M/S Hindustan Institute of Pharmakon Ltd., Bhopal V. THE DCIT 1(2), Bhopal

ITSSA 115/Ind/2018

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 4234 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 28-02-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-01-2024
• Assessment Year: 2006-2007
• Appeal Filed On: 13-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH PORWAL
• Assessee Lawyers: AJAY TULSIYAN
• Keywords: Corroborative evidences; Unexplained investment; Onus to prove; Capital receipt; Principle of natural justice; Search and seizure; Accommodation entries; Block assessment; Assessment record; Bogus
• Section: 143(3); 153A; 139(1); 22; 13; 20

Judgement Text

आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA Nos.114 to 116/Ind/2018 (Assessment Years: 2005-06,2006-07 & 2008-09) M/s. Hindustan Institute of Pharmakon Ltd. A-96, Industrial Area, Mandideep/A-5, Kasturba nagar Bhopal Vs. DCIT-1(2) Bhopal (Appellant / Assessee) (Respondent/ Revenue) PAN: AAACH4612C Assessee by Shri Ajay Tulsiyan, AR Revenue by Shri Ashish Porwal, Sr. DR Date of Hearing 16.01.2024 Date of Pronouncement 29 .02.2024 O R D E R Per Vijay Pal Rao, JM: These three appeals by the Assessee are directed against the three separate orders of Commissioner of Income Tax (Appeals), all dated 10.07.2018 arising from the assessment orders passed u/s 153A r.w. section 143(3) of the Act for Assessment Years 2005-06, 2006-07 & 2008-09 respectively. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 2 of 34 For A.Y.2005-06 the assessee has raised following grounds of appeal: “1. That the Learned CIT(A) erred in not appreciating the fact that since no incriminating documents were seized during the search regarding share capital, the addition made by the Learned AO was unwarranted and bad in law. That on the facts and in the circumstances of the case and in law the additions made u / s 68 are wrong and are prayed to be deleted. 2. That the Learned CIT(A) erred in upholding the addition of Rs. 10,00,000/- as made by the AO u/s 68 on account of share capital received from M/s Insileo Commercial Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 3. That the Learned CIT(A) erred in upholding the addition of Rs. 20,00,000/- as made by the AO u/s 68 on account of share capital received from M/s Patkin Tracon Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 4. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. ustenitute of Pharmakon imited." 2. Solitary issue arises is regarding the addition made by the AO u/s 68 of the Act on account of share capital received by the assessee from two investing companies. The assessee is a public limited company and filed its return of income u/s 139(1) of the Act for the year under consideration on 31.10.2005 declaring total income of Rs.1,45,403/-. Thereafter a search and seizure action u/s 132 of the Act was conducted at the premises of the assessee IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 3 of 34 on 07.11.2007. In response to notice u/s 153A the assesse filed return of income on 23.10.2008 showing the same income of Rs.1,45,400/- which was declared in the original return of income filed u/s 139(1) of the Act. The assessment was completed u/s 153A r.w. section 143(3) on 24.12.2009 whereby the AO has made additions on account of share capital received by the assessee by treating the same as unexplained cash credit. The assessee challenged action of the AO before the CIT(A) but could not succeed. 3. Before the Tribunal Ld. AR of the assessee has submitted that the assessment year 2005-06 was not pending as on the date of search and further no incriminating material was found or seized during the course of search and seizure action disclosing any undisclosed income in respect of the share capital received by the assessee. He has further submitted that the AO has also not referred to any incriminating material while making addition on account of share capital received by the assessee. The AO has made addition on account of share capital received by the assessee from three parties without any incriminating either found or seized during the search and seizure proceedings out of which the CIT(A) has deleted the addition in respect of one investor by following the decisions of this Tribunal and confirmed the addition in respect of the two other investors. He has relied upon the judgment of Hon’ble Supreme Court in case of Pr. CIT vs. M/s Abhisar Buildwell Pvt. ltd. 424 ITR 212 and submitted that the Hon’ble Supreme Court has upheld the judgment of Hon’ble Delhi High Court in case IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 4 of 34 of CIT vs. Kabul Chawla and held that in case no incriminating material is unearth during the search, the AO cannot assess or re- assess taking into consideration the other material in respect of the completed assessment/non-abated assessment. Thus, Ld. AR has contended that in respect of the completed/non-abated assessment no addition can be made in absence of any incriminating material found during the course of search and seizure u/s 132 or requisition u/s 132A of the Act. Thus, Ld. AR has contended that the addition made by the AO for A.Y.2005-06 which was a completed/non-abated assessment is not sustainable and the same is liable to be deleted. 4. On the other hand, Ld. DR has submitted that the AO has conducted an inquiry and found that the investor companies were not found at the given address and therefore, these investor companies are only paper companies used for providing accommodation entries. He has pointed out that the AO has conducted an inquiry about existence of these investor companies but these were not found at the given address as per the report of the inspector who was deputed to visit side. Ld. DR has further submitted that the AO has also analysed return of income filed by these companies as well as their financial statements and noted that these companies has shown very meagre amount of income that too only the interest income and therefore, these companies are not doing any business. On perusal of the balance sheet it was found that the companies are having no fixed asset and declared IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 5 of 34 negligible income therefore, these companies are only paper companies formed to provide bogus entries of share capital etc. He has relied upon the orders of the authorities below. 5. We have considered rival submission as well as relevant material on record. During the course of assessment proceedings the AO has noted that the assessee has received share capital from four companies. Details of which are given at page no.2 of the assessment order as under: 5.1 The AO has made an addition in respect of the share capital received by the assessee from three companies namely Orchid IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 6 of 34 Consultancy of Rs.20,00,000/-, Insilco Commercial Pvt. ltd. of Rs.10,00,000/- and Patkin Tracom Pvt. ltd. of Rs.20,00,000/- total amounting to Rs.50,00,000/- u/s 68 of the Act being unexplained cash credit. The addition has been made by the AO on the basis of the entries recorded in the books of account of the assessee as well as other details and evidences filed by the assessee. Thus, it is manifest from the assessment order that addition in question was made on the basis of the entries in the books of account and inquiry conducted by the AO in respect of the evidences produced by the assessee and no reference has been made by the AO to any material or documents found or seized during the course of search and seizure action much less incriminating material. Therefore, there is no dispute on the fact that the addition made by the AO is not based on any incriminating material either found or seized during the course of search and seizure operations. Thus, in absence of any incriminating material disclosing any undisclosed income of the assessee on account of share capital receipt during the year under consideration the addition made by the AO is not sustainable when assessment for the year under consideration was not pending on the dated of search and therefore, was not-abated by virtue of search. The Hon’ble Supreme Court in case of Pr. CIT vs. M/s Abhisar Buildwell Pvt. ltd. (supra) has considered and decided this issue in favour of the assessee and the concluding part of the judgment in para 13 & 14 is as under: 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 7 of 34 (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs. 5.2 While upholding the judgment of Hon’ble Delhi High Court in case of CIT vs. Kabul Chawla (supra) the Hon’ble Supreme court has held that in respect of completed/non-abated assessment no addition can be made by the AO in the absence of any incriminating material found during the course of search u/s 132 or requisition u/s 132(1) of the Act. Accordingly in view of the facts and circumstances of the case the addition made by the AO without any IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 8 of 34 incriminating material found during the course of search u/s 132 is not sustainable and liable to be deleted. We order accordingly. Since the addition made by the AO has been deleted by us in absence of any incriminating material therefore, we do not propose to go into the merits of the addition made u/s 68 of the Act for this assessment year. 6. For A.Y.2006-07 the assessee has raised following grounds of appeal: “1. That the Learned CIT(A) erred in not appreciating the fact that since no incriminating documents, were seized during the search regarding share capital, the addition made by the Learned AO was unwarranted and bad in law. That on the facts and in the circumstances of the case and in law the additions made u/s 68 are wrong and are prayed to be deleted. 2. That the Learned CIT(A) erred in upholding the addition of Rs. 10,00,000/- as made by the AO u/s 68 on account of share capital received from M/s Cap Vanijya Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 3. That the Learned CIT(A) erred in confirming the addition of Rs. 10,00,000/- being share capital received from M/s Vinjyoti Tracon Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 4. That the Learned CIT(A) erred in upholding the addition of Rs. 20,00,000/-- being share capital received from M/s Marut Properties Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 9 of 34 5. That the Learned CIT(A) erred in upholding the addition of Rs. 10,00,000/- being share capital received from M/s Varsha Traders Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 6. That the Learned CIT(A) erred in upholding the addition of Rs. 10,00,000/- being share capital received from M/s Bangal Exim Scrips Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 7. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises. “ 7. As it is clear from the grounds of appeal that the AO has made addition on account of share capital received by the assessee from various companies. 8. We have heard ld. AR as well as Ld. DR and considered the relevant material on record. At the outset, we note that the assessment for A.Y.2006-07 is also completed/non-abated assessment as on the date of search and no incriminating material was found during the course of search and seizure action. The addition made by the AO in the proceedings u/s 153A only on the basis of the entries in the books of accounts and other material produced by assessee or gathered by AO during the assessment proceedings is not sustainable. Therefore, in view of our finding on this issue for A.Y.2005-06 the addition made by the AO for IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 10 of 34 A.Y.2006-07 is not sustainable and liable to be deleted. We order accordingly. 9. For A.Y.2008-09 the assessee has raised following grounds of appeal: “1. That the Learned CIT(A) erred in not appreciating the fact that since no incriminating documents were seized during the search regarding share capital, the addition made by the Learned AO was unwarranted and bad in law. That on the facts and in the circumstances of the case and in law the additions made u/s 68 are wrong and are prayed to be deleted. 2. That the Learned CIT(A) erred in upholding the addition of Rs. 10,00,000/- being share capital received from M/s Agrawal Road Carrier Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 3. That the Learned CIT(A) erred in upholding the addition of Rs. 30,00,000/- being share capital received from M/s Desmond Vinimay Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 4. That the Learned CIT(A) erred in upholding the addition of Rs. 50,00,000/- being share capital received from M/s Bazigar Trading Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 5. That the Learned CIT(A) erred in upholding the addition of Rs. 50,00,000/- being share capital received from M/s Aachman Vanijay Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 6. That the Learned CIT(A) erred in upholding the addition of Rs. 40,00,000/- being share capital received from M/s Mudra IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 11 of 34 Vincom Pvt. Ltd. That on the facts and in the circumstances of the case, the addition made and upheld is wrong and bad in law and it is prayed that the same very kindly be deleted now. 7. That the appellant craves leave to add, to alter, amend, modify, substitute, delete and/or rescind all or any of the grounds of appeal on or before final hearing, if necessity so arises.” 10. During the year under consideration the assessee has received share capital from seven companies. The details of which are given by the AO at page no.3 as under: s. No. Name Address Amount(Rs) 1 Rapid Commercial Pvt Ltd 20, Dawa Bazar, 4th Floor, 13-14 RNT Marg Indore 22,50,000/- 2 Spectrum Chemicals Pvt Ltd 28. Lal Building, 36. Goa Street, Near Shere Punjab Hotel Mumbai 17.50,000/- 3 Desmond Vinimay P Ltd 9,12, Lal Bazar Street, E Block, 2 ^ (cd) Floor. Kolkata 30,00,000/- 4 Bazigar Trading Pvt Ltd 863, Marshal House 33/1, N.S.Road, Kolkata 50,00,000/- 5 Agrawal Road Carrier Ltd 48, Neq Loha Mandi, Indore 10,00,000/- 6 Mani Mudra Vincom P Ltd 863, Marshal House 33/1, N.S 40.00.000/- 7 Aachman Vanijya P. Ltd. 863, Marshal 50,00,000 IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 12 of 34 House-33/1 < N.S. Road, Kolkata 2,20,00,000 10.1 The AO has made an addition of Rs.2,20,00,000/- u/s 68 of the Act in respect of the share capital received by the assessee from these seven companies while framing assessment u/s 153A r.w.section 143(3) on 24.12.2009. On appeal the CIT(A) deleted the addition in respect of the share capital received from M/s. Rapid Commercial & finlease Pvt. ltd. and M/s Spectrum Chemicals by following the decision of this tribunal dated 17.11.2014 in case of M/s Gajanan Developers and Distributors Pvt. ltd. in IT(SS)A No.206 to 211/Ind/2013 and IT(SS)A No.164 to 167/Ind/2013 and CO No.96 to 101/2013. However, the addition made by the AO in respect of the remaining five companies has been confirmed by the CIT(A) while passing impugned order. 11. Before the Tribunal the Ld. AR of the assessee has submitted that the AO has made addition on the ground that the investor companies were not found at the given address and therefore, these companies do not existing but only paper companies for providing accommodation entries. He has referred to the finding of the AO in respect of M/s Agrawal Road Carrier Ltd. and submitted that the AO has made the addition merely on the ground that this company was not found existence at the given address. The AO has made reference to the inquiry made with one M/s Sunil Agrawal regarding IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 13 of 34 share capital investment in the case of Vignesh Warehouse and Distributors Pvt. Ltd. and Gajanan Developers and Distributors Pvt. Ltd. The AO also obtained the details of ROC, Gwalior and noted the annual return of the company was reportedly not found for the year under consideration. Ld. AR has submitted that all these inquiries were conducted by the AO on the back of the assessee and the assessee was never confronted with these inquiries and statement recorded at the back of the assessee. He has submitted that the existence of the company cannot be doubted when the assessee has produced the return of income, copy of the audited financial statements along with all the relevant Annexures, copy of tax audit report etc. He has submitted that the AO has conducted the enquiry behind the back of the assessee and without the knowledge of the assessee. The assessee was never confronted with the persons whose statements were recorded. The assessee has submitted the address as received from the company and whatever address mentioned by the company is submitted to the AO. Later on at any point of time if the company changes its address and doesn't inform to the assessee company, the assessee will not come to know about the said facts. It may be possible that the company might have changed the address. He has submitted that the AO has mentioned about the enquiry done in the case of some other companies and found that the investor company is providing entries. In this reference it is submitted that the enquiry was conducted in the case of some other companies and not in the case of the assessee company. No where it is mentioned in the enquiry IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 14 of 34 that the entries has been provided to the assessee company. How an inference can be drawn from the enquiry of some other companies that the same also exists with the assessee company. This has many if and buts and in such circumstances additions can not be made. He has submitted that the assessee was never confronted with the persons whose statements were recorded. No documents if any collected by the department were supplied to the assessee. He has submitted that the bank statements were received from the companies regarding investment in share capital. It is further submitted that the department has the Income Tax return of the investor company but no comments on the financial position is made by the department. He has submitted this in itself proves that the company has the capacity of making investment with the assessee company and the company is having its existenance and also capacity of making investment. He has submitted that the main thrust of the AO in its enquiry is that the investor company is not existing on the addresses provided. But again the AO himself proves that the company is in existenance. On the one hand it is being said that the company is not at the given address but on the other hand all the returns etc is with the AO. Thus, it is clear that the company exists and invested in the share capital of the assessee company. The AO has not doubted the financial capacity of the investor company which in itself proves the capacity of the investing company. Thus, all the three ingredients which are required i.e. identity of the investor, genuineness of the transaction and creditworthiness are fully established. Even the AO has not doubted IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 15 of 34 on all the three ingredients. In the assessment, the total thrust of the AO while passing the assessment order is that the investor company is a paper Company. The assessee has submitted the required documents to substantiate its claim. Simply not finding the office at the given address does not proves that the company is not genuine or does not have the capacity of making investment. He has submitted if the company is not genuine, how the AO has found the return, directors of the company.Thus, from above it is very clear that the assessee has genuinely accepted and allotted the shares to M/s Agrawal Road Carriers Pvt. Ltd. M/s. Desmond Vinimay Pvt. Ltd. 12. Ld. AR has submitted that during the year the assessee company has received the share capital of Rs. 30,00,000/- from M/s Desmond Vinimay Pvt. Ltd., Kolkata having PAN AABCD0962A. During the course of assessment proceedings, the assessee has filed the confirmation letter of the investor company. As per this confirmation letter, the amount of Rs. 30,00,000/- was sent by the investor company by Cheque No. 135458 dated 30.04.2007 drawn on ICICI Bank, Kolkata. During the course of assessment proceedings the assessee has also filed the copy of acknowledgement of filing return, copy of audited Profit & Loss A/c and Balance Sheet and bank account of the investor company. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 16 of 34 M/s. Bazigar Trading Pvt. Ltd. 13. Ld. Counsel for the assessee has submitted that during the year the assessee company has received the share capital of Rs. 50,00,000/- from M/s Bazigar Trading Pvt. Ltd., Kolkata having PAN AABCB3052B. During the course of assessment proceedings, the assessee has filed the confirmation letter of the investor company. As per this confirmation letter, the amount of Rs. 30,00,000/- was sent by the investor company by Cheque No. 470845 dated 04.05.2007 drawn on Standard Chartered Bank, NS Road Branch, Kolkata and Rs. 20,00,000/- by cheque no. 262785 dated 05.09.2007 drawn on Standard Chartered Bank, NS Road Branch, Kolkata. During the course of assessment proceedings the assessee has also filed the copy of acknowledgement of filing return, copy of audited Profit & Loss A/c and Balance Sheet and bank account of the investor company. M/s. Aachman Vanijya Pvt. Ltd. 14. Ld. Counsel for the assessee has submitted that during the year the assessee company has received the share capital of Rs. 50,00,000/- from M/s Aachman Vanijya Pvt. Ltd., Kolkata having PAN AACCA5165H. During the course of assessment proceedings, the assessee has filed the confirmation letter of the investor company. As per this confirmation letter, the amount of Rs. 50,00,000/- was sent by the investor company by Cheque No. 204379 dated 25.05.2007 drawn on Standard Chartered Bank, NS IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 17 of 34 Road Branch, Kolkata. During the course of assessment proceedings the assessee has also filed the copy of acknowledgement of filing return, copy of audited Profit & Loss A/c and Balance Sheet and bank account of the investor company. M/s Mani Mudra Vincom Pvt. Ltd. 15. Ld. Counsel for the assessee has submitted that during the year the assessee company has received the share capital of Rs. 40,00,000/- from M / s Mani Mudra Vincome Pvt. Ltd., Kolkata having PAN AADCM4316K. During the course of assessment proceedings, the assessee has filed the confirmation letter of the investor company. As per this confirmation letter, the amount of Rs. 40 ,00,000/- was sent by the investor company by Cheque No. 486759 dated 20.04.2007 drawn on Standard Chartered Bank, NSB Road Branch, Kolkata. During the course of assessment proceedings the assessee has also filed the copy of acknowledgement of filing return, copy of audited Profit & Loss A/C and Balance Sheet and bank account of the investor company. 16. Thus, Ld. AR has submitted that the AO brushed out all the evidences like bank statement, acknowledgement of return and audited Balance Sheet etc. and preferred to add the same as unexplained investment only on the basis of inspector report who has intimated that no concern was found in the given address. It is submitted that the AO has conducted the enquiry behind the back of the assessee and without the knowledge of the assessee. The IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 18 of 34 assessee has submitted the confirmation letter, copy of return and Balance Sheet received from the company regarding investment in share capital. Whatever address mentioned by the company is submitted to the AO. Later on or at any point of time if the company changes its address and doesn't informed to the assessee company, the assessee will not come to know about the said facts. It may be possible that the company might have changed the address. He has submitted that the main thrust of the AO in its enquiry is that the assessee company is not existing on the addresses provided. The assessee has submitted the bank account, Balance Sheet & P/L account, acknowledgement of return and confirmation letter in support of its claim. All these documents clearly prove the identity, genuineness of the transaction and capacity of the investor company. For the reasons not known to the assessee, if on the given address company is not found it is not the fault of the assessee and also this does not goes to prove that the company is not in existenance or is not capable enough. Further, the AO has mentioned that the investor company is not having income. In this reference it is submitted that the company has sufficient turnover to justify the investment. He has submitted that the investment made in the assessee company is duly reflected in the Balance Sheet of the investor company. Bank account also reveals that there are no cash deposits but cheques were obtained from others and then invested in the assessee company by cheque only. In the assessment, the total thrust of the AO while passing the assessment order is that the investor company is a paper Company. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 19 of 34 The assessee has submitted the required documents to substantiate his claim. Simply not finding the office at the given address does not proves that the company is not genuine or does not have the capacity of making investment. Thus, from above it is very clear that the assessee has genuinely accepted and allotted the shares to M/s Agrawal Road Carrier Ltd., M/s Desmond Vinimay Pvt. ltd., M/s. Bazigar Trading Pvt. Ltd., M/s Aachman Vinijya Pvt. Ltd. & M / s Mani Mudra Vincom Pvt. Ltd. 16.1 He has submitted that the amount invested in the assessee's company is not loan but share capital money. It is held by various courts that if the shareholder exists than, possibly, no further enquiry need be made but if the assessing officer finds that the alleged shareholder does not exists than, infect, it would mean that there is no valid issuance of share capital because shares can not be issued in the name of non existing persons. Reliance is placed in the case of CIT vs. Active Traders (P) Ltd (1993) 115 CTR (Cal.) 69, CIT vs. Kwick Tradres (1993) 199 ITR 85-86, CIT vs. Preteek Finance & Investment Co. Ltd. (1995) 215 ITR 272 (Del.). 17. Ld. AR has also relied upon the judgment of Hon’ble Delhi High Court in case of CIT vs. M/s Winstral Petro Chemicals Pvt. ltd. 330 ITR 603 and submitted that the Hon’ble High Court has held that the AO is not justified in drawing an adverse inference only because the inspector reported that the share applicants were not found functioning at the given address or the summons issued to IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 20 of 34 share applicants were returned unserved with the remark not traceable. He has then relied upon the decision of Hon’ble Bombay High Court in case of CIT vs. M/s Creative World Telefilms Ltd. 33 ITR 100 and submitted that when the assessee has produced all the details of the shareholders through PAN cards, bank account, return of income confirmation then the addition made by the AO without bringing any contrary material or record to prove that the details and evidences produced by the assessee are bogus is not justified. Ld. AR has further contended that the capacity of the investor cannot be doubted merely from the income declared in the return of income but it has to be seen from the funds available to the investor companies as per the books of account and particularly the balance sheet of the investor company. In support of his contention he has relied upon the following decisions: 1.CIT V/s M/s Value Capital Services (P) Ltd. (2008) 307 ITR 334 (Delhi).Honourable High Court of Delhi 1. CIT - 9 V/s M/s Vrindavan Farms (P) Ltd. in ITA No. 71/2015 High Court of Delhi 2. M/s Hindon Forge (P) Ltd. V/s DCIT Circle 1 in ITA No. 3800/Del/2017 ITAT Tribunal Delhi Bench "C" Delhi 18. Thus, Ld. AR has submitted that the assessee discharge its onus to prove identity and the creditworthiness of the investor companies as well as genuineness of the transactions by producing confirmation of the investor company, copies of Cheque through which the payment was received by the assessee from investor companies, copy of ITR Acknowledgement for the year under consideration, copy of audited financial statements along with IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 21 of 34 Annexures, copies of certificate of incorporation of Memorandum of Article as well as Memorandum of Association. All these documents were produced by the assessee during the course of assessment proceedings goes to establish the identity and creditworthiness of the investor as well as genuineness of the transactions. He has referred to the balance sheets of these investor companies and submitted that sufficient funds were available with these companies for making investments in the share capital of assessee. Even in the bank account of these companies funds were available and there is no entry of any cash deposit prior to issuing Cheque to the assessee. 19. On the other hand, ld. DR has submitted that the assessee has claimed to have issued share capital at premium of Rs.90 per share in addition to face value of Rs.10 per share which is not commensurate to the financial position of the assessee company. The AO has conducted the inquiry reveals the facts that these investor companies do not existing at the given address and mentioned in the return of income. The directors of the investor companies are well known entry provider as detected during the course of search and seizure action carried out in case of Agrawal Road Carrier Ltd. He has pointed out that in some of the confirmations filed by the assessee are undated and the companies are based at Kolkata but as per the report of the inspector the same were not found at the given address. Therefore, the AO through the inquiry has established that these companies are paper companies IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 22 of 34 having no business activities, no fixed assets and very meager income. The return of income shows that these companies have declared very negligible income in comparison to the huge investments made in the shares of the assessee company. Therefore, by considering overall facts and circumstances as detected from the inquiry conducted by the AO it is proved that these investing companies are only paper companies used for providing bogus accommodation entries. He has relied upon the orders of the authorities below. 20. We have considered rival submission as well as relevant material on record. The AO while framing the assessment u/s 153A of the Act has made addition in respect of share capital received by the assessee from seven companies. The details of which have already been reproduced however, for ready reference the same are again reproduced as under: s. No. Name Address Amount(Rs) 1 Rapid Commercial Pvt Ltd 20, Dawa Bazar, 4th Floor, 13-14 RNT Marg Indore 22,50,000/- 2 Spectrum Chemicals Pvt Ltd 28. Lal Building, 36. Goa Street, Near Shere Punjab Hotel Mumbai 17.50,000/- 3 Desmond Vinimay P Ltd 9,12, Lal Bazar Street, E Block, 2 30,00,000/- IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 23 of 34 ^ (cd) Floor. Kolkata 4 Bazigar Trading Pvt Ltd 863, Marshal House 33/1, N.S.Road, Kolkata 50,00,000/- 5 Agrawal Road Carrier Ltd 48, Neq Loha Mandi, Indore 10,00,000/- 6 Mani Mudra Vincom P Ltd 863, Marshal House 33/1, N.S 40.00.000/- 7 Aachman Vanijya P. Ltd. 863, Marshal House-33/1 < N.S. Road, Kolkata 50,00,000 2,20,00,000 20.1 On appeal the CIT(A) has deleted the addition in respect of two companies namely Rapid Commercial Pvt. ltd. & Spectrum Chemicals Pvt. ltd. and confirmed the addition in respect of share capital received from remaining five companies. In the assessment order the AO has made reference of inquiry conducted through income tax inspector as well as an inquiry conducted by the department in case of Vignesh Warehouse and Distributors Pvt. ltd. and Gajanan Developers and Distributors Pvt. ltd. Ld. AR has raised an objection that all these inquiries were conducted by the AO as well as by the department in case of third person were at the back of the assessee and the assessee was not confronted with these inquiries and statements. Thus, Ld. AR has contended that no evidence can be used against the assessee without confronting the assessee as well as giving opportunity to counter as well as IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 24 of 34 cross examine the witnesses. The AO has reached the conclusion that the share capital received by the assessee from these companies is nothing but accommodation entries based on set of information/material i.e. (i) Report of the Inspector regarding the companies were not found at the given address and (ii) the investigation carried out by the department in case of third party wherein the statement of one Shri Suneel Agrawal was recorded. The AO also doubted the capacity of these investor companies by considering the meager income declared by these companies in the return of income as well as absence of fixed assets in their balance sheet. So far as, the report of the inspector and the investigation carried out by the department in case of Vignesh Warehouse and Distributors Pvt. ltd. and Gajanan Developers and Distributors Pvt. ltd. are concerned it is manifest from the record that the AO has not confronted those reports and statements to the assessee much less to giving opportunity to the assessee to cross examine those witnesses whose statements were recorded by the department in during the investigation carried out in case of third person. Even the report of the inspector was also not confronted with the assessee. It is settled proposition of law that if any evidence or statement is made the basis of assessment order without allowing assessee to cross examine the witness or to rebut the evidence, the same is violation of principle of natural justice and renders the assessment order as invalid. The Hon’ble Supreme Court in in case of Andaman Timber Industries vs. CCE 62 taxmann.com 3(SC) has held as under: IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 25 of 34 “6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross- examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.” IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 26 of 34 20.2 Similar view has been taken by various High Courts on the point of violation of principle of natural justice. Thus, the assessee has a right to be confronted with the material before same is used against the assessee. The AO is duty bound to communicate the assessee about the outcome of the inquiry if any conducted by him or information/evidences gathered as a result of such inquiry. It is also settled proposition of law that the assessee has all the rights to know the evidence and information which has to be used by the AO against him so that he would bring his own stand and material to meet such information/evidence brought against him by the AO. It is manifest from the assessment record that the AO has not given the assessee an opportunity either to rebut the information which was gathered by the AO or to cross examine the witness whose reports and statement was considered by the AO while passing assessment order. Therefore, the said information/material which was gathered in the back on the assessee cannot be used against the assessee and hence, the addition made by the AO on the basis of such material is not sustainable. 20.3 Moreover, we find that the assessee has produced all relevant documents to prove the identity and creditworthiness of the investor companies as well as genuineness of the transactions. The party wise details of documents produced by the assessee are as under: In respect of M/s Desmond Vinmay Pvt. ltd. i.Copy of confirmation letter issued by M/s Desmond Vinmay Pvt. ltd. (b) Copy of Cheque issued to Hindustan Institute of Pharmakon Ltd. by M/s Desmond Vinmay Pvt. ltd. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 27 of 34 (c) Copy of ITR acknowledgment of A.Y.2008-09 of M/s Desmond Vinmay Pvt. ltd. (d) copy of Audited Financial Statements along with annexures (e) copy of certificate of incorporation of M/s Desmond Vinmay Pvt. ltd. (f) Copy of Memorandume and Articles of Association of M/s Desmond Vinmay Pvt. ltd. In respect of M/s Aachman Vanijya Pvt. Ltd. i.Copy of confirmation letter issued by M/s Aachman Vanijya Pvt. Ltd. (b) Copy of relevant extract of bank statement of M/s Aachman Vanijya Pvt. Ltd. (c) Copy of ITR acknowledgment of A.Y.2008-09 of M/s Aachman Vanijya Pvt. Ltd. (d) copy of Audited Financial Statements along with annexures for the relevant FY 2007-08 of M/s Aachman Vanijya Pvt. Ltd. (e) copy of certificate of incorporation of M/s Aachman Vanijya Pvt. Ltd. (f) Copy of Memorandume and Articles of Association of M/s Aachman Vanijya Pvt. Ltd. In respect of M/s Bazigar Trading Pvt. Ltd. i. Copy of confirmation letter issued by M/s Bazigar Trading Pvt. Ltd. (b) Copy of relevant extract of bank statement of M/s Bazigar Trading Pvt. Ltd. (c) Copy of ITR acknowledgment of A.Y.2008-09 of M/s Bazigar Trading Pvt. Ltd. (d) copy of Audited Financial Statements along with annexures for the relevant FY 2007-08 of M/s Bazigar Trading Pvt. Ltd. (e) copy of PAN car of M/s Bazigar Trading Pvt. Ltd. (f) Copy of certificate of incorporation of M/s Bazigar Trading Pvt. Ltd. (g) Copy of Memorandum and Articles of Association of M/s Bazigar Trading Pvt. Ltd. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 28 of 34 In respect of M/s Manimundra Vincom Pvt. Ltd. i.Copy of confirmation letter issued by M/s Manimundra Vincom Pvt. Ltd. (b) Copy of relevant extract of bank statement of M/s Manimundra Vincom Pvt. Ltd. (c) Copy of ITR acknowledgment of A.Y.2008-09 of M/s Manimundra Vincom Pvt. Ltd. (d) copy of Audited Financial Statements along with annexures for the relevant FY 2007-08 of M/s Manimundra Vincom Pvt. Ltd. (e) copy of certificate of incorporation of M/s Manimundra Vincom Pvt. Ltd. (f) Copy of Memorandum and Articles of Association of M/s Manimundra Vincom Pvt. Ltd. In respect of M/s Agarwal Road Carriers Ltd. i.Copy of confirmation letter issued by M/s Agarwal Road Carriers Ltd. (b) Copy of relevant extract of bank statement of M/s Agarwal Road Carriers Ltd. 20.4 The AO has doubted the capacity of the investor companies by considering return of income and profit and loss account whereas in the balance sheet of these investor companies it is manifest that a sufficient fund was available with these investor companies to make investment in the shares of the assesse. Once the assessee has produced the income tax return filed by these companies along with audited report, financial statements and audit report then the identity of these companies cannot be disputed even if the address given on record is changed. In the balance sheets of these companies deducted the transactions of investments in the shares of the assessee company and corresponding availability of funds in the shape of share capital and reserves and surplus which is much IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 29 of 34 more than investment made in the share of the company. Therefore, without considering funds available with these investor companies as per the books of account and particularly the balance sheet the capacity of these companies cannot be doubted merely on the basis of the income declared in the return of income. These investments were made through banking channel and even in the bank account of these companies no abnormality was found or pointed out by the AO. There is no finding by the AO that the assesee’s own fund has routed back in the garb of share capital through these companies and therefore, genuineness of the transactions cannot be doubted. Further the AO has not even whispered about any tented transactions of circuitous nature. This could have been very well detected by verifying relevant bank accounts of assessee as well as investor companies to reflect any abnormal entries indicating the transactions of circuitous in nature. Therefore, when no such transactions was detected from the relevant record and these companies were having sufficient funds as per their books of account as well as bank account then the capacity and genuineness of the transactions cannot be doubted in the absence of any contrary material to show that the record produced by the assessee is bogus and not genuine. The CIT(A) has considered this issue in para 7.3 as under: “7.3 During the course of appeal, the AR informed that the search in the case of appellant was carried out simultaneously alongwith search at the premises of Shri Yogiraj Sharma and others. Similar additions were made in respect of share capital in the hands of companies controlled by Shri Yogiraj Sharma including one M/s Gajanan Distributors and Developers Pvt. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 30 of 34 Ltd., Bhopal u/s 153A/153C r.w.s. 143(3) of the Act. It has been informed that on appeal, the Hon'ble ITAT, Indore vide its common order dated 17.11.2014 in IT(SS)A No. 206 to 211/Ind/2013, IT(SS) * A No. 164 to 167/Ind/2013 and CO Nos. 96 to 101/Ind/2013 has deleted the additions made in respect of various companies contributing share capital. A copy of the judgment has been filed. It is observed that following the same facts and inquiries, identical addition made in respect of M / s Rapid Commercial Finlease Pvt. Ltd. and M / s Spectrum Chemicals Pvt. Ltd. have been deleted by the ITAT. It has been further informed by the AR that the aforesaid order of the ITAT has been confirmed by the Hon'ble MP High Court and the appeal filed by the Department has been dismissed. A copy of Hon. High Court's order dated 08.11.2016 in 1TA - 19 - 2105 has been filed.” 20.5 Thus, the very basis of the AO that in case of Gajanan Distributors and Developers Pvt. Ltd. the department detected the fact and gathered information about the bogus accommodation entries provided by person who are controlled these companies has been reversed by CIT(A) by following the decision of this tribunal. It is pertinent to note that the when CIT(A) has accepted the transactions of share capital received from two companies namely M/s Rapid Commercial Finlease Pvt. ltd. and M/s Spectrum Chemicals Pvt. ltd. then the transactions in respect of other five companies cannot be doubted particularly when the assessee has produced identical supporting evidence in respect all the companies which includes confirmation, bank account statements, ITR, audited financial statements, certificate incorporation, Memorandum of Article and Association etc. Therefore, the order of the CIT(A) to the extent of upholding the addition made in respect of IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 31 of 34 the share capital received from the remaining five companies is contradictory to the finding of the CIT(A) in respect of the two companies namely M/s Rapid Commercial Finlease Pvt. ltd. and M/s Spectrum Chemicals Pvt. ltd. Even otherwise if the transactions of two companies are accepted as genuine based on the same set of supporting evidence then the denial of the transactions in respect of the other companies is not justified. The Hon’ble Delhi High Court in case of CIT vs. M/s Winstral Petro Chemicals Pvt. ltd. (supra) has held in para 7 to 11 as under: “7. It has not been disputed before us that the share application money was received by the assessee company by way of account payee cheques, through normal banking channels. It is not the case of the revenue that the payment of Share Application Money was not made from the bank account of the applicant companies. Admittedly, copies of application for allotment of share were also provided to the Assessing Officer. It is not the case of the revenue that the share applications were not signed on behalf of the applicant companies and were forged documents. It is also not the case of the revenue that the shares were not actually allotted to the companies. Therefore, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal, in our view, were justified in holding that the genuineness of the transactions had been duly established by the assessee. 8. As regards identity of the subscribers, the assessee filed copies of Certifications of Incorporation, PAN cards, PAN details and company details, downloaded from the site of Department of Company Affairs besides written confirmation from the applicants. It is not the case of the revenue that the copies of Certificates of Incorporation, PAN cards, PAN details or company details submitted by the assessee were forged documents. In fact, the Assessing Officer did not even make an attempt to verify the genuineness of these documents by summoning the IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 32 of 34 record of Registrar of Companies or Department of Company Affairs. If he entertained any doubt about the genuineness of these documents, nothing prevented him from summoning the record from these authorities. If the Assessing Officer so desired, the genuineness of the PAN cards and PAN details could easily have been verified by him from the record available with the Department. The assessee-company also furnished written confirmation from the applicant companies. All the share applicants were duly served with the notices under section 133(6) of the Act. In these circumstances, the finding of Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal that the identity of the subscribers stood duly established from the documents produced by the assessee, cannot be said to be perverse and does not call for interference by this Court. 9. The finding of fact recorded by the Tribunal, which is the final fact finding-authority, cannot be said to be perverse merely because some of the applicants had a common address and the Inspector deputed by the Assessing Officer to make field inquiries did not find five applicants functioning at the addresses provided to him. There is no legal bar to more than one companies being registered at the same address. Since the applicant companies were duly incorporated, were issued PAN cards and had bank accounts from which money was transferred to the assessee by way of payee accounts cheque, they cannot be said to be non-existent, even if they, after submitting the share application had changed their address or had stopped functioning. 10. In view of the decision of this Court in the case of Divine Leasing & Finance Ltd. (supra), the identity of the share applicants would be established if details of address or PAN card are furnished to the Department along with the copies of Shareholders' Register, Share Application Form, Share Transfer Register, etc. In this case, Share Application Forms were duly produced before the Assessing Officer and this is not the case of the revenue that that the Assessing Officer had asked the assessee to produce Shareholders' Register and Share Transfer Registers, but the assessee-company had failed to do so. IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 33 of 34 11. The Assessing Officer was not justified in adding the amount of share application money to the income of the assessee, merely because the applicants did not respond to the notices sent to them. If the Assessing Officer so wanted, he could have found out the current address of those applicants, who, according to the report of the Inspector, were not found functioning at the address given to the Assessing Officer, by summoning the Directors, etc., of those companies and asking them to furnish the current address of the company. The names and addresses of Directors, if not available with the assessee, could have been obtained from the office of Registrar of Companies or from the banks on which the cheques were drawn. No such attempt, however, was made by the Assessing Officer. In these circumstances, we found no reason to disturb the finding of fact recorded by the ITAT.” 20.6 Therefore, once the assessee has produced certificate of incorporation, Pan Card and other details then the identity of investor companies cannot be doubted. Further the assessee produced audited financial statements of these investor companies along with bank account statement to show the capacity as well as genuineness of the transactions and nothing contrary has been brought by the AO to contradict the facts recorded in the evidence produced by the assessee. Therefore, the addition made by the AO and sustained by the CIT(A) is not justified and liable to be deleted. 20.7 Accordingly in view of the above facts and circumstances we find that the assessee has discharged its onus to prove identity and creditworthiness of the investor companies with supporting relevant evidence which remained uncontroverted and further when the transactions are through banking channels and AO has not pointed IT(SS)ANo.114 to 116/Ind/2018 Hindustan Institute of Pharmakon Ltd. Page 34 of 34 out any infirmity or tented transactions in the bank account of the parties then the genuineness of the transactions is also proved by the assessee. Once the assesse has discharged its onus the burden is shifted on the AO to bring some contrary material and disprove the evidence brought on record by the assessee. In absence of any such material the addition made by the AO is not sustainable the same is deleted. 21. In the result, appeals of the assessee are allowed. Order pronounced in the open court on 29.02.2024. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ 29 .02.2024 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore