Case Law Details

Case Name : Asstt. CIT Vs Ravnet Solutions (P.) Ltd. (ITAT Delhi)
Appeal Number : IT Appeal Nos. 6589 to 6592 (Delhi) of 2013
Date of Judgement/Order : 16/03/2018
Related Assessment Year : 2005-06 to 2008-09
Courts : All ITAT (5510) ITAT Delhi (1250)

ACIT Vs Ravnet Solutions (P.) Ltd. (ITAT Delhi)

 Where assessee, in receipt of share capital, had established onus cast on it to explain identity and creditworthiness of subscribers and genuineness of impugned share transactions by filing evidences such as copies of confirmations, ITRs, PANs and bank statements, etc. AO was not justified in making addition under section 68.

FULL TEXT OF THE ITAT JUDGMENT

All the appeals by Revenue are directed against different Orders of the Ld. CIT(A)-XXXII, New Delhi, Dated 17th September, 2013, for the A.Ys. 2005-2006, 2006-2007, 2007­2008 and 2008-2009, challenging the deletion of additions of Rs.1,52,08,500, Rs.96 lakhs, Rs.58,10,000 and Rs.2,46,91,500 on account of bogus share capital and share premium made by A.O. by treating them as unexplained cash credits, under section 68 of the I.T. Act, 1961, respectively in all the assessment years under appeal.

2. We have heard the learned Representatives of both the parties and perused the material on record. Learned Representatives of both the parties submitted that facts and issues are same in all the appeals. Therefore, for the purpose of disposal of all the Departmental Appeals, the facts are taken from A.Y. 2005-2006 in ITA.No.6589/Del./2013.

ITA.No.6589/Del./2013 – A.Y. 2005-2006 :

3. Briefly, the facts of the case are that search and seizure operation under section 132 of the I.T. Act, was conducted by Directorate of Intelligence on 26th March, 2010 in Aseem Gupta Group of Cases at various premises of Aseem Kumar Gupta, C.A, who was, allegedly, provided accommodation entries to several beneficiaries. Search and survey covered the premises of several beneficiaries including that of the assessee. The A.O. issued notice under section 153A of the I.T. Act. In response thereto, assessee filed return for the assessment year under appeal, declaring income of Rs.3,929/-The assessee had earlier filed return under section 139 of the I.T. Act declaring income of Rs.3,929/- which was processed under section 143(1) of the I.T. Act. The A.O. noted that assessee has shown receipt of sum of Rs.10,13,900/- as share capital and Rs.1,41,94,600/- as share premium. The assessee was asked to file evidences to establish the identity and capacity of the persons who had given him share capital and share premium. The assessee was asked to furnish copy of the ITR, Bank Statement with their names and addresses from whom share application money was received along with the reasons and basis for issue of shares at high premium. The A.O. noted that assessee has failed to furnish any evidence to establish identity and capacity of the persons, who have given share capital and share premium to the assessee. The A.O, therefore, made addition of Rs.1,52,08,500/- considering it to be the unexplained income of assessee under section 68 of the I.T. Act,

1961. The A.O. completed the assessment under section 143(3) r.w.s. 153A of the I.T. Act, 1961 Dated 23rd December, 2011. Similar additions were made in remaining assessment years.

4. The assessee challenged the findings of the A.O. and above addition before Ld. CIT(A). The assessee raised several grounds of appeal before the Ld. CIT(A) stating therein that assessment order is passed in violation of principles of natural justice and that impugned assessment order is framed without jurisdiction as per law, totally illegal and void abinitio. No cross-examination have been allowed to the assessee. It was submitted that addition have been made without recovery of incriminating material found during the course of search. Therefore, assessment is bad in law. The assessee also filed application under Rule 46A of I.T. Rules for admission of additional evidences. The assessee filed additional evidence in the paper book and it was submitted that A.O. issued show cause notice dated 09th December, 2011 and fixed the case for 16th December, 2011. The notice was received by the assessee in the evening of 14th December, 2011. The assessee brought this fact about late service of the notice to the A.O. vide letter dated 15th December, 2011 and requested to grant time up-to 23rd December, 2011 to file required details. However, the A.O. without considering the request of the assessee, passed the impugned assessment order on 23rd December, 2011. Thus, it was a case, where adequate opportunity of hearing was not allowed to the assessee. The assessee, therefore, requested that additional evidences may be admitted which are confirmation of accounts of all the three investors i.e., (1) M/s. KMC Portfolio Pvt. Ltd., (2) Chotti Leasing & Financing Leasing Pvt. Ltd., and (3) Moderate Credit Corporation Ltd., with copy of the Board Resolution, Copy of Form No.2, Copy of company master data of all the investors, copy of PAN, ITR, Certificate of Incorporation, Bank Statements, Share Application Form with resolution of all the Investors. The assessee relied upon several decisions in support of the contention that additional evidence may be admitted.

4.1. The Ld. CIT(A) sent these additional evidences to the A.O. for his examination and to offer his comments. The A.O. filed his remand report which is reproduced in the impugned appellate order, in which he has briefly explained that assessee attended before him in the remand proceedings with all the supporting documents on which assessee relied upon. The assessee produced the books of account and supporting evidences. It was explained that earlier notices were also issued, which were not complied with by the assessee. The assessee was provided copy of seized material seized from the O/o. Shri Aseem Kumar Gupta. The assessee’s letter dated 15th December, 2011, seeking adjournment is available on record. The A.O, therefore, objected to the filing of the additional evidences. Reply of assessee sent through speed post on 23.12.2011 has been received in Office on 26.12.2011.

4.2. With regard to the merits, the A.O. confirmed that assessee produced the above documentary evidences to prove identity of the investors, their creditworthiness and genuineness of the transaction in the matter. But status of these companies are doubtful. The A.O. in the remand report stated that assessments in the cases of Chotti Leasing & Financing Leasing Pvt. Ltd., and Moderate Credit Corporation Ltd., were completed in his Circle under section 153A/153C of the I.T. Act and M/s. KMC Portfolio Pvt. Ltd., is apparently not related to Shri Aseem Kumar Gupta. The documents are similar in the cases of all the Investors. Since, Shri Aseem Kumar Gupta stated in his statement that he has provided accommodation entries, therefore, there were no reason for him to differ with the order of the A.O.

4.3. The assessee filed rejoinder in which all the facts stated earlier were reiterated and it was submitted that assessee proved the identity and creditworthiness of the Investors. No defects have been pointed out in the documents filed by the assessee. Nothing was found during the course of search against the assessee. The A.O. in the remand report admitted that this Circle assessed two of the Investors and that there is no relation between the Investor and Shri Aseem Kumar Gupta. The assessee relied upon several decisions of Hon’ble jurisdictional Delhi High Court and others in support of the contention that it has proved the conditions of Section 68 of the I.T. Act, 1961.

4.4. The Ld. CIT(A) considering the material on record in the light of remand report of the A.O. admitted the additional evidences as per Rule 46A of the I.T. Act because same were relevant and vital and goes to the route of the matter. It may be noted here that the Revenue Department did not challenge these findings of the Ld. CIT(A) in the Departmental Appeals admitting the above additional evidences.

4.5. The assessee further submitted before Ld. CIT(A) that the additions have been made in the assessment order which were not based upon any material or evidence found as a result of search but were made on the basis of the return of income already filed enclosed with the Audit Report, showing share capital and share premium. Therefore, no assessment could be framed under section 153A of the I.T. Act. The assessee relied upon several decisions in support of his contention. The Ld. CIT(A) however, noted that search was conducted in the case of the assessee and its Directors. Therefore, Section 153A is applicable to frame the assessment against the searched person under section 153A of the I.T. Act. The Ld. CIT(A) following the decision of the Delhi High Court in the case of Anil Kumar Bhatia, rejected the contention of assessee. The Ld. CIT(A) also noted that after search and seizure operation, it is mandatory to initiate proceedings under section 153A of the I.T. Act. This ground of appeal of assessee was dismissed by the Ld. CIT(A).

5. As regards addition of Rs.1,52,86,500 made under section 68 of the I.T. Act, the assessee filed detailed written submissions, supported by evidence and case law to explain that addition on merit is wholly unjustified. The written submissions of the assessee were reproduced in the appellate order, which reads as under :

15. In the course of appeal proceedings the A.R of the appellant filed the following written submissions:

“Ld. CIT(A). AO has made an addition of Rs.10,13,900/- as unexplained share capital and further a sum of Rs.1,41,94,600/- on account of unexplained premium u/s 68.

First, it is submitted as was submitted earlier also that impugned addition has been made dehors the seized material which is evident from the plain reading of the assessment order and which reads that the addition is being made on the basis of sums appearing in the books of accounts. Therefore, in view of the special bench decision in the case of All Cargo Global Logistics Ltd. vs. DCIT in ITA no’s 5018 to 5022 & 5059/M/10 dated 06-07-2012, impugned addition could not be made in the present proceeding u/s 153A.

Even on merit, it is submitted that assessee has filed exhaustive evidences of the impugned share capital and share premium which are held in the paper book (PB 39- 80). Your good self would kindly see from the perusal of these details that the details furnished show not only the names of the shareholders but also their addresses, occupations and PAN numbers (PB39).

The appellant furnished apart from the above details, the copies of share application forms, incorporation certificate, copy of PAN card, copies of bank statements and copy of company master details downloaded from the ROC website, copy of Form No. 2 along with the copy of resolution passed by the appellant company. Copies of these evidences are enclosed in the paper book and are detailed as under :-

S. No.
Name of the Shareholders
Application for Share
Certificate of Incorporation
PAN/ ITR
Bank Statement
Company Master Details
Resolution
Confirmation of Accounts
1.
KMC Portfolio Pvt. Ltd., (earlier
Prakriti Softek Pvt. P. Ltd.)
64
63
55
57-63
52
65
44
2.
Chotti Leasing &
Finance Pvt. Ltd.,
74
66.67
70-73
53
75
43
3.
Suma Finance &
Investment
Ltd., (now
Moderate Credit Corporation Ltd.)
79
76
77
80
54
78
42

PB 45-48 is the copy of Board Resolution.

PB 49-51 is the copy of Form no. 2

In the light of these evidences, impugned addition could not be made in view of the following juridical decisions:

1. CIT vs. Goelsons Golden Estate Pvt. Ltd.(DHC) in ITA No. 212/2012

2. CIT vs. Dwarkadhish Investment Pvt. Ltd. (2011) 330 ITR 298.

Income—Cash credit—Share application money— Though in s. 68 proceedings, the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue—Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68Revenue has all the power and wherewithal to trace any personMoreover, it is settled law that the assessee need not to prove the ‘source of source —In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques—No question of law arises.

3. CIT vs. Winstral Petrochemicals (P) Ltd.:
(2011) 330 ITR 603

Income—Case credit—Share application money— Assessee company was found to have received the money through banking channels—Assessee company also furnished written confirmations from the applicant companies, copies of certificates of incorporation, PAN cards, PAN details and company details etc. of the applicants—Finding of Tribunal that identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse—There is no legal bar to more than one company being registered at the same address— Merely because the applicants did not respond to the notices sent to them, AO was not justified in adding the amount of share application money to the income of the assessee.

4. Kamdhenu Steel & Alloys Ltd. (DHC) : 248 CTR 33.

5. CIT vs. Oasis Hospitalities Pvt. Ltd., (DHC): 333 ITR 119.

Income – Cash credit—Share application money— Though the share applicants were not produced in spite of specific direction of the AO, assessee company has filed copies of PAN, acknowledgement of returns of the share applicants and their bank account statements of the relevant period when the cheques were clearedThus, primary onus was discharged by the assessee— Assessee was not confronted with the investigation carried out by the Investigation Wing or given any opportunity to cross-examine the persons whose statements were recorded by the Investigation Wing to draw adverse conclusion against the assessee—As regards discrepancies in the bank statements, these statements were provided by the shareholders and were printed on the bank stationeryAssessee was never confronted with these discrepancies by the AO—In any case, it does not follow from these discrepancies that the amount of share capital was undisclosed income of the assessee—Even the correct bank statements as claimed by the AO show that the assessee has received cheques from the shareholdersThough source of cash deposits in the bank accounts of some shareholders is questionable, AO has not further probed the matterTherefore, remedy lies in reopening the case of these investors and addition cannot be made in the hands of the assessee.

It is, therefore, prayed that the impugned addition may please be deleted.

Adverse observations of Ld. A.O. are met as under :-

1. Ld. A.O. has mentioned that assessee has not furnished the evidences to prove the identity and capacity of the shareholders and genuineness of the transactions.

In reply, it is respectfully submitted that the details and evidences were filed by the appellant along with its letter dated 23.12.2011(PB 39-41) which, it appears, has not been considered by the Id. A.0 even though the assessment order has been passed on 23.12.2011 only though it was served on 29.12.2011.

It may please be appreciated that assessee along with other groups of companies and their directors were being represented by the same AR, namely Mr. Ram Avtar Agarwal and because of simultaneous proceeding being undertaken and AR being one, there was some delay in furnishing the information. But the last letter was served on the assessee in the evening of a day prior to the date of hearing and on that adjournment was sought in writing and thereafter the above letter dated 23.12.2011 was filed before Ld. AO.

1. Ld.AO has mentioned that assessee had not furnished the justification for premium.

In reply, it is submitted that shares were offered at premium in view of the fact that the appellant company was having very good orders in hand and was having very bright future and i.e. why the Board passed a resolution a copy of which was filed to Ld. A.0. taking into account these factors (PB 45). In any case, the issuance of shares at a price is the prerogative of the issuing company in the invitation of offer. Any shareholder who is willing to buy shares at that price makes offer which in turn is accepted by the company. There are no statutory restrictions and it is something which falls within the domain of contractual terms. Therefore, when having regard to the bright future based upon it perception of the events, the appellant company invited offers at a premium, it is for the prospective shareholder^) to judge and decide as to whether the share premium was justified from their perspective and when these shareholder so decide, that is the end of the matter and the business prudence of the investor is not open for questioning. Therefore, this objection of AO that assessee did not provide any rationale for issue of shares at high premium is misplaced.

1. Ld. AO has mentioned that assessee has taken accommodation entries from the entities owned or fully controlled by Shri Asseem Kumar Gupta in other assessment years.

In reply, it is submitted that first there is no basis or material with Ld. A.0 to make this allegation and in any case according to Ld. A.0 himself, there is no adverse evidence for this year. Therefore, all the objections of Ld. A.0 in making the impugned addition are bad in law.”

5.1. The Ld. CIT(A) considering the evidences on record, remand report of the A.O. and submissions of the assessee, deleted the addition on merit. The findings of the Ld. CIT(A) in paras 16 to 16.10 of the impugned order are reproduced as under :

16. I have gone through the facts of the case, written submissions of the appellant, remand report of the Assessing Officer and the rejoinder of the appellant. I have also pursued the case laws relied upon by the appellant. Here, for the sake of convenience, it would be appropriate to extract the relevant portion of the Assessing Officer comments on this issue.

During the year under consideration assessee company received share capital of Rs.10,13,900/- and share premium of Rs.l,41,94,600/- from following three companies, by issuing 1,01,390 number of shares of Rs. 10/-each at a premium of Rs.140/- per share:

d) KMC Portfolio Pvt. Ltd., Rs.88,80,000/-
e) Chotti Leasing & Finance Pvt. Ltd., Rs.55,78,500/-
f) Suma Finance & Investment Ltd., Rs. 7,50,000/-

(now known as Moderate Credit Corporation Ltd).

The AO made the addition as the assessee failed to filed any evidence to establish the identity and capacity of persons who had given the share capital and share premium, and failed to establish the genuineness of the transactions.

With reply dated 23.12.2011, assessee furnished following evidences:

7) Copy of confirmation of share holder with their PAN and place of assessment.

8) Copy of bank statement

9) Copy of form No. 2 filed with ROC

10) Copy of Resolution regarding allotment of shares.

11) Details of shares holders, giving the latest address and other particulars downloaded from the site of ROC.

12) Copy of ITR of the subscribers to share capital for Asstt. Year 11-12 in respect of M/s. KMC Portfolio Pvt. Ltd. and M/s. Chotti Leasing & Finance (P) Ltd., and for AY2007-08 in the case of M/s. Moderate Credit Corporation Limited.

The assessee has furnished above mentioned documents to prove the identity, capacity, genuineness of the transactions, and creditworthiness of parties. However, the status of these companies is still doubtful in view of the nature of documents submitted during the remand proceedings, and documents found during the course of search and seizure operation of Shri Aseem Kumar Gupta, who has also categorically admitted that these companies were run by him to provide accommodation entries. The assessments in the cases of M/s. Chotti Leasing & Finance (P) Ltd., & M/s. Moderate Credit Corporation Ltd., were completed in this circle u/s. 153A/153C, and M/s. KMC Portfolio Pvt. Ltd., is though apparently not related to Shri Aseem Kumar Gupta, however nature of the transactions in the bank account and papers submitted are apparently similar. Accordingly there seems to be no reason to differ with the order of the AO.”

16.1. From the comments of the Assessing Officer in his remand report, it is seen that the Assessing Officer has examined the additional evidences and appeared to be satisfied with the evidence filed by the appellant. The Assessing Officer however, has observed that the status of the companies who had subscribed to the share capital and share premium is doubtful in view of the nature of documents submitted during the remand proceedings and documents found during the course of search and seizure operation in the case of Sh. Assem Kumar Gupta, who had categorically admitted that these companies were run by him to provide accommodation entries. This observation is totally based on surmises and conjecture. The Assessing Officer has not brought on record any material to substantiate this observation. Not only in the assessment proceedings, but also in the remand proceedings the Assessing Officer did not make any effort to conduct enquiries to find out the status of these companies. The Assessing Officer should have issued notices u/s 133(6) to these companies and also summoned the directors of these companies u/s 131 and recorded their statements. This was not done by the Assessing Officers. The Assessing Officer has merely relied on the report of the Investigation wing for his observation that these companies were run by Sh. Assem Kumar Gupta to provide accommodation entries. Moreover, there is a contradiction by the Assessing officer himself so far as his observation is concerned on this issue. In the very next sentence after his observation, the Assessing officer has stated that “assessments in the cases of M/s Chotti Leasing & Finance (P) Limited & M/s Moderate Credit Corporation Ltd, were completed in this circle u/s 153A/153C, and M/s KMC Portfolio Pvt Ltd, is though apparently not related to Shri Aseem Kumar Gupta, however nature of the transactions in the bank account and papers submitted are apparently similar.” Therefore, on the basis of such contradictory observations it is not understood as to how the AO could justify his findings in the assessment order.

16.2. On perusal of the assessment record, I find that the appellant had also filed these additional evidences on 26.12.2011 before the Assessing Officer vide its letter dated 23.12.2011. However, since the assessment order was passed on 23.12.2011, the Assessing Officer did not consider these evidences filed before him on 28.12.2011.

16.3. The appellant has filed the following documents as additional evidences which the Assessing Officer has not examined during the course of assessment proceedings :

(i) Copies of confirmations of accounts of M/s KMC Portfolio (P) Ltd, M/s Chotti Leasing & Finance (P) Ltd and M/s Moderate Credit (P) Ltd.

(ii) Copy of Board Resolution.

(iii) Copy of Form No.2 filed with ROC.

(iv) Copy of Company master data of M/s KMC Portfolio (P) Ltd, M/s Chotti Leasing & Finance (P) Ltd and M/s Moderate Credit (P) Ltd.

(v) Copies of PANs, ITRs, certificates of incorporation, Bank Statements, Share application forms, Resolution of –

(a) M/s KMC Portfolio (P) Ltd

(b) M/s Chotti Leasing & Finance (P) Ltd

(c) M/s. Moderate Credit (P) Ltd.

16.4. On the basis of above material placed on record, it is seen that the appellant has discharged its onus cost upon it u/s 68 in proving the –

  • Identity of the subscriber companies;
  • Genuineness of the transaction, namely whether it has been transmitted through banking or other indisputable channels; and
  • Creditworthiness of these subscribers.

16.5. Thus, the three ingredients which the appellant company has to fulfill in accordance with the provisions of section 68 of the I.T. Act, 1961 have been fulfilled in this case. The appellant has a) established the identity of the subscribers; b) prove the genuineness of the transactions i.e whether it was transmitted through banking or other indisputable channels; and c) established the creditworthiness or the financial strength of the subscribers. I also find that the appellant furnished complete details i.e., names of the share holders, their addresses, occupation and their PANs. On the basis of the documentary evidences filed by the appellant, in my opinion, the appellant has discharged its onus in proving the transactions pertaining to share capital and share premium.

16.6. On perusal of the documentary evidences furnished by the appellant, I find that all the subscribers are corporate entities who have applied for shares in the appellant company and the shares were duly allotted to them through a resolution passed in the Meeting of Board of Directors of the company held on 31st day of March 2005. The resolution passed in the meeting of Board of Directors of the company is extracted below:

“Resolved that, equity share of Rs.10/- each at a premium of Rs.140/- per share be allotted to the following :

S.No. Particular PAN No No. of Shares Rate
1. M/s. KMC Portfolio Pvt. Ltd., RZH-266, Raj Nagar, Part-II, Palam, New Delhi – 110 045. AACCP-
5345-A
59200 10/- at Premium
2. M/s. Chotti Leasing & Finance Pvt. Ltd., D-11, Nanda Devi

Tower, Central Market, II
Floor, Prashant Vihar, Delhi – 110 034.

AABCC-
8851-H
37190 10/- at Premium
3. Suma Finance & Investment
Pvt. Ltd., (presently known as
Moderate Credit Corporation
Ltd.) 7-B, 1st Floor, Dacres
Lane, Kolkata.
AAAACS-0309-P 5000 10/- at Premium

Further resolved that sh. R.P. Singh a director of the company be & hereby authorize to issue the share certificates under the common seal of the company to the share holder name as above, who have been allotted the share of the company.

Certified True Copy

For Ravnet Solutions Pvt. Ltd.,

(Director/Auth Signatory)”

16.7. In instant case, I find that the Assessing Officer has not brought on record any material or cogent evidence to substantiate his observations and findings given in the assessment order. Therefore, such observations and findings are not only vague but are based on mere surmises and conjecture. The Assessing officer has not brought on record any adverse material against the submissions made by the appellant and documentary evidence placed on record. Before treating that the credit entries representing share capital and share premium as un-explained and adding them u/s 68 of the I.T. Act, 1961 in the hands of the appellant, the Assessing Officer was duty bound to thoroughly investigate the identity, credit worthiness and genuineness of the subscribers, which he failed to do so.

16.8. Regarding the Assessing Officer’s observation that the appellant has not furnished any reasons or basis for issuance of shares at such a high premium, I find that the appellant has given an explanation on this issue in its written submissions. As mentioned above, these written submissions were sent to the Assessing Officer for the examination and comments. However, the Assessing Officer in his remand report did not comment on these submissions of the appellant. It has been explained by the appellant in the written submissions that the shares were offered at premium in view of the fact that the appellant company was having very good orders in hand and was having very bright future and that is why the Board of Directors passed a resolution to issue the share of the company at premium. The issuance of shares at premium is the prerogative of the issuing company in an invitation offer. There is no statutory restriction and it is something which falls within the domain of contractual terms. It is for the prospective shareholders to judge and decide as to whether the share premium was justified from their perspective and when these shareholders so decide, there the matter ends and the business prudence of the investors is not open for questioning. Therefore, I do not find this as a good ground for the Assessing Office to disbelieve that the shares of the appellant company of the face value of Rs.10/- were sold at premium, without bringing adverse material on record against the appellant.

16.9. In the instant case, as stated above, the appellant had given names and addresses of the subscribers. These subscribers were income tax assesses. Their TANs were in the file of the Assessing Officer. In spite of all these details/ information, the Assessing Officer did not pursue the matter further to verify the same. There was no effort made to pursue the share subscribers or to check the veracity of the evidence filed regarding their tax profile. What the appellant could do to discharge its onus, it had been done and if the AO had any doubt, it was his duty to probe the matter further till he exhausted all means to detect any falsity of the appellant. When the AO is satisfied with the evidence filed by the appellant and if the AO did not bother to make further enquiries independently regarding the share subscribers, it cannot be said that the appellant faulted and make an addition.

16.10. Therefore, in view of the above discussion and considering the facts of the case as also the various case laws relied upon by the appellant, I hold that the Assessing Officer was not justified in treating the amount of share capital and share premium as un­explained credits u/s 68 of the I.T. Act, 1961. Accordingly, the addition of Rs.1,52,08,500/- (Rs.47,90,000 + Rs.4,30,31,800) made by the Assessing Officer is deleted. This ground of appeal is allowed.”

5.2. The Ld. CIT(A) similarly deleted additions on merits in remaining assessment years in appeals.

6. The assessee, in all the Departmental Appeals, moved petition under Rule 27 of the Appellate Tribunal Rules, seeking permission of the Tribunal to support the order of the Ld. CIT(A) on the ground that “in any case and in view of the matter and having regard to the facts and circumstances of the case, the Ld. CIT(A) ought to have deleted the addition of Rs.1,52,08,500 on account of share capital inter alia, on the ground that no incriminating material has been found as a result of search for making the impugned additions and therefore, the Ld. CIT(A) ought to have deleted the same on this ground itself.”

6.1. The Learned Counsel for the Assessee submitted that the assessee filed original return of income under section 139 of the I.T. Act, on 05th August, 2005, declaring income of Rs.3929/- which have been processed under section 143(1) of the I.T. Act, 1961. Copy of the acknowledgment of filing of the return is filed on record. He has submitted that Ld. CIT(A) has deleted the addition on merit and assessee seeks to support the order of the Ld. CIT(A) in deleting the addition on the ground that no incriminating material has been found as a result of search because addition is made in assessment under section 153A of the Act, on the basis of the details submitted in original return of income already filed and stood completed on the date of the search. No assessment was pending on the date of the search. He has submitted that in case where some inter-connected grounds are subject matter of appeal, the other ground not subject matter of the appeal, can be considered at the instance of the respondent. He has relied upon the following decisions in support of his contention.

6.2. Decision of jurisdictional Delhi High Court in the case of CIT vs. Edward Keventer (Successors) P. Ltd., (1980) 123 ITR 200 in which, in para-9, it was held as under :

“ 9. If a party appeals, he is the party who comes before the Tribunal to redress a grievance alleged by him. If the other side has a grievance, he has a right to file a cross-appeal (and under the CPC and the IT Act of 1961, a memorandum of objections). But, if no such thing is done, he is deemed to be satisfied with the decision. He is, therefore, entitled to support the judgment of the first officer on any ground but he is not entitled to raise a ground which will work adversely to the appellant. In fact such a ground may be a totally new ground, it if is purely one of law, and does not necessitate the recording of any evidence, even though the nature of the objection may be such that it is not only a defence to the appeal itself but goes further and may affect the validity of the entire proceedings. But the entertainment of such a ground would be subject to the restriction that even if it is accepted, it should be given effect to only for the purpose of sustaining the order in appeal and dismissing the appeal and cannot be made use of, to disturb or to set aside, the order in favour of the appellant [B.R. Bamasi vs. CIT (1972) 83 ITR 223 (Bom) ; TC8R. 911] relied on”.

6.3.Decision of Hon’ble Gujarat High Court in the case of Dahod Sahakari Kharid Vechan Sangh Ltd., vs. CIT (2006) 282 ITR 321 (Guj.) in which following question of Law was referred:-

2. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that it was necessary for assessee to file cross objection in spite of fully succeeding in appeal and therefore, it cannot challenge the finding by the CIT(A) of assessee being guilty of concealment of income and/or furnishing inaccurate particulars?

6.4. The findings of the Hon’ble Gujarat High Court on this question in paras 17 to 21 of the judgment reads as under :

“17. Taking up the second issue first. The Tribunal has committed an error in law in holding that the assessee having not filed cross objection against findings adverse to the assessee in the order of Commissioner (Appeals), the said findings had become final and remained unchallenged. The Tribunal apparently lost sight of the fact that the assessee had succeeded before the Commissioner (Appeals). The appeal had been allowed and the penalty levied by the Assessing Officer deleted in entirety. In fact, there was no occasion for the assessee to feel aggrieved and hence, it was not necessary for the assessee to prefer an appeal. The position in law is well-settled that a cross objection, for all intents and purposes, would amount to an appeal and the cross objector would have the same rights which an appellant has before the Tribunal.

18. Section 253 of the Act provides for appeal to the Tribunal. Under sub-section (1), an assessee is granted right to file an appeal; under sub-section (2), the Commissioner is granted a right to file appeal by issuing necessary direction to the Assessing Officer; sub-section (3) prescribes the period of limitation within which an appeal could be preferred. Section 253(4) of the Act lays down that either the Assessing Officer or the assessee, on receipt of notice that an appeal against the order of Commissioner (Appeals) has been preferred under sub-section (1) or sub­section (2) by the other party, may, notwithstanding that no appeal had been filed against such an order or any part thereof, within 30 days of the notice, file a memorandum of cross objections verified in the prescribed manner and such memorandum shall be disposed of by the Tribunal as if it were an appeal presented within the period of limitation prescribed under sub-section (3). Therefore, on a plain reading of the provision, it transpires that a party has been granted an option or a discretion to file cross objection.

19. In case a party having succeeded before Commissioner (Appeals) opts not to file cross objection even when an appeal has been preferred by the other party, from that it is not possible to infer that the said party has accepted the order or the part thereof which was against the respondent. The Tribunal has, in the present case, unfortunately drawn such an inference which is not supported by the plain language employed by the provision.

20. If the inference drawn by the Tribunal is accepted as a correct proposition, it would render rule 27 of the Tribunal Rules redundant and nugatory. It is not possible to interpret the provision in such manner. Any interpretation placed on a provision has to be in harmony with the other provisions under the Act or the connected Rules and an interpretation which makes other connected provisions otiose has to be avoided. Rule 27 of the Tribunal Rules is clear and unambiguous. The right granted to the respondent by the said Rule cannot be taken away by the Tribunal by referring to provisions of section 253(4) of the Act. The Tribunal was, therefore, in error in holding that the finding recorded by the Commissioner (Appeals) remained unchallenged since the assessee had not filed cross objections.

21. Accordingly, the second question (proposed question No. 3) is answered in the negative i.e., in favour of the assessee and against the revenue.”

6.5. Decision of ITAT, Delhi Tribunal in the case of ITO, Ward-11(6), New Delhi vs. Smt. Gurinder Kaur (2006) 102 ITD 189 (Del.) in which, in para-11 of the order, it was held as under:

“11. Even de hors Rule 27 of the Appellate Tribunal Rules, it is open to the respondent in an appeal before the Tribunal to raise a new ground in defence of the order appealed against. It has been so held by the Supreme Court in Hukam Chand Mills Ltd. v. CIT [1967] 63 ITR 232. At page 237 of the report it was held that even assuming that Rule 27 is not strictly applicable, the Tribunal has inherent powers under section 254(1) to entertain the argument of the respondent which amounted to a new ground. It was further held by the Supreme Court as follows:

“It is necessary to state that Rules 12 and 27 are not exhaustive and the powers of the Appellate Tribunal. The rules are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under section 33(4) of the Act.”

It is significant to note that in the case before the Supreme Court, the department which was the respondent sought to raise a new plea in defence of the order appealed against. Earlier, in New India Life Assurance Co. Ltd. v. CIT [1957] 31 ITR 844, the Bombay High Court while pointing out the difference between an appellant and respondent before the appellate court, observed at page 55 that the respondent “may support the decision of the trial court, not only on the ground contained in the judgment of the trial court, but on any other ground”. Later, in the case of B.R. Bamasi v. CIT [1972] 83 ITR 223, the Bombay High Court which was dealing with the case of right of the respondent to defend the order appealed against held that the respondent would be entitled to raise a new ground in defence of the order appealed against, provided it is a ground of law and does not necessitate any other evidence to be recorded, the nature of which would not only be a defence to the appeal itself, but may also affect the validity of the entire assessment proceedings. It was further held that the ground served as a weapon of defence against the appeal and, if accepted should not place the appellant in a worse than he would have been, had he not appealed. In CIT v. Gilbert & Barkar Mfg. Co. [1978] 111 ITR 529, the Bombay High Court made no distinction between the appellant and respondent in an appeal before the Tribunal and held that both were entitled to raise new points or contentions subject only to the condition firstly that no new facts are required to be brought on record is capable of being disposed of on the facts on record and secondly that an opportunity is given to the other side to meet that point which is allowed to be raised for the first time in the appeal. This was also a case of the respondent. To the same effect are the decisions of the Allahabad, Gauhati, Kerala and Gujarat High Courts cited on behalf of the assessee. Therefore, whether it is the appellant or the respondent before the Tribunal, new points or contentions can be raised provided they did not involve investigation into facts (as contrasted with the record) and that an opportunity is given to the other side to meet the contentions. Applying these principles to the present case, we overrule the preliminary objection of the Ld. Sr. DR and permit the assessee to raise the new points before us as a respondent.”

6.6. The Learned Counsel for the Assessee on merits of such contention relied upon the decision of jurisdictional Delhi High Court in the case of CIT (Central)-III vs. Kabul Chawla (2016) 380 ITR 573 (Del.) in which it was held as under :

Completed assessments can be interfered with by the A.O. while making the assessment under section 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 known in the course of original assessment”

6.7. Decision of jurisdictional Delhi High Court in the case of Pr. CIT, Central-2, New Delhi vs. Meeta Gutgutia (2017) 82 taxmann.com 287 (Del.) in which in paras 69 to 72, it was held as under :

“69. What weighed with the Court in the above decision was the “habitual concealing of income and indulging in clandestine operations” and that a person indulging in such activities “can hardly be accepted to maintain meticulous books or records for long.” These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission.

70. The above distinguishing factors in Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts.

71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYs 2000­01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs.

Conclusion

7. To conclude :

(i)Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153 A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04.”

6.8. The Learned Counsel for the Assessee also relied upon the decision of Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) in which it was held as under :

“Where, as per provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and documents which were seized did not establish any co-relation, document-wise, with four assessment years then order passed for initiation of proceeding u/s.153C should be quashed.”

6.9. The Learned Counsel for the Assessee submitted that since, during the course of search no incriminating material was found against the assessee so as to make the impugned addition under section 68 of the I.T. Act and no assessment was pending on the date of the search, therefore, no addition could be made on merits under section 153A of the I.T. Act, 1961. Ld. CIT(A) on this ground should have deleted the addition.

7. The Ld. D.R. on the other hand, objected to the admission of the petition under Rule 27 of the Appellate Tribunal Rules. The Ld. D.R. submitted that there was a search in the case of the assessee on 26th March, 2010 and in the case of Shri Aseem Kumar Gupta Group of cases who was running accommodation entry racket. Notice under section 153A was issued to the assessee before completion of the assessment and addition was made under section 68 of the I.T. Act for accommodation entry of share application money. The Ld. CIT(A) dismissed this ground of appeal of the assessee. The assessee did not file any cross-appeal or the cross objection. The assessee is not supporting the order of the Ld. CIT(A) but attacking the order of the Ld. CIT(A) which is not permissible. The Ld. D.R. relied upon the order of the ITAT, Ahmedabad Bench in the case of DCIT vs. Sandeep M. Patel (2012) 137 ITD 104 (Ahd.) in which it was held that “Rule-27 sanctions a defendant only to “support” the order of the Ld. CIT(A) and not permitted to “attack” the Judgment. The assessee can support the order of the CIT(A) on any ground which is decided against him.” The Ld. D.R. also relied upon the decision of the Hon’ble Punjab & Haryana High Court in the case of Self Knitting Works vs. CIT (2015) 116 DTR 319 (P&H) in which it was held as under:

“Where Respondent is aggrieved against any disallowance or addition sustained by CIT(A) which is not under challenge at behest of Appellant, only remedy available with Respondent is to either file separate appeal or agitate issue by way of cross objections in appeal filed by Appellant impugning disallowance or addition sustained.”

7.1. The Ld. D.R. also relied upon the decision of the jurisdictional Delhi High Court in the case of ACIT vs. Vipul Motors (P) Ltd., Order dated 08.08.2013 in ITA.Nos.2675 & 2676/Del./2010) in which it was held that “during the pendency of proceeding under section 153A of the Act, the A.O. is not empowered to issue notice under section 148 of the Act”. The Ld. D.R. also relied upon the decision of Hon’ble Supreme Court in the case of CIT vs. Mukundray K. Shah (2007) 290 ITR 433 (SC) in which it was held as under :

“Diary seized during search revealing that company MKSEPL in which assessee had substantial interest and which had accumulated profits advanced moneys to two closely related partnership firms in which also assessee was a partner which amounts were withdrawn by assessee and utilised for purchase of RBI bonds, the amounts were advanced by MKSEPL for the benefit of assessee by using the two firms as conduits and the said amount was rightly assessed as deemed dividend in the hands of assessee in block assessment.”

7.2. The Ld. D.R. submitted that the Ld. CIT(A) held that addition can be made under section 153A of the I.T. Act in respect of the seized material.

8. We have considered the rival contentions. In the present case, search was conducted in the case of the assessee as well as in the case of Shri Aseem Kumar Gupta Group cases at various premises who was allegedly providing accommodation entries. The A.O, therefore, issued notice under section 153A of the I.T. Act. However, prior to that, assessee had already filed return under section 139 of the I.T. Act, on 05th August, 2005, which have been processed under section 143(1) of the I.T. Act. Therefore, no assessment was pending prior to the search. The assessment was completed under section 143(1) of the I.T. Act. The Ld. CIT(A) in the impugned order held that ‘once search is initiated, provisions of Section 153A are applicable for framing assessment in the case of such person. ’ The Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla (supra), considering the conspectus of Section 153A in the light of Law explained in various judgments, decided the legal position and one of them was that “once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place.” To that extent, there is no dispute as regards the legal position is concerned that assessments are to be framed under section 153A of the I.T. Act. However, the Hon‘ble Delhi High Court at the end decided that “completed assessments can be interfered by the A.O. while making assessment under section 153A only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment.” The Hon’ble jurisdictional Delhi High Court in its latest decision in the case of Pr. CIT, Central-2, New Delhi vs. Meeta Gutgutia (supra), reiterated the same proposition that “invocation of Section 153A by Revenue for A.Ys. 2001-2002 to 2003-2004 was without any legal basis as there was no incriminating material qua each of those assessment years.” Similarly, the Hon’ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society (supra) held that “where, as per provisions of Section 153C of the Act, incriminating material which was seized had to be pertain to assessment year in question and documents which were seized did not establish any co-relation document-wise with four assessment years, then order passed for initiation of proceeding under section 153C should be quashed.” These legal propositions have not been disputed by the Ld. D.R. It is, therefore, clear from the above discussion in the light of these case laws that there should be recovery of incriminating material (unearthed) during the course of search, then only, the A.O. can interfere with the completed assessments. However, in the present case, no incriminating material was unearthed during the course of search in the case of the assessee to make the addition under section 68 of the I.T. Act against the assessee. The assessee filed original return of income prior to the search which was completed. The assessee disclosed receipts of share capital and share premium in the original return of income. The A.O. on the basis of the original return of income made the impugned addition in the assessment order under section 153A of the I.T. Act. Therefore, no incriminating material was found during the course of search to make such addition against the assessee. The Ld. CIT(A), deleted the addition on merit which is in challenge before the Tribunal in Departmental Appeals. The assessee in his Petition under Rule-27 of the Appellate Tribunal Rules, sought permission of the Tribunal to support the order of the Ld. CIT(A) under Rule-27, by contending that the Ld. CIT(A) should have deleted the addition in question under section 68 of the I.T. Act, on the ground that no incriminating material has been found, as a result of search. Rule-27 of the Appellate Tribunal Rules provides – “The respondent, though he may not have appealed, may support of the order appealed against on any of the grounds decided against him.” In the present case, the assessee is a respondent and have not filed any cross-appeal or cross objection. The assessee wanted to support the order of the Ld. CIT(A) on the ground which is decided against him because the Ld. CIT(A) decided this issue against the assessee on the ground that search under section 132 of the Act, have been conducted in the case of the assessee. Even if search have been conducted in the case of the assessee under section 132 of the I.T. Act, the A.O. could proceed under section 153A of the I.T. Act. But, completed assessment could be interfered with by the A.O. while making assessment under section 153A only on the basis of the recovery of incriminating material found during the course of search. It is, therefore, not a case set-up by the Revenue that any incriminating material was found during the course of search so as to make the addition under section 68 of the I.T. Act. No new facts are to be investigated. The assessee in the present petition sought to support order of Ld. CIT(A) in deleting the addition on ground decided against it. Assessee did not want more relief as against deleted by Ld. CIT(A). Therefore, assessee is justified in moving petition under Rule-27 of Appellate Tribunal Rules to support the order appealed against on any of the ground decided against him. The decisions relied upon by Learned Counsel for the Assessee squarely applicable to the facts and circumstances of the case. The decisions relied upon by the Ld. D.R. would not support the case of the Revenue on this proposition. We, therefore, permit the assessee to raise his point in Petition under Rule-27 of the Appellate Tribunal Rules. The application of the assessee under Rule-27 of the Appellate Tribunal Rules is accordingly allowed.

8.1. Considering the above discussion, it is, clear that during the course of search, no incriminating material was found so as to make any addition under section 153A of the Act, on account of unexplained share capital/premium which was already disclosed in the original return of income. Therefore, the decisions of jurisdictional Delhi High Court in the case of Kabul Chawla (supra), squarely applicable to the facts and circumstances of the case because no assessment was pending on the date of search and addition is made merely on the basis of book entries already disclosed to the Revenue Department. Therefore, the Ld. CIT(A) should have deleted the addition on this ground itself. The order of the Ld. CIT(A), to that extent, is set aside and quashed. The addition would stand deleted because no incriminating material was found during the course of search to make any addition under section 68 of the I.T. Act, 1961. The petition under Rule-27 of the Appellate Tribunal Rules, is accordingly allowed.

9. As regards the addition on merit deleted by the Ld. CIT(A), the Ld. D.R. contended that it was brought on record that accommodation entries have been received from Shri Aseem Kumar Gupta and his statement was recorded by the Investigation Wing. The assessee did not produce any evidence at the assessment stage. The satisfaction of the A.O. at the remand proceedings is not required because the satisfaction of the Ld. CIT(A) is required. A.O. made enquiry under section 250(4) of the I.T. Act on behalf of the Ld. CIT(A). The Ld. CIT(A) has put the responsibility of not conducting enquiry on the A.O. Therefore, the Ld. CIT(A) should have conducted enquiry and relied on judgment of jurisdictional Delhi High Court in the case of Jansampark Advertising and Marketing Pvt. Ltd., in ITA.No.525 of 2015 dated 11.03.2015.

10. On the other hand, Learned Counsel for the Assessee, reiterated the submissions made before the authorities below and submitted that assessee produced sufficient evidence before the authorities below on which remand report from the A.O. was called for. The A.O. did not object to the evidences produced by the assessee. The A.O. accepted that Investors are not related to Shri Aseem Kumar Gupta. The A.O. did not summon any of the Investor and nothing was found against the assessee during the course of search. The Learned Counsel for the Assessee relied upon the following decisions of the Delhi High Court on the proposition that addition have been rightly deleted by the Ld. CIT(A).

10.1. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Gangeshwari Metal Pvt. Ltd., (2014) 361 ITR 10 (Del.) (HC) in which it was held as under :

“It was held that where complete particulars of share applicants are furnished to the A.O. and the A.O. has not conducted any enquiry into the same or has no material in his possession to show that those particulars are false and cannot be acted upon, then no addition can be made in the hands of the company u/s.68.”

10.2. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd., & Others (2014) 361 ITR 220 (Del.) (HC) in which it was held as under :

“Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has “created” evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; A.O. failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable.”

10.3. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Expo Globe India Ltd., (2014) 361 ITR 147 (Del.) (HC) in which it was held as under :

“The order of the CIT (A), would reveal that even though the Assessing Officer had initially concluded on the basis of the materials made available at that stage that service of the entry providers had been utilized to bring in capital, after remand the CIT (A) elaborately took into account considerable material furnished by the assessee. These included income tax returns, balance sheets, ROC particulars and bank account statements. On the basis of these, the CIT(A) held that the share application money or the source of the share application money had been satisfactorily explained. The ITAT was of the opinion that no interference was warranted having regard to the facts of this case. This Court is of the opinion that the only sentence in paragraph-6 of the impugned order that amounts were refunded to the applicants itself should not be a ground to conclude that the findings recorded by the lower authorities are not on the basis of evidence. The entire controversy sought to be raised is purely factual.”

10.4. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Five Vision Promoters Pvt. Ltd., & Ors. (2016) 380 ITR 289 (Del.) (HC) in which it was held as under :

“Provisions of s.68 can be invoked only where assessee offers no explanation at all or explanation offered is unsatisfactory, and addition thereunder can be made only on that condition.”

10.5 Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.) (HC) in which it was held as under :

“The A.O. cannot make any addition in respect of share application money without satisfying himself as to the veracity and genuineness of the transaction by examining the bank accounts or the accounts of the companies who had applied for shares.”

10.6. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Oasis Hospitalities (P) Ltd., (2011) 333 ITR 119 (Del.) (HC) in which it was held as under :

“Income – Cash credit – Share application money – Though the share applicants were not produced in spite of specific direction of the AO, assessee company has filed copies of PAN, acknowledgement of returns of the share applicants and their bank account statements of the relevant period when the cheques were cleared – Thus, primary onus was discharged by the assessee – Assessee was not confronted with the investigation carried out by the Investigation Wing or given any opportunity to cross-examine the persons whose statements were recorded by the Investigation Wing to draw adverse conclusion against the assessee. As regards discrepancies in the bank statements, these statements were provided by the shareholders and were printed on the bank stationery – Assessee was never confronted with these discrepancies by the A.O. –

In any case, it does not follow from these discrepancies that the amount of share capital was undisclosed income of the assessee – Even the correct bank statements as claimed by the AO show that the assessee has received cheques from the shareholders – Though source of cash deposits in the bank accounts of some shareholders is questionable, AO has not further probed the matter – Therefore, remedy lies in reopening the case of these investors and addition cannot be made in the hands of the assessee.”

11. We have considered the rival contentions. The A.O. directed the assessee to furnish copy of the ITR and related Bank Statements of new shareholders with their names and addresses at the assessment stage. The A.O. however, noted that since assessee did not produce these documents, he made addition under section 68 of the I.T. Act. The assessee filed application under Rule 46A of I.T. Rules, before Ld. CIT(A) in which it was submitted that A.O. issued show-cause notice dated 09th December, 2011 and case was fixed for hearing on 16th December, 2011. The assessee received notice in the evening on 14th December, 2011 and vide letter dated 15th December, 2011 requested the A.O. to grant time up to 23rd December, 2011 to file the required details. The assessee sent reply with documents on 23.12.2011 which were received by A.O. on 26.12.2011. The A.O. however, passed the order dated 23rd December, 2011. The assessee, therefore, pleaded that no sufficient opportunity have been given to him to file required details. The additional evidences were, confirmation of accounts of all the Investors, their Board Resolution, Copy of Form No.2, Copy of master data, Copy of PAN, Copy of ITR, Copy of Certificate of Incorporation, Bank Statements and Share Application Forms of all the Investors. The Ld. CIT(A) called for the remand report from the A.O. and directed the A.O. to examine the additional evidences. The Ld. CIT(A) admitted the additional evidences by holding that no proper opportunity have been given to assessee at the assessment stage to produce evidences. The Revenue is not in appeal to challenge these findings of the Ld. CIT(A) in admitting the additional evidences. It, therefore, stands proved on record that assessee was prevented by sufficient cause in not producing required evidences before A.O. because no sufficient time was given to the assessee at assessment stage. The assessee later on produced all these additional evidences before Ld. CIT(A) which have been examined by the A.O. as per the directions of the Ld. CIT(A). The A.O. did not point-out any defect or error in the evidences produced at the appellate stage. Thus, all these additional evidences have been examined by the A.O. which clearly prove the identity of the Investors, their creditworthiness and genuineness of the transaction in the matter. Even the A.O. in the remand report submitted that two of the Investors have been assessed in his Circle under section 153A/153C of the I.T. Act and the Investors are apparently not related to Shri Aseem Kumar Gupta. The admission of the A.O. therefore, clearly show that assessee is not beneficiary of any alleged accommodation entries provided by Shri Aseem Kumar Gupta and how his statement recorded by Investigation Wing, was relevant to the case of the assessee, has not been proved by the Revenue. The A.O. on these additional evidences though made some enquiries, but did not find anything against the assessee. No further enquiry have been made by the A.O. on these additional evidences. No incriminating material was found during the course of search against the assessee so as to make the above addition under section 68 of the I.T. Act. The A.O. has not brought on record any material to substantiate his observations in the remand report. The A.O. did not make any effort to conduct any enquiry directly from these Investors. The A.O. did not issue notices under section 133(6) or summon under section 131 against these Investors for recording their statements. The A.O. was swayed by the fact that statement of Shri Aseem Kumar Gupta was recorded by Investigation Wing to provide accommodation entries. However, such fact is contradicted by the A.O. himself by noting in the remand report that his Circle has assessed two of the Investors under section 153A of the Act and that Investors are not apparently related to Shri Aseem Kumar Gupta. Therefore, there was nothing on record to support the finding of fact recorded by the A.O. Evidences and material available on record clearly justify the findings of Ld. CIT(A) in deleting the addition. The assessee also explained the reasons for issuance of shares at high premium on which A.O. in the remand report did not make any comment on the submissions of the assessee. The Ld. CIT(A), therefore, was justified in holding that A.O. was not justified in treating share capital and share premium as unexplained credits under section 68 of the I.T. Act. We may rely upon the following decisions.

11.1. The Hon’ble Supreme Court in the case of CIT vs. Lovely Exports Pvt. Ltd., (2008) 216 CTR 195 in which it was held as under :

“If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company.”

11.2. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Kamdhenu Steel & Alloys Ltd., & Others 361 ITR 220 in which it was held as under :

“Once adequate evidence/material is given, which would prima facie discharge the burden of the assessee in proving the identity of shareholders, genuineness of the transaction and creditworthiness of the shareholders, thereafter in case such evidence is to be discarded or it is proved that it has “created” evidence, the Revenue is supposed to make thorough probe before it could nail the assessee and fasten the assessee with such a liability under s.68; AO failed to carry his suspicion to logical conclusion by further investigation and therefore addition under s.68 was not sustainable.”

11.3. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Laxman Industrial Resources Pvt. Ltd., ITA.No.169 of 2017 dated 14th March, 2017, in which it was held as under :

“The CIT(A) took note of the material filed by the assessee and provided opportunity to the AO in Remand proceedings. The AO merely objected to the material furnished but did not undertake any verification. The CIT(A) deleted the addition by relying upon the decision of the Hon’ble Apex Court in the case of Lovely Exports Pvt.Ltd. (supra) and judgement of Delhi High Court in the case of CIT vs Divine Leasing & Finance Ltd. [2008] 299 ITR 268. The ITAT confirmed the opinion of the Ld.CIT(A). Hon’ble High Court in view of the above findings noted that the assessee had provided several documents that could have showed light into whether truly the transactions were genuine. The assessee provided details of share applicants i.e. copy of the PAN, Assessment particulars, mode of amount invested through banking channel, copy of resolution and copies of the balance sheet. The AO failed to conduct any scrutiny of the document, the departmental appeal was accordingly dismissed.”

11.4. Decision of Hon’ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT, Order Dated 30th July, 2010 in SLP.No.21073 of 1999 in which it was held as under :

“We have examined the position, we find that the shareholders are genuine parties. They are not bogus and fictitious therefore, the impugned order is set aside.”

11.5. Decision of Hon’ble Madhya Pradesh High Court in the case of CIT vs. Peoples General Hospital Ltd., (2013) 356 ITR 65 in which it was held as under :

“Dismissing the appeals, that if the assessee had received subscriptions to the public or rights issue through banking channels and furnished complete details of the shareholders, no addition could be made under section 68 of the Income-tax Act, 1961, 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 the company’s own income from undisclosed sources. It was nobody’s case that the non-resident Indian company was a bogus or non­existent company or that the amount subscribed by the company by way of share subscription was in fact the money of the assessee. The assessee had established the identity of the investor who had provided the share subscription and that the transaction was genuine. Though the assessee’s contention was that the creditworthiness of the creditor was also established, in this case, the establishment of the identity of the investor alone was to be seen. Thus, the addition was rightly deleted. CIT v. Lovely Exports P. Ltd. [2009] 319ITR (St.) 5 (SC) applied.”

11.6. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. (i) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under :

“In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the “source of source”. The assessee-company was engaged in the business of financing and trading of shares. For the assessment year 2001-02 on scrutiny of accounts, the Assessing Officer found an addition of Rs.71,75,000 in the share capital of the assessee. The Assessing Officer sought an explanation of the assessee about this addition in the share capital. The assessee offered a detailed explanation. However, according to the Assessing Officer, the assessee failed to explain the addition of share application money from five of its subscribers. Accordingly, the Assessing Officer made an addition of Rs.35,50,000/- with the aid of section 68 of the Act, 1961 on account of unexplained cash credits appearing in the books of the assessee. However, in appeal, the Commissioner of Income-tax (Appeals) deleted the addition on the ground that the assessee had proved the existence of the shareholders and the genuineness of the transaction. The Income-tax Appellate Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) as it was also of the opinion that the assessee had been able to prove the identity of the share applicants and the share application money had been received by way of account payee cheques. On appeal to the High Court: Held, dismissing the appeals, that the deletion of addition was justified.”

11.7. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Winstral Petrochemicals P. Ltd., 330 ITR 603 in which it was held as under :

“Dismissing the appeal, that it had not been disputed that the share application money was received by the assessee-company by way of account payee cheques, through normal banking channels. Admittedly, copies of application for allotment of shares were also provided to the Assessing Officer. 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 cheques, they could not be said to be non-existent, even if they, after submitting the share applications had changed their addresses or had stopped functioning. Therefore, the Commissioner (Appeals) and the Tribunal were justified in holding that the genuineness of the transactions had been duly established by the assessee.”

11.8. Decision of the Hon’ble jurisdictional Delhi High Court in the case of CIT vs. Value Capital Services Pvt. Ltd., (2008) 307 ITR 334 (Del.) (HC) in which it was held as under :

“Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose.”

12. Considering the facts of the case and our findings on the legal issue, there is no need to consider this issue on merit in detail. The Ld. CIT(A) on proper perspective and considering the material on record, correctly deleted the addition on merit. In view of the above, we do not find any error in the order of the Ld. CIT(A) in deleting the addition on merit. The Departmental Appeal for the A.Y. 2005-2006 stands dismissed.

13. The findings in A.Y. 2005-2006 are followed in the remaining assessment years because the issues are same in the remaining appeals as is also suggested by the parties. In view of the above discussion, the Departmental Appeals for the A.Ys. 2006-2007, 2007-2008 and 2008-2009 are also dismissed.

14. In the result, all the appeals of the Department are dismissed.

Order pronounced in the open Court.

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Category : Income Tax (28342)
Type : Judiciary (12648)
Tags : ITAT Judgments (5689) Section 68 (241)

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