TMI Blog2014 (10) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... r to issuance of cheque moreover there is no cash transaction in the bank statement and we found that all the amounts are received and paid through account payee cheques. AO has not made any efforts by calling information u/s 133(6) or by issuing summon u/s 131 to any of the creditors which is evident from the assessment order itself. Moreover, it is also clear from the assessment order that the Assessing Officer had never asked the assessee to produce the creditors - as per requirement of Section 68 the sum credited in the books of accounts can be considered to be the income of the assessee in a case where the assessee does not offer any explanation or the explanation offered by him, in the opinion of AO is not satisfactory - The explanation of the assessee in the present case is that all these creditors are income tax assessees and their PANs have given alongwith their copy of bank account as well as preceding years. By filing these evidences, it can be said that the assessee had discharged the initial burden laid upon him under Section 68. All the parties from whom loan was taken were having substantial funds available with them to advance the money – merely on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dits in the form of unsecured loan from K.K.Patel Finance Limited. East West Finvest (I) Limited, Purvi Finvest Limited and Trimurtis Finvest Limited. The other items of addition were disallowance of interest expenses and disallowance of expenses u/s 14A. 4. By the impugned order, the ld. CIT(A) deleted the addition after having the following observations :- 4. I have already mentioned in para 2.3 herein above, the various issues on which additions are made in various cases of assessee group under appeal as listed in Table no. 1. For the sake of brevity, I am giving' my finding on each of these issues involved before giving my decision on the various grounds raised by the appellants. 4.1 Issue No.1: Unexplained share capital, premium and share, application money introduced as the source could not be explained by the assessee. The AO has considered the source of introduction of share capital, premium and / or share application money year after year in the cases of Lunkad group as unexplained. The table no.2 below reflects the quantum of addition made on this issue in various cases of the group. As could be seen from the table, in some of the assessment years, initia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the modus operandi of the business noticed from the facts as emerged from the impounded material, I consider the entire amount of introduction of share application money of ₹ 1,41,37,000/- as unexplained. Hence, the same is added to the total income of the assessee u/s. 68 of the I.T.Act. In the assessment orders for all these relevant assessment years, the AO has detailed the modus operandi adopted by the assessee group based on the notings on the impounded loose papers and documents. The AO has illustrated in the body of the assessment order the numerous entries of cash receipts from various parties/ mediators and cash payment / deposit in bank accounts as recorded in the impounded loose papers. The entries pertains to the period of about one month from 03.04.2006 to 01.05.2006. The group has been maintaining their bank accounts of different group companies in Centurion Bank, HSBC Bank, IDBI Bank and Bank of Rajasthan. After depositing the cash in any of the bank account, the funds have been rotated from one bank account of the group company to the bank account of other group companies in the form of share capital, share premium and share application money which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appliances Ltd.,[IT-141/09-10, CIT(A)-II, Indore] and M/s. Sanghvi Foods Pvt. Ltd., [IT-409/09-10, CIT(A)-II, Indore] it is observed that the AO had even examined Shri Anil Saini, Director of K.K. Patel Finance Ltd., (one of the associates of Lunkads) and Shri Sarad Darak, Director of Trimurti Finvest Pvt. Ltd. and Poorvi Finvest Pvt. Ltd. Both Shri Anil Saini and Shri Sarad Darak could not explain the sources of the bank deposits in the accounts of those companies satisfactorily. The bank accounts of these three companies (i.e. K.K. Patel Finance Ltd., Trimurti Finvest Pvt. Ltd. and Poorvi . Finvest Pvt. Ltd.) are maintained in the Indore Swayam Siddh Mahila Co-operative Bank whereby funds were transferred to Mittal Appliances Ltd., and Sanghvi Foods Pvt. Ltd. Prior to transfer of fund, the account reflects deposit entries (by clearing). When specific question was asked by the AD to Shri Anil Saini to explain such credit entries, he first said it was share capital, then he said it might be loans and advances which might have squared up. Similarly, Shri Sarad Darak also failed to explain the sources of the deposit in the bank account. In the circumstances, the assessing officer, Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been held that the Lunkad group had failed in discharging its onus to explain the source of huge share capital introduced year after year in their group companies. The documents impounded during the survey in the Lunkad group of cases, though, for the limited period only, do suggest the modus operandi adopted by them in providing entries to the beneficiaries. But this has not been accepted by the Lunkad group so far. Rather, they (Lunkad group) have issued - confirmatory letters to the various beneficiaries in support of having given genuine loan and share application money. Had they accepted the modus operandi of providing only entries, then the required recourse would have been confirming the additions made in the hands of beneficiaries. But this has not been done so. Rather the Lunkad group had tried to re-inforce the stand of beneficiaries by way of issuing confirmatory letters to them but in their own cases they have utterly failed to discharge the primary onus of explaining the source. Therefore, in the circumstances, the additions made on this issue were sustained on substantive basis in the cases of Lunkad group of companies itself. Confirming addition on the same issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiaries in support of having given genuine loan and share application money on the one hand and had failed utterly to discharge the primary onus of explaining the source in their own cases], addition was to be sustained in the hands of Lunkad group of companies. It was also observed therein that had the Lunkad group accepted giving entries to those beneficiaries then I would have sustained the addition in the case of beneficiaries. But since that was not done so and the Lunkad group rather had attempted to reinforce the stand of beneficiaries saying that the unsecured loan and share capital given to the beneficiaries were no longer the accommodation entries but rather genuine transactions, I had taken decision to grant relief in the case of beneficiaries because otherwise that would have amounted to double addition on the same item though on different hands. It is noted that the relevant appeals in the case of Purvi Finvest Pvt. Ltd, East West Finvest (I) Ltd and Trimurti Finvest Pvt. Ltd could not be decided due to change in the jurisdiction (appeals were transferred to Bilaspur), but the facts are that these companies were also the associates of Lunkad group and therefore the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss objections are also heard on merit. 7. The assessee has filed the written synopsis of the arguments, which reads as under :- With reference to the hearing of above referred cross objections we have to submit that the short facts of the case are that a search and seizer operation u/s 132 was carried out at the assessee's premises and company Sharda Commodities Pvt. Ltd., of which assessee is director on 02.05.2008. No incriminating document was found and seized during the course of search. Consequent to the search notices related 153(A) was issued in respect of all the years and following addition were made:- S.No. Particular Assessment Year 2004-05 Assessment Year 2005-06 Assessment Year 2006-07 Assessment Year 2007-08 01. Unexplained Cash Credits 1,35,50,000/- 18,00,000/- 15,00,000/- 02. Disallowance out of Interest 5,75,371/- 30,24,946/- 28,30,354/- 10,91,968/- 03. Disallowance 14A 1,00,189/- 1,27,806/- 1,02,645/- 17,988/- Aggrieved by the order of the Ld. A.O. the assessee preferred an appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncriminating document was found and seized, which could indicate any undisclosed income. (ii) The only addition made by the A.O. was on account of Cash Credit u/s 68, interest thereon and disallowance u/s 14A . On these two issues the special bench of ITAT in the case of All Cargo Global Logistics Ltd Vs. DCIT reported in 137 ITD 287 (Mum-SB) and various benches of Tribunal and so also Delhi High Court in the case of Anil Kumar Bhatia after analyzing section 153A and so also CBDT Circular held that no addition could be made in assessment u/s 153A / 143 (3) when no incriminating document was found and seized during the course of search , which could indicate any undisclosed income in the completed assessment which are not abate. The same will be clear from the followings:- (i) Section 153A as introduced in the statute w.e.f 01.06.2005, wherein the section starts with the non obstante phrase Notwithstanding ... , therefore, as soon as the search is concluded, the AO having jurisdiction over the assessee, a jurisdiction is cast upon the AO to issue notices under section 153A(1), for the preceding six years, calling upon that person to file its returns. As soon as the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shown in the balance sheet. This point was specifically responded to in letter dated 6th August, 2006, in which it was submitted that the CFS activity commenced from 7th April, 2003. A notification had been received from the Commissioner of Customs (Import), Jawahar Customs House bearing No.3 of 2003 dated 28th Feb, 2003, classifying the area of 3,282 square mtrs. as customs area for the purpose of storage, stuffing/de-stuffing and clearance of export/import cargo. Subsequently the Commissioner has notified the same area as Customs area for export cargo and the assessee has been certified as a custodian for cargo under Customs Act, 1962, Copies of relevant notifications were also enclosed. On the above facts the Hon'ble Special Bench in para 58 held as under.- 58. Thus question No.1 before us is answered a) as under: (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under section 153A for which assessments shall be made for each of the six assessment years separately: (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The block assessment so made was independent of and in, addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 1 53C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where search is initiated under section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2008, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in. which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings shall abate . The reason is not far to seek; Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the sane assessment year determining the total income of the assessee in order to ensure this state of affairs namely, that in respect the six assessment years preceding the assessment year relevant to the year in which the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 143(3) or computed under section 143(1) .In para No. 14, it is mentioned that the Department seeks to place interpretation on the provisions, which if accepted, would lead to serious hardship, inconvenience, injustice, absurdity and anomaly. Finally, it has been mentioned that the Board Circular No. 7 of 2003, dated 5th September, 2003 (2003) 184 CTR (St) 33. Clearly indicates that the appeal, revision etc. arising out of earlier assessment shall not abate, which means that there is no merger of earlier assessments with the assessment made under the new scheme . (v) Further in para 55(d) (g) to (i) the Hon'ble Bench observed as under:- Para d (d)In the case of Padmasundara Rao (Deed.) (Supra) a note of caution has been made that while interpreting a statute, casus omissus should not be readily inferred. Instead all parts of a statute or section must be construed together with reference to the context and other clause so as to make it a consistent statute. We have read the provisions of section 132(1) and section 153A together, which are n the nature of cause and effect and therefore in our humble opinion we have rightly read them together, Reading se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the sanctity is violated not only on detection of undisclosed income or asset but also when books of account or other documents which should have been produced in original assessment as they were relevant to the assessment, have not been produced, but found in the course of search. (i) The decision in the case of Ramallah Gupta (supra) leads to the conclusion that recourse to section 147 cannot be taken for the years which are covered under section 153A. There is other finding regarding reassessment of 6 years also, which is incidental to the aforesaid finding. We may add that we have not held that the assessment can be made only for those years in respect of which books or assets etc, are found We have come to the clear finding that assessment/ reassessment for all six years will have to be made. The real question is the scope of reassessment which is not pending, for which we have read provisions of section 132(1) and section 153A together. Thus the total income under reassessment may be the same as in the original assessment or may be higher than that, depending upon the materials which are uncovered in the course of search. We are also of the view that issue of notice fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in case of Allcargo Global Logistics Ltd Vs. Dy CIT (2012) 137 ITD 287 and order of Special Bench dated 06.07. 2012 has been referred. 6.1 The Special Bench in the case of Allcargo Global Logistics Ltd (Supra) has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.05.2003 and no satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make addition in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with 143(3) , which, according the Anil Kumar Bhatia (supra), such determination , in the orders passed under section 153A would be similar to the orders passed in any reassessment , where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income . Therefore, the AO. Accordingly has to stop short in these proceedings and restrict himself to the income already determined /assessed in the already concluded proceedings for the year(s), whether under section 143(1) or 143(3) .Thus it is a case of valid notice under section 153A, with no undisclosed income to be clubbed with income originally assessed and finalized However, it has to be added here that proceedings under section 153A are linked to the search having been initiated on the person, not with the documents found and seized The documents so found and seized, may become useful to the AO for making an assessment of total income under section 153A read with 143(3). (b) In the case of Shree Yamuna Proteins Dahod Vs. ACIT CC-1, Baroda ITA No. 227 to 232 /Ahd/2010 order dated 21.09.2012 the Hon'ble ITAT Ahmedabad Bench held as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) to delete the adhoc disallowance made by AO does not call for any interference. (e) ACIT Kolkata V s. Hindustan Storage Distribution Co. Ltd. in IT (SS) A NO. 135/Kol/2011 order dated 04.08.2012. Para 3 In view of the above discussion and also bearing in mind the binding nature of Special Bench decision in the case of All Cargo Logistics Ltd. *Supra), we confirm the stand of the Commissioner (Appeals), wherein it has been held that where incriminating material found in the course of search proceedings relating to any assessment year, the completed assessment for such years cannot be disturbed. The stand so taken by the Commissioner is consistent with the stand taken by the Special Bench, Mumbai of this Tribunal, Which has been pointed out earlier, is a binding judicial precedence for us. Accordingly, grievances of the Assessing Officer are rejected. (f) Shri Shankar R.Jhunjhunwala Vs. ACIT Aurangabad IT No. 225/PN111 order dated 31.07.2012 Para 8. Even viewed in the aforesaid context, we find that the claim of the assessee is untenable. In this case, as the Commissioner of Income Tax (Appeals) has observed, the income returned by the assessee under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 for the various assessment years, the same are given hereunder:- Assessment Year Date of Original Return Field Date of Intimation I Assessment Date upto which notice U/S143 could be issued Remark 2004-05 30.03.2005 31.03.2006 31.03.2006 No notice u/s 143(2) was issued, therefore, the assessment has attained finality before the date of search i.e. 04.10.06 2005-06 17.04.2006 31.03.2008 30.04.2007 The time limit for issuance of notice u/s 143(2) has not been expired. Therefore the assessment was still open and in view of the provisions of section 153A such assessment gets abated 2006-07 31.03.2007 31.03.2008 31.01.2008 The time limit for issuance of notice u/s 143(2) has not been expired. Therefore the assessment was still open and in view of the provisions of section 153A such assessment gets abated Under section 153A the Assessing Officer is empowered to assessee or reassess the total income for six assessment years, proceeding to the year of assessment in which search has taken place. There can be only one assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he was substantially interested were also having business dealings with RHPL and were also outstanding in the column of sundry debtors. Hence, it was clearly seen that these loans were just transfer of funds. 29. It is clear from the finding recorded by the Assessing Officer in his assessment order framed u/s 153A that the fact regarding assessee having received loans and advances from three companies, was found only during the course of assessment proceedings. Nowhere the Assessing Officer has referred any incriminating material found during the course of search so as to indicate that advance was given to the assessee in contravention of provisions of section 2(22) (e). However, we found that CIT(A) while dealing with this issue have noted that the information that the assessee has not paid tax on deemed dividend taxable u/s 2(22)(e) came to the knowledge of the authorized officer during the course of search. 30. It is clear from the above that contradictory finding has been recorded by the CIT(A) with respect to information that assessee has not paid tax on deemed dividend taxable u/s 2(22) (e) came to the knowledge of authorized office during the course of search. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied on the order of Assessing Officer and contended that the issue has been decided by Co-ordinate Bench in the case of Narmada Extrusions order dated 30.12.2011. 9. Rival contentions have been considered and records perused. From the record, we found that the assessee had borrowed loans from the following parties :- S.No. Name of the parties PAN No. address 1. M/s. K.K.Patel Finance AABCK4282G Ltd., 114, Starlit Tower, Y.N. Road, Indore. 2. M/s. Purvi Finvest Ltd., AABCP6564C G-1, Rudraksh , 127, Baikunthdham Colony, Indore (M.P.) 3. M/s. Trimurti Finvest AAACT6383N Ltd.,9, Bhoj Nagar, Annapurna Road, Indore. 4. M/s.East West Finvest AAACE6834D Ltd., G01, Rudraksh , 127, Baikunthdham, Colony, Indore MP Page 66 of 79 10. During the course of assessment, the Assessing Officer asked the assessee to establish identity, genuineness and creditworthiness of these creditors. It was submitted that M/s. K.K.Patel Finance Limited, Indore, is being regularly assessed to tax and engaged in the finance activities and they have given the deposits on interest basis to other also. As per balance sheet filed with the Department they have share capital to the tune of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal have also dealt with the merit of the addition and found that addition to be restricted to the extent of entries found in the material collected during the course of survey at Lunkad Group and not to the extent of entire amount of loan so taken from Lunkad Group. 13. From the record, we found that Assessing Officer has made addition in respect of the loans which were taken and even repaid by the assessee. While making the addition, following was the precise observations of the Assessing Officer :- The assessee's balance sheet reflects credits amounting to ₹ 2,70,21,800/-. He asked to explain the genuineness of the credits as well as identity and creditworthiness of the creditor, in response, the assessee has filed confirmations from the said creditors, in response, the assessee has filed confirmations from the said creditors, copies of final accounts have been filed in respect of one creditor and copy of acknowledgement of return in respect of one person. The lender's names include some of the persons who are considered to be regular name lenders'. The names in question alongwith the amount shown as received from them are reflected below :- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of bank account as well as preceding years. By filing these evidences, it can be said that the assessee had discharged the initial burden laid upon him under Section 68. When the particulars regarding income tax assessment and bank account, audited balance sheet duly indicating advancing of loan to the assessee, have been filed then initial burden has to be held to be discharged and then the burden shifts on the Revenue to show that what is stated or explained by the assessee is not satisfactory. No material whatsoever, has been brought on record by the ld. Assessing Officer to show that what was explained by the assessee, was not a correct state of affairs. If any sum is found credited in the accounts of the creditors. Then the creditors may be examined so as to explain the credit so far as the source of deposit in the account of the assessee is concerned. The assessee can be considered to have explained by bringing the material on record in the shape of confirmations, bank account and income tax numbers of that person. Thus the assessee had filed ample evidence to discharge the burden cast upon him and the ld. Assessing Officer has not brought any material on record to show t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... address of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income tax assessees. Their index numbers were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit worthy or were such who could advance the alleged loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do anything further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or preserve or based on no evidence. If the conclusion is based on same evidence on which a conclusion could be arrived at, no question of law as such arises. 22. Now coming to the decision of Narmada Extrusions Limited in I.T(SS).A.Nos. 327/Ind/2011 order dated 30.12.2011, as cited by the ld. CIT DR, we found that in this case also on merit it was held that the addition should be restricted with reference to the incriminating documents found during course of survey in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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