Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) Pvt. Ltd
[Citation -2017-LL-0801-17]

Citation 2017-LL-0801-17
Appellant Name Principal Commissioner of Income-tax, Delhi-2
Respondent Name Best Infrastructure (India) Pvt. Ltd.
Court HIGH COURT OF DELHI AT NEW DELHI
Relevant Act Income-tax
Date of Order 01/08/2017
Judgment View Judgment
Keyword Tags search and seizure operation • opportunity to cross-examine • share application money • incriminating material • corroborative evidence • additional evidence • undisclosed income • unexplained credit • documents seized • legal infirmity
Bot Summary: The further statement of Mr. Anu Aggarwal, Director of Best Group, as recorded on 24th October, 2008 reads as under: Q. No. 3 Please provide the details of share premium of various companies of the Best Group of companies for the last 6 year. The assessee has furnished the affidavit of the director of share applicant company, share application form, confirmation from share applicant, certificate of incorporation of the shareholder company and copy, of income tax return of share applicant company. In paragraph 2, it is mentioned that the share applicant company is registered with Registrar of Companies and registration number along with date of registration is also given. The assessee has furnished share application form for which also the address of the share applicant company, number of shares applied for, amount paid by cheque, details of cheque number as well as permanent account number of the company has been given. The confirmation has been filed by the share applicant company giving all necessary particulars and, for ready reference, we reproduce the same herein below: Aries Crafts Private Limited 13/34, W.F.A., IVth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi-110005 To whom it may concern ITA No. 13 of 2017 connected matters Page 30 of 34 Name of the Company: Best City Developers Pvt. Ltd. Number of shares: 15000000 Equity Shares of Rs.1 each at a premium of Rs.9 per share. From the above, it is evident that the share applicant company has given the confirmation on its letter head which gives the complete address of the said company. In the case under consideration before us, the assessee has duly furnished the declaration of the director of the share applicant company, share application form, confirmation and certificate of incorporation from Registrar of Companies as well as income tax return of the share applicant company.


IN HIGH COURT OF DELHI AT NEW DELHI ITA No. 13/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST INFRASTRUCTURE (INDIA) PVT. LTD. ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates ITA No. 11/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST INFRASTRUCTURE (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates ITA No. 12/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST CITY REALTORS (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and ITA No. 13 of 2017 & connected matters Page 1 of 34 Mr. Pranjal Srivastava, Advocates ITA No. 20/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST REALTORS (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates ITA No. 14/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST INFRASTRUCTURE (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No. 15/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST INFRASTRUCTURE (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates ITA No. 13 of 2017 & connected matters Page 2 of 34 + ITA No.16/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST CITY DEVELOPERS INDIA PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No. 17/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel : versus BEST CITY PROJECTS (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No.18/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST CITY PROJECTS (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No. 19/2017 ITA No. 13 of 2017 & connected matters Page 3 of 34 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST CITY REALTORS (INDIA) PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No. 21/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST CITY DEVELOPERS INDIA PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates + ITA No. 22/2017 PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-2 ...Appellant Through: Mr. Rahul Kaushik, Senior Standing Counsel versus BEST REALTORS (INDIA( PVT. LTD ...Respondent Through: Mr. Ved Kumar Jain, Ms. Rano Jain and Mr. Pranjal Srivastava, Advocates ITA No. 13 of 2017 & connected matters Page 4 of 34 CORAM: JUSTICE S. MURALIDHAR JUSTICE PRATHIBA M. SINGH ORDER % 01.08.2017 Dr. S. Muralidhar, J.: 1. These appeals filed by Revenue under Section 260A of Income Tax Act, 1961 ( Act ) are against common order dated 31st May, 2016 passed by Income Tax Appellate Tribunal ( ITAT ) in appeals filed by Assessee for Assessment Years ( AYs ) 2005-06 to 2009-10. Assessees belong to Best Group . Questions of law 2. In three of appeals filed by Revenue i.e. ITA Nos. 11, 12 and 21 of 2017 question of law framed by Court by order dated 21 st March, 2017 reads as under: Did ITAT fall into error in holding that additions made under Section 68 of Income Tax Act, 1961, on account of statements made by assessee's Directors in course of search under Section 132 of Act were not justified? 3. In other appeals, ITA Nos. 13 to 20 and 22 of 2017, question of law framed by this Court by order dated 21st March, 2017 reads as under: Whether having regard to materials seized in course of search under Section 132 and statements made on behalf of assessee, additions made by Assessing Officer under Section 153A, were not justified as held by ITAT? ITA No. 13 of 2017 & connected matters Page 5 of 34 Background facts 4. facts which lead to filing of these appeals are that search took place in case of both Mr. Tarun Goyal as well as Best Group of Companies on 15th September, 2008. During search various loose papers were found. According to Revenue, seized documents were with regard to unaccounted receipts from sale of certain properties and unrecorded expenditure in construction business. 5. In support of its assumption of jurisdiction under Section 153 of Act, Revenue places reliance on statements of Mr. Tarun Goyal and Mr. Anu Aggarwal as recorded on day of search i.e. 15th September 2008 and statements of Mr. Anu Aggarwal and Mr. Harjeet Singh, Directors of Best Group, as recorded on 24th October, 2008. These statements were made under Section 132 (4) of Act. case of Revenue is that for purposes of Section 153A of Act these statements, by themselves, constitute incriminating material. Revenue also places reliance on three documents i.e. A-1, A-4 and A-11. Statement of Tarun Goyal 6. relevant portion of statement of Mr. Tarun Goyal as recorded on 15th September, 2008 during survey/search and relied upon by Revenue reads as under: Q. No.2 Please provide details of your transaction with Best Group of Companies, such as M/s Best Infrastructure (I)(P) Ltd, M/s Best City Projects (I)(P) Ltd., their directors, Sh. Harjeet Singh Arora, Sh. Balvinder Singh, Sh. Anu Aggarwal and other group concern? ITA No. 13 of 2017 & connected matters Page 6 of 34 Ans. Personally, I had made no transactions with Best Group of Companies or their directors. However, certain companies for which I am authorized signatory has made transactions with Best Group of Companies, such as M/s Best Infrastructure (I) (P) Ltd., M/s Best City Projects (I) (P) Ltd., M/s Best City Realtors (I) (P) Ltd. and other group concerns. M/s Best group of companies, through their Directors, Sh. Harjeet Singh Arora had approached us for providing them entry for share capital. They had provided us cash, against which we issued him cheques through companies of which I am authorized signatory. These companies have taken commission of 0.25% for providing them cheque against cash received. We have provided them approx. 8 crores of bogus share capital against which we have received commission income in these companies we are offering this income for taxation, which is over and above normal income earned by me during course of year. At rate of 0.25% of undisclosed income earned by us would tantamount to Rs. 2 lakhs. Q. No.3 Have you provided entries to Best Group of Companies or to their directors also? Ans. companies for which I am authorized signatory have provided entry to Best Group of Companies only and not to their directors. Q. No. 4 Please confirm that regarding your answer to Q.No.2 of this statement you were taken to office of Best Group of Companies at Plot No. H-8, Best Plaza, Netaji Subash Place, Pitampura, New Delhi to confront your statement with them. However they refused any such confrontation or cross examination. Ans. I confirm that I was taken to office of Best Group of Companies for confrontation/cross examination by directors of company however they refused any such cross examination/confrontation regarding transactions mentioned in my answer to Q. No. 2 of this statement. ITA No. 13 of 2017 & connected matters Page 7 of 34 Q. No. 6 Please mention name of companies and bank accounts which are used for purpose of accommodation entries as stated by you in answer to question No. 5. Ans. Though I do not remember exactly name of companies and name of bank accounts which are used for accommodation entry purpose however I confirm that accounts of M/s Max-well Securities (P) Ltd. are mostly used for accommodation entries. Regarding rest of companies and bank accounts used for purpose can be stated by me after going through records, which I will submit later on. Q. No. 7 Please state for last six years what amount of accommodation entries have been given by you through entities controlled by you. Please also give name of beneficiary with corresponding amount and year of transactions. Ans. For last six years total amount of accommodation entries given by me through entities controlled by me is around 30 to 35 crores of rupees. Some of beneficiaries along with approximate value of accommodation entries are given as under;- (i) MTech Developers (P) Ltd. (Delhi Ashram) (ii) Green City Buildtech (P) Ltd. Noida (iii)AMR Infrastructure (P) Ltd. Noida . (iv) Natraj Buildwell (P) Ltd. Mahipalpur, Delhi (v) Best Group of Companies - Pitampura, New Delhi (vi) S.K. Enterprises -Ashok Vihar, New Delhi amount of accommodation transaction are with above mentioned six companies are Rs. 5.0 Cr. Rs. 5.0 Cr, Rs. 3.0 Cr, Rs. 2.0 Cr., Rs. 8.0 Cr. and Rs. 2.0 Crores respectively. same is also represented in table at next page. Regarding other beneficiaries and amount at accommodation entries can ITA No. 13 of 2017 & connected matters Page 8 of 34 only be stated after going through records which I will submit later on. S.No. Name of beneficiary Amount 1 M. Tech Developers (P) Ltd. Rs.5.00 Cr. (Delhi Ashram) 2 Green City Buildtech (P) Ltd. Rs.5.00 Cr. Noida (UP) 3 AMR Infrastructure (P) Ltd. Rs.3.00 Cr. Noida 4 Natraj Buildwell (P) Ltd. Rs.2.00 Cr. Mahipalpur, Delhi. 5 Best Group of Companies Rs.8.00 Cr. Pitampura, New Delhi. 6 S.K. Enterprises-Ashok Vihar, Rs.2.00 Cr. New Delhi 7. following statement of Mr. Tarun Goyal was recorded on 15th September, 2008 under Section 133A: Q. No. 13 (Survey u/s 133A dt 15-09-2008) What do you know about following companies: (a) M/s Aparna Credit (P) Ltd. (b) M/s Bhavani Portfolio (P) Ltd. (c) M/s Compari Fiscal Services (P) Ltd. (d) M/s Sai Baba Finvest (P) Ltd. (e) M/s Tejasvi Investment (P) Ltd. And also explain whether you have any interest in above stated companies and connected in any manner what so ever? Ans. All companies mentioned in question had their registered office in this premises i.e. 13/34, 4th Floor, WEA, Main Arya Samaj Road, Karol Bagh, New Delhi-110005. ITA No. 13 of 2017 & connected matters Page 9 of 34 Statement of Anu Aggarwal 8. As far as Mr. Anu Aggarwal, Director of Best Group, is concerned, questions put to him and answers given by him on 15th September, 2008 read as under: Q.No.11 Please provide details of share capital of various companies of Best group for last six year. Ans. I will be providing these details in due course of time as computer prints is being taken out. Q. No. 12 Please provide details of share premium of various companies of M/s Best Group for last six years. Ans. I will be providing these details in due course of time as computer prints is being taken out. Q. No. 13 Please provide details of secured loans raised by you for your various projects and also give details of security provided against secured loan. Ans. We have taken secured loan of Rs. 16 Cr from Bank of Baroda, Naharpur, Rohini, New Delhi in our company M/s Best City Developers (I) (P) Ltd. against security of our flat no. 14 and No. 26 both situated at Sector-20, Dwarka, New Delhi. Q. No. 14 Please provide details of unsecured loans raised by you for your various projects by your various companies, during last six years. Ans. I am not able to give immediate reply and I could give details of unsecured loan after going through looks of accounts in short time. Q. No. 15 I am showing you Annexure A-I of party BO-1 page No. I to 71, which gives details of cash received for sale of property not reflected in books of accounts, Annexure A-4, ITA No. 13 of 2017 & connected matters Page 10 of 34 pages 1 to 31 and Annexure A-11 pages I to 100 which give details of expenses made for construction work which are also not reflected in books of accounts. You are requested to explain these documents and reconcile them with your regular books of accounts. Ans: I have gone through these documents in Annexure A-l, A- 4 and A-11 and I am unable to explain these documents. We have received cash as Advance for sale of property in certain instances which has not been reflected in our books of accounts. Part of cash received which has not been accounted by us in regular books of accounts has been utilized for making expenses in our construction business. This reflects our unexplained, unaccounted work in progress. This is explanation for seized documents Annexure A-4 and A-11. unaccounted cash reflects are reflected in seized documents Annexure A-I To account for these seized documents and other seized documents which cannot be adequately explain by us, we voluntarily offer sum of Rs. 8 Crores (Rs. Eight Corers) which is over and above normal income earned by us during course of year. This Rs. 8 Crores (Eight Crores) represents our undisclosed income earned during year on accounts of unexplained cash receipts, unexplained work in progress as well as share capital and share premium received This discloser of Rs. Eight Corers which is over and above normal income earned by us during course of year is being made to buy peace of mind, to avoid penalty and prosecution proceedings and also to avoid protected litigation. Q. No. 16 During course of search at your office premises, H-8, 1st floor, Best Plaza, - Netaji Subhash Place, Pitampura, New Delhi cash of Rs.59,96,800/- (Rs Fifty nine lakh Ninety six thousand Eight hundred only) was found, and inventoried, however as per looks of accounts, cash in hand is Rs. 30,01,000/- (Rs. Thirty lakh one thousand only), please explain source of cash. ITA No. 13 of 2017 & connected matters Page 11 of 34 Ans. I am unable to give explanation right now. 9. further statement of Mr. Anu Aggarwal, Director of Best Group, as recorded on 24th October, 2008 reads as under: Q. No. 3 Please provide details of share premium of various companies of Best Group of companies for last 6 year. Ans. required information is being produced/submitted today itself. Q.No.5 During course of search cash of Rs.59,96,800/- was found and as per books total cash in hand was Rs. 30,01,000/-. Please explain difference and give explanation. Ans: cash in question was received from different persons on account of advance on account of sale of properties. As I have already mentioned in my earlier statement dated 15-09- 2008 to question No. 15 where I had clearly mentioned that we have received cash from different persons in lieu of bookings of properties. I may clarify that amount of Rs. 8 crores surrendered at time of search, includes this unexplained cash of Rs. 30 Lacs (Approximately.) Q. No. 6 During course of search on Sh. Tarun Goyal, he has stated in his statement that he has provided you accommodation entries. Please explain same. Ans. I personally do not know Sh. Tarun Goyal, except that he may have invested in our group companies. However we have not received any accommodation entries from anybody. I have already given my statement on 15-09-2008 in which in my answer to question no. 15. I had surrendered total amount of Rs. 8 Cr. on account of unexplained cash received from various bookings in my group companies and unexplained expenses towards work in progress of various projects in those companies and other outgoing. These unexplained receipts and out goings can be correlated and detailed at time of ITA No. 13 of 2017 & connected matters Page 12 of 34 assessment after going through seized material and other available records. Q. No. 7 At time of search on 15-09-2008 to question No. 15, you also confirmed in your answer that this surrender of Rs. 8 Cr. includes receipt of share capital and share premium. Please explain and clarify same. Ans. As explained in answer to question no. 6, utilization of unexplained receipts and its correlation with outgoings can be ascertained after examining seized material and therefore it is difficult to detail if any amount from surrender was utilize towards receipt of any share capital or not. Q. No.8 During course of statement on oath u/s 131(IA) of Sh. Mahesh Garg, who was running two companies namely M/s Dreamland Solutions (P) Ltd. and M/s Meghdoot Express (P) Ltd. having business address at 104, B.D. Chambers, D.B. Gupta Road, New Delhi has stated that he has provided your group accommodation entries. Please explain. Ans. We don't know Sh. Mahesh Garg personally. However, we can't add anything more to our statement given on 15-09-2008 in regard to unexplained receipts and unexplained outgoings and our further answer to question No. 6 & 7 above. Q. No.9 Please give bifurcation of surrendered amount i.e. heads in which you are willing to surrender and companies in which you desire to surrender. Ans. It has already been explained in our answer to question no. 6 that surrendered amount is towards group of companies from unexplained receipts and outgoing there against and we shall be able to provide precise details at time of assessment after examining seized material and other documents in our possession in detail. ITA No. 13 of 2017 & connected matters Page 13 of 34 Statement of Harjeet Singh 10. statement of Mr. Harjeet Singh as recorded on 24th October, 2008 reads as under: Q. No. 3 During course of search on 15-09-2008, you were not present at your premises. You were requested to come and co-operate and you joined your office late night. In your absence, Sh. Anu Aggarwal who is also Director in Best Group of Companies gave his statement. In his statement Sh. Anu Aggarwal had surrendered amount of Rs. 8 Crores on account of undisclosed income earned during year on account of unexplained cash receipts, unexplained work in progress as well as share capital and share premium received. Do you agree with statement given by Sh. Anu Aggarwal? Ans. Yes I agree with statement given by Sh. Anu Aggarwal. He is fully authorized to take decision in best interest of Group. I stand by his statement and promise to pay tax liabilities within time allowed by Department. Assessment Order 11. Although separate assessment orders were passed in respect of each Assessees for AYs in question, illustratively, assessment order dated 30th December, 2010 passed by Assessing Officer ( AO ) in case of Best Infrastructure (India) Pvt. Ltd. For AY 2005-06 is being discussed herein. 12. In above assessment order, AO set out tabulated chart on basis of above statements of Mr Tarun Goyal and Mr Anu Aggarwal and concluded that share premium and share application money was nothing but unexplained credit and accordingly added Rs. 3.60 Crores to assessable income of Assessee under Section 68 of Act. reason ITA No. 13 of 2017 & connected matters Page 14 of 34 given by AO for this addition was that Assessees had failed to give any explanation or furnish any documentary evidence to prove identity of investors and their creditworthiness. They were also unable to prove genuineness of above transactions. It was also noted that Assessees failed to produce persons who purportedly advanced alleged share application money or their bank accounts. 13. In para 5.3 of assessment order, AO noted that Assessee has submitted some evidences in form of affidavit and certificate of incorporation regarding Tarun Goyal Group of Companies, which were examined on test check basis. AO further noted that said affidavits were undated and not countersigned by Notary/Oath Commissioner. These affidavits were on forms that were purchased before date of payment by so called Directors of Tarun Goyal Group of Companies. AO also noted that Mr. Anu Aggarwal in her statement had categorically denied knowing these directors of Tarun Goyal Group of Companies and he went on to state that he is not aware if these Employees/Directors who have signed affidavits have left companies. 14. AO proceeded to also add commission that might have been paid for accommodation entries. It was found that since Assessee company had taken accommodation entries to tune of Rs. 3.60 crores, therefore, by applying rate of commission at rate of 2.25%, it must have paid sum of Rs. 8.10 lakhs out of its undisclosed income. Order of CIT (A) 15. Commissioner of Income Tax (Appeals) [ CIT (A) ] dismissed ITA No. 13 of 2017 & connected matters Page 15 of 34 appeal in case of Best Infrastructure (India) Pvt. Ltd. for AY 2005-06 by order dated 11th November, 2013. ground taken by Assessee that addition was made by AO without any evidence being collected during search and seizure operation under Section 132 of Act, was negatived. CIT (A) also noted that when Mr. Anu Aggarwal, Director of Best Group of Companies, was confronted with those seized documents, he admitted undisclosed income of Rs. 8 crores for entire Group under Section 132 (4) of Act, which, included bogus share capital/ share application money. 16. CIT (A) noted that during search proceedings, Mr. Tarun Goyal had stated under Section 132(4) of Act that he had received cash from Best Group and in return he had given them share capital in form of cheque. It was observed by CIT (A) that evidence does not mean only documentary evidence. Judicially it has been held that statement under Section 132(4) is important evidence collected as result of search and seizure operation. Therefore, I hold that in instant case addition of share capital is based on evidence gathered during search. 17. Reference was made by CIT (A) to decision of this Court in CIT v. Anil Kumar Bhatia (2013) 352 ITR 493 (Del) where it was held that AO had jurisdiction under Section 153A of Act to make assessment for all six years and compute total income of Assessee, including undisclosed income, notwithstanding that Assessee filed returns before date of search which stood processed under Section 143 (1) of Act. Therefore, challenge to assessment orders on ground of ITA No. 13 of 2017 & connected matters Page 16 of 34 erroneous assumption of jurisdiction under Section 153A of Act was negatived by CIT (A). 18. As regards merits of additions made under Section 68 of Act, CIT (A) again referred to statements recorded in course of search and in particular statement of Mr. Anu Aggarwal where he accepted undisclosed income of Rs.8 crores earned during year on account of "unexplained cash receipts, unexplained work-in-progress as well as share capital and share premium received. CIT (A) noted in course of appellate proceedings that authorised representative ( AR ) of Assessee had filed detailed written submissions dated 7th February, 2012 and his arguments were, thus, summarised as under: i) appellant company has placed on record entire evidence and material to discharge burden which lay upon it u/s 68 of I.T. Act. Ne emphasized that following evidences were filed in support of genuineness of share capital. a) PAN of shareholder. b) Name, address and confirmation of shareholder. c) Each shareholder is corporate entity, i.e. identity of shareholder is not doubtful. d) Payment is through banking channels. ii) As result of search and seizure operation u/s 132 no cash or loose papers were even found to allege, assume or conclude that, share capital received represented undisclosed income of appellant company. iii) In paper book, Ld. AR has filed copy of form no. 2 filed by appellant company before registrar of company showing allotment of shares. iv) Ld. AR has relied upon following judicial ITA No. 13 of 2017 & connected matters Page 17 of 34 pronouncement that under these circumstances, section 68 cannot be invoked. a) CIT v. Stellar Investment Ltd. 192 ITR 287. b) Sophia Finance Ltd. 205 ITR 98 (FB) (Del). c) CIT v. Divine Leasing and Finance Ltd 299 ITR 268(Del.) d) CIT v. Lovely Exports (P) Ltd. 319 ITR5 (ST) 19. Assessee also raised point that statement of Mr. Tarun Goyal had been recorded behind back of Assessee and in absence of cross-examination such evidence was of no evidentiary value. It was further specifically pointed out that statement of Shri Tarun Goyal has not been provided to Appellant company. Further, Director of Appellant company denied that Mr. Goyal was brought before them, face to face, for purpose of his cross-examination. It was denied that any entry had been received from Mr. Goyal or Mr. Mahesh Garg and merely because share holders had common addresses, it does not become ground to hold that share capital was unexplained under Section 68 of Act. In support of this proposition, reliance was placed on decision of this Court in CIT v. Victor Electrodes Ltd. (2012) 329 ITR 271 (Del). 20. request was made by Assessee during appellate proceedings before CIT (A) for admission of additional evidence in form of bank statements of share holders. This application was forwarded by CIT (A) to AO who by his letter dated 25 th October, 2012 opposed to admission of additional evidence. Even then, CIT (A) admitted additional evidence and directed AO to conduct enquiry. In pursuance to which, AO by letters dated 10th July and 19th August, 2013, submitted remand report. AO stated that summons under Section 131 were ITA No. 13 of 2017 & connected matters Page 18 of 34 issued to Mr. Goyal but he did not appear. Then AO requested Mr. Harjeet Singh and Mr. Anu Aggarwal to produce Mr. Tarun Goyal to which they replied that they do not presently know whereabouts of Mr. Tarun Goyal. AO maintained that during entire course of assessment proceedings, Directors of Best Group had never demanded to cross- examine Mr. Goyal. 21. CIT (A) had further noted submission of learned counsel for Assessee that Mr. Tarun Goyal had later retracted his statement made under Section 132 (4) of Act on 10th October and 4th November, 2008 and stating that they had been taken under coercion. CIT (A) relied on disclosure of Mr. Anu Aggarwal offering Rs. 8 crores to tax during search proceedings. Reference was made to Annexure A-1 and A-11 which contained details of unaccounted cash received and expenses which had not been entered in books of accounts. Reference was also made to statements of Mr. Harjeet Singh and Mr. Tarun Goyal. version of AO that till 15th October, 2008 Mr. Anu Aggarwal kept quiet and did not ask for copy of statement of Mr. Goyal or seek his cross-examination was accepted by CIT (A). Consequently, additions made by AO were sustained. Appeals before ITAT 22. As already noted that separate assessment orders and separate corresponding orders were passed in appeal by CIT (A) in respect of each of Assessees forming part of Best Group. further appeals ITA No. 13 of 2017 & connected matters Page 19 of 34 filed by Assessees before ITAT against orders of CIT (A) for AYs 2005-06 to 2009-10 were consolidated, heard together and disposed of by way of common impugned order by ITAT on 31st May, 2016. 23. Two issues were raised by Assessees, in all these appeals, for consideration of ITAT. 24. In three of these appeals, first issue was raised before ITAT regarding addition made under Section 68 of Act, wherein, ITAT on merits found additions made to be unjustified. Against judgment concerning these three matters, Revenue has filed ITA Nos. 11, 12 and 21 of 2017. 25. other issue that arose before ITAT was whether assumption of jurisdiction under Section 153A of Act, qua each of Assessees, was justified in law. ITAT held this issue in favour of Assessee, therefore, Revenue has challenged same by filing remaining appeals, i.e., ITA Nos.13 to 20 and 22 of 2017. Here, ITAT had held that there was no incriminating material for each of AYs other than year of search, i.e., AY 2008-09 to justify assumption of jurisdiction under Section 153A of Act. Submissions of counsel for Revenue 26. Mr. Rahul Kaushik, learned Senior Standing counsel for Revenue, has submitted that statement of Mr. Tarun Goyal remained unrebutted as Assessees never sought to cross-examine him. Secondly, statement of Mr. Anu Aggarwal surrendering Rs.8 crore in course of search and ITA No. 13 of 2017 & connected matters Page 20 of 34 also his admission of receiving accommodation entries was itself incriminating material for purposes of assumption of jurisdiction under Section 153A of Act. In support of his contention, learned counsel for Revenue placed considerable reliance on decision of this Court in Smt. Dayawanti Gupta v. CIT (2016) 390 ITR 496 (Del) and sought to distinguish judgment of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (2016) 380 ITR 573 (Del). He submitted that apart from above, documents A-1, A-4 and A-11 that were seized during search, also constituted incriminating material. According to him, there was no requirement that incriminating material qua each of AYs, for which addition was made, needed to exist. He relied upon observations of this Court in decision in CIT v. Anil Kumar Bhatia (supra). He also sought to distinguish recent decision of this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia 2017 (295) CTR 466 (Del). 27. As regards additions made on merits under Section 68 of Act, Mr. Kaushik again took this Court through materials and submitted that deletion made by ITAT, of additions which had been made by AO which were further confirmed by CIT (A), was not called for in facts and circumstances of case. Submissions of counsel for Assessee 28. Supporting order under appeal, Mr. Ved Kumar Jain, learned counsel appearing for Assessee, submitted that surrender of Rs. 8 crores made by Mr. Anu Aggarwal was only vis-a-vis year of search and not ITA No. 13 of 2017 & connected matters Page 21 of 34 other years. Even for year of search, additions under Section 68 of Act were found to be unjustified by ITAT. He pointed out that ITAT had examined thoroughly entire evidence and returned factual finding which has not been assailed on ground of perversity. 29. Mr. Jain submitted that as far as assumption of jurisdiction was concerned, so-called documents seized were only loose sheets. These were confronted to Mr Anu Aggarwal who categorically stated: I am unable to explain these documents. We have received cash as advance for sale of property in certain instances which has not been reflected in our books of accounts. Part of cash received which has not been accounted by us in regular books of accounts has been utilizedfor making expenses in our construction business. This reflects our unexplained, unaccounted work in progress. 30. Mr. Jain placed reliance on decision of this Court in Commissioner of Income Tax v. Harjeev Aggarwal (2016) 290 CTR 263 and submitted that mere statements made during course of search, under Section 132 (4) of Act, cannot be considered to be incriminating material. He submitted that decision in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) has considered legal position after analysing entire case law and, therefore, decision in Smt. Dayawanti Gupta v. CIT (supra) would not come to aid of Revenue in present case. He pointed out that apart from fact that Mr. Tarun Goyal had later retracted his statement, it was plain that even copy of statement of Mr. Tarun Goyal was not provided. Further, Mr. Tarun Goyal could not be produced for cross-examination, therefore, no reliance could be placed on his statement. ITA No. 13 of 2017 & connected matters Page 22 of 34 Analysis and reasons 31. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra), this Court had considered entire gamut of case law on assumption of jurisdiction under Section 153A of Act. In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) this Court had occasion to extensively discuss decision in Smt. Dayawanti Gupta v. CIT (supra) to point out why said decision was distinguishable in its application to facts of former case. However, since same arguments have been advanced by Revenue in present case, said decision in Smt. Dayawanti Gupta v. CIT (supra) is being again discussed herein. 32. In Smt. Dayawanti Gupta v. CIT (supra) Assessees were dealing in business of pan masala, gutkha, etc. Firstly, Assessees therein were, by their own admission not maintaining regular books of accounts. Secondly, they also admitted that papers recovered during search contained details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside books of accounts and they were actually unaccounted transactions made by two of firms of Assessees. Thirdly, Court found as matter of fact that Assessees were habitually concealing income and that they were indulging in clandestine operations and that such persons can hardly be expected to maintain meticulous books or records for long. As pointed out by this Court in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra) ITA No. 13 of 2017 & connected matters Page 23 of 34 decision in Smt. Dayawanti Gupta v. CIT (supra), therefore, turned on its own facts and did not dilute law explained in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra). 33. At this stage, it requires to be noticed that decision of this Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) took note inter alia of decision of Bombay High Court in Commissioner of Income Tax v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78 (Bom), wherein it was held that if no incriminating material was found during course of search, in respect of each issue, then no addition in respect of any such issue can be made to assessment under Sections 153A and 153C of Act. decisions of this Court in CIT v. Anil Kumar Bhatia (supra) and CIT v. Chetan Das Lachman Das [2012] 254 CTR 392 (Del) were extensively discussed in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra). Court in Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) had also discussed and concurred with decision of Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (2013) 36 Taxman 523 (Raj) which had held that assessment in respect of each of six assessment years, preceding year of search is separate and distinct assessment. It was further held in said decision that If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of Act and earlier assessment shall have to be reiterated. ITA No. 13 of 2017 & connected matters Page 24 of 34 34. In Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) legal position was summarised thus: 37. On conspectus of Section 153A (1) of Act, read with provisos thereto, and in light of law explained in aforementioned decisions, legal position that emerges is as under: i. Once search takes place under Section 132 of Act, notice under Section 153 (1) will have to be mandatorily issued to person searched requiring him to file returns for six AYs immediately preceding previous year relevant to AY in which search takes place. ii. Assessments and reassessments pending on date of search shall abate. total income for such AYs will have to be computed by AOs as fresh exercise. iii. AO will exercise normal assessment powers in respect of six years previous to relevant AY in which search takes place. AO has power to assess and reassess 'total income' of the. aforementioned six years in separate assessment orders for each of six years. In other words there will be only one assessment order in respect of each of six AYs "in which both disclosed and undisclosed income would be brought to tax". iv. Although Section 153 does not say that additions should be strictly made on basis of evidence found in course of search, or other post-search material or information available with AO which can be related to evidence found, it does not mean that assessment "can be arbitrary or made without any relevance or nexus with seized material. Obviously assessment has to be made under this Section only on basis of seized material. v. In absence of any incriminating material, completed assessment can be reiterated and abated assessment or ITA No. 13 of 2017 & connected matters Page 25 of 34 reassessment can be made. word 'assess' in Section 153 is relatable to abated proceedings (i.e. those pending on date of search) and word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, jurisdiction to make original assessment and assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on basis of findings of search and any other material existing or brought on record of AO. vii. Completed assessments can be interfered with by AO while making assessment under Section 153 only on basis of some incriminating material unearthed during course of search or requisition of documents or undisclosed income or property discovered in course of search which were not produced or not already disclosed or made known in course of original assessment. 35. As noted in Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta Gutgutia (supra), several other High Courts have also come to similar conclusion either by following Commissioner of Income Tax (Central-III) v. Kabul Chawla (supra) or otherwise. This includes decisions of Gujarat High Court in Principal Commissioner of Income Tax v. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj); Principal Commissioner of Income Tax-1 v. Devangi alias Rupa 2017-TIOL-319- HC-AHM-IT; Karnataka High Court in CIT v. IBC Knowledge Park Pvt. Ltd. (2016) 385 ITR 346 (Kar); Kolkata High Court in Pr. CIT-2 v. Salasar Stock Broking Ltd. 2016-TIOL-2099-HC-KOL-IT and Bombay High Court in CIT v. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom). In Principal Commissioner of Income Tax Central-2, New Delhi v. Meeta ITA No. 13 of 2017 & connected matters Page 26 of 34 Gutgutia (supra) entire gamut of case law had been analysed and legal position was reiterated that unless there is incriminating material qua each of AYs in which additions are sought to be made, pursuant to search and seizure operation, assumption of jurisdiction under Section 153A of Act would be vitiated in law. This is one more occasion for Court to reiterate that legal position. 36. Turning to facts of present case, it requires to be noted that statements of Mr. Anu Aggarwal, portions of which have been extracted hereinbefore, make it plain that surrender of sum of Rs. 8 crores was only for AY in question and not for each of six AYs preceding year of search. Secondly, when Mr. Anu Aggarwal was confronted with A- 1, A-4 and A-11 he explained that these documents did not pertain to any undisclosed income and had, in fact been accounted for. Even these, therefore, could not be said to be incriminating material qua each of preceding AYs. 37. Fourthly, copy of statement of Mr. Tarun Goyal, recorded under Section 132 (4) of Act, was not provided to Assessees. Mr. Tarun Goyal was also not offered for cross-examination. remand report of AO before CIT(A) unmistakably showed that attempts by AO, in ensuring presence of Mr. Tarun Goyal for cross-examination by Assessees, did not succeed. onus of ensuring presence of Mr. Tarun Goyal, whom Assessees clearly stated that they did not know, could not have been shifted to Assessees. onus was on Revenue to ensure his presence. Apart from fact that Mr. Tarun Goyal has ITA No. 13 of 2017 & connected matters Page 27 of 34 retracted his statement, fact that he was not produced for cross- examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of Act of Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, facts in present case are different from facts in Smt. Dayawanti Gupta v. CIT (supra) where admission by Assessees themselves on critical aspects, of failure to maintain accounts and admission that seized documents reflected transactions of unaccounted sales and purchases, is non-existent in present case. In said case, there was factual finding to effect that Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission. 39. For all aforementioned reasons, Court is of view that ITAT was fully justified in concluding that assumption of jurisdiction under Section 153A of Act qua Assessees herein was not justified in law. 40. Turning to additions under Section 68 of Act made on merits for three of AYs. perusal of common impugned order of ITAT reveals that very detailed discussion has been undertaken after analysing seized material. Para 38 of impugned order is relevant in this context which reads as under: ITA No. 13 of 2017 & connected matters Page 28 of 34 38. Before learned CIT (A), assessee has produced copy of bank account of all share applicant companies. CIT (A) has admitted same as, additional evidence and has called for remand report from Assessing Officer. There is no cash deposit in bank account of any of share applicant before issue of cheque for share application money to group companies of assessee. On other hand, credit is by way of transaction. During remand proceedings, Assessing Officer has made necessary verification from bank of share applicant and no adverse finding is recorded by him in remand report. Therefore, facts on record are contrary to allegation of Revenue that assessee gave cash to Shri Tarun Goyal and he, after depositing same in bank account of various companies, issued cheques for share application money. On these facts, decision of Hon'ble Jurisdictional High Court in case of Harjeev Aggarwal (supra) would be squarely applicable. Therefore, we hold that statement of Shri Tarun Goyal cannot be used against assessee because: (i) His statement was recorded behind back of assessee and assessee was not allowed any opportunity to cross-examine him. (ii) There is no corroborative evidence in support of statement of Shri Tarun Goyal. On other hand, material found during course of search and other evidences placed on record by assessee are contrary to allegation made by Shri Tarun Goyal in his statement. 41. Court has not been persuaded to hold that above finding of ITAT on legal position regarding Revenue being disabled from relying on statement of Mr. Tarun Goyal suffers from any perversity. Further ITAT has in impugned order in paras 45 and 46 observed as under: ITA No. 13 of 2017 & connected matters Page 29 of 34 45. Now, we come back to facts of assessee's case in respect of share application money received. assessee has furnished affidavit of director of share applicant company, share application form, confirmation from share applicant, certificate of incorporation of shareholder company and copy, of income tax return of share applicant company. Assessing Officer has disputed validity of affidavit on ground that affidavit is not certified by notary and stamp paper for purchase of affidavit is dated prior to application made for share application money. On verification of copy of affidavit which is placed at pages 48 & 49 of assessee s paper book, we find that affidavit is not made in presence of notary public and, therefore, it cannot be considered as affidavit in legal sense. Nevertheless, it remains self-declaration by director of share applicant company in which he has confirmed that company has applied to M/s Best City Developers (India) Private Limited for 15 lakhs equity shares for which payment of Rs.1,50,00,000/- has been made by cheque. detail of cheque number and name of bank have also been provided. In paragraph 3, permanent account number of share applicant company has also been provided. In paragraph 2, it is mentioned that share applicant company is registered with Registrar of Companies and registration number along with date of registration is also given. assessee has furnished share application form for which also address of share applicant company, number of shares applied for, amount paid by cheque, details of cheque number as well as permanent account number of company has been given. confirmation has been filed by share applicant company giving all necessary particulars and, for ready reference, we reproduce same herein below: Aries Crafts Private Limited 13/34, W.F.A., IVth Floor, Main Arya Samaj Road, Karol Bagh, New Delhi-110005 To whom it may concern ITA No. 13 of 2017 & connected matters Page 30 of 34 Name of Company: Best City Developers (India) Pvt. Ltd. Number of shares: 15000000 Equity Shares of Rs.1 each at premium of Rs.9 per share. Amount invested: Rs.150,00,000/- Rupee One Crore Fifty Lac Only. Details of Payment as under: _____________________________________________________________ Chq. No. Date Amount (Rs.) Bank Branch _____________________________________________________________ 474604 15.03.2008 100,00,000 HDFC Bank Ltd. New Delhi 474615 25.03.2008 50,00,000 HDFC Bank Ltd. New Delhi Total 150,00,000 Bank Account No.: 003142340000152 Bank Particulars: HDFC Bank Limited Ansari Road, Darya Ganj, New Delhi - 110 002 Source of funds: Out of sale of shares Occupation: Business Income Tax PAN Number: AADCA5439P Ward 1(3), New Delhi. Share Certificates Received: Yes We do hereby confirm that information furnished above is correct. For Aries Crafts Private Limited Sd/- Authorised Signatory 46. From above, it is evident that share applicant company has given confirmation on its letter head which gives complete address of said company. In confirmation, number of shares applied and amount invested has been given. Details of payments i.e., cheque number, date of cheque and name of bank on whom cheque is drawn is given. Address of bank and bank account number has also been given, source of fund is given as well as permanent account number of company is also given. ITA No. 13 of 2017 & connected matters Page 31 of 34 42. Thereafter ITAT held in para 48 as under: 48. .....In case under consideration before us, assessee has duly furnished declaration of director of share applicant company, share application form, confirmation and certificate of incorporation from Registrar of Companies as well as income tax return of share applicant company. Assessing Officer did not make any verification from those documents. In this case, he even did not issue any summons to director of share applicant company neither made any cross verification from income tax record of share applicant company whose permanent account number was furnished before him. Assessing Officer simply rejected evidences furnished by assessee. Hon'ble Jurisdictional High Court in case of Gangeshwari Metal Pvt. Ltd. (supra) has disapproved action of Assessing Officer wherein Assessing Officer sits back with folded hands till assessee exhausts all evidence or material in his possession and then comes forward to merely reject same on presumptions. facts in assessee s case are identical to facts before Hon ble Jurisdictional High Court in case of Gangeshwari Metal Pvt. Ltd. (supra). In case under appeal before us also, Assessing Officer simply sits back till assessee submitted all evidences and thereafter rejected those evidences on basis of presumption and suspicion. He did not make any enquiry, he did not issue any summons to share applicant company, he did not try to verify from record of share applicant company who are all assessed to income tax. In view of above, respectfully following decision of Hon'ble Apex Court in case of Orissa Corporation P. Ltd. (supra) and of Hon'ble Jurisdictional High Court in case of Rakam Money Matters Pvt. Ltd. (supra), Victor Electrodes Ltd. (supra), Fair Finvest Ltd. (supra) and Gangeshwari Metal Pvt. Ltd. (supra), we hold that assessee has duly discharged onus which lay upon it to prove credit in form of share capital. Accordingly, addition made for unexplained share capital is deleted. ITA No. 13 of 2017 & connected matters Page 32 of 34 43. With Assessees discharging burden placed on them to explain credit appearing in books of accounts, Court is satisfied that even on this aspect impugned order of ITAT suffers from no legal infirmity warranting interference. Conclusion 44. Accordingly question framed by Court in ITA Nos. 11, 12 and 21 of 2017 by order dated 21st March, 2017 is answered in negative i.e. in favour of Assessee and against Revenue by holding that additions made under Section 68 of Act on account of statements made by Assessee's Directors in course of search under Section 132 of Act were rightly deleted by ITAT. 45. question framed in ITA Nos. 13 to 20 and 22 of 2017 by order dated 21st March, 2017 is answered in affirmative i.e. in favour of Assessee and against Revenue by holding that having regard to materials seized in course of search under Section 132 and statements made on behalf of Assessee, assumption of jurisdiction under Section 153 of Act and consequent additions made by AO were not justified. 46. Consequently, appeals of Revenue are dismissed but in circumstances, with no orders as to costs. CM 831/2017 in ITA 11/2017;CM 834/2017 in ITA 12/2017 CM 836/2017 in ITA 13/2017; CM 839/2017 in ITA 14/2017 CM 842/2017 in ITA 15/2017; CM 845/2017 in ITA 16/2017 ITA No. 13 of 2017 & connected matters Page 33 of 34 CM 848/2017 in ITA 17/2017; CM 851/2017 in ITA 18/2017 CM 854/2017 in ITA 19/2017; CM 857/2017 in ITA 20/2017 CM 865/2017 in ITA 21/2017; CM 862/2017 in ITA 22/2017 47. For reasons stated in applications, delay in filing appeals is condoned. applications are, accordingly, disposed of. S. MURALIDHAR, J. PRATHIBA M. SINGH, J. AUGUST 01, 2017 dn/b nesh ITA No. 13 of 2017 & connected matters Page 34 of 34 Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) Pvt. Ltd
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