Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Mridul Commodities Pvt. Ltd. Versus Deputy Commissioner of Income-tax, Kolkata

2016 (10) TMI 498 - ITAT KOLKATA

Unexplained cash credit u/s 68 - assessments framed u/s 153A - bifurcation of abated and unabated assessments - non incriminating material found during the course of search - Held that:- We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

legislature had conferred powers on the ld AO to just follow the assessments 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. Accordingly the grounds raised by the assessee are allowed. - Decided in favour of assessee - I.T (SS). A Nos. 14 & 15/Kol/2015 - Dated:- 7-10-2016 - Shri M. Balaganesh, AM And Shri S.S. Viswanethra Ravi, JM For the Assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

and facts are identical, we dispose of both the appeals by this consolidated order. 2. The only common issue to be decided in these appeals is as to whether the ld CITA is justified in upholding the addition made in the sums of ₹ 20,00,000/- and ₹ 72,00,000/- as unexplained cash credit u/s 68 of the Act in the search assessments framed u/s 153A of the Act in the absence of any incriminating material found during the course of search to that effect. 3. The brief facts of this issue is .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

notice u/s 142(1) of the Act for Asst Year 2012-13. In response thereto, the assessee filed its returns on 9.5.2013 disclosing total loss of ₹ 23,830/- for the Asst Year 2008-09 and total income of ₹ 10,94,660/- for the Asst Year 2009-10. The ld AO observed in his order that the group, primafacie, was found to be generating unaccounted income by suppressing its income by claiming inflated expenses in its flagship concern Rahee Industries Ltd. In the A.Y. 2010-11 Rahee Industries Ltd .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) ; M/s Shambav Distributors Pvt Ltd (Rs. 27,00,000/-) totaling to ₹ 72,00,000/-, he brought the same to tax as unexplained cash credit u/s 68 of the Act for the Asst Year 2009-10 for the same reasons. 4. Before the ld CITA, the assessee objected to the making of additions u/s 68 of the Act in the assessments framed u/s 153A of the Act in as much as there was absolutely no incriminating material found during the course of search which would enable the ld AO to draw an adverse inference wit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

disturbed in section 153A assessment. Similarly for Asst Year 2009-10, it was pleaded that the assessment was originally framed u/s 143(1) of the Act and the time limit for issuance of notice u/s 143(2) of the Act had expired and accordingly it could reasonably be concluded that the said assessment proceeding also had got concluded on the date of search i.e on 22.9.2011. It was pleaded that without having any incriminating material found in the course of search relatable to Asst Year 2009-10, th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lged in generating the unaccounted income and was also indulged in taking and giving accommodation entries. Thus, at least, there were indirect evidences which were gathered in the course of search. 5. The assessee submitted that the ld AO 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 C .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he 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 No. DCIT /CC-XXI/Kol/2014- 15/454 dated 16.7.2014 stated the following .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

sions means - i) books of account, other documents found in course of search but not produced in the course of original assessment and ii) undisclosed income or property discovered in the course of search. Against the above contention of the assessee in case of technical irregularities it is being submitted that assessment u/s 153A means reassessment as per provision of sec. 153A which is being reproduced as under : Therefore, in case of reassessment revisit of the same issues can be made even i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s of share applicant were called for vide q.no. 15, 16 and 30 which are being reproduced as under:- Therefore the allegation that the conclusion was drawn behind the back of the assessee is not correct because in the initial notice as reproduced above the details of share applicant were called for which was complied to after exhausting some opportunities in the first instance and in the second having repeatedly appeared it was the onus of the assessee to come with full details of the share appli .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 subscribing companies are mere paper companies and based on these observations, he dismissed the claim of the assessee. Aggr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

round No.1(a) and on the facts and in the circumstances of the case, the action of Ld. CIT(A) to confirm addition U/s.68 of Income Tax Act, 1961 towards share capital is erroneous, arbitrary and bad in law. (c) That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in confirming addition U/s. 68 of Income Tax Act, 1961 towards share capital fund by relying on various judicial decisions which are distinguishable on facts. (d) That on the facts and in the circu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al found thereon. Reliance was placed on the following decisions in support of his contentions:- 1. CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC) 2. Decision of this tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 dated 9.12.2015 3. CIT vs Kabul Chawla reported in (2016) 380 ITR 573 ( Delhi HC) 4. CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 ( Bom) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion 68 of the Act and hence the addition deserves to be deleted. 9. In response to this, the ld DR argued that the expression incriminating material is not found in the provisions of the Act and it is only the Hon ble Courts which had imported those words while rendering the decisions. He stated that the Hon ble Courts are divided on this issue and placed reliance on the decision of the Hon ble Karnataka High Court in the case of Canara Housing Development Co vs DCIT reported in (2014) 49 taxma .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s 132 of the Act on an assessee. They are :- Section 132(1) - If the concerned authority has in consequence of information in his possession, has reason to believe that - (a) where a person fails to produce the books of accounts and other documents in response to notice u/s 142(1) or summons issued u/s 131(1) of the Act ; or (b) where a person fails to comply with the requirements of summ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

esaid three primary conditions for invoking search proceedings cannot be given a go by while framing section 153A assessments and the instant case falls under section 132(1)(c ) of the Act. The provisions of section 153A of the Act use the expression assess or reassess total income and hence the search 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 follow .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f 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. Once the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is any incriminating material found during the course of search relatable to those concluded years, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and those proceedings were not pending on the date of search to get themselves abated. The provisions of section 153A of the Act are reproduced hereunder for the sake of convenience :- [Assessment in case of search or requisition.77 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

f each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in wh .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he 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 f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s 153A of the Act for those six assessment years. b) In respect of the year of search, notice u/s 143(2) of the Act would be issued and assessment thereon would be completed u/s 143(3) of the Act. c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of sea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

/s 143(2) of the Act has expired or; (ii) assessment years where assessments are already completed u/s 143(3) of the Act ; unless they are reopened u/s 147 of the Act for some other purpose in both the scenarios stated above. 6.4.2. The scheme of assessment proceedings contemplated u/s 153A of the Act are totally different and distinct from the proceedings contemplated u/s 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled al .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the relevant assessment year. 10.2. We also find that recently the Hon ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) held as under:- 37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges 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 issu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd 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 availab .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

edings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii) Completed assessments can be interfered with by the AO .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rial was unearthed during the search, no additions could have been made to the income already assessed. 10.3. We find that the decision relied upon by the ld DR in the case of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) does not in any manner advance the case of the revenue as admittedly the Hon ble Delhi High Court in para 24 of its order had held as under:- 24. We are not concerned with a case where no incriminating material was found during the search conducted under section .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

13) 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) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

could be seen above. For the sake of convenience, the relevant portion of the remand report is reiterated hereinbelow:- Therefore, in case of reassessment revisit of the same issues can be made even if no incriminating materials are found on that issue. 10.6. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version