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
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