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32.1 The Assessing Officer after being fully satisfied with the genuinity of company and sources of credit entries in bank account, sent a detailed note on the comparison of assessee company with shell companies and explanation of the credit entries as mentioned in points above, (deviation note) to the Deputy Director of Investigation (ADIT), Mohali on 26.12.2019 vide letter (deviation note) note no. 1733, dated 24.12.2019, at the fag end of assessment proceedings being satisfied by the fact that the sources of the transactions as per evidences/documents submitted and regular books of accounts of the assessee company stood explained by leading cogent and reliable evidence. However, the ADIT(lnvestigation), Mohali acted without any jurisdiction and without application of mind and rejected the ITA 5 &145/CHD/2023 A.Y. 2017-18 deviation note in less than 12 hours. It is pertinent to mention that the ADIT (Investigation), Mohali rejected the deviation note sent with detailed replies and evidences in less than 12 hours and observed that the assessee company is a shell company. Thus, the ADIT (lnvestigation), Mohali exceeded her jurisdiction knowingly and issued dictates based on Appraisal Report. The ADIT, Investigation, Mohali vide letter no. 1763 dated 27.12.2019 addressed to the Ld. Assessing Officer rejected the proposal/deviation note for not proposing the additions despite the fact that ample evidence both reliable and cogent had been produced by the assessee company calling for no addition at all and still proceeded to dictate the Assessing Officer to make additions by assigning flimsy reasons as if the ADIT (Investigation) was an assessing authority; and still further the ADIT(Investigation), by giving reference to the CBDT instructions bearing No. FTS/194840/12 dated 20.11.2012, proved beyond a shadow of doubt that she had exceeded her powers by rejecting the said deviation note.

32.2 The Assessing Officer acted on the dictate of a third party and on borrowed satisfaction to declare the assessee company as a shell company and made addition of all credit ITA 5 &145/CHD/2023 A.Y. 2017-18 entries in the bank account of the assessee company as undisclosed income u/s 68 of the Income Tax Act, 1961, without even issuing any Show Cause Notice to the assessee company for treating it as a shell company. Also, the ld. Assessing Officer neither issued a Show Cause Notice nor mentioned a single word about shell company in any of the questionnaires sent by him on 14.08.2019 (page 21-22 of paperbook), 07.10.2019 (page 25-28 of paperbook) and 05.12.2019 (page 35-37 of paperbook). The Assessing Officer erroneously made an addition, disregarding the comprehensive evidence provided by the assessee to substantiate its claim regarding the lenders. It is crucial to note that the company extended funds in submitted details as identity, sources, bank A/c, etc of each creditor, and there is no entity, individual or otherwise, that can be deemed as a sham entity. Furthermore, all the lenders executed the transfers from their active and operational bank accounts. Notably, within the same fiscal year, the assessee company repaid all lenders except Sh. Baldev Singh and advance received from Dharma Wires Private Limited was repaid in the subsequent year. The CIT(A) in his order has mentioned as under :

9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Rai Gupta are the directors/shareholders of the appellant company. Sh. Sahil Singla is the son, Smt. Kiran Singla is the wife and Smt. Sakshi Singla is Daughter in Law of Sh. TN Singla. After taking into consideration the above facts, it is observed that the AO has held in his order the appellant company to be a shell company as merely existing on papers and not carrying out any business activities. After perusing the findings of the AO recorded in the assessment order and the material available on record, it is noted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs.l,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and paying stamp duty. The same AO has assessed Long Term Capital Gain in the hands of M/s TJR from the said transaction. It is not the case of the AO that the said land was a Benami asset held in the name of M/s TJR. Further, M/s TJR paid earnest money of Rs.1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat/apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, on facts, it is observed that M/s TJR was having income generating apparatus in past and future years and was undertaking business activities. There is no definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference and ITA 5 &145/CHD/2023 A.Y. 2017-18 consequences out of the same as per the provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had credit amounting to Rs 2,02,23,250/- in its bank account and the appellant could not explain purpose of such credits.
9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Rai Gupta are the directors/shareholders of the appellant company. Sh. Sahil Singla is the son, Smt. Kiran Singla is the wife and Smt. Sakshi Singla is Daughter in Law ofSh. TN Singla .After taking into consideration the above facts, it is observed that the AO has held in his order the appellant company to be a shell company as merely existing on papers and not carrying out any business activities. After perusing the findings of the AO recorded in the assessment order and the material available on record, it is noted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs.1,73,00,000/- and sold during A.Y. 2012-13 for Rs.5,00,05,000/-by executing registered sale deed on 30.11.2011 and paying stamp duty. The same AO has assessed Long Term Capital Gain in the hands of M/s TJR from the said transaction. It is not the case of the AO that the said land was a Benami asset held in the name of M/s TJR. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat/apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, on facts, it is observed that M/s TJR was having income generating apparatus in past and future years and was undertaking business activities. There is no definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference ITA 5 &145/CHD/2023 A.Y. 2017-18 and consequences out of the same as per the provisions of Income Tax Act.