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TMI Blog2017 (8) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 69C of the Act. 2. The CIT(A) erred in law and on facts in deleting the addition of Rs. 36,36,180/- on account of bogus cash credit u/s 68 of the Act. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of hearing of the appeal." The grounds raised by the Revenue in the other two appeals are also similar except the difference in the amounts. 2.1 Grounds raised in C.O.No.396/Del/2014 (In ITA 6697/Del/13) for the A.Y. 2006-07 read as under: "1. That on the facts and circumstances of the case and the provision of law, the Ld. CIT(A) has failed to appreciate that the notice issued u/s. 153C and assessment order passed by the Ld.AO u/s. 153C/143(3) is illegal, bad in law, without jurisdiction and wrong on facts. The additions made are unjust, unlawful and arbitrary and are made against the principles of natural justice. 2. That on the facts and circumstances of the case and the provisions of law, the Ld. CIT(A) has failed to appreciate that the Ld.AO was not justified to ignore the submissions of the appellant that the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. CIT (A) did not give sufficient opportunity of being heard to the appellant and ignored the concept of 'Real Income' and wrongly directed the AO to work out the peak from the entries in the cash books of the appellant company for the relevant year, without granting the credit of the peak of financial transactions as per the cash books for the preceding years. 7.That on the facts and circumstances of the case, the various observations and findings of the Ld.CIT(A) and Ld. AO in the impugned appellate order and assessment order, respectively, is irrelevant and vitiated in the law. 9. That the Ld. CIT(A) has erred in ignoring the fact that the AO has erred both on facts and in law, in using statement of various persons without giving a copy of the same and opportunity to cross examine. 10. That the Ld.CIT(A) has erred in ignoring the explanation given, evidences and material placed and available on record. The same has not been properly considered and judicially interpreted and the same do not justify the additions/disallowances made. The additions have been sustained with preset mind of the Ld. CIT(A) and her order is based on surmises, conjectures and suspicio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Inventories of fabrics and textile goods shown in the balance sheet as the closing stock of the last year stands at Rs. 10,78,36,450/- and for this Assessment year the figure is Rs. 10,86,12,500/- which was almost the same. Therefore, purchase and sales were only out of current year "transactions" which were held unverifiable and bogus. The Assessing Officer further held that the assessee company had no bank account as per the assessee's reply dated 13/12/2010. Therefore, purchases and sales were unverifiable. Therefore, entire purchases of Rs. 40,59,650/- were held bogus and brought to tax as unaccounted expenditure u/s 69C of the Act by the Assessing Officer . Further, the Assessing Officer held that no sale bills were produced. Since, there is no evidence submitted the entire sale of Rs. 36,36,180/- was held as bogus cash credit u/s 68 of the Act. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). Before the CIT(A), the assessee took up the grounds challenging the proceedings under Section 153A of the Act, violation of principles of natural justice and also that on merit. The CIT(A) while rejecting the grounds of challenge to Section 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjective and rational "Satisfaction". The Ld. AR further submitted that there is no clear finding in aforesaid note on i) nature of documents and ii) as to how AO arrived at the satisfaction that same belongs to assessee which is quite crucial and critical iii) the financial implications of documents for the block period. Nothing is comprehensible from the aforesaid note. The Ld. AR submitted that how can the AO without enumeration of basic documents and by mere mentioning of Annexure No's can treat as adequate for arriving at just and valid satisfaction u/s 153C. This, according to the Ld. AR, reflects mechanical recording of the same. On both the above counts, that is non recording of satisfaction by specified authority (being A.O of a searched party) and for total lack of clarity of nature of documents seized and how treated to be belonging to the assessee, makes the instant proceedings null and void and the given note at page 1 cannot be treated as valid for assumption of jurisdiction. 6. The Ld. AR further submitted that there are at least four High Court Decisions (including two from Jurisdictional - High Court reported at [2014] 289 ITR 341; [2014] 270 CTR 467 in case of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The first response to AO in the month of November, 2010 during assessment proceedings (Pages 38 to 43 of Paper Book) that seized document are fully disclosed and accounted and nothing is undisclosed as far as search related documents are concerned remained uncontroverted; ii) At no stage it is controverted that seized documents found during search are not fully disclosed and unaccounted. 9. The Ld. DR relied upon various decisions of the Tribunal & Hon'ble High Court as well as the order of the Assessing Officer. Firstly, the Ld. DR relied upon the decision of the Hon'ble Delhi High Court in case of SSP Aviation Ltd Vs DCIT (20 taxmann.com 214) wherein it is held that in view of provisions of section 153C, satisfaction that is required to be reached by Assessing Officer having jurisdiction over searched person is that valuable article or books of account or documents seized during search belong to a person other than searched person and, it is not necessary that documents so seized must reflect any undisclosed income. The Ld. DR also relied upon the decision in case of CIT Vs Classic Enterprises (35 taxmann.com 244, 219 Taxman 237, 358 ITR 465, 268 CTR 364) wherein the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts or produce the share applicant in proceeding. iv. Sanraj Enginering Pvt. Ltd. Vs. CIT( ITA No. 79/2016) (Delhi) wherein the Hon'ble Delhi High Court held that addition made u/s 68 on account of unsecured loans was justified where initial onus of proving the creditworthiness of the lenders was not discharged by the assessee. v. Naresh Chandra Jain Vs CIT (ITA No.335 of2009) (Allahabad) wherein the Hon'ble Allahabad High Court held that tribunal was justified in holding that amount of loan received by assessee was unexplained income u/s 68 in as much as identity, genuineness, creditworthiness of the transaction is not proved. 11. The Ld. DR submitted that the following decisions may be considered with regard to addition u/s 69C: i. R. Mallika Vs CIT T20171 79 taxmann.com 117 (SC) wherein the Hon'ble Supreme Court dismissed SLP against Madras High Court's ruling that where assessee had not discharged burden as regards source from which investment had been made, investment in property was an unexplained investment and same was rightly added to income of assessee. iii. Kahan Udyog Vs CIT T20131 38 taxmann.com 261 (Delhi)/2013 1 219 Taxman 23 (Delhi)(MAG.) wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque book is incriminating material in his assessment order. Therefore, the provisions of Section 153C and the assessment order passed u/s 143(3) has not been fully satisfied as per the provisions of these Sections. In-fact though the AO relied upon the statements of Shri B. K. Dhingra, the assessee was not given an opportunity to cross examine the said person and hence the principle of natural justice was also not followed by the Assessing Officer. This is another procedural lapse on part of the Assessing Officer. Since in the instant case only cheque book entries belonging to the assessee were found during the course of search in the premises of the M/s. Thapar Homes Group which was not taken into cognizance while making addition in the assessee's case at the time of Assessment, therefore, issue of notice u/s.153C of the Income Tax Act by the AO in our opinion is not a valid notice. Therefore, the decision of the Hon'ble Delhi High Court in the case of SSP Aviation Ltd. (Supra) will not be applicable in the present case. However, since all the entries found in those documents have already been reflected in the books of accounts as per the records furnished by the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sunny Infraprojects Ltd. (ITA No. 502/2016 order dated 24.04.2017), the Hon'ble Delhi High Court held as under: "10. As already mentioned, this Court considers it necessary only to address the issue as to whether what was recovered during the search could be considered to be incriminating material qua each of the Assessees. In that view of the matter, the Court is not answering the other aspects concerning the validity of the initiation of the proceedings under Section 153C of the Act and, in particular, whether the material which may be relevant to the year of the search could justify the re-opening of the assessment for the assessments of the earlier years as was done in the present case. 11. It is important to note that in case of each of these Assessees, returns were filed for the AYs in question. The returns were picked up for scrutiny and the assessment was finalized under Section 143(3) of the Act for each of the Assessees for each of the AYs in question. Notice under Section 153C of the Act was issued to each of the Assessees nearly two years after the actual search of the Minda Group. The copy of the Satisfaction Note prepared by the AO of the Assessee refers to the 'i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee." 14. As far as the present cases are concerned, the documents and material seized are only the balance sheet, audit reports etc., which did not reflect any income that was not already disclosed when the assessments were finalized initially under Section 143(3) of the act. This by itself is sufficient to delete the additions sustained by the CIT(A). Consequently, the ITAT was not in error in ordering such deletion. 15. For the aforementioned reasons, the question framed is answered in the negative i.e., against the Revenue and in favour of the Assessee. The appeals are dismissed but in the circumstances, no orders as to costs." The reliance on the order of the ITAT, Delhi Bench in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not mean that the assessment" can be arbitrary or made without any relevance or nexus with the seized material. Obviously an ITA Nos. 707, 709 and 713 of 2014 of assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete 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 while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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