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DCIT, Central Circle-31, New Delhi. Vs. M/s. Godhuli Vanijya Private Limited, 73 Cotton Street, Burra Bazar, Kolkata, West Bengal.
July, 12th 2021

ITA 288 (Del) of 2015

IN THE INCOME TAX APPELLATE TRIBUNAL
[DELHI BENCH “C”: NEW DELHI]

BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER
&

SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
(Through Video Conferencing)

ITA No. 288/Del/2015

(Assessment Year: 2009-10)

DCIT, M/s. Godhuli Vanijya

Central Circle-31, Vs. Private Limited,

New Delhi. 73 – Cotton Street,

Burra Bazar, Kolkata,

West Bengal.

PAN : AADCG3844N

(Appellant) (Respondent)

Department by : Ms. Sunita Singh, CIT DR
Assessee by : Shri Rakesh Joshi, C.A.;
Date of Hearing
03/06/2021
Date of pronouncement 09/07/2021

O R D E R


PER PRASHANT MAHARISHI, A. M.

1. This appeal is filed by the ld Dy. Commissioner of Income Tax, Central
Circle-31, New Delhi [the ld AO] against the order of the Ld. CIT
(Appeals)–XXXIII, New Delhi, [the ld CIT (A)] dated 29.09.2014 for
assessment year 2009-10. By This order appeal filed by the assessee
against assessment order passed by The ACIT, Central Circle-19, New
Delhi [ the ld AO] u/s 153C read with section 153A of the Income tax
Act [ The Act] on 30.03.2014 determining the total income of the
assessee at Rs. 55,00,740/- against the returned income of Rs. 740/-,
was allowed by the ld CIT(A) deleting the addition of Rs 5 Cr. The ld AO
has made this addition u/s 68 of the Act on the basis of documents found
during the course of search at another person. So the ld AO is aggrieved.

2. The following grounds of appeal raised by the revenue:-

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ITA 288 (Del) of 2015

“ 1. On the facts and in the circumstances of the case, the CIT (A)
has erred in deleting addition of Rs. 5,00,00,000/- made u/s
68 of the IT Act on account of unexplained share capital and
premium;

2. On the facts and in the circumstances of the case and in law,
the CIT (A) has erred in holding that on the prevailing facts of
the case the onus on the part of the assessee u/s 68 of the
stands discharged.

3. The order of the CIT (A) is erroneous and is not tenable on
facts and in law.”

3. Brief facts of the case shows that search u/s 132 of the Act took place in
case of M/s. Akruti Hotels Pvt Ltd on 22.11.2011. During the course of
search, certain documents were seized. The satisfaction in the case of
searched person was recorded stating that seized documents belong to
the assessee company. Consequently, The Ld Assistant Commissioner of
Income Tax, Central Circle-23, New Delhi, [Ld AO of the assessee]
recorded a satisfaction for initiating action u/s 153C of the Act and
consequently a notice was issued on 20.09.2013 for AY 2009-10. The
appellant had filed its original return of income u/s 139 (1) of the income
tax act on 1 October 2009. On the date of search, admittedly, no
assessment proceedings for the impugned assessment year are pending
before the income tax authorities.

4. In response to the above notice, assessee filed its return of income on
13.01.2014 showing income of Rs. 740/- . Consequently, notice u/s
143(2) of the Act was also issued on 11.02.2014.

5. Case of the ld AO is that assessee is engaged in the business of providing
services and it was incorporated on 16.02.2009 and therefore, this is the
first year of its operation. The assessee has shown receipt of service
charge for the year of Rs. 9000/- only. He found from the audited
balance sheet of the assessee as on 31.03.2009, that it has issued share
capital to 10 different companies having a face value of Rs. 10/- each
and has collected share premium of Rs. 4,90,00,000/-. Thus, the total
share capital was issued of Rs. 5 crores. He noted that the assessee
company has just been incorporated, yet to start its operation but has
received huge premium per share of Rs 490/ - from 10 companies,

Page | 2
ITA 288 (Del) of 2015

which are based at Kolkata. The ld AO issued letters to all these
companies u/s 133(6) of the Act asking for the audited accounts, audited
report, source of investment, details of business and reasons for
investment along with bank statement. The letters were either not
replied or remained unserved. Therefore, assessee was asked to submit
all these details. Assessee was also asked to produce all the Directors for
their personal examination to verify identity, creditworthiness, and
genuineness of the transaction. The assessee submitted the requisite
details and the ld AO noted that the companies are showing meager
profit, based at Kolkata, Guwahati, not engaged in any business, does
not have any legitimate income for source of this investment and no bank
statement was furnished. Therefore, the ld AO issued show cause notice
that why the above sum of Rs. 5 crores should not be added u/s 68 of
the Act as unexplained cash credit. The assessee submitted that it has
discharged its onus by submitting the requisite details such as name,
address, PAN, Bank statement and balance sheet of the investors to
prove their identity, creditworthiness, and genuineness of the transaction.
Assessee also promised to produce the Directors of those companies
given adequate time. The ld AO noted that assessee could not produce
the Directors of the above company and bank statement for verification.
Therefore, the assessee has failed to discharge its onus. Thereafter, he
discussed modus operandi of accommodation entry from the Kolkata
companies and proceeded to make an addition of Rs. 5 crores u/s 68 of
the Act. On 30.03.2014 assessment order u/s 153C read with section
153A of the Act was passed making the above addition of Rs. 5 crores
and determining the total income of Rs. 5,00,00,740/-.
6. The assessee preferred an appeal before the ld CIT(A) raising the first
jurisdictional issue that the order u/s 153A of the Act is invalid as
satisfaction note u/s 153C is not recorded in file of the person searched
but in the file of assessee. This argument was rejected. The second
argument was that in case of concluded assessment no addition could be
made in the hands of the assessee unless incriminating material was
found during the course of search. The assessee referred to various

Page | 3
ITA 288 (Del) of 2015

seized documents. It was stated that those documents relates to the
shareholder of the assessee company and even otherwise they are not
incriminating in nature. The ld CIT(A) noted that seized documents
relates to share holders of the appellant company and as additions are
made on account of share capital, he relying on the order of the Hon’ble
Delhi High Court in case of Anil Bhatia upheld the action u/s 153A of the
Act rejected this argument.
7. The ld CIT(A) on the merits of the case held that the assessee has
discharged its initial onus submitted the evidence such as share holder
application forms, income tax returns, share certificate, form No. 2 under
the Companies Act, bank statement and other documents. He further
held that on perusal of the record, he noted that in many cases
shareholders have replied in response to notice u/s 133(6) of the Act. He
also noted that there is no references as to whom notices were not
served on which shareholder. He further held that the assessee was not
given any opportunity stating that notices have not been served on which
shareholder. He further held that declaration of small profit of
shareholder does not say that investment is not genuine as the
investments are disclosed in the balance sheet, which explained the
source of such investment. He held that the assessee has already filed
the balance sheet of the investors. In view of this, he deleted the
addition u/s 68 of the Act as according to him assessee discharged its
onus by proving identity, creditworthiness, and genuineness of the new
shareholders. Thus, on the issue of jurisdiction he decided against the
assessee and on the merits, he deleted the addition. Therefore, the ld AO
has filed this appeal before us contesting the deletion of addition of Rs. 5
crores u/s 68 of the Act.
8. At the time of hearing the assessee has invoked the provision of Rule 27
of the ITAT Rules contesting that the issue of jurisdiction is decided
against the assessee wherein, the ld CIT (A) relying upon the decision of
the Hon’ble Delhi High Court in case of Anil Bhatia has held that addition
can be made in the hands of the assessee in concluded assessment
despite no incriminating documents are found during the course of

Page | 4
ITA 288 (Del) of 2015

search. Therefore, the ld AR submitted that against this issue decided
against the assessee by the ld CIT (A), assessee would like to invoke the
above rule and stated that the jurisdiction assumed by the ld AO is not
valid.
9. He submitted that the documents found during the course of search are
already mentioned by the ld CIT (A) in is order at pg No. 15. He
submitted that none of these documents is incriminating in nature and
therefore, no addition can be made in the hands of the assessee. He
submitted that the impugned assessment year 2009-10 is already
concluded at the time of search on 22.11.2011 and further at the time of
recording of the satisfaction by the ld AO of the assessee. Thus, he
stated that the addition made in the hands of the assessee is not based
any incriminating material found during the course of search. He
submitted the timelines as

a. For AY Date of filing of return is 1.10.2009,
b. date by which notices u/s 143(2) could have been issued is

30/09/2010 and
c. Date of search is 22/11/2011.
Thus, on the date of search, this assessment for AY 2009-10 in case of
the assessee was a concluded assessment and is tinkered only if there is
an incriminating material found during the course of search. He further
referred to the decision of the Hon’ble Delhi High Court in CIT Vs. Anil
Kumar Bhatia 2011 Taxman 453, the decision of the Hon’ble Supreme
Court in CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344
(SC). He further relied upon the decision of the coordinate bench in ITA
No. 288 and 287/Del/2015 for Assessment Year 2010-11 in the group
company case, which is related to the same search wherein, the
coordinate bench has decided in favour of the assessee on this issue. e
therefore, submitted that the issue is squarely covered in favour of the
assessee.
10. The ld DR vehemently objected to the invocation of Rule 27 of the ITAT
Rules. On the issue, she specifically referred to the decision of the
Hon’ble Delhi High Court in case of Anil Kumar Bhatia (supra) and

Page | 5
ITA 288 (Del) of 2015

extensively relied upon paragraph No. 11, 12, 13, and 15 of that decision.
She further referred to the Page No. 4 of the assessment order to show
that all the shareholders are having meager income and therefore, the
issue of share to such shareholders found form the balance sheet of the
assessee company clearly shows that these are incriminating documents.
She further referred to page No. 15 of the order of the ld CIT (A)
wherein, categorically share certificate in name of certain shareholder and
share transfer form were found. She stated that when the assessee has
issued share to Kolkata based company at a hefty premium finding from
share certificate and share transfer form clearly shows that those are
incriminating documents. Such documents coupled with the low income
of the shareholder makes it an incriminating documents based on which
the ld AO correctly assumed jurisdiction u/s 153A of the Act. She
submitted that all these documents are all with respect to the shareholder
and therefore, it has been correctly used to invoke provisions of section
153A of the Act.
11. She also submitted that on the merits the genuineness of the parties who
introduced share capital is in series doubt and the ld CIT(A) have not
given any reason that even if the assessee failed to produce the share
holders before the ld AO the addition is deleted. She submitted that the
ld CIT (A) has grossly erred in deleting the addition u/s 68 of the Act.
She relied on plethora of judicial precedents wherein, it has been held
that when assessee failed to produce the shareholder, coupled with other
mitigating circumstances the addition u/s 68 of the Act can be made
when shares are issued to Kolkata based companies at a huge premium.
12. The ld AR in rejoinder submitted that the documents are not found from
the premises of the assessee but from the premises of Akruti Hotels Pvt.
Ltd. This company is based in New Delhi whereas the assessee is based
at Kolkata. Therefore, it was submitted that these documents of share
certificate etc were not found from the premises of the assessee. He
further submitted that share certificate and share transfer form were
found vide Page No. 49, 51 and 52 of Annexure A-11. As such, the share
certificate, and share transfer form pertained to those shareholders. He

Page | 6
ITA 288 (Del) of 2015

further stated that the share certificate and names of the shareholders
are part of the annual return as well as share capital issued by the
assessee. They cannot be stated to be an incriminating document. He
further relied upon the decision of the Hon’ble Delhi High Court in 86
Taxmann 84 in Pr. CIT Vs. Index Securities Pvt. Ltd wherein, even the
trial balance and balance sheet of the assessee could also not to be said
to be incriminating. Therefore, he held that mere availability of the share
certificate of the shareholders of the assessee from the premises of the
third party could not be held to be pertaining to assessee and much less
incriminating in nature.
13. On the merits of the case, he relied on the order of the ld CIT (A) holding
that assessee has discharged its onus and therefore, the addition has
rightly been deleted by him.
14. We have carefully considered the rival contentions and perused the
orders of the lower authorities. Firstly we come to the application of the
assessee-invoking rule 27 of the ITAT rules wherein it has been stated
that the learned CIT – A has erred in not appreciating that the addition is
not sustainable in a non-abatted assessment year without any
incriminating document found during the course of search. The learned
CIT – A in paragraph number 3.3 of his order has held that a perusal of
the seized documents shows that these seized documents relates to
shareholders of the appellant company. Addition is made on account of
share capital. Therefore the additions are relatable to seized document.
Therefore relying on the decision of the honourable Delhi High Court in
case of Shri Anil Bhatia in [2012] 24 taxmann.com 98 (Delhi)/[2012] 211
Taxman 453 (Delhi)/[2013] 352 ITR 493 (Delhi that the jurisdiction of the
assessing officer u/s 153A is to assess total income for the year and not
restricted to seized material Where it has been held that even if for one
assessment year, there are seized documents, the relatable to addition,
the assessing officer can be made addition for all the assessment years
covered u/s 153A. Therefore, accordingly on jurisdictional grounds the
grounds of appeal are dismissed for both the assessment years.
Therefore apparently he decided on this issue against the assessee and

Page | 7
ITA 288 (Del) of 2015

therefore the assessee is entitled to challenge this issue as it has been

decided against the assessee by invoking provisions of rule 27 of the

Income Tax Appellate Tribunal Rules. The arguments of the assessee are

also supported by the decision of the honourable Delhi High Court in

Sanjay Sawhney V PCIT [2020] 116 taxmann.com 701 (Delhi)/ [2020] 273

Taxman 332 (Delhi) [2020] 116 taxmann.com 701 (Delhi)/ [2020] 273 Taxman 332

(Delhi). Therefore we now proceed to decide the issue whether the additions on the

basis of the seized material can be made in the hands of the assessee in this

assessment year or not.

15. Admittedly in this case search took place in case of Akruti Hotels Pvt.

Ltd on 22.11.2011 wherein, alleged incriminating documents which are

also listed at page No. 15 of the order of the ld CIT(A) are found as

under:-

Annexure A 11 Pages Documents Seized
seized from the 52 Share Certificate in the name of Response
premise of Aakriti Overseas Pvt. Ltd. Share No. 70001-85000,
Hotels Pvt. Ltd, 3rd 51 ^ Certificate No. 00000009
floor, 12, 49^ Share Transfer Form - 70001 - 85000,
Community Centre, Certificate No. 0000009
Saket, New Delhi. Share Certificate in the name of Raj Nand Hela,
Share No: 05001 -09900, Certificate No:
51 1/ 00000015
Share Transfer Form - 05001 - 09900,
Certificate No: 00000015

16. It is established principle that in case of search the provision of section
153C of the Act could have been invoked prior to 01.06.2015 when AO is
satisfied that money, bullion, jewellery or other valuable article or thing,
seized or requisitioned pertains to a person other than the person
searched, then such documents or asset shall be handed over to the AO
having jurisdiction over such person, then such AO shall proceed, if he is
satisfied that such documents or assets have bearing on the
determination of total income of such other person, shall assess him in
accordance with provision of section 153A of the Act. Therefore, the first
threshold to be crossed by the ld AO by holding that the share
Page | 8
ITA 288 (Del) of 2015

certificates along with share Transfer forms pertain to the assessee.
The second threshold that needs to be crossed at the time of making any
adjustment to the total income of the assessee based on the above
documents is to prove that the documents so found pertaining to the
assessee are incriminating in nature (having a bearing on the
determination of total income of the assessee) which has the capability of
enhancing the income of the assessee. Therefore, it is apparent that in
case of persons other than searched person for the relevant year prior to
01.06.2015 the requirement clearly says that the documents pertaining
to assessee must be found during the course of search on another person
which has a bearing on enhancing income of the assessee.
17. Admittedly in this case search was conducted on another assessee i.e.
M/s Akruti Hotels Limited. Therefore now it is required to be tested
whether the documents found during the course of search on Akruti
Hotels limited are pertaining to the assessee or not. In the present case
the documents found are at page 49 on Annexure A-11 is share certificate
in the name of Raj Nand Hela. Page no. 51 is share transfer form of
certificate No. 15 in the name of Raj Nand Hela. Both these documents
are the property of Mr. Raj Nand Hela and therefore, there cannot be said
to be the pertain to the assessee. Similarly page No. 51 and 52 the share
certificate in the name of Response Overseas Ltd and share transfer form
were found. These share transfer forms also did not belong to the
assessee but to the shareholder. The share certificate shows that those
investors are holding share in the assessee company. Therefore, the
property of this share certificate does not remain with the assessee but
with the shareholder whose name appears on those share certificates.
Anyway, these shares are issued by the assessee in the name of those
persons, which is part of the details of shareholders as well as the books
of account of the assessee wherein share capital is shown. If it is to be
believed that these documents found during the course of search on
Akruti Hotels Limited pertain to the assessee, then natural corollary would
be that whenever a share certificates are found during the course of
search, the company whose shares are issued, would be covered u/s

Page | 9
ITA 288 (Del) of 2015

153C of the act. The share certificates are owned by the person in
whose name those were issued. This is not the case, where the share
certificates along with the blank transfer forms duly signed by the
shareholders along with some other materials such as blank receipts of
consideration received of those shares as well as sale note issued by the
shareholders are found togetherwith. Therefore, in this case we do not
agree with the contentions of the revenue that share certificates in the
name of Response Overseas Private Limited and Raj Nand Hela along with
the transfer forms pertains to the assessee company.
18. Now we come to the decision of the Hon’ble Delhi High Court in case of
Anil Kumar Bhatia (supra). On careful consideration of para 23 it was
categorically held by the Hon’ble High Court that

“23. We are not concerned with a case where no
incriminating material was found during the search conducted
under Section 132 of the Act. We, therefore, express no
opinion as to whether Section 153A can be invoked even in
such a situation. That question is therefore left open.”
19. Thus, the honourable high court was not concerned with the case where
no incriminating material was found during search and therefore, it did
not express any opinion as either section 153A can be invoked in such
situation. Therefore, this decision does not referred to the situation
where no incriminating documents are found during the course of search.
The case before us is there is no material found pertaining to the
assessee in search on third party.
20. The Hon’ble Supreme Court in CIT vs Sinhgad Technical Education Society
397 ITR 344 (SC) clearly held that in case of the person other than
searched person, concluded assessment can be tinkered with only if
incriminating material is found in those assessment years. Therefore, in
the present case it is apparent that no incriminating material found during
the course of search and therefore, the concluded assessment year i.e.
2009-10 cannot be tinkered with.
21. As we have already held that share certificates as well as the share
transfer forms found during the course of search on AKruti Hotels Ltd

Page | 10
ITA 288 (Del) of 2015

does not pertain to the assessee and therefore same can also not be an

incriminating material, which has a bearing on the income of the

assessee. Thus, there cannot be any addition in the hands of assessee on

this count. In view of this, the ground raised by the assessee by invoking

Rule 27 of ITAT Rules succeeds. In the result, on this issue the appeal of

the department fails.

22. In view of our decision above, the issue on the merits of the case with

respect to the addition of Rs. 5 crores u/s 68 of the Act is left open.

23. In the result appeal of the ld AO is dismissed.

Order pronounced in the open court on 09/07/2021.

-Sd/- -Sd/-
(AMIT SHUKLA) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 09/07/2021.

*AK Keot*

Copy forwarded to

1. Appellant
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT

ASSISTANT REGISTRAR
ITAT, New Delhi

Page | 11

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