ACIT, Central Circle 9, New Delhi v. M/s. Vidhya Shankar Investment Pvt. Ltd
[Citation -2016-LL-0928-115]

Citation 2016-LL-0928-115
Appellant Name ACIT, Central Circle 9, New Delhi
Respondent Name M/s. Vidhya Shankar Investment Pvt. Ltd.
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 28/09/2016
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags search and seizure operation • share application money • confirmation letter • unaccounted income • undisclosed income • satisfaction note • unexplained cash • valuable article • audited accounts • documents seized • seized material • onus to prove • sale of share • share capital • book value
Bot Summary: The Commissioner of Income Tax erred in law and on facts in deleting the addition of Rs.4,78,21,800/- made by the AO by treating the bogus share application money and share premium as unexplained cash credit. The Commissioner of Income Tax erred in law and on facts in deleting the addition of Rs.7,75,00,000/- made by the AO by treating the bogus share application money and share premium as unexplained cash credit. The Commissioner of Income Tax erred in law and on facts in deleting the addition of Rs.9,73,37,500/- made by the AO by treating the bogus share application money and share premium as unexplained cash credit. AO also noticed that all the purchases of the shares of M/s. Jagat Group are connected and controlled by owner of M/s. Jagat Group, Shri Satish Kumar Pawa and Shri Sant Lal Agrawal and it has come on record that shares of assessee company were sold by M/s. Jagat Group at the price of Rs.3.5 per share against the face value of Rs.10 and book value of Rs.90.25 per share which shows that the assessee company is a main company to introduce undisclosed income of M/s. Jagat Group under the garb of share capital and share premium routed through various companies mentioned in the detailed assessment order. Its accounts are not in dispute, because from the return filed by the assessee on 23.03.2009 qua AY 2008-09 and return filed by assessee on 04.09.2007 qua 2007-08, treated u/s 153C, it is clear that share capital amounting to Rs.77,50,000/- and share premium of Rs.6,97,50,000/- for AY 2007-08, share capital amounting to Rs.47,90,000/- and share premium of Rs.4,30,31,800/- for AY 13 ITA Nos.6569 to 6571/Del./2013 2008-09 and Rs.97,40,000/- and share premium of Rs.8,75,97,500/- for AY 2009-10 tallied with Documents-II having been declared by the assessee even prior to the search and seizure operation. Undisputedly, the assessee company has supplied confirmation letter from the share applicants; copies of bank accounts of a day or week of the share applicants; copy of acknowledgement of ITRs and copy of balance sheets etc. The assessee company has duly discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants who have subscribed to the shares during the years under assessment, u/s 68 of the Act, the assessee company cannot be faulted merely on the basis of conjectures and surmises particularly in the absence of any cogent material.


IN INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT and SHRI KULDIP SINGH, JUDICIAL MEMBER ITA No.6569/Del./2013 (ASSESSMENT YEAR : 2007-08) ITA No.6570/Del./2013 (ASSESSMENT YEAR : 2008-09) ITA No.6571/Del./2013 (ASSESSMENT YEAR : 2009-10) ACIT, Central Circle 9, vs. M/s. Vidhya Shankar Investment Pvt. Ltd., New Delhi. 402, Amber Tower, Naniwala Bagh, Azadpur, Delhi 110 033. (PAN : AAACV4336K) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Aggarwal, Advocate and Shri Shailesh Gupta, CA REVENUE BY : Ms. Poramita Tripathy, CIT DR Date of Hearing : 07.09.2016 Date of Order : 28.09.2016 ORDER PER KULDIP SINGH, JUDICIAL MEMBER : Since identical question of fact and law have been raised in aforesaid appeals, same are being disposed off by way of consolidated order to avoid repetition of discussion. 2 ITA Nos.6569 to 6571/Del./2013 2. Appellant, Assistant Commissioner of Income-tax, Central Circle 9, New Delhi (hereinafter referred to as revenue ) by filing present appeals sought to set aside impugned orders dated 30.09.2013 passed by Commissioner of Income-tax (Appeals)-XXXII, New Delhi qua assessment years 2007-08, 2008-09 and 2009-10 on grounds inter alia that :- AY 2007-08 1. Commissioner of Income Tax (Appeals) erred in law and on facts in deleting addition of Rs.4,78,21,800/- made by AO by treating bogus share application money and share premium as unexplained cash credit. 2. (a) order of CIT (A) is erroneous and not tenable in law and on facts. (b) appellants craves leave to add, alter or amend any/all of grounds of appeal before or during course of hearing of appeal. AY 2008-09 1. Commissioner of Income Tax (Appeals) erred in law and on facts in deleting addition of Rs.7,75,00,000/- made by AO by treating bogus share application money and share premium as unexplained cash credit. 2. (a) order of CIT (A) is erroneous and not tenable in law and on facts. (b) appellants craves leave to add, alter or amend any/all of grounds of appeal before or during course of hearing of appeal. AY 2009-10 1. Commissioner of Income Tax (Appeals) erred in law and on facts in deleting addition of Rs.9,73,37,500/- made by AO by treating bogus share application money and share premium as unexplained cash credit. 3 ITA Nos.6569 to 6571/Del./2013 2. (a) order of CIT (A) is erroneous and not tenable in law and on facts. (b) appellants craves leave to add, alter or amend any/all of grounds of appeal before or during course of hearing of appeal. 2. Briefly stated facts necessary for adjudication of controversy at hand in these appeals are : during search and seizure operation under section 132/133A of Income-tax Act, 1961 (for short Act ) conducted on 14.09.2010 at business and residential premises of M/s. Jagat Agto Commodities Pvt. Ltd., 802, Amba Deep Building, K.G. Marg, New Delhi, numerous documents were recovered containing balance sheet and trial balance of M/s. Vidhya Shankar Investments Pvt. Ltd. (assessee) for period 01.04.2010 to 04.09.2010 belonging to assessee company. After recording satisfaction note u/s 153C, notices were issued for Assessment Years 2005-06 to 2010-11 on 13.02.2013 to which assessee raised objections vide letter dated 21.02.2013 inter alia that documents do not belong to assessee company. Assessee opted to treat return filed u/s 139(1) as reply to notice issued u/s 153C. Then, assessee was served with notice u/s 143 (2) and 142 (1) and in response thereto, Shri Ravinder Goel, CA/AR put in appearance, filed necessary details and explanation. 4 ITA Nos.6569 to 6571/Del./2013 3. From documents seized during search and seizure operation form M/s. Jagat Group and S.K. Jain Group, it was noticed that Shri S.K. Jain Group was indulged into providing entries under garb of share capital etc. through its sham companies and M/s. Jagat Group was found to rerouting its unrecorded and unaccounted income by way of taking entries of loan and share capital from such sham companies. Revenue also noticed that Shri Satish Pawa and Shri Sant Lal Agrawal, head of M/s. Jagat Group have acquired/purchased various such companies having huge net worth by purchasing their shares at very low prices in name of their family members or their employees and assessee company is also one of such company. 4. During year under assessment i.e. 2007-08, assessee company had received share capital of Rs.47,90,000/- and share premium of Rs.4,30,31,800/- from 32 investors; for AY 2008-09, assessee company had received share capital of Rs.77,50,000/- and share premium of Rs.6,97,50,000/- from 29 investors; for AY 2009-10, assessee company had received share capital of Rs.97,40,000/- and share premium of Rs.8,75,97,500/- from 26 investors; assessee company filed necessary documents which AO has not found to be genuine; AO also came to conclusion that these documents do not prove capacity of investors to 5 ITA Nos.6569 to 6571/Del./2013 provide share capital/share premium allegedly invested by them and companies are appearing not into any business and having income to make such investment. 5. AO also noticed that all purchases of shares of M/s. Jagat Group are connected and controlled by owner of M/s. Jagat Group, Shri Satish Kumar Pawa and Shri Sant Lal Agrawal and it has come on record that shares of assessee company were sold by M/s. Jagat Group at price of Rs.3.5 per share against face value of Rs.10 and book value of Rs.90.25 per share which shows that assessee company is main company to introduce undisclosed income of M/s. Jagat Group under garb of share capital and share premium routed through various companies mentioned in detailed assessment order. AO also noticed that sale of share @ Rs.3.50 per share as against book value of share of assessee company at Rs.90.25 per share makes entire transaction doubtful. Therefore, how M/s. Jagat Group purchased entire company for consideration of Rs.87,44,750/- when in month of transfer, share capital and reserve and surplus of assessee company were Rs.22,54,99,727/-. AO also noticed that so called invoices have merely sold their investment at throw away prices inspite of fact that there was no business exigency or market factors to sell their investment at throw away prices. AO 6 ITA Nos.6569 to 6571/Del./2013 treated same as accommodation entries and thereby treated same as unexplained cash u/s 68 of Act by making addition to tune of Rs.4,78,21,800/- (Rs.47,90,000/- + Rs.4,30,31,800/-) qua AY 2007-08; Rs.7,75,00,000/- (Rs.77,50,000/- + Rs.6,97,50,000/-) qua AY 2008-09; and Rs.9,73,37,500/- (Rs.97,40,000/- + Rs.8,75,97,500/-) qua AY 2009-10. 6. Assessee carried matter before ld. CIT (A) by way of filing appeals who has allowed all appeals qua AYs 2007- 08, 2008-09 and 2009-10 vide impugned orders. Feeling aggrieved, assessee has come up before Tribunal by way of filing present appeals. 7. We have heard ld. Authorized Representatives of parties to appeal, gone through documents relied upon and orders passed by revenue authorities below in light of facts and circumstances of case. 8. ld. DR for revenue challenging impugned orders contended inter alia that ld. CIT (A) has erred in law as well as on facts that AO has no jurisdiction u/s 153C of Act; that AO issued notice u/s 153C after recording satisfaction note on basis of incriminating material against assessee company seized during search and seizure operation on M/s. Jagat Group of companies and relied upon orders passed by AO. 7 ITA Nos.6569 to 6571/Del./2013 9. However, on other hand, ld. AR for assessee to repel contentions raised by ld. DR contended inter alia that AO has no jurisdiction in this case to make assessment u/s 153C as documents seized pertains to period 01.04.2010 to 04.09.2010 and not qua assessment years under consideration; that income-tax return of all entities/invoices treated as in- genuine invoices by AO have been confirmed by AO; that only list of shareholders were seized which does not find mention in satisfaction note. 10. Undisputed facts necessary to adjudicate upon controversy at hand are inter alia that search and seizure operation was conducted at business and residential premises of M/s. Jagat Group on 14.09.2010 and numerous documents were seized; that balance sheet and trail balance of M/s. Vidhya Shankar Investments Pt. Ltd., assessee company, pertaining to period 01.04.2010 to 04.09.2010 were seized; that assessee had filed return u/s 139 (1) declaring income at Rs.17,466/- on 04.09.2007 qua AY 2007-08; at Rs.14,410/- on 23.03.2009 qua AY 2008-09; and at Rs.16,120/- on 10.10.2009 qua AY 2009-10. 11. In backdrop of aforesaid undisputed facts and circumstances of case, first question arises for determination in this case is :- 8 ITA Nos.6569 to 6571/Del./2013 as to whether AO who has recorded satisfaction that documents relate to assessee company, that is other than searched person, had jurisdiction to pass assessment order in question? 12. Identical issue has come up before Hon ble jurisdictional High Court in case entitled as SSP Aviation Ltd. vs. DCIT (2012) 346 ITR 177 (Delhi). ratio of judgment in SSP Aviation Ltd. (supra) is that AO who has recorded satisfaction qua documents seized during search and seizure operation pertaining to some third party i.e. other than searched person has no power except to forward documents to AO having jurisdiction over said third person. ratio of judgment in SSP Aviation Ltd. (supra) is applicable to facts and circumstance of case wherein AO who has passed impugned assessment order, set aside by ld. CIT (A), after recording his satisfaction u/s 153C, has no jurisdiction whatsoever. He was merely empowered to forward seized document pertaining to assessee to concerned AO having jurisdiction over assessee company. 13. For ready perusal, operative part of judgment in SSP Aviation Ltd. (supra) is reproduced as under :- Section 153C of Income-tax Act, 1961, merely enables Revenue authorities to investigate into contents of document seized, which belongs to 9 ITA Nos.6569 to 6571/Del./2013 person other than person searched so that it can be ascertained whether transaction or income embedded in document has been accounted for in case of appropriate person. It is aimed at ensuring that income does not escape assessment in hands of any other person merely because he has not been searched under section 132 of Act. It is only first step to enquiry, which is to follow. Assessing Officer who has reached satisfaction that document relates to person other than searched person can do nothing except to forward document to Assessing Officer having jurisdiction over other person and thereafter it is for Assessing Officer having jurisdiction over other person to follow procedure prescribed by section 153A in attempt to ensure that income reflected by document has been accounted for by such other person. It will be seen that whereas section 158BD refers to satisfaction of Assessing Officer that any "undisclosed income" belongs to any person other than searched person, section 153C(1) in contrast refers merely to satisfaction of Assessing Officer that valuable article or books of account or document "belongs" to person other than searched person. latter provision does not refer to any undisclosed income at all. machinery provided in section 153C read with section 153A merely facilitates enquiry regarding existence or otherwise of undisclosed income in hands of person other than searched person. starting point of enquiry is seizure of valuable article or books of account or document, which according to satisfaction reached by Assessing Officer, belongs to person other than searched person. At time when Assessing Officer having jurisdiction over searched person reaches satisfaction that document belongs to person other than searched person, it is not necessary for him to also reach firm conclusion/opinion that document shows undisclosed income belonging to such other person. This is matter for enquiry, which is to be conducted in manner prescribed by section 153C. fact that procedure envisaged by section 153C is somewhat cumbersome and that person other than 10 ITA Nos.6569 to 6571/Del./2013 searched person is put to some inconvenience cannot be argument to hold that entire proceedings are bad in law. There can be some inconveniences in case where income had already been disclosed by other person who has not been searched. However, there is no cause for any apprehension that income-tax authorities will exploit situation to harass assessee where there is evidence adduced by them to and establish that income reflected by valuable article or books of account or document seized during search has already been disclosed by them. Even if they tend to act unreasonably or under misplaced enthusiasm, there are adequate safeguards which can be availed of by those persons. 14. Not only this, revenue vide its circular no.24/2015 dated 31.12.2015 further clarified position as to mandatorily recording of satisfaction for purpose of section 158BD/153C as under :- CIRCULAR NO.24/2015 [F.NO.279/MISC./140/2015/ ITJ], DATED 31-12-2015 issue of recording of satisfaction for purposes of section 158BD/153C has been subject matter of litigation. 2. Hon'ble Supreme Court in case of M/s Calcutta Knitwears in its detailed judgment in Civil Appeal No. 3958 of 2014 dated 12-3-2014 [2014] 43 taxmann.com 446 (SC) (available in NJRS at 2014-LL- 0312-51) has laid down that for purpose of section 158BD of Act, recording of satisfaction note is prerequisite and satisfaction note must be prepared by AO before he transmits record to other AO who has jurisdiction over such other person U/S 158BD. Hon'ble Court held that "the satisfaction note could be prepared at any of following stages: 11 ITA Nos.6569 to 6571/Del./2013 (a) at time of or along with initiation of proceedings against searched person under section 158BC of Act; or (b) in course of assessment proceedings under section l58BC of Act; or (c) immediately after assessment proceedings are completed under section 158BC of Act of searched person." 3. Several High Courts have held that provisions of section 153C of Act are substantially similar/pari- materia to provisions of section 158BD of Act and therefore, above guidelines of Hon'ble SC, apply to proceedings U/S 153C of IT Act, for purposes of assessment of income of other than searched person. This view has been accepted by CBDT. 4. guidelines of Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to notice of all for strict compliance. It is further clarified that even if AO of searched person and "other person" is one and same, then also he is required to record his satisfaction as has been held by Courts. 5. In view of above, filing of appeals on issue of recording of satisfaction note should also be decided in light of above judgment. Accordingly, Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BDI153C should be withdrawn/not pressed if it does not meet guidelines laid down by Apex Court. 15. Bare perusal of circular (supra) goes to prove that in cases at hand, satisfaction u/s 153C has been recorded during search and seizure operation by AO having no jurisdiction over assessee company whereas it was required to be recorded by 12 ITA Nos.6569 to 6571/Del./2013 AO, having jurisdiction which is missing in this case as such assessment u/s 143 (3) read with section 153C is not sustainable as has been rightly held by ld. CIT (A). Moreover, no document belonging to assessee company was found from premises of M/s. Jagat Group. 16. When undisputedly satisfaction note pertaining to documents available at pages 85 to 87 of A-2 found and seized from residential premises of Shri Satish Kumar Pawa has not been recorded, assessment order is not sustainable. Moreover, AO has not enquired into aforesaid documents by putting enquiries to assessee. 17. AO also proceeded on premise that it is beyond comprehension to believe that share having face value of Rs.10 has been sold for Rs.3.50 per share but has not preferred to bring on record any material that aforesaid invoices are concerned/ connected with assessee company. Moreover, its accounts are not in dispute, because from return filed by assessee on 23.03.2009 qua AY 2008-09 and return filed by assessee on 04.09.2007 qua 2007-08, treated u/s 153C, it is clear that share capital amounting to Rs.77,50,000/- and share premium of Rs.6,97,50,000/- for AY 2007-08, share capital amounting to Rs.47,90,000/- and share premium of Rs.4,30,31,800/- for AY 13 ITA Nos.6569 to 6571/Del./2013 2008-09 and Rs.97,40,000/- and share premium of Rs.8,75,97,500/- for AY 2009-10 tallied with Documents-II having been declared by assessee even prior to search and seizure operation. 18. Even otherwise, AO has not conducted investigation/inquiry regarding transactions in question on basis of which addition has been made nor documents relied upon have ever been put to assessee nor same have even figured in satisfaction note. 19. Now, next question arises for determination in this case is:- as to whether CIT (A) has erred in facts and law in deleting addition of Rs.4,78,21,800/- qua AY 2007-08, Rs.7,75,00,000/- qua AY 2008-09 and Rs.9,73,37,500/- qua AY 2009-10, by treating bogus share application money / share premium as unexplained cash credit? 20. Undisputedly, assessee company has supplied confirmation letter from share applicants; copies of bank accounts of day or week of share applicants; copy of acknowledgement of ITRs and copy of balance sheets etc. for scrutiny by AO, which AO has declared ingenuine on basis of conjectures and surmises inter alia that these documents do not prove capacity of these persons to give share capital/ share premium for investment; that these companies appear to be 14 ITA Nos.6569 to 6571/Del./2013 not doing any business and drawing such income to justify their investment; and that most of investors sold their shares to person connected or controlled by Shri Sant Lal Agrawal and Shri Satish Kumar Pawa at price of 1/4th of face value of share. 21. When undisputedly AO has perused relevant details pertaining to share capital / share premium qua year under assessments as furnished by assessee company and has not minced word to question validity of those documents nor AO has given any findings regarding summons issued u/s 131 of Act for personal deposition and furnishing of details by investors in assessee company. Even no statement of these investors was recorded by AO. 22. So, when all shareholders appear before AO and filed confirmations, bank statements, copy of ITRs for AY 2007-08 to 2011-12, copy of PAN, name of directors, copy of audited accounts, etc. to establish investment made by them in assessee s company, their identity cannot be questioned on basis of conjectures and surmises. In absence of any adverse material on record that cash receipt/deposits were noticed in bank accounts of these companies in question, capacity of these investors cannot be questioned. Moreover, assessee company 15 ITA Nos.6569 to 6571/Del./2013 has received subscription of these shareholders through banking transactions. 23. So, assessee company has duly discharged its onus to prove identity, creditworthiness and genuineness of share applicants who have subscribed to shares during years under assessment, u/s 68 of Act, assessee company cannot be faulted merely on basis of conjectures and surmises particularly in absence of any cogent material. 24. Moreover, documents i.e. balance sheets and trial balance seized from premises of M/s. Jagat Group pertains to period 01.04.2010 to 04.09.2010, hence not relevant for years under assessment. To apply provisions contained u/s 153C, seized material is required to be of relevant assessment year. 25. In view of what has been discussed above, we find no illegality or perversity in findings returned by ld. CIT (A). Consequently, appeals under consideration are hereby dismissed. Order pronounced in open court on this day 28th of September, 2016. Sd/- sd/- (G.D. AGRAWAL) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 28th day of September, 2016 TS 16 ITA Nos.6569 to 6571/Del./2013 Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A)-XXXII, New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI. ACIT, Central Circle 9, New Delhi v. M/s. Vidhya Shankar Investment Pvt. Ltd
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