other appeals CO No.259/12 & 11 other cross objections preponderance of probability is to be considered and contradictions mentioned by assessing officer does make the case in favour of revenue. The facts that copy of bank account of the investing company was not produced to support appellant's claim and not a single document regarding investment of existing companies in the appellant company was found definitely casts doubts over the genuineness of transaction. Assessee has further mentioned that for AY 2010-11, auditors were M/s. Sudhir Otlikar and company. Hence certificate issued by J & 8 Associates in the capacity of the auditors of investing company on 12th March 2010 will not help assessee's cause. Also the fact that investing company is not generating any net profit indicates that it should not have surplus funds to invest in the appellant company. These contradictions tilt the case in favour of revenue following principle of preponderance of probability. Para 24. 25, 26 and 27 of the submission made by assessee. Assessee's claim that assessing officer has not contradicted material produced by the assessee company cannot be accepted. Assessing Officer has in detail brought upon the contradictions in the submission made by the assessee. Address of the investing company was not located when enquiries were made by Investigation Wing of Kolkata. Investing companies does not have any significant net profit to have surplus funds to invest money Into appellant company. These facts tilt the case in favour of revenue by following principle of preponderance of probability. Further statement given by Mr. John Mathews clearly indicates that investment transaction was not genuine and was in lieu of cash paid by the appellant company. Para 28, 29, 30, 31, 32, 33, 34 and 350f the submission made by assessee. Appellant company has not fully discharged its onus of proving genuineness of transaction and creditworthiness of investing company in the light of contradictions brought on the record by the assessing officer. Since appellant 21 & 11 other appeals CO No.259/12 & 11 other cross objections company has not fully discharged its basic onus, additions made under section 68 are fully justifiable. All the case laws relied upon by the assessee presume that assessee has discharged its primary onus completely. However this is not the case with the appellant company. . Para 36 37, 38 and 39 of the submission made by assessee 'Statement given by one of the director of the appellant company has evidentiery value. The statement is not taken under coercion or force. The statement is given voluntarily. In view of this retraction of the statement cannot be accepted. Mr. John Mathews having no relation to business activity of the appellant company is not the relevant point here. His statement is to be considered with reference to claim of investment made by investing companies. In this context statement by Mr. John Mathews has evidentiary value. Shri Heri Narayan Halan, director of the appellant company is responsible dignitary of the company and is in the knowledge of affairs of the company. Hence, assessee's contention that no reliance should be made upon statement of the director of appellant company is not acceptable. Para 40,41 and 42 of the submission made by assessee. Declaration of undisclosed income given by the assessee in this case is voluntary. It has on its own given the declaration. No coercion or force is used by Department to take any such confession. It was only when during recording of statement assessee could not substantiate its claim, it offered undisclosed income for taxation. Addition in this case is made on the fact that assessee company did not discharge its onus of proving genuineness of transaction and creditworthiness of investing companies in view of various contradictions shown by the assessing officer in his order. Thus it Is clear that addition is not made purely and merely on the basis of declaration made. Para 43 and 44 of the submission made by assessee. Levy of the interest is as per provisions of the law. As brought upon by the assessing officer in his order share capital claimed by the assessee has been treated as assessee's own income under section 68 and hence assessee is liable to pay interest on the tax which he is not paid at the time of filing of return or at the stages of advance-tax payment.
Para 45 of the submission made by assessee. No comments. In view of the above, it is requested that addition made by the assessing officer may be upheld". 4.10 The comments of the AD were also given to the AR of the appellant for further submission. The AR has made submissions and submitted that no new facts has been brought on record by the AO except the repetition as given in the assessment order. The submissions of the AR are also reproduced above. From the perusal of the remand report and submission of the appellant, it is observed that the AO has repeated the same arguments as given in the assessment order and no new fact has been brought on record. Since the facts of the assessment order and arguments of the AD has been discussed, therefore, no further comments are required. 4.11 It is also pertinent to mention that during the appellate proceedings the case was discussed with the AD and the Addl, CIT, Central Range-8, Shri R.M. Tiwari. During the discussion, I have asked the Addl. CIT to explain whether any investigation regarding the bank details have been made in this case. The Addl. CIT has fairly admitted that complete bank enquiries were made in case of all investing companies on the basis of details submitted by the assessee upto third down layer but nowhere it was found that cash was' deposited in any account before issuing the cheques for investment made in the purchase of shares of assessee company. He has further stated that since no adverse finding was recorded during the bank account investigation, therefore, it was not mentioned in the assessment order. 4.12 From the fact that the AO has made enquiries in all the bank accounts upto third down layer and nowhere it was found that the cash was deposited against issuing of cheques for investment of shares in these companies, therefore, the statement recorded of Shri Jose Mathew itself proves wrong in which he has stated that the cash was given and cheques were received for the investment of shares in these companies. The statement of Shri Ajay Kumar, Director, automatically goes wrong on the basis of the fact that nowhere in any account it was found that .cash was deposited before issuing cheques for investing in the 23 & 11 other appeals CO No.259/12 & 11 other cross objections share application money of these companies and moreover, no incriminating document was found and seized and no statement was given by any director of the investing company that cash was received against cheques issued. The director has also retracted its statement by not disclosing the income admitted in the return filed. Although it is an established law that the statement recorded u/s. 132(4) and 132(1) of the LT. Act is having evidentiary value but it is not a conclusive evidence until and unless it is corroborated with documentary evidences. In the present case, the statement of Shri Jose Mathew and Shri Ajay Kurnar has proved wrong because nowhere in the bank account investigation, it was found by the AO that in all cases any cash was deposited before issuing the cheques for share application money in these companies. In view of these facts, the statements recorded without any corroborative evidence cannot be adversely applied against the assessee. Besides, the facts of the case, the decisions of Hon'ble Courts relied on by the AR of the appellant are also in favour of the assessee, the gist of which is reproduced as under : "COMMISSIONER OF INCOME TAX VS. OASIS HOSPITALmES PVT. LTD. 333 ITR pg. 119 We may also usefully refer to the judgment of the Supreme Court in the case of Commissioner of Income Tax Vs. P. Mohanakala [(2007) 291 ITB 278 (SC)]. In that case, the assessee had received foreign gifts from one common donor. The payments were made to them by Instruments issued by foreign banks and credited to the respective accounts of the assessees by negotiations through bank in India. The evidence indicated that the donor was to receive suitable compensation from the assessees. The AO held that the gifts though apparent were not real and accordingly treated all those amounts which were credited In the books of account of the assessee, as their Income applying Section 68 of the Act. The assessee did not contend that even If their explanation was not satisfactory the amounts were not of the nature of Income. The CIT (A) confirmed the assessment. On further appeal, there was a difference of opinion between the two Members of the Appellate Tribunal and the matter was referred to the Vice President who concurred with the findings and conclusions of the AO and the CIT(A). On appeal, the High Court re-appreciated the evidence and substituted Its own findings and came to the conclusion that the reasons assigned by the Tribunal were 24 & 11 other appeals CO No.259/12 & 11 other cross objections in the realm of surmises, conjecture and suspicion. On appeal to the Supreme Court, the Court while reversing the decision of the High Court held that the findings of the AO, CIT (A) and the Tribunal were based on the material on record and not on any conjectures and surmises. That the money came by way of bank cheques and was paid through the process ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 12 of 27 of banking transaction as not by itself of any consequence. The High Court misdirected itself and erred in disturbing the concurrent findings of fact. While doing so, the legal position contained in Section 68 of the Act was explained by the Supreme Court by assessing that a bare reading of Section 68 of the Act suggests that (i) here has to be credit of amounts in the books maIntained by the assessee; (if) such credit has to be sum of money during the previous year; and (ii) either (a) the assessee offers no explanation about the nature and source of such credits found In the books or (b) the explanation offered by the assessee, in the opinion of the AO, is not satisfactory. It is only then that the sum so credited may be charged to income tax as the income of the assessee of that previous year. The expression "the assessee offers no explanation" means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the AO tor not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the AO is required to be formed objectively with reference to the material on record. Application of mind is the sine qua non for forming the opinion. In cases where the explanation offered by the assessee about the nature and source of the sums found credited in the books Is not satisfactory there is, prima facie, evidence against the assessee, viz., the receipt of money. The burden is on the assessee to rebut the same, and, if he fails to rebut it, it can be held against the assessee that it was a receipt of an income nature. The burden is on the assessee to take the plea that even If the explanation is not acceptable, the material and attending circumstances available on record do not ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 13 of 27 justify the sum found credited In the books being treated as a receipt of Income nature. We would like to refer to another judgment of the Division Bench of this Court in the case of Commissioner of Income 25 & 11 other appeals CO No.259/12 & 11 other cross objections Tax Vs. Value Capital Services P. Ltd. [(2008) 307 ITR 334 (Delhi)]. The Court In that case held that the additional burden was on the Department to show that even if share application did not have the means to make investment, the Investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. In the absence of such findings, addition could not be made in the income of the assessee under Section 68 of the Act. It is also of relevance to point out that In Commissioner of Income Tax Vs. Stellar Investment Ltd. [(1991) ITR 287 (Del.)] where the increase in subscribed capital of the respondent company accepted by the ITRO and rejected by the CIT on the ground that a detailed investigation was required regarding the genuineness of subscribers to share capital, as there was a device of converting black money by issuing shares with the help of formation of an Investment which was reversed by the Tribunal, this Court held that even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances the amount of share capital could be regarded as undisclosed income of the company. This view was confirmed by the Apex Court in CIT Vs. Stellar Investment Ltd. [(2001) 251 ITR 263 (SC)]. ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 14 of 27 Having taken note of the legal position in detail, we now proceed to decide each appeal on the application of aforesaid principles. ITA No.2093 of 2010 & ITA No.2095 of 2010. In both these appeals, the assessee Is the same. Since these appeals pertain to two assessment years, vtz., Assessment Year 2003-04 and Assessment Year 2004-05, that Is the reason for two appeals though common issue is based on Identical facts. While making the assessment In respect of return filed for Assessment Year 2004-05, the AO noticed that the assessee had received share application money of 3 lacs each from sIx private limited companies during the year relevant Assessment Year 2003-04. It Is for this reason notice under Section 148 of the Act was Issued in respect of Assessment Year 2003-04 and reassessment done. The 26 & 11 other appeals CO No.259/12 & 11 other cross objections AO made addition of • 18 lacs to the Income of the assessee on protective basis In the Assessment Year 2004- 05 as well. It is for this reason we say that the transaction Involved In both the appeals is same. The order of the AO would reveal that it had received an information from the Investigation Wing which had made various enquiries/investigations on the basis of which It was found that these six Investors belong to one Mahesh Garg Group who were not carrying on any real business activity and were rather engaged In the business of providing accommodations entries. They were, thus, entry operators of which the assessee was the beneficiary. According to the AO, the modus operandi Involved In such type of activity was like this: an entry operator operates a number of accounts In the same bank/branch or In different ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 15 of 27 branches in the name of companies, firms, proprietary concerns and individuals and for the operation of these bank accounts, filing Income tax returns etc., persons are hired. Most of these persons work on part-time basis and are called upon to sign documents, cheque books, etc. whenever required. Whenever any' beneficiary Is Interested In taking, an entry, he would approach the entry operator and handover the cash along with commission and take cheques, Demand Draft, Postal Order. The cash Is deposited by the Entry Operator In a bank account either In his name or In the name of relative/friends or other person hired by him for the purposes of opening the bank account. After the deposit of cash when there is sufficient balance, the Entry Operator Issues Demand Draft, Postal Orders, cheques in the name of beneficiary. Most of these concerns/individuals also have obtained PAN· from the Department and are filing Inc. returns, but what Is shown In the return Is not actual state of affairs. The assessees filed copies of PAN, acknowledgement of filing income tax returns of the companies, their bank account statements for the relevant period, l.e., for the period when the cheques were cleared. However, parties were not produced in spite of specific direction of the AO instead of taking opportunities in this behalf. Since the so- called Directors of these companies were not produced on this ground coupled with the outcome the detailed inquiry made by the Investigating Wing of the Department, the AO made the addition. This addition could not be sustained as the primary onus was discharged by the assessee by 27 & 11 other appeals CO No.259/12 & 11 other cross objections producing PAN number, bank account, copies of. income tax returns of the share applicants, etc. We also find that the ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 16 of 27 Assessing Officer was influenced by the information received by the Investigating Wing and on that basis generally modus operandi by such Entry Operators is discussed in detail. However, whether such modus operandi existed in the present case or not was not investigated by the AO. The assessee was not confronted with the investigation carried out by the Investigating Wing or was given an opportunity to cross-examine the persons whose statements were recorded by the Investigating Wing. As regards discrepancies found by the AO in the bank statement, suffice is to mention that the bank statements that were filed by the assessee were provided by the shareholders and were computer printed on the bank stationery. The same were filed by the assessee during the assessment proceedings without any suspicion of their being incorrect. During the assessment proceedings, the assessee was never confronted by the AO that there are discrepancies between the bank statements filed and the statements directly called by the A.O. However, even after considering the alleged discrepancies, it does not follow that the amount of share capital was the undisclosed income of the assessee. Even the correct Bank statements as claimed by the AO reveal that the assessee has received cheques from the shareholders. In this backdrop, the following observations of this Court in the case of Commissioner of Income Tax Vs. K.C. Fibers Ltd. (2010) 187 TAXMAN 53 (Del.) are reproduced: "It is strange that when the Assessing Officer is questioning the bona fides of M/s Diamond Protein Ltd. for collecting money to subscribe to the share to the capital of the assessee, but it is the assessee who is fastened with the liability. The Assessing Officer did not question M/s Diamond Protein Ltd. in this behalf. Insofar as Assessing Company is concerned, it is not disputed that money was paid to its towards the aforesaid share application money, by means of cheques. It is not for the Assessing Company to probe as to the source from where n/s Diamond Protein Ltd. collected the aforesaid money. It was for the Assessing ITA Nos.2093, 2094, 2095 of 2010, 514 of 2007 & 539 of 2008 Page 17 of 27 Officer, in these circumstances to inquire into the affairs of M/s Diamond Protein Ltd. which is an independent company inasmuch as no finding is arrived at by the Assessing 28 & 11 other appeals CO No.259/12 & 11 other cross objections Officer that the two companies are umbrella companies or have any relationship with each other. " We are, therefore, of the opinion that there is no merit in these two appeals, which are accordingly dismissed at the admission stage Itself. ITA NO.2094 of 2010 In this case, the assessee had shown receipt of 99.18 lacs on account of share application money. In order to prove the genuineness of the transactions and Identity of the share applicants and their creditworthiness, the assessee had filed confirmation from these parties, which were 30 In number. The assessee had also supplied Income tax particulars of these share applicants. The AO issued notices under Section 133(6) of the Act, which remained unserved on 22 out of 30 parties. Even remaining 08 persons did not respond. Local inquiry made through Inspector revealed that the parties did not exist at the given addresses. On Inquiries from bank, the AO found various discrepancies In the statement sent by the bank and the statement produced by the assessee. Even some of the names given by the assessee were not the same as In the bank records. The AO confronted entire material to the assessee and allowed various opportunities. However, the assessee did not produce even a single party. Accordingly, the AO made an addition of '99.18 lacs to the Income of assessee on account of unexplained share capital under Section 68 of the Act. Similarly, the AO also made addition of 3.1 0 lacs on account of unexplained credit under Section 68 of the Act. ITA Nos.2093, 2094, 2095 of 2010,514 of 2007 & 539 of 2008 Page 18 of 27 The CIT (A) allowed the appeal and deleted the addition. After recording the findings that necessary documents to prove the identity of Investors, creditworthiness and genuineness of the transactions were produced by the assessee, he was of the opinion that even when some discrepancies were found in the bank statement of these Investors produced by the assessee, facts remain that the AO had himself obtained the copies of the bank statement of some of the share applicants and the perusal of those statements reveals that there was a debit entry in support of demand draft purchased by the share applicant. The 29 & 11 other appeals CO No.259/12 & 11 other cross objections assessee had also filed copies of the confirmations In acknowledgement of Income tax returns filed by the share applicants from which it was clear that the tax payers were the existing assessees and they had filed the return of income in Delhi Itself. On this evidence, It was concluded that the shareholders were identifiable who were assessed to Income tax and therefore under no circumstances, the share capital could be treated as undisclosed Income of the company. The Tribunal while confirming the aforesaid view of the CIT (A) has summarized the discussion as under: 9. We have carefully considered the rival submissions in the light of the material placed before us. The necessary details were filed b; e assessee with the AO to show the identity of the person who had applied for the shares. The shares also been allotted to respective persons in respect of which intimation was given to Registrar of Companies and necessary evidence has also been placed on record in the paper book which found place at page 23 and 24 of the paperbook. The assessee also had placed on record the evidence as well as copy of income-tax returns of the share applicants. Keeping in view all these evidences it cannot be held that the assessee did not establish the identity of the share applicants. If it is so, then the law as pronounced by the Hon’ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd. (supra) is clear that if the share application ITA , 2a95 of 2010, 514 of 2007 & 539 of 2008 Page 19 of 27 money is received by the assessee company from alleged bogus shareholders whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments In accordance with law, but the same cannot be regarded as undisclosed income of the assessee. In this view of the situation, we find no Infirmity in the order of the CIT(A) vide which addition made on account of share application money has been deleted. " Having regard to the decisions noted above, we are of the view that the addition was rightly deleted by the CIT (A) and the tribunal. Requisite documents were furnished showing the existence of the shareholders from bank accounts and even their income tax details. From bank accounts of these shareholders, it was found that they had deposited certain cash and source thereof was questionable. The AO should have made further probe which he failed to do. Moreover, remedy with the Department lies in reopening the case of 30 & 11 other appeals CO No.259/12 & 11 other cross objections these Investors and the addition cannot be made in the hands of assessee. We accordingly dismiss this appeal". CIT vs. Divine Leasing & Finance Ltd., General Exports & Credits Ltd. & Lovely Exports P. Ltd. IT A No. 953/2006 The Income-tax Appellate Tribunal has dismissed the Revenue's appeal and thus there are concurrent findings pertaining to the factual matrix following paragraph from the impugned decision adequately highlight the necessary details : "Thus, the question is whether in the present case, the Assessing Officer had material to conclude that the share applicants, In question did not exist. It is seen that the assessee company has furnished the necessary details such as PAN No./lncome-tax Ward No./PAN card of the share applicants and some of them are assessed to tax. No share application money has been received through banking charges. In some cases, the confirmations/affidavits of share applicants containing the above detail were also filed. It is seen that the Assessing Officer did not carry out any inquiry into the income-tax record of the persons who had given the PAN No./Ward No. In order to ascertain the non-existence of the share applicants In question. The Assessing Officer has neither controverted nor disapproved the material filed by the assessee. In the case of CIT v. Makhnl and Tyagi P. Ltd. reported in [2004] 267 ITR 433 (Delhi), the jurisdictional High Court has decided that when the documentary evidence was placed on record to prove the Identity of all the shareholders Including their PAN/GIR number and filing of other documentary evidence In the form of ration card etc., which had neither been controverted nor disapproved by the Assessing Officer, no interference was called for. The Tribunal has justified in deleting the addition. The Assessing Officer proceeded to make the impugned addition on the ground that in some cases where summons issued were returned unserved and in some cases summons though served but there was no compliance. In this connection, it may be mentioned that In the case of CIT v. Orissa Corporation Ltd. [1986] 159 ITR 78 (SC) the Hon'ble Court has held that when the assessee borrows the loan and if an assessee gives names and addresses of the 31 & 11 other appeals CO No.259/12 & 11 other cross objections creditors, who are assessed to tax and full particulars' Is furnished then the assessee ahs discharged the duty. If the Revenue merely issues summons under section 131 and does not pursue the matter further, the assessee does not become responsible for the same even if the creditors do not appear. Addition cannot be made under section 68". No question of law, far less any substantial question of law arises for out consideration. We may, however, briefly reflect upon a submission made by the learned counsel for the respondent to the effect that the assessee had, in its letter dated March 8, 1999, requested the Assessing Officer to examine the assessment records of the share applicants whose GR Nos. had been supplied. It is not controverted that action was not taken by the Assessing Officer, but It has justifiably been contended that this inaction is due to paucity of time left at that stage since the assessment had to be passed by March 31, 1999. It has been painted out that several adjournments had been granted by the Assessing Officer oil the asking of the assessee. The timing of the assessee's said letter is most suspect. Generally speaking, It is Incumbent on the Assessing Officer to manage his schedule, while granting adjournments, In such a manner that he does not run out of time for discharging the duties cast on him by the statute. In the present case, the details had been furnished to the Assessing Officer much before March 1999, but he failed to react to the shifting of the burden to Investigate Into the creditworthiness of the share applicants. Therefore, the appeal is dismissed. CIT vs. Lovely Exports P. Ltd. [2009]319 ITR (St.) 5 (SC) (para 2) - ITA (L) No. 2182 of 2009 Heard learned counsel for the Revenue. Office objections are overruled. Registry is directed to register the appeal. At the instance of the Revenue, the appeal is taken up for admission. The question sought to be raised in the appeal was also raised before the Tribunal and the Tribunal and the Tribunal was pleased to follow the judgment of the apex court in the case of CIT v. Lovely Exports P. Ltd. [2008] 21, CTR 195; [2009] 319 ITR (St.) 5 wherein the apex court observed that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing officer, then the Department can 32 & 11 other appeals CO No.259/12 & 11 other cross objections always proceed against them and if necessary reopen their individual assessments. In the case in hand, it is not disputed that the assessee had given the details of name and address of the shareholder, their Pan/GIR number and had also given the cheque number, name of the bank. It was expected on the part of the Assessing officer to make proper investigation and reach the shareholders. The Assessing officer did nothing except issuing summons which were ultimately returned back with an endorsement "not traceable". In our considered view, the Assessing officer ought to have found out their details through PAN cards, bank account details or from their bankers so as to reach the shareholders since all the relevant material details and particulars were given by the assessee to the Assessing Officer. In the above circumstances, the view taken by the Tribunal cannot be faulted. No substantial question of law is involved in the appeal. In the result, the appeal is dismissed in limine with no order as to costs. CIT v. STL Extrusion P. Ltd. (MP) [2011] 333 tm 269 The said order was challenged by the respondent before the Tribunal. The Tribunal by the impugned order dated May 10, 2010, allowed the appeal of the respondent by observing thus: "3. We have considered the rival submissions of learned representatives of both, sides and perused the material available on record. Ground No. 1 is, general in nature, therefore, requires no deliberation from our side. For ground No.2 the brief facts are that the assessee company is engaged in the business of manufacturing and trading of PVC riqid pipes, originally filed its return of loss of Rs. 22, 91,022 on November 30, 2000. A search under section 132 was carried out at the premises of the assessee company on October 8, 2003. Consequent to search, a notice under section 153C read with section 153A was served upon the assesee on June 3, 2004 to which the assessee again filed the return of loss, I.e., Rs.22,91,022/- as origInally filed. During the assessment proceedings the assessee was asked about the details of increase in share capital of the assessee to which the assessee filed a list containing nine share holders from whom the share capital of Rs.l,59,300 and Rs.15,31,200 was received. The assessee also filed confirmation from the subscribers through duly notarized affidavits containing, the details like name, address, age, source of Income, annual income, date of purchase of 33 & 11 other appeals CO No.259/12 & 11 other cross objections application of share tendered, number of shares purchased alongwith the amount given by subscribers. On receipt of these confirmations, neither anything was asked from the assessee nor any inquiry was made. The addition of Rs.l,59,300 was made by the Assessing Officer by observing as under: 'On a perusal of the submission made by the assessee In respect of share application money received by the assessee during the year. It is seen that In respect of the following persons the assessee has received share application money In cash. These persons are not assessed to Income-tax and PAN are not mentioned. On a perusal of the affidavits filed, it is seen that all the affidavits are In the handwriting of one person. It is also noticed that even on the same page the signatures of the deponent differs. It is quite unlikely that when a person is applying for.huge amounts such as Rs.5,00,000/- ore more Is not assessed to tax. Hence considering the above, the names of the persons are not genuine and it Is the unexplained money of the assessee, which Is Introduced by the assessee company under the name of share application money. These persons appear to be dummy person and hence the entire amount of the share application money is considered as bogus share application money. The assessee company has not proved the genuineness of such person also not proved the capacity to apply for such huge amounts. These are dummy and the assessee company has Introduced its own money as share application money. ' 4. On appeal, the learned appellate authority by following the decision of the hon'ble jurisdictional High Court in the case of crr v. Rathi Finlease Limited [200B] 215 CTR (MP) 429 to the effect that the onus is on the assessee to establish the genuineness of the credits, affirmed the stand of the Assessing Officer which is under challenge before the Tribunal. We have found that the Impugned addition under section 68 of the Act has been made by the learned Assessing officer by suspecting that the share application money is bogus without appreciating the facts and the contents of the affidavit have not been disapproved. Thus, the undisputed fact is that the assessee has proved the Identity of the subscribers with the help of affidavits which were not found to be bogus or false. An affidavit Is not a mere piece of paper rather It carried Its authenticity as the contents of the same are duly sworn before a Magistrate or a Notary Public/Oath Commissioner, as the case may be.
34 & 11 other appeals CO No.259/12 & 11 other cross objections During the signing of these affidavits, the deponent, appears before the person before whom they are sworm and their signatures are duly taken on the register maintained by such Notary Public. If the Assessing Officer was apprehensive on the authenticity of such affidavit, nothing prevented him to cross examine the deponents and to verify the contents of such affidavits but that was not done in the present appeals. Therefore, in view of a decision of the hon'ble apex court In the case of Mehta Parikh and Company v. CIT (supra), these affidavits become unchallengeable. The ratio laid down by the Hon'ble Delhi Court In the case of err v. Shiv Prakash Aggrawal [2008] 306 ITR 324 (relevant page 326) further fortifies out view. As far as the reliance of the Revenue upon the decision from the hon'ble jurisdictional High Court In the case of CIT v. Rathi Finance limited [2008] 215 CTR (MP) 429 to the extent that the assessee has to establish the genuineness of the credits, we are in full agreement with the argument but In the present appeal the assessee has duly established the Identity, source of the credits. Even It Is not the case that the shares have been Issued to non- existing persons. Broadly we are of the view that once the Identity and source of the subscribers is established for making share application, no addition can be made under section 68 of the Act because even the hon'ble apex court in the case of CIT vs. Lovely Exports Limited even stepped ahead by concluding as under (2008) 216 CTR (SC) 195; (2009) 319 ITR (St.)5: 'If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to tie Assessing Officer then the Department is free to proceed to reopen their individual assessments in accordance with law, but is cannot be regarded as undisclosed income of the assessee company'. Our view is further fortified by the decision of the hon'ble Delhi High Court in CIT v. Divine Leasing and Finance Limited, general Exports and Credit Limited and Lovely Exports Private Limited [2008] 299 ITR 268 (Delhi) wherein it was held that it Is the duty of the Assessing Officer to investigate the creditworthiness of the shareholders and in view of the finding that the assessee proved the genuineness of shareholders no addition can be made under section 68 of the Act. In the present appeal, since the assessee has discharged its onus by proving the Identity of 35 & 11 other appeals CO No.259/12 & 11 other cross objections subscribers and even otherwise had any suspicion still remained in his mind, nothing prevented him to initiate action as per the provisions of the Act. The existence of subscribers to share application is not in doubt as the assessee duly furnished their names, age, address, date of filling the application, number of shares for which respective applications were made, amount given and the source of income of the applicant. In view of these facts, we are of the considered opinion that there is no justification for making the Impugned addition because once the existence of the investors/share subscribers is proved, the onus shifts on the Revenue to establish that either the share applicants are bogus or the impugned money belongs to the assessee company itself. Once the confirmation letters are filed, no addition can be made on account of the share application money in the hands of the company. Our view finds support from the decision in Shri Barkha Synthetics Limited v. Asst. CIT [2006]283 ITR 377; 155 Taxman 289 (Raj). The cases like CIT v. G.P. International Limited [2010] 325 ITR 25 (P& H); 229 CTR (P&H) 86, CIT v. Steller Investment Limited [1991] 192 ITR287 and Sphla Finance Limited [1994] 205 ITR 98 (Delhi) support the case of the assessee". 4.13' In my knowledge there were two decisions in favour of the revenue which were also confronted to the assessee during the appellate proceedings, the decision of Hon'ble Delhi High Court in case of Nova promoters & Finleys P. Ltd. (342 ITR 169). The AR of the appellant has submitted that the facts of the present case are distinguishable as all evidences in support of claim that investment was made by genuine shareholders were submitted before the AO and during the appellate proceedings also. There is no allegation of availing accommodation entry as alleged in the decision of Hon'ble Delhi High Court. There is no proof of giving cash against the cheques issued by the investing companies. No statement of any director of the investing company was recorded nor any summons were issued. The AD has not rejected any submission made during the course of assessment proceedings. In an other case of Indore Bench of Tribunal in case of Agrawal Coal Corporation Ltd. (135 ITD 27.0), the AR has submitted that complete submissions from the investing companies, details of cheque No., name of the bank and date of cheques were submitted before the AO. The confirmation from the auditors of the company were also submitted. The balance-sheet and P&L account of the investing company which had shown substantial net worth were also submitted. The proof 36 & 11 other appeals CO No.259/12 & 11 other cross objections of filing statutory returns by the companies for the current period were also submitted. The proof of filing statutory returns by the companies for the current period were also submitted. The proof of issue of notice to the 'shareholders were also filed. The appellant had also already issued shares and the detail of distinctive No., share certificate No., intimation to ROC about issue of shares, payment of stamp duty, interest and statutory reserves maintained under the Companies Act were submitted and no summons were issued by the AO to prove that the companies were not existing. In view of these facts, it is observed that the facts given in the decision of Hon'ble Delhi High Court and the Tribunal are distinguishable to the facts of the present case. Since in this case no company belonging to Mr. Choksi had made investment in shares, therefore, there is no relevance of the statement mentioned by the AO. 4.14 In view of the above facts and judicial decisions of Hon'ble Courts, it is held that the assessee has proved the identity, creditworthiness and genuineness of the transaction by submitting documentary evidences during the course of assessment proceedings and before me. Moreover, the facts of the present case are covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd. supra and the other decisions as discussed above where it is held that once the identity of the shareholder/subscriber is established, payment was made through account payee cheques, net worth of the subscriber is proved by filing balance-sheet and moreover, confirmation letters are filed, no addition can be made on account of share application money in the hands of the company. In totality of facts and circumstances, it is held .that the three conditions of section 68 are proved by submission of documentary evidences and no incriminating document was found and seized and nothing adverse was found in the investigation of the bank account by the AO in each case of the company, therefore, the addition made by the AO is not sustainable, hence deleted.
13. Similarly, addition made by AO on account of share capital in the case of M/s. Auster Properties Ltd., was deleted by CIT(A) after observing as under:-
37 & 11 other appeals CO No.259/12 & 11 other cross objections “Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were 9 companies who have subscribed the share application money but in the present case there are 8 companies. Out of these 8 companies, 5 companies are the same as discussed in the case of M/s. Reva Properties Ltd. and M/s.Mihir Agencies P. Ltd., M/s. Alembic Securities Pvt. Ltd. & M/s. Alpha Chemi Trade Agency Pvt. Ltd. are new companies in this case who have subscribed the share capital in AY 2009-10 amounting to Rs.l,50,000/-, 2,00,00,000/- & Rs.7,90,00,000/- respectively. The papers relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were also the same as submitted and discussed in the case of other companies. On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. M/s. Alpha Chemi Trade Agency Pvt. Ltd., M/s. Alembic Securities Pvt. Ltd., M/s. Mihir Agencies P. Ltd. & . M/s. Talent Infoway Ltd. are the companies. One Mr. Mukesh Choksi is a director in these companies. These companies had also subscribed shares of the assessee company. In the assessment order, the Assessing Officer has made reference that in one statement recorded in some other case, Mr. Choksi has stated that he was engaged in giving accommodation entries to the companies for creating bogus capital gain and was also issuing the bogus bills. From this statement, the AO has drawn inference that the share capital subscribed by these companies was bogus, i.e. cheques were issued against cash received from the assessee company. During assessment proceedings, the AR of the appellant has submitted details relating to these companies. It was submitted that all the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque No., date of cheque, bank a/c. share allotment letters giving detail of share certificate No., copy of bank account of the assessee was submitted before the AO. But the AO has not accepted these documents and relied on the statement of' Mr. Choksi only and added back the share application money by holding it as unexplained cash credit u/s. 68 of the LT. Act.
38 & 11 other appeals CO No.259/12 & 11 other cross objections 4.6 From the perusal and submission of the appellant and facts of the case, it is noticed that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. He has given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in the statement he has stated that he has received cash from the assessee company and issued cheque against this cash as share application money. There is no mention in the statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during· search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made for the bank account of these companies, the AO has not found any instance of cash deposit against issuing .of cheques. Now, it has to be examined whether these companies had fulfilled the conditions of section 68. For identity, the each company has PAN and regularly assessed to tax. For creditworthiness, each company has independent bank account and details were submitted to the AO. For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and. 'the assessee company's bank account. Therefore, all the conditions,' i.e. identity,creditworthiness and genuineness of transaction are fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which is not corroborated by any documentary evidence. In totality of facts and circumstances, it is held that the case is covered by the decision of Hon’ble Supreme Court in the case of Lovely Exports (supra). Thus, the addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted and the ground of appeal is allowed.
14. Addition made on account of share capital in case of M/s.Karburi Properties Ltd., was deleted by CIT(A) after observing as under:- Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the. same and there is no change in the facts and circumstances of the present case, therefore, the 39 & 11 other appeals CO No.259/12 & 11 other cross objections same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were 9 companies who have subscribed the share application money but In the present case there are 8 companies. Out of these 8 companies, 7 companies are the same as discussed in the case of M/s. Reva Properties Ltd. and only M/s. Mihir Agencies P. Ltd. is new company in this case who have subscribed the share capital in AY 2009-10 amounting to Rs.1,50,000/-.The papers relating to the identity, creditworthiness and genuineness of the transaction relating to this company were also the same as submitted and discussed in the case of other companies. On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. M/s. Alpha Chemi Trade Agency Pvt. Ltd., M/s. Alembic Securities Pvt. Ltd., M/s. Mihir Agencies P. Ltd. & M/s. Talent Infoway Ltd. are the companies registered with the registrar of companies. One Mr. Mukesh Choksi is a director in these companies: These companies had also subscribed shares of the assessee company. In the assessment order, the Assessing Officer has made reference that in one statement recorded in some other case, Mr. Choksi has stated that he was engaged in giving accommodation entries to the companies for creating bogus capital gain and was also issuing the bogus bills. From this statement, the AO has drawn inference that the share capital subscribed by these companies was bogus, i.e. cheques were issued against cash received from the assessee company. During assessment proceedings, the AR of the appellant has submitted details relating to these companies. It was submitted that all the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque No.,' date of cheque, bank a/c. share allotment letters giving detail of share certificate No., copy of bank account of the assessee was submitted before the AO. But the AO has not accepted these documents and relied on the statement of Mr. Choksi only and added back the share application money by holding it as unexplained cash credit uls, 68 of the LT. Act. 4.6 From the perusal and submission of the appellant and facts of the case, it is noticed that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. He has given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in 40 & 11 other appeals CO No.259/12 & 11 other cross objections the statement he has stated that he has received cash from the assessee company and issued cheque against this cash as share application money. There Is no mention in the statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made for the bank account of these companies, the AO has not found any instance of cash deposit against issuing of cheques. Now, it has to be examined whether these companies had fulfilled the conditions of section 68. For identity, the each company has PAN and regularly 'assessed to tax. For creditworthiness, each' company has independent bank account and details were submitted to the AO. For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, Le. identity, creditworthiness and genuineness of transaction are fulfilled, Thus reliance cannot be placed on a general statement of Mr. Choksi alone which is not corroborated' by any documentary evidence. In totality of facts & circumstances, it is held that the case is covered by the decision of Hon'ble Supreme Court in case of Lovely Exports (supra). Thus, addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted and the ground of appeal is allowed.
15. Similar addition made on account of share capital in case of Vedisa Properties Ltd., was deleted by CIT(A) after observing as under: Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were 9 companies who have subscribed the share application money but in the present case there are 6 companies. All these companies are the same as discussed in the case of M/s. Reva Properties Ltd., On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed 41 & 11 other appeals CO No.259/12 & 11 other cross objections out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. Therefore, it is held that the identity, creditworthiness and genuineness of the transaction has been proved and the addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted.
16. Addition made on account of share capital in case of M/s. Archieve Reality Developers Pvt. Ltd., was deleted by CIT(A) after observing as under:-
Since the appellant company is a group company and the modus operandi for collecting the share application money and the evidences filed relating to the investing companies are the same and there is no change in the facts and circumstances of the present case, therefore, the same decision is followed in this case. In the case of M/s. Reva Properties Ltd., there were 9 companies who have subscribed the share application money but in the present case there are 5 companies. All the companies are the same as discussed in the case of M/s. Reva Properties Ltd., On the basis of the submissions made and the bank enquiry made by the Assessing Officer, no discrepancy was pointed out and moreover, no incriminating document was found and seized during the course of search relating to the share application money. Therefore, it is held that the identity, creditworthiness and genuineness of the transaction has been proved and the addition made by the Assessing Officer u/s. 68 is not sustainable, hence deleted.
Addition made on account of share capital in case of M/s. Chikura Properties Ltd., was deleted by CIT(A) after observing as under:- All these grounds are relating to the investment made by each company in the share application money of the assessee which is discussed in the above ground by taking a combined view because the facts and documentary evidence in each company are the same. Therefore, to avoid repetition and for the sake of convenience, all these grounds are discussed in a cumulative manner in the above grounds. Therefore, these grounds have become infructuous, hence dismissed.
However, the CIT(A) dismissed the legal ground taken by assessee with regard to validity of assessment framed u/s.153C.
Against the above, orders of CIT(A) revenue is in further appeal before us whereas assessee had filed cross objection wherein legality of assessment framed u/s.153C was challenged.
Learned AR has drawn our attention to the share capital received by the following assessee and disallowed by the AO. Our attention was invited to the detailed finding given by CIT(A) as quoted above, wherein the CIT(A) has deleted the same. As per learned AR, Hon‟ble Tribunal vide its order dated 18/12/2015 in & 6107/Mum/2012 for assessment year 2008-2009, 2009-2010 had confirmed the action of the CIT(A) for deleting these additions. The details of name of company, assessment year and the relevant pages of the Tribunal are as under:-
Sr.No. Name of the Company Assessment Remarks Year 1 Archive Realy Developers Ltd., Oshin Investment & Fin P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P.Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Delton Exim Pvt. Ltd., 2008-09 Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 2 Archieve Realy Developers Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P.Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co.Ltd., 2009-10 Refer page No.11 of the Order of the CIT(A) in the case of Archieve Realty Developers Ltd., Sidh Housing Development Co. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 3 Auster Properties Ltd., Oshin Investment & Fin P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 4 Auster Properties Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Hingora Finvest Pvt. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2009-10 Refer page No.12 of the Order of the CIT(A) in the case of Auster Properties Ltd., Mihir Agencies P. Ltd., 2009-10 Refer page No.13 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Alembic Securities Pvt. Ltd., 2009-10 Refer page No.12 of the Order of the CIT(A) in the case of Auster Properties Ltd., Alpha Chemi trade Agency Pvt. Ltd., 2009-10 Refer page No.12 of the Order of the CIT(A) in the case of Auster Properties Ltd., 5 Cikura Properties Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Hingora Finvest Pvt. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2009-10 Refer page No.11 of the Order of the CIT(A) in the case of Cikura Properties Ltd., Deltron Exim Pvt. Ltd., 2009-10 Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 6 Karburi Properties Ltd., Oshin Investment & Fin P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Hingora Finvest Pvt. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2008-09 Refer page No.11 of the Order of the CIT(A) in the case of Karburi Properties Ltd., Hema Trading Company Pvt. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Deltron Exim Pvt. Ltd., 2008-09 Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 7 Karburi Properties Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Mihir Agencies Pvt. Ltd., 2009-10 Refer page No.13 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 8 Reva Properties ltd., Javda India Impex Ltd., 2007-08 Refer page No.10 of the Order of the CIT(A) in the case of Reva Properties Ltd., 9 Reva Properties Ltd., Oshin Investment & Fin P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Hingora Finvest Pvt. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Realgold trading co. Pvt. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Hema Trading Company Pvt. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 10 Reva Properties Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2009-10 Refer page No.11 of the Order of the CIT(A) in the case of Reva Properties Ltd., Deltron Exim Pvt. Ltd., 2009-10 Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 11 Vedisa Properties Ltd., Oshin Investment & Fin P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2008-09 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Javda India Impex Ltd., 2008-09 Refer page No.11 of the Order of the CIT(A) in the case of Vedisa Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2008-09 Refer page No.11 of the Order of the CIT(A) in the case of Vedisa Properties Ltd., Deltron Exim Pvt. Ltd., Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 12 Vedisa Properties Ltd., Oshin Investment & Fin P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Doldrum Investments & Finance P. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Sidh Housing Development Co. Ltd., 2009-10 Refer page No.11 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., Gyaneshwar Trading & Finance Co. Ltd., 2009-10 Refer page No.11 of the Order of the CIT(A) in the case of Vedisa Properties Ltd., Deltron Exim Pvt. Ltd., 2009-10 Refer page No.10 of the Order of the Hon'ble ITAT J Bench in the case of Jogia Properties Ltd., 21. With regard to the filing of cross objection in case of Karburi Properties Ltd., contention of learned AR was that in the appeal proceedings for A.V. 2008-09 being the appeal filed by the Income tax department against the order of the Commr. of Income Tax (Appeals) assessee has filed the cross objection on 23rd December 2014 which is registered under CO.NO.264/M/2014. As per learned AR, assessee had received the intimation about filing of the appeal by the Department in Form 36 alongwith Grounds of Appeal on 7th October 2013. As per provisions of Section 253(4) of Income Tax Act, 1961, assessee was required to file the cross objections within 30 days from the receipt of the intimation of filing the appeal by the Department. The said cross objection was required to be filed on or before 6th November, 2013.
The said cross objection is filed on 23/12/2014. There is a delay of 410 days.
Application for condonation of delay was filed on the following grounds:-
45 & 11 other appeals CO No.259/12 & 11 other cross objections We were under a bonafide belief that once the addition made by the Assessing Officer is deleted and no addition survives after the order of CIT (Appeal) which will result into Nil demand against us and hence we are not eligible to file the cross objections as our grievance regarding the tax liability is resolved by the order of the Commr. of Income Tax (Appeal). In the present case the addition made by the Learned Assessing Officer is totally deleted by the Learned Commr. of Income Tax (Appeal) and there is no demand outstanding against us for A.Y. 2008-09.
2. Based on the above bonafide belief, we did not file the cross objection within the period of 30 days from the date of receipt of the Form No.36 and the Grounds of Appeal
3. We submit that in the cross objection the legal issue has been raised regarding the applicability of Section 153C of Income Tax Act, 1961. On the facts & circumstances of the case, it is our prayer that notice issued u/s 153C is bad in law. This is a legal issue and it goes to the root of the proceedings. We submit that a legal issue can be raise by the appellant at any time before the disposal of the appeal.
4. Reliance is placed in the case of National Thermal Power Co. Ltd., 229 ITR pg.383 (Supreme Court) wherein the Hon'ble Supreme Court has held that the question of law arising from the facts can be raised before the Hon'ble Tribunal. The ratio of this decision is applicable on the facts of the case. We also rely upon the decision in the case of Pratap Singh Ravinderjeet Singh 218 ITR pg.536 (M.P. High Court), wherein it has been held that legal issue which goes to the root of the matter then it should be admitted.
5. We also submit that under R le 27 of Income Tax Appellate Tribunal Rules, the Respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. The Hon'ble Commr. of Income Tax (Appeals) has decided the issue of the validity of issue of notice u/s 153C against us. According to us, we are eligible to defend ourselves on the issue of validity of notice u/s 153C. We rely upon the decision of Hon'ble Mumbai Tribunal in the case of ACIT vs Triace, ITA No.2827 /MUM/04 (A.Y.1995-96) wherein the issue was identical. The assessee challenged the validity of notice u/s 148 of Income Tax Act, 1961. The Learned CIT(Appeal) held the said issue against the assessee, but gave relief on merits. The assessee did not filed the appeal to the Hon'ble 46 & 11 other appeals CO No.259/12 & 11 other cross objections Tribunal on the issue of validity of notice u/s 148. The Department filed the appeal against the relief given on merits. The assessee objected to the validity of notice before Hon'ble Tribunal and relied upon Rule 27 of Income Tax Appellate Tribunal Rules. The Hon'ble members have held that the ground of the assessee should be admitted and have decided the matter accordingly.
6. Based on the above legal matrix, we request your honour to kindly condone the delay in filing the cross objection and admit the legal ground regarding the validity of issue of notice u/s 153C.
With regard to filing of cross objection under Rule 27 of ITAT Rules, reliance was placed on the following decisions:- a. The Asst. Commr. Of Income Tax Cir 18(3) vs. M/s. Triace (Mumbai ITAT) b. National Thermal Power Co.Ltd., vs. Commissioner of Income Tax Reported in 229 ITR 383 (SC) c. Pratapsingh Ravindrajeet Singh vs. Commissioner of Income Tax Reported in 218 ITR 536 (Madhya Pradesh High Court)
With regard to applicability of the provisions of Section 153 C, learned AR submitted that the conditions of Section 153C are not satisfied. The learned Assesseing Officer has wrongly exercised the jurisdiction u/s 153C. The provisions of Section 153C can only be invoked when the Assessing Officer, who is dealing with the case of a person against whom search has taken place, is satisfied that any money, bullion, jewellery or other valuable article or thing or books of accounts or documents belongs to a person other than a person referred to in section 153 A then the books of accounts or documents or seized assets shall be handed over to the Assessing Officer "having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and 47 & 11 other appeals CO No.259/12 & 11 other cross objections issue such other person notice and assess or reassess the income of such other person in "accordance with the provisions of Section 153 A. The basic condition is that the money, bullion, jewellery or other valuable article or thing or books of accounts or documents belongs to a person other than a person referred to in section 153 A are found during" the course of search in case of a person against whom the proceedings are initiated u/s153A. The Assessing Officer had issued the notice u/s 153 C dated 16/12/2010. Assessee had filed the letter dated 12/1/2011 asking for the copy of the satisfaction recorded and as to how the conditions of Section 153C are satisfied. The Assessing Officer has not recorded any satisfaction applicable to A.Y. 2008-09. Our attention was invited to the satisfaction which is on page 7 of the paper book. The Assessing Officer has recorded a noting for A.Y. 2004-05 to A.Y. 2009-10. There is no recording of the satisfaction as applicable to A.Y. 2008-09. He has referred to page 1 of Annexure A-1 seized in the case of Jogia Properties Ltd, he has referred to page No.1 as the document. As per learned A.R. this paper cannot be considered as document. Page No.1 is on page No.8 of the paper book. This page contains the details of various companies giving the details of their bank account with Union Bank of India, Nariman Point branch with the name of the persons who are authorized to operate the said" bank account. The name of the assessee company is appearing at Sr.No.13. These details must have been prepared by Jogia Properties Pvt. Ltd. Page No.1 by no stretch of imagination can be construed as a document belonging to the assessee.
48 & 11 other appeals CO No.259/12 & 11 other cross objections This is a piece of paper wherein details of bank account of 24 companies are mentioned and the name of the assessee is appearing at Sr.No.13. It was submitted that no document belonging to the assessee was found during the course of search in case of Jogia Properties Pvt. Ltd. When no document was found belonging to the assessee notice u/s 153C cannot be issued. During the course of investigation of Jogia Properties Pvt. Ltd, the reply was filed before the ADI Investigation Wing.
Reliance was placed on the case of Vijaybhai Chandrani' Reported in 333 ITR P.·436, wherein the Hon'ble Gujarat High Court has held that during the course of search the document belonging to other person should be found to initiate proceedings u/s. 153C, it was also held that there may be a reference to a petitioner in the paper seized in as much as his name is reflected in the seized paper and certain details are given under different column but it does not mean that the document belong to the petitioner.
With regard to merit of addition, learned AR contended that assessee has produced all the necessary evidences and proof in support of the claim that the amount of share capital received from eight parties is genuine and supported with the documents and provisions of Section 68 cannot apply to the said transactions. As per learned A.R. during the course of search no incrementing material was found to prove that the transactions with eight parties are not genuine and the assessee has given cash and has received the cheque from these parties. The assessee has produced the documents such as the proof of existence of 49 & 11 other appeals CO No.259/12 & 11 other cross objections the Corporate body, registration number with ROC, PAN No., balance sheet, ROC returns, details about the share capital introduced giving the details such as cheque number, name of bank and branch, confirmation of giving share capital, certificate from Auditors of the Company, Board Resolution of the investing company, proof of filing the tax return, investor companies having high networth etc. The transaction of share capital is duly reflected in the regular books of accounts. No undisclosed income is found or detected during the course of search.
As per learned AR during the assessment proceedings, the Ld. Assessing Officer did not issue a single letter, notice or summons to any of the investing company and has not brought on record a single material contrary to the evidences produced by the assessee.
Our attention was also invited to Page 31 of the CIT(A)‟s order wherein he has given a finding that "even independent enquiry made about the bank account of these companies, the AO has not found any instance of cash deposit against issue of cheques". This finding is not challenged by the Department. There are total six assesses and the Ld. CIT (A) has treated the case of M/s. Reva Properties Ltd., as the lead case. He has given a finding on internal page 29 giving a reference to the case of Reva Properties Ltd., and also has stated that the facts are the same in all cases. During the hearing the Ld. Counsel for the appellant has produced the order passed by Ld. CIT(A) in the case of Reva Properties Ltd and in para 4.11 internal page 27, he has given a finding that during appellate proceedings he had discussed the matter with the 50 & 11 other appeals CO No.259/12 & 11 other cross objections Ld. AO and the Ld. Addl. Commr. and asked whether any investigation regarding bank details have been made. He has stated that the Ld. Commr. has fairly admitted that complete bank enquiries were made in case of all Investing companies on the basis of the details submitted by the assessee upto third down layer but nowhere it was found that cash was deposited in any account before issuing the cheque for investments made in the purchase of shares of the assessee company. He further stated that since no adverse finding was recorded during the bank account investigation, this fact was not mentioned in the assessment order. The Department has not challenged this finding of Ld. CIT(A) which clinches the issue and proves the allegation of the Department that assessee has given cash and has received cheques from the investing companies.
Learned AR also placed on record the order of the Co-ordinate Bench and contended that in the case of Jogia Properties Ltd, the Hon'ble J- Bench in appeal no. 6106 and 6107 for A.Y. 2008-09 and 2009-10 has approved the order of Ld. CIT (A) deleting the addition made by the Ld. Assessing Officer u/s 68. The parties who have made investments in Jogia Properties Ltd and the parties who have made investments in the share capital of the assessee company are same, except one party viz. Gyaneshwar Trading & Finance Co Ltd. The details of the said party is submitted at pages 83 to 105 of paper book for AY. 2008-09. The ratio of decision of the Hon'ble Tribunal in the case of Jogia Properties Ltd is also squarely applicable on the facts of the case. The Hon'ble Tribunal has 51 & 11 other appeals CO No.259/12 & 11 other cross objections also dealt with the issue of statement by Shri Jose Mathews, the directors of the company and also the statement of Mr. Mukesh Chokshi. The conclusion of the Hon'ble Tribunal on all these aspects also is applicable on the facts of the case.
On the other hand, learned CIT(DR) contended that, the documents were found and seized belonging to the assessee company which cannot be denied because the entries of these loose papers is duly reflected in the books of account. Therefore, there is not even an iota of doubt that the seized papers are not belonging to the assessee. In view of these facts and circumstances, the AO has rightly issued notice u/s. 153C with the satisfaction that the documents found and seized during the search are belonging to the assessee company.
As per learned DR, the objection of the assessee that no incriminating documents were found and seized during the search operation at the business premises of M/s. Jogia Properties Pvt. Ltd. is not sustainable because in the provisions u/s. 153C there is no mention of the word “incriminating” or undisclosed”. It is simply mentioned that the books of account or documents seized belonging to a person other than the person referred to in section 153A, then the books of account will be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each other person and issue notice and assess or re-assess his income in accordance with the provisions of section 153A.
52 & 11 other appeals CO No.259/12 & 11 other cross objections 32. It was vehemently argued by learned CIT(DR) that nowhere in the language of section 153C is mentioned the words „incriminating‟ or „undisclosed‟. Therefore, the intention is very clear that if the documents belonging to the other person are found in the search and seizure operation, then the AO has the jurisdiction to issue notice u/s. 153C r.w.s. 153A after recording the reasons. In the present case, the documents which were found and seized belonging to the assessee. Secondly, the statement of Shri Jose Mathew was recorded on the date of search and a consequent statement of Shri Ajay Kumar was recorded on 15/04/2010 who has made a disclosure on account of share application money in case of companies mentioned in the assessment order in respective years. On the basis of the seized papers and the statements recorded, the AO has reason to believe and he has recorded the reasons as per the provisions of section 153A. Since the AO having jurisdiction over the case of person searched and the assessee was the same, he was justified in issuing notice u/s. 153C after recording satisfaction.
We have considered rival contentions and carefully gone through the orders of the authorities below. We had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as well as cited by learned AR and DR during the course of hearing before us. We had also carefully gone through the order passed by Tribunal in case of Jogia Properties Ltd., wherein search was carried out u/s.132 and assessment was framed u/s.153A dated 18/12/2015, wherein the Tribunal have confirmed the action of the CIT(A) for deleting the addition made by 53 & 11 other appeals CO No.259/12 & 11 other cross objections AO on account of share capital. The precise observation of the Tribunal was as under:- The above titled appeals have been preferred by the Revenue against the common order dated 27.07.2012 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to AY 2008-09 and AY 2009-10. As the facts and issues involved in both the appeals are similar and the impugned order of the Ld. CIT(A) is also common in both the appeals, hence the same are taken together for disposal with this common order.
The brief facts of the case as drawn out from the impugned order and the available record on the file are that a search and seizure operation was carried out u/s. 132 of the I.T. Act at the business premises of assessee on 04.03.2010 situated at 208, Ashirwad Building, Ahmedabad Street, Carnac Bunder, Mumbai. During the course of search it was found that assessee had been maintaining its books of accounts at another premises situated at 20, Bhatia Niwas, 233/235, Samuel Street, Masjid Bunder, Mumbai - 400 009. Therefore, the said premise was covered for survey action u/s. 133A of the I.T. Act. During the survey action, it was revealed that seven other companies have also been operating from the said premise Bhatia Niwas. It revealed that the assessee and all the above stated seven companies were engaged in investment activities and have made investments in equity shares of various companies including one M/s. Shree Global Trade fin. Ltd. The investments were made out of the share capital of the company, which consisted of the share application money received from various other concerns. It was also revealed that there was one common director in some of the above stated seven companies e.g. Shri Ajay Kumar has been the director of M/s Jogia Properties Pvt. Ltd., M/s Auster Properties Pvt. Ltd. and M/s Reva Properties Pvt. Ltd. Similarly Shri Om Hari Halan has been a director in M/s Archive Realty Developers Pvt. Ltd. and M/s. Vedisa Properties Pvt. Ltd.; Similarly Sh. Narayan Hari Halan was director in M/s. Martand Properties Pvt. Ltd., M/s. Karburi Proprties Pvt. Ltd. and M/s. Cikura Properties Pvt. Ltd. Further, it was also revealed that all the above said Directors were closely related to each other. The case of the assessee was thus covered under section 153A and the other seven companies were covered u/s. 153C of the I.T. Act.
During the course of another separate survey action in the case of „M/s. Shree Global trade fin. Ltd.‟ i.e. the company in which the assessee company had made investment, statement of one Shri Jose Mathew, Jt. General Manager in the said company „M/s. Shree Global trade fin. Ltd.‟ was also recorded on 04.03.2010. In his statement, he stated that the share application money received in the assessee company and other group companies have been obtained by paying cash in lieu of the cheques received as share capital. The said money received as share capital by the assessee company and other group companies was further invested in his company „M/s Shree Global trade fin. Ltd.; This statement of Shri Jose Mathew was confronted to Shri Ajay Kumar, one of the Directors of the assessee company who in turn offered the amount received as share capital from the companies as mentioned in the assessment order as unexplained credits. Shri Jose Mathew and Sh. Ajay Kumar however, retracted from their statements latter on.
4. The Assessing Officer (hereinafter referred to as the AO) issued notice u/s. 153A to the assessee. In the return filed in response to the notice u/s 153A, the amount declared as undisclosed income in the statement of Shri Ajay Kumar, Director of the company during the search action had not been disclosed. The AO observed that all the above said 7 companies have been doing their business from the same place and that these concerns were also not well established companies. A total of ten companies (8 companies in AY 2008-09 & 2 companies in AY 2009-10), names of which have been mentioned in the assessment order, had subscribed to the shares of these companies including the assessee. The AO further noted that the above concerns were sister concerns and their nature and the modus operandi was same as that of the assessee company. The AO further observed that the search and seizure operation was also conducted on one Shri Mukesh Chokshi, who was operating many companies through which he was indulged in providing the bogus entries including long term capital gain, short term capital gain, losses, speculative losses and share application money etc. It was also observed that two companies of Mr. Mukesh Chokshi, i.e. M/s. Talent Infoway and M/s. Mihir Agencies have also made investment in AY 2009-10 55 & 11 other appeals CO No.259/12 & 11 other cross objections for the purchase of shares in the M/s. Jogia Group of companies. The AO observed that Shri Ajay Kumar, Director of the company had offered the amount received as share capital from above said companies as unexplained credits in AY. 2008-09 & AY 2009-10. Since the undisclosed income declared in the statement was not offered for taxation in the return filed, therefore, the AO gave a show cause notice to the assessee to submit complete details of share application money received and utilized. The AO also asked the assessee to submit the complete evidences to prove the identity, credit worthiness and genuineness of the transaction of the share holding companies. In response to the show cause notice, the Ld. AR of the assessee submitted its reply along with relevant details, confirmations and evidences etc.; The AO however was not satisfied with the reply of the assessee and noted certain discrepancies in the evidences submitted by the assessee viz. the assessee had not provided share application form; No Board resolution was provided; Bank statements were not provided in some cases or that the directors of the company were not produced for cross examination. The AO thereafter discussed the issue of retraction of statement given by the Director of the company, Shri Ajay Kumar and observed that the statement recorded by the income-tax authorities u/s. 131 has evidentiary value even after its retraction and that the same can be used against the assessee. The AO further held that the documents filed relating to share application money were all result of an afterthought and the same cannot be relied or considered as supporting documentary evidences for receiving share application money and retracting the declaration made. In view of all these facts and circumstances, the AO held that the assessee had failed to prove the identity, credit worthiness and genuineness of the transaction of the above share holding companies, he therefore, treated the investment made by these companies amounting to Rs.12,80,00,000/- and Rs.3,90,00,000/- for the AYs. 2008-09 & 2009-10 respectively as undisclosed income of the assessee company u/s. 68 of the I.T. Act. Being aggrieved by the above additions, the assessee filed appeal before the CIT(A).
5. The Ld. CIT(A), after considering the submissions of the assessee and analyzing the facts and circumstances of the case, observed that 10 companies had subscribed the share application money in the assessee company. The papers 56 & 11 other appeals CO No.259/12 & 11 other cross objections relating to the identity, creditworthiness and genuineness of the transaction relating to these companies were submitted by the assessee to the AO. The AO had also made bank enquiry in this respect but no discrepancy or incriminating evidence was found. The Ld. CIT(A) further noted that no incriminating document relating to the share application money was found or seized during the course of search. Further in respect to the companies, M/s. Mihir Agencies P. Ltd. & M/s. Talent Infoway Ltd. in which one Mr. Mukesh Choksi has been a director, the Ld. CIT(A) observed that these companies had been registered with the registrar of companies. These companies had subscribed to the shares of the assessee company in AY 2009- 10. The Ld. CIT(A) in this respect observed that during assessment proceedings, the Ld. AR of the assessee had submitted all the details relating to these companies. All the companies were having PAN and independently and regularly assessed to tax. Complete details of cheque number., date of cheque, bank a/c. share allotment letters giving detail of share certificate number, copy of bank account of the assessee was submitted before the AO. He further noted that the statement of Mr. Choksi was not recorded in the context of this case but was recorded in some other case. Mr. Choksi had given a general statement that he was giving accommodation entries to the companies against cash received from them. Nowhere in the statement, had he stated that cash was received from the assessee company and cheque was issued against the cash as share application money. There was no mention in the said statement that transaction with the assessee company was not genuine. No incriminating document was found and seized during search operation to prove that cash was given against cheques received from these companies. Even independent enquiry made in respect of the bank accounts of these companies, the AO could not find any instance of cash deposit against issuing of cheques. The Ld. CIT(A) thereafter examined the applicability of section 68 of the Act to the set of facts of the case of the assessee and concluded that for the establishment of identity, each company was having PAN and regularly assessed to tax; For creditworthiness, each company had independent bank account and details were submitted to the AO; For genuineness of transaction, all payments were made through account payee cheques duly reflected in the bank of each company and the assessee company's bank account. Therefore, all the conditions, i.e. identity, creditworthiness and 57 & 11 other appeals CO No.259/12 & 11 other cross objections genuineness of transaction were fulfilled. Thus reliance cannot be placed on a general statement of Mr. Choksi alone which was not corroborated by any documentary evidence. He therefore held that in totality of facts & circumstances, the case was covered by the decision of Hon'ble Supreme Court in case of Lovely Exports Pvt. Ltd.[216 CTR 195 (SC)].He therefore deleted the additions so made by the Assessing Officer u/s. 68 of the Act. Being aggrieved by the above deletion of the additions made by the AO, the Revenue has thus come in appeal before us.
We have heard the rival contentions of the Ld. Representatives of the parties at length and have also gone through the record. The contention of the Ld. DR has been that during the search action, Sh Ajay kumar, one of the directors of the company had admitted that the money received as share application money was unexplained income of the assessee and he had offered it for taxation. He therefore has contended that subsequent retraction is nothing but an afterthought of the assessee. The Ld. DR has further contended that Sh. Mukesh Chokshi was a hawala dealer, hence the share application money received by the assessee was the result of a bogus transaction. The Ld. DR in this respect has relied upon the decision of the co-ordinate bench of the Tribunal in the case of “Gold Star Finvest (p) Ltd.”[2013] 33 Taxmann.com 129. The Ld. DR has also referred to the decisions of the Tribunal in the case of “M/s. Richmand Securities Pvt. Ltd.” in ITA No.4624/Mum/2005 dated 29.8.2008 and further in the case “M/s. Mihir Agencies Pvt. Ltd.” in ITA No.4912/Mum/2005 dated 30.5.2008 wherein the decision in the case of “M/s Gold Star Finvest (P) Ltd” has been followed.
The Ld. A.R. on the other hand has relied upon the documents produced before the lower authorities and has reiterated the submissions as were made before the lower authorities. Inviting our attention to the case record relating to AY 2008-09, the Ld. AR has pointed out that none of the companies who had invested in the assessee company in the AY 2008-09 belonged to Sh. Mukesh Chokshi. He has further invited our attention to the various documents filed in the paper book to contend that the assessee had submitted all the required details such as balance sheet, return filed giving the full 58 & 11 other appeals CO No.259/12 & 11 other cross objections particulars about the company, the confirmations from the investing companies regarding the investments made in the share capital of the assessee company, certificate from the auditors to the effect that the said company was assessed to tax and that the investment was duly reflected in their regular books of accounts. The details of allotment of shares, the complete details giving cheque number, name of the bank, date, amount, address, PAN Number, ROC Number etc. in respect of each of the 8 companies from whom the assessee had received the share application money in the AY 2008-09 was filed. The details of the notice issued by the assessee company for holding the meetings of the shareholders and the proof of dispatch of the notice to the shareholder were also submitted. The Ld. AR has further submitted that even in respect the 2 companies which belonged to Sh. Mukesh Chokshi, who had invested in the assessee company in the AY 2009-10, the assessee had submitted all the requisite details such as the name, address, PAN number, Registration number with Registrar of Companies, details of the bank account, details of shares allotted, intimation to ROC about issue of shares, issue of notices by the assessee company for holding, the meetings of the shareholders and proof of dispatch of notice to the shareholder.
8. He has further contended that there was nothing incriminating found either during the search action or otherwise on the record warranting such additions in the case of assessee. The Ld. AR has further invited our attention to the written submissions filed before the Ld. CIT(A), wherein, each of the objections raised by the AO in respect of the evidences submitted in relation to each of the 8 companies was duly replied and dealt with. It has been explained that the assessee had provided the complete details of the share application money received together with confirmations and that there was no statutory obligation to obtain the application form from the investor. The investor companies had given a ledger account confirmations. Complete details about the bank account giving cheque number, date, name of bank was submitted. The Ledger Account confirmation in the books of Investor company was also submitted. The board resolution was not available with assessee as the assessee has got no legal right to ask for copy of board resolution when complete information about the investments made was available. The evidence relating to the net worth of the investing companies was also submitted.
59 & 11 other appeals CO No.259/12 & 11 other cross objections The Ld. DR on the other hand, though, has fairly admitted that no direct incriminating material against the assessee was found during the search action, he, however, has contended that it is a case of circumstantial evidence which is corroborated with the admission of one of the directors of the assessee company. At this stage the Ld. AR has pointed to the question No. 15 in the statement of Sh. Ajay Kumar, Director of the company, wherein it was pointed out to him that one Mr. Jose Mathews had on 4.3.2010, during the course of survey in the case of Shree Global Trade fin. Ltd., had stated that the share application received in case of the assessee from certain companies had been obtained by paying cash. In reply to question No. 15, it has been stated by the said Sh. Ajay Kumar that the statement given by Mr. Jose Mathews was not true. He was not aware about the business activity of the assessee company. The Ld. AR has further stated that Mr. Jose Mathews had nothing to do with the business activity of the assessee company. Mr. Jose Mathews also had retracted the statement which was recorded during the course of survey u/s. 133A and the necessary proof and evidence for the same was also produced before the AO. The AO had also thereafter not issued any notice to Mr. Jose Mathews. The Ld. AR therefore has submitted that no reliance can be placed in the statement of Mr. Jose Mathews.
We have considered the above submissions of the Ld. AR of the assessee. We have also gone through the statement of Sh. Ajay Kumar Halan, recorded under section 131 of the Act. The relevant part of his statement for the purpose of proper analysis is reproduced as under:
We find force in the above submissions of the Ld. AR. of the assessee. Mr. Jose Mathews was the employee of Shree Global Trade fin. Ltd. and not of the assessee company neither of the alleged seven Group companies of the assessee. The said Mr. Jose Mathews was even in no way related to the investing companies who made investments in the assessee company, the transactions relating to which have been treated bogus by the AO. When the said person was neither the employee of the assessee company nor was in any way related to the investing 62 & 11 other appeals CO No.259/12 & 11 other cross objections companies, his statement in the circumstances could not be said to have any evidentiary value. Mr. Jose Mathews was the employee of the company in which the assessee had made the investments, which was a totally different transaction. He was not in any manner connected to the transactions in question before us. As regards the statement of Shri Ajay Kumar Halan, the Ld. AR while inviting our attention to answer to question No.3 of the statement has submitted that he was appointed as the director on 15.2.2010 only. That he was not the director in the previous year relevant to A.Y. 2009-10. He was also not the Director during the previous year from 1.4.2009 to 15.2.2010, during the time when the transaction had taken place. He was not the employee of the assessee company nor was any way connected with the business of the assessee prior to 15.2.2010. He has further pointed out that there was no direct admission of Sh. Ajay Kumar about any unexplained income. He has demonstrated that he was given an impression that in view of the statement of Sh. Mukesh Chokshi and Sh. Mr. Jose Mathews in some other search or survey actions, it was established that the assessee had received unexplained investment, in response to which he stated that he has come to know about these facts then only as revealed by the department and taking into consideration the fact and circumstances as were before him when these question were put to him, he agreed to offer the amount as unexplained income of the company. In view of this the Ld. AR has submitted that no reliance can be placed on the statement of Sh. Ajay Kumar who was neither in any way connected with the activities of the company when the transaction took place nor his admission was based on his personal knowledge, rather he agreed to admit the additions on the basis of facts presented to him i.e. the alleged unreliable statements of Mukesh Chokshiand Mr. Jose Mathews.
The Ld. AR has further explained that during the assessment proceedings, the assessee vide different letters including letter dated November 30, 2011 had explained to the Assessing Officer all the above facts and that the disclosure was made solely on the basis of information provided to him by the investigation wing and purely on the mistaken belief that the transaction of share investments by nine companies could not be explained. However subsequently he gathered the information, the papers, the documents, the confirmations, bank statements, balance sheets and other records of all the nine 63 & 11 other appeals CO No.259/12 & 11 other cross objections companies. Based on the information and documents he found that all the nine companies were genuine and they had invested in the share capital of the assessee company. No confessional statement was given by any of the nine shareholding company before the Investigation Wing.
We find force in this contention also of the Ld. AR. A perusal of the statement of Sh. Ajay Kumar, recorded under section 131 of the Act, as reproduced above, reveals that the acceptance or offer of the unexplained income was not based on his own knowledge or admission of facts but on the basis of facts and statements presented by the revenue before him. He has never admitted that the transactions were not genuine or the same were bogus. In answer to question No.13 put to him, he has stated to the investigation wing that he did not know Mr. Mukesh Choksi, neither he was aware of his group concerns. The shares were allotted to M/s. Talent Infoways and M/s Mihir Agencies in due course after duly complying with all the legal provisions. Similarly in the case of other companies as is revealed from the answer to question No.15, that owing to the facts mentioned by the investigation wing and the facts and circumstances which were available to him on that date, he had agreed to disclose the share application money received as unexplained. The Ld. AR has duly brought on the file that he was not connected to the company when the transactions took place. Under such circumstances, in the absence of any corroborating evidence and solely on the basis of retracted statement of the said Sh. Ajay Kumar, a perusal of which reveals that the same was not based on his own knowledge of the relevant facts/transaction in question, additions made by the AO cannot be held to be justified in any manner. The Ld. AR has further brought our attention in this respect to the Instructions issued by CBDT bearing No.F.No.286/2/2003-IT (Inv.II) dated 10/3/2003 wherein it has been stated that during the course of search / survey, no attempt should be made to obtain the confession as to the undisclosed income. Any action on the contrary shall be reviewed adversely. CBDT has also referred to the fact that if the confession statements are taken which are not based on credible evidence then later they are retracted. In the present case also, not a single incriminating material was found during the search action. The addition is made purely on the basis of declaration 64 & 11 other appeals CO No.259/12 & 11 other cross objections made by Sh Ajay Kumar, Director. The Ld. AR has relied upon the following decisions in this respect. (a) DCIT vs Pramukh Builders ITA No. 2170/Ahd./1999 A.Y. 1994-95 dated 6.7.2007 Reported in 115TTJ p. 330 (Third Member) (b) CIT vs. K. Bhuvanendra and Others 303 ITR p. 235 (Madras High Court) (c) S. Khader Khan Son Reported in 300 ITR p. 157 (Madras High Court) (d) Oriental Containers Ltd. vs. ACIT (2010) 6 Taxmann.com 121 (Mum). (e) Prem Sons ITA No.4698/MUM/2006 AY 2003-04 dt. 15/1/2009 (f) KalashbenManharlalChokshi 174 Taxmann pg.466 (Guj.High Court) (g) Rajesh Jain ITA No.SSA No.203/Del/2003 reported in 100 TTJ 929 12. We have gone through the above case laws relied upon by the Ld. AR. We find that in the above mentioned Judicial decisions, the various courts of law have been almost unanimous in holding that though the admission is an important piece of evidence but it can not be said that it is conclusive; it is open to the person who made the admission to show that it is incorrect and that merely on the basis of statement recorded during the search under mistaken belief and which has been retracted subsequently and without there being any corroborative evidence or incriminating material found, no addition can be made. As regards the statement of Mr. Mukesh Choksi relied upon by the revenue, the Ld. AR has submitted that he had never stated that assessee had given any cash to him or any accommodation entry was provided by him to the assessee. No name of the assessee figured in his statement recorded in any other case. During the course of survey/search on assessee also, not a single evidence was found to suggest that cash was given to Mr. Mukesh Choksi and accommodation entries were taken. The ld. AR has relied upon the decisions of the Hon‟ble Bombay High Court as well as various decisions of the Mumbai Tribunal wherein it has been held that no reliance can be 65 & 11 other appeals CO No.259/12 & 11 other cross objections placed on the statement of Mr. Mukesh Choksi when the assessee has independently established the genuineness of the transaction. The Ld. AR has further relied upon the following decisions wherein it has been held that once the assessee submits the basic information about the investor company and substantiates the same no addition can be made by invoking the provisions of Section 68 of the Income Tax Act, 1961. a) Lovely Exports Pvt. Ltd. – 299 ITR (Delhi High Court) page 268 and SLP rejected by the Supreme Court in 319 ITR (statute page 5). b) CIT vs Creative World Telefilms Limited 333 ITR p. 100 (Bombay High Court) c) ACIT vs. VenketeshwarIspat (P) Ltd. (Chhatisgarh High Court) (2010) 41 DTR – 350 d) CIT vsGangour Investments Ltd. (2009) 18 DTR (Delhi) – 242 e) CIT vs STL Extrusion Pvt. Ltd. (2011) 333 ITR – p. 269 (MP High Court) f) CIT vs. G.P. International Limited (2010) 325 ITR p. 25 (P&H) g) CIT vs. Siri Ram Syal Hydro Power Pvt. Ltd. 196 Taxman p. 444 (Delhi High Court) h) CIT vs HLT Finance Pvt. Ltd. (2011) 201 Taxman p. 28 (Delhi High Court) 13. On the other hand the Ld. DR has relied upon one decision of Mumbai ITAT in the case of Gold Star Finvest Pvt. Ltd. (supra) wherein while determining the income of that assessee, the Tribunal has estimated the income at certain percentage. The Ld. AR has however submitted that the ratio of this decision cannot overrule the decisions of Bombay High Court and several Mumbai ITAT decisions as relied upon by him. He has further relied upon the following decisions wherein the additions made by the AO on the basis of general statement of Mukesh Chokshi have ultimately been deleted by the higher authorities.
1. Kataria Ketan Ishwarlal Vs. ITO – ITA No.4304/M/2007 decided on 30.04.2010.
66 & 11 other appeals CO No.259/12 & 11 other cross objections 2. ACIT Vs. Shri Ravindrakumar Toshniwal – ITA No.5302/M/2008 decided on 24.02.2010 3. ITO Vs. Truptic Shah – ITA No.1442/M/2010 decided on 29.04.2011 4. Smt. Manjulaben L. Shah Vs. ITO – ITA No.3112/M/2014 decided on 31.10.2014 5. M/s SDB Estate private ltd. vs. ITO ITA No. 584/M/2015 decided on 15.04.2015 6. M/s. Yamuna Estate Pvt. Ltd. vs. ITO ITA No.2672/M/2012 decided on 09.09.2015 7. CIT vs. Rajni Devi A. Choudhry (Bom. HC) ITA NO. 1333of 2008 decided on 27.4.2009 8. “Shri Mukesh R. Marolia vs. Additional CIT” (2006) 6 SOT 247 (Mum) 9. “CIT vs. Shri Mukesh R. Marolia” in ITA No.456 of 2007 decided on 07.09.2011 (Bom HC) 10. SLP No.20146/2012 styled as “CIT vs. Shri Mukesh R. Marolia vide order dated 27.01.14 (SC) 11. “CIT vs. M/s. Kesar A. Gada in ITA No.300 of 2013 decided on 21.01.15(Bom. HC) 12. “CIT vs. Kasturben H. Gada” in ITA No.299 of 2013 decided on 21.01.15.(Bom HC) 13. CIT vs. M/s Sharda Credit Pvt. Ltd. ITA NO. 3090 of 2009 decided on 12.9.2011(Bom. HC) 14. We have perused the case laws relied upon by the Ld. Representatives of the parties. In our view, each case has to be decided on its own facts. Merely because, in the case of one company Gold Star Finvest Pvt. Ltd. run by Mukesh Chokshi, the income has been determined on percentage/commission basis treating the said company as accommodation entry provider, that itself cannot hold a justification to completely ignore the facts and evidences brought on the file by the assessee. The case of the assessee has to be adjudged on the basis of its own set of facts and evidences. Moreover the facts and circumstances of the case of the assessee are squarely covered by the various decisions of the Hon‟ble Jurisdictional High Court Of Bombay. We further find that the issue, relating to the investments made by the companies relating to the said Mr. Mukesh Chokshi in some other cases, has travelled up to the level of Hon‟ble Supreme Court. In the case of “Shri Mukesh R. Marolia vs. Additional CIT” (2006) 6 SOT 247 (Mum), the assessee had made share transaction through the companies M/s. Richmond Securities Pvt. Ltd. and M/s. Scorpio Management. Mr. Mukesh Chokshi has been the 67 & 11 other appeals CO No.259/12 & 11 other cross objections director of M/s. Richmond Securities Pvt. Ltd. The Tribunal, after considering the overall facts and circumstances of the case, observed inter-alia that on the basis of evidence available and there being no incriminating material found during the search action, observed that the assessment has to be completed on the basis of records and material available before the Assessing Authority. The personal knowledge and excitement on events should not lead the AO to a state of affairs where salient evidences are overlooked. Where every transaction of the assessee has been accounted, documented and supported in such an event, even though, the amount invested by the assessee has grown into a very sizeable amount which looks quite amazing, the evidence produced by the assessee cannot be brushed aside. The Tribunal under such circumstances deleted the addition. The Revenue took the matter to the Hon‟ble Bombay High Court. The Hon‟ble Bombay High Court, while adjudicating the above issue in the case styled as “CIT vs. Shri Mukesh R. Marolia” in ITA No.456 of 2007 decided on 07.09.2011, observed that though there was some discrepancy in the statement of director (Mr. Mukesh Chokshi) of M/s. Richmond Securities Pvt. Ltd. regarding the sale transaction, but owing to the factual finding given by the Tribunal on the basis of evidences furnished by the assessee, the decision of the Tribunal cannot be faulted. The Hon‟ble Bombay High Court upheld the finding of the Tribunal holding the sale transactions as genuine. The Department preferred appeal before the Hon‟ble Supreme Court. The Hon‟ble Supreme Court dismissed the SLP No.20146/2012 styled as “CIT vs. Shri Mukesh R. Marolia vide order dated 27.01.14. Similarly in the case of “CIT vs. M/s. Kesar A. Gada in ITA No.300 of 2013 decided on 21.01.15 wherein the AO, while making the additions under section 68 of the Act, had relied upon the statement of Mr. Mukesh Chokshi that he had given various accommodation entries to various parties. The Hon‟ble Bombay High Court observed that where the assessee had brought the relevant evidences regarding the genuineness of transaction and that in his statement Mr. Mukesh Chokshi had not mentioned the name of the respondent/assessee as one to whom accommodation entries were given, the Hon‟ble Bombay High Court upheld the findings of the Ld. CIT(A) which were further confirmed by the Tribunal holding that the transactions were genuine and the additions under section 68 of the Act were 68 & 11 other appeals CO No.259/12 & 11 other cross objections not warranted. Similar findings have been given by the Hon‟ble Bombay High Court in the case of “CIT vs. Kasturben H. Gada” in ITA No.299 of 2013 decided on 21.01.15. In CIT vs. M/s Sharda Credit Pvt. Ltd. (supra), the Hon‟ble High Court has dismissed the appeal of the revenue on identical facts. The Hon‟ble Bombay High Court while upholding the order of the Tribunal in the above stated appeals has also relied upon the decision of the Hon‟ble Bombay High Court in the case of “Shri Mukesh R. Marolia” (supra). Even in the case of “Smt Rajni S Chowdhry” (supra), the Hon‟ble Bombay High Court has upheld the decision of the Tribunal given on the basis of appreciation of evidence and factual finding, accepting the transaction carried carries through broker M/s Gold Star Finvest (P) ltd. as genuine.
We further find that the issue is squarely covered by the various decisions of the Tribunal on the basis of same facts. Recently the Tribunal, in the case of “ITO vs. Superline Construction Pvt. Ltd. & Others” in ITA No.3645/M/2014 & Others vide common order dated 30.11.2015 in identical facts and circumstances while dealing with the issue of making investments by way of share application money invested by the same companies as in the case of an assessee i.e. M/s. Talent Infoways and M/s. Mihir Agencies, has upheld the findings of the Ld. CIT(A) deleting the additions. The other case laws relied upon by the Ld. DR are thus not applicable to the case of the assessee in the light of the direct decision of the Jurisdictional High Court on the identical facts which holds a binding precedent on this Tribunal. Even otherwise there is no evidence on record that the assessee had given its own money to the investing company for the purpose of making investments. It may be observed that the Hon‟ble Supreme Court in the case of Lovely Exports Pvt. Ltd. referred above has clearly laid down the law that once the assessee has given the complete details and the information of the investors who have made investments in the share capital of the company and proved identify then no addition can be made in the hands of the assessee company and in respect of such investments the department should proceed against the individual investor. In the case in hand also, the requisite details, proof, confirmation, evidences etc. are produced. The ratio of the decision of the Hon‟ble Supreme Court is directly applicable on the facts of the case.
69 & 11 other appeals CO No.259/12 & 11 other cross objections In view of the above discussion of the matter, we do not find any infirmity in the factual finding given by the CIT(A) after duly appreciation of evidence on the file and the same is accordingly upheld. 16. In the result, the above captioned appeals of the Revenue are hereby dismissed. Order pronounced in the open court on 18.12.2015.
It is clear from the order of the Tribunal that all the share applicants for which additions have been made by AO have been dealt by Tribunal in threadbare. The Tribunal have also considered the judicial pronouncements cited before it as applicable to the facts of the instant case and confirmed the finding of the CIT(A) with reference to the merit of the addition so made by AO on account of share capital which was deleted by the CIT(A). We found that CIT(A) in all these years have also deleted the addition after recording detailed finding which are as per material on record. Detailed finding has been recorded by CIT(A) while deleting addition in the hands of Jogia Properties Ltd., with reference to the very same share applicants and the Tribunal in its order dated 18/12/2015 had further fortified the finding of CIT(A). Thus two appellate authorities have given the concurrent finding with regard to the identity, genuineness and creditworthiness of all the share applicants, therefore, no addition was warranted on account of these share applicants. Respectfully following the order of the Tribunal in case of Jogia Properties Ltd., wherein also from the very same applicants, share capital was received except Gyaneshwar Trading & Finance Co.Ltd., We had also 70 & 11 other appeals CO No.259/12 & 11 other cross objections gone through the documentary evidences filed in case of Gyaneshwar Tradings to prove the identity, genuineness and creditworthiness. As per the documents placed at page 83 to 105 of paper book for A.Y.2008-09, all the three conditions have been satisfied and no addition u/s.68 is warranted for the amount invested by Gyaneshwar Trading & Finance Co. Ltd., Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the addition so made on account of share capital.
With regard to the legal issue taken by the assessee in the cross objection, as per our considered view, the same can be taken at any time as per the verdict of Hon‟ble Supreme Court in case of National Thermal Power Co. Ltd., 229 ITR pg.383. We also found that assessee has given sufficient reason for delay in filing the cross objection. Since it is purely legal issue which goes to the root of the issue considering the reasons filed for condonation of delay, we are satisfied that there was sufficient reasons for delay in filing the cross objection, accordingly, in the interst of substantial justice, we condone the delay and decide the legal issue. The assessee has challenged the legality of the assessment framed u/s.153C on the plea that no satisfaction was recorded by AO of the searched person so as to empower the concerned AO of these concerns to make addition u/s.153C. Learned AR placed on record report on inspection taken of the records dated 28/08/2015 which reads as under:- Jogia Properties Ltd. A.Y. 2008-09 alld 2009-10 ITA No.6106/M/2012 and 6107/M/2012 Hearing fixed on 8th September, 2015 Report on the inspection taken of the records The appellant had made an application vide letter dated 05/08/2015 to the Assessing Officer requesting for inspection of the assessment records. The said assessment records were with the Hon'ble Commr. of Income Tax, DR, Smt. Neena Pandey, f-Bench, Mumbai ITAT. The Inspector Ms. Ambika Shashidharan, attached to f-Bench, Mumbai ITAT, gave the inspection of the records on 20/08/2015 at 3 pm. Shri Dilip V. Lakhani, Chartered Accountant, the authorised representative and Shri Viresh Sohoni, the representative of the appellant, took the inspection of the assessment records and the findings of the said inspection are as under.
1. There is no proof or evidence on record to the effect that the Assessing Officer gave the copies of the statement recorded of Mr. Mukesh Chokshi on 25/11/2009 and 11/12/2009.
2. No proceeding sheet / order sheet was available for inspection, 3. No recording of any satisfaction for initiating proceedings u/s 153C against 7 companies. Place: Mumbai Dilip V. Lakhani Viresh Sohoni Dated: 20/08/2015 Authorised Representative Representative of Appellant 36. It is clear from the above inspection report that no satisfaction has been recorded by the AO of the searched person i.e., M/s. Jogia Properties Ltd., for initiating proceedings u/s.153C against these seven companies.
From the record we found that in the file of the company which was searched viz. Jogia Properties Ltd., the Ld. Assessing Officer has not recorded any satisfaction to comply with the provisions of Section 153C. A search & seizure action was taken against M/s. Jogia Properties Ltd and pages 1 to 126 which are a part of Annexure- A 1 were seized in the hands of Jogia Properties Ltd.,. The search took place on 4th and 5th March 2010. The Ld. Assessing Officer of Jogia Properties Ltd. did not record any satisfaction as per the provisions of 72 & 11 other appeals CO No.259/12 & 11 other cross objections Section 153C. The assessee has produced the copy of the inspection report which was obtained in the proceedings of Jogia Properties Ltd. In the inspection report it is clearly stated that the Ld. Assissing Officer of Jogia Properties Ltd has not recorded any satisfaction. The Ld. CIT (DR) also has not produced any evidence during the course of hearing to prove that the Ld. Assessing Officer of Jogia Properties Ltd has recorded the satisfaction.
Hon‟ble Gujarat High Court in the case of Vijaybhai N Chandrani 333 ITR 436 held as under:- Sections 153A, 1538 and 153C of the Income-tax Act, 1961, lay down a scheme for assessment in case of search and requisition. Section 153C which is similarly worded to section 158BD of the Act, provides that where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A he shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person. However, there is a distinction between the two provisions inasmuch as under section 153C notice can be' issued only where the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to such other person, whereas under section 158BD if the Assessing Officer was satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. Thus a condition precedent for issuing notice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong 73 & 11 other appeals CO No.259/12 & 11 other cross objections to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated.
Learned AR also invited our attention to page 3 of the paper book filed in cross objection proceedings. Page 3 is the copy of the satisfaction recorded u/s 153C in the hands of Karburi Properties Ltd. The reference to years are 2004-05 to 2009-10. The Ld. Assessing Officer has relied upon page 1 of Annexure - A 1 of the seized panchnama dated 04.03.2010. The said page 1 is on page 4 of the paper book. The said page contains the details of 24 entities giving the name, account number and the persons who are authorised signatory. This paper does not belong to Karburi Properties. During the course of investigation, the assessee had filed detailed explanation on the contents of pages 1 to 126 and copy of the submissions made before the Ld. Assessing Officer. The said explanation was accepted and there is not a whisper about the contents of any of the pages from 1 to 126 in the assessment order.
For understanding of legal requirement of initiating proceeding u/s.153C, we here below reproduce provision of Section 153C. Assessment of income of any other person. Section 153C reads as under. Assessment of Income of any other person. 153C. Notwithstanding anything contained in section 139, section 147, section 148, section 149, Section 151 and section 153, where the Ld. Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or 74 & 11 other appeals CO No.259/12 & 11 other cross objections assets seized or requisitioned shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person and that Ld. Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Provided that in case of such other person, the reference to the date of initiation of the search under Section 132 or making of requisition under section 132A in the second proviso to [sub- Section (1) of 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Ld. Assessing Officer having other person. Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Ld. Assessing Officer shall not be required to issue notice for assessing or reassessing the total assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessrnent has abated." In Order to issue a valid notice u/s 153C, the Ld. Assessing Officer of a person against whom search action is taken, records a satisfaction that any money, bullion, jewellery or other valuable article or thing, or books of account or documents seized, belong to a person, other than a person referred to in Section 153A, then the such books of account or documents or assets seized shall be handed over to the Ld. Assessing Officer having jurisdiction over such other person. The recording of the satisfaction is a must and even if the Ld. Assessing Officer for the person searched and the 'other person' is the same, still the satisfaction has to be recorded by the Ld. Assessing Officer of the search person referred to in Section 153A.
of the proposition that for initiating proceedings u/s.153C, satisfaction should be recorded in the file of searched person, reliance can be placed on the following judicial pronouncements. a. Vijaybhai N. Chandrani Vs. Asst. Commr. Of Income Tax Reported in 333 ITR 436 (Guj. HC) b. Pepsico India Holdings (P.) Ltd. Vs. Asst. Commr. Of Income Tax 75 & 11 other appeals CO No.259/12 & 11 other cross objections Reported in 228 Taxmann 116 (Delhi HC) c. Beejay Securities & Finance Ltd. ITA Nos. 4859 to 4865/MUM/2009 (AY. 2001-02 to AY. 2007-08) date of pronouncement 24/06/2011 d. M/s. Jindal Stainless Ltd. ITA Nos. 3480 & 3481 (Del) 2006 (AY. 2003-04 & 2004-05) Reported in 21 ITAT INDIA 812 (Delhi) e. LMJ International Ltd. ITA No. 2173/Koll2006 (AY. 1999-2000) Reported in 119 TTJ (Kol) 214. f. Right Development & Estate Pvt. Ltd. ITA Nos. 4616 to 4619/MUM/2009 (AY. 2004-05 to AY. 2007-08) date of pronouncement 23/09/2011. g. Asst. Commr. Of Income Tax Vs. Inlay Marketing Pvt. Ltd. (ITAT Delhi) h Tanvir Collections Pvt. Ltd. Vs. Asst. Commr. Of Income Tax (ITAT Delhi) i V. K. Fiscal Services Pvt. Ltd. Vs. Dy. Commr. Of Income Tax (ITAT Delhi) j. Dy. Commr. Of Income Tax, Central Circle-5 New Delhi Vs. Qualtron Commodities Pvt. Ltd. 54 Taxmann.com 295 (Delhi Tribunal) k Dy. Commr. Of Income Tax Vs. Aakash Arogya Mindir P. Ltd 58 Taxmann.com 293 (Delhi Tribunal) l. CIT vs. Sinhgad Technical Education Society, 378 ITR pg.84 (Bombay High Court)
76 & 11 other appeals CO No.259/12 & 11 other cross objections m. CIT vs. Mechmen (2015) 280 CTR 198 (Madhya Pradesh High Court) n. CIT vs. IBC Knowledge Park Pvt Ltd, (2016) Taxmann.com, 108 (Karnataka High Court) o. Cit vs. Shettys Pharmaceuticals & Biologicals Ltd., (2015) 230 Taxman 268 (Andhra Pradesh High Court) 42. Applying proposition of law laid down in above judicial pronouncements, notice issued u/s 153C is bad in law and consequently the order passed by the Ld. Assessing Officer u/s 153C needs to be cancelled.
Now, coming to the statement of one Mr. Jose Mathews which was recorded during course of search. Subsequently Mr. Jose Mathews has retracted his statement. The fact of retraction was also intimated to the Ld. Assessing Officer during the assessment proceedings. The necessary proof for the same was also produced during the course of hearing. Mr. Jose Mathews was neither an employee nor a director nor a person anyway connected with the affairs of either Jogia Properties Ltd or any of these 7 companies. His statement has no evidential value. During the course of search and post search investigation also not a single piece of evidence was found by the Investigation Wing or by the Ld. Assessing Officer to prove what was originally stated by Mr. Jose Mathews. This retraction of statement of Jose Mathews have also been dealt by the Tribunal elaborately in its decision dated 18/12/2015 and after considering the 77 & 11 other appeals CO No.259/12 & 11 other cross objections same Tribunal had uphold the deletion of addition in respect of share capital.
From the record we found that of post search investigation on 15/04/2010, a summons u/s 131 was issued to the director of the company Mr. Narayan Hari Halan. He was appointed as director of the company on 15/02/2010. He was nowhere connected with the affairs of Jogia Properties Ltd or Karburi Properties Ltd., during the period 01/04/2007 to 31/03/2008 and 01/04/2008 to 31/03/2009. He was not aware about the affairs of the company for the period 01/04/2007 to 31/03/2009.
We found Tribunal have elaborately dealt with the summon issued to Mr. Narayan Hari Halan in its order dated 18/12/2015. We found that the director of the company while recording statement has clearly stated that Mr. Jose Mathews is not fully aware about the business activity of the company. The statement made by Mr. Jose is not true. He also further stated that owing to the facts mentioned to him by the Authorised Officer and the circumstances of that case he is offering certain sum received as share capital as the income for A.Y. 2008-09 and 2009-10. The statement of the director cannot be referred to as the document found during the course of search and on the basis of the statement no notice u/s 153C can be issued.
We had also gone through the statement of Mr. Mukesh Chokshi. In this statement there is no reference to the assessee. There is no allegation that the assessee has given the cash and received the 78 & 11 other appeals CO No.259/12 & 11 other cross objections Cheque by way of share application. The statement of Mr. Mukesh Chokshi cannot be base for acquiring jurisdiction by issue of notice u/s 153C is concerned. The Tribunal have also dealt threadbare with the statement of Shri Mukesh Chokshi in its order dated 18/12/2015.
In view of the above, we can conclude that no document belonging to the assessee was found during the course of search and also none of the statements of Mr. Jose Mathews, Mr. Narayan Hari Halan or Mr.Mukesh Chokshi can be construed as a document belonging to the assessee for issue of notice u/s 153C.
Now, coming to the contention of CIT (DR) during the course of hearing with respect to the cross objection so filed by the assessee. The CIT(DR) referred the document seized during the course of search were confronted with the director of the company. This is not a correct statement of fact. The documents which were seized were explained in the assessment proceedings and no incriminating material is seized. No papers belonging to the assessee is seized and hence the question of confronting the same to the directors does not arise. There is no reference in the assessment order regarding confrontation of the documents to the directors and also in the satisfaction recorded there is no reference to this aspect.
The CIT(DR) has referred to the incriminating documents. We found that no document belonging to the assessee was found and hence the question of incrementing document may not arise/.
79 & 11 other appeals CO No.259/12 & 11 other cross objections 50. Learned DR placed reliance on the on the decision of the Hon'ble Chhatisgarh High Court in the case of Trilok Singh Dhillon. We fond that facts of the case are distinguishable and not applicable to the facts of the instant case. Our above observation further fortified by the Circular No.24 dated 31/12/2015 issued by Central Board of Direct Taxes wherein it has been clarified that even if the Ld. Assessing Officer of the assessee who is searched and the Ld. Assessing Officer of other person is the same, the Ld. Assessing Officer of the assessee who is searched has to record satisfaction. This Circular makes the position very clear and the Circular is applicable on the facts of the case. Based on this Circular also the notice issued by the Ld. Assessing Officer of the assessee company is not valid.
In view of the above factual and legal matter, we do not find any merit for the order passed u/s.153C r.w.s. 143(3).
In the result, Cross Objection filed by the assessee is allowed in terms indicated hereinabove, whereas appeals filed by Revenue are dismissed. Order pronounced in the open court on this 18/11/ 2016. sd/- sd/- AMARJIT SINGH R.C.SHARMA न्यानयक सदस्य / JUDICIAL MEMBER ऱेखा सदस्य / ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक Dated 18/11/2016 pkm, PS / Karuna Sr.P.S. आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. आमकय आमुक्त(अऩीर) / The CIT(A), Mumbai. 3.