Dy. Commisioner of Income Tax, Central Cir.,2, Surat V. Ambaji Syntex Pvt. Ltd., Surat

ITSSA 54/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1912 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 26-05-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 30-08-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Unexplained cash credit; Bogus Share capital; Share purchase agreement
• Section: 68; 132; 143(3); 153A; 143(2); 139(1)

Judgement Text

आयकर अपीलȣय अͬधकरण, स ु रत Ûयायपीठ, स ु रत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND Dr ARJUN LAL SAINI, ACCOUNTANT MEMBER आ.अ.सं./IT(SS)A No.54/SRT/2021(AY 2009-10) (Hearing in Virtual Court) Deputy commissioner of Income-tax, Central Circle-2, Room No.505, 5 th Floor, Aayakar Bhawan, Majura Gate, Surat-395001 Vs Ambaji Syntex Pvt. Ltd. 504, Trividh Chambers, Opp. Fire Brigade, Ring Road, Surat PAN : AABCA 9728 K अपीलाथȸ/Appellant Ĥ×यथȸ /Respondent Ǔनधा[ǐरती कȧ ओर से /Assessee by Sh. Rasesh Shah, C.A राजèव कȧ ओर से /Revenue by Sh. H.P. Meena, CIT-DR सुनवाई की तारीख/Date of hearing 27.05.2022 उɮघोषणा कȧ तारȣख/Date of pronouncement 11.07.2022 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income tax (Appeals)-4 Surat [for short to as ‘Ld. CIT(A)’] dated 21.06.2021for assessment year (AY) 2009-10, which in turn arises out assessment order passed by Assessing Officer under section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 2 vide order dated 16.10.2017. The Revenue has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition made during the course of assessment proceedings u/s 153A has to be confined to the incriminating material found during the course of search u/s 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that the provisions of Sec.153A requires a notice to be issued requiring the assessee to furnish the return of income in respects of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought tonaught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating the fact that incriminating data in the form of computer back-ups were found and seized during the course of search and the Assessing Officer has made a detailed analysis of the same and also correlated the same with the additions made in the assessment order. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not adjudicating the issue of substantial addition on merits and thereby deleting the addition of Rs.6,28,50,000/- made on account of unexplained cash credit u/s IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 3 68 of the Income Tax Act without appreciating the fact that the assessee had failed to prove the identity, creditworthiness & genuineness of the Kolkata based investor company from whom share capital was received. 5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not adjudicating the issue of substantial addition on merits and thereby deleting the addition of Rs.6,28,50,000/- made on account of unexplained cash credit u/s 68 of the Income Tax Act without appreciating the fact that such accommodation entry in form of share application money was arranged by the assessee from the Kolkata based entry providing companies, which was accepted by the directors of the entry providing companies before the Investigation Wing. 6. It is, therefore, prayed that the order the Ld. CIT(A)-4,Surat may be set aside and that of the AO may be restored to the above extent.” 2. Brief facts of the case as extracted from the order of lower authorities are that assessee is a company engaged in the business of job work of dyeing and printing of textile goods. The assessee filed its return of income for assessment year 2009-10 declaring income of Rs.12,78,690/-. A search action under section 132 of Income tax Act was carried out on 19.02.2015 on the group cases of Sumeet Industries Ltd in Surat. The assessee is part of this group. In the search action certain incriminating material was found and seized which IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 4 relates to the assessee-company. The Assessing Officer in para-1 of his assessment order recorded that after recording the reasons, the case of assessee was selected for scrutiny by issuing notice under section 153A on 30.12.2015. In response to notice under section 143(2) r.w.s.143(1) of the Act the assessee filed its return of income on 27.05.2016 declaring same income as filed under section 139(1) of the Act. The Assessing Officer after serving statutory notice proceeded for assessment. 3. During assessment, the Assessing Officer recorded that Sumeet Industries Ltd. and other group concerns, debited expenses of job work as retrieved from computers back- up/pen drive which was not accounted in the respective concern. The Assessing Officer in para-4.2 of his assessment order further recorded that assessee-company received share application money of Rs.6.28 crores from some Kolkata based companies Survika Vinimay Pvt. Ltd. during the year under consideration. The Assessing Officer further noted that Kolkata based paper company, made investment in the share of Survika Vinimay Pvt. Ltd. bearing face value of Rs.10/- each IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 5 at premium of Rs.187/- per share in financial year 2006-07 and totalling to Rs.12.84 crores. These shares were transferred by Kolkata based companies to assessee-company (Ambaji Syntex Pvt. Ltd.), Betex India Ltd., Mahesh Kumar Somani (HUF), Manish Kumar Somani, Sharda Devi Somani, Rashmi Somani, Raj Kumar Somani, Raj Kumar Somani (HUF) Suman Devi Somani, Ritesh Somani and Rakesh Somani at a rate of Rs.10/- per share on 17.05.2010. In the whole transactions, the assessee-company had got the control over funds of Rs.12.84 crores in Survika Vinimay Pvt. by mere investment of Rs.62.50,000/- and this fund has been utilized as investment in shares of assessee-company and other group companies including Betex India Ltd. Accordingly, a show cause notice dated 28.08.2018 was issued to assessee-company as to why share application money from Survika Vinimay Pvt. Ltd. during the financial year 2008-09 relevant to assessment year 2009-10 be not treated as unexplained income in the form of bogus share premium and added under section 68 of the Act. The Assessing Officer recorded gist of the reply of assessee in para-4.3 of his assessment order. The assessee in its reply in IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 6 sum and substances submitted that transaction of investment in share is genuine and to prove the identity of shareholders, the assessee has file complete address of shareholder, confirmation and bank statement of shareholders. It was contended that share holders are having active status of Registrar of Company (ROC) and complete master data of Share Holders Company were provided to prove the identity. To prove the creditworthiness, the assessee furnished copy of bank statement of share holders showing that they have enough found to invest money in the capital of assessee- company and copy of return of income of shareholder party was filed. To prove the genuineness of investment, the assessee-company furnished copy of annual accounts of share holder parties, showing having enough net worth to invest in shares of assessee-company. The book value of share as on 31.03.2013 at Rs.107.91. The assessee-company stated that a premium of Rs.90/- has been decided taking into the fair market value of shares which is prescribed method under Rule 11UA (2)(a) of the Income Tax Rules, 1962. To prove the prudence decision of the assessee that the decision is taken by IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 7 Management after discussion and passing resolution of Board of Directors, copy of board resolution, ledger of share capital account and share premium account was furnished. To prove the communication, the assessee filed copies of share certificates. The reply of assessee was not accepted by the Assessing Officer by holding that the investor is corporate entity who are registered ROC therefore by furnishing data of ROC, the identity does not stand fully establish. The assessee is required to prove the identity of Investor Company with the satisfaction of Assessing Officer that share holding company is real company. On creditworthiness, the Assessing Officer held that funds were transferred on same date or prior to the date of investment which was exactly tellies as more or less. For genuineness of such transactions, the Assessing Officer held that assessee was not having prior relationship either business or otherwise; the investors suddenly invested in assessee-company at an exorbitantly high premium why Kolkata based company which have invested in Survika Vinimay Pvt. Ltd. with high premium has sold their shares to assessee-company at per or below par value. The Assessing IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 8 Officer on aforesaid observation and referring certain case law treated the share application money of Rs.6.285 crores as unexplained cash credits and added to the income of assessee- company. Aggrieved by the addition in the assessment order, the assessee filed appeal before Ld. CIT(A). 4. Before Ld. CIT(A), the assessee also raised additional ground of appeal by raising plea that search action was conducted on 19.02.2015 in the group cases of Sumeet Industries Ltd. and the assessment for impugned year was not pending thus not abated assessment and no incriminating materials were seized in the course of search conducted on 19.02.2015 on assessee- company and addition under section 68 is not permissible in the assessment made under section 143(3) r.w.s. 153A. On additional aground of appeal as well as on addition on merit, the assessee-company filed detailed written submission. The submission of assessee is extracted in para-4 of the order of Ld. CIT(A). On the validity of addition under section 68 in assessment order under section 153A, on additional ground of appeal, assessee stated that assessee-company is in the business of job work of dyeing and printing of textile goods. IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 9 The assessee filed its return of income for assessment year 2009-10 on 30.09.2009 declaring income of Rs.12,78,690/-. A search action was conducted at the business premises of assessee on 19.02.2015. The assessee was served with notice under section 153A on 30.12.2015. In response to notice under section 153A, the assessee filed its return of income on 26.05.2016 showing total income at Rs.12,78,690/-. On the date of search, assessment for assessment year 2009-10 has already completed and no assessment was pending. Hence, it was a case of unabated assessment and in absence of incriminating material relating to alleged share application money, the addition under section 68 is not permissible. The addition of share application money in the order under section 153A is bad in law and deserves to be deleted. During the course of search, no documents whatsoever related to share application money received and share allotted by assessee- company, was recovered in the search. In the assessment order, the Assessing Officer has not pointed out any incriminating material on this issue in the whole of the assessment. The Assessing Officer made inquiries with regard IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 10 to completed assessment. The scope of assessment proceedings under section 153A in respect of assessment which is already completed is restricted only to the assessment of any income which is based on incremental material found during the course of search. The assessee further explained that Assessing Officer has no jurisdiction in making an assessment of income which is not based on incremental material found in the course of search action. The assessment for the relevant assessment year 2009-10 has already been completed prior to the date of search. To support his submission, Ld. AR for the assessee relied on various case law including the decision of Hon'ble jurisdictional High Court in the case of PCIT Vs. Saumya Construction Pvt. Ltd. [2016] 387 ITR 529 (Guj); CIT Vs Rameshbhai Javrajbhai Desai 121 taxmann.com 333 (Guj); Delhi High Court in CIT vs. Kabul Chawla [2016] 380 ITR 573 (Del)/[2015] 61 taxmann.com 412(Del); Special Bench of Mumbai Tribunal in All Cargo Global Logistics Ltd. &Ors. Vs. DCIT [2012] 74 DTR (Mum) (58) (Trib.) 89 and other various case law. IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 11 5. On the merit of addition, the assessee stated that during the year under consideration, the assessee received share application money of Rs.6.28 crores by issuing 2,09,500 equity shares of the face value Rs.10/- per share at premium of Rs.290/- per share. The total share capital received was Rs.20.95 lakh and share premium of Rs.6.075 crores and no incriminating material was found in the course of search action, as the assessment was completed and no addition under section 68 was warranted. The assessee to prove the creditworthy of investor submitted that Suvika Vinimay Pvt. Ltd. was having worth off Rs.12.85 crores and they invested only Rs.6.28 crores, thus, the investor was having sufficient fund to invest in the share. The Assessing Officer issued notice to the assessee and assessee furnished complete details showing the name, address, PAN and shares allotted, confirmation of investor, copy of ITR and computation of investor, copy of bank statement of investor, copy of audited balance-sheet, copy of statement of assessee, copy of share application form and share certificate and discharge its onus. The Assessing Officer rejected the submission of assessee in a IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 12 mechanical manner despite furnishing complete details. Though, the assessee has proved the identity, creditworthiness and genuineness of such share transactions. No materials have provided by Assessing Officer that the assessee has taken a bogus accommodation entry and story framed by Assessing Officer of bogus entry is self-serving story made by him. The assessee, to support its various other contentions, relied on various case law including the decision of Hon'ble jurisdictional High Court in the case of DCIT Vs Rohini Builders (2002) 256 ITR 360 (Guj), and in the case of CIT vs. Ranchhod V Nakhava (21 taxmann.com 159 (Guj) and Hon'ble Delhi High Court in the case of CIT Vs Ultratrech Finance & Investments Ltd. [ITA No.1122/2010] (Del). 6. The Ld. CIT(A) on considering the contents of assessment order and the submission of assessee recorded that search action under section 132 was carried out on 19.02.2015 consequent upon service of notice under section 153A was issued to the assessee on 30.12.2015. The assessee furnished its return of income in compliance of notice under section 153A. The Assessing Officer made the addition of Rs.6.28 IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 13 crores in the assessment order passed under section 143(3) r.w.s. 153A on account of share application and share premium. The Ld. CIT(A) further recorded that during appellate stage, assessee raised additional ground of appeal. The additional ground of appeal was forwarded to the Assessing Officer. The Assessing Officer was asked to furnish his comment on or before 15.06.2021. The Ld. CIT(A) recorded that no response was received from the Assessing Officer. The Ld. CIT(A) recorded that the additional ground of appeal raised by assessee during appellate proceedings, is admitted as there is purely legal issue which goes to the root of the matter. The ld CIT(A) followed the judgment of Hon'ble Apex Court in the case of National Thermal Power Corporation Vs CIT (1998) 229 ITR 383 (SC). The Ld. CIT(A) while considering the additional ground raised by assessee noted that in the course of search action under section 132 on the premises of assessee no incriminating material was seized qua share application and share premium and addition made by Assessing Officer are not based on any incriminating material found during the course of search action. On the date of search action IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 14 assessment for this year was not pending. Thus, it was unabated assessment on the date of search, as no assessment was pending; further no incriminating material was found which could be made basis of addition. The Ld. CIT(A) by following the mandate of decision of Hon'ble jurisdictional High Court in the case Saumya Construction Pvt. Ltd. (supra) held that assessee’s case is covered by this decision and no addition can be made in the abated assessment in absence of incriminating material found during the course of search action related with the addition. 7. The Ld. CIT(A) also referred various case law cited in assessee’s in its written submission. Once the Ld. CIT(A) granted relief to the assessee on legal issue, the addition on merit was not adjudicated by him. Further, aggrieved by the order of Ld. CIT(A) the Revenue has filed present appeal before the Tribunal. 8. We have heard the submission of Ld. Commissioner of Income Tax-departmental representative (Ld. CIT-DR) for the Revenue and the Ld. Authorized Representative (AR) for the assessee and have gone through the order of authorities below. The Ld. IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 15 CIT-DR for the Revenue supported the order of Assessing Officer. He submits that Assessing Officer was justified in making the order after sufficient inquiries as assessee- company is a beneficiary of the share application money which was not substantiated to the satisfaction of the Assessing Officer. The Ld. CIT(A) deleted the addition by relying upon the decision of Hon'ble jurisdictional High Court in the case of Saumya Construction Pvt. Ltd. (supra). Against the decision of Hon'ble jurisdictional High Court, the Revenue has already filed SLP before Hon'ble Supreme Court. Ld. CIT-DR submits that Ld. CIT(A) has not considered the case on merit. The ld CIT-DR for the revenue submits that as per statutory provisions under section 253A, there is no bar for making addition in abetted assessment. Once assessment reopened under section 153A, the assessing officer has jurisdiction to make additions in six assessment years as prescribed in the Act. 9. On the other hand the ld AR for the assessee supported the order of ld CIT(A). The Ld. AR for the assessee submits that on the date of search action under section 132 on 19.02.2015, IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 16 the date of completion of assessment for 2009-10 has already expired long back. The time period of issuance of notice under section 143(2) has expired on 30.09.2010. Thus, admittedly no assessment for assessment year 2009-10 was pending on the date of search. During the search, no incriminating material qua the alleged share application money or share premium was found, recorded or seized. The addition under section 68 is admittedly not based in incriminating material. Thus, the addition was not legally justifiable in the whole of the assessment order. The Assessing Officer nowhere in the assessment order mentioned that any incriminating material qua the alleged share capital or share application money was received or the amount received by assessee-company was bogus share application money. The Ld. AR for the assessee submits that in absence of any incriminating material seized or found, no addition can be made in the abated assessment. The Ld. CIT(A) appreciated the fact that and deleted the entire addition. IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 17 10. To support his submission, the ld. AR for the assessee relied upon the following decision Hon'ble Apex Court and Hon'ble High Courts as well as jurisdictional High Court:-  CIT Vs Kabul Chawla [380 ITR 573] (Del HC) (SLP Dismissed in SC-380 ITR (ST)4]  PCIT Vs Saumya Construction (P) Ltd. [81 taxmann.com 292] (Guj)  CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd [58 taxmann.com 78] (Bom)  Jai Steel (India) Jodhpur vs. ACIT (2013) 573 CTR 281 (Raj)  PCIT Vs Meeta Gutguta [2017] 82 taxmann.com 287 (Del)  CIT Vs Veerprabhu Marketing Ltd. [388 IETR 574 (Cal)  ITOVs M/s Narmada Thermal Power Ltd.[ITA No.2522/ Ahd/2016] 11. The Ld. AR for the assessee submits that even otherwise on merit he has a good and no such addition under section 68 is sustainable. The assessee furnished complete details of investors which include their PAN, complete address, copy of ITR, and minutes of board meeting held for allotment of share, share certificate, account confirmation and bank statement. The assessee-company also substantiated share premium with the market value of shares was determined in accordance with prescribed method under 11UA(2)(a) IT Rules. IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 18 12. In support of his submissions the ld AR for the assessee relied on the following case laws;  DCIT Vs Rohini Builders (2002) 256 ITR 360 (Guj),  CIT Vs Ranchhod V Nakhava (21 taxmann.com 159 (Guj)  Hon'ble Delhi High Court in CIT Vs Ultratrech Finance & Investments Ltd. [ITA No.1122/2010] (Del) 13. We have considered the rival submission of both the parties and have gone through the orders of authorities below. We find that during the assessment, the Assessing Officer made the addition of Rs.6.28 crores by taking view that assessee- company was received share application money and share premium. We find that in reply to the show cause notice, the assessee filed detailed written submission to substantiate its identity, creditworthiness and genuineness of such share application money; however the reply of assessee was not accepted by Assessing Officer. The Assessing Officer treated the share application money and added their Vuvika Vinimay Pvt. Ltd. as unexplained cash credit and addition added under section 68 on record. Before Ld. CIT(A), the assessee challenged the validity of addition in the assessment order under section 143(3) r.w.s.153A by raising additional ground IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 19 of appeal that in absence of any incriminating material found during the search action. The Ld. CIT(A) after admitting the additional ground raised by assessee, categorically recorded that no incriminating material was found at the premises of assessee-company during the search action under section 132 of the Act on 12.02.2015. On the date of search action, no assessment proceedings for this assessment year, was pending and no incriminating material about share application money and share premium were found during the search action and the addition which has been made in absence of any incriminating material found during search action. The ld CIT(A) held categorically held that no addition can be made in the assessment order under section 153A, as no incriminating material found during the course of search action as held by Hon'ble jurisdictional High Court in the case of Saumya Construction Pvt. Ltd. (supra); Hon'ble Delhi High Court in Kabul Chawla (supra) and Hon'ble Rajasthan High Court in Jai Steel (India) (supra). We find that the order of Ld. CIT(A) is based on legal position settled not only by supported the decision of Hon'ble jurisdictional High Court in the case of IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 20 Saumya Construction Pvt. Ltd. (supra) has had also supported the decision of Hon'ble Bombay High Court in the case of All Cargo Global Logistics Ltd. & Others (supra) and the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). 14. Before us, no contrary law has brought to take other view except of pleading the statement of fact that the decision of Hon'ble jurisdictional High Court in Saumya Construction Pvt. Ltd (supra) has not been accepted by the Department and an SLP has been filed before Hon'ble Apex Court. We find that on similar ratio of law, the decision of Delhi High Court in Kabul Chawla (supra) and of Bombay High Court in Continental Warehousing Corporation (Nhava Sheva) Ltd (supra) has been affirmed by Hon’ble Apex Court in CIT Vs Singhad Technical Education Society [84 taxmann.com 290] (SC), therefore, we do not find any merit in the submissions of ld CIT-DR for the revenue. Thus, in absence of any contrary of law, we do not find any infirmity in the order passed by Ld. CIT(A), which we affirm with these additional observation. 15. Considering the fact that we have affirmed the order passed by Ld. CIT(A) on legal issue, therefore, consideration and IT(SS)A No54/SRT/2021 (A.Y 09-10) Ambaji SyntexPvt. Ltd. 21 adjudication on other submissions of the parties on merit have become academic. 16. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 11/07/2022 and the result was also placed on the Notice Board. Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) [लेखा सद᭭य/ACCOUNTANT MEMBER] [᭠याियक सद᭭य JUDICIAL MEMBER] Surat, Dated: 11/07/2022 Dkp. Out Sourcing Sr.P.S Copy to: 1. Appellant- 2. Respondent- 3. CIT(A)- 4. CIT 5. DR 6. Guard File True copy/ By order // True Copy // Sr.P.S./Assistant Registrar, ITAT, Surat