Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
 
Open DEMAT Account with in 24 Hrs and start investing now!
From the Courts »
Open DEMAT Account in 24 hrs
 Inordinate delay in income tax appeal hearings
 Income Tax leviable on Tuition Fee in the Year of Rendering of Services: ITAT
 Supreme Court invoked its power under Article 142 of Constitution to validate notices issued under section 148 as notices issued under section 148A. However the same shall be subject to amended provisions of section 149.
 ITAT refuses to stay tax demand on former owner of Raw Pressery brand
 Bombay HC sets aside rejection of refund claims by GST authorities
 [Income Tax Act] Faceless Assessment Scheme does not take away right to personal hearing: Delhi High Court
 Rajasthan High Court directs GST Authority to Unblock Input Tax Credit availed in Electronic Credit Ledger
 Sebi-taxman fight over service tax dues reaches Supreme Court
 Delhi High Court Seeks Status Report from Centre for Appointments of Chairperson & Members in Adjudicating Authority Under PMLA
 Delhi High Court allows Income Tax Exemption to Charitable Society running Printing Press and uses Profit so generated for Charitable Purposes
 ITAT accepts Lease Income as Business Income as Business Investments were mostly in nature of Properties

ACIT, Central Circle-31, ARA Centre, E-2, Jhandewalan Extn., New Delhi. vs. Bhadani Financiers Pvt. Ltd., Room No.22, Ground Floor, Shanti Niketan, 8, Camac Street, Park Street, Kolkata.
May, 01st 2019

Subject: Facts of the case, in brief, are that the assessee is a company and derives income from financing activities.

Referred Sections:
Section 68 of the IT Act,
Section 153A

Referred Cases / Judgments: 
CIT vs. Kabul Chawla reported in 380 ITR 573
CIT Vs. Kabul Chawla 2015, 61 Taxmann.com 412(Delhi).
Development Company Vs. DCIT dated 09.08.2014
ITO vs. M/s Synergy Finlease Pvt. Ltd. vide ITA No.4778/Del/2013,
Pr. CIT, Central-1 vs. NRA Iron & Steel reported in 103 taxman.com 48,
PCIT vs. NDR Promoters, 102 taxman.com 182,
Development Company vs. DCIT,
CIT vs. Kabul Chawla reported in 380 ITR 573,
CITvs. Kabul Chawla (supra),
CIT vs. Dharampal Premchand Ltd. vide ITA No.512/2016,

           IN THE INCOME TAX APPELLATE TRIBUNAL
                 DELHI BENCH : A : NEW DELHI

     BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
                         AND
        MS SUCHITRA KAMBLE, JUDICIAL MEMBER
                               ITA Nos.175 & 176/Del/2017
                           Assessment Years: 2009-10 & 2010-11

ACIT,                                   Vs     Bhadani Financiers Pvt. Ltd.,
Central Circle-31,                             Room No.22, Ground Floor,
ARA Centre,                                    Shanti Niketan,
E-2, Jhandewalan Extn.,                        8, Camac Street, Park Street,
New Delhi.                                     Kolkata.

                                               PAN: AABCB9305MH

                                 CO Nos.88 & 89/Del/2017
                               (ITA Nos.175 & 176/Del/2017)
                            Assessment Years: 2009-10 & 2010-11

Bhadani Financiers Pvt. Ltd.,           Vs.    ACIT,
Room No.22, Ground Floor,                      Central Circle-31,
Shanti Niketan,                                ARA Centre,
8, Camac Street, Park Street,                  E-2, Jhandewalan Extn.,
Kolkata.                                       New Delhi.

PAN: AABCB9305MH
                                ITA Nos.169 & 170/Del/2017
                            Assessment Years: 2008-09 & 2009-10

ACIT,                                   Vs.    Pragati Imports Pvt. Ltd.,
Central Circle-31,                             Room No.22, Ground Floor,
ARA Centre,                                    Shanti Niketan,
E-2, Jhandewalan Extn.,                        8, Camac Street, Park Street,
New Delhi                                      Kolkata.

                                               PAN: AAECP5404A
                                         ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                  CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58


                                  CO Nos.59 & 60/Del/2017
                                ITA Nos.169 & 170/Del/2017
                            Assessment Years: 2008-09 & 2009-10

Pragati Imports Pvt. Ltd.,              Vs.       ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi

PAN: AAECP5404A
                                ITA Nos.171 & 172/Del/2017
                            Assessment Years: 2008-09 & 2009-10

ACIT,                                   Vs.       Pragati Tradecom Pvt. Ltd.,
Central Circle-31,                                Room No.22, Ground Floor,
ARA Centre,                                       Shanti Niketan,
E-2, Jhandewalan Extn.,                           8, Camac Street, Park Street,
New Delhi                                         Kolkata.

                                                  PAN: AAECP5405B

                                 CO Nos.61 & 62/Del/2017
                               (ITA Nos.171 & 172/Del/2017)
                            Assessment Years: 2008-09 & 2009-10

Pragati Tradecom Pvt. Ltd.,             Vs.       ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi

PAN: AAECP5405B
                                ITA Nos.173 & 174/Del/2017
                            Assessment Years: 2008-09 & 2009-10

ACIT,                                   Vs.       Pragati Imptrade Pvt. Ltd.,
Central Circle-31,                                Room No.22, Ground Floor,
ARA Centre,                                       Shanti Niketan,
E-2, Jhandewalan Extn.,                           8, Camac Street, Park Street,
New Delhi                                         Kolkata.

                                                  PAN: AAECP5693F




                                              2
                                         ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                  CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58


                                 CO Nos.63 & 64/Del/2017
                               (ITA Nos.173 & 174/Del/2017)
                            Assessment Years: 2008-09 & 2009-10

Pragati Imptrade Pvt. Ltd.,             Vs.       ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi

PAN: AAECP5693F
                                 ITA Nos.33 & 34/Del/2017
                            Assessment Years: 2008-09 & 2009-10

ACIT,                                   Vs.       Swastik Tradex (P) Ltd.,
Central Circle-31,                                Room No.22, Ground Floor,
ARA Centre,                                       Shanti Niketan,
E-2, Jhandewalan Extn.,                           8, Camac Street, Park Street,
New Delhi                                         Kolkata.

                                                  PAN: AALCS6030J

                                 CO Nos.52 & 53/Del/2017
                                (ITA Nos.33 & 34/Del/2017)
                            Assessment Years: 2008-09 & 2009-10

Swastik Tradex (P) Ltd.,                Vs.       ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi

PAN: AALCS6030J
                                 ITA Nos.35 & 36/Del/2017
                            Assessment Years: 2008-09 & 2009-10

ACIT,                                   Vs.       Swastik Tracom (P) Ltd.,
Central Circle-31,                                Room No.22, Ground Floor,
ARA Centre,                                       Shanti Niketan,
E-2, Jhandewalan Extn.,                           8, Camac Street, Park Street,
New Delhi                                         Kolkata.

                                                  PAN: AALCS5219H




                                              3
                                         ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                  CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58


                                 CO Nos.54 & 55/Del/2017
                                (ITA Nos.35 & 36/Del/2017)
                            Assessment Years: 2008-09 & 2009-10
Swastik Tracom (P) Ltd.,                Vs.       ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi
PAN: AALCS5219H
                              ITA Nos.37, 38 & 39/Del/2017
                       Assessment Years: 2008-09, 2009-10 & 2010-11
ACIT,                                   Vs.       Swastik Exports & Imports P. Ltd.,
Central Circle-31,                                Room No.22, Ground Floor,
ARA Centre,                                       Shanti Niketan,
E-2, Jhandewalan Extn.,                           8, Camac Street, Park Street,
New Delhi                                         Kolkata.
                                                  PAN: AALCS5220J
                               CO Nos.56, 57 & 58/Del/2017
                              (ITA Nos.37, 38 & 39/Del/2017)
                       Assessment Years: 2008-09, 2009-10 & 2010-11
Swastik Exports & Imports P. Ltd.,       Vs.      ACIT,
Room No.22, Ground Floor,                         Central Circle-31,
Shanti Niketan,                                   ARA Centre,
8, Camac Street, Park Street,                     E-2, Jhandewalan Extn.,
Kolkata.                                          New Delhi
PAN: AALCS5220J

         (Appellant)                                     (Respondent)

               Assessee by               :        Shri Gautam Jain, Advocate &
                                                  Shri Lalit Mohan, CA
               Revenue by                :        Shri Sanjay Goyal, CIT, DR

               Date of Hearing       :            28.03.2019
               Date of Pronouncement :            30.04.2019

                                        ORDER
 PER BENCH:

        The above batch of appeals filed by the Revenue are directed against the

 separate orders dated 17th October, 2016 of the CIT(A)-30, New Delhi, relating to

                                              4
                                         ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                  CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



respective assessment years as mentioned above. Respective assessees have also

filed Cross Objections against the appeals filed by the Revenue. Since identical

grounds have been taken by the Revenue as well as the assessee in the appeals and

Cross Objections, respectively, therefore, these were heard together and are being

disposed of by this common order for the sake of convenience.


2.     First we take up ITA No.175/Del/2017 as the lead case. Facts of the case, in

brief, are that the assessee is a company and derives income from financing

activities.   The original return of income was filed on 25th September, 2013

declaring total income of Rs.2,70,43,362/-. A search and seizure action u/s 132 of

the IT Act, 1961 was initiated in the case of the assessee on 18th June, 2013 at Shanti

Niketan Building, 8, Camac Street, Kolkata. Subsequently, the assessment jurisdiction over

the assessee was transferred from Central Circle-29, New Delhi to the PCIT (Central)-3,

New Delhi vide order u/s 127(1) dated 8th May, 2015 with immediate effect. In response

to notice u/s 153A of the Act issued on 22nd April, 2015, the assessee filed the return on

12th May, 2015 declaring total income of Rs.2,70,43,362/-. Subsequently, the Assessing

Officer issued statutory notices u/s 143(2) and 142(1) along with a questionnaire in

response to which the AR of the assessee appeared from time to time and filed the requisite

details.


3.     The Assessing Officer, during the course of assessment proceedings, observed

that the assessee has received share capital and share premium to the tune of




                                             5
                                      ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                               CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



Rs.19,35,00,000/- and unsecured loan of Rs.1,50,00,000/- during the year under

consideration from the following investors:-




4.      He noted that the assessee company is a private limited company having

equity shares of face value of Rs.10/- each. However, the assessee has shown receipt

of huge premium of Rs.90/- per share. All these six share applicants, i.e., the

investors are also private limited companies incorporated in the preceding year only.

He observed that the search action u/s 132 of the IT Act was conducted on 18th June,

2013 at the registered offices of all the aforesaid six companies situated at Shanti

Niketan Building, 8, Camac Street, Kolkata. During the search, consequential survey

action u/s 133A of the Act was conducted at 133, Canning Street, Kolkata where

statements of the directors of some of the above mentioned companies were

recorded u/s 131 of the Act on 18th June, 2013. He observed that in their statements,

all of them have stated that the companies in which they are directors are solely

jamakharchi/paper companies used for providing accommodation entries. They do
                                          6
                                       ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



not have any real business activity and they charge commission at 0.5% for

providing accommodation entry.

5.      Considering the statements of the four directors of some of the companies

who had invested in the six aforementioned investor/shareholder companies, the

Assessing Officer confronted the same along with their statements recorded u/s 131

of the Act and asked the assessee to produce the directors/controlling persons of all

the shareholders who had made investments in the aforesaid six companies.







6.      The assessee, in response to the notice, filed the following submission which

has been reproduced by the A.O. at para 8 of his order and which reads as under:-

     "At the outset it is respectfully submitted and reiterated that during the year
     assessee had received share application money of Rs. 19,35,00,000/- and
     unsecured loan of Rs.1,50,00,000/- from share holders for which evidence in the
     shape of following documents have already been placed on record:

     i)      Copy of share certificate of each of the share holders;
     ii)      Copy of letter by assessee company to the share holders intimating the
     allotment of shares;
     iii)    Copy of share application form of the share holders;
     iv)     Copy of minutes of the Board of Directors of the shareholders for
     investment in assessee company;
     v)       Copy of confirmation of investment by way of share capital and loan
     separately alongwith source of such investment of each of the shareholders;
     vi)      Copy of ledger account of share capital and loans of each of the
     shareholders in the books of assessee company;
     vii)     Copy of bank statement of the shareholder;
     viii)    Copy of the acknowledgement of return of income along with audited
     balance sheet for assessment years 2009-10 of the share holder;
     ix)      Copy of income tax jurisdiction alongwith PAN of the shareholders;
     x)       Copy of company master data of each of the shareholders;
     xi)      Copy of list of signatory of the shareholders;
     xii)     Copy of intimation u/s 143(1) of each of the shareholders.
     xiii)    Copy of certification of incorporation alongwith memorandum of
     association and article of association of the each of the shareholders;

                                           7
                                           ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                    CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58


     xiv)    Copy of board resolution of assessee company;
     xv)     Copy of Form 2 for allotment of shares filed by assessee company
     before ROC;
     xvi)    Copy of Form 20B (Annual Return) filed by assessee company before
     ROC; and
     xvii)   Copy of bank statement of assessee company.
     xviii)  Details/information of source of fund for investment made.

     2.1       It is also submitted that all the shareholders have independently
               confirmed their investment as well as unsecured loan g iven in
               response to notices u/s 133(6) of the Act. In view thereof the
               submission of assessee is that assessee has at its end furnished
               complete details and evidence in the shape of confirmation (both
               independent and otherwise) income tax particulars, bank
               statements and audited financial statements of shareholders to
               discharge the burden in respect of share capital subscribed and
               unsecured loan g iven by the shareholders of assessee company and
               also establish that such companies cannot in law be called to be
               paper companies havin g no business of their own except of
               providing accommodation entries. The assessee in support of the
               above also seeks to tabulate the assets position of each of shareholder
               companies to show that such companies are investment companies having
               made strategic investment in the assessee company:
Sr.         Name of companies      Share capital        Reserves &    Loans &         Investment
No.                                                      Surplus      advances
      Swastik Export &                                 5,67,00,000    25,85,479       6,37,50,000
1.                                  1,00,00,000
      Imports (P) Ltd.
      Pragati Imptrade (P)                             5,67,00,000    25,90,411       6,37,50,000
2.                                  1,00,00,000
      Ltd.
3.    Pragati Imports (P)                              5,67,00,000    25,88,767       6,37,50,000
                                    1,00,00,000
      Ltd.
4.    Swastika Tracom (P)                              5,67,00,000    25,85,479       6,38,08,000
                                    1,00,00,000
      Ltd.
5.    Pragati Tradecom (P)                             5,67,00,000    25,90,411       6,37,50,000
                                    1,00,00,000
      Ltd.
      Swastika Tradex (P)                              5,67,00,000    25,88,767       6,38,08,000
6.                                  1,00,00,000
      Ltd.

     2.3       Apart from the above, assessee submits to your goodself that all the
               above share holders are already centralized and assessed with you/under
               your jurisdiction, so you have additional privilege of cross verification of
               facts, figures & contentions etc. In any case, having chosen to assessee
               the same independently, it has to be hold that such companies are not
               paper companies: when they independent sources of investment which
               sources are being independently examined in their hands. A not on lifting

                                                   8
                                          ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                   CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



               of corporate veil enclosed herewith (Pages 262-265 of this reply)

     2.4        Having regard to the above, it ought to be held that the shareholders
                companies are not paper companies having no business of their own
                except providing accommodation entries. There is no material to
                support the aforesaid and therefore the submission is that allegation in
                the notices is legally and factually misconceived".

7.         However, the Assessing Officer was not satisfied with the explanation given

by the assessee. From the various details furnished by the assessee in the case of the

aforementioned six companies, the Assessing Officer observed that the

investors/shareholders which are private limited companies are not actively engaged

in any business. From the documents furnished by the above mentioned investors

u/s 133(6) of the IT Act, he noted that these companies have share capital and share

premium running in crores of rupees whereas they have declared meager income.

Further, some of the directors of these companies are the employees of KLJ Group

of companies.       He noted that during the search action u/s 132 of the IT Act

conducted on 18th June, 2013, the statements of various directors were recorded

wherein the directors have stated that they do not know about the activities of the

companies in which they are directors.            The Assessing Officer reproduced the

statements recorded from various directors in the assessment order.


8.         The Assessing Officer further noted that during the course of search at

Shantiniketan Building, room No.22, Ground Floor, 8 Camac Street, Kolkata, six

bunches of loose papers          identified as KLJ/KOL/1, KLJ/KOL/2, KLJ/KOL/4

KLJ/KOL/5, KLJ/KOL/7 and KLJ/KOL/9 were seized which contained details of

                                              9
                                       ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



the persons from whom share application was received, details of share allotted and

other related details as required under the provisions of the Companies Act, 1956.

He observed that a perusal of these papers revealed that the shareholders of the

assessee company have sold their shareholding to the associated companies of the

KLJ group during the F.Y. 2009-10. From the various details so analysed by him,

he noted that the shareholders have sold their shareholding @ Rs.10 per share

whereas they have purchased the share @ Rs.120/- (i.e., face value of Rs.10/- +

premium of Rs.40/- per share). The Assessing Officer, therefore, asked the assessee

to produce the directors/main controlling persons of all the investors along with their

account books and bank statements of the investor companies for the relevant year

before him for his personal examination with a view to establish the identity, credit

worthiness and genuineness of the transactions. In response to the notice u/s 142(1),

Shri Rajesh Kumar Surana was produced on 22nd March, 2016 whose statement was

recorded and who was confronted with the contents of his earlier statement recorded

u/s 131 of the IT Act on 18th June, 2013 wherein he had stated that he works as an

entry operator and provides entries to the business group by charging commission.

In his statement recorded on 22.03.2016, he submitted that no statement was

recorded on 18th June, 2013 and only signatures were obtained on the print out

supplied to him. He further stated that these are investment companies. However,

the Assessing Officer rejected the same stating that it is an afterthought and the

person is making a false statement just to accommodate the assessee. He noted that


                                           10
                                       ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



in his reply to Question No.12 on 18th June, 2013, Shri Rajesh Kumar Surana in his

own handwriting had written that he had given the statement without any threat or

pressure. The Assessing Officer similarly recorded the statements of Shri Sanjay

Kumar Singhi, Sandeep Kumar Singhi and Shri Jivendra Mishra who had given

similar replies as by Shri Rajesh Kumar Surana. Rejecting the various explanations

given by the assessee and observing that the assessee failed to substantiate the credit

worthiness and genuineness of the six companies who have made investment in the

shares of the assessee company, the Assessing Officer, invoking the provisions of

section 68 of the IT Act, made addition of Rs.20.85 crores to the total income of the

assessee. The Assessing Officer further made addition of Rs.10,42,500/- u/s 69C of

the IT Act being the commission expenses incurred for obtaining accommodation

entries which is 0.5% of the accommodation entry of Rs.20.85 crores. Thus, the

Assessing Officer accordingly determined the total income of the assessee at

Rs.23,65,85,862/- as against the returned income of Rs.2,70,43,362/-.


9.      Before the CIT(A), it was argued that during the course of search action u/s

132 of the IT Act, no incriminating document/material was found at the time of

search or subsequently. At the time of initiation of search action u/s 132 of the Act,

the assessment or reassessment was also not abated and the additions made in the

assessment order u/s 153A of the Act dated 29th March, 2016 are not based on any

incriminating document/material. For the above proposition, decision of the Hon'ble

Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 ITR 573 was

                                           11
                                         ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                  CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



relied upon.    So far as the loose papers seized/inventorised as annexures i.e.,

KLJ/KOL/1, KLJ/KOL/2, KLJ/KOL/4 KLJ/KOL/5, KLJ/KOL/7 and KLJ/KOL/9

are concerned, it was argued that these documents do not belong to the assessee and

the same belong to the six investor companies of the assessee.                     These are all

statutory registers required as per the Companies Act, 1956 and the transactions

reflected in the registers pertained to the share issue and transfer in relation to the six

investor companies of the assessee during the F.Y. 2007-08 to 2009-10. These

transactions are duly reported to ROC by filing various statutory forms and are also

reflected in the financial statements of the six investor companies of the assessee.

Further, the issue of shares at a premium was fully incorporated and disclosed in the

audited financial statements and relevant ROC returns of the assessee. It was again

reiterated that the assessment was not abated at the time of initiation of search action

u/s 132 and no incriminating document/material was found as a result of the search

action to show that the assessee had taken any accommodation entry. So far as the

alleged commission is concerned, it was again submitted that no evidence was found

in the search u/s 132 of the Act which shows any alleged commission.


10.     Based on the arguments advanced by the assessee, the ld.CIT(A) deleted the

addition on the ground that no incriminating document/material was found during

the course of search and the assessment was not abated at the time of initiation of

search action u/s 132 of the Act and, therefore, no addition can be made u/s 153A of

the Act. While holding so, he relied on the decision of the Hon'ble Delhi High court

                                             12
                                           ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                    CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



in the case of Kabul Chawla (supra). The relevant observation of the CIT(A) at para

6.4 read as under:-

      "6.4 I have carefully considered assessment order, written submissions, case
      laws relied upon and oral arguments of Ld.AR. The objections/arguments of the
      appellant are discussed as under:-

      (i)    In the assessment order, the following additions have been made u/s
      153A, without seizing any incriminating document/material during the search
      and seizure action u/s 132 on 18.6.2013:

      (a)   Unexplained cash credit on account of share
      application/premium u/s 68 of the Act                        :Rs.20,85,00,000/-

      (b)       Unexplained expenses u/s 69C of the Act          :Rs.10,42,500/-

      Therefore, it is submitted by the appellant that in absence of any incriminating
      document/material, no addition can be made u/s 153 A of the Act, when the
      assessment is not abated at the time of initiation of the search action u/s 132 of
      the Act. Therefore, in these facts and circumstances, I agree with the arguments
      of the appellant.

      (ii)    As, I have already held (supra), while deciding in ground no. 2, that no
      addition can be made in the assessment order u/s 153A of the Act, since no
      incriminating document/material was found during search action u/s 132 and
      also assessment was not abated, in view of the ratio laid down in the decision of
      the Hon'ble Jurisdictional High Court of Delhi in the case of CIT Vs. Kabul
      Chawla 2015, 61 Taxmann.com 412(Delhi).

      In view of the above, it is not required now to adjudicate the above ground no.
      3, 4 and 5 and hence these are treated as allowed. Therefore, addition u/s 68 of
      the Act of Rs. 20,85,00,000/- and u/s 69C of the Act of Rs. 10,42,500/-, are
      deleted."

11.          Aggrieved with such order of the ld.CIT(A), the Revenue is in appeal before

the Tribunal raising the following grounds:-

      "1.      On the facts and in the circumstances of the case the Ld. CIT(A) has
      erred in law and on the facts in directing the A.O to delete the addition made u/s
      68 of the I.T. Act on account of unexplained credits and u/s 69C on account of
      unexplained expenses.


                                               13
                                          ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                   CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58


      2.      On the facts and in the circumstances of the case the Ld. CIT (A) has
      erred in law and on facts by relying on the decision in the case of Sh. Kabul
      Chawla by the jurisdictional High Court which has not been accepted by the
      department and SLP against the same has been filed Hon'ble Supreme Court.

      3.      On the facts and in the circumstances of the case, the Ld. CIT(A) has
      erred in law and on facts in arriving at the conclusion that the words 'total
      income' as used in Section 153A would only mean undisclosed income
      discovered from seized/incriminating material.

      4.       On the facts and in the circumstances of the case, the Ld. CIT(A) had
      erred in law and on facts in adopting a restrictive and pedantic interpretation of
      the scope of assessment u/s 153A of the Act.

      5.       On the facts and in the circumstances of the case, the Ld. CIT(A) had
      erred in law and on facts in arriving at the conclusion that the words `total
      income' as used in section 153A would only mean income unearthed during
      search when the decision of the Hon'ble High Court of Karnataka in the case of
      Canara Housing Development Company Vs. DCIT dated 09.08.2014 has held
      that total income includes income unearthed during search and any other income.

      6.       That the order of the CIT (A) is perverse, erroneous and is not tenable on
      facts and in law.

      7 That the grounds of appeal are without prejudice to each other.

      8. That the appellant craves leave to add, amend, alter or forgo any ground(s) of
      appeal either before or at the time of hearing of the appeal."







12.      The ld. DR strongly opposed the order of the CIT(A) deleting the addition

by relying on the decision of the Hon'ble Delhi High Court in the case of Kabul

Chawla (supra). Referring to the decision of the coordinate Bench of the Tribunal

in the case of ITO vs. M/s Synergy Finlease Pvt. Ltd. vide ITA No.4778/Del/2013,

order dated 8th March, 2019, he submitted that the Tribunal, following the decision

of the Hon'ble Supreme Court in the case of Pr. CIT, Central-1 vs. NRA Iron & Steel

reported in 103 taxman.com 48, has allowed the appeal filed by the Revenue and


                                              14
                                      ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                               CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



upheld the addition made by the Assessing Officer u/s 68 of the Act on account of

share capital and share premium. Referring to the decision of the Hon'ble Delhi

High Court in the case of PCIT vs. NDR Promoters, 102 taxman.com 182, he

submitted that the Hon'ble Delhi High Court has upheld the addition made by the

Assessing Officer u/s 68 of the IT Act in respect of the amount received as share

capital from several companies on the ground that all these companies were

maintained by one person who was engaged in providing accommodation entries

through paper companies and all such companies were located at the same address.

So far as the decision relied on by the ld.CIT(A) in the case of Kabul Chawla (supra)

is concerned, the ld. DR submitted that the decision of the Hon'ble Delhi High Court

has not been accepted by the Department and SLP against the same has been filed in

the Hon'ble Supreme Court which is pending. Further, the words `total income' as

used in section 153A would not mean only undisclosed income discovered from

seized or incriminating material and a restrictive and pedantic interpretation of the

scope of assessment u/s 153A of the Act cannot be adopted. Referring to the

decision of the Hon'ble Karnataka High Court in the case of Canara Housing

Development Company vs. DCIT, he submitted that the income includes income

unearthed during search and any other income. Therefore, the order of the CIT(A)

should be reversed and the order of the Assessing Officer be restored.


13.     The ld. counsel for the assessee, on the other hand, heavily relied on the

order of the CIT(A). He submitted that the original return of income in the instant

                                          15
                                      ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                               CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



case was filed on 25th September, 2009. The search was conducted on 18th June,

2013. The notice u/s 153A of the Act was issued on 22nd April, 2015. At the time of

search no incriminating material was found and the addition u/s 68 of Rs.20.85

crores was made on the basis of the figures already appeared in the audited accounts

which were already filed before the Revenue authorities. He submitted that the

addition is not based on any incriminating material found as a result of the search on

the assessee, and the so-called loose papers seized and inventorised by the Assessing

Officer did not belong to the assessee and they belonged to the six investor

companies of the assessee. Further, these are all statutory combined registers and the

transactions reflected in the registers pertained to the share issue and transfer in

relation to the six investor companies of the assessee which are duly reported to the

ROC by filing various statutory forms. Therefore, when the addition is not based on

any incriminating material found as a result of the search, therefore, in view of the

decision of the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla

reported in 380 ITR 573, the addition made by the Assessing Officer is not

sustainable and the order of the CIT(A) should be upheld and the grounds raised by

the Revenue should be dismissed. Merely because the Revenue has filed an appeal

before the Hon'ble Supreme Court against the decision of the Delhi High Court, the

same cannot be a ground to take a contrary view than the view taken by the Hon'ble

Delhi High Court unless the same is reversed by the Hon'ble Supreme Court. He

accordingly submitted that the appeal filed by the Revenue be dismissed.


                                          16
                                        ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                 CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



14.      We have considered the rival arguments made by both the sides and perused

the orders of the authorities below. We find the assessee in the instant case filed the

original return of income on 25th September, 2009 for the impugned assessment

year. The return was duly accepted and intimation u/s 143(1) of the Act was issued.

No assessment or reassessment was completed u/s 143(3) or 148 of the IT Act and

no notice u/s 143(2) of the Act was issued thereafter or any other proceedings have

been commenced to disturb the said return of income. Therefore, it has attained

finality prior to the date of search on 18th June, 2013. It is an admitted fact that in

the search action u/s 132 of the Act, no incriminating document/material was found

and seized at the time of search and also subsequently. Since at the time of initiation

of search action u/s 132 of the Act the assessment or reassessment was not abated

and the additions made in the assessment order passed u/s 153A of the Act dated 29th

March, 2016 are not based on any incriminating document/material seized,

therefore, in view of the decision of the Hon'ble Delhi High Court in the case of CIT

vs. Kabul Chawla (supra), the addition made by the Assessing Officer cannot be

sustained.   We find the Hon'ble Delhi High Court in the case of Pr. CIT vs.

Dharampal Premchand Ltd. vide ITA No.512/2016, order date 21.08.2017 has held

as under:-

      "Although an appeal by the Revenue against the said decision in Kabul
      Chawla is pending before the Supreme Court, there is no stay of the said
      judgment and, therefore, as far as this Court is concerned, the decision
      in Commissioner of Income Tax v. Kabul Chawla (supra) is still good law.
      That decision explicitly holds that there has to be incriminating material to
      justify the assumption to jurisdiction under Section 153A of the Act qua each
      of the AYs for which assessment is sought to be reopened."
                                            17
                                        ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                                 CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



15.     The various other decisions relied on by the ld. counsel for the assessee in

the paper book also support the case of the assessee that in absence of any

incriminating material found during the course of search, no addition can be made

u/s 153A of the Act in case of a non-abated assessment. So far as the loose papers

seized and inventorised as Annexures KLJ/KOL/1, KLJ/KOL/2, KLJ/KOL/4

KLJ/KOL/5, KLJ/KOL/7 and KLJ/KOL/9 are concerned, it is an admitted fact that

these papers do not belong to the assessee and these papers belong to the six investor

companies of the assessee. Further, these are all statutory combined registers which

were required to be maintained as per Companies Act, 1956 and the transactions

reflected in the registers pertained to the share issue and transfer in relation to those

six investor companies of the assessee.           Therefore, this cannot be called as

incriminating material. We, therefore, do not find any infirmity in the order of the

CIT(A) in deleting the addition. Accordingly, the order of the CIT(A) is upheld and

the grounds raised by the Revenue are dismissed.

CO No.88/Del/2017 (A.Y. 2009-10)

16.     The ld. counsel for the assessee did not press the grounds of the Cross

Objection filed by the assessee for which the ld. DR has no objection. Accordingly,

the CO filed by the assessee is dismissed as not pressed.

17.     In the result, the appeal filed by the Revenue and the CO raised by the

assessee are dismissed.




                                            18
                                      ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                                               CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58



ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39/Del/2017

18.   In all the above appeals, the Revenue has raised identical grounds wherein

addition made by the Assessing Officer u/s 68/69C have been deleted by the CIT(A)

on the ground that no incriminating material was found and seized during the course

of search and also subsequently and at the time of initiation of search action u/s 132

of the IT Act the assessment or reassessment was also not abated and the additions

are not based on any incriminating document/material. We have already decided

the issue in ITA No.175/Del/2017 as above and the grounds raised by the Revenue

have been dismissed. Following the same reasoning, the grounds raised by the

Revenue in all these appeals are dismissed.

CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58/Del/2017

19.   The ld. counsel for the assessee did not press the grounds raised in the Cos for

which the ld. DR has no objection. Accordingly, all the COs filed by the respective

assessees are dismissed as not pressed.

20.     In the result, all the appeals filed by the Revenue and the COs raised by the

assessees are dismissed.

        The decision was pronounced in the open court on 30.04.2019.

            Sd/-                                                                Sd/-

(SUCHITRA KAMBLE)                                              (R.K. PANDA)
 JUDICIAL MEMBER                                           ACCOUNTANT MEMFBER

Dated: 30th April, 2019

dk

                                          19
                    ITA Nos.176, 169,170, 171,172,173,174, 33,34,35,36,37,38 & 39
                             CO Nos.89,59,60,61,62,63,64,52,53,54,55,56,57 & 58




Copy forwarded to

1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(A)
5.   DR
                                  Asstt. Registrar, ITAT, New Delhi




                        20

Home | About Us | Terms and Conditions | Contact Us
Copyright 2023 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting