Case Law Details

Case Name : M.L. Singhi & Associates (P) Ltd. Vs DCIT (ITAT Delhi)
Appeal Number : ITA.Nos.3338 & 3339/Del./2017
Date of Judgement/Order : 26/02/2021
Related Assessment Year : 2009-10 & 2010-11

M.L. Singhi & Associates (P) Ltd. Vs DCIT (ITAT Delhi)

No addition could be made against the assessee if no incriminating material was found during the course of search

It is not in dispute that whatever queries were raised by the A.O. time to time, have been replied by assessee along with documentary evidences. All the replies filed by assessee along with documentary evidences are filed in the paper book. The assessee explained each and every Investor Company. It is not in dispute that all the Investor Companies are corporate entities and registered with ROC, therefore, it being a legal entity and assessed to tax with the Income Tax Department, their identity cannot be disputed by the A.O. The assessee also explained the issue of their creditworthiness and genuineness of the transaction by filing the documents of Investor Companies i.e., confirmations, confirmation of accounts, affidavits of the Investor Companies, bank accounts, ITRs, Audited balance-sheets, Memorandum and Articles of Associations, Master Datas, share allotment advise and issue of Share Certificate etc., Resolution of Investor Companies and assessment orders of the Investor Companies etc., Similar type of documents have been filed in the case of each and every Investor Companies which have not been doubted by the A.O. The assessee explained in its reply before the A.O. on the basis of the documentary evidences on record that all the Investor Companies are identifiable corporate entities and assessed to tax and have worth to make investment in assessee company. Merely because Investor Companies were showing low income or meagre income in the return of income, is not a sole criteria to disbelieve the explanation of assessee. Actual Share Certificates were also issued to the Investor Companies. The bank statements of the Investor Companies shows that they have sufficient bank balance with them and all the transactions with the assessee company are routed through banking channel. All the Investor Companies have confirmed their transactions with the assessee company. The Investor Companies have also confirmed the transaction directly to the A.O. in response to the notice issued under section 133(6) of the I.T. Act, 1961. The assessee is a NBFC Company registered with the RBI. The A.O. has wrongly mentioned in the assessment order that reply of the assessee of February have been considered in January. The assessee also explained before the A.O. that in the case of 02 Investor Companies their address were incorrect in the notices issued under section 133(6) of the Act and correct addresses were supplied later on. Therefore, no fault could be found with the explanation of assessee. The assessee produced 02 Directors of the Investor Companies who have also confirmed their transaction with the assessee company in their statements recorded by the A.O. The A.O. later on did not fix any other date for recording the statements of remaining Directors of Investor Companies. The A.O. received report from the Investigation Wing at Kolkata, but, it is not clarified in the assessment order if the report of Investigation Wing, Kolkata was ever supplied to the assessee or confronted to the assessee so that assessee could rebut the same. Therefore, in the absence of any confrontation of the report of the Investigation Wing to the assessee, the same cannot be read in evidence against the assessee. Whatever the objections have been raised by the A.O. in the assessment order for disbelieving the explanation of assessee on the basis of some material found during the course of search, material found from the Chartered Accountant of the assessee, statement of Shri Sampath Sharma, Director of the assessee company etc., and low income declared by the Investor Companies have already been considered by the ITAT, Delhi Benches in Group cases on identical facts and entire addition have been deleted on merits as well as it was held that no addition could be made against the assessee because no incriminating material was found during the course of search. Therefore, all the points raised by the A.O. have already been considered and decided by different Benches of the ITAT, Delhi Benches, Delhi in the Group cases as noted above.

Considering the above discussion in the light of Order of the Tribunal in the Group Cases and in case of assessee and the decisions of various High Courts referred to above and the decisions relied upon by the Learned Counsel for the Assessee, it is clear that assessee proved identity of the Investors and also furnished sufficient documentary evidences to prove creditworthiness of the Investors, genuineness of the transaction in the matter. Therefore, initial onus upon the assessee to prove ingredients of Section 68 of the I .T. Act, 1961 stands discharged. The decisions relied upon by the Ld. D.R. have also been considered in the Group cases as above and did not find in favour of the Revenue because the assessee has been able to prove creditworthiness of the creditors and genuineness of the transaction. Therefore, the decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and above discussion, we are of the view that entire addition made by the authorities below of Rs.6.7 crores is wholly unjustified and is liable to be set aside. In view of the above, we set aside the Orders of the authorities below and delete the entire addition of Rs.6.7 crores.

**

When money lending was part of the business of the assessee company, no addition under section 2(22)(e) of the I.T. Act, 1961 could be made

In the case of Parle Plastic Ltd., 332 ITR 63 it was held that when money lending was part of the business of the assessee company, no addition under section 2(22)(e) of the I.T. Act, 1961 could be made. In the case of Creative Dyeing & Printing Ltd., 318 ITR 476 (Del.) the Hon’ble Delhi High Court held that business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act, 1961. In the case of Shri P.K. Malhotra 338 ITR 538 (Cal.) (HC) the Hon’ble Calcutta High Court held that when shareholder permitted to mortgage its properties for loan and received loan, it would not attract the provisions of Section 2(22)(e) of the I.T. Act. Since the assessee is NBFC Company registered with RBI and as per assessment order itself the nature of business of assessee is financing and investment and the details submitted by Learned Counsel for the Assessee clearly show that assessee is mainly engaged in finance business for giving loans and advances and earn interest thereon, would clearly prove that assessee is mainly in the business of lending of money to others, therefore, business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act and as such the case of the assessee would fall to the exception provided in sub-clause-(ii) of Section 2(22)(e) of the I.T. Act, 1961. In view of the above, we set aside the Orders of the authorities below and delete the addition of Rs.20 lakhs. Accordingly, Ground No.3 of the appeal of the Assessee is allowed. No other point is argued.

FULL TEXT OF THE ITAT JUDGEMENT

Both the appeals by the Assessee are directed against the different Orders of the Ld. CIT(A)-35, New Delhi, Dated 27.03.2017, for the A.Ys. 2009-2010 and 2010-2011.

2. We have heard the Learned Representatives of both the parties through video conferencing and perused the material on record.

3. In both the appeals assessee challenged the addition of Rs.6.70 crores and Rs.9.60 crores respectively under section 68 of the I.T. Act, 1961 on account of unexplained share capital / premium. Learned Representatives of both the parties mainly argued in A.Y. 2009-2010 and have submitted that the issue is same in A.Y. 2010-2011 also and documentary evidences and facts are identical. Therefore, the Order in A.Y. 2009-2010 may be followed in A.Y. 2010-2011. We, therefore, proceed to decide the appeal of assessee for the A.Y. 2009-2010 as under :

4. The facts of the case are that original return in this case was filed on 19.02.2010 declaring income of Rs.13,46,170/- which was processed under section 143(1) of the I.T. Act, 1961. Subsequently, a search and seizure operation under section 132 of the I.T. Act was conducted in
Brahmaputra Group of cases including the assessee on 28.09.2010 and various books of account and documents including those belonging to the assessee were found and seized. Notice under section 153A was issued on 02.02.2021 requiring the assessee to file return of income. In response thereto, assessee filed letter submitting before A.O. that original return filed by it may be treated as return having been filed in response to notice under section 153A of the I.T. Act, 1961, declaring income of Rs.13,46,170/-. The assessee produced the books of account and other documents time to time before A.O. which have been examined.

4.1. From the details submitted by the assessee and material available with the Department, it was found that during financial year relevant to assessment year under appeal, assessee has raised share capital money to the tune of Rs.6.70 crores from Kolkata-Howrah based Companies as under :

Sl. No. Name and address of the Company No. of Shares Nominal value of share (Rs.) Premium paid per share (Rs.) Date of allotment
1. BGS Credit P. Ltd., 1, Raj Ballab Saha Lane, Howrah – 711 101 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per share) 30.03.2009
2. Kathleen Vyapar P. Ltd., 1, Raj Ballab Saha Lane, Howrah – 711 101 22500 2,25,000 (Rs.10 per share) 42,75,000 (Rs.190 per
share)
30.03.2009
3. Sahaj Tie UP P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 19000 1,90,000 (Rs.10 per share) 36,10,000 (Rs.190 per
share)
30.03.2009
4. Hopewell Merchants P. Ltd., 10, Mullik Street, Kolkata-7. 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009
5. Madson Agencies P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 42500 4,25,000 (Rs.10 per share) 80,75,000 (Rs.190 per
share)
30.03.2009
6. Midnight Agencies P. Ltd., 1, Raj Ballab Saha Lane, Howrah – 711 101 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009
7. Real Trade Com P. Ltd., 1/A, Grant Lane, 1st Floor,,Kolkata – 700 012. 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009
8. Poorak Trading P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 12500 1,25,000 (Rs.10 per share) 23,75,000 (Rs.190 per
share)
30.03.2009
9. Motorex Finance P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 37500 3,75,000 (Rs.10 per share) 71,25,000 (Rs.190 per
share)
30.03.2009
10. Topline Finvest P. Ltd., 2, Lal Bazar Street, 107C, Todi Chamber, 1st Floor,

Kolkata

25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009
11. Shree Sudarshan Casting P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 12500 1,25,000 (Rs.10 per share) 23,75,000 (Rs.190 per
share)
30.03.2009
12. Spandan Vanihya P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor,
Kolkata – 700 001.
13500 1,35,000 (Rs.10 per share) 25,65,000 (Rs.190 per
share)
30.03.2009
13. Vibgyor Vinimay P. Ltd., 9/12, Lal Bazar Street, Block E, 2nd Floor, Kolkata – 700 001. 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009
14. . Giriraj Tradecom P. Ltd., 1/A, Grant Lane, 1st Floor, Kolkata – 700 012. 25000 2,50,000 (Rs.10 per share) 47,50,000 (Rs.190 per
share)
30.03.2009

4.2. Accordingly, a questionnaire Dated 31.08.2012 was issued and assessee was confronted with the result of investigation made by the Department in respect of share capital and assessee was also required to file certain details and the counter-foil of issue of share certificates and copies of the share application forms etc., The assessee was also required to produce the above shareholder companies through their Directors for verification of genuineness of the investment in shares by them in assessee company. The questionnaire is reproduced in the assessment order in which it was also brought to the notice of assessee that the Department has verified the existence of these companies,
their creditworthiness of the and genuineness of the transaction by making survey under section 133A of the I.T. Act on certain shareholders above which are 07 in number and it was found that they do not exist at the given address. It was also found that they are not engaged in regular business. The Directorate of the Kolkata provided further opportunity to the shareholder companies to prove their
existence, identity, creditworthiness of the and genuineness  of the transaction, but, none of the parties have appeared before the Investigation Wing. During the course of search proceedings, statement of Shri Sampat Sharma, Director in some of the Companies of Brahmaputra Group was recorded in which he has explained that he has no idea about receipt of share capital/share premium money.
Further, Investigation Wing asked to supply the documents of issue of share certificates and evidence of dispatch of the documents along with application form details of investigation and Memorandum and Articles of Association of Kolkata-Howrah based companies and was also directed to produce these companies for verification.

4.3. Similarly, in the questionnaire Dated 31.08.2012, assessee was confronted with the fact that certain
documents including blank signed share transfer forms, blank money transfer receipts, blank signed Power of Attorney etc., were found at the premises No.M3, N5, Azadpur Commercial Complex, New Delhi during the course of survey under section 133A of the I.T. Act in the premisesof Shri M.L. Agarwal, C.A. who is the Auditor of the assessee company.

4.4 In response to the questionnaire Dated 31.08.2012 assessee filed reply along with confirmations, bank statements, copies of the ITR, balance-sheet etc., of the Investor Companies based at Kolkata-Howrah. These documents were examined, but, not found satisfactory inasmuch as the assessee has filed copies of these companies ledger accounts as appearing in the books of account of the assessee duly confirmed by them. Whereas the confirmation required by the O/o. The Assessing Officer were on the ledger accounts of the assessee in the books of the Investor Companies. The copies of the ITRs filed reveal that those Investor Companies have declared NIL income in some cases or very meagre income has been declared which does not prove creditworthiness of the and genuineness of the transaction. The A.O. noted that assessee did not file other reply as per query raised by him.

4.5 Apart from, during the course of search operation in Brahmaputra Group of cases carried-out at the premises A-7, Mahipalpur, New Delhi, the following incriminating documents were, inter alia, seized by the party BA5 as under:

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50lakhs is written.

ii. Page No.1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murarilal Aggarwal MLA is made.

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs.30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs.5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs.3 lakhs in the name of Saratj Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A Singhal and M.L. Aggarwala dividing into Rs 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.”

4.6.  During the course of search and post-search Investigation, the assessee of this Group has not been able to explain the above entries satisfactorily though these entries are to be dealt with in relevant cases, but, this also proves the fact that this Group is engaged in bringing back their unaccounted, undisclosed income in the guise of share capital/share application money. The statement of Shri Sampat Sharma, Director of some of the companies of Brahmaputra Group was recorded in which he has shown his inability as to how share capital/premium was taken. The A.O, therefore, issued final show cause notice Dated 31.01.2013, relevant portion is reproduced in the assessment order in which all the above facts were again reiterated and assessee was asked to explain as to who are the owners and shareholder of the transferring companies, details of the share applicants/share premium received by Brahmaputra Group of companies, why the original share certificates of above companies were lying in the custody as on the date of search and survey, file the details of share certificates along with evidence of Annual General Body Meeting [“AGM”] and Resolution for transfer of shares, the details of the companies and the persons which were appearing on different pages in the aforesaid Register and to produce the Register having details of issue and dispatch of the shares. The A.O. also reproduced the statement of Shri Sampath Sharma in the notice and asked the assessee in case the assessee fails to explain the above entries with source, it will be presumed that all these entries are nothing, but, the money of different companies/entities of  Brahmaputra Group which have been routed by them through various non-est companies based at Kolkata-Howrah and addition shall be made accordingly. It was also noted that incomplete details have been submitted by assessee.

    4.7. In response to the show cause notice, assessee filed letter Dated 06.03.2013 with confirmation of the parties which confirmations were also filed on record. No other reply have been filed. The A.O. also noted in the assessment order that ADIT (Inv.), Kolkata has submitted its report Dated 28.02.2011 intimating that 48 parties were operating at Kolkata which are merely paper companies and they have no actual business activities. During the assessment proceedings a letter Dated 29.01.2013 was sent to ADIT (Inv.), Kolkata requesting to send the final report which was submitted vide letter Dated 22.03.2013 confirming non-existence of the parties.

    4.8. The A.O. also noted that during the course of assessment proceedings the assessee produced Shri Ajit Kumar, Director of M/s. Motorex Finance Pvt. Ltd., Kolkata and Vinay Kumar Shah, Director of Shri Sudarshan Casting Pvt. Ltd., Kolkata and M/s. Madson Agencies Pvt. Ltd., who had invested a sum of Rs.75 lakhs, Rs.25 lakhs and Rs.85 lakhs respectively as share capital/share application money with the assessee company in assessment year under appeal. The A.O. also noted that statement of these persons were recorded, but, they have not been able to explain as to whom the share certificates were sold by them and for which amount and they were unable to produce the original share certificates and bank statements etc., The A.O, therefore, noted that assessee has failed to discharge its onus to prove the identity of the share applicants, their creditworthiness of the and genuineness of the transaction. Therefore, entire share application money of Rs.6.70 crores was treated as unexplained in the hands of the assessee under section 68 of the I.T. Act and addition was accordingly made.

4.9. The assessee challenged the addition before the Ld. CIT(A), but, appeal of assessee has been dismissed confirming the Order of the A.O.

5. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has also filed written submissions and gist of the case Law relied upon in support of the contention. He has submitted that each of the shareholders from whom share capital was received are identifiable corporate entities and assessed to tax. The entire share capital has been received through banking channel and there were no material found during the course of search to prove that the monies came from the coffers of the assessee company. The bank statements of each of the Investors reflects the capacity of the shareholders/applicants and have not been adversely commented upon by the authorities below. There is no adverse inference drawn by the authorities below as regards the premium amount received by the assessee. The net worth of the Investors are in crores and is duly reflected in their audited balance-sheet. The genuineness of the transaction can be seen from confirmations, Affidavits, bank statements, Certificate of Incorporation along with Memorandum and Articles of Association, Master Data from Registrar of Companies [“ROC”] showing them as an active Company, Board Resolution by assessee company regarding allotment of shares, Board resolution of Investor Companies for making investments, acknowledgment of return of income of the Investor Companies along with their audited financial statements and Orders of assessment of Investor companies. The shareholders/Investors have independently confirmed their investment in response to notice under section 133(6) of the I.T. Act, 1961. The assessee company is registered as NBFC Company with Reserve Bank of India and assessee company is mainly in the business of investment in the securities of listed as well as unlisted companies and lending of the money to different companies including M/s. Brahmaputra Group and other reputed companies. Paper Book 75-76 is the reply before A.O. in which the same facts have been explained that the Investors have been made compliance to the notice under section 133(6) of the I.T. Act, 1961. In case of 02 parties notice was sent at the wrong address and assessee later on provided correct address as per reply. Learned Counsel for the Assessee submitted that A.O. was not justified in referring in the assessment order that reply of February have been considered by him in January, 2013. PB-19 onwards are the detailed evidences submitted before the authorities below as explained above along with worth of the Investor Companies to make investment in assessee company. PB-41 is reply Dated 19.03.2015 explaining each issue of creditworthiness and genuineness of the transaction of the Investors supported by documentary evidences. It was also explained that shares were actually allotted to the Investor Companies and complete details and their Certificate Nos. Etc., were also filed. Two Directors i.e., Shri Vinay Kumar Shah and Shri Ajit Kumar were produced before A.O. and their statements have been recorded in which they have confirmed the transaction with the assessee, but, later on no other data was fixed by the A.O. for producing the other Directors at the convenient time. No further examination have been done. PB-79 is the reply regarding Shri M.L. Agarwal, C.A. There is no objection raised for raising the premium amount per share in the assessment order.Learned Counsel for the Assessee submitted that in the group cases and in the case of assessee for earlier years, ITAT, Delhi Benches have decided the identical issue and deleted similar addition. Therefore, the issue is covered by the following decisions :

1. Order of ITAT, Delhi E-Bench, New Delhi in the case of M/s. M.L. Singhi & Associates (P) Ltd., New Delhi vs., DCIT, Central Circle-7, New Delhi in ITA.Nos.3335, 3336 & 3337/Del./2017 Dated 17.09.2018, for the A.Ys. 2006-07, 2007-08 & 2008­09.
2. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Finlease (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi in ITA.No.3332/ Del./2017 Dated 29.12.2017, for the A.Y. 2007-08.
3. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Realtors (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi in ITA.No.3406/ Del./2017 Dated 23.04.2018, for the A.Y. 2007-08.
4. Order of ITAT, Delhi A-Bench, New Delhi in the case of Brahmaputra Holdings (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi in ITA.No.3330/
Del./2017 Dated 29.05.2018, for the A.Y. 2007-08.
5. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Finlease (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi in ITA.Nos.3333 & 3334/Del./2017 Dated 15.01.2020, for the A.Ys. 2009-10 and 2010-11.

5.1.  Learned Counsel for the Assessee filed copies of the above orders in the paper book in which the Tribunal in Group cases and case of assessee have considered the identical material and evidence on record and deleted the entire addition. He has further submitted that no report of the survey under section 133A of the I.T. Act, 1961, have been supplied to the assessee, therefore, no adverse inference could be drawn against the assessee. The issue of non-compliance to the notice by Investigation Wing have already been considered in the Group appeals as above along with statement of Shri Sampath Sharma, Director of the assessee company and no adverse inference have been drawn. The assessee filed complete details to the notice issued by the A.O. Copes of the replies are filed in the paper book. Merely because Investors have shown NIL income or meagre income is not a relevant consideration because the net worth of the shareholder shall have to be considered and seen by the authorities below. In support of this contention, the Learned Counsel for the Assessee relied upon the Order of ITAT in the case of Pr. CIT vs., Goodview Trading Pvt. Ltd., in ITA.No.377/Del./2016 and Judgment of Hon’ble Delhi High Court in the case of ITO vs., N.C. Cables Ltd., 391 ITR 11 (Del.). He has also relied upon Judgment of the Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Vrindavan Farms (P) Ltd., in ITA.No.71/Del./2015 on the proposition that low income of the share holder is not relevant consideration. Seized document was not considered as relevant to assessment year under appeal by ITAT in Group Appeals as mentioned above. The issue of non-compliance to the notice under section 133(6) have also been considered favourably by ITAT in the Group cases as mentioned above. Learned Counsel for the Assessee also relied upon following Judgments in support of the contention that assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction, therefore, initial onus upon assessee stood discharged to prove conditions of Section 68 of the I.T. Act and that assessee need not to prove source of the source. The Learned Counsel for the Assessee also relied upon the following Judicial pronouncements.

1. PCIT vs., Ami Industries (India) (P) Ltd.,
424 ITR 219 (Bom.)
2. CIT vs., Five Vision Promoters (Pvt) Ltd.,
380 ITR 289 (Del.).
3. CIT vs., SVP Builders (India) 238 Taxman 653 (Del.)
4. PCIT vs., Adamine Constructions (P) Ltd.,
99 taxmann.com 45 (SC)
5. PCIT vs., Adamine Constructions (P) Ltd.,
99 taxmann.com 44 (Del.)
6. PCIT vs., Himachal Fibers Ltd.,
98 taxmann.com 173 (SC)
7. PCIT vs., Himachal Fibers Ltd.,
98 taxmann.com 172 (Del.)
8. PCIT vs., Oriental International Co. P. Ltd., 401 ITR 83 (Del.)
9. Pr. CIT vs., Chain House International (P) Ltd., 262 Taxman 207 (SC)
10. CIT vs., Softline Creations (P) Ltd., 387 ITR 636 (Del.)
11. Psychotropics Leasing & Finance (P) Ltd., vs., ITO ITA.No.1122/Del./2014, Dated 11.10.2018.
12. SRM Securities P. Ltd., vs., DCIT ITA.No.7825/Del. / 2017, Dated 11.12.2018.
13. CIT vs., Winstral Petrochemicals (P.) Ltd.,
330 ITR 603 (Del.) (HC).
14. Anish Ahmed & Sons vs., CIT 297 ITR 441 (SC).

5.2. No material was found during the course of search so as to indicate that assessee has received any bogus share application money. Learned Counsel for the Assessee, therefore, submitted that no addition could be made against the assessee.

6. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee company is closely connected to Investors by filing their documents and producing 02 Directors of Investor Companies. The A.O. relied upon the documents found from possession of the Chartered Accountant of the assessee during search. The assessee failed to prove the creditworthiness of the Investors. A.O. wrote letter to the Kolkata Investigation Wing and reply was received which confirmed that Investor Companies were non-existing. The A.O. recorded statement of 02 of the Investor Company’s Directors, but, they were very evasive in their replies. The Ld. D.R. in support of her contention relied upon the following decisions.

1. PCIT vs., NDR Promoters Pvt. Ltd., [2019] 2019-TIOL-172-HC-Del-IT-Delhi High Court.
2. PCIT vs., NRA Iron & Steel (P.) Ltd.,
[2019] 103 taxmann.com 48 (SC).
3. Prem Castings (P.) Ltd., vs., CIT [2017] 88 taxmann.com 189 (Allahabad).
4. CIT vs., MAF Academy (P.) Ltd., 361 ITR 258.
5. CIT vs., Navodaya Castle Pvt. Ltd.,
[2014] 367 ITR 306 (Del.)
6. Konark Structural Engineering (P.) Ltd., vs., DCIT [2018] 96 taxmann.com 255 (SC).
7. J.J. Development Pvt. Ltd., vs., CIT
2018-TIOL-395-SC-IT.
8. CIT vs., Nipun Builders & Developers (P.) Ltd., 350 ITR 407 (Del.) (HC).
9. CIT vs., Nova Promoters & Finlease (P) Ltd., 342 ITR 169 (Del.) (HC)
10. CIT vs., N.R. Portfolio Pvt. Ltd.,
[2014] 264 CTR 258 (Del.)
11. CIT vs., Ultra Modern Exports (P.) Ltd.,
220 Taxman 165 (Del.) (HC)
12. CIT vs., Frostair (P.) Ltd., 210 Taxman 221 (Del.) (HC).
13. CIT vs., Empire Builtech (P.) Ltd.,
366 ITR 110 (Del.) (HC)
14. CIT vs., Focus Exports (P.) Ltd.,
228 Taxman 88 (Del.) (HC)
15. PCIT vs., Bikram Singh [2017] 399 ITR 407 (Del.) (HC)
16. Rick Lunsford Trade & Investment Ltd., vs., CIT [2016] 385 ITR 399 (Cal.) (HC)
17. Rick Lunsford Trade & Investment Ltd., vs., CIT 2016-TIOL-207-SC-IT.

7. We have considered the rival submissions and perused the material on record. It is not in dispute that whatever queries were raised by the A.O. time to time, have been replied by assessee along with documentary evidences. All the replies filed by assessee along with documentary evidences are filed in the paper book. The assessee explained each and every Investor Company. It is not in dispute that all the Investor Companies are corporate entities and registered with ROC, therefore, it being a legal entity and assessed to tax with the Income Tax Department, their identity cannot be disputed by the A.O. The assessee also explained the issue of their creditworthiness and genuineness of the transaction by filing the documents of Investor Companies i.e., confirmations, confirmation of accounts, affidavits of the Investor Companies, bank accounts, ITRs, Audited balance-sheets, Memorandum and Articles of Associations, Master Datas, share allotment advise and issue of Share Certificate etc., Resolution of Investor Companies and assessment orders of the Investor Companies etc., Similar type of documents have been filed in the case of each and every Investor Companies which have not been doubted by the A.O. The assessee explained in its reply before the A.O. on the basis of the documentary evidences on record that all the Investor Companies are identifiable corporate entities and assessed to tax and have worth to make investment in assessee company. Merely because Investor Companies were showing low income or meagre income in the return of income, is not a sole criteria to disbelieve the explanation of assessee. Actual Share Certificates were also issued to the Investor Companies. The bank statements of the Investor Companies shows that they have sufficient bank balance with them and all the transactions with the assessee company are routed through banking channel. All the Investor Companies have confirmed their transactions with the assessee company. The Investor Companies have also confirmed the transaction directly to the A.O. in response to the notice issued under section 133(6) of the I.T. Act, 1961. The assessee is a NBFC Company registered with the RBI. The A.O. has wrongly mentioned in the assessment order that reply of the assessee of February have been considered in January. The assessee also explained before the A.O. that in the case of 02 Investor Companies their address were incorrect in the notices issued under section 133(6) of the Act and correct addresses were supplied later on. Therefore, no fault could be found with the explanation of assessee. The assessee produced 02 Directors of the Investor Companies who have also confirmed their transaction with the assessee company in their statements recorded by the A.O. The A.O. later on did not fix any other date for recording the statements of remaining Directors of Investor Companies. The A.O. received report from the Investigation Wing at Kolkata, but, it is not clarified in the assessment order if the report of Investigation Wing, Kolkata was ever supplied to the assessee or confronted to the assessee so that assessee could rebut the same. Therefore, in the absence of any confrontation of the report of the Investigation Wing to the assessee, the same cannot be read in evidence against the assessee. Whatever the objections have been raised by the A.O. in the assessment order for disbelieving the explanation of assessee on the basis of some material found during the course of search, material found from the Chartered Accountant of the assessee, statement of Shri Sampath Sharma, Director of the assessee company etc., and low income declared by the Investor Companies have already been considered by the ITAT, Delhi Benches in Group cases on identical facts and entire addition have been deleted on merits as well as it was held that no addition could be made against the assessee because no incriminating material was found during the course of search. Therefore, all the points raised by the A.O. have already been considered and decided by different Benches of the ITAT, Delhi Benches, Delhi in the Group cases as noted above. The gist of their findings are reproduced as under.

7.1.  Order of ITAT, Delhi E-Bench, New Delhi in the case of M/s. M.L. Singhi & Associates (P) Ltd., New Delhi vs., DCIT, Central Circle-7, New Delhi (supra), in paras 22 to 27 held as under :

“22. We have considered the submissions of both the parties and perused the material available on the record. In the present case, it is an admitted fact that a search was conducted simultaneously in the cases belonging to the Brahmaputra Group. Few of the cases related to the said group having identical facts as were involved in the assessee’s case were subject matter of the adjudication before the ITAT Delhi Bench ‘A’, New Delhi. Even the contentions raised by both the parties are also similar.

23. On a similar issue, the ITAT Delhi Bench ‘A’, New Delhi in the case of Brahmaputra Holdings (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3330/Del/2017 for the assessment year 2007-08, vide order dated 29.05.2018 has given the relevant findings in paras 3 to 7, which read as under:

“3.  Assailing the impugned order, the ld. AR, Shri Gautam Jain, Advocate submitted that the order of assessment made u/s. 153C in the instant case is not legally valid, as the same is not based on any incriminating material detected as a result of search on the searched person, viz., Brahmaputra group of cases. It was submitted that no proceedings were pending either on the date of search or on the date of issuance of notice u/s. 153C of the Act and the ld. CIT(A) has not considered this submission raised before him by way of ground No. 3. It is also the contention of the assessee that the documents alleged to have been referred to by the Assessing Officer in the assessment order have been used by the Assessing Officer in multiple cases of the group including the assessee without pointing out as to how the said documents were incriminating to the assessee or the same belong to the assessee. It is further submitted that two such cases of the group are Brahmaputra Finlease (P) Ltd. for A.Y. 2007-07 and M/s. Brahmaputra Realtors (P) Ltd. (A.Y. 2007-08) where also similar additions were made on the basis of the very same documents. The matter in those cases travelled upto the Tribunal and the identical additions have been deleted by the Tribunal in both the above cases vide orders dated 29.12.2017 and 23.04.2018. It was next contended on behalf of the assessee that none of the documents/papers pointed out by the Assessing Officer in the assessment order belong to the assessee and therefore, the notice issued u/s. 153C itself is invalid. Reliance is placed on the following decisions:

(i) CIT vs. Vinita Chaurasia, 394 ITR 758 (Del.)

(ii) CIT vs. Arpit Land (P) Ltd., 393 ITR 276 (Bom)

(iii) Canyon Financial Services Ltd. vs. ITO, 399 ITR 202 (Del)

(iv) CIT vs. Renu Construction (P) Ltd., 399 ITR 262 (Del.)

(v) Pepsi Foods Pvt. Ltd. vs. ITO, 367 ITR 112 (Del), SLP dismissed by Supreme Court in Appeal © No. 4659/2015 dated 04.12.2017

(vi) M/s. Pepsico India Holding Pvt. Ltd. vs. ACIT, 370 ITR 295 (Del)

(vii) CIT vs. Lavanya Land (P) Ltd., 397 ITR 246 (Bom)

4. It was next contended that none of the documents referred to by the Assessing Officer are the material, much less incriminating material, to denote any income or share capital and share premium and therefore, the notice issued u/s. 153C is legally invalid, having been issued without any jurisdiction. Reliance is further placed on the following decisions in support:

(i) CIT vs. Sinhgad Technical Education Society, 378 ITR 84 (Bom) upheld by Hon’ble Supreme Court (397 ITR 344(S C)

(ii) CIT vs. RRJ Securities Ltd., 380 ITR 612 (Del.)

(iii) Pr. CIT vs. Index Securities (P) Ltd., 157 DTR 20(Del)

5. On the other hand, the ld. DR relied on the decisions of the authorities below and submitted that the ld. CIT(A) has passed a reasoned order which needs not to be interfered with.

6. We have considered the rival submissions and have gone through the entire material available on record including the decisions cited. A perusal of the assessment order reveals that the Assessing Officer while invoking the provisions of section 153C and issuing notice under that section to the assessee, has considered the following documents found as a result of search at the premises of Brahmaputra group of cases, belonging to the assessee:

i) Page No. 23 of Annexure A-6 (a diary relating to FY 2009-10)-on the back side of this page recording is made in the name of “Shri Shyam Trexim & Fincom (P) Ltd.” against which Rs. 50 lakhs is written;

ii) Page No. 1 of Annexure A-7-on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lal Aggarwal dated 31.5.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made;

iii) The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008;

iv) Page 1 of Annexure A-10-it contains a hand written extracted of cash book containing entry of Rs. 5 lakhs in the name of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggaral. The entries are for the date 28.05.2008, the date of writing of this page; and

iv) Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A. Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

These documents led the Assessing Officer to doubt share capital raised by the assessee and to make addition of Rs.10,00,000/- u/s. 68 of the Act. We find considerable substance in the contention of the assessee that the above documents neither go to suggest any undisclosed income of the assessee nor any nexus with the share capital declared by the assessee. In fact, the Assessing Officer has derived inferences/presumptions on the basis of above papers found in the search without proving them as belonging to the assessee or their nature being incriminating to the assessee. Therefore, the assessment order confirmed by the ld. CIT(A) is not found fit to support, having been passed without proving the primary ingredients of section 153C of the Act. It is worthwhile to note that the very same papers, as listed above, were also taken against the other group companies, i.e., Brahmaputra Finlease (P) Ltd.  and M/s. Brahmaputra Realtors (P) Ltd. for the assessment year 2007-08 and similar additions were made in those cases also based on the same search and same papers. However, the ITAT Delhi Bench in the case of Brahmaputa Finlease (P) Ltd. (ITA No. 3332/Del./2017) vide order dated 29.12.2017 has examined the same documents and deleted the addition by quashed the assessment order as under:

4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under:

“Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5.

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side\ of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made.

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Sin ghal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted / undisclosed income in the guise of share capital/ share application money.”

4.11.We find that the Item No. (i) contains recording in the name of “Shri Shyam Trexim & Fincom Pvt. Ltd”. The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the ‘Brahmaputra Group’ and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely “M/s Brahmaputra Infrastructure Ltd” in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected

Further, the ld. Authorities below have also referred to the statements recorded of Shri Sampat Sharma against the assessee. The same statements were also read against M/s. Brahmaputra Finlease (P) Ltd. (supra), where, the Tribunal after relying on various decisions has held as under:

“4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the
statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search.”

In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

4.20.  In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.”

7. The above decision of Tribunal was also followed by coordinate Bench in another group case, namely M/s. Brahmaputra Realtors (P) Ltd. vs. DCIT (ITA No. 3406/Del./2017) where vide order dated 23.04.2018, the addition made on account of unexplained share capital stood deleted in the identical facts and circumstances of the case. Therefore, respectfully following the above decisions of coordinate bench and there being no contrary material on record and further relying on the decision of Hon’ble Delhi High Court in the case of Kabul Chawla and plethora of other decisions relied by the assessee, we find no justification to sustain the impugned order and the addition made against the assessee. Accordingly, the appeal of the assessee deserves to be allowed, being full of merits.”

24. Similarly, in the case of M/s Brahmaputra Realtors (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3406/Del/2017 for the assessment year 2007-08, the relevant findings have been given in paras 3 to 9 of the order dated 23.04.2018which read as under:

“3. It is the submission of the learned AR that though the learned AO made Annexures A-6, A-7 and A-10 as the basis for making the addition, he failed to substantiate how these documents are incriminating the assessee so as to make the addition in their hands. Nowhere learned AO brought on record to connect these documents to the additions under the head “share capital” and even if the authority failed to notice that the said documents go unexplained to have any nexus with the addition in dispute or to show that those relate to any accommodation entries entered by the Brahamputra group. Further, the additions in respect of the amounts mentioned in some of the documents were made in the case of another company M/s Brahmputra Infrastructure Ltd. in the Asstt. Year 2009-10. The sum and substance of the argument of the learned AR is that the documents neither belong to nor pertain to the assessee and they do not establish any nexus as alleged between the contention of the department that the assessee obtained the accommodation entries thereunder and the additions made in this case. For these reasons, it is contended that in so far as all the proceedings u/s 153C of the Act are bad and even on merits, the addition is liable to be deleted.

4. According to the learned DR, during the course of search hard discs of computers were seized, which contain incriminating material and the recordings on the documents reflected accommodation entries obtained by the Brahmputra group, as such, the authorities below are justified in making addition and sustaining the same.

5. At the outset, learned AR submitted that the five documents relied upon by the learned AO in this matter were also relied upon by the revenue in the case of another group company i.e. M/s Brahmputra Finlease P. Ltd. ITA No.3332/Del/2017 and a coordinate bench of this Tribunal by order dated 29.12.2017 discussed the matter at length and found that the revenue failed to bring on record any cogent reasons to connect these documents with the additions of share capital and inasmuch as no material, much less incriminating, supporting the addition is available on record, the addition cannot be sustained and since as the documents neither belong to nor pertain to the assessee thereon by applying the principle laid down by the Hon’ble Delhi High Court in the case of CIT vs Kabul Chawla, 380 ITR 573, the bench held that no addition could be sustained.

6. We have perused the record. The assessment order reads that the Ld. AO placed reliance on five documents and also the statement of one Shri Sam path Sharma, Director, to reach the conclusion that the assessee obtained accommodation entries. On a careful perusal of the description of the documents given in this matter with the documents relied upon in the case of Brahmputras Finlease Co. (supra), we find that they are identical as demonstrated below:

Reference to documents in the case of M/s Brahmputra Finlease P. Ltd. ITA No.3332/Del/2017 Reference to documents in the case M/s Brahmputra Realtors P. Ltd. ITA No.3406/Del/2017
Apart from, during the course of search operation in Brahmaputra Group of cases,carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009- 10)- on the back side\ of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made ITA No. 3332/Del/2017

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/undisclosed income in the guise of share capital/share application money.

“Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5

i. Page No. 23 of Annexure A6 (a diary relating to F.Y. 2009-10)- on the back side\ of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made ITA No. 3332/Del/2017

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book  containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into

Rs.25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P.

Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted / undisclosed income in the guise of share capital/share application money.”

7. On considering the above documents vide para 4.11, a coordinate bench of this Tribunal considered the relevance of these documents to the companies of Brahmputra group and also the incriminatory nature of these documents inasmuch as the names of Shri Shyam Trexim and Fincom P. Ltd., Shri Murari Lal Aggarwal, Shri Sarat Aggar5wal, and Shri A. Sin ghal are mentioned in these documents and nothing incriminating the assessee could be inferred from these documents. Relevant observations of the Tribunal are as follows:

4.11 We find that the Item No. (i) contains recording in the name of “Shri Shyam Trexim & Fincom Pvt. Ltd”. The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the ‘Brahmaputra Group’ and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely “M/s Brahmaputra Infrastructure Ltd” in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected.

8. Further, in respect of relevance and reliability of the statement of Shri Sam path Sharma, Director, the Tribunal observed as follows:

4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

9. On a consideration of the entire material in the light of the law laid down in the case of CIT vs. Kabul Chawla reported in 380 ITR 573, the coordinate Bench of this tribunal concluded that, –

4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.”

25. A similar view has been taken by the ITAT Delhi Bench ‘A’, New Delhi in the case of M/s Brahmaputra Finlease (P) Ltd. Vs DCIT, Central Circle-17, New Delhi in ITA No. 3332/Del/2017 for the assessment year 2007-08 wherein vide order dated 29.12.2017, the relevant findings have been given in paras 4.7 to 4.20 which read as under:

“4.7 We have heard the rival submission and perused the relevant material on record. Main issue in dispute in the grounds raised before us is whether any addition could have been made under section 153A of the Act in the case of the assessee. In the case of Kabul Chawla (supra) relied upon by the Ld. counsel of the assessee, the Hon’ble High Court of Delhi in para-37 of the decision has summarized the legal position as under:

“Summary of the legal position

37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

ii. Assessments and   reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”.

iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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.”

(emphasis supplied externally)

4.7.1 In view of the legal position summarized above, the Hon’ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, theb in absence of incriminating material, no addition could have been made. The relevant paragraph of the decision is reproduced as under: “Conclusion

38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”

4.7.2 In view of above decision, we are required to examine the two conditions. The First condition is whether for the year under consideration, the assessment stood completed before the date of search or not. The second condition is that whether any incriminating material unearthed during the course of the search qua the addition made, which was not already disclosed or made known in the course of original assessment.

4.8  As regard the first condition, the Ld. counsel has already referred to page 105A of the paper book, which is a copy of the assessment order passed under section 143(3) of the Act on 24/11/2009. Since in the case of the assessee search was carried out on 28/09/2010, thus, it is undisputed that assessment was completed prior to the date of search.

4.9 Now regarding the second condition, the Ld. CIT(DR) has mentioned that documents impounded from the premises of Sh. M.L. Aggarwal, Chartered Accountant, during the course of survey proceeding are incriminating material found during the course of search. We do not agree with the contention of the Ld. CIT (DR) that these materials like blank shares transfer forms etc could be termed as found during the course of search at the premises of the assessee. The survey proceedings carried out at the premises of the Chartered Accountants, ML Aggarwal are separate from the search proceedings carried out at the premises of the assessee. There is no concept of group of assessee in Income-tax assessments. Each assessee is treated separately. If any material is found during the course of search from the premises of one assessee, it can be used against another assessee either under section 153C or under section 148 of the Act depending on material belonging to or pertaining to that another assessee but it cannot be termed as material found during the course of the search of another assessee for making addition under section 153A of the Act. If any material impounded during the course the survey at the premises of one assessee and found to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we reject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act.

4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under:

“Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side\ of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Sin ghal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/undisclosed income in the guise of share  capital/share application money.”

4.11 We find that the Item No. (i) contains recording in the name of “Shri Shyam Trexim & Fincom Pvt. Ltd”. The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the ‘Brahmaputra Group’ and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely “M/s Brahmaputra Infrastructure Ltd” in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected.

4.12 The next argument of the Ld. CIT(DR) is that the statement recorded under section 132(4) of the Act of Sri Sampat Shrama is incriminating material found during the course of search. We have observed that said statement of Sh. Sampat Sharma was recorded at his residential premises during search proceeding carried out separately. In our opinion, the statement of Sh. Sampat Sharma was not recorded in search proceeding of the assessee and thus, it cannot be considered as incriminating material found during the course of the search of the assessee.

4.13 Without prejudice to our observation, we do not find any mention of any incriminating material in the statement of Sh. Sampat Shrama recorded under section 132(4) of the Act. The Ld. counsel drawn our attention to copy of the statement available on page 427 to 450 of the paper book and english translation of the same available on pages 420 to 426 of the paper book. In response to question No. 6, regarding details of the bank accounts, Sh. Sharma stated that he did not remember the bank account numbers and all the pass books of the accounts were kept in the office of Brahmaputra Infra Projects Ltd. In response to question No. 8, he explained where the books were kept. The documents referred in question No. 20 to 25 are admittedly not belonging to the assessee. The question No. 26 relates to investment by Sh. Sharma. On perusal of the entire statement of Sh. Sampat Shrama, we do not find any mention of any incriminating material qua the addition made.

4.14 Further, in the case of Best Infrastructure (India) Private Limited (supra) the question of law framed is as under:’

“Did the ITAT fall into error in holding that the additions made under Section 68 of the Income Tax Act, 1961, on account of the statements made by the assessee’s Directors in the course of search under Section 132 of the Act were not justified ?”

4.15 In the said case, a search was conducted in case of Mr. Tarun Goyal and Best Group Companies. During the course of search, Sh Tarun Goel admitted of having provided accommodation entry to the best group companies. The Director of the Best group of companies, Sh Anu Aggarwal also surrendered Rs.8 crore during the course of search against share capital and share premium. Another Director, Sh. Harjit Singh in his statement also concurred with the statement of Sh. Anu Aggarwal. In the case, the learned CIT-(A) held that evidence does not mean only documentary evidence and the statement under section 132(4) of the Act is an important evidence collected as a result of search and seizure operation and thus, the addition of share capital was based on evidence gathered during the search. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The Hon’ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under:

“38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the assessee were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessee herein was not justified in law.”

4.16 In the case of Harjeev Aggarwal (supra), the Hon’ble High Court observed as under:

“19 In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV – B of the Act.

20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The works evidence found as a result of search” would not taken within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the Assessee during search operation.

4.17 The Hon’ble High Court in the above case further noted that the statement recorded under section 132(4) of the Act may be used for making the assessment but only to the extent it is relatable to the incriminating evidence/material unearthed or found during the course of search. The Hon’ble High Court also cited the decision of CIT Vs. Sh. Ramdas Motor Transport, (1999) 238 ITR 177 of Hon’ble Andhra Pradesh High Court, where it is explained that in case no unaccounted documents or incriminating material is found, the powers under section 132(4) of the Act cannot be invoked.

4.18 Further, as far as the decision of the Hon’ble Supreme Court in the case of Video Master (supra), is concerned, we agree with the argument of the Ld. counsel that in said case certain other materials like loose papers and vouchers were found which corroborated the statement and in those circumstances it was held that it could not be said that addition was based on no evidence. The relevant finding of the Hon’ble Supreme Court is reproduced as under:

“3. In the second round, the assessment order dated March 29, 2000, gave detailed reasons for arriving at the conclusion that the figures stated in the statement recorded were corroborated, in particular, by various loose sheets found at the premises of the assessee as well as vouchers, some of which related to the two films in question. In an appeal filed to the Tribunal, the Tribunal framed three issues, two of which were unnecessary for the reason that the statement recorded on August 25, 1995, was said to be relevant but not conclusive. Therefore, whether the statement was made under duress and whether it was retracted lawfully would have no relevance at this stage. However, the Tribunal went into these issues as well and ultimately, found that the statement could be used as evidence. Further, it examined other corroborative evidence referred to in the assessment order and arrived at a finding that the added income would be income which can be added under section 158BC for the block assessment period in question. In an appeal filed under section 260A to the Bombay High Court, the High Court found, after narrating the facts, that no substantial question of law arises.

4. We are of the view, in accordance with the view of the High Court, that no substantial question of law arises. Further, though it was vehemently argued by Shri Devansh A. Mohta, learned counsel appearing for the assessee, that this was a case both of perversity and of there being no evidence at all. We find that not only are the findings of fact recorded in some detail but that it is not possible to say that this is a case of no evidence at all inasmuch as evidence in the form of the statement made by the assessee himself and other corroborative material are there on record.”

4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus,no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.”

26. Since, the facts of the present case are identical to the facts involved in the aforesaid referred to cases belonging to the same group and even the search took place simultaneously and the AO relied upon the similar five documents and the statements while making the additions. We, therefore, by respectfully following the aforesaid referred to orders in the case of the various assessees belonging to the same group delete the impugned addition.

27. The facts involved in other two assessment years i.e. 2007-08 and 2008-09 in ITA Nos. 3336 & 3337/Del/2017 are similar to the facts involved in ITA No. 3335/Del/2017 for the assessment year 2006-07 which we have already disposed off in the former part of this order, therefore, our findings given therein shall apply mutatis mutandis.”

7.2. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Finlease (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi (supra), in paras 4.7 to 4.20 held as under :

“4.7 We have heard the rival submission and perused the relevant material on record. Main issue in dispute in the grounds raised before us is whether any addition could have been made under section 153A of the Act in the case of the assessee. In the case of Kabul Chawla (supra) relied upon by the Ld. counsel of the assessee, the Hon’ble High Court of Delhi in para-37 of the decision has summarized the legal position as under:

“Summary of the legal position

37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under:

i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place.

 ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise.

iii The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the ‘total income’ of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs “in which both the disclosed and the undisclosed income would be brought to tax”.

iv Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment “can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material.”

v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings.

vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO.

vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A 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.”

(emphasis supplied externally)

4.7.1 In view of the legal position summarized above, the Hon’ble High Court in para-38 of the decision held that in the case, on the date of search, if the assessment already stood completed, theb in absence of incriminating material, no addition could have been made. The relevant paragraph of the decision is reproduced as under:

“Conclusion

38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed.”

4.7.2 In view of above decision, we are required to examine the two conditions. The First condition is whether for the year under consideration, the assessment stood completed before the date of search or not. The second condition is that whether any incriminating material unearthed during the course of the search qua the addition made, which was not already disclosed or made known in the course of original assessment.

4.8 As regard the first condition, the Ld. counsel has already referred to page 105A of the paper book, which is a copy of the assessment order passed under section 143(3) of the Act on 24/11/2009. Since in the case of the assessee search was carried out on 28/09/2010, thus, it is undisputed that assessment was completed prior to the date of search.

4.9 Now regarding the second condition, the Ld. CIT(DR) has mentioned that documents impounded from the premises of Sh. M.L. Aggarwal, Chartered Accountant, during the course of survey proceeding are incriminating material found during the course of search. We do not agree with the contention of the Ld. CIT (DR) that these materials like blank shares transfer forms etc could be termed as found during the course of search at the premises of the assessee. The survey proceedings carried out at the premises of the Chartered Accountants, ML Aggarwal are separate from the search proceedings carried out at the premises of the assessee. There is no concept of group of assessee in Income-tax assessments. Each assessee is treated separately. If any material is found during the course of search from the premises of one assessee, it can be used against another assessee either under section 153C or under section 148 of the Act depending on material belonging to or pertaining to that another assessee but it cannot be termed as material found during the course of the search of another assessee for making addition under section 153A of the Act. If any material impounded during the course the survey at the premises of one assessee and found to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot be treated as part of the search carried out at the premises of the another assessee. Further, the Assessing Officer in the impugned order has not brought on record what was incriminating in the said material impounded from the premises of Sh. M.L. Agrawal. In view of our discussion, we reject the above contentions of the Ld. CIT(DR) that any incriminating material qua the addition was found during the course of the search action under section 132 of the Act.

4.10 Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under:

“Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side\ of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made

iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv. Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/undisclosed income in the guise of share capital/share application money.”

4.11 We find that the Item No. (i) contains recording in the name of “Shri Shyam Trexim & Fincom Pvt. Ltd”. The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the ‘Brahmaputra Group’ and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely “M/s Brahmaputra Infrastructure Ltd” in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected.

4.12 The next argument of the Ld. CIT(DR) is that the statement recorded under section 132(4) of the Act of Sri Sampat Shrama is incriminating material found during the course of search. We have observed that said statement of Sh. Sampat Sharma was recorded at his residential premises during search proceeding carried out separately. In our opinion, the statement of Sh. Sampat Sharma was not recorded in search proceeding of the assessee and thus, it cannot be considered as incriminating material found during the course of the search of the assessee.

4.13 Without prejudice to our observation, we do not find any mention of any incriminating material in the statement of Sh. Sampat Shrama recorded under section 132(4) of the Act. The Ld. counsel drawn our attention to copy of the statement available on page 427 to 450 of the paper book and english translation of the same available on pages 420 to 426 of the paper book. In response to question No. 6, regarding details of the bank accounts, Sh. Sharma stated that he did not remember the bank account numbers and all the pass books of the accounts were kept in the office of Brahmaputra Infra Projects Ltd. In response to question No. 8, he explained where the books were kept. The documents referred in question No. 20 to 25 are admittedly not belonging to the assessee. The question No. 26 relates to investment by Sh. Sharma. On perusal of the entire statement of Sh. Sampat Shrama, we do not find any mention of any incriminating material qua the addition made.

4.14 Further, in the case of Best Infrastructure (India) Private Limited (supra) the question of law framed is as under:’

“Did the ITAT fall into error in holding that the additions made under Section 68 of the Income Tax Act, 1961, on account of the statements made by the assessee’s Directors in the course of search under Section 132 of the Act were not justified ?”

4.15 In the said case, a search was conducted in case of Mr. Tarun Goyal and Best Group Companies. During the course of search, Sh Tarun Goel admitted of having provided accommodation entry to the best group companies. The Director of the Best group of companies, Sh Anu Aggarwal also surrendered Rs.8 crore during the course of search against share capital and share premium. Another Director, Sh. Harjit Singh in his statement also concurred with the statement of Sh. Anu Aggarwal. In the case, the learned CIT-(A) held that evidence does not mean only documentary evidence and the statement under section 132(4) of the Act is an important evidence collected as a result of search and seizure operation and thus, the addition of share capital was based on evidence gathered during the search. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The Hon’ble High Court, after considering the arguments of both parties on the issue whether statement under section 132(4) of the Act constitute incriminating material, held as under:

“38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax Vs. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta Vs. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintained accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the assessee were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.

39. For all the aforementioned reasons, the Court is of the view that the ITAT was fully justified in concluding that the assumption of jurisdiction under Section 153A of the Act qua the Assessee herein was not justified in law.”

4.16 In the case of Harjeev Aggarwal (supra), the Hon’ble High Court observed as under:

“19 In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV –B of the Act.

20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The works evidence found as a result of search” would not taken within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the Assessee during search operation.

4.17 The Hon’ble High Court in the above case further noted that the statement recorded under section 132(4) of the Act may be used for making the assessment but only to the extent it is relatable to the incriminating evidence/material unearthed or found during the course of search. The Hon’ble High Court also cited the decision of CIT Vs. Sh. Ramdas Motor Transport, (1999) 238 ITR 177 of Hon’ble Andhra Pradesh High Court, where it is explained that in case no unaccounted documents or incriminating material is found, the powers under section 132(4) of the Act cannot be invoked.

4.18 Further, as far as the decision of the Hon’ble Supreme Court in the case of Video Master (supra), is concerned, we agree with the argument of the Ld. counsel that in said case certain other materials like loose papers and vouchers were found which corroborated the statement and in those circumstances it was held that it could not be said that addition was based on no evidence. The relevant finding of the Hon’ble Supreme Court is reproduced as under:

“3. In the second round, the assessment order dated March 29, 2000, gave detailed reasons for arriving at the conclusion that the figures stated in the statement recorded were corroborated, in particular, by various loose sheets found at the premises of the assessee as well as vouchers, some of which related to the two films in question. In an appeal filed to the Tribunal, the Tribunal framed three issues, two of which were unnecessary for the reason that the statement recorded on August 25, 1995, was said to be relevant but not conclusive. Therefore, whether the statement was made under duress and whether it was retracted lawfully would have no relevance at this stage. However, the Tribunal went into these issues as well and ultimately, found that the statement could be used as evidence. Further, it examined other corroborative evidence referred to in the assessment order and arrived at a finding that the added income would be income which can be added under section 158BC for the block assessment period in question. In an appeal filed under section 260A to the Bombay High Court, the High Court found, after narrating the facts, that no substantial question of law arises.

4. We are of the view, in accordance with the view of the High Court, that no substantial question of law arises. Further, though it was vehemently argued by Shri Devansh A. Mohta, learned counsel appearing for the assessee, that this was a case both of perversity and of there being no evidence at all. We find that not only are the findings of fact recorded in some detail but that it is not possible to say that this is a case of no evidence at all inasmuch as evidence in the form of the statement made by the assessee himself and other corroborative material are there on record.”

4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search.

In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus,no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.”

7.3. Order of ITAT, Delhi A-Bench, New Delhi in the case of Brahmaputra Holdings (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi (supra), in paras 6 to 7 held as under :

6. We have considered the rival submissions and have gone through the entire material available on record including the decisions cited. A perusal of the assessment order reveals that the Assessing Officer while invoking the provisions of section 153C and issuing notice under that section to the assessee, has considered the following documents found as a result of search at the premises of Brahmaputra group of cases, belonging to the assessee:

i) Page No. 23 of Annexure A-6 (a diary relating to FY 2009-10)-on the back side of this page recording is made in the name of “Shri Shyam Trexim & Fincom (P) Ltd.” against which Rs. 50 lakhs is written;

ii) Page No. 1 of Annexure A-7-on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lal Aggarwal dated 31.5.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made;

iii) The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008;

iv) Page 1 of Annexure A-10-it contains a hand written extracted of cash book containing entry of Rs. 5 lakhs in the name of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggaral. The entries are for the date 28.05.2008, the date of writing of this page; and v) Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A. Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written.

These documents led the Assessing Officer to doubt share capital raised by the assessee and to make addition of Rs.10,00,000/-u/s. 68 of the Act. We find considerable substance in the contention of the assessee that the above documents neither go to suggest any undisclosed income of the assessee nor any nexus with the share capital declared by the assessee. In fact, the Assessing Officer has derived inferences/ presumptions on the basis of above papers found in the search without proving them as belonging to the assessee or their nature being incriminating to the assessee. Therefore, the assessment order confirmed by the ld. CIT(A) is not found fit to support, having been passed without proving the primary ingredients of section 153C of the Act. It is worthwhile to note that the very same papers, as listed above, were also taken against the other group companies, i.e., Brahmaputra Finlease (P) Ltd. and M/s. Brahmaputra Realtors (P) Ltd. for the assessment year 2007-08 and similar additions were made in those cases also based on the same search and same papers. However, the ITAT Delhi Bench in the case of Brahmaputa Finlease (P) Ltd. (ITA No. 3332/Del./2017) vide order dated 29.12.2017 has examined the same documents and deleted the addition by quashed the assessment order as under :

4.10. Another argument, made by the Ld. CIT(DR) in support of her claim of incriminating material was that the Item No.(i) mentioned on page 6 of the assessment order, was incriminating in nature as it contained detail of accommodation entry. For having clarity on the issue raised by the Ld. CIT(DR), we may like to reproduce the relevant part of the assessment order as under:

Apart from, during the course of search operation in Brahmaputra Group of cases, carried out at premises A-7, Mahipalpur, New Delhi, the following incriminating documents were inter alia seized by party BA-5

i. Page No. 23 of Annexure A-6 (a diary relating to F.Y. 2009-10)- on the back side of this page recording is made in the name of “Shri Shyam Trexim & Fincom P. Ltd.” against which Rs. 50 lakhs is written.

ii. Page No. 1 of Annexure A-7 – on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made

iii The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008.

iv Page 1 of Annexure A-10 – it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page.

v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/ undisclosed income in the guise of share capital/share application money.”

4.11. We find that the Item No. (i) contains recording in the name of “Shri Shyam Trexim & Fincom Pvt. Ltd”. The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the ‘Brahmaputra Group’ and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely “M/s Brahmaputra Infrastructure Ltd” in assessment year 2009-10. This fact was not controverted by Ld. CIT(DR). Thus, we find that no incriminating material qua the addition made is found during the course of search from the premises of the assessee. Accordingly, above contention of Ld. CIT(DR) are rejected. She also submitted that during the course of search, hard disks of computers and others material were also seized which contained incriminating material. The Ld. CIT(A) failed to substantiate the claim either by the impugned assessment order or through any other documentary evidence. In the assessment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected.

Further, the ld. Authorities below have also referred to the statements recorded of Shri Sampat Sharma against the assessee. The same statements were also read against M/s. Brahmaputra Finlease (P) Ltd. (supra), where, the Tribunal after relying on various decisions has held as under :

“4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon’ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search.” In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search.

4.20. In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed.”

7. The above decision of Tribunal was also followed by coordinate Bench in another group case, namely M/s. Brahmaputra Realtors (P) Ltd. vs. DCIT (ITA No. 3406/Del./2017) where vide order dated 23.04.2018, the addition made on account of unexplained share capital stood deleted in the identical facts and circumstances of the case. Therefore, respectfully following the above decisions of coordinate bench and there being no contrary material on record and further relying on the decision of Hon’ble Delhi High Court in the case of Kabul Chawla and plethora of other decisions relied by the assessee, we find no justification to sustain the impugned order and the addition made against the assessee. Accordingly, the appeal of the assessee deserves to be allowed, being full of merits.”

7.4. Order of ITAT, Delhi A-Bench, New Delhi in the case of M/s. Brahmaputra Finlease (P) Ltd., New Delhi vs., DCIT, Central Circle-17, New Delhi (supra), in paras 13 to 37 held as under :

“13. In the light of the aforestated notings/observations, the Assessing Officer made an addition of Rs. 2.30 crores in A.Y 2009-10 and Rs. 5.15 in A.Y 2010-11.

14. The findings of the Assessing Officer can be summarised as under:

i) Notices u/s 133(6) were not served.

ii) Confirmations of all the parties were not received.

iii)Companies were asked to attend the proceedings through their directors but all the directors did not attend the assessment proceedings.

iv) Statement of Shri Sharma is adverse as being director of the company, he had no knowledge of the shares purchased by the investor companies.

15. We find that vide reply filed on 22.02.2013, the assessee has furnished confirmation of accounts, bank statements, income tax returns and audited balance sheet of the investor company, Memorandum and Articles of Association, list of directors and master data of the investor company as appearing the Registrar of Companies, Kolkata, share allotment advice, certified true copy of the Resolution of Investee Company passed by the board of directors of the company and copy of the resolution passed by the board of directors of investor company and copy of assessment orders of the investor company were also filed.

16. Vide reply dated 19.03.2013, the assessee once again filed all the documents requisitioned by the Assessing Officer. In the case of Finvest Pvt Limited, since on the earlier occasion, confirmation could not be filed, the assessee filed copy of the assessment order u/s 143(3) of the Act for A.Y 2006-07.

17. In so far as the share certificates are concerned, it was explained clearly that the appellant company had issued share certificates to all the share applicants and at present these companies were not their share holders/members as they have sold their shares. Since the assessee had no access to the share certificates, therefore, the same could not be filed.

18. Regarding producing the shareholder companies through their directors/authorised representatives for verification of genuineness of the investment, it was explained that two directors, namely Shri Sarat Agarwal and Shri Vinay Kumar Shah were produced for verification /examination. It was further brought to the notice of the Assessing Officer that the directors waited for long hours and whole day was spent in recording the statement of only one director, namely, Shri Ajit Kumar Singh and it was requested that exact date and time may be given to produce the investor companies through their directors/authorised representatives for verification of genuineness of investment in shares by them as the directors had to come all the way from Kolkata/Howrah,

19. All these relevant parts of the reply of the assessee are exhibited at pages 61 to 68 of the paper book.

20. It appears that the Assessing Officer was heavily influenced by the statement of Shri Sampat Sharma who admittedly accepted that he was only a dummy director and knew nothing about the share allotment to these companies. However, we find that the Assessing Officer did nothing to do to bring on record who is the ultimate beneficiary of these transactions. If Shri Sampat Sharma categorically admitted that he is a dummy director, nothing prevented the Assessing Officer to lift the corporate veil. Having failed to lift the corporate veil, we have to look at the transactions and not through the transactions.

21. Another adverse comment made by the Assessing Officer is in respect of returned income of the investor companies. In our considered opinion, substance over form should prevail. The returned income may be one of the factors, but it is not be all and and all. If the returned income is not sufficient to justify the credit worthiness of the share applicants, then the most important factor is to look at the net worth of the applicant.

22. The five applicant companies are namely,

i) Basukinath vanijya Pvt Ltd

ii) Midnight Agencies Pvt Ltd

iii) Spardan Vanijya Pvt Ltd

iv) Topline Finvest Pvt Ltd

v) Kokila Export Pvt Ltd

23. The net worth of these companies are as under:

i) M/S BASUKINATH VANIJA (P) LTD

Address : 1A, GRANT LANE, 1st FLOOR,
KOLKATA 700012

No. of shares : 25,000

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) RTGS 30.03.2009 50,00,000
TOTAL 50,00,000

Return Filed on : 25.09.2009

Auditors of Company: Debabrata & Associates

Net Worth of the company :

Particulars As on 31.03.2009 As on 31.03.2008
Shareholders Fund
Share capital______________ 53,86,200 42,82,200
Reserve & Surplus 10,09,29,025 7,99,52,678
Total 10,63,15,225 8,42,34,878
Application of Funds
Current Assets Loans & advances
Stock of shares 8,25,30,300 7,85,85,000
Cash and bank balance 1,65,3549 4,23,164
Loans & Advances 2,20,50,007 54,43,063
Less: Current Liabilities & Provisions
Liabilities 4,500 1,03,500
Provisions 5,545 2,19,965
Total 10,045 3,23,465
Net Current Assets 10,62,23,811 8,41,27,762
Miscellaneous expenditure to the extent not written i off or adjusted ______________
Deferred Revenue Expenditure 84,200 99,000
Total 10,63,15,225 8,42,34,878

115-116)

M/S MIDNIGHT AGENCIES (P) LTD
Address : 1,  BALLAV SAHA LANE HOWRAH, WEST BENGAL 711101
No. of shares : 25,000
PAN: AABCM6864G

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 121780 13.08.2008 50,00,000
TOTAL 50,00,000

Return Filed on : 25.09.2009
Auditors of Company: Debabrata & Associates

Provisions  Particulars As on 31.03.2009 As on 31.03.2008
Shareholders Fund
Share capital 1,77,50,000 1,13,17,500
Reserve & Surplus 22,24,31,344 10,02,07,019
Total 24,01,81,311 11,15,24,519
Application of Funds

……

Current Assets Loans & advances

 
Stock of shares 22,37,17,500 9,21,51,370
Cash and bank balance 9,06,731 13,72,394
Loans & Advances 1,07,30,909 1,67,95,281
Other Current Assets 48,00,000 12,00,000
Less: Current Liabilities & Provisions    
Liabilities 4,264 4,263
Provisions 7,564 6763
Total 11,828 11,026
Net current Assets 24,01,43,311 111508019
Deferred Revenue Expenditure 38,000 16500
Total 24,01,81,311 11524519

M/S SPANDAN VAN1JA (P) LTD
Address :
9/12, LAL BAZAAR STREET? BLOCK –
E,2nd FLOOR KOLKATA, WEST BENGAL 700001
No. of shares : 25,000
PAN: AAJCS5887K

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 121780 13.08.2008 50,00,000
TOTAL 50,00,000

Return Filed on : 25.09.2009
Auditors of Company: Manabendra Bhattacharyya & Co

Particulars As on 31.03.2009 As on 31.03.2008
Shareholders Fund
Share capital 85,02,500 16,55,000
Reserve & Surplus 16,05,26,756 3,04,24,383
Total 16,90,29,256 3,20,79,383
Application of Funds

Current Assets Loans & advances
Stock of shares 14,43,57,000 1,61,47,000
Cash and bank balance 1,39,2625 49,280
Loans & Advances 1,28,70,884 57,45,237
Other Current Assets 10,70,0361 1,05,00,361
Less: Current Liabilities & Provisions
Liabilities 2,005 2,003
Provisions 3,98,709 3,98,341
Total 4,00,714 4,00,344
Net Current Assets 1,68,92,0156 3,20,41,533
Deferred Revenue Expenditure 1,03,400 31,200
Preliminary Expenses 5,700 6,650
16,90,29,256 3,20,79,383

M/S TOPLINE FINVEST (PI
LTD Address
: 107C TODI CHAMBER 2,
LAL BAZAAR STREET, KOLKA TA, WEST
BENGAL 700001

No. of shares : 25,000 PAN:
AAACT9954B

Payments made Via

Sr. No. Cheque No./ RTGS Date Amount (Rs)
0 RTGS 30.03.2009 50,00,000
TOTAL 50,00,000

Return filed on 24.09.2009

Auditors of Company: Pawan Mauna & Co

50,00,000

Particulars As on 31.03.2009 As on 31.03.2008
Shareholders Fund
Share capital 2,29,31,000 1,60,93,500
Reserve & Surplus 22,78,93,579 9,79,58,325
Total 25,08,24,579 11,40,51,825
Application of Funds
Current Assets Loans & advances
Stock of shares 21,61,06,516 8,92,31,400
Cash and bank balance 19,35,218 1220148
Loans & Advances 1,95,87,189 2,08,98,545
Other Current Assets 1,31,70,875 27,00,000
Less: Current Liabilities & Provisions
Liabilities 2,021 2,020
Provisions 7,998 7,548
Total 10,019 9,568
Net Current Assets 25,07,89,779 11,40,40,525
Deferred Revenue Expenditure 34,800 11,300
Total 25,08,24,579 11,40,51,825

MTSlCOKILA EXPORTS PRIVATE LIMITED
Address : 9/12, LAL BAZAAR STREET,
KOLKATA, WEST BENGAL 700001
No. of shares : 15,000
PAN: AABCK1178G

Payments made Via

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 129093 16.06.2008 30,00,000
TOTAL 30,00,000

24. A perusal of the aforementioned statements giving total net worth of share applicant companies speaks for their credit worthiness. In so far as Kokila Exports is concerned, its director Shri Ajay Kumar Singh appeared before the Assessing Officer who examined him but did not put any question towards net worth of the company nor asked the director to furnish its financial details. Once the company was represented through its directors, it was incumbent upon the Assessing Officer to specify his queries and the assessee cannot be held responsible once he has established the source.

25. In our considered opinion, whether the assessee has discharged the initial burden cast upon him by provisions of section 68 of the Act or not, is purely a question of fact and the facts on record, as discussed hereinabove, clearly demonstrate that the assessee has prima facie discharged the initial onus cast upon it by provisions of section 68 of the Act.

26. As mentioned elsewhere, the Assessing Officer has observed that these share applicant companies are non-existent and this observation was based upon the report of the INV Wing, Kolkata. We fail to understand that if these share applicant companies were non-existent, then how come they were assessed to Income tax, which is evident from their assessment orders placed in the paper book.

27. It would be pertinent to mention here that the applicant’s premises were searched and not a single document was found during the course of search proceedings which could suggest that the assessee has purchased cheques by way of cash from these share applicant companies. Each of the shareholders from whom share capital was raised/received are duly identifiable corporate entities and assessed to tax as well. The entire share capital has been subscribed through banking channels and there was no material found during the search which proves that the money came from the coffers of the appellant company. Financial statements of each share holder company exceeds its net worth, thereby establishing the credit worthiness of the share applicant companies to make investment in shares of the applicant company. Further, each share holder has independently
confirmed their investment in response to notices u/s 133(6) of the Act.

28. In our considered opinion, suspicion can be no basis to make addition. Moreover, the Revenue in the case of shareholder companies has accepted their independent identity, source of income and carrying on business of investments and disinvestments. Therefore, the ratio laid down by the Hon’ble Supreme Court in the case of Lovely Exports Pvt Ltd 319 ITR 5 squarely applies on the facts of the case in hand. In fact, in the case of Stellar Investments Ltd 251 ITR 263 wherein the decision of the Hon’ble High Court of Delhi in 192 ITR 287 was upheld wherein it was held that in the case of a company, even if the subscribers to the share capital are not genuine, then too, it would not be regarded as undisclosed income of the assessee company.

29. The ld. DR placed heavy reliance on the decision in the case of NRA Iron and Steel 103 com 48 wherein the Hon’ble Supreme Court has reversed the order of the lower authorities holding that where there was failure on the part of the assessee to establish credit worthiness of investor companies, then merely because the assessee company had filed all the primary evidences, it would not suffice and the onus upon the assessee is not discharged

30. We have explained the facts of the case in hand and have also extracted the net worth of the share applicant companies. Therefore, the facts of the case in hand are clearly distinguishable from the facts of the case in NRA Iron and Steel [supra] in as much as in that case, the assessee failed to explain the net worth of share applicants.

31. Similarly, the facts of NDR Promoters Pvt Ltd [2019]-TIOL— 172-High Court-DEL-IT, Prem Castings [P] Ltd 88 com 189 and Navodaya Castle P. Ltd 367 ITR 306 are clearly distinguishable from the facts of the case in hand as explained elsewhere.

32. In the case of Navodaya Castle [supra], the assessee was unable to produce the directors and principal officers of the share holder companies and there were adverse remarks in respect of the bank account, which raised doubt on the identity and credit worthiness of the share holders. As mentioned elsewhere, the assessee did produce some directors of the share applicant companies but the Assessing Officer could record statement of only one director. Thereafter, the Assessing Officer did not ask the assessee nor forced the attendance of the directors of the share applicant companies and there are no adverse findings in so far as the bank accounts are concerned.

33. Similarly, in the case of NR Portfolio Pvt Ltd 42 com 339, the Hon’ble High Court of Delhi observed that if the Assessing Officer doubts the documents produced by the assessee, the onus shifts on the assessee to further substantiate the facts. In the case in hand, the assessee did file net worth of all the share applicant companies and further corroborated the share transactions with master data filed with Registrar of Companies.

34. The other decisions relied upon by the ld. DR are also distinguishable on facts of the case in hand.

35. As mentioned at the beginning that the underlying facts in issues in A.Y 2010-11 are identical to those of A.Y 2009-10, for the sake of completeness we will extract the networth of share applicant companies for A.Y 2010-11 as under:

SI. No. Name and address of the Company No. of Shares Nominal value of share (Rs.) Premium paid per share (Rs.) Dated of allotment
1.  M/s Kokila Exports Pvt. Ltd., 9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 12,500 1,25,000 (Rs. 10 per share) 23,75,000 (Rs. 190 per share) 30.03.2009
2.  M/s Abhilasha Exports Pvt. Ltd.,Saklat Palace, Kolkata-72 25,000 2,50,000 (Rs. 10 per share) 47,50,000 (Rs. 190 per share) 30.03.2009
3.   M/s Ambika Vimcom Pvt. Ltd.,1, Mahindra Nath Roy Bye Lane,Howrah-711101 10,000 1,00,000 (Rs. 10 per share) 19,00,000 (Rs. 190 per share) 30.03.2009
4.  M/s Deesha Tie Up Pvt.
Ltd.,1, Raj Ballab Saha
Lane, Howarh – 711.101
15,000 1,50,000 (Rs. 10 per share) 28,50,000 (Rs. 190 per share) 30.03.2009
5.       M/s Madam Agencies Pvt. Ltd.,9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 25,000 2,50,000 (Rs. 10 per share) 47,50,000 (Rs. 190 per share) 30.03.2009
6. M/s Puspadant Infrastructure Ltd.,52, Weston Street, 4th floor,Kolkata-13 50,000 5,00,000 (Rs. 10 per share) 95,00,000 (Rs. 190 per share)
7. M/s Pushpanjali Commotrade Pvt. Ltd.,3, Saklat Palace, 25,000 2,50,000 (Rs. 10 per share) 47,50,000 (Rs. 190 per share)
8, M/s Ranisati Stockist Pvt. Ltd., Kolkata-72 1A, Grand Lane, 1st floor, Kolkata- 700 012 12,500 1,25,000 (Rs. 10 per share) 23,75,000 (Rs. 190 per share)
9.                  M/s Sahej Tie Up Pvt. Ltd., 9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 10,000 1,00,000 (Rs. 10 per share) 19,00,000 (Rs 190 per share)
10.    M/s Sankat Mojchan Vinimay Pvt. Ltd., 9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 12,500 1,25,000 (Rs. 10 per share) 23,75,000 (Rs. 190 per share)
11.    M/s Shree Sudarshan Casting Pvt. Ltd., 9/12, Lai Bazar Street, Block E-, 2nd floor, Kolkata-700 001 25,000 2,50,000 (Rs. 10 per share) 47,50,000 (Rs. 190 per share)
12.    M/s Skylight Distributors Pvt. Ltd., 3, Saklat Palace, Kolkata- 700 072 25,000 2,50,000 (Rs. 10 per share) 47,50,000 (Rs. 190 per share)
13. M/s Tarakeshwar Commercial Pvt. Ltd.,9/12, Lai Bazar Street, Block per share)190 per share)  E-, 2nd floor, Kolkata-700 001 10,000 1,00,000 (Rs. 10 per share) 19,00,000 (Rs.190 per share)

Sr.    M/s RANISA TI STOCKISTS PRIVATE LIMITED Name o f Entities                                          Amoun t

(Rs-)

No.        Address: 1A, Grant Lane Kolkat-72 No. of Shares: 12,500 PAN No.    25,00,000
AAECR1291D

Payments made Via

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 893862 23.09.2009 25,00,000
TOTAL 25,00,000

Bank Name: Syndicate Bank Ward: ITO WD 39(3)/WBG/W/139/3

Return filed on: 17.09.2010

Auditors of the Company: Pawan Maurya & Co.

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 57,60,000 57,60,000
10,75,40,000 10,75,40,000
Total 11,33,00,000 11,33,00,000
Application of Funds
Current Assets Loans & advances
Stock of shares 9,98,50,000 11,30,00,000
Cash and bank balance 1,84,461 1,80,531.66
Loans & Advances 1,60,25,554
Other Current Assets 1,00,000
Less: Current Liabilities & Provisions 29,54,835.77 1,000
Net Current Assets 11,32,05,179.23 11,31,79,531.66
Preliminary Expenditure
To the extent not written off or adjusted 5,320.20 7,093.60
Deferred Revenue Expenditure 65,400 87,200
Profit & Loss Account 24,100.57 26,174.74
Total 11,33,00,000 11,33,00,000

M S SAHAJ TIE UP PRIVATE LIMITED

Address: D/12, Lai Bazar Street, Block E, 2nd Floor Kolkata-700001

No of Shares: 10,000

PAN No. AAECR1291D

Pavments made Via

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) RTGS 05.09.2009 20,00,000
TOTAL 20,00,000

Bank Name: Axis Bank Auditors of the Company:

Agrawal Singhania & Co.

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 1,38,15,000 1,38,15,000
Reserve & Surplus 23,25,53,263 23,25,53,263
Total 24,63,68,263 24,63,68,263
Application of Funds
Investment 24,03,00,000
Current Assets Loans & advances
Stock of shares 21,96,50,000
Cash and bank balance 41,65,522 12,64,145
Loans & Advances 13,64,702 1,94,74,476
Other Current Assets 1688804 1,58,93,117
Less: Current Liabilities & Provisions 1201899 99,81,815
Net Current Assets
Preliminary Expenditure
Deferred Revenue Expenditure 30,000 51998
Profit & Loss Account 21,135.54 16,342
Total 24,63,68,263 24,63,68,263

MS SANK AT MQCHAN VINIMAY PRIVATE LIMITED

Address: 9/12, Lal Bazar Street, Block E 4th Floor, Kolkata
No. of Shares: 12,500

PAN No. AAECR1291D

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 894016 23.09.2009 25,00,000
TOTAL 25,00,000

Auditors of the Company:
H.K. Saha & Co.

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 41,55,000 41,55,000
Reserve & Surplus 77,045,000 77,045,000
PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 41,55,000 41,55,000
Reserve & Surplus 77,045,000 77,045,000
Total 8,12,00,000 8,12,00,000
Application of Funds
Current Assets Loans & advances
Stock of shares 6,85,72,600 9,65,10,000
Cash and bank balance 279,188.23 1,00,039.66
Loans & Advances 1,17,71,297
Other Current Assets 5,00,000
Less: Current Liabilities & Provisions 3,073 1,55,12,000
Net Current Assets 8,11,20,012.23 8,10,98,039.66
Preliminarv Expenditure
To the extent not written off or adjusted 5,320.20 7,093.60
Deferred Revenue Expenditure 53,400 71,200
Profit & Loss Account 21,267.57 23,666.74
Total 8,12,00,000 8,12,00,000

M/s Skylight Distributors Pvt Ltd

Address 9/12, Lal Bazar Street, Block E 4th Floor, Kolkata
No. of Shares: 12,500
PAN No. AAECR1291D
Payments made Via
Bank Name: Syndicate Bank Ward: ITO Ward 1(4)

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 197440 04.03.2010 50,00,000
TOTAL 50,00,000

Net Worth of the Company
PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 1,54,44,290 41,00,000
Reserve & Surplus 48,51,15,879 15,60,00,000
Total 50,05,60,169 16,01,00,000
Application of Funds
Current Assets Loans & advances
Stock of shares 40,53,48,000 14,00,00,000
Cash and bank balance 3,07,03,679
Loans & Advances 65,552 2,00,93,380
Other Current Assets 6,44,27,648
Less: Current Liabilities & Provisions 1,32,920 87,001
Net Current Assets 50,04,11,959 16,00,06,379
Miscellaneous Expenditure
Preliminary Expenses 1,48,210 93,330
Profit & Loss Account 291
Total 50,05,60,169 16,01,00,000

M/S TARKESHWAR COMMERCIAL PRIVATE LIMITED
Address: 9/12, Lai Bazar Street, E Block, 4th Floor, Kolkata- 700001
No. of Shares: 10,000
PAN No. AADCT0358A
Payments made Via

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 894086 24.09.2009 2,000,000

Bank Name: Syndicate Bank Auditors of the Company:

Pawan Maurya & Co.

Net Worth of the Company
PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 5,810,000 5,810,000
Reserve & Surplus 108,490,000 108,490,000
Total 114,300,000 114,300,000
Application of Funds
Current Assets Loans & advances
Stock of Shares 90,470,000 101,000,000
Cash & Bank Balance 277,900.36 180,526
Loans & Advances 16,412,027 13,000,000
Other Current Assets 7,950,000
Total 115,109,927.36 114,180,526
Less: Current Liabilities & Provisions
Liabilities 902,000 1,000
Provision 1,492
Total 903,492 1,000
Net Current Assets 114,206,435.36 114,179,526
Preliminary Expenditure
(To the extent not written off or adjusted) 5,320.20 7,093.60
Deferred Revenue Expenditure 65,400 87,200′
Profit & Loss 22,844.44 26,180.40
Total 114,300,000 114,300,000

M/S ABH1LASHA EXPORTS PRIVATE LIMITED
Address: 95A C R Avenue, Kolkata, West Bengal 700073
No. of Shares: 25,000
PAN No. AAHCA5909J

Sr. No. Cheque No./ RTGS Date Amount (Rs)
i) 894086 24.09.2010 50,00,000
TOTAL 50,00,000

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 3626,460 100,000
Reserve & Surplus 172,956,542.15
Total 176,583,002.15 100,000
Application of Funds
Current Assets Loans & advances
Stock-in-Trade 124,650,000
Sundry Debtors 1,104,666
Cash & Bank Balances 10,106,506.65 81,437
Loans & Advances 41,210,007
Total 177,071,179.65 81,437
Less: Current Liabilities & Provisions
Net Current Assets 559,937.50 501
176,511,242.15 80,936
Miscellaneous Expenditure
(To the extent not written off or adjusted)
Preliminary Expenditure 71,760 15,930
Profit & Loss 3,134
Total 176,583,002.15 100,000

M/S AMBIKA VINCOM PRIVATE LIMITED
Address: 1, Mahendra Nath Roy Bye Lane, Howrah, West Bengal – 711101 No. of
Shares: 10,000 PAN No. AAHCA3091P

Sr. No. Cheque No./RTGS Date Amount (Rs)
i) 894086 24.09.2009 20,00,000
TOTAL 20,00,000

Bank Name: Syndicate Bank

Auditors of the Company: Pawan Maurya & Co.

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 8,760,000 8,760,000
Reserve & Surplus 164,547,063.02 164,540,698.64
Total 173,307,063.02 173,300,698.60
Application of Funds
Current Assets Loans & advances
Stock of shares 140,460,000 159,900,000
Cash & Bank Balances 221,920.82 157,866
Loans & Advances 32,541,982 13,127,021
Total 173,223,902.82 173,184,887
Less: Current Liabilities & Provisions
Liability 2,000 1,000
Provision 3,560 1,482
Total 5,560 2,482
Net Current Assets 173,218,342.82 173,182,405
Preliminary Expenditure
(To the extent not written off or adjusted) 5,320.20 7,093.60
Deferred Revenue Expenditure 83400 111200
Total 173,307,063.02 173,307,063.02

M/s Deesha Tie Pvt Ltd

Address: 1, Raj Ballav Saha Lane, Howrah, West Bengal 711101

No. of Shares: 15000

PAN No. AABCD7985M

Sr. No. Cheque No./RTGS Date Amount (Rs)
i) 894086 05.09.2009 30,00,000
TOTAL 30,00,000

Bank Name:Axis Bank Auditors of the Company:

Agrawal Singhania & Co.

PARTICULARS As on 31.03.2010 As on 31.03.2009
Shareholders Fund
Share capital 24,908,500 24,908,500
Reserve & Surplus 443,501,525.39 443,496,297.59
Total 468,410,025.39 468,404,797.59
Application of Funds
Current Assets Loans & advances
Stock of shares 444,282,971.97 442,261,455
Cash & Bank Balances 346,431.92 892,722.41
Loans & Advances 10,578,339 20,804,524
Total 468,807,742.89 473,458,701.41
Current Liabilities & Provisions
Liability 502,264.50 5,190,691.82
Provision 6,453 11,212
Total 508,717.50 5,190,691.82
Net Current Assets 468,299,025.39 468,256,797.59
Miscellaneous Expenditure
(To the extent not written off or adjusted) 111,000 148,000
Deferred Revenue Expenditure
Total 468,410,025.39 468,404,797.59

M/S PUSHPADANT INFRASTRUCTURE LIMITED

Address: 10A, Hospital Street, 2nd Floor, Room No. 205, Kolkata, West Bengal 700072

No. of Shares: 50000 PAN

No. AAFCP1441G

Sr. No. Cheque No./ RTGS Date Amount (Rs)
I) 190442 25.02.2010 50,00,000
II) 09.03.2010 50,00,000
TOTAL 100,00,000

Bank Name: Axis Bank Auditors of the Company: S. Sadhu &

Assciates Net Worth of the Company

PARTICULARS
Shareholders Fund
Share capital 15,500,000
Reserve & Surplus 735,347,864.15
Total 750,847,864.15
Application of Funds
Current Assets Loans & advances
Stock-in-trade 654,810,000
Sundry Debtors 36,594,799
Cash & Bank Balances 21,964,900.15
Loans & Advances 191,811,281
Total 905,180,980.15
Less: Current Liabilities & Provisions 154,499,796
Net Current Assets 750,681,184.15
Miscellaneous Expenditure
(To the extent not written off or adjusted) _____________________
Preliminary Expenses 166,680
Profit & Loss Account
Total 750,847,864.15

M/S PUSHPANJALI COMMQ TRADE PRIVATE LIMITED

Address: 3 Saklat Place, Kolkata, West Bengal 700072

No. of Shares: 25000

PAN No. AAECP9727C

Sr. No. Cheque No./RTGS Date Amount (Rs)
i) 198364 09.03.2010 50,00,000
TOTAL 50,00,000

Shareholder Fund
Share capital 10,100,000 100,000
Reserve & Surplus 490,095,030
Total 500,195,030
Application of Funds Current Assets Loans & Advances
Stock-in-Trade 419,862,600
Sundry Debtors 14,911,033
Cash & Bank Balances 9,886,846.50 81,444
Loans & Advances 61,266,165.50
Total 505,926,645 81,444
Less: Current Liabilities & Provisions 5,874,025 501
Net Current Assets 500,052,620 80,913
Miscellaneous Expenditure (To the extent not written off or adjusted-­–)
Preliminary Expenses 15,930
Profit & Loss Account 142,410 3,157
Total 500,195,030 100,000

Bank Name : Axis Bank

Auditors of the Company :

H.K. Saha & Co.

Net Worth of the Company

11 M/s. Kolkata Exports (P) Ltd.,

Address : 9/12, Lal Bazar Street, Block-E, 2nd Floor,

Kolkata – 700001.

No. of Shares : 12500 PAN No. AABCK1178K

Sr. No. Cheque No./ RTGS Date Amount (Rs)
I) 17.04.2009 25,00,000
TOTAL 25,00,000

12. M/s. MADSAN AGENCIES (P) LTD. Address : 9/12,

Lal Bazar Street, Block-E, 2nd Floor, Kolkata – 700001.

Sr. No. Cheque No./ RTGS Date Amount (Rs)
I) 08.07.2009 50,00,000
TOTAL 50,00,000

M/S SLDHARSHAN CASTING(P) LTD

Address: 9/12, Lai Bazar Street, Block-E, 2nd Floor, Kolkata – 70000

No. of Shares: 25000

PAN No. AADCS9429B

Sr. No. Cheque No./ RTGS Date Amount (Rs)
I) 08.07.2009 50,00,000
TOTAL 50,00,000

36. It can be seen from the aforementioned net worth of the share applicant companies, only net worth of three companies is not available, namely, Kokila Exports, M/s Madsan Agencies P. Ltd and M/s Sudharshan Casting [P] Ltd. However, we find that the directors of these companies, namely, Shri Ajit Singh for Kokila Exports and Shri Vinay Kumar Shah for Madsan Agencies and Sudharshan Casting appeared before the directors incompliance to summons u/s 131 of the Act. We are of the considered view that the assessee has prima facie discharged the initial onus cast upon it successfully.

37. Considering the facts of the case as explained hereinabove, we are of the considered opinion that the assessee has successfully discharged the initial onus cast upon it by provisions of section 68 of the Act.”

7.5. The issue is, therefore, covered by the above decisions of the Tribunal in Group/Assessee’s cases in favour of the assessee based on identical facts.

7.6. Apart from above Judgments, it is well settled Law that assessee need not to prove the source of the source. We rely upon Judgments of the Hon’ble Delhi High Court in the case of (1) Dwarakadhish Investment P. Ltd., [2011] 330 ITR 298 (Del.); (2) Rohini Builders 256 ITR 360 (Guj.) and (3) Zafar Ahmed & Co., 30 Taxmann.com 269 (Alld.). We also rely upon the following decisions.

7.7. CIT vs. Fair Investment Ltd., 357 ITR 146 in which it was held that A.O. did not summon investors and did not make efforts. There is no finding that material disclosed was untrustworthy. The Appellate Authorities rightly deleted the addition.

7.8. Decision of 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.”

7.9. Decision of Hon’ble jurisdictional High Court in the case of CIT vs. Kamdhenu Steel and Alloys Ltd., &Ors. 361 ITR 220 (Del.) 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.”

7.10. Decision of Hon’ble jurisdictional High Court in the case of CIT vs. Vrindavan Farms Pvt. Ltd., etc. ITA.No.71 of 2015 dated 12th August, 2015 (Del.), in which it was held as under :

“The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon’ble High Court.

7.11. Decision of jurisdictional High Court in the case of CIT vs. Lax man 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.

7.12. Decision of the Hon’ble Supreme Court in the case of Earth Metal Electric Pvt. Ltd., vs. CIT 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.”

7.13. Decision of Hon’ble jurisdictional High Court in the case of Divine Leasing & Finance Ltd., 299 ITR 268, in which it was held as under :

“No adverse inference should be drawn if shareholders failed to respond to the notice by A.O.

7.14.Decision of Hon’ble M.P. 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 non-existent 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.”

7.15. Decision of Hon’ble jurisdictional 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.”

7.16. Decision of Hon’ble jurisdictional 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 non­existent, 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.”

7.17. Decision of Hon’ble jurisdictional 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.”

7.18. Judgment of Hon’ble Delhi High Court in the case of Pr. CIT vs., Kurele Paper Mills P. Ltd., 380 ITR 571 (Del.) in which Hon’ble Delhi High Court held as under :

“Held, dismissing the appeal, that the order of the Commissioner (Appeals) revealed that there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search as was manifest from the Order of the Assessing Officer. Consequently, it was held that the Assessing Officer was not justified in invoking section 68 of the Income-tax Act, 1961, for the purposes of making additions on account of share capital. There was nothing to show that the factual determination was perverse.”

7.19. Considering the above discussion in the light of Order of the Tribunal in the Group Cases and in case of assessee and the decisions of various High Courts referred to above and the decisions relied upon by the Learned Counsel for the Assessee, it is clear that assessee proved identity of the Investors and also furnished sufficient documentary evidences to prove creditworthiness of the Investors, genuineness of the transaction in the matter. Therefore, initial onus upon the assessee to prove ingredients of Section 68 of the I .T. Act, 1961 stands discharged. The decisions relied upon by the Ld. D.R. have also been considered in the Group cases as above and did not find in favour of the Revenue because the assessee has been able to prove creditworthiness of the creditors and genuineness of the transaction. Therefore, the decisions relied upon by the Ld. D.R. would not support the case of the Revenue. Considering the totality of the facts and circumstances of the case and above discussion, we are of the view that entire addition made by the authorities below of Rs.6.7 crores is wholly unjustified and is liable to be set aside. In view of the above, we set aside the Orders of the authorities below and delete the entire addition of Rs.6.7 crores. All the grounds raised by the assessee are allowed.

8. In the result, appeal of the Assessee allowed.

ITA.No.3339/Del./2017 – A.Y. 2010-2011 :

9. On Ground Nos.1 and 2, assessee challenged the addition of Rs.9.60 crores on account of share capital/ premium received from 19 Investor Companies. The Learned Representatives of both the parties submitted that the issue is identical as have been considered in A.Y. 2009-2010. The documentary evidences are also same. They have, therefore, submitted that the Order in A.Y. 2009-2010 may be followed in this assessment year as well. In view of the above, we find that the issue is same and based on identical facts, therefore, following the reasons for decision for the A.Y. 2009-2010 (supra), we set aside the Orders of the authorities below and delete the entire addition of Rs.9.60 crores. In the result, Ground Nos.1 and 2 of the appeal of Assessee are allowed.

10. On Ground No.3, assessee challenged the addition of Rs.20 lakhs on account of alleged deemed dividend brought to tax by invoking the provisions of Section 2(22)(e) of the I.T. Act, 1961.

11. During the search proceedings carried-out at the residence of Shri Sampat Sharma and Smt. Kavita Sharma at L-3, Mahipalpur, New Delhi, certain documents [Party-BA-6, Annexure A-1, pages 7-18] were found and seized. The said documents indicate investment of Rs.20 lakhs in immovable property at Sarve Satyam Society, CGIIS Ltd., Plot No.12, Sector-4, Dwarka, New Delhi by Shri Sampat Kumar Sharma. During the course of assessment proceedings, it was submitted before A.O. that he has taken loan from assessee company on 02.04.2009 in which he is a Director. Photo copy of the Affidavit is also been filed which shows that assessee company has given loan of Rs.20 lakhs through online transfer of fund on Dated 02.04.2009 drawn on IOB, Daryaganj, New Delhi. The A.O, therefore, noted that provisions of Section 2(22)(e) of the I.T. Act are attracted as the assessee has given loan to his Director. Therefore, addition of Rs.20 lakhs was made against the assessee. The Ld. CIT(A) confirmed the addition and dismissed this ground of appeal of assessee.

12. Learned Counsel for the Assessee submitted that provisions of Section 2(22)(e) of the I.T. Act are not applicable in the case of assessee as the assessee is a NBFC Company registered with RBI and assessee company is mainly in the business of lending of money to different Companies. He has submitted that Exception-(ii) to Section 2(22)(e) of the I.T. Act, 1961 provides that dividend does not include (-) “any advance or loan made to the shareholder (or the said concern) by a Company in the ordinary course of its business where the lending of money is the substantial part of the business of the Company.” He has, therefore, submitted that where lending of money was substantial part of business of company, loan advanced by it to its shareholders, would not be taxed as deemed dividend under section 2(22)(e) of the I.T. Act, 1961. He has relied upon Judgment of Hon’ble Delhi High Court in the case of Commissioner of Income Tax vs., Bharat Hotels Ltd., 410 ITR 417 (Del.) and Judgment of Hon’ble Bombay High Court in the case of Commissioner of Income Tax vs., Parle Plastics Ltd., 332 ITR 63 (Bom.) in which it was held that when money lending is part of business of assessee company, the amount lend-out by the Company cannot be taxed as deemed dividend. He has filed the details of assessment for the A.Ys. 2009-2010 and 2010-2011 to declare that total assets of the assessee company and loans and advances given in those years which would show that the percentage of the total assets deployed in total loans and advances are 35.90% and 42.26% respectively in A.Ys. 2009-2010 and 2010-2011. He has also filed details of interest received which is substantially high as against the total profit received by the assessee. He has, therefore, submitted that no addition could be made against the assessee.

13. On the other hand, Ld. D.R. relied upon the Orders of the authorities below.

14. We have considered the rival submissions. In the case of Parle Plastic Ltd., 332 ITR 63 it was held that when money lending was part of the business of the assessee company, no addition under section 2(22)(e) of the I.T. Act, 1961 could be made. In the case of Creative Dyeing & Printing Ltd., 318 ITR 476 (Del.) the Hon’ble Delhi High Court held that business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act, 1961. In the case of Shri P.K. Malhotra 338 ITR 538 (Cal.) (HC) the Hon’ble Calcutta High Court held that when shareholder permitted to mortgage its properties for loan and received loan, it would not attract the provisions of Section 2(22)(e) of the I.T. Act. Since the assessee is NBFC Company registered with RBI and as per assessment order itself the nature of business of assessee is financing and investment and the details submitted by Learned Counsel for the Assessee clearly show that assessee is mainly engaged in finance business for giving loans and advances and earn interest thereon, would clearly prove that assessee is mainly in the business of lending of money to others, therefore, business transaction would not attract the provisions of Section 2(22)(e) of the I.T. Act and as such the case of the assessee would fall to the exception provided in sub-clause-(ii) of Section 2(22)(e) of the I.T. Act, 1961. In view of the above, we set aside the Orders of the authorities below and delete the addition of Rs.20 lakhs. Accordingly, Ground No.3 of the appeal of the Assessee is allowed. No other point is argued.

15. In the result, appeal of the Assessee allowed.

16. To sum-up, appeals of the Assessee for the A.Ys. 2009-2010 and 2010-2011 are allowed.

Order pronounced in the open Court.

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567891011
12131415161718
19202122232425
2627282930