Appeal Details
Counselvise Citation
[2023] 100 COUNSELVISE.COM (IT) 5870 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
9 month(s) 5 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-10-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
B
Next Hearing Date
18-09-2023
Assessment Year
2017-2018
Appeal Filed On
24-01-2023
Judgement Text
आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ , चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH ‘B’ CHANDIGARH BEFORE: SHRI A.D.JAIN, VICE PRESIDENT AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 33/CHD/2023 Ǔनधा[रण वष[ / Assessment Year : 2017-18 Evershine Resorts Private Limited, SCO80-81, 3 rd Floor, Sector 17-C, Chandigarh. Vs. बनाम The DCIT, Central Circle-2, Chandigarh. èथायीलेखासं./PAN No:AABCE9501E अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent आयकर अपील सं./ITA No. 146/CHD/2023 Ǔनधा[रण वष[ / Assessment Year :2017-18 The DCIT, Central Circle-2, Chandigarh Vs. बनाम Evershine Resorts Private Limited, SCO 80-81, 4 th Floor, Sector 17-C, Chandigarh èथायीलेखासं./PAN No:AABCE9501E अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent आयकर अपील सं./ITA No. 739/CHD/2022 Ǔनधा[रण वष[ / Assessment Year :2013-14 Evershine Resorts Private Limited, SCO80-81, 3 rd Floor, Sector 17-C, Chandigarh Vs. बनाम The DCIT, Central Circle-2, Chandigarh èथायी लेखा सं./PAN No:AABCE9501E अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 2 Ǔनधा[ǐरती कȧ ओर से/Assessee by : Shri Rohit Goyal, CA & Shri T.N.Singla, C.A. राजèव कȧ ओर से/ Revenue by : Shri Chandrajit Singh, CIT DR तारȣख/Date of Hearing : 19.09.2023 उदघोषणा कȧ तारȣख/Date of Pronouncement : 31.10.2023 आदेश/ORDER PER BENCH ITA No.33/CHD/2023 and ITA No.146/CHD/2023 are cross appeals filed by the assessee and the Revenue, respectively, against the order dated 19.12.2022 passed by the ld. CIT(A)-3, Gurgaon pertaining to Assessment Year 2017-18. 2. ITA No. 739/CHD/2022 is assessee's appeal against the order dated 30.11.2022 passed by the CIT(A)-3, Gurgaon pertaining to 2013-14 assessment year. ITA 33/CHD/2023 3. In ITA No. 33/CHD/2023, the assessee has raised the following Grounds of appeal : 1. That the order of Learned C.I.T. (Appeals) is bad and against the facts and Law. 2. That the assessment completed u/s 153A of the Income Tax Act, 1961 is against the provisions of the law as neither any search was conducted on the company nor any Panchnama was prepared in the name of the company. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 3 3. That on the facts and in the circumstances of the case, the Order of assessment passed under Section 153A of the Act is wholly illegal and without jurisdiction as no search had been conducted under Section 132 of the Act in any of the business premises of the appellant - company. 4. That the learned CIT(A) has wrongly upheld addition of Rs. 10,00,000/-received from Sh. Behari Lal Desh Raj without any justification. 5. That the learned CIT(A) has wrongly upheld addition of Rs. 40,00,000/-received from Om Prakash & Sons without any justification. 6. That the learned CIT(A) has wrongly upheld addition of Rs. 17,00,000/-received from Sh. Baldev Singh without any justification. 7. That the learned CIT(A) has wrongly upheld addition of Rs. 10,00,000/-received from M/s Dharma Wires Private Limited without any justification. 8. That the learned CIT (A) has wrongly upheld addition of Rs. 77,00,000/-u/s 68 of the Act on surmises and conjectures. 9. That the learned CIT(A) has wrongly upheld disallowance of loss of Rs. 5,000/- without discussing the same in the impugned order. 10. That the learned CIT(A) has wrongly enhanced income of the appellant company by Rs. 40,00,000/- without any justification. 11. Whether the additions made by the learned assessing officer on the dictate of third party be upheld by learned CIT(A) without issuing any notice for such additions. 4. Vide letter/application dated 13.04.2023, the assessee has sought to raise the following Additional Grounds : ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 4 1. That the approval u/s 153D was granted by the JCIT without application of mind and without consideration of relevant records. 2. That no search was conducted on the appellant company and otherwise also the alleged search, if any, conducted was in violation of provisions of Section 132(1) of the Income Tax Act,1961. 4.1 The ld. Counsel for the assessee states at the bar that he does not wish to press these additional grounds. Rejected as not pressed. 5. Ground No.1 is general. 6. Apropos Ground No. 2, the Assessing Officer (in short ‘the AO’) passed assessment order dated 29.12.2019, under Sections 153A(1)(b) read with Section 143(3) of the Income Tax Act, making various additions. Before the ld. CIT(A), the assessee raised, Ground Nos. 2 to 4, contending that assessment had been wrongly completed by the AO u/s 153A of the Act, against the provisions of the law, as neither any search was conducted on the assessee company, nor any Panchnama was prepared in the name of the company; that the AO had wrongly passed the assessment order u/s 153A of the Act; and that the AO had wrongly declared the assessee company as a shell company, without application of his own mind. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 5 6.1 The assessee also raised Additional Ground No. 1 before the ld. CIT(A) contending that the assessment order passed u/s 153A of the Act was wholly illegal and without jurisdiction as no search had been conducted u/s 132 of the Act in any of the business premises of the assessee company. 6.2 Additional Ground No.2 was raised before the CIT(A) to the effect that the finding recorded in the assessment order to the effect that search & seizure operations were carried out u/s 132 of the Act in the case of the assessee company, was perverse and wholly erroneous and, therefore, the order of the assessment passed u/s 153A of the Act was without jurisdiction. 6.3 Additional Ground No.3 before the CIT(A) was that the additions made in the assessment order were not based on any corroborative and relevant incriminating material stated to have been unearthed during the course of search by the AO, though no search had taken place and, therefore, the order of assessment was wholly illegal and without jurisdiction, in view of the judgement in case of “Commissioner of Income Tax (Central)-III Vs Kabul Chawla”, [2016] 380 ITR 573 (Del)/[2015] 281 CTR 45 (Del). ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 6 6.4 Additional Ground No.6 was to the effect that the AO had framed the assessment u/s 153A of the Act in undue haste, in a mechanical manner and without application of mind, as evidenced by the documentary evidence on record exchanged between the AO and the ADIT (Investigation), Mohali. 7. Apropos Ground No.2 and Additional Ground Nos. 1,2 and 6, raised before him, the ld. CIT(A) observed that the assessee had contended in these grounds that no search was conducted on it and no Panchnama was prepared in its name; and that the assessee had submitted that the order passed u/s 153A was illegal and without jurisdiction, since no search had been conducted u/s 132 of the Act. The ld. CIT(A) reproduced the relevant page of the Panchnama at page 127 of the impugned order, as furnished by the assessee. It was observed that in view of the submission of the assessee, a letter dated 07.09.2022 was sent to the AO, requiring the AO to furnish the details of the warrant executed/the Panchnama prepared, on the basis of which, proceedings u/s 153A of the Act were initiated; that in response, the AO had furnished the copy of the warrant executed in respect of the premises situated at SCO 80-81, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 7 4 th Floor, Sector 17-C, Chandigarh; that on perusal thereof, it had been observed that the warrant of authorization u/s 132(1) was executed in the name of the assessee, on 16.02.2018, at the said premises. The ld. CIT(A) has reproduced the said warrant of authorization at pages 128- 129 of the impugned order. The ld. CIT(A) rejected Ground No. 2 and additional Ground Nos. 1, 2 and 6 taken by the assessee before him, holding that the AO was justified in initiating assessment proceedings u/s 153A of the Act as the assessee was covered u/s 132(1) of the Act. 8. Apropos Ground No. 3 and Additional Ground Nos. 3 and 5 (Additional Ground No.5 being to the effect that in the absence of any reliable or cogent evidence during the course of search stated to have been unearthed that any amount of unexplained credits in the bank accounts, the impugned addition made in the hands of the assessee company were not sustainable in law or on facts), raised before him, the ld. CIT(A) observed that on this ground, the assessee had stated that additions made in the order u/s 153A of the Act could not be sustained in the absence of any incriminating material found during the search proceedings, and it had relied on the decision of the Hon'ble Delhi High Court in the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 8 case of “CIT Vs Kabul Chawla”; that from the facts of the case, it was observed that in this case, the return u/s 139 of the Act was filed on 31.08.2017; that therefore, as on the date of search, i.e., 16.02.2018, proceedings in this case were not completed as time to issue notice u/s 143(2) of the Act had not expired; that therefore, the ratio of the decision of the Hon'ble Delhi High Court in the case of “Kabul Chawla” was not applicable to the facts of the case; that therefore, the AO was not to restrict the additions subject to the incriminating seized material; that moreover, it had been noted that in terms of the provisions of Section 153A(1)(b), the AO was required to assess/re-assess the total income in the year under consideration; that it has been held by the Hon'ble Kerala High Court in the case of “CIT Vs K.P.Ummerthat” that when a notice u/s 153A is issued, it enables the Department to carry out assessment/re- assessment with respect to six immediate prior years and this does not require any incriminating material referred during search relating to those prior years in which there is no time left on the date of search for an assessment u/s 143(3); that the same view has been upheld by the Hon'ble Allahabad High Court in the case of “Rajkumar Arora”, 367 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 9 ITR 517 (All), the Hon'ble Kerala High Court in the case of “C.N. Gopakumar Vs CIT”, (2016) 75 taxmann.com 215 (Ker) and the Hon'ble Allahabad High Court in the case of “CIT Vs Kesarwani Zerda Bhandar”, ITA No. 270/2014; and that keeping in view the provisions of the Act and the ratio of the decisions mentioned, it had been observed that the AO was having jurisdiction to assess the income of the assessee on the basis of the material available at the time of assessment and he was not to restrict the additions subject to the incriminating material found during the course of the search. With these findings, the ld. CIT(A) dismissed Ground of appeal No.3 and Additional Grounds of appeal Nos. 3 and 5. 9. Ground No.3 taken before us also corresponds to Ground No.2 raised before the ld. CIT(A), which was rejected by the CIT(A), as noted in para No. 7 above. 10. Concerning Ground Nos. 2 & 3, on behalf of the assessee, it has been contended that the ld. CIT(A) has erred in failing to take into consideration the fact that the assessment was completed u/s 153A against the requirement of the law, as neither any search was conducted on the assessee company u/s 132 of the Act in any of its business ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 10 premises, nor any Panchnama was prepared in its name. It has been contended that the assessee company had also requested the AO to provide a copy of the Search warrant in the name of the company, but the same was not provided to the assessee company; that neither the name of the company was mentioned in the Panchnama, nor the copy of Search Warrant was provided to the assessee company, despite repeated requests made; that the search was conducted on the residential premises of the three Directors of the assessee company, namely Shri Trilokinath Singla, Shri Jagdish Rai Gupta and Shri Sant Ram Sharma in their individual capacity; that simultaneously, search was also conducted on the business premises of M/s Kansal Singla & Associates, Chandigarh on SCO Nos. 80-81, 4 th Floor, Sector 17-C, Chandigarh which is also the registered address of the company; that during the search of M/s Kansal Singla & Associates, regular books of account alongwith bank statement of the company were found; that one of the Directors of the company, Shri Trilokinath Singla, who is also a partner in M/s Kansal Singla & Associates, was present in person at the time of search in M/s Kansal Singla & Associates, but his signatures were not taken on the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 11 Panchnama prepared in the name of M/s Kansal Singla & Associates; that the ld. CIT(A) has observed that a letter dated 07.9.2022 was sent to the AO, requiring him to produce a copy of Search Warrant executed/Panchnama prepared, on the basis of which, proceedings u/s 153A were initiated on the company; that while reproducing copy of Search Warrant in his order, the ld. CIT(A) has observed that the AO was justified in initiating proceedings u/s 153A of the Act, as the warrant of authorization u/s 132(1) was executed in the name of the company on 16.02.2018, at SCO No. 80-81, 4 th Floor, Sector 17-C, Chandigarh. 11. It has been contended on behalf of the assessee company that the AO has observed that during the search & seizure operation conducted on the Punjab Sand Mining Group of Cases on 16.02.2018, it had been found that M/s TJR Properties Pvt. Ltd. and M/s Evershine Resorts Pvt. Ltd., on whom, search had been conducted at SCO Nos. 80-81, 4 th Floor, Sector 17-C, Chandigarh, on 16.02.2018, were shell companies and existed only on paper and had no profit earning apparatus of their own as such, because these companies were not carrying on any kind of business activity, whatsoever. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 12 11.1 It may be noted at this juncture that vide Ground No.4 raised by the assessee before the ld. CIT(A), the assessee contended that the AO had wrongly declared the assessee company as a shell company, without application of his own mind. In the impugned order, the ld. CIT(A) has disposed of the said Ground No.4 taken before him alongwith Ground Nos. 7 & 8, which are against the addition of Rs.4,82,00,000/- and, again, another addition of Rs.4,82,00,000/-, respectively, u/s 68 of the Act, and additional Ground No.4, as per which, the additions made in the hands of the assessee company on the basis of its bank entries, regarding which entries, sufficient and credible information including the source by way of evidence had been placed on the assessment record for discharging its burden, were not sustainable in law, as no enquiry had been undertaken by the AO and/or any material brought on record establishing the amount of bank entries as explained, thereby inviting the application of the provisions of Section 68 of the Act. 12. The ld. CIT(A) observed, inter-alia, that a search & seizure operation u/s 132(1) of the Act had been carried out in the case of the assessee on 16.02.2018; that there was an ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 13 allegation against the assessee group and its promoters, of irregularity in the sand mining actions carried out during April/May, 2017, by the Government of Punjab; that subsequently, assessment proceedings had been initiated in this case by issuing notice u/s 153A of the Act, on 09.03.2014; that the AO had drawn an inference from the statement of Shri Jagdish Rai Gupta and Shri Sant Ram Sharma, the Directors in the assessee company, recorded during the search, that the assessee company is a shell company which exists only on paper and it does not have any profit earning apparatus, since it is not carrying out any kind of business activity; that during the assessment proceedings, bank account statement of the assessee was examined by the AO and it was observed that there were bank credits amounting to Rs.4,82,00,000/- in the bank account maintained with the Bank of Maharashtra, which were found to be disproportionate to the income as well as the business affairs of the assessee, since the identity and credit worthiness of the persons and genuineness of the transactions could not be established; that the same was confronted to the assessee vide Show Cause Notice dated 11.12.2019; that in response, the assessee had furnished the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 14 details of the persons from whom the said credit entries were received during the year under consideration; that however, the reply of the assessee was not found tenable by the AO and it was held that the assessee had not been able to explain the purpose and utilization of these credit entries to substantiate the genuineness of the transactions; and that it was, therefore, that, the addition of Rs.4,82,00,000/- had been made by the AO on account of unexplained credits in the books of account u/s 68 of the Act. 13. The ld. CIT(A) observed that the assessee had submitted during the proceedings before him that credits amounting to Rs.4,82,00,000/- were received in its bank account maintained with the Bank of Maharashtra during the year under consideration; that it had been contended that all the credits were received from genuine persons and the assessee had furnished necessary documentary evidence in respect of each credit entry as confirmation/affidavit, bank account statement, ledger account and Income Tax Return of such persons; that it had been submitted that all these documents had also been furnished before the AO during the assessment proceedings and it had also been acknowledged by the AO in the assessment order; that it had ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 15 been contended that assessment in the case of Shri Trilokinath Singla, from whom, credit had been received in the bank account, was also completed by the same AO and no addition on account of this transaction had been made; that it had also been submitted that the AO was satisfied with the bank accounts and a Deviation Note had been sent to the ADIT (Investigation), Mohali, in respect of such credits; that it had been further stated that the AO had distorted the statements of Shri Jagdish Rai Gupta and Shri Sant Ram Sharma in bits and pieces, and he relied on wrong facts, and that no Show Cause Notice/questionnaire had been issued in this respect by the AO ; that further, it had been explained that the assessee company has land of Rs.1.06 Cr measuring 10 bighas and 3 biswas, purchased vide Registered Sale Deed, dated 25.08.2008; that the assessee had shown sale of the said land in parts, for Rs.28 lacs, Rs.2,43,00,000/- and Rs.1 Crore, during assessment years 2013-14, 2018-19 and 2019-20, respectively; that it had been stated that the assessee had declared corresponding capital gains in its ITRs for assessment years 2013-14, 2018-19 and 2019-20, which had been assessed by ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 16 the AO; and that it had been contended that therefore, the assessee was having income generating apparatus. 14. The ld. CIT(A) has observed that on taking into consideration the aforesaid facts, it was found that the AO had held the assessee company to be a shell company as merely existing on paper and not carrying out any business activity and not having any income generating apparatus; that on perusing the material available on record, it had been observed that the assessee company had land of Rs.1.06 Crore, measuring 10 bighas and 3 biswas, purchased vide Registered Sale Deed dated 25.08.2008; that the Deed had been registered by the Deputy Registrar, Kalka and Stamp Duty of Rs.5.50 lacs had been paid; that the said land was appearing in Schedule VII of the fixed assets of the balance sheet of the assessee; that it was not the case of the AO that the said land was a benami asset of any other person; that the assessee had shown sale of the said land in parts, for Rs.28 lacs, Rs.2.43 Cr and Rs. 1 Cr, during assessment years 2013-14, 2018-19 and 2019-20 respectively; that the assessee had declared corresponding capital gains in its ITRs for assessment years 2013-14, 2018-19 and 2019-20, which had been assessed by the AO; ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 17 that it was, therefore, evident that the assessee was having income deviating apparatus; that the AO had relied on the statement of Shri Sant Ram Sharma, one of the Directors of the assessee company, recorded u/s 132(4) of the Act, by inferring that Shri Sant Ram Sharma clearly stated in his statement that he was not maintaining any company or business which requires upkeep and maintenance of books of account; that thus, Shri Sant Ram Sharma was not aware of any such company in the name of M/s Evershine Rersorts Pvt. Ltd., as mentioned by the AO in para 8.1 of the assessment order; that on going through the said statement of Shri Sant Ram Sharma, as reproduced by the AO in the assessment order, it had been observed that the Authorized Officer had put question No.11 to Shri Sant Ram Sharma in respect of maintenance of books of account in his own individual capacity, as evident from the word “apni”, which means “own”. 15. The ld. CIT(A) observed that there is no definition of “shell company” given under the provisions of Income Tax Act or the Companies Act; that every case needs to be examined on merits as per the peculiar facts and circumstances, to draw such an inference and consequences ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 18 out of the same, as per the provisions of the Income Tax Act; that in order to decide the merits of the addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of the credits received by the assessee in terms of conditions laid down in the provisions of Section 68 of the Act; that thus, it is required to examine the identity and credit worthiness of the persons from whom amounts have been received and the genuineness of the transactions on merit by considering each credit separately; that the AO has not discussed each and every credit separately on merits in the assessment order before drawing the inference that the credits were unexplained; that the AO was again directed during the appellate proceedings vide letter No.293 dated 12.08.2021 to examine said credits on merits in respect of identity and credit worthiness of such persons and genuineness of transaction; that in the remand report dated 05.09.2022, the AO did not bring on record any adverse finding in respect of identity and credit worthiness of such persons and genuineness of transactions, except by stating that the assessee is a shell company and does not have any profit deviating apparatus; that however, the AO did not make any ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 19 further enquiry in respect of credits in the bank account during the remand proceedings and relied upon the facts as discussed in the assessment order. 16. The ld. CIT(A) has observed that therefore, it was required to examine the identity and credit worthiness of such persons from whom amounts had been received and the genuineness of the transactions on merit, by considering each credit separately; that during the assessment proceedings, it was observed by the AO that the assessee had credits amounting to Rs.4 lacs in its bank accounts and the assessee could not explain the purpose and utilization of such credits; that thus, the addition of Rs.4.82 Cr had been made by the AO; that the assessee had submitted during the appellate proceedings that it had received credits of Rs.4.82 Cr in its bank account maintained with the Bank of Maharashtra, and it furnished documentary evidence in respect of the identity and credit worthiness of such persons and the genuineness of the transaction; that the documentary evidences furnished by the assessee had been examined independently, in the light of the findings of the AO recorded in the assessment order as well as the remand report. The ld. CIT(A) summarized the analysis of the credit ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 20 entries appearing in the bank account by way of a Chart/Table, which finds place at pages 117 to 121 of the impugned order. 16.1 The CIT(A) observed that in view of the analysis made by him and looking into the factual matrix of the case, it had been observed that the assessee had explained the credits of Rs.4.05 Cr received in the bank account during the year under consideration, by furnishing necessary documentary evidences in support of the identity and credit worthiness of the persons and the genuineness of the transaction; that thus, the assessee had discharged its primary onus as required u/s 68 of the Act by furnishing names and addresses of the depositors, copies of their bank account statements reflecting transactions taking place through banking channels, their confirmations alongwith acknowledgement of their ITRs containing PANs and their assessment particulars; that all these documents had also been furnished before the AO during assessment proceedings; that although the AO had admitted having received the said documents during the assessment proceedings, he did not take them into consideration while making the addition; that the AO had recorded in his order ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 21 that the assessee could not explain the purpose and utilization of such credits; that the AO had failed to take cognizance of the fact and addition u/s 68 of the Act is to be made if the assessee does not offer any explanation regarding the source and nature of the credits received in the bank account, or if the explanation offered is not found to be satisfactory by the AO. 17. The ld. CIT(A) observed that whereas the assessee had duly furnished its explanation in respect of bank credits received during the year under consideration alongwith necessary documentary evidences by explaining the source and nature of the same; that if the AO was not satisfied with the explanation of the assessee in respect of the source and nature of the credits received, he should have recorded such dissatisfaction in the assessment order by conducting further examination of the documents or by conducting further enquiries and thus, he should have shifted the onus back on the assessee; that however, no adverse finding has been recorded in the assessment order in respect of the documentary evidences furnished by the assessee in support of bank credits of Rs.4.05 Cr; that the statement and documents furnished by the assessee during the appellate ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 22 proceedings had also been forwarded to the AO for remand report; that in the remand report also, the AO has not discussed the documentary evidences furnished by the assessee in support of the bank credits on merits, let alone pointing out any defect in the same; that in view of this discussion and after making independent perusal of the documents furnished by the assessee, it had been noted that the assessment order was non-speaking and mechanical in nature and had been passed without discussing the merits of the documents; that there was no direct or indirect evidence pointed out by the AO before making such addition; and that therefore, after considering the merits of the case and the analysis of the credits as per the chart/table reproduced by him in the order and on the strength of the documentary evidence, it was observed that there was no justification in such addition made in the hands of the assessee u/s 68 of the Act. It was in this manner, that the ld. CIT(A) deleted the addition of Rs.4.05 Cr. 17.1 However, the ld. CIT(A) confirmed the addition of Rs.77 lacs, finding that the assessee could not explain the credits received in the bank account during the year under consideration, to this extent. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 23 17.2 The ld. CIT(A), as such, partly allowed the original Ground Nos. 7 and 8 taken before him (wrongly mentioned as Ground Nos. 5 & 6 at page 123, para 9.6 of the impugned order and additional Ground No.4, whereas the original Ground No.4, though deliberated upon, as discussed above, was stated to be “not separately adjudicated since quantum addition has been adjudicated.” 17.3 On behalf of the assessee, it has been contended that apropos issue of shell company, the Assessing Officer observed that during the search and seizure operation under section 132(1) of the Income Tax Act, conducted on the Punjab Sand Mining Group of cases on 16.02.2018, it had been found that M/s TJR Properties Private Limited and M/s Evershine Resorts Private Limited, on whom, search had been conducted at SCO Nos. 80-81, Fourth Floor, Sector 17- C, Chandigarh, on 16.02.2018, were shell companies and existed only on paper and had no profit earning apparatus of their own as such, because these companies were not carrying on any kind of business activities whatsoever; that the AO, in para 4 of his order dated 29.12.2019, contends that during the search and seizure operation u/s 132(1), it was found that the appellant company is a shell company ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 24 and has no profit earning apparatus as such because the company is not carrying any kind of business Activities; that the Assessing Officer observed that during the search, statement of Shri Jagdish Rai Gupta was recorded on oath under section 132(4) of the Income Tax Act; that the AO, after reproducing part of statement of Jagdish Rai Gupta (Director), contended that Jagdish Rai Gupta has admitted that no business activity has been carried out by the company from the date of its establishment; that the Assessing Officer observed that further, Shri Jagdish Rai Gupta had denied any knowledge of any business transactions from bank transactions carried out by M/s Evershine Resorts Private Limited; that further, the AO, after reproducing part of statement of Sant Ram Sharma observed that therein, he had contended that he was unaware about any company with the name, M/s Evershine Resorts Private Limited; that the Assessing Officer observed that thus, M/s Evershine Resorts Private Limited was a shell company and the amount received by the company from its lenders was not at all genuine and its credit worthiness could not be proved under any circumstances; that the Assessing Officer observed that therefore, the amount of Rs. 4,82,00,000/- ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 25 credited by the assessee company in its bank account during the year under consideration was being held to be the unexplained cash credits of the assessee company within the meaning of Section 68 of the Income Tax Act and the same was being added to the income of the assessee company; and that in this manner, the Assessing Officer made addition of total credits in the bank account amounting to Rs. 4,82,00,000/- to the income of the assessee company. The AR of the company stated that the company has never received money from any unknown or unrelated person and even no funds were ever transferred to any unknown or unrelated person, except money paid for the genuine transactions done by the company; that no transaction was ever done to rotate any undisclosed money or black money or to inflate the turnover or to divert the bank loans or to evade the tax during any year since its inception, except genuine transaction; that the company, after coming to know about the contents of Appraisal Report, submitted a detailed note of comparison of the appellant company with the general characteristics of a shell company before the AO on 23.12.2019 during the assessment proceedings; that the Assessing Officer was satisfied with the replies submitted by ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 26 the company in response to various questionnaires issued by the AO during the assessment proceedings and he did not ask any query about the status of the company as shell or genuine company during the whole assessment proceeding; that the AO was fully satisfied with the status of the company as a genuine company upto 27.12.2019 ( the date of the ADIT’s Reply to the AO’s Deviation Note) and also the creditworthiness and genuinity of all the credit entries in the bank statements after verification of books of account, statements of its directors and documents or evidences submitted by the appellant and, accordingly, he sent a Deviation Note (APB-48-350) to the Deputy Director of Investigation (ADIT), Mohali on 26.12.2019 vide letter No. 1733, dated 24.12.2019 calling for no addition at all with the observation "amounts have been credited in the bank accounts of the companies from known sources, which has been duly accounted for by the assessee companies in their respective books of account and shown in their audit report as well as ITR filed in due course on regular basis." The Deviation Note as scanned and reproduced hereunder : ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 27 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 28 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 29 17.4 The ld. Counsel for the assessee has contended that the ADIT, Investigation, Mohali took less than 12 hours to go through all the documents and detailed replies and evidences as submitted by the company and rejected the said deviation note vide letter no. 1763 dated 27.12.2019 with an unauthorized dictat to declare our genuine company declared as a shell company as mentioned in Appraisal Report, On receipt of reply from the ADIT on 27.12.2019, the AO also changed his mind and declared our company as a ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 30 shell company, although he was fully satisfied while sending the deviation note on 26.12.2019 till 06:00pm; that it is proved from this that the Learned Assessing Officer had to forego his satisfaction and adhere to the dictat of a third party, i.e. the ADIT(lnv). The AR of the company submitted that the Assessing Officer, after relying on the documents, information and explanation submitted by the assessee, had proposed no addition at all, as he was completely satisfied with regard to the fact that the assessee company was not a shell company and all amounts credited in the Bank accounts of the assessee company were only from known sources which were genuine and duly accounted for in its books of account, upto 26.12.2019, and he prepared a Deviation Note for making no additions at all; that this fact has been established beyond a shadow of doubt by the fact that a Deviation Note was prepared by the Assessing Officer, dated 24/12/2019, and sent to the ADIT, Investigation, Mohali on 26/12/2019 at 06:00 pm, vide letter No. 1733 (along with all submissions of the assessee and note on comparison of the Appellant company with a Shell company), after perusal of :- a) Statements of directors recorded during search and post search investigations; ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 31 b) Replies filed by the company including its books of account; c) A detailed note on comparison of the assessee company with a so called shell company; d) Submission of cogent and reliable documentary evidences. 17.5 The ld. Counsel has submitted that in this Deviation Note, the Assessing Officer has categorically admitted that there was no document or reasoning supplied to him by the Investigation Wing, due to which, the credit entries in the bank account of the assessee company could be treated as unexplained (Deviation Note-para 3/last); that further, he has also admitted (Deviation Note-para 4/last) that after going through the replies of the assessee company, he was satisfied that the amounts have been credited in the bank account of the assessee company from known sources, which have been duly accounted for by the assessee company in their books of account and shown in their audit report as well as ITR filed in due course on regular basis; that further, no question/explanation regarding the status/genuinity of the company was ever asked during the assessment proceedings and simply by distorting the statements of the Directors, i.e., Sh. Jagdish Gupta and Sh. Sant Ram Sharma ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 32 and following the dictat of the third party in the Deviation Note, the company was declared as a Shell Company. 17.6 Reliance has been placed on the judgment of the Hon'ble Delhi High Court in the case of ‘PCIT vs Agson Global Pvt. Ltd.’, dated 20.01.2022, wherein it was held that- "4.2 What is of some significance is that a deviation report dated 20-12-2018 was prepared by the AO, which was, markedly different from the assessment orders passed by him. This aspect of the matter has been adverted to at great length by the Tribunal in the impugned order and shall also be alluded to by us in the latter part of the judgment. 4.3 Suffice it to state that the Deputy Director of Investigation Wing had submitted a written appraisal report on 4-1-2018. Despite the stand taken by the Deputy Director (Investigation) in the appraisal report and the communication dated 24-12-2018, at the meeting held on 28-12-2018, the AO and the Assistant Commissioner of Income-tax (ACIT) reiterated the position taken in the deviation report. 4.4 in the deviation report, the AO concluded that since the source of the cash movement concerning receipt of money by the assessee in the form of share capital/share premium amounting to Rs. 365.28 crores was traceable directly to the assessee's bank accounts, the addition of the said sum was not justified. 4.5 Likewise, insofar as the issue concerning addition of Rs. 941.86 crores qua bogus purchases was concerned, the AO in the deviation report made the following significant observations : (i) Contrary to what the appraisal report had held, all purchases made by the assessee were not bogus. (ii) 50% of the purchases were verified by issuing notices under section 133(6) of the Act. Qua them, confirmatory letters, as well as copies of the ledger accounts, were presented by the assessee. In respect of these, no variation was found. (iii) If the value of such purported bogus purchases, as noticed in the appraisal report, was taken into account and juxtaposed against sales booked against the very same persons- it would show that the assessee has, in fact, declared a profit. In other words, if transactions with such parties are treated as bogus purchases, the profit reflected in the books will have to be reduced. The rationale given was that one cannot disallow bogus purchases and at the same time treat the sales with the same parties as ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 33 genuine and bring the same to tax. Therefore, the suggestion made in the appraisal report that an ad hoc addition of 25% should be made to the income on account of such bogus purchases, may ultimately be detrimental to the interest of the revenue, if the sale is also to be treated as bogus. (iv) Reference was made to the transactions arrived at with three entities by the assessee in the financial year 2016- 2017. It was noticed that similar transactions made with the same or different parties that were bogus transactions, is something which obtained strength from the fact that stock worth Rs. 450 crores, was found short, although the same stood recorded in the books of accounts. In sum, the conclusion reached was that the books of accounts were not genuine and were liable to be rejected under section 145(3) of the Act and thereafter a gross profit rate had to be estimated on a reasonable basis keeping in mind the prevailing market trend. 4.6 As regards cash deposits made by the assessee during the demonetization period; against a proposal to add Rs. 180.53 crores, as suggested by the Investigation Wing, for the reasons given in the deviation report, the amount was pared down to Rs. 99.04 crores. Thus, the suggested addition on this score to the total income of the assessee concerning AY 2017-2018 was restricted to Rs. 99.04 crores. 11.5 That being the position, the Tribunal concluded that the assessee had been able to prove the identity of the investors, their creditworthiness and genuineness, which are the ingredients of section 68 of the Act. The relevant observations made in paragraph 86 by the Tribunal read as follows : "86. Considering the facts of the case in the light of material on record in voluminous paper books and confirmations of the parties and the summary of transfer of funds reproduced above, it is clear that assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. We may also note that during the course of hearing of these appeals, A.O. was present in the Court, but, did not make any adverse comment upon the documentary evidences filed in the paper book filed by the assessee. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties. Considering the totality of the facts and ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 34 circumstances of the case and material on record, we are of the view that assessee has been able to prove that it has received genuine amounts which is routed through various companies. Therefore, there was no justification to make any addition under section 68 of the I.T. Act." 15.1 In the context of this aspect, the Tribunal returned the following findings of fact: (v) Because there was dissonance in the AO's views, as recorded in the deviation report and the remand report when compared to the additions/disallowance made in the assessment orders, the appraisal report generated pursuant to the search and seizure action was called for by the Tribunal and perused. A perusal of the report by the Tribunal revealed that addition/disallowance concerning bogus purchase was made only to protect the interest of the revenue. (viii) Insofar as the abated AYs were concerned i.e., AYs 2015- 2016, 2016- 2017 and 2017-2018, it was, as per the Tribunal, apparent that the assessee had purchased goods, which were in value less than the sum for which they were sold. Therefore, as held by the A.O. in the deviation report, if the purported bogus purchases were to be disallowed then necessarily the sales shown in the assessee's regular books of accounts would also have to be excluded which would result in the assessee's income falling below the returned/declared income. In this regard, the Tribunal recorded that for the AYs 2012-2013 to 2017-2018, the total sales recorded by the assessee was Rs. 36,20,60,89,783/-, as against purchases made from the same very parties amounting to Rs. 36,02,14,17,848/-. Resultantly, for the said period, the assessee had shown a profit of Rs. 18,46,71,935/-. 15.8 According to us, the observations made by the Tribunal are pure findings of fact, which cannot be interdicted by us in appeal. The inconsistency in the approach adopted by the A.O., while preparing the deviation report and framing the assessment order with regard to purported bogus purchases is an aspect, which cannot be ignored and has been correctly highlighted by the Tribunal.” 17.7 The ld. Counsel for the assessee has further submitted that the assertion of the Assessing Officer that the assessee company is a shell entity having no profit earning apparatus of its own is wrong, because the assessee company had already purchased land on the Pinjore Kalka ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 35 Highway, and purchase deed was registered on 25.08.2008 for Rs. 1.06 Crores and stamp duty of Rs. 5.50 lacs was also paid on the said sale deed; that thereafter, the company tried to enter into Joint Venture, but the deal could not mature due to slump in the market and construction of Bye Pass for Parwanoo & Shimla; and that the company then decided to sell the said site / land. 17.8 The ld. Counsel for the assessee has stated that the Assessee Company received advance of Rs. 20,00,000/- each through banking channel on 28.03.2012 and 26.12.2012 from Mr. Mohit Bhardwaj as per the terms of agreement to sell executed on 20.03.2012; that a part of the said land was also sold for Rs. 28.00 lacs on 14.09.2012 (i.e., in F.Y. 2012- 13), through registered sale deed in favour of Mr. Mohit Bhardwaj, in pursuance of the aforesaid agreement to sell dated 20.03.2012. 17.9 It has been averred that further, the sale deed of Rs. 28 lakhs was registered in the name of Sh. Mohit Bhardwaj during AY 2013-14 and the cost of the above-mentioned land was reduced from the cost of the land in the balance sheet for the A.Y 2013-14, but thereafter, due to some compelling reasons, he could not arrange the balance funds and hence, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 36 the sale of the balance land and its registry was delayed; that the earnest money of Rs. 20,00,000/- each received from Sh. Mohit Bhardwaj on 28.03.2012 and 26.12.2012, respectively, was shown as part of sale proceeds of land during AY 2018-19; that to avoid forfeiture of his earnest money, on the basis of the aforesaid agreement to sell, he finally got the sales deeds of the balance land registered during AYs 2018-19 and 2019-20, for Rs. 2,43,75,000/- and Rs. 1,00,00,000/-, respectively, in the name of his associate, namely, Sh. Manoj Kumar. 17.10 The ld. Counsel has stated that during Financial Year 2017-18, part of the land was sold for Rs. 2,43,75,000/- through registered sale deeds, and advance tax of Rs. 30,00,000/- was paid by the company and also self-tax of Rs. 12,63,980/-was paid for the year; that during F.Y 2018-19, land of Rs. 1,00,00,000/- was sold through registered sale deeds and advance tax of Rs. 17,00,000/- was paid; that capital gain tax was paid by the company during AYs 2018-19 and 2019-20 on the sale of the balance land, as per the terms of agreement to sell, which was executed on 20/03/2012; that the assessee company reduced the advance of Rs. 40 lakhs received from Sh. Mohit Bhardwaj in ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 37 A.Y 2012-13 and A.Y 2013-14 from the cost of land in A.Y 2018-19 and A.Y 2019-20 to calculate the Capital Gains Tax. 17.11 It has been submitted that further, there is no definition of 'Shell Company', either under the Income Tax Act, or under the Companies Act; that a detailed note on 'Shell Company' has been submitted with the AO and Id CIT(A) (Page 199-204 of Paperbook). 17.12 The AR contends that since its incorporation, the assessee company is regularly preparing its Profit and Loss Account as well as its Balance Sheet, and it has also been getting its accounts audited regularly; and that this company is a legal entity and it is operating like any other genuine company. 17.13 It has further been stated in the Note filed, that even the Registrar of Companies and the MCA have identified certain shell companies after 2013 and even the Directors of such shell companies have been disqualified; that however, the assessee company has been treated as a legal and genuine company. It has been stated that as per the various definitions of 'shell company', a shell company is a company which is having dummy directors and does not conduct any ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 38 activity other than in a pass-through capacity; that the assessee company is regularly doing the business activity and it even made purchase of property and made sincere efforts to develop the proposed commercial colony, like other real estate developers; and that for a company to be genuine, it is not necessary that there should essentially be trading or manufacturing activity in the company. 17.14 It has been stated that loans or advances were received or given to relatives or friends or sister concern, as and when required, and that such transactions cannot, by any stretch of imagination, render the genuine and legal assessee company to be either a paper company, or a shell company; that no Director or shareholder of the assessee company is fictitious; that the Directors and shareholders of the assessee company are respectable persons of means and repute; that therefore, there is no illegal purpose or motive of the Directors or shareholders to do business in the assessee company; and that no allegation is levied by the AO that this company is an entry operator or doing any illegal activities. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 39 17.15 The ld. Counsel has submitted that the company filed a detailed reply on the issue of shell company after receipt of appraisal report from ICAI, New Delhi, along with a note on comparison of a shell company with a genuine company, which was reproduced by CIT(A) in his order at pages 80-83. 17.16 The ld. Counsel for the assessee has averred that the CIT(A), on pages 113-116 of his order, has accepted the genuinity of the company and has mentioned that - "there is no definition of shell company given under provisions of Income Tax Act, 1961 or Companies Act 1956/2013. Each case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference and consequences out of the same as per the provisions of the Income Tax Act." 17.17 The assessee has contended that until 27.12.2019, the Assessing Officer had remained completely satisfied with regard to the fact that M/s Evershine Resorts Private Limited was not a shell company and the Assessing Officer had been satisfied that all transactions were through banking channels only and had agreed that these transactions were absolutely genuine transactions; that also, the AO had accepted that these transactions stood duly accounted for in ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 40 the books of account of the company; that the Assessing Officer had himself proposed no addition of these credits in the case of the company, in the Deviation Note sent by him to the Deputy Director of Income Tax (Investigation), Mohali, on 16.12.2019; that this fact stands established beyond any shadow of doubt, by the fact that the said Deviation Note was prepared by the Assessing Officer on 24.12.2019 and was sent to the Deputy Director of Income Tax (Investigation), Mohali, on 26.12.2019, at 6.00 PM, vide letter No. 1733, in the case of M/s Evershine Resorts Private Limited; that in the Deviation Note, the Assessing Officer had categorically admitted that there was no document or reasoning supplied to him by the Investigation Wing of the Department, due to which, the credit entries in the bank accounts of the assessee company could be treated as unexplained; that the Assessing Officer had also admitted that after going through the replies of the assessee company, he had become satisfied that the amounts had been credited in the bank account of the assessee company from known sources, which had been duly accounted for by the assessee company in its books of account, and shown in its Audit Report and Income Tax Return, filed in due course, on a ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 41 regular basis; that on 27.12.2019, the Assessing Officer had received an unwarranted, illegal and unauthorized diktat from the Deputy Director of Income Tax (Investigation), Mohali, that is, letter no. 1763 sent to him by the Deputy Director of Income Tax (Investigation) Mohali on 27.12.2019, wherein he, that is, the Assessing Officer, was illegally directed to make additions of all the credits in the bank accounts of M/s Evershine Resorts Private Limited, in its respective case, without any basis and without any adverse material on record against M/s Evershine Resorts Private Limited; that the AO found himself in a predicament upon receiving the said illegal diktat of the Deputy Director of Income Tax (Investigation), Mohali, on 27.12.2019, within less than twenty-four hours of his having sent his Deviation Note to the Deputy Director of Income Tax (Investigation), Mohali, on 26.12.2019; that the AO had no choice, but to forcibly proceed against M/s Evershine Resorts Private Limited on the said third party dictat and on borrowed satisfaction, in an utterly arbitrary and blatant violation of the provisions of the Income Tax Act; that thus, the Assessing Officer had staged a somersault and had made the additions by assigning flimsy reasons therefore as if it was ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 42 the Deputy Director of Income Tax (Investigation), Mohali, and not he, that is, the Assessing Officer, who was the actual assessing authority; that the AO, without application of his own mind, in the haste of adherence to these illegal instructions of a third party, by throwing all laws of the land to the wind, has declared the genuine company as a shell company and made addition of all the credits received in the bank account of the company, irrespective of the merit of each such credit. 17.18 It has further been contended that the AO, in para 12.1 of his order, contends that the company did not produce books of account for verification during the assessment proceedings. The assessee has contended that search u/s 132 (1) was conducted at the business premises of M/s Kansal Singla and Associates, Chandigarh; and that during the course of search in the business premises of M/s Kansal Singla & Associates, regular books of account, along with bank statements of the company, i.e., M/s Evershine Resorts Private Limited, were found from the premises of the said M/s Kansal Singla & Associates mentioned on page 357 of the appraisal report (page 198 of the paper book). ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 43 17.19 It has been stated that as submitted, during the course of search in the business premises of M/s Kansal Singla & Associates, regular books of account along with bank statements of the appellant company were found and copies of all these books of account were taken on CD by the department as per Panchnama of M/s Kansal Singla & Associates; that the books of account were also examined by the AO before sending Deviation Note dated 24.12.2019 to the Investigation Wing, as per the contents of his letter dated 24.12.2019 (page 348-350 of the paper book); and that the unauthorized dictate of the ADIT Investigation is at Pages 351-353 of the paper book. 17.20 It has been contended that the books of account were also submitted before the ACIT on 16.02.2022, during remand proceedings (Page 368 of the Paper Book). 18. The ld. DR, on the other hand, has placed strong reliance on the impugned order. 19. We have heard the parties and have perused the material on record with regard to original Ground Nos. 2 & 3 and Additional Ground Nos. 1 & 2. The main grievance of the assessee by way of these grounds is that since there was no search conducted on the assessee company, nor any ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 44 Panchnama was prepared in its name, the order of assessment, passed u/s 153A of the Act, is bad in law. So far as Additional Ground No.1, the JCIT erred in granting approval u/s 153D of the Act, without application of mind and without considering the relevant record. 20. Apropos the issue of non search and no Panchnama in the name of the assessee, the ld. CIT(A) has reproduced, at page 127 of the impugned order, the relevant page of the Panchnama. This is as follows : ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 45 20.1 As per this page of the Panchnama, the warrant is in the case of M/s Kansal Singla & Associates, SCO 80-81, 4 th Floor, Sector 17-C, Chandigarh. 20.2 As per the ld. CIT(A), the warrant of authorization u/s 132(1) of the Act was executed in the name of the assessee on 16.02.2018, at the said premises. The said warrant of authorization has been reproduced at pages 128 and 129 of the impugned order. The same is also being reproduced hereunder : ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 46 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 47 20.3 The ld. CIT(A) has held that since the assessee is covered u/s 132(1) of the Act, the AO was justified in initiating assessment proceedings u/s 153A of the Act. 21. Let us see whether the findings of the ld. CIT(A) on this issue are correct. 22. A copy of the Panchnama has been placed at APB- 344 to 347. As per this Panchnama (APB- 344), the warrant is in the case of M/s Kansal Singla & Associates. The details and ownership of the place of search are M/s Kansal Singla & Associates, SCO 80-81, 4 th Floor, Sector 21-C, Chandigarh. It is seen that even at APB—346, which is a copy of the list/inventory of books of account/documents found and seized/impounded, the address has been shown as “SCO 80-81, 4 th Floor, Sector 21-C, Chandigarh”. So is also the case at page 347, which is a continuation of the list/inventory. 23. The above apart, in this Panchnama, the assessee company, i.e., M/s Evershine Resorts Private Limited has nowhere been named. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 48 24. However, despite the above discrepancies, it is seen that in the Search Warrant, which has been reproduced hereinabove, the name of the assessee company has been clearly mentioned. This being so, the ld. CIT(A) is correct in observing, at page 127 of the impugned order, that the Warrant of Authorization u/s 132(1) of the Act was issued in the name of the assessee on 16.02.2018. It was in view of this, that the ld. CIT(A) held the AO to be justified in initiating assessment proceedings u/s 153A of the Act, since the assessee was covered under the provisions of Section 132(1). 25. The ld. Counsel for the assessee has not been able to controvert the above factual position, which is patent on record. Therefore, finding no merit therein, Ground Nos. 2 and 3 raised by the assessee before us are rejected. 26. Coming to Ground No.4, while examining the identity and credit worthiness of the persons from whom the amounts were received by the assessee and also the genuineness of the transactions, the ld. CIT(A) observed that as per the credit entries appearing in the bank account of the assessee, an amount of Rs.10 lacs had been received by the assessee from Bihari Lal Deshraj. It was noted that the assessee had ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 49 furnished bank account statement and ledger account in this regard. The ld. CIT(A) observed that the assessee had not been able to establish the genuineness of the transactions and the credit worthiness of the lender, since the assessee had failed to furnish copy of Income Tax Return of Bihari Lal Deshraj, and that the copy of bank statement and confirmation furnished were also not legible. It was held that thus, the genuineness of transaction and the credit worthiness of Bihari Lal Deshraj had not been established by the assessee. Therefore, the ld. CIT(A) confirmed the addition of Rs.10 lacs. 27. The ld. Counsel for the assessee, in this regard, has contended that the copy of account of the party has been attached at APB-53, wherein, the amount stands shown as received on 13.11.2016 and repaid on 24.03.2017. It has been submitted that the bank account has been attached at APB 64-70 and the copies of Balance Sheet and ITR at pages 56 to 63. It has been submitted that in case the ld. CIT(A) found these documents to be not legible, he could have asked the assessee to submit legible copies thereof. It has been further submitted that even as per the Deviation Note of the AO (APB- 348 to 350), the AO had specifically ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 50 mentioned on 24.12.2019 that all the documents in support of the deposits had been received and had been found to be from known sources and duly recorded in the books of the respective parties; that however, the DDIT, on 27.12.2019, reiterated the Appraisal Report and it was therefore, that the AO made the addition as against his own said observation in the Deviation Note. It was submitted that as such, the addition is wholly contrary to the law which states that the AO cannot complete the assessment on the dictat of a third party/other officer. Reliance has been placed on “J.R. Cold Storage Vs Union of India & others”, 448 ITR 37 (All) and “Commissioner of Income Tax, Shimla Vs Greenworld Corporation, Parwanoo”, (2009) 5 TMI 14 – SC. 28. On this issue, the ld. DR has placed reliance on the impugned order. 29. In this regard, we find that while sustaining the addition of Rs.10 lacs, the ld. CIT(A) has observed that the copy of bank statement and confirmation furnished are not legible and that the assessee has not been able to establish the genuineness of the transaction and the credit worthiness of the lender by failing to furnish copy of ITR of Bihari Lal Deshraj, the lender. As per the copy of account of the party, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 51 the amount is shown to have been received by the assessee on 13.11.2016. It was repaid on 24.03.2017. The bank account is at APB 64-70. The Balance Sheet and ITR is at APB 55-63. Besides, in the Deviation Note, on 24.12.2019, the AO has clearly mentioned that all the documents in support of the deposit had been received and they had been found to be from known sources and duly recorded in the books of the respective parties. This specific observation of the AO has nowhere been met by the ld. CIT(A). We find that despite the Deviation Note, it was only on the basis of the reiteration of the Appraisal Report by the DDIT on 27.12.2019, that the AO made the addition which has been confirmed by the ld. CIT(A). 30. In “S.R. Cold Storage” (supra), the Hon'ble Allahabad High Court has held that the quasi-judicial function provided under the Income Tax Act cannot be given a complete go-bye, rendering the participation of the assessee in proceedings u/s 148 or 148A or 147 of the Income Tax Act to be a mere empty formality, creating liability on assessees only on the basis of the data fed in the database/portal of the Department, having not liked to adjudicate the matter in ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 52 accordance with law so as to take the risk of initiation of disciplinary proceedings against himself. 31. In “Greenworld Corporation, Parwanoo” (supra), the Hon'ble Supreme Court has held that an order passed by a quasi-judicial authority on the dictat of a higher authority is illegal and, being without jurisdiction, it is a nullity. It has been held that an Income Tax Officer, while passing an order of assessment, performs a quasi-judicial function. It has been held that it is one thing to say that while making the orders of assessment, the AO shall be bound by the statutory circulars issued by the CBDT, but it is another thing to say that the assessing authority exercising quasi-judicial function, keeping in view the scheme contained in the Act, would lose its independence to pass an independent order of assessment. It was also held that if the AO passes an order at the instance or dictat of a higher authority, it shall be illegal. 31.1 On the basis of the above, we find that the assessee is correct in contending that the ld. CIT(A) has erred in upholding the addition of Rs.10 lacs received by the assessee from Bihari Lal Deshraj. Accordingly Ground No.4 is accepted and the addition of Rs.10 lacs is deleted. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 53 32. Concerning Ground No.5, the assessee contends that the ld. CIT(A) has wrongly upheld the addition of Rs.40 lacs received from M/s Om Prakash & Sons, without any justification. The AO had made the addition of all the credits in the bank account, amounting to Rs.4,82,00,000/-. As per the assessee, these additions were made without considering each credit separately on merits, on the plea that the purpose of utilization of the funds had not been explained by the assessee. 32.1 The ld. Counsel for the assessee has submitted that before the AO, vide reply (APB 37-41) dated 21.12.2019, the bank statement, copy of account in the books of the assessee company and confirmation from M/s Om Prakash & Sons had been duly filed by the assessee; that the AO had made the addition without mentioning the deficiency on the part of the assessee to prove the utilization of funds and also without mentioning the documents submitted by the assessee during the assessment proceedings. It has been contended that the documents had been filed before the ld. CIT(A), vide reply dated 21.03.2020, as find mention at pages 58, 90, 99 and 119 of the CIT(A)’s order. The ld. counsel has submitted that the ld. CIT(A) confirmed the addition without ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 54 providing the assessee any opportunity to submit the ITR of the lender and that therefore, the assessee now seeks to file, as additional evidence, copy of ITR-V of Shri Rahul Kakkar, Proprietor of M/s Om Prakash & Sons, for assessment year 2017-18 (APB-73), copy of computation of Shri Rahul Kakkar (Proprietor of M/s Om Prakash & Sons), for assessment year 2017-18 (APB 74) and copy of audited Balance Sheet of M/s Om Prakash & Sons as on 31.03.2017 (APB 75-77). It has been submitted that confirmation of copy of account of the assessee company in the books of M/s Om Prakash & Sons for assessment year 2017-18 (APB 71), copy of account of M/s Om Prakash & Sons in the books of the assessee company, for assessment year 2017-18 (APB 72), and copy of Account Statement of M/s Om Prakash & Sons, for assessment year 2017-18 (Paper Book 78-79) had also been filed before the CIT(A). 32.2 It has been contended that the assessee company filed written submissions alongwith all the annexures before the ld. CIT(A) on 21.03.2020; that it took the ld. CIT(A) three years to notice that the assessee had failed to submit ITR to prove the credit worthiness of the party; that the ld. CIT(A) never raised any query, nor issued any notice asking the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 55 assessee to submit the ITR; that moreover, the ld. CIT(A) has not offered any comment or finding on the papers submitted by the assessee to prove the credit worthiness of the lender. 32.3 It has been contended that as per the ITR, the lender has filed its ITR at Rs.6,58,806/- and has a turnover of Rs.2,09,67,970/-; that neither the AO, nor the ld. CIT(A) found the documentary evidence furnished by the assessee company to be unsatisfactory, else, they could have initiated proceedings under either Section 133(6), or Section 131 of the Act, for further investigation, which was not done by either of the authorities below; and that the loans, in fact, were repaid during the year itself, through banking channels. 33. The ld. DR, on the other hand, has, again, placed strong reliance on the impugned order, contending that undisputedly, the ITR of the lender was not furnished by the assessee before the authorities below and that this being so, the ld. CIT(A) has correctly confirmed the addition made, which requires no interference whatsoever. 34. It is seen that it has not been disputed that so far as regards the amount of Rs.40 lacs received from M/s Om ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 56 Prakash & Sons by the assessee during the year, the assessee had filed, alongwith reply dated 21.12.2019, a copy whereof is at APB 71-79, confirmation of copy of account of M/s Evershine Resorts Pvt. Ltd. in the books of the lender, M/s Om Prakash & Sons, for assessment year 2017-18, a copy whereof is at APB 71, a copy of account of M/s Om Prakash & Sons in the books of M/s Evershine Resorts Pvt. Ltd., for assessment year 2017-18, a copy whereof is at APB 72, and a copy of bank account statement of M/s Om Prakash & Sons, for assessment year 2017-18, a copy whereof is at APB 78-79. As per the Deviation Note dated 24.12.2019, the AO had verified the sources and genuineness of the loans, including the one at hand, from the books of account and other documents and evidences submitted by the assessee company, and had been satisfied that such sources stood explained as per the regular books of account of the assessee company and by the documentary evidence produced, and so, no addition was suggested. However, it was only after the letter was received from the DDIT (Investigation) (ADIT), Mohali, that the additions were made by the AO. So far as regards the ld. CIT(A), he confirmed the addition of Rs. 40 lacs by merely stating that ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 57 the assessee had failed to furnish the copy of ITR of the lender. At the same time, the ld. CIT(A) did not deem it appropriate to make any observation about the aforesaid documents placed on record before him by the assessee. 34.1 Under the circumstances, we allow the copy of ITR-V of Shri Rohit Kakkar, Proprietor of M/s Om Prakash & Sons, for assessment year 2017-18 (copy at APB 73), copy of computation of the said Shri Rahul Kakkar, for assessment year 2017-18 (copy at APB 74) and copy of audited Balance Sheet of M/s Om Prakash & Sons, as on 31.03.2017 (copy at APB 75-77), as additional evidence. Infact, all this evidence undisputedly is already available on the record of the Department. Examination of such evidence is necessary for the just and proper decision of the issue at hand. Further, the Department has not opposed such admission of additional evidence. 35. From all the documents as above, the contention raised on behalf of the assessee is found to be correct. The amount stands repaid to M/s Om Prakash & Sons during the year. Further, the evidence amply proves the credit worthiness of the lender, in as much as according to the Income Tax Return, the return was filed at Rs.6,58,806/- for the year ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 58 under consideration. The lender was having a turnover of Rs.2,09,67,970/-. 35.1 Evidently, neither of the authorities below found the evidence furnished by the assessee in this regard to be unsatisfactory. Had it been otherwise, an investigation could have been ordered under Sections 133(6) or 131 of the Act. However, this was not done. Moreover, to begin with, the AO, as evident from the Deviation Note, did not intend to make any addition, having been satisfied as to the explanation of the sources and it was only on the directive of the third party that the addition was ordered. 35.2 In the above facts and circumstances, finding no merit in the confirmation of the addition of Rs.40 lacs, received by the assessee from M/s Om Prakash & Sons, the order of the ld. CIT(A) in this regard is reversed and the addition of Rs.40 lacs is deleted while accepting Ground No.5. 36. Coming to Ground No.6, as per this ground, the ld. CIT(A) has wrongly upheld the addition of Rs.17 lacs received from Shri Baldev Singh, without any justification. As noted, the AO made addition of the credit entries in the bank, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 59 amounting to Rs.4,82,00,000/-, without considering each credit separately on merit and on the observation that the purpose and utilization of the funds was not explained by the assessee. The ld. CIT(A) was of the view that the assessee had not been able to establish the genuineness of the transaction and the credit worthiness of the lender, since the assessee had failed to submit copy of bank account statement. 36.1 The ld. Counsel for the assessee has stated that before the AO, vide reply (APB 37 and 41), dated 21.12.2019, affidavit of Shri Baldev Singh, his bank statement, copy of his accounts in the books of the assessee company, confirmation from Shri Baldev Singh and his ITR-V had been filed. It has been submitted that the addition was wrongly made without mentioning any deficiency on the assessee's part to prove the source of the funds and also without making mention, in the assessment order of all the documents furnished by the assessee during the assessment proceedings. It has been submitted that vide reply (pages 58,90,99 and 119 of the CIT(A)’s order), dated 21.03.2020, that documents were submitted before the CIT(A) as well. It has been contended that it took a period of three years for ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 60 the ld. CIT(A) to notice that one page of the bank account statement of Shri Baldev Singh was missing; that the assessee had filed copies of affidavit, ITR-V, confirmation and copy of account alongwith the bank account statement of Shri Baldev Singh, in order to prove his credit worthiness and genuinity; that however, one page from the bank statement of Shri Baldev Singh got misplaced from the reply submitted before the ld. CIT(A); that however, the ld. CIT(A), rather than asking the assessee company to provide the said page of the bank statement again, or to issue a Show Cause in this regard, wrongly upheld the addition of Rs.17 lacs, ignoring all the other documentary evidences submitted by the assessee. Attention has been drawn to all the said documents filed before the authorities below, copies whereof have been filed in the assessment proceedings, requesting the same to be admitted as additional evidence, since the ld. CIT(A), as per the assessee, did not provide opportunity to submit the complete bank account statement of Shri Baldev Singh. A copy of Computation of Income of Shri Baldev Singh for assessment year 2017-18 (APB 83-85) has also been filed. 36.2 It is seen that since the ld. CIT(A) did not afford any chance to the assessee to produce the complete bank ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 61 account statement before him, these documents are necessary to decide the controversy regarding the sustainability of the addition of Rs. 17 lacs received by the assessee from Shri Baldev Singh in a just and proper manner. The Department has also not controverted this. Accordingly, considering the said documents, which are allowed to be raised as additional evidence, we find that the addition of Rs.17 lacs has been wrongly confirmed by the ld. CIT(A). Accordingly, this addition is deleted and Ground No.6 is accepted. 37. So far as regards Ground No.7, this pertains to addition of Rs.10 lacs, received by the assessee from M/s Dharma Wires Pvt. Ltd., as confirmed by the ld. CIT(A). 37.1 Again, the AO has made the addition by an all- sweeping statement that the purpose and utilization of funds was not explained by the assessee, without considering this credit separately on its merit. According to the ld. Counsel for the assessee, vide reply (APB 37 & 41) dated 21.12.2019, the Balance Sheet, Bank Statement, copy of accounts in the books of the assessee company, ITR-V and confirmation, of M/s Dharma Wires Pvt. Ltd., were filed before the AO during the assessment proceedings. The ld. counsel has stated that ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 62 again, the AO did not mention any deficiency on the part of the assessee to prove the source of the funds, and he also did not mention the details of the documents so submitted by the assessee. 37.2 The CIT(A) confirmed the addition by stating that the assessee was not able to establish the genuineness and credit worthiness. The stand of the assessee is that it had filed written submissions alongwith all the annexures before the CIT(A) on 21.03.2020; that the ld. CIT(A) took three years to realize that the genuineness and credit worthiness had not been proved by the assessee, from the documents submitted by the assessee before the ld. CIT(A). It has been contended that M/s Dharma Wires Pvt. Ltd. is a Private Limited Company and it has duly recorded the loan/advance given to the assessee, in the audited Balance Sheet of the company; that the same was submitted by the assessee company before both the taxing authorities alongwith all the other documents, such as ITR, copy of account, bank statement and confirmation; that while confirming the addition, the ld. CIT(A) merely made a vague observation that the assessee had not been able to establish the genuineness and credit worthiness; that as to how this was so, no reason, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 63 much less any cogent reason, has been given by the ld. CIT(A) in the impugned order; that the CIT(A) did not even ask the assessee to submit any other specific document to prove the credit worthiness and went on to merely confirm the addition without any basis. It has been contended that all the abovesaid documents have been filed at pages 88 to 112 and 377 of the APB. These documents are; Confirmation on copy of account of M/s Evershine Resorts Private Limited in the books of M/s Dharma Wires Private Limited for AY 2017-18 (paperbook page 88); Copy of account of M/s Dharma Wires Private Limited in the books of M/s Evershine Resorts Private Limited for AY 2017-18 (paperbook page 89); Copy of ITR-V of M/s Dharma Wires Private Limited for AY 2017-18 (paperbook page 90); Copy of bank account statement of M/s Dharma Wires Private Limited for AY 2017- 18 (paperbook page 91-97); Copy of audited balance sheet M/s Dharma Wires Private Limited as on 31.03.2017 (paperbook page 98-112) and, Certified copy of details of loans and advances Account in the Balance Sheet of M/s Dharma Wires Private Limited (Paperbook page 377). It has been submitted that since the CIT(A) confirmed the addition without any justification and without asking the assessee for ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 64 any documents, the assessee company has now submitted certified copy of break-up of loans and advances of M/s Dharma Wires Pvt. Ltd., as per its balance sheet, to substantiate its claim of genuineness of the credits received, which are shown in the balance sheet of the lender company. It has also been stated that these loans were repaid in the next year, through banking channels. It has been stressed that the lender company diligently disclosed this transaction in its audited balance sheet, further corroborating the authenticity of the advances; and that it is noticeable that the funds were disbursed from the lender company’s routine operational bank account, providing a clear trail of the legitimacy and genuineness of the transaction. It has further been contended that in case the authorities below found the documentary evidence furnished by the assessee to be unsatisfactory, they could have instituted proceedings under the provisions of either Section 133(6), or 131 of the Act, for further investigation, but this was not done and the addition was wrongly made, which is liable to be deleted. 37.3 Here too, we find force in the stand taken by the assessee. The AO has made addition without considering the merits of the documents furnished before him, just by ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 65 observing that the purpose and utilization of the funds did not stand explained by the assessee. As to how this was so has not been delineated in the assessment order and the addition has been made simply as a part of the entire credit entries in the bank, amounting to Rs.4,82,00,000/-. The ld. CIT(A) also confirmed the addition by just observing, without proving as to how it was so, that the assessee was not able to establish the genuineness and credit worthiness. Here again, the documents furnished by the assessee were not even mentioned in the impugned order, what to talk of deliberating on the merits of each of these documents. 37.4 On a consideration of these documents, as also the break-up of loans and advances as per the balance sheet of the lender company, we find the loan to be genuine, as stand disclosed in the audited balance sheet of the lender company. Further, it has remained undisputed that the funds were advanced from the routine operational bank account of the lender company, providing a clear trail/movement and thereby lending legitimacy to the transaction. The audited balance sheet of M/s Dharma Wires Pvt. Ltd., as on 31.03.2017, has not been disputed to be forming a part of the records of the Department. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 66 37.5 It is also seen that no doubt about either the credit worthiness of the lender, or the genuineness of the transaction, is evincible, either from the assessment order, or from the order passed by the ld. CIT(A) and not only this, no doubt with regard thereto stands raised, in as much as no enquiry/investigation was initiated by either of the authorities below. Moreover, it also stands irrefuted that the advance was returned by the assessee company to the lender in the next year, through banking channels. 37.6 From the above, the irascible conclusion is that the addition was but as a result of non-application of mind by the AO, rather on the mere dictat of a third party, i.e., the ADIT. 37.7 For the above discussion, Ground No.7 is also accepted and the addition of Rs.10 lacs is deleted. 38. Concerning Ground No.8, the assessee is aggrieved of the ld. CIT(A) having upheld the addition of Rs.77 lacs, made u/s 68 of the Act. 38.1 The AO, besides observing that the purpose and utilization of the funds was not explained by the assessee, held that the assessee was a shell company, as it does not ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 67 have any profit earning apparatus and that the books of account were not produced for verification. Besides, the AO observed that the assessee company had not furnished any copy of account or confirmation, etc., of the lender from whom the amount had been received during the year. 38.2 The ld. CIT(A) observed that the assessee could not explain the credits amounting to Rs.77 lacs received in the bank account during the year under consideration, in terms of the provisions of Section 68 of the Act; that such transaction lacks credit worthiness; that the onus was on the assessee to furnish an explanation regarding the source and nature of the credits received in the bank account by explaining the identity and the credit worthiness of the lenders and the genuineness of the transaction; and that however, the assessee could not discharge its onus completely, as required u/s 68 of the Act, to the extent of Rs.77 lacs. 38.3 The ld. Counsel for the assessee has contended that the assessee company had submitted the Cash Flow Statement, the explanation of each debit and credit entry in the assessee's bank account alongwith the balance sheet, affidavits, confirmations, bank statements, ITRs, copy of ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 68 accounts etc.; that however, rather than considering each credit entry separately, the AO, on the dictat of a third party, made additions of all the credit entries in the bank account of the assessee company, without considering the nature, source, credibility and genuineness of each credit transaction received during the year; that it was after being fully satisfied with the genuineness of the company and the sources of the credit entries in its bank account, that the AO sent a detailed note on the comparison of the assessee company with shell companies and explanation of the credit entries, by virtue of the Deviation Note, to the DDIT (Investigation), Mohali, on 26.12.2019, vide letter/Note No.1733, dated 24.12.2019, at the fag end of the assessment proceedings; that though she was not authorized to do so, the DDIT (Investigation), Mohali, without jurisdiction and without application of mind, rejected the said Deviation Note in less than 12 hours; that the Deviation Note was rejected by observing that the assessee company is a shell company and issuing a dictat to the AO, based on the Appraisal Report, vide letter No. 1763, dated 27.12.2019; that the ADIT (Investigation), Mohali, rejected the AO’s proposal/Deviation Note for not proposing the additions, inspite of the ample, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 69 reliable and cogent documentary evidence produced by the assessee company on the record before the AO, and directed the AO to make additions by assigning flimsy reasons, as if it was her, i.e., the ADIT, and not the AO, who was the assessing authority, giving reference to CBDT Instruction No.FTS/194840/12 dated 20.11.2012, exceeding her powers in rejecting the Deviation Note. It has been contended that despite the Deviation Note issued by him, on the dictat of the ADIT (Investigation), Mohali, the AO, on part satisfaction, declared the assessee company as a shell company and made addition of all the credit entries in the bank account of the assessee company, as undisclosed income u/s 68 of the Act; that this was done without even issuing a Show Cause Notice to the assessee as to why it should not be treated as a shell company; that so much so, in none of the questionnaires issued by the AO (APB 15-16, 18-21 and 28-30), on 19.08.2019, 07.10.2019 and 11.12.2019, did the AO mention anything about the assessee company being proposed to be treated as a shell company. 38.4 The ld. Counsel for the assessee contended that the assessee company received funds and submitted details like identity, sources, bank account, etc., of each creditor ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 70 and there is no entity, individual or otherwise, that can be deemed to be a sham entity; that further more, all the lenders executed the transfers from their active and operational bank accounts; and that notably, the assessee company repaid all the lenders except Shri Baldev Singh, within the same Financial Year and the advance received from M/s Dharma Wires Pvt. Ltd. was repaid in the subsequent year. It has been contended that the AO did not make any adverse observations in the Remand Report; that the entire investigation/proceedings before the AO revolve around calling the assessee company a shell company, on the dictat of a third party; that the AO made addition of all the credit entries in the bank account of the assessee company, amounting to Rs.4,82,00,000/- ignoring all the proofs and documentary evidences submitted by the assessee during the assessment proceedings; that however, when the same documents were submitted before the ld. CIT(A) during the appellate proceedings, the ld. CIT(A), even though he granted relief of Rs.4,05,00,000/- on verification of all the documents, upheld the addition of Rs.77 lacs, which was confirmed without asking the assessee for any other ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 71 documents or evidence and without issuing any Show Cause Notice or raising any query. 38.5 The ld. Counsel for the assessee has contended that so far as regards the observation of the AO that the assessee company did not produce the books of account for verification, it is undisputed that the search was conducted at the business premises of M/s Kansal Singla and Associates, Chandigarh; that during the search, regular books of account alongwith bank statements of the assessee company were found from the premises, as also mentioned at page 357 of the Appraisal Report (APB 198); that during the search, copies of all the books of account so found were taken by the Department on CD, as per Panchnama (APB 344-347) of M/s Kansal Singla and Associates, Chandigarh; that the books of account were also examined by the AO before he sent his Deviation Note dated 24.12.2019 to the Investigation Wing, as per the contents of his letter (APB 348-350) dated 24.12.2019; and that the books of account were also submitted before the ACIT by the assessee during the remand proceedings, as available at APB 369. 38.6 It has been contended that by producing before the AO, all the said documentary evidences, in support of the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 72 credit worthiness of the lenders and the genuineness of the transactions, thereby, the assessee's onus stood amply discharged and shifted on to the AO, which onus of the AO was never discharged by the AO and the additions of all the credit entries in the bank account of the assessee company were made merely on bland, bald and specious pleas, without even mentioning the documentary evidences so filed by the assessee, what to talk of discussing the merits of such voluminous documentary evidence. It has been contended that thus, it is amply clear that no deficiency, whatsoever, was found by the AO in the documentary evidence filed by the assessee to explain the credits introduced during the year under consideration. It has been contended that even the ld. CIT(A), at page 166 of his order, has observed that the AO has not discussed each and every credit separately on merits in the assessment order before drawing the inference that the credits were unexplained. 38.7 Reliance has been sought to be placed on the decision of the Hon'ble Delhi High Court in the case of “Pr. Commissioner of Income Tax (Central-I) Vs M/s Adamine Construction Pvt. Ltd.”, 2018 (2) TMI 1815 (Del), wherein, the report forming the basis of the entire findings of the AO ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 73 was held as incapable of being considered as primary material. It has been stated that vide order dated 28.09.2018, the Hon'ble Supreme Court has dismissed the SLP filed in the said case. 39. The ld. DR, on the other hand, has again placed strong reliance on the impugned order. It has been contended that the AO has specifically found that in the statement of Shri Jagdish Rai Gupta, recorded on oath in the course of search, he was specifically confronted about the nature of the business activities and revenue operations of the companies; that he had clearly admitted that he was one of the Directors in M/s TJR Properties Pvt. Ltd. and M/s Evershine Resorts Pvt. Ltd.; that he had stated that these companies were incorporated in 2008; that he had clearly stated that M/s TJR Properties Pvt. Ltd. was not involved in any kind of business activity; that he had denied any knowledge of any business transactions or bank transactions carried out by M/s TJR Properties Pvt. Ltd.; that likewise, in the case of the assessee company, i.e., M/s Evershine Resorts Pvt. Ltd. also, Shri Jagdish Rai Gupta had stated that any kind of business activity was not being carried out in this company right from the date of its establishment; ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 74 that Shri Jagdish Rai Gupta had categorically denied any knowledge of any banking transaction carried out by this company also; that Shri Jagdish Rai Gupta had been specifically confronted with the Account Statement of M/s TJR Properties Pvt. Ltd., but in his reply, Shri Jagdish Rai Gupta had stated that he had no knowledge of any banking transaction, i.e., debit or credit, carried out by this company; that he had further stated that this company had been incorporated with him by Shri Triloki Nath Singla, Chartered Accountant; that he had again submitted that he was not aware of any RTGS entries reflected in this bank statement; that similarly, in the case of M/s Evershine Resorts Pvt. Ltd. also, Shri Jagdish Rai Gupta had been confronted with the bank account statement of M/s Evershine Resorts Pvt. Ltd., that here also, Shri Jagdish Rai Gupta had not been able to furnish any explanation regarding the debit and credit entries reflected in the bank statement and he had simply denied any knowledge of the banking transactions of this company; and that in this case also, Shri Jagdish Rai Gupta had submitted that M/s Evershine Resorts Pvt. Ltd. had also been created by Shri ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 75 Triloki Nath Singla and that he himself had never issued or received any cheque on behalf of the this company. 39.1 The ld. DR has contended that likewise, the AO also recorded that Shri Sant Ram Sharma, one of the Directors in M/s Evershine Resorts Pvt. Ltd., was also covered in this search action and his statement on oath was also taken during the search; that therein, he was specifically asked to furnish details of the companies/businesses maintained by him and the whereabouts of the books of account thereof; that Shri Sant Ram Sharma had clearly stated that he was not maintaining any company or business which requires the upkeep and maintenance of books of account; that thus, Shri Sant Ram Sharma also was not aware of any such company by the name of M/s Evershine Resorts Pvt. Ltd. 39.2 The ld. DR has contended that it was on the basis of the aforesaid statements of Shri Jagdish Rai Gupta and Shri Sant Ram Sharma, that the AO had inferred that M/s TJR Properties Pvt. Ltd. and M/s Evershine Resorts Pvt. Ltd. are shell companies which exist only on paper and do not have any profit earning apparatus as such, because these ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 76 companies are not carrying out any kind of business activity whatsoever. 39.3 The ld. DR has contended that these categoric observations and findings of fact have nowhere been controverted and, therefore, Ground No. 8 raised by the assessee does not have any force and it is liable to be rejected, confirming the addition of Rs.77 lacs made u/s 68 of the Act. 39.4 On this issue, we find that while deleting the additions of the entire credit entries in the assessee's bank account, amounting to Rs.4,82,00,000/-, the ld. CIT(A) did not agree with the conclusion of the AO that the assessee was nothing else but a shell company. For arriving at this opinion, the ld. CIT(A) has observed that the assessee company has land of Rs.1.06 Cr., measuring 10 bighas and 3 biswas, which was purchased vide Registered Sale Deed dated 25.08.2008; that the Deed has been registered by the Deputy Registrar, Kalka and Stamp Duty of Rs.5,50,000/- has been paid; that this amount is appearing in Schedule-VII of the fixed assets, of the Balance Sheet of the assessee; that it is not the case of the AO that the said land is a benami land of any other person; that the assessee has shown sale ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 77 of the said land in parts, for Rs.28 lacs, Rs.2,43,00,000/- and Rs. 1 Cr, during assessment years 2013-14, 2018-19 and 2019-20; that the assessee has declared corresponding capital gains in its Income Tax Returns for the said assessment years 2013-14, 2018-19 and 2019-20, which capital gains have been assessed by the AO. From this, the ld. CIT(A) arrived at the finding that it was evident that the assessee was having an income generating apparatus. The ld. CIT(A), apropos the observations made by the AO in the assessment order with regard to the statement recorded on oath during the search, of Shri Sant Ram Sharma, Director, observed that the relevant Question No.11 put to Shri Sant Ram Sharma in respect of maintenance of books of account, was with regard to maintenance of such books of account in his own individual capacity, and not that of the company, as evident from the use of the word “apni”. 39.5 The ld. CIT(A) observed that there is no definition of shell company given either under the provisions of the Income Tax Act, 1961, or those of the Companies Act, 1956 or those of the Companies Act, 2013, and that to arrive at the conclusion of a company being a shell company, the facts of each case are required to be examined independently, on ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 78 merits, as per the provisions of the Income Tax Act. It was observed that in order to decide the merit of the addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it was required to examine the source and nature of the credits received by the assessee, in accordance with the provisions of Section 68 of the Act. It was observed that thus, it was required to examine the identity and credit worthiness of the lenders and the genuineness of the transactions on merit, by considering each credit separately. It was observed that the AO had not discussed each credit separately on merit before drawing the inference that the credits were unexplained. It was observed that the AO was directed to again examine such credits on merit in respect of the identity and credit worthiness of the lenders and the genuineness of the transactions. It was observed that in the Remand Report dated 05.09.2022, the AO had not brought on record any adverse findings in respect of either the identity and credit worthiness of the lenders, or the genuineness of the transactions, except by stating that the assessee is a shell company and it is not having any profit generating apparatus. It was observed that however, the AO did not make any further enquiry in respect of the credits in ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 79 the bank account, during the remand proceedings and merely relied on the facts as discussed in the assessment order. 39.6 After examining and analyzing the credit entries himself, the ld. CIT(A) observed that the assessee had explained the credits to the extent of Rs.4,05,00,000/-, received in the bank account during the year under consideration, by furnishing necessary documentary evidences in respect of the identity and credit worthiness of the lenders and the genuineness of the transactions. The ld. CIT(A) held that thus, the assessee had discharged its primary onus as required under the provisions of Section 68 of the Act by furnishing the names and addresses of the depositors, the copies of their bank account statements reflecting transactions taking place through banking channels, their confirmations alongwith acknowledgement of their ITRs containing PANs and their assessment particulars. It was observed that all these documents had also been furnished before the AO by the assessee during the assessment proceedings and that although the AO had admitted having received the said documents during the assessment proceedings, yet the same had not been taken ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 80 into account by the AO while making the additions. It was observed that the AO had recorded in his order that the assessee could not explain the purpose and utilization of such credits; that however, the AO had failed to take cognizance of the fact that addition u/s 68 of the Act is to be made if the assessee does not offer any explanation regarding the source and nature of the credits received in the bank account, or if the explanation offered is not found satisfactory by the AO. It was observed that in the case at hand, the assessee has duly furnished its explanation in respect of the bank credits received during the year under consideration alongwith necessary documentary evidences, by explaining the source and nature of the same. It was observed that if the AO was not satisfied with the explanation of the assessee in respect of the source and nature of the credits received, he should have recorded such dissatisfaction in the assessment order by conducting further examination of the documents, or by conducting further enquiries and, thus, he should have shifted the onus back on to the assessee; that however, no adverse finding had been recorded in the assessment order in respect of the documentary evidences furnished by the assessee in support ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 81 of the bank credits of Rs.4,05,00,000/-. It was observed that the submissions and documents furnished by the assessee during the appellate proceedings had also been forwarded to the AO for remand report; that in the Remand Report also, the AO had not even discussed the documentary evidences furnished by the assessee in support of the bank credits on merits, let alone pointing out any defect in the same. It was observed that in view of these facts and after making independent perusal of the documents furnished by the assessee, it had been noted that the assessment order was non speaking and mechanical in nature and had been passed without discussing the merits of the documents. It was observed that there was no direct or indirect evidence pointed out by the AO before making such addition. It was observed that therefore, after considering the merits of the case and analyzing the credits and the strength of the documentary evidence, it had been observed that there was no justification in such addition made in the hands of the assessee u/s 68 of the Act. It was, on these observations that the ld. CIT(A) deemed it appropriate to delete the addition to the extent of Rs.4,05,00,000/-. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 82 39.7 However, surprisingly, the above detailed discussion with regard to the addition to the extent of Rs.4,05,00,000/- was not found appropriate to be applicable to the remaining addition of Rs.77 lcs also, which addition was confirmed by the ld. CIT(A). This addition of Rs.77 lacs, as discussed in the preceding paragraphs, has been found by us also to be unsustainable. The discussion with regard thereto is not being repeated here. The assessee, to reiterate, has presented ample documentary evidence in support of the credits to the extent of Rs.77 lacs, which have not been considered by the ld. CIT(A). This, in our considered opinion, is unsustainable in law and on facts. Therefore, the addition of Rs. 77 lacs is also deleted. Ground No.8 is accepted. 40. Ground No.9 pertains to disallowance of loss of Rs.5000/-. The AO observed that the assessee company had shown loss of Rs. 5000/- in its return of income. It was observed that the company had failed to produce bills and vouchers of the expenses claimed, due to which, the genuineness of the expenses claimed did not stand proved. It was observed that the assessee had failed to produce ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 83 books of account. It was observed that the assessee company was a shell company. 40.1 The ld. CIT(A) confirmed the addition by holding that no documentary evidences had been submitted by the assessee. 40.2 It is seen that as per computation (APB 10) loss of Rs.5000/- has been shown. The same is the position as per the Profit & Loss Account (APB 4). In the notice (APB 20) dated 07.10.2019, at point No.12, the AO had mentioned that the books of account and other documents were seized during the search. The assessee company submitted the books of account before the AO vide letter dated 21.01.2022, as is available at APB 113. The same were also seized in the hard disk, as mentioned in the Panchnama. Therefore, it cannot be said that books of account and other documents were not produced. The issue of the company not being a shell company has been deliberated upon, in extenso, in the preceding paragraphs. 40.3 However, it has not been disputed that the bills and vouchers of the expenses claimed had not been ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 84 produced. Therefore, the addition made is hereby sustained. Ground No.9 is rejected. 41. Apropos Ground No.10, the ld. CIT(A) enhanced the income of the assessee company by an amount of Rs.40 lacs. While doing so, ld. CIT(A) observed that an Agreement to Sell was entered into on 20.03.2012, with Shri Mohit Bhardwaj, for the sale of land measuring 10 bighas and 3 biswas, situated at Pinjore, Panchkula, for a consideration of Rs. 3.80 Cr. The ld. CIT(A) found that the Sale Agreement with Shri Mohit Bhardwaj could not be executed within the stipulated time, as mentioned in the Agreement to Sell dated 20.03.2012 (APB 376). It was observed that the last date for registration was fixed as 19.03.2013 and it was stipulated that if it was not registered by that date, the advance made by the purchaser would stand forfeited. The ld. CIT(A) observed that since the assessee company had passed the entry in its books of account in Financial Year 2016-17 and the amount was forfeited in assessment year 2017-18, the same was taxable under the provisions of Section 56(2)(ix) of the Act, as amended w.e.f. 01.04.2014. The ld. CIT(A) show caused the assessee as to why the amount of Rs. 40 lacs be not treated as income in the assessment year 2017-18. In ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 85 its reply, the assessee contended before the ld. CIT(A) that the land was sold for Rs.2,43,00,000/- and Rs.1 Crore in assessment years 2018-19 and 2019-20, respectively, and that in assessment year 2018-19, the sale consideration was taken at Rs.2,83,00,000/-, comprising of sale consideration of Rs.2,43,00,000/- and the advance payment of Rs.40 lacs, and that Rs.2,83,00,000/- had been taken as sale consideration when the land was transferred in assessment year 2018-19 and, therefore, effectively, it was not a case of forfeiture. 41.1 The CIT(A), however, was not satisfied with the stand taken by the assessee and he, therefore, made addition of Rs.40 lacs u/s 251(1)(a) of the Act. 42. Before us, challenging the action of the ld. CIT(A) in enhancing the income of the assessee by the amount of Rs.40 lacs, the assessee has raised Ground No.10. The ld. CIT(A) has contended that the Agreement to Sell dated 20.03.2012 has been placed at APB 376; that advance of Rs.20 lacs was received on 28.03.2012 and that of Rs.20 lacs was received on 26.12.2012 and the final date of transfer of the land was 19.03.2013, as per the Agreement; that if it was not registered by that date, the amount was liable to be ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 86 forfeited as on 19.03.2013, as per the terms of the Agreement. It has been contended that the amount of Rs.40 lacs (Rs.20 lacs + Rs.20 lacs) was shown as advance in the books of account upto 31.03.2016, under the head of Long Term Liabilities, as per APB 6). It has been stated that in Financial Year 2016-17, the said figure was reduced from the cost of land as per Accounting Standards, to rectify the mistake committed in the Balance Sheet for Financial Year 2012-13. It has been contended that the said advance of Rs.40 lacs assessed to be paid in assessment year 2012-13, when the stipulated period expired on 19.03.2013. It has been stated that the land was finally transferred during the Financial Year 2018-19. It has been contended that during assessment year 2017-18, i.e. the year under consideration, neither the time period under the original Agreement expired, nor was the final Sale Deed executed, and as such, there was no justification to tax the amount on the basis of a wrong entry posted in assessment year 2017-18. It has been contended that entries in books of account cannot determine the taxation, as per the settled law, as income tax is to be charged as per the applicable provisions of law and not on the basis of entries in the books of account. Reliance in this ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 87 regard has been placed on “Kedar Nath Jute Manufacturing Co. Ltd.”, 82 ITR 363 (S.C). It has been contended that the land was finally transferred in Financial Years 2017-18 and 2018-19, to Shri Manoj Kumar and capital gain on transfer of this land was declared in assessment years 2018-19 and 2019-20. It has been contended that the land was sold for Rs.2,43,75,000/- during assessment year 2018-19 and the advance of Rs.40 lacs, received upto Financial Year 2012-13 was added in the sale consideration to calculate the gain on the sale of the land and due taxes were paid during assessment year 2018-19. Attention, in this regard, has been drawn to the computation which has been placed at APB 48-50. 42.1 The ld. Counsel for the assessee has averred that the ld. CIT(A) has exceeded his power of enhancement under the provisions of Section 251(1) of the Act, since there is no such issue as was raised by the assessee in the appeal, or considered by the AO in the assessment order. Drawing our attention to the assessment order for assessment year 2017- 18, it has been contended that therein, there is no discussion about the forfeiture of the advance received against the land in question. It has been contended that ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 88 advance against land was received upto 26.12.2012; that it is, therefore, contended that the AO has not considered this issue during the assessment proceedings. It has been contended that the other additions amounting to Rs.4,82,00,000/- were made under the provisions of Section 68 of the Act, as unexplained credits, during the year, on different issues. The ld. Counsel for the assessee has placed reliance on “CIT, Bombay Vs Shapoorji Pallonji Mistry”, 44 ITR 891 (S.C.). Reliance has also been placed on “CIT, Calcutta Vs Rai Bahadur Hardut Roy Moti Lal Chamaria”, 66 ITR 443 (S.C.). Reliance has further been placed on “CIT Vs Sardari Lal & Co.”, 251 ITR 864 (Del). Reliance has also been placed on “CIT Vs M/s Shiv Parkash Janak Raj & Co. P Ltd.”, order dated 30.09.1996 rendered by the Hon'ble Supreme Court. Reliance has also been placed on “The Peerless General Finance & Investment Co.Ltd. Vs CIT”, 105 CCH 0058 S.C. Reliance has also been placed on “Chowringhee Sales Bureau P. Ltd. Vs CIT”, 87 ITR 542 (S.C.). 42.2 On the other hand, supporting the CIT’s order on this issue, the ld. DR has contended that since the overall addition remains less than that of Rs.4,82,00,000/-, as made by the AO, it is well within the power of the ld. CIT(A), ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 89 under the provisions of Section 251(1)(a) of the Act, to make any other addition. Referring to the provisions of Section 251(1)(a), the ld. CIT(A) stated that the provisions of this Section authorized the CIT(A) to enhance the income without any condition laid down in the Act. 43. On this issue, we find that as patent on record, as per the Agreement to Sell dated 20.03.2012, the last date of registration has been fixed as 19.03.2013. As per the recital in the Agreement to Sell, failure to execute the Sale Deed, was to result in forfeiture of the advance of Rs.40 lacs. Remarkably, the ld. CIT(A) has not made mention in the impugned order about the date of execution having been extended beyond the date originally fixed, i.e., 19.03.2013. The assessee has maintained that the advance of Rs.40 lacs was included in the sale consideration, as receipt, in assessment year 2018-19. This has nowhere been disputed on behalf of the Department. Further, it also remains unchallenged that in the year under consideration, i.e., assessment year 2017-18, no sale of the land in question took place. As such, the Agreement to Sell dated 20.03.2012 ceased to exist on 19.03.2013, the date fixed for execution. As per the express provisions made in the Agreement to Sell, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 90 the deemed date of forfeiture is 19.03.2013 and not beyond the same. As noted, there has been given no extension of the Agreement to Sell. The date of 19.03.2013 does not fall in the year under consideration, i.e., assessment year 2017-18. This apart, it is trite law that entries in books of account are not determinative of the incidence of taxation. The position of Hon'ble Supreme Court in the case of ‘Kedar Nath Jute Mills” (supra), is to this very effect. No decision to the contrary has been cited before us. 43.1 The ld. Counsel for the assessee has also referred to the provisions of Section 251(1)(a) of the Act, read with the Explanation thereto. As per Section 251(1)(a), describing the powers of the Commissioner (Appeals), it has been laid down that in disposing of an appeal, the Commissioner(Appeals) shall, in an appeal against an order of assessment, have the power to confirm, reduce, enhance or annul the assessment. The Explanation to Section 251(1) states, inter-alia, that in disposing of an appeal, the Commissioner (Appeals) may consider and decide any matter arising out of the proceedings in which the order appealed against was passed, notwithstanding that such matter was not raised before the Commissioner (Appeals) by the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 91 appellant. Thus, it is evident that the ld. CIT(A), as per these provisions, has power to revise only those matters which were considered by the AO and which are arising out of the proceedings in which the order appealed against was passed. In the case at hand, the issue of forfeiture of advance amount was nowhere considered by the AO in the assessment order. As such, it was a new source of income which was brought to tax by the ld. CIT(A) by making enhancement of Rs.40 lacs and that too, without any prior notice to the assessee. This, evidently, in our considered opinion, is not countenanced u/s 251(1) of the Act. Therefore, the grievance of the assessee in this regard is justified. 44. Accordingly, Ground No.10 is also accepted and the enhancement of income of the assessee by the amount of Rs.40 lacs is hereby cancelled. 45. In view of the above, the assessee's appeal is partly allowed, as indicated. ITA 146/CHD/2023 46. In this appeal, filed by the Department, which is a cross-appeal to the assessee's appeal (supra), in ITA 33/CHD/2023, the following grounds have been raised : ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 92 i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) erred in not appreciating the fact that the amount of Rs.4,05,00,000/-credited in bank account of assessee during A.Y.2017-18 was to be considered as unexplained cash credit u/s 68 of the Act as the assessee did not establish its genuineness during the course of assessment proceedings? ii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is right in partly allowing the appeal of the assessee by holding that identity and creditworthiness of the persons from whom such credits were received, were proved, and genuineness of the transaction was also established even though the purpose of such credit was not explained? iii) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in allowing the appeal of the assessee on the issue of credit entries even when all three limbs of section 68 was not proved / established as the assessee itself is a shell company? 47. The deletion of the addition to the extent of Rs.4,05,00,000/- has been discussed by us while dealing with the assessee's appeal in ITA 33/CHD/2023. The ld. DR has contended that while wrongly deleting the addition to this extent, the ld. CIT(A) has erred in not appreciating that this amount was to be considered as unexplained cash credit, as the assessee did not establish its genuineness during the assessment proceedings. 48. The matter has been dealt with at length by the ld. CIT(A) which we have duly dwelt on while dealing with the ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 93 assessee’s appeal. Those observations are not being reproduced here. 48.1 As correctly contended on behalf of the assessee, in the Deviation Note dated 24.12.2019, the AO himself accepted the authenticity of the identification and the source of the depositors. The documents submitted in this regard by the assessee were thoroughly examined and verified by the AO before sending the Deviation Note. It was only on receipt of the DDIT’s letter to the contrary, that the AO made the addition of the total credits received in the bank account of the assessee, as opposed to his initial proposal of not making any addition, as delineated in the Deviation Note. It was, thus, only on a dictat of third party, i.e., the ADIT (Investigation), Mohali, that the additions were illegally made, without examining the merits of the documents furnished by the assessee in support of the ingredients of the provisions of the provisions of Section 68 of the Act, to rebut the addition. The AO, as evident from the Deviation Note, was fully satisfied that the ingredients of Section 68 of the Act stood complied with. The ld. CIT(A) also arrived at the same conclusion and deleted the addition to the extent of Rs.4,05,00,000/-. While doing so, he has recorded elaborate ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 94 findings of fact and law in the order under appeal, which the Department has remained unable to rebut and repel. Remarkably, even in the Remand Report dated 05.09.2022, as noted by the ld. CIT(A), the AO did not bring on record any adverse findings in respect of the identity and credit worthiness of the lenders and the genuineness of the transactions, other than merely dubbing the assessee company to be a shell company, which, according to the AO, did not have any income generating apparatus. This issue of shell company has also been discussed by us at length in the preceding part of this order, while dealing with the assessee's appeal. 48.2 Besides the above, it has been stated before us on behalf of the assessee, that in reply to RTI applications to the CBDT, Ministry of Corporate Affairs and SEBI, it was admitted that there was no definition of ‘shell company’ in India. Further, apropos the AO’s Remand Report, where the AO referred to compilation of data base on shell companies, claiming three lists, i.e., Confirmed List (16537), Derived List (16739) and Suspect List (80670), ordered by SFIO. The AO claimed that the names of such companies were removed from the Register by the Registrar of Companies. It has been ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 95 contended on behalf of the assessee, and not rebutted by the Department before us, that the name of the assessee did not figure in any of these lists, as the assessee is an active company and none of the Directors of this company have been barred. Also, the AO had not issued any Show Cause Notice to the assessee as to why the assessee company should not be treated as a shell company. 49. In view of the above, finding no merit whatsoever in the grounds raised by the Department, these grounds are rejected. 50. Accordingly, the Department’s appeal is dismissed. 51. As such, the assessee's appeal in ITA 33/CHD/2023 is partly allowed, whereas, the Department’s appeal in ITA 146/CHD/2023 is dismissed. ITA No.739/Chd/2022 52. ITA No. 739/CHD/2022 is assessee's appeal against the order dated 30.11.2022 passed by the CIT(A)-3, Gurgaon pertaining to 2013-14, taking the following Grounds of appeal:- ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 96 1. That the order of the learned CIT(A) is bad, against the f acts and law. 2. That the learned CIT(A) has wrongly upheld the Order of assessment passed under section 153 A of the act which is wholly illegal and without jurisdiction as no search has been conducted under Section 132 of the Act in any of the business premises of the appellant-company. 3. That the learned CIT(A) has wrongly upheld the finding recorded in the assessment Orders to the eff ect that search and seizure operations were carried out under Section 132 of the Act in the case of the appellant-company, is perverse and wholly erroneous and therefore, the Order of assessment passed under Section 153A of the Act is without jurisdiction. 4. That the learned CIT(A) has wrongly disallowed Long term Capital Loss amounting to Rs. 12,98,969/. 5. That the learned CIT(A) has wrongly made addition of Long term Capital Gain of Rs.2,11,250/- without any justif ication. 6. That the application craves leave to add, al ter amend or withdraw any Grounds of appeal before the final hearing. 53. Apart from the above, the ld. Counsel for the Assessee has raised the following Additional Grounds of appeal: ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 97 1. That the approval u/s 153D was granted by the JCIT without application mind and without consideration of relevant records. 2. That no search was conducted on the appellan t company and other wise also alleged search, if any conducted was in viol ation of provisions of section 132(1) of the Income Tax Act, 1961 (in short 'the Act'). 54. At the outset, the ld. Counsel for the Assessee has contended that the Additional Grounds are not pressed. Rejected as not pressed. 55. Ground Nos. 1 and 6 are general. 56. Ground Nos. 2 and 3 correspond to Ground Nos. 2 and 3 in the Assessee’s appeal for A.Y. 2017-18, in ITA No. 33/Chd/2023 (supra). The findings recorded qua Ground Nos. 2 and 3 in ITA No. 33/Chd/2023 are squarely applicable to Ground Nos. 2 and 3 in the present appeal. Accordingly, as in ITA No. 33/Chd/2023, Ground Nos. 2 and 3 in the present appeal are also rejected. 57. As per Ground No. 4, the ld. CIT(A) has wrongly disallowed Long Term Capital Loss amounting to Rs. 12,98,969/-. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 98 58. Ground No. 5 states that the ld. CIT(A) has wrongly made addition of Long-Term Capital Gain of Rs. 2,11,250/-, without any justification. 59. The Assessing Officer observed that the balance sheet of the Assessee tallied at Rs. 1,04,00,000/- as on 31.3.2013, wherein issued capital had been shown at Rs. 1,00,000/-. The Assessing Officer observed that Assessee company had not shown any Revenue receipt or expenses during the year, and that however, the Assessee company had shown losses of Rs. 12,98,969/- during the year, in its ITR. The Assessing Officer observed that since the Assessee company had not taken out any business activity during the year under consideration and had failed to produce the bills and vouchers of the expenses claimed by it, the genuineness of the expenses claimed did not stand proved. The Assessing Officer observed that further, the Assessee company had failed to produce its books of account for verification and examination. The A.O. observed that furthermore, the Assessee company had been found to be a shell company managed and controlled by Shri T.N. Singha, having no genuine regular business. The Assessing Officer, on ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 99 considering these facts, disallowed the losses of Rs. 12,98,669/- claimed by the Assessee in its Profit & Loss account and ITR. 60. The A.O. observed that further, the bank account statement of the Assessee company regarding bank account No. 60086344592 with Bank of Maharashtra revealed credit entries of Rs. 48 lacs during the year, which were found to be disproportionate to the income as well as turnover, as far as regards the affairs shown by the Assessee company; that further, the Assessee had not furnished any copy of account or confirmation, etc., of the lender from whom the amount had been received during the year under consideration, to substantiate the genuineness of these credit entries, in its reply. The Assessing Officer observed that thus, the Assessee company had failed to prove the identity of the party, the genuineness of the transactions and the creditworthiness of the lender. The Assessing Officer observed that vide show cause notice dated 11.12.2019, the Assessee company had been required to show cause as to why these credit entries of Rs. 48 lacs may not be treated as unexplained cash credits within the meaning of section 68 of ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 100 the Act and added to its income accordingly. The Assessing Officer observed that in response to the query, vide reply dated 20.12.2019, the Assessee company had submitted details of the persons from whom these credit entries of Rs. 48 lacs had been received during the year. The Assessing Officer observed that the Assessee company had claimed receipt of Rs. 20 lacs from Shri Mohit Bhardwaj and receipt of Rs. 28 lacs against the sale of land. The Assessing Officer observed, that further, the alleged sale of land had not been shown by the Assessee company in its Income Tax return. The Assessing Officer observed that further, in the computation of profit or gain, all these transactions had not been shown by the Assessee company in its business income, or its income, under the head ‘capital gain’. The Assessing Officer observed that thus, the Assessee company had not disclosed this sale in its books of account. The Assessing Officer observed that further, the purchase of the land taken from Shri Mohit Bhardwaj and the utilization of this fund towards the business activity of the Assessee company had not been explained satisfactorily to substantiate the genuineness of the transactions in respect of these credit entries of Rs. 20 lacs. The Assessing Officer observed that ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 101 the Assessee company existed only on paper and it did not have any profit earning apparatus as such, it was not carrying on any kind of business activity whatsoever. The Assessing Officer observed that further, the books of account of the Assessee company had not been produced for verification. On these facts, the Assessing Officer held the amount of Rs. 48 lacs credited in the bank account of the Assessee company during the year under consideration, to be the unexplained cash credit of the Assessee company within the meaning of section 68 of the Act and added the same to the income of the Assessee company. 61. Before the ld. CIT(A), the Assessee raised Ground No. 5 against the disallowance of loss of Rs. 12,98,969/- and Ground Nos. 6 and 7 challenging the addition of Rs. 48 lacs made u/s 69 of the Act. Further, the Assessee also raised before the ld. CIT(A), an Additional Ground No.4, which was to the effect “...... that the additions made in the hands of the appellant - company on the basis of its bank entries, regarding which entries sufficient and credible information including the source by way of evidence had been placed on the assessment records for discharging its burden, are not ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 102 sustainable in law as no inquiry has been undertaken by the Assessing Officer and / or any material brought on record establishing the amount of bank entries as unexplained thereby inviting the application of provisions of Section 68 of the Act”. 62. The ld. CIT(A) observed, inter alia, that the Assessing Officer had held the Assessee company to be a shell company merely existing on papers and not carrying on its business activity and not having income generating apparatus. The CIT(A) observed that from the material available on record, it had been found that the Assessee company had land of Rs. 1.11 Crores, measuring 10 bighas and 3 biswas, purchased vide reregistered sale deed dated 25.8.2008; that the deed had been registered by the Deputy Registrar, Kalka and stamp duty of Rs. 5,50,000/- had been paid; and that said land was appearing in Schedule 7 of the fixed assets of the balance sheet of the Assessee. The ld. CIT(A) observed that it was not the case of the Assessing Officer that the said land was the Benami asset of any other person; that the Assessee had shown sale of the said land in parts for Rs. 28,00,000/-, Rs. 2,43,00,000/-, and Rs. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 103 1,00,00,000/- during assessment years 2013-14, 2018-19 and 2019-20; that the Assessee had declared corresponding capital gains in its Income Tax returns for assessment years 2013-14, 2018-19 and 2019-20, which had been assessed by the Assessing Officer and that, therefore, it was evident the Assessee was having an income generating apparatus; that the Assessing Officer had relied on the statement of Shri Sant Ram Sharma, one of the directors of the Assessee company, recorded u/s 132(4) of the Act, by inferring that Shri Sant Ram Sharma had clearly stated in his statement that he was not maintaining any company or business which requires upkeep and maintenance of books of account; and that the Assessing Officer had observed that thus, Shri Sant Ram Sharma was not aware of any such company in the name of M/s Evershine Resorts Pvt. Ltd. The ld. CIT(A) observed that on going through the statement of Shri Sant Ram Sharma, as reproduced by the A.O. in the assessment order, it had been seen that the authorized officer had put Question No. 11 to Shri Sant Ram Sharma in respect of maintenance of books of account in his own individual capacity, as evident from the word ‘apni’, that means ‘own’. The ld. CIT(A) observed that there is no definition of ‘shell ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 104 company’ given under the provisions of the Income Tax Act, 1961 or the Companies Act, 1956, or the Companies Act, 2013. The ld. CIT(A) observed that every case needs to be examined on merits as per the peculiar facts and circumstances to draw such an inference and consequences out of the same, as per the provisions of the Income Tax Act. The ld. CIT(A) examined the source and nature of the credits received by the Assessee in terms of the conditions laid down in the provisions of section 68 of the Act. The ld. CIT(A) observed that the documentary evidence furnished by the Assessee during the assessment proceedings, had been examined independently by him in the light of the findings of the Assessing Officer, as recorded in the assessment order, as well as the remand report. The ld. CIT(A) observed that it was noted that the amount of Rs. 20,00,000/- had been received by the Assessee from Shri Mohit Bhardwaj on account of advance for land vide Nos. 3232 dated 24.12.2012, in its bank account on 26.12.2012 and that the same was also corroborated from the copy of the cheque furnished and the bank account statement. The ld. CIT(A) observed that further, the Assessee had shown the earnest money received in the balance sheet as on 31.3.2013, as ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 105 received from Shri Mohit Bharadwaj under the head of long term borrowings and advance for land. The ld. CIT(A) observed that if the A.O. was not satisfied with the explanation of the Assessee, he could have carried out independent verification. The ld. CIT(A) observed that further, the Assessing Officer had misconstrued in the remand report that the earnest money received had been adjusted against the final sale proceeds during the assessment years 2018-19 and 2019-10. The ld. CIT(A) observed that in fact, the Assessee had stated vide submissions dated 20.12.2019, before Assessing Officer, for assessment year 2012-13, that the earnest money of Rs. 20,00,000/- received had been adjusted against the cost of land during A.Y. 2017-18, in the balance sheet. The ld. CIT(A) observed that the said earnest money, forfeited subsequently and adjusted against the cost of land, had been treated by him as income from other sources u/s 56 of the Act, while adjudicating the appeal of the Assessee for assessment year 2017-18 and income had accordingly been enhanced u/s 251 of the Act by Rs. 40,00,00/-. The ld. CIT(A) observed that in view of the fact that the receipt of Rs. 20,00,000/- had been duly accounted for by the Assessee in ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 106 its books of account and the transaction was verifiable from the bank account statement of the Assessee, the Assessing Officer was not justified in making the addition of Rs. 20,00,000/- 63. In respect of the amount of Rs. 28,00,000/-, the ld. CIT(A) noted that the Assessee had entered into an agreement to sell its land measuring 10 bighas 3 biswas with Shri Mohit Bharadwaj on 20.3.2012 for Rs. 3,80,00,000/- and the transfer was to be executed by 19.3.2012; that the Assessee got the sale deed executed in favour of Shri Mohit Bharadwaj on 17.8.2012, for Rs. 28,00,0000/- for sale of land measuring 1 bigha 4 biswas; and that thus, the source and nature of Rs. 28,00,000/- stood explained. The ld. CIT(A) observed that the sale was reflected in the schedule of fixed assets and the Income Tax Return ( Long Term Capital Loss of Rs. 12,98,969/-) vide Schedule Part-B TI and CG. The ld. CIT(A) observed that, therefore, the Assessing Officer had made an incorrect observation that the sale of the land was not reflected in the Income Tax return. The ld. CIT(A) observed that, however, on going through the same, it had been noted that the Assessee had taken the cost of land at ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 107 Rs. 28,00,000/- for the purpose of computation of Long Term Capital Gain. The ld. CIT(A) observed that the Assessee had purchased 10 bighas and 3 biswas of land during the F.Y. 2008-09, for Rs. 1,11,73,376/-; and that on that basis, the cost of land sold worked out to Rs. 13,34,134/-, on a proportionate basis. The ld. CIT(A) observed that accordingly, Long Term Capital Gain on this transaction should have been worked out by taking the cost of land at Rs. 13,34,134/-, instead of Rs. 28,00,000/-. The ld. CIT(A) observed that on this basis, the Long Term Capital Gain from the sale of the land was being computed at Rs. 2,11,350/-; and that, therefore, the taxable income from deposits of Rs. 28,00,000/- in the bank account of the Assessee worked out at Rs. 2,11,250/-. 64. In the above manner, the addition of Rs. 48,00,000/- made by the Assessing Officer was restricted by the ld. CIT(A) to Rs. 2,11,250/-. The ld. CIT(A) further observed that the Long Term Capital Gain of Rs. 12,98,969/- was not being allowed to be carried forward. 65. The ld. Counsel for the Assessee has contended that the Assessing Officer has wrongly stated that the sale of ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 108 land has not been shown by the Assessee in its Income Tax return. It has been contended that the Assessing Officer has also wrongly observed that the Assessee company had not disclosed its sale in the books of account and the computation of profit / gain on this transaction in its business income or income under the head capital gain. It has been contended that the Assessee had submitted during the assessment proceedings, a copy of the registered sale deed of land at Rs. 28,00,000/-. It has been contended that the Assessee had also received earnest money of Rs. 20,00,000/- from the same person, after executing the agreement to sell. It has been submitted that the Assessing Officer did not deny that the Assessee had submitted these documents during the assessment proceedings, though these documents were neither considered by the Assessing Officer, nor mentioned in the assessment order. It has been submitted that further, the sale of land was declared in the ITR (APB -7), Balance Sheet (APB 3 – 6) and the Computation of Income (APB 8 -9). It has been submitted that this fact has also been explained by the ld. CIT(A) in the impugned order. ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 109 66. The ld. Counsel for the Assessee has submitted that the Department is not in appeal against the deletion of the aforesaid amount of Rs. 48,00,000/- at the hands of the ld. CIT(A). It has been submitted that as per the sale deed, the total land available with the Assessee was 10 bighas and 3 biswas, out of which, land measuring 6 bigha and 13 biswas was salable land, which was sold in the financial years 2012-13, 20127-18 and 2018-19. It has been submitted that all the documents corroborating the claim of sale of the land were filed before the ld. CIT(A) by the Assessee. It has been contended that the land measuring 3 bighas and 10 biswas was not salable due to passage for the land at the backside and adjoining road on national highway. It has been submitted that the ld. CIT(A) arbitrarily reduced the cost of land on a pro-rata basis, without issuing any show cause notice to the Assessee company and also disallowed the Long Term Capital Loss amounting to Rs. 12,98,969/- and further made addition of Rs. 21,11,250/-. It has been contended that by reducing the cost of land out of the sale proceeds of the land without issuing show cause notice for doing so, the ld. CIT(A) overstepped his authority and beside reducing the cost of land, disallowed Long Term ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 110 Capital Loss of Rs. 12,98,969/- and made further addition of Long Term Capital Gain of Rs. 2,11,250/-. The ld. Counsel for the Assessee has submitted that in violation of the provisions of section 251(1), the ld. CIT(A) did not provide any reasonable opportunity to the Assessee to show cause against the enhancement and it has been contended that though the ld. CIT(A) has accepted the sale of land as sale of long term assets eligible for Long Term Capital Gain or loss, he exceeded his power by reducing the cost of the asset sold, for calculation of the capital gain / loss from the sale of part of land during the year, without providing any reasonable opportunity to the Assessee before enhancement of liability / assessment and wrongly reduced the Long Term Capital Loss, claimed in the return at Rs. 12,98,969/-, to Rs. 2,11,250/-. 67. On the other hand, the ld. DR has placed strong reliance on the impugned order. It has been contended that since the Assessee had purchased 10 bighas and 3 biswas of land during the F.Y. 2008-09 for Rs. 1,11,73,376/-, and it had taken the cost of land at Rs. 28,00,000/- for the purpose of computing Long Term Capital Gain, on a ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 111 proportionate basis, the cost of the land sold, i.e., the land measuring 1 bigha 4 biswas, was correctly worked out by the ld. CIT(A) to Rs. 13,34,134/- and that it was on this amount of Rs. 13,34,134/- that the Long Term Capital Gain ought to have been worked out, instead of at Rs. 28,00,000/-. It has been contended that as such, the Long-Term Capital Gain on sale of land was correctly computed by the ld. CIT(A) at Rs. 2,11,250/-, to which amount, the addition of Rs. 48,00,000/- made by the Assessing Officer was restricted. 68. As discussed herein above, and as also accepted by the ld. CIT(A) himself, the sale of land measuring 1 bigha and 4 biswas was reflected in the schedule of fixed assts and the Long Term Capital Loss of Rs. 12,98,969/- was claimed in the Income Tax Return, filed Schedule Part-B TI and CG, thereby disclosing the sale duly in the books of account. The total land available with the Assessee 3 bighas 3 biswas. 6 bighas and 13 biswas was out of said land which was sold in financial years 2012-13, 2017-18 and 2018-19. All the documents concerning the sale of land were filed before the ld. CIT(A) also. The land measuring 3 bighas and 10 biswas was undisputedly not salable due to passage for the land at ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 112 the backside and adjoining road at national highway. Before reducing the cost of land on a proportionate basis, no show cause notice was issued to the Assessee, in direct contravention of the provisions of section 251(2) of the Act. Therefore, the grievance of the Assessee in this regard is found to be correct and accordingly, Ground no.4 is accepted. 69. We find that as per the provisions of section 251 (2) of the Act, the CIT(A) has been mandated not to enhance an assessment unless the appellant has had a reasonable opportunity to show case against such enhancement. In the present case, the ld. CIT(A) reduced the cost of land on a pro-rata basis, disallowed the Long Term Capital Loss claimed at Rs. 12,98,969/- and made addition to Long Term Capital Gain of Rs. 2,11,250/-. Undisputedly, this was done without issuing any enhancement notice to the Assessee, thereby depriving the Assessee of any opportunity to show cause against the enhancement. Therefore, the grievance of the Assessee by way of Ground No. 5 is correct. The addition of Rs. 2,11,250/-, representing Long Term Capital Gain, made by the ld. CIT(A) is found to be without any ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 113 justification. The same is deleted while accepting Ground No. 5. 70. Accordingly, the appeal of the Assessee in ITA No. 739/Chd/2022, for assessment year 2013-14 is partly allowed. 71. In the result, the appeal of the Assessee in ITA Nos. 33/Chd/2023 and 739/Chd/2022 are partly allowed, whereas the appeal of the Department in ITA No.146/Chd/2023 is dismissed. Order pronounced in the Open Court on 31.10.2023. Sd/- Sd/- (VIKRAM SINGH YADAV) (A.D.JAIN ) ACCOUNTANTMEMBER VICE PRESIDENT Dated: 311.0.2023 “Poonam / rkk” “आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 5. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order,
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