The ACIT, Central Circle-3, Vadodara V. M/s. Blackberry Ventures Pvt. Ltd., Vadodara

ITSSA 85/AHD/2021

AI Insights

The case involves multiple appeals by the Revenue against the order of the CIT(A) which deleted additions made by the Assessing Officer (AO) under section 68 of the Income Tax Act, 1961. The appeals pertain to the assessment years 2011-12, 2014-15, and 2015-16, following a search and seizure operation under section 132 of the Act. The primary legal issue was whether additions could be made under section 153A in the absence of incriminating material for unabated assessment years. The Tribunal found that the CIT(A) correctly applied the law as no incriminating material was found during the search that could justify the additions made by the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135657 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 25-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-03-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 10-06-2021
• Other Referred Cases: CIT Vs Anil Kumar Bhatia [211 Taxman 453, 352 ITR (493)], E.N. Gopakumar vs. Commissioner of Income-tax (Central) [2016] 75 Taxmann.com 215 (ker.), Mahalaxmi Sugar Mills, 160 ITR 920(SC), Saumya Construction (P.) Ltd, PCIT Vs. Meeta Gutgutia [96 taxmann.com 468], CIT Vs. Shalimar Buildwell Pvt. Ltd. (2014)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Income from undisclosed sources; Search and seizure
• Section: 68; 132; 143(3); 153A; 133(6); 43

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’C” BENCH, AHMEDABAD SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER आयकर अपील सं./IT(SS)A Nos. 84,85 &161/AHD/2021 िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष /Asstt. Years: 2011-12 & 2014-2015 to 2015-16 ACIT Central Circle-3, Vadodara Vs. M/s. Blackberry Ventures Pvt. Ltd. 11/C, Jaishri Narayan Co- Operative Hsg. Society, Subhanpura, Vadodara-390015 PAN: AAECB3532B (Applicant) (Respondent) Revenue by : Shri A.P. Singh, CIT. D.R Assessee by : Shri C.A. Jigar Adhyaru, A.R. सुनवाई क तारीख/Date of Hearing : 22/03/2023 घोषणा क तारीख /Date of Pronouncement : 26/04/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned three appeals have been filed at the instance of the Revenue against the common order of the Learned Commissioner of Income Tax (Appeals)- 12, Ahmedabad, dated 09/03/2021 arising in the matter of assessment order passed under s. 153A r.w.s. 143(3) & 143(3) of the Income Tax Act, 1961 (here- in-after referred to as "the Act") relevant to the Assessment Years 2011-12 & 2014-15 to 2015-16. First, we take up ITA No. 84/AHD/2021, an appeal by the Revenue for the AY 2011-12 2. The Revenue has raised following grounds of appeal: ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 2 “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 during the assessment 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 sec. 153A requires a notice to be issued requiring the assessee to furnish his return of income in respect 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 to naught 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 that while computation of undisclosed income of the block period u/s.158BB was to be made on the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation hi sec.!53A and sec.l53Bl specifically states that the provisions of Chapter-XIV-B, under which sec. 158BB falls, would not be applied where a search was initiated u/s.132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that assessment in relation to certain issues not related to the search and seizure may arise in any of the said six assessment years after the search u/s. 132 is conducted in the case of the assessee, and that if the interpretation of the Id. CIT(A) were to hold it will not be possible to assess such income in the 153A proceedings, while no other parallel proceedings to assess such other income can be initiated, leading to no possibility of assessing such other income, which could not have been the intention of the legislature. Further, the AO is duty bound to assess correct income of assessee as held by the Hon'ble Apex Court in the case of Mahalaxmi Sugar Mills, 160 ITR 920(SC). 5. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the decisions of Hon'ble Delhi High court in the case of CIT Vs Anil Kumar Bhatia [211 Taxman 453, 352 ITR (493)] & Kerala High Court in the case of E.N, Gopakumar vs. Commissioner of Income-tax (Central) [2016] 75 Taxmann.com 215 (ker.) wherein Courts held that assessments in a search case can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 of the Act. 6. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that the statement given by Shri Anish Kumar Joshi that the assessee company was a bogus and paper company, was illogical and should not have been relied upon by the Assessing Officer being the statement given by a third party, ignoring the fact that he was one of the Directors of the company and was a responsible person for the affairs of the company. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that Shri PankajAgarwal, an entry operator in Kolkatta in his statement on oath admitted that he operates various paper companies including the assessee for providing accommodation and the assessee has also failed to prove the genuineness of the share capital and share premium received by it and the creditworthiness of the persons from whom it was claimed to have received. 8. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in not appreciating the fact that the companies who have made investments in the assessee- ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 3 company were having weak financials and the high premium paid by them for purchase of shares of another such company shows that the transactions were not genuine and they lack creditworthiness. 9. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting entire addition of Rs.40,16,29,000/- made on account of unexplained investment under Section 68 of the Income-tax Act. 10. It is, therefore, prayed that the order the Ld. CIT(A)-12, Ahmedabad may be set aside and that of the AO may be restored to the above extent. 11. The appellant craves leave to add, alter, amend and/or withdraw any ground(s) of appeal either before or during the course of hearing of the appeal.” 3. The effective issue raised by the Revenue vide ground Nos. 1 to 5 of its appeal is that the learned CIT(A) erred in holding that in the assessment proceeding under section 153A of the Act addition can only be made based on incriminating materials found from the premises of the assessee. 4. The facts in brief are that the assessee is a private limited company and has not carried out any business activity during the year under consideration. There was a search and seizure action under section 132 of the Act carried out in the case of the assessee dated 12 th February 2015. Accordingly, the proceedings under section 153A of the Act were initiated vide notice dated 05-01-2016. The assessee before the AO objected on the initiation of proceedings under section 153A of the Act on the ground that no incriminating material was discovered during the search action. Furthermore, the regular assessment under section 143(3) of the Act for the year under consideration was already completed. 5. The objection of the assessee was rejected by the AO by holding that once search action under section 132 of the Act has been carried out, then the proceedings under section 153A of the Act have to be initiated for six assessment years immediately preceding the relevant assessment year in which the search was conducted and accordingly the assessment is to be completed as per the provision of the Act. Finally, the AO completed the assessment under section 153A r.w.s. 143(3) of the Act by treating the credit of share capital and premium ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 4 thereon for Rs. 40,16,29,000/- as income of the assessee under section 68 of the Act. 6. The aggrieved assessee preferred an appeal before the learned CIT(A). 6.1 The assessee before the learned CIT(A) reiterated that the year under consideration is unabated/completed assessment year where regular assessment under section 143(3) of the Act has already been completed vide order dated 29 th January 2014. During the regular assessment under section 143(3) of the Act, the question was raised about the credit of share capital at premium. The required details were duly submitted during the assessment under section 143(3) of the Act. The AO also cross examined the details furnished by the assessee by issuing notices under section 133(6) of the Act to the share subscribers. The AO, after due verification, did not find any infirmity in the transaction of issue of share capital at premium. During the search, no material of an incriminating nature was found by the search team. Therefore, no addition can be made in the year under consideration being unabated assessment years in the absence of incriminating materials. 6.2 The learned CIT(A) after considering the facts in totality concurred with the contention of the assessee by holding that no assessment can be made in the case of unabated assessment year in the absence of incriminating material. The relevant finding of the learned CIT(A) is extracted as under: “5.19 It is an undisputed fact that on the date of initiation of the search no assessment proceedings were pending in this assessment year. Therefore, the proceedings were not abated in the case as mentioned in the second proviso to section 153A (1) of the Act. It seems that the AO lost sight of the fact that he was not making an assessment under section 153A (1) of the Act read with its second proviso. As discussed hereinabove, there is no indication in the contents of the assessment order that the addition was made on the basis of any incriminating material found and seized in search. 5.20 In view of the aforesaid findings and respectfully following the judgments/decisions of Jurisdictional High Court, Jurisdictional Tribunal and other Courts, wherein it has been held that in absence of incriminating material / evidence, addition / disallowance cannot be sustained within the pale of section 153A of the Act. In my considered opinion, the action of the AO for making addition of the share capital and premium treating the same as unexplained u/s.68 of IT Act is not justified and the same is ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 5 deleted as not tenable in the eyes of law. Accordingly, the addition made in assessment , completed u/s. 153A is deleted.” 7. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 8. The learned DR before us filed a paper book running from pages 1 to 75 and reiterated the findings contained in the assessment order. 9. On the other hand, the learned AR before us filed the Written Submission running from pages 1 to 8 and reiterated the findings contained in the appellate order. 10. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, there was search action under section 132 of the Act dated 12 th February 2015 (i.e. during the financial year 2014-15 corresponding to A.Y. 2015-16) carried out in the case of the assessee and in consequence to the same, the proceedings under section 153A of the Act were initiated for the year under consideration i.e. A.Y. 2011-12 being the year/period falling under block of six assessment years preceding to the A.Y. in which the search was conducted. The assessment under section 153A r.w.s. section 143(3) of the Act for the year under consideration was framed after making addition of Rs. 40,16,29,000/- being bogus accommodation entry in the form of share capital issued at premium. On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO by observing that there was no material of incriminating nature found during the search at the premises of the assessee. Therefore, the year under consideration being unabated/completed assessment year, no addition should be made in absence of any incriminating material. The learned DR before us vehemently argued that there is no provision under section 153A/153C which restrict the assessment or reassessment in case of search to the extent of incriminating materials only. ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 6 10.1 About the fact that no addition can be made in the absence of incriminating material in unabated assessment year, we find that it has been settled by various Hon’ble Courts including Hon’ble Jurisdictional High Court that the completed/ unabated assessments cannot be disturbed in the absence of any incriminating materials/ documents whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in Section 153A/153C 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 reported in 81 taxmann.com 292 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 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 on hand, we note that year under consideration is unabated as the assessment under section 143(3) of the Act was completed before the date of search. The AO in the assessment order while making the addition in the hands of assessee has nowhere referred any material of incriminating nature found from the premises of assessee about the credit of share capital along with premium which would have made basis for the addition in the assessment. We also find that during the regular assessment proceeding under section 143(3) of the Act, the question was raised regarding the credit of share capital and premium which, the assessee duly explained. The AO also cross verified the same from the share subscribers by issuing notices under section 133(6) of the Act and thereafter, the AO accepted the genuineness of the credit of share capital and premium. In our considered view, once the revenue authority accepted the genuineness of any transaction in the regular assessment after due verification, then the same cannot be disturbed in the proceedings under section 153A unless and until some incriminating material was unearthed during ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 7 the search proceeding. The learned CIT(A), in this regard, has given unambiguous finding that no material of incriminating nature was found or referred by the AO for making the assessment under section 153A r.w.s. 143(3) of the Act. 10.2 At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A) suggesting that the addition was made based on incriminating material found from the premises of the assessee. Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts in the absence of incriminating material/information found from the premises of the assessee. 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.” 10.3 We also draw support and guidance from the judgment of Hon’ble Supreme Court in case of PCIT Vs. Meeta Gutgutia reported in 96 taxmann.com 468 where the SLP filed by the Revenue was dismissed. The headnote of the judgment reads as under: I. Section 153A of the Income-tax Act, 1961 - Search and seizure (General principles) - Assessment years 2001-02 to 2003-04 and 2004-05 - High Court in impugned order held that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year - Whether SLP against said decision was to be dismissed - Held, yes [Para 2] [In favour of assessee] 10.4 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 ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 8 case. Accordingly, we do not find any infirmity in the finding of the learned CIT (A). Hence the ground of appeal of the Revenue is hereby dismissed. 10.5 Since we have decided the issue on technical ground, we do not find necessary to give finding on the merit of the issue since all the other issue raised by the Revenue on merit become infructuous. Thus, the other grounds of appeal of the Revenue are also dismissed accordingly. 11. In the result, the appeal of the Revenue is dismissed. Coming to IT(SS)A NO. 85 & 161/AHD/2021 appeal by the Revenue for A.Y. 2014-15 and 2015-16 12. The issue involved in both the assessment years i.e. A.Y. 2014-15 and 2015-16 are interconnected. Therefore, we have clubbed both the appeals together for the sake of brevity and proceed to adjudicate the issue on the facts pertaining to A.Y. 2014-15 but the finding will be applicable for both the assessment years. 13. The only issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO under section 68 of the Act on account of amount credited on sale of investment. 14. The facts in brief are that the AO during the assessment proceedings found that the assessee company is a paper company which was floated in Kolkata by entry operator namely Pankaj Aggarwal. The assessee was not doing any business and not found existing on the registered address of Kolkata. During the A.Y. 2011- 12, it issued/allotted 1,58,57,900 shares and collected fund of Rs. 40,16,29,000/- in the following manner: S.No. Particular No of share Face value Premium Total 1. 2 Directors 1,00,000 Rs. 1 - Rs. 1,00,000/- 2. Merit Sales Pvt Ltd 1,50,00,000 Rs. 1 - Rs. 1,50,00,000/- ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 9 3. 10 Different Pvt companies 7,57,900 Rs. 1 Rs. 509/- Rs. 38,65,29,000/- Total 1,58,57,900 Rs. 40,16,29,000/- 14.1 The above proceeds from share allotments were utilised for making investment amounting to Rs. 40,08,81,000/- in the shares of different private limited companies which only operates on papers. The AO also found that in the investment made by the assessee company, there was no actual transfer of fund but only the rotation of the fund. Furthermore, the assessee company sold its investment in the years under consideration i.e. A.Y. 2014-15 and in A.Y. 2015-16 for Rs. 21.70 cores and Rs. 18.12 crores respectively aggregating to Rs. 39,82,31,000/- only to provide exit to the companies based in Kolkata. The above proceeds were transferred to the Cube Group of companies of Shri Sanjai Shah and Smt. Bindiya Shah as unsecured loan. Shri Sanjai Shah and Smt. Bindiya Shah hold 100% share of Merit Sales Pvt Ltd. which is majority shareholder (94.6%) of Assessee Company. Likewise, Merit Sales Pvt Ltd. also exists only on paper. It is because, it was not found existing at the registered address during the survey proceeding undertaken on the Merit Sales Pvt. Thus, Shri Sanjai Shah and Smt. Bindiya Shah held indirect control over the assessee company. 15. The AO also found that cash was deposited in the bank of certain individuals which layered into bank account of exit entry providers (who purchased assessee investment) which intern transferred the fund to the assessee bank being sale proceeds on so called sale of investments. The assessee finally layered the amount into the cube group of companies in the guise of unsecured loan. 15.1 The AO in view of the above facts believed the amount credited for Rs. 21.7 crores and Rs. 18.12 crores in the A.Y. 2014-15 and 2015-16 respectively on account of so-called sale of investment and finally layered into the cube group of companies was nothing but unaccounted income of cube group. Hence, the AO to safeguard the interest of revenue made protective addition in the hand of the assessee by holding that the substantive addition needs to be made in the hand of cube group of companies in which amount was finally layered. ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 10 16. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO. The relevant finding of the learned CIT(A) extracted as under: “6.9. It is also worth noting that, the A.O. has considered the appellant company BVPL as paper company, inspite of the fact that, the Income Tax Department of Kolkata, itself has conducted assessment proceeding of the said company for A.Y. 2011-12 and concluded the assessment u/s. 143(3) of the Act. During the course of assessment proceedings, the Income Tax Officer, Ward-11(3), Kolkata had issued notices on BVPL, the notices were served and the submissions were also made. Also, as stated earlier, the company BVPL had raised share capital in A.Y. 2011-12 by issuing shares at premium. The Income Tax Officer, Ward-11(3), Kolkata, for the sake of cross examination, had issued notice u/s. 133(6) of the Act to all the subscribers of shares. All the notices were served and duly responded. No discrepancy was found by the Income Tax Officer, Ward-11(3), Kolkata in respect of the share capital raised by BVPL. 6.10 From the above facts it is amply clear that the presumption made by the A.O. is totally groundless and merely based on the statement of a third Party, Mr. Pankaj Agarwal. 6.11 Here it is also worth noting that based on statement of some third party, the A.O., not only have presumed that the appellant company is a Paper company, but all those companies who have purchased the investments of appellant company are also paper companies. However, it is important to mention here that no incriminating documents were found during the course of search proceeding which substantiate the contention of the A.O. No iota of evidence was produced by the AO that proves that all the companies who had purchased the investment of the appellant company were paper companies. 6.12 Instead of placing any concrete evidence, the AO has tried to establish nexus between the cube group of companies and the creditors of creditor of appellant company. It was presumed by the AO that the money transferred by the purchasers of investments, in the accounts of BVPL, is nothing but the unaccounted income of cube group of companies which has been brought back in form of unsecured loan in their books of accounts through the appellant company. 6.13 It was observed by the A.U. that a company, Bigbull Goods Pvt. Ltd. (hereafter referred as BGPL) had purchased investment of Rs.1,40,00,000/- from the appellant company in F.Y. 2013-14. The said company has paid Rs. 50 Lacs to the appellant company on 17.02.2014. The A.O. has found that there were certain credit entries in the bank account of BGPL before making the payment to appellant company. On further investigation it was allegedly found that BGPL had taken transfer of funds from persons who had deposited cash in their bank account. 6.14 Here the A.O. has presumed that the cash deposited in bank accounts of such parties is unaccounted money of cube group of companies and same was brought back in their books of account in form of unsecured loan through the appellant company. In this regard appellant submitted that the assumption made by the A.O. is totally baseless. It is mere an imagination of the A.O. and not the fact. No incriminating documents have been found in possession of the Cube Group of companies suggesting any such cash introduction. There was never any introduction of unaccounted money by the Cube Group of companies in any of these transactions. The fact that cube group of companies have received unsecured loan from these companies should not give rise to presumption that Cube Group had introduced cash in lieu of the unsecured ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 11 6.15 Moreover, it is most respectfully submitted that the money involved in the whole transaction is of around Rs.40 crore (sales of investment worth Rs.21.7 crore and Rs.18.13 crore} and it is presumed by the A.O. that cash of such huge amount is deposited to the bank accounts of different companies having their offices based in Kolkata and other regions of the country and the same money had been brought back in the books of cube group of company in form of unsecured loans through the appellant company. Here, the A.O. had not produced any probatory evidence on record proving such an allegation. 6.16 Furthermore, one cannot presume that the appellant company would be having specific knowledge about how the purchaser companies have arranged the funds for the purchase of investments. There were around 31 companies in F.Y. 2013-14 and 17 companies in F.Y.2014-15 who had purchased the investment of appellant company and there would be many business transactions undertaken by the purchasers of investment of appellant company with their creditors for arranging such funds. How can the appellant would have specific knowledge of such creditors?. Further, the AO could not have established any nexus between the appellant company and the different creditors of purchaser companies by producing any convincing evidences. The A.O. had stated that the cash is deposited in the bank account of such creditors of purchaser of Investment of appellant company. If the A.O. had found such transaction as doubtful then the addition should have been made in the hands of the creditors and not in the case of the appellant. The appellant company cannot be made liable to explain the source of such credits entries in the books of third parties which are totally unknown to the appellant. 6.17 Additionally, it is also to be noted that the AO could not produce any cogent evidence in support of his contentions that the purchaser entities of the investments of appellant company were paper companies. The A.O. has merely relied on the statement of any third party. It is worth noting that AO had the bank statement of some of the parties who had purchased the investment of the appellant company, which apparently confirms that the purchasers companies were well in existence and were carrying some sort of business. The movement of the funds from the bank accounts of the purchaser companies to the appellant company is fully established from the said bank account. Moreover, the purchases and sale of shares by the appellant company has never been doubted by the AO which was supported with documents and evidences. There is no adverse finding of the AO on such purchases and sales of shares. It is also submitted that when the A.O. was not satisfied regarding the genuineness of the impugned transaction, he should have called for further information u/s. 133(6) of the Act from the purchaser companies. In this regard, the AO has not brought any adverse facts on record I through inquiry, if any, carried out in the assessment proceedings. 6.18 It is also noticed that, if the assessing officer was not satisfied regarding how the purchaser companies of investments have arranged the funds then the addition should have been made in the hands of the purchasers of investments and not in the case of the appellant company. The appellant company cannot be made liable to explain the source of such credits entries. Also, it is worth noting that it is not the first time the appellant company has sold its investments. In the normal course of business, earlier also, it has sold investments in F.Y. 2011-12 based on its business policy. At that time the AO has not raised any dispute regarding sale of investments. The sale of investment by the appellant company was accepted by the AO. Then how the AO can make addition in later years for the same type of transaction considering it as unexplained without placing any corroborative evidence on j record. It is needless to mention here that the A.O. has merely based on the \ statement of a third party made addition in the case of appellant company without producing any documentary evidence on record. ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 12 6.19 If the cash has been deposited in the bank account of creditors of creditors of appellant company, the addition could have been made in the case of such creditors in whose bank accounts cash has been deposited and not in the case of appellant company. 6.20 It is also observed by the AO that the purchaser companies of whom the appellant had submitted copy of Income Tax return and bank statements have shown losses in their returns and regular balances are also less than Rs. 1 lakh whereas investments in shares by these companies are in crores. In this regard, it is respectfully submitted that the source of investment is not necessarily the income or the bank' balance but the investment may be purchased by taking substantial loans. It is further observed by A.O. on perusal of the bank statements, that the amount is credited on the same day or day before the fund is debited to purchase the shares and most of the parties are having address of Kolkata only where the entry providers have their network of bogus companies. In this regard, it has been submitted that there is no bar on getting the loan/fund on the same day or on the day before. Therefore nothing should be presumed or suspected against the appellant on this basis. Also there were no incriminating documents found during the course of search proceedings substantiating the contention of the A.O. 6.21 The Hon'ble Allahabad High Court has held in case of CIT Vs. Shalimar Buildwell Pvt. Ltd. (2014) that money could not be unexplained if it passes through proper banking channels. It is clarified that where the assessee received amount of unsecured loan through banking channels and credit worthiness and the identity of donors/creditors had been proved, such money could not be treated as unexplained. 6.22 It has also been submitted that the appellant has raised in total Rs.40,16,29,000/- as share capital. It is worthwhile to mention here that, on the basis of statement of Mr. Pankaj Agarwal, the AO has made addition of Rs. 40,16,29,000/- in A.Y. 2011-12, treating the share capital and share premium as unexplained cash credit u/s. 68 of the Act. It is important to mention here that the funds raised through share capital were invested in the shares of different companies. Appellant company had sold such investments in A.Y. 2014- 15 and A.Y, 2015-16 for Rs.21,70,00,000/- and Rs.18,12,31,000/- respectively. The A.O. has made addition of the share capital in A.Y. 2011-12 when the funds were raised and also in A.Y. 2014-15 and A.Y. 2015-16 when the investments were sold. By this way, the AO has erred in making addition of the same money twice. Here, once the addition is made in the case of appellant company by A.O., treating the share application money as unexplained cash credit u/s.68 of the Act, in A.Y. 2011-12, then it is not justified to tax the same money again in A.Y. 2014-15 and A.Y. 2015-16. 6.23 In instant case, the addition is already made by the A.O. in A.Y. 2011-12 in case of the appellant company on account of share application money treating the same as unexplained income of the appellant company and therefore the addition should not be made again at the time of sale of investment by the appellant company or on lending money in form of unsecured loan to cube group of companies from such sales proceeds. Addition cannot be made on both source and its application. 6.24 Also, from the sale proceeds of the investments sold, the appellant company has advanced unsecured loans to cube group of companies. And the AO has made addition in the hands of borrowers of unsecured loans also. By this way, the AO erred in making addition of the same amount at multiple times. Therefore, addition of Rs. 21.7 crore and Rs.18.13 crore received by the appellant company as sale proceeds of investment is not tenable in the eyes of law and needs to be deleted as a whole.” ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 13 17. Being aggrieved by the order of the learned CIT(A), the Revenue is in appeal before us. 18. The learned DR before us filed a paper book running from pages 1 to 90 and reiterated the findings contained in the assessment order. 19. On the other hand, the learned AR before us filed the Written Submission running from pages 1 to 4 and reiterated the findings contained in the appellate order. 20. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the respondent assessee during the AY 2011-12 collected fund of Rs. 40,16,29,000/- on issue of shares at premium out which an amount of 40,08,81,000/- was subsequently invested in shares of certain private limited companies. During the years under consideration i.e. A.Y. 2014-15 and 2015-16, the assessee sold its investment for Rs. 21.70 crores and Rs. 18.12 crores respectively and entire sale proceeds was transferred to the Cube-group of companies based in Broda owned by Shri Sanjai Shah and Smt. Bindiya Shah who also hold indirect control over the assessee company. The AO held that the amount received by the assessee company on the sale of investment is nothing but the unaccounted money of Cube-Group which layered back to them in the form of unsecured loan. Accordingly, the protective assessment was made in the hands of assessee company for A.Y. 2014-15 and 2015-16 on account of receipt of sale proceeds of investments amounting to Rs. 21.70 crores and Rs. 18.12 crores respectively. On appeal by the assessee, the learned CIT(A) was pleased to delete the addition made by the AO. 20.1 At the outset, we note that the concept of protective assessment is not defined in the provisions of the Act. However, the same has been used by the revenue authority as a precautionary tool where it is established that some income ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 14 has been accrued or arisen, but the AO is not sure who is liable to pay tax on such income. The AO may proceed to assess such income on protective and substantive basis. The Hon’ble Supreme court in the case of Lalji Haridas vs. ITO reported in [1961] 43 ITR 387 has defined the concept of protective assessment as under: “In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B.” 20.2 The objective of the protective assessment is that in case substantive assessment made in the hand of other person is not sustained, then tax shall be collected from the person in whose hand protective assessment has been made. The protective assessment will come to an end, the moment substantive addition is confirmed. However, the concept of protective or substantive assessment only be applied where it is established beyond doubt that some income has been accrued or arisen in a particular assessment year but there is some uncertainty about the person who is liable to tax. In other words, this concept cannot be applied in cases where it cannot be established beyond that the income has accrued or arisen. In holding so, we draw support and guidance from the order of the co-ordinate bench of this tribunal in the case of ITO ward 10(1) Ahmedabad vs. Ketan B Thakkar HUF reported in [2015] 61 taxmann.com 18 wherein it was held as under: “The protective assessment of an income can be made where, in the opinion of the Assessing Officer, an income has definitely arisen in a particular assessment year but there is any doubt about the entity in whose income is to be brought to tax. In the light of this legal position, when court revert to the facts of the present case, the court find that even income having arisen is not free from doubt since the Assessing Officer himself is not sure about the embezzlement having actually taken place. In the course of assessment of 'V', it is an admitted position that the Assessing Officer has disallowed the embezzlement loss and is in appeal against such a disallowance. When the fact of embezzlement is not accepted by the Assessing Officer, there cannot be any occasion to make substantive assessment and protective assessment in respect of such an embezzlement income. The question of protective assessment of such an income in the hands of the assessee, on protective basis, could have arisen in a situation in which, for example, the Assessing Officer was to come to a conclusion that embezzlement in has taken place but he was not sure as to who has done the embezzlement. Of course, even this proceeds on the assumption that an amount embezzled by the assessee form his employer, even if that be so, would constitute his income notwithstanding the fact that, in such a situation, the fact ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 15 of unlawful gains are coupled with corresponding obligation to return the same to its rightful owner. [Para 12]” 20.3 Coming to the facts of the case to hand, the AO based on the statement one Shri Pankaj Aggarwal held that the assessee company is a paper company. There was no nexus whatsoever established between assessee company and Pankaj Aggarwal neither his statement provided to the assessee for rebuttal, nor the cross examination was provided. Likewise, the AO also held the companies in which the assessee company made investment and the companies to whom assessee company sold its investment as paper company without assigning any cogent reason or material facts/evidence. The AO in his finding discussed the trail of fund in case of one company namely M/s Bignull Goods Pvt Ltd (BGPL) to whom assessee company sold its investment for Rs. 1.4 crore in the A.Y. 2015-16. The AO found that just before making payment to the assessee company the bank of BGPL was credited for same amount from different persons in whose bank account cash was deposited. Accordingly, the AO presumed the cash deposits in the bank account of the person who transferred fund to BGPL are unaccounted cash of Cube-Group of companies without establishing nexus between those person and cube-group. The AO further presumed the entire sale proceeds on investment which received from more than 30 different companies as unaccounted money of cube group. It is settled position of law that the no income can be assessed based on presumption, surmise, and conjecture whatsoever strong it is. In the case on hand, the entire basis of AO treating the sale proceeds as unaccounted money of cube group are based on presumption and surmises. 20.4 Further, the AO lost the sight to the fact that the assessee company was having fund in the form of share capital and premium which was invested in the shares of different companies and finally the investment was sold, and the amount was lent to the cube group as loan. Thus, the origin of funds in dispute starts when the assessee company issued shares in the A.Y. 2011-12. Therefore, any action or doubt can only be raised at origin i.e. in A.Y. 2011-12. However, we note that the AO has made the addition of the credit of share capital along with ITA nos.84,85&161/AHD/2021 A.Ys. 2011-12, 2014 to 2015-16 16 premium in the A.Y. 2011-12 which has been deleted by us on technical ground vide paragraph no. 10.4 of this order. In our considered opinion, the same amount cannot be added again in the year under consideration in the hands of the assessee company. In view of the above and considering the facts and circumstances on record, we do not find any reason to interfere in the finding of the learned CIT(A). Hence, the grounds of appeal of the Revenue for both the assessment years viz 2014-15 and 2015-16 are hereby dismissed. 21. In the result, both the appeals of the Revenue are hereby dismissed. 22. In the combined results, all the appeals filed by the Revenue are dismissed. Order pronounced in the Court on 26/04/2023 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 26/04/2023 Tanmay/Manish