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17.3 On behalf of the assessee, it has been contended that apropos issue of shell company, the Assessing Officer observed that during the search and seiz ure operation under section 132(1) of the I ncome Tax Act, conducted on the Punjab Sand Mi ning Group of cases on 16.02.2018, it had been found that M/s TJR Properties Pri vate Limited and M/s Evershine Resorts Private Limited, on whom, search had been conducted at SCO Nos. 80-81, Fourth Floor , Sector 17- C, Chandigarh, on 16.02.2018, were shell companies and existed only on paper and had no profit ear ning apparatus of their own as such, because these com panies were not carr ying on any ki nd of business activities whatsoever; that the AO, in para 4 of his order dated 29.12.2019, contends that during the search and sei zure operation u/s 132(1), it was found that the appellant company i s a shell company ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 and has no profit earning apparatus as such because the company is not carrying any kind of business Activities; that the Assessing Officer observed that during the search, statement of Shri Jagdish Rai Gupta was recorded on oath under section 132(4) of the I ncome Tax Act; that the AO, after reproducing part of statement of Jagdish Rai Gupta (Director), contended that Jagdi sh Rai Gupta has admi tted that no busi ness activity has been carried out by the company from the date of its establishment; that the Assessi ng Officer observed that further, Shri Jagdish Rai Gupta had denied any knowledge of any business transactions from bank transactions carried out by M/s Evershine Resorts Pri vate Limited; that further, the AO, after repro duci ng part of statement of Sant Ram Sharma observed that therein, he had contended that he was unaware about any company with the name, M/s Ev ershine Resorts Private Limited; that the Assessing Officer observed that thus, M/s Evershine Resorts Private Limited was a shell company and the amount received by the company from its lenders was not at all genuine and i ts cr edit worthiness could not be proved under any circumstances; that the Assessing Officer observed that therefore, the amount of Rs. 4,82,00,000/-

ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 17.4 The ld. Counsel for the assessee has contended that the ADIT, Investigation, Mohali took less than 12 hours to go through all the documents and detailed replies and evidences as s ubmitted by the company and rejected the said deviation note vide letter no. 1763 dated 27.12.2019 with an unauthorized dictat to declare our genuine company declared as a shell company as mentioned in Apprai sal Report, On receipt of reply from the ADIT on 27.12. 2019, the AO also changed his mind and declared our company as a ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 shell company, although he was fully satisfi ed while sending the deviatio n note o n 26.12.2019 till 06:00pm; that it is proved from this that the Learned Assessing Officer had to forego his satisfaction and adhere to the dictat of a third party, i.e. the ADIT(lnv). The AR of the company submitted that the Assessing Officer, after relyi ng on the documents, information and explanation submitted by the assessee, had proposed no addition at all, as he was completely satisfied with regard to the fact that the assessee com pany was not a shell company and all amounts credited in the Bank accounts of the assessee company wer e only from known sources which were genuine and duly accounted for in its books of account, upto 26.12.2019, and he prepared a Deviation Note for making no additions at all; that this fact has been established beyond a shadow of doubt by the fact that a Deviation Note was prepared by the Assessing Officer, dated 24/12/2019, and sent to the ADIT, Investigation, Mohali on 26/12/2019 at 06:00 pm, vide letter No. 1733 (along with all submissions of the assessee and note on comparison of the Appellant company with a Shell com pany), after perusal of :-

17.12 The AR contends that since its i ncorporation, the assessee company is regularly prepari ng its Profit and Loss Account as well as its Balance Sheet, and it has also been getting its accounts audited regularly; and that this company is a legal entity and it is operating like any other genuine company.

17.13 I t has fur ther been stated i n the Note filed, that even the Registrar of Com panies and the MCA have identified certain shell companies after 2013 and even the Director s of such shell com panies have be en disqualified; that however, the assessee company has been treated as a legal and genuine company. It has been stated that as per the various defi nitions of 'shell company', a shell company is a company which is having dummy directors and does not conduct any ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 acti vity other than in a pass-through capacity; that the assessee company is regularl y doing the business activity and it even made purchase of property and made sincere efforts to develop the proposed comm ercial colony, like other real estate developers; and that for a company to be genuine, it is not necessary that there should essentially be tradi ng or manufacturing acti vity in the company.

38.3 The ld. Counsel for the assessee has contended that the assessee company had submitted the Cash Flow Statement, the explanation of each debit and credit entry in the assessee's bank account alongwith the balance sheet, affidavi ts, confirmations, bank statements, ITRs, copy of ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 accounts etc.; that however, rather than consi dering each credit entry separatel y, the AO, on the dictat of a third party, made additions of all the credit entries in the bank account of the assesse e company, without considering the nature, source, credibility and genuineness of each cr edit transaction received during the year; that it was after being fully satisfied with the g enuineness of the com pany and the sources of the credit entries in its bank account, that the AO sent a detailed note on the comparison of the assessee company with shell companies and explanation of the cr edit entries, by virtue of the Deviation Note, to the DDIT (Investi gation), Mohali, on 26.12.2019, vide letter/Note No.1733, dated 24. 12.2019, at the fag end of the assessment proceedings; that though she was not authorized to do so, the DDIT (Investigation), Mohali, without jurisdiction and without application of mind, rejected the sai d Deviation Note in less than 12 hours; that the Deviation Note was rejected by obser ving that the assessee company is a shell company and issuing a dictat to the AO, based on the Appraisal Report, vide letter No. 1763, dated 27.12.2019; that the ADIT (Investi gation), Mohali, rejected the AO 's proposal/D eviation Note for not proposing the additions, inspite of the ampl e, ITA 33 &146/CHD/2023 & ITA 739/CHD/2022 reliable and cogent documentary evidence produced by the assessee company on the record before the AO, and directed the AO to make additions by assigning flimsy reasons, as if it was her, i.e., the ADIT, and not the AO, who was the assessing authority, giving reference to CBDT Instruction No.FTS/194840/12 dated 20.11.2012, exceeding her powers in r ejecting the Deviation Note. It has been contended that despite the D eviation Note issued by him, on the dictat of the ADIT (Investigation), Mohali, the AO, on par t satisfaction, declared the assessee company as a shell company and made addition of all the cr edit entries in the bank account of the assessee company, as undisclosed incom e u/s 68 of the Act; that this was done without even issui ng a Show Cause Notice to the assessee as to why it should not be treated as a s hell company; that so much so, i n none of the questionnaires issued by the AO (APB 15- 16, 18-21 and 28-30), on 19.08.2019, 07.10.2019 and 11.12.2019, did the AO m ention anything about the assessee company being proposed to be treated as a shel l company.