AI Drafter 
TaxTMI 
TaxTMI 
2022 (9) TMI 517
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....he case. 3. The assessee company is engaged 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 ....
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....0,000 Total 2,50,00,000 3.3. The ld. AO vide order sheet noting dated 03.10.2019 directed the assessee to submit following details / explanations:- 8. In regard to share capital and premium received, 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 ba....
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....also in the form of share capital and share premium into other companies of Podar Group including assessee company before us. (ii) Shri Navin Nishar, a Chartered Accountant, had arranged for the cash to be picked up by his angadia and to be given to Shirish Shah and subsequently the same 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....
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....nce, thereby proving their identity. From the audited financial statements submitted already, it is evident that the shareholders are financially capable to make investment in assessee company , thereby proving their creditworthiness. From the application form for equity shares, confirmation from shareholder companies confirming purchase 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....
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....avin Nishar , Shri N K Sodhani and Shri Shirish Shah, were relied upon, which stood subsequently retracted by 4 parties. As stated earlier, statement of Shri Shirish Shah was not even furnished to the assessee by the ld. AO. Accordingly, it was argued that statements alone, without any corroborative material on record, cannot form the incriminating material in order to make addition. It was stated that no addition 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....
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....ated to shareholder companies of all Podar Group of companies including assessee company, in which share capital / premium has been received, that following points are noteworthy:- 14.3 On perusal of various documents related to shareholders of all Podar group of companies including assessee company, in which huge share capital/ premium has been received, following points are noteworthy: (i) These alleged share applicants are having 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....
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....ng material is available which discredits and impeaches the particulars furnished by the assessee and also establishes the link between self-confessed 'accomodation entry providers', whose business is to help assessees bring into their books of account their unaccounted monies through the medium of share subscription, share capital, unsecured loan etc. The involvement of the assessee in such modus operandi is clearly indicated by valid statements of several key persons along with incriminating materials 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....
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....company for the Asst Year 2012-13. 4.1. The assessee further submitted before the ld. CIT(A) that similar additions made in the hands of group company of assessee i.e Goodluck Apparels Pvt Ltd for Asst Years 2011-12 and 2012-13 were deleted by the ld. CIT(A). Accordingly, the ld. CIT(A) in the case of Goodluck Apparels Pvt Ltd deleted the addition made u/s 68 of the Act in the sum of Rs 1,46,70,000/- towards receipt of share capital and share premium. It was observed that same observations were made in the hands 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 placi....
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....ver, when these parties were cross examined by the assessee during the course of assessment proceedings in the presence of the ld. AO, all these parties confirmed the contents stated in their retraction affidavits. Subsequently all these parties were again re-examined by the ld. AO before the completion of assessment. Even in that re-examination proceedings, all the parties reiterated the contents stated in the retraction affidavits. Hence we categorically hold that no addition could be made in the hands of the assessee 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 o....
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..... Shri. Kirit Kumar Dharishbhai, Shri. Navin Nishar and Shri. Naresh Kumar Sodani had in the course of their cross-examination that was facilitated to the assessee by the A.O at behest of the CIT(A) in the course of the remand proceedings, had once gain filed their duly notarized retraction affidavits dated 26.09.2019, 27.09.2019 & 27.09.2019, respectively, and had clearly stated that their earlier statements recorded u/s 131 of the Act during the course of the survey proceedings should not be relied upon. Although, the A.O 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 retractio....
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....i). Vinod Solanki Vs. Union of India (2008) (16) Scale 31 (ii). Kailashben Manharlal Chokshi Vs. CIT (2008) 174 Taxman 466 (Gujarat) (iii). CIT, Ranchi Vs. Ravindra Kr. Jain (2011) 12 taxmann.com 257 (iv). M. Narayanan & Bros. Vs. ACIT (2011) 13 taxmann.com 49 (Mad) (v). ACIT Vs. Jorawar Singh M. Rathod (2005) 148 taxman 35 (Ahd)(Mag) (vi). Shree Chand Soni Vs. DCIT (2006) 101 TTJ (Jd) 1028 (vii). Basant Bansal Vs. ACIT, Jaipur [63 Taxmann.com 199] (viii). ACIT Vs. Shri. Johari lal Sodhani [ITA 145/Jp/2013] (ix). First 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 observati....
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....by the CIT(A) that the A.O while passing the assessment order as well as in his remand report had merely relied upon a so called digital evidence i.e a text message dated 29th & 30th June, 2016 between Shri. Navin Nishar and Shri. Kirit Kumar Dharishbhai Suba, which was clarified by Shri. Navin Nishar in his statement recorded u/s 131 on 11.01.2018 as a communication qua certain cash transactions between Shri. Sirish Shah"s Angadia/cash handler and Angdia/cash handler of Shri. Kirit Kumar Dharishbhai Suba. Referring to the said so called digital evidence, it was observed by the CIT(A) that the 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 materia....
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.... as regards proving the identity and creditworthiness of the shareholders and the genuineness of the transactions of receipt of share premium. As is discernible from the records, we find that the assessee had in the course of the proceedings before the lower authorities furnished documentary evidence to substantiate the authenticity of receipt of share premium from the 19 share subscribers, viz (i). statement showing the details of share capital and share premium received during the F.Y 2010-11 stating the names, address, PAN of the applicant of shares, amount of share capital, date of application for 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 ....
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....d by the A.O. As a matter of fact, we find that the A.O had at no stage i.e in the course of the assessment proceedings or in the remand proceedings ever issued notices under Sec. 133(6) or summons u/s 131 of the Act to the share subscribers, despite the fact that their complete details were available with him. We, thus, are of the considered view, that not only the assessee had on the basis of irrefutable documentary evidences substantiated to the hilt the authenticity of the transaction of receipt of share premium, rather, the A.O by not carrying out any verifications can safely be held to have not 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....
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....rial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso. In any view of the matter the three essential tests while confirming the pre-proviso Section 68 of the Act laid down by the Courts namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on facts it was found satisfied. Further it was a submission on behalf of the Revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders i.e. they are bogus. The 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....
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....share premium of Rs. 2.25 crore received by it from the aforementioned 19 share subscribers could not have held as an unexplained cash credit within the meaning of Sec. 68 of the Act. We, thus, finding no infirmity in the view taken by the CIT(A) who had rightly held that as the assessee had duly discharged the onus that was cast upon it as regards proving the identity, creditworthiness and genuineness of transactions in question, therefore, the share premium of Rs. 2.25 crore received from the 19 share subscribers could not have been assessed as an unexplained cash credit u/s 68 of the Act, uphold his view. 12. We, thus, in the backdrop of our aforesaid deliberations, finding no infirmity in the very well reasoned order of the CIT(A), uphold the view taken by him that the share premium of Rs. 2.25 crore received by the assessee during the year under consideration could not be held as an unexplained cash credit within the meaning of Sec. 68 of the Act. Accordingly, finding no merit in the appeal of the revenue we dismiss the same. 13. Resultantly, the appeal of the revenue being devoid and bereft of any merit is dismissed. 5.2. Respectfully following the afores....