TMI Blog2016 (10) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... nts already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld DR in this regard deserves to be dismissed. In view of the aforesaid findings we hold that the additions towards share application monies in the sums of ₹ 20,00,000/- and ₹ 72,00,000/- for the Asst Years 2008-09 and 2009-10 respectively , which were unabated / concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search. Hence we hold that the ld AO ought to have only followed the old assessed income either u/s 143(3) or 143(1) of the Act for the relevant years. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the additions made towards share application money. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merr, who is a well known entry operator. There was one case of M/s AMR Construction Ltd. where search was conducted by the Hyderabad Investigation Unit, during which Safeco project Ltd. had accepted that they had not carried any actual sub-contract work for M/s. AMR Construction and had only provided bogus entries. In the F. Y. 2010- 11 too, M/s. Rahee industries Ltd. had debited certain expenses by way of commission payments to M/s. Hooghly Alloy Steel Co. Pvt. Ltd. However, Hooghly Alloys is actually engaged in the business of manufacturing of sponge iron and it is likely that they had not provided any technical service to Rahee Industries Ltd. The group was further alleged to have been routing their unaccounted income back into the business in the form of share capital and share premium in its books of accounts. The ld AO observed that in respect of share application money received in the sums of ₹ 20,00,000/- from Shambav Distributors Pvt Ltd, the assessee could not prove the identity of the subscribers and genuineness of transactions and accordingly proceeded to add the same as unexplained cash credit u/s 68 of the Act for the Asst Year 2008-09. Similarly in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide his letter dated 19.9.2013 asked the assessee the following details :- Please give full details of shareholders fund including those of any increase year wise from A.Y. 2006-07 to 2012-13. In response to this, the assessee drew the attention of the ld CITA to the compliance letter dated 5.3.2014. It was stated that the omission to supply the so-called address and PAN details were not pointed out to the assessee by the ld AO during the course of next hearing on 10.3.2014. The assessee submitted the income tax return acknowledgements of M/s Shambav Distributors Pvt Ltd , M.s Digamvari Agency Pvt Ltd and M/s Wig Wam Finance Investment Pvt ltd along with their statement of accounts to establish the identity and genuineness of shareholders. The ld CITA observed that the assessee submitted only the balance sheet and profit and loss account of the share subscribers but did not file the copies of the bank statements of either of the subscribers or its own bank statements. It was submitted before the ld CITA that since the matter is very old, the copies of bank statements of the share subscribers could not be produced. 6. The ld AO in his remand report in Proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) Genuineness of transactions 7. The ld CITA considered the remand report of the ld AO and examined the balance sheet and the summary of his observations are tabulated hereinbelow:- As on 31.3.2009 Shambav Dist Digamvari Wig Wam Share capital 52,95,000 20,46,000 1,62,66,500 Share premium 4,67,55,000 4,67,04,000 8,31,01,500 Sale of shares 16,00,000 Interest income 95,278 8,37,818 Miscellaneous income 6,940 Returned income 5,690 1,530 25,480 The entire share capital and share premium was invested in the equity shares of other private limited companies including the assessee company. He concluded that the subscribi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , he argued that the entire details of share subscribers were duly examined by the ld CITA and reflected in his order. The ld CITA erroneously came to the conclusion that the said entities are mere paper companies based on the lower income declared by them in the profit and loss account. But what is relevant to be seen for the purpose of explaining the source for making the investments in assessee company is only the availability of cash flow with the said companies which had admittedly been their own funds in the form of share capital and share premium. This fact had not been disputed by the ld CITA in his order. He argued that the entire addition has been made only because in the appraisal report, the investigation wing had made some wild allegations about the assessee group about the generation of unaccounted income. Hence it could be safely concluded that the ld AO had made the additions only to satisfy what has been stated in the appraisal report without having any independent application of mind on his part and without bringing any materials on record in support of the addition and bring evidences in support of the wild allegations made in the appraisal report. He argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h assessment could be framed u/s 153A of the Act irrespective of any incriminating materials. In support of his proposition that section 143(1) is not an assessment, he placed reliance on the following decisions :- Tata Metaliks Ltd vs CIT in ITA No. 301 of 2005 dated 22.9.2014 (Cal HC) DCIT vs Zuari Estate Development Investment Co. Ltd in Civil Appeal No. 6758 of 2004 dated 17.4.2015 (SC) With regard to the addition made on merits, he heavily relied on the order of the ld CITA. 10. We have heard the rival submissions and gone through facts and circumstances of the case. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2008-09 was originally completed u/s 143(3) of the Act and hence it falls under concluded proceeding , as on the date of search. The assessment for the Asst Year 2009-10 was completed u/s 143(1) of the Act. Onc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del Trib) dated 29.6.2016 had addressed this aspect. The relevant head notes is reproduced below:- Section 153A, read with section 143, of the Income-tax Act, 1961-Search and seizure Assessment in case of (in case of section 143(1) assessment)-Assessment year 2004-05- Whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and, thus, said assessment cannot be reopened in exercise of power of section 153A-Held yes (Paras 10 and 12) (In favour of assessee). 10.2 We find that the Co-ordinate Bench of this tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 dated 9.12.2015 reported in 2016-TIOL-167-ITATKOL had explained the aforesaid provisions as below:- 6.4. In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s 132 of the Act :- a) Notice u/s 153A of the Act would be issued on the person on whom the warrant of authorization u/s 132 of the Act was issued for the six assessment years p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merges is as under: i) Once a search takes place under section 132 of the act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the Ay in which the search takes place. ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv) Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Das reported in (2012) 211 Taxman 61 (Del HC) ; Madugula Venu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) ; Filatex India Ltd vs CIT reported in (2014) 229 Taxman 555 (Del HC) ; Jai Steel (India) vs ACIT reported in (2013) 219 Taxman 223 (Del HC) ; CIT vs Murli Agro Products Ltd reported in (2014) 49 taxmann.com 172 (Bom HC) ; CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). Hence it could be safely concluded that the decision of Hon ble Delhi HC in the case of Kabul Chawla supra is the latest one on the impugned issue which had considered the decisions that were quoted by the ld DR and distinguished the same. 10.5. We find that the ld AO had also clearly admitted in his remand report that there was no incriminating materials found in the course of search with regard to the concluded assessment years for making share capital addition as could be seen above. For the sake of convenience, the relevant portion of the remand report is reiterated herei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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