DCIT Vs N. M. Agrofood Products Pvt. Ltd (ITAT Jaipur)
ITAT Jaipur held that assessment which are already completed after making proper inquiries cannot be allowed to again reframed merely based on the search without any fresh evidence. Addition unsustainable
Facts-
The case of the assessee was selected for scrutiny and the assessment u/s 143(3) was completed on 25.03.2015. Thereafter, search was conducted in 2018 and AO observed that assessee company has received total quantum of share capital and premium on account of the aforesaid share allotment of 6,49,50,000/-from companies and individuals who not only lack credit worthiness but their identity itself cannot be proved. Hence, the assessee company was issued show cause notice that why the amount of share allotment money shouldn’t be considered as bogus and added back to the total income of the assessee.
After considering reply of the assessee, AO observed that transactions are bogus and are to be treated as unexplained income u/s 68.
Conclusion-
Held that CIT(A) has after considering the details arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment which are already completed after making the proper enquiries by the AO, and those assessment cannot be allowed to again reframed merely based on the search and that too without any fresh evidence. Merely the surveys conducted parties are not available after 8 years it is not the fault of the assessee and without any fresh material unearthed during search no fresh addition can be made on the issue which are already settled.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal is filed by the revenue aggrieved from the order of the Commissioner of Income Tax (Appeal)- 4, Jaipur [ Here in after referred as Ld. CIT(A) ] for the assessment year 2012-13 passed on 25.11.2021, which in turn arise from the assessment order passed by the Assistant Commissioner of Income Tax, Central Circle-3, Jaipur dated 31.12.2019 pursuant to the search and seizure action under section 132 of the Income Tax Act, passed under section 143(3) r.w.s. 153A of the Act.
2. In this appeal the revenue has marched following grounds of appeal:
Ground-1. The Ld. CIT (Appeal) has erred in law in holding that additions can be made in the proceedings under section 153A of the Income Tax Act 1961 in respect of the assessments which were completed prior to the date of search, except based on some incriminating material unearthed during the search which was not already available to the Assessing Officer. While granting relief to the assessee, the Ld. CIT (Appeal) has failed to take note of the position that Hon’ble Supreme Court of India has admitted SLP against this proposition in the following matters –
i. Principal Commissioner of Income Tax v. Gahoi Foods Ltd. 117 taxmann.com 118(SC)/272 Taxman 521(SC) dated 24.01.2020
ii. ii. Principal Commissioner of Income-tax, Central-4 v. Dhananjay International Ltd.,114 taxmann.com 351(SC)/270 Taxman 15(SC) dated 16.09.2019.
2. The Ld. CIT (Appeal) has erred in law and on facts in not carrying out her duty of adjudicating the grounds on merit, and dismissing them only on a technical.
3. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition to Rs. 5,20,00,000/ made by the AO on account of unexplained share premium u/s 68 of the Income-tax Act, 1961.
4. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition to Rs. 5,95,00,000/ made by the AO on account of unexplained unsecured loans u/s 68 of the Income-tax Act, 1961
5.The Appellant craves leave or reserves right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
3. The brief facts of the case are that in this case, original return of income was filed by assessee 30.09.2012, declaring total income at Rs.1,33,69,670/- for the Assessment Year 2012-13. Thereafter, the case of assessee was selected for scrutiny, accordingly, the assessment u/s 143(3) of the Income tax Act, 1961 was completed on 25.03.2015 and thus, the assessment was completed in this case as on the date of search and income was assessed at Rs. 1,34,11,740/-. After giving effect of Ld. CIT(A) in the first quantum proceeding, the income was reduced to Rs.1,33,83,700/.
4. A search was conducted on 08.02.2018 in the case of “NM Group, Sriganganagar” to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search.
4.1 Accordingly, notice u/s 153A of the IT Act, 1961 for this year was issued on 30.07.2018 and duly served upon the assessee. In compliance to the notice u/s 153A of the IT Act, 1961, return of income was e-filed on 22.08.2018, declaring total income of Rs. 1,33,83,690/- ( which was finally decided after appeal effect of first round ) for the year under consideration. The assessee company is carrying out business of Grain Merchants. Apart from this, the assessee has shown income from house property.
4.2 Accordingly, notice u/s 143(2) & 142(1) of the Income tax, 1961 were issued along with questionnaire requiring certain details/ information, which was duly served upon the assessee.
5. During the course of analysis of the financials of assessee company it was observed that assessee company has shown to have issued shares of face value of 10 at exorbitantly high premium of 190 per share on 26.03.2012 to certain persons, most of which were companies shown to have been registered at Kolkata and other companies which were shown to have been registered at Delhi. The total quantum of share capital and premium shown to have been received by M/s N M Agrofood Products Pvt. Ltd on account of the aforesaid share allotment is 6,49,50,000. The details of the list of allotees filed by the assessee. These allotees are companies shown to be registered in Kolkata. The details their total income as per their ITR for the assessment year under consideration wherein these companies have shown to have subscribed for shares at exorbitantly high premiums was obtained and placed on record in the assessment order at page 3 para 5.1. The ld. AO observed that most of the companies that have shown to have invested in shares of the assessee company at exorbitant premium have shown insignificant incomes in the year of such investment. From the financial data ld. AO observed that the companies based in Kolkata do not seem to have the financial capacity for the investment in shares of the assessee company at huge premium that they have shown to have made. Moreover, most of the Kolkata companies have the same address, and on verification, it is observed that the directors of these companies are also directors in many other companies also based in Kolkata and simply provided accommodation entries of share application / premium thereon.
6. In order to ascertain the existence of the above-mentioned companies, during the course of search proceedings; surveys were authorized at the given addresses of M/s Ritesh Properties Pvt. Ltd, Rites Real Estate Pvt. Ltd, Rupali Trade & Holding Pvt. Ltd, Surbhika Vyapaar Pvt. Ltd at 4, Synanogue Street, Kolkata as well as at the given addresses of Waltair Investment Pvt. Ltd, Axiom Commodities Pvt. Ltd and Extent VinimayPvt. Ltd at 63, Radha Bazaar Street, Kolkata. The survey teams did not find existence of any of these companies at the given addresses. The reports of the survey teams were reproduced in the assessment order. The ld. AO after going through the report and financial details of these companies based in Kolkata, stated that these companies have no real existence or identity, and that the investment being shown by them by means of share premium in M/s N M Agrofood Products Pvt. Ltd simply appears to be an arrangement to route the unaccounted money generated by the group concerns via layering them in bank accounts and finally introducing them by means of share premium in the group concerns through the Kolkata based shell companies.
7. During the course of post-search proceedings, Shri Manoj Kumar Gupta, main person of the group was asked to submit his explanation with regards to the genuineness of the share premium shown to have been received by assessee company from the above mentioned Kolkata based companies. In response, Shri Manoj Kumar submitted that this issue was previously considered during the course of assessment proceedings u/s 143(3) and that confirmations from all the share allotees were submitted by him during the course of assessment proceedings. The ld. AO stated that the statement of Shri Manoj Kumar was considered, but is not acceptable as mere submission of confirmation letters does not discharge the onus cast upon the assessee to satisfactorily explain the nature and source of the share premium received. It is clear that Kolkata based investing companies do not have any creditworthiness to make such huge investments that they have shown. On physical verification, these companies were found to be non-existent.
8. Same way the ld. AO observed that companies shown to have been registered in Delhi and have invested in the assessee company details of their total income as per their I.T. Returns for the A.Y. 2012-13 relevant to the F.Y. 2011-12, being the year in which they have shown to have subscribed for shares at exorbitantly high premium were tabulated in the assessment order at page 7, para 5.4.
9. The ld. AO observed that most of the companies that have shown to have invested in shares of assessee company at exorbitant premium have shown insignificant Incomes in the year of such Investment. From the above financial data, the companies based in Delhi do not have the financial capacity for the investment in shares of assessee company that they have shown to have made. Moreover, most of the companies have the same / similar address, which is another Indicator of the fact that they are suitcase/paper companies without any actual existence. The fact that these companies have shown to have made share premium investment in the same tranche as other Kolkata based shell companies, it is apparent that the investment being shown by the Delhi based companies in assessee company is prima facie an arrangement to route the unaccounted money generated by the group concerns. via layering them in bank accounts and finally Introducing them as share premium in the group concerns through accommodation entry providing shell companies.
10. The three individuals shown to be residents of Delhi made investment in the assessee company. The ld. AO observed that it is highly improbable that certain individuals would simply invest in a Ganganagar based company at an exorbitant premium. The ld. AO thus, observed that assessee company has received total quantum of share capital and premium on account of the aforesaid share allotment of 6,49,50,000/-from companies and individuals who not only lack credit worthiness but their identity itself cannot be proved. Hence, the assessee company was issued show cause notice that why the amount of share allotment money shouldn’t be considered as bogus and added back to the total income of the assessee.
11. The assessee filed its reply vide letter dated 13.12.2019, where in the assessee contended that;
“That your good self has suspected transaction of allotment of share capital on account of the reason that share having face value of Rs. 10 has been issued at high premium of Rs. 190/- per share and also issued these shares mainly to Kolkatta & Delhi based companies and accordingly show cause as to why this amount should not be added back to income in AY 2012-13 u/s 68 of the Act, in this connection we are to submit as under:
i) In AY 2012-13, assessee company has allotted share capital of Rs. 32,47,500/ and also received share premium of Rs. 6,17,02,500/-totalling to Rs. 6,49,50,000/-.
ii) Assessee company has allotted 3,24,750 shares during the year having face value of Rs. 10 at share premium of Rs. 190/- per share. Assessee company has allotted shares as on 26-03-12. Fair market value as on 26-03-12 as per book value method works out to as under:
