TMI Blog2018 (12) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... l observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the ld. D/R claims that the additions have been made. The Hon’ble Supreme Court in the case of Kishinchand Chellaram vs. CIT [1980 (9) TMI 3 - SUPREME COURT] had held that the opportunity of cross-examination must be provided to the assessee. Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation u/s 132 of the Act or whether the statements were recorded during the course of any survey operations u/s 133A of the Act. It is well settled that a statement recorded during the course of survey operation cannot be used as evidence under the Act. Coming to the alleged cash trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 15/05/2014. In response to the notices, the assessee filed revised returns for both the Assessment Years declaring the same income as filed in the original return. The Assessing Officer completed the assessments for both the Assessment Years u/s 153A r.w.s. 143(3) of the Act on 31/03/2015 determining total income of the assessee at ₹ 3,06,92,522/- for the Assessment Year 2008-09 ₹ 8,27,83,440/- for Assessment Year 2010-11. 4.1. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority granted part relief. He relied on the decisions of the Hon ble Calcutta High Court in the case of PCIT vs. Salasar Stock Broking Limited (ITA No.264 of 2016) dt. 24.08.2016 and the judgment in the case of CIT vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta) and held that, incriminating material is a prerequisite for making additions in an assessment framed u/s 153A/143(3) of the Act, wherever assessments for the respective Assessment Years have not abated. He pointed out that the Hon ble Jurisdictional High Court has concurred with the judgment of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 0573 (De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. v. That on the fact and in the circumstances of the case, the Ld. CIT(A) had erred in allowing the assessee's appeal by observing that additions made by the AO in the assessment order passed u/s 153A/143(3) are not based on any incriminating documents/papers seized during the search operation. vi. That on the fact and in the circumstances of the case, the Ld. CIT(A) had erred in not adjudicating the appeal on merit. vii. That on the fact and in the circumstances of the case, the department craves to add more grounds or alter any ground at the time of appeal. 6. The ld. D/R, submitted that the incriminating material need not necessarily be found during the course of search and seizure proceeding conducted in the premises of the assessee and its group and that the material which is gathered during the course of any proceedings under the Act, undertaken in connection with any other persons and the material gathered during post search operations in the case of the assessee can also be the basis on which additions can be made in such cases in an assessment made u/s 153A r.w.s. 143(3) of the Act. He submitted that in the case on hand the addition in question w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which cash trial was prepared was bank statements of disclosed accounts and hence not incriminating material. He referred to page 2 to 5 of the assessment order and submitted that factual mistakes have been made by the Assessing Officer. The factual mistakes were pointed out for both the Assessment Years. 7.1. He relied on certain case-law to submit that deposits made in the earlier year cannot be taxed in the current Assessment Year. He pointed out on facts that no cash has been deposited in these Assessment Years. He further argued that the addition cannot be made based on the cash trial because the assessee was not provided with the copy of the bank statement of those third parties which allegedly formed a chain of companies and in the companies in which the alleged cash deposits were made. He further submitted that copy of the alleged statement recorded from those third parties who are allegedly part of the chain of companies who are the or bank account holders of the alleged chain of companies were not provided to the assessee nor any opportunity was given to the assessee to cross-examine them. Hence he submitted that the chain of companies whose bank accounts and statement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch and seizure, when the assessment for the Assessment Years in question have not abated. In the case on hand, the assessee filed its original return of income on 29/09/2008 for the Assessment Year 2008-09 and on 24/09/2010 for the Assessment Year 2010-11. The time limit for issual of notice u/s 143(2) of the Act, was 30/09/2009 and 30/09/2011 respectively for Assessment Year 2008-09 2010-11. The search and seizure operation was conducted in this case on 18/02/2013. The statutory period for issual of notice u/s 143(2) of the Act, in the case of both the Assessment Years had expired prior to the date of search operation. Hence the assessment for the impugned Assessment Years have not abated. The Assessing Officer made the addition in question by observing as under at page 14 15 of the assessment order:- I) Names of the companies appealing m statements of the entry providers given to investigation wing figure as applicants to shares in the assessee company. II) Perusal of the operating bank a/c shows that the a/c of most of the investing companies is in the same bank as that of the assessee company. III) There is no justification on record whatsoever as to whether the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l High Court observed that the Ld. ITAT, Kolkata was of the opinion that the assessing officer had no jurisdiction u/s 153A of the I.T. Act to reopen the concluded cases when the search seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. ITAT relied upon the judgments of Delhi High Court in the case of CIT(A) Vs. Kabul Chawla in ITA No. 707/2014 dated 28.08.2014. The Court also observed that more or less an identical view has been taken by this Bench in ITA No. 661/2008 in the case of CIT Vs. Veerprabhu Marketing Limited. Considering the above facts, the Honorable High Court did not admit the appeal filed by the Department. It held as follows:- Subject matter of challenge is a judgement and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as ITA No.1775/Kol/2012 and allowed a cross-objection registered as CO-30/Kol/2013 both pertaining to the assessment year 2005- 06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... threadbare and analysing the various judgments of different High Courts laid down the following legal proposition in terms of scope of addition which can be made u/s. 153A(1) which are 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 153 A (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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upa {supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Principal Commissioner of Income Tax v. Saumya Construction P. Ltd. {supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in CIT v. IBC Knowledge Park P. Ltd. {supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in CIT-2 v. Salasar Stock Broking Ltd. {supra), too, followed the decision of this Court in Kabul Chawla (supra). In CIT v. Gurinder Singh Bawa {supra), the Bombay High Court held that: 6...once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings. 63. Even this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of ₹ 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. But, the issue was whether there was any incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO. Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the opportunity of cross-examination must be provided to the assessee. The Jurisdictional High Court in the case of CIT Vs Eastern Commercial Enterprises (1994) 210 ITR 103 (Kol HC) held as follows:- As a matter of fact, the right to cross-examination a witness adverse to the assessee is an indispensable right and the opportunity of such cross-examination is one of the cornerstones of natural justice. 9.1. The Judgment of the Hon ble Kerala High Court in the case of E.N. Gopakumar vs. CIT (Supra) lays down a proposition, contrary to the propositions of law laid down by the Hon ble Jurisdictional High Court in the case of CIT vs. Veerprabhu Marketing Ltd. (supra) and PCIT vs. Salasar Stock Broking Limited (supra). 9.2. Even otherwise, it is not clear as to which of these statements were recorded during the course of search operation u/s 132 of the Act or whether the statements were recorded during the course of any survey operations u/s 133A of the Act. It is well settled that a statement recorded during the course of survey operation cannot be used as evidence under the Act. 10. Coming to the alleged cash trail, none of the material gathered by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
