Central)-2 v. M/S Jpm Tools Ltd

$~43 & 45 to 53 IN THE HIGH COURT OF DELHI AT NEW DELHI 43 +ITA 358/2022 & CM APPL. 42277/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... AppellantThrough:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JPM TOOLS LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 45 +ITA 360/2022 & CM APPL. 42279/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JAY FE CYLINDER LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. ITA Nos.358-368/2022 Page 1 of 13 46 +ITA 361/2022 & CM APPL. 42280/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JAY IRON AND STEEL LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 47 +ITA 362/2022 & CM APPL. 42281/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate.versus M/S JPM TOOLS LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 48 +ITA 363/2022 & CM APPL. 42285/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. ITA Nos.358-368/2022 Page 2 of 13 versus M/S JAY AUTO COMPONENTS LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 49 +ITA 364/2022 & CM APPL. 42286/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JAY IRON AND STEEL LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 50 +ITA 365/2022 & CM APPL. 42287/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JAY IRON AND STEEL LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. ITA Nos.358-368/2022 51 +ITA 366/2022 & CM APPL. 42288/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. versus M/S JAY AUTO COMPONENTS LTD...... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 52 +ITA 367/2022 & CM APPL. 42289/2022 PR. COMMISSIONER OF INCOME TAX(CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate.versus M/S JAY ACE TECHNOLOGIES LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 53 +ITA 368/2022 & CM APPL. 42290/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. ITA Nos.358-368/2022 Page 4 of 13 versus M/S JAY AUTO COMPONENTS LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. % Date of Decision: 26[th]September, 2022 PR. COMMISSIONER OF INCOME TAX(CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate.versus M/S JAY ACE TECHNOLOGIES LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. 53 +ITA 368/2022 & CM APPL. 42290/2022 PR. COMMISSIONER OF INCOME TAX (CENTRAL)-2 ..... Appellant Through:Mr.SanjayKumar,Sr.StandingCounsel for Revenue with Ms. EashaKadian, Advocate. ITA Nos.358-368/2022 Page 4 of 13 versus M/S JAY AUTO COMPONENTS LTD. ..... Respondent Through:Mr. Salil Aggarwal, Sr. Advocatewith Mr. Madhur Aggarwal & Mr.Mahir Aggarwal, Advocates. % Date of Decision: 26[th]September, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J (Oral): 1.Present income tax appeals have been filed challenging the commonorder dated 23[rd]December, 2021 passed by the Income Tax AppellateTribunal (‘ITAT’) in ITA No. 7280/Del./2017 for Assessment Year (‘AY’)2010-11, ITA No. 6640/Del./2017 for AY 2009-10, ITA No. 6639/Del./2017for AY 2009-10, ITA No. 7281/Del.2017 for AY 2011-12, ITA No.6622/Del./2017 for AY 2009-10, ITA No. 6626/Del./2017 for AY 2008-09,ITA No. 6628/Del./2017 for AY 2010-11, ITA No. 6624/Del/2017 for AY2011-12,ITANo.6638/Del./2017forAY2011-12andITANo.6623/Del./2017 for AY 2010-11. 2.Learned counsel for the Appellant states that the ITAT has erred inrelying upon the judgement of this Court in the case of CIT vs KabulChawla 380 ITR 573 (Del) ignoring the fact that Revenue's SLP on similarissue is pending adjudication before the Supreme Court in the case of M/sApar Industries Ltd. ITA Nos.358-368/2022 Page 5 of 13 3.He states that the ITAT has erred in holding that no incriminatingmaterial was found in the search, whereas the original copies of sharecertificates pertaining to share capital and premium allotted to investorcompanies were found at the premises of the Assessee company itselfinstead of investor companies premises evidencing that the investorcompanies were bogus/accommodation entry providing entities. He furtherstates that the Tribunal failed to appreciate that the additions were based ona statement made by one Sh.Rajesh Agarwal which has live link with thedocuments seized during the course of search. 4.He also contends that as the notices issued under Section 133(6) of theIncome Tax Act, 1961 (‘the Act’) to the investor companies were returnedback unserved, they were not genuine business entities and they did not havesufficient networth to make investment. 5.Per contra, learned senior counsel for the Respondents/Assessees,who appears on advance notice, states that only photocopies of the sharecertificates were found during search and not the original share certificates,as alleged by learned counsel for the Appellant.In support of hiscontention, he relies upon the following portion of the impugned orderpassed by the ITAT:- “iii) Share Certificates found during the course of search, withregards to allotment of shares by Minda group of companies tovarious companies, noted by AO at page 18 of his order. We havegone through the orders so passed by AO, CIT (A) and also theremand report so furnished by AO during the course of appellantproceedings and notice that these share certificates pertained to 8companies, namely, M/s JA Builders Ltd, M/s JPM AutomobilesLtd, M/s IBER Medior Ltd, M/s JPM Tsukada Pvt Ltd, M/sBrilliant Jewels Pvt. Ltd, M/s JPM Tools Ltd, M/s JPM Farms Pvt.Ltd, M/s Jay Nikki Industries Ltd. as recorded by CIT (A) at pages ITA Nos.358-368/2022 “iii) Share Certificates found during the course of search, withregards to allotment of shares by Minda group of companies tovarious companies, noted by AO at page 18 of his order. We havegone through the orders so passed by AO, CIT (A) and also theremand report so furnished by AO during the course of appellantproceedings and notice that these share certificates pertained to 8companies, namely, M/s JA Builders Ltd, M/s JPM AutomobilesLtd, M/s IBER Medior Ltd, M/s JPM Tsukada Pvt Ltd, M/sBrilliant Jewels Pvt. Ltd, M/s JPM Tools Ltd, M/s JPM Farms Pvt.Ltd, M/s Jay Nikki Industries Ltd. as recorded by CIT (A) at pages ITA Nos.358-368/2022 59 and 60 of his order. In our opinion share certificates merelyrecord the number of shares issued along with the price of shares,which are duly disclosed in the books of accounts so compiled bythe assessee, as such, even if the share certificates have been foundand seized the same cannot be taken to be “incriminating” innature, as they merely record the details of transactions, which areduly disclosed and recorded in the books of accounts. The learnedCIT DR though argued that original share certificates were seizedduring the course of search, however, the assessee’s case allthroughout has been that photocopies of share certificates wereseized. In any case, even in the remand report which has beenextracted by CIT (A) at page 42 of his order, the AO has not beenable to place material on record to rebut the contention ofassessee that the share certificates were photocopies and notoriginal. Even the Ld. CIT DR during the course of hearing hasnot been able to place on record any material to establish thefactual position as to whether the share certificates seized wereoriginal or photocopies. However, on going through the orders ofassessment, we have noticed that no addition has been made withregards to the share certificates seized of six companies seized bythe Revenue and additions have only been made with regards totwo companies i.e. M/s JPM Tools Ltd. and M/s Jay NikkiIndustries Ltd., wherein, also the learned AO in the order ofassessment has not made the share certificates as a basis to makeaddition under section 68, rather, he has placed reliance on thepost investigation report and statement of a third party Sh. RajeshAgarwal. Thus, whether the share certificates were original orphotocopies, the same will make no difference, as the same has notbeen made as basis by the AO in the impugned order ofassessment. Similar view has also been taken by a coordinatebench of ITAT Delhi in the case of ACIT vs Moon Beverages Ltd.(ITAT Delhi) in ITA No. 115 to 118/Del/2018, wherein, followingfindings have been recorded, on which we draw our support: “46.1 Before deciding the issue on merit, we would first like todecide the legal ground raised by the assessee challenging thevalidity of the assumption of jurisdiction u/s 153A in absenceof any incriminating material found during the course ofsearch when the assessment was not pending. As mentioneddecide the legal ground raised by the assessee challenging thevalidity of the assumption of jurisdiction u/s 153A in absenceof any incriminating material found during the course ofsearch when the assessment was not pending. As mentioned ITA Nos.358-368/2022 earlier, the original return was filed on 30th September, 2009declaring income at Rs.10,27,91,857/-. The assessment wascompletedu/s143(3)determiningthetotalincomeatRs.10,27,91,857/-. This assessment was rectified u/s 154 of theIT Act determining the income at Rs.7,50,21,860/-. Thus, theassessment was completed and was not pending on the date ofsearch. A perusal of the assessment order shows that theaddition is not based on any incriminating material, but, based-on postsearch enquiries or statements recorded u/s 132(4) ofthe Act. The share certificates and counterfoils thereof foundduring the search, in our opinion, cannot be construed asincriminating in nature.” ITA Nos.358-368/2022 earlier, the original return was filed on 30th September, 2009declaring income at Rs.10,27,91,857/-. The assessment wascompletedu/s143(3)determiningthetotalincomeatRs.10,27,91,857/-. This assessment was rectified u/s 154 of theIT Act determining the income at Rs.7,50,21,860/-. Thus, theassessment was completed and was not pending on the date ofsearch. A perusal of the assessment order shows that theaddition is not based on any incriminating material, but, based-on postsearch enquiries or statements recorded u/s 132(4) ofthe Act. The share certificates and counterfoils thereof foundduring the search, in our opinion, cannot be construed asincriminating in nature.” 6.He further states that the statement of Mr.Rajesh Agarwal cannot berelied upon by the Appellant inasmuch as the Assessees were not given anopportunity to cross-examine Mr.Rajesh Agarwal despite a request beingmade by the Respondents-Assessees. 7.He also states that all investor companies had filed detailed repliesbefore the Assessing Officer and had furnished all requisite details as askedfor by the Assessing Officer in the notices issued under Section 133(6) ofthe Act.He emphasises that the investor companies had sufficient networthto make the investment. In support of his contention, he relies upon thefollowing Table reproduced by the ITAT in the impugned order:- ITA Nos.358-368/2022 Page 8 of 13 ITA Nos.358-368/2022 8.ItissettledlawthatwheretheassessmentoftheRespondnets/Assessees has attained finality prior to the date of search andno incriminating documents/materials have been found and seized at thetime of search, no additions can be made under Section 153A of the Act, asin that eventuality, the cases of the Respondnets-Assessees would be of non-abated assessment. (See: CIT vs Kabul Chawla 380 ITR 573 (Del),Principal Commissioner of Income Tax vs. Bhadani Financiers Pvt. Ltd.,2021 SCC OnLine Del 4430 and PCIT vs. Meeta Gutgutia, (2017) 82taxmann.com 287 Del) 9.This Court finds that though the appeal in APAR Industries Ltd. ispending adjudication before the Apex Court, yet there is no stay order infavour of the revenue. Consequently, in view of the judgments of theSupreme Court in Kunhayammed and Others Vs. State of Kerala andAnother, (2000) 6 SCC 359 and Shree Chamundi Mopeds Ltd. Vs. Churchof South India Trust Association CSI Cinod Secretariat, Madras (1992) 3SCC 1, the issue of law is covered by the judgments passed by this Court.10.In the present batch of matters, both CIT (A) and ITAT have givenconcurrent findings of fact that no incriminating material had been broughton record by the Assessing Officer to sustain the additions.In fact, theITAT in the impugned order, has held that the allegation of the AssessingOfficer that no notices under Section 133(6) of the Act were received by theinvestors, is irrelevant as the said parties had filed detailed replies in ITA Nos.358-368/2022 Page 10 of 13 response to the Section 133(6) notices along with the requisite details asrequired by the Assessing Officer. 11.Further, upon perusal of the Table reproduced hereinabove, whichshows the networth of the investor companies and the investment made inthe share capital, this Court is in agreement with the contention of learnedsenior counsel for the Respondents-Assessees that the investor companieshad sufficient networth to make investment in the Assessee’s group ofcompanies. 12.Learned predecessor Division Bench of this Court in PCIT vs. BestInfrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287 (Delhi) hasheld that statements recorded under Section 132 (4) of the Act of the Act donot by themselves constitute incriminating material. The relevant portion ofthe said judgment is reproduced hereinbelow:- response to the Section 133(6) notices along with the requisite details asrequired by the Assessing Officer. 11.Further, upon perusal of the Table reproduced hereinabove, whichshows the networth of the investor companies and the investment made inthe share capital, this Court is in agreement with the contention of learnedsenior counsel for the Respondents-Assessees that the investor companieshad sufficient networth to make investment in the Assessee’s group ofcompanies. 12.Learned predecessor Division Bench of this Court in PCIT vs. BestInfrastructure (India) (P.) Ltd. [2017] 84 taxmann.com 287 (Delhi) hasheld that statements recorded under Section 132 (4) of the Act of the Act donot by themselves constitute incriminating material. The relevant portion ofthe said judgment is reproduced hereinbelow:- “36. Turning to the facts of the present case, it requires to benoted that the statements of Mr. Anu Aggarwal, portions ofwhich have been extracted hereinbefore, make it plain that thesurrender of the sum of Rs. 8 crores was only for the AY inquestion and not for each of the six AYs preceding the year ofsearch. Secondly, when Mr. Anu Aggarwal was confrontedwith A- 1, A-4 and A-11 he explained that these documentsdid not pertain to any undisclosed income and had, in factbeen accounted for. Even these, therefore, could not be saidto be incriminating material qua each of the preceding AYs. 37. Fourthly, a copy of the statement of Mr. Tarun Goyal,recorded under Section 132 (4) of the Act, was not provided tothe Assessees. Mr. Tarun Goyal was also not offered for thecross-examination. The remand report of the AO before theCIT(A) unmistakably showed that the attempts by the AO, inensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus ofensuring the presence of Mr. Tarun Goyal, whom the ITA Nos.358-368/2022 Assessees clearly stated that they did not know, could not havebeen shifted to the Assessees. The onus was on the Revenue toensure his presence. Apart from the fact that Mr. Tarun Goyalhas retracted his statement, the fact that he was not producedfor cross- examination is sufficient to discard his statement. 38. Fifthly, statements recorded under Section 132 (4) of theAct of the Act do not by themselves constitute incriminatingmaterial as has been explained by this Court in HarjeevAggarwal (supra). Lastly, as already pointed out hereinbefore,the facts in the present case are different from the facts in Smt.DayawantiGupta(supra) wherethe admission bytheAssessees themselves on critical aspects, of failure to maintainaccounts and admission that the seized documents reflectedtransactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was afactual finding to the effect that the Assessees were habitualoffenders, indulging in clandestine operations whereas there isnothing in the present case, whatsoever, to suggest that anystatement made by Mr. Anu Aggarwal or Mr. Harjeet Singhcontained any such admission. 39. For all the aforementioned reasons, the Court is of theview that the ITAT was fully justified in concluding that theassumption of jurisdiction under Section 153A of the Act quathe Assessees herein was not justified in law.” (emphasis supplied) 13.In any event, in the present cases, as the Respondents-Assessees weredenied the opportunity to cross-examine Mr.Rajesh Agarwal, despite aspecific request, this Court is in agreement with the ITAT that his statementneeds to be excluded and cannot be relied upon as a piece of evidence tomake any addition. In fact the Supreme Court in the case of M/s AndamanTimber Industries vs. CCE (SC), 127 DTR 241 has held “...not allowing theassessee to cross-examine the witnesses by the Adjudicating Authoritythough the statements of those witnesses were made the basis of the ITA Nos.358-368/2022 Page 12 of 13 (emphasis supplied) 13.In any event, in the present cases, as the Respondents-Assessees weredenied the opportunity to cross-examine Mr.Rajesh Agarwal, despite aspecific request, this Court is in agreement with the ITAT that his statementneeds to be excluded and cannot be relied upon as a piece of evidence tomake any addition. In fact the Supreme Court in the case of M/s AndamanTimber Industries vs. CCE (SC), 127 DTR 241 has held “...not allowing theassessee to cross-examine the witnesses by the Adjudicating Authoritythough the statements of those witnesses were made the basis of the ITA Nos.358-368/2022 Page 12 of 13 impugned order is a serious flaw which makes the order nullity inasmuch asit amounted to violation of principles of natural justice because of which theassessee was adversely affected.” 14.Consequently, this Court is of the view that no substantial question oflaw arises for consideration in the present batch of appeals and accordingly,the same are dismissed along with pending applications. MANMOHAN, J SEPTEMBER 26, 2022KA MANMEET PRITAM SINGH ARORA, J ITA Nos.358-368/2022 Page 13 of 13