TMI Blog2019 (6) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... JAIPUR] wherein the Co-ordinate Bench has considered and discussed at length various decisions laying the legal proposition that in absence of any incriminating material, no addition can be made in cases where the assessment has not got abated on the date of search. Validity of assessment order passed u/s 143(3) r.w.s. 153B (1)(b) on the ground that notice u/s 143(2) was not issued within the stipulated time - HELD THAT:- Provisions of Section 292BB of the Act does not support the case of the Revenue as in the present case, the very issuance of notice u/s 143(2) is beyond the prescribed period of time whereas the section 292BB talks about the situations where the notice has either not been served upon the assessee or not been served in time or not have been served in a proper manner. In the present case, the matter is not about the service of the notice in time to the assessee rather the matter is very issuance of notice u/s 143(2) beyond the prescribed time period. Therefore, section 292BB cannot come to the rescue of the Revenue in the present case. In the entirety facts and circumstances, we are therefore of the considered view that since the notice u/s 143(2) has been i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eged lender company was never produced before the Assessing Officer for examination and also ignoring the fact that that the assessee neither expressed its inability in producing the lender nor produced the lender for examination before the Assessing Officer. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Director of lender/investor company when the Director or Principal Officer of the lender/investor company was never produced. 6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the additions by observing that the appellant cannot be fastened upon the burden to produce the lender before the AO and in not considering the decision of the Hon ble Supreme Court in Navodaya Castles (P) Ltd. vs. CIT(2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contended that the ld. AO passed the assessment order against the doctrine of audialtermpartem violating the principle of natural justice, therefore the assessment order ought to held as bad in law and deserves to be annulled. 3. Briefly stated, the facts of case are that the assessee company derives its income from business of financial services. The assessee company e-filed its original return of income u/s 139 on 05.02.2014 for the assessment year 2013-14. Subsequently, a search and seizure operation u/s 132 was carried out on Bhatia/Shubham Group Kota on 03.03.2016. During the course of search operation, certain incriminating documents/papers were seized which was claimed by the Revenue as belonging to the assessee company, the case of the assessee company was thereafter centralized, satisfaction note was prepared and notice u/s 153C was issued on 13.10.2017 which was duly served on the assessee. In response to the notice u/s 153C, the assessee filed its return of income on 05.02.2014 declaring total income at Rs. Nil. Subsequently, the notice u/s 143(2) was issued on 03.11.2017. During the course of assessment proceedings, the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) of the Act. Since the assessee has challenged the legality of the order passed by the Assessing Officer in its cross objection, we deem it appropriate firstly to examine the said grounds of appeal raised by the assessee in its cross objection. 5. In ground no. 1 of its cross-objection, the assessee company has raised the ground relating to non-recording of legally required satisfaction by the Assessing Officer and the order so passed u/s 153C r/w 243(3) without jurisdiction. During the course of hearing, the said ground was not pressed by the ld. AR. Hence the same is dismissed as not pressed. 6. In Ground No. 2 of its cross objection, the assessee has raised the ground stating that the order passed u/s 153C read with section 143(3) deserve to be annulled as the assessment for the year under consideration was not abated as on the date of search and no addition can be made in absence of any incriminating material found during the course of search. Further, the ld. CIT(A) erred in holding that the legal contentions so raised cannot be accepted in view of the SLP admitted in various cases and holding that the grounds so raised are academic in nature. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Denim Developers Ltd. This clearly establishes that the department has not found any incriminating document or material to show that unsecured loan and share capital from M/s Denim Developers Ltd was bogus. The ld AO made the addition against share capital and unsecured loan travelling beyond the scope of section 153C/153A of IT Act. 9. It was further submitted that on a conspectus of the provisions of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under: a. Once a search takes place under section 132 of the Act, notice under section 153A(1) of the Act will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. b. The Assessing Officer is legally required to assess or re-assess the total income of six assessment years immediately preceding to the year of search. The second proviso to section 153A provides that if the assessment or re- assessment of any of the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment under section 153A. Therefore, in the absence of any incriminating material recovered during the search impugned additions made during the course of assessment/reassessment u/s 153A of the Act are without jurisdiction. 11. In support, the assessee submitted that under identical facts, the Co-ordinate Bench in case of M/s Kota Dal Mill vs. DCIT, Kota (ITA No. 997 others dated 31.12.2018) has decided the matter in favour of the assessee and finding therein equally applies in the instant case. Further, reliance was placed on the decision of Hon ble Delhi High Court in case of Pr. CIT (Central) vs T.S Pulses Pvt. Ltd (ITA No. 471/2017 dated 09th August, 2017) and the decision of Hon ble Delhi High Court in case of CIT vs. RRJ Securities Ltd (2015) 62 taxmann.com 391 (Delhi) besides various other decisions. 12. Per contra, the ld. CIT DR submitted that the additions made to the total income of the assessee relate to the unexplained cash credit in the books of account introduced in the garb of unsecured loans and share capital which in fact is the re-routing of the assessee s undisclosed income. It has been gathered from the invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in the case of M/s. All Cargo Global Logistics Ltd. as well as Kabul Chawla (supra) were challenged before the Hon ble Supreme Court and the Hon ble Supreme Court has admitted the SLP for examination of the issue. Hence the issue is still pending adjudication before the Hon ble Supreme Court. He has relied upon the orders of the authorities below. 13. We have heard the rival contentions and perused the material available on record. In the present case, the assessment order has been passed u/s 153C r/w 143(3) of the Act. The legal position in this regard is that once the AO of the searched person is satisfied that the seized assets/documents belong to another person and the said assets/documents have been transferred to the AO of such other person, the proceedings for assessment/reassessment of income of the other person u/s 153C has to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the assessee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssibility of any income that may have remained undisclosed for the impugned assessment year. In this regard, we refer to the satisfaction note prepared by DCIT Central Circle, Kota dated 13.10.2017 which is reproduced verbatim as under: A search action u/s 132 was carried out on Bhatia/Shubham Group Kota on 03.03.2016. During the course of search operation, certain incriminating documents/papers were seized and impounded, which validated the information gathered on tax evasion against the Shubham Group Kota. During the course of search, page number 239 to 259 (Annexure A-4) found and seized from Choudhary Hotel Premise, Near Aerodrome, Circle Kota which is a copy of sale deed of land executed on 15.04.2013 by late Abdul Rehman in favour of M/s Resonant Wealth Consultancy Private Limited, wherein consideration of ₹ 400/- lacs is registered. During the search action u/s 132 of IT Act on Shubham Group of Kota, incriminating documents were seized vide page Nos. 239 to 259 of Annexure A-4 by Party-11 from Choudhary Hotel Premises. Near Aerodrome Circle, Kota which is a copy of Sale Deed of land executed on 15.04.2013 by Late Abdul Rehman in favour of M/s Resonant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... movable properties. Some properties have been got registered in financial year 2014-15. Therefore, assessment of the assessee is required under section 153C of the Act for assessment year 2015-16. Details of which are attached in Annexure- A (Copy enclosed). Similarly, copies of page number 1 to 7 (Annexure A-2, party number 11) were seized which is details of advances received against flats by M/s Resonant Wealth Consultancy Private Limited. These documents contain details for the period beginning 1st April 2015 to 26th February 2016. Huge amount details have been maintained which required further verification. Those may result in undisclosed income of the Company. Therefore, assessment under section 153C is required for Assessment Year 2016-17. Page number 1 2 were seized by party number 16 in Annexure A-5. These documents carries details of expenses of ₹ 7,080/- ₹ 18,880/- which required to be examined from books of accounts of M/s Resonant Wealth Consultancy Private Limited. These transactions pertain to financial year 2015-16. The date of birth of Company is 01.02.2012 as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording of satisfaction by the AO and, therefore, would not abate by virtue of the second proviso to Section 153A of the Act and as held by the Courts that completed assessments can be interfered with by the AO while making the assessment under Section 153C only on the basis of some incriminating material unearthed during the course of search, therefore, in absence of any incriminating documents found during the course of search relating to unsecured loan and share application transaction with M/s Denim Developers Ltd and such transactions being duly recorded in the books of accounts, the additions made while passing the assessment order passed u/s 153C r/w 143(3) deserve to be deleted. 15. We find that similar view has been taken by the Co-ordinate Bench in case of M/s Kota Dal Mill (supra) wherein the Co-ordinate Bench has considered and discussed at length various decisions laying the legal proposition that in absence of any incriminating material, no addition can be made in cases where the assessment has not got abated on the date of search. In the said decision, the Co-ordinate Bench has also considered the decision of Hon ble Delhi High Court in case of CIT vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. This Court had summarized the legal position in respect of Section 153A of the Act as under:- '37. On a conspectus of Section 153A(1) of the Act, read with the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 produced or not already disclosed or made known in the course of original assessment.' 22. The aforesaid principles would be equally applicable to proceedings initiated under Section 153C of the Act as Section 153C(1) of the Act expressly provides that once the AO has received money, bullion, jewellery or other valuable articles or thing or books of account or documents seized from the AO of the searched person, he would proceed to assess or reassess the income of the person to whom such assets/books belong in accordance with Section 153A of the Act. 23. In the present case, the Assessee had claimed that the assessments for the concerned assessment years were not pending on the date of recording of satisfaction by the AO and, therefore, would not abate by virtue of the second proviso to Section 153A of the Act. Further, the period of six years would also have to be reckoned with respect to the date of recording of satisfaction note that is, 8th Sep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. 17. In light of above discussions and in the entirety of facts and circumstances of the case and respectfully following the decisions referred supra, the addition made by the AO while passing the assessment order u/s 153C r/w 143(3) is not sustainable and accordingly, the same is hereby directed to be deleted. Ground no. 2 of assessee s cross-objection is thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the reassessment proceedings are absolutely in the abuse of the process of law, illegal and bad in law. The provisions of Section 153A of the Act cannot be applied in respect of assessment year in respect of which assessment has already been completed unless some incriminating material/information comes in the possession/knowledge of the assessing officer during the course of search proceedings. The assessment for AY 2014-15 was not pending as on the date of search, as shown in table below: Assessment Year Date of filing of return u/s 139(1) Time limit prescribed for issue of notice u/s 142(1)/143(2) Date of Search at Shubham Group Date of Satisfaction note 2014-15 17-11-2014 30-09-2015 03-03-2016 13-10-2017 Thus, the time limit prescribed for issue of notice u/s 142(1)/143(2) of IT Act for AY 2014-15 has expired before the search over Shubham Group which was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated in his statement that the assessee company has made unaccounted payment of ₹ 5,35,00,000/- to his Late Father Shri Abdul Rahman. In answer to Question no. 3, he said that 12 Bigha land was sold by his father to Smt Navneet Kaur @ ₹ 55,00,000/- per Bigha and this land was sold to Shubham Group. In answer to question no. 6, he stated that out of ₹ 6.60 Crore, investment of ₹ 3.62 Crore was made in purchase of agriculture land and advance of ₹ 50,00,000/- was made for purchase of land. Here also he has not stated that unaccounted payment of ₹ 5.35 Crore was received from assessee. In answer to question no. 8 of statement dated 16-11-2015, he stated that registry of land was made in name of Smt Charanjeet Kaur as against name of Smt Navneet Kaur stated by him in his earlier statement. In answer no. 9, he stated that his father sold 17 bigha land as against 12 bigha stated by him in his earlier statement. Therefore, he has no where stated that the assessee i.e. M/s Resonant Wealth Consultancy Pvt. Ltd has paid unaccounted money to his father. Therefore, even the statement of Shri Wazidur Rahman cannot be termed as incriminating material in suppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person which in the present case is the date of preparation of satisfaction note which is 13.10.2017, and on the said date, the assessment was not abated as the same already stood completed. Therefore, in case of completed assessment, the addition can be made only on the basis of incriminating material/document found during the course of search while passing the order u/s 153C r/w 143(3) of the Act as we have discussed in detail in context of AY 2013-14. 29. Coming to the specifics of the additions made by the AO, it needs to be examined whether each of such additions are based on any incriminating documents found and seized during the course of search. Regarding addition made by the AO u/s 68 of the Act in respect of share capital, special deposit, debenture money received from M/s Denim Developers Ltd amounting to ₹ 8.84 crore, there is nothing on record which suggest that any documents were found and seized during the course of search. These transactions were duly recorded in the books of accounts of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search on 3.03.2016 and the said fact remain undisputed before us. Therefore, the copy of the sale deed found during the course of search in respect of transaction undertaken by the assessee cannot be held as incriminating material as the said transaction has already been admitted by the assessee and duly disclosed in the books of accounts of the assessee company and which is available with the Assessing Officer before the date of search. 31. Regarding the statement of the legal heir namely Shri Wazidur Rahman which was recorded by the department on 22.06.2015 and 16.11.2015, it is the case of the department that in the said statement, Shri Wazidur Rahman has stated that the land belonged to his late father shri Abdul Rahman who has sold 17 bighas of land on 15.3.2013 to Subham Group @ ₹ 55 lacs per bigha for a total consideration of ₹ 9.35 Crores, however the sale consideration of only ₹ 4 crores was shown in the registered sale deed and the remaining amount of ₹ 5.35 crores was paid by the assessee company, a group company of Subham Group in cash outside the books of accounts. In its submissions, the assessee company has contended that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh for above land purchase transactions. Assessee Company has declared to have purchased this property at a consideration of ₹ 4,00,00,000/-, purchase consideration recorded in the purchase deed whereas, search seizure proceedings revealed that actual investment in the said land was ₹ 9,35,00,000/-. When examined on oath u/s 131(1A) of I.T.Act, 1961 on 22.06.2015 16.11.2015, Shri Vazidur Rahman revealed that the above referred land belonged to his late father Abdul Rahman who had sold (17 Bighas of land) on 15.04.2013 to Shubham Group @ ₹ 55 lacs per Bigha for total consideration of ₹ 935/- lacs, however, the sale consideration of only ₹ 400/- lacs was shown in the registered sale deed and that the remaining amount was paid by M/s Resonant Wealth Consultancy Private Limited, a group of company of Shubham Group in case outside of books of account. He further revealed that his father has already expired on 29.11.2013. The sale deed for the aforesaid transaction had been executed under the ownership of company M/s Resonant Wealth Consultancy Private Limited through its Director. In view of above, it was clear that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, the addition made by the AO while passing the assessment order u/s 153C r/w 143(3) is not sustainable and accordingly, the same is hereby directed to be deleted. Ground no. 2 of assessee s cross-objection is thus allowed in favour of the assessee and against the Revenue. 33. Since we have deleted the additions as aforesaid, the ground no. 3 in assessee s cross-objection and the grounds raised by the Revenue wherein it has challenged the deletion of additions made by the AO on merits has become infructious and are not adjudicated upon. 34. In the result, assessee s cross objection is allowed and revenue s appeal is dismissed. ITA No. 1371/JP/2019 CO No. 3/JP/2019 35. Now, we take up the Revenue s appeal and cross objection of the assessee for AY 2016-17. The Revenue is in appeal against the deletion by the ld CIT(A) of the addition made by the Assessing Officer on merits and assessee in its cross objection has raised various grounds challenging the legality of the order passed by the Assessing Officer u/s 143(3) read with 153(B)(1)(b) of the Act. Since the assessee has challenged the legali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jarat), the Hon ble High Court of Karnataka in case of Pai Vinod v. Deputy Commissioner of Income-tax (2013) 35 taxmann.com 164 (Karnataka), the Hon ble High Court of Kerala in case of Commissioner of Income Tax-11, Cochin vs. V.V. Devassy (2018) 89 taxmann.com 22(Kerala), the Hon ble High Court of Madras in case of Commissioner of Income Tax, Chennai vs. Gitsons Engineering Co. (2015) 53 taxmann.com 108 (Madras) and the Hon ble Kolkata High Court in case of Principal Commissioner of Income Tax vs Oberoi Hotels (P) Ltd (2018) 96 taxmann.com 104 (Calcutta). It was accordingly submitted that where the notice u/s 143(2) had not been issued within prescribed time limit, assessment made u/s 143(3) read with section 153B (1)(b) being void ab initio would be null void. Therefore, the assessment carried out by the Assessing Officer for the assessment year under consideration deserves to be quashed on the aforesaid ground. 39. Per contra, the ld. DR submitted that the appellant was issued notice u/s 143(2) after filing of return of income and the appellant duly attended assessment proceedings before the Assessing Officer. Accordingly, principle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the notice in the present case as required under Section 153 (A)(1)(a) of the Act was already given. Moreover, as observed earlier, several detailed questionnaires and other notices u/s 142(1) 143(2), eleven times to be specific, which are undisputed one, were issued as detailed on page 3 of the assessment order to the assessee before the completion of assessment. These notices were sufficient opportunities so as to give notice to the assessee, asking him to attend the office of the AO in person or through a representative duly authorized in writing or produce or cause to be produced at the given time any documents, accounts, and any other evidence on which he may rely in support of the return filed by him. 2.2.11 The reliance is placed on recent decision by Hon ble High Court of Delhi in case of Ashok Chaddha V/s ITO reported in 337 ITR for holding this view. It may be mentioned that when the issue of requirement of notice under section 143(2) for an assessment under section 147 came up for consideration in the scenario of post amendment by Finance Act 2006 before Hon ble High Court of Delhi recently in the case of CIT vs. Madhya Bharat Energy Corpn., ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf shows that it has been issued beyond the prescribed limitation period as prescribed u/s 143(2) of the Act which is reproduced as under:- (2) Where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. 41. The very issuance of notice u/s 143(2) is thus beyond the limitation period and therefore, the consequent assessment order passed by the Assessing Officer suffers fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be dispensed with. 10. One of the arguments put forth on behalf of the Revenue is that in course of reassessment proceedings once a notice is issued under Section 148 of the Act, the assessee is made aware of what part of the income or on what count the assessee's income is perceived to have escaped attention. It is submitted that in such a scenario, the requirement of a notice under Section 143(2) may be somewhat diluted, if not unnecessary. Apart from the fact that such argument cannot be countenanced in the light of the dictum in Hotel Blue Moon (supra), it is evident that an assessment under Section 143(3) of the Act is consequent upon a hearing and the production of evidence on such points on which the Assessing Officer may harbour doubts and are indicated in his notice under Section 143(2) of the Act. Section 143(3) of the Act contemplates an assessment undertaken by the Assessing Officer upon material being produced by the assessee on grounds which are indicated by the Assessing Officer in his notice under Section 143(2) of the Act in respect whereof the Assessing Officer may have misgivings or may disagree with the return filed by the assessee. Implicit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r clause (b) of this sub-section or nine months from the end of the financial year in which books of account or documents or assets seized or requisitioned are handed over under section 153C to the Assessing Officer having jurisdiction over such other person, whichever is later 43. Further, even the provisions of Section 292BB of the Act does not support the case of the Revenue as in the present case, the very issuance of notice u/s 143(2) is beyond the prescribed period of time whereas the section 292BB talks about the situations where the notice has either not been served upon the assessee or not been served in time or not have been served in a proper manner. However, in the present case, the matter is not about the service of the notice in time to the assessee rather the matter is very issuance of notice under section 143(2) beyond the prescribed time period. Therefore, section 292BB cannot come to the rescue of the Revenue in the present case. In the entirety facts and circumstances, we are therefore of the considered view that since the notice u/s 143(2) has been issued beyond the prescribed limitation period, the entire proceedings suffer from the jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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