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Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL
Before: SHRI BEFORE SHRI G.D. AGRAWALG.D. AGRAWALG.D. AGRAWAL & G.D. AGRAWAL & AND & SHRI SHRI CHANDRA MOHAN GARG SHRI SHRI CHANDRA MOHAN GARG
PER G.D. AGRAWAL, VP PER G.D . AGRAWAL, VP :- PER G.D PER G.D . AGRAWAL, VP . AGRAWAL, VP The appeal by the assessee for the assessment year 2004-05 and the appeals by the Revenue for assessment years 2004-05 to
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2009-10 are directed against the order of learned CIT(A)-III, New Delhi dated 21st October, 2011.
ITA No.44/Del/201 ITA No.44/Del/2012 (Revenue’s appeal) and ITA No.44/Del/201 ITA No.44/Del/201 2 (Revenue’s appeal) and 2 (Revenue’s appeal) and 2 (Revenue’s appeal) and ITA No.14/Del/2012 (Assessee’s appeal) for AY 2004-05 ITA No.14/Del/2012 (Assessee’s appeal) for AY 2004 05 :- ITA No.14/Del/2012 (Assessee’s appeal) for AY 2004 ITA No.14/Del/2012 (Assessee’s appeal) for AY 2004 05 05
These cross-appeals are being taken up together for hearing and disposal because they involve some of the common issues.
The grounds raised in the Revenue’s appeal i.e. ITA No.44/Del/2012 read as under:-
“1. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.7,52,00,000/- made by the Assessing Officer on account of issue of bogus share application money.
The order of the ld.CIT(A) is erroneous and is not tenable on facts and in law.
The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
The grounds raised in the assessee’s appeal i.e. ITA No.14/Del/2012 read as under:-
“1. On the facts and circumstances of the case, the order passed by the A.O. and confirmed by the learned Commissioner of Income Tax (Appeals) under Section 153A is bad, both in the eye of law and on facts.
On the facts and circumstances of the case, the proceedings initiated under Section 153A against the appellant are in violation of the statutory conditions of the Act and the procedure prescribed under the law and as such the same is bad in the eye of law.
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On the facts and circumstances of the case, the notice issued under Section 153A by the A.O. is bad both on facts and in law and as such the assessment framed in consequence thereof is liable to be quashed.
On the facts and circumstances of the case, the assessment framed under Section 153A/143(3) being against the statutory provisions of the Act and the procedure prescribed under the law, is bad and the same is liable to be quashed.
On the facts and circumstances of the case CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the A.O. has erred in using the provisions of section 153A of the Act as review proceedings, which is not permissible under the law.
6.(i) On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in confirming the disallowance of an amount of Rs.60,00,000/- made by A.O. on account of interest on borrowed funds.
(ii) On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in not appreciating the contention of the appellant that the interest expenses having been incurred during the year in respect of current assets, the same is revenue in nature and as such fully allowable under the provisions of the Act.
(iii) On the facts and circumstances of the case ld.A.O. has erred both on facts and in law in misinterpreting the proviso to section 36(1), which is applicable when the capital is borrowed for the purpose of acquisition of a capital asset and not the current assets such as stock in trade. The expenses on account of interest having been incurred without any enduring benefit is fully allowable under the provisions of the Act.
7.(i) On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in confirming the abovesaid disallowance in view of the fact that no incriminating material was found during the course of search.
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(ii) The disallowance is otherwise untenable as the reassessment proceedings under section 153A are to be restricted to the incriminating material found during the course of search.
On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in not appreciating the fact that the various additions made by the A.O. are otherwise untenable as the original assessment has been completed under Section 143(3) and the disallowance has been made in the reassessment proceedings merely on change of opinion without there being any adverse material found during the course of search.
9.(i) On the facts and circumstances of the case ld.CIT(A) has erred both on facts and in law in not appreciating the fact that the original assessment order passed under Section 143(3) having merged with the order of appellate authorities, the A.O. was not justified in reappraising the same and tinkering with the same.
(ii) The above action of the A.O. is against the provisions and the Scheme of the Act.”
The facts of the case are that the assessee is a company which had filed the original return of income for assessment year 2004-05 on 1st November, 2004 which was assessed u/s 143(3) of the Act vide order dated 28th December, 2006 at a net taxable income of `3,05,04,140/-. Subsequently, search u/s 132 was conducted on 25th September, 2008. After the search, proceedings u/s 153A were initiated and finally, assessment u/s 153A read with Section 143(3) was completed on 30th December, 2010 at the total income of `11,17,04,140/-, in which following additions were made:-
(i) Addition on account of share application money : `7,52,00,000/-
(ii) Addition on account of interest : `60,00,000/-
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Learned CIT(A) deleted the addition made by the Assessing Officer on account of share application money. Therefore, Revenue is in appeal against the deletion of such addition. Learned CIT(A) sustained the addition on account of interest against which assessee is in appeal.
At the time of hearing before us, learned CIT-DR argued at length and pointed out that during the course of search of the assessee’s premises, number of documents were found and seized which indicated the introduction of share application money by the assessee in various years and the pattern of receiving share application money. He referred to paragraph 4 of the assessment order in this regard. He also stated that after post search enquiry, new finding with regard to some of the share applicants has emerged which indicated that those share applicants have been indulging in providing accommodation entries. This finding was not available during the original assessment proceedings. Accordingly, he stated that the CIT(A) was not justified in observing that no incriminating material was found either during the search or any post search enquiry and, therefore, the addition is not sustainable in the proceedings u/s 153A. He stated that during the course of search also, certain material was found and seized and during the post-search enquiry also, various new facts and materials were found which were not available during original assessment proceedings. Therefore, the addition was rightly made by the Assessing Officer u/s 153A.
With regard to deletion of addition on merits also, he stated that the onus is upon the assessee to prove the credit in its books of account. To discharge such onus, assessee has to establish the identity of the shareholder, creditworthiness of the shareholder and
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genuineness of the transaction. From the various details given by the Assessing Officer in respect of the share applicants whose credits have not been accepted, it is evident that they had very meager business income and from such meager income, they cannot invest huge money in the form of share capital with the assessee company. That summons issued to those share applicants were not complied with. The assessee was informed of this position and was requested to produce the director of such share applicant company. The assessee did not produce the director of the said company. On these facts, the Assessing Officer rightly concluded that the assessee did not discharge the onus which lay upon it to prove the credit in the form of share capital. In support of his contention, he relied upon the decision of Hon'ble Delhi High Court in the case of CIT Vs. Nova Promoters and Finlease (P) Ltd. – [2012] 342 ITR 169 (Delhi). He, therefore, submitted that the order of learned CIT(A) on this point may be reversed and that of the Assessing Officer may be restored.
Learned counsel for the assessee stated that no incriminating material relating to share application money was found during the course of search and, therefore, the addition with regard to unexplained cash credit in the form of share application money is out of the purview of Section 153A of the Income-tax Act, 1961. In support of this contention, he relied upon the following decisions of Hon'ble Delhi High Court :-
(i) CIT Vs. Kabul Chawla in ITA No.707, 709 and 713/2014 dated 28.08.2015.
(ii) CIT Vs. RRJ Securities Ltd. in ITA No.175 to 177/Del/2015 dated 30.10.2015.
He also relied upon the following decisions of ITAT :-
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(i) Parsvnath Developers Ltd. Vs. DCIT – ITA No.5188/Del/2013 dated 31.10.2014.
(ii) Sanjay Aggarwal Vs. DCIT – ITA No.3184/Del/2013 dated 16.06.2014.
He submitted that the contention of the learned DR, that during the course of search various documents were found and seized which were with regard to introduction of share application money by the assessee in various years and therefore the addition made with regard to share application money was well within the ambit of Section 153A, is misplaced. He referred to the assessment order and pointed out that in paragraph 4 of the assessment order, the Assessing Officer has mentioned as under:-
“During the course of search, a number of documents were found which indicated the introduction of share application money by the assessee in various years and the pattern of receiving share application money. One of these documents seized during search is Annexure A-22 of Party SCE pages 15 to 16 which indicate the pattern of share application money and a group summary of the share application money. There is another document inventorized as Annexure A7 Party SMA Page 30 which gives pattern of share application money in M/s Suncity Projects (P) Ltd. The document clarifies that the company is basically controlled by four group of companies viz., Essel Group, Action Group, Odeon Group, Suncity Group & other miscellaneous companies. On the basis of above documents a summary of share capital, share application money and share premium was prepared for each of the assessment year which shows the increase in share application money as well as the pattern of share application money in each year.”
That none of the details mentioned above in paragraph 4 of the assessment order can be said to be incriminating material. The details
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found by the Revenue authorities during the course of search were the documents relating to share application money which were duly disclosed by the assessee in its account. The document was only the group summary of the share application money because in the assessee company, persons from various groups viz. M/s Suncity Group, Essel Group, Action Group and Odeon Group of companies have applied for shares and the Assessing Officer himself, after analyzing all the share application money, has mentioned about the application by these groups of companies who have applied for the shares in the assessee company. That in the assessment order, the Assessing Officer has nowhere mentioned that any incriminating material was found at the time of search. Learned DR also, though argued at the time of hearing that various documents relating to share application money were found and seized, has not pointed out a single document which will fall within the ambit of incriminating material. He further stated that the learned CIT-DR has stated that during post-search enquiry, it is gathered that some of the share applicants who have applied for shares in the assessee company are issuing accommodation entries in the form of share application money. This submission of learned DR is factually incorrect as, in the post-search enquiry in the case of the assessee, no person has stated that he has provided accommodation entry to the assessee. The statement of any such person, if any, is neither confronted to the assessee nor placed on record even before the Tribunal. He, therefore, submitted that on these facts, the decisions of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable.
With regard to the merit of the addition of share application money, the learned counsel stated that the assessee has duly proved
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the identity, creditworthiness and genuineness of the transaction and thereby has discharged the onus to prove the credit in the form of share application money. He has stated that the assessee has furnished the copy of share application form, confirmation from investor company, copy of income tax return and bank statement of the investor company, certificate of incorporation of the investor company and, therefore, in view of various judicial pronouncements, the assessee has duly discharged the onus to prove the credit in its account. He has also furnished the written submission in this regard running into eight pages.
We have carefully considered the arguments of both the sides and have perused the material placed before us. In the case of Kabul Chawla (supra), Hon'ble Jurisdictional High Court has considered all earlier decisions of Hon'ble Delhi High Court and has also considered the decisions of other High Courts and Tribunals and summarized the legal position in paragraph 37 and at the conclusion of the case in paragraph 38, which are reproduced below:-
“Summary of the legal position.
On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:-
i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.
ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.
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iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”.
iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”
v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.
vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.
vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.
Conclusion
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The present appeals concern AYs 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”
In clause (iv) above, their Lordships held “Obviously an assessment has to be made under this Section only on the basis of seized material”. In clause (v), the same is reiterated by holding “In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made”. In clause (vii), it is stated “Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search”.
In the case of RRJ Securities Ltd. (supra), in paragraph 21, it has been held :-
“In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisidciton to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may be remained undisclosed in the relevant assessment years. This Court in Commissioner of Income Tax (Central)-III v. Kabul Chawla : ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments.”
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Having discussed the legal position held by Hon'ble Jurisdictional High Court above, let us examine the facts of the case so as to ascertain whether any incriminating material was unearthed during the course of search or requisition of documents. For the year under consideration, the assessee had filed the return of income on 1st November, 2012 declaring total income of `3,05,04,140/-. The case was taken up for scrutiny by issuance of notice u/s 143(2). From page 1 to 62, there are the details and evidences produced by the assessee during the original assessment proceedings. Paragraph 3 of the assessee’s reply before the Assessing Officer, copy of which is placed at page 1 of the assessee’s paper book, reads as under:-
“3. Share Application Money As desired, we are enclosing herewith a list showing details of Share Application Money. Share Application Money was received from 29 parties, out of which 15 are old and fresh application money was received from 14 parties. As desired we are enclosing herewith confirmations of fifteen parties in respect of old share application money and confirmation with photocopy of bank statements in support of source of depositing Share Application Money in respect of fourteen parties from whom fresh share application money was received during the year.”
From the above, it is evident that during original assessment proceedings, the Assessing Officer made enquiry with regard to share application money and the assessee duly explained the same along with necessary evidence i.e. confirmation of share applicant, photocopy of bank statement etc. Satisfied with the same, the Assessing Officer completed the assessment u/s 143(3) on 28th December, 2006 accepting the income declared by the assessee i.e., `3,05,04,140/-. Now, the question is whether any incriminating material relating to share application money was found at the time of search. Learned CIT-DR has relied upon the observations of the
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Assessing Officer in paragraph 4 of the assessment order so as to point out that incriminating material was found. However, in paragraph 4, the Assessing Officer only pointed out “During the course of search, a number of documents were found which indicated the introduction of share application money”. Admittedly, the assessee has already disclosed the share application money received during the year under consideration and the names of the persons from whom such share application money was received and confirmations from share applicants. Therefore, the document which indicated the receipt of share application money or the persons from whom such share application money was received cannot be said to be incriminating material because these details are already placed on record by the assessee during original assessment proceedings which was prior to the date of search. The Assessing Officer has also referred to another document which gives the pattern of share application money in Suncity Projects (P) Ltd., i.e. the assessee company. The said document clarifies that the assessee company is basically controlled by four group of companies, viz., Essel Group, Action Group, Odean Group, Suncity Group and other miscellaneous companies. In our opinion, when the names of all the share applicants along with their addresses were already on record, merely because in a document those share applicants have been classified in some groups, does not mean that such document was an incriminating material indicative of any undisclosed income. For the year under consideration, the Assessing Officer has treated the share application money of M/s Anu Fashions Pvt.Ltd. Rs.4,02,00,000/-, M/s Churu Trading Co. Pvt.Ltd. Rs.3,00,00,000/- and M/s Daulat Finvest Pvt.Ltd. Rs.50,00,000/-. The facts relating to M/s Anu Fashions Pvt.Ltd. are discussed at page 7 paragraph 4.9 of the assessment order. Main reason given by the Assessing Officer for not accepting creditworthiness of M/s Anu
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Fashions Pvt.Ltd. is the meager income shown by the said company. However, in the details discussed in the assessment order relating to M/s Anu Fashions Pvt.Ltd., there is no mention by the Assessing Officer with regard to any incriminating material. In the case of Churu Trading Co. Pvt.Ltd., the Assessing Officer, during assessment proceedings, has issued notice u/s 133(6). In response to which, the company did not furnish the requisite information. The Assessing Officer also asked the assessee to produce the director of the said company who was not produced. Thus, here again, there is no reference to any incriminating material found and seized during the course of search indicative of any undisclosed income in the form of share application money. Identical facts are there with regard to M/s Daulat Finvest Pvt.Ltd. The said company also did not furnish the information in response to notice u/s 133A and also the director of the said company was not produced but, there is no mention of any incriminating material found and seized during the course of search with reference to share application money received from M/s Daulat Finvest Pvt.Ltd. Therefore, we have no hesitation to hold that no incriminating material relating to share application money was found during the course of search of the assessee’s premises and, therefore, the decisions of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) are squarely applicable. Respectfully following the same, we hold that the addition on account of share application money made by the Assessing Officer was out of purview of assessment u/s 153A.
With regard to the merit of the addition of share application money, both the parties have argued at length in support of their rival contentions. Learned DR has claimed that the assessee has not discharged the onus to prove the credit in its account in the form of
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share application money and therefore, learned CIT(A) was not justified in deleting the addition on merits also. Learned counsel for the assessee, on the other hand, stated that the assessee has duly discharged the onus by producing the confirmation of the investor company who is assessed to income tax. The assessee has also produced the copy of bank statement, balance sheet and certificate of incorporation of the investor company. He has also relied upon the various judicial pronouncements in support of his contention that the assessee has duly discharged the onus to prove the credit. However, while considering the scope of assessment u/s 153A, we have arrived at the conclusion that in view of the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), since no incriminating material relating to share capital money was found, the completed assessment for assessment year 2004-05 cannot be interfered with. In view of the above, we are not going into the merit of the argument of both the sides so as to record the finding whether the assessee has discharged the onus of proving the credit in the form of share application money or not but, we uphold the order of learned CIT(A) deleting the addition of `7,52,00,000/- on the limited ground that in view of the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), the completed assessment cannot be interfered with. With this remark, we dismiss the Revenue’s appeal in ITA No.44/Del/2012.
The only other ground raised in the assessee’s appeal is with regard to the disallowance of `60,00,000/- made by the Assessing Officer on account of interest on borrowed money. With regard to this ground also, it was stated by the learned counsel that in the assessment u/s 153A, the Assessing Officer disallowed `60,00,000/- out of interest on the ground that the borrowed money has been utilized
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for acquisition of a capital asset and, therefore, interest income is to be disallowed in proportion to the investment in the acquisition of the capital asset. The learned counsel stated that no incriminating material with regard to interest expenditure has been found and, therefore, the issue relating to disallowance of interest was also out of the purview of reassessment u/s 153A.
Learned DR, on the other hand, relied upon the orders of authorities below on this point.
We have already discussed the scope of assessment u/s 153A at length while discussing ground Nos.1 to 5 of the assessee’s appeal and, respectfully following the decisions of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Pvt.Ltd. (supra) have arrived at the conclusion that completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document. Admittedly, no incriminating material relating to interest expenditure was unearthed during the course of search or requisition of documents and, therefore, in our opinion, the disallowance of interest was out of the purview of the assessment u/s 153A. In the absence of incriminating material, the Assessing Officer should reiterate the completed assessment. Accordingly, we delete the disallowance of `60,00,000/- made by the Assessing Officer out of interest expenditure and allow ground Nos.6 to 9 of the assessee’s appeal.
In the result, the appeal of the assessee is allowed and the appeal of the Revenue in ITA No.44/Del/2012 is dismissed.
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ITA No.45/Del/2012 ITA No.45/Del/2012 – Revenue’s appeal for AY 2005 ITA No.45/Del/2012 ITA No.45/Del/2012 Revenue’s appeal for AY 2005 Revenue’s appeal for AY 2005-06 : Revenue’s appeal for AY 2005 06 : 06 :- 06 : 23. The only ground raised in this appeal by the Revenue reads as under:-
“On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.3,79,00,000/- made by the Assessing Officer on account of issue of bogus share application money.”
The facts of the case are that for the year under consideration, the assessee had filed the original return on 30th October, 2005 declaring total income of `2,04,80,490/-. The same was assessed u/s 143(3) vide order dated 24th December, 2006 at the taxable income of `2,08,86,122/-. After the search, in response to notice u/s 153A, the assessee filed the return declaring income of `2,04,80,490/- i.e. the income declared in the original return. The assessment u/s 153A was completed on 30th December, 2010 at the total income of `5,87,86,122/- in which the Assessing Officer made the addition of `3,79,00,000/- in respect of share application money. The same was deleted by the learned CIT(A). Hence, this appeal by the Revenue.
At the time of hearing before us, learned DR stated that his arguments mainly remain the same as were advanced in assessment year 2004-05. In addition, he pointed out that for the year under consideration, the Assessing Officer made the addition in respect of share application money received from following two parties :-
(i) Churu Trading Co. P.Ltd. : `2,52,00,000/- (ii) Vandana Laboratories P.Ltd. : `1,27,00,000/-
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He stated that the issue of Churu Trading Co. P.Ltd. is already discussed in assessment year 2004-05. In respect of Vandana Laboratories P.Ltd., he referred to the assessment order page 9 and pointed out that in respect of search at the premises of Best group of cases, it was gathered that such group was taking accommodation entries mainly in the form of share capital. M/s Vandana Laboratories P.Ltd. is one of the companies which was providing accommodation entries. Thus, in the case of M/s Vandana Laboratories P.Ltd., enough evidence has been brought by the Revenue on record in post-search enquiry that the said company was an entry provider. In view of the above, learned CIT(A) was not justified in accepting the share application money received from M/s Vandana Laboratories P.Ltd. to be genuine.
Learned counsel for the assessee, on the other hand, relied upon the order of learned CIT(A) and his arguments advanced while hearing the appeal for assessment year 2004-05. He further submitted that as per the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), the addition can be made u/s 153A only if incriminating material was found and seized during the course of search of the assessee. Admittedly, in the case of search of the assessee, no incriminating material was found and seized so as to establish that M/s Vandana Laboratories P.Ltd. was an entry provider. The Assessing Officer has referred to some investigation carried out by the Investigation Wing during the course of search of Best group of cases. However, in respect of such averment in the assessment order, no material has been confronted to the assessee and no material is even produced before the ITAT. That if the Department has claimed to have gathered some material during the course of investigation of some other assessee which is used against
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the assessee, a copy of such material should have been provided to the assessee. Even otherwise, the order of the Assessing Officer is vague and general in nature. He has not referred to any specific finding or any statement having been given by the director of M/s Vandana Laboratories P.Ltd. that it has given accommodation entries to the assessee, i.e., M/s Suncity Projects Pvt.Ltd. He produced before us the copy of the order of ITAT in the case of M/s Vandana Laboratories P.Ltd. for assessment year 2003-04 in which the Revenue had challenged the deletion of various additions. That those additions were to the tune of `70,70,000/- by way of first ground, `56,00,000/- by way of second ground and `41,50,000/- by way of fifth ground. From a reading of the order of the ITAT, it would be clear that M/s Vandana Laboratories P.Ltd. is a genuine company which is carrying on the business and not an entry provider as alleged by the Assessing Officer in the assessment order.
We have carefully considered the submissions of both the sides and have perused the material placed before us. We have already discussed at length the scope of assessment u/s 153A specially when the original assessment was already completed u/s 143(3) while deciding the Revenue’s appeal for assessment year 2004-05. In the light of the above legal position as already discussed by us, let us examine whether in respect of M/s Vandana Laboratories P.Ltd., it can be said that the Revenue has found any incriminating material in the course of search. Admittedly, no incriminating material relating to M/s Vandana Laboratories P.Ltd. was found at the time of search of the assessee’s premises. The details mentioned by the Assessing Officer at page 9 & 10 of his order relating to M/s Vandana Laboratories P.Ltd. are reproduced below for ready reference :-
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“ii. M/s Vandana Laboratories Ltd. The assessee has introduced a sum of Rs.1,27,00,000/- as share application money and share premium in the name of M/s Vandana Laboratories Ltd. The summon sent to the assessee for personal attendance has not been complied with. However, before the close of the proceedings, on 22-2-2010, the company has furnished a copy of balance sheet which is analyzed. The only source of the income of the company in the AY 2006-07 is Rs.2500/- as interest income for which the source is not clear. The total expenditure of the company is Rs.2957/-. Further, in the immediate preceding year in which the share application money has been given the total income of the company is Rs.15347/- as interest on income tax refund and Rs.2861/- as interest on FDR. Against this income, the expenditure of the company is Rs.19078/-. In the expenditure of the company there is neither any salary nor any electric bill nor any establishment expenditure. Only essential expenditure like payment of Auditor Fee is included in the total expenditure. Both the income as well as expenditure component are self explanatory about the financial status of the company and its creditworthiness. Obviously, the company has been used as a conduit to transfer the money.
Further, it has also come to notice that a search u/s 132 was conducted on 15-09-2008 on Best Group of Cases and it came to notice that a large number of companies are providing accommodation entries mainly in the form of share capital and share premium to Best group of companies. The modus operandi of these companies was to accept the cash from the beneficiary and deposit this case in different paper companies. After rotating the amount from different companies, the same is transferred to the beneficiary company in the form of share capital or share application money. The ADIT(Inv) found that the corporate status of these companies is not genuine.
From the detailed finding of the search it came to notice that a large number of private limited companies and firms were providing accommodation entries. The directors of these companies were 5-6 same people who worked in same premises. A number of bank accounts in various banks were opened in the names of these companies. A comprehensive list of such companies from
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whom accommodation entries were obtained was provided by ADIT(Inv) during search and relevant portion of the list is given hereunder:
S.No. Name and Address of the Name of Bank A/c Bank A/c No. company/firm directors details 67. Vandana Goyal Family Trustees : 1. Axis Bank, 223010100074777 Trust; 13/34, WEA, Arya 1. Tarun Goyal Karol Bagh Samaj Road, Karol Bagh 2. Vandana Goyal 68. Vandana Laboratories 1. Rajesh Prasad 1. ABN Amro 751481 Pvt.Ltd.; 13/34, WEA, Arya 2. Jitender Kumar Bank, B.K. Samaj Road, Karol Bagh Road 2. Standard 52205031591 Chartered 69. Venus Insec Pvt.Ltd.; 1. Ritu Saxena 1. Kotak 172200002779 13/34, WEA, Arya Samaj 2. Pramod Kumar Mahindra Bank, Road, Karol Bagh K.G. Marg
From the above, it is also evident that a number of paper companies have been floated to provide accommodation entries and secondly, it is also evident that M/s Vandana Laboratories (P) Ltd. is also one such company.
From the above enquiries, the following facts have come to notice:
(a) The company from whom the assessee has shown huge share premium and share application money is controlled by the Directors who have also stated that a large number of companies operated by them are simply for name sake as they are not carrying out any business activity. There is also an admission that these are paper entities floated for the purpose of providing accommodation entries.
(b) The facts of the present case has much relevance because the case is peculiar as the person who is managing the affairs of these companies has admitted before the Department that he was managing these companies only for the purpose of providing accommodation entries.
(c) The assessee was made aware of the outcome of the investigation of the Department and he was asked to produce Director of these companies so as to examine their creditworthiness but he has failed to discharge his
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onus. The summons issued to these companies at the addresses given by the assessee have been received back with the postal remarks that the company do not exist at the given address. In view of these facts, it cannot be said that the identity and the creditworthiness of the company has been established.”
From paragraph 1 of the order, it is evident that Assessing Officer has made enquiry directly from M/s Vandana Laboratories P.Ltd. by issuing summons to the said party, in response to which, the said company had furnished a copy of the balance sheet. On analysis of this balance sheet, the Assessing Officer found that the company had a meager income and expenditure. In paragraph 2, the Assessing Officer has discussed the search proceedings u/s 132 on 15th September, 2008 at Best group of cases. As per Assessing Officer, during the course of search at Best group of cases, it came to the notice that large number of companies are providing accommodation entries mainly in the form of share capital and share premium to Best group of companies. As per Assessing Officer, the Investigation Wing has provided a comprehensive list of such companies from whom accommodation entries were obtained by Best group of companies and the list included the name of M/s Vandana Laboratories P.Ltd. from whom the assessee had claimed to have received the share application money. However, the Assessing Officer has not mentioned whether the statement of director of M/s Vandana Laboratories P.Ltd. was recorded and if it was recorded, whether any enquiry was made with regard to share application money given by them to M/s Suncity Projects Pvt.Ltd. i.e., the assessee. The alleged report of ADIT, Investigation in the case of Best group of cases has not been produced on record. The statement, if any, of the director of M/s Vandana Laboratories P.Ltd., has also not been produced on record. Therefore, in our opinion, the details mentioned by the Assessing Officer in the assessment order are
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completely vague and on the basis of above, an opinion cannot be formed that M/s Vandana Laboratories P.Ltd. is providing accommodation entries. Moreover, during the course of assessment proceedings, the Assessing Officer issued summons to M/s Vandana Laboratories P.Ltd. which was duly responded by the said company. Therefore, if Assessing Officer had any doubt that M/s Vandana Laboratories P.Ltd. is entry provider, he could have verified the same from the said company.
The assessee has produced before us the order of the ITAT in the case of M/s Vandana Laboratories P.Ltd. for assessment year 2003-04 vide ITA No.1789/Del/2009. It was the Revenue’s appeal before the ITAT and following grounds were raised:-
“1. On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting an addition of Rs.70,70,000/- especially when the genuineness of transaction, creditworthiness and identity of the parties was not established.
On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting an addition of Rs.56 lacs made by the AO on account of unexplained investment u/s 69A of IT Act, 1961 ignoring the fact that the transaction was not supported by any independent evidence.
On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting the addition of Rs.3 lacs made u/s 68 of the Income-tax Act, 1961.
On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting an addition of Rs.51,780/- made by the AO on account of unexplained investment u/s 69A of IT Act.
On the facts and in the circumstances of the case, the ld.CIT(A) has erred in deleting disallowance of Rs.41,50,000/- on account of bad debts ignoring the fact
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and even the amended provisions of Section 36(1)(vii) and 36(2) have not taken away the power of the AO to enquire that the debt has become bad.”
While dealing with ground No.5, the ITAT held as under:-
“20. Apropos Ground No.5 i.e. bad debts, the same is supported by resolution of Board of Directors, the amount has been actually written off in assessees books of accounts which was due from M/s Vertex Drugs as trade debt on account of purchases effected in 1997-98 which have not been disputed. The amount being a trade debt considered as irrecoverable and actually written off, relying on Hon'ble Delhi High Court judgment in the case of Morgan Securities and Credits (P) Ltd. and Autometers (supra) P.Ltd. (supra), we uphold the order of CIT(A) deleting the addition.”
From this order of the ITAT, it is evident that M/s Vandana Laboratories P.Ltd. is a genuine company which is carrying on the business since long because, as per order of the ITAT, M/s Vandana Laboratories P.Ltd. was to receive the sum of `41,50,000/- in respect of a trading transaction between them and M/s Vertex Drugs in the year 1997-98. Thus, M/s Vandana Laboratories P.Ltd. is in the business at least from the year 1997-98. The appeal by the ITAT is decided on 19th February, 2010. Thus, the existence of M/s Vandana Laboratories P.Ltd. and carrying on of the business by it is proved beyond doubt. The allegations made by the Assessing Officer in the assessment order are not supported with any evidence, at least no evidence is confronted to the assessee or brought on record before us. In view of the above, we are of the opinion that even in respect of share application money from M/s Vandana Laboratories P.Ltd., the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable because no incriminating material relating to share application money from M/s
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Vandana Laboratories P.Ltd. was found during the course of search of the assessee’s premises or during the course of post-search investigation in the case of the assessee.
Since, in our opinion, the addition of share application money amounting to `3,79,00,000/- is out of the purview of addition u/s 153A, we do not go into the merits of the addition made by the Assessing Officer and deleted by learned CIT(A). We, respectfully following the decision of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra), hold that in the absence of any incriminating material found during the course of search of assessee’s premises, completed assessment cannot be interfered with. Accordingly, the order of learned CIT(A) is upheld.
ITA No.46/Del/2012 ITA No.46/Del/2012 – Revenue’s appeal ITA No.46/Del/2012 ITA No.46/Del/2012 Revenue’s appeal Revenue’s appeal for AY 2006 Revenue’s appeal for AY 2006 for AY 2006-07 : for AY 2006 07 : 07 :- 07 : 34. The only ground raised in this appeal by the Revenue reads as under:-
“On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.35,00,000/- made by the Assessing Officer on account of issue of bogus share application money.”
The facts of the case are that for the year under consideration, the original return of income was filed on 7th December, 2006 declaring taxable income of `6,19,38,793/- which was accepted u/s 143(1). After the search, notice u/s 153A was issued and in the assessment completed u/s 153A read with Section 143(3), the assessment was completed at `6,54,38,793/-. While making the assessment, the Assessing Officer made the addition of `35,00,000/- in respect of share application money from Churu Trading Co. P.Ltd. The same was deleted by the learned CIT(A). Hence, this appeal by the Revenue.
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At the time of hearing before us, both the parties fairly agreed that the issue involved is identical to the issue in the Revenue’s appeal for assessment year 2004-05 because, in that year also, there was credit in the form of share application money from Churu Trading Company. Therefore, both the parties agreed that their arguments remain the same as were advanced while arguing appeal for assessment year 2004-05.
We have already considered the arguments of both the parties while considering the Revenue’s appeal for assessment year 2004-05. For the detailed discussion therein, we uphold the order of learned CIT(A) and reject the Revenue’s appeal.
ITA No.47/Del/2012 ITA No.47/Del/2012 – Revenue’s appeal for AY 2007 ITA No.47/Del/2012 ITA No.47/Del/2012 Revenue’s appeal for AY 2007 Revenue’s appeal for AY 2007-08 : Revenue’s appeal for AY 2007 08 : 08 :- 08 : 38. The only ground raised in this appeal by the Revenue reads as under:-
“On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.3,25,00,000/- made by the Assessing Officer on account of issue of bogus share application money.”
The facts of the case are that for the year under consideration, the assessee filed the original return of income on 6th November, 2007 declaring net taxable income of `19,58,85,803/-. The same was accepted u/s 143(1). After the search, notice u/s 153A was issued, in response to which, the assessee filed the return of income on 9th March, 2010 declaring the same income i.e., `19,58,85,803/-. Assessment u/s 153A read with Section 14393) was completed by
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making the addition of `3,25,00,000/- in respect of share application money received from the following two parties:-
(i) M/s Dauphin Cables (P) Ltd. : `3,00,00,000/- (ii) M/s Disha Impex (P) Ltd. : `25,00,000/-
Learned CIT(A) had deleted the addition. Hence, this appeal by the Revenue.
At the time of hearing before us, both the parties relied upon their arguments advanced while arguing the Revenue’s appeal for assessment year 2004-05.
We have already dealt with the arguments of both the parties while deciding the Revenue’s appeal for assessment year 2004-05. Let us examine the facts of this year so as to ascertain whether any incriminating material relating to Dauphin Cables (P) Ltd. and Disha Impex (P) Ltd. was found at the time of search at the assessee’s premises. With regard to Dauphin Cables (P) Ltd., the Assessing Officer has discussed the facts from page 10 to 14 of the assessment order. It has been mentioned by the Assessing Officer that a detailed enquiry has been conducted by the Investigation Wing in the case of Dauphin Cables (P) Ltd. in which it was revealed that Dauphin Cables (P) Ltd. has raised money from a number of entities which were not found to be genuine. When DDIT(Investigation) asked Dauphin Cables (P) Ltd. to prove the genuineness and creditworthiness of the persons who have given share application money during the year 2002-03 and 2003-04, the party has submitted a letter dated 13th March, 2009. The Assessing Officer has reproduced such letter on page 13 of the
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assessment order and, for ready reference, the same is reproduced below:-
In this respect, it is humbly submitted that the share were allotted to them against subscriptions made by them by A/c payee cheques and all the above parties are tax payees. Please note that these shares were allotted to them during Financial Years 2002-03 and 2003-04. It is submitted that all the above mentioned subscriptions of shares were genuine transactions. Please note that since these are old transactions, it will not be feasible for the company to produce all the persons to your good office for verification at your end on such short notice.
However, it is submitted that in case the company is not in a position to explain the genuineness of the above transactions, it will include the respective amounts in its income for the relevant assessment years and pay tax on the same. This inclusion of income will be without prejudice to the fact that these amounts represent the genuine transactions and the payment of tax on the same by the company by way of including in the income in the relevant years will be only to buy peace and avoid protracted litigation with the department.
Please note that these were business loss in the company for assessment year 2003-04 and 2004-05, the copies of income tax return and balance sheets of Dauphin Cables Pvt.Ltd. for the year 31.03.2003 & 31.03.2004 are enclosed. It is submitted for the sake of argument that even if the assessee company will offer the above amount of share capital as its income, still no tax shall be payable by the company. This will be clear from the following :
Asstt. Year Business Loss as per Share Capital Net Loss return 2003-04 30,52,451 2,30,000 28,22,451 2004-05 29,00,807 26,00,000 3,00,807 59,53,258 28,30,000 31,23,258
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The above facts mentioned by the Assessing Officer cannot be said to be incriminating material found as a result of post-search enquiry in the case of the assessee because the above investigation is related to the share application money in the hands of Dauphin Cables (P) Ltd. In fact, the surrender of the share application money by Dauphin Cables (P) Ltd. in its hands only proves the genuineness of Dauphin Cables (P) Ltd. In any case, the above details mentioned in the assessment order nowhere indicate any incriminating material found against the receipt of share application money by the assessee from Dauphin Cables (P) Ltd.
In the case of Disha Impex (P) Ltd. also, the Assessing Officer has not pointed out that any incriminating material was found at the time of search in respect of share application money received from Disha Impex (P) Ltd. The Assessing Officer treated the share application money received from Disha Impex (P) Ltd. as unexplained on the ground that summon issued u/s 131A to the company was returned unserved and the assessee did not produce the director of Disha Impex (P) Ltd. Thus, there is no reference to any incriminating material found at the time of search in the assessment order. At the time of hearing before us also, the learned DR was unable to point out any incriminating material found at the time of search in respect of share application money received from Dauphin Cables (P) Ltd. or Disha Impex (P) Ltd. In view of the above, we are of the opinion that the decisions of Hon'ble Jurisdictional High Court in the case of Kabul Chawla (supra) and RRJ Securities Ltd. (supra) would be squarely applicable. Respectfully following the same, we uphold the order of learned CIT(A) on this point.
ITA No.48/Del/2012 – Revenue’s appeal for AY 2008 ITA No.48/Del/2012 Revenue’s appeal for AY 2008-09 : 09 :- ITA No.48/Del/2012 ITA No.48/Del/2012 Revenue’s appeal for AY 2008 Revenue’s appeal for AY 2008 09 : 09 :
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The only ground raised by the Revenue in this appeal reads as under:-
“On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.10,63,00,000/- made by the Assessing Officer on account of issue of bogus share application money.”
The facts of the case are that for the year under consideration, the assessee filed the return of income on 9th March, 2010 declaring taxable income of `40,95,03,401/-. The Assessing Officer completed the assessment u/s 153A read with Section 143(3) by making the addition of `10,63,00,000/- in respect of share application money received from following two parties :-
(i) Churu Trading Co. P.Ltd. : `10,50,00,000/- (ii) Blue Line Motors Pvt.Ltd. : `13,00,000/-
Learned CIT(A) deleted the addition. Hence, this appeal by the Revenue.
At the time of hearing before us, both the parties fairly agreed that for the year under consideration, return of income was filed after the search and, therefore, examination of genuineness of share application money was well within the powers of the Assessing Officer while making the assessment u/s 153A and therefore, whether the assessee has discharged the onus to prove the credit in the form of share application money is to be examined on merits. Learned DR stated that the company has received huge amount of share application money from Churu Trading Co. P.Ltd. year after year beginning from assessment year 2004-05. In this year alone, the
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assessee has received huge sum of `10,50,00,000/- and the total sum received in all the six years under consideration is about `20,00,00,000/- from one party alone i.e., Churu Trading Co. P.Ltd. The Assessing Officer has issued notice u/s 133(6) to Churu Trading Co. P.Ltd. requiring it to furnish copies of income tax return, balance sheet, bank account etc. In response to the notice, the said company has neither furnished the documents nor gave any reply. Thereafter, the Assessing Officer asked the assessee to produce the director of the company i.e., Churu Trading Co. P.Ltd. The assessee has not produced the director of the company. Therefore, the Assessing Officer has rightly concluded that it is a case where the assessee has neither proved the identity of the creditor nor the creditworthiness of the creditor. He further stated that almost similar are the facts with regard to Blue Line Motors Pvt.Ltd. In the said case also, the summon issued u/s 133(1A) was received back and the assessee did not produce the director of the said company. He, therefore, submitted that the Assessing Officer rightly treated the share application money received from Churu Trading Co. P.Ltd. and Blue Line Motors Pvt.Ltd. as unexplained. He, therefore, requested that the order of the CIT(A) should be reversed and that of the Assessing Officer may be restored.
Learned counsel for the assessee, on the other hand, pointed out that during assessment proceedings, vide letter dated 15th December, 2010, the assessee produced the confirmation from Churu Trading Co. P.Ltd. It has also furnished the bank statement of Churu Trading Co. P.Ltd., copy of their income tax return, copy of their audited balance sheet, copy of share application form, memorandum and articles of association of the said company, copy of said company’s details with ROC and list of directors of the company. He also stated that when the Assessing Officer pointed out that the director of Churu Trading Co.
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P.Ltd. has not replied to the summons issued by the Department, the assessee contacted Churu Trading Co. P.Ltd. and thereafter, Churu Trading Co. P.Ltd. had supplied details to the Assessing Officer through Blue Dart. In support of this contention, he produced the delivery certificate from Blue Dart, as per which, an envelope from Zee Entertainment was delivered on 20th December, 2010 at 11.27 am to Shri J.C. Bindra in Jhandewalan Extension, New Delhi. He stated that Churu Trading Co. P.Ltd. is a group company of Zee Entertainment. In support of this contention, he furnished the confirmation from Zee Entertainment affirming that Churu Trading Co. P.Ltd. is one of their group companies. Similar information and evidences were furnished with regard to Blue Line Motors Pvt.Ltd. With these evidences, the assessee has duly discharged the onus of proving the cash credit which lay upon it. In support of this contention, the learned counsel relied upon the following decisions:-
(i) CIT Vs. Rakam Money Matters Pvt.Ltd. – ITA No.778 of 2015 dated 13.10.2015 (Delhi).
(ii) CIT Vs. Vrindavan Farms (P) Limited – ITA No.71/Del/2015 (Delhi).
(iii) CIT Vs. Fair Finvest Ltd. – [2013] 357 ITR 146 (Delhi).
(iv) CIT Vs. Goel Sons Golden Estate P.Ltd. – ITA No.212/2012 (Delhi).
(v) CIT Vs. Gangeshwari Metal Pvt.Ltd. – [2014] 361 ITR 10 (Delhi).
(vi) CIT, Orissa Vs. Orissa Corporation P.Ltd. – [1986] 159 ITR 78 (SC).
We have considered the rival submissions and perused relevant material placed before us. The Assessing Officer, at page 7 paragraph 4.9 of his order, has mentioned “The assessee has filed its reply dated 15-12-2010 alongwith documents stated therein and the same has been duly examined and placed on records of each assessment year”.
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Copy of the letter of the assessee dated 15th December, 2010 addressed to the Assessing Officer reads as under:-
“The DCIT Central Circle-1, New Delhi.
Sub : In the case of M/s Suncity Projects (P) Ltd. Assessment Year : 2008-09 PAN : AABCS8906K.
Sir,
With reference to the discussions held at the time of last hearing and clarifications sought by your goodself regarding share application/share capital received from following companies, we wish to submit as under:
M/s Churu Trading Co.(P) Ltd.
In support of share application money received from M/s Churu Trading Co.(P) Ltd., we have already filed confirmation in the form of confirmed copy of account for financial year 2007-08, copy of their bank statements from where they have made the payment to us indicating source of making payment, copy of their audited annual accounts for financial year 2007-08, copy of share application forms, M/A and proof of filing I.T. return for Assessment Year 2008-09, status report as per ROC site etc. The whole share application money of Rs.10,50,00,000/- was received through account payee cheque only and credited to our bank account. Out of the whole share application money, Rs.1,00,00,000/- was refunded through account payee cheque and balance remains outstanding as at 31.03.2008 & 31.03.2009.
M/s Blue Line Motors (P) Ltd.
In support of share application money received from M/s Blue Line Motors (P) Ltd., we have already filed confirmation in the form of confirmed copy of account for financial year 2007-08, copy of their bank statement from where they have made payment to us indicating source of
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making payment, copy of their audited annual accounts for financial year 2007-08, copy of share application form, M/A and proof of filing I.T. return for assessment year 2008-09, status report as per ROC site etc. The whole share application money of Rs.13,00,000/- was received through account payee cheque only and credited to our bank account. The whole share application money was refunded during the same financial year through account payee cheque and no balance was outstanding as at 31.03.2008.
We are again enclosing herewith copy of all the aforesaid documents relating to aforesaid entities for your ready reference and record.
Thanking you, Yours faithfully, For Suncity Projects Pvt.Ltd., (Authorized Representative) Encl. As above.”
Thus, admittedly, the assessee has filed the confirmation, bank statement, copy of audited annual accounts, copy of share application form, proof of filing of income tax return and status report as per ROC site in respect of both the share applicants. With this factual background, let us consider the cases relied upon by the learned counsel in support of his contention. Learned counsel for the assessee has relied upon the decision of Hon’ble Apex Court in the case of Orissa Corporation P. Ltd. (supra). In the said case, the assessee furnished before the Assessing Officer letters of confirmation and gave the particulars of income tax number of the creditors. The Assessing Officer issued summons u/s 131 to the creditor which were returned unserved with the remark “left”. Therefore, the Assessing Officer made the addition of `1,50,000/- as unexplained cash credit. The Tribunal deleted the addition holding that merely because the assessee could not produce the parties, it did not follow automatically that an adverse inference should be drawn against the assessee.
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When the Revenue took up the matter to Hon'ble Supreme Court, Hon’ble Apex Court held :-
“that in this case the respondent had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under section 131 at the instance of the respondent, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the respondent could not do anything further. In the premises, if the Tribunal came to the conclusion that the respondent had discharged the burden that lay on it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion was based on some evidence on which a conclusion could be arrived at, no question of law as such arose. The High Court was right in refusing to state a case.”
Hon'ble Jurisdictional High Court in the case of Rakam Money Matters Pvt.Ltd. (supra) held as under:-
“13. It is not in dispute that extensive material was produced by the assessee in the present case to prove the identity, genuineness and creditworthiness of the companies who had subscribed to its shares. Among the materials produced were the income tax returns and the PAN card details of the eight companies. Even if the Directors of these companies did not respond to the summons issued by the AO, it was not impossible for the AO to make proper enquiries to ascertain the genuineness of these entities and satisfy himself of their creditworthiness. As pointed out by the CIT(A), the AO failed to make any effort in that direction. He did not take to the logical end the half-hearted attempt at getting the Directors to appear before him. He did not even seek the
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assistance of the AOs of the concerned companies whose ITRs and PAN card copies had been produced.”
In the case of Vrindavan Farms (P) Ltd. (supra), Hon'ble Jurisdictional High Court held as under:-
“3. The ITAT has in the impugned order noticed that in the present case the Revenue has not doubted the identity of the share applicants. The sold basis for the Revenue to doubt their creditworthiness was the low income as reflected in their income tax returns. The entire details of the share applicants were made available to the AO by the assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been rightly commented by the ITAT that without doubting the documents, the AO completed the assessment only on the presumption that low return of income was sufficient to doubt the credit worthiness of the share holders.
The Court is of the view that the assessee by produced sufficient documentation discharged its initial onus of showing the genuineness and creditworthiness of the share applicants. It was incumbent to the AO to have undertaken some inquiry and investigation before coming to a conclusion on the issue of creditworthiness. In para 39 of the decision in Nova Promoters (supra), the Court has taken note of a situation where the complete particulars of the share applicants are furnished to the AO and the AO fails to conduct an inquiry. The Court has observed that in that event no addition can be made in the hands of the assessee under Section 68 of the Act and it will be open to the Revenue to move against the share applicants in accordance with law.
In the facts and circumstances of the present appeals, the Court is satisfied that no substantial question of law arises. The appeals are dismissed.”
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In the case of Goel Sons Golden Estate P. Ltd. (supra), Hon'ble Jurisdictional High Court held as under:-
“We have examined the said contention and find that the assessee during the course of assessment proceedings has filed confirmation letters from the companies, their PAN number, copy of bank statements, affidavits and balance sheet. Thereafter the Assessing Officer had asked the assessee to produce the said Directors/parties. Assessee expressed its inability to produce them. The Assessing Officer did not consequent thereto conduct any inquiry and closed the proceedings. This is a case where the Assessing Officer has failed to conduct necessary inquiry, verification and deal with the matter in depth specially after the affidavit/confirmation along with the bank statements etc. were filed. In case the Assessing Officer had conducted the said enquiries and investigation probably the challenge made by the Revenue would be justified. In the absence of these inquiries and non-verification of the details at the time of assessment proceedings, the factual findings recorded by the Assessing Officer were incomplete and sparse. The impugned order passed cannot be treated and regarded as perverse. The appeal is dismissed as no substantial question of law arises.”
That the above decisions of Hon'ble Jurisdictional High Court and Hon’ble Apex Court would be squarely applicable to the facts of the assessee’s case. The assessee has produced the confirmation of capital contribution by the investor company, income tax details of the investor company, copy of income tax return, bank statement and balance sheet of the investor company and present status of the investor company from the ROC website. From the balance sheet of Churu Trading Co. P.Ltd. which is placed in the assessee’s paper book, we find that the share capital of the company including reserves and surplus as on 31st March, 2008 is `392.17 crores. As against the huge share capital of `392 crores, the total share application money given to the assessee company in all the years taken together is less than `20
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crores. M/s Churu Trading Co. P.Ltd. is a group concern of Zee Entertainment which is evident from the certificate issued by them affirming that Churu Trading Co. P.Ltd. is a group concern of Zee Entertainment and also affirming the details sent by them to DCIT Shri J.C. Bindra. The confirmation is reproduced below for ready reference:-
“To whomsoever it may concern
This is to certify that on 16-12-2010 we have received documents from M/s Churu Trading Co.Pvt.Ltd., which is one of our Group Company having same office address 135, Continental Building, Dr. A.B. Road, Worli, Mumbai, and the same had been couriered to Mr. JC Bindra, DCIT, Central Circle-1, E-2, ARA Centre, Jhandewalan Ext, New Delhi through Blue Dart on 16-12-2010 vide Receipt No.13070323781. The Blue Dart had issued receipt no.13070323781 in the name of M/s Zee Entertainment, as we have a centralized agreement with the courier company for all our group companies at Continental Building.
The said documents were delivered to Mr. J.C. Bindra, DCIT, Central Circle-1, E-2, ARA Centre, Jhandewalan Ext, New Delhi on 20-12-2010.
For Zee Entertainment Enterprises Ltd.
Authorized Signatory.”
Similar details were furnished by the assessee with regard to Blue Line Motors P. Ltd. As per audited balance sheet of the said company, the share capital of the company including reserves and surplus is `42.78 lakhs while the share application money given by them to the assessee company is `13 lakhs only.
On these facts, the decision of Hon’ble Apex Court as well as Hon'ble Jurisdictional High Court relied upon by the learned counsel would be squarely applicable. Similar to the assessee’s case, in the
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case of Rakam Money Matters Pvt.Ltd. also, the director of the shareholder companies did not respond to the summon issued by the Assessing Officer. However, Hon'ble Jurisdictional High Court held that if the Assessing Officer did not make proper enquiries on the basis of income tax returns and PAN details of share applicant companies, the addition for unexplained credit cannot be sustained. In the case of the assessee, the facts are identical. The assessee produced confirmation, income tax return, balance sheet and bank statement of share applicant companies. The Assessing Officer did not make any effort to examine those evidences produced by the assessee. Therefore, the above decision of Hon'ble Delhi High Court would be squarely applicable.
Similar views are expressed by their Lordships in the case of Vrindavan Farms (P) Ltd. (supra). In the said case also, the assessee produced permanent account numbers, confirmations, bank statement, balance sheet and certificate of incorporation of share applicant companies. The Assessing Officer, without undertaking any investigation on these documents, made addition on the ground that those companies had very low income. Hon'ble Jurisdictional High Court was of the view that by producing sufficient documents, assessee had discharged its initial onus of showing the genuineness and creditworthiness of share applicants. The facts in the case of the assessee are identical, therefore, the above decision of Hon'ble Jurisdictional High Court would be squarely applicable.
In view of the above, respectfully relying upon the decision of Hon’ble Apex Court in the case of Orissa Corporation P.Ltd. (supra), and the decisions of Hon'ble Jurisdictional High Court in the case of Rakam Money Matters Pvt.Ltd. (supra), Vrindavan Farms (P) Ltd.
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(supra) and Goel Sons Golden Estate P. Ltd. (supra), we uphold the order of learned CIT(A) on this point.
ITA No.49/Del/2012 ITA No.49/Del/2012 – Revenue’s appeal for AY 2009 ITA No.49/Del/2012 ITA No.49/Del/2012 Revenue’s appeal for AY 2009 Revenue’s appeal for AY 2009-10 : Revenue’s appeal for AY 2009 10 : 10 :- 10 : 60. The only ground raised in this appeal by the Revenue reads as under:-
“On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs.4,99,00,000/- made by the Assessing Officer on account of issue of bogus share application money.”
At the time of hearing before us, both the parties fairly admitted that all the facts relating to this year are identical to the facts in the Revenue’s appeal for assessment year 2008-09 with the only modification that as against the share capital of `10,63,00,000/- in assessment year 2008-09, this year, the share capital of `4,99,00,000/- was received. Both the parties stated that their arguments advance for assessment year 2008-09 would be squarely applicable.
We have already considered the arguments of both the sides and the legal position in the light of the case law relied upon before us. We find that in this year, the Assessing Officer has made the addition of `4,99,00,000/- in respect of share application money received from following three parties :- (i) Churu Trading Co. Pvt.Ltd. : `2,80,00,000/- (ii) Tashi Delek Gaming Solutions : `2,00,00,000/- (iii) Antriksh Housing P.Ltd. : `19,00,000/-
The facts relating to Churu Trading Co. Pvt.Ltd. have already been discussed by us. With regard to Tashi Delek Gaming Solutions and Antriksh Housing P.Ltd., we find that the assessee vide letter dated
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15th December, 2010 has furnished the confirmation of share capital contribution from the investor company, the bank statement, income tax return and the audited balance sheet of the investor company, and present status of the investor company from ROC website. The Assessing Officer has not accepted the credit of these companies on the ground that the notice u/s 133(6) issued to the investor company remains uncomplied with and the assessee could not produce the director of the said company. Both these issues have already been considered by us while considering the Revenue’s appeal for assessment year 2008-09 and, for the detailed discussion therein, we do not find any justification to interfere with the order of learned CIT(A). The same is sustained. 64. In the result, the appeals of the Revenue for the all the years are dismissed and the appeal of the assessee for assessment year 2004-05 is allowed. Decision pronounced in the open Court on 21.03.2016.
Sd/- Sd/- (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG) (CHANDRA MOHAN GARG (CHANDRA MOHAN GARG (G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL) G.D. AGRAWAL JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT
VK.