The Deputy Commissioner Of Income Tax, Central Circle-1, Rajkot V. M/s. Amidhara Devlopers Pvt. Ltd., Rajkot

ITSSA 116/RJT/2018

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3794 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 23-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 01-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Residential status; Search and seizure; Source of fund; Accommodation entries; Competent authority; Assessment record; Set aside
• Section: 68; 132; 143(3); 153A; 208; 13; 22

Judgement Text

Page 1 of 22 आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT (CONDUCTED THROUGH E-COURT AT AHMEDABAD) BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER अपील सं./IT(SS)A Nos.116-117/Rjt/2018 िनधाᭅरण वषᭅ/Asstt. Years: (2011-2012 & 2012-2013) D.C.I.T., Central Circle-1, Rajkot. Vs. M/s Amidhara Developers Pvt. Ltd., “Atlantis” Opp. Big Bazar, 150 ft Ring Road, Rajkot PAN: AAFCA6672E (Applicant) (Respondent) Revenue by : Shri Mehul Ranpura, A.R Assessee by : Shri K.K. Oza, CIT.D.R सुनवाई कᳱ तारीख/Date of Hearing : 29/04/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 24/06/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: 1. The captioned appeals have been filed at the instance of the Revenue against the separate orders of the Learned Commissioner of Income Tax (Appeals), Jamnagar, of even dated 17/08/2018 arising in the matter of assessment order passed under s. 153A r.w.s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Years 2011-12 & 2012-13. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 2 of 22 First we take up ITA No. 116/RJT/2018, an appeal by the Revenue for AY 2011-12 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the La, CIT(A) has erred in law and on facts in deleting the addition of Rs.21,38,44,000/- made on account of Share Capital. 2. On the facts and in the circumstances of the case and in law, the Ld. CII(A) has erred in law and on facts in not appreciating the provisions of Section 153A of the I.T. Act, 1961 which required the total income to Re brought under tax without any restrictions. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that such assessment or re-assessment u/s.153A of the I T. Act, 1961 is to be restricted only to the incriminating material found during the search. 4. The Ld.CIT(A) has erred in law and on facts in observing that no adverse inference or replies were received by the Department in rospan.se to reference made to Foreign Tax Authority, even though no reply was received from the Foreign Tax Authority till the floatation of assessment and the response received subsequently have not been called for by the Id.CIT(A). 5. The Ld.CIT(A) has erred in law and on facts in giving relief by observing that the additional onus under first proviso to Section 68 applied only to resident share holder from A.Y. 2013- 14, without appreciating that the requirements of the provisions of Section 68 are still applicable to all credits. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. ClT(A) be- set aside and that of the A,0. be restored to the above extent. 3. The first issue raised by the Revenue is that the learned CIT(A) erred in holding that the addition in the assessment or reassessment under section 153A of the Act be restricted to the incriminating materials found during the search proceedings. 4. The facts in brief are that the assessee in the present case is a private limited company and engaged in the activity of construction of residential flats as well as commercial complex. There was a search and seizure operation conducted under section 132 of the Act dated 16 th October 2014. As a result of search, the AO IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 3 of 22 initiated the proceedings by issuing notice under section 153A of the Act. The assessee in response to such notice filed return of income under section 153A of the Act. However, the assessee contended that the year under consideration is an unabated assessment year as the normal scrutiny assessment under section 143(3) of the Act was already completed. Therefore, there cannot be any addition to the income declared by it in the absence of any incriminating document found during the search proceedings. The assessee in support of his contention relied on the judgment of Hon’ble Gujarat High Court in the case of Pr. CIT vs. Saumya Construction (P.) Ltd. reported in 81 taxmann.com 292 besides relying upon plethora of other case laws applicable to the issue of hand. 5. However, the AO disagreed with the contention of the assessee by observing that there is no prohibition under section 153A of the Act requiring to frame the assessment in the case of search proceedings only on the basis of incriminating documents/materials found during the search. The AO in this regard placed reliance upon the judgment of Hon’ble Kerala High Court in case of E.N. Gopakumar vs. CIT reported in [2016] 75 taxmann.com 215 (Kerala). 5.1 The AO further observed that though there are judicial pronouncement where it was held that while making assessment/reassessment under section 153A of the Act, the completed assessments can be interfered on the basis of incriminating materials unearthed during the course of search. But the term “incriminating material” has nowhere been defined under the Act. However, the meaning to the word being ‘incriminating material’ can be assigned based on judicial precedent laid down over the period. As per the AO, the materials collected pre and post search proceeding will also fall within the preview of incriminating material. 5.2 The AO further observed that in post search enquiries, it was found that the signature of the so called investor were forged. There was no correlation between premium charged by the assessee and financial performance of the assessee. Likewise, there was no basis of charging different amount of premium from different IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 4 of 22 investors and furthermore, there was no reason specified for not charging any premium from the regular directors to whom, the shares were allotted. There was no dividend or benefit extended to the investors over the years for their capital investment. Likewise, there were several anomalies in share application forms. As per the AO, all these infirmities constitute incriminating materials. Accordingly, the AO framed the assessment under section 153A of the Act after making addition to the total income of the assessee. 6. On appeal, the learned CIT (A) deleted the additions made by the AO by observing as under: 5.5 It is an undeniable fact that, during the course of search at the premises of the appellant, no document or books of account were found, which had not been produced by the appellant in the course of original assessment proceedings: The AO states that, he did call for assessment records of the appellant from the DCIT Circle 1(1) did not hand over the old records and hence, expressed! his inability to verify whether the issue of share capital was considered while passing the original assessment or not. However, although this is the lapse on the part of the department in failure to furnish the records, though however, it cannot be attributed to the appellant The fact is that, the assessment has already been finalized. The jurisdictional' decision of the Hon'ble Gujarat High Court is squarely applicable in case. The Hon'ble High Court of Gujarat in the case of Pr, CIT vs Construction Pvt. Ltd. (2016) 387 ITR 529 (Gujarat), had held that, "Under section 153A of the Act, an assessment has to be made in relation to the search of requisition, namely, in relation to material disclosed during the search or requisition, in relation, to any assessment year, no incriminating material is found, no addition o r disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur v. Assistant Commissioner of Income Tax (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Commissioner of Income-tax-1 v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years however, (here must be some incriminating material available with the Assessing Officer with' respect to the sale transactions in the particular assessment year. Relying upon the decisions referred to above, addition made in the year under consideration is deleted, as the same is beyond the scope of section 153A |of the 11 Act. This ground of appeal is allowed, 7. Being aggrieved by the order of the learned CIT (A), the Revenue is in appeal before us. 8. The learned DR before us has filed the written submissions wherein it was contended that as a result of search share application forms were found which were IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 5 of 22 seized. These share application forms were not signed properly. As per the learned DR there was mismatch in the signature of the share applicant with other documents and thus he pleaded to treat such documents as incriminating in nature. It was also pointed out by the learned DR that the share application forms were not filed by the assessee during the assessment proceedings under section 143(3) of the Act. The argument of the learned DR about the non-availability of share application forms was based on the reasoning that the previous AO has not forwarded the complete assessment folders while framing the assessment under section 153-A of the Act. Likewise, the assessee was demanded to furnish the paper book containing the details which were filed at the time of assessment proceedings but the assessee has not done so. Thus, the inference can be drawn that such details were not available before the AO at the time of original assessment. Furthermore, the assessee to avoid the examination of the documents/evidences which were filed during the assessment proceedings has not furnished the same in the assessment proceedings framed under section 153-A of the Act. Furthermore, the documents which were found during the course of the search proceedings cannot be treated as dumb document until and unless the same are compared with the documents filed by the assessee during the original assessment proceedings under section 143(3) of the Act. Accordingly the learned DR was of the view that the assessee failed to discharge the primary onus imposed upon it under the provisions of section 68 of the Act. Thus, the learned DR submitted that the finding of the learned CIT-A that there was no including document found during the course of search is based on wrong assumption of facts. 8.1 On the contrary, the learned AR submitted that the share application forms are representing the share capital which have been duly incorporated in the books of accounts and to this effect no doubt has been raised by the authorities below. Thus according to the learned AR the documents relating to the share application forms cannot be said as incriminating in nature. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 6 of 22 8.2 Both the learned DR and the AR, before us, vehemently supported the order of the authorities below as favourable to them. 9. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the year under consideration is unabated assessment year which was subject to scrutiny assessment under section 143(3) of the Act. It has been settled by various Hon’ble Court including Hon’ble Jurisdictional High Court that the completed assessment can be reiterated in the absence of any incriminating material/ documents whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in Section 153- A of the Act is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to the completed assessment proceedings. The Hon’ble Gujarat High Court in the case of Saumya Construction (supra) has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during the course of search. The word incriminating has not been defined under the Act but it refers to those materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case, we note that there was no incriminating document found during the search which would have made basis for the addition in the assessment order except the discrepancies in the shares application form, signature of the investors, mismatch in the amount of premium. All these details referred by the AO in the assessment for making the addition do not really refer to any incriminating documents. The seized materials or evidences which are already there in public domain or which are simply dumb and non-speaking documents or records or which could have been requisitioned otherwise also, by a regular enquiry during regular assessment proceedings, can't be considered as incriminating material or evidence. 9.1 At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 7 of 22 be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in case of Saumya Construction (P.) Ltd (supra) wherein it was held as under: Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, the earlier assessment would have to be reiterated. 9.2 In view of the above we hold that there cannot be any addition to the total income of the assessee of the regular items as made by the AO in the present case. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence, we uphold the same. Thus the ground of appeal of the Revenue is hereby dismissed. 9.3 As we have held that there cannot be any addition of regular items of disallowance/addition to the total income of the assessee which have only been disclosed in the books of accounts. Admittedly all the additions/disallowances made by the AO represent the regular items therefore it is directed to the AO delete the addition made by him. 10 However without prejudice to the above finding on technical ground we decided to adjudicate the issue raised by the revenue on merit also. 11 The fact of case on merit goes like this. The assessee in the year under consideration issued 15,06,625 equity shares at face value of Rs. 10 per share and premium of Rs. 90 to Rs. 150 per share to different individual/parties. Accordingly, the assessee received a sum of Rs. Aggregating to Rs. 22,59,24,000/- on account of share capital. The details of the same stand as under: IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 8 of 22 S. No. Shareholder status No of share FV/ share Premium/ share Total amount 1. Virendrabhai J Mehta NRI- USA 61,250 10 150 98,00,000/- 2. Paresh Ishwarlal Benani NRI- USA 2,15,050 10 150 3,44,08,000/- 3. Niketan Sarojkumar Mehta NRI- USA 2,05,750 10 96.43 2,19,00,000/- 4. Rashmi Niketan Mehta NRI- USA 55,600 10 150 88,96,000/- 5. Mahendra K Rathod NRI- USA 45,000 10 90 45,00,000/- 6. Gitaben M Rathod NRI- USA 22,000 10 90 22,00,000/- 7. Chandres I Benani NRI- USA 1,40,400 10 150 2,24,64,000/- 8. Gita C Benani NRI- USA 40000 10 150 64,00,000 9. Milan M Rathod NRI- USA 4,19,800 10 150 6,71,68,000 10. Safeen Sharfuddin Charnia NRI- Angola 1,06,000 10 150 1,69,60,000/- 11. Nayana P benani NRI- USA 195175 10 150 3,12,28,000/- Total 15,06,625 22,59,24,000/- 11.1 The assessee during the assessment proceeding under section 153A of the Act to establish the identity of share subscribers, genuineness of transaction and credit worthiness of the investors furnished the following documents: 1. Name & Address of all the share subscribers; 2. Copies of share application form received from the shareholder duly signed & stamped, which evidences the identity and existence of the subscribers; 3. Copies of passport of the NRI share subscribers; 4. Confirmation from the shareholders; 5. Copies of bank statements of the company evidencing the genuineness of the funds received from the subscribers; 6. Copies of bank statements/certificates of the shareholder to substantiate that the transaction is carried out through banking channel and establishing the creditworthiness of the share subscribers; 11.2 The assessee on the strength of above documents submitted that it has discharged its primary onus cast under section 68 of the Act by furnishing the necessary details as discussed above. The assessee further submitted that all the investors are NRI and transferred fund to the assessee for the acquisition of shares from their respective NRE account maintained in India. The certificate issued by the respective bank of the investor is sufficient enough to establish the genuineness of IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 9 of 22 transaction and creditworthiness of the shareholder. The assessee also contended that it is liable to explain the source of credit in its books of account and not about the source of funds in the hands of the investors. The amended provision of section 68 of the Act requires assessee to explain source of source in case of credit in the nature of share capital and premium thereon but the same is applicable prospectively from 1 st April 2013. Therefore, the amended provision is not applicable to the year under consideration. Furthermore, the amended provisions are only applicable in the case of amount in the nature of share application money and premium credited by the resident only whereas in its case, the amount was credited from Non-residents. . 11.3 The assessee further submitted all these detail were furnished during the original assessment proceeding under section 143(3) of the Act and the AO accepted the genuineness of the share application money and premium thereon. Therefore once the genuineness of the credit of share application money verified by the Revenue authority and accepted as genuine in the original proceedings, the same cannot be disturbed on same set of document without bringing additional materials and evidences which prove otherwise. 11.4 However, the AO disregarded the submission of assessee by holding that the assessee failed to discharge the initial onus cast upon him under section 68 of the Act i.e. proof of identity, genuineness of transaction and creditworthiness of the parties. In none of the case, the assessee furnished any detail with regard to the creditworthiness of the investor. 11.5 Nevertheless, an independent enquiry was made by the AO based on the details furnished by the assessee with respect to the proof of identity and genuineness of transactions. In the enquiry, the sources of fund in the hand of investors were mapped and it was noticed that the bank accounts of the investors were credited before making the investment. The amount in the bank of investors were credited from tax haven countries like British Virgin Island, Mauritius and IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 10 of 22 Switzerland by the person namely Shri Sajid Umedali Dhrolia residing in Angola who is controlling certain entities, the names of which appeared in the panama paper leak. In some cases, the investors who are residing in USA, their bank account were credited from certain entities established in countries such as UAE and Hong Kong. However, there was no correlation between the activity carried out by the investor and the entities based in the UAE and Hong Kong. For example, the investor namely Smt. Naiyna P Benenai, was engaged in the business of hotel/motel services whereas her bank account was credited through remittance made by a Hong Kong based entity namely Bluetone Investment Ltd which is engaged business of export of machineries. Likewise, in some cases, the bank accounts of investors were credited from domestic cheque clearance from angadia/Shroff. All these points were highlighted to the assessee and explanation was sought but the assessee failed to explain. Under the provision of section 68 of the Act, the initial burden cast on the assessee. Once the initial burden is discharged by the assessee, it the duty of the AO to conduct necessary enquiries. If the AO in enquiry finds material deficiency/ incriminating information, the onus shifts on the assessee again to discharge additional burden. But the assessee did not make any submission or explanation on additional findings as pointed by the AO. Thus, the assessee failed to discharge initial as well as additional burden cast upon it. 11.6 The AO with respect to the claim of the assessee i.e. all the materials/ information with regard to identity, genuineness and creditworthiness were furnished before the AO in original assessment proceedings, noted that he has not received full materials from the previous AO. Further, it was not prohibited under the law that once assessee furnishes the necessary details during original assessment proceeding, the same cannot be demanded during reassessment proceedings. 11.7 The AO with respect to the contention of the assessee i.e. amended provision under section 68 of the Act is prospective and applicable only on the amount credited by the resident investors, held that the amendment was brought by the IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 11 of 22 Finance Act 2012 which was clarificatory in nature. Therefore, the same is applicable retrospectively from the inception of the main provision. As far as the applicability of the amendment is concern in case of amount credited from resident investor, it is nowhere prohibited that if similar transaction is carried out with non-resident, the issues shall not be investigated in similar fashions. Thus, the AO in view of the above treated the partial amount of Rs. 21,38,44,000/- out of total amount of Rs. 22,59,24,000/- credited from the investors as unexplained cash credit under section 68 of the Act. 12 On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO. The ld. CIT-A while deleting the addition made certain observations summarized hereunder: a. All the investor are NRI and residing outside India since decades and in all cases, the amount was transferred from their respective NRE account. b. The assessee before the AO also furnished copy of their passport, certificate from investor bank for transaction carried out, bank statement showing amount transferred through banking channel and creditworthiness/liquidity in their bank accounts, confirmation from investors, copy of proof of their residential address in India and in some cases, the investor namely Shri Presh I Benani appeared before AO and confirmed the investment. From these documents, the assessee discharged primary onus impose under section 68 of the Act. c. There were several credit entries from several parties in the bank of the investors which were utilized for making investment in the shares of company. However, the AO doubted only certain amount credited in the bank account of the investors whereas no adverse finding or allegation made by the AO against other credit entries in the investor banks. d. The AO doubted the amount credited in the bank of investor namely Shri Sajid Umedali Dharolia by observing that he is controlling certain entities which is appearing on panama paper leak. However, the entities which IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 12 of 22 appear in panama paper were incorporated in the year 2012 whereas amount in the investor bank was credited in the year 2011. Likewise, there was no direct nexus between assessee and person whose name appeared in the panama paper was established by the AO. e. In the case of the investor namely Smt. Nayna P Benani and Shri Milan R Rathod, the AO alleged that the investors besides receiving fund from other parties also received fund from the company namely M/s Bluetone Investment Ltd., a Hong Kong based company engaged in the business of export of machineries whereas the investor is residing in USA and engaged in business of hotel/motel which establishes no correlation/ nexus justifying why such entity should pay such amount to the investors. The allegation of the AO is merely a presumption without having concrete evidences. f. The investor namely Shri Shafeen S Charania is permanently residing in Angola who made investment of Rs. 1,69,60,000- only. In this respect the AO himself has given finding that Shri Shafeen S Charania booked a flat in assessee’s project in the year 2008-09 by making advance payment of Rs. 1,70,48,000/- which got cancelled in the year and advance was refunded by assessee to Shri Shafeen S Charania. Out of the said amount received from the assessee on cancellation of booking, Shri Shafeen S Charania made investment in the shares of the assessee company. Thus, from the finding of the AO, the credit itself gets explained but the AO still made addition merely on the basis that he is connected to Shri Sajid Umedbhai Dhrolia which is unjustified in the given facts and circumstances. g. In case of certain other investors such as Shri Presh I Benani, Smt. Nayna P Benani, Chandresh I Benani, Milan R Rathod, the AO himself held part of the investment amounting to Rs. 22.4 Lakh, 24.8 lakh, 4.4 lakh, and 69.2 lakh respectively as genuine. h. The AO made reference to the foreign tax authority through FT &TR division of the CBDT but no adverse replies was received by the AO against the assessee which again proves the genuineness of the assessee. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 13 of 22 i. There was no iota of evidence brought on record by the AO suggesting that there was exchanged of unaccounted money between the assessee and the investors. j. The additional onus under amended provision of section 68 of the Act is only applicable in case of credit from the resident assessee and the same is applicable prospectively from 1 st April 2013. Therefore assessee only needs to explain sources of credit in its hand which has been explained sufficiently. 13. Being aggrieved by the order of the learned CIT-A, the Revenue is in appeal before us. 14. The learned DR before us filed a written submissions and case records running into pages 1 to 163 comprising the details of the case records, appraisal report and copy of FTTR report. It was contended by the ld. DR that the finding of the learned CIT-A that there was no negative remark in the assessment order with respect to the report of FTTR is based on wrong assumption of facts. It is for the reason that there was no FTTR report available before the AO at the time of finalizing the assessment. Therefore, it was incumbent upon the learned CIT-A to call for such FTTR reports from the concern authorities for deciding the issue on hand. 14.1 The learned AR further submitted that now the report about the FTTR has been received in part and the relevant details have all been placed therein. 14.2 Similarly, the AO in his assessment order has discussed above 24 investors whereas the learned CIT-A has given his findings only for 11 investors. Thus the finding of the learned CIT-A is incomplete as it does not to all the investors. 14.3 According to the learned CIT-A, no adverse inference can be drawn against the assessee merely on the reasoning that the companies listed in Panama were registered in the year 2012. It is for the reason that the person namely Shri Sajid IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 14 of 22 Umed Bhai dharolia was engaged in providing the accommodation entries. Thus he must have provided accommodation entries in the earlier years as well. 14.4 One of the party namely Shri Shafeen has given advances to the assessee 9 years ago and no return on such money was given to the party by the assessee. This transaction is very unusual. It is for the reason that no one gives any advance for such a long period of time without any return. But there was no finding of the learned CIT-A to this effect. 14.5 It was also submitted by the learned DR that there were certain transactions carried out through Angadia which were disguised in the name of share capital received through the NRI’s. It is not possible for the NRI’s to involve Angadia for such huge cash transactions. Thus it is apparent that it was the money of the assessee which was utilized for bringing the share capital through the parties based outside India. 14.6 The nature of the payment received in the NRE bank account of the investors through the domestic clearance was not explained. Likewise, there was no information available on record whether such NRI’s are filing the return of income in India. 15. On the contrary, the learned AR for the assessee before us filed two sets of paper books running from pages 1 to 159 and 1 to 100 and submitted that the assessee has furnished the necessary documents such as copy of the passport, certificate from the bank, bank statement, address proof and the confirmation of the investors which are available in the paper book. Thus, the assessee has duly discharge its onus cast upon it to explain the source of money credited in its bank account. There was no evidence brought on record suggesting that it was the money of the assessee which was routed through the NRI parties. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 15 of 22 15.1 The learned AR further submitted that the NRE accounts can only be credited by the foreign remittance. Thus the allegation that the amount was credited in the NRE accounts through the domestic clearance is based on wrong assumption of facts. 15.2 All the details filed by the assessee during the original assessment proceedings to the AO were duly verified and examined by him (AO) and thereafter once the AO was satisfied during the original assessment proceedings, no addition was made. 15.3 There was no adverse remark against the assessee about the FT and TR report so as to suggest that the amount of share capital was bogus in nature. 15.4 The learned AR further submitted that the 1 st proviso attached to section 68 of the Act was made applicable with effect from 1 April 2013 and therefore the same cannot be applied in the year under consideration. 15.5 Both the learned DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 16. We have heard the rival contentions of both parties and perused the materials available on record. In the instant case the assessee has issued shares at a premium of Rs. 90 to 150 - per-share to certain NRIs which has been dealt in the preceding paragraphs. The genuineness of the same was accepted in the original assessment framed under section 143(3) of the Act. Subsequently, a search proceeding under section 132 of the Act carried out in the case of the assessee and assessment proceeding under section 153A of the Act initiated. The AO in the assessment proceeding held that amount of share capital and premium thereon as unexplained for the reason elaborated in the preceding paragraphs. On appeal, the learned CIT(A) deleted the same. Now the Revenue is in appeal before us. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 16 of 22 16.1 The provision of Section 68 of the Act fastens the liability on the assessee to provide the identity of the lenders, establish the genuineness of the transactions and creditworthiness of the parties. These liabilities on the assessee were imposed to justify the cash credit entries under Section 68 of the Act by the Hon’ble Calcutta High Court in the case of CIT Vs. Precision Finance (P) Ltd. reported in 208 ITR 465 wherein it was held as under: “It was for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. On the facts of this case, the Tribunal did not take into account all these ingredients which had to be satisfied by the assessee. Mere furnishing of the particulars was not enough. “ 16.2 Now first we proceed to understand the identity of the party. The identity of the party refers existence of such party which can be proven based on evidences. As such the identity of a party can be established by furnishing the name, address and PAN detail, bank details, ITR etc. 16.3 The next stage comes to verify the genuineness of the transaction. Genuineness of transaction refers what has been asserted is true and authentic. A genuine transaction must be proved to be genuine in all respect not merely on a piece of a paper. The documentary evidences should not be a mask to cover the actual transaction or designed in way to present the transaction as true but same is not. Genuineness of transaction can be proved by submitting confirmation of the parties along the details of mode of transaction but merely showing transaction carried out through banking channel is not sufficient to prove the genuineness. As such the same should also be proved by circumstantial surrounding evidences as held by the Hon’ble Supreme court in the case of Shri Durga Prasad More reported in 82 ITR 540 and in case of Smt. Sumati Dayal reported in 214 ITR 801. 16.4 The last stage comes to verify the creditworthiness of the parties. The term creditworthiness as per Black Law Dictionary refers as: "creditworthy, adj. (1924) (Of a borrower) financially sound enough that a lender will extend credit in the belief default is unlikely; fiscally healthy-creditworthiness.” IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 17 of 22 16.5 Similarly in The New Lexicon Webster's Dictionary, the word "creditworthy" has been defined as under:- "creditworthy, adj. of one who is a good risk as a borrower." 16.6 It the duty of the assessee to establish that creditor party has capacity to advance such loan and having requisite fund in its books of account and banks. The capacity to advance loan can be established by showing sufficient income, capital and reserve or other fund in the hands of creditor. It is required by the AO to find out the financial strength of the creditor to advance loan with judicious approach and in accordance with materials available on record but not in arbitrary and mechanical manner. 16.7 We are conscious to the fact that there was an amendment under the provisions of section 68 of the Act wherein a proviso was inserted but the same is not applicable for the year under consideration. It was brought under the statute with effect from 1 st April 2013 and the Hon’ble Bombay High Court in the case of CIT vs. Gagandeep Infrastructure Pvt Ltd reported in 80 taxmann.com 272 where it was held that such amendment is prospective and applicable from A.Y. 2013-14 onward. The year before us relates to the assessment year 2012-13 which is not subject to the amendment in the proviso of section 68 of the Act. 16.8 It is also pertinent to note that the amended provisions are applicable to the persons being subscribers of the shares who are residents. However, there is no ambiguity to the fact that in the case on hand, all the shares subscribers of the shares were non-residents. Thus, for this reason as well, the amended proviso to section 68 of the Act is not applicable to the assessee. The coordinate bench of Mumbai tribunal in case of M/s Syntesia Network Security India Pvt. Ltd vs. ITO in ITA No. 2927/Mum/2017 also made similar observation. The relevant observation of Mumbai tribunal extracted here under: 19. Furthermore, the law is section 68 is not apply to remittances made in India by non-resident is strengthened by the proviso to u/s.68 inserted w.e.f. asst. yr. 2013-14. According to the said proviso, if an assessee company, in which public are not substantially interested, receives money by way of share capital, then the source of funds of resident shareholder has to be established by the assessee in order to get out of the kin of the deeming provision under s. 68. Hence, the proviso talks of the IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 18 of 22 source being established only when the shareholder is a resident of India. There is no such requirement if shareholder is a non-resident. Therefore, the creditworthiness of the shareholders, if he is a non- resident, does not have to be established by the assessee in respect of remittance received by him. 16.9 In the light of the above discussion, we proceed to adjudicate the issue on hand. Admittedly all the shareholders have subscribed the shares in the assessee company are the NRI and the payment has been received through the NRE account. We also find that the assessee during the proceedings under section 153A has furnished passport of the investors and there residential address in India in order to proof their identity. Likewise, the copies of confirmation from the investors were also filed to establish the genuineness of the transaction and copy of NRE bank statement along with certificate issued by the bank certifying remittance from the investor account to the assessee bank as proof of genuineness and creditworthiness of the investor. One of the investor namely Shri Presh I Benani also appeared before the AO in person and confirmed the transaction. 16.10 However, the AO without pointing any deficiency in the above primary document held that the assessee failed to explain the genuineness of the credit of share application money and premium thereon. The view of the AO was based on the fact that bank accounts of the investor were credited by several parties just before making investment by them in the assessee shares. Likewise, the bank accounts were also credited by the remittance from several countries including the tax heaven countries like British Virgin Island, Switzerland and Mauritius by the individual namely Shri Sajid Umedbhai Dharolia who is controlling certain entities which were alleged as paper company as highlighted in the report International Consortium of Journalist popularly known as “Panama Paper leak”. Besides there was remittance from the entities based in Hong Kong and Dubai and also from the domestic clearance from angadia/Shroff. The AO alleged that the nature of transaction between investor residing in USA and entities based in Hong Kong and Dubai were very unlikely as the business of the investor and those entities were very much contrasting. The AO also alleged that cash was given to angadia/Shroff for taking cheque entry in the bank of the investor. IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 19 of 22 16.11 In our considered view all of the above allegation are in nature of surmises and presumptions only. As nowhere it has been established by way of direct link between the assessee and the individual who were controlling paper companies. It is also pertinent to note the entity referred by the AO as Paper Company appearing in “Panama Paper Leak” were incorporated in the year 2012 i.e. after the transaction between assessee and the investors. Furthermore, the panama paper leak is not conclusive evidence. It is just a report prepared by consortium of some investigating journalist around the globe which is not a competent authority under the law. We are also conscious to the fact that the learned DR before us at the time of hearing has also filed the copy of the FTTR report which is placed on pages 152 to 163 of the paper book. On perusal of the report we note that there was not any adverse remark made against the assessee or any of the investor. In the FT & TR report, there were the documents filed with respect to the company namely M/s Skyplex Trading Ltd. based in Dubai which was liquidated. There is no allegation by the revenue that the assessee has received any money from such party in the year under consideration in the name of share capital. Thus no adverse inference can be drawn against the assessee in such report. 16.12 The allegation of the of the AO that no explanation offered with regard to remittance by the entities based in Hong Kong and Dubai in the bank of the investor. In this regard we again note that these are only presumption and surmises. There is no finding that the amount remitted by those entities are not genuine or the amount belong to the assessee. Furthermore, under provision of section 68 as applicable to the year under consideration, the assessee is only expected to explain the sources of credit its books of account and not the sources of source. The assessee cannot be expected to explain the transaction carried out by the investor with the third party in the given facts and circumstances. 16.13 The Allegation of the AO that the bank account of the investors were credited by the domestic clearance and the sources of these clearance are mapped with IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 20 of 22 angadia/shrooff who provided cheque entry against receipt of cash is prima facie based on wrong assumption. It is undisputed that all the amounts credited in the books of the assessee from the investor were from NRE account. NRE account is a type of bank account which can be only held by Non-Resident citizen of India residing outside India or by Person of Indian Origin (POIs) who is citizen of other countries except Pakistan and Bangladesh. As per the guideline of RBI the NRE account can only be credited by inward remittance from outside India, interest accruing on the account, interest on investment, transfer from other NRE/ FCNR(B) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance), and current income like rent, dividend, pension, interest etc. will be construed as a permissible credit to the NRE account. Thus, the finding of the AO that bank account of the investors were credited by angadia/Shroff through domestic clearance is factually wrong. 16.14 It is also important to highlight that the normal assessment proceeding under section 143(3) of the Act was also made in the case of the assessee where genuineness of the credit of share application money and premium thereon was duly accepted by the Revenue after verification of documentary evidences furnished by the assessee. Thus the same cannot be reviewed in absence of any additional material which suggest otherwise. The Revenue alleged that the complete assessment record was not available before assessing authority under section 153A of the Act and whatever records available suggest that the previous AO has not made through investigation w.r.t. identity, genuineness and credit worthiness of the parties and merely based on documentary evidences furnished by the assessee accepted the genuineness of the parties and transactions. In this regard we are of the considered view that no adverse inference can be drawn against the assessee in absence complete case records which were available during the original assessment proceeding. Indeed it is failure on the part of Revenue authority for which assessee cannot be penalized. Coming to allegation that the previous AO has not made through or adequate investigation, we are of the view that previous AO IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 21 of 22 after enquiry which may be adequate or inadequate accepted the genuineness of the parties and transactions which cannot be reviewed by the another AO on the reasoning that the previous AO has not carried out through enquiry. 16.15 It is worthy to note that the part of the amount received from the share subscribers was not subject to the addition under section 68 of the Act. 16.16 In view of the above elaborated discussion and after considering facts in totality we hereby held that the assessee on merits discharged the onus cast under section 68 of the Act. Hence we do not find any reason to interfere in the finding of the learned CIT(A). Thus, the ground of appeal of the Revenue on merit is also hereby dismissed. 17. In the result, the appeal of the Revenue is dismissed. Coming to ITA No. 117/Rjt/2018, an appeal by the Revenue for the A.Y. 2012-13 18. The Revenue has raised following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the La, CIT(A) has erred in law and on facts in deleting the addition of Rs.4,35,60,000/- made on account of Share Capital. 2. On the facts and in the circumstances of the case and in law, the Ld. CII(A) has erred in law and on facts in not appreciating the provisions of Section 153A of the I.T. Act, 1961 which required the total income to Re brought under tax without any restrictions. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and on facts in holding that such assessment or re-assessment u/s.153A of the I T. Act, 1961 is to be restricted only to the incriminating material found during the search. 4. The Ld.CIT(A) has erred in law and on facts in observing that no adverse inference or replies were received by the Department in rospan.se to reference made to Foreign Tax Authority, even though no reply was received from the Foreign Tax Authority till the floatation of assessment and the response received subsequently have not been called for by the Id.CIT(A). 5. The Ld.CIT(A) has erred in law and on facts in giving relief by observing that the additional onus under first proviso to Section 68 applied only to resident share holder from A.Y. 2013- IT(SS)A no.116-117/Rjt/2018 Asstt. Years 2011-12 & 2012-13 Page 22 of 22 14, without appreciating that the requirements of the provisions of Section 68 are still applicable to all credits. 6. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 7. It is, therefore, prayed that the order of the Ld. CIT(A) be- set aside and that of the A,0. be restored to the above extent. 19. The effective issue raised by the Revenue is that the learned CIT(A) erred in holding that the addition in the assessment or reassessment under section 153A of the Act be restricted to the incriminating materials found during the search proceedings and furthermore the additions were also deleted on merit. 20. At the outset we note that the issue raised by the Revenue in its grounds of appeal for the AY 2012-13 are identical to the issues raised by the Revenue in ITA No. 116/Rjt/2018 for the assessment year 2011-12. Therefore, the findings given in 116/Rjt/2018 shall also be applicable for the year under consideration i.e. AY 2012- 13. The ground of appeal of the Revenue for the assessment 2011-12 has been decided by us vide paragraph No. 16 of this order against the Revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2011-12 shall also be applied for the year under consideration i.e. AY 2012-13. Hence, the ground of appeal filed by the Revenue is hereby dismissed. 21. In the result, the appeal of the Revenue is hereby dismissed. 22. In the combined result, both the appeal of the Revenue are hereby dismissed. Order pronounced in the Court on 24/06/2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 24/06/2022 Manish