TaxTMI 
TaxTMI 
2022 (1) TMI 824
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....ia. In addition, the MMG group has business interests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc. 3. A search & seizure operation u/s 132 of the I.T. Act, 1961 was carried out on 28.03.2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the said search. During the course of search carried out at the different premise located in India in M.M. Aggarwal Group of cases, documents and data storage devices, etc. belonging to the assessee were found and seized. In response to notice u/s 153A of the IT Act, 1961 issued to the assessee on 10th May, 2016, the assessee filed the return of income on 29th June, 2016 declaring total income at Rs. 1,19,27,480/-. 4. During the course of assessment proceedings, the AO noted that the assessee company is shown to have received share capital at substantial premium from the following parties:- S. No. Name of Subscriber No. of shares subscribed Face value of share Paid up value Premium received Total Financial Year 2008-09 1. Veneet Capital Services (P) Ltd. 1,52,750 10/- ....
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....ing of unaccounted money. 2. Lakhotia Impex Pvt. Ltd is a dummy company being operated to facilitate the accommodation entry. Revenue from operations is Nil which clearly establishes that no business whatsoever is being run by these companies. From the financials of Lakhotia Impex Pvt. Ltd, it is evident that fixed assets held are NIL as on 31.3.2014 and gross total income for AY 2014-15 is of only Rs. 6,529 which establishes beyond doubt that this company does not operate any business and is only a conduit for routing of unaccounted money.' In view of the above, it has been crystalised that assessee company has received its own group unaccounted fund in the garb of share capital and share premium, through numerous non descript shell companies. During the year under consideration, assessee company has received total sum of Rs. 10.33 crores as share capital and share premium from following group companies and shell companies. 1. Veneet Capital Services Pvt. Ltd. 2. Lakhotia Impex Pvt. Ltd. ............................" 7. Before the CIT(A), the assessee challenged the validity of assessment proceedings u/s 153A in absence of any in....
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....stated anything against the assessee in his statement. Therefore, reference to this statement is infructuous. Similarly, in the assessment order, the AO has referred to the statement of Sh. Mukesh Aggarwal, but the statement does not have any relevance to the case of assessee because the person has not stated anything against the assessee in his statement. Therefore, reference to this statement is infructuous. Various decisions were brought to the notice of the CIT(A) for the proposition that when every detail is given before the AO establishing the identity and creditworthiness of the investor companies and genuineness of the transactions, merely because the Director of the said company could not be produced cannot be a ground to make the addition. 10. Based on the arguments advanced by the assessee, the ld.CIT(A) upheld the validity of assessment proceedings u/s 153A. He, however, deleted the addition made by the AO u/s 68 of the IT Act, 1961 by observing as under:- "5. Findings: I have considered the submission of Ld. A.R., assessment order and cases law cited in this regard. The AO invoked the process u/s 153A after the search on appellant group on 28.03.20....
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....O to initiate proceedings u/s 153A. The assessee contentions in this regard as under- a) In respect of share certificate found during the course of search in respect of companies mentioned at serial no.1 & 2. It has also been submitted that companies JA Builders Ltd and JPM Automobiles Ltd was also assessed with the AC1T, Central Circle -13, New Delhi and the order have also been passed at the same time. In the order passed in the case of JA Builders Ltd and JPM Automobiles Ltd no addition towards share capital have been made. As such the appellant contended that same Assessing officer while passing the order at the same time in respect of same issue has formed two different views. b) The shares certificates found in respect of companies mentioned at serial no 3 to 5 is related to investments made by group concerns of JPM group and does not pertain to outsiders 5.2 These merit examination of the case under 153A of the I T Act 1961. The availability of such documents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind s....
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.... the AO is in tune with judgement of Hon'ble Delhi High Court in CIT (C )-III vs. Kabul Chawla (Delhi) [2015] 61 taxman.com 412(Delhi), 234 Taxman 30. The same if further strengthened by the judgement of Hon;ble Delhi High Court in the case of Dayawanti Gupta vs CIT in 'ITA Nos 357,358,359/2015 and other' dated 27/10/2016. Having considered the detailed and belaboured submissions of the Ld AR and the material on record, 1 am drawn to the conclusion that the action of the AO does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The AO was well within his powers to invoke section 153 A of the Act on prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground no. 4(a) and 4(b) are therefore dismissed. 5.4 Regarding the merit, as per grounds of appeal no.3, I 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. Necessary information and documents were requisitioned to verify the i....
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....opinion has no criteria. The capacity to invest has other ingredients also including availability of funds required. Thus, it is only source and availability of fund which remains the factor to observe accordingly the addition made by A.O u/s 68 of the Act is deleted. 5.7. Ld AR also placed reliance on the judgments in CIT vs. Sophia Finance Ltd. [1994] 205 ITR 98 (FB) (Delhi), CIT vs. Nipuan Auto (P) Ltd. {[2014] 49 taxmann.com 13 (Del.) 361 ITR 155 (Del.)}, Commissioner of Income-Tax vs Winstral Petrochemicals p. Ltd. 2011 330 ITR 603 (Del.), CIT v. Divine Leasing and Finance Ltd. [2008] 299 ITR 268 (Delhi), CIT v. Stellar Investments Ltd 192 ITR 287 (Del.) & CIT v. Stellar Investment Ltd 2001 251 ITR 263 (SC) and contented that the appellant duly discharged the initial burden to establish the identity, creditworthiness and genuineness by submitting necessary documentary evidences in respect of the shares application money. Reliance is also placed on the judgments in CIT v. Lovely Exports Pvt. Ltd. 319 ITR (ST.) 5 (SC), CIT v. Divine Leasing & Finance Ltd 299 ITR 268 (Del.), [SLP rejected by Hon'ble SC vide order dated 21.01.2008], CTT vs Five Vision Promoters Pvt. Ltd 6....
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....upra) took note inter alia of the decision of Bombay High court in the Commissioner of Income fax v. Continental Ware housing Corporation (NhavaSheva) Ltd.[2015]58 taxmann.com 78(Bom), wherein it was held that if no incriminating materials was found during the course of search, in respect of each issue, then no addition in respect of arty such issue can be made to the assessment under Section I53A and 153C of the Act. The decisions of this court in CIT v Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012J254 CTR 392 (Del) were extensively discussed in Commissioner of Income Tax (Central-III) v Kabul Chawla (supra). The Court in Commissioner of Income Tax (Central-Ill) v Kabul Chawla (supra) had also discussed and concurred with the decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj) which had held that the assessment in respect of each of the six assessment years, preceding the year of search "is a separate and distinct assessment. "It was further held in the said decision that "If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assess....
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....No specific corroborative evidence has been brought on record by Assessing Officer to prove that the equity subscription is an accommodation entry. Besides, appellant has also discharged its onus and submitted all the documentary evidence in respect of the investment. The details submitted in this regard by the appellant have also been made part of order by Assessing officer. It is also undisputed fact that the Director of appellant companies have never made any statement regarding the share capital/share premium/share application money and no disclosure have been made with regard to share capital/share premium/share application money/unsecured loan. As such the addition made by the Assessing officer is unsustainable on the various legal grounds and on facts of the case. The addition made in the case of the appellant is deleted. These grounds are accordingly allowed." 10. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- "1 The Ld. CIT(A) has erred on facts and in law in deleting the addition made on account of unexplained cash credit u/s 68 of Rs. 11,33,00,000/-. 2. The Ld. CIT(A) has erred....
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.... submitted that since the assessee, in the instant case, has failed to substantiate the credit worthiness of the share applicants who have invested in the assessee company with huge premium, therefore, the order of the ld.CIT(A) should be set aside and the order of the AO be restored. 13. The ld. Counsel for the assessee, on the other hand, heavily relied on the order of the CIT(A) deleting the addition made by the AO u/s 68 of the IT Act. Referring to the ground raised by the Revenue, he submitted that as per the said ground, the ld.CIT(A) has erred in law and on facts by stating that the director of the assessee company has never made any statement/surrender regarding the receipt of share capital/share premium of Rs. 88.52 crores from various nondescript companies. The ld. Counsel for the assessee drew the attention of the Bench to the chronological sequence of events which are as under:- Sr. No. Date Sub particulars Page No of common paper book 1 29.03.2015 Surrender made in response to Q. 25 of Statement recorded u/s 132(4) of the Act. 77-82 2 29.03.2015 Filed surrender letter, stating details of surrender. 83 3 18.05.2015 Surrend....
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....etracted. 17. The ld. counsel for the assessee, referring to various decisions submitted that when surrender is non-descriptive, vague and subject to cross checking on the basis of books of account such addition is not sustainable in absence of any corroborative evidence. For the above proposition, he relied on the decision of Hon'ble Allahabad High Court in the case of CIT vs. Dilbagh Rai Arora reported in 263 Taxman 30. He also relied on the following decisions to the proposition that although statement recorded u/s 132(4) has certain evidentiary value, however, the statement cannot be on a stand alone basis and without reference to any other material discovered during the search and seizure operation, empowers the AO to frame the block assessment:- a) PCIT vs. Anand Kumar Jain (HUF), 432 ITR 384 (Del); b) CIT vs. Best Infrastructure (India) (P) Ltd., 397 ITR 82 (Del); c) CIT vs. Harjeev Agarwal, 290 CTR 263 (Del); d) M.S. Aggarwal vs. CIT, 406 ITR 609 (Del); e) Smt. Shivali Mahajan vs. ACIT, ITA No.5585/Del/2015, order dated 19th March, 2019 for AY 2006-07 Delhi ITAT). f) M/s Brahmaputra Finlease (P) Ltd. vs. DCIT, ITA No.....
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....ustified. He accordingly submitted that the grounds raised by Revenue should be dismissed. 21. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, has made addition of Rs. 10,33,00,000/- u/s 68 of the Act being the amount of share capital and share premium received from two companies, the details of which are given at para 4 of this order. We find, the ld.CIT(A) deleted the addition the reasons of which are already given in the preceding paragraphs. We do not find any infirmity in the order of the CIT(A) on this issue. We find, the AO, in the instant case, has issued summons u/s 131 of the Act for the purpose of verification of identity, credit worthiness of the share applicants and the replies were received which is evident from pages 48 to 49 of the assessment order. We find, in page 53 of the assessment order the AO has prepared the table and at item Nos.22 and 23, the AO in the remark column has categorically mentioned that replies were received in compliance to summons u/s 1....
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....the ld.CIT(A) has discussed all these issues thoroughly. We find, the assessee, in the instant case, has discharged the initial burden cast on it by filing the requisite details before the AO, summons u/s 131 were replied, there was compliance to the notice u/s 133(6), the investor companies have shown huge reserves and surplus and own capital. Merely because these companies have taxable income which is less than the amount invested during the year in our opinion cannot be a ground for making the addition especially when all the investor companies have got huge net worth in shape of own capital and free reserves and are group companies and all transactions are through proper banking channel. 24. We further find from the various details furnished by the assessee in the paper book that Shri Narendra Kumar and Shri Deepak Kumar are Directors of M/s. Veneet Capital Services Pvt. Ltd., and Shri Kishore Kargeti and Shri Pawan Kumar Bagri are the Directors of M/s. Lakhotia Impex (P) Ltd. It is seen from the assessment order that no enquiries have been conducted by issue of notice u/s. 131 or u/s.133(6) of the I.T. Act, 1961 in respect of the above Directors. So far as the source of Rs.....
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....amounts was paid as tax by such share applicants and did not carry out a deeper analysis or rather chose to ignore it. In these circumstances, the inferences drawn by the CIT (A) are not only factual but facially accurate. 9. Having regard to these circumstances, the court discerns no question of law, least a substantial question, having regard to the fact" 25. We find, the Hon'ble Delhi High Court in the case of CIT vs. Vrindavan Farms (P) Ltd., in ITA No.71/2015, order dated 12.08.2015, has held as under:- "3. The IT AT has in the impugned order noticed that in the present case the Revenue has not doubted the identity of the share applicants. The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their Income Tax Returns. The entire details of the share applicants were made available to the AO by the Assessee. This included their PAN numbers, confirmations, their bank statements, their balance sheets and profit and loss accounts and the certificates of incorporation etc. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the above documents submitted to him. It has been ri....
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....Ltd. and both had substantial returned income in the year in question of Rs. 1,28,24,076/- and Rs. 10,93,50,350/-. Therefore, there was no reason to doubt either, the credit worthiness of the investor or the genuineness of the transaction. The aforesaid findings are purely factual in nature and do not raise any substantial question of law for consideration of this Court. We do not find any reason to interfere with the impugned order." 28. We find, the coordinate Bench of the Tribunal in ITO vs. Angel Cement (P) Ltd. vide ITA No.4691/Del/2016, order dated 18.03.2021, has held as under:- "Held, In so far as genuineness of the transaction is concerned, the funds have been received through banking channels and bank statement of all the investors/lenders company have been filed which prove conclusively that the assessee companies had received the funds from the said investors, who in turn have received money from the same group companies; and they have not only corroborated this fact in their confirmation along with copies of income tax return but also from their audited balance sheets filed alongwith their Income Tax Returns. [Para 62] 63. Again, in so far as the c....
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....esponded to and in majority of cases they were duly responded. But be that as may be, where notices have not been served or not responded to, then also in the present cases their identity cannot be disputed, because in all the cases assessments have been done under scrutiny proceedings u/ss. 143(3) or 147; and in most of the cases appeals are also pending. Hence this factor, itself will not vitiate the case of the assessees. Similarly, even if directors were not produced, then there is no legal obligation on the assessee to produced the directors as held in many cases as relied upon by the Ld. Counsel in foregoing para 27. Apart from that, once assessments have been made on substantive basis in each and every case, then mere non production of directors loses its significance when all the statutory records and sources of funds have been duly explained, on which no adverse material has been brought to rebut the same by the Assessing Officer. Thus, in our opinion this factor on the facts of the present case is not so detrimental. 67. Thus, it is quite evident that in various chains of links and the flow of the funds, nowhere there are any unaccounted funds of any of the lende....
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....ompanies. No such attempt was, however, made by him. Therefore, the Commissioner of Income- tax (Appeals) and the Income-tax Appellate Tribunal, in our view, were justified in holding that the identity of the share applicants and the genuineness of the transactions had been established by the assessee. For the reasons given in the preceding paragraphs, no substantial question of law arises for our consideration." 30. So far as the allegation of the Revenue that there was surrender made by the director of the company Shri Sanjeev Aggarwal in his statement recorded u/s 132(4) is concerned, we find, this issue was also considered by the coordinate Bench of the Tribunal in the case of Moon Beverages and Hindustan Aqua Ltd., vide ITA Nos.7374/Del/2017 and 7567/Del/2017 for AY 2013-14, order dated 7th June, 2018 where the Tribunal has observed as under:- "37. We further find from the order of the ld. CIT(A) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross ....
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....ly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment." 40. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No.3332/Del/2017 order dated 29.12.2017, following the above decision of the Hon'ble Delhi High Court, has observed as under :- "4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, ....
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....ee accompanying notes 1 to 24 which form an Integral part of financial statements As per our report attached even date For Ghanshyam Gupta & CO. Chartered Accountants Registration No.:020719N Ghanshyam Pad Gupta Propreitor Membership No.: 87179 Place: New Delhi Date: 7th September 2014 For and on behalf of the Board of Directors Veneet Capital Services Private Limited Spall komen Deepak Kumar Director Place:New Delhi Date :7th Sept 2014 For VENDET CAPITAL SERVICES PVT. LTD. Редфак кител Director/Authorised Signatory Narender Kumar Director Place:New Delhi Date :7th September 2014 Certified True VENEET CAPITAL SERVICES PRIVATE LIMITED Statement of Profit and Loss for the year ended 31 March 2014 (All amounts in Rupees, unless otherwise stated) Note For the year ended 31 March 2014 For the year ended 31 March 2013 Revenue Revenue from Operation 15 Other income 16 56 Total Revenue Expenditure Employee benefit expense Depreciation Other Expenses 1,300,799 666 1,301,465 1,475,069 1,475,069 17 198 586,0....