M/S TJR PROPERTIES PVT. LTD.,CHANDIGARH vs. ACIT, CC-2, CHANDIGARH

आदेश/Order

PER A.D.JAIN, VICE PRESIDENT

This is assessee's appeal against the order dated 30.11.2022 of the ld.CIT (A)-3, Gurgaon pertaining to 2016- 17 assessment year.

ITA 738/CHD/2022 A.Y. 2016-17 2

ITA 738/CHD/2022 A.Y. 2016-17 3

grounds :

3.1 The additional Grounds 1 & 2 are legal grounds and

therefore admitted, not requiring any fresh materials to be

gone into.

3.2 At the outset, the Id. Counsel for the Assessee has

stated at the bar that he does not wish to press the

additional grounds. Rejected as not pressed.

adjudication.

conducted on the Assessee company, nor any ‘Panchnama’

was prepared in its name, the provisions of section 153A of

the Income Tax Act, 1961 (in short 'the Act') are not

applicable and so, the assessment completed u/s 153A of the

Act is against the provisions of law. This Ground

corresponds to Ground No. (b) raised by the Assessee before

ITA 738/CHD/2022 A.Y. 2016-17 4

the ld. CIT(A). The Assessing Officer passed the assessment

order dated 30.12.2019 u/s 153A(1)(b) read with

section143(3) of the I.T.Act, making various additions. Before

the ld. CIT(A), the Assessee raised this issue by way of

Ground No. (b).

observed, inter alia, that a letter dated 7.9.2022 had been

sent to the A.O., requiring him to furnish details of the

warrant executed / ‘Panchnama’ prepared,’ on the basis of

which, proceedings u/s 153A of the Act were initiated; that

in response, the A.O. had furnished the copy of the warrant

which was duly executed in the name of the Assessee on

6.2.2018, in respect of the premises situated at SCO 80-81,

4th Floor, Sector 17-C, Chandigarh; that the said warrant

was found containing the name of the Assessee; that

accordingly, it was found that the warrant of authentication

u/s 132(1) of the Act had been executed in the name of the

Assessee; and that, therefore, the A.O. was justified in

initiating assessment proceedings u/s 153A of the Act.

contended that neither any search was conducted on the

Assessee company, nor any ‘Panchnama’ was prepared in its

ITA 738/CHD/2022 A.Y. 2016-17 5

name; that the Assessee company filed an application under

the RTI Act, bearing Registration No. CCITC/R/E/20/0001

dated 7.1.2020, seeking information with regard to copy of

last warrant, a copy whereof has been placed at Assessee’s

Paper Book (‘ABP’),pages 346-350. It has been contended

that the said application of the Assessee was transferred

(APB 351-352) to the DGIT, ITO office of PCIT (Investigation),

Ludhiana and the DCIT, Central Circle-2, Chandigarh (APB

354-356) and finally to the DCIT, Central Circle-2, Mohali

(APB 357); that none of the Income Tax Authorities provided

the Assessee company with the copy of the said warrant; that

the ACIT, Central Circle-2, Chandigarh vide order (APB 360-

361), dated 5.2.2.020, passed u/s 7(5) of the RTI Act, denied

the Assessee company with a copy of the search warrant.

the Act was completed against the provisions of the law, as

neither any search u/s 132 was conducted on the Assessee

company, nor any ‘Panchnama’ was prepared in its name;

that though the Assessee specifically requested the

Assessing Officer to provide it with a copy of the search

warrant in the name of the Assessee company, no such

search warrant was provided to the Assessee company; that

ITA 738/CHD/2022 A.Y. 2016-17 6

neither the name of the company was mentioned in the

‘Panchnama’; nor a copy of the search warrant was provided

to the Assessee company, despite repeated requests. It has

been contended that the search was conducted at the

residential premises of the Assessee company, namely Shri

Tarloki Nath Singla and Shri Jagdish Rail Gupta in their

individual capacity; that simultaneously, search was also

conducted in the business premises at M/s Kansal Singla

and Associates, Chandigarh, at SCO 80-81, 4th Floor, Sector

17-C, Chandigarh, which is also the registered address of the

Assessee company; that during the search of M/s Kansal

Singla and Associates, regular books of account along

withbank details of the company were found; that one of the

directors of the company, Shri T.N.Singla, who is also a

partner in M/s Kansal Singla and Associates, was present at

the time of search, but his signatures were not taken on the

‘Panchnama’ prepared in the name of M/s Kansal Singla and

Associates; that on the request of the Assessee company, the

ld. CIT(A), vide letter dated 7.9.2022, directed the A.O. to

furnish a copy of the search warrant / ‘Panchnama’

prepared, on the basis of which, the assessment u/s 153A

had been completed in the case of the Assessee company;

ITA 738/CHD/2022 A.Y. 2016-17 7

that the ld CIT(A), in the impugned order, has similarly

mentioned that the “Assessing Officer furnished the copy of

the warrant which was duly executed in the name of the

appellant on 16.2.2018 in respect of the premises situated at

SCO 80-81, 4th Floor, Sector 17-C, Chandigarh. The said

warrant was found containing the name of the appellant”;

that the ld. CIT(A), by simply observing so, agreed with the

action of the Assessing Officer and held that the Assessing

Officer was justified in initiating assessment proceedings u/s

153A of the Act; that the ld. CIT(A) did not provide the

Assessee with the copy of the warrant, nor reproduced the

same in the order; that since none of the Income Tax

Authorities provided the Assessee with the copy of the search

warrant, the Assessee company was suspicious that its name

was not mentioned in the search warrant.

original search warrant from the Department, which was

produced. The name of the Assessee company was

foundmentioned in the search warrant. It is seen that a copy

of the ‘Panchnama’ has been placed at APB 519-522. At APB

519, at item A, it is mentioned: ‘Warrant in the case: M/s

Kansal Singla and associates’; at item (B), it has been stated

ITA 738/CHD/2022 A.Y. 2016-17 8

that: ‘Warrant to search (Details and Ownership of place of

search): M/s Kansal Singla and Associates SCO 80-81, 4th

Floor, Sector 21C, Chandigarh. So, the name of the Assessee

Company, is not mentioned in this ‘Panchnama’. Also, this

‘Panchnama’ does not bear the signature of Shri T.N.

Singla,Director of the Assessee Company, who is stated to

have been present at the place of search at the time of the

search.

Department, as contained in the oral arguments addressed

by the ld. CIT (DR) and the written submissions dated

5.6.2023 are that providing of the copy of the warrant is not

a right of the searched persons; that u/s 96 of the CrPC read

with section 76 of the Evidence Act, a certified copy of a

search warrant could be obtained on payment of legal fee.

Reliance has been placed on the decision of the Hon'ble

Delhi High Court in the case of ‘MDLR’, 361 ITR 405

(Delhi), wherein, it has been held in para 24, that it will be

salutary and proper that a copy of the search warrant be

furnished to the occupant or the person searched; and that

this would curtail any allegation of interpolation, addition of

names, etc. On the issue as to whether it is necessary to

ITA 738/CHD/2022 A.Y. 2016-17 9

have the names of the person searched in the ‘Panchnama’,

the ld. DR has sought to place reliance on ‘MDLR’ (supra),

wherein, the Hon'ble Delhi High Court has held that since

the 22 parties whose names were not mentioned, did not

object to the order u/s 153A in the petition u/s 264

pursuant to the assessment order, such objection was not

justified in the writ petition filed; that the assessment order

under section 153A cannot and should not be permitted to

become a matter of writ petition as the First Appellate

Forum; and that the First Appellate Statutory Authority

could deal statutorily with the questions and issues raised in

the writ petition the jurisdiction of the First Appellate

Authority having not been invoked with the appeals preferred

by the writ petitioners.

main person on the search warrant, the ld. CIT (DR) has

contended that there is no re-equipment of service of warrant

on the main person, who is usually occupied at other

premises, that the search warrant is required to be served on

the witnesses.

been mentioned in the search warrant, which was produced

ITA 738/CHD/2022 A.Y. 2016-17 10

in the original by the Department before us. Therefore, this

puts this entire controversy at rest and the Assessee’s

objection in this regard is found to be unjustified and it is,

accordingly, rejected, while rejecting Ground No.2.

these grounds stand effectively decided by us in the

preceding paragraphs, where we have found that the Search

Warrant did contain the name of the assessee company,

therefore, the grievance of the assessee by way of Ground

Nos. 3 & 4 does not contain any merit and, accordingly,

Ground Nos. 3 & 4 are rejected.

based on any incriminating material found during the

search. In this regard, the Id. CIT(A) has held that the

Assessing Officer was having jurisdiction to assess the

income of the Assessee on the basis of the material available

at the time of the assessment and he was not to restrict the

additions subject to the incriminating material found during

the search. For holding so, the Id. CIT(A) has placed reliance

on the decision of the Hon'ble Kerala High Court in the case

of "CIT vs. KPUmmer", (citation not given); the decision of

ITA 738/CHD/2022 A.Y. 2016-17 11

the Hon'ble Allahabad High Court in the case of 'Rajkumar

Arora', 367 ITR 517 (Allahabad); the decision of the Hon'ble

Kerala High Court in the case of 'EN Gopakumar vs. CIT',

(2016) 75 taxman.com 215 and the decision of the Hon'ble

Allahabad High Court in the case of 'CIT vs.Kesarvani Zarda

Bhandar', ITA No.270/2014. The Id. Counsel for the

Assessee, on this issue, has contended that the A.O. issued

notice u/s 153A of the Act on 09.03.2019, against which, the

company filed return and challenged the initiation of

proceedings u/s 153A vide letter dated 03.05.2019 (APB-1);

and that the additions made by the Assessing Officer are not

emanating from the search proceedings, as no incriminating

material or evidence was found during the course of the

alleged search related to the Assessee company for the year

under consideration. Reliance in this regard is placed on the

order of the Hon'ble Apex Court wherein, the SLP filed by the

Department in the cases of 'Meeta Gutgutia, 96 taxmann.com

468/257 Taxman 441 (SC) and 'Kabul Chawla' were

dismissed by the Hon'ble Apex Court. The relevant portion is

re-produced below

"Recently, Hon'ble ITAT Delhi in ‘Alankar Saphire Developers v. Dy. CIT’, [2020] 116 taxmann.com

ITA 738/CHD/2022 A.Y. 2016-17 12

389/184 ITD 847 (Delhi -Trib.) decided the issue that if no incriminating material is found in the search, no addition can be made u/s 153A. During the course of hearing in this case the assessee relied on the decision of Hon'ble Delhi High Court in ‘CIT v. Kabul Chawla', [2015] 61 taxmann.com 412/234 Taxman 300/[2016] 380 ITR 573 (Delhi) and ‘Pr. CIT v. Meeta Gutgutia’, [2017] 82 taxmann.com 287/248 Taxman 384/395 ITR 526(Delhi). On the basis of arguments of the parties the Tribunal noted that SLP filed by the Department in the case of ‘Kabul Chawla' (Supra) was dismissed by the Hon'ble Apex Court for low tax effect and SLP filed before the Supreme Court in the case of ‘Meeta Gutgutia’, (supra) was dismissed by the Hon'ble Supreme Court in ‘Pr. CIT v.Meeta Gutgutia’,[2018] 96 taxmann.com 468/257 Taxman 441 (SC) by observing that ‘We do not find any merit in this petition’ . The Department submitted that SLP on the similar issue has been admitted by the Hon'ble Apex Court in ‘M/s Apar industries’ (Citation not provided). The Tribunal however held that once the SLP is not admitted, the decisions given by the High Court in the case of ‘Kabul Chawla’ and ‘Meeta Gutgutia’ became final and binding."

14.1 The Id. Counsel for the Assessee has contended that

therefore, the addition made by the Assessing Officer cannot

be sustained in the present case in the order passed under

ITA 738/CHD/2022 A.Y. 2016-17 13

section 153A of the Act, in the absence of any incriminating

material found during the course of search action, where

there was no pending assessment which could be said to

have abated on the date of search.

14.2 Reliance has been placed on the judgment of the

Hon'ble Apex Court in the case of 'PCIT vs M/s Abhisar

Buildwell P. Ltd.', CA No. 6580, dated 24.04.2023, wherein,

the Hon'ble court held that "in case no incriminating

material is unearthed during the search, the AO cannot

assess or reassess taking into consideration the other

material in respect of completed assessments/unabated

assessments. Meaning thereby, in respect of

completed/unabated assessments, no addition can be made

by the AO in absence of any incriminating material found

during the course of search under Section 132 or requisition

under Section 132A of the Act, 1961.”

14.3 Reliance has further been placed on the judgement of

the Hon'ble High Court of Bombay, in 'Pr. CIT Vs. Sandeep

Agarwal (HUF)', dated 09/10/2023, wherein, it was held that

- "We dismiss the appeal, holding that the only issue which

arises for determination will have to be answered against the

ITA 738/CHD/2022 A.Y. 2016-17 14

Revenue and favouring the Assessee given the decisions of

the Hon'ble Supreme Court in 'Abhisar Buildwell (P.) Ltd.',

(supra) and 'U.K. Paints (Overseas)', (supra). The

clarification issued in both these judgments is, however,

issued in these matters as well in the context of

reassessment proceedings under Sections 147 and 148 of the

IT Act. However, as noted above, all contentions of all parties

are kept open in this context.

14.4 It has been contended that the Assessing Officer has

wrongly made addition u/s 153A(l)(b) r.w.s. 143(3) of the Act

on the direction of the third party without having any

incriminating material on record, as no incriminating

material/document was unearthed by the Department during

the search proceeding. Hence, assessment u/s 153A(l)(b)

r.w.s. 143(3) of the Income Tax Act, 1961 has been wrongly

made, against the provisions of the law.

14.5 The ld. DR has not been able to rebut the above

position.

14.6 The ground-wise submissions and material of both

the parties qua all the additions made have been considered

in extensor while dealing with Ground Nos. 6 to 11, infra. At

ITA 738/CHD/2022 A.Y. 2016-17 15

the same time, in view of the above-referred legal position, as

settled by ‘Abhisar Buildwell’ (supra), Ground No. 5 is

accepted.

conducted on the Assessee company, nor any ‘Panchnama’

was prepared in its name, the provisions of section 153A of

the Income Tax Act, 1961 (in short 'the Act') are not

applicable and so, the assessment completed u/s 153A of the

Act is against the provisions of law. This Ground

corresponds to Ground No. (b) raised by the Assessee before

the ld. CIT(A). The Assessing Officer passed the assessment

order dated 30.12.2019 u/s 153A(1)(b) read with

section143(3) of the I.T.Act, making various additions. Before

the ld. CIT(A), the Assessee raised this issue by way of

Ground No. (b).

15.1 The ld. CIT(A), in para 10 of the impugned order, has

observed, inter alia, that a letter dated 7.9.2022 had been

sent to the A.O., requiring him to furnish details of the

warrant executed / ‘Panchnama’ prepared,’ on the basis of

which, proceedings u/s 153A of the Act were initiated; that

in response, the A.O. had furnished the copy of the warrant

ITA 738/CHD/2022 A.Y. 2016-17 16

which was duly executed in the name of the Assessee on

6.2.2018, in respect of the premises situated at SCO 80-81,

4th Floor, Sector 17-C, Chandigarh; that the said warrant

was found containing the name of the Assessee; that

accordingly, it was found that the warrant of authentication

u/s 132(1) of the Act had been executed in the name of the

Assessee; and that, therefore, the A.O. was justified in

initiating assessment proceedings u/s 153A of the Act.

15.2 Before us, on behalf of the Assessee, it has been

contended that neither any search was conducted on the

Assessee company, nor any ‘Panchnama’ was prepared in its

name; that the Assessee company filed an application under

the RTI Act, bearing Registration No. CCITC/R/E/20/0001

dated 7.1.2020, seeking information with regard to copy of

last warrant, a copy whereof has been placed at Assessee’s

Paper Book (‘ABP’),pages 346-350. It has been contended

that the said application of the Assessee was transferred

(APB 351-352) to the DGIT, ITO office of PCIT (Investigation),

Ludhiana and the DCIT, Central Circle-2, Chandigarh (APB

354-356) and finally to the DCIT, Central Circle-2, Mohali

(APB 357); that none of the Income Tax Authorities provided

the Assessee company with the copy of the said warrant; that

ITA 738/CHD/2022 A.Y. 2016-17 17

the ACIT, Central Circle-2, Chandigarh vide order (APB 360-

361), dated 5.2.2.020, passed u/s 7(5) of the RTI Act, denied

the Assessee company with a copy of the search warrant.

the Act was completed against the provisions of the law, as

neither any search u/s 132 was conducted on the Assessee

company, nor any ‘Panchnama’ was prepared in its name;

that though the Assessee specifically requested the

Assessing Officer to provide it with a copy of the search

warrant in the name of the Assessee company, no such

search warrant was provided to the Assessee company; that

neither the name of the company was mentioned in the

‘Panchnama’; nor a copy of the search warrant was provided

to the Assessee company, despite repeated requests. It has

been contended that the search was conducted at the

residential premises of the Assessee company, namely Shri

Tarloki Nath Singla and Shri Jagdish Rail Gupta in their

individual capacity; that simultaneously, search was also

conducted in the business premises at M/s Kansal Singla

and Associates, Chandigarh, at SCO 80-81, 4th Floor, Sector

17-C, Chandigarh, which is also the registered address of the

Assessee company; that during the search of M/s Kansal

ITA 738/CHD/2022 A.Y. 2016-17 18

Singla and Associates, regular books of account along

withbank details of the company were found; that one of the

directors of the company, Shri T.N.Singla, who is also a

partner in M/s Kansal Singla and Associates, was present at

the time of search, but his signatures were not taken on the

‘Panchnama’ prepared in the name of M/s Kansal Singla and

Associates; that on the request of the Assessee company, the

ld. CIT(A), vide letter dated 7.9.2022, directed the A.O. to

furnish a copy of the search warrant / ‘Panchnama’

prepared,on the basis of which, the assessment u/s 153A

had been completed in the case of the Assessee company;

that the ld CIT(A), in the impugned order, has similarly

mentioned that the “Assessing Officer furnished the copy of

the warrant which was duly executed in the name of the

appellant on 16.2.2018 in respect of the premises situated at

SCO 80-81, 4th Floor, Sector 17-C, Chandigarh. The said

warrant was found containing the name of the appellant”;

that the ld. CIT(A), by simply observing so, agreed with the

action of the Assessing Officer and held that the Assessing

Officer was justified in initiating assessment proceedings u/s

153A of the Act; that the ld. CIT(A) did not provide the

Assessee with the copy of the warrant, nor reproduced the

ITA 738/CHD/2022 A.Y. 2016-17 19

same in the order; that since none of the Income Tax

Authorities provided the Assessee with the copy of the search

warrant, the Assessee company was suspicious that its name

was not mentioned in the search warrant.

original search warrant from the Department, which was

produced. The name of the Assessee company was

foundmentioned in the search warrant. It is seen that a copy

of the ‘Panchnama’ has been placed at APB 519-522. At APB

519, at item A, it is mentioned: ‘Warrant in the case: M/s

Kansal Singla and associates’; at item (B), it has been stated

that: ‘Warrant to search (Details and Ownership of place of

search): M/s Kansal Singla and Associates SCO 80-81, 4th

Floor, Sector 21C, Chandigarh. So, the name of the Assessee

Company, is not mentioned in this ‘Panchnama’. Also, this

‘Panchnama’ does not bear the signature of Shri T.N.

Singla,Director of the Assessee Company, who is stated to

have been present at the place of search at the time of the

search.

Department, as contained in the oral arguments addressed

by the ld. CIT (DR) and the written submissions dated

ITA 738/CHD/2022 A.Y. 2016-17 20

5.6.2023 are that providing of the copy of the warrant is not

a right of the searched persons; that u/s 96 of the CrPC read

with section 76 of the Evidence Act, a certified copy of a

search warrant could be obtained on payment of legal fee.

Reliance has been placed on the decision of the Hon'ble

Delhi High Court in the case of ‘MDLR’, 361 ITR 405

(Delhi), wherein, it has been held in para 24, that it will be

salutary and proper that a copy of the search warrant be

furnished to the occupant or the person searched; and that

this would curtail any allegation of interpolation, addition of

names, etc. On the issue as to whether it is necessary to

have the names of the person searched in the ‘Panchnama’,

the ld. DR has sought to place reliance on ‘MDLR’ (supra),

wherein, the Hon'ble Delhi High Court has held that since

the 22 parties whose names were not mentioned, did not

object to the order u/s 153A in the petition u/s 264

pursuant to the assessment order, such objection was not

justified in the writ petition filed; that the assessment order

under section 153A cannot and should not be permitted to

become a matter of writ petition as the First Appellate

Forum; and that the First Appellate Statutory Authority

could deal statutorily with the questions and issues raised in

ITA 738/CHD/2022 A.Y. 2016-17 21

the writ petition the jurisdiction of the First Appellate

Authority having not been invoked with the appeals preferred

by the writ petitioners.

main person on the search warrant, the ld. CIT (DR) has

contended that there is no re-equipment of service of warrant

on the main person, who is usually occupied at other

premises, that the search warrant is required to be served on

the witnesses.

been mentioned in the search warrant, which was produced

in the original by the Department before us. Therefore, this

puts this entire controversy at rest and the Assessee’s

objection in this regard is found to be unjustified and it is,

accordingly, rejected, while rejecting Ground Nos.6 & 7.

the Income Tax Act and the said amount was already

declared as income in the Profit & Loss Account during the

year.

AO Observation - Page 10-11 of AO Order

ITA 738/CHD/2022 A.Y. 2016-17 22

21.1 AO made addition of all the credit entries in bank of

Rs. 1,04,41,412/-without considering each credit separately

on merit and on the plea that purpose and utilization of

funds not explained by assessee. The AO made addition on

third party dictate when AO was fully satisfied with the

genuinity and creditworthiness of the lender. The AO in the

assessment order has wrongly made addition of

Rs.1,04,41,412/- including Rs.4,50,000/- received from

GenX Abode and cash deposit amounting to Rs. 16,00,000/-

on the plea that the assessee could not explain the purpose

and utilization of funds without mentioning any deficiency

on the part of assessee to prove the sources or genuinity of

funds and also did not mention that the assessee even

submitted documents to prove the genuinity and

creditworthiness of the lenders during the assessment

proceedings in his assessment order.

CIT Observation - Page 100 (point 3) of CIT Order

21.2 CIT(A) confirmed addition of Rs. 4,50,000/- received

from GenX Abode Private Limited by mentioning that - "the

assessee was not able to establish genuineness and

creditworthiness as it has failed to submit any document to

support this transaction."

ITA 738/CHD/2022 A.Y. 2016-17 23

21.3 The CIT(A) has himself reproduced the submission of

the appellant company dated 21.03.2020 on page 58, 90, 99

and 119 of CIT order, wherein the appellant company clearly

mentions the loans and advances received from Gen Abode

Private Limited to be squared up loans as the same were

received on 28.08.2015 and repaid on 09.09.2015, i.e.,

within the same year. The appellant company submitted copy

of account of M/s Gen X Abode in the books of the company

to substantiate the claim which was neither considered as

documentary evidence by the CIT(A) not mentioned in its

observation while confirming the addition.

21.4 The assessee company submitted the completed reply

before the CIT(A) in 2020, and it took the CIT(A) more than 2

years to realize that the assessee failed to submit some of

the documentary evidences to substantiate its claim of

transaction with M/s Gen X Abode.

21.5 The CIT(A) never raised any query nor issued any

show-cause notice in this regard and suddenly by taking a

plea of non submission of documents, confirmed the addition

made by the AO without even asking the assessee company

to submit any other documentary evidence.

ITA 738/CHD/2022 A.Y. 2016-17 24

Documents submitted before ITAT vide reply dated

21.12.2019 (Paper book page 43-51 and 310-311).

were neither challenged nor disputed by the department in

the appeal. Hence, any receipt already shown as income in

the Profit and Loss Account cannot be added u/s 68 of the

Act, without any specific reasons or evidence.

ITA 738/CHD/2022 A.Y. 2016-17 25

22.1 The assessee company received Rs. 4,50,000/- from

M/s Gen X Abode on 28.08.2015 and the same was re-paid

to the lender on 09.09.215. (Copy of account of M/s Gen X

Abode Private Limited in the books of the company was

provided to the Id. AO as well as to the CIT(A)). The assessee

company received Rs. 4,50,000/- from Gen X Abode Private

Limited wrongly though it's sister concern of Motia

Construction Limited. The money was returned back

immediately on 09.09.2015 and thereafter Rs.4,50,000/- was

received from Motia on 21-9-2015 Gen X Abode an Motia

Construction Ltd are same group companies. Commission

was to be paid by Motia Construction Ltd (sister concern) but

wrongly issued from Gen X Abode. (ITR of Gen X for AY 216-

17 paperbook Page 310, 311)

22.2 Since the CIT(A) confirmed the addition without giving

the assessee any opportunity to submit documents, therefore

the assessee company has now submitted all the documents

along with copy of voucher, copy of accounts of assessee

company in the books of lender ad copy of ITR-V as

additional evidence to substantiate its claim of the credits

being genuine. The submission of said documents are neither

challenged nor disputed during the hearing by the

ITA 738/CHD/2022 A.Y. 2016-17 26

department. The AR has informed that the said loans were

repaid during the year itself through banking channels.

Further, if the AO or CIT(A) were not satisfied with the

genuineness of the transaction with the lender company,

they could have initiated action under Sections 133(6) or 131

of the Act for further investigation. However, it is noteworthy

that neither the AO nor the CIT(A) extended any such notice

to the lender for additional inquiries. Instead, an addition of

Rs. 4,50,000/- was made based on the directive of a third

party.

22.3 The documents are submitted by the company in

paperbook to prove the identity and sources of the said firm,

and the addition of Rs. 4,50,000/-confirmed by CIT(A) is to

be deleted.

Act and the said amount was already declared as income in

the Profit & Loss Account during the year includes addition

of Rs. 16,00,000/- on account of cash deposits made by the

assessee company.

AO Observation - Page 10-11 of AO Order

Rs. 1,04,41,412/-without considering each credit separately

ITA 738/CHD/2022 A.Y. 2016-17 27

on merit and on the plea that purpose and utilization of

funds not explained by assessee.

24.1 The AO made addition on third party dictate when AO

was fully satisfies with the genuinity and creditworthiness of

the lender. The AO in the assessment order has wrongly

made addition of Rs. 1,04,41,412/- including Rs. 4,50,000/-

received from Gen X Abode and cash deposit amounting to

Rs. 16,00,000/- on the plea that the assessee could not

explain the purpose and utilization of funds without

mentioning any deficiency on the part of assessee to prove

the sources or genuinity of funds and also did not mention

that the assessee even submitted documents to prove the

genuinity and creditworthiness of the lenders during the

assessment proceedings in his assessment order.

CIT Observation - Page 101 (point 5) of CIT Order

account of cash deposit made by the assessee company by

mentioning that - "The cash deposits were explained as made

on account of income generated during the year under

consideration which was duly reflected in P&L account.

However, no evidence/details giving the particulars of person

from whom such cash was received, nature of transaction

ITA 738/CHD/2022 A.Y. 2016-17 28

with them have been furnished. Therefore, cash source

deposits and of Rs.l6,00,000/-remain unexplained."

25.1 The assessee company submitted copy of income

account along with copy of cash account, bank account

statement, profit and loss account and copy of expense

account in the books of the company for AY 2016-17 before

the CIT(A) which were not considered by the CIT(A) before

confirming the addition.

25.2 While confirming the addition on page 101 of CIT(A)

Order, the CIT(A) has wrongly mentioned that the assessee

company has deposited Rs. 4,50,000/-each 08.05.2015,

21.09.2015 and 25.03.2015. The amount credited on

08.05.2015 and 21.09.2015 is the amount transferred from

bank account of the company (Bank of Maharashtra 5369) on

which Rs. 50,000/- is TDS Receivable. The CIT has wrongly

taken a plea that the assessee company has deposited cash

amounting to Rs.4,50,000/- on 25.03.2015 as date

mentioned by the CIT(A) falls in the purview of AY 2015-16

and not AY 2016-17. Hence, the CIT(A) was wrong in

confirming the addition on wrong facts.

ITA 738/CHD/2022 A.Y. 2016-17 29

page 46) it is clearly evident that the assessee made total

cash deposit of Rs. 5,50,000/- on the following dates :-

09.04.2015 Rs. 2,00,000/- 08.10.2015 Rs. 1,00,000/- 19.10.2015 Rs.1,00,000/- 16.12.2015 Rs. 1,00,000/- 29.12.2015 Rs.50,000/- The above cash deposits tally with the deposits in the copy of

cash account (paperbook page 12).

26.1 As per the Income Account on paperbook page 46, the

assessee company has Total Receipt of Rs. 15,50,000/-, after

deduction expenses of Rs. 1,00,000/- and an amount f Rs.

5,00,000/- as cheque issued but not presented for payment,

the company has declared income of Rs. 9,50,000/-in it's

P/L Account on Page 7 of Paperbook.

Documents submitted before ITAT vide reply dated

21.12.2019 (Paper book page 43-51 and 310-311)- 1. Profit & Loss A/c of M/s TJR Properties Private Limited as on 31.03.2016 (Paperbook Page 7) 2. Cash account of M/s TJR Properties Private Limited as on 31.03.2016. (Paperbook Page 12) 3. Bank Account statements of M/s TJR Properties Private Limited for A.Y. 2016-17 (Paperbook Page 15-19) 4. Copy of account of Income in the books of M/s TJR Properties Private Limited for A.Y.2015-16 (Paperbook Page 45) 5. Copy of account of Income in the JDOoks of M/s TJR Properties Private Limited for A.Y.2016-17 (Paperbook Page 46)

ITA 738/CHD/2022 A.Y. 2016-17 30

26.2 The AO in para 12.1 of the order contends that the

company could not prove the purpose and utilization of

funds towards business activities to substantiate the

creditworthiness of Rs. 1,04,41,410/- as the company is a

shell company and existed only on paper.

26.3 The assessee contends that the company submitted

the cashflow statements, explanation of each debit and

credit entry in the bank account of the Appellant Company

along with the Balance Sheet, Affidavit, confirmations, bank

statements, ITRs, Balance sheets] copy of accounts etc. but

instead of considering each credit entry separately, the AO

with a vitiated mind and on the dictate of third party, made

additions of all the credit entries in the bank account of the

Appellant Company without considering the nature, source,

credibility and genuinity of each credit transaction received

in the bank account of the Appellant Company during the

year.

company and sources of credit entries in bank account, sent

a detailed note on the comparison of appellant Company with

ITA 738/CHD/2022 A.Y. 2016-17 31

shell companies and explanation of the credit entries as

mentioned in points above, (deviation note) to the Deputy

Director of Investigation (ADIT), Mohali on 26.12.2019 vide

letter (deviation note) note no. 1733. Dated 24.12.2019 at

the fag end of assessment proceedings being satisfied by the

fact that the sources of the transactions as per evidences /

documents submitted and regular books of accounts of the

appellant company stood explained by leading cogent and

reliable evidence. However, the ADIT(lnvestigation), Mohali

was not authorized but she acted without any jurisdiction

and without application of mind and rejected the deviation

note in less than 12 hours. It is pertinent to mention that

the ADIT (Investigation), Mohali rejected the deviation note

sent with detailed replies and evidences in less than 12

hours and observed that the appellant company is a shell

company. Thus, the ADIT(lnvestigation), Mohali exceeded her

jurisdiction knowingly and issued dictates based on

Appraisal Report. The ADIT, Investigation, Mohali vide letter

no. 1763 dated 27.12.2019 addressed to the Learned

Assessing Officer rejected the proposal/deviation note for not

proposing the additions despite the fact that ample evidence

both reliable and cogent had been produced by the appellant

ITA 738/CHD/2022 A.Y. 2016-17 32

company calling for no addition at all and still proceeded to

dictate the Assessing Officer to make additions by assigning

flimsy reasons as if the ADIT was an assessing authority;

and still further the ADIT by giving reference to the CBDT

instructions bearing No. FTS/194840/12 dated 20.11.2012

proved beyond a shadow of doubt that she had exceeded her

powers by rejecting the said deviation note.

27.1 The AO acted on the dictate of a third party and on

borrowed satisfaction to declare the appellant company as a

shell company and made addition of all credit entries in the

bank of the appellant company as undisclosed income u/s 68

of the Income Tax Act, 1961 without even issuing any show

cause notice to the appellant company for treating it as a

shell company. Also, the Learned Assessing Officer neither

issued a show cause notice nor mentioned a single word

about shell company in any of the questionnaires sent by

him on 19.08.2019 (page 20-21 of paperbook), 0740.2019

(page 24-27 of paperbook) and 11.12.2019 (page 33-35 of

paperbook).

27.2 The Assessing Officer (AO) erroneously made an

addition, disregarding the comprehensive evidence provided

by the (assessee to substantiate its claim regarding the

ITA 738/CHD/2022 A.Y. 2016-17 33

lenders. It is crucial to note that the company extended

funds in submitted details as identity, sources, bank A/c,

etc of each creditor, and there is no entity, individual or

otherwise, that can be deemed as a sham entity.

Furthermore, all the lenders executed the transfers from

their active and operational bank accounts. Notably, within

the same fiscal year, the assessee company repaid all lenders

except Sh. Baldev Singh and advance received from Dharma

Wires Private Limited was repaid in the subsequent year.

Further, the CIT(A) in his order has mentioned that-

"It was further explained that the AO has used statement of Sh. Jagdish Rai Gupta selectively in parts by drawing wrong inference that M/S TJR was a shell company. It was submitted that M/s TJR Properties was having land which was purchased during F.Y. 2007. 18 for Rs. 1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and after paying stamp duty. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat /apartment and paid TDS of Rs.1,50,000/- @1%. Thus, M/s TJR was having income generating apparatus and was undertaking business activities and was not a shell company.

9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Rai Gupta are the directors/shareholders of the appellant company. Sh. Sahil Singla is the son, Smt. Kiran Singla is the wife and Smt. Sakshi Singla is Daughter In Law ofSh. TN Singla .After taking into consideration the above facts, it is observed that the AO has held in his order the appellant company to be a shell company as merely existing on papers and not carrying out any business activities. After perusing the findings of the AO recorded in the assessment order and the material available on record, it is noted that M/s TJR Properties was having land which was purchased during FY. 2007-18 for Rs.1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and

ITA 738/CHD/2022 A.Y. 2016-17 34

paying stamp duty. The same AO has assessed Long Term Capital Gain in the hands of M/s TJR from the said transaction. It is not the case of the AO that the said land was a Benami asset held in the name of M/s TJR. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during FY. 2016-17 for purchase of a plot to build flat/apartment and paid TDS of Rs.1,50,000/- @1%. Thus, on facts,' it is observed that M/s TJR was having income generating apparatus in past and future years and was undertaking business activities. There is ho definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to\ draw such inference and consequences out of the same as per the^ provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had cred amounting to Rs 1,04,41,410/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs. 1,04,41,410/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisation of such credits The appellant submitted during the appellate proceedings that it had received credits of Rs. 1,04,41,410/- in its bank account maintained with Bank of Maharashtra and furnished documentary evidence in support of identity and creditworthiness of such persons a genuineness of transaction which have been also furnished during the assessment proceedings. The AO was again directed during appellate proceedings vide letter no.295 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of transaction. In the remand report dated 15.07.2022(supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of transactions except by stating that appellant is a shell company and doesn't have any profit generating apparatus. It was further stated that one of the group companies, i. e., M/s Evershine Recreation Pvt Ltd was a shell company from whom the appellant has received credits. However, the AO did not make any further enquiry in respect of credits in the bank account during the remand proceedings and relied upon the facts as discussed in the assessment order.

The appellant has discharged its onus as required u/s 68 of the Act All the above mentioned documents were also furnished before the AO

ITA 738/CHD/2022 A.Y. 2016-17 35

during the assessment proceedings. Although the AO has admitted to have received the said documents during the assessment proceedings yet the same were not taken into account by the AO while making addition. The AO has recorded in his order that the appellant could not explain the purpose and utilisation of such credits. However, the AO failed to take cognisance of the fact that addition u/s 68 of the Act is to be made if the appellant doesn't offer any explanation regarding the source and nature of credits received in the bank account or if the explanation offered is not found satisfactory by the AO. Whereas in this case the appellant has duly furnished its explanation in respect of bank credits received during the year under consideration alongwith necessary documentary evidence. If the AO was not satisfied with the explanation of the AO in respect of source and nature of credits received, he should have recorded such dissatisfaction in the assessment order. However, no adverse finding has been recorded in the assessment order in respect of the documentary evidence furnished by the appellant in support of bank credits. The submissions and documents furnished by the appellant during the appellate proceedings were also forwarded to the AO for remand report. In the remand report also, the AO has not even discussed the documentary evidence furnished by the appellant in support bank credits let alone pointing out any defect in the same. In view of the above discussion and after making independent perusal of documents furnished by the appellant, it is noted that the assessment order is non speaking, mechanical in nature and has been passed without discussing merits of the documents. There is no direct or indirect evidence pointed out by the AO before making such additions. Therefore, after considering the merits of the case, analysis of credits as per the above table and strength of documentary evidence, it is observed that there is no justification in such addition made in the hands of the appellant u/s 68 of the Act Therefore, the addition of Rs.83,91,412/- is hereby deleted."

27.3 The assessee contends that the AO did not make any

adverse findings in the remand report and the entire

investigation / proceedings of the AO revolves around stating

the appellant company as shell company on the dictate of

third party. The AO made addition of all the credit entries in

the bank account of the company amounting to Rs.

1,04,41,412/-/- ignoring all the proofs and documentary

evidences submitted by the assessee during the assessment

ITA 738/CHD/2022 A.Y. 2016-17 36

proceeding. However, same documents were submitted before

the CIT(A) during the appellate proceedings and the CIT(A)

granted relief of Rs. 83,91,412/- to the assessee after

verification of all the documents and confirmed addition of

Rs. 20,50,000/- without asking assessee for any other

evidence or document by CIT(A) during appellate proceeding

continued for three years as no show cause notice was

issued or query was raised by the CIT(A).

Ground No.8 & 9 is found to be justified and it is accepted

as such. The addition of Rs.20,50,000/- is, accordingly,

deleted.

Rs.4,83,429 on account of depreciation of car

AO Observation - Page 10-11 of AO Order

4,83,429/- claimed by the assessee in its return without

discussing the same in order.

30.1 Ground No. 10 states that the CIT(A) has wrongly

upheld the disallowance of Rs.4,83,429/- against loss

claimed in the return of income. The AO disallowed the

ITA 738/CHD/2022 A.Y. 2016-17 37

depreciation on vehicle to the extent of Rs.4,83,429/-without

making any discussion in the assessment order. The CIT(A)

too did not make any discussion in the impugned order while

upholding the disallowance.

30.2 The company submitted the following documents has

been placed before us, as also furnished before both income

tax authorities-

remained that the car was registered in the name of the

assessee company and was used for business purposes only.

The copy of the Registration Certificate has been filed in

support.

30.4 The documents placed on file by the assessee have not

been disputed or challenged by the Department. The Id.

CIT(A), though, in para 11 of the impugned order, has

observed that the assessee did not furnish any documentary

evidence in support of the loss claimed.

ITA 738/CHD/2022 A.Y. 2016-17 38

30.5 It is seen that as per the Computation of Income

(paperbook page 4), loss was of Rs. 2,40,680/-, whereas as

per the Profit &'Loss Account (paperbook page 7), the loss

was of Rs. 4,83,429/-.

30.6 The contention of the Id. Counsel for the assessee has

been that the AO wrongly observed that bills and vouchers

and books of account were not produced by the assessee and

that the AO wrongly disallowed the loss at Rs. 4,83,429/-

asper the Profit & Loss Account, without considering the loss

claimed in the return of income, at Rs. 2,40,680/-. It has

further been contended that the Id.CIT(A) went wrong in

observing that no documentary evidence was filed, whereas

the aforementioned papers were filed, as also ITR-V of the

assessee company, for assessment year 2016-17 (paperbook

page 3) and Balance Sheet of the assessee company as on

31.03.2016 (paperbook page 6-11) were also filed. This has

not been disputed before us.

30.7 In the search conducted, at the business premises of

M/s Kansal Singla & Associates, regular books of account

alongwith bank statements of the assessee company were

found, which fact stands duly mentioned at page 357 of the

Appraisal Report (paperbook page 116). Copies of all these

ITA 738/CHD/2022 A.Y. 2016-17 39

books of account were taken on CD by the Department, as

per Panchnama (paperbook page 275-278).

30.8 The books of account were examined by the AO before

sending the Deviation Note dated 24.12.2019 to Investigation

Wing. This is evident from the contents of the AO's letter

dated 24.12.2019 (paperbook page 296-298). The Dictate by

the ADIT (Investigation), on which, however, the AO acted is

available at paperbook page 299-301.

30.9 Further, the books of account were also submitted by

the assessee before the AO during the remand proceedings,

on 16.02.2022, as available at papebook page 52.

appellant company by way of Ground Nos. 10 is justified. It

is accepted as such and the disallowance of loss of Rs.

4,83,489/- is, accordingly, deleted.

Order pronounced on 22.02.2024.

Sd/- Sd/- (VIKRAM SINGH YADAV) ( A.D. JAIN ) ACCOUNTANT MEMBER VICE PRESIDENT

“Poonam”

ITA 738/CHD/2022 A.Y. 2016-17 40

आदेश क� ��त�ल�प अ�े�षत / Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar