ACIT, CENTRAL CIRCLE-2(1), MUMBAI V. M/S LUXORA REALTORS P. LTD., MUMBAI

ITA 1096/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 9206 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 11-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ADJUDICATING ONLY GROUND
• Keywords: Unexplained cash credit; Bogus Share capital; Share purchase agreement; Question of law; Fair market value; Corroborative evidences; Valuation report; Onus to prove; Condonation of delay; Revenue expenditure
• Section: 131; 68; 132; 143(3); 153A; 195; 143(2); 264; 64; 48; 9(1); 9(1); 9(1); 13; 153; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT) “A” BENCH, MUMBAI BEFORE SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, HON'BLE JUDICIAL MEMBER ITA NO. 1096/MUM/2020 (A.Y: 2013-14) ACIT – Central Circle – 2(1) Room No. 804, 8 th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 v. M/s. Luxora Realtors Pvt. Ltd., Soham House, Hari Om Nagar Opp. Eastern Express Highway Mulund(E), Mumbai – 400081 PAN: AABCO3197J (Appellant) (Respondent) Assessee by : Shri Kishore Dewani Department by : Ms. Shailja Rai Date of Hearing : 13.01.2022 Date of Pronouncement : 08.02.2022 O R D E R PER S. RIFAUR RAHMAN (AM) 1. This appeal is filed by the revenue against order of the Learned Commissioner of Income Tax (Appeals)–48, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.11.2019 for the A.Y. 2013-14. 2. Brief facts of the case are that, the original return of income was filed by the assessee for A.Y.2013-14 on 30.09.2013 declaring loss of 2 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., ₹.2,27,16,946/. A search & seizure action u/s.132(1) of the Income-tax Act, 1961 (in short “Act”) carried out in the case of M/s. Luxura Infrastructure Pvt., Ltd., and its Group Companies and Executives on 19.03.2015, it has resulted in detection of undisclosed income amounting to ₹.149,03,66,361/-. During the course of the search proceedings at the residential premises of Shri Swapnesh Agarwal, Finance Controller of Soham Group, a Pen Drive was found and seized which contained an excel sheet in the name of ‘LRPL TDR’. On analysis of the above excel sheet it was found that the sheet contained details of the payments made by M/s.Luxora Realtors Pvt., Ltd., to various parties for the purchase of Transfer Development Rights (TDR). It was also observed that there was another table in this excel sheet which contained details of certain payments received by Shri Chaitanya Parekh. Shri Swapnesh Agarwal was confronted with this sheet and he was asked to explain the contents of the same. In response Shri Swapnesh Agarwal stated with reference to Q.No.19 in his statement, for the sake of clarity it is reproduced below: “Q.19 One of the sheet obtained from the same pen drive contains a TDR statement which is made Annexure D to this statement. The said sheet contains two different tables. From table 1 It Is seen that LRPL has made a payment of Rs. 3 Crs to S R Realtors on 16.8.2013, Subsequently, S R Realtors has paid similar amount to Buildcube and Gautam enterprises on the very next day. Similar transactions have taken place with Jayant Thorat, Deepak C Khadkar. Please explain the transaction. 3 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., Ans. Sir, The payments made from LRPL (Luxora Realtors Pvt Ltd) to various parties are on account of advances given for purchase of TDR for the project for which we have executed MOU with respective parties. The payments made by S R Realtors and other parties to Soham Group Companies are in the nature of unsecured loan for which Shri Chaitanya N Parekh is liable in his personal capacity” 3. In the search proceedings cash amounting to ₹.32,00,000/- was found and Shri Chaitanya Parekh stated that the cash found at his residential premise belonged to assessee company, and the same was duly reflected in the books of the assessee company and he furnished a copy of the cash in hand of the assessee as on 19.03.2015 wherein the cash balance was duly reflected. Assessing Officer observed that the provisions of section 153C were attracted in this case and accordingly these cases were centralized in of DCIT-Central Circle-2(4), Mumbai. Notices were issued u/s. 153C and served on the assessee. When the assessee was asked to file the return of income assessee declared loss as per original return of income. Subsequently notices u/s. 143(2) and 142(1) of the Act were issued and served on the assessee. The assessment was completed u/s. 143(3) r.w.s. 153C of the Act by making addition u/s. 68 of the Act and further additions were made relating to brokerage of ₹.1,30,00,000/-, sales and marketing at ₹.1,24,53,166/-, finance cost at ₹.11,86,093/- and legal and professional fess of ₹.42,77,037/-. Above additions were made by the Assessing Officer with 4 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., the observation that the above said expenses which were incurred for the projects carried on by the assessee therefore it should be debited to the work in progress pertaining to the projects carried on by the assessee. Accordingly, he disallowed the above said expenditures. 4. Aggrieved assessee preferred an appeal before the Ld.CIT(A), before the Ld.CIT(A) assessee filed detailed submissions and for the sake of clarity it is reproduced below: - “FACTS: 1. The Appellant is a Company and is regularly assessed to tax by Dy. Commissioner of Income Tax CC 2(1), Mumbai, (hereafter referred to as the DCIT.) Before that the case of the Appellant was with ACIT-15(2)-I, Mumbai (herein after referred to as “the then Assessing Officer”. 2. The Appellant Company is engaged in the business of Builders and Developers. 3. The Return of Income for the Assessment Year under the Appeal was electronically filed on 13/09/2013 declaring Total loss of Rs.2,27,16,946/-. A set of Computation of Income and Audited Accounts are enclosed herewith for Honour's ready and kind reference(Annexure) 4. The Income Tax assessment was completed u/s. 143(3) on 09/03/2017 determining total Income of Rs.15,86.06,125/- and demand of Rs.7,49,36,690/. A copy of order U/s 143(3) dated 09/03 2017 1s enclosed herewith for Honour's ready and kind reference [Annexure] 5. While passing the order U/S 143(3) dated 09/03/2017, the then assessing officer, made addition of share application and share premium received from M/S Aanya Properties (1) Ltd of Rs.15,86,06,125/-, against which the Appellant preferred appeal with CIA (A) -24, which is pending. However, such addition made in the Assessment Order U/s 143(3) for the AY 2012-13 was deleted by Hon'ble CIT (A). 5 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 6. In the meantime a search action u/s 132 of Income Tax Act, 1961 was carried out in the case of the associate persons and group companies of the Appellant company on 15/03/2015. As a consequent to the search a notice u/s. 153C was received for filling the block return of previous 6 years. 7. In response to the above notice, the Appellant filed the Return of income u/s. 153C for the relevant assessment year on 24/11 2017 declaring at total loss of Rs.2,27,16,943/-. 8. The Income Tax Assessment was completed w/s.143(3) r.w.s. u/s. 153C on 29,12 2017 determining total income of Rs.16,68,05,486/- and demand of Rs. 8,05,54,300/- was raised. A copy of the Assessment Order is already enclosed with Form -35 which is on record. GROUND No 1: 1. The Appellant Company is engaged in the business of Builders & Developers. 2. During the year under Appeal, the Appellant Company received Share Application Money of Rs. 34,39,31,745/-from its Shareholders out of which a sum of Rs. 15,86,06,125/- was received from Aanva Properties (1) Ltd. 3. The Income Tax assessment was completed u/s. 143(3) and the date of order stated in assessment order was 09/03/2017 determining total Income of Rs. 15,86,06,125/- and a demand of Rs. 7,49,36,690/-. 4. While passing the order U/S 143(3) dated 09/03/2017, the then assessing officer (Ld. ACIT), made addition of share application and share premium received from M/S Aanya Properties (I) Ltd of Rs. 15,86,06,125/- holding the same as unexplained cash credit within the meaning of section 68 without properly considering the supporting evidences furnished by the appellant to prove identity, creditworthiness and genuineness in respect of sources of funds of the shareholders. 5. During the assessment proceedings, the then assessing officer (Ld. ACIT) required the Appellant to submit certain documents which were called by him and the Appellant submitted all the supporting evidences called for. 6. The Appellant submitted (i) financial statements of Aanya Properties (J) Ltd, (ii) Incorporation Certificate of Aanya Properties (I) Ltd, (iii) details of ultimate beneficiary owners through Aanya 6 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., Holdings Ltd., (iv) Bank Statements of Appellant Company reflecting the payments received towards share application money from Aanya Properties (1) Ltd., (v) bank Statements of Aanya Properties (I) Ltd reflecting payments received from its holding company namely Aanya Holdings Ltd., (vi) correspondence with the appropriate authorities of the Central Government of India, etc. In addition to the above various other details pertaining to Identity, Capacity, Creditworthiness and Genuineness of Aanya Properties (J) Lid. were also filed during the course of Assessment proceedings for Assessment year 2012-2013 which were on records. Therefore the Appellant not only proved the identity capacity and genuineness of shareholders and the soirees of their funds but also proved the source of source which was more than the required details while verifying the identity capacity and genuineness of shareholders. 7. The then assessing office (Ld. A.C.I.T) proceeded in a pre- conceived and biased manner merely because the shareholding Company was Mauritius Company and mechanically followed the order of his predecessor in Assessment Year 2012-13 (although Hon. C.I.T. (Appeal) decided in favour of Appellant) because the department filed second appeal with Hon. I.T.A.T., Mumbai. The copy of written submission made by the Appellant before C1T(A)-24 for the Assessment Year 2012-13 and CIT (A) order dated 29/07/2016 for the Assessment Year 2012-13 in the case of Appellant are enclosed herewith for your Honor's kind and ready reference Annexure 8. While passing order U/s 143(3) of the I. T. Act dated 09/03/2017(Annexure of this Paper Book), the then Assessing officer tried to find technical fault, (although they were not there) in the proceedings with Reserve Bank of India, F.I.P.B. etc. The Ld. D.C.I.T. also misinterpreted the partial information received from the office of Principal C.I.T.-15 which were in turn received from Mauritius Revenue Authority through FT & TR division. 9. Your honour's kind attention drawn to para 4.4 of in page no, 11 of the Assessment order U/S 143(3) dated 09/03/2017 passed by the then Assessing officer under Appeal where the Ld. D.C.I.T. has categorically stated that the information received from revenue authority of Maurine through Foreign Tax and Tax Research Division Ministry of Finance Government of India were partial in nature. Moreover, the information received stated that M/s. Aanya Properties (1) Ltd. had not booked any profit from FY 2006-07 (year of incorporation) till FY 2012-13 almost all its investment made through capital money raised from its share holders i.e. M/s. Aanya Holdings Ltd. it was seen through the financial statements of Aanya Properties (I) Ltd that the company did not have any self generating source of 7 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., Income. These information were not complete therefore the predecessor Assessing Officer of LRPL sent another letter dated 17/10/2016 to Mauritius Authority through FT and TR Division. The reply in this regard had not been received till the date of passing the date of Assessment Order under this Appeal. 10. In this connection the Appellant most humbly submits before your Honour that the Mauritius Report might be in the opinion the Ld. D.C.I.T. partial in nature but the findings of the report no where give any negative clue. On the contrary the findings of the Mauritius Report were very categorical that the funds were provided by Investors i.e. Aanya Properties (1) Ltd. through capital money raised from sole share holder M/s Aanya Holding Ltd. and not out of self generating source of Income, in this connection the Appellant draws your kind attention to the fact that the prime question under consideration was to satisfy the genuine source and not to ascertain whether the funds were received out of capital investment or out of profit booked. The report clearly says that the money received was out of capital investment in the humble view of the Appellant it is not necessary that the funds received are genuine if received only out of the profit booked and not out of the capital investment. 11. The Ld. D.C.I.T. should have appreciated the facts and the variety of evidence substantiating the identity capacity and genuineness of shareholders were furnished and the report received from Mauritius Revenue Authority was quite positive. 13. The Id. A.C.I.T. (the then assessing officer) did not accept any thing and treated the share Application Money as unexplained cash credit within the meaning of section 68 and held the same as unexplained income. The Appellant preferred appeal against said addition with Hon'ble CIT (A)-24, which is pending. 14. In the meantime, a search action u/s 132 of Income Tax Act, 1961 was carried out in the case of other associate persons and grow) companies of the Appellant company on 15/03/2015. Hence provisions of section 153C were attracted. The jurisdiction of the Appellant was transferred from the then Assessing Officer (i.e A.C.I.T. 15(2) (1), Mumbai) to DCIT- Central Circle 2 (4), Mumbai. Thereafter jurisdiction of the Appellant had been assigned to the charge of DCIT- Central Circle 2(1), Mumbai. 8 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 15. In response to the notice U/s 153C, Appellant filed the Return of income u/s 153C for the relevant assessment year on 24/11/2017 declaring at total toss of Rs. 2,27,16,943/-. 16. During the course of Assessment proceedings, The Ld. D.C.I.T, vide questionnaire dated 22.1 1.2017 asked the Appellant to prove the credit worthiness of the subscribers of Appellant's shares and the genuineness of the transaction. 17. In response to show cause notice letter dated 22/11/2017, reply vide letter dated 15/12/2017 was submitted, the relevant portion of letters are re-produced for your honour 's kind and ready reference, which included following details/ explanations: I) Point 2 of Letter dated 15/12/2017 : "2. Point 24 is explained herein below: i. In para 24 of your questionnaire you have referred the number of equity shares to Aanya Properties (I) Ltd. (herein after API) as 400,297 giving reference to page 19-20 of the seized material marked as Annexure A-1. Similarly, the quantity of shares with reference to page 21-22, page 29-30, page 31-32, page 33-34 and page 35-36 is also stated as 400,297 which is factually incorrect. In this connection we bring it to your notice that the correct quantity of equity shares as stated in share certificate on the above pages are as under: Page Numbers Number of Shares 19-20 4,00,297 21-22 22,42,305 29-30 53,85,577 31-32 90,696 33-34 8,69,688 35-36 3,18,260 The above facts can be verified from the seized materials in your possession. ii. In this connection, we enclose herewith a statement showing allotment of shares to API which include the above shares (Annexure 1) iii. In order to prove the identity capacity, creditworthiness and genuineness we enclose herewith the following documents for your kind perusal and record 9 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., a. Certificate of incorporation of API (Annexure 2) b. Copy of the constitution documents of API (Annexure 3) c. Statement of remittances received from time to time from API to LRPL towards share capital and copy of the ledger of API in the books of LRPL (Annexure 4 & 5) d. Copy of bank statements of LRPL reflecting receipt of funds towards shares allotted to API (Annexure 6) e. Copy of remittance certificates issued by bank (Annexure 7) f. Copy of returns of allotment (Annexure 8) g. Copy of bank statements of API reflecting the remittance of funds towards share capital (Annexure 9) h. Copy financial statements of API reflecting such investments made in LRPL (Annexure 10) i. Shareholding Pattern of API (Annexure 11). (Please note that the entire shareholding of API is with another Mauritius based company namely Aanya Holdings Ltd (AHL). j. List of, name and address of shareholders of AHL who. were the ultimate beneficiaries (Annexure 12) iv. You will kindly observe that primarily investments were made by non-residents in AHL and the funds were further invested by AHL into API and finally API made investment in the share capital of LRPL. v. In view of the above we respectfully submit that the identity, capacity, genuineness and creditworthiness of the API stands properly explained 3. Point 26 is explained herein below (for the sake of better connectivity point 26 is explained before point 25): i. As regards creditworthiness of the subscribers it may be kindly noted that the creditworthiness etc. in respect of API have already been explained in para 2 above ii. As regard the creditworthiness of the other subscriber i e. Essence Conwell Pvt. Ltd (hereafter referred to as EC PL), a company incorporated in India, we enclose herewith the following documents: a. Copy of Certificate of incorporation of ECPL (Annexure XZ) 10 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., b. Copy of memorandum of association of ECPL (Annexure XZ) c. Copy of bank statements of ECPL reflecting such payments toward shares (Annexure XZ) d. Copy of bank statements of LRPL reflecting receipts of such money towards shares (Annexure XZ) e. Copy of balance sheet of ECPL (Annexure XZ) f Copy of acknowledgment of return of income of ECPL (Annexure XZ) iii. In view of the above we respectfully submit that the identity, capacity, genuineness and creditworthiness of the ECPL stands properly explained iv. As regards to your query in respect of fair market values of the said shares along with supporting documentary evidence, it may be kindly noted that the market value of the share have been worked out from time to time by a Chartered Accountant. The copies of valuation reports are enclosed herewith as under: a. Certificate dated XYZ m/s R.P.Gandhi & Co. chartered accountants (Annexure XYZ) b. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) c. Certificate dated XYZ m/s R.P. Gandhi& Co. chartered accountants (Annexure XYZ) d. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) e. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) f. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants (Annexure XYZ) g. Certificate dated XYZ m/s R.P.Gandhi& Co. chartered accountants Repeat (Annexure XYZ) v Thus you will observe the value of the shares have been determined on the basis of the certificates issued by m/s R.P.Gandhi & Co. chartered accountants. " 11 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., A copy of letter dated 15/12/2017 along with relevant supporting documents are enclosed herewith for your honour's kind and ready reference / Annexure The aforesaid details were furnished to the Ld. D.C.I. T. to prove the identity, capacity and genuineness of such investments 18. To sum up, the Appellant tried its level best to satisfy to the Ld. D.C.I.T. on Account of Identity, Capacity and genuineness of such investments made by Aanya Properties (1) Ltd. To summaries before your Honour, the Appellant submitted following documents/ evidence in support of its stand to prove and satisfy the Ld. D.C.I.T. i. Copy of certificate of incorporation of Aanya Properties (1) Ltd. (Annexure of this paper book) ii. Copy of Constitution Documents of Aanya Properties (1) Ltd. (Annexure of this paper book) iii. Bank statements of Aanya Properties (I) Ltd. reflecting such investments made (Annexure of this paper book) iv. Bank statement of the Appellant company reflecting the payment received from Aanya Properties (1) Ltd. (Annexure of this paper book) v. Foreign Inward remittance certificates in respect of remittance by Aanya Properties (1) Ltd. (Annexure of this paper book) vi. Financial statement of Aanya Properties (1) Ltd. reflecting such investments and source of funds (Annexure to of this paper book) vii. Shareholding list of the Appellant company (Annexure of this paper book) viii. Shareholding list of Aanya Properties (1) Ltd. (Annexure of this paper book) ix. List of ultimate beneficiary owners of Aanya Holdings Ltd (Mauritius) (Annexure of this paper book). This company holds 100% shares of Aanya Properties (1) Ltd. which in turn holds shares in the Appellant company which is subject of dispute before your honour. In this connection the Appellant also respectfully submits that the details of ultimate Beneficiaries of Aanya Holding Ltd were furnished (Annexure to this paper book). However since then some more additional supporting evidence have been received in order to further 12 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., substantiate the claim of identity genuineness and creditworthiness of the Investors. The same are enclosed herewith for your Honour's ready reference (Annexure not submitted with Ld. D.C.I.T.) 19. Thus your Honour will kindly observe that the Appellant had not only proved the identity, capacity and genuineness of the source of investments made by Aanya Properties (I) Ltd. but also had been able to prove identity, capacity and genuineness of source of sources also although it is not the onus on the Appellant to prove the source of source. 20. Your Honour will kindly observe that: i. All the transactions are through authorised banking channels for which supporting evidences in the form of Bank statements of investments made by Aanya Properties (I) Ltd. as well as of the Appellant company were produced. ii. All the regulatory authorities of Government of India including Reserve Bank of India had thoroughly scrutinized the remittances and given their approval which was produced. iii. All the foreign remittance certificates issued by banks were produced. iv. The shareholding pattern of investee company (i.e. The Appellant Company), were produced. v. The shareholding pattern of investor company (i.e. Aanya Properties (I) Ltd were produced vi. The shareholding pattern of Aanya Holdings Ltd., Mauritius, (which is 100% holding company of Aanya Properties (I) Ltd.). vii. In addition to item no. vi the details of ultimate beneficiaries of Aanya Holding Ltd. along with supporting evidence were produced which proves not only source but source of source. Viii Proof of incorporation of Aanya Properties (I) Ltd. their constitution were produced. ix. The Financial Statements of Aanya Properties (I) Ltd. where such investments in the Appellant Company were duly reflected were produced. These financial statements also reflected the source of such investments. This financial statements were produced x. The basis of the premium amount in the form of a Certificates from a Chartered Accountant were also produced. 13 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 21. Ignoring the submissions made by the Appellant, the Ld. D.C.I.T. made addition of Rs. 15,86,06,125/- received from M/S.Aanya Properties (2) Ltd) in an arbitrarily manner, holding the same as unexplained cash credit within the meaning of section 68 without properly considering the supporting evidences furnished by the appellant to prove identity, creditworthiness and genuineness in respect of sources of funds of the shareholders. 22. While passing order u/s.143(3) r.w.s. u/s 153C , the Ld. D.C.I. T ignored the submission made by the Appellant & mechanically made addition of share application money received from M/S Aanya Properties (I) Ltd amounting to Rs. 15,86,06,125/- as unexplained cash credit within the meaning of section 68 based on order U/S 143(3) of her predecessor. 23. As regards to the order of Hon'ble CIT (A) -24, Mumbai dated 29/07/2016 for the A Y 2012-13, wherein Hon’ble CIT (A) - 24, Mumbai (copy of the order is enclosed hereinabove as Annexure to this paper book) made some important observations, which are reproduced below for your honour's kind and ready reference: "2.4.3 Ground Nos. 2 & 3 are in respect of the merits of the addition u/s 68 of the Act. Ld. AO found that the appellant had issued 80,28,179 non-cumulative preference shares of face value Rs. I each at premium of Rs.9/- to M/s Ananya Properties (i) Ltd., a foreign body corporate based at Port Louis, Republic of Mauritius. He required the appellant to substantiate the receipt of sum of Rs. 8, 02,8 1, 790 /-from the said entity. Despite evidence being filed by way of confirmation from M/s Ananya Properties (i) Ltd., copies of Bank statement of M/s Ananya Properties (i) Ltd., copy of Certificate of incorporation, copy of Memorandum of Association, Leger copy as well as bank statement reflecting the payments, Ld. AO was not satisfied and made the addition of the investment made by M/s Ananya properties (I) Ltd. as cash credit within the meaning of section 68 of the Act. 2.4.4 During the course of appellate proceedings, the appellant has vehemently argued that all the details required to satisfy the basic tests of section 68 of the Act were furnished before the Ld. AO so as to prove the identity and creditworthiness of the cash creditor as well as the genuineness of the transaction. In this regard, it has been stated that not only had the appellant proved the creditworthiness of the shareholder viz., M/s. Ananya Properties (I) Ltd., It had even proved the source of the source i.e., that of M/s. Ananya Holdings Ltd., a Mauritius based company. The appellant has furnished a number of details which were all filed before the Ld. A.O that is being summed up as follows: 14 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., i. Confirmation of Aanya Properties (1) Ltd. confirming the investments made in the Appellant company (Annexure 7 (iii) of this paper book) ii. Bank statements of Aanya Properties (1) Ltd. reflecting such investments made (Annexure 7(iv) to 7 (VI) of this paper book) iii. Copy of certificate of incorporation of Aanya Properties (I) Ltd. (Annexure 7(viii) of this paper book) iv. Copy of Memorandum of Association of Aanya Properties (I) Ltd. (Annexure 7(ix) of this paper book) v. Bank statement of the Appellant company reflecting the payment received from Aanya Properties (I) Ltd. (Annexure 8(xxxvi) of this paper book) vi. Bank statements of Aanya Holding Ltd reflecting payments made to Aanya Properties (I) Ltd. (Annexure 8(xiii) of this paper book) vii. Foreign Inward remittance certificates in respect of remittance by Aanya Properties (I) Ltd. {Annexure 8(xlvi) of this paper book) viii. Copy of FIPB approval for condonation of Delay in FDI and copy of compounding application to CEFA cell of Reserve Bank of India (Annexure 9(1) of this paper book) ix. The proof of basis of share premium amount in the Form of Certificates by a Chartered Accountant. (Annexure 3(xxxiv) of this paper book) x. Financial statement of Aanya Properties (I) Ltd. reflecting such investments and source of funds (Annexure 8(iii) to 8(xxxv) of this paper book) xi. Shareholding list of the Appellant company (Annexure 2(xviii) of this paper book) xii. Shareholding list of Aanya Properties (1) Ltd. (Annexure 8(ii) of this paper book) xiii. List of ultimate beneficiary owners of Aanya Holdings Ltd (Mauritius) (Annexure 8(LI) of this paper book). This company holds 100% shares of Aanya Properties (I) Ltd. which in turn holds shares in the Appellant company which is subject of dispute before your honour. " 15 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 2.4.5 It will, therefore, be useful to understand the provisions of section 68 in I right perspective. While dealing with the taxation laws, Courts have regularly invoked section 106 of the Evidence Act, 1872. Section 68 is the statutory recognition of the said section according to which a person is in the best position to know the relevant facts related to him. Treating the cash credits as income of the assessee is not a new concept introduced by the Act. The effect of section 68 is that a sum found credited in the books of the assessee can be charged to income-tax as his income. Over the years law regarding cash credits has evolved and has taken a definite shape. A few important aspects of the law with regard to section 68 can be enumerated here - (i) section 68 can be invoked when following three conditions are satisfied - (a) when there is credit of amounts in the books maintained by the assessee (b) such credit has to be a sum of money during the previous year (c) either the assessee offers no explanation about the nature and source of such credits found in the books or the explanation offered by the assessee, in the opinion of the Assessing Officer, is not satisfactory. It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. (ii) The expression the assessee offers no explanation means the assessee offers no proper, reasonable and acceptable explanation as regards the sums found credited in the books maintained by the assessee. The opinion of the Assessing Officer for not accepting the explanation offered by the assessee as not satisfactory is required to be based on proper appreciation of material and other attending circumstances available on the record. The opinion of the Assessing Officer is required to be formed objectively with reference to the material on record. Once the explanation of the assessee is found unbelievable or false, the Assessing Officer is not required to bring positive evidence on record to treat amount in question as income of the assessee. However, while considering the. explanation of the assessee, the Assessing Officer has to act reasonably - application of mind is the sine qua non for forming the opinion. (iii) Phrase appearing in the section — "nature and sources of such credits" - should be understood in fight perspective, so that genuineness of the transaction can be decided on merits and not on prejudices. Courts are of the firm, view that the evidence produced by the assessee cannot be brushed aside in a castral manner. Assesses cannot be asked to prove the impossible. Explanation about 'source of source ' or 'origins of the origin' cannot and should not be called for while making inquiry under this section. 16 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., (iv) In the matters related to section 68, burden of proof cannot be discharged to the hilt - such matters are decided on the particular facts of the case as well as on the basis of preponderance of probabilities. Credibility of the explanation, not the materiality of evidences, is the basis for deciding the cases falling under section 68. (v) Though confirmatory letters or account payee cheques do not prove that the amount in question is properly explained for the purpose of section 68 and assessee has to establish identity and creditworthiness of the creditor as well as the genuineness of the transaction, it is also true that money received through foreign remittance with RBI approval is a strong indicator of bonafide of the cash credit that has to be disapproved only with positive evidence. (vi) In matters regarding cash credit, the onus of proof is not a static one. As per the provisions of the section, the initial burden of proof lies on the assessee. Amount appearing in the books of account of the assessee is considered a proof against him. He can prove the identity of the creditors by either furnishing their PANs or assessment orders or such other documents. Similarly, genuineness of the transaction can be proved by showing that the money was received by an account payee cheque or by draft. Creditworthiness of the lender can be established by attending circumstances. Once the assessee produces evidences about identity, genuineness and creditworthiness of the lender, onus of proof shifts to the revenue. 2.4.6 I find that Hon'ble Delhi High Court was seized of a similar situation in Commissioner of Income-tax v. Shiv Dhooti Pearls & Investment Ltd. [2015] 64 taxmann.com 329 (Delhi) and it, inter alia, held as under: "12. The Court has examined the decision of the Gauhati High Court in Nemichand Kothari' (supra). Therein the Gauhati High Court referred to Section 68 of the Act and observed that the onus of the Assessee "to the extent of his proving the source whom which he has received the cash credit. " The High Court held that the AO had ample 'freedom' to make inquiry "not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assesses, in the form of loan from the creditor, though routed through the sub- creditors, actually belongs to, or was of, the assessee himself." Thereafter, the High Court, on a harmonious construction of Section 106 of the Evidence Act and Section 68 of the Act, held as under: What, thus, transpires from the above discussion is that while Section 106 of the Evidence Act limits the onus of the Assesses to the extent of his proving the source from which he has received the 17 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., cash credit, Section 68 gives ample freedom to the Assessing Officer to make inquiry not only into the source(s) of the creditor, but also of his (creditor's) sub-creditors and prove, as a result, of such inquiry, that the money received by the Assessee, in the form of loan from the creditor; though routed through the sub-creditors, actually belongs to, or was oft the Assessee himself. In other words, while Section 68 gives the liberty to the Assessing Officer to enquire into the source/sources from where the creditor has received the money, Section 106 makes the Assessee liable to disclose only the source(s) from where he has himself received the credit and it is not the burden of the Assessee to show the source(s) of his creditor nor is it the burden of the Assessee to prove the creditworthiness of the source(s) of the sub-creditors. If Section 106 and Section 68 are to stand together, which they must, then, the Interpretation of Section 68 has to be in such a way that it does not make Section 106 redundant. Hence, the harmonious construction of Section 106 of the Evidence Act and Section 68 of the Income Tax Act will be that though apart from establishing the identity of the creditor, the Assessee must establish the genuineness of the transaction as well as the creditworthiness of his creditor, the burden of the Assessee to prove the genuineness of the transactions as well as the creditworthiness of the creditor must remain confined to the transactions, which have taken place between the Assessee and the creditor. What follows, as a corollary, is that it is not the burden of the Assessee to prove the genuineness of the transactions between his creditor and sub-creditors nor is it the burden of the Assessee to prove that the sub-creditor had the creditworthiness to advance the cash credit to the creditor from whom the cash credit has been, eventually, received by the Assessee. It, therefore, further logically follows that the creditor's creditworthiness has to be judged vis-a-vis the transactions, which have taken place between the Assessee and the creditor, and it is not the business of the Assessee to find out the source of money of his creditor or of the genuineness of the transactions, which took between the creditor and sub-creditor and/or creditworthiness of the sub-creditors, for, these aspects may not be within the special knowledge of the Assessee. " (Emphasis Supplied) 13. The above observations, far from supporting the case of the Revenue, does the opposite. In the subsequent decision of this Court in Mod. Creations (P.) Ltd. v. ITO [2013] 354 1TR 282'[2011] 202 Taxman 10 (Mag./13 taxmann.com. 114 (Delhi), the position was clarified by the Court and it was held: “It will have to be kept in mind that Section 68 of the I.T. Act only sets up a Presumption against the Assessee whenever unexplained 18 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., credits are found in the books of accounts of the Assessee. It cannot but be gainsaid that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the Assessee. This burden, which is placed on the Assessee, shifts as soon as the Assessee establishes the authenticity of transactions as executed between the Assessee and its creditors. It is no part of the Assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the Assessee to prove the creditworthiness of the sub-creditors." 14. In Mod. Creations (P) Ltd. (supra) this Court negatived the case of the Revenue that the onus was on the Assessee to prove the source of the sub-creditor. It was observed as under: "14. With this material on record in our view as far as the Assessee web concerned, it had discharged initial onus placed on it. In the event the revenue still had a doubt with regard to the genuineness of the transactions in issue, or as regards the creditworthiness of the creditors, it would have have to discharge the onus which had shifted on to it. A bald assertion by the A.O. that the credits were a circular route adopted by the Assessee to plough back its own undisclosed Income into Its accounts, can be of no avail. The revenue was required to prove this allegation. An allegation by itself which is based an assumption will not pass muster in law. The revenue would be required to bridge the gap between the suspicions and proof in order to bring home this allegation. The IT A T, in our view, without adverting to the aforementioned principle laid stress on the fact that despite opportunities, the Assessee and/or the creditors had not proved the genuineness of the transaction. Based on this the ITAT construed the intentions of the Assessee as being mala fide. In our view the I TAT ought to have analyzed the material rather than be burdened by the fact that some of the creditors had chosen not to make a personal appearance before the AC. If the AC. had any doubt about the material placed on record, which was largely bank statements of the creditors and their income tax returns, it could gather the necessary information from the sources to which the said information was attributable to. No such exercise had been conducted by the AC. In any event what both the AC. and the IT AT lost track of was that it was dealing with the assessment of the company, i.e., the recipient of the loan and not that of its directors and shareholders or that of the sub-creditors. If it had any doubts with regard to their credit worthiness, the revenue could always bring it to tax in the hands of the creditors and/or sub-creditors. [See CIT v. Divine Leasing & Finance Ltd. (20082 2991TR 268 (Delhi) and CIT v. Lovely Exports (P., Ltd. [20082 216 CTR 195 (SCH. " (Emphasis supplied) 19 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 2.4.7 If above referred principles are applied to the facts and circumstances of the case under consideration, it becomes absolutely clear that the appellant had discharged its onus and burden of proof. Not only had it furnished the trail of banking transactions, it had also produced copies of Form-FCCPR submitted to the RBI evidencing receipt of funds from the foreign entity. Further, confirmation of the said entity was also furnished before the Ld AO which has not been negated by him. Thus, the identity of the creditor, its creditworthiness and genuineness of the transaction stands explained and if the Ld. AO still harbored any doubts about the creditworthiness or identity of the creditor, he had all the right under the Act to hold further inquiry and confront the appellant with such inquiry. To the contrary, Ld A.O. did not make any attempt to discharge his burden to rebut the evidences produced by the appellant and made the addition merely on the basis of a suspicion, it is trite law that the AO cannot brush aside the evidences submitted during assessment proceedings and make additions on mere whims and fancies. Even the Hon'ble Supreme Court-in the case of State of Kerala v. C Velukutty Co. [1966] 60 ITR 239 has held that the judgment is a faculty to decide the matters with wisdom truly and legally and not to depend on the arbitrary caprice of a Judge, but on settled and invariable principles of justice. 2.4.8 Further, Hon'ble Supreme Court in the case of MahabirPrasad SantoshKumar v. State of U.P. AIR 1970 SC 1302 has observed as under: ''Recording of reasons in support of a decision on a disputed claim by a quasi-judicial authority ensures that the decision is reached according to law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency. A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater, for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was correctly applied and the decision was just." 2.4.9 On weighing the pros and cons. I am of the considered view that Ld. AO has given a go by to the known canons of jurisprudence by completely ignoring the evidence produced by the appellant. He has not even adverted to the fact that RBI had taken cognizance of the Form-FCGPR. I find that, though not required, the appellant has, in fact, given the source of source and hence, the addition made by the Ld. AO cannot stand the test of legal scrutiny. I am also fortified 20 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., in my above view by the decision of the Hon'ble Bombay High Conn in the case of Commissioner of income-tax V. Tania Investments (P.) Ltd 322 ITR 394 (Born) and the Hon'ble Mumbai Bench of ITAT in the case of income-tax Officer 9(1)-1 v. Anant Shelters (P.) Ltd [2012] 20 taxmann.com 153 (Mum.) 2.4.10 It is also seen that the Hon'ble Mumbai Bench of IT AT was seized of the issue of cash credit from a foreign country in the case of AC IT vs Ms Linfox Logistics (I) Pvt. Ltd. in ITA 8641/M/2012 where vide order dated 30.09.2015, the Honble Tribunal deleted the addition made on the basis of the FIRC issued by the Bank in the following terms: "7. We have carefully considered the rival submissions. During the year under consideration the assessee company received a sum of Rs. 1,02,78,800/-, which was claimed to be received from its parent company is. M/s. Linfox International Group Pty. Ltd., Australia. In support of such credit, assessee furnished before the lower authorities a copy of the FIRC issued by the Bank. The CIT(A) has noticed that the copy of FIRC furnished by the assessee reflects the name of the assessee as the beneficiary and the name of the sender/remitter -M/s. Linfox International Group Pty. Ltd., Australia was also mentioned. It is also noticed by the C/T(A) that FIRC shows purpose of the remittance as "towards share application '. Quite clearly, the impugned sum has been received by the Assessee through banking channels, and the material on record clearly brings outsource as well as the nature of the amount received. Under these circumstances, in our view, the CIT(A) made no mistake in holding that the identity and creditworthiness of the creditor and genuineness of the transaction stood satisfactorily explained. In the absence of any credible material with the Revenue to disprove the findings of the CIT(A), we hereby affirm the same. Thus, on this aspect the Revenue fails. 2.4.11 Similarly in the case of CIT vs Tulip Finance Ltd. [2009] 178 Taxman 182 (Delhi), the Hon'ble Delhi High Court confirmed the finding of the IT AT on the basis of remittance certificates submitted to the RBI and in doing so it was, inter alia, held as under: "3 ....... As regards the remaining shareholder, that is 8, it was noted that he was an NRI and the share capital of Rs.15 lacs received from him was through his NRE account. The remittances were through three separate cheques, of which details were available. The assessee had also filed bank certificates submitted to the RBI 21 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., presumably for the purpose of remittance of dividend to said 8. In the light of such evidence, the C1T(A) as also the Tribunal had come to a conclusion of fact that the assessee had discharged the burden which lay upon it 'for establishing the identity of the shareholders as well as the genuineness of the transactions. As such, the Tribunal confirmed the findings of the CIT(A) and deleted the addition which had been made by the AO. It is obvious that the findings returned by the CIT(A) as well as the Tribunal are pure findings of fact and no question of law arises on this issue." 2.4.12 In the case of CIT vs Peoples General Hospital ltd. [2013] 35 taxmann.com 444 (Madhya Pradesh), Hon'ble High Court confirmed the deletion of addition on the basis of the fact that the foreign company was not found to be a bogus company and that the money was transmitted through banking channels. In doing so, it was, inter alia, held as under: "In the case at C1T v. Lovely Exports (P.) Ltd. [Application No. 11993 of 2007, dated 11-1-2008], the Apex Court specifically held that if the Identity of the person providing share application money is established, then the burden is not on the assessee to prove the creditworthiness of the said person. However, the department can proceed against the said, company in accordance with law. [Para 16] The position of the present case is identical. It is not the case of any of the parties that the company in Sharjah is a bogus company or a non-existent company and the amount which was subscribed by the said company by way of share subscription was in fact the money of the assessee. In the present case, the assessee had established the identity of investor who had provided the share subscription and it was established that the transaction was genuine, though as per contention of the assesses the creditworthiness of the creditor was also established. In the present case, in the light of the judgment of Lovely Exports (P.) Lid. (supra), only establishment of the identity of the investor is to be seen, The Delhi High Court also, in the case of CIT v. Divine Leasing # Finance Ltd. [2008] 299 ITR 268/[2007] 158' Taxman 440, considering a similar question held that the Assessee- company, having received subscriptions from the public/rights issue through banking channels and furnished complete details of the shareholders, no addition could be made, under section 68 in the absence of any positive material or evidence to indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company's own income from undisclosed sources. [Para 16] 22 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., In view of law laid down oy the Apex Court, the substantial questions framed in these appeals do not arise for consideration. Accordingly, all these appeals are dismissed with no order as to costs. " 2.4.13 It is thus apparent that the source of the funds which was routed through banking channels and reported to the RBI stands explained. Lt Ld. A.O wanted to bring certain other information or evidence on record to negate the appellant's claim,' he was not precluded from doing so. However, as brought out earlier, it is seen that he has not even cared to discuss the facts available on record and has merely gone by his whims and fancies. Accordingly, in view of the overwhelming factual and legal support in favour of the appellant, Ground Nos. 2 and 3 are allowed. 24. In addition to the above your Honour's kind attention is also drawn to c judgment of the Apex Court wherein Hon’ble Supreme Court in the case of CIT Vs Lovely Export 120081216 CTR 195 (SO upheld the order of the Delhi High Court that once the identity of the shareholder have been established even if there is a case of bogus share capital, if cannot be added in the hands of the Company unless any adverse evidence is not on record. 25. Hon'ble Gujarat High Court,in the case of Nemichaod Kothari Vs. CIT (2003) 264 ITR 254 (Gauh), wherein it was held that it is a settled law that the burden of the assessee to prove the genuineness of the transaction as well as the creditworthiness of the creditor must remain confined to the transactions which have taken place between the assessee and the creditor. It is not the business of the assessee, to find out the source of the money of his creditors. 26. Hon'ble ITAT, Mumbai in the case of AC IT Vs. Goldmohur Design And Apparel Park Ltd , 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 promenaded 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 to the revenue to add the same to the assessee's income as unexplained cash credit. The gist of the aforesaid judgement published on www.itatonline.org is enclosed herewith for your Honour's kind and ready reference [Annexure] 27. Hon'ble Delhi High court in the case of CIT Vs Gansour Investment Ltd (IT A No. 34/2007) has held that the Revenue can 23 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., make addition under section 68 of the Act only if assessee is unable to explain the credits appearing in the books. 28. Hon'ble ITAT, Delhi in the case of ACIT Vs. TRN Enersv Pvt Ltd held that share application money cannot be treated as unexplained credit if the AO does not make any investigation on the documentary evidences filed by the assessee or ask for the production of the investors for exam mat ion U/s 131 or if adverse material is found during the search to prove that share application money is bogus or an arranged affair of the assessee. The gist of the aforesaid judgement published on www.itatonline.org is enclosed herewith for your Honour's kind and ready reference [Annexure ] 29. The Appellant most humbly submits that the Appellant discharged is onus to prove identity, capacity and genuineness of the mount of shares capital received from Aanya Properties (I) Ltd. 30. The Appellant therefore prays before your Honour to kindly delete the addition made by Ld. D.C.I.T. on this ground. GROUND No 2,3,4& 5: 1. The Appellant Company is engaged in the business of Builders & Developers. 2. The Appellant Company is developing a residential project called Crystal Spires in the city of Thane. 3. Since project 'was under construction, major expenses related to project were debited to work in progress and not claimed as revenue expenditure . 4. During the year under Appeal, the Appellant incurred certain expenses, such as Brokerage Rs. 1,30,00,000/-, Sales & Marketing Expenses Rs. 1,24,53,166/-, Finance Cos: Rs. 11,86,093/- and legal & Professional fee Rs. 42,77,037/- aggregating to Rs. 3,09,16,296/- which were not directly related to the project and therefore, as per the Accounting Standards issued by Institute of chartered Accountants, the Appellant claimed such expenses as revenue expenditure and debited to profit and loss account. 5. During the assessment proceedings, the Appellant submitted all the details called for. 6. The Ld. D.C.I.T. made addition of Rs. 1,09,16,296/- stating that the Appellant failed to justify the claim of the said expenses as revenue expenditure. Accordingly The Ld. D.C.I.T, the Ld. D.C.I.T. disallowed the said expenses as revenue expenditure and added to work in progress. 24 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 7. The assessment order U/S 143(3) of the year under consideration was passed on 09/03/20/ 7 and then assessing officer did not make any disallowance in relation of aforesaid expenses in said order. The copy of assessment order dated 09/03/2017 is enclosed hereinabove as annexure for your honour's kind and ready reference. The various courts held that in cases were assessment U/S 143(3) of the Income Tax Act, 1961 was completed, the scope of assessment under section 153A would be restricted to incriminating material found during the course of search. During the assessment proceedings u/s 143(3), vide letter dated 17/02/2016, details of all operating expenses debited to profit and loss account. After thorough verification, he allowed the expenses debited to profit and loss account as claimed by the Appellant. Hence it clearly establishes that all material facts necessary for verification of claim of operating expenses debited to profit and loss account were readily available to the then assessing officer at the time of assessment U/S 143(3) of the Income Tax Act, 1961 and the A.O. passed the order after applying his mind, hence disallowance made by the Ld. D.C.I.T was bad -in- law. 8. Your Honour's kind attention drawn to the decision in the case of AH Cargo Global Logistics Vs DCIT (Supra) , of the Hon'ble ITAT Special bench which held that in cases were assessment U/S 143(3) of the Income Tax Act, 1961 was completed , the scope of assessment under section 153A would be restricted to incriminating material found during the course of search. In para 48 of the order, Hon’ble ITAT Spec tat bench held a) in assessments that are abated, the AO retains the original jurisdiction as well as jurisdiction conferred on him U/S 153A for which assessments shall be made for each of the six assessment year? separately. b) In other cases. in addition to the income that has already been assessed, the assessment u/s 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment and (ii) undisclosed income or property discovered in the course of search. The gist of the aforesaid judgement published on www.itatonline.org is enclosed herewith for your Honour's kind and ready reference [Annexure] 9. Your Honour's kind attention drawn to the decision in the case of Ideal Appliances Co. Pvt. Ltd Vs DCIT Central Circle-44, of the Hon'ble ITAT, Mumbai held that since no incriminating material was unearthed during the search, no additions could have made to the income already assessed. The gist of the aforesaid judgement published on www.taxguru .in is enclosed herewith for your Honour's kind and ready reference /Annexure. 25 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 10. Your Honour's kind attention is also drawn to a decision of Hon’ble Delhi High court in the case of CIT Vs Kabul Chawla (2016) 380ITR 573 (Delhi) held that since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. The gist of the aforesaid judgement published on www. itatonline. org is enclosed herewith for your Honour's kind and ready reference Annexure. 11.. Without prejudice, presuming that the stand taken by the Ld. D.C.I.T. as correct, Ld. D.C.I.T. should have increased the work in progress by Rs.3,09,16,296/-, same not done and the income earned out of surplus fund be reduced from work in progress. 12. The Appellant therefore prays before your Honour to kindly delete the addition made by Ld. D.C.I. T. on this ground. We hope Your Honour will find the above in order and shall thank you to kindly consider the above submissions before passing the order." 5. After considering the detailed submissions of the assessee Ld.CIT(A) disposed off the appeal filed by the assessee by adjudicating only Ground No. 2 raised by the assessee on the issue of incriminating material and other grounds raised by the assessee were dismissed as it becomes academic in nature. For the sake of clarity, the finding of the Ld.CIT(A) with regard to Ground No. 2 are reproduced below: - “5.2 Ground No.2: This ground of appeal relates to addition of Rs. 3,09,16,129/-, which is reduced from Work-in-progress. This issue is discussed in para 6, 61.1 and 6.2 of the assessment order. In this regard, assessee, in the written submission (para 4 above), has — stated that the assessment u/s. 143(3) of the year under consideration was already passed prior to search and the AO did not make any addition on account of brokerage, sales & marketing, finance cost and legal & professional fees. Therefore, the AO cannot revisit the order without any incriminating material. AO has not brought out anything in the assessment order to establish, that certain new facts or new insights/revelations or any incriminating document or any admission in statements recorded in search 26 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., proceedings were discovered or unearthed, due to which issued closed in earlier 143(3) order is being reassessed/revisited in the 153A assessment. In view of this, the ground no. 2 of assesssee’s appeal is allowed.” 6. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - “1. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,09,16,296/- and further holding that the AO could not make addition without incriminating material without considering the fact that once the assessment is initiated u/s 153A or 153C of the Act, it is open for the AO to make addition on any issue whether any incriminating material related that is found in the course of search or not’’ 2. Whether on the facts and in the circumstances of the case and in Law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,09,16,296/and further holding that he AO could not make addition without incriminating material without considering the fact that on this issue, he decision in the case of Commissioner of Income Tax s. Continental Warehousing & All Cargo Global logistics has not been accepted by the Revenue & SLP been filed in the Apex Court which is pending for adjudication.” 7. Before us, revenue raised the grounds of appeal contesting that Ld.CIT(A) was not justified in deleting the addition and holding that the Assessing Officer could not make addition without incriminating material and he failed to consider the fact that once the assessment is initiated u/s.153A or 153C of the Act, it is open for the Assessing Officer to make addition on any issue whether any incriminating material related is found in the course of search or not and further the Hon'ble Jurisdictional High Court decision in the case of CIT v. Continental Warehousing & All Cargo 27 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., Global logistics [374 ITR 0645] which has not been accepted by the revenue and it is in appeal before on Hon'ble Apex court. 8. At the time of hearing, Ld. DR heavily relied on the order passed by the Assessing Officer and he relied on the case law submitted by him which are as below: - S. No. [A] On the issue of addition being made in Search Assessments even in the absence of Incriminating Material 1 CIT v. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) 2 E.N. Gopakumar v. CIT[2016] 75 taxmann.com 215 (Kerala) 3. M/s. Canara Housing Development .v. Dy.CIT (Karnataka High Court) on 25 July, 2014 ITA No. 38/2014 [B] List of few cases wherein the SLP filed by the Revenue, against the orders of High Courts given in favour of the assessee on the issue of addition being made in Search Assessments even in the absence of Incriminating Material, are admitted 1 Pr.CIT v. Gahoi Foods (P.) Ltd [2020] 117 taxmann.com 118 (SC) 2 Pr.CIT v. Param Dairy Ltd. [2021] 133 taxmann.com 148 (SC) 3 Pr.CIT v. Gaurav Arora [2021] 133 taxmann.com 293 (SC) 4 CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 64 taxmann.com 34 (SC) In addition to the case laws relied Ld. DR further relied on the decision rendered by the Hon'ble Kerala High Court in the case of CIT vs K.P. Ummer dated 19/02/2019, ITA No. 174 of 2013 for the contention that there is no bar on making any addition to the income of the assessee even in case of completed assessments irrespective of the fact that no incriminating material was found during the course of search proceedings.” 9. On the other hand, Ld. AR of the assessee submitted written submissions and it is reproduced below: - “Ground No.1 & 2: Hon’ble CIT(A) deleted addition made in assessment framed u/s 153C in absence of incriminating material. A.O. Para 6 Page 3 CIT(A) Para 5.2 Page 13 & 14 28 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., A) Regular assessment u/s 143(3) completed on 09/03/2017 by ACIT—15(2)(1) allowing expenses at Rs.3,09,16,296/- in the assessment framed and determining business loss at Rs.2,27,16,946/- as shown. (P37 to 49) B) Notice u/s 153C issued on 16/11/2017 by DCIT, Central Circle- (2)(1), Mumbai pursuance to action u/s 132(1) on associate concern. C) No incriminating evidence found for the year under consideration. A.O. has not based addition made at Rs.3,09,16,296/- on any incriminating material found in the course of search. D) The issue covered in favour of assessee by decision of Hon'ble Apex Court in the case of CIT vs. Sinhgad Technical Education Society reported at 397 ITR 0344 (SC). E) No incriminating evidence/material has been found in the course of search at the premises of M/s. Luxora Infrastructure Pvt. Ltd. and Group Companies on the basis of which jurisdiction is assumed in the case of assessee u/s 153C. F) In absence of incriminating material no jurisdiction with A.O. to make any addition in respect to assessment year which has achieved finality u/s 143(3) of I.T. Act 1961. In the case of assessee for Asstt. Year 2013-14 regular assessment has been completed u/s 143(3) on 09/03/2017 i.e before initiation of proceedings u/s 153C on 16/11/2017. Thus addition made in absence of incriminating material in the assessment framed u/s 153C for Asstt. Year 2013-14 is bad in law. Hon'ble CIT(A) has rightly deleted addition made by A.O. Reliance on: i) (2017) 397 ITR 0344 (SC) CIT vs. Sinhgad Technical Education Society (P-2). ii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.50/2017 in the case of M/s. Marytime Suppliers Pvt. Ltd., Nagpur. (P-11 & 12) iii) Hon'ble Bombay High Court, Bench at Nagpur in ITA No.54/2017 in the case of Dnarampal Agrawal, Nagpur. (P- 15) iv) (2015) 374 ITR 0645 (Bom.) CIT vs. Continental Warehousing Corporation (P-26)” 29 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., 10. Considered the rival submissions and material placed on record, we observe that the original assessment u/s. 143(3) of the Act was completed on 09.03.2017 and the assessment was framed and business loss was determined at ₹.2,27,16,947/-, subsequent to search notice u/s. 153C of the Act was issued and served on the assessee. We observed from the notice u/s.153C of the Act that the issues raised in the notice and the additions made by the Assessing Officer in assessment order are not the same, in the Assessment Order Assessing Officer analysed the financial statements and disallowed certain expenditures which according to the Assessing Officer should have been charged to work-in-progress accordingly, he made addition. After careful consideration of the order passed by the Ld.CIT(A) and Ld.CIT(A) gave a finding that the addition made by the Assessing Officer in the Assessment Order are not based on any incriminating material found during the search it is in line with the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing & All Cargo Global logistics (supra). Further we observe that revenue has raised Ground No. 2 with the submission that revenue has not accepted the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Continental Warehousing & All Cargo Global logistics (supra). However, the above decision is binding 30 ITA NO. 1096/MUM/2020 (A.Y: 2013-14) M/s. Luxora Realtors Pvt. Ltd., on this jurisdiction and we do not find any reason to interfere with the finding of the Ld.CIT(A) as per which Assessing Officer has not made the addition based on any incriminating material found during search. Therefore, ground raised by the revenue is dismissed. 11. In the result, appeal filed by the Revenue is dismissed. Order pronounced on 08.02.2022 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board. Sd/- Sd/- (AMARJIT SINGH) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 08.02.2022 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum