TaxTMI 
TaxTMI 
2018 (6) TMI 471
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....er and distributor of Coca Cola procure in India. In addition, the MMG group has business interests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc.. A search & seizure operation u/s 132 of the I.T. Act, 1961 was carried out on 28.03.2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the said search. During the course of search carried out at the different premise located in India in M.M. Aggarwal Group of cases, documents and data storage devices, etc. belonging to the assessee were found and seized. In response to notice u/s 153A of the I.T. Act, 1961 issued to the assessee on 10.05.2016, the assessee filed the return of income on 29.06.2016 declaring a total income of Rs. 7,42,51,690/-. 2.1 During the course of assessment proceedings, the Assessing Officer observed that the assessee has raised share capital of Rs. 11,85,00,000/- from Superior Industrial Enterprises Ltd. on account of issue of 3,16,000 shares of Rs. 10/- each with premium of Rs. 365/-. He observed that during the course of pre-search enquiries, it was gathered that the assessee group had....
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....of the I.T. Act which were either returned back or delivered but there was no response or only part compliance. Ultimately the Assessing Officer came to the conclusion that the assessee failed to establish the identity, creditworthiness and genuineness of the parties wherefrom funds were received by the investor of the assessee who are also group companies of the assessee group. Since the assessee has received an amount of Rs. 11,85,00,000/- towards share capital and share premium and the assessee could not discharge the burden cast on it to the satisfaction of the Assessing Officer, he treated the same as unexplained cash credit u/s 68 of the I.T. Act as the income of the assessee for the relevant period under consideration. 3. Before the ld. CIT(A), the assessee apart from challenging the addition on merit challenged the assumption of jurisdiction u/s 153A of the I.T. Act. It was submitted that the original return was filed on 29.08.2013 declaring an income of Rs. 7,42,51,690/- which was processed u/s 143(1) on 18.04.2014. The search u/s 132 was conducted in this case on 28.03.2015 and notice u/s 153A was issued on 10.05.2016. It was argued that no incriminating material was det....
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....Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected. These being primary and basic the legal ground going to the root of the assessment, it is necessary to examine the nature of incrimination material conferring upon the AO necessary jurisdiction u/s 153A to utilize such material arising consequent to the search operation. The material so found and seized and thereafter relied upon and utilized thereon in the assessment of the assessee leading the AO to conclude that the share application / capital received by the appellant ....
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....A is bound to be initiated in such situations. Therefore, this action of the AO is in tune with judgment of Hon'ble Delhi High Court in CIT (C)-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412 (Delhi), 234 Taxman 30. The same is further strengthened by the judgment of Hon'ble Delhi High Court in the case of Dayawanti Gupta vs CIT in 'ITA Nos 357,358.359/2015 and other' dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record, I am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The AO was well within his powers to invoke section 153A of the Act on prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground no. 4 (a) and 4 (b) are therefore dismissed. 6. So far as the addition on merit is concerned, ld. CIT(A) also dismissed the said ground by observing as under :- "B. As far as the merits of the case are concerned, I have gone through the asse....
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....be satisfactory:" The appellant has neither produced the investor nor arranged to provide the requisite information and documents directly from it as such failed to substantiate its contention. The onus to prove its contentions has not been discharged by the assessee appellant. Concept of Onus is dynamic no doubt, but the assessee is required to first discharge the onus cast upon by way of information in possession of the department based on the seizure of such documents that create prima facie basis for the AO to arrive at his conclusions. The assessee has presented a whole series of jurisprudence without substantively discharging its onus. Such onus does not shift back by the mere act of the assessee in plainly denying the imputations without really offering corroborative data or any substantive contentions to establish its case to rebut the imputation. The appellant fails on this count as the primary onus is yet not discharged. I find no substantive basis to accept the contentions of the assessee. The addition in this regard is has to be confirmed as the available jurisprudence is clearly distinguishable on the facts of the case. Accordingly the addition made by A.O. u/s 68 o....
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....ever is higher; (b) "venture capital company", "venture capital fund" and "venture capital undertaking" shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 94[Explanation] to clause (23FB) of section 1O;]" [emphasis supplied] C1. The share premium charged by the appellant clearly falls within the mischief of this section in absence of assessee furnishing a reliable and robust basis of valuation of such equity. The relevant rule in this regard is rule 11 A(1) cb. The assessee is in clear mischief of the same, hence the premium charged by the assessee is to be subjected to the provisions of section 56 (2) viib read with rule 11UA (1)cb. It is bounden on the assessee to furnish reliable valuation determining such share premium as in its case for the AY 2013-14, from a qualified valuer. The assessee has not done the same, nor has any submission filed before me in this regard. The share premium so charged for this year falls in clear mischief of the provisions of law as discussed above. The same premia are, therefore, to be brought to tax. As the addition in case of the assessee has been upheld for this period, the addition here above wil....
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....ged. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the aforesaid share holder had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of funds provided by the appellant company. 2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the shareholder was a corporate entity, duly assessed to tax and, had subscribed to share-capital through banking channels and supported by necessary documents, share capital received could not in law or on fact be brought to tax u/s 68 of the Act. 2.4 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences to discharge the burden with regard to both genuineness of the transactions and creditworthiness of the share applicants and therefore, in absence of any whisper to rebut the said evidence, the credits could not arbitrarily be regarded as unexplained cash credit under section 68 of the Act. 2.5 That relia....
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.....332/Del/2017 order dated 29.12.2017 for assessment year 2007-08, the decision of the Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 and the decision of the Hon'ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263, he submitted that the statements recorded u/s 133(4) do not by themselves constitute incriminating material. 10. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the decision in the case of Pr.CIT vs. Meeta Gutgutia reported in 395 ITR 526 and various other decisions, he submitted that in absence of any incriminating material found as a result of search, assumption of jurisdiction u/s 153A is not in accordance with law. He also relied on the following decisions :- (i) Pr.CIT vs. Lata Jain, 384 ITR 543. (ii) 211 Taxman 61 (Del) CIT v. Chetan Das Laxhman Das. (iii) 352 ITR 493 (Del) CIT vs. Anil Kumar Bhatia. (iv) 380 ITR 571 (Del) CIT vs. Kurele Paper Mills P. Ltd. dated 06.07.2015. (v) 241 Taxman 440 (Del) CIT vs. MGF Automobiles Ltd. (vi) ITA No.634/2015 Pr. CIT vs. Smt. Kusum Gupta. (vii) W.P. ....
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....he investor is a listed group company and copy of audited financial statement, acknowledgement of return of income, confirmations of investor, bank statements, memorandum of article or association were filed. Further, assessment was completed u/s 143(3) in the case of the said investor company. There is no evidence on record to suggest that the money received as share capital and share premium has originated from the coffers of the assessee company. 14. Referring to various decisions, he submitted that non-production of shareholder/director by the assessee cannot be a ground for making addition u/s 68 if assessee discharged the initial onus cast on it. He submitted that the Assessing Officer has not established that the particulars furnished by the assessee are false especially when no enquiries were made either from the shareholder by issuing notice u/s 133(6) or enquiry from the Assessing Officer of the investor company or banker of investor or registrar of company. 15. Referring to page 59K of the Paper Book, he submitted that the assessee had requested specific date for production in respect of general questionnaire dated 16.08.2016, copy of which is placed at page 596 of the....
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.... on the order of the ld. CIT(A). She submitted that the A.O. has extensively and exhaustively proved that identities and creditworthiness of such parties & genuineness of transactions regarding amount of Rs. 11.85 crores as share capital & share application money paid to the Assessee company by several entities/firms/companies are bogus, non-existent paper entities having no worthy business to advance such share capital & share application money. Thus said assessee company has miserably failed to prove all three ingredients required for provision of section 68 of I.T. Act, 1961. 19. Referring to the decision in the case of CIT vs. MAF Academy (P.) Ltd. reported in 361 ITR 258, she submitted that the Hon'ble Delhi High Court in the said case has held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assesee's taxable income under section 68 of the I.T. Act. 20. Referring to the decision of the Hon'ble Delhi....
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....commodation entry providers in garb of share application money, was to be added to its taxable income under section 68. 25. Referring to the decision in the case of CIT vs. Ultra Modern Exports (P.) Ltd. reported in 40 taxmann.com 458, she submitted Hon'ble Delhi High Court has held that where in order to ascertain genuineness of assessee's claim relating to receipt of share application money, Assessing Officer sent notices to share applicants which were returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, Assessing Officer was justified in drawing adverse inference and adding amount in question to assessee's taxable income under section 68. 26. Referring to the decision in the case of CIT vs. Frostair (P.) Ltd. reported in 26 taxmann.com 11, she submitted that the Hon'ble Delhi High Court has held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper. 27. Referring to the decision in the case of CIT vs. N R Portfolio Pvt. Ltd. reported in 29 taxmann.com 291, she submitted that the Hon'bl....
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....ed the appeal of assessee holding that Assessee has failed to prove Identity, Creditworthiness & genuineness of Transaction & burden of proving such ingredients of provision of section 68 of I.T. Act was never discharged from Assessee due to utter failure to produce substantive corroborative evidence to prove such. He has categorically held that Assessee has not done a reliable & robust valuation of share premium charges strictly as per Rule 11 UA(l)cb r.w.s. 56(2)(viib) & Ld. CIT(A) has dismissed the Appeal of the Assessee which is justified under the facts and circumstances of the case. 32. So far as assessee company's grounds of Appeal regarding "no incriminating material is available" she filed the written synopsis and submitted that it has no merit on facts & law for following reasons: i. Provision of section 153A of LT. Act 1961 inserted w.e.f 01.06.2003 is an OVERRIDING ( Notwithstanding) Provision if search & seizure is conducted after said date of insertion & in this case search & seizure was conducted at assesseee's business/different premises covered under section 132 of the I.T. Act 1961 wherein documents/data storage devices etc. were found & seized & on exa....
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....tries in terms of share capital & share premium as assessee miserably failed to prove identity of such Entities , genuineness of transaction found to be NONGENUINE & creditworthiness which was never proved as such Entities were only existing on paper without any physical presence as none of such entities were produced before said A.O. for examination being bogus/paper in existence. iv. In legal parlance, Incriminating material means materials which are used for wrongful / illegal act in violation of any law in existence. In this case the assessee company indulged in practice of avoiding genuine tax by routing undisclosed/unaccounted taxable income through bogus share capital & share premium investment by non- existent entities having no creditworthiness by non26 genuine transaction thus falling under section 68 of Income Tax Act 1961. The basic information/materials obtained by seizure which were inquired/investigated further to establish by A.O. that Identity of such entities is not established, genuineness of transaction has been found to be NON-GENUINE & creditworthiness was never proved & such Entities were only existing without any physical presence as none of such entities ....
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....ons u/s 132(4) and 131 made addition of Rs. 11,85,00,000/- in the hands of the assessee u/s 68 of the I.T. Act on the ground that the assessee failed to substantiate with cogent evidence to his satisfaction regarding the identity and creditworthiness of the investor and the genuineness of the transaction. According to the Assessing Officer, since the assessee could not produce the investor company and since its returned income is meager considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted. We find, in appeal, ld. CIT(A) upheld the action of the Assessing Officer on merit, the reasons for which have already been reproduced in the preceding paragraph. He has also dismissed the ground raised by the assessee challenging the validity of assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search, the reasons for which have already been reproduced in the preceding paragraphs. Ld. CIT(A) alternatively also held that the addition is sustainable on account of mischief of provisions of section 56(2)(viib) read with Rule 11UA(1)cb, the....
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....IT(A) that the assessment proceedings were pending at the time of search and was abated is factually incorrect. 36. We find the ld. CIT(A) at para 5 page 11 of his order has observed as under :- "The basis of addition as taken by the A.O. was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs. 88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18.05.2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected." 37. We further find from the order of the ld. CIT(A) that there was no surrende....
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....tion 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment." 40. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under :- "4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee o....
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....tion of jurisdiction u/s 153A was not in accordance with law. The various other decisions relied on by the ld. counsel for the assessee also supports his case. The Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society reported in 397 ITR 344 has upheld the decision of Hon'ble Bombay High Court wherein the Hon'ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. 45. Since in the instant case addition of Rs. 11,85,00,000/- was made on the basis of statements recorded u/s 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made u/s 153A since the assessment was not abated in the instant case. In view of the above, we hold that the ld. CIT(A) was not justified in upholding the action of the Assessing Officer in assuming jurisdiction u/s 153A of the I.T. Ac....
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....epresents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged. 2.2 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once the aforesaid share holder had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of funds provided by the appellant company. 2.3 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that the shareholder was a corporate entity, duly assessed to tax and, had subscribed to share-capital through banking channels and supported by necessary documents, share capital received could not in law or on fact be brought to tax u/s 68 of the Act. 2.4 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences to discharge the burden with regard to both genuineness of the transactions and creditworthiness of the share applicants and therefore, in absence of any whisper to rebut the said e....