TaxTMI 
TaxTMI 
2025 (11) TMI 221
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....ooked the fact that the Assessee was not a searched entity therefore section 153A was not applicable. b. Completing assessment made under section 153A(I)(b) of the Income Tax Act, 1961 at an income of Rs. 32,03,83,800/- as against income of Rs. 23,83,800/- returned by the Appellant, treating share application/share capital received during the year of Rs. 31,80,00,000/- from M/s. Arrow Distribution Private Limited, Golden Mercantile Limited, Pine View Investment Private Limited, and M/s. Shalini Holdings Ltd as bogus/unexplained income u/s 68 of the Income Tax Act despite the fact that the Appellant has fully discharged its onus of proving identity, genuineness and creditworthiness of the persons from whom application money has been received by submitting all the relevant documents. c. Arbitrarily treating the share application/l capital as bogus despite independently verifying the transaction by calling information from the share applicant by recording the statement of directors of M/s. Arrow Distribution Private Limited, Golden Mercantile Limited,. Pine View Investment Private Limited and M/s. Shalini Holdings Ltd on oath u/s 131 of Income Tax Act these transacti....
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....ts and so that addition made therein needs to be quashed. i. That the orders passed by learned A.O. & CIT are bad in law and against the principles of natural justice. 2. At the outset of the hearing, ld. AR for the assessee submitted that assessee has filed additional ground of appeal under Rule 11 of the Income Tax (Appellate Tribunal) Rules and it is purely legal issue and the same is reproduced below :- "1. That on the facts & circumstances of the case, the Assessment Order passed by Ld. DCIT needs to be quashed because this is a case of unabated assessment which has been reopened U/S 153C based on the information received in the search & seizure operations on Bestech Group. A plain reading of the documents seized do not reveal anything which have a bearing on the determination of total income. 2. That the Ld. A.O. erred in invoking section 153C in the case of the Appellant on the satisfaction that the material seized represents undisclosed income of the Appellant, without appreciating that the material seized includes Share Application documents, the introduction of share capital is duly recorded in the books of Accounts of the Appellant, and ther....
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....(1) of the Act was carried out on 04.07.-2012 at the residential business premises of the persons associated with M/s Bestech Group. During the search at corporate office M/s Bestech Group concerns at, Plot No. 90, Sec. 44, Gurgaon, documents related to introduction of share capital were found and seized at page No. 139-122 of Annexure A-4 to the Panchnama dated 04.07.2012 from the corporate office at Plot No. 90, Sec, 44, Gurgaon,. of M/s Bestech Group which gives certain the details of share capital share applications money received by M/s Hiteshi Leasing & Housing Pvt Ltd, 12873, Ram Nagar Extension Shahdara, Delhi The source, genuineness, creditworthiness and identity of the persons/company from whom share capital/share application money has been received by the assessee company from issue also needs to be examined in the light of provisions of the Income- tax Act. In view of the above and as per the provisions of sub-section (1) of Section 153C of the Act, I am satisfied that the document seized from the business premises of M/s Bestech Group belongs to a company other than the company referred to in section 153A. Accordingly it is directed to issue ....
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.... He further submitted that the transactions undertaken during the year, i.e. share application, allotment and forfeiture, all are duly recorded in the financials of the Assessee Company for FY 2010-11 relevant to Assessment year under consideration and the Audit Report, Balance Sheet, P&L A/c Annexures etc are on Pages 5 to 18 of Paper book. He draw out attention to Schedule A to balance Sheet "Share Capital" where it is stated as follows: 10,00,000 Partly paid-up equity shares of Rs. 10/- each Rs. 3/- each paid up Forfeited during the year 3,000,000 9. Ld. AR further submitted that the list of documents mentioned in para 3 hereinabove, cannot be regarded as incriminating as they don't suggest any income escaping assessment as the effect of those documents have been duly incorporated in the books and balance sheet of the Assessee Company. He further submitted that the DCIT Central Circle (1) passed a detailed order of 12 pages but has nowhere stated what was in these documents which are used to reopen the Assessment Proceedings u/s 153C and how they were incriminating documents. 10. Ld. AR of the assessee in view of his above submission prayed that the impugned orde....
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....e order of ld. AO and to point out the shortcomings in the order of ld. CIT(A), however, when the ld. Spl. Counsel for the Department was requested to explain as to how the disputed documents fall into that category of 'incriminating material', he was not able to, point out from the contents of the disputed documents itself, as to if there was anything in the form of any absolute admission against the interest of the assessee, that any of the investor companies or anyone operating these companies had received any funds, by any means, from the assessee company or anyone operating the assessee company. He was unable to cite from the disputed documents that there was any evidence emanating from the documents themselves which show that cash was given by the assessee company or anyone operating the assessee company in lieu of the share capital receipts. 10. All that was attempted to be canvassed by the Ld. Spl. Counsel for the Department was to draw inferences after inferences, from the existence of these documents themselves and from the fact of having been found at the time of search and that as possibly these disputed documents were prepared contemporaneous to the applicatio....
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....hed by direct evidence. 'Incriminating material' for the purpose of 153A of the Act, has to be distinguished from 'inculpating material' or 'any material that may implicate the assessee'. Implicating circumstances surrounding a document are not sufficient to label it as 'incriminating material'. The latter two material, inculpating or implicating, may be dependent or outcome of inferences drawn from the content of the document, surrounding circumstance or the existence of the document and may be relevant for forming a 'belief' of escapement of income or for discrediting any claim of the assessee with regard to any income or expenses during any other form of assessment or reassessment, except where the assessment is supposed to be on the basis of incriminating material found during search. 14. In that case by drawing inferences or any process of reasoning, preponderance of probabilities or circumstances should first explore how the seized material reflects on total income for the search assessment. Thus, where the seized material is sought to be considered as incriminating material, it has to have in its body some narration or even omission of facts which lead to instant co....
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.... "Thus, the shareholders/share capital subscribers of M/s Spiral E-Systems Private Limited being same as that of M/s American Hotels and Restaurants Pvt. Ltd, it is evident that the share application/ share capital subscription received by M/s Spiral E-Systems Private Limited from these very/same share capital applicants/subscribers bears the same color and nature as that of the share capital subscription received by American Hotels and Restaurants Pvt. Ltd. from these very/same share capital subscribers." "During the course of search proceedings, the documents found and seized as Annexure A-29 (i.e. pertaining to share capital subscription in M/s Spiral E-Systems Private Limited), were also confronted to Sh. Sushen Mohan Gupta, who in his statement recorded on oath (as aforesaid) on 04.01.2020 had stated that his brother Sh. Sushant Mohan Gupta is aware about these transactions." 18.1 Regarding allegation of common share subscribers, Ld. Counsel of assessee has submitted that only two share subscribers are common l.e. Madhav Fincap Pvt. Ltd. and M/s Ladliji Enterprises Pvt. Ltd. which subscribed the share capital in M/s Spiral E Systems Pvt. Ltd. as well as Am....
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....ns from the shareholders and therefore, the assessee need not give any further confirmations in the matter since all these copies, share capital documents, receipts etc are seized. In this regard, while there is no denial to the fact that the seized annexure A-29 contains the purported documents as aforesaid, yet the fact that neither the assessee could adduce these documents afresh, nor any of the purported share applicant furnished any details wrt notices issued under Section 133(6) of the Act itself proves that these documents were merely a smoke screen and there was a pre-arranged agreement/understanding under which these documents were provided to the assessee company at the time of Availment/receipt of bogus capital. Clearly, neither primary onus has been discharged, nor the assessee could ensure compliance of notices under Section 133(6) of the Act from these so called share applicants despite being specifically asked to do so. Lastly, as per para 4(c) of the above submissions, the assessee has contended that there is no direct evidence of any cash given for share capital subscription. In this regard, I pose a question to myself as to whether a tax....
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.... 23. Thus, whatever submissions the learned spl. counsel for the Department has made bringing forth as to how the disputed documents have in themselves certain contents which make them incriminating material has not at all been examined and brought on record in the assessment order. On the contrary the assessing officer has preferred to complete the search assessment on the basis of principles of preponderance of probabilities and circumstantial evidence. The findings of Ld. AO in that regard on page No. 28 are required to be reproduced below:- ....................... 33.5 This establishes that the assessing officer seems to have been driven by a 'borrowed belief' arising out of the examination of transactions by the Enforcement Directorate. Nothing was found specifically implicating the Spiral E-Systems Pvt. Ltd. or any investor company or Shri Susant Mohan Gupta. The fundamental principle of assessment being of taxing real income even if under the deeming provisions seems to have been ignored and on a principles of alchemy, all the transactions around Shri Sushen Gupta and M/s American Hotels and Restaurants Pvt. Ltd. were considered tainted. 33.6 Ac....
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....ements, bolsters his submissions:- a) M/s Prakash Industries Ltd. bearing ITA nos. I.T.As. No.4039, 4040, 4041, 4042 & 4043/DEL/2017; Delhi bench of ITAT order dated 18.06.2021. b) M/s. Gee Ispat Pvt. Ltd., New Delhi US Acit4256-4259/Del/2014 and M/s Gee Ispat Pvt. Ltd., V ACIT ITA No. 5424.5425.5475.5476/Del/2014 c) PCIT v. Sunway Realtech (P.) Ltd. [2022] 142 taxmann.com 477 (Delhi) d) PCIT v. Panchmukhi Management Services Pvt. Ltd. (Delhi IIC)2022] Taxscan (HC) 712 e) Sunny Infraprojects Ltd. - ITA No. 502 of f) Index Securities Pvt. Ltd. (86 taxmann.com 84) g) Therapeutic India Pvt. Ltd. (ITA No. 4515/Del/2012 h) M/S. Brahamputra Finlease (P) Ltd. V DCIT, ITA No. 3332/Del/2017 35. There is no substance to allege that the learned CIT (A) proceeded on a predetermined notion to hold there was nothing unusual about the documents. Learned sr. counsel for the Department has vehemently stressed that on the point that on the basis of seized material a belief had formed in the mind of assessing officer, however, when such belief is not exhibited in the form of reasoning such belief is of no consequence and....