TaxTMI 
TaxTMI 
2019 (3) TMI 1117
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....il income. Original assessment was completed u/s 143(3) on 26th December, 2011 at a loss of Rs. 1,06,53,140/-. Tax was levied u/s 115JB on the book profit of Rs. 1,19,22,760/-. A search and seizure operation u/s 132 of the IT Act was carried out on 28th March, 2015 in the case of M.M. Aggarwal Group of cases during which the case of the assessee was also covered. In response to notice u/s 153A of the Act issued to the assessee on 10th May, 2016, the assessee filed the return of income on 28th May, 2016 declaring nil income. During the course of assessment proceedings, the Assessing Officer observed that it was gathered during the course of pre-search enquiries that the assessee group had received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and credit worthiness. The search action established beyond doubt that the assessee company like other group companies had received share capital from various non-descript and shell companies/entities which grossly lacked credit worthiness and were in the nature of accommodation entries. He observed that during pre-search verification spot enquiries were made at the reg....
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....G Finance India Ltd. 6. The Assessing Officer observed that the assessee has received the share capital/share premium and share application money from different persons during assessment year 2008-09 to 2015-16 which are as under:- 1. M/s Versatile Polytech Private Limited S.No. Name of the investor company/ person from whom share capital/ premium received. No. of shares Total amount Rate of share premium Total Share Premium A.Y. 2009-10 1. Moon Beverages Ltd. 70385 18300100 250 17596250 2. Enrich Agro Food Products Pvt. Ltd. 70385 18300100 250 17596250 A.Y. 2014-15 1. Moon Beverages Ltd. 71731 18650060 250 17932750 2. Enrich Agro Food Products Pvt. Ltd. 53655 13950300 250 13413750 3. Focus Buildwell Pvt. Ltd. 9807 2549820 250 2451750 4. MSG Finance India Pvt. Ltd. 8269 2149940 250 2067250 7. He observed that the company M/s Versatile Polytech Pvt. Ltd. has shown to have received share capital in each of the previous year relevant to assessment year 2009-....
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.... the sales and income figures of these investor entities as per their ITD database details depict too meek a balance sheet to justify such huge fund transfer transactions in their bank accounts, along with other observations as mentioned clearly suggests that these accounts belong to various entry providing companies and the same were utilized to provide accommodation entries to the beneficiaries, i.e., Kandhari group. According to the Assessing Officer, no investor has been produced by the assessee group. The assessee failed to furnish any documentary evidence regarding the existence of such investor. Mere filing of confirmations from parties, according to the Assessing Officer, does not discharge the onus of the assessee. According to him, it cannot be believed that investors invests their crores of rupees in a non-listed company without any return and the recipient company even does not have the particulars/contact details of such investors. He, therefore, asked the assessee to establish the identity, credit worthiness and genuineness of the investors who had subscribed to the share capital of the assessee company. The assessee, in response to the same, filed various details lik....
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....brought any material on record to indicate that the investment is unexplained. It was argued that the investors are incorporated companies, accounts of which are duly audited. The accounts of the investors clearly show that the investment is duly recorded in their books of account. It was argued that income is not a criteria for making an investment and the criteria is availability of funds which is clearly proved from the accounts of the investors. Therefore, there was no occasion for the Assessing Officer to make such an addition. 13. Based on the arguments advanced by the assessee, the ld.CIT(A), relying on various decisions including the decision of Hon'ble Delhi High Court in the case of Pr. CIT vs. Best Infrastructure India Pvt. Ltd. (2017) TIOL 2203, the decision in the case of PCIT vs. Meeta Gutgutia (2017) TIOL 1000, the decision in the case of CIT vs. Kabul Chawla, ITA No.707/2014, Order dated 28th August, 2015 and various other decisions held that since no incriminating material was found during the course of search in respect of equity share capital, it cannot lead to the conclusion drawn by the Assessing Officer. No corroborative evidence was brought on re....
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....saction related to share capital/ premium where as the assessee failed to discharge the primary onus cast upon it u/s 68 of the IT act 1961 of proving identity, satisfactory explaining the creditworthiness and genuineness of these transactions. 4. The Id. CIT(A) has erred on facts and in law in not even considering the statements of directors of the investing companies admitting that the investing companies in which they are directors, are actually paper companies meant for providing accommodation entries. 5. The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal." 16. The ld. DR strongly challenged the order of the CIT(A) deleting the addition both legally and on merit. She submitted that incriminating documents were found during the course of search and pre-search enquiries that most of the companies of the group which had contributed share capital with the assessee company are only paper companies/shell companies without having any credit worthiness. The admission made by Shri Varinder Pal Singh Kandhari and Shri Pradeep Kumar Shastri constitutes valid evidence under the Indian Evidenc....
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....l) (vi) M/s Pebble Investment & Finance Ltd. vs. ITO, 2017-TIOL-238-SC-IT (vii) Raj Hans Towers (P) Ltd. vs. CIT, 56 taxmann.com 67 (viii) PCIT vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Del) 18. The ld. counsel for the assessee, on the other hand, strongly relied on the order of the CIT(A). He submitted that the original assessment in this case was completed u/s 143(3) on 26th December, 2011 at a loss of Rs. 1,06,53,140/- and income u/s 115JB at Rs. 1,19,22,760/-. The search took place on 28th March, 2015 and on the date of search no assessment was pending. No incriminating material was found during the course of search relating to share application money which is the subject matter of appeal. Relying on various decisions including the decision of the Tribunal in the case of the sister concern, namely Moon Beverages Ltd. vs. ACIT 2018-TIOL 1159, order dated 7th June, 2018, he submitted that under identical circumstances, the Tribunal has deleted the addition on the ground that no addition could have been made u/s 153A since the assessment was not abated and no incriminating material was found/seized during the course of search and the addition was made only on ....
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....stment in the assessee company. Relying on various decisions, he submitted that the assessee in the instant case has clearly proved the identity and credit worthiness of the investors and genuineness of the transaction. The facts mentioned in the assessment order are cut and paste orders from some other case and are not applicable to the facts of the present case. The assessee has not only proved the source of funds, but has also demonstrated that these companies are not paper companies. The group companies are only the investors and the companies are yielding income before investment. Therefore, the various decisions relied on by the ld. DR are distinguishable and are not applicable to the facts of the present case. He accordingly submitted that both legally and factually the addition is not sustainable. Since the order of the CIT(A) is in consonance with law, therefore, the same has to be upheld and the grounds raised by the Revenue should be dismissed. 20. We have considered the rival arguments made by both the sides and perused the relevant material available on record. We have also considered the various decisions cited before us. We find the original return of income in....
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....otice u/s 143(2) expires on 30.09.2014 i.e. the notice u/s 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice u/s 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28.03.2015. Under these circumstances, the finding of the ld. CIT(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 ITA No.7374/Del/2017 ITA No.7567/Del/2017 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 wi....
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....aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessees herein was not justified in law." 39. We find the Hon'ble Delhi High Court in the case of CIT vs. Harjeev Aggarwal reported in 290 CTR 263 has observed as under :- "23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 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 ....
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....Meeta Gutgutia reported in 395 ITR 526 has taken a similar view and has held that once the assessment has ITA No.7374/Del/2017 ITA No.7567/Del/2017 attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings u/s 153A of the I.T. Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings u/s 153A which are contrary to and/or nor disclosed during the regular assessment proceedings. 44. The Hon'ble Delhi High Court again in the case of Pr.CIT vs. Lata Jain reported in 384 ITR 543 has held that in absence of any incriminating material found as a result of search, assumption 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 ye....
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.... 24. In appeal, the ld.CIT(A) deleted the share application money to the extent of Rs. 14,34,620/- by observing as under:- "Findings 5.1 1 have considered the submissions of the Ld. AR, assessment order and case laws cited in this regard. The AO invoked Sec 153A after search on appellant group on 28.03.2015 on receipt of appraisal report from the DI (Investigation) with the allegation that the appellant company has received unexplained credit in its books u/s 68 of the IT Act. All the grounds of appeal are dealt with together being of similar in nature: 5.2 Regarding the merits, as per ground of appeal no. 5 & 6, 1 have gone through the assessment order passed by and A.O. and verified the material placed on paper book and was part of the assessment records also. All necessary information documents were requisitioned to verify the identity, genuineness of transaction and credit worthiness of the investors were duly submitted by the appellant for respective investors. The Ld. AR submitted following documents to prove identity, genuineness and creditworthiness of the investor: (a) Form 2 filed before ROC (b) Confirmations from the investors (c) Statements of bank a....
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....August 2017 in the case of Principal Commissioner of Income Tax, Delhi - 2 vs Best Infrastructure India Pvt Ltd ITA No.l3/2017 covers the case of the appellant on the facts. Relevant Para of the judgment is extracted below:- 31. In Principal Commissioner of Income Tax Central 2, NewDelhi v. Meeta Gutgutia(supra),this Court had considered the entire ground of case law on the assumption of jurisdiction under Section 153A of the Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia(supra) this Court had the occasion to extensively discuss the decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why the said decision was distinguishable in its application to the facts of the former case. However, since the same arguments have been advanced by the Revenue in the present case, the sold decision in Smt. Dayawanti Gupta v, CIT(supra) is being again discussed herein. 32. In Smt. Dayawanti Gupta v. CIT (supra) the Assessees were dealing in the business of pan masala, gutkha, etc. Firstly, the Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that the papers recovered d....
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....hare applicant companies. The CIT (A) has admitted the same as, additional evidence and has called for the remand report from the Assessing Officer. There is no cash deposit in the bank account of any of the share applicant before the issue of cheque for share application money to the group companies of the assessed. On the other hand, the credit is by way of transaction. During remand proceedings, the Assessing Officer has made necessary verification from the bank of the share applicant and no adverse finding is recorded by him in the remand report. Therefore, the facts on record are contrary to the allegation of the Revenue that the assessee gave cash to Shri TarunGoyal and he, after depositing the same in the bank account of various companies, issued cheques for share application money. On these facts, the decision of Hon'ble Jurisdictional High Court in the case of Harjeev Aggarval (supra) would be squarely applicable. Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because (i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him. ....
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....e on the basis of the projected sales of the assessee for next five years and this projected figures were supplied by the management to the valuer. According to him, neither the management nor the valuer has given any basis for the projected figures. Therefore, valuation done by the valuer was not found to be satisfactory for which he rejected the same. He, therefore, held that the assessee has not been able to justify the premium on which shares were issued. He accordingly confirmed the addition on account of premium amounting to Rs. 3,58,65,500/- (i.e., 1,43,462 shares @ Rs. 250/0) u/s 56(2)(viib) of the IT Act, 1961 read with Rule 11UA. 26. Aggrieved with such order of the CIT(A), the assessee is in appeal raising the following grounds:- "1. The Ld. CIT(A) has grossly erred on facts as well as in law in confirming the order passed by the Ld. AO which is ex facie illegal, arbitrary and without jurisdiction being against the provisions of Income Tax Act, 1961 and principles of natural justice. 2. a) The Ld. CIT(A) has grossly erred on facts as well as in law in ignoring the fact that the impugned additions u/s 143(3) / 153A were made by the Ld. AO in spite of the fact ....
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....r which shows that these companies are having sufficient funds and these are not paper companies. He submitted that the addition on merit which was argued while arguing for assessment year 2009-10 will be applicable for this year also. 28. So far as the addition sustained by the CIT(A) by invoking the provisions of section 56(2)(viib) is concerned, the ld. counsel for the assessee submitted that during assessment proceedings, the Assessing Officer has not considered any issue pertaining to section 56(2)(viib) which is evident from the assessment order. He submitted that it is the settled position of law that the CIT(A) does not have any jurisdiction to make such additions on the issues which were never considered by the Assessing Officer. He submitted that although the powers of the CIT(A) are co-terminus with that of the powers of the Assessing Officer, yet, he has jurisdiction only on those items which have been considered by the Assessing Officer irrespective of the fact whether the issue is the subject matter of appeal or not. The CIT(A) does not have any jurisdiction over those issues which have not been considered by the Assessing Officer because these will be the subje....
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....itted that there is no whisper in the order of the CIT(A) as to which figure was found incorrect and what should be the correct figure. He has completely ignored the various submissions made by the assessee and, therefore, the findings of the CIT(A) are against the materials on record. Further it is only in Explanation (a)(ii) of sec 56(2)(viib) that satisfaction of Ld. AO is required but there is no such condition in explanation (a)(i) which means that if shares are valued as per rule 11U/11UA, the AO is not permitted to reject the valuation. The valuation report filed by the appellant is also under expl. (a)(i) of sec 56(2)(viib). As per rule 11UA(2)(b), the assessee is required to fulfill only two conditions, firstly, to obtain a certificate from a merchant banker or a Chartered Accountant, secondly, the valuation must be based on Discounted Free Cash Flow method only. There is no other condition prescribed under this rule. In the case of the appellant, it has filed valuation report from a qualified Chartered Accountant whose valuation is based on Discounted Free Cash Flow method. Therefore, the appellant has complied with both the conditions. Since, the valuation filed by the a....
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....ion of the same cannot be made u/s 153A. He further held that the assessee has discharged the onus cast on it by proving the identity and creditworthiness of the share applicants and the genuineness of the transaction. The Revenue is not in appeal before us. However, the ld. DR, at the time of hearing, invoked the Rule 27 of the ITAT Rules and tried to argue the relief granted by the CIT(A) to the extent of Rs. 14,34,620/-. First of all, even though the argument advanced by the ld. DR is accepted for a moment, even then the tax effect on the relief granted by the CIT(A) will be within the limit prescribed by CBDT for filing of appeals by the Revenue. Therefore, at the threshold itself, the argument of the ld.CIT, DR falls flat and probably for this very reason, the Revenue has not filed any appeal against the relief granted by the CIT(A). Even otherwise also as mentioned while adjudicating the appeal for 2009-10, all the investor companies are group companies and their turnover and profitability etc. have been reproduced by the Assessing Officer in the body of the assessment order and therefore, these are not at all paper companies. Further, no incriminating material was found d....
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.... which the assessee makes a grievance and ranges over the whole assessment to correct the AO not only with regard to a matter raised by the assessee in appeal but also with regard to any other matter which has been considered by the AO and determined in the course of assessment. However, there is a solitary but significant limitation to the power of revision, viz. that it is not open to the AAC to introduce in the assessment a new source of income and the assessment has to be confined to those items of income which were the subject-matter of original assessment." 36. Similarly, the Delhi Bench of the Tribunal in Vikrant Puri vs. ACIT and vice versa, vide ITA No.142 & 5789/Del/2013 & ITA No.608/Del/2013, order dated 4th March, 2016 for assessment year 2008-09, after considering various decisions of the Hon'ble Delhi High Court and Hon'ble Supreme Court, has observed as under:- "9.1 We have gone through the assessment order as well as the impugned order passed by the Ld. CIT(A) on the additions in dispute, we are of the view that after admitting the additional evidence, Ld. CIT(A) has held that the stand taken by the Revenue that amount received by the assessee from ....
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....decisions rendered by the Hon'ble Supreme Court as well as Hon'ble High Court, we hold that Ld. CIT(A) did not have any jurisdiction to make such additions on the issues which were never considered by the AO as has been done in the present case. Therefore, the impugned order on the issues involved in the grounds of appeal are without jurisdiction and is not sustainable in the eyes of law, hence, we cancel the impugned order dated 26.11.2012 being without jurisdiction by accepting the Appeal filed by the Assessee." 37. The Hon'ble Delhi High Court in Sardari Lal & Co., reported in 251 ITR 864 (Del) (FB), has observed as under:- " This court was of the view that the question for consideration was whether the directions of the Appellate Assistant Commissioner to the Income Tax Officer to conduct enquiry and furnish information on the aforesaid points is within the scope of his powers under section 251(1)(a) of the Act. After noticing several judgments, it was held as follows : " Thus, the principle emerging from the aforenoted pronouncements of the Supreme Court is, that the first appellate authority is invested with very wide powers under section 251(1)(a) of the Act ....