TaxTMI 
TaxTMI 
2016 (3) TMI 1125
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.... 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. 2. The order of the ld.CIT(A) is erroneous and is not tenable on facts and in law. 3. 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." 4. 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. 2. 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. 3. On the facts and circumstances of the case, the notice issued under Section 153A by ....
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.... 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." 5. 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 Rs. 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 Rs. 11,17,04,140/-, in which following additions were made:- (i) Addition on account of share application money : Rs. 7,52,00,000/- ....
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....d 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. 9. 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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....s 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 a....
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....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 interfere....
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.... For the year under consideration, the assessee had filed the return of income on 1st November, 2012 declaring total income of Rs. 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." 17. From the above, it is evident that during original assessment proceedings, the Assessing Officer made enquiry wi....
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....paragraph 4.9 of the assessment order. Main reason given by the Assessing Officer for not accepting creditworthiness of M/s Anu 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 ....
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....ss the Revenue's appeal in ITA No.44/Del/2012. 19. The only other ground raised in the assessee's appeal is with regard to the disallowance of Rs. 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 Rs. 60,00,000/- out of interest on the ground that the borrowed money has been utilized 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. 20. Learned DR, on the other hand, relied upon the orders of authorities below on this point. 21. 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 ....
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.... (i) Churu Trading Co. P.Ltd. : Rs. 2,52,00,000/- (ii) Vandana Laboratories P.Ltd. : Rs. 1,27,00,000/- 26. 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. 27. 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....
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....riminating 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 :- "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 ....
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.... 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 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 f....
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....ar 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. 2. 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. 3. 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. 4. 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. 5. 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 and even th....
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.... 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 - Revenue's appeal for AY 2006-07 :- 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." 35. 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 Rs. 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 Rs. 6,54,38,793/-. While making the assessment, the Assessing Officer made the addition of Rs. 35,00,000/- in respect of share application mo....
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....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 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 subscri....
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.... 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 2008-09 :- 45. 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." 46. The f....
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....m 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. 49. 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. 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 Decemb....
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....tion 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. 02. 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 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 an....
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....s 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." 52. 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 assistance of the AOs of the concerned companies whose ITRs and PAN card copies had been produced." 53. In the case of Vrindavan Farms (P) Ltd. (supra....
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....quent 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." 55. 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 websi....
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.... 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. 58. 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....