Search and seizure–Assumption of jurisdiction under section 153A–No incriminating material found

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Search and seizure–Assumption of jurisdiction under section 153A–No incriminating material found

Since no assessment was pending on the date of search and addition had been made on basis of post-search enquiries and statements recorded under section 132(4) on various persons, therefore, AO had no power to assume jurisdiction under provisions of section 153A as no incriminating material was found.

AO observed that during course of pre-search enquiries, it was gathered that assessee group had received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and creditworthiness. AO came to the conclusion that assessee failed to establish identity, creditworthiness and genuineness of the parties wherefrom funds were received by investor of assessee who are also group companies of assessee group. Since the assessee has received certain huge amount towards share capital and share premium and the assessee could not discharge burden cast on it to satisfaction of AO, he treated same as unexplained cash credit under section 68Held: Addition under section 68 was made on the basis of statements recorded under section 132(4) and post-search enquiry and no incriminating material was found/seized during course of search, therefore, no addition could have been made under section 153A since assessment was not abated in the instant case. CIT(A) was not justified in upholding action of AO in assuming jurisdiction under section 153A. Accordingly, the addition made by the AO and upheld by the CIT(A) in the 153A assessment proceedings being <i>void ab-initio</i> were deleted.

Decision: In assessee’s favour.

Relied: CIT v. Kabul Chawla 380 ITR 573, CIt v. Meeta gutgutia 395 ITR 526

Referred: Brahmaputra Finlease (P) Ltd. v. DCIT vide ITA No. 332/Del/2017 order, dt. 29-12-2017,CIT v. Best Infrastructure (India) (P) Ltd. 397 ITR 82 (Del-HC), CIT v. Harjeev Aggarwal 290 CTR 263 (Del-HC),CIT v. Lata Jain, 384 ITR 543, 211 Taxman 61 (Del) CIT v. Chetan Das Laxhman Das. 352 ITR 493 (Del), CIT v. Anil Kumar Bhatia, 380 ITR 571 (Del), CIT v. Kurele Paper Mills (P) Ltd., dt. 6-7-2015, CIT v. Lata Jain 384 ITR 543, CIT v. Sinhgad Technical Education Society 397 ITR 344 (SC), 241 Taxman 440 (Del), CIT v. MGF Automobiles Ltd. ITA No. 634/2015 CIT v. Smt. Kusum Gupta. W.P. (C) 8721/2014 & CM No. 20052/2014 Praveen Kumar Jolly,  IT Appeal No. 810/2016, CIT v. Mahesh Kumar, ITA Nos. 61 & 62/2017 Pr. CIT v. Ram Avtar Verma and 397 ITR 82  CIT v. Best Infrastructure (India) (P) Ltd. CIT v. MAF Academy (P) Ltd. 361 ITR 258, CIT v. Navodaya Castle (P) Ltd. 367 ITR 306 (Del-HC), Konark Structural Engineering (P) Ltd. v. Dy. CIT (2018) 254 Taxman 184 (Bom), Prem Castings (P) Ltd. v. CIT in (IT Appeal No. 34 of 2016, dt. 29-11-2017), CIT v. Nipun Builders & Developers (P) Ltd. 350 ITR 407 (Del–HC), CIT v. Nova Promoters & Finlease (P) Ltd. 342 ITR 169,  CIT v. Ultra Modern Exports (P) Ltd. (ITA No. 262 of 2012, dt. 11-12-2012), CIT v. Frostair (P) Ltd. ITA Nos. 183 of 2002 & 1638 of 2006, dt. 24-8-2012, CIT v. N R Portfolio (P) Ltd. (2013) 263 CTR 456 (Del), CIT v. Empire Builtech (P) Ltd. 366 ITR 110 (Del), CIT v. Focus Exports (P) Ltd., in (IT Appeal No. 218 of 2012, dt. 16-9-2014), CIT v. Bikram Singh, ITA No. 55/2017 (Del) and Rick Lunsford Trade & Investment Ltd. v. CIT 385 ITR 399 (Cal).

IN THE ITAT, DELHI BENCH

R.K. PANDA, A.M. & BEENA A. PILLAI, J.M.

Moon Beverages Ltd. v. ACIT

ITA No. 7374/Del/2017

ITA No. 7567/Del/2017

7 June, 2018

Assessee by: Gautam Jain, Advocate Lalit Mohan, Advocate

Department by: Shefali Swaroop, Commissioner–Departmental Representative

ORDER

R.K. Panda, A.M.

The above two appeals filed by the respective assessees are directed against the separate orders of the Commissioner (Appeals)- XXVI, New Delhi relating to assessment year 2013-14. Since identical grounds have been taken by the respective assessees in their appeals, therefore, for the sake of convenience, these were heard together and are being disposed of by this common order.

ITA No. 7374/Del/2017 (Moon Beverages Ltd.) :–

2. Facts of the case, in brief, are that the assessee company is one of the group companies of MMG (MM Aggarwal) group and is engaged in the business of preparation, manufacturing, packing and sale of soft drinks on the basis of concentrate and other raw material procured from Coca Cola in the capacity of bottler and distributor of Coca Cola procure in India. In addition, the MMG group has business interests in several segments like chartering and leasing of vessels to ONGC and other companies, real estate, education and hospitality etc.. A search & seizure operation under section 132 of the Income Tax Act, 1961 was carried out on 28-3-2015 in the case of M.M. Aggarwal Group of cases. The case of the assessee was also covered in the said search. During the course of search carried out at the different premise located in India in M.M. Aggarwal Group of cases, documents and data storage devices, etc. belonging to the assessee were found and seized. In response to notice under section 153A of the Income Tax Act, 1961 issued to the assessee on 10-5-2016, the assessee filed the return of income on 29-6-2016 declaring a total income of Rs. 7,42,51,690.

2.1 During the course of assessment proceedings, the assessing officer observed that the assessee has raised share capital of Rs. 11,85,00,000 from Superior Industrial Enterprises Ltd. on account of issue of 3,16,000 shares of Rs. 10 each with premium of Rs. 365. He observed that during the course of pre-search enquiries, it was gathered that the assessee group had received substantial amount of share capital from various non-descript and shell companies which did not have any factual identity and creditworthiness. It was also gathered that the investment by such entities with the assessee group was mainly in the form of share capital which was subscribed at an abnormally high premium which lacked genuineness on their part to have agreed to subscribe at such premium without having received any return either in the form of dividends or appreciation in the value of their investment till date. He observed that search action further established beyond doubt that the assessee company like other group companies had received the impugned share capital from various non-descript and shell entities/companies which grossly lacked creditworthiness and were in the nature of accommodation entries to convert the undisclosed income of the assessee group having been received in the form of such share capital from the stated entities/companies. He further observed that search action revealed the modus operandi of the assessee group for converting their undisclosed income through the aid of various personnel/employees who categorically admitted having aided the group in such misdemeanor by facilitating the process of creating various bogus companies within the group and having received share capital from such outside non-descript/shell companies and thereafter making the same available in the operating companies of the group through a layered structure as per the instructions of the promoter and his other employees/office bearers. The assessing officer analyzed the tax returns from the income-tax data base and referred to the enquiries conducted on Delhi and Kolkata based companies. He also referred to the statement of Shri Narender Kumar Jain, who is close confident and associate of the promoter of the MMG Group Shri Sanjeev Agrawal and their CA, Shri Ashwani Verma, the statement of Shri Narinder Kumar Garg who is Director of M/s. North Delhi Beverages (P) Ltd., the statement of Shri Sanjeev Aggarwal, who is directorcum- promoter of MM group companies, the statement of Shri Krishan Kumar Bajaj, General Manager-Finance of the assessee company. He further referred to the statement of various other persons, the enquiries conducted under section 133(6) of the Income Tax Act and the summons issued to various directors of the non-descript companies under section 131 of the Income Tax Act which were either returned back or delivered but there was no response or only part compliance. Ultimately the assessing officer came to the conclusion that the assessee failed to establish the identity, creditworthiness and genuineness of the parties wherefrom funds were received by the investor of the assessee who are also group companies of the assessee group. Since the assessee has received an amount of Rs. 11,85,00,000 towards share capital and share premium and the assessee could not discharge the burden cast on it to the satisfaction of the assessing officer, he treated the same as unexplained cash credit under section 68 of the Income Tax Act as the income of the assessee for the relevant period under consideration.

3. Before the learned Commissioner (Appeals), the assessee apart from challenging the addition on merit challenged the assumption of jurisdiction under section 153A of the Income Tax Act. It was submitted that the original return was filed on 29-8-2013 declaring an income of Rs. 7,42,51,690 which was processed under section 143(1) on 18-4-2014. The search under section 132 was conducted in this case on 28-3-2015 and notice under section 153A was issued on 10-5-2016. It was argued that no incriminating material was detected as a result of search and the addition was made on the basis of post-search enquiries and statements recorded under section 132(4) of the Income Tax Act. Relying on various decisions, it was argued that since no assessment was pending on the date of search and the addition has been made on the basis of post-search enquiries and statements recorded under section 132(4) on various persons, therefore, the assessing officer has no power to assume jurisdiction under the provisions of section 153A of the Income Tax Act.

4. So far as the merit of the case is concerned, it was submitted that the assessee had filed full details on account of the sum received from M/s. Superior Industrial Enterprises Ltd. towards share capital and share premium. It was submitted that the assessee has furnished the complete address and PAN number of the investor company along with the distinctive number of share certificates, the various cheques issued on different dates with the name of the bank, the name and address of the directors as on 31-3-2013, the complete copy of the income tax return for assessment year 2013-14, copy of Form No. 2 of Moon Beverages Ltd. filed with ROC as ‘Return of Allotment’, copy of Board Resolution of the assessee company and various other details to substantiate the identity and creditworthiness of the investor companies and the genuineness of the transactions. Therefore, addition cannot be made under section 68 of the Income Tax Act. It was accordingly argued that the addition made by the assessing officer should be deleted.

5. However, the learned Commissioner (Appeals) was not satisfied with the arguments advanced by the assessee. So far as the legal ground challenging the validity of assumption of jurisdiction under section 153A is concerned, he dismissed the ground raised by the assessee by observing as under :–

“I have carefully considered the submission of the learned Authorised Representative., assessment order and cases law cited by him. I have also perused the assessment order and find that the assessing officer proceeded to frame assessment under section 153A after the search on appellant group on 28-3-2015 and on receipt of appraisal report from the DI (Investigation) that the appellant company has received an unexplained credit in its books under section 68 of the Income Tax Act.

The basis of addition as taken by the assessing officer was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs. 88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18-5-2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected. These being primary and basic the legal ground going to the root of the assessment, it is necessary to examine the nature of incrimination material conferring upon the assessing officer necessary jurisdiction under section 153A to utilize such material arising consequent to the search operation. The material so found and seized and thereafter relied upon and utilized thereon in the assessment of the assessee leading the assessing officer to conclude that the share application/capital received by the appellant are unexplained.

But, It is undisputed fact that the department found information in respect of the share certificates and the counterfoils thereof and other significant related material during the course of search operations that upon collating with the information received by the department lead to specific inputs in respect of doubtful nature on genuineness of the equity infused in the companies of the group. The material so gathered is prima facie incriminating in its nature and substance so as to attract the provisions of S. 153A of the Act in the case of the appellant. The overall schema that emerges there from indicates that there was prima faciematerial available in this regard to enable the assessing officer to initiate proceedings u1s 153A. The assessee contentions in this regard as under

(a) In respect of share certificate found during the course of search in respect of companies mentioned at serial no 1 & 2 It has also been submitted that companies JA Builders Ltd. and JPM Automobiles Ltd. was also assessed with the ACommissioner, Central Circle -13, New Delhi and the order have also been passed at the same time. In the order passed in the case of JA Builders Ltd. and JPM Automobiles Ltd. no addition towards share capital have been made. As such the appellant contended that same Assessing officer while passing the order at the same time in respect of same issue has formed two different views.

(b) The shares certificates found in respect of companies mentioned at serial no 3 to 5 is related to investments made by group concerns of JPM group and does not pertain to outsiders

These merit examination of the case under 153A of the Income Tax Act 1961. The availability of such documents raises valid doubts on the genuineness of the transactions involved herein. The issue of existence of incriminating material has to be considered in totality. The assessee cannot hide behind seizure or non seizure of documents. The same has to be construed with the trade practices and the expected action on part of an independent entity in normal circumstances. Any such entity will surely expect due returns or capital appreciation in due course. The investor is surprisingly bereft of interest in the matter. The assessing officer and this appellate forum too have to construe the incriminating material in a harmonious fashion. Hon’ble Delhi High court has also reiterated in many rulings that action under section 153A is bound to be initiated in such situations. Therefore, this action of the assessing officer is in tune with judgment of Hon’ble Delhi High Court in CIT (C)-III v. Kabul Chawla (Delhi) (2016) 380 ITR 573 (Delhi) : (2016) 234 Taxman 30 (Delhi). The same is further strengthened by the judgment of Hon’ble Delhi High Court in the case of Dayawanti Gupta v. CIT in ‘ITA Nos 357,358.359/2015 and other, dt. 27-10-2016. Having considered the detailed and belaboured submissions of the learned Authorised Representative and the material on record, I am drawn to the conclusion that the action of the assessing officer does not go at variance with the provisions of law and the available jurisprudence in this matter in so far as invoking the proceedings per section 153A is concerned. The assessing officer was well within his powers to invoke section 153A of the Act on prima facie finding about information that surfaced during the search. Basis above discussions, these grounds of appeal are not sustainable. The ground no. 4 (a) and 4 (b) are therefore dismissed.

6. So far as the addition on merit is concerned, learned Commissioner (Appeals) also dismissed the said ground by observing as under :–

“B. As far as the merits of the case are concerned, I have gone through the assessment order passed by and assessing officer and verified the material placed on paper book and was part of the assessment records also. The summon was issued but the same was not delivered also the following information and documents were requisitioned by issuing notice under section 133(6) of the Act

(i) Relevant extracts Statements of bank account statement of the investors showing payments made towards share application money.

(ii) Copies of allotment letters.

(iii) Share Application form duly filled by the investor companies.

(iv) Confirmation in respect of allotment of equity shares to the investors.

(v) Copy of PAN card of the investor companies.

(vi) Memorandum & Articles of Association of the investor companies clearly depicting their corporate identity number.

(vii) Copies of share certificates issued by the assessee company.

(viii) A chart showing details of director of the investor companies.

(ix) A chart showing details of shareholders of the investor companies.

(i) Copies of the acknowledgement of the Income Tax return filed for assessment year 2009-10 by the investor companies along with their audited financials for the year ended 31-3-2009.

B1. It is required to refer to here the section 68 as amended from assessment year 2013-14 onwards. The section confers enhanced onus on the investing entity in the assessee by virtue of the proviso. This reads as under–

“Cash credits.

68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the assessing officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :–

Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless–

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the assessing officer aforesaid has been found to be satisfactory:”

The appellant has neither produced the investor nor arranged to provide the requisite information and documents directly from it as such failed to substantiate its contention. The onus to prove its contentions has not been discharged by the assessee appellant. Concept of Onus is dynamic no doubt, but the assessee is required to first discharge the onus cast upon by way of information in possession of the department based on the seizure of such documents that create prima facie basis for the assessing officer to arrive at his conclusions. The assessee has presented a whole series of jurisprudence without substantively discharging its onus. Such onus does not shift back by the mere act of the assessee in plainly denying the imputations without really offering corroborative data or any substantive contentions to establish its case to rebut the imputation. The appellant fails on this count as the primary onus is yet not discharged. I find no substantive basis to accept the contentions of the assessee. The addition in this regard is has to be confirmed as the available jurisprudence is clearly distinguishable on the facts of the case. Accordingly the addition made by assessing officer under section 68 of the Act (as applicable for assessment year 2013-14 onwards) is sustainable.”

7. The learned Commissioner (Appeals) further observed that effect from assessment year 2013-14 onwards, the provisions of section 56(2)(viib) are attracted to the case of the assessee. He observed that the share premium charged by the assessee clearly falls within the mischief of this section in absence of assessee furnishing a reliable and robust basis of valuation of such equity shares as per rule 11UA(1)cb of the Income Tax Act. The relevant observation of the learned Commissioner (A reads as under :–

“C. There is another aspect to such transactions with effect from assessment year 2013-14 onwards. In this regard, it is also pertinent to refer to section 56 (2) vii b, which reads as under :–

“56. (1) Income of every kind which is not to be excluded from the total income under this Act shall be chargeable to income-tax under the head “Income from other sources”, if it is not chargeable to income-tax under any of the heads specified in section 14, items A to E. (2) In particular, and without prejudice to the generality of the provisions of sub-section (1), the following incomes, shall be chargeable to income-tax under the head “Income from other sources”, namely :–

(viib) where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration received for such shares as exceeds the fair market value of the shares:

Provided that this clause shall not apply where the consideration for issue of shares is received- (i) by a venture capital undertaking from a venture capital company or a venture capital fund; or (ii) by a company from a class or classes of persons as may be notified by the Central Government in this behalf.

Explanation.–For the purposes of this clause,–

(a) the fair market value of the shares shall be the value- (i) as may be determined in accordance with such method as may be prescribed 93; or (ii) as may be substantiated by the company to the satisfaction of the assessing officer, based on the value, on the date of issue of shares, of its assets, including intangible assets being goodwill, know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, whichever is higher; (b) “venture capital company”, “venture capital fund” and “venture capital undertaking” shall have the meanings respectively assigned to them in clause (a), clause (b) and clause (c) of 94(Explanation) to clause (23FB) of section 10;)”

C1. The share premium charged by the appellant clearly falls within the mischief of this section in absence of assessee furnishing a reliable and robust basis of valuation of such equity. The relevant rule in this regard is rule 11 A(1) cb. The assessee is in clear mischief of the same, hence the premium charged by the assessee is to be subjected to the provisions of section 56 (2) viib read with rule 11UA (1)cb. It is bounden on the assessee to furnish reliable valuation determining such share premium as in its case for the assessment year 2013-14, from a qualified valuer. The assessee has not done the same, nor has any submission filed before me in this regard. The share premium so charged for this year falls in clear mischief of the provisions of law as discussed above. The same premia are, therefore, to be brought to tax. As the addition in case of the assessee has been upheld for this period, the addition here above will get subsumed in the quantum added by the assessing officer under section 68, However, in case of any alterations in income computations later on, the provisions as discussed above shall get invoked. The assessing officer is directed to make a note of the same in the file also.

8. Aggrieved with such order of the learned Commissioner (Appeals), the assessee is in appeal before the Tribunal by raising the following grounds :–

“1. That the learned Commissioner (Appeals)-26, New Delhi has erred both in law and on facts in upholding the initiation of proceedings under section 153A of the Act and, framing of assessment under section 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld of Rs. 11,85,00,000- is without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla 380 ITR 573 and Pr. CIT v. Meeta Gutgutia 395 ITR 526.

1.2 That finding off the learned Commissioner (Appeals) that it is a case of abated assessment is factually incorrect and, thus in absence of jurisdiction the action is entirely vitiated.

2 That the learned Commissioner (Appeals) has erred both in law and on facts in sustaining an addition made by learned Deputy Commissioner of Income of Rs. 11,85,00,000 (Rs. 31,60,000 + Rs. 11,53,40,000) on account of sum received from M/s. Superior Industrial Enterprises Ltd. as share capital and share premium and erroneously held as unexplained cash credits under section 68 of the Act particularly when no incriminating material either in the shape of unexplained cash or investment or document had been detected as a result of search on the appellant company or even gathered in the instant assessment proceedings :–

2.1 That while sustaining the aforesaid addition the learned Commissioner (Appeals) has completely overlooked that there was no adverse material brought on record by the learned assessing officer to assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged.

2.2 That the learned Commissioner (Appeals) has failed to appreciate that once the aforesaid share holder had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of funds provided by the appellant company.

2.3 That the learned Commissioner (Appeals) has failed to appreciate that the shareholder was a corporate entity, duly assessed to tax and, had subscribed to share-capital through banking channels and supported by necessary documents, share capital received could not in law or on fact be brought to tax under section 68 of the Act.

2.4 That the learned Commissioner (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences to discharge the burden with regard to both genuineness of the transactions and creditworthiness of the share applicants and therefore, in absence of any whisper to rebut the said evidence, the credits could not arbitrarily be regarded as unexplained cash credit under section 68 of the Act.

2.5 That reliance placed on section 56(2)(vii)(b) of the Act and, various judgments to bring to tax a credit duly recorded and, explained is based on complete misconception and, thus unsustainable.

2.6 That various adverse findings by the learned Commissioner (Appeals) to sustain the addition is factually incorrect, contrary to record and are not based on proper appreciation of law and therefore, untenable.

3. That the learned Commissioner (Appeals) has erred both in law and on facts in upholding the levy of interest under section 234A, under section 234B, under section 234C and under section 234D of the Act which are not leviable on the facts and circumstances of the case of the appellant company.

It is therefore, prayed that, it be held that assessment made by the learned assessing officer and sustained by the learned Commissioner (Appeals) be quashed and, further addition so upheld by the learned Commissioner (Appeals) along with interest levied be deleted and appeal of the appellant company be allowed.”

9. Learned counsel for the assessee at the outset strongly objected to the order of the learned Commissioner (Appeals) dismissing the appeal of the assessee. So far as ground relating to the validity of assumption of jurisdiction under section 153A is concerned, he submitted that the addition made by the assessing officer and sustained by the learned Commissioner (Appeals) is illegal and beyond the scope of provisions of section 153A/143(3) of the Income Tax Act. He submitted that on the date of search on 28-3-2015 no incriminating material was found in respect of the addition made by the assessing officer and the assessment was not pending. Neither the assessing officer nor the learned Commissioner (Appeals) has referred to any incriminating material found as a result of search while making/sustaining the addition. He submitted that the sum offered by Mr. Sanjeev Aggarwal in his statement recorded under section 132(4) amounting to Rs. 88.52 crores comprised of two components i.e. pertaining to assessment year 2008-09–Rs. 30.78 crores and balance–Rs. 57.74 crores. He submitted that Shri Sanjeev Aggarwal has retracted from his statement regarding surrender of income to the extent of 30.78 crores pertaining to assessment year 2008-09 which is evident from pages 30 to 35 of the Paper Book.

9.1 Referring to the decision of the Delhi Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. v. DCIT vide ITA No. 332/Del/2017 order, dt. 29-12-2017for assessment year 2007-08, the decision of the Hon’ble Delhi High Court in the case of CIT v. Best Infrastructure (India) (P) Ltd. 397 ITR 82 and the decision of the Hon’ble Delhi High Court in the case of CIT v. Harjeev Aggarwal 290 CTR 263, he submitted that the statements recorded under section 133(4) do not by themselves constitute incriminating material.

10. Referring to the decision of the Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla 380 ITR 573, the decision in the case of Pr.CIT v. Meeta Gutgutia 395 ITR 526 and various other decisions, he submitted that in absence of any incriminating material found as a result of search, assumption of jurisdiction under section 153A is not in accordance with law. He also relied on the following decisions :–

(i) Pr. CIT v. Lata Jain, 384 ITR 543.

(ii) 211 Taxman 61 (Del) CIT v. Chetan Das Laxhman Das.

(iii) 352 ITR 493 (Del) CIT v. Anil Kumar Bhatia.

(iv) 380 ITR 571 (Del) CIT v. Kurele Paper Mills (P) Ltd., dt. 6-7-2015.

(v) 241 Taxman 440 (Del) CIT v. MGF Automobiles Ltd.

(vi) ITA No. 634/2015 Pr. CIT v. Smt. Kusum Gupta.

(vii) W.P. (C) 8721/2014 & CM No. 20052/2014 Praveen Kumar Jolly.

(viii) IT Appeal No. 810/2016 Pr. CIT v. Mahesh Kumar.

(ix) IT Appeal Nos. 61 & 62/2017 Pr. CIT v. Ram Avtar Verma.

(x) 397 ITR 82 Pr. CIT v. Best Infrastructure (India) (P) Ltd.

11. So far as merit of the case is concerned, he submitted that the assessee for the impugned assessment year has received an amount of Rs. 11,85,00,000 on account of issue of 3,16,000 shares of Rs. 10 with a premium of Rs. 365 each from M/s. Superior Industrial Enterprises Ltd.. The assessee had given details of the said company such as Complete Address with PAN numbers, List of Directors, distinct cheques numbers of different dates for purchase of shares, copy of confirmation of the investor company, their bank statement, copy of annual return of the said company, list of shareholders of the investor company, copy of company master data of the investor company and various other details to substantiate the identity and creditworthiness of the investor company and the genuineness of the transaction.

12. Referring to the copy of the assessment order in the case of M/s. Superior Industrial Enterprises Ltd., copy of which is placed at page 33 and 34 of the Paper Book, he submitted that the assessing officer in the order passed under section 143(3) on 15-3-2016 has assessed the income of that company at Rs. 29,90,617. Referring to pages 187 to 349 of the Paper Book, learned counsel for the assessee drew the attention of the Bench to the copy of notices issued by the assessing officer on various dates and replies filed by M/s. Superior Industrial Enterprises Ltd. during the course of assessment proceedings. He submitted that during 143(3) assessment proceeding in the case of M/s. Superior Industrial Enterprises Ltd., the assessing officer of the said company had issued notice under section 133(6) to various persons who had purchased shares in the said company. Therefore, once the return of the said investor company has been accepted and no addition has been made on account issue of share capital by that company, addition cannot be made in the hands of the assessee company on account of purchase of shares by M/s. Superior Industrial Enterprises Ltd. in the assessee company. Relying on various decisions, he submitted that source of source cannot be a basis to make the addition.

13. He submitted that the burden of the assessee was discharged since the investor is a listed group company and copy of audited financial statement, acknowledgement of return of income, confirmations of investor, bank statements, memorandum of article or association were filed. Further, assessment was completed under section 143(3) in the case of the said investor company. There is no evidence on record to suggest that the money received as share capital and share premium has originated from the coffers of the assessee company.

14. Referring to various decisions, he submitted that non-production of shareholder/director by the assessee cannot be a ground for making addition under section 68 if assessee discharged the initial onus cast on it. He submitted that the assessing officer has not established that the particulars furnished by the assessee are false especially when no enquiries were made either from the shareholder by issuing notice under section 133(6) or enquiry from the assessing officer of the investor company or banker of investor or registrar of company.

15. Referring to page 59K of the Paper Book, he submitted that the assessee had requested specific date for production in respect of general questionnaire dated 16-8-2016, copy of which is placed at page 596 of the Paper Book, and, thereafter, filed reply dated 21-11-2016, copy of which is available at page 60 and 61 of the Paper Book. However, no enquiry was conducted from the shareholder and also no show-cause notice issued to the assessee.

16. So far as the allegation of the assessing officer that the investor company had low income is concerned, he submitted that low income of shareholder is not a relevant consideration and only net worth is relevant to determine the creditworthiness of the shareholder. He submitted that since the assessment has been completed under section 143(3) in the case of the investor company which is a group company and a listed company, therefore, the assessing officer, without making proper enquiry could not have made addition on flimsy ground. He submitted that the assessee company has also made investment of Rs. 4,30,00,000 in M/s. Superior Industrial Enterprises Ltd. and the assessing officer has not made any addition on account of this. This clearly establishes that M/s. Superior Industrial Enterprises Ltd. is not a non-descript or nonexistent or paper company. In view of the above, he submitted that the addition is uncalled for.

17. So far as the order of the learned Commissioner (Appeals) invoking the provisions of section 56(2)(viib) read with rule 11UA(1)(cb) is concerned, he submitted that the learned Commissioner (Appeals) without giving any opportunity to the assessee held that the share premium charged by the assessee falls within the mischief of the said provisions. He submitted that the learned Commissioner (Appeals) cannot sustain an addition on the basis of new source of income which was not there in the assessment order. In any case he submitted that the book value of the shares is much more than the share premium charged by the company. He accordingly submitted that in absence of any incriminating material, no addition could have been made by disturbing a completed assessment. Further, the assessee has discharged the initial burden cast on it by furnishing sufficient details to prove the identity and capacity of the investor company and genuineness of the transaction. Since the investor company has been assessed under section 143(3) and since the investment of the assessee in the investor company has also not been doubted by the assessing officer, therefore, under the facts and circumstances of the case no addition is sustainable legally and factually.

18. Learned Departmental Representative on the other hand heavily relied on the order of the learned Commissioner (Appeals). She submitted that the assessing officer has extensively and exhaustively proved that identities and creditworthiness of such parties & genuineness of transactions regarding amount of Rs. 11.85 crores as share capital & share application money paid to the Assessee company by several entities/firms/companies are bogus, non-existent paper entities having no worthy business to advance such share capital & share application money. Thus said assessee company has miserably failed to prove all three ingredients required for provision of section 68 of Income Tax Act, 1961.

19. Referring to the decision in the case of CIT v. MAF Academy (P) Ltd. 361 ITR 258, she submitted that the Hon’ble Delhi High Court in the said case has held that where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in question were to be regarded as bogus and, thus, amount received from said transactions was to be added to assesee’s taxable income under section 68 of the Income Tax Act.

20. Referring to the decision of the Hon’ble Delhi High Court in the case of CIT v. Navodaya Castle (P) Ltd. 367 ITR 306, she submitted that the Hon’ble High Court remitted the matter back to the Tribunal for fresh adjudication since the assessee was unable to produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the assessing officer from the concerned bank, the assessing officer had genuine concerns about identity and creditworthiness of shareholders as well as genuineness of the transactions. She submitted that the SLP filed by the assessee was dismissed by the Hon’ble Supreme Court.

21. Referring to the decision of the Hon’ble Bombay High Court in the case of Konark Structural Engineering (P) Ltd. v. DCIT(2018) 254 Taxman 184 (Bombay), she submitted that the Hon’ble High Court in the said decision has held that where assessee-company received certain amount as share capital from various shareholders, in view of fact that summons served to shareholders under section 131 were unserved with remark that addressees were not available and moreover those shareholders were first time assessees and were not earning enough income to make deposits in question, impugned addition made by assessing officer under section 68, was to be confirmed.

22. Referring to the decision in the case of Prem Castings (P) Ltd. v. CIT in (IT Appeal No. 34 of 2016, dt. 29-11-2017), she submitted that the Hon’ble High Court has held that where assessee company had received share capital from various contributors and admitted that alleged investors were close friends and business associates of its directors, burden was upon assessee to disclose true and correct details of said investors and since identity of alleged investors was never established additions made under section 68 was justified

23. Referring to the decision in the case of CIT v. Nipun Builders & Developers (P) Ltd. 350 ITR 407, she submitted that the Hon’ble Delhi High Court has held that where assessee failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed under section 68.

24. Referring to the decision in the case of CIT v. Nova Promoters & Finlease (P) Ltd. 342 ITR 169, she submitted that the Hon’ble Delhi High Court has held that amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68.

25. Referring to the decision in the case of CIT v. Ultra Modern Exports (P) Ltd. in (IT Appeal No. 262 of 2012, dt. 11-12-2012), she submitted Hon’ble Delhi High Court has held that where in order to ascertain genuineness of assessee’s claim relating to receipt of share application money, assessing officer sent notices to share applicants which were returned unserved, however, assessee still managed to secure documents such as their income tax returns as well as bank account particulars, in such circumstances, assessing officer was justified in drawing adverse inference and adding amount in question to assessee’s taxable income under section 68.

26. Referring to the decision in the case of CIT v. Frostair (P) Ltd. in (IT Appeal Nos. 183 of 2002 & 1638 of 2006, dt. 24-8-2012), she submitted that the Hon’ble Delhi High Court has held that where details furnished by assessee about share applicants were incorrect, addition under section 68 was proper.

27. Referring to the decision in the case of CIT v. N R Portfolio (P) Ltd. (2013) 263 CTR 456 (Delhi), she submitted that the Hon’ble Delhi High Court has held that if assessing officer doubts the documents produced by assessee, the onus shifts on assessee to further substantiate the facts or produce the share applicant in assessment proceeding.

28. Referring to the decision in the case of CIT v. Empire Builtech (P) Ltd. 366 ITR 110, she submitted that the Hon’ble Delhi High Court has held that under section 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. She also relied on the following decisions :–

(i) CIT v. Focus Exports (P) Ltd., in (IT Appeal No. 218 of 2012, dt. 16-9-2014).

(ii) PCIT v. Bikram Singh, ITA No. 55/2017 (Delhi).

(iii) Rick Lunsford Trade & Investment Ltd. v. CIT, 385 ITR 399 (Cal).

29. Referring to the decision in the case of Rick Lunsford Trade & Investment Ltd. v. CITin (Special Leave to Appeal CC No. 19386/2016, dt. 21-11-2016), she submitted that the Hon’ble Supreme Court has dismissed the SLP upholding the decision of the Hon’ble High Court that it is open to the Revenue Department to make addition on account of alleged share capital under section 68, where the assessee company has failed to show genuineness of its shareholders. Assessing officer has categorically after making necessary inquires & after taking into consideration of investigation reports & search & seizure materials made the addition.

30. The learned Departmental Representative summarized the finding of the assessing officer and submitted that :–

i. Such entities who have invested are paper-existing only without physical existence

ii. Such entities were never produced for examination by assessing officer

iii. Such entities have no worthy business to advance such investment

iv. Such entities have no proper identity of existence without any creditworthiness

v. Such entities only indulged to provide accommodation entries of unaccounted/undisclosed Money routed through banking channell creation of PAN & filing of Income Tax returns etc., thus doing only non-genuine transaction/bogus transaction

vi. Significant deficiencies/discrepancies have been established by said assessing officer to prove identity as non-existent/bogus only paper entities/Creditworthiness is Absent due to negligible/loss Income of such Entities/Genuineness of Transaction is only Sham/non-genuine.

31. Referring to the order of the learned Commissioner (Appeals), she submitted that the learned Commissioner (Appeals) has correctly in fact & in Law has dismissed the appeal of assessee holding that Assessee has failed to prove Identity, Creditworthiness & genuineness of Transaction & burden of proving such ingredients of provision of section 68 of Income Tax Act was never discharged from Assessee due to utter failure to produce substantive corroborative evidence to prove such. He has categorically held that Assessee has not done a reliable & robust valuation of share premium charges strictly as per rule 11UA(1)cb read with section 56(2)(viib) & learned Commissioner (Appeals) has dismissed the Appeal of the Assessee which is justified under the facts and circumstances of the case.

32. So far as assessee company’s grounds of Appeal regarding “no incriminating material is available” she filed the written synopsis and submitted that it has no merit on facts & law for following reasons :–

i. Provision of section 153A of Income Tax Act 1961 inserted with effect from 01-6-2003 is an OVERRIDING (Notwithstanding) Provision if search & seizure is conducted after said date of insertion & in this case search & seizure was conducted at assesseee’s business/different premises covered under section 132 of the Income Tax Act 1961 wherein documents/data storage devices etc. were found & seized & on examination & further Investigation on such seized details/Information it was found regarding bogus/nonexistent entities who had advanced investment in assessee’ company proving that Identity of such entities is not established, genuineness of transaction has been found to be NON-GENUINE & creditworthiness was never proved & such entities were only existing on paper without any physical presence as none of such entities was produced before the said assessing officer being of bogus existence and as such these details/information seized which prove bogus existence/non-genuine transaction having no creditworthiness of such parties can be treated as INCRIMINATING EVIDENCE against the said Assessee proving routing of undisclosed/unaccounted money circulated through bogus share capital & share premium invested by bogus entities & so ratios in Kabul Chawla case of Delhi High Court in 380 ITR 573 & Meeta Gutgutia 395 ITR 526 are NOT applicable in this case being DISTINGUSHABLE as In this case incriminating materials in terms of name & addresses, amounts of accommodation entries etc. which in inquiry by the assessing officer during assessment proceedings ultimately proved bogus/non-genuine & paper-entities etc.

ii. As search & seizure has been conducted in this case, question of assessment under other sections like 147/148 does not arise at all being prohibited under section 153A being OVERRIDING section under Income Tax Act on the basis of materials found & seized under section 132 of Income Tax Act 1961.

iii. Bare & plain reading of provisions of section 153A of Income Tax Act 1961 does not directly state any word like ‘Incriminating material’ in said section, however without prejudice, spirit of said provision may indicate materials found & seized during search under section 132 which would be utilized as basic information for such assessment under section 153A & if on further inquiry/investigation by assessing officer during assessment proceedings on such seized materials, unaccounted/undisclosed income has been found & established for said assessment. The assessing officer in the said case relied on seized documents/information on prima-facie bogus share capital & share premium (valuation of which NOT as per provision of Income Tax Act 1961 as stated by learned Commissioner (Appeals) in Appeal order) and after conducting further inquiry/investigation on said seized materials/information the assessing officer finally established bogus/accommodation entries in terms of share capital & share premium as assessee miserably failed to prove identity of such Entities, genuineness of transaction found to be NONGENUINE & creditworthiness which was never proved as such Entities were only existing on paper without any physical presence as none of such entities were produced before said assessing officer for examination being bogus/paper in existence.

iv. In legal parlance, Incriminating material means materials which are used for wrongful/illegal act in violation of any law in existence. In this case the assessee company indulged in practice of avoiding genuine tax by routing undisclosed/unaccounted taxable income through bogus share capital & share premium investment by non- existent entities having no creditworthiness by non26 genuine transaction thus falling under section 68 of Income Tax Act 1961. The basic information/materials obtained by seizure which were inquired/investigated further to establish by assessing officer that Identity of such entities is not established, genuineness of transaction has been found to be NON-GENUINE & creditworthiness was never proved & such Entities were only existing without any physical presence as none of such entities was produced before said assessing officer being bogus existence.

v. Had there been no search & seizure of such paper- documents from said Assessee, then assessing officer could not have obtained basis information/details that ultimately, on further inquiry/investigation by assessing officer, during assessment proceedings, resulted to establish bogus share capital/share premium money as accommodation entries only for routing taxable undisclosed/unaccounted income in a wrongful manner.

vi. It is the wisdom of Legislation that no word/concept ‘incriminating material’ is directly incorporated in provision of section 153A of Income Tax Act 1961, although spirit of said provision of section 153A indicate that search & seizure action under section 132 has been done in the case of Assessee & panchnama has been drawn for said Assessee & that certain materials/information have been found/seized due to such search & that such found/seized materials/information have been utilized for purpose of assessment under section 153A wherein assessing officer has found or established undisclosed/unaccounted taxable income on further inquiry/investigation on such found/seized materials/information & thus such found & seized materials/information is termed as ‘Incriminating materials/information’ against Assessee. Moreover assessing officer is prohibited to take any action under section 147/148 of Income Tax Act 1961 in case search & seizure under section 132 has been done in the case of Assessee & certain materials/information have been found/seized in said assessee’s case & assessment under section 153A is mandated. Moreover, as on date said provision under section 153A is valid law under Income Tax Act 1961.

vii. Any material/information found/seized under section 132 of Income Tax Act 1961 is ‘incriminating material’ if on further inquiry/investigation by assessing officer, certain undisclosed/unexplained taxable income is found/established ultimately in assessment under section 153A of Income Tax Act 1961.

33. She accordingly submitted that considering all facts and the cited case laws, the Appeal of assessee deserves to be dismissed since the grounds of appeal are devoid of any merit.

34. We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the assessing officer on the basis of various enquiries conducted and statement recorded of various persons under section 132(4) and 131 made addition of Rs. 11,85,00,000 in the hands of the assessee under section 68 of the Income Tax Act on the ground that the assessee failed to substantiate with cogent evidence to his satisfaction regarding the identity and creditworthiness of the investor and the genuineness of the transaction. According to the assessing officer, since the assessee could not produce the investor company and since its returned income is meager considering the huge investment made by it in the shares of the assessee company with huge premium, therefore, the provisions of section 68 are clearly attracted. We find, in appeal, learned Commissioner (Appeals) upheld the action of the assessing officer on merit, the reasons for which have already been reproduced in the preceding paragraph. He has also dismissed the ground raised by the assessee challenging the validity of assumption of jurisdiction under section 153A in absence of any incriminating material found during the course of search, the reasons for which have already been reproduced in the preceding paragraphs. Learned Commissioner (Appeals) alternatively also held that the addition is sustainable on account of mischief of provisions of section 56(2)(viib) read with rule 11UA(1)cb, the reasons for which have already been reproduced in the preceding paragraph. It is the submission of the learned counsel for the assessee that the original return was filed on 12-9-2013 declaring income at Rs. 7,42,51,693 which was assessed under section 143(1) on 18-4-2014. The notice under section 143(2) was not issued before the prescribed time limit and, therefore, the assessment on the date of search was not pending. Since the addition made by the assessing officer is not based on any incriminating material found during the course of search and addition has been made on the basis of post-search enquiry and on the basis of statements recorded under section 132(4) of the Income Tax Act, therefore, the same cannot constitute incriminating material so as to enable the assessing officer to assume jurisdiction under section 153A of the Income Tax Act. It is also the submission of the learned counsel for the assessee that the investment of Rs. 4,34,00,000 made by the assessee company in M/s. Superior Industrial Enterprises Ltd. has not been doubted by the assessing officer and the same has been accepted in the order passed under section 143(3) for the impugned assessment year. Further, the assessment of M/s. Superior Industrial Enterprises Ltd. was completed under section 143(3) on 15-3-2016 by the ITO, Ward-24(4), New Delhi wherein the assessing officer after verifying the details filed by the assessee has accepted the investment made by the said company towards purchase of shares in the assessee company.

35. Before deciding the issue on merit, we would first like to decide the legal ground raised by the assessee challenging the validity of the assumption of jurisdiction under section 153A in absence of any incriminating material found during the course of search when the assessment was not pending as per ground of appeal no.1 to 1.2. It is an admitted fact that the original return of income was filed on 12-9-2013 which was accepted under section 143(1) vide intimation dated 18-4-2014. The period for issue of notice under section 143(2) expires on 30-9-2014 i.e. the notice under section 143(2) could not have been served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. Therefore, in absence of issue of any notice under section 143(2) and since no other proceedings are pending, therefore, it had attained the finality much prior to the date of search on 28-3-2015. Under these circumstances, the finding of the learned Commissioner (Appeals) that the assessment proceedings were pending at the time of search and was abated is factually incorrect.

36. We find the learned Commissioner (Appeals) at para 5 page 11 of his order has observed as under :–

“The basis of addition as taken by the assessing officer was statement recorded of Shri Sanjeev Agarwal during the course of search wherein he has surrendered an amount of Rs. 88.52 crore out of which a sum of Rs. 30.78 crores were referred to for the assessment year 2008-09 and rest of amount was non descriptive and vague and was surrendered subject to cross checking of the facts and to explain after access to the books of accounts. The said statement was retracted by said Shri Sanjeev Agarwal on 18-5-2015 within two months from the date of original statement. Though the appellant has stated to have recorded all the transactions under appeal in its books of account and offered all the necessary and relevant proof thereof as such. Since the assessment proceedings were pending at the time of search and was abated, the legal ground objected as such by the appellant was not valid as such the same is bound to be rejected.”

37. We further find from the order of the learned Commissioner (Appeals) that there was no surrender of income for the impugned assessment year and the surrender was only for the assessment year 2008-09 which too was retracted within two months. He has also observed that the statement was non descriptive and vague and subject to cross checking of fact to be explained after access to books of accounts. We, therefore, find merit in the submissions of the learned counsel for the assessee that the addition made by the assessing officer under section 68 of the Income Tax Act is not based on any incriminating material and is based on statements recorded during search under section 132(4) and post-search enquiries.

38. The Hon’ble Delhi High Court in the case of CIT v. Best Infrastructure (India) (P) Ltd.397 ITR 82 has held that statements recorded under section 132(4) of the Income Tax Act do not by themselves constitute incriminating material. The relevant observation of the Hon’ble High Court reads as under :–

“38. Fifthly, statements recorded under section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in CIT v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT(supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is nonexistent in the present case. In the said case, there was a factual finding to the effect that the Assessees 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 Assessees herein was not justified in law.”

39. We find the Hon’ble Delhi High Court in the case of CIT v. Harjeev Aggarwal 290 CTR 263 has observed as under :–

“23. It is also necessary to mention that the aforesaid interpretation of section 132(4) of the Act must be read with the explanation to section 132(4) of the Act which expressly provides that the scope of examination under section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment.”

40. The Co-ordinate Bench of the Tribunal in the case of Brahmaputra Finlease (P) Ltd. vide ITA No. 3332/Del/2017 order dated 29-12-2017, following the above decision of the Hon’ble Delhi High Court, has observed as under :–

“4.19 We find that in the case of best Infrastructure (India) (P) Ltd. (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) (P) Ltd. (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.”

41. In the light of the above decisions, statements recorded under section 132(4) of the Income Tax Act, 1961 cannot constitute as incriminating material.

42. As mentioned earlier, the addition of Rs. 11,85,00,000 was not made on the basis of any incriminating material but is based on statements recorded during the search under section 132(4) and post-search enquiries. It has been held in various decisions that completed assessments cannot be disturbed under section 153A in absence of any incriminating material.

43. The Hon’ble Delhi High Court in the case of Kabul Chawla 380 ITR 573 has held that the completed assessment can be interfered with by the assessing officer while making the assessment under section 153A only on the basis of some incriminating material found on or 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 not known in the course of original assessment. Following the above decision, the Hon’ble Jurisdictional High Court in the case of CIT v. Meeta Gutgutia 395 ITR 526 has taken a similar view and has held that once the assessment has attained finality for a particular year i.e. it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Income Tax Act. This of course would not apply if incriminating materials are gathered in the course of search or during the proceedings under section 153A which are contrary to and/or nor disclosed during the regular assessment proceedings.

44. The Hon’ble Delhi High Court again in the case of Pr. CIT v. Lata Jain 384 ITR 543has held that in absence of any incriminating material found as a result of search, assumption of jurisdiction under section 153A was not in accordance with law. The various other decisions relied on by the learned counsel for the assessee also supports his case. The Hon’ble Supreme Court in the case of CIT v. Sinhgad Technical Education Society 397 ITR 344 has upheld the decision of Hon’ble Bombay High Court wherein the Hon’ble High Court had upheld the decision of the Tribunal holding that the incriminating material which was seized has to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years.

45. Since in the instant case addition of Rs. 11,85,00,000 was made on the basis of statements recorded under section 132(4) and post-search enquiry and no incriminating material was found/seized during the course of search, therefore, following the decisions cited (supra), we hold that no addition could have been made under section 153A since the assessment was not abated in the instant case. In view of the above, we hold that the learned Commissioner (Appeals) was not justified in upholding the action of the assessing officer in assuming jurisdiction under section 153A of the Income Tax Act. Accordingly, the addition made by the assessing officer and upheld by the learned Commissioner (Appeals) in the 153A assessment proceedings being void ab-initio are deleted.

46. Since the assessee succeeds on this legal ground, arguments made by the learned counsel for the assessee on merit are not adjudicated being academic in nature.

47. The appeal filed by the assessee is accordingly allowed.

ITA No. 7567/Del/2017 (Hindustan Aqua Ltd.) :–

48. Grounds raised by the assessee in this appeal are as under :–

“1. That the learned Commissioner (Appeals)-26, New Delhi has erred both in law and on facts in upholding the initiation of proceedings under section 153A of the Act and, framing of assessment under section 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such.

1.1 That addition made and upheld of Rs. 13,10,00,000 is without jurisdiction since it is not based on any material found as a result of search on the appellant, as have been also held by the judgments of Hon’ble Delhi High Court in the case of CIT v. Kabul Chawla 380 ITR 573 and Pr. CIT v. Meeta Gutgutia 395 ITR 526.

1.2 That finding of the learned Commissioner (Appeals) that it is a case of abated assessment is also factually incorrect and, thus in absence of jurisdiction the action is entirely vitiated.

2 That the learned Commissioner (Appeals) has erred both in law and on facts in sustaining an addition made by learned Deputy Commissioner of Income of Rs. 13,10,00,000 (Rs. 3,27,50,000 + Rs. 9,82,50,000) on account of sum received from M/s. Superior Industrial Enterprises Ltd. as share capital and share premium and erroneously held as unexplained cash credits under section 68 of the Act particularly when no incriminating material either in the shape of unexplained cash or investment or document had been detected as a result of search on the appellant company or even gathered in the instant assessment proceedings.

2.1 That while sustaining the aforesaid addition the learned Commissioner (Appeals) has completely overlooked that there was no adverse material brought on record by the learned assessing officer to assume that credits by way of share capital represents unexplained cash credit and, burden which lay upon the assessee in terms of section 68 of the Act had not been discharged.

2.2 That the learned Commissioner (Appeals) has failed to appreciate that once the aforesaid share holder had duly confirmed the investment made, he could not have upheld the addition on arbitrary grounds and that too without bringing any evidence or even alleging that aforesaid credits by way of share capital emanated from the source of funds provided by the appellant company.

2.3 That the learned Commissioner (Appeals) has failed to appreciate that the shareholder was a corporate entity, duly assessed to tax and, had subscribed to share-capital through banking channels and supported by necessary documents, share capital received could not in law or on fact be brought to tax under section 68 of the Act.

2.4 That the learned Commissioner (Appeals) has also failed to appreciate that appellant had placed on record voluminous evidences to discharge the burden with regard to both genuineness of the transactions and creditworthiness of the share applicants and therefore, in absence of any whisper to rebut the said evidence, the credits could not arbitrarily be regarded as unexplained cash credit under section 68 of the Act.

2.5 That reliance placed on section 56(2)(vii)(b) of the Act and, various judgments without opportunity to bring to tax a credit duly recorded and, explained is based on complete misconception and, thus unsustainable.

2.6 That various adverse findings by the learned Commissioner (Appeals) to sustain the addition is factually incorrect, contrary to record and are not based on proper appreciation of law and therefore, untenable.

3. That the learned Commissioner (Appeals) has erred both in law and on facts in upholding the levy of interest under section 234A, under section 234B, under section 234C and under section 234D of the Act which are not leviable on the facts and circumstances of the case of the appellant company.

It is therefore, prayed that, it be held that assessment made by the learned assessing officer and sustained by the learned Commissioner (Appeals) be quashed and, further addition so upheld by the learned Commissioner (Appeals) along with interest levied be deleted and appeal of the appellant company be allowed.”

49. After hearing both the sides, we find the grounds raised by the assessee in the instant case are identical to grounds raised in ITA No. 7374/Del/2017. We have already decided the issue and the appeal filed by the assessee has been allowed. Following similar reasoning, the appeal filed by the assessee is allowed.

50. In the result, both the appeals filed by the respective assessees are allowed.

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