TMI Blog2020 (2) TMI 772X X X X Extracts X X X X X X X X Extracts X X X X ..... , of other persons are found with searched persons assumption of jurisdiction by AO of Other persons may be justified but since these are generally the regular books of account on the basis of which returns are prepared, there cannot be any undisclosed income arising from them. In view of expression, books of account/documents/assets seized have a bearing on the determination of total income appearing in section 153C(1), proceedings u/s. 153C will not be valid. In view of this, we are of the opinion that assessing officer did not have any jurisdiction to invoke the provisions of section 153C of the income tax act and therefore it has not been rightly invoked by him. Thus, action of AO for reopening of the assessment u/s 147 of the act is upheld. Validity of reopening of assessment - reopening has been challenged as proceedings u/s 147 is solely on the basis of the unverified, on rectified, unsubstantiated and unconfirmed statement of Mr Malu - HELD THAT:- AO merely on the basis of the statement of the entry operators, who did not name the share deposit as 1 of the companies operated by them, the inspector report saying that share deposit and did not exist by inquiring at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... binding decisions of courts and tribunals and hence liable to be set aside and quashed and declared non est. in law. 2 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment of the appellant at income of ₹ 147,95,510/- as against the income of ₹ 3,20,260/- declared by the appellant. 3 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment that could not have been re-opened u/s 147/148 as no valid reasons have been recorded by the Assessing Officer to establish any satisfaction on his part that any income belonging to the appellant has escaped assessment. 4 On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law , in sustaining the action of AO as no incriminating material whatsoever was found/unearthed as a result of search. 5 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO in initiation of proceedings u/s 147, of the IT Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable and without being guided by the binding decisions of courts and tribunals and hence liable to be set aside and quashed and declared non est. in law. 2 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment of the appellant at income of ₹ 1,85,99,907/-as against the income of (₹ 29,00,030/-) declared by the appellant. 3 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the assessment that could not have been re-opened u/s 147/148 as no valid reasons have been recorded by the Assessing Officer to establish any satisfaction on his part that any income belonging to the appellant has escaped assessment. 4 On the facts and in the circumstances of the case Ld. CIT (A) New Delhi has erred both on facts and in law , in sustaining the action of AO as no incriminating material whatsoever was found/unearthed as a result of search. 5 On the facts and circumstances of the case, the learned Ld. CIT (A) New Delhi has erred, both on facts and in law, in sustaining the action of AO in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 148 of the Act on 31.03.2017. The Assessee filed return in response to that notice on 13.04.2017 declaring the same income. The assessment u/s 143(3) read with section 147 of the Act was passed on 12.05.2017 at ₹ 14795510/-. The addition of ₹ 1.35 crores was made in the hands of the Assessee u/s 68 of the Act. During the search and seizure u/s 132 of the Act on 09.10.2014 on Kuber Group of Cases details relating to companies with respect to share capital and unsecured loan came to the light. The statement recorded on oath on 15.12.2014 Shri Mulchand Mallu declared undisclosed income of ₹ 100 crores of the Kuber Group of Companies and its directors out of total undisclosed income of ₹ 150 crores. During the course of assessment proceedings statement of Mr. Malu was also recorded u/s 131 of the Act. The AO noted that the Assessee issued share capital of ₹ 1.35 crores from M/s. Pawmex Sales pvt. Ltd and same was added u/s 68 of the Act. Against the order of the ld Assessing Officer Assessee preferred appeal before the ld CIT(A), who dismissed the appeal of the Assessee. During the appeal Assessee raised an additional ground of appeal contesting that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on 31.03.2017; on the ground that material found in search of Kuber Group reveals that the assessee has alleged to have been received accommodation entries in the form of share allotment money. Assessee asked the AO to provide an opportunity of cross examination of the alleged entry operators during the course of assessment proceedings. However the AO could not provide the same, the assessee has also asked the CIT (A), when CIT (A) called for remand report the AO revealed the truth of addition made which is discussed in below paras. 3. Aggrieved with the order of the AO assessee filed appeal before the CIT (A) who vide his order dated 19.12.2018 affirmed the order of the AO. Now the Assessee is in appeal before this Hon ble Bench. Finding of CIT(A) on legal ground of section 147 is at Page No*-29 of the CIT(A) order. 4. It is submitted that certain dates which goes to the root of the matter are being reproduced. These dates are important to adjudicate the legal as well as issues on merits. DATE Event Remarks 14.03.2011 Shares have been allotted to M/s Powmex sales Pvt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Page No-104 and 105 of PB 12.05.2017 AO framed the assessment. Despite the fact that the AO have time up-to 31.12.2017 the AO framed the assessment within 21 days of the time span Admitted fact AO was having time upto 31.12.2017. However he has passed the assessment order in a hurried manner. Submissions of the assessee are as under:- 5. In respect of Ground number-3,5 and 10 are related to assumption of jurisdiction under section 147 of the Act. In this regard the arguments of the assessee are as under:- 6. Provisions of section 153C/153A are bypassed. It is submitted that perusal of the reasons recorded would show that in very first Para, it has been mentioned by the AO that during search and post search proceedings , information relating to entities providing accommodation entries of share application money share premium.....etc came to light. The AO further mentioned that as per the information gathered it was found that during the AY 2011-12 assessee Company has received share capital and share premium from M/s Powmex S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Further there is no mention about the status of income tax return of the assessee firm related to the impugned year, otherwise every time when reasons are recorded, the revenue is mentioning the status of original return, its status and relation of information with that return. This fact would also show that the AO has wrongly assumed the jurisdiction of section 147 or deliberately by passed the provisions of section 153C, keeping in mind the verdict of Kabul chawala reported in 380 ITR 573. 12. Further generally the cases, where 147 is to be invoked, the revenue did not centralise the case with that of searched person and the notice of 147 is always issued by the jurisdictional AO who has original jurisdiction. However in the case of the assessee the assessment is centralised this fact would further prove beyond doubt that the assessee matter ought to have been reassessed under section 153C of the Act. 13. All above facts in totality would show that AO has erred in initiating action under section 147 of the Act. He would have invoked the provisions section 153C, like he has initiated in the case of Marudhara, a sister concern whose books were also seized and fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor company which is mentioned in reasons is different from the address available in public Domain. 18. Further in the reasons recorded the AO has alleged that assessee has received an amount of ₹ 2,15,00,000-. Out of which an amount of ₹ 65 lakhs is Share allotment money and amount of ₹ 1.50Crore is unsecured loan. The AO has completely overlooked that this loan was an interest bearing loan and assessee has also deducted TDS on this amount. See Submissions of the assessee before the AO at Page No-95 of the PB. However these facts have not been proved to be false by the AO. 19. No Independent application mind of AO:- It is submitted that in the very first Para of reasons recorded the AO has used the expression Kuber group of cases . Then he has mentioned that during search and post search proceedings information relating to entities providing accommodation entries of share application money.................to Kuber Group entities (a general observation which entity not specified) came to light. Then he has referred to that information gathered it was found that during AY 2011-12 M/s Kuber Khan Pan Udyog that is the assessee has received share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een mentioned. d. AO has not even mentioned whether the share application money was pending or shares have been allotted in lieu of the same. e. No enquiry either from ROC or from the Bank, where the account of the investor company was in operation. f. Reference to the generic name of Kuber Group of Companies is also non application of mind. g. No live link between the material and the belief entertained by the AO. h. Reasons recorded are conclusions one after the other without reference to any tangible material. i. In assessee case neither 131(1) nor 133(6) have been done. 24. Further assessee seeks to rely on the following judgments: - Wherein it has been held that reassessment is not permissible on the basis of borrowed satisfaction, where there is non application of mind. Where there is no live link between the reasons to believe and formation of belief. Where the conclusions drawn against assessee are not supported by tangible material. a. SBS Realtors Vs ITO- ITA No-7791/Del/2018 b. PCIT Vs Shodiman Investment Pvt Ltd Bombay High Court. c. Agaya Ram Vs CIT- 386 ITR 0545(Del) d. CIT Vs RMG Poly Vinayl- 396 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that once the assessments are centralised then assessment proceedings would only commence after the issuance of notice of relevant assessment proceedings, during the intgrim period the proceedings are not pending rather a stage of one proceeding completes and the next stage would have to be begin that is the proceedings of trying a suit. And hence any commission issued without the pendency of proceedings then such commission is bad in law. 29. On merits the assessee has filed all the details before the AO and has asked for cross examination of the alleged entry provider, which request of the assessee has been denied by the AO. 30. The assessee has filed following documents before the AO during the course of proceedings- a. Copies of share application forms. b. Informations given to ROC for allotment of shares. c. Confirmations- d. Bank statements. e. ITR acknowledgments f. Annual Financial Statements g. MCA data available in public domain- Perusal of which would show that M/s Powmex has paid up share capital of ₹ 1,93,00,000/-. 31. It is next submitted that finding of the AO starts from Para-6.5 of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... searched. She stated that documents belong to Kuber Group of companies but the Assessee s name was not included in the Panchnama and only certain information contained therein pertained to the Assessee. She further stated that documents founds during the course of search were nothing but just books of accounts of the group companies where the Assessee s company name was found. She therefore, stated that AO has nowhere quoted that the documents were incriminating in nature. Therefore, provisions of section 153C could not have been invoked. She further relied on the decision of coordinate bench in ITA No 2915/Del/2017 dated 08.01.2018, wherein, the reopening u/s 147 of the Act was upheld. She further stated that perquisite to invoking section 153C of the Act could not have been invoked. She further relied upon the decision of the coordinate bench in case of Mannat Hospitality pvt. Ltd vs. ITO ITA No. 7348/Del/2018 dated 07.06.2019, wherein the objection of the Assessee against the order passed u/s 147 was rejected. Therefore, she submitted that there was no ambiguity in initiating the proceedings u/s 147 of the Act. 9. We have carefully considered rival submissions and perused th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. 10. Section 153C was amended with effect from October 1, 2014 to provide that notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to any person, other than the person in respect of whom the search was conducted, the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess income of such other person in accordance with the provisions of section 153A if he is satisfied that the books of account or documents or assets seized or requisitioned have a be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptember 2010 (for VSIPL). Both sets of documents were seized not from the respective Assessees but from the searched person i.e. Jagat Agro Commodities (P) Ltd. In other words, although the said documents might 'pertain' to the Assessees, they did not belong to them. Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under Section 153 C of the Act was not met in the case of the two Assessees. Merely because regular books, of other persons are found with searched persons assumption of jurisdiction by AO of Other persons may be justified but since these are generally the regular books of account on the basis of which returns are prepared, there cannot be any undisclosed income arising from them. In view of expression, books of account/documents/assets seized have a bearing on the determination of total income appearing in section 153C(1), proceedings u/s. 153C will not be valid. In view of this, we are of the opinion that assessing officer did not have any jurisdiction to invoke the provisions of section 153C of the income tax act and therefore it has not been rightly invoked by him. Thus, action of AO for reopening of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate proceedings before the learned CIT A, assessee submitted a remand report dated 25/10/2018, which is at page number 22 of 38 of the appellate order. In para number 5 the learned AO stated that the assessment order are based on the statement of Shri Moolchand Malu, post search investigation and investigation during assessment proceedings. The assessee specifically asked the AO to provide cross-examination or the information to show that the amount of share capital taken by the assessee from the above stated company is an accommodation entry. None of the statements of the investigation wing, though referred to many of the companies, however the name of this company from womb the assessee has taken share capital is appearing. In para number 8 of the remand report, the learned assessing officer has categorically stated that during the assessment proceedings commission u/s 131 (1) (D) of the income tax act, 1961 was issued to the Calcutta investigation wing. A list of 27 companies was sent for necessary enquiry. As per report of Calcutta wing, 9 companies are such companies, which are used for routing, and providing accommodation entry to the beneficiaries as per the statement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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