Marudhara Marketing Pvt. Ltd., New Delhi V. ACIT, Central Circle- 30, New Delhi

ITA 890/DEL/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6821 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 06-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Document seized; Principle of natural justice; Question of law; Onus to prove; Documents seized; Set aside
• Section: 153A; 12AA; 250; 64; 131; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.890/DEL./2019 (ASSESSMENT YEAR : 2014-15) M/S. MARUDHARA MARKETING PVT. LTD., VS. ACIT, C/O RAVI GUPTA, ADVOCATE, CENTRAL CIRCLE 30, E 6A, KAILASH COLONY, NEW DELHI. NEW DELHI 110 048. (PAN : AAACM8162G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI P.C. YADAV, ADVOCATE REVENUE BY : SHRI J.K. MISHRA, CIT DR DATE OF HEARING : 04.09.2019 DATE OF ORDER : 21.10.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, M/S. MARUDHARA MARKETING PVT. LTD. (HER EINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 28.12.2018 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS)-30, NEW DELHI QUA THE AS SESSMENT YEAR 2014-15 ON THE GROUNDS INTER ALIA THAT:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW IN UPHOLDING THE IMPUGNED ORDER PASSED BY THE RESPONDENT ILLEGALLY, VIOLATING THE PRINCIPLES OF NATURAL JUSTICE, WITHOUT FAIR AND OBJ ECTIVE APPLICATION OF MIND TO THE FACTS OF THE CASE AND TH E LAW APPLICABLE ITA NO.890/DEL./2019 2 AND WITHOUT BEING GUIDED BY THE BINDING DECISIONS O F COURTS AND TRIBUNALS AND HENCE LIABLE TO BE SET ASIDE AND QUAS HED AND DECLARED NON EST IN LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED LD. CIT (A) ERRED BOTH ON FACTS AND IN LAW, IN SUST AINING, THE ORDER PASSED BY THE LD. ASSESSING OFFICER IS BAD AN D LIABLE TO BE QUASHED AS THE SAME HAS BEEN FRAMED ON THE BASIS OF SATISFACTION NOTE WHICH DOES NOT REVEAL ANY INCRIMINATING EVIDEN CE LEADING TO UNDISCLOSED INCOME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED LD. CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN SUSTAINING THE ACTION OF AO IN COMPLETION OF PROCEEDINGS U/S 153A R. W .S. 153C, OF THE ACT, SOLELY ON THE BASIS UNVERIFIED/ UNRATI FIED/ UNSUBSTANTIATED/ UNCONFIRMED STATEMENT OF SHRI MUL CHAND MALU. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED LD. CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN SUSTAINING THE ASSESSMENT BY THE LD. AO AND MAKING ADDITIONS OF RS.1,79,99,800/- ON ACCOUNT OF SHARE C APITAL AND SHARE PREMIUM, IGNORING THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED LD. CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN SUSTAINING THE ASSESSMENT BY THE LD. AO AND IN MAK ING ADDITION OF RS.1,79,99,800/- ON ACCOUNT OF SHARE CA PITAL AND SHARE PREMIUM, DESPITE THE FACT THAT THE ASSESSEE H AS DISCHARGED THE ONUS CAST UPON IT UNDER SECTION 68 OF THE INCOM E-TAX ACT. 6. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LEARNED LD. CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN SUSTAINING THE ASSESSMENT BY THE LD. AO AND IN MA KING ADDITION OF RS.1,79,99,800/- DESPITE THE FACT THAT NO INCRIMINATING DOCUMENTS WERE FOUND DURING THE COURSE OF SEARCH. 7. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE LD. CIT (A) HAS ERRED BOTH ON FACTS AND IN LAW, IN SUSTAINI NG THE ACTION OF AO VIOLATING THE PRINCIPLE OF NATURAL JUSTICE BY NO T PROVIDING OPPORTUNITY FOR CROSS-EXAMINATION OF PERSONS, WHOSE STATEMENTS HAVE BEEN RELIED UPON BY THE AO, IN SPITE OF SPECIF IC REQUEST MADE BY THE APPELLANT IN ASSESSMENT PROCEEDINGS AS WELL AS BEFORE CIT(A). 8 THAT THE IMPUGNED ASSESSMENT ORDER IS ARBITRARY, ILLEGAL, BAD IN LAW AND IN VIOLATION OF RUDIMENTARY PRINCIPL ES OF CONTEMPORARY JURISPRUDENCE. ITA NO.890/DEL./2019 3 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE ISSUE AT HAND ARE : ASSESSEE COMPANY BEING A PRIVATE LIMITED COMPANY ENGAGED IN AGRICULTURAL ACTIVITIES. ORIGINAL ASSESSMENT OF THE ASSESSEE WAS PROCESSED UNDER SECTION 143 (1) OF THE INCOME-TAX A CT, 1961 (FOR SHORT THE ACT) AT THE RETURNED INCOME BUT ON THE BASIS OF SEARCH AND SEIZURE OPERATION CARRIED OUT U/S 132 OF THE ACT AT THE VAR IOUS BUSINESS AND RESIDENTIAL PREMISES OF KUBER GROUP OF CASES INCLUD ING PREMISES OF SHRI VIKAS MALU AT 1/8, WEST PATEL NAGAR, NEW DELHI. FR OM THE SEARCHED PREMISES, DOCUMENTS BELONGING TO ASSESSEE WERE FOUN D AND ASSESSING OFFICER (AO) OF VIKAS MALU RECORDED SATISFACTION NO TE THAT CERTAIN DOCUMENTS WERE FOUND PERTAINING TO ASSESSEE, WHICH WERE HANDED OVER TO AO OF THE ASSESSEE ON THE BASIS OF WHICH SATISFA CTION NOTE WAS RECORDED AND NOTICE U/S 153A READ WITH SECTION 153C WAS ISSUED. AO FRAMED ASSESSMENT U/S 153A R/W SECTION 153C BY MAKI NG ADDITION OF RS.1,79,99,800/- ON ACCOUNT OF SHARE CAPITAL AND SH ARE PREMIUM ON FAILURE OF THE ASSESSEE TO PROVIDE NECESSARY EVIDEN CE TO PROVE THE SHARE CAPITAL AND SHARE PREMIUM TO PROVE THE IDENTITY OF CREDITORS, GENUINENESS AND CREDITWORTHINESS OF THE COMPANY PROVIDING SHARE CAPITAL/SHARE APPLICATION MONEY/SHARE PREMIUM AND ASSESSED THE TO TAL INCOME OF THE ASSESSEE AT RS.1,80,49,600/-. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION BY DISMISSIN G THE APPEAL. ITA NO.890/DEL./2019 4 FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UP ON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. 5. UNDISPUTEDLY, ASSESSMENT WAS FRAMED IN THIS CASE U/S 153C OF THE ACT ON THE BASIS OF SEARCH AND SEIZURE OPERATION CA RRIED OUT AT THE PREMISES OF KUBER GROUP AS WELL AS THE PREMISES OF VIKAS MALU ON 09.10.2014. IT IS ALSO NOT IN DISPUTE THAT ON THE BASIS OF SEARCH AND SEIZURE OPERATION, SATISFACTION NOTE WAS RECORDED, AVAILABLE AT PAGES 64 & 65 OF THE PAPER BOOK. IT IS ALSO NOT IN DISPUTE THAT SEARCH AND SEIZURE OPERATION WAS NEVER BEEN CARRIED OUT AT THE PREMISE S OF THE ASSESSEE. 6. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRCU MSTANCES OF THE CASE, LD. AR FOR THE ASSESSEE CONTENDED INTER ALIA THAT IN THE SATISFACTION NOTE RECORDED BY THE AO OF THE SEARCHED PERSON, NO DISCUSSION ON THE DOCUMENT SEIZED PERTAINING TO THE ASSESSEE HAS BEEN MADE; THAT ADDITION HAS NOT BEEN MADE ON ANY OF THE INCRIMINATING MATER IAL UNEARTHED DURING THE SEARCH AND SEIZURE OPERATION AT THE KUBER GROUP OF CASES AND VIKASH MALU ON 09.10.2014; THAT THE AO HAS MADE THE ADDITI ON ONLY ON THE BASIS OF MATERIAL ALREADY SUPPLIED BY THE ASSESSEE AND NOT ON ANY INCRIMINATING MATERIAL; THAT THE NOTICE U/S 143 (2) OF THE ACT WAS REQUIRED TO BE ISSUED ON 30.09.2015 WHICH WAS NEVER ISSUED TILL DATE; ITA NO.890/DEL./2019 5 THAT ALLEGED SEIZED MATERIAL APPEARED IN THE SATISF ACTION NOTE OF THE SEARCHED PERSON DOES NOT FIND MENTION IN THE SATISF ACTION NOTE RECORDED BY THE AO OF THE ASSESSEE; THAT ASSESSMENT WHICH WA S NOT PENDING ON THE DATE OF SEARCH CANNOT BE REOPENED U/S 153C IF T HERE IS NO INCRIMINATING MATERIAL FOUND AND IN THESE CIRCUMSTA NCES, REASSESSMENT CANNOT BE MADE AND RELIED UPON ON THE DECISIONS IN CIT VS. INDEX SECURITIES (2018) 304 CTR 0067 (DEL.) AND CIT VS. S INGHAD TECHNICAL EDUCATION 397 ITR 344 (SC). HE ALSO RELIED UPON THE DECISIONS IN CIT VS. RRJ SECURITIES 380 ITR 612 (DEL.) AND CIT VS. S WAR AGENCY 397 ITR 400 (DEL.) . 7. AS AGAINST THIS, LD. DR FOR THE REVENUE IN ORDER TO REPEL THE ARGUMENTS ADDRESSED BY THE LD. AR FOR THE ASSESSEE FILED DETAILED SUBMISSIONS WHICH ARE EXTRACTED FOR RECORD AND READ Y PERUSAL AS UNDER :- AS MENTIONED IN PARA 5 OF THE ASSESSMENT ORDER, T HE ASSESSEE WAS ASKED TO PRODUCE THE DIRECTORS OF THE COMPANIES FROM WHICH SHARE CAPITAL/SHARE PREMIUM WAS RECEIVED DURING THE YEAR. THE ASSESSEE NEVER PRODUCED THOSE PERSONS BEF ORE THE AO. THEREFORE, ONUS CAST ON THE ASSESSEE WAS NEVER DISC HARGED. FURTHER, THE SHARE CAPITAL AND SHARE PREMIUM HAS BE EN RECEIVED FROM A COMPANY BASED IN KOLKATA. THE PROFIT SHOWN B Y THE SAID SUBSCRIBER M/S BINAPANI MERCHANDISE PVT. LTD. WAS O NLY RS. 16,437/-. ON PERUSAL OF BANK STATEMENT OF M/S BINAP ANI MERCHANDISE PVT. LTD. SUBMITTED BY THE ASSESSEE BEF ORE THE AO, IT MAY BE NOTED THAT THE CHEQUES ARE RECEIVED AND IMME DIATELY ANOTHER CHEQUE IS ISSUED BY M/S BINAPANI. AT ANY GI VEN POINT OF TIME, THE BALANCE IS IN THE RANGE OF RS.38,000-80,0 00. HENCE, THE SURROUNDING CIRCUMSTANCES SHOW THAT M/S BINAPANI MERCHANDISE PVT. LTD IS AN ENTRY PROVIDER COMPANY. THE RELIANCE ON STATEMENTS OF MR. MOOLCHAND MALU AND MR. VIKAS K UMAR AGARWAL OF KOLKATA IS ONLY TO SUBSTANTIATE THE FIND INGS. THE FACT REMAINS THAT THE ASSESSEE NEVER PRODUCED THE DIRECT ORS OF M/S BINAPANI MERCHANDISE PVT. LTD BEFORE THE AO AND THE REFORE ONUS CAST ON THE ASSESSEE WAS NEVER DISCHARGED. ITA NO.890/DEL./2019 6 2. IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED WITH R EGARD TO ADDITION MADE U/S 68 OF I.T. ACT : 1. PCIT VS NRA IRON & STEEL (P.) LTD. [2019] 103 TAXMANN.COM 48 (SE) WHERE HON'BLE SUPREME COURT REV ERSE ORDER OF LOWER AUTHORITIES HOLDING THAT WHERE THERE WAS FAILURE OF ASSESSEE TO ESTABLISH CREDIT WORTHINESS OF INVES TOR COMPANIES, ASSESSING OFFICER WAS' JUSTIFIED IN PASSING ASSESSM ENT ORDER MAKING ADDITIONS UNDER SECTION 68 FOR SHARE CAPITAL I PREMIUM RECEIVED BY ASSESSEE COMPANY. MERELY BECAUSE ASSESS EE COMPANY HAD FILED ALL PRIMARY EVIDENCE, IT COULD NOT BE SAI D THAT ONUS ON ASSESSEE TO ESTABLISH CREDIT WORTHINESS OF INVESTOR COMPANIES STOOD DISCHARGED 2. PCIT VS NDR PROMOTERS PVT LTD (2019-TIOL- 172-HC-OEL-IT) WHERE HON'BLE DELHI HIGH COURT HELD THAT A CASE INVOLVING MAKE-BELIEVE PAPER WORK TO CAMOUFLAG E THE BOGUS NATURE OF THE TRANSACTIONS IS TO BE TREATED AS UNEX PLAINED CREDIT U/S 68 3. ITO VS SYNERGY FINLEASE PVT. LTD (ITA NO.4778/0EI/2013) WHERE HON'BLE ITAT DELHI HELD THA T WHERE INVESTOR OF SHARE APPLICATION MONEY HAD NOMINAL INC OME AND CHEQUES HAD BEEN RECEIVED JUST BEFORE ISSUE OF CHEQ UES FOR SHARE APPLICATION MONEY, CREDITWORTHINESS WAS NOT PROVED AND ADDITION U/S 68 WAS SUSTAINED. 4. PREM CASTINGS (P.) LTD. VS CIT [2017] 88 TAXMANN .COM 189 (ALLAHABAD) WHERE HON'BLE ALLAHABAD HIGH COURT HELD THAT ADDITIONS U/S 68 WARRANT BEING SUSTAINED WHERE THE IDENTITIES & CREDITWORTHINESS OF INVESTORS IN THE ASSESSEE COMPA NY ARE NOT ESTABLISHED BY THE ASSESSEE & ARE ALSO PROVED INCOR RECT BY THE DEPARTMENT'S ASSESSEE INFORMATION SYSTEM. IN SUCH CIRCUMSTANCES, ASSESSEE CANNOT RESIST THE ADDITIONS ON GROUNDS THAT IT DID NOT HAVE OPPORTUNITY TO CROSS-EXAMINE R ELEVANT WITNESSES. AN ASSESSEE COMPANY CANNOT HIDE BEHIND T HE SHELL OF A CORPORATE ENTITY TO FEIGN IGNORANCE REGARDING THE I DENTITY OF ANY PERSON WHO INVESTS IN ITS SHARE CAPITAL. PREM CASTINGS (P.) LTD. VS CIT 2018-TIOL-274-SC-IT WHERE HON'BLE SUPREME COURT HELD AS FOLLOWS: 'WE DO NOT FIND ANY MERIT IN THIS PETITION. THE SPE CIAL LEAVE PETITION IS ACCORDINGLY DISMISSED.' 5. CIT VS MAF ACADEMY (P.) LTD (361 ITR 258) WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE ASSESSEE, A PRIVATE LIMITED COMPANY, SOLD ITS SHARES TO UNRELATED PARTI ES AT A HUGE PREMIUM AND THEREUPON WITHIN SHORT SPAN OF TIME THO SE SHARES WERE PURCHASED BACK EVEN AT A LOSS, SHARE TRANSACTI ONS IN QUESTION WERE TO BE REGARDED AS BOGUS AND, THUS, AM OUNT RECEIVED FROM SAID TRANSACTIONS WAS TO BE ADDED TO ASSESSEE'S TAXABLE INCOME UNDER SECTION 68 IT WAS HELD AS FOLL OWS: ITA NO.890/DEL./2019 7 '53 IN CONTRAST TO THE ABOVE JUDGMENTS, IN THE PRES ENT CASE, THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IN THE FACTUAL MATRIX, WE HAVE HELD THAT THE ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE THE INITIAL ONUS AND HAS NOT BEEN ABLE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS OF THE SHARE APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THOUGH, IN OUR CONSIDERED OPINION, NONE OF THE ABOV E JUDGMENTS, REFERRED TO BY THE ASSESSEE RESPONDENT, ARE APPLICABLE IN THE FACTS OF THE PRESENT CASE AND IN VIEW OF THE FINDINGS RECORDED BY US HEREINABOVE. 54. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HE ASSESSEE HAS NOT DISCHARGED THE ONUS SATISFACTORILY AND THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE JU STIFIED AND SUSTAINABLE. ' 6. CIT VS NAVODAYA CASTLE PVT LTD [2014] 367 ITR 30 6 (DEL) WHERE HON'BLE DELHI HIGH COURT ACCEPTED THAT SINCE THE ASSESSEE WAS UNABLE TO PRODUCE THE DIRECTORS AND TH E PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFICER HAD OBSER VED THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CREDITW ORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACT IONS. '20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL I N THE PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS M ERELY REPRODUCED THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITION. IN FACT, THEY SUBSTANTIALLY RELIED UPON AND QUOTED THE DECIS ION OF ITS CO-ORDINATE BENCH IN THE CASE OF MAF ACADEMY P. LTD., A DECISION WHICH HAS BEEN OVERTURNED BY THE D ELHI HIGH COURT, VIDE ITS JUDGMENT IN CIT V. MAF ACADEMY P. LTD. [2014] 206 DLT 277 ; [2014] 361 ITR 258(DELHI) ). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND PRINCIPAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND DETAILS COLLECTED BY THE ASSESS ING OFFICER FROM THE CONCERNED BANK, THE ASSESSING OFFI CER HAS OBSERVED THAT THERE WERE GENUINE CONCERNS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL TH AT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL F OR FRESH ADJUDICATION KEEPING IN VIEW THE AFORESAID CASE LAW . NAVODAYA CASTLE PVT LTD VS CIT ([2015] 56 TAXMANN.C OM 18 (SC)/[2015] 230 TAXMAN 268 (SC) SLP OF ASSESSEE DISMISSED BY HON'BLE SUPREME COURT ITA NO.890/DEL./2019 8 7. KONARK STRUCTURAL ENGINEERING (P.) LTD. VS DCIT [2018] 96 TAXMANN.COM 255 (SC)WHERE ASSESSEE-COMPANY RECEI VED CERTAIN AMOUNT AS SHARE CAPITAL FROM VARIOUS SHAREH OLDERS, IN VIEW OF FACT THAT SUMMONS TO SHAREHOLDERS UNDER SEC TION 131 COULD NOT BE SERVED AS ADDRESSES WERE NOT AVAILABLE , AND, MOREOVER, THOSE SHAREHOLDERS WERE FIRST TIME ASSESS EES AND WERE NOT EARNING ENOUGH INCOME TO MAKE DEPOSITS IN QUEST ION, ADDITION MADE BY ASSESSING OFFICER UNDER SECTION 68 WAS TO BE CONFIRMED; SLP DISMISSED KONARK STRUCTURAL ENGINEERING (P.) LTD. VS DCIT [20 18] 90 TAXMANN.COM 56 (BOMBAY) WHERE HON'BLE BOMBAY HIG H COURT HELD THAT WHERE ASSESSEE-COMPANY RECEIVED CER TAIN AMOUNT AS SHARE CAPITAL FROM VARIOUS SHAREHOLDERS, IN VIEW OF FACT THAT SUMMONS SERVED TO SHAREHOLDERS UNDER SECTION 131 WE RE UNSERVED WITH REMARK THAT ADDRESSEES WERE NOT AVAIL ABLE, AND, MOREOVER, THOSE SHAREHOLDERS WERE FIRST TIME ASSESS EES AND WERE NOT EARNING ENOUGH INCOME TO MAKE DEPOSITS IN QUEST ION, IMPUGNED ADDITION MADE BY AO UNDER SEC. 68, WAS TO BE CONFIRMED 8. PRATHAM TELECOM INDIA PVT LTD VS DCIT (2018-TIOL - 1983-HC-MUM-IT) WHERE HON'BLE BOMBAY HIGH COURT HEL D THAT MERE PRODUCTION OF PAN NUMBERS & BANK STATEMEN TS IS SUFFICIENT ENOUGH TO DISCHARGE THE BURDEN ON TAXPAY ER TO ESCAPE THE REALMS OF SECTION 68 9. J J DEVELOPMENT PVT LTD VS CIT (2018-TIOL-395-SC -IT) WHERE HON'BLE SUPREME COURT HELD THAT WHEN THE ASSE SSEE FAILS TO PROVIDE A CONVINCING EXPLANATION WITH REGARD TO THE CASH CREDIT BEFORE THE AO AND THE SAME WAS ACCEPTED BY T HE ITAT BEING A FACT FINDING BODY, THE SAME CANNOT BE DISPU TED FURTHER. APEX COURT DISMISSED THE SPECIAL LEAVE TO PETITION FILED BY THE ASSESSEE 10. DRB EXPORTS (P.) LTD. VS CIT [2018] 93 TAXMANN. COM 490 (CALCUTTA) WHERE HON'BLE CALCUTTA HIGH COURT HE LD THAT WHERE AO MADE ADDITION UNDER SECTION 68 IN RESPECT OF INCREASE IN SHARE CAPITAL OF ASSESSEE-COMPANY, IN VIEW OF FA CT THAT ADDRESSES OF MOST OF PURPORTED SHAREHOLDERS WERE ID ENTICAL AND THEY COULD NOT BE TRACED OUT DESPITE NOTICE ISSUED UNDER SECTION 131, TRIBUNAL WAS JUSTIFIED IN CONFIRMING IMPUGNED ADDITION 11. CIT VS NIPUN BUILDERS & DEVELOPERS (P.) LTD (30 TAXMANN.COM 292, 214 TAXMAN 429, 350 ITR 407, 256 C TR 34) WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE ASSE SSEE FAILED TO PROVE IDENTITY AND CAPACITY OF SUBSCRIBER COMPAN IES TO PAY SHARE APPLICATION MONEY, AMOUNT SO RECEIVED WAS LIA BLE TO BE TAXED UNDER SECTION 68. IT WAS HELD AS FOLLOWS: ITA NO.890/DEL./2019 9 '12. A PERUSAL OF THE ORDER OF THE TRIBUNAL SHOWS T HAT IT HAS GONE ON THE BASIS OF THE DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE THE AO AND HAS HELD THAT IN THE LIG HT OF THOSE DOCUMENTS, IT CAN BE SAID THAT THE ASSESSEE H AS ESTABLISHED THE IDENTITY OF THE PARTIES. IT HAS FUR THER BEEN OBSERVED THAT THE REPORT OF THE INVESTIGATION WING CANNOT CONCLUSIVELY PROVE THAT THE ASSESSEE'S OWN MONIES W ERE BROUGHT BACK IN THE FORM OF SHARE APPLICATION MONEY . AS NOTED IN THE EARLIER PARAGRAPH, IT IS NOT THE BURDE N OF THE AO TO PROVE THAT CONNECTION. THERE HAS BEEN NO EXAMINATION BY THE TRIBUNAL OF THE ASSESSMENT PROCEEDINGS IN ANY DETAIL IN ORDER TO DEMONSTRATE T HAT THE ASSESSEE HAS DISCHARGED ITS ONUS TO PROVE NOT ONLY THE IDENTITY OF THE SHARE APPLICANTS, BUT ALSO THEIR CREDITWORTHINESS AND THE GENUINENESS OF THE TRANSAC TIONS. NO ATTEMPT WAS MADE BY THE TRIBUNAL TO SCRATCH THE SURFACE AND PROBE THE DOCUMENTARY EVIDENCE IN SOME DEPTH, IN THE LIGHT OF THE CONDUCT OF THE ASSESSEE AND OTHER SURROUNDING CIRCUMSTANCES IN ORDER TO SEE WHETHER T HE ASSESSEE HAS DISCHARGED ITS ONUS UNDER SECTION 68. WITH RESPECT, IT APPEARS TO US THAT THERE HAS ONLY BEEN A MECHANICAL REFERENCE TO THE CASE-LAW ON THE SUBJECT WITHOUT ANY SERIOUS APPRAISAL OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 13. WE, THEREFORE, ANSWER THE SUBSTANTIAL QUESTION OF LAW FRAMED BY US IN THE NEGATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. THE APPEAL OF THE REVENUE IS ALLOWED WITH NO ORDER AS TO COSTS.' 12. CIT VS NOVA PROMOTERS & FINLEASE (P) LTD (18 TAXMANN.COM 217, 206 TAXMAN 207, 342 ITR 169, 252 C TR 187) WHERE HON'BLE DELHI HIGH COURT HELD THAT AMOUNT REC EIVED BY ASSESSEE FROM ACCOMMODATION ENTRY PROVIDERS IN GARB OF SHARE APPLICATION MONEY, WAS TO BE ADDED TO ITS TAXABLE I NCOME UNDER SECTION 68. IT WAS HELD AS FOLLOWS: '41. IN THE CASE BEFORE US, NOT ONLY DID THE MATERI AL BEFORE THE ASSESSING OFFICER SHOW THE LINK BETWEEN THE ENTRY PROVIDERS AND THE ASSESSEE-COMPANY, BUT THE ASSESSING OFFICER HAD ALSO PROVIDED THE STATEMENTS OF MUKESH GUPTA AND RAJAN JASSAL TO THE ASSESSEE IN COMPLIANCE WITH THE RULES OF NATURAL JUSTICE. OUT O F THE 22 COMPANIES WHOSE NAMES FIGURED IN THE INFORMATION GI VEN BY THEM TO THE INVESTIGATION WING, 15 COMPANIES HAD PROVIDED THE SO-CALLED 'SHARE SUBSCRIPTION MONIES' TO THE ASSESSEE. THERE WAS THUS SPECIFIC INVOLVEMENT OF TH E ASSESSEE-COMPANY IN THE MODUS OPERANDI FOLLOWED BY MUKESH GUPTA AND RAJAN JASSAL. THUS, ON CRUCIAL FAC TUAL ITA NO.890/DEL./2019 10 ASPECTS THE PRESENT CASE STANDS ON A COMPLETELY DIF FERENT FOOTING FROM THE CASE OF OASIS HOSPITALITIES (P.) L TD. (SUPRA). 42. IN THE LIGHT OF THE ABOVE DISCUSSION, WE ARE UN ABLE TO UPHOLD THE ORDER OF THE TRIBUNAL CONFIRMING THE DELETION OF THE ADDITION OF RS. 1,18,50,000 MADE UN DER SECTION 68 OF THE ACT AS WELL AS THE CONSEQUENTIAL ADDITION OF RS. 2,96,250. WE ACCORDINGLY ANSWER THE SUBSTANT IAL QUESTIONS OF LAW IN THE NEGATIVE AND IN FAVOUR OF T HE DEPARTMENT. THE ASSESSEE SHALL PAY COSTS WHICH WE A SSESS AT RS. 30,000/-.' 13. CIT VS ULTRA MODERN EXPORTS (P.) LTD (40 TAXMAN N.COM 458, 220 TAXMAN 165) WHERE HON'BLE DELHI HIGH COURT HELD THAT WHERE IN ORDER TO ASCERTAIN GENUINENESS OF ASS ESSEE'S CLAIM RELATING TO RECEIPT OF SHARE APPLICATION MONEY, ASS ESSING OFFICER SENT NOTICES TO SHARE APPLICANTS WHICH RETURNED UNS ERVED, HOWEVER, ASSESSEE STILL MANAGED TO SECURE DOCUMENTS SUCH AS THEIR INCOME TAX RETURNS AS WELL AS BANK ACCOUNT PA RTICULARS, IN SUCH CIRCUMSTANCES, ASSESSING OFFICER WAS JUSTIFIED IN DRAWING ADVERSE INFERENCE AND ADDING AMOUNT IN QUESTION TO ASSESSEES TAXABLE INCOME UNDER SECTION 68. IT WAS HELD AS FOL LOWS: '9. AS NOTICED PREVIOUSLY, THE CIT (A) WAS OF THE OPINION THAT THE ASSESSEE HAD DISCHARGED THE BASIC ONUS WHICH WAS CAST UPON IT AFTER CONSIDERING THE RULING IN LOVELY EXPORTS (P.) LTD.'S CASE (SUPRA). THE MATERI AL AND THE RECORDS IN THIS CASE SHOW THAT NOTICE ISSUED TO THE 5 OF THE SHARE APPLICANTS WERE RETURNED UNSERVED. THE PARTICULARS OF RETURNS MADE AVAILABLE BY THE ASSESS EE AND TAKEN INTO CONSIDERATION IN PARAGRAPH 3.4 BY THE AO IN THIS CASE WOULD SHOW THAT THE SAID PARTIES/APPLICAN TS HAD DISCLOSED VERY MEAGER INCOME. THE AO ALSO NOTICED T HAT BEFORE ISSUING CHEQUES TO THE ASSESSEE, HUGE AMOUNT S WERE TRANSFERRED IN THE ACCOUNTS OF SAID SHARE APPL ICANTS. THIS DISCUSSION ITSELF WOULD REVEAL THAT EVEN THOUG H THE SHARE APPLICANTS COULD NOT BE ACCESSED THROUGH NOTI CES, THE ASSESSEE WAS IN A POSITION TO OBTAIN DOCUMENTS FROM THEM. WHILE THERE CAN BE NO DOUBT THAT IN LOVELY EX PORTS (P.) LTD. (SUPRA), THE COURT INDICATED THE RULE OF 'SHIFTING ONUS' I.E. THE RESPONSIBILITY OF THE REVENUE TO PRO VE THAT SECTION 68 COULD BE INVOKED ONCE THE BASIC BURDEN S TOOD DISCHARGED BY FURNISHING RELEVANT AND MATERIAL PARTICULARS, AT THE SAME TIME, THAT JUDGMENT CANNOT BE SAID TO LIMIT THE INFERENCES THAT CAN BE LOGICALLY AND LEGITIMATELY DRAWN BY THE REVENUE IN THE NATURAL CO URSE OF ASSESSMENT PROCEEDINGS. THE INFORMATION THAT ASS ESSEE ITA NO.890/DEL./2019 11 FURNISHES WOULD HAVE TO BE CREDIBLE AND AT THE SAME TIME VERIFIABLE. IN THIS CASE, 5 SHARE APPLICANTS COULD NOT BE SERVED AS THE NOTICES WERE RETURNED UNSERVED. IN TH E BACKDROP OF THIS CIRCUMSTANCE, THE ASSESSEE'S ABILI TY TO SECURE DOCUMENTS SUCH AS INCOME TAX RETURNS OF THE SHARE APPLICANTS AS WELL AS BANK ACCOUNT PARTICULARS WOUL D ITSELF GIVE RISE TO A CIRCUMSTANCE WHICH THE AO IN THIS CASE PROCEEDED TO DRAW INFERENCES FROM. HAVING REGARD TO THE TOTALITY OF THE FACTS, I.E., THAT THE ASSESSEE COMM ENCED ITS BUSINESS AND IMMEDIATELY SOUGHT TO INFUSE SHARE CAP ITAL AT A PREMIUM RANGING BETWEEN RS. 90-190 PER SHARE A ND WAS ABLE TO GARNER A COLOSSAL AMOUNT OF RS. 4.34 CR ORES, THIS COURT IS OF THE OPINION THAT THE CIT (APPEALS) AND THE ITA T FELL INTO ERROR IN HOLDING THAT AO COULD NOT HAVE ADDED BACK THE SAID AMOUNT UNDER SECTION 68. THE QUESTION OF LAW CONSEQUENTLY IS ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' 14. CIT VS FROSTAIR (P.) LTD (26 TAXMANN.COM 11, 21 0 TAXMAN 221) WHERE HON'BLE DELHI HIGH COURT HELD THA T WHERE DETAILS FURNISHED BY ASSESSEE ABOUT SHARE APPLICANT S WERE INCORRECT, ADDITION UNDER SECTION 68 WAS PROPER. IT WAS HELD AS FOLLOWS: 12. THE APPLICATION OF THE RATIO OF EVERY DECISION BY A QUASI-JUDICIAL BODY LIKE THE ITAT HAS TO BE NUANCED , AND CONTEXTUAL. THUS, WHILE THE FINDINGS IN DIVINE LEAS ING, OASIS INTERNATIONAL OR EVEN LOVELY EXPORTS MIGHT BE PRECEDED BY A GENERAL DISCUSSION OF THE CORRECT APP ROACH TO BE ADOPTED BY THE AO, IN A GIVEN CASE WHERE ADDI TIONS ARE SOUGHT TO BE MADE ON ACCOUNT OF SHARE APPLICATI ON MONEYS NOT FOUND TO BE GENUINE, THE BASIC FACTS OF THE CASE CANNOT BE LOST SIGHT OF. ON A PROPER APPLICATI ON OF THE RATIO IN OASIS - AND SUBSEQUENTLY, THE DIVISION BENCH RULING IN CIT V. NOVA PROMOTERS & FINLEASE (P) LTD [2012J 206 TAXMAN 207/18 TAXMANN.COM 217 (DELHI) IT IS EVIDENT THAT THE AO TOOK INTO ACCOUNT - IF WE MAY S AY SO, IN EXHAUSTIVE DETAIL, AFTER A PAINSTAKING EXAMINATI ON OF THE RECORDS AFTER TWO OR THREE LAYERS OF SCRUTINY- ALL THE MATERIALS AND HELD THAT THE CLAIM THAT THE AMOUNTS CLAIMED TO BE RECEIVED ON ACCOUNT OF SHARE APPLICAT IONS WERE NOT BASED ON GENUINE TRANSACTIONS. THE CIT (A) UPHELD THAT ORDER, AFTER CALLING FOR A REMAND REPOR T. IN THESE CIRCUMSTANCES, THE CONCLUSION OF THE TRIBUNAL , THAT THE ASSESSEE HAD DISCHARGED ITS ONUS, APPEARS TO BE BASED ON A SUPERFICIAL UNDERSTANDING OF THE JAW, AND AN UNINFORMED ONE ABOUT THE OVERALL FACTS AND CIRCUMST ANCES OF THE CASE. ITA NO.890/DEL./2019 12 13. IN VIEW OF THE ABOVE REASONS, THE QUESTIONS OF LAW IN THESE APPEALS ARE ANSWERED IN FAVOUR OF THE REVE NUE. THE ORDERS OF THE ASSESSING OFFICER ARE RESTORED. T HE APPEALS ARE TO SUCCEED AND ARE THEREFORE ALLOWED. 15. CIT VS N R PORTFOLIO PVT LTD [2014] 42 TAXMANN. COM 339 (DELHI)/[2014] 222 TAXMAN 157 (DELHI)(MAG)/[2014] 2 64 CTR 258 (DELHI) WHERE HON'BLE DELHI HIGH COURT HELD THA T IF AO DOUBTS THE DOCUMENTS PRODUCED BY ASSESSEE, THE ONUS SHIFTS ON ASSESSEE TO FURTHER SUBSTANTIATE THE FACTS OR PRODU CE THE SHARE APPLICANT IN PROCEEDING. IT WAS HELD AS FOLLOWS: '30. WHAT WE PERCEIVE AND REGARD AS CORRECT POSITIO N OF LAW IS THAT THE COURT OR TRIBUNAL SHOULD BE CONVINC ED ABOUT THE IDENTITY, CREDITWORTHINESS AND GENUINENES S OF THE TRANSACTION. THE ONUS TO PROVE THE THREE FACTUM IS ON THE ASSESSEE AS THE FACTS ARE WITHIN THE ASSESSEE'S KNOWLEDGE. MERE PRODUCTION OF INCORPORATION DETAILS , PAN NOS. OR THE FACT THAT THIRD PERSONS OR COMPANY HAD FILED INCOME TAX DETAILS IN CASE OF A PRIVATE LIMIT ED COMPANY MAY NOT BE SUFFICIENT WHEN SURROUNDING AND ATTENDING FACTS PREDICATE A COVER UP. THESE FACTS I NDICATE AND REFLECT PROPER PAPER WORK OR DOCUMENTATION BUT GENUINENESS, CREDITWORTHINESS, IDENTITY ARE DEEPER AND OBTRUSIVE. COMPANIES NO DOUBT ARE ARTIFICIAL OR JUR ISTIC PERSONS BUT THEY ARE SOULLESS AND ARE DEPENDENT UPO N THE INDIVIDUALS BEHIND THEM WHO RUN AND MANAGE THE SAID COMPANIES. IT IS THE PERSONS BEHIND THE COMPANY WHO TAKE THE DECISIONS, CONTROLS AND MANAGE THEM.' 16. CIT VS EMPIRE BUILTECH (P.) LTD (3661TR 110) WH ERE HON'BLE DELHI HIGH COURT HELD THAT U/S 68 IT IS NOT SUFFICIENT FOR ASSESSEE TO MERELY DISCLOSE ADDRESS AND IDENTITIES OF SHAREHOLDERS; IT HAS TO SHOW GENUINENESS OF SUCH IN DIVIDUALS OR ENTITIES. 17. CIT VS FOCUS EXPORTS (P.) LTD (51 TAXMANN.COM 4 6 (DELHI)/[2015] 228 TAXMAN 88 WHERE HON'BLE DELHI HI GH COURT HELD THAT WHERE IN RESPECT OF SHARE APPLICATION MON EY, ASSESSEE FAILED TO PROVIDE COMPLETE ADDRESS AND PAN OF CERTA IN SHARE APPLICANTS WHEREAS IN CASE OF SOME OF SHARE APPLICA NTS, THERE WERE TRANSACTIONS OF DEPOSITS AND IMMEDIATE WITHDRA WALS OF MONEY FROM BANK, IMPUGNED ADDITION MADE UNDER SECTI ON 68 WAS TO BE CONFIRMED 18 PCIT VS BIKRAM SINGH [2017] 85 TAXMANN.COM 104 (DELHI)/[2017] 250 TAXMAN 273 (DELHI)/[2017] 399 IT R 407 (DELHI) WHERE HON'BLE DELHI HIGH COURT HELD THAT EV EN IF A TRANSACTION OF LOAN IS MADE THROUGH CHEQUE, IT CANN OT BE PRESUMED TO BE GENUINE IN THE ABSENCE OF ANY AGREEM ENT, ITA NO.890/DEL./2019 13 SECURITY AND INTEREST PAYMENT. MERE SUBMISSION OF P AN CARD OF CREDITOR DOES NOT ESTABLISH THE AUTHENTICITY OF A H UGE LOAN TRANSACTION PARTICULARLY WHEN THE ITR DOES NOT INSP IRE SUCH CONFIDENCE. MERE SUBMISSION OF ID PROOF AND THE FAC T THAT THE LOAN TRANSACTIONS WERE THROUGH THE BANKING CHANNEL, DOES NOT ESTABLISH THE GENUINENESS OF TRANSACTIONS. LOAN ENT RIES ARE GENERALLY MASKED TO PUMP IN BLACK MONEY INTO BANKIN G CHANNELS AND SUCH PRACTICES CONTINUE TO PLAGUE INDIAN ECONOM Y 19 RICK LUNSFORD TRADE & INVESTMENT LTD VS CIT [20 16] 385 ITR 399 (CAL) THE ASSESSEE DID NOT PRODUCE BOOK S OF ACCOUNT OR BANK ACCOUNTS OR SHAREHOLDERS' REGISTER. EIGHT O UT OF FIFTY SIX PERSONS FROM SHAREHOLDERS' LIST PROVIDED BY ASSESSE E DENIED SUBSCRIPTION. REMAINING NOTICES RETURNED WITH ENDOR SEMENT 'NOT KNOWN'. HON'BLE CALCUTTA HIGH COURT HELD THAT UNEXP LAINED SHARE APPLICATION MONEY WAS RIGHTLY TREATED AS ASSE SSEE'S INCOME 20 RICK LUNSFORD TRADE & INVESTMENT LTD VS CIT [20 16- TIOL-207 -SC-IT] (SUPREME COURT) WHERE HON'BLE SUPR EME COURT DISMISSED SLP UPHOLDING THAT IT IS OPEN TO TH E REVENUE DEPARTMENT TO MAKE ADDITION ON ACCOUNT OF ALLEGED S HARE CAPITAL U/S 68, WHERE THE ASSESSEE COMPANY HAS FAILED TO SH OW GENUINENESS OF ITS SHAREHOLDERS. 8. WHEN WE EXAMINE PARA 6(IV) OF SATISFACTION NOTE RECORDED BY THE AO OF THE OTHER PERSON, AVAILABLE AT PAGE 64 OF THE PAPER BOOK, THE DOCUMENT SEIZED REFERRED TO UNSECURED LOAN OF RS.80 ,00,000/- BORROWED FROM M/S. HANDSOME MERCHANTS PVT. LTD. SHARE RECEI VED FROM BINAPANI MERCHANDISE PVT. LTD. FOR RS.51,42,000/- A ND SHARE PREMIUM FOR RS.1,28,57,000/-. 9. IT IS FURTHER MENTIONED IN PARA 6(V) OF SATISFAC TION NOTE THAT THE SEIZED DOCUMENTS, LEDGERS FOUND IN RESPECT OF SHARE APPLICATION AMOUNT AND UNSECURED LOAN RECEIVED FROM VARIOUS PARTIES AN D THESE DOCUMENTS BELONG TO ASSESSEE AND SOUGHT TO INITIATE PROCEEDIN GS U/S 153C OF THE ACT. HOWEVER, WHEN WE EXAMINE REASONS RECORDED BY THE AO OF THE ASSESSEE FOR INITIATING PROCEEDINGS U/S 153C OF THE ACT, THERE IS NOT A ITA NO.890/DEL./2019 14 PASSING REFERENCE EVEN TO THE AFORESAID INFORMATION /DOCUMENTS ALLEGEDLY SEIZED FROM VIKAS MALU RATHER IN THE COLUMN OF INFO RMATION/DETAILS, IT IS MENTIONED THAT, LEDGER ACCOUNTS FOUND OF GREEN VALLEY RESORTS. TR IAL BALANCE JOURNAL ENTRY IN THE BOOKS OF BLOOMING DALE RESORTS PURCHASE OF SHARES AMOUNTING OF RS.5,00,000/-. AMOUNTING TO RS.10,00,000/- GIVEN TO BLOOMING DALE RESORTS AND RS.10,00,000/- T O KUBER BREWERIES LTD.. FOR READY PERUSAL, REASONS RECORDED BY AO OF THE ASSESSEE FOR INITIATING PROCEEDINGS U/S 153C ARE EXTRACTED AS UN DER :- REASONS RECORDED FOR INITIATION OF PROCEEDING U/S 1 53C OF THE I.T. ACT, 1961 IN THE CASE OF M/S. MARUDHARA MARKETING P T. LTD. PAN: AACCM8162G IN KUBER GROUP OF CASES SEARCH & SEIZURE ACTION AT THE RESIDENTIAL/BUSINESS PREMISES OF THE PERSONS WAS CO NDUCTED ON 09.10.2014. DURING THE COURSE OF SEARCH, VARIOUS IN CRIMINATING DOCUMENTS/BOOKS OF ACCOUNT WERE FOUND AND SEIZED. W HILE EXAMINING THE SEIZED DOCUMENTS OF THIS GROUP, THE A .O OF THE SEARCHED PERSON CAME ACROSS WITH CERTAIN DOCUMENTS WHICH ACCORDING TO HIM DO NOT BELONG TO THE SEARCHED PERS ON BUT BELONG OF M/S MARUDHARA MARKETING PVT. LTD. THE PERSON OTH ER THAN THE SEARCHED PERSON HE HAS ALSO RECORDED HIS SATISFACTI ON THAT ACTION U/S 153C OF THE ACT' IS ATTRACTED IN THIS CASE OF P ERSON OTHER THAN THE SEARCHED PERSON. THE SAID DOCUMENTS ARE AS UNDE R :- S. NO. SEARCHED PREMISES ANNEX- URE PAGE DATE/ PERIOD INFORMATION/ DETAILS WARRANT IN THE NAME OF SH. VIKAS MALU PAN:ACZPM0292M 1/9, WEST PATEL NAGAR, NEW DELHI A-4 A-6 A-7 PAGE NO.30- 33 PAGE NO.26 & 49 LEDGER ACCOUNTS FOUND OF GREEN VALLEY RESORTS. TRIAL BALANCE. JOURNAL ENTRY IN THE BOOKS OF BLOOMING DALE RESORTS PURCHASE OF SHARES AMOUNTING OF RS.5,00,000/-. AMOUNTING TO RS.10,00,000/- GIVEN TO BLOOMING DALE RESORTS AND ITA NO.890/DEL./2019 15 10,00,000/- TO KUBER BREWERIES LTD. THE AO OF THE SEARCHED PERSON HAS HANDED OVER THE A BOVE SEIZED DOCUMENTS WITH HIS SATISFACTION TO THE UNDERSIGNED BEING THE AO OF M/S MARUDHARA MARKETING PVT. LTD., THE PERSON OT HER THAN THE PERSON SEARCHED FOR INITIATING ACTION U/S 153C OF T HE ACT. I HAVE CAREFULLY GONE THROUGH THESE SEIZED DOCUMENT S AND HAVE PATIENTLY APPLIED MY MIND IN THE SEIZED DOCUMENTS A S HANDED OVER TO ME BY THE A.O. OF THE SEARCHED PERSONS NAME LY SH. VIKAS MALU. 1/8, WEST PATEL NAGAR, NEW DELHI FROM WHERE T HESE DOCUMENTS WERE SEIZED ALONG WITH THE SATISFACTION A ND I AM SATISFIED THAT THESE SEIZED DOCUMENTS HAVE A BEARIN G ON THE DETERMINATION OF THE TOTAL INCOME M/S MARUDHARA MAR KETING PVT. LTD, PAN:AACCM8162GH FOR THE RELEVANT ASSESSMENT YE ARS REFERRED TO IN SUB-SECTION (1) OF SECTION 153A OF T HE ACT AND THAT IT IS A FIT CASE FOR INITIATING PROCEEDINGS U/S 153 C OF THE ACT. ACCORDINGLY, NOTICE U/S 153A R.W.S 153C OF THE I.T. ACT, 1961, M/S MARUDHARA MARKETING PVT. LTD. PAN:AACCM8162GH F OR A.YS. 2009-10 TO 2014-15 ARE BEING ISSUED PLACE : NEW DELHI. SD/- DATE : 06.9.16 (RAKESH KUMAR) ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 31, NEW DELHI. 10. AGAIN WHEN WE PERUSED PARA 5.2 OF THE ASSESSMEN T ORDER AO HAS LOST SIGHT OF THE INFORMATION/DETAILS/DOCUMENTS REF ERRED RATHER PROCEEDING TO MAKE THE ADDITION ON THE BASIS OF INF ORMATION/DOCUMENTS REFERRED TO IN PARA 6(IV) OF THE REASONS RECORDED I N CASE OF SEARCHED PERSON. 11. NOW, THE LD. AR FOR THE ASSESSEE CONTENDED THAT THE PROCEEDINGS INITIATED BY THE AO IN THIS CASE ARE INVALID AS NO INCRIMINATING MATERIAL HAS BEEN UNEARTHED DURING THE COURSE OF SEARCH. WH EN WE EXAMINE THIS FACT IN THE LIGHT OF THE FACT THAT THE PRESENT ADDI TION PERTAINS TO ASSESSMENT YEAR 2014-15 AND WHEN WE FURTHER EXAMINE THE CONTENTION ITA NO.890/DEL./2019 16 OF THE ASSESSEE THAT ASSESSMENT PERTAINS TO AY 2014 -15 STOOD TERMINATED BY OPERATION OF LAW WHEN TIME FOR ISSUING THE NOTIC E U/S 143 (2) WAS EXPIRED. WHEN WE EXAMINE THIS CONTENTION IN THE LI GHT OF THE FACT THAT ORIGINAL IT RETURN WAS FILED BY THE ASSESSEE ON 29. 09.2014 WHICH WAS PROCESSED ON 21.03.2015 AS PER ASSESSMENT ORDER AS ADMITTED BY THE AO IN PARA 1 OF THE ASSESSMENT ORDER. IN THESE CIRCUM STANCES, THE AO WAS REQUIRED TO ISSUE NOTICE U/S 143 (2) BEFORE 30.09.2 015, BUT STRANGELY ENOUGH NO NOTICE HAS BEEN ISSUED U/S 143 (2) TO THE ASSESSEE TILL DATE. 12. COORDINATE BENCH OF THE TRIBUNAL IN CASE OF DEC ISION RENDERED BY THIRD MEMBER IN DCIT VS. M/S. ROYAL CARTONS P. LTD. IN ITA NO.472/COCH/2013 FOR AY 2005-06 ORDER DATED 16.09.2 015 DECIDED THE IDENTICAL ISSUE RELYING UPON THE FINDINGS MADE IN T HE DECISION OF THIRD MEMBER IN CASE OF HOTEL ROYALE PARK VS. DCIT IN ITA NOS.601- 603/COCH/2013 & CO NOS.01-03/COCH/2014 WHICH IS EXTRACTED FOR READY PERUSAL AS UNDER :- THE PROVISIONS OF S. 153C OF THE ACT WAS AMENDED T O OBVIATE PRACTICAL DIFFICULTIES WHICH AROSE IN ITS INTERPRETATION FROM TIME TO TIME. THE AMENDMENT MAD E BY FINANCE (NO.2) ACT, 2014 AS THE LEGISLATURE FOUND T HAT DIFFERENT AUTHORITIES WERE ASSIGNING DIFFERENT MEAN INGS TO THE PROVISIONS. AS SUCH, A STATE OF AFFAIRS RESULTE D IN AMBIGUITIES WHICH GAVE RISE TO CONFLICTING DECISION S ON SUBJECT, THE LEGISLATURE IN ITS WISDOM THOUGHT IT P RUDENT TO CHANGE THE LANGUAGE THOROUGHLY EXPLICIT. IT SO HAPPENED FROM TIME TO TIME THAT DURING THE COURSE O F CONDUCTING A SEARCH AND SEIZURE OPERATION U/S. 132 OF THE ACT, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE AR TICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS BELONGING TO ANOTHER PERSON WERE SEIZED. ON ONE HAND, THE SEIZED MATERIALS WERE SENT TO THE ASSESSING AUTHORITY HAVI NG JURISDICTION OVER THE OTHER PERSON AND ON THE OTHER HAND, THE ASSESSING AUTHORITY RECEIVING SUCH SEIZED MATER IAL ITA NO.890/DEL./2019 17 ACTS MECHANICALLY INITIATES PROCEEDINGS HIS 153C OF THE ACT WITHOUT ANY VERIFICATION. SUCH INTERPRETATION I S NEVER THE INTENDMENT OF THE LEGISLATURE. THE LEGISLATURE FOUND THAT MULTIPLICITY OF PROCEEDINGS RESULTED AND CONFU SION REIGNED SUPREME. IN ORDER TO ELIMINATE SUCH CONTRAD ICTORY SITUATIONS, IT WAS MADE CLEAR THAT THE ASSESSING AU THORITY WHILE RECEIVING SUCH SEIZED MATERIAL BELONGING TO T HE OTHER PERSON SHALL BE SATISFIED THAT SUCH MATERIAL MUST BE OF INCRIMINATING NATURE', THUS, THE AMENDING ACT, I N FACT, EXPLAINED THE PROCEDURE TO DEAL WITH A SITUAT ION WHERE INCRIMINATING MATERIALS FOUND IN COURSE OF A SEARCH BELONGED TO A THIRD PERSON. THE PROVISION WA S AMENDED TO STOP UNINTENDED CONSEQUENCES AND TO PREV ENT UNDUE HARDSHIP ON THE THIRD PARTY WHO IS NOT BEING- SEARCHED. THE SCHEME THAT EVEN A PARTNERSHIP DEED O R A DISCLOSED BANK STATEMENT OR PROJECTED STATEMENT WAS ENOUGH TO ASSUME JURISDICTION U/S. 153C OF THE ACT WAS CURTAILED TO THE EXTENT OF INCRIMINATING MATERIALS FOUND. IN FACT A LOGICAL CONCLUSION WAS DRAWN TO THAT EFFE CT. IN FACT, THE INTERPRETATION OF THE EXISTING PROVISIONS WAS DEFEATING THE OBJECT AND PURPOSE OF THE ENACTMENT A ND WAS LEADING TO INFRUCTUOUS LITIGATION WITHOUT ANY R HYME OR REASON. BY SUCH INTERPRETATION, THERE WERE TWO ASSESSMENT ORDERS STANDING ON THE SAME ISSUES RAISI NG IDENTICAL TAX DEMANDS FOR THE SAME ASSESSMENT YEARS WHICH IS AN ABSURD PROPOSITION. THIS BASED ON THE M AXIM UT RES MAGIS VALEAT QUAM PAREAT. THE CONSTRUCTION WHICH WOULD REDUCE THE LEGISLATURE TO A FUTILITY SH OULD BE AVOIDED; AN ALTERNATIVE THAT WILL INTRODUCE UNCERTA INTY, FRICTION OR CONFUSION INTO THE WORKING OF THE SYSTE M SHOULD BE REJECTED. AN INTERPRETATION WHICH LEADS T O UNWORKABLE RESULTS AND BRINGS ABOUT ABSURDITY CANNO T BE ACCEPTED. IN ANY CASE, SUCH A SITUATION WAS NEVER T HE INTENTION OF THE LEGISLATURES. TO DO AWAY WITH THIS JUDICIAL ERROR, THE ACT WAS AMENDED TO CURE THE OBV IOUS OMISSION AND TO CLARIFY THE INTENTION BEHIND THE ENACTMENT.' 25. THEREFORE, IN THE LIGHT OF THE ABOVE DECISION, I AM OF THE FIRM VIEW THAT THE ORDER PASSED BY THE LD. JUDICIAL MEMBER IS IN ACCORDANCE WITH LAW. I, THEREFORE, ANSWER QUESTION NO.1 ACCORDINGLY, I.E. IN THE ABSENCE OF ANY INCRIMINATI NG MATERIAL, TO INITIATE PROCEEDINGS U/S. 153C OF THE ACT, THE ASSE SSING OFFICER IS NO! JUSTIFIED IN RE-OPENING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005-06 WHICH HAS ATTAINED FINALITY. 13. FURTHERMORE, IT IS UNDISPUTED FACT THAT AO MADE ADDITION ON THE BASIS OF ITEMS WHICH WERE NOT AT ALL SUBJECT MATTER OF THE REASONS ITA NO.890/DEL./2019 18 RECORDED IN CASE OF THE ASSESSEE RATHER MADE THE AD DITION ON THOSE ITEMS WHICH WERE DISCLOSED BY THE ASSESSEE AT THE TIME OF FILING THE ORIGINAL RETURN OF INCOME. IN THESE CIRCUMSTANCES, WHEN NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH OPERATION INDICATING THAT ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY, NO P ROCEEDING U/S 153C CAN BE INITIATED. ALL THESE FACTS AS TO ENTIRE SHA RE APPLICATION MONEY AND SHARE PREMIUM HAVE BEEN DULY PROVED TO HAVE BEEN DI SCLOSED IN THE ORIGINAL RETURN OF INCOME FROM THE QUESTIONNAIRE IS SUED BY AO U/S 14291) AS IS EVIDENT FROM PAGES 48 TO 50 OF THE PAP ER BOOK, WHICH IS A LETTER ISSUED BY THE AO TO THE ASSESSEE. AO FURTHE R CATEGORICALLY MENTIONED AT PAGE 50 OF THE PAPER BOOK THAT FINANCI ALS FOR AY 2009-10 TO 2014-15 ARE AVAILABLE ON ITD/MCA. ALL THESE FAC TS GO TO PROVE THAT THE ASSESSMENT WAS NOT PENDING ON THE DATE OF SEARC H AND AS SUCH, WAS NOT LIABLE TO BE REOPENED U/S 153C OF THE ACT AS NO INCRIMINATING MATERIAL AND THE ITEMS WHICH ARE ALREADY DISCLOSED CANNOT BE REASSESSED. 14. HONBLE SUPREME COURT IN CASE OF CIT VS. SINHGAD TECHNICAL EDUCATION SOCIETY (2017) 397 ITR 344 (SC) DECIDED THIS LEGAL ISSUE BY HOLDING THE DECISION RENDERED BY THE TRIBUNAL IN FA VOUR OF THE ASSESSEE BY RETURNING FOLLOWING FINDINGS :- SEARCH AND SEIZURE-NEW SCHEME OF ASSESSMENT IN SEA RCH CASES- VALIDITY OF PROCEEDING U/S 153C-ASSESSEE WAS EDUCAT IONAL INSTITUTION REGISTERED UNDER THE BOMBAY PUBLIC TRUS TS ACT, 1950 AND SOCIETIES REGISTRATION ACT, 1860-ASSESSEE ALSO GOT ITSELF REGISTERED UNDER SECTION 12AA AND BECAUSE OF SAID R EGISTRATION UNDER SECTION 12AA OF THE ACT, SECTIONS 11 AND 12 O F THE ACT APPLY TO ASSESSEE AS PER WHICH INCOME EARNED BY ASS ESSEE FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES (SECTION 11) AND INCOME FROM CONTRIBUTIONS WERE EXEMPT FROM TAXA TION UNDER ITA NO.890/DEL./2019 19 CERTAIN CIRCUMSTANCES- AO RECORDED HIS SATISFACTION TO EFFECT THAT ASSESSEE TRUST COULD NOT BE CONSIDERED AS A GENUINE TRUST AND ISSUED NOTICE U/S. 153C FOR INITIATION OF PROCEEDIN G-CIT(A) PARTLY ALLOWED ASSESSEE'S APPEAL AND SUSTAINED ACTION OF A O IN INITIATING PROCEEDING U/S. 153C-ITAT HELD THAT SATI SFACTION WAS NOT PROPERLY RECORDED AND NOTICE UNDER SECTION 153C WAS TIME BARRED IN RESPECT OF ASSESSMENT ~ 2000-01 TO 2003-0 4 ITAT QUASHED NOTICE IN RESPECT OF ASSESSMENT YEARS AND H IGH COURT UPHELD ODDER OF ITAT-HELD, AS PER PROVISIONS OF SEC TION 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS SEIZED HA D TO PERTAIN TO ASSESSMENT YEARS IN QUESTION AND DOCUMENTS WHICH WERE SEIZED DID NOT ESTABLISH ANY CO-RELATION, DOCUMENT- WISE, WITH THESE FOUR ASSESSMENT YEARS-SINCE THIS REQUIREMENT UNDER SECTION 153C OF THE ACT WAS ESSENTIAL FOR ASSESSMEN T UNDER THAT PROVISION, IT BECAME JURISDICTIONAL FACT-PARA 9 OF ORDER OF ITAT REVEALED THAT ITAT HAD SCANNED THROUGH SATISFACTION NOTE AND MATERIAL WHICH WAS DISCLOSED THEREIN WAS CULLED OUT AND IT SHOWED THAT SAME BELONGED TO ASSESSMENT YEAR 2004-0 5 OR THEREAFTER-IT WAS SPECIFICALLY RECORDED THAT COUNSE L FOR DEPARTMENT COULD NOT POINT OUT TO CONTRARY-ITAT RIG HTLY PERMITTED THIS ADDITIONAL GROUND TO BE RAISED AND C ORRECTLY DEALT WITH SAME GROUND ON MERITS AS WELL -ORDER OF HIGH C OURT AFFIRMING THIS VIEW OF TRIBUNAL WAS THEREFORE, WITH OUT ANY BLEMISH- ASSESSMENT ORDER WAS SET ASIDE ONLY IN RE SPECT OF FOUR SUCH ASSESSMENT YEARS THAT TOO ON THE TECHNICAL GRO UND- REVENUE'S APPEALS DISMISSED. 15. FURTHERMORE, ASSESSMENT ORDER REVEALS THAT THE AO HAS CARRIED OUT THE ENTIRE EXERCISE OF ASSESSMENT MECHANICALLY BECAUSE SATISFACTION NOTE RECORDED BY AO OF THE ASSESSEE IS DIAMETRICALL Y OPPOSITE/DIFFERENT FROM THE SATISFACTION NOTE RECORDED BY THE AO OF SE ARCHED PERSON. SATISFACTION NOTE RECORDED BY THE AO IN CASE OF THE ASSESSEE IS PERTAINING TO SOME ENTRIES OF GREEN VALLEY RESORTS, BLOOMING DATES RESORT AND KUBER BREWERIES BUT BEARING NO MENTION O F RECEIVING ANY SHARE APPLICATION MONEY FROM BINAPANI MERCHANDISE. IT APPEARS THAT AO HAS LOST SIGHT OF THE PROVISIONS CONTAINED U/S 1 53C AND HAS TRAVELLED BEYOND HIS JURISDICTION WITHOUT VERIFYING THE REQUI REMENT THAT ITA NO.890/DEL./2019 20 INCRIMINATING MATERIAL HAS TO BE THERE TO INITIATE THE PROCEEDINGS U/S 153C OF THE ACT. 16. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE AND LAW APPLICABLE THERETO, WE ARE OF THE CONSIDERED VIEW T HAT ADDITION CANNOT BE MADE ON THE BASIS OF SURROUNDING CIRCUMSTANCES AND STATEMENT RECORDED DURING THE STATEMENT OF MOOLCHAND MALU AND VIKAS KU MAR AGARWAL RECORDED DURING THE SEARCH PROCEEDINGS AS CONTENDED BY LD. DR, HENCE THE SUBMISSIONS MADE BY THE LD. DR AND CASE LAWS RE LIED UPON ARE NOT APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE CA SE. 17. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WE AR E OF THE CONSIDERED VIEW THAT THE ASSESSMENT FRAMED U/S 153C IS NOT SUSTAINABLE IN THE EYES OF LAW BEING WITHOUT JURISDICTION AND A LSO BEING TIME BARRED, HENCE HEREBY QUASHED WITHOUT GOING INTO THE MERITS OF THE CASE. CONSEQUENTLY, THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF OCTOBER, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 21 ST DAY OF OCTOBER , 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-30, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.