TaxTMI 
TaxTMI 
2015 (11) TMI 1758
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....aintaining the charging of interest u/s 234B as mandatory in nature even when no such interest was chargeable on the amount of income returned." 2. Short facts of the case are as under: "A search u/s 132 of the I.T. Act was executed on 21.11.2006 on the office and factory premises of the assessee. The assessee was served with the notice u/s 153A and assessee filed nil returned income and depreciation remained unadjusted of Rs. 791676 claimed to be carried forward. The facts of the all AYs are same but for the detail addition, we are reproducing the share application money received by the assessee and it was added to the total income of the assessee in respect of AYs from AY 2001-02 to 2004-05 which reads as under: 2.3.1] Assessment Year 2001-02 S.No Name of Company PAN No Amount Status 1. Authentic Investment & Finance Limited AAACA7079C 1000000 Share Allotted 2. Indo Capital Market Limited AAACI3899L 5,00,000 Amount Refunded on 05-03-2002 vide Ch No 631437 2.3.2] Assessment Year 2002-03 S.No Name of Company PAN No Shares Amount Status 1. Priyans Saree P Limited AAACP1882C 20000 10,00,000 Share Allotted 2. Indo Capital Market Limited....
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....-. The assessee was asked to justify the amount of share capital and share application as received by the assessee of Rs. 1,90,00,000/-. The assessee had filed confirmation of share application /share capital, amount of share application and share capital received through an account payeee cheque, share application form and copy of board resolution has also been filed. The assessee also submits as under:- "1] That you have asked the assessee to justify the amount of share application/share capital of Rs. 2,35,00,000/-(Rupees Two Crore Thirty Five Lakhs Only). That you have proposed to added an amount of Rs. 2,35,00,000/- to the income of the assessee in respect of share application money/share capital as received by the assessee.That on perusal of the details of share application/ share capital money as received by the assessee, you will find that the assessee company has received share application money of Rs. 25,00,000/- from M/s Shreevear Overseas P. Ltd. Relevant Document as to justify the identity, capacity and genuineness of the transaction has been proved.The assessee had issued 370000 Equity Shares of Rs. 10/- each with shares premium of Rs. 40/- which comes to Rs. 37,00,0....
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....ted complete details about the share holders by stating as under: "1.1] That you have asked from the assessee to justify the amount of share application money and share capital as received by the assessee in the year under consideration. 1.2] That in the year under consideration the assessee has received an amount of Rs. 1,85,00,000/- on account of share application/share capital. 1.3] Confirmation letter duly singed along with share application form have already been filed on Pg No. 38 to 83 of our earlier submission. 1.4.1] That entire amount of share application/ share capital received by the asseessee through an account payee cheques. 1.4.2] That share application form, copy of board resolution and confirmation letter have also been filed. 1.5] That as to justify the identity and existence of the companies from which share application money and share capital were received by the assessee. The assessee by depositing the requisite fee with the registrar of companies obtained following documents: I] Certificate of Incorporation II] Form No.18 as filed in case of change of address III] Copy of article of association and memorandum of association. IV] Copy of Form No. 32 i....
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....that on 27/11/2006 he has personally appeared before the ITO (Inv), Mumbai and his statement was recorded oath. That as remembered by him in reply to the question Nos 10 & 11 of his statement. He has accepted the amount invested by his company in the share capital of the assessee company.That when the assessee had filed complete details as to prove the genuineness of the amount of share application money/ share capital. The amount of share application/ capital was also received through an account payee cheque. Compete documents as available with the assessee has also been filed and as obtained by it with the ROC after depositing the requisite fee. In that case there is no reason to disbelieve on the amount of share application money/ share capital as received by the assessee. M/s AUTHENTIC INVESTMENT & FINANCE LIMITED That M/s Authentic Investment & Finance Limited was incorporated on 06-03-1987. Name of the company has been changed from M/s Authentic Investment & Finance Limited to M/s MEDIA SAVVY (INDIA) LIMITED w.e.f 16-03-2001. The assessee had received an amount o Rs. 1000000/- from the said company vide two different cheques of Rs. 500000/- each towards share application m....
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....anged to Janak Turbo Dynamics Limited. The said name finally changed to M/s HImgiri Dynamics Limited on 04-02-2002.That at the time of investment in the share application/ share capital address of the corporate office was given that of Mumbai. However, registered office of this company is situated at Indore itself. Present address of the said company is as under:- M/S HIMGIRI DYNAMICS LIMITED CL-101, SUKHLIA PANDIT DINDAYAL UPADHYAY NAGAR INDORE That entire amount of share application money received by the assessee duringthe financial year 2002-03 i.e. Asst Year 2003-04. Copy of audited final account of that company for the Asst Year 2003-04 is enclosed. On perusal of the said balance sheet you will find that issued capital of the assessee companywas Rs. 10,11,65000/- and investment in the shares of unquoted equity shares as per Schedule- 3 was of Rs. 17635000/- which increased from Rs. 2500000/-.That from the balance sheet itself it is proved that investment in the share application/ capital in the unquoted companies duly considered in the audited final account of that company. From this balance sheet itself, the amount of investment made by that company in the share applicat....
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....unt of Rs. 36308000/- shown as invested in the share application money of Rs. 36308000/- .Copy of Balance sheet of the said company as on 31.03.2007 is also enclosed.The assessee has properly discharged onus lying on him by proving the identity , capacity and genuineness of the share application/ share capital.That when the assessee had filed complete details as to prove the genuineness of the amount of share application money/ share capital. The amount of share application/ capital was also received through an account payee cheque. Compete documents as available with the assessee has also been filed and as obtained by it with the ROC after depositing the requisite fee. In that case there is no reason to disbelieve on the amount of share application/ share capital as received by the assessee.That from the above documents existence of the above company stand proved. Hence, the amount of share application money/ share capital as received by the assessee be treated as genuine. M/s DELTA FASHION LIMITED The assessee had received an amount of Rs. 20,00,000/- from M/s Delta Fashion Limited, Mumbai towards share application money for allotment of 40000 Equity shares of Rs. 10/- each wit....
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....ving the identity , capacity and genuineness of the share application/ share capital.That when the assessee had filed complete details as to prove the genuineness of the amount of share application money/ share capital. The amount of share application/ capital was also received through an account payee cheque. Compete documents as available with the assessee has also been filed and as obtained by it with the ROC after depositing the requisite fee. In that case there is no reason to disbelieve on the amount of share application/ share capital as received by the assessee.That from the above documents and detail of PA No and TAN No and letter as written by one of the director to the ecomonic offence wing, existence of the above company stand proved. Hence, the amount of share application money/ share capital as received by the assessee be treated as genuine. M/s CUBE COMMUNICATION (P) LIMITED The assessee had received an amount of Rs. 25,00,000/- from the above company as a share application money in respect of 50000 Equity shares of Rs. 10/- each with premium of Rs. 40/- each.That entire amount of share application money were received by the assessee through an account payee cheque....
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....of Rs. 10/- each with premium of Rs. 40/-.The amount of share application money of Rs. 30,00,000/- received by the assessee through an account payee cheques. Details of the same are as under:- Date Cheque No Bank Amount(Rs) 20-02-2003 141604 IDBI BANK 500000 20-02-2003 141609 IDBI BANK 500000 20-02-2003 141610 IDBI BANK 500000 24-02-2003 141619 IDBI BANK 1000000 24-02-2003 141620 IDBI BANK 500000 3000000 Copy of covering letters , share application forms and copy of board resolution are enclosed on Page Nos 58 to 69 of our earlier submission.That copy of TAN allotment letter, Certificate of Incorporation, Annual return as filed with the registrar of companies for the year ended on 31.03.2005, Article of Association and memorandum of Association are enclosed.That from the above documents as obtained from the site of Income Tax and from Registrar of Companies. Existence of the company stand proved. Here, we would also like to clarify that the assessee company had received share application money in the year 2002- 03 relevant to the Asst Year 2003-04 and search was conducted on the business premises of the assessee during the previo....
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....n/ share capital.That when the assessee had filed complete details as to prove the genuineness of the amount of share application money/ share capital. The amount of share application/ capital was also received through an account payee cheque. Compete documents as available with the assessee has also been filed and as obtained by it with the ROC after depositing the requisite fee. In that case there is no reason to disbelieve on the amount of share application/ share capital as received by the assessee.That from the above documents and detail of PA No existence of the above company stand proved. Hence, the amount of share application money/ share capital as received by the assessee be treated as genuine. M/s HINDUSTAN CONTINENTALS LIMITED The assessee had received an amount of Rs. 20,00,000/- on account of share application / share capital.The share application money of Rs. 20,00,000/- were received by the assessee though an account payee cheques in respect of 40000 Equity shares of face value of Rs. 10/- with share premium of Rs. 40/- each. Confirmation letter duly signed with share application form and copy of board resolution are enclosed on Page Nos 51-55 of our earlier submi....
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....ame of the assessee company has been changed from M/s Mcsure Capital Market Limited to M/s Samyak International Limited w.e.f 01-04-2005. That on perusal of the Balance Sheet for the year ended on 31.03.2004 and perusal of the previous year figure. You will find that total issued capital was of Rs. 30322000/- and investment in shares as shown by the assessee in Schedule- E was of Rs. 11072000/-.PA No and TAN No of the above company are as under:- PA No:- AABCM3526F TAN No BPLM01586E Copy of certificate of Incorporation, certificate of incorporation in respect of change of Name of the company, Form o 32 in respect of change of directors, Copy of audited final accounts for the year ended on 31.03.2004 & 31.03.2007, Article of Association and Memorandum of Association are enclosed as to justify the identity and existence of the company.The assessee has properly discharged onus lying on him by proving the identity , capacity and genuineness of the share application/ share capital.That when the assessee had filed complete details as to prove the genuineness of the amount of share application money/ share capital. The amount of share application/ capital was also received through an a....
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....n details from whom share application money were received by the assessee. These companies have been used as mere conduit companies for routing of unaccounted money into the business in the garb of share application money. As per reports received from Add DIT ((INV) Mumbai , DDIT (INV) Surat and Add DIT (INV) Kolkata, in respect of these companies (which have given share application money) just after search proceedings , it was observed that most of the companies were not in existence. Some of the companies not having any worth and were providing only accommodation entries. Hence, the source of share application money as received by the assessee company can not be treated as properly explained. Regarding Hindustan continental Ltd in the case of Shri Sanjay Agrawal in A.Y 2005-06 & in the case of Smt Meena Kumari Agrawal for A.Y 2004-05, it was found that the company was giving accommodation entries. Further, during search it was also found that the shares shown to have been purchased by the above mentioned companies have been shown to be purchased back by the family members of the group on single date i.e 25.08.2005. Hence, the source of share application money as received by the ....
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....t Year 2003-04 S.no Name of Company PAN No Shares Amount Status 1. Delta Fashion Ltd. AAACD5697H 400000 2000000 Share Allotted 2. Frec Wings Import Limited AAACF4480A 300000 1500000 Share Allotted 3. Himgiri Dynamics Ltd. AABCJ0296M 600000 3000000 Share Allotted 4. Hindustan continental Ltd. AABCH1575M 400000 2000000 Share Allotted 5. Mcsure Capital Ltd[Now known as Samyak International Ltd] AABCM3526F 100000 500000 Share Allotted 6. Lyton Mgmt. Services Ltd L-84 600000 3000000 Share Allotted 7. Cube communication Ltd. AABCC0767E 500000 500000 Share Allotted 8. Shreshth Leasing & Finance Ltd. AADCS3850Q 400000 2000000 Share Allotted 9. Shreevar Overseas Ltd S-1948 500000 2500000 Share Allotted 2.3.4] Assessment Year 2004-05 S.No Name of Company PAN No Shares Amount Status 1 Cube Communication Private Limited AABCC0767E 20000 1000000 Share Allotted 2.4] The assessee during the course of assessment proceeding and also before the appellate authority filed the following documents:- S.No Particulars 1 Confirmation of amount of Share application 2 TAN No as the share Applicant 3 Certificat....
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.... share capital of the assessee company was made. The said explanation of the assessee was reproduced by the assessing officer in his order and the assessing officer also failed to counter the claim of the assessee. 2.5.4.2] The Assessing officer while passing the assessment order shown a letter as written by the director of M/s Delta Fashion Limited in the year 2007 regarding transaction in the name of their company from the bank account of Union Bank of India. The said complaint was filed in respect of another company M/s Delta Wings Limited and not in respect of M/s Delta Fashion Limited, from whom share application money was actually received by the assessee company. The assessee during the course of assessment proceeding properly replied and explained that the amount of share application money was received by the assessee in the year 2003-04 and not in the year 2007-08 to which complaint was filed and the amount of share application money was received from the bank account of the share applicant company with State Bank of Hyderabad and not from Union Bank of India. The reply as filed by the assessee was reproduced in the assessment order and not counters by the assessing offic....
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....mily members and that too in the previous year relevant to the Asst Year 2006-07. Here, it is to be noted that the assessee company had not purchased any shares. That purchase of the shares by the different family members again proved the identity of the share holders. Hence, in any case, addition to the income of the assessee was not justified. If the Ld CIT(A) was of the opinion that shares were purchased at very low price in that case, necessary addition is to be made in the hand of the directors and other family members U/s 56 of the Act but not in the case of the appellant company. 2.10.1] That Hon'ble Mumbai Bench of ITAT in the case of ACIT vs Krishna Sheet Processors P Limited [ Appeal No ITA No 546/ Mum/ 2013 dt 30-06-2015 for the Asst Year 2009-10 ] has deal with the similar issue.... 2.10.2] That Hon'ble Indore Bench of ITAT in the case of M/s Agrawal Coal Corporation, as discussed by the AO, has categorically held that if the identities of the share holders' stand proved. In that case, no addition is to be made to the income of the assessee. 2.10.3] That Hon'ble Apex Court in the case of Lovely exports P Limited as reported in 11 ITJ 35 has held that:- "2. Can the a....
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....Hon'ble Delhi High Court vide order dt 21-01-2013 in the case of GANGESHWARI METAL PVT LTD [ Appeal No ITA No 597/2012] has discussed the similar issue in detail and after considering the decision in the case of Nova Promoters P Limited......... 2.10.13] Hon'ble Delhi Bench of ITAT in the case of ITO vs Neelkanth Finbuild Limited [ Appeal No ITA No 2821/ Del/ 2009 dt 01-04-2015] for the Asst Year 2006-07........... 2.10.14] That Hon'ble Mumbai Bench of ITAT in the case of Veedhata Tower P Limited [ ITA No 7070/ Mum/ 2014 ] dt 21-01-2015.......... COUNTER ON THE SUBMISSION OF THE LD CIT DR 2.11] The Ld CIT DR during the course of hearing before the Hon'ble Bench argued that huge share premium of Rs. 40/- Per share was received by the assessee. The Ld CIT DR also referred the blank transfer deed of the share applicant. The Ld CIT DR and Sr DR placed reliance on the following decisions:- S.No. Reference of Decision Citation of the Decision 1 CIT vs Korlay Tradingn CO Ltd 232 ITR 820 [ Calcutta] 2 N Tarika Property Invest (P) Ltd 51 taxmann.com 387 [SC] 3 CIT vs N R Portfolio (P) Ltd 42 taxmann.com 339 [ Delhi] 4 Gayathri Associates 41 taxmann.com 526 [ AP 5 CIT vs ....
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.... Delhi ] 4 CIT vs Fair Finvest Ltd 357 ITR 146 [ Delhi ] 5 M/s Gabs Fabrics (P) Ltd ITA No 3473/ Del/ 2013 2.15] That in the present appeal, the assessee company has properly discharged its onus as lying U/s 68 of the Income Tax Act. The assessing officer utterly failed to make independent inquiry. Hence, following the decision of the Hon'ble Delhi High Court in the case of Gangeshwari Metal P Limited [ Supra], addition made to the income of the assessee on account of share application money is not justifiable. Hon'ble Bench is therefore requested to delete the same and oblige." 6. On the other hand, ld. DR submitted that there was search u/s 132 of the Act and during the search proceeding, the assessee has received money from various companies as share application money as per assessment orders. The ld. DR submitted that as per the decision of MP High Court in the case of CIT vs. Rathi Finlease Ltd. 215 CTR 429 (MP) wherein considering the judgment of Hon'ble Supreme Court in the case of CIT vs. Steller Investment and the judgment of Hon'ble Supreme Court in the case of Lovely Export Ltd., 11 ITJ 357, Hon'ble High Court has held that each and every transaction of s....
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....se inference can be drawn unless the other parties are allowed crossexamination, who have admitted that they are banami lenders in the case of Sanjay Agrawal and Smt. Meena Agrawal. Hence, no negative inference can be drawn against the assessee.The assessing officer during the course of assessment proceeding simply asked about the inquiry made by investigation wing of Surat and Mumbai but detail of the same was not provided. The assessing officer asked specific query only in respect of investment made by M/s Shresth Leasing & Finance Limited and also in respect of complaint filed by the director of M/s Delta Fashion Limited with the economic offence wing. The assessee during the course of assessment proceeding and also in the appellate proceeding it was categorically explained that Shri Suneet Kabra, Director of M/s Shresth Leasing &Finance Limited, personally appeared before the ITO ( Inv) Mumbai and his statement was recorded wherein he has accepted that investment in the share capital of the assessee company was made. The said explanation of the assessee was reproduced by the assessing officer in his order and the assessing officer also failed to counter the claim of the assesse....
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....of the shares by the different family members again proved the identity of the shareholders. Hence, in any case, addition to the income of the assessee was not justified. If the Ld. CIT(A) was of the opinion that shares were purchased at very low price in that case, necessary addition is to be made in the hand of the directors and other family members under the I.T. Act but not in the case of the appellant company.In the present appeal, since the assessee has discharged its onus by proving the identity of subscribers and even otherwise had any suspicion still remained in his mind, nothing prevented him to initiate action as per the provisions of the Act. The existence of subscriber to share application is not in doubt as the assessee duly furnished their names, age, address, date of filing the application, number of shares for which respective applications were made, amount given and the source of income of the applicant. In view of these facts, we are of the considered opinion that there is no justification for making the impugned addition because once the existence of the investor/share subscribers is proved, onus shifts on the revenue to establish that either the share applicant....
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.... The aforesaid judgment has been followed by all the Courts and the judgments relied on by the appellants relates to the period prior to the judgment in Lovely Exports. As the Apex Court has specifically held that if the identity of the person providing share application money is established then the burden was not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said Company in accordance with law. The position of the present case is identical. It is not the case of any of the parties that M/s Alliance Industries Limited, Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said Company by way of share subscription was in fact the money of the respondent assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P) Ltd., we have to see only in respect of the establishment of the identity....
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.... present appeal, since the identity of such share subscribers, as we have discussed above, was established, therefore, no addition u/s 68 is warranted in the case of the assessee company. So far as the decision from Hon'ble jurisdictional High Court in the case of CIT vs. Rathi Finlease Limited (2008) 215 CTR (MP) 249 is concerned, in that case, despite several opportunities, the assessee was unable to provided confirmations from the concerned parties, therefore, the Hon'ble Court reached to a particular conclusion, whereas in the present appeals, the identity of share applicants, namely, M/s. Shrilal Traders Private Limited, M/s Lakeview Vinimay Private Limited, M/s Saharsh Suppliers Private Limited and M/s Ambitions Tie Up Private Limited was established, therefore, in view of the decision from Hon'ble Apex Court in the case of Lovely Exports Private Limited (supra), this judicial decision from Hon'ble High Court may not help the revenue. 6.So far as the argument of the learned Sr. DR and the objections / observations of the learned Assessing Officer/learned Commissioner of Income Tax (Appeals) that these are paper companies only, the contention raised on behalf ....
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....be the copies of the shareholders register, share application forms, share transfer register, etc; (c) The creditworthiness or financial strength of the creditor/subscriber can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. The AO can discredit the documents produced by the assessee with cogent reasons and materials but not on the realm of suspicion; (ii)If the assessee has produced documents like PAN Card, bank account details or details from the bankers the onus shifts upon the AO and it is for him to reach the shareholders and the AO cannot burden the assessee merely on the ground that summons issued to the investors were returned back with the endorsement "not traceable" (v) There is an additional burden on the Department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the ....
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.... Assessing Officer as a result of investigations carried out by the revenue authorities into the activities of such "entry providers". The existence with the Assessing Officer of material showing that the share subscriptions were collected as part of a premeditated plan - a smokescreen - conceived and executed with the connivance or involvement of the assessee excludes the applicability of the ratio. In our understanding, the ratio is attracted to a case where it is a simple question of whether the assessee has discharged the burden placed upon him under sec.68 to prove and establish the identity and creditworthiness of the share applicant and the genuineness of the transaction. In such a case, the Assessing Officer cannot sit back with folded hands till the assessee exhausts all the evidence or material in his possession and then come forward to merely reject the same, without carrying out any verification or enquiry into the material placed before him. The case before us does not fall under this category and it would be a travesty of truth and justice to express a view to the contrary. (emphasis supplied) As can be seen from the above extract, two types of cases have been indic....
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.... category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the assessing officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under section 68 of the Act. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. The appeal is dismissed." Hon'ble Delhi High Court in the case of CIT (Central)-III vs Anshika Consultants P Limited [ Appeal No ITA 467/ 2014 dt 16-04-2015 ] has held that:-______ Whether the assessee company charged a higher premium or not, should not have been the subject matter of the enquiry in the first instance. Instead, the issue was whether the amount invested by the share applicants were from legitimate sources. The objective of Section 68 is to avoid inclusion of amount which are suspect. Therefore, the emphasis on genuineness of all the three aspects, identity, creditworthiness and the transaction. What is disquieting in the present case is when the assessment was completed on 31.12.2007, the investigation report which was specifically called from the concer....
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....n letter. In the present appeal, the matter in dispute is not unsecured loan but share capital and it was categorically held that the assessee need to prove the identity of the share holders only. The assessee in present case not only filed confirmation letter but ample documents as to discharged the onus lying on the assessee. Hence, decision of the Hon'ble Calcutta High court are distinguishable on the fact of the present case. In case of N Tarika Property Investment (P) Ltd , Hon'ble Delhi High court as reported in 40 taxmann.com 525 and by the Hon'ble Apex court as reported in 51 taxmann.com 387 has observed that the bank account as provided was forged and fabricated bank account. In the present appeal in hand the assessee has provided copy of bank statement, PA No and various other documents and the assessing officer failed to pointed out any defects in these documents. Hence, the facts of the case of N tarika Property Investment [P] Ltd is distinguishable with the facts of the present appeal in hand. In case of CIT vs N R Portoflio (P ) Limited as reported in 42 taxmann.com 339, Hon'ble High Court has observed that mere providing the PA No by the appellant and not co-oper....
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....uineness and creditworthiness of the share application money . In the present case as stated the assessee has extend its full co-operation and also filed ample documents as to prove the ingredients of provision of section 68 of the Act. The share of the assessee company was not buy back by the assessee company but the transactions were executed between the share holders in the previous year relevant to the Asst Year 2006-07. Hence, fact of the case of MAF Academy (P) Limited was distinguishable with the fact of the present case of the assessee. In the case of Subhlakshmi Vanijya ( P) Ltd as reported in 60 taxmann.com 60 , Hon'ble Kolkata Bench observed that insertion of the proviso to section 68 was retrospective in nature. That proviso to section 68 of the Income Tax Act was inserted by the Finance Act 2012 w.e.f 01-04-2013. Since, the date of applicability was clearly mentioned with this amendment, Hence, the said insertion of the proviso have prospective applicability. That Hon'ble Mumbai Bench of ITAT in the case of Veedhata Tower P Limited [ ITA No 7070/ Mum/ 2014 ] dt 21- 01-2015 has discussed the issue of share application money in detail and held that the assessee prior t....
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....find that in this case, the Assessing Officer has simply made the addition on the information collected by Investigation Wing as a gospel truth. In our mind, that information could be sufficient for starting investigation but that cannot substitute all sort of evidence. We find that in this case, the identity of the investor, genuineness of the transaction and credit worthiness of the share applicant is proved. Even share applicants were available with the Assessing Officer in form of balance-sheet, incometax returns, PAN details etc. Assessee co. received the subscription through one public right issue through banking channel and furnished complete details of shareholders, thus, no addition cold be made u/s 68 of the I.T. Act in absence of any positive material or evidence to indicate that shareholders were benami or fictitious persons or that any part of share capital represented company's own money from undisclosed sources. Therefore, we delete the additions u/s 68 of the I.T. Act in all the AYs 2001- 02 to 2004-05. 10. In respect of other years, the ld. CIT(A) has passed the common order for all the AYs from AY 2001-02 to 2004-05, therefore, we allow all the appeals for all th....
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....tter carried to ld. CIT(A) and ld. CIT(A) has confirmed the addition by observing as under: "1.4.1] That provision of section 153A is special and independent code. That during the course of search assessment what can be added is the amount of income detected during the course of search. If this addition as done by the assessing officer is permissible in that case there is no reason for execution of the search. Since, all these information were provided by the assessee itself with the return of income. 1.4.2.1]That language of section 153A of the Income Tax Act read as under:- "153A. Assessment in case of search or requisition..Notwithstanding anything contained in s. 139, s. 147, s. 148, s. 149, s. 151 and s. 153, in the case of a person where a search is initiated under s. 132 or books of account, other documents or any assets are requisitioned under s. 132A after the 31st day of May, 2003, the AO shall. (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in cl. (b), in the prescribed form and verified in the prescr....
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....ding on the date of search shall abate. In other words, the assessments which are not pending shall hold thefield. The language of s. 153A is not unambiguous and is not susceptible to only one meaning. In the circumstances, the principle of literal construction is of no help. One of the salutary rules is rule of harmonious construction. According to this rule, a statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment. The meaning of assessment/reassessment does not always mean taking recourse to the whole procedure laid down in the Act for computing the tax liability. It is possible to effect reconciliation of the two provisos appended to s. 153A by restricting the meaning of the term "assess or reassess" appearing in the first proviso. After the search, the total income of the assessee is to be recomputed on the basis of the undisclosed income unearthed during search and the same is to be added with the regular income assessed under s. 143(3) or computed under s. 143(1) for each of the six preceding assessment years. Where any prepaid taxes are there, the same are requi....
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....assessment operate in different fields and have different purposes to be fulfilled altogether. Items of regular assessment cannot be added back in the proceedings under s. 153C when no incriminating documents were found in respect of the disallowed amounts in the search proceedings. The additions made by the AO, being all relating to regular assessments are hereby deleted..Raj Krushna Bose vs. Binod Kanungo AIR 1954 SC 202, Mohammad Sher Khan AIR 1922 PC 17 and King vs. Dominion Engineering Co. Ltd. AIR 1947 PC 94 applied; Abhay Kumar Shroff vs. CIT (2007) 210 CTR (Jharkhand) 602 : (2007) 290 ITR 114 (Jharkhand) relied on. " 14. Ld. AR has filed written submission, which reads as under: "1.1] The assessee in the Ground No 1 of all the appeal has challenged the addition to the income of the assessee on account of share application money even when no incriminating documents were found and seized during the course of search. 1.2] That in the case of the above assessee search U/s 132 of the Income Tax Act was executed on 21-11-2006 and in consequence of search action, notice u/s 153A of the Income Tax Act was issued on 08-10-2007 for the Asst Year 2001-02 to 2006-07 and year of sear....
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....ssment year falling within such six assessment years ." 1.6.2] That as per second proviso to section 153A[1] of the Income Tax Act read as under:- " Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub- section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate." 1.6.3] That as per sub- section (2) of section 153A of the Income tax read as under:- " [2] If any proceeding initiated or any order of assessment or re-assessment made under sub- section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal commissioner or commissioner." 1.6.4] That in the present appeal relates to the Asst years 2001-02 to 2004-05 , return of income in respect of all the assessment years ha....
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....the AY in which the search takes place. II] Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. III] The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". IV] Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." V] In absence of any incriminating material, the c....
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....ch, the Assessing Officer cannot pass order u/s 153A r.w.s. sec. 143(3) of the I.T. Act in the case of Kalani Bros. in IT(SS)A No.71/Ind/2014 and others. The relevant portion of the order is reproduced hereunder: "8. In respect of 153A bad in law on the ground that original assessment proceedings u/s 143(3) was completed on 29.12.2006 (hereinafter referred as "original assessment order for ease of reference), the AO treated the said lease transaction as sale transaction and taxed the total security deposit receivable as sale consideration of sale of land. The addition made in the search assessment order pertained to the issue already dealt in the original assessment order i.e. lease transaction categorized as sale transaction. The fact that the aforesaid issue bears no relation to the any of the material / documents / records found and seized during the search action on 16.04.2009. Ld. CIT(A) has relied upon the Circular No. 7 of 2003 which clarifies the position of the pending appeals as on the date of the search. The relevant portion is produced herewith - "The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reass....
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....ment of any proceedings in these cases for these assessment years in terms of second proviso to section 153A of the Act. There is no seized material belonging to the assessee which was found and seized in relation to additions made. In a recent decision, Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has held that completed assessments can be interfered with by the Assessing Officer while making assessment u/s 153A of the Act, 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 was not produced or not already disclosed or made known in the course of original assessment. In all these cases no assessments were pending on the date of search for these assessment years. No assessments were abated in terms of second proviso to section 153A of the Act. Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) has considered various High Court decisions relied upon by the learned DR. The Hon'ble Delhi High Court has considered the cases of Canara Housing Development Co. vs. DCIT; Madugula vs. DCIT; CIT vs. Che....