TaxTMI 
TaxTMI 
2015 (12) TMI 1082
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....twelve appeals included six appeals preferred by the Assessee and six appeals preferred by the Revenue. The said appeals, respectively, impugned six separate orders passed by the Commissioner of Income Tax (Appeals) [CIT(A)] - all dated 22nd February, 2012 - disposing of the respective appeals preferred by the Assessee against the assessment orders dated 31st December, 2010 passed in respect of the aforementioned AYs. 2. The Revenue has projected the following questions of law in each of the aforesaid appeals:- "(i) WHETHER in the facts and circumstances of the case, ITAT could have deleted additions under section 68 of the Act on the ground that they are not based on any material found as a result of the search on the assessee company? (ii) WHETHER in the facts and circumstances of the case, ITAT could have held that there was no valid search since the impugned additions have been made under section 153A /143(3) of the Act without reference to any material found as a result of search? (iii) WHETHER in the facts and circumstances of the case, ITAT could have held that additions made in nonabated assessments, are invalid? (iv) WHETHER on the fa....
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.... carried cut in connection with the issues of providing share capital contribution to the SVP Group of concerns. Along with the Assessee company 19 other such companies were covered U/s 153A of the Act. Based on the materials seized from the premises of SVP Group of companies with regard to the investment in shares mainly in cash, action u/s 153C of the Act was also initiated in respect of the 12 companies. 8. According to the Revenue, a notice under Section 153A of the Act was issued on 17th February, calling upon the Assessee to file its returns within 15 days from the receipt of the said notice, however, this is disputed by the Assessee and it is contended that no such notice was ever issued but only an order-sheet entry was passed which was not signed by the AO. Thereafter, another notice dated 15th September, 2010 was issued under Section 153A of the Act calling upon the Assessee to file returns for the AYs 2003-04, 2004-05, 2006-07, 2007-08 and 2008-09 within a period of fifteen days. Further, on the said date, notice under Section 142(1) of the Act was also issued for AY 2009-10. In response to the aforesaid notice, the Assessee filed its returns for the respective six AY....
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....,50,67,324* (Bank Deposits) Nil 2,50,67,324 2,50,67,324 2009-10 2,18,05,733 (Bank Deposits) Nil 2,18,05,733 2,18,05,733 10. Insofar as AY 2003-04 and AY 2004-05 are concerned, no funds were received by the Assessee, nonetheless, the AO made ad hoc additions "to protect the revenue leakage". Proceedings before CIT(A) 11. The Assessee, being aggrieved by the assessment orders, preferred appeals before the CIT(A), inter alia, challenging that the Assessee had not been provided with reasonable and sufficient opportunity to explain its stand and that the additions made were arbitrary. The Assessee contended that no material much less evidence was found as a result of the alleged search to make the impugned addition -in an order of assessment u/s 153A & 143(3) of the Act. In fact, it was admitted that no material was found in the search notice dated 16th December, 2010 which recorded that "nothing has been seized relevant in your case during the course of perch and seizure proceedings conducted at the registered office of the company". 12. The Assessee filed its written submissions and also produced books of accounts as well as the source of the funds ....
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....r launching prosecution under Section 277A read with Section 278B of the Act. Insofar as the AY 2003-04 and 2004-05 are concerned, the ad hoc addition of Rs. 50,00,000/- made by the AO in respect of each of those years was also deleted. Proceedings before the ITAT 15. The Revenue as well as the Assessee filed appeals before the ITAT. The Revenue contended that the CIT(A) had erred in deleting the additions made under Section 68 of the Act. According to the Revenue, the Assessee had failed to discharge its onus of proving the credits in the Assessee's account and, thus, the amount credited in its books was liable to be taxed under Section 68 of the Act. The Assessee, on the other hand, filed appeals challenging the issue of search authorization under Section 132 of the Act and the assumption of jurisdiction under Section 153A of the Act, as no seizure had been made during the search conducted under Section 132 of the Act. Further, the Assessee contested the findings of the CIT(A) that the Assessee was a conduit for routing funds to various beneficiaries including the SVP Group and also impugned the directions issued by CIT(A). 16. Insofar as the legal issues raised rela....
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....the Act is concerned, Mr Aggarwal stressed that the credit in the books of the Assessee had been duly explained and was supported by affidavits of persons from whom the money have been received. He submitted that no defect in the affidavits had been pointed out and no reasons have been provided as to why the evidence provided by the Assessee was not accepted. He submitted that none of the affidavits had been challenged and further, no investigation or enquiries had been conducted with regard to the genuineness of the receipts. He submitted that the Assessee on its behalf had discharged its onus of not only providing confirmation from the persons from whom funds had been received but had also in addition provided evidence that such persons were assessed under the Act by providing their Permanent Account Numbers (PAN). He argued that in the circumstances, the identities of the payers and the genuineness of the transaction had been established and the same could not be arbitrarily rejected by the Revenue. On the other hand, the Revenue had not produced any material which would controvert the evidence produced by the Assessee. 21. Mr C.S. Aggarwal further contended that the stand of....
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....e nomenclature or the source indicated by the assessee. In other words, the truthfulness of the assertion of the assessee regarding the nature and the source of the credit in its books of account can be gone into by the Income-tax Officer. In the case of Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi), the Income-tax Officer had accepted the increased subscribed share capital. Section 68 of the Act was not referred to and the observations in the said judgment cannot mean that the Income-tax Officer cannot or should not go into the question as to whether the alleged shareholders actually existed or not. If the shareholders are identified and it is established that they have invested money in the purchase of shares then the amount received by the company would be regarded as a capital receipt and to that extent the observations in the case of Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi), are correct but if, on the other hand, the assessee offers no explanation at all or the explanation offered is not satisfactory then, the provisions of section 68 may be invoked. In the latter case section 68, ITA 727/2015 & other connected matters Page 16 of 23 being a substantive section, ....
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.... However, the grievance of the Assessee was allayed as CIT(A) gave sufficient opportunities to the Assessee, during the appellate proceedings, to produce the relevant material in support of the credit entries in its books of accounts. 25. The documents filed by the Assessee before the CIT(A) have not been filed in these proceedings except in ITA 362/2015, which relates to the AY 2003-04. A perusal of the documents filed by the Assessee indicates that the Assessee had filed affidavits of several persons who claimed to have made large cash payments to the Assessee as share application money for allotment of shares. It is seen that one Vijay Kumar, Director of M/s Chyris Information Management Services (P) Ltd. had filed an affidavit affirming that M/s Chyris Information Management Services (P) Ltd. had made a cash payment of Rs. 6 lacs to the Assessee. The registered office of the said company was affirmed as B-4/71A, Lawrence Road, Delhi, which was the same as the registered office of the Assessee Company. A similar affidavit was filed by one Manoj Kumar in his capacity as a Director of M/s Lawrence Distributors (P) Ltd. affirming that Lawrence Distributors (P) Ltd. had made a ca....
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.... stated that he had not heard of the Assessee Company. The fact that a common address is shared by several companies may not be a ground to doubt the identity or the creditworthiness of the companies; however in the given facts there are several factors, which viewed cumulatively, clearly provide a good reason to doubt the veracity of the Assessee's claims. The address is that of a Janta flat which is normally used as residence by persons of limited means; the said address is also stated to be residential address of several individuals, who are ostensibly not related to each other; large payments have been made in cash; shares are stated to have been subscribed at a premium even though the Assessee company has no track record and for two years (out of six years in question) did not even have a bank account; and even though the Assessee company has not made significant profits, does not employ any qualified personnel (its expense on salary and wages is insignificant) and has not made any investment in traded securities yet it has attracted large subscriptions to its share capital. These factors are required to be considered for ascertaining whether the Assessee has established the c....
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....fore, the question of deleting any alleged unexplained credit on account of the funds invested with the SVP Group did not arise. In the circumstances, the only issue that could be examined by the AO and the CIT(A) was whether the Assessee had explained the sources of the credit entries in its books. It cannot be disputed that the fact; (a) that the Assessee's registered office was located at a Janta Flat occupied by the persons belonging to lower middle class; (b) that no commercial activity was found at the registered office of the company; (c) that several persons/companies which the Assessee claimed had paid funds to the Assessee for acquiring its share capital or for purchase of shares of other companies held by the Assessee were also stated to be located/residents of the same Janta Flat, it was also the registered office of the Assessee Company; (d) that a large amount of payments received by the Assessee were in cash; (e) that the Assessee did not have a bank account in two years, would certainly be relevant factors in determining whether the credit entries in the books of the Assessee were genuine and from creditworthy sources. However, it was for the fact- finding authoriti....