TMI Blog2017 (8) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee against the above three appeals. For the sake of convenience all these appeals were heard together and are being disposed of by this common order. 2. The Grounds of appeals by the Revenue in ITA No. 6697/DEL/2013 for AY 2006-07 are as under: 1. The CIT(A) erred in law and on facts in deleting the addition of ₹ 40,59,650/- as disallowance of purchases u/s 69C of the Act. 2. The CIT(A) erred in law and on facts in deleting the addition of ₹ 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 il ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of law, the Ld. CIT (A) has erred in wrongly directing the AO to work out the peak from the entries in the cash bOOR of the appellant for the relevant year and make a singular addition of the said amount, as unexplained investment/expenditure, ignoring the fact that the same has duly been entered in the audited books of accounts of the appellant for the year under consideration; B) That 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Office held that all the purchases and sales are in cash and the items purchased and sold were textile goods and fabrics. The Assessing Officer further held that There is no name of any companies in these products. Shwals are purchased and sold in pieces and rest other items are sold in meters. It was further observed by the Assessing Officer that the purchases and sales are within M/s Thapar Homes Groups. Inventories of fabrics and textile goods shown in the balance sheet as the closing stock of the last year stands at ₹ 10,78,36,450/- and for this Assessment year the figure is ₹ 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 ₹ 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 eviden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t dated 26.11.2014 in case of Manju Finance Corporation was relied upon by the Ld. AR. The Ld. AR further submitted that instant note is recorded mechanically and without application of mind. The Ld. AR submitted that the same is recorded without even narrating and describing the nature of documents and their financial implications and only Annexure numbers are loosely and vaguely mentioned which do not meet the basic criteria of any objective 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 of 2009 wherein it is held that Once, it is held that the reopening of the assessment is bad in law, then, in our opinion, the CIT (A) as also the ITAT were not justified in dealing with the merits of the case . The Ld. AR has given the following notes as his submissions on High Court of Delhi s decision in case of SSP Aviation (346 ITR 177) which is relied heavily by Revenue at ITAT and CIT(A). Relevant facts of instant case/documents: 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 requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Developers (P) Ltd. (350 ITR 407) wherein the Hon ble Delhi High Court held that where assesseer failed to prove identity and capacity of subscriber companies to pay share application money, amount so received was liable to be taxed u/s 68. iii. CIT Vs. N R Portfolio Pvt. Ltd (29 taxmann.com 291) wherein the Hon ble Delhi High Court held if A.O doubts the documents produced by the assessee, the onus shifts on the assessee to further substantiate the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mandi, Tehsil Mehrauli, New Delhi. I have examined the above mentioned documents/papers and provision of section 153C is invokeable in this case. As the undersigned is also the jurisdictional AO of M/s. Saldi Chits P. Ltd., Khaasra No. 34/7, Village Dera Mandi, Tehsil Mehrauli, New Delhi, this satisfaction note is placed in the file before issuing notice u/s. 153C. Sd/- ACIT, Central Circle-17, New Delhi The Assessing Officer has not set out as to how the said 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 whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Satisfaction Note could have formed a valid basis for the AO to initiate proceedings against the Petitioner under Section 153C of the Act for AY 2010-11 or any of the other years as proposed. 20. For all the aforementioned reasons, the Court quashes the impugned notice dated 23rd July, 2014 issued by the AO to the Petitioner under Section153C of the Act and all proceedings consequent thereto including the order dated 16th March 2016 of the AO. In case of Pr.CIT vs. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... RRJ Securities Limited (supra) noted as under: 35. ..Section 153C only enables the AO of a person other than the one searched to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e. a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 153A 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 evidence found, it does 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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