TaxTMI 
TaxTMI 
2022 (9) TMI 517
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the business of printing services. The assessee is one of the companies belonging to Podar Group and had filed its return of income for the A.Y. 2012-13 on 20.09.2012 declaring total income at Rs Nil. A search and seizure action u/s 132 of the Act and Survey action u/s 133A of the Act was carried out on Podar Education Group on 09.01.2018. In the said search, the assessee was also covered. Consequent to search, the assessee was centralized with DCIT, CC-1(4), Mumbai. The ld. AO issued notice u/s 153C of the Act dated 21.09.2019 to the assessee and in response to the said notice, assessee filed its return declaring total income at Rs Nil. The assessee pleaded that during the course of search, no money, bullion , jewellery or other valuable article or thing or any books of accounts or documents belonging to the assessee were seized from the premises of Podar Group and hence the provisions of section 153C of the Act are not applicable to the facts of the assessee's case. In the assessment order, the ld AO relied on the following documents seized from the Podar Centre, Chamar Baug, Parel, Mumbai :- a) Page 8 of Annexure A-7 b) Page 3 of Annexure A -11 3.1. Apart from the docume....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed, the assessee was asked vide order sheet noting dated 03-10-2019 to submit following details/explanation: a. Please submit share price per share (giving break-up of face value and share premium). b. Please submit name and address of shareholder, PAN of persons to whom shares have been allotted, relationship if any, no. of shares allotted, face value, share premium, total amount. Please submit the copy of return filed with ROC for allotment of shares. Also please justify the rate of share premium charged and applicability of Section 56(2)(viib). c. Please justify the sale consideration vis-à-vis the net worth/ profitability of the company. d. Please submit details of utilization of Share Premium received. e. Please submit the copy of ITR, Computation of Income, complete Balance Sheet set with Capital Account of said persons for relevant assessment year. Also please submit their relevant bank statements showing the source of payments in their hands. It may kindly be noted that you are in receipt of the share application money and therefore, onus is on you to prove the identity of the person, credit worthiness of the person and genuinity of the transaction. If any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was introduced into the companies of Podar Group. There was a text message in whatsapp found, which was confirmed by Mr Suba that the said messages were between him and Shri Navin Nishar. (iii) Shri Dhirubhai Thakkar, associated with Dhara Angadia Services, Ahmedabad , wherein he confirmed the message found in the mobile of Shri Navin Nishar with Dhara Angadiya Services and stated that the communication was between Delhi based branch of Dhara Angadia Services and Shri Navin Nishar for exchange of cash. (iv) Shri Sureshbhai Thakkar, associated with Dhara Angadia Services, Ahmedabad , wherein he confirmed the message found in the mobile of Shri Navin Nishar with Dhara Angadiya Services and stated that the communication was between Delhi based branch of Dhara Angadia Services and Shri Navin Nishar for exchange of cash. (v) Shri Shirish Shah, wherein he admitted that Shri Navin Nishar contacted him to acquire certain companies i.e M/s Southmint Real Estate Pvt Ltd , M/s Aansal Securities Services Pvt Ltd, M/s Lakeside Properties Pvt Ltd and M/s Amazing Suppliers Pvt Ltd. 3.6. Further during the course of search proceedings u/s 132 of the Act in the case of Podar Educational Ins....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rchase of shares, acceptance letter, board resolution of shareholder companies for purchase of shares of assessee company and bank statements of shareholder companies highlighting the payment for purchase of shares, genuineness of transactions are also proved. All the amounts were received through account payee cheques through normal banking channels and no cash transaction was involved at all. b) The statements of various parties viz. Shri Jayesh Zanani , Shri Kirit Dharsibhai Suba, Shri Navin Nishar, Shri Naresh Kumar Sodhani , Shirish Shah etc have been retracted and the original statements have no evidentiary value in the eyes of law. The various retraction affidavits filed by parties are as under:- (i) Shri Kirit Dharsibhai Suba on 03.04.2018 (ii) Shri Navin Nishar on 04.06.2018 (iii) Shri N K Sodhani on 30.08.2018 (iv) Shri Jayesh Zanani on 02.04.2018 c) Further assessee was allowed opportunity to cross examine Shri Kirit Dharsibhai Suba, Shri Navin Nishar and Shri N K Sodhani by the ld. AO in his presence and during the course of cross examination, all 3 persons relied on their retracted statements. d) Statement of Shirish Shah which has been relied upon by the l....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... could be made on the basis of statements of third parties. k) In para 3 of show cause notice , the ld. AO had relied on the statement of Shri Kirit Suba recorded on 12.01.2018 wherein, he admitted that the cash was introduced in the following companies in the form of share premium i.e M/s Anant Autotools Pvt Ltd ; M/s Goodluck Apparels Pvt Ltd; M/s Goodways Realtors Pvt Ltd ; M/s Parel Graphics Print Pvt Ltd and Shreesai Printing Pvt Ltd. In this regard, it was submitted that the statement of Shri Kirit D Suba recorded during the course of survey u/s 133A of the Act has no evidentiary value. Reliance was placed on the decision of Hon'ble Calcutta High Court in the cae of S P Agarwalla alias Sukhdeo Prasad Agarwalla vs ITO reported in 143 ITR 629 (Cal) and Hon'ble Delhi High Court in the case of CIT vs Kamadhenu Steel & Alloys Ltd reported in 248 CTR 33 (Del). It was also pointed out that section 133A of the Act does not empower the ld. AO to examine any person on oath and such statement recorded u/s 133A of the Act does not bind the assessee. Moreover, the said statement has been subsequently retracted by Shri Kirit D Suba. Hence no reliance could be placed on the original state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aving very meagre or nominal income. (ii) No dividend income from investment in private limited companies has been shown by them. (iii) Salary expenses of these companies are very nominal amount, which shows that not more than one or two employees must have been employed by these companies that too for clerical services. (iv) The income and potential of these alleged share applicants do not justify the high amount of share premium appearing in their reserve and surplus account. (v) The pattern of receipt of money and immediate payment of amount is identical in all the alleged share applicants. (vi) As per information available on www.MCA.gov.in website, the directors of one share applicant company are directors in other share applicant companies too i.e. one common person is director in two or three alleged share applicant companies. (vii) Most of the Investor-companies were struck off as per MCA website. The status of these companies which have allegedly invested in shares of Podar Group companies and name of their directors as per MCA website is tabulated below: (ix) There is a web of transactions in the financials of alleged shareholders to hide the actual transact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....found during search such as deleted excel file retrieved from computer of Mr Jayesh Zanani, Accountant of Podar Group, papers found and SMS chat within intermediaries. The existence of such material shows that the share subscriptions were collected as part of a pre-meditated plan. 3.14. With regard to the retraction affidavits filed by key persons, the ld. AO observed that these affidavits were filed for the first time in appellate proceedings before the ld. CIT(A) in the case of Podar Education Trust for AY 2011-12, Anandilal and Ganesh Podar Society for AY 2011-12 and Goodluck Apparels Pvt Ltd for AY 2011-12 and AY 2012-13. It is noted that retraction affidavit dated 06.09.2018 of Shri Kirit D Suba was not submitted during the reassessment proceedings completed in December 2018 for the reasons best known to the assessee. Similar was the case with other retraction affidavits filed by remaining people. The time lapse of 5 to 8 months in making retraction affidavits evidently exhibit that it is only a well-planned afterthought to suit their line of argument. 3.15. The ld. AO further during assessment proceedings re-examined Shri Kirit D Suba, Shri Navin Nishar and Shri N K Sodhani....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of the assessee company also by the ld. AO. Further, the assessee placed reliance on the order of the ld. CIT(A) in the case of yet another group company viz. Hemadri Machine Tools Pvt Ltd, wherein the same addition in respect of share application money was made by the ld. AO and ld. CIT(A) deleted the addition by following the order passed in the case of Goodluck Apparels Pvt Ltd referred to supra. Further the assessee also placed on record the copy of tribunal order in the case of Hemadri Machine Tools Pvt Ltd in ITA No. 714/Mum/2020 dated 09.08.2021 before the ld. CIT(A) , wherein the revenue's appeal was dismissed by the tribunal. We find that the ld. CIT(A) by placing reliance on the said tribunal order dated 09.08.2021, deleted the addition made in the sum of Rs 2.50 crores in the hands of the assessee company herein. Aggrieved, the revenue is in appeal before us. 5. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the assessee company had received share capital of Rs 2.50 crores at a premium of Rs 40 per share from 15 shareholder companies. The details of the same have already been stated hereinabove. We find t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee company by placing reliance on the statements recorded from aforesaid parties, which stood subsequently retracted. With regard to statement of Shirish Shah relied upon by the ld. AO, it is a fact on record that the said statement was never furnished to the assessee for its rebuttal. Hence it has resulted in gross violation of principles of natural justice as it strikes the very foundation of the assessment. The statements of third parties i.e. two angadias relied upon by the ld. AO are totally unrelated to the assessee company and there is absolutely no linkage of the said parties with the assessee company. Hence we hold that no addition could be made in the hands of the assessee by placing reliance on the statements of third parties. 5.1. We find that the ld. CIT(A) had placed reliance on merits on the decision of this Tribunal in the case of Hemadri Machine Tools Pvt Ltd (group concern of the assessee before us) in ITA NO. 714/Mum/2020 dated 09.08.2021. In the said case, this Tribunal had dealt elaborately the issue of addition made u/s 68 of the Act in respect of share capital and share premium on the very same set of facts. The relevant operative portion of the said judge....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had in his remand report, dated 06.11.2019 requested the CIT(A) not to admit the retraction "affidavits" of the aforementioned persons as additional evidence U/rule 46A, however, we find that the CIT(A) being of the view that the aforesaid "affidavits" had a material bearing on the adjudication of the issues before him, as well as in all fairness taking cognizance of the fact that as it was only after the receipt of the assessment order that it had came to the knowledge of the assessee company that the A.O had relied upon the statements of Shri. Navin Nishar and Shri. N.K Sodani for making the additions u/s 68 of the Act, had rightly concluded that the retraction affidavits of the said persons were clearly admissible under Rule 46A(1)(c) and Rule 46A(1)(d) of the Income-tax Rules, 1962. Accordingly, we find that the aforementioned persons had clearly by way of their retraction "affidavits" resiled from their averments made in their respective statements that were recorded u/s 131 of the Act in the course of the survey proceedings. Apart from that, the fact that the aforementioned persons had in the course of their cross-examination relied on their retraction "affidavits" and had fu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rst Global Stockbroking Pvt. Ltd. [115 TTJ 173](Mum) In fact, we find that the CBDT in its Instruction F. No. 286/2/2003-IT (Inv-II), dated 10th March, 2003, had itself stated that during the course of search and survey proceedings the officials should abstain from laying undue emphasis on recording statements or obtaining confessions regarding undisclosed income, but focus should be on collection of evidence of undisclosed income. Further, the aforesaid directions were once again reiterated by the CBDT in its Circular F.No. 286/98/2013-IT, dated 18.12.2014. We, thus, in terms our aforesaid observations concur with the view taken by the CIT(A) that as the A.O pursuant to the retraction of their respective statements by the aforementioned persons, viz. Shri. Kirit Kumar Dharishbhai, Shri. Navin Nishar and Shri. Naresh Kumar Sodani, had failed to place on record any corroborative material which would substantiate that the averments made by them in their original statements recorded u/s 131 of the Act on 11/12.01.2018 i.e during the course of the survey proceedings revealed the correct facts, therefore, his hollow claim that the retraction of the aforementioned persons being a result ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... same was not only by any means found to be related to the assessee company, but even otherwise the date borne on the same i.e 29th & 30th June, 2016 was relevant to A.Y 2017-18 and not the year under consideration. In the backdrop of the aforesaid facts, we concur with the observation of the CIT(A) that no incriminating material was found in the course of the search proceedings which would evidence that the receipts of Podar trusts were routed to the assessee company in the garb of share premium during the year under consideration. Although it is a matter of fact that no incriminating material had surfaced in the course of the search proceedings which would irrefutably evidence that the Share premium of Rs. 2.25 crore received by the assessee company during the year under consideration was sourced out of the receipts of charitable/educational institutions of Podar group, however, even otherwise as the so called "digital evidence" i.e text message retrieved from the mobile phone of Shri. Navin Nishar dated 29th & 30th June, 2016, was not found from the possession of the assessee, therefore the presumption contemplated in Sec. 132(4A) and Sec. 292C could also by no means be invoked ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r subscribing the shares, number of shares allotted, amount of share capital, amount of premium on the total amount received, details of share capital and share premium, copy of board resolution for allotment of 5,00,000 shares, copies of letters of the applicant companies seeking allotment of equity shares, copies of the letters confirming the allotment of equity shares to the applicant companies, copy of share valuation report issued by registered valuer, viz. D.N Shetty & Co, dated 22.04.2010 under DCF method, copy of bank statement evidencing that the application money was received from the share applicants through banking channel, copy of certificate of incorporation, certificate of commencement of business, copy of PAN card, memorandum of association, articles of association, resolution passed by applicants of shares in the board meeting, application for shares and confirmations from all the 19 share applicants. In the backdrop of the aforesaid facts, we concur with the view taken by the CIT(A) that as the assessee had placed on record substantial material evidencing the identity and creditworthiness of the share applicants, as well the genuineness of the transactions in ques....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... carried any doubts as regards the genuineness and veracity of the documents filed by the assessee before him. Accordingly, in the backdrop of the aforesaid facts, we are of a strong conviction that as the assessee by placing on record substantial documentary evidence, viz. name, PAN, address, copies of share application forms, board resolution, acknowledgement of income-tax returns, Form No. 2 for allotment of equity shares, financial statements, form of allotment of shares etc. had duly discharged the onus that was cast upon it and proved the identity, genuineness and creditworthiness of the share applicants, which had not been dislodged or disproved by the A.O by carrying out any independent enquiries, therefore, the CIT(A) had rightly concluded that the A.O bypassing such clinching documentary evidences filed by the assessee could not have held the share premium of Rs. 2.25 crore as an unexplained cash credit within the meaning of Sec. 68 of the Act. 11. We shall now deal with the observation of the CIT(A) that as the "Proviso" to Sec. 68 had been made available on the statute vide the Finance Act, 2012 w.e.f 01.04.2013, which therein provides that in a case where any sum cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Apex Court in Lovely Exports (P) Ltd. (supra) in the context to the preamended Section 68 of the Act has held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit." Further, we concur with the view taken by the CIT(A) that now when the assessee had filed with the A.O the complete details of the 19 share subscribers, viz. names, address, PAN nos., confirmations etc., and still if the A.O was of the view that the share premium was received by the assessee from bogus shareholders, then, it was open for him to proceed against such share subscribers and could not have assessed the said amount as an unexplained cash credit in the hands of the assessee company. Our aforesaid view is supported by the judgment of the Hon"ble Supreme Court in the case of CIT Vs. Lovely Export Pvt. Ltd. (2008) 216 CTR 195 (SC). Also a similar view qua the pre-amended Sec. 68 of the Act i.e the ass....