TaxTMI 
TaxTMI 
2018 (1) TMI 1032
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.... Delhi. 3. The Departmental Appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 09.09.2016 for A.Y. 2007-2008. 4. Briefly, the facts of the case are that search, seizure and survey operations under section 132/133A of the I.T. Act were conducted on 12th April, 2012 in the case of the assessee along with other cases of Aryan Sainik Group at various residential and business premises. These cases were centralised. The first reference for exchange of information was made by Investigation Wing on 28th December, 2012 and the part information was received by the Pr. CIT, Central-II, New Delhi on 27th May, 2015 from FT & TR CBDT, New Delhi. The A.O. issued notice under section 153A of the I.T. Act on 09th October, 2013 and the assessee in response thereto filed return declaring income at Rs. 6,93,41,849 on 16th May, 2014. The assessee furnished details, filed submissions and produced the documents. The assessee declared income under the head "Income from Business", Income from House Property and Income from "Other sources". The A.O. noted that during the F.Y. under appeal the assessee-company has received share capital and s....
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....the assessee and assessment was completed vide order under section 143(3) dated 14.12.2009 wherein the A.O. made small additions on account of donation, disallowance of repair and maintenance of Road and disallowance of depreciation on plant and machinery with disallowance of late deposit of employees share to P.F. and after giving the deduction on account of depreciation and deduction under section 80G, income of assessee has been computed at Rs. 7.63 crores. The original assessment order was subject to appeals before Appellate Authorities. Thereafter, search action was undertaken on assessee company on 12th April, 2012 after completion of the assessment under section 143(3) as noted above. It was, therefore, submitted that the assessment order framed by A.O. under section 153A is illegal, invalid and bad in law because addition made by the A.O. did not have any connection or linkage with any incriminating documents or evidence found as a result of search proceedings. It was submitted that additions under section 153A could be made only on recovery of incriminating material during the course of search. Nothing is produced on record to justify the additions. The detailed written su....
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.... its year of incorporation till A.Y. 2014-2015 details of which are noted at page-28 of the appellate order. Assessee also explained that it is engaged in business of coal benefications and setting-up Thermal Power Generation Plants and it has set-up two coal benefication plants in the State of Chattisgarh and Orissa. The promoters have vast experience in this line and assessee company have been granted various credit facilities and many investors made investment in assessee company. The details of loans and bank guarantees are noted at page-29 of order. M/s. STL Investor has also made investment in earlier years considering the worth of the assessee-company following RBI and FEMA Rules. In earlier year, the same share capital/premium have been accepted by the Revenue Department from M/s.STL. The assessee received the amount in question through banking channel which have been supported by the Bank Statement of the Investor, Balance Sheet and Foreign Inward Remittance Certificate. With a view to verify the credentials of M/s. STL, reference was sent to Mauritius Revenue Authorities and they have filed their reply which have corroborated the contention of the assessee that it has rec....
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....submissions of both the parties, deleted the entire addition and his findings in para 8.4 of the impugned order at pages 80 to 113 are reproduced as under : "8.4. Finding : I have considered the written submissions of the appellant, assessment records, case laws and have gone through the assessment order passed u/s 143(3) r.w.s. 153A of the Act. I have also considered the arguments of the ARs. In the relevant year, the Appellant had allotted 40,00,000 equity shares on 02.08.2006 having face value of Rs.I01- each at a premium of Rs. 15/- to the following investors. S. No. Name of the shareholder No. of shares issued 1 Spectrum Technologies Ltd. 14,31,200 2 Dr. A V Mohan Rao 536 3 Dynamic Generation Pvt. Ltd. 968,264 4 Sarvesh Coal tech Pvt. Ltd. 16,00,000 Total 40,00,000 In the opinion of the AO the Appellant had failed to establish the genuineness of the money received as Share Capital and Share Premium amounting to Rs.3,57,80,000/- from M/s Spectrum Technologies Limited ("STL") and had failed to establish creditworthiness of MI s STL. The various contentions of the AO and various reasons on account of which the addition of Rs. 3,57,80,000/....
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....TL cannot be questioned. Thus, the appellant's prima facie contention is accepted. Additionally, it is of significance to recount that the Appellant had been incorporated on 01.01.1996. During AY 2007-08, the appellant company was constructing 11 MTPA coal washery on BOO basis for APGENCO, neared completion of 7.5 MTPA washery for which commercial production was to be commenced soon. The appellant company also planned to set up a 2x25 MW thermal power plant adjacent to its washery at Korba, for which it had already procured the land and the necessary agreements/ permissions for setting up of the power plant. The existing washery was designed using State of the Art Technology and during the year, was running 6th year of full scale operations, and did not need any new technology absorption. Further, it is seen that the promoters, various investors of repute had started investing in the Appellant Company even prior to the year under Appeal. Some of the investment had come from Foreign Investors. Pursuant to the Policy of the Government of India, the said investment had come as Foreign Direct Investment (FDI) in the Coal Sector. Such Investment had been routed through the Reser....
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.... fact, the AO has also nowhere claimed that he had found any incriminating material during the course of search that would warrant making the said addition. Instead, the AO has tried to justify the addition of Rs. 3,57,80,000/- on the basis of information gathered during the course of post search enquiries. It is also seen from the records that during the course of post search Investigation/ enquiries, the Appellant was called upon to establish the identity and creditworthiness of the entities that had subscribed to the Share Capital and Share Premium and to establish the genuineness of the transactions. The appellant had furnished sufficient documentary evidence to substantiate the identity and creditworthiness of the investors. The investigation wing had in the case of M/s STL referred the matter to the FT & TR division for obtaining necessary information about M/s Spectrum Technologies Limited from the Mauritius Revenue Authority (MRA). From examining the submissions made by the Appellant before the investigation wing and the AO, it is evident that the Appellant had furnished the following information/ documents during the Investigation and Assessment proceedings: - (i) ....
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....lso hit by the provision of section 56(1) of I.T. Act. In support of his action of making of addition of Rs.3,57,80,000 in AY 2007-08, the AO also relied upon various case laws and prepositions in Para 5.10.1 to 5.10.13 and in Para 5.11 of the said assessment order. The AO has also put forth an argument that the huge premium charged by the Appellant was also hit by the provision of section 56(1) of the Act. I have perused all the records including the assessment records, the detailed written submissions filed by the Ld. ARs and have heard the various arguments put forth by the Ld. ARs during the course of Appellant proceedings. The objections of the AO can broadly be clubbed into;- (I) Questioning the credentials of the Appellant Company (II) Questioning the reasonability of the amount of Share Premium charged by the Appellant Company (III) Questioning the Creditworthiness of M/ s STL, Mauritius and genuineness of the transactions; and (IV) Judicial pronouncements supporting AO's contention of making addition u/s 56 r.w.s. 68 of the I.T. Act. The above objections of the AO are dealt with as under:- (I) Questioning the credentials of the Appellant Company ....
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....- Ratija ( in the State of Chhattisgarh} and - Kalinga (in the State of Orissa) The Ratija plant was commissioned in December 1999 with a capacity of 2.50 million tons per annum. The capacity was expanded to 5.00 million tons per annum in 2003, 8.00 million tons per annum in 2008 and 10.00 million tons per annum of raw coal in 2009. The main customers are Gujarat State Electricity Corporation Limited, Rajasthan Rajya Vidyut Utpadan Nigam Limited and Reliance Natural Resources Limited. The Kalinga plant is located at Talcher, District Angul in the State of Orissa. Kalinga plant was commissioned in 2008. The initial installed capacity of Kalinga Plant was 6.53 million tons per annum of raw coal which has been expanded to 9.52 million tonnes per annum of raw coal in October 2012. The Appellant is seen to have a proven track-record. The promoters had over 30 years of successful entrepreneurship. The Appellant had been granted credit-rating of 'A+' by credit-rating agencies like CRISIL RATINGS, INDIA RATING AND RESEARCHFITCH GROUP etc. The Appellant had been granted various credit facilities like term loans, Working capital loans, Guarantee limits etc. from a consortium....
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....m M/s STL, then the same could have been questioned. This grievance of the AO is therefore ill founded. The AO has tried to step into the issue of the investor Share holders and has tried to question the quantum of the Premium. It is a fact that the quantum of Share Premium is a matter of negotiation between the prospective investor and the Company. The prospective investor namely M/s STL, Mauritius were no novices. The Appellant is stated to have held series of meetings with most of the investors and after considering the offers made by various investors, the Appellant zeroed down on Akula Energy, a global investment company focused on developing renewable energy projects around the world. The terms and conditions of investment including the number of shares to be allotted and the price per share on which the allotment was to be made were finalized. Akula Energy made this investment through their special purpose vehicle namely Spectrum Technologies Ltd., Mauritius i.e. M/s STL. Additionally. it has also been submitted that the existing net-worth of the appellant company as on 31.03.2006 was approx. Rs. 17.4 per share, and over the next 3-4 years, the appellant's turnover....
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....the company. Thus the premium was based on fundamentals and was not decided arbitrarily. The same amount of premium was charged from other investors, which has been accepted by the AO. 2. The Appellant had made submissions dated 03.11.2014, 16.02.2015, 28.03.2016, 29.03.2016 and 31.03.2016 before the AO with regard to the charging of the Share Premium. 3. The basis of charging the Share Premium were explained in the submissions referred to in Para 2 above. It was reiterated that shares were issued to existing shareholders at the same rate and no differential price was charged from any investor. 4. The AO is oblivious to the modern day business environment. In today's time even startup companies that are incurring huge business losses or even cash losses in the initial years are able to get huge valuations from angle investors/ venture capitalists who invest millions of dollars in such companies by merely looking at the future prospects. The Appellant had been running a state of the art Coal Washery in India and was nearing completion of few more washeries. The appellant company also planned to set up a 2x25 MW thermal power plant adjacent to its washery at Korba, for wh....
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....rovisions of sec. 56(2)(viib) would not be relevant while framing the Appellant's assessment for A.Ys prior to A.X 2013-14. In any case; when the AO has considered that the provision 'of sec 56(2)(viib)/ 56(2)(viia) have no relevance in the present assessment year, then it is evident that there is no other provision of the Act under which the question of issue of shares at premium can be regulated. The CBDT and the Government had realized this short coming in the IT Act and had therefore inserted see 56(2)(viib) with w.e.f. A.Y. 2013-14. 6. Firstly, it was for the investors to judge as to whether they would like to subscribe to the shares of the Appellant company and, if yes, then at what price. It is beyond the jurisdiction of the AO to step into the shoes of the investor for taking a business decision. As this is against the principles of commercial expediency as the AO does not have jurisdiction to step into the shoes of a taxpayer and dictate whether or not to undertake a transaction. It is for the investor to see the commercial expediency and viability of the investment at a given price. The fundamentals of the Appellant Company and the strengths of the company....
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....mpany was only to show its' "Source" and not "Source's Source". The Appellant Company had duly discharge its' onus of showing the "Source" as having come from M/s PIL and Indian Coal Agency. The AO has admitted the "Source" of the Appellant's funds. The AO has illegally made the additions in the impugned assessment order by questioning the "Source's Source" by questioning the sources of M/s STL. (v) Even after the aforesaid amendment, the Share Capital and Share Premium received from non-resident entities and from well regulated share holder entities or from Venture Capitalists etc has been kept out of the ambit of Section 68. M/s STL is a Mauritius based non-resident entity and it is promoted by well regulated Akura Energy Group which is a world renowned Private Equity investment company focused on developing renewable energy projects around the world. Therefore, the Share Capital and Share Premium received from M/ s STL were not covered even by the amended provisions of section 68 that became effective from 1.4.2013. (vi) Taking the fact of this amendment as the manifestation of intention of Legislature, it is evident that the Legislature always wanted t....
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....ort Louis, Republic of Mauritius. 24th October 1994 Sookraj 5, Duke of Edinburg 1 100 Seechum Avenue, Port Louis, Republic of Mauritius c) Prior to the removal from the register of companies, the directors of STML were: Director's name Address Dr. A V Mohan Rao 15, Warren Street, Apartment 210, Jersey City, New Jersey, 07302-6457, USA Mr. Akula Srikant 15, Warren Street, Apartment 210, Jersey City, New Rao Jersey, 07302-6457, USA Ms. Tanya Sek Sum 5, Duke of Edinburg Avenue, Port Louis, Republic of Mauritius Mr. Salim Jhumka 5, Duke of Edinburg Avenue, Port Louis, Republic of Mauritius d) Kindly refer to the enclosed Appendixes 1 and 2 re.change in shareholding and directorship of STML. e) The details of the holding company are as follows:- Name of holding company Address of holding company Name of director Address of Director Akula Energy Ventrues, LLC (previously known as Spectrum Investment Group USA, LLC) 200, Lanidex Plaza, 2nd Floor, Parsipanny, NJ, 07054, USA 1. Dr.A.V.Mohan Rao 15. Warren Street, Apartment 210, Jersey City, New Jersey, 07302-6457, USA 2.Srikan....
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....hange rate of US$ to Indian Rupees of Rs. 66 per US Dollar, the Paid up Share Capital works out to Rs. 9,11,46,000 as on 31.12.2004 and Rs.29,45,91,000/- as on 31.12.2008. The above facts are enough to establish and substantiate the financial strength of M/s STL. Add to that the fact that M/s STL was a group concern promoted by Akula Energy, which, according to information available in the public domain, has Investments across the globe In the renewable energy sector. Thus there was no need for M/ s STL to earn business income to make the said investment. It had the financial might of Akula Energy to draw upon for funding the said investment. In view of the above background and, more particularly, the fact that Department had done independent enquiry from MRA through the good offices of the FT & TR Division wherein the credentials and creditworthiness of M/ s STL was established beyond any doubt, this observation of the AO is factually incorrect. (IV) Judicial pronouncements supporting AO's contention of making addition u/s 56 r.w.s. 68 of the I.T. Act. The plea of the appellant is that the AO has tried to project the investment received as share Capital and Share Pre....
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....actions had taken place between the Appellant and unrelated investors. The transactions had taken place through normal banking channels after approvals/ intimation of RBI and other statutory authorities. The assertions made by the Appellant have been corroborated by the inquiries made by the Department through the FT & TR. All the cases referred to in para 5.10.8 and 5.10.9 are not relevant. The Appellant has not only established the identity of the creditor but has also established their creditworthiness as well as the genuineness of the transaction. The Appellant has no where taken the stand that merely establishing the identity of the creditor is sufficient. The Appellant has no where taken the stand that manner of payment by account payee cheque alone is sacrosanct and can make a bogus transaction as genuine transaction. The facts of Commissioner of Income-tax vs. Nova Promoters and Finlease (P) Ltd. dated February 15, 2012 reported in [2012J 342 ITR 169, the relied upon case are completely different from the Appellant's case. In the case of Nova Promoters, the Assessing Officer received a letter dated 3rd March, 2006 from the Director of Income Tax (Investigation), New D....
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....e company; list of bank accounts of Directors; and; a note justifying the expenses. Thereafter, the assessee did file some details but they were not exhaustive/ complete. For example, the details of accounts received on account of share premium were not furnished along with the details of share capital, and the address and PAN numbers were not provided for all parties. In the Appellant's case the Appellant had filed all the details that were called for. There is no allegation made by the AO that there was any divergence in PAN details or that the Appellant had not filed details of the business activities carried out during the year; details of the share capital raised during the year; details of the investment made during the year; details of the loans and advances made during the year; job work income during the year; share holding pattern, copy of all accounts of the company; list of bank accounts of Directors; and, a note justifying the expenses. Contrary to the case relied upon by the AO, the Appellant had filed complete details of amounts received on account of share premium along with the details of Share capital and PAN numbers and addresses of the investors. In the ....
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....pellant, the relied upon company did not have any track record. Its promoters were unknown. No due diligence in the form of credit rating or appraisal was done by any bank or credit rating agency. In the relied upon case the investors were not angel investors but were entry providers. In the Appellant's case the investor was a company promoted by Akula Energy who are reputed to be among the largest private equity/angel investors. In the cited case. the Share subscribers merely rotated cash that was deposited in the bank accounts before issue of cheques for shares and the share subscribers did not have there on profit making apparatus and were not involved in any business activity. Further, the respondent assessee did not give any dividend or interest to the said share subscribers. . In the case of the Appellant, no cash was deposited in the bank accounts of the share subscribers. The share subscribers have there on profit making apparatus and business activity. The share subscribers had raised funds from there on independent credible sources. The Appellant had been regularly paying dividend to the share subscribers as per details given above. The AO has also placed reliance o....
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.... the case of the Appellant. None the less, the case of Major Metals Ltd and Om Vinyls Pvt Ltd need to be examined. In the case of Major Metals Ltd, the assessee had approached the Settlement Commission u/s 245C(1) of the IT Act. The Hon'ble Settlement Commission had passed an order u/s 245D(4) of the Act wherein the income offered by the assessee was substantial enhanced, the penalty u/s 271(1)(C) was imposed and no immunity from prosecution was granted. Thus, the matter before the Hon'ble Mumbai High Court was of judicial review of powers of Hon'ble ITSC. In the instant appeal, we are not questioning the powers of the Hon'ble ITSC. Therefore, the ratio laid down in the relied upon case is not applicable and relevant on the facts of Appellant's case. The case of Om Vinyls Pvt Ltd was where the assessee had filed a Civil Writ Petition against the re opening of its assessment for asst year 2007-08 u/s 148 of the I T Act. The reasons in support of the impugned notice which are furnished to the petitioner reads as 'under: "1. During the course of search and seizure carried action out on 01.10.2013 in the case of Shri Praveen Kumar Jain Group, it was as....
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....to come into effect w.e.f. A.Y. 2013-14. The Appellant had correctly stated that provisions of sec. 56(2)(viib) would not be relevant while framing the Appellant's assessment for A.Ys prior to A.Y 2013-14. The Appellant had submitted following additional facts/ prepositions:- (i) Premium charged by a Company is added to the Reserves of the Company. Hence the Share holder who pays the premium, also becomes entitled to the enhanced Reserves of the Company. (ii) Is charging High Premium in the interest of the Company? Obviously, charging higher Premium is in the interest of Company as it strengthens the financial health of the Company. Also, it acts as an attraction to future prospective investors. (iii) Share Premium is a Revenue Receipt or Capital Receipt? Very obviously, Share Premium like Share Capital is a Capital Receipt. Since Share Premium is a Capital Receipt, the same cannot be per-se brought to tax. This view finds support from following case laws.- - CIT us. Allahabad Bank Ltd. [1969J 73 ITR 745 (SC) - CIT us. Vacuum Oil CO. [1966J 59 ITR 685 (SC) - Punjab State Industrial Corporation LTd. us. CIT [1997J 225 ITR 792 (SC) - Brooke Bond India Ltd., vs. CI....
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....NSULTANTS PVT. LTD. HIGH COURT OF DELHI, (2015) 93 CCH 0016 Del HC. 2. ADDITIONAL COMMISSIONER OF INCOME TAX vs. OM OILS & OIL SEEDS EXCHANGE LTD. HIGH COURT OF DELHI, (1985) 152 ITR 0552 : (1984) 18 TAXMAN 0337 1st September, 1983, ITAT MUMBAI. 3. GREEN INFRA LTD. VS. INCOME TAX OFFICER ITAT, BOMBAY TRIBUNAL (G) [2013] 145 ITD 240 (MUMBAI - TRIB.) / [2014] 159 TTJ 728 (MUMBAI - TRIB.) 4. Kamdhenu Steel & alloys Limited v. CIT [2012] 19 taxmann.com 26, (Delhi), 5. Hon'ble Delhi High Court in the case of CIT vs. Real Time Marketing (P) Ltd. reported in 306 ITR 55 and CIT vs. Value Capital Services Ltd. reported in 307ITR 334 6. In the case of Lovely Exports Private Limited v. CIT [2008] 216 CTR 195 SC, 7. Hon'ble Supreme Court in the case of CIT vs. Stellar Investment Ltd. reported in 251 ITR 263. 8. Case of CIT vs. Peoples General Hospital Ltd., reported in 356 ITR 65 (MP). In fact, similar view has also been expressed in the following cases: i. 350 ITR 220 (All) CIT vs. Jay Dee Securities and Finance Ltd. ii. 350 ITR 222 (All). CIT vs. Misra Preservers (P) Ltd. iii. 361 ITR 220 (Del) CIT vs. Kamdhenu Steel and Alloys Ltd. iv. 320 ITR 619 Bhav Shakti Stee....
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....6.1010. The said Balance Sheets and Profit and Loss Account were duly audited by Jose Thibaut. The investment made by M/s STL, Mauritius in Appellant Company was duly reflected in the Balance Sheets of M/s STL. The documents received from the Mauritius Revenue Authorities confirmed the identity and creditworthiness of M/s STL, Mauritius and genuineness of the transactions. The MRA also confirmed the "source of source" as having come from Akula Energy. The genuineness of the transactions is further substantiated from the fact that M/s STL, Mauritius had invested Rs. 1,78,97,570 in the Appellant Company on 23.06.1999, Rs. 9,26,430 on 18.08.1999, Rs. 4,11,64,000 on 20.12.2003, Rs. 1,27,73,410 on 21.03.2005, Rs. 2,33,67,722 on 21.03.2005, and Rs. 3,57,80,000 on 02.08.2006. In fact, the ARs have pointed out that majority of the share application money (i.e Rs. 2,30,78,952) for allotment of shares on 02.08.2006, had already been received in earlier years, and was pending allotment as on 01.04.2006. The reasonability of Share Premium has always been the subject matter of negotiations between the Company and its Share holders till the amendment was made in section 56 (2) (viib) and sec....
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....'ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 ITR 573 and entire addition is liable to be deleted. He has submitted that this issue have been decided by the Ld. CIT(A) against the assessee merely because the matter is pending before the Supreme Court in the case of Kabul Chawla (supra). He has submitted that the decision of the jurisdictional High Court is binding on the income tax authorities and it is legal in nature and arising out of the order of the Ld. CIT(A). Therefore, the additional ground may be admitted for hearing and disposed of cross objection. 11. On the other hand, Ld. D.R. objected to the admission of the additional ground of cross objection. The Ld. D.R. submitted that for admitting additional ground, facts should be on record and it should be legal in nature and it should be raised before the authorities below. The Ld. D.R. also submitted that in this case reference for exchange of information was made by Investigation Wing on 28th December, 2012 and part information was received on 27th May, 2015 through FT & TR CBDT, New Delhi which is relating to the creditworthiness of the investor company. Panchanama and Statements were also recorded during ....
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....h proceedings. He has however, decided this issue against the assessee because the legal issue has not been settled by the Hon'ble Supreme Court in the case of Kabul Chawla (supra). Learned Counsel for the Assessee, therefore, submitted that no incriminating material was found during the course of search so as to make addition under section 68 of the I.T. Act against the assessee. Learned Counsel for the Assessee also submitted that reference made by Investigation wing for exchange of information in December, 2012 and part information received May, 2015 are after conclusion of the search dated 12th April, 2012 and as such, the same could not be construed as incriminating material found or seized during the course of search. Therefore, it is a clear case of making additions under section 153A when there being no recovery of any incriminating material against the assessee during the course of search. 14. We have considered the rival submissions with regard to admission of additional ground of cross objection. It is not in dispute that the assessee raised the above issue before Ld. CIT(A) that the order of the A.O. is not in accordance with law because he cannot pass the order under ....
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.... Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. Conclusion 72. To conclude : (i)Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153 A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04." 17. In the present case, it is not in dispute that assessee filed original return of income on 31st October, 2007, declaring income of Rs. 7.24 crore. The case was selected for scrutiny assessment and the A.O. completed the assessment under section 143(3) dated 14.12.2009. The A.O. did not make any addition under section 68 of the I.T. Act as regards the share capital/share prem....
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....sessments have been made on the basis of the seized documents, statements recorded during the course of search, disclosure made by assessee and FT & TR reports. Copies of the panchanama and statements are also filed on record. However, as noted above, none of the above documents are incriminating material in nature against the assessee. The A.O. made the addition under section 68 of the I.T. Act only on the basis of facts already on record which has also been considered in original assessment proceedings under section 143(3) of the I.T. Act and claim of assessee has been accepted by the A.O. prior to the search. Therefore, no assessment was pending against the assessee on the date of search. The completed assessments can be interfered with by the A.O. while making assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment. However, the department has failed to produce any material to justify the addition made in assessment under section 153A under section 68 of the I.T. Act. The reliance of the Ld. D.R. on the decision of other....
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.... 540. (ii) Decision of Delhi High Court in the case of CIT vs. Nipun Builders and Developers Pvt. Ltd., 350 ITR 407 (Del.) (iii) CIT vs. Nova Promoters & Fin Lease Pvt. Ltd., 342 ITR 169 (Del.) (iv) N.R. Portfolio Pvt. Ltd., vs. CIT 29 taxmann.com 291 (Del.) (v) CIT vs. Empire Buildtech Pvt. Ltd., 366 ITR 110 (Del.) (vi) CIT vs. Focus Exports Pvt. Ltd., 228 Taxman 88 (Del.) (vii) CIT vs. MAF Academy Pvt. Ltd., 361 ITR 258 (Del.) (viii) Navodya Castle Pvt. Ltd., vs. CIT 56 taxmann.com 18 (SC). (ix) CIT vs. Manish Buildwell (P) Ltd., 16 Taxman 27 (Del.) 22.1. The Ld. D.R, therefore, submitted that the Ld. CIT(A) should not have deleted the addition on merits. 23. On the other hand, Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has submitted that Section 56 is not applicable in the case of the assessee. No incriminating material was found during the course of search to prove that assessee received bogus share capital/premium. No additional evidence was brought before Ld. CIT(A). Therefore, there is no violation of Rule 46A of the I.T. Rules. Reference was made to Mauritius Authorities after search but nothing agains....
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....ith confirmation of the investor, mode of receipt of money, evidence of income tax return, constitution of company and confirmation letter regarding the genuineness of the investors wherefrom receipt is shown, PAN particulars of investor company, copy of the bank statement showing relevant transaction, copy of foreign inward remittance certificate, source from where investment amount had been originated, copy of the balance sheet and P & L A/c of investor, copy of Board resolution and copies of ROC records. The assessee explained before the authorities below that share capital/premium was shown in the books of account of assessee and remained subject matter of regular assessment under section 143(3) of the I.T. Act in which the A.O. accepted the explanation of assessee. During the course of search no incriminating material was found that would suggest that share capital or share premium was bogus or investor was not genuine. The entire amount received from M/s. STL had come as FDI through the banking channel and supported by bank statements and Foreign Inward Remittance Certificate. It is also proved on record that M/s. STL, Investor has invested in assessee company in earlier year....
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....oduction started and foreign investors made investment in Coal Sector including the assessee. Thus Foreign Direct Investment ("FDI") in Coal Sector was routed through RBI and there was a compliance of the relevant provisions of law. The contention of assessee has been proved through documentary evidence on record and amount of share capital/premium have been shown in the books of account on which return was already filed prior to the search and accepted under section 143(3) after examining the merits of the case. The history of assessee-company proved its worth which proved value adopted for premium is on sound basis. Premium is added to reserves, so the shareholder/investors became entitled to the enhanced reserves. A.O. did not bring any evidence on record that amount in question came from coffers of assessee-company. No incriminating material was found during the course of search that it was a bogus investment by M/s. STL. Therefore, no addition could be made against the assessee. We rely upon decision of jurisdictional High Court in the case of Pr. CIT vs. Kurela Paper Mills Ltd., 380 ITR 571. The A.O. did not make any enquiry on the documentary evidence filed by the assessee. ....
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....d as under : "The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court. 31. Decision of jurisdictional High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as under : "The CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon'ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon'ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine.....
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....d as under : "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source". The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of Rs.71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee of....
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....o substantial question of law arose." 38. Considering the facts of the case in the light of material on record, it is clear that assessee produced sufficient documentary evidence before A.O. to prove the ingredients of Section 68 of the I.T. Act. The A.O. however, did not make any further enquiry on the documents filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the investor company and the assessee because investor was a foreign entity established in Mauritius. Even the reply received from Mauritius Revenue Authorities proved the identity of the investor, its creditworthiness and genuineness of the transaction. It is not reported if any, cash was found deposited in the account of the investor before making investment in assessee company. Therefore, the totality of the facts and circumstances of the case clearly proved that assessee discharged its initial onus to prove the identity of the investor company, its creditworthiness and genuineness of the transaction. 39. It may be also be noted here that A.O. has referred to provisions of Section 56(2)(viib) of the I.T. Act in the assessme....
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....ismissed and C.O. of the assessee is allowed. REMAINING APPEALS 41. In all remaining matters, facts and issues are same. Search, seizure and survey action under section 132/133A of I.T. Act were conducted on 12.04.2012 in cases of remaining assessees along with other cases of Aryan Sainik Group of Cases at residential and business premises. Reference for exchange of information was made after conclusion of search. The assessees pleaded that no incriminating material was found in search so as to make any addition on the basis of entries recorded in books of account already disclosed to Revenue Department prior to search in proceedings under section 153A of the I.T. Act. Issue is covered by Judgment of Hon'ble Delhi High Court in the case of Kabul Chawla (supra). The assessee proved conditions of Section 68 of the I.T. Act. Learned Representatives of both the Parties briefly argued these appeals and stated issues are identical as have been considered in lead case of M/s. Spectrum Coal and Power Ltd., for A.Y. 2007-2008 (supra). Since, issues are same, therefore, facts are not mentioned in detail in remaining appeals which are of same group i.e., Aryan Sainik Group on same facts. T....
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....rder of Ld. CIT(A) in deleting both the addition. The assessee in the cross objection has also raised additional ground stating therein that unabated assessment can be interfered with by the A.O. while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and supported order of Ld. CIT(A) in deleting addition on merits. ITA.No.3221/Del./2016 & C.O.No.247/Del./2016 - A.Y. 2009-2010 in the case of M/s. Shyam Indus Power Solutions Pvt. Ltd., New Delhi 48. The Departmental Appeal as well as Cross Objection by assessee are directed against the order of the Ld. CIT(A)-27, New Delhi, dated 11.03.2016 for A.Y. 2009-2010. 49. In the Departmental Appeal, the Revenue challenged the deletion of addition of Rs. 44,70,116 on account of VAT penalty and in deleting addition of Rs. 4.50 crores on account of unexplained cash credit under section 68 of the I.T. Act on account of share application money/share premium. 50. The assessee in the cross objection, has supported the order of Ld. CIT(A) in deleting both the addition. He also challenged the order of Ld. CIT(A) in confirming the assessment under section 153A o....
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....that all the issues are same in the remaining appeals as have been decided in the case of M/s. Spectrum Coal Power Ltd., in ITA.No.6103/Del./2016 and C.O.No.15/Del./2017 for A.Y. 2007- 2008. 58. In all the above Departmental appeals as well as Cross Objections of the assessee, similar issues have been raised which have been considered and decided in the case of Spectrum Coal Power Ltd., (supra). In some of the cross objections, assessee has taken a ground of cross-objection in the cross-objection that assessments are illegal and bad in law under section 153A of the I.T. Act because there is no recovery of any incriminating material during the course of search so as to make additions under section 68 of the I.T. Act. However, in some of the cross objections as noted above, assessee has raised additional ground challenging the orders of the authorities below in making and confirming the assessment orders under section 153A of the I.T. Act because there is no recovery of incriminating material found during the course of search against the assessee. The assessee pleaded that all these issues are covered by the judgment of jurisdictional High Court in the case of CIT vs. Kabul Chawla (....