Income Tax Appellate Tribunal - Delhi
Dcit, New Delhi vs Sh. Nirmal Minda, Gurgaon on 25 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'E' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 4541/Del/2014
Assessment Year: 2005-06
DCIT, Nirmal Minda,
Central Circle-03, J-10/31, 32 & 33, D.L.F. Phase-II,
vs
New Delhi. Gurgaon.
(PAN: AFYPM4910J)
(Appellant) (Respondent)
Department by : Ms Shefali Swaroop, CIT DR
Assessee by : Shri Salil Aggarwal, Adv.
Shri Shaailesh Gupta, Adv.
Date of Hearing : 20.03.2018
Date of Pronouncement: 25.04.2018
ORDER
PER SUDHANSHU SRIVASTAVA, J.M.
This appeal has been preferred by the revenue and arises out of order dated 12.05.2014 passed by the Ld. Commissioner of Income Tax (Appeals)-XXV {'CIT (A)'}, New Delhi wherein the Ld. CIT (A) has deleted the additions made by the Dy. Commissioner of Income Tax ('AO'), Central Circle-21, New Delhi in the order of assessment dated 28.03.2013 passed u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter called 'the Act'). ITA No. 4541/Del/2014 Assessment year 2005-06
2. The brief facts of the case are that the original return in this case was filed on 17.10.2005 declaring income of Rs. 96,81,030/-. The said return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called 'the Act') and subsequently, the case was reopened u/s 148 by issuance of notice u/s 148 on 30.3.2012. In compliance to the notice u/s 148, a copy of return already filed on 17.10.2005 was filed with a request that the same may be treated as return filed in compliance to notice u/s 148. Prior to the issuance of notice u/s 148, a search and seizure operation was carried out on 10.01.2012 in the Minda Group of cases. Search was also carried out at the residence of Shri Nirmal Kumar Minda, (the assessee) and during the course of search and seizure, it was gathered that Minda Group had allegedly raised bogus share capital/share premium by taking accommodation entries through paper companies. It was also gathered that one of the major paper companies was M/s Pioneer Finvest Ltd. which had made investment in the Minda group of companies by way of share application money. During the course of search and seizure operation, it was also gathered that the group companies of the Minda group namely Minda Industries Ltd., Minda Investment 2 ITA No. 4541/Del/2014 Assessment year 2005-06 and Minda Project had allegedly received money in the form of share application money and share premium money from M/s Pioneer Finvest Ltd. As per the information gathered during the course of search and seizure, during assessment year 2005-06 i.e. the year under consideration, the Minda Group of companies allegedly received share application money worth Rs. 2.5 crores and share premium amounting to Rs. 22.5 crores from M/s Pioneer Finvest Ltd. During the course of search and seizure operation, it also came to the knowledge of the Income Tax Department that the assessee, being the controlling person of Minda group, had allegedly given Rs. 25 crores in cash to M/s Pioneer Finvest Ltd. and had then received back the amount in guise of share application money and share premium money in his group companies. It was also within the knowledge of the Income Tax department that M/s Pioneer Finvest Ltd. was formed by one Shri Pawan Ruia who was an entry operator, as had been established during the course of search operation by the Investigation Wing of Kolkata in the year 2004. The department also had information that M/s Pioneer Finvest Ltd had been acquired by the Minda Group at a cost of Rs. 10 per share.
3 ITA No. 4541/Del/2014 Assessment year 2005-06 2.1 After the issuance of notice u/s 148, the assessee was required to show cause as to why the amount of Rs. 25 crore alleged to have been paid by the assessee for acquiring M/s Pioneer Finvest Ltd not be added to the income of the assessee. However, the assessee submitted before the Assessing Officer that he had not acquired any shares of M/s Pioneer Finvest Ltd and nor had he entered into any transaction with M/s Pioneer Finvest Ltd. The Assessing Officer also required the assessee to submit some other details and also issued letters u/s 133(6) of the Act to M/s Chandni Commercial Pvt. Ltd. and M/s Gyan Commercial Pvt. Ltd. (both at Kolkata) to verify the alleged transactions which remained undelivered. The Assessing Officer proceeded to treat the amount of Rs. 25 crore as unaccounted income of the assessee and completed the assessment at Rs. 25,96,81,030/-.
2.2 Aggrieved, the assessee approached the First Appellate Authority challenging the addition on merits as well as challenging the validity of initiation of reassessment proceedings u/s 148 of the Act. The Ld. Commissioner of Income Tax (Appeals) did not accept the assessee's averments on the challenge to the reassessment proceedings on the legal ground. 4 ITA No. 4541/Del/2014 Assessment year 2005-06 However, the Ld. Commissioner of Income Tax (Appeals) deleted the addition on merits by holding that the Assessing Officer did not bring any cogent material on record to substantiate that the assessee had made cash payment of Rs. 25 crore in lieu of obtaining the cheques/share application money. 2.3 Now aggrieved, the department has approached the Income Tax Appellate Tribunal (ITAT) and has challenged the action of the Ld. Commissioner of Income Tax (Appeals) by raising the following grounds of appeal:-
"1. That the Commissioner of Income Tax(A) has erred in law and on facts of the case in deleting the addition of Rs. 25 crores made by the Assessing Officer on account of undisclosed income.
2. (a) The order of the Commissioner of Income Tax(A) is erroneous and not tenable in law and on facts.
(b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal."
2.4 Further, in the instant case, the AO had initiated the proceedings u/s 147 of the Act, and before the Ld. CIT (Appeals), the assessee had challenged the initiation of the reassessment proceedings vide ground nos. 1.3, 1.4, 1.5, 1.7 & 1.8, and these grounds of the appeal of the assessee were dismissed by the Ld. 5 ITA No. 4541/Del/2014 Assessment year 2005-06 CIT (Appeals) and since the addition made by the AO was deleted, the assessee did not prefer an appeal before the ITAT. However, on 12.12.2017, the learned authorized representative for the assessee made an application under Rule 27 of Income Tax Appellate Tribunal Rules, wherein the reopening of the assessment has been challenged by raising the following grounds:
(i) That the learned Commissioner of Income Tax (Appeals) has erred both on facts and in law in upholding the validity of the initiation of proceedings u/s 147 of the Income Tax Act.
(ii) That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that the learned AO failed to pass any speaking order against the objections to reopening of assessment so filed by the assessee and as such, the assessment so made without satisfying the statutory preconditions need to be quashed as such."
3. However, at the time of hearing of the appeal, the Ld. Authorised Representative (AR) submitted that in so far as the first contention raised in Rule 27 application is concerned, the same was not being pressed. Hence the same is dismissed as withdrawn.
6 ITA No. 4541/Del/2014 Assessment year 2005-06 3.1 In respect of second contention, the Ld. AR submitted that the AO had failed to pass any speaking order on the objection/s raised by the assessee challenging the validity of the notice u/s 148 of the Income Tax Act. In support the learned AR placed reliance on the communication filed before the AO and submitted that in the absence of any order having been passed thereon, the assessment made deserved to be quashed. The Ld. AR also relied on the following judgments:
(i) PCIT vs. M/s Tupperware India Pvt. Ltd., reported in 284 CTR 68 (Del)
(ii) Ferrous Infrastructure (P.) Ltd. vs. DCIT, reported in 120 DTR 281(Del)
(iii) Deepak Extrusions Pvt. Ltd. vs. DCIT, reported in 80 taxmann.com 77 (Karn.)
(iv) M/s Jayanthi Nataraj vs. ACIT, reported in 161 DTR 281 (Mad.)
(v) Copy of the order of ITAT Delhi in the case of Asha Jain vs. ACIT in ITA No. 3519/Del/2014.
(vi) Copy of the order of ITAT Delhi in the case of Sh.
Shyamlal Mukherjee vs. ITO in ITA No.
4140/Del/2016.
7
ITA No. 4541/Del/2014
Assessment year 2005-06
(vii) Copy of the order of ITAT Delhi in the case of Shiva Rubber vs. ITO in ITA No. 2212/Del/2015.
(viii) Copy of the order of ITAT Delhi in the case of ITO vs. M. L. Creations in ITA No. 4009/del/2016
(ix) Copy of the order of ITAT Delhi in the case of Sh.
Khusro Irshad vs. ITO in ITA No. 2115/Del/2016.
4. The Ld. CIT (DR) opposed the aforesaid contentions and submitted that the assessee had in fact raised no such objections about the initiation of proceedings u/s 148 of the Act before the AO and, therefore, the aforesaid judgments were inapplicable and that the contentions of the assessee do not deserve to succeed.
5. We have considered the rival submissions and perused the material on record. It is seen that in the instant case, notice u/s 148 of the Act was issued on 30.03.2012, and after the receipt of the notice, the assessee filed a reply dated 07.05.2012 requesting the AO to provide a copy of the reasons. The same was provided to the assessee by the AO through a communication dated 08.10.2012, providing various details and such reply cannot be termed as objection to the initiation of the reassessment proceedings. Thereafter, another reply was filed on 19.03.2013, wherein the assessee made submissions vis a vis reasons to 8 ITA No. 4541/Del/2014 Assessment year 2005-06 believe and stated that the original return of the assessee be accepted. In our considered opinion, this reply also cannot be termed as objection and further, this reply was filed at the fag- end of the limitation when the AO had no time left to complete the assessment. Hence on careful consideration of the facts of the instant case, we find that the Ld. CIT DR is correct in her contention that the proceedings initiated u/s 148 of the Act has not been objected to by the assessee which needed to be disposed off in terms of the judgment of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd. v. ITO reported in (2003) 259 ITR 19(SC), and hence the second contention of the assessee raised in the Rule 27 application is rejected and consequently, the application of the respondent under Rule 27 of the Income Tax Appellate Tribunal Rules is rejected as such.
6. Now we proceed to dispose off the grounds of appeal raised in the appeal filed by the revenue.
7. The Ld. CIT DR contended that on the facts stated by the AO in his order, since Shri Pawan Ruia was an entry operator and M/s Pioneer Finvest Ltd. was a company controlled by him, the learned CIT (Appeals) had erred in deleting the addition. The 9 ITA No. 4541/Del/2014 Assessment year 2005-06 Ld. CIT DR vehemently argued that the order of the Ld. CIT (A) deserved to be set aside and the order of the AO restored.
8. In response, the learned counsel appearing for the assessee/respondent supported the finding of the Ld. CIT (Appeals) and submitted that the impugned addition had been made on mere surmises and conjecture and while making the addition, there was absolutely no evidence available from which any inference could be drawn against the assessee that it was the assessee who had made the aforesaid investment and M/s Pioneer Finvest Ltd. was merely a paper company. The Ld. AR submitted that no evidence was brought on record to substantiate the allegation against the assessee. He further contended that the allegation of the AO in the order of assessment that the assessee had failed to furnish any response to show cause notice was factually incorrect. The Ld. AR referred to page 38 of the paper book which was assessee's response to the AO's notice dated 21.03.2013. The Ld. AR submitted that in the reply it was stated that the allegation was a general allegation that the shares of M/s Pioneer Finvest Ltd. had been taken over by the entities and persons belonging to Nirmal Minda whereas the assessee has not made any such investment. The Ld. AR 10 ITA No. 4541/Del/2014 Assessment year 2005-06 submitted that it was submitted by the assessee before the AO that the assessee Shri Nirmal Minda had not made any investment in M/s Pioneer Finvest Ltd. which was duly supported by the balance sheet as well as bank statement. It was further submitted by the learned counsel that in the aforesaid response it was submitted that the assessee was neither a director nor a shareholder in the company M/s Pioneer Finvest Ltd.
8.1 It was contended by the Ld. AR that there being no evidence that the assessee had made investment, the addition deleted by the learned CIT (Appeals) was entirely justified. It was further contended that no adverse inference can be drawn by the revenue against the assessee in the absence of any evidence that it was the assessee who had made the investment. The Ld. AR further contended that no adverse finding had been brought on record to conclude that the investment made by the assessee remained unexplained and came from unexplained resources. It was further submitted that it is not a case that M/s Pioneer Finvest Ltd. was a paper company because the said company was existing on record and had also been assessed to tax u/s 148 of the Act by an order dated 30.10.2012, wherein the income of the 11 ITA No. 4541/Del/2014 Assessment year 2005-06 said company had been assessed at Rs. 27,52,930/-. The Ld. AR reiterated that in the absence of any finding that the investment emanated from unexplained resources, the adverse inference drawn against the assessee was untenable.
9. We have heard the rival submissions and have also perused the material on record. In the appeal filed by the revenue, although the revenue has raised two grounds of the appeal, ground no. 2 is general in nature and it is ground no. 1 wherein it has challenged the deletion of addition of Rs. 25 crores. The aforesaid addition had been made by the AO on the basis of the finding recorded that the assessee being the controlling person of Minda Group of cases had obtained share capital/share premium in the Minda Group companies in the guise of accommodation entry and as such he had held that the assessee had made an investment which had not been explained by the respondent/assessee. It is seen that the impugned addition has been made on account of the following reasons stated in the order of the assessment:
i. During the course of the search and seizure operation conducted by the investigation wing in the Minda Group of cases and at the residence of the assessee, it 12 ITA No. 4541/Del/2014 Assessment year 2005-06 had been found that the Minda Group was raising bogus share capital/share premium by taking accommodation entries through paper companies, and one of the major paper company was M/s Pioneer Finvest Ltd. which had made investment in Minda Group by way of share application money. ii. M/s Pioneer Finvest Ltd. was an entry operator and a paper company which had made investment in the group companies of Minda Group namely Minda Industries Ltd, Minda Investment and Minda Project in the form of share application money and share premium.
iii. The Minda Group of companies had given cash to the different paper companies and taken cheque from them.
iv. The assessee being the controlling person of Minda Group had given Rs. 25 Crores in cash to M/s Pioneer Finvest Ltd and then received the above amount in the guise of the share application money and share premium in his group companies.
13 ITA No. 4541/Del/2014 Assessment year 2005-06 v. M/s Pioneer Finvest Ltd was formed by one Shri Pawan Ruia who was an entry operator and in the year 2004 the investigation wing of the Department in Kolkata had carried out search operation in the case of Shri Pawan Ruia which established that Shri Pawan Ruia was an entry operator.
vi. The investigation wing had observed that the shares of M/s Pioneer Finvest Ltd have been taken over by the entities and persons belonging to the assessee and in the post search enquiries conducted by the investigation wing, the AR of the Minda Group had admitted that M/s Pioneer Finvest Ltd had been acquired by the Minda Group at the cost of Rs. 10 per share whereas the Net Asset Value (NAV) of the share of the aforesaid company was more than Rs. 100 per share and, therefore, the share application money and share premium of Rs. 25 crore received by the Minda Group was an accommodation entry.
vii. That during the course of the assessment, assessee was requested to file various details and documents which had not been provided by the assessee. 14 ITA No. 4541/Del/2014 Assessment year 2005-06 viii. Notices u/s 133(6) of the Act were issued to M/s Chandni Commercial Pvt. Ltd and M/s Gyan Commercial Pvt. Ltd. and these notices remained undelivered. Further, the investigation wing had carried out investigation in respect of companies of the Ruia Group and none of the Ruia group companies were found existing, which proved that the companies formed by Shri Pawan Ruia were paper companies and entry operators.
9.1 In view of the aforesaid reasons, the AO concluded that since the assessee had failed to explain the source of the funds of the amount invested by the paper company M/s Pioneer Finvest Ltd. in the companies controlled by the assessee, the same is his undisclosed income. The assessee, being aggrieved, preferred an appeal before the learned CIT (Appeals) and it was submitted before the Ld. CIT (A) that the impugned addition had been made purely on suspicion and on assumption and presumption and that there was no material to substantiate the allegation made in the order of assessment. It is seen that to rebut the contention of the assessee, the Ld. CIT (A) required the AO to present his submissions in respect of such contentions and produce all the 15 ITA No. 4541/Del/2014 Assessment year 2005-06 necessary details, assessment record, seized documents, statements etc relating to the allegation made in the order of assessment. It is further seen that despite the specific direction by the Ld. CIT (A), the AO could not substantiate his allegation made in the order of assessment at the time of hearing before the Ld. CIT (A). It has been recorded by the Ld. CIT (A) that even the appraisal report of the investigation wing does not support the allegation of the AO and further the AO also admitted that except for the innocuous contents given in the appraisal report, there was no material to support the allegation. The relevant Para of the order of the learned CIT (A) is being reproduced hereunder:
"Now coming to grounds 1.2, 1.6 & 1.9.Since the grounds are closely interlinked and interconnected they are taken up simultaneously. The said grounds dwell on the addition of Rs. 25,00,00,000 (Twenty Five Crores) made to the declared income of the assessee as Unexplained Investment.
As opposed to the grounds as above the ld A.O.'s version in the above respect was that:-
i) It was found that one of the major companies i.e. M/s Pioneer Finest Ltd. Had made investment in Minda Group of companies by way of share application money.
ii) The group companies of Minda Group namely Minda Industries Ltd., Minda Investment and Minda Project received money in the form of share application money and share premium from M/s Pioneer Finest Ltd., the entry operator and paper company.16 ITA No. 4541/Del/2014
Assessment year 2005-06
iii) The Minda group companies gave cash to the different paper companies an took cheque from them.
iv) During the period relevant to A.Y. 2005-2006 Minda Group of Companies took Rs. 2.5 crore share application money and Rs. 22.5 crores as share premium money from M/s Pioneer Finest Ltd.
v) The appellant being the controlling person of Minda Group gave Rs. 25 Crores in cash to the above paper company and then received the above amount back in the guise of share application and share premium money in his group companies.
vi) It is worth mentioning here that the paper company, M/s Pioneer Finest Ltd., was formed by one Shri Pawan Ruia, who was an entry operator. In the year 2004 the Investigation Wing of Kolkata carried out a search against him. In the search it was established that Shri Pawan Ruia was an entry operator/
vii) It was also claimed by the Investigation Wing that th Authorised Representative for the Minda Group of cases vide order sheet entry dated 29.03.2012 admitted that M/s Pioneer Finest Ltd., was acquired by the M/s Nirmal Minda Group at the cost of Rs. 10/- per share whereas the NAV of the share was more than Rs. 100/-.
viii) It was also alleged by the investigation wing that the investment of M/s Pioneer Finest Ltd., was changed from the Ruia Group Of Companies to investment in Nirmal MInda Group.
ix) Therefore the share application money and share premium amount of Rs. 25/- crore received by the group companies of Minda was an accommodation entry." The appellant refuted the above allegations on the strength of the pleas and arguments which already find mentioned under Para 3 (supra). On an appreciation and thoughtful consideration of the entire facts narrated supra the following salient features were noticed:-
17 ITA No. 4541/Del/2014
Assessment year 2005-06
i) Nothing was mentioned in the assessment order regarding evidence or material on the basis of which aforesaid findings were arrived at.
ii) The present jurisdictional ld. AO who was asked to attend the office of the undersigned with all the necessary details, assessment record seized documents, statements etc relating to the allegations outlined above by a letter dated 03.04.2014, also failed to throw any light on any of the allegations (i) to (ix) highlighted as above. On a perusal of the appraisal report and the assessment records also no clue could be had with regard to the above allegations.
iii) The allegations could not be underpinned by the jurisdictional ld. AO during the hearing 11.04.2014 with the help of any seized document or paper or statement on oath of any of the related parties which stood corroborated by requisite evidence.
iv) The A.O. was asked by the undersigned to explain the material/evidence available with Department on the basis of which the aforesaid findings were recorded by the ld. AO in the assessment order passed u/s 143(3) r.w.s. 147 of the Act on 28.03.2013. Upon a perusal of the appraisal report by the undersigned also it was not clear as to what the basis was for the above allegations. The ld. A.O. also stated that except for innocuous contents given in the appraisal report there was no material/evidence on record to support that M/s Pioneer Finest Ltd., had made investment in Minda Group of companies by way of share application money; that the group companies of Minda Group namely Minda Industries Ltd., Minda Investment and Minda Project received money in the form of shre application money and share premium from M/s Pioneer Finest Ltd., an entry operator and paper company; that the Minda group companies gave cash to the different paper companies and took cheque from them during the period relevant to A.Y. 2005-2006; that Minda Group of Companies took Rs. 2.5 crore share application money and Rs. 22.5 crores as share premium money from M/s Pioneer 18 ITA No. 4541/Del/2014 Assessment year 2005-06 Finest Ltd., the appellant being the controlling person of Minda Group gave Rs. 25 crores in cash to the above paper company and then received the above amount back in the guise of share application and share premium money in his group companies; that M/s Pioneer Finest Ltd was acquired by the M/s Nirmal Minda Grup at the cost of Rs. 10/- per share whereas the NAV of the share was more than Rs. 100/-that the investment of M/s Pioneer Finest Ltd. Was changed from the Ruia Group fo Companies to investment in Nirmal Minda Group; that the share application money and share premium amount of Rs. 25/- crore received by the group companies of Minda was an accommodation entry; that the share capital /share premium of M/s Pioneer Finest Ltd.
Increased by Rs. 2.50 crore and Rs. 22.50 crore respectively during F.Y. 2004-2005 and that the control of M/s Pioneer Finest Ltd. Was taken over by the entities of M/s Nirmal Kumar Minda by acquiring shares of M/s Pioneer Finest Ltd. @ 10/- each as against the NAV of more then Rs. 100/- each and payment of each by Mr. Nirmal Kumar Minda in lieu of cheques from M/s Pioneer Finest Ltd. On the contrary as per copy of audited annual accounts of F.Y. 2004-2005 of M/s Pioneer Finest Ltd, available on assessment record brought by the ld. AO during the hearing, no increase in share capital/share premium of the said company was noticed during FY 2004- 2005.
v) As per the list of shareholders, the list of transfer of share of M/s Pioneer Finest Ltd. and the Statement of Affairs of M/s Nirmal Kumar Minda & his family members available on assessment record brought by the ld. AO during the hearing on 11.4.2014, no share of M/s Pioneer Finest ltd., was seen to have been acquired by Mr. Nirmal Kumar Minda and/or his entities during FY 2004-2005.
vi) As per the list of Directors of M/s Pioneer Finest Ltd., available in the assessment order brought by the ld. AO durig the hearing on 11.04.2014, neither Mr. Nirmal Minda nor any 19 ITA No. 4541/Del/2014 Assessment year 2005-06 of his family members were found to be the director/directors of M/s Pioneer Finest Ltd. during FY 2004-2005.
vii) As per the copy of Bank Statements fo M/s Nirmal Kumar Minda and his family members for F.Y. 2004-2005 and copy of audited annual accounts of M/s Pioneer Finest Ltd. for F.Y. 2004-2005 available in the assessment record brought by the ld. AO during the hearing on 11.04.2014, no deposits by cheques were seen to have been made by M/s Pioneer Finest Ltd with Mr. Nirmal Kumar Minda and/or his family members during FY 2004-2005.
In the ultimate analysis no concrete, cogent and sound evidence/material in the shape of cash book and bank's statement were furnished to support the allegation of cash payment of Rs. 25 crores being made by M/s Nirmal Kumar Minda in lieu of obtaining cheques from M/s Pioneer Finest Ltd during FY 2004-2005."
9.2 It is seen from the aforesaid that the Ld. CIT (A) has held that in the absence of any concrete, cogent and sound evidence/material in the shape of cash book and bank statement to support the allegation of cash payment of Rs. 25 crores being made by the assessee for obtaining cheques from M/s Pioneer Finvest Ltd. during the year 2004-05, the addition is unsustainable. The Ld. CIT (A) held that the AO did not bring any cogent material/evidence on record to substantiate the allegation that the assessee had made cash payment of Rs. 25 crores in lieu of obtaining the cheques. He has further held that the AO had failed to bring any cogent material on record to prove that the 20 ITA No. 4541/Del/2014 Assessment year 2005-06 assessee had acquired any share/s of M/s Pioneer Finvest Ltd. which could give him controlling rights in that company. He has also held that the AO had failed to establish that M/s Pioneer Finvest Ltd. had raised the share capital/share premium of Rs. 2.50 crores and Rs. 22.50 crores respectively during the FY 2004-05. He has further noted in his order that even during the course of proceedings before him he gave further opportunity to the AO to substantiate the allegation/s by going into the truth and veracity of the matter with the help of appraisal report, necessary details, assessment record, seized documents, statements etc but the AO failed to establish the allegation on the basis of which he had recorded the finding in his order for making the impugned addition.
9.3 The learned CIT (Appeals) finally concluded that in absence of any evidence brought on record justifying that the assessee had made investment the addition deserved to be deleted. In arriving at the aforesaid conclusion the learned CIT (A) also considered the fact that in the assessment of M/s Pioneer Finvest Ltd framed u/s 147 of the Act for the AY 2005-06, no adverse inference had been drawn of the investment made by the aforesaid company when it had acquired the shares of the Minda 21 ITA No. 4541/Del/2014 Assessment year 2005-06 Group of companies and which clearly established that the amounts invested by it was an explained sum and was out of the funds belonging to the said company.
9.4 Therefore, on facts of the case, we are of the considered opinion that the addition u/s 69 of the I.T. Act, could be only made when it is established that the assessee had made an investment and had failed to explain the nature and sources of the said investment. However, in the instant case there is not an iota of evidence which could suggest that the assessee had made any investment so as to justify the addition made by the AO. In our opinion the inference drawn by the AO is based on mere suspicion and is unsupported by any material whatsoever. It has not been demonstrated by any cogent material that it was the assessee who had made the investment/paid cash for acquiring shares of M/s Pioneer Finvest Ltd. On the contrary, no adverse inference was drawn in the assessment proceedings of M/s Pioneer Finvest Ltd. 9.5 Further, the assessee had categorically stated before the AO that he had not acquired the shares of the aforesaid company nor had he entered into any transaction with such company. Thereafter, the onus was on the AO to rebut the aforesaid contention of the assessee by bringing on record any 22 ITA No. 4541/Del/2014 Assessment year 2005-06 material to the contrary. It is further seen that the AO had also issued notice u/s 133(6) of the Act to M/s Pioneer Finvest Ltd. and same was also replied to by the aforesaid company on 23.03.2013 by providing the necessary details, which confirm the aforesaid submission of the assessee. It is seen that in the reply filed by the aforesaid, M/s Pioneer Finvest Ltd had also provided the shareholding pattern of the aforesaid company, which establishes that the assessee had not purchased the shares of the aforesaid company. It is settled law that the AO is not only an adjudicator but is also an investigator and, therefore, before recording any adverse finding, it was the duty of the AO to support the allegation/s based on some material, which is completely absent in the instant case. Even, in this appeal filed by the revenue, no material has been brought before us to rebut the factual finding of the Ld. CIT (A). It is settled law that if the finding of the fact recorded by the lower authorities is incorrect, then it is the duty of the appellant to assail such finding by bringing material and in absence of any material, the finding of the lower authorities cannot be disturbed. In the case of CIT vs. Surendra Buildtech Pvt Ltd (ITA No. 141/2012), the Hon'ble Jurisdictional High Court has held as under: 23 ITA No. 4541/Del/2014
Assessment year 2005-06 "...If a CIT (Appeals) records a factually incorrect finding, then the Revenue/assessee, when they prefer an appeal before the ITAT, must place necessary documents/papers on record to show and establish that the factual findings were incorrectly recorded by the first appellate authority. ITAT is a (the sic) final fact finding authority. In case an appeal is preferred by the Revenue, then the onus is on them to show and establish that factually wrong findings have been recorded by the first appellate authority and the findings recorded by the Assessing Officer are correct. Nothing prevents the Revenue from filing the papers/documents before the ITAT. In case they fail to discharge the said onus and commit a lapse, their failure and inability cannot give rise to a question of law under Section 260A of the Act...."
9.6 We are, thus, of the opinion that unless any evidence is brought on record justifying that it was the assessee who had made any such investment, the addition is unsustainable in law.
It is well settled rule of law that suspicion howsoever strong cannot par take the character of evidence. We, thus, find no infirmity in the order of learned CIT (Appeals) who has deleted the addition and we endorse the findings of the learned CIT (A) and find no evidence has been brought on record which could justify the conclusion of the AO that the assessee had made the investment/paid cash to M/s Pioneer Finvest Ltd.
10. In the result the appeal of the revenue is dismissed. 24 ITA No. 4541/Del/2014 Assessment year 2005-06 The order is pronounced in the open court on 25th April, 2018.
Sd/- Sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
Dated: 25th April, 2018
'GS'
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order
ASSISTANT REGISTRAR
25