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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI N.S.SAINI, AM &SHRI PAVAN KUMAR GADALE, JM
Per Shri N.S.Saini, AM: These are the appeals filed by the Revenue against the consolidated order of the CIT(A), Raipur, dated 22.07.2014 for the assessment years 2006-2007 to 2012-2013. The assessee has filed cross objections.
Grounds No.1 & 2 in appeals for assessment years 2006-07, 2007- 08, 2009-10, are directed against the order of CIT(A) in deleting the additions of Rs.1,69,40,000/-, Rs.9,00,000/-, Rs.3,41,50,000/-, CO Nos.11 to 17/RPR/2015 respectively on account of share application/capital received as unexplained cash credits u/s.68 of the income Tax Act, 1961. 3. Ground Nos.3 to 6 in appeals for the assessment years 2006-07, 2007-08 and 2009-10 and ground Nos.1 to 4 in appeals for the assessment years 2008-09, are directed against the order of CIT(A) in deleting the additions made on account of applying net profit rate after rejection of books of accounts u/s.145 of the Act for Rs.1,43,00,000/- for the assessment year 2006-07, Rs.3,55,00,000/- for assessment year 2007-08, Rs.2,30,00,000/- for assessment year 2008-09, Rs.4,39,00,000/- for assessment year 2009-10, respectively.
We have heard rival submissions and perused the orders of lower authorities and materials available on record. The assessee is engaged in the business of contract work and transportation work. A search and seizure operation was conducted in the case of the assessee on 24th and 25th May, 2011. In pursuance to the same, notice u/s.153A of the Act was issued and impugned orders of assessments were passed. It is not in dispute that assessment for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10, were completed prior to the date of search. In other words, the assessments for these assessment years were not abated.
We find that the above additions made by the AO in the impugned assessment years were not based on any incriminating material found during the course of the search.
The Revenue could not show any incriminating material, which was found during the course of the search on the basis of which above CO Nos.11 to 17/RPR/2015 additions could have been made. It is a settled position of law that in an assessment made in pursuance to search in respective assessment years for which assessment proceedings were not abated, additions cannot be made de hors the incriminating materials found during the course of search. We, therefore, do not find any merit in these appeals of the Revenue. Accordingly, the appeals of Revenue for the assessment years 2006-07, 2007-08, 2008-09 and 2009-10 are dismissed.
Grounds No.1 & 2 in appeals for assessment years 2010-11 and 2011-12 are directed against the order of CIT(A) in deleting the additions of Rs.8,56,00,000/- and Rs.9,64,20,000/-, respectively on account of share application/capital received as unexplained cash credits u/s.68 of the income Tax Act, 1961. 8. Brief facts relating to the above grounds are that the AO observed that the assessee had received share capital/share application money from the following of the amounts mentioned against their names as under: SI. No. Assessment Year Name of the Share Applicant Amount (Rs.) 1 2006-07 Adhishwar Nirman Pvt. Ltd. 8,00,000 2 2011-12 Amar Agrawal 20,00,000 3 2010-11 Ansh Vyapaar Pvt. Ltd. 6,21,00,000 4 2011-12 Ansh VvapaarPvt. Ltd. 3,88,70,000 5 2009-10 Asha Budhia 1,50,000 6 2010-11 Camellia Commotrade Pvt. Ltd. 20,00,000 7 2009-10 Consolidated Finlease Ltd 8,00,000 8 2010-11 Dristi Tie-Up Pvt. Ltd. 15,00,000 9 2010-11 Economy Infrastructure Pvt. Ltd 55,00,000 10 2006-07 Edmond Commercial Pvt. Ltd. 5,00,000 11 2009-10 Gloria Credit & Commerce Pvt. Ltd. 28,00,000 12 2010-11 Gloria Credit & Commerce Pvt. Ltd. 25,00,000 13 2009-10 Himadri Dealcom Pvt. Ltd. 55,00,000 14 2010-11 Himadri Deaicom Pvt. Ltd 15,00,000 CO Nos.11 to 17/RPR/2015 15 2006-07 Hoogly Vinimay Pvt. Ltd 10,00,000 16 2006-07 JMO Mercantile Pvt. Ltd 20,00,000 17 2006-07 Kamroop Vinimay Pvt. Ltd. 30,00,000 18 2007-08 Mansarwar Dealers Pvt.Ltd 9,00,000 19 2006-07 Nandan Merchantile Pvt. Ltd. 30,00,000 20 2006-07 Nikhil Trexim Pvt. Ltd. 7,00,000 21 2011-12 Parijat Berter Pvt. Ltd. 5,75,50,000 22 2009-10 Perfect Tradecom Pvt. Ltd. 10,00,000 23 2010-11 Perfect Tradecom Pvt. Ltd. 25,00,000 24 2006-07 Purshottam Garg 8,50,000 25 2010-11 R.R.Energy Limited 4,15,52,000 26 2006-07 Rajendra Kumar Agrawal 4,50,000 27 2009-10 Rajlaxmi Vanijya Pvt. Ltd. 70,00,000 28 2006-07 Savita Garg 2,00,000 29 2010-11 Sector Infrastructure Pvt. Ltd. 40,00,000 30 2006-07 Shreevar Overseas Ltd. 35,00,000 31 2010-11 Spark Enclave Pvt. Ltd. 5,00,000 32 2010-11 Spin Packaging pvt. Ltd. 25,00,000 33 2009-10 Sravsti Udyog Viniyog Pvt. Ltd. 42,00,000 34 2008-09 Subhash Chandra Singhal 9,90,000 35 2010-11 Subhash Chandra Singhal 5,00,000 36 2011-12 Subhash Chandra Singhal 45,00,000 37 2006-07 Sugam Commercial Pvt. Ltd. 5,00,000 38 2006-07 Sunflower Vinimay Pvt. Ltd. 5,00,000 39 2009-10 Victor Dealers Pvt. Ltd. 15,00,000 40 2009-10 View Point Retail Pvt. Ltd. 10,00,000
In the course of search u/s 132 of the Act, statutory-records like Minutes of meeting Register, Share-holders Register, duly filled-in share application forms, Counterfoils of issued share-certificates, etc. required to be maintained at the registered office were not found. The persons present in the house also could not provide satisfactory explanation. In order to verify the identity and creditworthiness of the investors and genuineness of the transactions, notices u/s. 133(6) of the Act were issued. However, notices in respect of following were returned unserved:- Sl.No. A.Y. Name of Share Applicant Amount CRs.) 2,00,000 1. 2006-07 Shri Santosh Agrawal 45,00,000 2. 2009-10 M/s. Satyam Tradecom 3. 2009-10 M/s. Sravasti Nidhi Pvt. Ltd. 20,00,000 CO Nos.11 to 17/RPR/2015
The AO on perusal of the balance sheets of the shareholder companies, found that they did not possess sufficient creditworthiness to invest the amounts shown against their names. It was held that such inflow of share application money has to be seen in the perspective of money laundering through share application route, in which unaccounted money available with the promoters/ developers/ family members and their associates is routed back to their books of account in the garb of share application money without payment of due taxes, the evidences of which were found during search operation. The AO noted that from the written submissions filed by the assessee it was held that it was a managed affair in connivance with shareholder companies of Kolkata. Such inference was held as further strengthened due to non-availability of the share application forms, counterfoils of share certificates issued, etc. at the assessee’s registered office. Referring to the provisions of sec. 68 of the Act, the A.O. has held that if the, assessee fails to offer any explanation in respect of the amounts credited in the books of account for any previous, then such sums may be charged to tax as income of that previous year. Relying on the following cases the A.O. has concluded that in this case the appellant has failed to discharge its onus in proving the identity, creditworthiness and genuineness of the share applicants. CIT v. P. Mohanakala 291 ITR 278 (i) (ii) CIT v. Durgaprasad More (82 ITR 540) (iii) Sumati Dayal v. CIT (214 ITR 801) (iv) N R Portfolio Pvt. Ltd. (ITA NO. 1019/2011) dtd. 22.11. 2013: (v) Nova Promoters & Finlease (342 ITR 169); (vi) CIT v. Nipun Builders and Developers [2013] 350 ITR 407 (Del); (vii) Bharti Pvt. Ltd. v. CIT [1978] 111 ITR 951 (Cal.); (viii) Hindustan Tea Trading Co. Ltd. (129 Taxman 601 Cal.); CO Nos.11 to 17/RPR/2015 (ix) Rathi Finlease Ltd. (IT. Appeal No. 63 of 2004, dtd 11-10-2007) (x) MAF Academy P Ltd (ITA no. 341 /2012) dated 28.11.2013; (xi) Oasis Hospitalities (P.) Ltd. ( 333 ITR 119/ 198); (xii) VijayKumarTalwar v. CIT [2011] 330 ITR 1/196 (S.C) (xiii) Agrawal Coal Corp. Pvt. Ltd. (135 LTD 270);
It was further held that inquiries conducted by the A.O. cement the findings that the identity and creditworthiness of the creditors were not established, they were found to have no capacity and purpose to invest by way of share application money in the assessee's company. Accordingly,
the below mentioned amounts were treated as unexplained cash credits
u/s 68 and added to the total income of the assessee.
A.Y. Total Share Share Application Difference (Rs.) Addition made for Application money money received Share Application received (Rs.) from Directors / Money U/S68 Relatives (Rs.) (Rs.) 2006-07 1,75,90,000/- 6,50,000/- 1,69,40,000/- 1,69,40,000/- 2007-08 9,00,000/- Nil 9,00,000/- 9,00,000/- 2008-09 9,90,000/- 9,90,000/- Nil NIL 2009-10 3,41,50,000/- Nil 3,41,50,000/- 3,41,50,000/- 2010-11 12,76,52,000/- 4,20,52,000/- 8,56,00,000/- 8,56,00,000/- 2011-12 10,29,20,000/- 65,00,000/- 9,64,20,000/- 9,64,20,000/- 2012-13 Nil Nil Nil Nil Total 28,42,02,000/- 5,01,92,000/- 23,40,10,000/- 23,40,10,000/-
Against the above order of AO, the assessee carried the matter
before the CIT(A) and submitted that the assessee had received share
application money in A.Y. 2006-07 to 2011-12 from number of share
applicants. The share applicants, inter-alia, included directors, family
members and other group companies. The AO asked the assessee to establish the identity, creditworthiness and genuineness of transaction of receipt of share application money. The assessee filed the details. In case
of directors, family members and group companies, the AO accepted the CO Nos.11 to 17/RPR/2015 identity, credit-worthiness and genuineness of transaction and no addition was made. However, in other cases the AO did not accept and made the additions to the income u/s 68 as above. The assessee further submitted that it has filed various supporting, concerning all the share applicants, such as copies of Share Application Forms, Certificate of Registration from