AI OCR 
TaxTMI 
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2016 (3) TMI 1125
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.... "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 the A.O. is bad both on facts and in law and as such the assessment framed in consequen....
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....umstances 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/- (ii) Addition on account of interest : Rs. 60,00,000/- 6. Learned CIT(A) deleted the addition made by the Assessing Officer on account of share applica....
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....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 :- (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. 10. He submitted that the contenti....
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....o, 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. 12. With regard to the merit of the addition of share application money, the learned counsel stated that the assessee has duly proved the identity, creditworthiness and genuineness of the transaction ....
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....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 pr....
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....sessee 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 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 inc....
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.... 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 ....
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....at 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 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 incrim....
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....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 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 Labo....
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....roduced 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 ....
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.... 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 facts, it cannot be said that the identity and the creditworthiness of the company has been established." 29. 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 h....
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....ng 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 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." 31. 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 ....
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....d 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 money from Churu Trading Co. P.Ltd. The same was deleted by the learned CIT(A). Hence, this appeal by the Revenue. 36. 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....
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....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 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 th....
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....s 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 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 Rs. 40,95,03,401/-. The Assessing Officer completed the assessment u/s 153A read with Section 143(3) by making the addition of Rs. 10,63,00,000/- in respect of share application money received from following two parties :- (i) Churu Trading Co. P.Ltd. : Rs. 10,50,00,000/- (ii) Blue Line Motors Pvt.Ltd. : Rs. 13,00,000/- 47. Learned CIT(A) deleted the addition. Hence, this appeal by the Revenue. 48. At the time of hearing before us, both the ....
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....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 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....
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....ource 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 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." 51. 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 up....
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....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), 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,....
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....isdictional 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 Rs. 392.17 crores. As against the huge share capital of Rs. 392 crores, the total share application money given to the assessee company in all the years taken together is less than Rs. 20 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 ....
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....hese 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. 59. 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. (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 - Revenue's appeal for AY 2009-10 :- 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." 61. At the tim....