TaxTMI 
TaxTMI 
2021 (11) TMI 318
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....plained share application money u/s 68 of the Income Tax Act, 1961 without appreciating the fact that the addition made by the Assessing Officer was based on incriminating loose papers seized from the premises of 250, Sagar Plaza, M.P. Nagar, Zone-2, Bhopal. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) erred in inferring that the assessing officer did not record the satisfaction before initiating the proceeding u/s 153C of the Act particularly when the assessing officer duly recorded his satisfaction before commencing the proceedings u/s 153C of the Income Tax Act 1961 and which was available on record. 3.On the facts and in the circumstance of the case, the Ld. CIT(A) erred in not appreciating that corroborative and cogent evidences were found during the course of search which clearly establish that the assessee was in receipt of share application money of which the identity, genuineness and creditworthiness could not be proved by the assessee to the satisfaction of the assessing officer during the assessment proceedings. The appellant reserves his right to add, amend or alter the grounds of appeal on or before the date. The appea....
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....e is A.Y. 2008- 09. Assessee filed returns of income for A.Y. 2008-09 to 2011-12 on 29.10.2013. During the course of assessment proceedings, Ld. Assessing Officer found that the assessee has received share application money of Rs. 2,03,50,000/- in A.Y. 2011-12. The Assessing Officer asked the assessee to explain the same. In response, the assessee filed its replies stating that it has provided all the requisite details relating to the share holders e.g. complete names and addresses, relevant documents. However, the Assessing Officer did not accept the contentions of the assessee stating that the assessee failed to offer satisfactory explanation in respect of the nature and source of the share application money credited in the books of accounts in the relevant assessment year and added Rs. 2,03,50,000/- to the income of the assessee on account of undisclosed income u/s 68 of the I.T. Act. Being aggrieved, the assessee approached the ld. CIT(A) and ld. CIT(A) quashed the assessment on legal grounds. Now, the Revenue is in appeal before this Tribunal. 3. Before us, ld. CIT-DR defended the order of the Assessing Officer and submitted that since the assessee failed to offer satisfact....
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....sessments made by the A.O. for AY. 2009 10 to 2011@12 ore held unsustainable in law ond. therefore, the same are hereby quashed. 6.10 Coming back to the facts of this case it is undisputed that, no satisfaction was recorded by the AO of searched person. The AO even in the remand report has unequivocally admitted the same and said that he was unable to trace the satisfaction note in the case record of the appellant. From verification of case records received from AO., it is definite that 'no satisfaction' was recorded by the AO. of the searched person, because it is not available with AO. as well as on the case records. Considering the aforesaid judicial view on the scope of initiation of proceedings u/s 153C and assumption of jurisdiction in the unabated cases which is consistently followed by Hon' ble MP High Court and Circular no 24/2015 issued by Board, I have no option but to respectfully follow the view, that in search cases recording of satisfaction by both the AOs. i.e. the AO of searched person and AO. of the assessee before issuing notice u/s 153C is a sinequa-non and in absence of the same proceedings u/s 153C are bad-in-low. Having decided that issue....
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.... (lnd) (xvi) Amandeep Singh Bhatia Vis. ACIT - 29 ITJ 1 (lnd) (xvii) Sanjay Agarwal Vs. DCIT - 169 ITJ 282/291 (xviii) (Hyd) Himanshu B Kanakiya - 46 ITR (Trib) 756 (Mum) (xix) Anant Steef Pvt Ltd Vs. ACIT - 28 ITJ 47 (lnd) (xx) DCIT Vs. Kalani Brothers (Indore) Pvt Ltd - (2016) 27 ITJ 286 (lnd-Trib) (xxii) Chandrabhan Lal Chandani Vs. ACIT- J (J j, Bhopal - ITA No.IT(SS)A (xxiii) Rawal Das Jaswani vs. ACIT (2015) 43 CCH 606 (Raipur-Trib) 7.1. It has been held in the case of CIT V /s Kabul Chawla (supra) that in absence of any incriminating material, the completed assessment cannot be reopened and reassessment cannot be made. The word 'assess' in section 153A is relatable to abated proceedings and the word 'reassess' to completed assessment proceedings. Completed assessments can be interfered with by the Assessing Officer while making the assessment u/s.153A 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 were not produced or not already disclosed or made ....
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....ed amounts in the search proceedings. Further, it is again reiterated that as per the provisions of section 153C, additions can be made only when there is any. undisclosed income/unexplained cash or unexplained investment found on the basis of incriminating documents found during course of search". In the case of Global Realty Creations ltd & Ors Vs. DCII & Ors. Reported in (2017) 49 CCH 0454 (Del- Trib), wherein it is held as under:- Search and seizure-New scheme of assessment in search cases-Assumption of jurisdiction u/s 153C-Addition- Unexplained cash credit-Appellant-assessee company was engaged in business of lending money, securities and property and to discount, buy and sell and deals in biJJs, notes, warrant coupons and other negotiable or transferrable securities and documentsAO observed that, on perusal of ledger account of share application money filed by assessee revealed that assessee company received fresh share application money from different concerns-Accordingly, show cause notice was issued requiring it to prove identity and creditworthiness of parties as well as genuineness of those transactions and in response to same assesse filed only share ....
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....late order, court find that in the present case the AO has completed the assessment u/s. 153C of the I. T. Act, 1961 and made the addition in dispute without any incriminating material found during the search and seizure operation and the addition in this case was purely based on the material already available on record, which is not sustainable in the eyes of law, hence, needs to be deleted. Also on ttie perusa! nf the assessment order undisputedlv indicates that no reference whatsoever has been made to any material found/ seized during the course of search. {Para 13.7} Assumption of jurisdiction u/s 153C on account af very compelling specific focts evidencing that documents/assets not only belonged to those person but those documents assets evidenced clear existence of undisclosed income and when AO made addition without any incriminating material found during search and seizure operation, addition would not be sustainable. Respectfully following the binding precedent on this issue, in absence of any incriminating material found during the search and seizure operation and the impunged additions being purely based on material already available on record,....
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....igh Court in the case of Pepsi Food 367 ITR 112 and the decision of the MP High Court in Machen 380 ITR 591. CIT Vs. Calcutta Knitware (supra) and M.P. High Court in the case of CIT Vs. Mechmen (Supra) and CBDT Circular No. 24/2015 dated 31.12.2015, the assessment made by the A.O. was rightly quashed by the ld. CIT(A). Therefore, we do not find any infirmity in the order of the ld. CIT(A). We confirm the order of the ld. CIT(A) on this issue. Since, the assessment itself is quashed, the ground raised in the appeal of the Revenue with regard to challenging the absence of incriminating material has now, being academic in nature, become infructuous and consequently, the grounds raised in the appeal of the Revenue stand dismissed. 8. Now, we shall take up the appeal filed by the assessee i.e. IT(SS)A No.90/Ind/2020 for the assessment year 2012-13. The appeal is time-barred by 83 days. Ld. Counsel for the assessee submitted that the delay in filing the appeal is due to country-wide lockdowns imposed by the government in wake of Covid-19 outbreak and taking cognizance of the same the government had introduced the taxation and other laws (Relaxation and Amendment of Certain Provisions)....
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....e reiterated the submissions made before ld. CIT(A) and submitted that 10. Per contra, ld. CIT-DR defended the order of the Assessing Officer and submitted that since the assessee failed to prove the identity of the alleged lenders, the credit worthiness of the lenders and the genuineness of the transactions, the Assessing Officer was justified in making addition on account of undisclosed income u/s 68 of the I.T. Act. 11. We have heard rival contentions of both the parties and perused material available on record. We find that the Assessing Officer made the addition u/s. 68 in respect of the share application money received from the following persons :- S.No. Name of share applicant PAN Amount Evidences furnished 1 Chabadiya Developers Pvt Ltd F-77, B, Second Floor, Laxmi Nagar, Delhi 110092 AACCC7553R 5000000 (1) Share application form. (2) Confirmation letter from the company (3) Board Resolution (4) Receipt of share certificate (5) Affidavit of director (6) Bank statement of the company (7) Copy of Income Tax Return (8) Copy of audited final accounts (Balance sheer, P & L A/c etc.). (9) Certification of incorporation ....
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.... 25000 (1) Form No. 16 23. Jainendra Jain 22, Aakriti Garden, Nehru Nagar, Bhopal. ADYPJ9662J 25000 (1) Form No. 16 24. Jyoti Jain A-177, Sagar Estate Ayodhya Bye Pass Road, Bhopal. ADVPJ9578N 25000 (1) Form No. 16 25. KVS Pundhir Flat No. MIG-302, Kwality Home, Kolar Road, Bhopal. 25000 (1) Form No. 16 26 Kanchan Bhatiya 3, Comfort Enclave, Bawadia Kalan, E-8, Bhopal. ASIPB5111B 25000 (1) Form No. 16 27. Manish Bonde Q.No. G-3/25 (228 Qtrs), South T.T.Nagar, Bhopal. AHSPB5063D 25000 (1) Form No. 16 28. Minal Saxena J-167, Harshwardhan Nagar, Bhopal. BCVPS9519N 50000 (1) Form No. 16 29. Neelesh Jain A-164, Sagar Avenue, Ayodhya Bye Pass Raod, Bhopal. AIVPJ8437H 25000 (1) Form No. 16 30. Neelima Goswami C-44, Kakda Abhinav Homes Ayodhya Bye Pass Road, Bhopal. AMAPG0992R 25000 (1) Form No. 16 31. NIshi Prakash Jain H.No.42, Janakpuri colony, Ayodhya Bye Pass Road, Bhopal. AEIPJ0549P 25000 (1) Form No. 16 32. Pooja Choubey E-100/17, Shivaji Nagar, Bhopal. AYSPM3704H 25000 (1) Form No. 16 33. Prabhat Khare 26, Comfort Heri....
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....marised as under: - Comments on Summons issued by DDIT (Inv) Delhi Sn Name of Company Comments of DDIT on Summons issued Reply of Appellant 1 Span Amusement (P) Ltd. Left It is being submitted that the said address was the old address of the said company, the company had changed the address and the appellant had no knowledge of it, that is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 425 of paper book. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 2 Happening Motors (P) Ltd. Baar Baar Janne par Tala Band Mila It is submitted that this does not mean that the company does not exists at the said address. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 3 White Hat IT Services (P) Ltd. No Such Person It is being submitte....
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....he same is attached at page no 424 of paper book. 5 R.J. Febtex (P) Ltd. No Such firm at such address 6 Star Vision Media (P) Ltd. No Such firm at such address Address of the said party is correct as D-25 Laxmi Nagar, Delhi - 110092 and which is evident from the data downloaded from the MCA site, copy of the same is attached at page no 427 of paper book. 7 Shri Balaji Sainath Buildwell (P) Ltd. Reply not received till date This shows that the company existed at that place and the summons was properly delivered. 8 Bhagirathi Industries Limited Reply not received till date This shows that the company existed at that place and the summons was properly delivered. It is further stated that for the said company the AO had called directly the bank statement of the company, and therefore the contention that the company does not exists is absolutely wrong. 9 Mcgrip Marketing (P) Ltd. Reply not received till date 10 Startrans Logistic (P) Ltd. Incomplete address, returned back It is being submitted that the said address was the old address of the said company, the company had changed the registered Office a....
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....was found that there is no such office/company in given locality. office spaces. It is being submitted that there is no denial of Mr. Arun Kumar Jain regarding the address of the Bhagirathi Industries Ltd. Had the inspector enquired from Mr. Arun Kumar Jain that the truth would have prevailed. It is the common practice in big cities that there is sharing of 2 G.S. Trading Co. It is one story building. There are 6 shops at first floor and all are closed since long as appears from physical look. On enquiring no such company was located. The assessee had no transaction with this company 3 Span Amusement (P) Ltd. It is one story building. There are 6 shops at first floor and all are closed since long as appears from physical look. On enquiring no such company was located. It is being submitted that the said address was the old address of the said company, the company had changed the address and the appellant had no knowledge of it, that is the reason the inspector does not got any body at the said address. The new address is evident from the data downloaded from the MCA site, copy of the same is attached at page no 425 of paper book. It is further stated that....
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....with this company On going through the facts and material available on record, we find that the Assessing Officer noted that the Inspector visited the premises of the investor company and in some of the cases, he could not locate the said companies at the given address. However, the learned Counsel for the assessee submitted that in metro cities, like Delhi Mumbai, due to tenancy law problems or for several other genuine reasons, the company shifts its office from one place to another, therefore, in some cases, the Inspector might have visited the old premises. It was also submitted that in the metro towns like Delhi Mumbai, even one room is shared by so many persons and even the tables are also used on time sharing basis. It was further submitted that the companies are not living human beings. They are represented by the directors who are living humans. The said directors do the transactions of the company and manage its day to day affairs. In big/metro cities, the neighbors or nearby persons know the person who is the director of the company but do not know in which trade name or in which company's name, the said person is doing the business and that could be the reason that a....
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....h of the cash credit. The bank account cannot be manufactured or concocted to suit the convenience of any party. An extract of the books of account maintained by the bank is very much relevant under the Bankers Books Evidence Act. Further, the learned Counsel for the assessee also submitted that from the said bank accounts of share applicants, which were directly called by the A.O form the bankers of the creditors, did not show at all that the money deposited in those accounts belongs to the assessee as there is no finding of the A.O. that the assessee is the owner of the credit entries appearing in those bank accounts or the assessee is the owner of the bank account. There is also no cogent or concrete evidence on record which shows that it is the money of the assessee has been deposited in those bank accounts and then the same came under the guise of share application money. The balance sheets of the share applicant companies filed by the assessee, clearly show the sources of their funds which were used for making investment in the share capital of the assessee. Thus, learned Counsel for the assessee submitted that entire addition u/s.68 is solely based on assumptions, presumptio....
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....e aforesaid share applicants could not be assessed as a deemed income of the assessee u/s.68 of the I.T. Act. We find that all transactions are from the regular banking channel verifiable from the bank account of the assessee as well as the bank accounts of the share applicants, therefore, the assessee by placing these evidences had duly discharged its burden laid u/s.68 of the I.T. Act. In the case of ACIT Vs. Supretech Diamond Tools Pvt Ltd reported in 146 TTJ (Jd) 596, it was held as under :- There is no evidence that assessee had paid any commission and has refunded the amount received under the garb of share application money. Whether those companies were fictitious or bogus, the moot question here is that whether the assessee company had received share application money or not. It is seen that share capital was received through account payee cheques along with premium amount from five private limited companies. All these companies are assessed to tax and they are registered under the Companies Act. Return of allotment of shares in prescribed Form No. 2 to the RoC was also filed before AO as well as before CIT(A). It is further seen that the addition is based on alleg....
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.... cash has been deposited in their accounts. Therefore, the AO should examine the cases of those five companies instead of making addition in the hands of the assessee company. Accordingly, CIT(A) was justified in allowing the claim of the assessee. (Para 10.1) Conclusion: When the amount of share capital and share premium was received by the assessee company through regular banking channels from the five associate companies and all these companies are assessed to tax and they are registered under the Companies Act and return of allotment of shares in prescribed Form No. 2 to the RoC was also filed, addition made by AO on account of share capital and share premium was rightly deleted by CIT(A) as onus lies on those alleged bogus companies to prove that from which source the cash has been deposited in their accounts. 13. Hon'ble Supreme Court in case of CIT Vs. Lovely exports Pvt Ltd - 319 ITR (St) 5 (SC) held: "Can the amount of share money be regarded as undisclosed income u/s.68 of the I.T. Act ? We find no merit in this special leave petition for the simple reason that if the share application money is received by the assessee company fr....
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....was genuine though as per contention of the respondent the creditworthiness of the creditor was also established. No addition could be made under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. Revenues' appeals dismissed. Commissioner of Income Tax vs. Divine Leasing & Finance Ltd. decided by Delhi High Court (2008) 299 ITR 268 (Del); Commissioner of Income Tax vs. Lovely Exports (P) Ltd, (2008) 11 ITJ 357 (SC), followed. 16. Hon'ble Delhi High Court in case of CIT Vs. Gangeshwari Metal Pvt Ltd - (2013)84 CCH 037 (Del) HC; 361 ITR 0010 held: The CIT (A) had held that the genuineness of the transactions is established as the transactions are routed through banking channels. It was seen that the share application money was received through a/c payee cheques, detail of which had been filed by the assessee by filing the copy of the bank a/c of the share applicants. Thus where the ROI was filed by the creditors of the assessee and was accepted by the AO and payments were through a/c payee ....
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....e perverse and does not call for interference by this Court. (Paras 7 & 8) The finding of fact recorded by the Tribunal, which is the final fact finding authority, cannot be said to be perverse merely because some of the applicants had a common address and the Inspector deputed by the AO to make field inquiries did not find five applicants functioning at the addresses provided to him. There is no legal bar to more than one companies being registered at the same address. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of account payee cheque, they cannot be said to be non-existent, even if they, after submitting the share application had changed their address or had stopped functioning. (Para 9) The identity of the share applicants would be established if details of address or PAN card are furnished to the Department along with the copies of shareholders' register, share application forms, share transfer register, etc. In this case, share application forms were duly produced before the AO and this is not the case of the Revenue that the AO had....
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.... DTR (SC) 308, CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38 : (2008) 299 ITR 268 (Del) and CIT vs. Dwarikadhish Investment (P) Ltd. (2008) 2 DTR (Del) 7 : (2008) 167 Taxman 321 (Del) followed. 19. Hon'ble Karnataka High Court in case of CIT & Anr Vs. Arunananda Textiles (P) Ltd - (2011) 333 ITR 116 (Kar) held: Income-Cash credit-Share application money-Assessee able to identify the shareholders-It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest the amount in the shares-CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 relied on 20. Hon'ble Delhi High Court in case of CIT Vs. Steller Investment Ltd - 192 ITR 287 (Del) held: Reference-Question of law-Cash credits-Even if it be assumed that the subscribers to the increased share capital were not genuine, under no circumstances, can the amount of such capital be regarded as undisclosed income of assessee-company-If certain shareholders were bogus and money was provided by some other persons, reopening of assessment of such persons would be sensible-Tribunal, therefore, justified in ....
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....and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the questions sought for." 22. On consideration of above facts and discussion thereof in the light of the judicial ....