TMI Blog2018 (4) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... ame was passed after the appointed date of 1-4-2007 on a non-existent entity. See CIT v. Intel Technology India (P.) Ltd. [2015 (5) TMI 614 - KARNATAKA HIGH COURT] Unaccounted cash payments - Held that:- AO is not sure as to who the assessee and what is the nature of transaction and why it requires to be added. Under such circumstances the addition lacks substance and not supported by any evidence requires to be deleted. Addition u/s 68 - Held that:- Addition made by the AO in respect of share application money on protective basis as unexplained cash credits u/s 68 of the Act and deleted by the ld CIT(A) in the impugned order cannot be treated as unexplained cash credits in the hands of the assessee. - ITA No. 911 & 912/Bang/2015, 779, 780 & 781/Bang/2015, 1106/Bang/2015, 1113/Bang/2015 - - - Dated:- 10-4-2018 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER Appellant By : Shri K.R. Pradeep, C.A. Respondent By : Shri K.V.Arvind, Standing Counsel for Dept. ORDER These are a bunch of seven appeals. The assessee's appeals for Assessment Years 2005-06 and 2007-08 are directed against the orders of the Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missing the ground on validity of search. 8. The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law. 9. The authorities below erred in making addition of ₹ 1,83,50,000/- as alleged cash credit in the hands of the assessee. 10. The authorities below erred in relying on material and statements without furnishing the same to the assessee before passing the assessment order. 11. The authorities below erred in relying on statements without providing opportunity to cross examine. 12. That the approval granted u/s 153D of the Act is not as per law. 13. The appellant denies the liabilities of interest u/s 234B, 234C and 234D of the Act. Further prays that the interest if any should be levied only on returned income. 14. No opportunity has been given before levy of interest u/s 234B, 234C and 234D of the Act. 15. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234B, 234C and 234D of the Act. 16. The levy of interest u/s 234D is against the express provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as vague. The AO had sought reply without furnishing the evidence or information in his possession. The Ld. CIT-A who confirmed the order of the AO by reiterating the reasons given in the asst. order and ignored the argument of the assessee on the issue of lack of incriminating material and also binding decision of the Hon'ble Supreme Court in Lovely Exports - 216 CTR 195 (CLPB page 509). In this regard it is submitted neither the notice u/s 142(1) nor the asst. order makes a mention of any seized material which is incriminating in nature. The intimation u/s 143(1) of the Act was passed on 24-10-2005 (PB page 1A). The time limit for issue of notice u/s 143(2) of the Act was 30-09-2006 and since no notice u/s 143(2) of the Act has been issued the assessment stands concluded. Even in such cases, no reassessment u/s 153A can be made unless there is incriminating material. The assessee places reliance on the following decisions: All cargo global logistics limited v. DCIT - 147 TTJ 513- Bombay ITAT (SB). Kusum Gupta v. DCIT - 35 CCH 432 - Delhi ITAT - CLPB page 403/409 to 411 CIT v. Kabul Chawla - 380 ITR 573 - Delhi HC. Since there is no material seized in the hands of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2, 3, 9, 10 and 12 been returned by postal authorities with the endorsement no such person/not known/not found . The person at Sl.No. 5 denied the transaction and also knowledge about the assessee. ii. The result of the enquiry was show cause to the assessee. The assessee failed to discharge the burden of genuiness and identity of the 13 persons. As the assessee failed to establish the identity of the shareholder, creditworthiness and genuiness of the transaction, the Assessing Officer treated a sum of ₹ 1,83,50,000/- as an unexplained credit under section 68 of the Act. The above finding has been confirmed by the Appellate Commissioner. REPLY TO ASSESSEE SUBMISSIONS i. The assessee has relied on the addition of the Supreme Court in the case of Lovely Exports 216 CTR 195. The above judgement is not applicable in the facts and circumstances of the present case. In the case before the Supreme Court the identity, creditworthiness and genuiness of the shareholder was not in dispute. In the circumstances, the Supreme Court held that the same cannot be considered in the hands of the company. ii. The requirement of identifying the shareholder, creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e approval has been granted strictly in conformity with the provisions of the Act. Wherefore it is respectfully prayed that the appeal filed by the assessee may be rejected in the interest of justice and equity. 3.4.1 We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. In the case on hand, the assessee filed its return of income for Assessment Year 2005-06 on 2-9-2005 and the return was processed under Section 143(1) of the Act on 24-10-2005 (copy placed at page 1A - Paper Book). Therefore, the time limit for issue of notice under Section 143(2) of the Act was upto 30-9-2006. Since no notice there under was issued within the time specified by law, the assessment for Assessment Year 2005-06 does not abate as per the provisions of Sec. 153A of the Act and re-assessment if any must be carried out on the basis of incriminating material found during search. 3.4.2 We have carefully perused the order of assessment for Assessment Year 2005-06 dt.28-3-2013 and also the copy of panchanama and Annexures details of seized material as per panchanama (copies placed at pages 176 to 205 of Paper Boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d search when certain incriminating materials are detected. At paras 45 to 49 of its decision, the Hon'ble High Court has held as under : 45. Sections 153A, 153B and 153C were inserted by the Finance Act, 2003, with effect from 1/6/2003. They have replaced the post-search block assessment scheme in respect of any search or requisition made after 31/5/2003. Sub-section (i) of Section 153A inter alia deals with assessment in case of search or requisition. It begins with a non obstante clause and states that notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated under Section 132 or books of account, other documents or any valuable assets are requisitioned under Section 132A, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, return of income in respect of each assessment year falling within six assessment years referred to in clause (b) of Section 153(1) in the prescribed form and verified in the prescribed manner arid setting forth such other particulars as may be prescribed and the provisions of the Act shall, so f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levant to the previous year in which search is conducted under Section 132 or requisition is made under Section 132A and in respect of such assessment year - (a) no return of income has been furnished by such other person and no notice under sub section (1) of Section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub- section (2) of Section 143 has been served and limitation of serving the notice under sub-section (2) of Section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or valuable assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue notice and assess or reassess total income of such other person of such assessment year in the manner provided in Section 153A. 47. Chapter XIV-B consists of Section 158B to 158BH, inserted with effect from 01/07/1995, deals with special procedure for assessment in search cases. The Finance Act, 1995 inserted Chapter XIV-B In the Act, incorporating a new scheme of block assessment in cases relating to search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessments which have become necessary, because of books of accounts, documents or valuable assets of third parties irdicating their undisclosed income found during the search or requisition under Section 132/132A leading to a prima facie tax liability. A special procedure is contemplated in such cases. Such books of accounts, documents or valuable assets are required to be handed over by the Assessing Officer having jurisdiction over the persons searched requisitioned to the assessing officer of a third party on his satisfaction that they belong to a third party before handing over. 49. On a conjoint reading of the aforesaid provisions, it becomes clear that a search can take place only when a concerned officer has information and reason to believe that any person is in possession of any valuable assets, which has not been or would not be disclosed under the Act. In such a case, a search can take place. Following the search, if any books of account, other documents, any valuable assets is or are found in the possession or control of any person in the course of a search, then the books of account or other documents or valuable assets could be seized. Under Section I53A, the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 5. In the result, the assessee's appeal for Assessment Year 2005-06 is allowed as indicated above. Assessee's appeal in ITA No.912/Bang/2016 for A Y 2007-08. 6. This appeal by the assessee is directed against the order of the CIT (Appeals) - 11, Bangalore dt.14-3-2016 for A.Y. 2007-08. 7. Briefly stated, the facts of the case are as under :- 7.1.1 A search and seizure action under Section 132 of the Act was conducted in the case of Sri Dinesh Kumar Singhi, Bharat Mines and Minerals and the assessee on 19-7-2010. Pursuant to search, the assessee was issued a notice under Section 153C of the Act dt.22-11-2012 for Assessment Year 2007-08 and in response thereto, the assessee filed return of income on 11-2-2013 declaring a loss of ₹ 4,40,07,830 and also filed a letter dt.5-2-2013; recorded at pages 1 2 of the order of assessment, which reads as under :- This has reference to the notice issued by you u/s.153C of the Act and subsequent notice and letter issued by you dt.2-1-2013 and 28-1-2013 respectively, having reference No.AABCH3700J/DCIT/CC-1(2)/2012-13. In this regard, kindly note that the materials listed in the notice do not belong to us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid, time barred and infructuous. 7. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 8. The CIT-Appeals erred in dismissing the ground on validity of search. 9. The authorities below erred in making addition of ₹ 1,93,47,798/- as unaccounted production of Sponge Iron and clandestine removal of the same. 10. The authorities below erred in making addition of ₹ 55,22,060/- as unaccounted production of MS Billets and clandestine removal of the same. 11. The authorities below erred in making addition of ₹ 2,28,73,865/- as unaccounted production of TMT Bars and clandestine removal of the same. 12. That the approval granted u/s 153D of the Act is not as per law. 13. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered. 9. Before us, the learned Authorised Representative for the assessee and the ld. Standing Counsel for Revenue were heard and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeding can be taken against the company. Any order against the non existent company is a nullity and void. In a similar circumstance Hon'ble ITAT Bangalore in the case of GE Medical Systems in CLPB page 427 para 4.4.2 has held that the order is a nullity and void. Similarly in the case of CIT v. Indu Surveyors Loss Assessors Pvt Ltd - ITA 365 to 368, 371,372/2013 - Delhi HC CLPB page 465 has held in para 7 as under: 7. In identical circumstances, in cases arising out of the same search, this Court has by its order dated 19th August, 2015 in the Revenue's appeals ITA Nos.582, 584, 431, 533, 432 433 of 2015 (Pr. Commissioner of Income Tax (Central-II) v. Images Credit And Portfolio Pvt. Ltd.) and order dated 29th September, 2015 in ITA Nos.745, 746,748, 749 and 750/2015 (Pr.Commissioner of Income Tax (Central-2) v. M/s Mevron Projects Pvt. Ltd.) invalidated the assessment proceedings against the Assessee in those cases which, on account of having merged with another entity with effect from a date anterior to the search, also no longer existed on the date of search, on the date of the issue of notice and consequent assessment order passed under Section 153 C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stoms and Central Excise Settlement Commission with regard to the unaccounted quantity and its assessable value. The assessee admitted certain quantity of unaccounted sponge iron was used by itself for manufacturing MS Billets and unaccounted TMT bars were removed clandestinely. The assessee being successor company in view of the amalgamation, worked out the unaccounted and quantity of TMT bars before the settlement commission assessable value at ₹ 4,77,43,723/-. 4. The assessing officer has treated the unaccounted income of the assessee in view of the admission before the settlement commission and the same has been rightly upheld by the Appellate Commissioner. Hence the unaccounted income from sale of unaccounted TMT bars as admitted by the assessee is justified. Wherefore it is prayed that the appeal filed by the assessee be rejected in the interest of Justice and equity. 10. Ground No.4 - Validity of notice, proceedings and Asst. Order against non-existent entity. 10.1 We have considered the rival submissions, perused and carefully considered the material on record; including the judicial pronouncements cited. The preliminary issue raised in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment for Assessment Year 2007-08 dt.28-3-2013 is invalid and accordingly cancelled as the same was passed after the appointed date of 1-4-2007 on a non-existent entity. Consequently, ground No.4 of assessee's appeal is allowed. 11. In view of our decision on ground No.4 of the assessee's appeal on the issue of validity of assessment, we do not deem it appropriate to take up for consideration and adjudicate the other grounds and issues raised by the assessee. 12. In the result, the assessee's appeal for Assessment Year 2007-08 is allowed as indicated above. Assessee's appeals in ITA Nos.779 to 781/Bang/2015 for Assessment Years 2008-09 to 2010-11. 13. These three appeals by the assessee are directed against the order of the CIT (Appeals) - 11, Bangalore dt.27-2-2015 for Assessment Years 2008-09 to 2010-11. 14. Briefly stated, the facts of the case are as under :- 14.1 A search and seizure action under Section 132 of the Act was conducted at the assessee's premises on 19-7-2010. Pursuant thereto, notices under Section 153A of the Act were issued to the assessee for Assessment Year 2008-09 to 2010-11. In response thereto, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order. 14. The authorities below erred in relying on statements without providing opportunity to cross examine. 15. That the approval granted u/s 153D of the Act is not as per law. 16. The appellant denies the liabilities of interest u/s 234A, 234B, 234C and 234D of the Act. Further prays that the interest if any should be levied only on returned income. 17. No opportunity has been given before levy of interest u/s 234A, 234B, 234C and 234D of the Act. 18. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234A, 234B, 234C and 234D of the Act. 19. The levy of interest u/s 234D is against the express provisions of the law. 20. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered. For Asst. Year 2009-10 1. That the order of the authorities below in so far as it is against the appellant is against the law, facts, circumstances, natural justice, without jurisdiction, bad in law and all other k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stances, natural justice, without jurisdiction, bad in law and all other known principles of law. 2. That the total income computed and total tax computed is hereby disputed. 3. The proceedings of search and all other subsequent proceedings are bad in law, without jurisdiction and invalid. 4. The notice u/s 153A and subsequent proceedings are without jurisdiction and bad in law. 5. The order u/s 143(3) r.w.s 153A is bad in law, invalid, time barred and infructuous. 6. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 7. The CIT-Appeals erred in dismissing the ground on validity of search. 8. The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law. 9. The CIT-Appeals erred in refusing to rely on the decision of the Special Bench in All Cargo Global Logistics Limited on the issue of abatement of assessment. 10. The authorities below erred in making addition of ₹ 15,27,27,045/- as unaccounted cash payments m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same. The AO's action is not as per law and the assessee is not aware as to how the said conclusion was arrived at. There is no discussion about the Settlement Commission Order or any other nature. The issue has never been raised for the assessee's clarification in any of the notices mentioned above. Consequently the order suffers from non adherence to the principles of natural justice and hence the addition be deleted. 2. Addition of ₹ 16,71,82,094/- as unaccounted cash payments Sum of ₹ 16,71,82,094/- has been added substantively in the hands of the assessee and protectively in the hands of M/s Bharath Mines and Minerals. As mentioned in para 3.2 of the assessment order, the AO has discussed at length various materials alleged to have been seized from others other than the assessee and also statements said to have been made by various people. No notice or proposal has been given to the assessee before making the said addition. In para 2.28 of the assessment order, it is said that notice dt. 07-01-2013 was served on the assessee on 11-01-2013. It is also said that the assessee had filed a reply on 28-02-2013. Neither any notice was served on the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 411 (3) CIT v. Kabul Chawla - 380 ITR 573 - Delhi HC - CLPB page 170/171 In this case neither any notice nor assessment order mentions any material seized from the assessee. The only seized material seized from the assessee is as per panchnama pages 175 to 205 being A/BMMIL/01, A1/BMMIL/01,A2/BMMIL/1, A3/BMMIL/01. There is no reference to such seized material, moreover the material seized is not incriminating in nature. In such cases it has been held that no assessment u/s 153A can be made and requires to be vacated as held in (1) CIT v. Lancy Constructions - ITA 528 to 531/2014 - KAR HC - (2) CIT v. Continental Warehousing Corporation - 374 ITR 645 - Bombay HC (3) Jai Steel (India) v. ACIT - 259 CTR 281 - RAJASTHAN HC (4) PCIT v. Desai Construction Pvt Ltd - 387 ITR 552 - GUJ HC (5) CIT v. Kabul Chawla - 380 ITR 573 - Delhi HC. Secondly, the AO made an addition of ₹ 16,71,82,094 based on certain material seized from Bharat S Ghorpade and Dinesh Kumar Singhi mentioned A/BSG/01 , A/BSG/02 and A/DKS-1. These materials does not belong to the assessee and no proceeding u/s 153C has been held before use of the aforesaid material against the assessee. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted. Adverting to addition of ₹ 1,73,07,617/- towards unaccounted production of TMT bars, again the said addition is not made based on the incriminating material found during search. In such absence the addition requires to be deleted as explained supra. On the issue of approval u/s 153D the assessee relies on the submissions given supra for AY 2005-06. The grounds on interest u/s 234A/B/C are consequential in nature.' ITA 780/Bang/2015 - Asst. Year 2009-10 - BMMIL The assessee for the above assessment year filed its return of income on 29-09-2009 declaring book profit of ₹ 2,82,23,130/- (PB page 64). Further, notice u/s 153A was issued on 21-09-2010 calling for filing the return of income (PB page 65). Assessee filed the return of income on 'without prejudice' basis on 31-01-2012 declaring book profit of ₹ 2,82,23,130/- (PB page 66). The assessee has submitted all the details sought for and clarified on the issues raised in the notices. Strangely, the AO has completed the assessment by computing the total loss of ₹ 14,08,09,180/- after making additions of ₹ 19,06,35,900/-. However book profit of ₹ 2,82,23,1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/BSG/01 seized from Bharat S Ghorpade. However though the proposal was made for ₹ 3,21,53,235/- he proceeded to make addition of ₹ 15,27,27,045 based on the reasons given in AY 08-09. Addition is made based on seized material A BSG/02 besides A/BSG/01 though no notice proposing to add based on A/BSG/02 has been given. In this regard the assessee relies on the decision of Supreme Court in Suraj Mall Mohta Co. v. A.V. Visvanatha Sastri Anr - 26 ITR 1 (CLPB page 143). For the reasons and arguments mentioned supra in AY 08-09 and AY 09-10, it is submitted that the addition may be deleted. On the issue of approval u/s 153D the assessee relies on the submissions given supra for AY 2005-06. The grounds on interest u/s 234A/B/C are consequential in nature. 15.4.1 Revenue's submissions are as under : Assessment Year 2008-09 (ITA No.779/Bang/2015) i. During the course of search it was found that Mrs Snehalatha Singhi entered into raising and processing contracts with mine owners M/s. Karthikeyas Manganese and Iron Ores Pvt Ltd (KMIORE) and Mrs. Ambika Ghorpade (AKG). The processed ore was handed over by Mrs Snehalatha Singhi to the mine owners and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inesh Kumar Singhi has admitted recordings of transactions pertaining to the assessee. REPLY TO ASSESSEE SUBMISSIONS i. The contention of the assessee that the material indicating the purchase of iron ore with permit and without permit were not made available to the assessee and addition is based on surmise is incorrect. The above material has been confronted to the concerned persons and the same has been accepted by them. The relevant statements recorded have been extracted in the order of assessment and also the seized material has also been scanned and placed in the order of assessment. In view of the above contention of the assessee is not acceptable. ii. Further contention of the assessee that in view of the time-limit for issue of notice under section 143 (2) of the Act being expired on the date of search, no assessments can be made without the aid of incriminating material seized from the assessee and relates to the impugned year is incorrect. On plain reading of section 153A of the Act, section does not contemplate either incriminating material found in the course of search or undisclosed income being unearthed in the course of search. As per the law laid do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act is not confined to the seized material and the Assessing Officer is empowered to assess or reassess the total income on the basis of the material found in the course of any other proceedings or the material in possession of the Assessing Officer or any other material found in the course of search. In view of the above law laid down by the jurisdictional High Court in the case of Canara Housing, though the material found in the possession of the other person, the Assessing Officer was justified in considering the same in the proceedings under section 153A of the Act. Further the Act does not contemplate parallel proceedings under section 153A and 153C of the Act. The acceptance of the contention of the assessee would be contrary to the scheme of the chapter dealing with search assessments. 3. LEGALITY OF THE EXPENDITURE ON PURCHASE OF IRON ORE WITH AND WITHOUT PERMITS i. The Assessing Officer rightly arrived at a conclusion that the payments made for purchase of iron ore without permit is not an allowable expenditure as the same was in violation of the law governing the mining activity and transport of iron ore. It is further found that the consideration received to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of validity of the search action. The ITAT is a creation of statute and has to apply the law as laid down in the Act. In this view of the matter, this issue is decided against the assessee and consequently Ground No.7 of assessee's appeals for A.Y. 2008-09 to 2010-11 are dismissed. 17. Ground Nos.1 to 6, 8 9 (For A.Y. 2008-09) 17.1 The main contentions in the assessee's arguments put forth on other legal grounds is that in the case on hand there was no seizure of any incriminating material relevant to the impugned Assessment Year 2008-09 and further there is no mention of any incriminating or adverse material in the order of assessment that refers to the assessee, BMM Ispat Ltd. Consequently, the assessment for Assessment Year 2008-09 does not abate as per the provisions of Sec. 153A of the Act and therefore no reassessment can be made; as has been done in the case on hand. 17.2.1 We have perused the order of assessment for Assessment Year 2008-09 dt.28-3-2013; copy of the material seized as per copy of panchanama (placed at Paper Book pages 176 to 205); containing Annexures of the seized material, at files A/BMMIL/01, A1/BMMIL/01, A2/BMMIL/01 and A3/BMMIL/01 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ldge Park (P.) Ltd.'s case (supra) has explained the entire scope and principles governing the provisions of Sec. 153A and 153C of the Act. In their judgment, the Hon'ble Court has considered several decisions on this issue including Lancy Constructions case (supra) cited by the assessee and Canara Housing Development Co.'s case (supra) cited by Revenue. In its decision, in the case of IBC Knowledge Park (P.) Ltd. (supra) the Hon'ble Karnataka High Court has held that notice under Section 153A of the Act can be issued only if it is during a valid search when certain incriminating materials are detected. At paras 45 to 49 of its decision, the Hon'ble High Court has held as under : 45. Sections 153A, 153B and 153C were inserted by the Finance Act, 2003, with effect from 1/6/2003. They have replaced the post-search block assessment scheme in respect of any search or requisition made after 31/5/2003. Sub-section (i) of Section 153A inter alia deals with assessment in case of search or requisition. It begins with a non obstante clause and states that notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, in the case of a person where a se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or documents or valuable assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of Section 153A. Sub-section (2) of Section 153C states that where books of account or documents or valuable assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment- year relevant to the previous year in which search is conducted under Section 132 or requisition is made under Section 132A and in respect of such assessment year - (a) no return of income has been furnished by such other person and no notice under sub section (1) of Section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub- section (2) of Section 143 has been served and limitation of serving the notice under sub-section (2) of Section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person and that Assessing Officer shall proceed under Section 158BC against such other person and the provisions of Chapter XIV-B shall apply accordingly. Section 158BE prescribes time limit for completion of block assessment. Section 158BH states that except as otherwise provided in Chapter XIV-B all other provisions of the Act shall apply to the assessment made under the said chapter. Section 153C provides for the role of the Assessing Officer having jurisdiction ever the person searched/requisitioned as regards third party liability. The said section covers assessments which have become necessary, because of books of accounts, documents or valuable assets of third parties irdicating their undisclosed income found during the search or requisition under Section 132/132A leading to a prima facie tax liability. A special procedure is contemplated in such cases. Such books of accounts, documents or valuable assets are required to be handed over by the Assessing Officer having jurisdiction over the persons searched requisitioned to the assessing officer of a third party on his satisfaction that they belong to a third party before handing over. 49. On a conjoint reading of the afor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... criminating material was found / seized, we are of the view and hold the order of assessment for Assessment Year 2008-09 passed under Section 143(3) r.w.s. 153A of the Act vide order dt.28-3-2013 is bad in law and accordingly cancelled. Consequently, the original assessment and income returned as per the original return of income filed on 21-10-2009 stands restored. Assessee's appeal for Assessment Year 2008-09 is allowed in terms of Grounds 1 to 6 and 8 9. 18. Since we have allowed the assessee's appeal for Assessment Year 2008-09 in view of our findings rendered above at paras 17.1 to 17.2.4 of this order (supra), we do not deem it necessary to adjudicate on the other grounds 10 to 20 raised on merits, by the assessee. 19. In the result, the assessee's appeal for Assessment Year 2008-09 is partly allowed. Assessee's appeals in ITA Nos.780 781/Bang/2015 for A.Ys 2009-10 and 2010-11. 20. Grounds 1 to 6, 8, 9 14. 20.1 In these grounds (supra), the assessee has challenged the validity of search (Ground No.7) which we have dismissed (supra) and consequently contended that all subsequent proceedings such as issue of notices under Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest chargeable under Section 234A, 234B and 234C of the Act, if any, while giving effect to this order. 23. In the result, the assessee's appeal for Assessment Years 2009-10 2010-11 are partly allowed. Assessee's appeal in ITA No.1106/Bang/2015 Department's appeal in ITA No.1113/Bang/2015 24. These are cross appeals, one by the assessee and the other by Revenue, directed against the order of the CIT (Appeals) - 11, Bangalore dt.22-5-2015 for Assessment Year 2011-12. 25. Briefly stated, the facts of the case are as under :- 25.1 A search and seizure operation under Section 132 of the Act was conducted in the assessee's case on 19-7-2010. The assessee filed its return of income for Assessment Year 2011-12 on 31-1-2012 declaring total income of ₹ 45,63,86,880. The assessment was concluded under Section 153A r.w.s. 143(3) of the Act vide order dt.28-3-2013, wherein the assessee's income was determined at ₹ 130,24,08,180 in view of the following additions / disallowances :- (i) Cash credits : u/s.68 : ₹ 56,40,00,000. (ii) Unaccounted payment / expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e liabilities of interest u/s 234A, 234B and 234C of the Act. Further prays that the interest if any should be levied only on returned income. 14. No opportunity has been given before levy of interest u/s 234A, 234B and 234C of the Act. 15. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234A, 234B and 234C of the Act. 16. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered. Revenue's appeal. 26.2 In Revenue's appeal, the grounds raised are as under :- (i) The learned CIT (Appeals) has erred in deleting the addition made protectively towards unexplained cash credits / unaccounted payments. (ii) For the above and other grounds that may be agitated during the course of appeal, the order of the learned CIT (Appeals) may be set aside and that of the Assessing Officer restored. 27. Before us, apart from putting forth oral arguments, both the assessee and revenue have filed written submissions w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssions given supra for AY 2005-06. The grounds on interest u/s 234A/B/C are consequential in nature. 27.2 Department's Submissions. (ITA No.1113/Bang/2015 A.Y. 2011- 12) CASH PAYMENTS MADE TO MRS AMBIKA GHORPADE AND M/S.KMIORE The Assessing Officer has adopted the reasons assigned in the order of assessment for 2008-09 in the case of the assessee. The submissions for Assessment Year 2008-09 in the case of the assessee is relied on and stated below for convenience. i. During the course of search it was found that Mrs Snehalatha Singhi entered into raising and processing contracts with mine owners M/s. Karthikeyas Manganese and Iron Ores Pvt Ltd (KMIORE) and Mrs. Ambika Ghorpade (AKG). The processed ore was handed over by Mrs Snehalatha Singhi to the mine owners and the mine owners in turn sell the ore to the entities owned by Mr. DineshKumar Singhi i.e Bharat Mines and Minerals and BMM Ispat. The mines KMIORE belongs to Mr. Karthik M Ghorpade and his wife Mrs Ambika Ghorpade. The mines have been termed as new mines (NM) and old mines (OM) as per the timing of start of the mining lease of two mines. The profit has been shared between the mine owners and the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the same has been accepted by them. The relevant statements recorded have been extracted in the order of assessment and also the seized material has also been scanned and placed in the order of assessment. In view of the above contention of the assessee is not acceptable. ii. Further contention of the assessee that in view of the time- limit for issue of notice under section 143 (2) of the Act being expired on the date of search, no assessments can be made without the aid of incriminating material seized from the assessee and relates to the impugned year is incorrect. On plain reading of section 153A of the Act, section does not contemplate either incriminating material found in the course of search or undisclosed income being unearthed in the course of search. As per the law laid down by the Supreme Court in the case of Calcutta Knitwear (2014) 362 ITR 673 (SC), section has to be read in plain and reading new words into the section is not permissible. If the contention of the assessee is to be accepted regarding incriminating material, the same would amount to rewriting of the section 153A of the Act. iii. The above position has also been clearly held by the jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the material found in the possession of the other person, the Assessing Officer was justified in considering the same in the proceedings under section 153A of the Act. Further the Act does not contemplate parallel proceedings under section 153A and 153C of the Act. The acceptance of the contention of the assessee would be contrary to the scheme of the chapter dealing with search assessments. LEGALITY OF THE EXPENDITURE ON PURCHASE OF IRON ORE WITH AND WITHOUT PERMITS The Assessing Officer has adopted the reasons assigned in the order of assessment for 2008-09 in the case of the assessee. The submissions for Assessment Year 2008-09 in the case of the assessee is relied on and stated below for convenience. a. The Assessing Officer rightly arrived at a conclusion that the payments made for purchase of iron ore without permit is not an allowable expenditure as the same was in violation of the law governing the mining activity and transport of iron ore. It is further found that the consideration received towards sale of iron ore without permit has been inflated against the ore sold with permit and the same is reflected from the seized material placed at page 28, 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply the law as laid down in the Act. In this view of the matter, this issue is decided against the assessee and the grounds raised in this regard are dismissed. Consequently, Grounds 1 to 6 and 12 raised by the assessee challenging the validity of search are dismissed. 29. We have already held in the earlier paragraphs for earlier Assessment Years that assessment u/s.153A r.w.s. 143(3) of the Act could have been made only on the basis of incriminating material found and seized in the course of search of the assessee by following the decision of the Hon'ble jurisdictional High Court in the case of IBC Knowledge Park (P.) Ltd. (supra). This principle equally applies to these assessment years as well since no incriminating material was found and seized. Consequently, in the light of the record before us, we find that aforesaid addition / disallowance of ₹ 12,95,46,334 for this assessment year factually unsustainable and therefore delete the same. Consequently, Ground Nos.10 to 13 for Assessment Year 2011-12 is allowed. 30. Ground No.9 Set off of Brought Forward Business Loss ₹ 15,27,79,968. 30.1 In this ground, the assessee assails the action of the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res received from M/s. Panchmukhi Properties Pvt. Ltd. should not be treated as its unexplained income as the Assessing Officer was of the view that the credit worthiness and the transactions of the aforesaid two entities was not genuine. Brushing aside the assessee's contentions in letter dt.20-12-2013, that the aforesaid that the aforesaid transactions were through normal banking channels and established both the identity, credit worthiness of the above two parties, the Assessing Officer was of the view that the assessee has not discharged its onus in this regard and made an addition of ₹ 56.40 Crores as unexplained cash credits of the assessee under Section 68 of the Act on protective basis, since he had made the same addition of ₹ 54.60 Crores in the hands of Sri Dinesh Kumar Singhi and Smt. Snehalatha Singhi on substantive basis. On appeal, the learned CIT (Appeals) deleted the aforesaid protective addition of ₹ 56.40 Crores in the assessee's hands; holding as under at para 8 on pages 9 and 10 of the impugned order :- ** ** ** After going through the facts of the case and as held by me in my order of even date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re extracted below for convenience. UNEXPLAINED INVESTMENT IN SHARES APPLICATION MONEY i. During search it was found that company by name M/s.BPO Finance and Investments Private Limited (BPO), Kolkatta has issued and subscribed shares of ₹ 10 per share aggregating to ₹ 1,99,98,700/-. Further it was found that during the year the assessee and his wife have acquired 100% of the above issued and subscribed share capital. The shares were purchased from various parties by the assessee as listed in page 2 to 4 of the assessment order. The assessee in total has acquired 60% of the total shares issued and subscribed. In view of the acquisition of 100% of the issued and subscribed share capital of the above company, took over reserves and surplus of the above company at ₹ 125,40,64,500/- as on 31/3/2010. ii. Similarly another company by name M/s.Panchamukhi Properties Private Limited (PPPL) Kolkatta issued and subscribed shares of ₹ 10 per share aggregating to ₹ 2,22,91,950/-. The assessee purchased 60% of the shares and his wife purchased remaining 40% of the issued and subscribed shares. The details are tabulated in page 5 and 6 of the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered as shell entities with no independent business. The above companies were merely used as conduits to plug back unaccounted funds into the four group companies named above. The result of enquiries demonstrated BPO and PPPL are not genuine investors and is modus of bringing in share application money is only a smoke screen. ix. Though assessee did not cooperate in providing details of the directors of the above said to companies, the Department obtained the same from the ROC and it was found that Ms.Soma Dutta, Mr.Ranjeet Singh Kothari and Nemichand Jain are directors of the PPPL and Mr.Radhakant Tiwari and Ms.Soma Dutt are directors of BPO. The assessee and his wife were also directors in both the companies during the Assessment Year 2010-11. The enquiries revealed that some of the directors or employees of Mr.Sagarmal Nahata was arranging funds at Kolkatta. One of the director was found to be watchmen. The directors were not residing at the addresses provided. The signed blank cheques of the companies were found in the possession of Mr.Sagarmal Nahata. x. In view of the disproportionate investment of acquiring to companies worth ₹ 226 crores by paying a sum of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real transaction with respect to the share application money by lifting the veil and creating nexus with the investment to the payments made by the assessee as found and reflected in the seized documents. The failure on the part of the assessee to demonstrate the issues raised by the Assessing Officer in the course of post-search investigation or during the assessment proceedings would further justify the devise adopted by the assessee for investing his own unaccounted money into the subsidiaries. A. REPLY TO ASSESSEE CONTENTIONS i. The contention of the assessee that the existence of BPO and PPPL cannot be doubted in view of the long existence before the assessee acquired the shares and the bank accounts maintained by the said companies. The failure on the part of the assessee being holder of 60% of the shares and 40% of shares by his wife to identify the genuiness of the company and also the directors of the company would demonstrate the object of the said two companies owned by the assessee and his wife. The Hon'ble Supreme Court in the case of Vodafone has clearly held that the companies without any business being carried out, being used as a conduit for device for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record, including the judicial pronouncements cited. From the appraisal of the records before us, it emerges that the assessee received share application money from two companies M/s BPO Finance Investment Pvt. Ltd., Kolkata of ₹ 26.00 crores and ₹ 30.40 crores from M/s Panchmukhi Properties Pvt. Ltd., Kolkata, totaling to ₹ 56.40 croers routed through normal banking channels. Investigations by the Departments authorities below reveal that Shri Dinesh Kumar Singhi and Snehalatha Singhi are owners and 100% share holders of the aforesaid two companies who introduced the share application money in the assessee company and it was in this context that the investments in the assessee company and its 4 group companies i.e M/s BMM Ltd., M/s BMM Cements Ltd., M/s Ranjitpura Infrastructure Pvt. Ltd., and M/s Singhi Holdings Pvt. Ltd., was brought to tax in the hands of Smt. Snehalatha Singhi and Shri Dinesh Kumar Singhi in the ratio of their share holding in the two aforesaid companies M/s BPO Finance Investments Pvt. Ltd., and M/s Panchmukhi Properties Pvt. Ltd., on substantive basis u/s 69 of the Act. It is in this factual matrix of the case that the ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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