TaxTMI 
TaxTMI 
2016 (5) TMI 1298
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....- "1. That the ld.CIT(A) has erred on both facts and law of the case in confirming the additions of Rs. 3.60 crores u/s 68 on account of share capital issued by the assessee company and holding the same to be undisclosed income of the assessee company, which is unjustified, arbitrary, contrary to the law and facts and bad in law. 2. The ld.CIT(A) has erred both in law and facts of the case in confirming the additions made in assessment framed u/s 153A, which is not based upon any incriminating material found during the course of the search and that the Ld. AO erred in making the assessment in view of the fact that the assessment was not pending as on the date of the search, which is incorrect, unjustified and bad in law. 3. The ld.CIT(A) has erred in law & facts of the case in confirming the additions of Rs. 8,10,000/- on account of alleged commission paid for obtaining accommodation entries which is highly arbitrary, unjustified, bad in law, uncalled for and merely on presumption of the ld.A.O. 4. The ld.CIT(A) has erred in facts and law of the case in holding the validity of assessment u/s 153A which is bad in law, unjustified, uncalled for and needs to be quashed. 5. T....
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....nt u/s 153A. 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. 5. Learned DR, on the other hand, relied upon the order of the Assessing Officer as well as learned CIT(A). He stated that there was search and seizure operation at the premises of Shri Tarun Goyal group of companies. During the course of such search, Shri Tarun Goyal admitted that he is carrying on the business of providing accommodation entries to various parties. He also admitted to have provided accommodation entries to Best Group of cases. That during the course of search of Shri Tarun Goyal group, he was also taken to the assessee's premises for allowing his cross-examination to the assessee. However, the assessee refused to cross-examine Shri Tarun Goyal. He, therefore, submitted that the statement of Shri Tarun Goyal is a conclusive evidence against the assessee. He further pointed out that during the course of search of the assessee's premises, various loose papers and documents were found and....
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.... following decisions:- (i) M/s Andaman Timber Industries Vs. CCE, Kolkata-II - Civil Appeal No.4228 of 2006, judgment dated 2nd September, 2015 (SC). (ii) CIT, Delhi Vs. SMC Share Brokers Ltd. - [2007] 159 Taxman 306 (Delhi). (iii) Alok Agarwal Vs. DCIT - [2000] 67 TTJ 109 (Del). 7. With regard to the statement of Shri Anu Aggarwal, it is stated by the learned counsel that when a question was put to Shri Anu Aggarwal in respect of loose papers, he stated that the loose papers are with regard to receipt of cash as advance for sale of property in certain cases which has not been reflected in the books of account. Part of the cash received which has not been accounted in the regular books of account has been utilized for making expenses in construction business. This reflects unexplained or unaccounted work in progress. He had surrendered the sum of Rs. 8 crores during the course of search. However, subsequently, the surrender was modified and the assessee made the surrender of only Rs. 2 crores. In the assessment order also, the Assessing Officer has nowhere pointed out that any loose paper found and seized is pertaining to the receipt of share capital by the assessee. Accordi....
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....ble to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 9. In clause (iv) above, their Lordships held "Obviously an assessme....
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....ion is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. 24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed in....
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.... in Annexure A- 1, A-4 and A-11 and I am unable to explain these documents. We have received cash as advance for sale of property in certain instances which has not been reflected in our books of accounts. Part of the cash received which has not been accounted by us in regular books of accounts has been utilized for making expenses in our construction business. This reflects our unexplained, unaccounted work in progress. This is the explanation for the seized documents Annexure A-1. To account for these seized documents and other seized documents which can not be adequately explain by us, we voluntarily offer a sum of Rs. 8 Crores (Rs. Eight Crores) which is over and above the normal income earned by us during the course of the year. This Rs. 8 Crores (Eight Crores) represents our undisclosed income earned during the year on accounts of unexplained cash receipts, unexplained work in progress as well as share capital and share premium received. This discloser of Rs. Eight Crores which is over and above the normal income earned by us during the course of the year is being made to buy peace of mind, to avoid penalty and prosecution proceedings and also to avoid protected litigation." ....
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....nnot be relied upon to claim that the assessee was allowed an opportunity to crossexamine Shri Tarun Goyal and it was refused by them. No documentary evidence has been placed on record before us by the Revenue to support their contention that the director of the assessee company has refused to cross-examine Shri Tarun Goyal. It is pertinent to note that the search at assessee's premises as well as Shri Tarun Goyal group of companies took place simultaneously i.e., on 15th September, 2008. The statement of Shri Tarun Goyal on which the Department is placing heavy reliance is recorded on 15th September, 2008 and, in the said statement, it is mentioned by Shri Tarun Goyal that he was taken to the office of Best Group of companies for crossexamination by the director of the said company. However, they refused any such cross-examination. On the same day i.e., 15th September, 2008, the statements of Shri Anu Aggarwal as well as Shri Harjeet Singh, directors of Best group of companies are recorded but, in such statement, nowhere it is mentioned that they refused to crossexamine Shri Tarun Goyal. This issue arose before the CIT(A) and he, in his letter dated 19th February, 2013 written to ....
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....of validity of statement without allowing opportunity of cross-examination to the other side in the case of M/s Andaman Timber Industries (supra). Their Lordships held as under:- "According to us, not allowing the assessee to crossexamine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee." 19. Hon'ble Jurisdictional High Court has also considered a similar issue in the case of SMC Share Brokers Ltd. (supra). The relevant finding of their Lordships is in paragraph 6 of the order. The same is reproduced below:- "6. Learned counsel for the revenue relied upon One-up Shares & Stock Brokers (P) Ltd. v. R.R. Singh, CIT [2003] 262 ITR 275 to con....
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....in my answer to question no.15. I had surrendered a total amount of Rs. 8 Cr. on account of unexplained cash received from various bookings in my group companies and the unexplained expenses towards the work in progress of various projects in those companies and other outgoing. These unexplained receipts and out goings can be correlated and detailed at the time of assessment after going through the seized material and other available records. Q.No.7 At the time of search on 15-09-2008 to the question No.15, you also confirmed in your answer that this surrender of Rs. 8 Cr. Includes receipt of share capital and share premium. Please explain and clarify the same. Ans. As explained in the answer to the question no.6, the utilization of the unexplained receipts and its correlation with the outgoings can be ascertained after examining the seized material and therefore it is difficult to detail if any amount from the surrender was utilize towards the receipt of any share capital or not." 22. From the above, it is evident that by question No.3, Shri Anu Aggarwal was asked to submit the details of share premium of various companies of Best group of companies. In reply, he stated that th....
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.... none of the loose papers was relating to issue of share capital. The loose papers were pertaining to unaccounted receipt on sale and unaccounted expenditure on construction. In the statement dated 24th October, 2008, though the query was raised with regard to issue of share capital and the statement of Shri Tarun Goyal was confronted wherein he has alleged to have provided accommodation entry to the assessee group, Shri Anu Aggarwal categorically denied to have received any accommodation entries from anybody. 24. In view of the above, we hold that the issue of share capital was out of the purview of assessment u/s 153A as the assessment for assessment year 2005-06 was not pending on the date of search and no incriminating material relating to share capital was found during the course of search. Accordingly, the addition of Rs. 3,60,00,000/- made by the Assessing Officer and sustained by learned CIT(A) for unexplained share capital is deleted. 25. So far as the addition of Rs. 8,10,000/- for alleged unexplained expenditure for obtaining the share capital is concerned, both the parties agreed that this issue is consequential to the issue of share capital. We have accepted the asse....
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.... commission 1708/Del/2014 2005-06 2,00,00,000/- 4,50,000/- 1709/Del/2014 2007-08 15,00,000/- 33,750/- 27. At the time of hearing before us, both the parties fairly agreed that the grounds raised and the facts in all these appeals are identical to the facts and grounds raised in the case of M/s Best Infrastructure (India) Pvt.Ltd. for assessment year 2005-06 vide ITA No.1698/Del/2014, except the difference in amount of share capital. Therefore, both the parties fairly stated that the outcome of the appeal in ITA No.1698/Del/2014 in the case of M/s Best Infrastructure (India) Pvt.Ltd. for assessment year 2005-06 would be squarely applicable in all the above appeals. 28. We have already decided the appeal of M/s Best Infrastructure (India) Pvt.Ltd. for assessment year 2005-06 vide ITA No.1698/Del/2014 and, for the detailed discussion from paragraph No.8 to 25, we allow these appeals of the assessee also. The additions made for unexplained credit in the form of share capital as well as the addition made for alleged commission are deleted because they are out of the purview of assessment u/s 153A. ITA No.1701/Del/2014 - M/s Best Infrastructure (India) Pvt.Ltd.....
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....rguments. Accordingly, as agreed by both the parties, the appeal in ITA No.1705/Del/2014 i.e., in the case of M/s Best City Developers India Pvt.Ltd. for assessment year 2008-09 is taken up for consideration. In this case, the assessee has raised the following grounds:- "1. That the ld.CIT(A) has erred on both facts and law of the case in confirming the additions of Rs. 1.5 Crore u/s 68 on account of share capital issued by the assessee company and holding the same to be undisclosed income of the assessee company, which is unjustified, arbitrary, contrary to the law and facts and bad in law. 2. The ld.CIT(A) has erred both in law and facts of the case in confirming the additions made in assessment framed u/s 153A, which is not based upon any incriminating material found during the course of the search and that the ld.AO erred in making the assessment in view of the fact that the assessment was not pending as on the date of the search, which is incorrect, unjustified and bad in law. 3. The ld.CIT(A) has erred in law & facts of the case in confirming the additions of Rs. 3,37,500/- on account of alleged commission paid for obtaining accommodation entries which is highly arbitra....
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.... of Hon'ble Delhi High Court. (vii) ITO Vs. Nishit Fincap (P) Ltd. - 2016 (4) TMI 213, order dated 31st March, 2016 in ITA No.2515/Del/2010 (ITAT Delhi). (viii) ITO Vs. Softline Creations (P) Ltd. - ITA No.744/Del/2012, order dated 10th February, 2016 of ITAT, Delhi Bench 'G', New Delhi. (ix) Suncity Projects Pvt.Ltd. Vs. DCIT & others - ITA No.14/Del/2012 and others, order dated 21st March, 2016 of ITAT, Delhi Bench 'G', New Delhi. (x) CIT, Orissa Vs. Orissa Corporation P.Ltd. - [1986] 159 ITR 78 (SC). 33. He further submitted that the Assessing Officer made the addition mainly on the basis of the statement of Shri Tarun Goyal wherein he has allegedly stated to have provided the accommodation entries to the assessee. He stated that the statement of Shri Tarun Goyal was recorded behind the back of the assessee and the assessee was never allowed any opportunity to cross examine Shri Tarun Goyal. In the absence of his cross-examination having been allowed to the assessee, his statement cannot be utilized against the assessee. He further pointed out that even during remand proceedings, learned CIT(A) asked the Assessing Officer to allow cross-examination of Shri Tarun Go....
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....icer could not provide cross examination of Shri Tarun Goyal to the assessee during remand proceedings. But when the assessee was offered the cross examination of Shri Tarun Goyal, the assessee refused to cross examine him. Therefore, now, assessee cannot claim that the statement of Shri Tarun Goyal cannot be utilized against him. He further submitted that even the assessee in his statement while making the surrender of Rs. 8 crores referred to unexplained share capital. That the assessee claimed to have furnished the affidavit of the share applicant which is not notarized and the stamp paper on which the affidavit was drafted was purchased even prior to the date of application for allotment of share capital. This ultimately shows that the evidences furnished by the assessee before the Assessing Officer are the make-believe evidences and cannot be relied upon. He further submitted that the share application raised by the assessee was not by public offer but it is by private placement. Therefore, the burden is more upon the assessee to establish the identity of the shareholder, creditworthiness of the shareholder and genuineness of the transaction. He stated that the assessee despit....
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....ation". We have already discussed this issue at length earlier in this order and have arrived at the conclusion that the statement of Shri Tarun Goyal cannot be used against the assessee. 37. Further, Hon'ble Jurisdictional High Court in the case of Harjeev Aggarwal (supra) has also considered the evidentiary value of the statement recorded at the time of search and has held that any statement recorded during the course of search on a standalone basis without reference to any other material discovered during search and seizure operation would not empower the Assessing Officer to make a block assessment on the basis of such statement. Thus, any statement recorded during the course of search should be corroborated with the material discovered during the course of search. Let us examine the facts of the assessee's case and the stand of the Revenue in the light of the above decision of Hon'ble Jurisdictional High Court. The stand of the Revenue is that the assessee has taken the accommodation entry in the form of share capital from Tarun Goyal group of companies. In this regard, the assessee has paid cash against which Shri Tarun Goyal has issued cheque in the form of share ca....
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.... behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement. 39. Now, the next question is whether the assessee has been able to discharge the onus which lay upon it to prove the credit in its books of account in the form of share capital. It has been contended by the learned counsel that the assessee has duly discharged such onus and in support of his contention, he has relied upon various decisions of Hon'ble Apex Court, Hon'ble Jurisdictional High Court as well as ITAT Delhi Benches. Before going into the facts of the assessee's case, it would be appropriate to refer to those decisions relied upon by the learned counsel. 40. Learned counsel for the assessee has relied upon the decision of Hon'ble Apex Court in the case of Orissa Corporation P. Ltd. (supra). In the said case, the assessee furnished before the Assessing Officer letters of confirmation an....
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....pt 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." 42. In the case of CIT Vs. Victor Electrodes Ltd. - [2010] 329 ITR 271 (Del), Hon'ble Jurisdictional High Court has held :- "9. There was no legal obligation on the assessee to produce some Director or other representative of the applicant companies before the Assessing Officer. Therefore, failure of assessee to produce them could not, by itself, have justified the additions made by the Assessing Officer, when the assessee had furnished documents, on the basis of which, the Assessing Officer, if he so wanted, could have summoned them for verification. No attempt was made by the Assessing Officer to summon the Directors of the applicant companies. The addresses of these companies must be available on the share applications, Memorandum and Articles of Association and their income tax returns. If the Assessing Officer had any doubt about identity of the share applicants, he could have summoned the Directors of the applicant companies. No such attempt was, however, made by him. Therefore, the Commission of ....
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....s shown to be present in the case of Nova Promoters & Finlease (P.) Ltd. (supra) relied upon by the revenue. We are therefore not to be understood to convey that in all cases of share capital added under section 68, the ratio of Lovely Exports (P) Ltd. (supra) is attracted, irrespective of the facts, evidence and material. 9. No substantial question of law arises. The appeal is accordingly dismissed." 44. In the case of CIT Vs. Gangeshwari Metal (P.) Ltd. - [2014] 361 ITR 10 (Delhi), Hon'ble Jurisdictional High Court held as under:- "9. As can be seen from the above extract, two types of cases have been indicated. One in which the assessing officer carries out the exercise which is required in law and the other in which the assessing officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the assessing officer, after noting the facts, merely rejected the same. This would be apparent from the observations of the assessing officer in the assessment order to the following effect: - "Investigation ma....
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....rector of share applicant company, share application form, confirmation from share applicant, certificate of incorporation of the shareholder company and copy of income tax return of share applicant company. The Assessing Officer has disputed the validity of the affidavit on the ground that affidavit is not certified by the notary and the stamp paper for purchase of affidavit is dated prior to the application made for share application money. On verification of the copy of the affidavit which is placed at pages 48 & 49 of the assessee's paper book, we find that the affidavit is not made in the presence of notary public and, therefore, it cannot be considered as affidavit in legal sense. Nevertheless, it remains a self-declaration by the director of share applicant company in which he has confirmed that the company has applied to M/s Best City Developers (India) Private Limited for 15 lakhs equity shares for which payment of Rs. 1,50,00,000/- has been made by cheque. The detail of cheque number and the name of the bank have also been provided. In paragraph 3, the permanent account number of the share applicant company has also been provided. In paragraph 2, it is mentioned that the ....
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....1 to the creditors which were returned unserved with the remark "left". Thereafter, the Assessing Officer did not make any further verification from the income tax files of those creditors and confirmed the addition. The Tribunal deleted the addition holding that merely because the assessee could not produce the creditors, an adverse inference cannot be drawn against the assessee. When the matter reached to Hon'ble Apex Court, their Lordships held that on these facts, if the Tribunal came to the conclusion that the respondent had discharged the burden which lay upon it, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. 48. In the case of Rakam Money Matters Pvt. Ltd. (supra), the facts before Hon'ble Jurisdictional High Court were that the assessee furnished income tax return and permanent account number details of the companies. The directors of those companies did not respond to summons issued by the Assessing Officer. Hon'ble Jurisdictional High Court upheld the deletion of addition on the ground that the Assessing Officer did not take to the logical end the evidences furnished by the assessee. He even did not seek th....