ACIT, MUMB AI V. VTC JEWELS PRIVATE LIMTED, KOLKATA

ITA 6205/MUM/2025

AI Insights

The case involves the Income Tax Department (Revenue) appealing against the order of the Ld. CIT(A) which had deleted the addition of Rs. 25,00,000 made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The addition was initially made on the grounds that the share application money received by VTC Jewels Private Limited was not genuine. The Revenue contended that the CIT(A) erred in deleting the addition without considering the incriminating evidence found during the search operation. However, the Tribunal found that the CIT(A) had correctly applied the law, as no incriminating material was found during the search that could substantiate the Revenue's claims.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 847724 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2026
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Mumbai
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2025
• Other Referred Cases: Abhisar Buildwell Pvt. Ltd., Continental Warehousing Corporation (Nhava Sheva) Ltd, Kabul Chawla, Saumya Construction, PCIT vs. Best Infrastructure (India) P. Ltd., Harjeev Agarwal, Adamine Construction (P.) Ltd, Green Infra Ltd., Chiripal Poly Films Ltd., Goldmohur Design & Apparel Park Ltd., M/s. Sumati Chand Jewellers Pvt. Ltd., M/s. Morpan Merchant Pvt. Ltd., M/s. SRG Exim Pvt. Ltd., M/s. Starpoint Dealers Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK PERAMPURNA
• Assessee Lawyers: PRATIK JAIN; WAY OF ACCOUNTS PAYEE CHEQUES; THEY COULD; CHEQUES; REPAYMENTS WERE
• Keywords: Set aside; Retrospective amendment; Question of law; Corroborative evidences; Unexplained cash credit; Fair market value; Income from undisclosed sources; Onus to prove; Capital receipt; Retraction; Search and seizure; Valuation report; Accommodation entries; Block assessment; Source of fund; Bogus Share capital; Share purchase agreement; Bogus
• Section: 143(3); 132; 153A; 68; 56(2); 133(6)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & HON’BLE SHRI BIJAYANANDA PURUSETH, ACCOUNTANT MEMBER ITA No. 6205/Mum/2025 (Assessment Year: 2011-12) ACIT Kautiliya Bhavan, Mumbai - 400051 Vs. VTC Jewels Private Limited 6, CAMAC Street, Room No. 604, Kolkata - 700017 PAN/GIR No. AADCV0567D (Applicant) (Respondent) Assessee by Shri Pratik Jain Revenue by Shri Vivek Perampurna (CIT-DR) Date of Hearing 24.02.2026 Date of Pronouncement 23.03.2026 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the Revenue challenging the impugned order 30.07.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2011-12. The following grounds are reproduced below: “ 1. Whether, the Ld.CIT appeal On facts and in law, erred in deleting the addition of Rs.25,00,000/- made under section 68 of 1 the Income-tax Act, 1961, ignoring that the Printed from counselvise.com 2 ITA No.6205/Mum/2025 assessee failed to discharge the onus of proving the identity, genuineness and creditworthiness of the share applicant 2. whether, On facts and in law, the Ld. CIT appeal erred in holding that no incriminating material was found during search, whereas the statement recorded under section 132 sub section 4 of Shri Sanjay Dugar, a key person of the assessee group, clearly admitted to routing of unaccounted moncy through Jama Kharchi 3. Whether, the Ld. CIT appeal erred in relying upon the judgment of the Honorable Supreme Court in Abhisar Buildwell Pvt. Ltd., without appreciating that unlike in Abhisar Buildwell, the 3 present case contains direct incriminating evidence in the form of sworn statement under section 132 sub section4, corroborated by investigation reports of DGIT, Inv,, Kolkata, establishing the nexus between the assessee and entry providers. 4. Whether, the Ld. CIT appeal while deciding the ground of appeal of the assessee failed to appreciate that the Assessing Officer had brought on record the fact that Pulaglia Vayapaar Pvt. Ltd. had no financial capacity to invest in share capital and that the bank trail showed immediate round-tripping, thereby justifying the addition under section 68 of the Act” 2. All the grounds raised by the Revenue are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in deleting the addition of Rs. 25,00,000/- made by the AO under Section 68 of the Act. Therefore, we have decided to adjudicate these grounds through the present consolidated order. 3. Ld. DR, appearing on behalf of the Revenue, relying upon the order of the AO, submitted that a search and seizure action under Section 132(1) of the Act was conducted on 09.03.2015, Printed from counselvise.com 3 ITA No.6205/Mum/2025 along with search and seizure action in the case of the Gouti Group, and certain evidences were collected conclusively proving that M/s. Mati Chand Gouti Jewellers Pvt. Ltd. and its various group concerns had taken bogus share application money, claimed excess money charges, and carried out unaccounted sales of gold jewellery, etc. Consequent to the search, Proceedings under Section 153A of the Act were initiated against the assessee, and it was found that the assessee had taken bogus share application money, which was not genuine, and that the share capital so raised in the books of account was merely an accommodation entry. 4. It was also submitted that the Ld. CIT(A) erred in holding that no incriminating material was found during the search and in deleting the addition. According to the Revenue, the facts are contrary to the findings of the Ld. CIT(A), as during the course of the search, the statement of Mr. Sanjay Dugar, a key person of the assessee group, was recorded wherein he clearly admitted to routing unaccounted money through Jama Karchi. It was further submitted that the reliance placed by the Ld. CIT(A) on the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd. was not warranted in the facts of the present case, as there were sworn statements and incriminating evidences directly connecting the assessee with the obtaining of accommodation entries, thereby establishing the nexus between the assessee and the entry providers. Printed from counselvise.com 4 ITA No.6205/Mum/2025 5. Moreover, the AO had also brought on record the fact that M/s. Pulaglia Vyapar Pvt. Ltd. had no financial capacity to invest in the share capital, and the bank trail showed immediate round- tripping, thereby justifying the addition made by the AO under Section 68 of the Act. 6. On the contrary, the Ld. AR appearing on behalf of the assessee reiterated the same arguments as were raised before the Revenue Authorities and also relied upon the order passed by the Ld. CIT(A). The written submissions filed before the Ld. CIT(A) on behalf of the assessee are contained in Para No. 5 of the order of Ld. CIT(A) and the same is reproduced herein below: 5. The appellant vide letter dt. 17.12.2024 submitted as under:- “BRIEF FACTS OF THE CASE: The appellant is engaged in the business of trading and designing of gold jewellery. For the year under consideration, the appellant filed its original return of income on 28.09.2011 declaring total income at Rs.2,11,638/-. 2. Subsequently, a search and seizure action was carried out on Gouti group and its related concerns on 09.03.2015 u/s 132(4) of the Act, in which the appellant company was also covered. In response to the search action, notice u/s 153(A) of the Act was issued to the appellant. In response to the same, the appellant filed its return of income declaring total income of Rs.2,11,638/-. During the course of assessment proceedings, queries were asked with respect to the share application money received by the appellant from M/s.Pugalia Vyapaar Private Limited. The entire details of the same were filed before the Id. A.O. during the course of assessment proceedings. However, Id. A.O. arbitrarily rejected the said details and proceeded to make the addition on account of alleged unexplained share application money u/s 68 amounting to Rs.25,00,000/- . Printed from counselvise.com 5 ITA No.6205/Mum/2025 3. Aggrieved by the order dated 29-09-2017 passed by the Ld. AO, the appellant has filed an appeal before your honour and raised the following grounds 1. On the facts and circumstances of the Appellant’s case and in law, the Ld. Assessing Officer erred in invoking the provisions of section 153A which is illegal, bad in law or otherwise void-ab-initio for the want of jurisdiction, on the ground that no incriminating document/ evidence was found for the year under consideration. 2. On the facts and circumstances of the Appellant’s case and in law the Learned Assessing Officer erred in holding the appellant has entered into accommodation transactions without any cogent material on record as per the grounds stated in the assessment order or otherwise. 3. On the facts and circumstances of the Appellant’s case and in law the Ld. Assessing Officer erred in making addition of Rs.25,00,000/- on account of alleged bogus share application money by invoking provision of sec 68 of the Income Tax Act, 1961 as per the impugned order. 4. In respect of the above, our ground wise submission is as under Ground no.1: On the facts and circumstances of the Appellant’s case and in law the Ld. Assessing Officer erred in invoking the provision of section 153A which is illegal, bad in law or otherwise void-ab-initio for the want of jurisdiction, on the ground that no incriminating document/evidence was found for the year under consideration. Finding of the search 1.1 It is reiterated that a search action was carried out on the premises of the appellant and his group concerns on 09.03.2015. The search continued up to 5-6 days at all the premises of the appellant and its group concerns. During the entire search proceedings, the search officials stressed upon the share application money taken by the appellant group from various entities which were allegedly not genuine. The appellant explained that the said capital received was through proper banking channels and the same was genuine. Printed from counselvise.com 6 ITA No.6205/Mum/2025 1.1 During the course of search, the search officials kept pressurizing the directors of the appellant company to accept share capital received from various entities as bogus and non-genuine. Since the papers were not readily available, the directors explained that the said capital is entirely genuine and the supporting papers would be submitted in a week’s time since they need to enquire the concerned employees about the location of the same. However, the search officials keep pressuring the directors continuously, to accept the same as nongenuine and bogus. Therefore, in order to close the search action, end the mental duress and buy peace of mind, promoter of the group Shri Sanjay Dugar, offered the capital receipts in three entities i.e. M/s.Starpoint Dealers Pvt. Ltd., M/s. Morpan Merchant Pvt. Ltd. and M/s. SRG Exim Pvt. Ltd. as income in his statement recorded on 11.03.2015. The relevant portion of the statement recorded is reproduced hereunder:- “Q.25 In view of the reply to the aforesaid questions it is observed that you are not able to provide the basic and necessary supporting details and documents in support of the alleged transaction of share premium received by the group concerns. You have also failed to establish the genuineness of the alleged transaction of receipt of share premium by the above referred concerns. Please offer your comments upon your failure to substantiate said alleged transactions of share premium received by the concerns referred above. Ans. Presently, I am not able to provide the required details and also admit my failure in providing the basic and necessary details in support of the transaction of share premium received by my group concerns. I have examined the transactions, under consideration and have arrived at conclusion that part of share premium cannot be substantiated as the same has been received from Jama Kharchi Companies. Jama Kharchi Companies are not into real business but merely into the business of providing accommodation entries. I have given cash to such Jama Kharchi Companies and received it back as share premium by cheques. Such transactions were done to bring the unaccounted money, generated in my business, back to regular books of accounts of group concerns. I am Printed from counselvise.com 7 ITA No.6205/Mum/2025 submitting the breakup of the share premium which is non genuine and is in the nature of accommodation entry. I want to voluntarily offer such amount of Rs. 3,21,00,000/ - as my undisclosed income of the respective years. Year wise and concern wise break up is provided as under:- Grand Total (2,40,00,000/- plus Rs] 26,00,000/- plus Rs. 55,00,000/-) =! Rs. 3,21,00,000/- Further, in respect of other parties from whom my group concerns have received share premium and which are, in my opinion, genuine, 1 shall produce all the relevant details | and document in due course. Printed from counselvise.com 8 ITA No.6205/Mum/2025 1.3 Here, it is pertinent to mention that no disclosure in respect of share capital received by the appellant was made by the director during the course of search action and it was duly clarified that all the other receipts are genuine. No further question whatsoever was asked by the investigation team. 1.4 Moreover, it is pertinent to observe that even the disclosure related to other concerns was made under pressure, purely on the point that the relevant papers could be produced to the officials at the time of search to verify the said investments and accordingly, the offer was made in the said statement to escape the mental duress and end the search action. 1.5 Here, it is important to note here that there was not a single incriminating material found during the course of search which could even cast a doubt on the genuineness of the share capital. The acceptance made in the statement recorded was not based on any concrete findings unearth during the course of search. Post search events 1.6 After completion of search proceedings, the directors of the appellant company enquired with the concerned employees about the supporting in support of the share capital received in the appellant company. Accordingly, the said details were compiled and the same were submitted right after the closure of the search action before the Investigation Wing which is placed at page nos. 12- 18 of the paper book. Assessment Proceedings 1.7 During the course of assessment proceedings, notice u/s 153A of the Income Tax Act, 1961 was issued on 26.08.2016 to file the return of income within the period as referred u/s 153A(b) of the Act. The Assessee in response to the said notice, filed its return of income on 03.09.2016 declaring total income at Rs. 2,11,638/-. Notices u/s 143(2) dated 17.09.2017 was duly issued and served on the assessee. 1.8 The Id. A.O. show caused regarding the genuineness of the share application money from M/s. Pugalia Vyapaar Private Limited amounting to Rs.25,00,000/- and asked why the amount should not be added as income. In response to the same, the appellant duly submitted the entire details to prove genuineness of the Printed from counselvise.com 9 ITA No.6205/Mum/2025 share application money received, as envisaged u/s 68 of the Act. The appellant explained that the admission made during the course of search was incorrect and without any basis and hence, the same cannot be relied upon. It was also explained that no incriminating material has been found during the course of search which can lead to a conclusion that the share application money received are not genuine. 1.9 However, the Ld. AO ignoring the evidences and documents furnished by the AR of the appellant and relying blatantly on the basis of statement recorded to make an addition of Rs.25,00,000/- u/s 68 of the Act. Peculiar facts regarding the receipt of Share Capital and Premium 1.10 The appellant group is in the business of trading of gold jewellery and the group commands immense goodwill in the gold market. In light of the rising turnover of the group, the appellant felt the need of raising capital and accordingly, it started accepting share capital from various outside private parties who were interested in investing in the business of the appellant due to its reputation and overall growth. The private parties came through from the community of the promoters, social circles, business sources, etc. Accordingly,; during the year under consideration, the appellant has received share application money of Rs.25,00,000/- from the said party which are as under:- Addition in the absence of incriminating material 1.11 Now, it is pertinent to point out the settled law that the assessment made u/s 153A of the Act in the case of un-abated assessment years, shall be restricted only to the seized materials found during the course of search. Printed from counselvise.com 10 ITA No.6205/Mum/2025 1.12 For the sake of brevity, we submit herewith sequence of events in the instant case of the appellant. 1.13 Accordingly, as on the date of search, the assessment year under consideration was unabated and not pending before the A.O. Therefore, Id. A.O. was empowered only to make the addition based on the seized material found during the course of search. 1.14 This rationale has been laid down by the HonTile Jurisdictional High Court in the case of CIT-II Thane vs Continental Warehousing Corporation (Nhava Seva) Ltd 374 ITR 645 wherein it was held as under:- “Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of) - Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether no addition canbe made in respect of unabated assessments which have become final if no incriminating material is found during search - Held, yes [Paras 28, 29 & 30][In favour of assessee]” Reliance is also placed on the following judgments wherein similar proposition has been upheld:- a. CIT, Central Circle-II, Mumbai vs Gurinder Singh Bawa [386 ITR 483] Bombay High Court “Section 153A of the Income-tax Act, 1961 - Search and seizure – Assessment in case of - Proceedings under section 153A were without jurisdiction where no assessments were pending at that time and no incriminating evidence was found during search [Assessment year 2005-06] [In favour of assessee]” Printed from counselvise.com 11 ITA No.6205/Mum/2025 b. The same has been affirmed by the Hon’ble Jurisdictional High Court in the case of CIT, Central-IV vs SKS Ispat & Power Limited [Income Tax Appeals No. 1874 of 2014 and 58 of 2015] dated 12th July 2017 and in the case of Commissioner of Income Tax-20 vs Shri Deepak kumar Agarwal in Income Tax Appeal No. 1709 of 2014. c. All Cargo Global Logistics Ltd vs DCIT CC-44 [147 TTJ 513] wherein it was held that assessment which became unabated, assessment u/s 153A will be made only on the basis of incriminating material viz books of accounts, other documents found during the course of search. “Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of - Assessment year 2004-05 - Whether in a case where pursuant to issue of notice under section 153A assessments are abated, Assessing Officer retains original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of six assessment years separately - Held, yes - Whether in other cases, in addition to income that has already been assessed, assessment under section 153A will be made on basis of incriminating material viz. books of account, other document, found in course of search but not produced in course of original assessment, and undisclosed income or property discovered in course of search - Held, yes [In favour of revenue] “ d. Anil Mahavir Gupta vs ACIT [182 TTJ 265], Mumbai Tribunal “Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of - Assessment year 2003-04 - Where impugned additions were not based on any incriminating material found during course of search at premises of assessee and original assessment had not abated, such additions were beyond scope and ambit of an assessment order under section 143(3) read with section 153A(1) [In favour of assessee] Printed from counselvise.com 12 ITA No.6205/Mum/2025 Section 68 of the Income-tax Act, 1961 - Cash credits (Accommodation entries) - Assessment years 2002-03 to 2006-07 - Where creditors, who initially admitted to have undertaken accommodation transactions, had retracted their statements by filing affidavits and nothing was brought on record by Assessing Officer to disprove such retraction, he could not consider maximum balance in their account during year as unexplained - [In favour of assessee]” 1.15 The above decisions of the Honhle High Court have been further confirmed in the recent decision by the Hon*ble Supreme Court in the case of Abhisar Buildwell P. Ltd reported in [2023] 149 taxmann.com 399 wherein it has been held that Completed assessments can be interfered with by the AO while making the assessment u/s 153A only on the basis of some incriminating material unearthed during: the course of search. The relevant extract of the order is reproduced hereunder: - “13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under:- i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed Printed from counselvise.com 13 ITA No.6205/Mum/2025 assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re¬opened by the AO in exercise of powers under Section 147/148 of the Act, subject to jiilfilment of the conditions as envisaged/mentioned under section 147/148 of the Act and those powers are saved.” 1.16 Accordingly, in view of the above binding decision of the HonTole Supreme Court, it is settled that where no incriminating material is found during the search, no addition can be made in respect of completed/unabated assessment. 1.17 In the appellant’s case, not a single incriminating documents has been found from the premises, even though an extensive search action has been carried out on its premises. This fact is evident from the assessment order passed by the Id. A.O. Therefore, the addition made by the Id. A.O. in the assessment order is without any basis. 1.18 The various contentions of the Id. AO in the assessment order in light of the above decisions are discussed hereunder:- Printed from counselvise.com 14 ITA No.6205/Mum/2025 1.19 On perusal of the specific findings above as pointed out by the Id. AO in the assessment order, not a single reference to any incriminating material at the premises of the appellant has been pointed out. An incriminating though not defined under the Act, necessarily refers to an uncontroverted document or material which was found for the very first time at the premises of the appellant, and it establishes a clear link with the disputed transaction whether accounted or unaccounted which is alleged by the Id. AO. In the case of the assessee, an incriminating material would be a material or document which could establish the cash trail of the alleged accommodation entity pointed by the AO and was found Printed from counselvise.com 15 ITA No.6205/Mum/2025 at the premises of the appellant. Such incriminating material or document should also establish without any second guess that the impugned transaction of receipt of share capital is an accommodation entry. Without prejudice, at-least some document or material should have been found at the premises of the appellant which could even create a doubt on the impugned transaction of receipt of share capital. However, not a single such incriminating material has been brought on record by the Id. AO which was found at the premises of the appellant and which could cast even a doubt on the genuineness of the share capital received. 1.20 Here, it is pertinent to mention that the major reliance has been placed by the Id. AO on the statement of Mr. Sanjay Dugar, director of the appellant company. The copy of the statement is placed at page nos. 19-32 of the paper book. The disclosure made by Mr. Sanjay Dugar was limited to his other three companies namely M/s. Morpan Merchant Pvt. Ltd., M/s. Starpoint Dealers Pvt. Ltd. and M/s. SRG Exim Pvt. Ltd. amounting to Rs. 3.21 Crs., break of which is given in answer to Q. No. 25. Further, in the same answer, he has categorically stated that all other transaction are genuine. Therefore, the reliance placed on his statement is entirely incorrect and such statement in no circumstances can be termed as incriminating material in the appellant’s case. 1.21 In any case, we rely on another decision of HonTole Delhi High Court in the case of CIT vs. Harjeev Agarwal reported in 70 taxmann.com 95 (2016) wherein the court held that the statement recorded u/s 132(4) by itself cannot be construed as incriminating material. The relevant portion of the order is reproduced hereunder:- “23. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act. 24. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words “evidence found as a result of search” Printed from counselvise.com 16 ITA No.6205/Mum/2025 would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations Would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 25. (...) However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/ material found during search in order to for an assessment to be based on the statement recorded. 26. In CIT v. Sri Ramdas Motor Transport Ltd., (1999) 238 ITR 177 (AP), a Division Bench of Andhra Pradesh High Court, reading the provision of Section Printed from counselvise.com 17 ITA No.6205/Mum/2025 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. (...) 27. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search and cannot be the sole basis for making a block assessment. 28. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometimes statements are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statements, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee. 29. In Commissioner of Income Tax v. Naresh Kumar Aggarwal: (2014) 3699 ITR 171 (T & AP), a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. (...)” 1.22 Further, following the above decision, Delhi High Court in the case of PCIT v. Best Infrastructure (India) P. Ltd., reported in 84 taxmann.com 287 (2017) has held that: Printed from counselvise.com 18 ITA No.6205/Mum/2025 “38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal. ” 1.23 Further, with respect to the other contentions of the Id. AO, it has been already explained that the same are not related to the search action and therefore, the question of the same being incriminating material cannot arise. 1.24 In view of the above, it is submitted that the addition made on account of share capital received is not based on the incriminating material found during the search and therefore, the same is without jurisdiction which is liable to be deleted. 1.25 In this regard, it is submitted that identical additions were made in the other group company namely M/s. SRG Exim Pvt. Ltd, pursuant to the same search and on account of share capital received based on the same findings of the AO. After considering the argument of the assessee, Hon’ble Jurisdictional ITAT in the case of M/s. SRG Exim Pvt. Ltd, in ITA No. 665- 668/Mum/2021 dated 23.06.2023 has deleted the addition since the same were not based on the incriminating material (Copy enclosed at page nos. 49- 60 of the paper book). The relevant portion of the order is reproduced hereunder:- “5. We heard learned DR and perused the record. It is submitted that all these years fall under the category of unabated assessment years. We notice that the additions made by the AO in these years are related to the Share Application money received by the assessee, which were added u/ s 68 of the Act. It is not the case of the revenue that these additions have been made on the basis of any incriminating material found during the course of search, i.e, the AO has entertained the belief that these are only accommodation entries availed by the assessee, on the basis of report of the investigation wing. 6.1 The contention of the assessee is that the AO could not have made this addition in these years, since the department did not unearth any incriminating material during the course of search to prove that these are only accommodation entries. All the share application money received have been duly recorded in the books of accounts and no incriminating material was found during the course of Printed from counselvise.com 19 ITA No.6205/Mum/2025 search to show that they are bogus in nature. Since these assessment years fall under the category of unabated assessment years, no addition could have been made by the AO in these years in the absence of any incriminating material. We notice that the above said legal contentions of the assessee finds support from the decision rendered by Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra), wherein the High Court has upheld the view given by the Special bench of Tribunal in the case of All Cargo Logistics. The relevant observations made by Hon’ble Bombay High Court in the above said case are extracted below:- 6.5 The decision rendered in the above said cases by Hon’ble Bombay High Court and Hon’ble Delhi High Court has been upheld by Hon’ble Supreme Court in the recent decision rendered in the case of PCIT vs. Abhisar Buildwell P Ltd (Civil Appeal No. 6580 of 2021 dated 24th April, 2023). The relevant observations made by Hon’ble Supreme Court are extracted below:- 7. In view of the foregoing discussions, following binding decision rendered by Hon'ble Supreme Court in the case of Abhisar Buildwell P Ltd (supra), which in turn has approved the decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra) and the decision of Hon’ble Delhi High Court rendered in the case of Kabul Chawla (supra), we hold that the additions made by the Assessing Officer under section 68 of the Act towards Share Application money received by the assessee are liable to be deleted, since they are not based on any incriminating material found during the course of search. Accordingly, we set aside the orders passed by the Ld. CIT(A) and direct the Assessing Officer to delete the impugned additions made in all these years. ” 1.26 Similar decision has been rendered in another group concern by the Mumbai ITAT in the case of M/s. Morpan Merchant Pvt. Ltd. in ITA No. 663 & 664/Mum/2021 where identical addition on account of share capital has been deleted in the absence of incriminating material. The copy of the said decision is placed at page nos. 61-71 of the paper book. Printed from counselvise.com 20 ITA No.6205/Mum/2025 1.27 In light of the above, it is submitted that on identical facts, Tribunal has deleted the addition made on account of share application money based on the same search findings on the ground that the no incriminating material was found. Similarly, in the appellant’s case, the addition made on account of share capital is not related to the any findings of the search action and accordingly, the addition deserves to be deleted. Ground no.2: On the facts and circumstances of the Appellant’s case and in law the Ld. Assessing Officer erred in holding that the appellant has entered into accommodation transactions, without any cogent material on record. Ground no.3: On the facts and circumstances of the Appellant’s case and in la the Ld. Assessing Officer erred in making addition of Rs.25,00,000/- on account of alleged bogus share application money by invoking the provision of section 68 of the Act. Non-Applicability of section 68 2 Now coming to the merits of the case, it is submitted that ld. A.O. has alleged that the share capital received is unexplained as the appellant has not been able to substantiate the identity, genuineness and credit worthiness of the transaction. 2.1 In this respect, it is submitted that the share capital received during the year under consideration, is entirely genuine. The share subscriber is a registered private limited companies who have been regularly filing its income tax return and returns with ROC. The said company is self-sufficient to advance funds to any legitimate entity or person in accordance to its memorandum and articles. The share subscribers have given share application money through proper banking channel and with due formalities as required in the Company Law. 2.2 In order to substantiate this fact, the assessee is attaching herewith the following documents which are placed at page nos. 33-48 of paper book:- a. Acknowledgement of Return of income filed by share subscribers b. PAN No. 8s incorporation certificate of share subscribers c. Balance sheet of share subscribers. d. Bank statement of share subscribers showing the source of the said money Printed from counselvise.com 21 ITA No.6205/Mum/2025 e. Written confirmation issued by share subscribers confirming the investment made in the appellant which also contains the details of cheque payments and source of such investment in the hands of the share subscriber. f. Share application form and Extract of minute book of the share subscriber approving the allotment of shares to be allotted to share subscribers. 2.3 . It. is clear from, the provisions of the section 68 of the Act that the initial burden is upon the assessee to explain the nature and source of money received. In order to discharge this burden, the assessee is required to prove:- (a) Identity of the lender, (b) Genuineness of transaction; and (c) Creditworthiness of the lender. IDENTITY: 2.4 It is humbly submitted that the share capital has been received from corporate entity that is registered with the Registrar of Companies and also has been allotted with PAN. The said companies have been filing their returns of income which proves beyond doubt their identity. 2.5 It is humbly submitted that once the identity i.e. names are provided in respect of share application money received than in such case no addition can be made u/s 68 of the Act on account of alleged unexplained transactions. 2.6 In respect of the above reference to the decision of the HonTole Supreme Court in the case of Commissioner of Income Tax v. Lovely Exports (P.) Ltd. [2008] 216 CTR 195 is made. The relevant head note of the decision is reproduced herein below. “If the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the department is free to proceed to reopen their individual assessments in accordance with law but this amount of share money cannot be regarded as undisclosed income under section 68 of the assessee company”. 2.7 . It is submitted that the details in respect' of the share application money received from private limited company was available with the AO. The identity of Printed from counselvise.com 22 ITA No.6205/Mum/2025 the Share Applicant’s having being provided and proved, no addition on account of alleged unexplained transactions can be made u/s 68 of the Act. CREDITWORTHINESS: 2.8 The AO has questioned the creditworthiness of the applicant without any basis. Creditworthiness of the lender term “creditworthy” in its natural meaning would mean “considered suitable to receive credit, especially because of being reliable in paying money back in the past”. It is submitted that the share applicant company are carrying on the business of investing/trading in shares and securities. The same is evident from the audited financial statements. The company is having huge investments in various companies including that of the appellant company. The investment made in the appellant company is reflected in the audited balance sheet and bank statements submitted by them. The said company has huge own funds of Rs. 17.53 Crs. which is more than sufficient to make investment in the appellant company of Rs. 0.25 Crs. Therefore, the credit worthiness of the applicant cannot be doubted. GENUINENESS: 2.9 Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said lender and it came from the coffers from that lender. When the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. 2.10 Thus, in the appellant’s case, the documents listed above, prove the identity of share subscribers through the PAN, the genuineness through the balance sheet and credit worthiness though the bank statement of the creditor. Therefore, the appellant has duly discharged its onus\" to substantiate the transaction. 2.11 The above documents prove beyond doubt that the funds have been routed through proper banking channels and the provisions of section 68 have been duly satisfied. The assessee has duly proved the identity, genuineness and credit worthiness of its source as well as source of the source. Printed from counselvise.com 23 ITA No.6205/Mum/2025 2.12 Furthermore, the appellant during the course of assessment proceedings before the Id. AO has also substantiated the source of funds in the hands of share subscribers. It is submitted that all the share subscribers have made investment in the appellant company out of its own accumulated fund which are duly reflected in their Balance Sheet. The said funds have been raised by these parties much earlier to the year under consideration which can be verified from the audited financial statement enclosed in the paper book. Moreover, the share subscribers have duly explained their source in the confirmation issued by them which has been duly submitted before the Id. A.O. and enclosed in the paper book. The copy of the said confirmation is placed at page nos. 46 of the paper book. In the said confirmation, the share subscribers have clearly stated exact source of funds out of which the amount has been invested in the appellant company. 2.13 Further, Id. AO issued notice u/s 133(6) to the parties during the assessment proceeding which was duly replied by the parties. 2.14 Further, it is submitted that even after submitting the above mentioned details before the Id. Assessing officer, he has not made any further enquiry to prove that that the investment made by various share subscribers in the appellant’s company was nothing but sham transaction or that the details submitted are not correct or bogus. No corroborative or adverse information has been brought on record even to remotely suggest that the said investments made, by the respective companies were not genuine or bogus. As against the same, the appellant has discharged its onus by submitting the details as called from to time and has proved beyond doubt that the same was genuine transaction. 2.15 Once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in case any doubt is raised, then the Assessing officer is free to probe the matter further. However, to discredit the documents produced by the appellant on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion. Printed from counselvise.com 24 ITA No.6205/Mum/2025 2.16 Now, let us discuss the various allegations of the Id. A.O. raised in the assessment order. In the impugned order, Id. A.O. has heavily relied upon the statement of Shri Sanjay Dugar wherein he has admitted certain share capital being non genuine. In this regard, it is submitted that Shri Sanjay Dugar has nowhere made any admission in respect of share capital received in the appellant company. The relevant portion of statement is reproduced hereunder:- “Q.25In view of the reply to the aforesaid questions it is observed that you are not able to provide the basic and necessary supporting details and documents in support of the alleged transaction of share premium received by the group concerns. You have also failed to establish the genuineness of the alleged transaction of receipt of share premium by the above referred concerns. Please offer your comments upon your failure to substantiate said alleged transactions of share premium received by the concerns referred above. Ans. Presently, I am not able to provide the required details and also admit my failure in providing the basic and necessary details in support of the transaction of share premium received by my group concerns. I have examined the transactions, under consideration and have arrived at conclusion that part of share premium cannot be substantiated as the same has been received from Jama Kharchi Companies. Jama Kharchi Companies are not into real business but merely into the business of providing accommodation entries. I have given cash to such Jama Kharchi Companies and received it back as share premium by cheques. Such transactions were done to bring the unaccounted money, generated in my business, back to regular books of accounts of group concerns. I am submitting the breakup of the share premium which is non-genuine and is in the nature of accommodation entry. I want to voluntarily offer such amount of Rs. 3,21,00,000/- as my undisclosed income of the respective years. Year wise and concern wise break up is provided as under:- Printed from counselvise.com 25 ITA No.6205/Mum/2025 2.17 On perusal of the above statement, it is clear that the above statement given by Mr. Sanjay Dugar do not pertain to the share capital received by the appellant company. Moreover, Mr. Dugar has categorically stated that transactions in other companies are genuine. Accordingly, the action of the Id.AO at para 6.3.1, in relying upon the statement of Mr. Dugar to doubt the transaction of the appellant company is not correct. 2.18 Further, Id. A.O. has stated that some of the share subscribers, who have subscribed to the share of appellant as well as other entities, have common address or auditors. In this regard, it is submitted that such common address or common auditors doesn’t goes on to show that the share subscribers are not genuine. It is always a possibility that the said lenders belong to same group of individual and for practical purpose, operate from common address and have same auditors. In any case, the appellant has received share capital from only one party and therefore, the above allegation is not relevant in the appellant’s case. Therefore, the contention of the Id. A.O. is baseless. Printed from counselvise.com 26 ITA No.6205/Mum/2025 2.19 In this regard, we rely on the following judgment wherein it has been held that such enquiries cannot lead to a conclusion that the lender is non¬existent where adequate documents have been submitted:- CJTv. Winstral Petrochemicals fP.) Ltd. [2011110 taxmann.com 137/199 Taxman 135 fMag.l (Delhi) “Assessee-company received share application money by account payee cheques from twelve companies. During course of assessment, assessee was asked to prove identity and creditworthiness of applicants and genuineness of transactions. Assessee furnished copies of their applications for allotment of share, confirmation of payments, copies of their certificates of incorporation, PAN details and company details downloaded from the site of Department of Company Affairs and copies, of their PAN cards. Assessing Officer, however, added amount of share application money to income of assessee on grounds that some of applicants had a common address and during inspection by inspector five applicants were not found functioning at given address. Since applicants were duly incorporated, were issued PAN Cards and had bank accounts from which money was transferred to assessee by way of accounts payee cheques, they could not be said to be non-existent, even if they, after submitting share applications had changed their address or had stopped functioning” (Emphasis provided by us) 2.20 Further, Id. A.O. has stated that the reply filed the share subscriber (M/s. Pugalai Vyapaar Private Limited) in response to notices u/s 133(6) of the Act does not contains the complete details as-required. In this respect, it- is submitted that the appellant has no control over the share subscribers and cannot compel them to reply to the notices issued by the department. Here, it is important to appreciate that the said notices have been duly served proving the identity and genuineness of the share subscribers. 2.21 It is important to note that when the appellant has submitted the entire documents to discharge its primary onus, merely because such details were not Printed from counselvise.com 27 ITA No.6205/Mum/2025 submitted in response to notice u/s 133(6) cannot be a ground to term the said cash credit as unexplained. 2.22 Further, Id. AO has alleged that the investor companies are having minimal income. In this respect, it is submitted that investor’s company business is to invest in corporate, either quoted or unquoted or various financial instruments like mutual funds, etc. The investor company has proved its financial capabilities through its balance sheet wherein it has own funds of Rs. 17.53 Crs. and in the course of its business, it has invested in the appellant company as venture capital. This can also get corroborated from the fact that most of the share subscribers are NBFC companies and have invested in various companies with a long-term view and would earn income only on sale of such investments. In view of the same the allegations made by the AO does not disprove the facts or prove that the facts stated are false. 2.23 In this respect, we rely on the judgment of Hon'ble Delhi High Court in the case of CJT p. Vrindavan Farms (P.) Ltd. etc., in ITA.No.71 of 2015 dated 12th August, 2015 held as under : \"The sole basis for the Revenue to doubt their creditworthiness was the low income as reflected in their return of income. It was observed by the ITAT that the AO had not undertaken any investigation of the veracity of the documents submitted by the assessee, the departmental appeal was dismissed by the Hon'ble High Court.” 2.24 Further, we rely on the decision of Hon'ble Delhi High Court in the case of C/Tv. Value Capital Services (P.) Ltd. f20081 307 ITR 334 (Del.) |HC) in which it was held as under : \"Dismissing the appeal, that the additional burden was on the Department to show that even if the share applicants did not have the means to make the investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as the undisclosed income of the assessee. No substantial question of law arose.\" Printed from counselvise.com 28 ITA No.6205/Mum/2025 2.25 Further, we rely on the judgment of Delhi Tribunal in the case of ACIT vs. Adamine Construction (P.) Ltd [2017] reported in 87 taxmann.com 216) “In the present case there were 11 investor companies claimed to have invested in the assessee-company. In support of their identity and creditworthiness as well as genuineness of the transactions, the assessee had filed before the Assessing Officer, their (investor companies) confirmations, Income Tax return acknowledgements (except in the case of RGTC), bank accounts with this submission that entire amount had been received by the assessee-company through normal banking channels by account payee cheques/demand drafts. The confirmations filed revealed the source of funds, particulars of the bank account through which payments were received and the Income Tax particulars establishing the identity and creditworthiness of the respective share applicants. Thus, the assessee had discharged its primary onus to establish identity and creditworthiness of the investor companies as well as genuineness of the transactions. The Assessing Officer, on the other hand, had doubted the genuineness of the claimed receipt on the basis that some of the investor companies could not be found at the given address and that some of the investor companies responded to the summons by post, but had not caused appearance before him. The Assessing Officer also held that income of many of the investor companies was too low or meager to enable them to make such large investments in the share capital of the assessee-company. The Assessing Officer also observed that there appeared no justification for large components of share premium paid to the assessee along with the share capital The submission of the assessee in this regard remained that there is no law that more than one company cannot have its Registered office at one address and that there is no law that companies cannot change their Registered offices. It was submitted that business raise capital and such capital is rotated in economy for increasing production and trade and for making more efficient use of capital. Companies change and, sometimes in quick succession. This is the normal Printed from counselvise.com 29 ITA No.6205/Mum/2025 formation of capital in any open economy and the process of capital formation cannot be taken to be representing only unaccounted funds or impeded. It was submitted that all the companies having Registered office at the premises undisputedly belonged to one, 'B' Group. The sources of capital introduced in these companies were established during the respective assessment proceedings. It was further contended that no evidence was found during search to indicate introduction of cash in the form of share capital. It is also pertinent to mention over here that out of total 11 investor companies, notices could not be served in case of 3 companies as they were not available on the given addresses. The remaining 8 companies had responded and had filed their submissions. However, there is no dispute that in case of all the 11 investor companies, the assessee had filed primary documents and had accordingly discharged its initial onus to establish identity and creditworthiness of the investor companies and genuineness of the transaction as there is no dispute that all the transactions have been done through banking channels, i.e., through account payee cheques and demand drafts. Thus, the Assessing Officer has failed to discharge its onus to prove that the documents filed by the assessee, as discussed above, were false or fabricated as the Assessing Officer has not made any efforts to verify those documents especially when there is no dispute that all the investor companies were filing their returns of income and were being assessed by the Department. The Assessing Officer on the contrary remained suspicious on the claimed receipt from the investor companies on some other factors like some of them were not found on their given addresses, some of them had furnished their submissions through posts and some of them were not hatting sufficient income etc. as discussed above. Under these circumstances, the Commissioner (Appeals) was justified in deleting the addition made under section 68 on account of unexplained share capital and share premium. [Para 18]” (Emphasis provided by us) Printed from counselvise.com 30 ITA No.6205/Mum/2025 2.26 Thus, the contention of the Id. A.O. that certain share subscribers have shown meagre income cannot lead to addition u/s 68 of the Act. 2.27 Further, Id. A.O. has stated that entries in the bank account of the investors appear suspicious since there is low closing balance and there is corresponding cheque before any debits: In this respect, it is pertinent to note that since M/s. Pugalia Vyapaar Private Limited in mainly in the business of investing in other companies so such companies usually avoids keeping any idle bank balance in their bank accounts. Further, it is not a case of the Id.A.O. that cash has been deposited in the bank account before issue of cheques. Moreover, the share subscribers have duly explained in their confirmation, the exact nature of such cheques received out of which funds has been invested in the appellant company. Therefore, the allegations of the Id. A.O. in terming the funds received by appellant company is baseless. 2.28 Similarly, Id. A.O. has stated that the appellant has failed to furnish the share certificates during the course of assessment proceedings. In this respect, it is important to note that the share certificates are property of the share subscriber and the appellant who is the issuer, doesn’t possesses it. The appellant is in possession of share application form and share allotment form which are duly submitted before the Id. A.O. Therefore, the contention of the Id. A.O. in non- production of share certificates is incorrect. 2.29 Further, Id. A.O. has mentioned that the appellant has failed to furnish the business in which the share subscribers are indulged into. In this respect, it is submitted that the business of the share subscribers are duly reflected in the details submitted before Id. A.O. such as Financial Statements and has provided the RBI certificate thereby showing that it a NBFC company. The above details clearly show the nature of the business of the share subscribers. Therefore, the objection of the Id. A.O. is incorrect. 2.30 Further, in the assessment order, Id. AO has also stated that the valuation of shares is excessive and not justifiable. In this regard, it is submitted that in the case of private limited companies, the shares are allotted at a rate /value which Printed from counselvise.com 31 ITA No.6205/Mum/2025 was agreed upon, pursuant to the private negotiations between the allottees, the company and its existing shareholders, with the final approval of the board of Directors of the company. The shares were allotted at a premium, in compliance, with the provisions of. the Companies Act, 1956. In the appellant’s case, the shares have been duly issued 2.31 It is pertinent to point out that under the provisions of Companies Act, the Board of Directors has the power to allot shares at a premium, in the best interest of the Company. It has been held in the case of Lowri (Inspector of Taxes) v. Consolidated African Selection Trust Ltd. (1940) 2 All ER 545, that if the directors can obtain a premium on issue of shares, it is their duty to do so. Explaining the authority of directors to do so, it has been further held in the case of CIT vs. Standard Vaccum Oil Co. AIR 1966 SC 1393, that there can be no objection to the charging of varying rates of premium in respect of blocks of shares carrying the same rights. 2.32 Without prejudice to the above, the question of taxing any excess premium doesn’t arises in the year under consideration since the same has been inserted by virtue of section 56(2)(viib) w.e.f 01.04.2013 i.e. AY 2013-14. Therefore, the contention of the Id. A.O. in respect of valuation of shares is misplaced. 2.33 In this regard, reliance is placed on the decision of Mumbai Tribunal in the case of Green Infra Ltd. [2013] 38taxmann.com253 (Mumbai - Trib.) Wherein dealing with an identical issue, Tribunal held that charging of a premium is a prerogative of the company and its shareholders and revenue authorities cannot tax the same. The relevant portion of the decision is as under: - “No doubt a non est. company or a zero balance company asking for a share premium of Rs. 490 per share defies all commercial prudence, but at the same time one cannot ignore the fact that it is a prerogative of the Board of Directors of a company to decide the premium amount and it is the wisdom of the shareholders whether they want to subscribe to such a heavy premium. The revenue authorities cannot question the charging of such of huge premium without any bar from any legislated law of the land. Details of subscribers were before the revenue Printed from counselvise.com 32 ITA No.6205/Mum/2025 authorities. The Assessing Officer has also confirmed the ransaction from the subscribers by issuing notice under section 133(6). The Board of Directors contain persons, u>ho are associated with IDFC group of companies. Therefore, their integrity and credibility cannot be doubted. The entire grievance of the revenue revolves around the charging of such of huge premium so much so that the revenue authorities did not even blink their eyes in invoking provisions of section 56(1). [Para 10.1] 2.34 It is pertinent to note that the above addition has been upheld by the Hon’ble Bombay High Court which is reported in [2017] 78 taxmann.com 340 (Bombay). 2.35 Further, reliance is also placed on the decision of Mumbai Tribunal in the case of Chiripal Poly Films Ltd. reported in [2019] 104 taxmann.com 172 (Mumbai - Trib.) wherein it was held that the valuation of the shares is not relevant for the provisions of section 68 of the Act. The relevant portion of the decision is as under: - “Valuation is not relevant for determining genuineness of the transaction for the purpose of section 68. The Commissioner (Appeals) has rightly deleted the addition on account of the share premium. It is a settled position that what is apparent is real unless proved otherwise. It is a settled legal position that 'apparent is real' and the onus to prove that the apparent is not the real is on the party who claims it to be so. [Para 17] In the instant case, the overwhelming evidence proves that the 'nature' of receipt is share premium and share application money. The audited accounts of both parties, the statutory since it was the department which claimed that the share premium, is not in fact so, despite the statutory forms viz., Form 2 for return of allotment and Form 20B for annual return filed with RoC all show the 'nature' as share premium. If the department wants to contend that what is apparent is not real, it is the onus of the department to prove that it was assessee's own moneu which was routed through a third party. Only then can the provisions of section 68 be invoked. [Para 18] Printed from counselvise.com 33 ITA No.6205/Mum/2025 The assessee made another argument that the power of carrying valuation is not envisaged by the Legislature for the purpose of section 68. Wherever the Legislature intended to give the power to determine the value of the Assessing Officer, it either prescribes rule for valuation of a particular thing or vested upon the Assessing Officer the power to refer to the Valuation Officer. The power of the Assessing Officer to make a reference to the Valuation Officer is contained in section 142A. [Para 19] This section does not cover section 68. Thus, the Legislature does not envisage any sort of valuation for the purpose of section 68. Indeed, valuation of preference shares is a completely different exercise as compared to valuation of equity shares. The Assessing Officer makes the mention of the reserves and loss while challenging the charge of share premium on preference shares. 'Reserves' could be relevant for valuing equity shares. They are not relevant for valuing preference shares. Preference shareholders get priority over the equity shareholders in terms of payment of dividend and during winding up. They get only a fixed rate of dividend. The redemption amount depends on the terms of issue. The conversion depends on the terms of issue. The terms of issue are relevant for valuing preference shares. Even the present rule 11UA are applicable only to section 56(2) requires valuation of preference shares by the merchant bankers. The Assessing Officer has not even attempted to do any sort of valuation of preference shares. His addition is based entirely on conjectures and surmises. It is settled law that the assessment cannot be made on mere suspicion, conjectures and surmises: [Para 20] . Even amendment to section 68 brought by the Finance Act, 2012 does not refer to valuation. The insertion of the proviso to section 68 by the Finance Act, 2012 casts an additional onus on the closely held companies to prove source in the shareholders subscribing to the shares of companies. During the course of the hearing, the assessee explained that the explanatory memorandum to the Finance Bill 2012 makes it clear that the additional onus is onln with respect to source of funds in the hands of the shareholders before the transaction can be accepted as a Printed from counselvise.com 34 ITA No.6205/Mum/2025 genuine one. Even the amended section does not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the revenue's contentions that section 68 can be applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time. [Para 21] In view of the above facts and circumstances, the assessee has discharged its onus by adequately disclosing the transaction in its books of account, filing statutory forms as regards allotment of shares, provided name, address and PAN of the shareholders, etc. The assessee has sufficiently discharged the onus cast upon it for the purpose of section 68 and no addition can be made on this account. Hence, the Commissioner (Appeals) has rightly deleted the addition and the same was confirmed. These two common issues of revenue's appeal are dismissed. [Para 22] 2.36 Further, reliance is placed on the decision of Mumbai Tribunal in the case of Goldmohur Design & Apparel Park Ltd. reported in [2018] 96 taxmann.com 375 (Mumbai - Trib.) wherein it was held as under:- “The net asset value of shares as on 31-03-2008 comes to Rs. 33/- as the total asset is Rs. 19.30 crores, whereas, the premium charged per share is Rs. 154.72, thus, the excess premium charged comes to Rs. 121.72 resulting into total excess premium comes to Rs. 34.89 crores. However, as per the provisions of section 56(2)(viib), where a company, not being a company in which the public are substantially interested, receives, in any previous year, from any person being a resident, any consideration for issue of shares that exceeds the face value of such shares, the aggregate consideration receive for such share as exceed the fair market value of such share was inserted by the Finance Act, 2012, with effect from Printed from counselvise.com 35 ITA No.6205/Mum/2025 01-04-2013 and the present assessment year before us is 2009-10, therefore, the amendment made in section 68 is prospective in nature. The three essential tests while confirming the section 68 namely the genuineness of the transaction, identity and the capacity of the investor have all been examined by the impugned order of the Tribunal and on fact it was found satisfied. Further it was a submission on behalf of the revenue that such large amount of share premium gives rise to suspicion on the genuineness (identity) of the shareholders, i.e., they are bogus. The Apex Court in a case in this context to the pre amended section 68 has held that where the revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income tax Officer to proceed by reopening the assessment of such shareholder and assessing them to tax in accordance with law. It does not entitle the revenue to add the same to the assessee's income as unexplained cash credit. Thus, there is no infirmity in the order of the Commissioner (Appeals), thus this ground of the revenue is also dismissed. [Para 3.3]” 2.37 Accordingly, it is submitted that the addition made u/s 68 of the Act on the ground of excessive valuation is not tenable. 2.38 Moreover, Id. A.O. in the impugned order has alleged that the share capital taken are in nature of accommodation entries which means that the unaccounted cash income has been brought back in the books of the appellant. However, in- spite of an extensive search action on the appellant, not single evidence has been brought on record that cash has been exchanged between the parties. Also, it is not the case of the Id. A.O. that cash was found deposited in the bank accounts of the investors before making investments in appellant. Ld. A.O. has also not brought any evidence on record if the investments came from the coffers of the appellant company. 2.39 Therefore, the various contentions and objections raised by the appellant in the assessment are devoid of merits and only go on show that additions have been made in a hazardous manner & with a prejudicial mind-set, due to which the documents submitted by the appellant have not been correctly appreciated. Printed from counselvise.com 36 ITA No.6205/Mum/2025 2.40 Further, it is submitted that the similar addition of share capital in the case of other group assessee of the appellant group i.e. M/s. Sumati Chand Jewellers Pvt. Ltd, on similar facts has been dealt and decided by the HonTile Mumbai Tribunal. It is pointed out the said appeals were arising out of the same search matter in the Gouti Group and the addition made therein were deleted. The copy of the said decision is placed at page nos. 72-104 of the paper book. The relevant portion of the ITAT order in ITA No.655/Mum72021 dated 20.10.2023 is as under:- 22. We shall examine the relief granted by Ld CIT(A) with regard to the above said three companies and the additions confirmed by Ld CIT(A) together. It is noticed in the instant case that it is not the case of the AO that the assessee did not discharge the initial burden placed upon it with regard to the share capital/share premium money received by it. The assessee has furnished all the details relating to the investors/loan in order to discharge the burden placed upon it u/s 68 of the Act. We noticed from the record that the assessee has filed following documents in order to discharge the burden placed upon it under section 68 of the Act a) Certificate of Incorporation of share subscribers. b) PAN number of share applicants. c) Balance Sheet of share subscribers d) Bank Statement of Share subscribers. e) Acknowledgement of Return of income filed by Share subscribers. f) Form 2 filed before ROC for allotment of shares. g) Valuation report of shares From the details submitted it can be seen that the identities of share subscribers stand proved. Since they have made payments from their bank accounts through account payee cheques, these transactions cannot be treated as bogus. Since the payments have been made from of funds available with them, the credit worthiness would also stand proved. We notice that the AO has observed that these subscribers are either showing loss or meagre profits and such meagre profits are not commensurate with the investments made by them. However, there is no bar Printed from counselvise.com 37 ITA No.6205/Mum/2025 under the law that a person could not make investments out of borrowed funds. In the instant case, it is not the case of the AO that the applicants did not have funds available with them for making investments in the assessee company. In fact, the said investments have been routed through the bank accounts of the assessee as well as the subscribers. Further, these investments are duly reflected in their books of account. 22. We notice that the tax authorities have first relied upon the surrender made by Shri Sumati Chand Gouti and Shri Saniau Dupar in the statement taken u/s 132(4) of the Act during the course of search. We noticed earlier that the assessee is contending that Shri Sanjag Duaar was not a director during the period in which the search has taken place and hence his statement will not bind the assessee. Be that as it may, we notice that both the parties have admitted during the course o f search on the clear reasoning that they immediately did not have details with them. Accordingly, it was agreed to surrender the share capital received by them. After the conclusion of search, these persons have retracted the statements and furnished all the details relating to the share capital received by the assessees. It was also submitted that they have surrendered the income only under pressure. Thus, we notice that the evidences furnished by the assessee to prove the cash credits would outweigh the statements given by them and hence there is merit in the retraction made by them. Accordingly, in the facts and circumstances of the case, we are of the view that the tax authorities could not have relied upon the statements given by the above said two persons without bringing any material contrary to the evidences furnished by them. 23. We notice that the AO has mainly relied upon the report of investigation wing to come to the conclusion that the assessee has availed only accommodation entries. He has also referred to the no reply of the notices issued by them and non- furnishing of details called for. But the fact would remain that the assessee has furnished the relevant details before the AO and all those details were earlier filed with either Income tax department or with Registrar of Companies, i.e., with Government authorities. Hence the authenticity of those documents could not be Printed from counselvise.com 38 ITA No.6205/Mum/2025 doubted-with. When all the relevant- details-are available with-the- AO, it is the requirement that the AO should examine those documents and could reject them, only if he finds fault with those documents. We notice that the AO did not find any deficiency or fault with the evidences produced by the assessee. 24. With furnishing of all these documents, in our view, the assessee has discharged initial burden placed upon it under section 68 of the Act by furnishing above said documents. Hence the source as well as the source of source also stands proved by the subscribers. 25. The question that arises is whether the Assessing Officer could have made addition under section 68 of the Act by relying upon report of investigation wing or the statement given by the alleged accommodation entry providers. It is apposite to refer to the decision rendered by the Coordinate Bench in the case of M/s. Moraj Realty Pvt. Ltd. (ITA No. 708 & 709/Mum/2019 dated 08-12-2020), herein the decision was rendered by following the decisions rendered by Hon’ble Bombay High Court. It was held as under :- 26. The Hon’ble Bombay High Court has held in the case of CIT vs. Orchid Industries (P) Ltd (397 ITR 136)(Bom) that the addition u/s 68 could not be made once the assessee had produced the documents to prove the cash credits. It was further held that non-appearance of the share subscriber before the AO will not change this position. It is also apt to refer to the decision rendered by Hon’ble Bombay High Court in the case of PCIT vs. Paradise Inland Shipping (P) Ltd (2017)(84 taxmann.com 58)(Bom). In this case, it was allegation of the revenue that the assessee has received share application money from fictitious companies. The Hon’ble jurisdictional High Court held as under:- 28. In our view, the above said decisions rendered by the jurisdictional Hon’ble High Court and the co-ordinate bench supports the case of the assessee. Accordingly, following the above said decision, we hold that the addition made by the Assessing Officer under section 68 of the Act, in the facts and circumstances of the case, was not justified. We noticed earlier that some of the cash credits were received in the earlier year and not during the year under consideration. Printed from counselvise.com 39 ITA No.6205/Mum/2025 Accordingly, we confirm the relief granted by Ld CIT(A) for the reasons discussed above and set aside the decisions rendered by the learned CIT(A) in confirming the addition in these years. Accordingly, we direct the AO to delete the additions made under section 68 of the Act in all the years under consideration.” (emphasis provided by us) 2.41 Similar decision has been rendered in another group concern by the Mumbai ITAT in the case of M/s. Morpan Merchant Pvt. Ltd. in ITA No. 2515/Mum/2021 where identical addition on account of share capital has been deleted rejecting AO’s reliance on statement recorded during the search. The copy of the said decision is placed at page nos. 105-116 of the paper book. 2.42 Further, we rely on the following judicial precedents wherein addition made u/s 68 has been deleted once the assessee proves the Identity, Genuineness and Creditworthiness of the parties. a. Principal Commissioner of Income Tax vs Paradise Inland Shipping Pvt Ltd 84 Taxmann.com 58 (Bombay HC) Where reassessment resorted to on ground that companies which had purchased shares of assessee-company were not in existence, once assessee had produced documentary evidence to establish existence of companies, burden would shift on to revenue to establish initiation of reassessment and, thus, reassessment be set aside b. Commissioner of Income Tax-1 vs Gagandeep Infrastructure Pvt Ltd 80 Taxmann.com 272 (Bombay HC) Whether where assessee-company had established identity, genuineness and capacity of shareholders who had subscribed to its shares, Assessing Officer was not justified in adding amount of share capital subscription as unexplained credit - Held, yes - Whether where revenue urged that assessee had received share application money from bogus shareholders, it was for Income-tax Officers to proceed by reopening assessment of such shareholders and assessing them to tax in accordance with law and it did not entitle revenue to add same to assessee's income as unexplained cash credit - Held, yes [Para 3] [In favour of assessee] c. CIT vs Vacmet Packaging (India ) Pvt Ltd 367 ITR 217 (Allahabad HC) Printed from counselvise.com 40 ITA No.6205/Mum/2025 No addition could be made under section 68 on account of share application money received, where assessee had established identity and creditworthiness of applicant companies and genuineness of transaction d. CIT v. Dwarkadhish Investment (P) Ltd. [2010] 330 ITR 298/194 Taxman 43 (Delhi). “Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 2001- 02 - Whether though in section 68 proceedings, initial burden of proof lies on assessee, yet once he proves identity of creditors/share applicants by either furnishing their PAN numbers or income-tax assessment numbers and shows genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then onus of proof would shift to revenue and just because creditors/share applicants could not be found at address given, it would not give revenue right to invoke section 68 - Held, yes” Judgement of Hon’ble High Court Of Calcutta in the case of CIT vs. Sahibganj Electric Cables Pvt. Ltd. 115 ITR 408 “Section 68 of the Income-tax Act, 1961 - Cash credits - Assessment year 1961- 62 - Loans in question were received by assessee by cheques and repayments were also made by cheques - Assessee had given confirmation letters of respective parties and in said letters income-tax file numbers of alleged creditors were given - Cheques for repayment of loan were cleared through assessee’s banker - Tribunal held that assessee had discharged onus prima facie that laid on him and as such amount of loans were not his income from undisclosed sources - Whether order of Tribunal was justified - Held, yes” f. CIT Vs. Expo Globe India Ltd. (Delhi High Court) [1TA No. 1257/2011] Conclusion: This Court has carefully considered the submissions. The previous discussion, particularly the order of the CIT (A), would reveal that even though the Assessing Officer had initially concluded on the basis of the materials made available at that stage that service of the entry providers had been utilized to bring in capital, after remand the CIT (A) elaborately took into account considerable material furnished by the assessee. These included income tax Printed from counselvise.com 41 ITA No.6205/Mum/2025 returns, balance sheets, ROC particulars and bank account statements. On the basis of these, the CIT (A) held that the share application money or the source of the share application money had been satisfactorily explained. g. CIT Vs. Ujala Dyeing & Printing Mills Pvt. Ltd. (Gujarat High Court) [ITA No. 375/2008] Conclusion: Assessee has clearly discharged its onus of proving identity of parties, genuineness of transaction and creditworthiness of share applications inasmuch as evidently their returns of income, assessment orders, balance sheets showing investment, explanation regarding how they raised funds have been submitted before The~lower authorities. h. Madras High Court in case of CIT, Chennai vs. Pranav Foundation Ltd. [51 Taxmann.com 198 (2014)] has held that where the assessee has categorically established the nature and source of the said sum and discharged the onus that lies on it in terms of section 68. When the “nature and source” of the amount so invested is known, it cannot be said to undisclosed income. Therefore, the aforesaid addition as unexplained credit under section 68 is unwarranted. i. Reliance can be placed on the decision dated 12 December 2014 of the Hon’ble Mumbai ITAT, in the case of Elder IT Solutions Pvt. Ltd. v. CIT. (ITA NO.3325/Mum/2014) wherein -it has been held that where the Commissioner himself has not given a conclusive finding about the genuineness of the transaction, therefore, the enquiry of source of source is not warranted when the identity and source as well as transaction through banking channel has already been established by the assessee in view of the decision in the case of Lovely Exports (299 ITR 268). j. The Hon’ble Mumbai ITAT in case of Green Infra Ltd v. Income- tax Officer (159 TTJ 728). In this decision the Hon’ble ITAT has considered as under: Section 68: As per Section 68, the initial onus is upon the assessee to establish identity, genuineness of transaction and the capacity of the lender. The ITAT held the following: ‘The genuineness of the transaction can also be safely concluded since the entire transaction has been done through the banking channels duly recorded Printed from counselvise.com 42 ITA No.6205/Mum/2025 in the books of accounts of the assessee and dulu reflected in the financial statement of the assessee Applying the facts of the above decision in the case of the Company it is a good case to contend that the Company has proven the identity of lender entry. Hence addition under Section 68 cannot be made. k. CIT vs KC Pipes Pvt Ltd 386 ITR 532 [Punjab and Haryana HC] Section 68 of the Income-tax Act, 1961 - Cash credit - (Share Application money)- Assessment year 2006-07 - If shareholders had acquired money illegally, assessee could not be held liable [In favour of assessee] l. Kitara Capital Pvt Ltd vide ITA No. 130/M/2014, ITAT Mumbai The assessee received a loan of Rs. 1.77 crores from one, Encee Securities Pvt. Ltd. during the year. The AO received information from the Investigation Wing that one Mr. HS, director of Encee Securities Pvt. Ltd., was engaged in providing accommodation entries and made addition of Rs. 1.77 crores in the hands of the Assessee. The AO relied on the statement of Mr. HS wherein the said Mr. HS could not answer basic questions about Encee Securities Pvt. Ltd. The Tribunal observed that the said statement was retracted by Mr. HS, which according to Mr. HS was recorded under duress and under pressure, within a reasonable time and hence held that the authenticity of the statement relied on by the AO was under cloud and could not be considered as sole basis of addition. The Tribunal further observed that the money from which the loan was advanced germinated from the hands of the shareholders, who contributed to M/s Encee Securities Pvt. Ltd. but in the hands of the present assessee, it was merely a loan and this fact had not been denied by any party. M/s Encee Securities Pvt. Ltd. had never denied that loan was given to the Assessee. Therefore, the assessee could not be expected to prove the source of source. A harmonious construction of section 106 of the Evidence Act and section 68 of the Income-tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. The identity of the lender, capacity and genuineness of the loan was not in doubt. Printed from counselvise.com 43 ITA No.6205/Mum/2025 Therefore, held the addition made by the AO in the hands of the assessee was not justified. m. CIT v. Arnbuia Ginning Pressing and Oil Co. IP.) Ltd. 120111 15 taxmann.com 273/203 Taxman 34 (Mag.) (Ouj.) “Where assessee-company received share capital and deposits from its shareholders and had established identity and creditworthiness of shareholder and depositors by furnishing complete particulars of payments like cheque numbers and date, extract of bank passbooks, explanation of credits appearing in bank passbook, it could be said that assessee-company had proved genuineness of transaction warranting no addition under section 68. ” 2.43 Further, in the case of the appellant company, your honour would appreciate the fact that, share premium money received by the assessee cannot be regarded as income. In fact, any amount received from a shareholder towards share capital and towards share premium are both on capital account only. Furthermore any inter se bifurcation between share capital and share premium will have no impact on income as both are capital in nature. Various Courts have clearly observed that the issue of shares at a premium gives rise to no income as the receipt are not revenue in nature. We reply on the judgments of HonTole Bombay high court in the case of CIT vs. Apeak Info tech, Nagpur vide ITA No. 26/2017 dated 08.06.2017 wherein it was held as under: - “(a) We find that the impugned order of the Tribunal upheld the view of the CIT(A) to hold that share premium is capital receipt and therefore, cannot be taxed as Income. This conclusion was reached by the impugned order following the decision of this Court in Vodafone India Services Pvt. Ltd. (supra) and of the Apex Court in M/s G.S. Homes and Hotel P. Ltd. (supra). In both the above cases the Court has held that the amount received on issue of share capital including premium are on capital account and cannot be considered to be income. (b) It is further pertinent to note that the definition of income as provided under Section 2(24) of the Act at the relevant time did not define as income any consideration received for issue of share in excess of its fair market value. This came into the statute only with effect from 1st April, 2013 and thus, would have, Printed from counselvise.com 44 ITA No.6205/Mum/2025 no application to the share premium received by the Respondent - Assessee in the previous year relevant to the assessment year 2012 - 2013. Similarly, the amendment to Section 68 of the Act by addition of proviso was made subsequent to previous year relevant to the subject Assessment year 2012-13 and cannot be invoked. It may be pointed out that this Court in Commissioner of Income Tax vs. M/s. Gangadeep Infrastructure (P) ltd (Income Tax Appeal No. 1613 of 2014 decided in 20 March 2017) has while refusing to entertain a question with regard to Section 68 of the Act has held that the proviso to Section 68 of the Act introduced with effect from 1 April 2013 will not have retrospective effect and would be effective only from Assessment year 2013-14. (c) In view of the above, Question No.B as proposed also does not give rise any substantial question of law as it is an issue concluded by the decision of this Court in M/s Vodafone India Services Pvt. Ltd. (Supra) and in the Apex Court in M/s G.S. Homes & Hotels P.Ltd. (supra). Thus not entertained”. 2.44 Thus, to sum up, Section 68 of the Income Tax Act, 1961 enjoined the assessee to offer an explanation about the nature and source of the sum found credited in his books and if the explanation was not satisfactory, the amount can be credited and charged to income-tax as income of the assessee. Since the assessee, has submitted all the evidences related to the transaction and therefore the sum credited as share premium could not be treated as income of the assessee. 2.45 In view of the same, we request your honor to kindly delete the addition made as unexplained cash credit u/s. 68 of the Income Tax Act, 1961 amounting to Rs.25,00,000/-.” 7. We have heard the counsel for both the parties and perused the material placed on record. Before we deal with the merits of the grounds raised by the Revenue, it is necessary to evaluate the orders passed by the Ld. CIT(A) while deleting the additions. The Printed from counselvise.com 45 ITA No.6205/Mum/2025 operative portion of the order of the Ld. CIT(A) is contained in Para No. 7.1 to 7.11 and the same is reproduced herein below: 7. In Ground No. 1, the appellant has challenged the assessment proceedings under section 153A on that no incriminating document/ evidence was found for the year under consideration. The ground raised by the appellant relates to the claim that the additions made in the assessment order by the AO are not based on any incriminating material and hence, in absence of such material, the assessment being unabated, the additions made are bad in law and require to be deleted. 7.1 In this regard, it is first relevant to consider the law in respect of validity of addition made in respect of unabated assessment years in the absence of incriminating material. The above legal position finds support by the decisions of the Jurisdictional Hon’ble Bombay High Court in the case of Continental Corporation (Nhava Sheva) Ltd (2015) reported in 58 taxmann.com 78 and Gurinder Singh Bawa (2017) reported in 79 taxmann.com 398 wherein it was held that the AO is empowered to make additions only on the basis of incriminating material found during the course of search and not otherwise, in respect of unabated assessment years. 7.2 The above decisions of the Hon’ble High Court have been further confirmed in the recent decision by the Hon’ble Supreme Court in the case of Abhisar Buildwell P. Ltd reported in [2023] 149 taxmann.com 399 wherein it has been held that Completed assessments can be interfered with by the AO while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search. The relevant extract of the order is reproduced hereunder: - “13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of completed assessments in absence of any incriminating material. Printed from counselvise.com 46 ITA No.6205/Mum/2025 14. In view of the above and for the reasons stated above, it is concluded as under: - i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Section 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under section 147/148 of the Act and those powers are saved.” 7.3 Accordingly, in view of the above binding decision of the Hon’ble Supreme Court, it is settled that where no incriminating material is found during the search, no addition can be made in respect of completed/unabated assessment. 7.4 In the present case, the original return of income was filed on 28.09.2011 declaring total income of Rs. 2,11,638/-. Subsequently, a search action was carried on the assessee on 09.03.2015 and as on the date of search, no proceedings were pending. Thus, the assessment for the year is unabated. 7.5 Now, the question which arises here is regarding the incriminating material found during the course of search based on which the additions have been made by the AO. In the assessment order, AO has referred to the statement of director Printed from counselvise.com 47 ITA No.6205/Mum/2025 namely Shri Sanjay Dugar wherein he has allegedly accepted that the share capital received in the appellant company is not genuine. Further, in the assessment order, AO has referred to various enquiries made in respect of the share subscriber in the post search and assessment proceedings wherein he has observed that the said subscriber has shown low income and the address/auditor of the subscriber are common with the various other parties. Relying upon the above findings, AO has come to a conclusion that the share capital received of Rs. 26,00,000/- is not genuine. 7.6 In the submission filed by the appellant, it has been explained that the addition has been made by the AO on the basis of the statement recorded during the course of search of Shri Sanjay Dugar wherein he has accepted that the share capital received in the three group companies are not genuine. Appellant has pointed out that the disclosure made by Mr. Sanjay Dugar was limited to three other companies namely M/s. Morpan Merchant Pvt. Ltd., M/s. Starpoint Dealers Pvt. Ltd. and M/s. SRG Exim Pvt. Ltd. amounting to Rs. 3.21 Crs., break of which is given in answer to Q. No. 25. Further, in the same answer, he has categorically stated that all other transaction are genuine. Therefore, appellant has contended that the reliance placed on his statement is entirely incorrect and such statement in no circumstances can be termed as incriminating material in the appellant’s case. Further, the appellant has contended that the various other enquires/findings referred by the AO are not arising out of any incriminating material unearthed during the search. Accordingly, appellant has contended that the addition is not based on the any incriminating material and therefore, the addition is liable to be deleted. The relevant gist as made by the appellant reads as under: Printed from counselvise.com 48 ITA No.6205/Mum/2025 7.7 I have considered the facts of the case and submission of the appellant. I find that the main allegation arising out of the search action is largely based on the statement of Shri Sanjay Dugar wherein he has accepted that certain share capital received by group concerns are not genuine. It is seen that the AO has heavily relied on the statements recorded during the course of the search in the case of third parties much prior to the search action in the case of the assessee. However, what is important here to see is that whether these statements are suitably corroborated by supporting evidence and material found during the course of the search as the Hon’ble Courts have held in a number of decisions that statements recorded u/s 132(4) could be treated as incriminating material only when supported by corroborative evidence. I find that there is no disclosure made by Shri Sanjay Dugar in respect of share capital received by the appellant company as alleged by AO. In answer to Q. 25, the list of the companies mentioned do not Printed from counselvise.com 49 ITA No.6205/Mum/2025 include the appellant. Therefore, such statement cannot be treated as incriminating material to make addition on account of share capital received. 7.8 Further, in the assessment order, AO has referred to various findings in relation to the financial capacity of the share subscriber, common addresses and common auditors with certain other companies and valuation of the share capital. I find that the said findings are nowhere related to the search findings. No reference to any incriminating material has been made by the AO. 7.9 I find that the addition on account of share capital were also made in the group concerns of the appellant based on the same search findings. The said orders were challenged before Hon’ble ITAT. In the appellate order passed in the case of M/s. SRG Exim Pvt. Ltd. in ITA No. 665-668/Mum/2021 dated 23.06.2023, ITAT has deleted the addition of share capital since the same were not based on the incriminating material. The relevant portion of the order reads as under:- “5. We heard learned DR and perused the record. It is submitted that all these years fall under the category of unabated assessment years. We notice that the additions made by the AO in these years are related to the Share Application money received by the assessee, which were added u/s 68 of the Act. It is not the case of the revenue that these additions have been made on the basis of any incriminating material found during the course of search, i.e, the AO has entertained the belief that these are only accommodation entries availed by the assessee, on the basis of report of the investigation wing. 6.1 The contention of the assessee is that the AO could not have made this addition in these years, since the department did not unearth any incriminating material during the course of search to prove that these are only accommodation entries. All the share application money received have been duly recorded in the books of accounts and no incriminating material was found during the course of search to show that they are bogus in nature. Since these assessment years fall under the category of unabated assessment years, no addition could have been made by the AO in these years in the absence of any incriminating material. We notice that the above said legal Printed from counselvise.com 50 ITA No.6205/Mum/2025 contentions of the assessee finds support from the decision rendered by Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra), wherein the High Court has upheld the view given by the Special bench of Tribunal in the case of All Cargo Logistics. The relevant observations made by Hon’ble Bombay High Court in the above said case are extracted below:- ……………………. 6.5 The decision rendered in the above said cases by Hon’ble Bombay High Court and Hon’ble Delhi High Court has been upheld by Hon’ble Supreme Court in the recent decision rendered in the case of PCIT vs. Abhisar Buildwell P Ltd (Civil Appeal No.6580 of 2021 dated 24th April, 2023). The relevant observations made by Hon’ble Supreme Court are extracted below:- 7. In view of the foregoing discussions, following binding decision rendered by Hon'ble Supreme Court in the case of Abhisar Buildwell P Ltd (supra), which in turn has approved the decision rendered by Hon'ble Jurisdictional Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd (supra) and the decision of Hon’ble Delhi High Court rendered in the case of Kabul Chawla (supra), we hold that the additions made by the Assessing Officer under section 68 of the Act towards Share Application money received by the assessee are liable to be deleted, since they are not based on any incriminating material found during the course of search. Accordingly, we set aside the orders passed by the Ld. CIT(A) and direct the Assessing Officer to delete the impugned additions made in all these years.” 7.10 Further, appellant has pointed out that similar decision has been also been rendered in another group concern by the Mumbai ITAT in the case of M/s. Morpan Merchant Pvt. Ltd. in ITA No. 663 & 664/Mum/2021 where identical addition on account of share capital has been deleted in the absence of incriminating material. 7.11 In view of the above discussion, I find that the issue has already been dealt by jurisdictional Mumbai ITAT in the group concern of appellant holding that the Printed from counselvise.com 51 ITA No.6205/Mum/2025 additions made by the AO are not based on any incriminating material which has been found during the course of search. Since the assessment for the relevant assessment year was unabated, as per the decision of the Hon’ble Special Bench of Mumbai ITAT in the case of All Cargo Global Logistics Ltd. [2012] 23 taxmann.com 103 (Mum.) (SB) as also the Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 and the Hon’ble Supreme Court in the case of Abhisar Buildwell P Ltd [2023] 149 taxmann.com 399 and also ITAT decision in group concerns, completed assessment cannot be interfered while making an assessment u/s 153A of the Act unless such interference is on the basis of incriminating material gathered during the course of the search, which is not the case here. Accordingly, Ground No. 1 is allowed and the addition made is directed to be deleted. 8. After meticulously going through the facts of the present case and hearing the parties at length, we find that it is an undisputed fact that no addition can be made in respect of unabated assessment years in the absence of incriminating material. The said legal proposition also finds support from the decision of the Jurisdictional Hon’ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) reported in 58 taxmann.com 78 and in the case of Gurinder Singh Bawa (2017) reported in 79 taxmann.com 398, wherein it has been categorically held that the AO is empowered to make additions only on the basis of incriminating material found during the course of search in respect of unabated assessment years and not otherwise. Printed from counselvise.com 52 ITA No.6205/Mum/2025 9. The said legal proposition laid down by the Hon’ble Jurisdictional High Court has been further affirmed by the Hon’ble Supreme Court in the case of Abhisar Buildwell Pvt. Ltd., reported in (2023) 149 taxmann.com 399, wherein it has been reiterated that completed assessments can be interfered with by the AO only on the basis of incriminating material unearthed during the course of search. The relevant portion of the order is reproduced herein below: 7.2 The above decisions of the Hon'ble High Court have been further confirmed in the recent decision by the Hon'ble Supreme Court in the case of Abhisar Buildwell P. Ltd reported in [2023] 149 taxmann.com 399 wherein it has been held that Completed assessments can be interfered with by the AO while making the assessment u/s 153A only on the basis of some incriminating material unearthed during the course of search. The relevant extract of the order is reproduced hereunder: - 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: - i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; Printed from counselvise.com 53 ITA No.6205/Mum/2025 ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the 'total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961, However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Section 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under section 147/148 of the Act and those powers are saved.\" 10. Thus, it is now well-settled law, by virtue of a series of decisions including that of the Hon’ble Supreme Court, that where no incriminating material is found during the course of search, in that eventuality, no addition can be made in respect of completed/unabated assessment years. 11. Now, coming back to the facts of the present case, it is an undisputed fact that the year under consideration is A.Y. 2011– 12 and that a search action was carried out on the assessee on Printed from counselvise.com 54 ITA No.6205/Mum/2025 09.03.2015. As on the date of search, no proceedings were pending, thus, the assessment for the year under consideration was unabated. What is required to be analysed is whether any incriminating material was found during the course of search or not. 12. In the assessment order, the AO has only referred to the name of the one of the director, namely Mr. Sanjay Dugar, wherein he had allegedly accepted that the share capital receipts in the assessee’s company were not genuine. Further, in the assessment order, the AO has also referred to various enquiries made in respect of the share subscribers during the post-search and assessment proceedings, wherein he observed that the said subscribers had shown low income. 13. It is important to mention here that the disclosure made by the said Mr. Sanjay Dugar was limited to three other companies, viz., M/s Morpan Merchants Pvt. Ltd., M/s Starpoint Dealers Pvt. Ltd., and M/s SRG Exim Pvt. Ltd. The name of the assessee company was nowhere mentioned in the statement of the said Mr. Sanjay Dugar. Therefore, the reliance placed by the AO on the statement of Mr. Sanjay Dugar in the case of the assessee is factually incorrect, and such statement, in any event, cannot be termed as incriminating material in the assessee’s case. 14. Even otherwise, after going through the facts of the present case, we find that additions on account of share capital were also Printed from counselvise.com 55 ITA No.6205/Mum/2025 made in the group concerns of the assessee based on the same search. However, all those orders were challenged before the respective Benches of the ITAT. The Coordinate Bench of the ITAT in the case of M/s SRG Exim Pvt. Ltd., in ITA Nos. 665– 668/MUM/2021 dated 23.06.2023, deleted the additions. Likewise, another Coordinate Bench of the ITAT in the case of M/s Morpan Merchants Pvt. Ltd., in ITA Nos. 663 and 664/Mum/2021, also deleted identical additions on account of share capital in the absence of incriminating material. 15. Now the question before us is that once the Coordinate Benches of the ITAT had already dealt in detail with identical issues in the case of the group concerns of the assessee, holding that the additions made by the AO were not based on any incriminating material found during the course of search, whether a different view can be taken in the present case. 16. Therefore, considering the totality of the facts and circumstances of the present case, as well as the series of decisions of the Coordinate Benches of the ITAT and the Hon’ble High Court and the Hon’ble Supreme Court, we are of the view that a completed assessment cannot be interfered with while making an assessment under Section 153A of the Act unless such interference is based on incriminating material gathered during the course of search. Printed from counselvise.com 56 ITA No.6205/Mum/2025 17. Since in the present case no incriminating material was found during the course of search therefore no addition could have been made by the AO. Even otherwise, no new facts or circumstances or documents have been placed on records by Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A), therefore, we see no reasons to interfere into or to deviate from the detailed findings so recorded by Ld. CIT(A), hence we dismiss the grounds raised by the Revenue and uphold the order of Ld. CIT(A) deleting the additions. 18. In the result, the appeal filed by the Revenue stands dismissed with no order as to cost. Order pronounced in the open court on 23.03.2026 Sd/- Sd/- (BIJAYANANDA PURUSETH) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 23/03/2026 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. संबंधित आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मुम्बई/ DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// Printed from counselvise.com 57 ITA No.6205/Mum/2025 उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai Printed from counselvise.com "