TaxTMI 
TaxTMI 
2019 (6) TMI 142
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....f convenience. ITA No.7971/Del/2018 (A.Y. 2009-10) - Shri Rathi Steel Ltd. 3. Facts of the case, in brief, are that the assessee is a company and is engaged in the business of manufacturing of TMT bars having a manufacturing facility at Ghaziabad. It filed its return of income on 28th September, 2009 declaring total income of Rs. 1,72,95,890/-. The Assessing Officer completed the assessment u/s 143(3) on 29th December, 2011 determining the total income at Rs. 1,74,70,890/- wherein he made an addition of Rs. 1,75,000/- being fees paid to the RoC for increase in authorized share capital. A search and seizure action u/s 132 of the IT Act was conducted in the different business and residential premises of Rathi group of cases on 20th January, 2015. The case of the assessee company was also covered as one of the group companies and various incriminating papers/documents were found and seized during the course of search and seizure operation in this case. In response to notice u/s 153A of the IT Act, 1961, the assessee filed its return of income for the impugned assessment year on 22nd April, 2016 declaring total income of Rs. 1,71,16,922/-. The Assessing Officer issued statutory n....
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....share of face value of Rs. 10/-. Further, the companies which invested in the shares of the assessee company at such a high rate were hardly having any business activities of their own. The earning of these companies were so meager that it is highly improbable that these companies had their own funds to invest in the assessee company. To testify the availability of the share capital available with the companies who invested in the investing companies, he made inquiries by issuing summons through the Directorate of Income-tax (Inv.). The Assessing Officer noted that provisions of section 68 have been amended by Finance Act, 2012 w.e.f. 01.04.2013 whereby the onus is on the assessee to prove the source of source in the case of the receipt of share subscription to the satisfaction of the Assessing Officer. He referred to the decision of the Kolkata Bench of the Tribunal in the case of M/s Subhlakshmi Vanijya Pvt. Ltd. vs. CIT (2015) 60 taxmann.com 60 wherein the Tribunal has held that the amendment to section 68 of the Act is clarificatory and, hence, retrospective. According to the Assessing Officer, the provisions of section 68 of the Act casts onus on the assessee to satisfy all....
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....rmation and documents to prove the identity, genuineness and creditworthiness of share applicants. 1.4 That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that information received inpursuant to the remand report is deficient in establishing the capacity of the investor and genuineness of the share capital subscription transactions. The appellant craves leave to add, amend, alter or vary the above grounds of appeal at or before the time of hearing." 8. The ld. counsel for the assessee, at the outset, referring to pages 23 to 31 of the paper book, submitted that the assessee had already been assessed by the Assessing Officer u/s 143(3) of the Act vide order dated 29th December, 2011 i.e., much prior to the date of search determining the total income of the assessee at Rs. 1,74,70,890/- wherein he had made addition of Rs. 1,75,000/- on account of fees paid to RoC for increase in authorized share capital. He submitted that in the instant case, the additions were made by the Assessing Officer in the order passed u/s 153A/143(3) only on the basis of the balance sheet filed during the course of assessment proceedings and not on the basi....
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....ers Ltd., 2015 TMI 1523; vii) ACIT vs. Sameer Gupta (ITA No.514,515/Del/2017); viii) Sharp Mint Ltd. vs. DCIT (ITA No.3623/Del/200; ix) Moon Beverages Ltd. and Hindustan Aqua Ltd. vs. ACIT (ITA No.7374/Del/2017 & 7567/Del/2017). 10. He accordingly submitted that no addition in the instant case can be made since no incriminating material was found during the course of search. 11. So far as the merit of the case is concerned, he submitted that the assessee has filed full particulars giving the PAN and assessment particulars of the investor companies, their bank statements, copy of audited financial statements, confirmations provided by the investor companies and copy of ledger account of the investor companies in the books of the assessee for the relevant year under consideration. Even during remand proceedings, summons were issued to the investors of the of the investing companies and the investors of the investing companies have also filed the requisite details. Thus, the assessee, in the instant case, has not only proved the source, but also the source of the source. The assessee has discharged the onus cast on it in terms of section 68 of the A....
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....ntical to the facts of judgement delivered by Hon'ble Supreme Court in PCIT vs. NRA Iron and Steel [2019] 103 taxmann.com 48 -dated 05.03.2019, and judgement delivered by Hon'ble Delhi High Court in NDR Promoters Pvt. Ltd. (2019-TIOL-172-HC-DEL-IT). The enquiries carried out during search revealed that these investor companies were not even found existing at their registered address and all these companies were controlled by one or two persons and the directors were only name lenders. There is a categorical admission by the person controlling the investor companies that cash was accepted by him before issuing cheques to beneficiaries for investing in those beneficiary companies in the form of share application money and in turn he received commission of 0.5% on total amount. He has also admitted that he was regularly providing such accommodation entries from number of years. Further, during the course of assessment proceedings, the directors failed to appear before AO with the relevant books of accounts and documents even on being provided such opportunity twice. He submitted that all the investor companies, who had purchased shares of assessee companies at huge premium, in....
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....g material. The Hon'ble Delhi High Court in the case of Kabul Chawla (supra) while deciding an identical issue has observed as under:- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to 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 ....
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....that the SLP filed by the Revenue against the order of the Hon'ble Delhi High Court in the above decision was dismissed by Hon'ble Supreme Court. Similar view has been taken by the Hon'ble Delhi High Court in the case of Pr. CIT vs. Best Infrastructure (India) Pvt. Ltd.(supra); Pr. CIT vs. Baba Global Ltd. .(supra); Pr. CIT vs. Dharampal Premchand Ltd. (supra); and CIT vs. Jakson Engineers Ltd. (supra) by following its earlier decision in the case of Kabul Chawla (supra). The various other decisions relied on by the ld. counsel for the assessee also supports the case of the assessee. 17. We find the coordinate Bench of the Tribunal in the case of Moon Beverages Ltd. and Hindustan Aqua Ltd. vs. ACIT, ITA No.7374/Del/2017 & 7567/Del/2017, order dated 7th June, 2018, has decided an identical issue and held as under:- "35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction u/s 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact ....
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....iries. 38. The Hon'ble Delhi High Court in the case of CIT vs. Best Infrastructure (India) (P) Ltd. reported in 397 ITR 82 has held that statements recorded u/s 132(4) of the I.T. Act do not by themselves constitute incriminating material. The relevant observation of the Hon'ble High Court reads as under :- "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non- existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or ....
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....t addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search." 41. In the light of the above decisions, statements recorded u/s 132(4) of the I.T. Act, 1961 cannot constitute as incriminating material. 42. As mentioned earlier, the addition of Rs. 11,85,00,000/- was not made on the basis of any incriminating material but is based on statements recorded during the search u/s 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed u/s 153A in absence of any incriminating material. 43. The Hon'ble Delhi High Court in the case of Kabul Chawla reported in 380 ITR 573 has held that the completed assessment can be interfered with by the Assessing Officer while making the assessment u/s 153A only on the basis of some incriminating material found on or during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or not known in the course of original assessment. Following the above decision, the ....
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....the basis of balance sheet filed by the assessee in the return of income, therefore, respectfully following the decisions cited (supra) we hold that the addition made by the Assessing Officer u/s 68 of the IT Act on account of increase in share capital which has been upheld by the CIT(A) is not justified. Accordingly, the order of the CIT(A) is set aside and the Assessing Officer is directed to delete the addition. 19. Since the assessee succeeds on this legal ground, the addition on merit is not being adjudicated being academic in nature. 20. In the result, the appeal filed by the assessee is allowed. ITA No.7972/Del/2018, A.Y. 2011-12 (Shri Rathi Steel Ltd.) 21. The grounds of appeal raised by the assessee read as under:- "1. That the Commissioner of Income-tax (Appeals) erred on facts and in law in upholding addition of Rs. 1,76,20,000/-made by the assessing officer under section 68 of the Income- tax Act, 1961 ("the Act"), not appreciating that the appellant has rightly discharged the primary onus by proving the identity, genuineness and creditworthiness of the entities by submitting plethora of evidences. 1.1 That the Commissioner of income-tax (A....
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....d on facts and in law on confirming the addition which was merely on the basis of information received from the Investigation Unit of Income tax department without even an iota of evidence or adverse document in context to the same. 1.3 That the Commissioner of Income-tax (Appeals) erred on facts and in law in not appreciating that the Appellant had submitted all the relevant information and documents to prove the identity, genuineness and creditworthiness of share applicants. 1.4 That the Commissioner of Income-tax (Appeals) erred on facts and in law in holding that information received in pursuant to the remand report is deficient in establishing the capacity of the investor and genuineness of the share capital subscription transactions. The appellant craves leave to add, amend, alter or vary the above grounds of appeal at or before the time of hearing." 24. After hearing both the sides, we find the above grounds are identical to grounds of appeal in ITA No.7971/Del/2018. We have already decided the issue and the grounds raised by the assessee have been allowed. Following similar reasonings, the grounds raised by the assessee are allowed. ITA No.7....