TMI Blog2020 (1) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s.153D of the Act is to be regarded as perfunctory and mechanical in subversion of the spirit of Section 153D of the Act. Such symbolic approval is unfounded in law. As a corollary, in the absence of any valid approval under s.153D of the Act, the respective assessment orders giving cause of action in the form of captioned appeals requires to be quashed on this score also. We find merit in the legal proposition canvassed on behalf of the assessee. It is not in dispute that the assessment pertaining to assessment years in question viz. AYs. 2009 10, 2010-11, 2011-12 2012-13 stood concluded either under s.143(1) or under s.143(3) of the Act and not eventually pending at the time of search. Thus, assessment for these 4 years will not get abated in consequence of search. In the backdrop of these pertinent facts, we straightway notice that the scope of assessment under s.153A of the Act in respect of concluded and unabated assessments is circumscribed by the condition that additions/ disallowances must have some rational connection with the incriminating material against the assessee detected in the course of search. The scope of assessment under s.153A of the Act in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act for the assessment years in question, the payment made by the lender company which stood disallowed in the earlier years is required to be adjusted and consequently, accumulated profits of the lender company would stand reduced to the extent of disallowances carried out by the AO in the earlier assessment years. When a loan by a company to a shareholder in the manner set out in section 2(22)(e) is treated as a deemed dividend, it is to be treated as payment out of accumulated profits of the company. Hence, the addition under s.2(22)(e) of the Act for a given assessment year is required to be made having regard to the adjusted accumulated profits available with the lender company. - I.T(SS).A. Nos. 41 to 47/Ran/2019, I.T(SS).A. Nos. 48 to 54/Ran/2019 - - - Dated:- 20-1-2020 - Shri Pradip Kumar Kedia, Accountant Member And Smt. Madhumita Roy, Judicial Member For the Appellant : Shri Devesh Poddar, Advocate For the Respondent : Shri Inderjeet Singh, CIT.D.R. ORDER PER PRADIP KUMAR KEDIA - AM: The captioned appeals directed at the instance of two different assessees aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Do- -Do- -Do- 50/Ran/19 -Do- 2011-12 -Do- -Do- -Do- 51/Ran/19 -Do- 2012-13 -Do- -Do- -Do- 52/Ran/19 -Do- 2013-14 -Do- -Do- -Do- 53/Ran/19 -Do- 2014-15 -Do- -Do- -Do- 54/Ran/19 -Do- 2015-16 -Do- -Do- 143(3) of the Act 2. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91/-was added under the head net liability. The amount claimed under liability only appeared in the balance sheet and was not claimed as expenses for the year. As such, no disallowance is called for. 5. For that complete details with respect to sundry creditors being advance received from parties and other current liabilities being taxes payable, expenses and etc. was furnished before the Ld. AO and Ld. CIT(A). The authorities below without considering the submissions and the details field, on basis of an anonymous TEP, made the alleged additions in absence of any incriminating material found during the course of search operation. As such, the addition being made U/s 153A which stands originally accepted is unjustified, illegal and fit to be deleted. 6. For that Ld. CIT(A) was not justified in confirming the addition of ₹ 4,84,70,106/- U/s 69 being unexplained investment. For the year under consideration the assessee purchases fixed assets details of which was completely reflected in the audited books. The source of the payment stands explained as was made through banking channel and bills as available was also produced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y we also beg to submit that the order passed on 28/11/2016 has been passed back dated since on one hand Ld. AO has stated that the assessee did not make compliance to any of the show cause notice and on the other hand Ld. AO has stated that the reply of the assessee to notice dated 21/11/2016 which was filed on 29/11/2016 has been considered. As such, this shows that the order has been passed in a heist manner with a malice intention. Further, from the records it is seen that the order of assessment was sent to the assessee by speed post sometime in the 2nd week of December and the same was received on 14/12/2016. As such, it is clear that the order has been passed back dated with a simple objective to avoid the submissions of the assessee. We pray that the above legal ground of the assessee may kindly be admitted as an additional ground and be adjudicated upon since the same goes to the very root of the assessment and involves a legal finding. Reliance is placed upon the decision of Hon'ble Apex Court in the case of NTPC Vs. CIT 229 ITR 383. 6. The prayer for admission of additional grounds noted above which are not set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of sale and purchase with Shri Padam Kumar Jain and his associate company was in ordinary couse of business between the entities. It was pointed out that copy of seized documents primarily contains copy of invoices so raised for FY 2008-09, 2009-10, 2010-11 2011-12. The business of company came almost to halt from January 2012. It was thus submitted that no incriminating document was found for 4 years i.e. AYs. 2008-09 to 2011-12. It was further asserted that no document relating to AY 2012-13 to 2015-16 was either found or seized whether incriminating or non-incriminating. It was thus contented that in the absence of any document of incriminating matter found (AYs. 2008-09 to 2011-12) and in the absence of any document found or seized at all for AYs. 2012-13 to 2015-16, the unabated and concluded assessments should not be disturbed. It was submitted that the assessee has merely traded through Padam Kumar Jain Group of companies in the course of mining business and has no other association. The AO however proceeded on the premise that discovery of any incriminating document is not a sin qua non to make assessments under s.153A of the Act. The AO observed that issue of warran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected the submissions made on behalf of the assessee. The action of the AO was affirmed by the CIT(A) and the additions made by the AO were upheld. 10. Further aggrieved, the assessee preferred appeal before the Tribunal seeking to impugn the action of the Revenue authorities. 10.1 Learned Counsel for the assessee adverted to the additional grounds filed by the assessee at the outset and submitted that certain legal objections of overriding nature to the assessment proceedings under s.153A of the Act are involved in the instant case. 10.2 Delineating on such objections, the learned counsel referred to the assessment order and pointed out that all the assessment orders providing genesis to captioned appeals are stated to be passed on a singular date i.e. 28.11.2016. This is also incidentally the date on which the compliance was also parallelly sought by the AO with reference to a detailed questionnaire dated 21.11.2016 as appearing at page no.16 of the paper book. The assessee was directed by the questionnaire to submit its reply in a span of hardly 5 days. Statedly, the assessee did submit its reply to the said questionnaire da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emplated under s.153D of the Act in a spur. The approval granted by the JCIT, if any, on the same date as noted is thus illusory tantamounting to no approval; rendering the entire assessment process void and a nullity. The approval of the JCIT naturally would arise after the lapse of time compliance on 28.11.2016. Ordinarily, it is after a lapse of time of compliance, an officer would be expected to draft an assessment order and thereafter would send the same to the office of the JCIT for its review and approval together with case records. The reading of case records and approval of the draft order thereon by a senior authority would naturally take some minimum time howsoever efficient and in promptu, the whole process may be. Expecting an officer to draft as many as 28 assessment orders in a span of few hours and send it to the JCIT and, in turn, obtain approval thereon in toto is implausible, if the date of order on 28.11.2016 is to be believed as sacrosanct. It was thus contended that the date of assessment order is antedated as the circumstances clearly suggests. 10.4 Continuing further, the learned counsel contended that approval of the JCIT on the same day ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 28.11.2016. The approval of the Joint Commissioner on such assessment order (on 28.11.2016) without consideration of reply of the assessee is therefore, on the other hand, is either mechanical (if reply not available) or antedated (if reply available). In either situation, the assessment order is not legally sustainable. On a query from the bench, the learned counsel referred to the copy of the order sheet prepared in the course of the assessment as appearing at page no.174 to 180 listing date-wise events and occurrences and pointed out that no reply could be seen to have been filed by the assessee between the date of the questionnaire i.e. 21.11.2016 and the date of order i.e. 28.11.2016. Thus, no reply was filed by the assessee in the intervening period as asserted in the Bar. The only reply to the questionnaire was on 29.11.2016 on which date, the assessment order was supposedly already passed. Thus, the observations of the AO that the reply of the assessee in response to questionnaire was considered, are not in sync with date of the assessment. The assessment order is thus clearly antedated. The approval of the JCIT is thus also antedated. To provide room ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of unabated assessments. It was contended that without going into aspects of merits of wild and unsubstantiated allegations in TEP, the AO was not entitled to refer to TEP for the purposes additions/disallowance in respect of unabated and already concluded assessments in the assessment proceedings in terms of Section 153A of the Act in contemplation. 10.7.2 The learned counsel thereafter referred to the remand report obtained by the first appellate authority from the AO in the course of appellate proceedings before him and submitted that certain seized documents referred to in the remand report has no relevance with the additions made as well as the reference made in the seized documents are coded, unintelligible, vague and non-descript. Delving deeper, the learned counsel referred to the copy of panchnama (page no.181 of the paper book) as well as the list of inventory of documents seized along with pages on which identification marks were placed (page no.186 of the paper book). The learned counsel submitted that the identification marks noted in these documents are in the style of KDS-1 to KDS-6. The remand report, on the other hand, mainly talks of TEP recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was thus asserted that the legal position is crystal clear. In the same vein, it was submitted that documents found or acquired post search in the course of assessment cannot be used against the assessee while framing assessment of unabated assessment orders under s.153A of the Act. On facts, the learned counsel submitted that the return was earlier filed prior to search and the assessment proceedings in pursuant thereof is deemed to have been concluded on expiry of time limit as provided for initiation of assessment proceedings. The time limit for issuance of notice under s.143(2) of the Act stood expired at the time of search and in the absence of any pending assessment at the time of search, the assessment for AYs. 2009-10 to 2012-13 (in respect of both the assessee herein) pursuant to the original return has achieved finality. The learned counsel accordingly submitted that in the absence of any reference to any incriminating material discovered in the course of search in the assessment order, action of the AO/CIT(A) in making adjustments of routine nature in the course of search assessment under s.153A of the Act is impermissible and without sanction of law in view of several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f implausibility of AO and JCIT and the order/approval being allegedly antedated. It was further pointed out that it is not uncommon in the department to post the order after a gap of 10 to 15 days having regard to the low key infrastructure and limited capacity. It was submitted that no adverse inference should be drawn against the Revenue for such purported delinquency, if any. 12. The learned CIT-DR next referred to the scheme of the assessment under s.153A of the Act and submitted that once a search has been initiated under s.132 of the Act, what is required to be assessed is total income of the assessee. It was further contended that present scheme under s.153A of the Act is in departure with the old scheme of block assessment where the additions/adjustments could be made only on the basis of incriminating documents found in the course of search. No such legal requirement of presence of incriminating document per se could be read in the present scheme of search assessment in operation. The learned CIT-DR referred to the judicial precedents in the case of Canara Housing Development Co. vs. DCIT (2011) 49 taxmann.com 98 (Kar); Filatex India Ltd. vs. CIT (2014) 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in tandem with token and perfunctory approval of the draft assessment orders by superior authority without fulfillment of pre requisites of Section 153D of the Act. The first and foremost objection of the assessee throughout is that assessment orders were not really made on 28.11.2016 when it was ostensibly made but it was made on a later date. The respective assessment orders were thus challenged as void on the ground of such orders being antedated. It is the case of the assessee that a questionnaire raising substantial points was issued to the assessee in the course of assessment proceedings under s.153A of the Act on 21.11.2016 which required the assessee to make compliance thereof at a very short notice on 28.11.2016 at 11:30 a.m. On this date and time, the assessee was directed to furnish replies on various points. Admittedly, the assessee could not turn up on this date appointed for compliance. A reply to questionnaire was however filed on next day i.e. 29.11.2016. The AO however claimed to have passed the assessment order under s.153A of the Act in the meanwhile i.e. on 28.11.2016 itself (appointed date of hearing) after taking necessary approval of Joint Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed without laxity before the result of the proceedings were determined. The Revenue Officers must realize that statutory duties conferred on them are in the nature of a trust. They hold office as trustees of the public at large while dealing with public revenue and public money. We are unable to visualize as to how such long and complex assessment orders could be prepared and finalized for the approval of superior authority in few hours even if some ongoing draft works were assumed to be available in this regard. A natural question would arise as to what was the hurry for doing so? When seen in conjunction, it is yet more difficult to perceive that any superior authority, expected to keep a strict vigil on the actions of AO under s.153D of the Act, can possibly grant approval to such longish and high staked matters of as many as 28 cases in virtually no available time and remit the same to the AO on the same day for passing final order. Such inordinate and extravagant speed smacks of pretense and provokes us to think of colossal abnormality in conduct of the authorities concerned. 14.3 Needless to say, provision of Section 153D of the Act casts onerous respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the test of preponderance of probabilities. The assessee is not expected to prove its case of antedating the order with mathematical precision where it is otherwise evident to a demonstrable degree. All that is required in such cases is the establishment of such a degree of probability that a reasonable person may, on its basis, believe in the existence of facts in issue. The conduct of Assessing Officer cannot be countenanced, howsoever soft stance we may incline to take. The conduct, when seen in totality, is unprecedented and casts infallible impression that the assessment orders giving rise to the captioned appeals are antedated indeed and thus a nullity in the eyes of law. All the assessment orders are required to be cancelled at the threshold in such sordid circumstances. 14.5 It would however be also pertinent to delineate whether the so called approval of JCIT under s.153D of the Act meets legal requirement or not. As repeatedly observed above, the JCIT purportedly carried out the exercise of granting approval in a baffling haste. The order sheets recorded by the AO shows that what was sent to the JCIT were only draft asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversy that arises for adjudication is on the scope and ambit of assessment proceedings in search cases under s.153A of the Act. Section 153A of the Act provides for the procedure for completion of assessment where a search is initiated under s.132 of the Act or books of accounts or other documents or any assets are requisitioned under s.132A of the Act. The case propounded on behalf of the assessee is that additions/disallowances made in Section 153A of the Act proceedings has no rational connection with incriminating material, if any, discovered as a result of search and in the absence of any speaking material against the assessee found as a result of search, the AO is estopped from exercising unfettered powers in the matter of unabated and already concluded assessments. It is further case of the assessee that the assessment order also does not make any reference to any incriminating material found as a result of search while making additions/disallowances. The additions/disallowances were made by taking cognizance of some TEP received in the course of the assessment proceedings under s.153A of the Act which mainly refers to the financial statement of the assessee. Noticeably ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments in the course of the remand has no relevance with that of additions made and such reference by the AO are very unintelligible and vague nevertheless. The documents seized from third party were stated to be without any co-relation with the addition and were never confronted to the assessee. It was further pointed out that assessment on the basis of documents seized from third parties is dictated by different provision i.e. Section 153C of the Act. 15.2 On perusal of the case records, we find merit in the legal proposition canvassed on behalf of the assessee. It is not in dispute that the assessment pertaining to assessment years in question viz. AYs. 2009 10, 2010-11, 2011-12 2012-13 stood concluded either under s.143(1) or under s.143(3) of the Act and not eventually pending at the time of search. Thus, assessment for these 4 years will not get abated in consequence of search. In the backdrop of these pertinent facts, we straightway notice that the scope of assessment under s.153A of the Act in respect of concluded and unabated assessments is circumscribed by the condition that additions/ disallowances must have some rational connection with the incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Revenue against the aforesaid decision of the Hon ble Delhi High court was dismissed by the Hon ble Supreme Court in Pr.CIT vs. Meeta Gutgutia (2018) 96 taxmann.com 468 (SC). Contextually, we also observe that the Hon ble Supreme Court has stayed the operation of judgment of Hon ble Delhi High Court in Dayawanti Gupta (supra) vide order dated 3rd October, 2017 in SLP Petition No.20559/2017. 15.3.2 Similar view that no additions could be made on the basis of material collected after search and in the absence of any incriminating evidence found or seized during search has been endorsed by the Hon ble Gujarat High Court in Pr.CIT vs. Sunrise Finlease (P.) Ltd. (2018) 89 taxmann.com 1 (Guj.). 15.3.3 The Hon ble Gujarat High Court in Pr.CIT vs. Saumya Constructions Pvt. Ltd. (2016) 387 ITR 529 (Guj) also declined to agree with the plea on behalf of the Revenue that the new procedure provided under s.153A of the Act is different from earlier procedure provided under s.158BC r.w.s. 158BB of the Act and consequently, the plea of the Revenue that there is no condition in Section 153A of the Act that additions should be made strictly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... courts, the position of law is loud and clear that additions/disallowances under s.153A of the Act towards unabated assessments are permissible only where incriminating materials are found in search showing unaccounted income. 15.4 However, at this juncture, we simultaneously take note of various decisions referred to and relied upon on behalf of the Revenue for the proposition that presence of incriminating material discovered during the course of search is not a condition precedent for making additions/disallowances under s.153A of the Act. We do not consider it necessary to re-visit the judgments cited. The objections raised on behalf of the Revenue has been dealt with in the judicial precedents quoted in favour of the assessee. The decision cited in the case of Canara Housing Development Co.(supra) as well as Filatex India Ltd. (supra) has been taken note of by the Hon ble Gujarat High Court in Saumya Constructions Pvt. Ltd. (supra) while adjudicating the issue in favour of the assessee. Filatex India Ltd. (supra) was also considered in Meeta Gutgutia (supra). The decision rendered by the Hon ble Allahabad High Court in CIT vs. Rajkumar Arora (2014) 52 taxmann. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO. The Revenue has failed to rebut the factual assertions made on behalf of the assessee towards non-discovery of incriminating material at the time of drastic action of search on assessee and reference thereto in assessment order. Vague reference made to various seized material in the course of remand proceedings are also found to be unconnected to the search on the assessee. There is nothing on record that information contained in seized documents as per list of inventory were not recorded or reflected in the books of accounts found during search. The seized documents referred to in the remand proceedings at a later stage post search are admittedly found to be from the possession of third parties parallely searched. Be it as it may, in the absence of any reference to such seized documents in the assessment order and in view of the overwhelming reference to unsubstantiated tax evasion petition obtained in November 2016 post search, the action of the AO towards making additions in respect of concluded assessments towards undisclosed income is contrary to the judicial dicta. Accordingly, we are of the view that various additions/disallowances made by the AO are clearly beyond the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by applying Section 2(22)(e) of the Act. The assessee claimed that the amounts were received pursuant to commercial transaction and thus could not be assessed as deemed dividend under s.2(22)(e) of the Act. It was further argued on behalf of the assessee (Rajat Minerals) that the assessee being a registered shareholders of lender company, the provisions of Section 2(22)(e) of the Act has no application in view of the decision of the Hon ble Delhi High Court in the case of CIT vs. Ankitech Private Ltd. (2012) 340 ITR 14 (Del.). The legal proposition in Ankitech P. Ltd. (supra) has been confirmed by the Hon ble Supreme Court in the case of CIT vs. Madhur Housing And Development Company in Civil Appeal No. 3961 of 2013 Ors. judgment dated 05.10.2017. 16.3 It was also pleaded in the alternative and without prejudice to other submissions in this regard that once a loan paid by the lender company has been treated as deemed dividend in the manner set out in Section 2(22)(e) of the Act, it is to be treated as a payment out of accumulated profits of the company. Thus, as a logical conclusion, the disallowances made in the earlier years is required to be adjusted against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act for a given assessment year is required to be made having regard to the adjusted accumulated profits available with the lender company. The issue is decided on first principles and we do not intend to expand the scope of deliberation on this alternative arguments in view of our observations in para 16.4 above. 16.6 Other additions/disallowances on merits are factual in nature where only TEP has been relied upon. The defense of the assessee on factual aspects requires to be considered. We find that the singular opportunity of 5-6 days given to the assessee for compliance was grossly inadequate and the additions/disallowances made in view of such inadequacy is bad in law. The reference may be made to the decision of Sona Bilders vs. UOI 251 ITR 197 (SC) in this regard. Thus, all additions/disallowances other than addition under s. 2(22)(e) of the Act are liable to be set aside and remitted back to the file of the AO when examined on the touch stone of factual matrix. Hence, the additions when tested on merits will be governed by these observations. We however once again reiterate that our observations on merits will not come into play as the assessment orders ..... X X X X Extracts X X X X X X X X Extracts X X X X
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