TMI Blog2021 (7) TMI 879X X X X Extracts X X X X X X X X Extracts X X X X ..... of income and therefore, cannot under any stretch of imagination be said to be incriminating documents. Therefore the addition in respect of share capital cannot be made for the completed assessment years i. e. AY 2007-08 to 2011-12 in absence of any incriminating material found in search. Addition u/s 68 - As in respect of share capital, the ld. AR repeatedly stated that as far as possible, all the documentary evidences including register of minutes of meeting of shareholders were produced for verification and the copies of the same were also filed. All the documents establishing the genuineness of the transaction including the bank statements, board resolutions, Certificate of Chartered accountants etc. are attached.The assessee has also claimed to have filed evidences relating to the source of the share application money. All these evidences have neither been rebutted nor has any inquiry led to any inference that these are mere paper work and have been found to be bogus. Based on these evidences Ld. CIT (A) has deleted the additions in all the yearas on this score. Under these circumstances, we have no hesitation in holding that both in law and on facts, the above add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment was made outside the books of account. Assessee also stated that the transaction pertaining to difference of ₹ 5,56,000 is in respect of purchase of land and has been duly recorded in books and the transaction pertaining to difference of ₹ 732,150 pertains to M/s Prakash Thermal Power Ltd which is a group concern of the assessee company and the amount is duly accounted by it. The Ld. AR for the assessee also stated that theLd. AO has incorrectly totalled the addition to ₹ 23,99,260 instead of ₹ 12,88,150.Therefore, the addition stands deleted and the assessee gets relief. Addition on account of shifting of profits from the steel unit to the power unit - addition based on material found in the first search - HELD THAT:- Tax has been paid on book profits and any change in sale price will not impact the book profits.Assessee has paid tax of ₹ 42. 81 crores on book profits of ₹ 251. 89 crores. Even if the allegation of the Ld. AO is believed to be true, even then there will be no change in the tax liability of the Assessee. The book profits will remain unchanged as the profit of power division will reduce but profit of steel division will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the Ld. CIT(A) has erred in law and on facts in directing the A. O. to delete the addition of ₹ 8,18,311/- as unexplained expenditure on account of brokerage. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by relying on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court which has not been accepted by the department and SLP against the same has been filed before Hon ble Supreme Court. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words total income as used in Section 153A would only mean undisclosed income discovered from seized / incriminating material. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in adopting a restrictive and pedantic interpretation of the scope of assessment u/s 153A of the Act. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the words total income as used in section 153A would only mean income unearthed durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Housing Development Company Vs. DCIT dated 09. 08. 2014 has held that total income includes income unearthed during search and any other income. 8. That the grounds of appeal are without prejudice to each other. 9. That the appellant craves leave to add, amend, alter or forgo any ground(s) of appeal either before or at the time of hearing of the appeal. ITA No. 4041/Del/2017 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A. O to delete the addition made u/s 68 of the I. T. Act on account of unexplained cash credits amounting to ₹ 22,82,10,000/- on protective basis and ₹ 77,85,000/- on substantive basis. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A. O. to delete the addition of ₹ 11,79,975/- as unexplained expenditure on account of brokerage. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by relying on the decision in the case of Sh. Kabul Chawla by the jurisdictional High Court which has not been accepted by the department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition of ₹ 20,79,200/- as unexplained expenditure on account of brokerage without appreciating the facts brought on record by the A. O. 3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A. O. to delete the addition of ₹ 23,99,260/- made on the basis of electronic data seized during the search relating to purchase of land. 4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A. O. to delete the addition of ₹ 76,35,72,743/- made on account of shifting of taxable profit from steel division to exempted profit of power division by charging higher rates of power generated. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in directing the A. O. to restrict the addition of ₹ 1,39,28,065/- for unaccounted profit @ 1% of the total purchases of scrap to ₹ 1,04,46,052/- which is 0. 75% of the total purchases of scrap. 6. That the grounds of appeal are without prejudice to each other. 7. That the appellant craves leave to add, amend, alter or f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y material on record in support of his contention. 2. That on the facts and in the circumstances of the appellant s case, the Ld. CIT(A) has erred both on facts and in law in confirming addition of ₹ 2,46,82,226/- being average of seven days scrap purchases u/s 69C by holding the opinion of the AO as justified, whereas he himself accepted that the addition were made on estimated basis only. 3. That on the facts and in the circumstancesof the appellant s case, the Ld. CIT(A) has erred both on facts and in law in confirming addition to the extent of ₹ 96,52,514/- by estimating 0. 75% unrecorded profit on scrap purchase as against 1% estimated by the AO without there being any basis for their estimation. 4. That onthefacts andin the circumstancesof the appellant scase, theLd. CIT(A) has erred in law in confirming addition of ₹ 2,46,82,226/- u/s 69C and ₹ 96,52,514/- being 0. 75% unrecorded profit on scarp purchased on estimation basis in search case u/s 132 of the Act, even without bringing any cogent material on record. 5. Thatonthefacts andin the circumstancesof the appellant scase, theLd. CIT(A) has erred both on facts and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the appellant s case, the Ld. CIT (A) has erred both on facts and in law in confirming estimated addition of ₹ 1,88,64,391/- u/s 69C and ₹ 1,70,29,838/- and ₹ 36,76,987/- being 0. 75% unrecorded profit on scarp purchased and bazar/kabad scrap even though he himself accepted - (a) that copies of statements, seized documents and enquiry report received from Investigation Wing of Income tax deptt. relied upon by the AO, were never confronted and cross-examination of the deponent were also not provided. (b) that unregistered dealers of scrap, transporters, truck owners, suppliers have retracted from their earlier statements relied upon by AO during cross- examination before the Excise department. ITA No. 4066/Del/2017 1. That on the facts and in the circumstances of the appellant s case, the Ld. CIT (A) has erred both on facts and in law in confirming addition of ₹ 11,78,500/- u/s 69C merely on the basis certain documents seized during the course of search at third party by holding content of seized documents, Annexure, A-2 and A-6, as true, which were lack of reliability since these were unsigned / u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) that copies of statements, seized documents and enquiry report received from Investigation Wing of Income tax deptt. relied upon by the AO, were never confronted and cross-examination of the deponent were also not provided. (b) that unregistered dealers of scrap, transporters, truck owners, suppliers have retracted from their earlier statements relied upon by AO during cross- examination before the Excise department. That the appellant craves leave to add, amend or alter any of the grounds of appeal. ITA No. 4068/Del/2017 1. That on the facts and in the circumstances of the appellant s case, the Ld. CIT (A) has erred both on facts and in law in confirming addition to the extent of ₹ 15,22,408/- by estimating 0. 75% unrecorded profit on scrap purchase as against 1% estimated by the AO without there being any basis for their estimation. 2. That on the facts and in the circumstances of the appellant s case, the Ld. CIT (A) has erred in law in confirming addition of ₹ 15,22,408/- being 0. 75% unrecorded profit on scarp purchased on estimation basis in search case u/s 132 of the Act, even without bringing any cogent material on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase,the Ld. CIT(A) has erred both on facts and in law in confirming addition to the extent of ₹ 7,41,523/- by estimating 0. 75% unrecorded profit on scrap purchase as against 1 % estimated by the AO without there being any basis for their estimation. 2. That on the facts and in the circumstances of the appellant s case, the Ld. CIT(A) has erred in law in confirming addition of ₹ 7,41,523/- being 0. 75% unrecorded profit on scarp purchased on estimation basis in search case u/s 132 of the Act, even without bringing any cogent material on record. 3. That on the facts and in the circumstances of the appellant s case, the Ld. CIT(A) has erred both on facts and in law in confirming estimated addition of ₹ 7,41,523/- being 0. 75% unrecorded profit on scarp purchased even though he himself accepted - (a) that copies of statements, seized documents and enquiry report received from Investigation Wing of Income tax deptt. relied upon by the AO, were never confronted and cross-examination of the deponent were also not provided. (b) that unregistered dealers of scrap, transporters, truck owners, suppliers have retracted from their earlier statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 342410 Unaccounted Investment (Department and Assessee s Appeal) 4902650 4902650 Unexplained Expenditure in purchase of land (Department s appeal) 2399260 446600 2845860 ( Shifting of profit from steel division (Department s appeal) 763572743 528020878 1291593621 TOTAL 164480431 242543674 284067716 1198997768 691591957 2029877 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... naccounted investment out of 49,02,650, confirmed 0. 75% ₹ 36,76,987 and deleted 0. 25% ₹ 12,25,662 unexplained expenditure in deleted 23,99,260 deleted 446,600 5. Besides this, the Ld. AR for the assessee has also filed application dated 09. 12. 2020 requesting for admission of additional grounds under Rule 11 in respect of Assessment Year 2007-08 to 2011-12 which reads as under: A patently obvious and apparent error of law has taken place in the captioned assessments which is a jurisdictional issue and goes into the root of the matter. 2. The search under section 132(1) of the income tax act, 1961 ( the act ) was conducted on the assessee on 30. 10. 2012 (referred to as first search ). The assessment in respect of the proceedings relating to the said search was to get time-barred on 31. 03. 2015. However, on 27. 03. 2014, another search wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not need any form of actual deliberation. Hence it is manifest that this legal ground which is germane to the existence of the very assessment may deserve to be raised. if the assessee succeeds on this ground, then the material if any, found during the course of first search cannot be used for making the assessment consequent to the second search. 7. Without prejudice the aforesaid, it is submitted that the learned commissioner of income tax appeals-30 (referred to as ld. cit(a) ) has deleted the additions made based on the material found during the course of first search by holding that the same is not to be incriminating in nature and the additional grounds so raised support the order of the ld. cit(a) and therefore are permissible under rule 27 of the income-tax (appellate tribunal) rules, 1963. it has been heldby the hon ble delhi high court in the case of sanjay sawhney vs. pcit it appeal no. 834 of 2019 (116 taxmann. com 701) that assessee is entitled to defend order of the ld. cit (a) before the appellate forum on all grounds, including ground which has been held against him by the lower authority though final order is in its favour. In view of aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch, the Ld. AO passed assessment order under section 153A for AY 2007-08 within the limitation period of the first search using only the material of the first search and the enquiries conducted during assessment proceedings. Thus, no assessment order was passed under section 153A/143(3) in relation to first search conducted on 30. 10. 2012; and the Assessing Officer took cognizance only of the second search and has passed the impugned assessment orders in relation to the second search. 7. In so far as the assessment year 2010-11 is concerned, the status of the assessment as on date of second search, i. e. , 31. 03. 2014 was as under: AY Date of filing original return Date of filing revised return Due date of order under section 143(3) Status as on date of search-29. 03. 2014 2010-11 14. 10. 10 31. 3. 12 notice under 143(2) issued but last date of assessment under 143(3) was 31. 12. 12 and no assessment was made under section 143(3) Completed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l seized, if any. 9. The chart representing the material used in respect of each addition made is reproduced below: Addition Description of Material found Found in which search Page no. of assessment order Share Capital A1-A14 computation, intimation u/s 143(1), bank statement and schedules of balance sheet of share applicants A15-A25 cheque books of share applicants on which authorised signatory has signed on blank cheques Found in first search 2-4,30 reproduced at page 2-4 Salary paid in cash u/s 69C A2 and A6 containing details of proposed cash Page 15,26 of A2 and page 51,53 of A6 for AY 2010-11 containing details of proposed cash Found in first search from premises of Assessee company s director, Vipul Aggarwal s 36 Shifting of profit from steel division to power division by charging higher rates of power generated by power division A-6 (pg 6,8,37) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2A, as the case may be, shall abate. 11. The Ld. AR for the assessee argued that as per the section, as soon as the search is conducted, the Ld. AO is duty bound to proceed in accordance with the provisions of section 153A of the act. Notice under section 153A shall 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. Thereafter, the Ld. AO has to determine the total income of the assessee in whose case a search or requisition has been initiated in respect of each of the 6 assessment years. The initiation of proceedings under section 153A is mandatory for all the assessment years falling within the six years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. 12. The AR for the assessee also submitted that the Ld. AO had no option but to make separate assessments for both the searches as the material found for each search was to be used by making consequent assessments under section 153A of the Act. 13. To support his contention the AR also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to make the original assessment and the assessment under section 153A merges into one. Only one assessment shall be made separately for each assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. c. Hon ble High Court of Delhi in the case of MadugulaVenu266CTR 373 has held that: section 153a is couched in mandatory language which implies that once there is a search, the assessing officer has no option but to call upon the assessee to file the returns of the income for the earlier six assessment yeaRs. it is not merely the undisclosed income that will be brought to tax in such assessments, but the total income of the assessee, including both the income earlier disclosed and income found consequent to the search, would be brought to tax. d. Canara Housing Development Co. v DCIT [2014]49 taxmann. com 98 (Karnataka High Court) . with all the stops having been pulled out, the assessing officer under section 153a has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by section 153a, by even making reassessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of aforesaid two income. e. Hon ble High Court of Bombay in the case of JSW Steel Ltd. 422ITR 71 has held that: the assessing officer is mandated to issue notice to such person to furnish return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. such returns of income shall be treated to be returns of income furnished under section 139. Once returns are furnished, income is to be assessed or re-assessed for the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. thus, once section 153-a(1) is invoked, assessment for 6 assessment years immediately preceding the assessment year in which search is conducted or requisition is made becomes open to assessment or re-assessment. two aspects are crucial here. one is use of the expression notwithstanding in subsection (1); and secondly that returns of income filed pursuant to notice under section 153-a (1)(a) would be construed to be returns under section 139. the use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said assessment year shall not proceed thereafter and the assessment has to be made under section 153(1)(b) read with the first proviso thereunder. [para 15] Besides this, he also relied upon various judgments of the Tribunal. 14. The second limb of argument was that assessment in pursuance of first search did not abate due to the subsequent search. The Ld. AR for the assessee stated that as soon as a search takes place, section 153A comes into play and a notice for 6 years has to be necessarily issued and assessment/ re-assessment for those years has to be made. This process has to be followed to consummate and put at rest the proceedings consequent to search which have resulted into assessment. There is no scope for not issuing notices and not making assessment once a search has taken place. The Ld. AR for the assessee contended that the Ld. AO cannot take shelter under a subsequent search to hold that the first search related assessments have abated and therefore no notice and consequent assessments have to be made pursuant to the first search. This interpretation will defeat the intent and purpose of the legislature which mandated that after every search, six p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no proceedings were pending in respect of the first search on the date of second search. Hence if no proceedings relating to the first search were pending, there can be no abatement of the same. 17. The AR futher stated that the words Assess or reassess used in section have been defined in the case laws and from the language, it is very clear that the word pending is used in context of original assessments and original returns and not in regard of assessments under section 153A. Some of the decisions relied upon for the propositions are briefly referred hereinunder: a. Kabul Chawla Delhi HC 380 ITR 573 In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in section 153a is relatable to abated proceedings (i. e. , those pending on the date of search) and the word 'reassess' to complete assessment proceedings. b. DCIT v Rajlaxmi Denim [2019] 71 ITR(T) 173 (Jaipur - Trib. ) The term assess in section 153a is used in respect of the assessments which are pending as on the date of search and got abated whereas the term rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enacted as a proviso and to no other. A proviso is subsidiary to the main section and it must be construed in the light of the section itself. The object of the proviso, as it has so often been stated, is to carve out from the main section a class or category to which the main section does not apply. But in carving out from the main section one must always bear in mind what is the class referred to in the main section and must also remember that the carving out intended by the proviso is from the particular class dealt with by the main section and from no other class. Hence, the proviso cannot render the entire main section inoperative. 19. The AR of the assessee also stated that in construing a proviso of a section, a situation giving rise to anomaly and absurdity must be avoided. The proviso to the section has to be read so as not to restrict the beneficial effect of the meaning of the section. It has to be borne in mind that when the proviso is conflicting with the main section it should be so interpreted that, if possible, effect should be given to both. This is the essence of the rule of harmonious construction . An interpretation which reduces the provisions of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He further contended that the word shall is used in section 153A for both, issuance of notice consequent to search and mandatory assessments thereafter. In fact, the word has been used again in the first proviso expressing a strong assertion that assessments are to be mandatorily made for each of the 6 years once a search takes place. The word shall is also used in section 143 which means that assessments under section 143(3) are mandatory after issuance of notice under section 143(2). However, in the section 147 Income escaping assessment the word used is may which means that the AO may or may not pass an order. Therefore, whenever a search takes place under section 153A, assessment for the six preceding years, has to take place. From a plain reading of the second proviso, it can be seen that the second proviso does not talk of situation where all 6 years are pending on the date of search. It takes into account where some years are pending and some are completed. Therefore, the second proviso does not apply to a situation where the first search can be treated to be pending in toto in respect of all 6 AYs. The Ld. AO s reason perhaps is that on the date of second search, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in first search 2-4, 30 reproduced at page 2-4 23. The Ld. AR for assessee stated that material found during the course of first search cannot be used in making assessments in pursuance to the second search. If the department has not made an assessment in pursuance to the first search, material found during the course of the said first search cannot be used in respect of the assessment years relating to and in consequence of the second search. According him, material found during search does not even pertain to the impugned assessment year and infact in the description given by the Ld. AO himself, at page 2 of the order, only A21 pertains to cheque book of M/s Amar Jyoti Vanijya Pvt Ltd in respect of which addition has been made and rest all the annexures pertain to cheque books of other companies in respect of which no addition has been made and no share capital has been received from such companies during the impugned year. The cheque book is blank with signatures of authorised signatories and quite obviously does not pertain to any specific assessment year and therefore cannot be used for making the addition in AY 2010-11. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year in which addition is being made: a. CIT v. Kabul Chawla [2016] 380 ITR 573 (Delhi) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment 'can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this section only on the basis of seized material. ' b. Principal Commissioner of Income-tax, Central -2, New Delhi v. MeetaGutgutia [2017] 395 ITR 526 (Delhi) the legal position, as will be discussed shortly, is that there can be no addition made for a particular assessment year without there being an incriminating material qua that assessment year which would justify such an addition the court is unable to accept the submissions of revenue that there was incriminating material other than what has been discussed in the orders of the assessing officer, commissioner (appeals) and the tribunal for the assessment years in que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 2003-04 had been brought on record which could support such presumption. [para 48] as rightly pointed out by assessee that nothing was brought on record by the assessing officer to show that there was failure on part of the assessee to make a disclosure as regards the franchisee income in any of the earlier years. the incriminating material had to be in relation to any income that was not disclosed in the earlier returns. there was no such incriminating material to show that there was a failure by the assessee to disclose any franchisee income for those earlier years. the disclosure by the assessee on account of 'undisclosed franchisee commission' was relevant only for the year of search and not for the earlier years. [paras 49 50] section 153a is indeed an extremely potent power which enables the revenue to re-open at least six years of assessments earlier to the year of search. it is not to be exercised lightly. it is only if during the course of search under section 132 incriminating material justifying the reopening of the assessments for six previous years is found that the invocation of section 153a qua each of the assessment years would be justified. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public documents and available in public domain and already available with the department. None of the documents seized from the premise of the Assessee is of such nature which is not available with the department. No new information was coming out from the seized documents. b) Signed blank cheque books, computation, intimation u/s 143(1), bank statement and schedules of balance sheet of promoter companies found in the premises of the searched person belonging to shareholder of searched person by no stretch of imagination constitute incriminating material. The directors of the investor companies were the employees of the Assessee and the investors are the promoter group companies of the Assessee. Therefore presence of cheque books at the premises of Assessee where directors were sitting is not illegal and cannot be used against the Assessee. c) The Assessee has already submitted before the Ld. AO that these documents belong to the promoter group companies and were lying with the Assessee for filing statutory returns, paying taxes, fees and statutory dues, for general routine work of ROC, income tax and return filing, etc. The Assessee also filed name, address of reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or even after verification, nothing incriminating feature turns out, then it does not throw the onus back on the assessee. b. M/S. Gee IspatPvt. Ltd. , New Delhi vs Acit4256- 4259/Del/2014 and M/s Gee IspatPvt. Ltd. , V ACIT ITA No. 5424,5425,5475,5476/Del/2014 during the course of search at the assessee's premises blank singed share transfer forms of some of the descript companies, who were shown as investors in the share capital of the assessee company were found and seized and that the action u/s 132 of the act revealed that shares held by nondescript companies had been transferred to the directors and their family members at much lower price. 24. in the present case, since no incriminating material was found, therefore, the addition made by the ao u/s 153a of the act was not justified. 26. a similar view has been taken by the hon'ble jurisdictiona l high court in the case of pr. cit vs meetagutgutia prop. M/s ferns n petals (2017) 395 itr 526 (supra) wherein it has been held as under: any and every document cannot be and is not an incriminating document. no addition can be made for a particular assessment year without there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. merely because a valuable article or document belonging to an assessee is seized from the possession of a person searched under section 132 of the act, does not mean that the concluded assessments of the assessee are necessarily to be re-opened under section 153c of the act. in our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the assessee, which has no bearing on the assessments of the assessee for the years preceding the search, was seized from the possession of the searched persons. As indicated above, in the present case, the documents seized had no relevance or bearing on the income of the assessee for the relevant assessment years and could not possibly reflect any undisclosed income. this being the undisputed position, no investigation was necessary. d. Hon ble High Court of Delhi in the case of Index Securities Pvt. Ltd. (86 taxmann. com 84) HELD: as regards the second jurisdictional requirement viz. , that the seized documents must be incriminating and must relate to the ays whose assessments are sought to be reopened, the decision of the supreme court in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mises of the assessee, a survey under section 133A of the Act was also carried out at the premises of Sh. M. L. Aggarwal, Chartered Accountant located at N-5, Azadpur, Commercial Complex New Delhi and documents including blank signed share transfer form, blank signed money receipts for transfer of shares, blank signed power of attorney, Memorandum and Articles of Association with some ROC papers and copy of bank statements etc. in relation to one of the share applicants, i. e. , Edward Supply P. Ltd. were impounded from his premises. 4. 9 Now regarding the second condition, the ld. cit(dr) has mentioned that documents impounded from the premises of sh. m. l. aggarwal, chartered accountant, during the course of survey proceeding are incriminating material found during the course of search. we do not agree with the contention of the ld. cit (dr) that these materials like blank shares transfer forms etc could be termed as found during the course of search at the premises of the assessee. the survey proceedings carried out at the premises of the chartered accountants, ml aggarwal are separate from the search proceedings carried out at the premises of the assessee. There is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No. 406/2019 has observed as under: 7. At the outset it is required to be noticed that the Revenue s appeal against the decision of this Court in Kabul Chawla (supra) has been dismissed by the Supreme Court on account of the low tax effect. However, learned counsel for the Revenue states that there are other appeals of the Revenue pending in the Supreme Court questioning the correctness of the said decision. Nevertheless the fact remains that there is no stay of the operation of the decision of this Court in Kabul Chawla (supra) and it continues to hold the field. 8. Learned counsel for the Revenue submitted that the observations of the ITAT in the impugned order that there was no incriminating material in respect of the share capital and therefore the addition was unjustified, was not warranted. According to her this was beyond the judgment of this Court in Kabul Chawla (supra). 9. The fact remains that the Revenue itself is not disputing that in respect of the share capital no incriminating documents were found in the search proceedings. The Court s attention has been drawn to the decision of the Supreme Court in CIT v. Singhad Technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,618,619,628 Without prejudice, Mr. VP Aggarwal in his statement has stated that the amounts are taxable in the year in which they were introduced in the group companies and therefore as per Annexure A of his statement, no amount is taxable in impugned AY (Refer page 147-148 of paperbook). The Ld. AO has relied on his statement however, the Ld. AO states that no evidence is given that the money is not taxable in the impugned AY. The Ld. AO therefore only relies on part of the statement and does not believe other part of it to be true. b) Statement of new directors- Pawan Guleria and Sudhir Kumar Bali referred to at page 11, 19-22, 27, 30 of the order and also at page 178-182 and 183-187 of the paperbook Statement of Pawan Guleria (new director of Ankit Nivesh Management, AmarjyotiVanija Pvt Ltd and Lokpriya Trading) on 31. 10. 12 wherein he has stated that he was commercial Manager of the Assessee Company and did not know anything about the Assessee Company and was a director for name sake only. Statement of Sudhir Kumar Bali (new director of AnkitNivesh Management and Lokpriya Trading) on 30. 10. 12 wherein he stated that he was A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not considered the retraction and placed reliance on the statement obtained under threat by the department. The statements given under duress or coercion have no admissibility under the law. The statements were taken at midnight under pressure and coercion. It has been held by various courts that in normal circumstances, it is too much to give any credit to the statement recorded at such odd hours and such statement cannot be considered to be a voluntary statement, if it is subsequently retracted. The statements relied upon by the Ld. AO have been retracted within a span of 2-3 days and the retractions were also filed before the Ld. AO and the Ld. CIT(A) Refer page 302, 303, 305 of PBK . It is trite that when Assessee has retracted from disclosure made in statement and if no undisclosed income was found during search, the department cannot make additions on bare suspicion and presumption and solely on the basis of the statement. CBDT instructions state that confessions are often retracted by filing returns of income and the focus should be on collection of evidence of undisclosed income and no attempt should be made to obtain confession only. a) CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey that any instance of undue influence/coercion in the recording of the statement during search/survey/other proceeding under the i. t. act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the board adversely. 29. The Ld. AR stated that statement is something which is consequent to the search and cannot be reckoned as incriminating material found during the course of search and assessments that stood completed on the date of search cannot be made on the basis of statements. In support, the AR relied upon the judgment of Hon ble Delhi High Court in the case of PCIT vs. Best Infrastructure (India) Pvt. Ltd. in ITA No. 13-22/2017. It was observed as under: 38. fifthly, statements recorded under section 132 (4) of the act of the act do not by themselves constitute incriminating material as has been explained by this court in commissioner of income tax v. harjeevaggarwal (supra). lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in smt. dayawantigupta v. cit (supra) where the admission by the assessees themselves on critical aspects, of failure to maintain ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2-4 Salary paid in cash u/s 69C A2 and A6 containing details of proposed cash Page 15,26 of A2 and page 51,53 of A6 for AY 2010-11 containing details of proposed cash Found in first search from premises of Assessee company s director, Vipul Aggarwal s 36 Shifting of profit from steel division to power division by charging higher rates of power generated by power division A-6 (pg 6,8,37) showing power cost per unit dated 14. 5. 12 and 20. 08. 12 @3. 04 and 2. 09 per unit respectively Found in first search Page 39 Unexplained Expenditure-purchase of land Electronic data seized at Chapa (party BS-I) in a seized pendrive annexure PDI-1/2)-showing table about land purchases in which 2 columns -cost as per paper and actual amount paid are mentioned Found in survey on 30. 10. 12 38 of order Page 318- 320, 867-868 of PBK 34. Ld. AR further submitted that once the Assessing Officer has not passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were pending, therefore, the same shall automatically stand abated. She further pointed out that the assessee in the letter to the Ld. Assessing Officer has also stated the same position that notices issued under section 153A in relation to first search should be dropped and only assessment in consequence of the second search should be made. There cannot be two assessments under section 153A for the same assessment years which are falling within period of six assessment years which here in this case are mostly overlapping at least from assessment years 2008-09 onwards. DECISION 38. First of all, in so far as admission of additional grounds as raised by the assessee, are concerned, as discussed above, we find that same are purely legal grounds which are arising out of facts and material on record and apparent from the impugned assessment order, which is evident from the following passages in the assessment order which refers to seized documents found during first search on 30. 10. 2012, which has been contested by the Ld. Counsel of the assessee that same cannot be used in assessments consequent to second search on 31. 03. 2014:- 39. Thus, being purely leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b)assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : provided that the assessing officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this section pending on the date of initiation of the search under section 132 or making of requisition under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. Reassessment can be done on all completed assessments based on incriminating material found during the course of search indicating any undisclosed income. If no incriminating material is found qua the assessment years which are concluded or are unabated, then the original assessed income shall be taken as assessed income under section 153A. The term assessed in Section 153A is used in respect of assessments which are pending on the date of search and got abated whereas the term re-assess is used in respect of those assessment years whose assessment already stood completed and were not pending on the date of search. 43. Thus, the law as interpreted by the Hon ble High Courts as discussed above is that, there is no option for the Assessing Officer not to pass any assessment order for six assessment years prior to the year of search, if the search has been carried out under section 132 or requisition under section 132A. There cannot be any waiver of such condition of not to pass any order; or in another words, Assessing Officer cannot acquiesce his statutory duty for passing the assessment order in terms of Section 153A. Even if the search does not yield any incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 153A as provided in the statute. The the seized or incriminating documents found could have only used for the purpose of assessment and reassessment u/s 153A for the stipulated 6 assessment years; and if not then its fate end there. 46. If another search has taken place in the subsequent period, then any material or document found in that search relating to any of the assessment years forms the basis for assessment / re- assessment falling within the period of six years as contemplated under section 153A. The statute envisages that if there are multiple searches spreading into different years, then Ld. Assessing Officer is duty bound to pass the orders for the six years in respect of every search. As soon as search takes place the provision of Section 153A gets triggered and all the legal formalities of issuance of notice for six years have to be necessarily complied with and assessment/re-assessment for those assessment years has to be made. In our opinion, any document or material found in any search has to be used in the assessment or re-assessments falling within the period of six years relating to that search only and procedure of Section 153A has to be follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch alone and not kept in lock and key to be used subsequently in second search. Otherwise it will create immeasurable hardship to the assessee and certainly legislature did not intend to keep on extending the period of limitation of assessment and fate of determing the undisclosed income for perpetuity. If there is another search then same procedure and limitation has to be followed. 48. If we take the facts and circumstances of the instant case, then; Firstly, Assessing Officer should have framed the assessment under section 153A in pursuance of the first search conducted on 30. 10. 2012 for six assessment years prior to the year of search within the time allowed in the statute. Secondly, he was required to assess and re-assessee the total income of all six assessment years falling under section 153A either on the basis of incriminating documents found during the course of search or assess the income on the basis of return of income. Even if the first search related assessments were not made and the second search took place as is the case here, then Assessing Officer should have framed separate assessment orders for six years in respect of the both search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument in the light of principle laid down by the Hon ble Jurisdictional High Court and other High Court cited supra. As culled out from the assessment orders as well as arguments of the ld. AR, it is an undisputed fact that the additions which have been made, for instance, relating to the share capital, salary paid in cash, shifting of profit, unexplained expenditure on purchase of land, etc. were all based on documents found during the course of first search and there is no material whatsoever which was unearthed or found during the course of search conducted on 31. 03. 2014 which is the base of present assessments. Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla as well as in the case of PCIT vs. Meeta Gutgutia (supra) have clearly held that there can be no addition for a particular assessment year without there being any incriminating material qua that assessment year which could justify such an addition. The incriminating material has to be in relation to any income that was not disclosed in the earlier return and if there is no incriminating material then no addition can be made qua those assessment years whose assessment were completed earlier. There is no case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, New Delhi, various incriminating documents were found and seized including annexure A-15 to A-25 which are cheque books of different companies with signatures of Authorized Signatories on the blank cheques. The details of some of these incriminating documents are as follows: Page no. 30 of the assessment order C. Further the cheque book of this jamakharchi company was seized from the office premises of Prakash Group indicating that this company is controlled by Prakash Group. 53. The Assessing Officer has further stated that consequent to the first search, soft copy of the working papers, Balance Sheet, trial balances, journal, ledgers, TDS certificates, board resolutions, income tax filing records, slips of cheque books etc. of different companies controlled by the management of M/s Prakash Industries were found and they constitute incriminating material and therefore, addition to share application money has been made. 54. We have perused the submissions of the assessee, submissions of the revenue as well as the facts of the case and find that the material in respect of investor companies were admittedly found during the course of first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per records of Registrar of Companies showing Registration No. , date of incorporation, email, CIN and latest particulars 156 Copy of PAN card 157 Acknowledgement of Income Tax Returns for AY 2010-11 158 Audited Financial Statements for AY 2010-11 174-182 Bank Statements showing payment to Assessee 159-173 Bank Statement of Assessee Company showing the inflow of share application money 193-243 Communications between Assessee and Amarjyoti Vanija Pvt. Ltd. regarding 100,00,000 share warrants @ 81 per warrant taken by Amarjoti Vanija Pvt. Ltd. 187-188 Approval from BSE for issue of equity shares arising on conversion of 1 crore warrants under guidelines of SEBI 183 Certified by CA in accordance with SEBI guidelines regarding pricing of 100,00,000 warrants at ₹ 81/- per warrant convertible into shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2010-11 850-866 57. All these evidences have neither been rebutted nor has any inquiry led to any inference that these are mere paper work and have been found to be bogus. Based on these evidences Ld. CIT (A) has deleted the additions in all the yearas on this score. Under these circumstances, we have no hesitation in holding that both in law and on facts, the above addition is not correct and deserves to be deleted and consequently the appellant gets relief of ₹ 16,36,62,120/- for the AY 2007-08, ₹ 20,36,62,120/- for the AY 2008-09, ₹ 23,59,95,000/- for the AY 2009-10, ₹ 41,58,40,000/- for the AY 2010-11 and ₹ 15,81,65,000/- for the AY 2011-12 on account of addition of Share capital and₹ 8,18,311/-, ₹ 10,18,310/-, ₹ 11,79,975/-, ₹ 20,79,200/-, ₹ 7,90,825/- for the AY 2007-08 to 2011-12 respectively on account of unexplained expenditure being brokerage. 58. In the result, the appeals of the Revenue ITA No. 4039 to 4043/D/2017 stand dismissed. 59. Ground No. 1 of appellant s appeal no. 4064 to 4066/D/2017 for the AY 2008-09 to 2010-11 pertaining to the addition of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of investment and purchase of scrap. Further, there is an addition of ₹ 2,46,82,226/- in AY 2008-09, ₹ 1,88,64,391/- in A. Y. 2009-10 pertaining to investment on purchase and ₹ 1,28,70,018/- in AY 2008-09, ₹ 2,27,06,450/- in AY 2009- 10, ₹ 1,39,28,065/- in AY 2010-11, ₹ 41,68,654/- in AY 2011- 12, ₹ 20,29,877/- in AY 2012-13, ₹ 26,50,649/- in AY 2013-14 and ₹ 9,88,697/- in AY 2014-15 pertaining to purchase of scrap and an addition of ₹ 49,02,650/- on account of bogus purchase. These additions have been made on the basis of gate registers, documents from scrap dealers, bilties from transporters, etc. found in search conducted by the Excise Department. There is no reference to any other material found during the search by Income-tax department on the assessee. The only reference and basis of addition were proceedings initiated under the Central Excise Act. The Ld. AR for assessee brought to our notice the order of the Principal Commissioner, Central Excise dated 19. 06. 2018 and order of Hon ble Customs, Excise and Service Appellate Tribunal dated 27. 03. 2019 which was received after the order of L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 732,150 pertains to M/s Prakash Thermal Power Ltd which is a group concern of the assessee company and the amount is duly accounted by it. The Ld. AR for the assessee also stated that theLd. AO has incorrectly totalled the addition to ₹ 23,99,260 instead of ₹ 12,88,150. Therefore, the addition stands deleted and the assessee gets relief of ₹ 23,99,260 in AY 2010-11 and ₹ 4,46,600/- in AY 2011-12. 68. Ground No. 4 of ITA No. 4042 and 4043/D/2017for AY 2010-11 and 2011-12 of department s appeal are relating to the addition on account of shifting of profits. The next addition pertains to shifting of profits from the steel unit to the power unit. This addition is also based on material found in the first search. According to the Assessing Officer, the appellant has charged ₹ 5 as rates for acquiring power from its power unit thereby increasing the profit of the power unit which is exempt under section 80-IA of the Act and decreasing the profit of the steel unit. The evidence found during the course of first search showed cost of power manufactured by the power unit. Clearly, there is nothing incriminating about it. It only shows the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore no assessment has been made consequent to the first search. However material of the first search has been used for making the addition. If the department has not made an assessment in pursuance to the first search, material found during the course of the said first search cannot be used in respect of the assessment years relating to and in consequence of the second search. 2. Seized material does not pertain to the impugned AY a. The screenshot of the document at page 39 of assessment order showing the date and cost of power per unit shows the cost of ₹ 3. 04 per unit on 14. 05. 2012 and the cost of 2. 09 per unit on ₹ 20. 08. 12. Quite obviously, the seized document pertains to the AY 2013-14 and therefore cannot be used for making the addition in AY 2010-11. It would be clearly impermissible as the seized material available with the AO has no nexus with the assessments in which addition has been made and is wholly irrelevant for the purpose of assessing the income of the Assessee for the years in question. Admittedly, there is no seized material in the years for which addition has been made. b. Infact, the Ld. AO has himsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old by power to steel avg rate pu at which power sold by power to steel division Average rate IEX Peak rate IEX power sold by power division to CSEB / others through State electricity board quantity of power purchased by steel from CSEB avg rate pu at which power purchase d by steel division from CSEB AY 10-11 689,338,905 92,797,699 596,541,206 5 5. 07 10. 98 0 70,408,032 3. 72 1. The addition was made on the difference in price charged by power division from steel division as per the books of accounts and the average rate at which power was purchased by steel division from Chattisgarh State Electricity Board (CSEB). 2. Price charged for power was in consonance with rate charged by CSEB and rates that prevailed in India energy exchange ( IEX ) which is a statutory body that determines and publishes the contemporary rates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d' with a view to produce more profit to the assessee carrying on eligible business. [Para 8. 3] Sub-section (10) is a deeming provision and it must be strictly construed, the Assessing Officer must show at the first instance that the course of business between these closely connected persons was arranged so as to produce more than ordinary profits in the hands of a person carrying on the eligible business. Such a position has to be necessarily proved. There can be no inference as to the fulfilment of such a condition. Thus, it is vivid that unless such 'arrangement' or manipulation is shown to exist, there can be no question of discarding the declared actual profit and substituting it with a reasonable profit. It is manifest that there are two components of this. First is the 'arrangement' between the related parties and second, such arrangement should lead to higher profit. High profit must necessarily be the consequence of such an arrangement. To put it simply, if such an 'arrangement' is a cause, the higher profit is its 'effect'. It is well known that higher or lower profit of a business can be as a result of the cumulative effect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness is no criteria to press into service this provision, unless the 'arrangement' is proved in the first instance. The 'arrangement' needs to be specifically proved by the Assessing Officer by showing that the assessee intentionally made purchases at a relatively lower rate from the closely connected person vis- -vis that available in the market for the same products or the assessee made sales to the closely connected person at a relatively higher rate vis- -vis the prevailing market price of the similar products etc. or that the assessee having eligible income booked relatively less expenses or showed relatively more income on other counts in transactions with closely connected person. It is only when the existence of' 'arrangement' is proved in this manner that the provisions of sub-section (10) can be employed to reduce the extraordinary profits resulting from such lower payments or excess recoveries to/from the related person. To put it simply, the higher profit shown by the eligible assessee is the end point of the exercise to be undertaken by the Assessing Officer in this regard, starting with expressly showing as to how the transactions were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h no comparable price has been cited. Thus, this addition is not justified and method adopted by the Assessing Officer is not correct and the addition in question is on presumptions and surmises. The lower authorities have not properly appreciated the facts. They have not properly considered the various contentions raised on behalf of assessee for higher net profit margin in Silvassa unit. The assessee has given detailed charts given basis of allocation of common expenses to both the units. In respect of common expenses, the assessee has allocated most of the expenses on turnover basis. 6. Nothing contrary has been brought to our knowledge on behalf of revenue. Facts being similar, so following the same reasoning, we hold that there is no concrete evidence that the assessee has shifted the profit of Chakan Unit to Silvassa Unit at such a magniture and hence, the addition sustained by CIT(A) could not be sustained, as such, at the same time, the objection of revenue authorities on this point cannot be rejected as in toto. Taking into all the facts and circumstances in to consideration, the deduction of claim u/s. 80IB(5)(i) is restricted to 15% as against done by the CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. [2012] 26 taxmann. com 336 (Bom. ) 8. So far as questions (a) (b) are concerned, we find that the Tribunal has considered the entire evidence and on facts come to the conclusion that the profits earned by Kandla division of the respondent-assessee is not abnormally high due to any arrangement between the respondent-assessee and its German Principal. The Tribunal correctly held that extraordinary profits cannot lead to the conclusion that this is an arrangement between the parties. This would penalize efficient functioning. Further, the authorities have also recorded a finding that the industrial sewing machine needles imported and traded by the Mumbai division are different from those manufactured exported by the Kandla division. Consequently, this also negatives any arrangement between the parties to show extraordinary profits in respect of its Kandla division so as to claim deduction under Section 10A of the Act. These are findings one of fact. The appellant-revenue have not been able to show that the findings are perverse or arbitrary. In the circumstances, questions (a) and (b) as formulated by the appellant/revenue do not raise substantial questions of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restricting the profit from the eligible business of assessee to 20% of the turnover. In our view, the Department having not fulfilled the conditions of section 80IA(10), disallowance in the present case is not justified . At the cost of repetition, it needs to be stated that only relying upon TP documentation, AO has inferred that the profit earned by assessee at 50% is more than the arm's length profit. However, without bringing material on record that the profit earned by assessee at 50% is not the profit ordinarily earned in similar line of business, it cannot be said that it is not at arm's length. Moreover, excess profit may be due to various reasons. Therefore, without analysing those factors, it cannot be said that only because average profit earned by comparables is 15%, the profit earned by assessee at 50% is not reasonable. The Chennai Bench of the Tribunal in case of Tweezmen India (P. ) Ltd. v. Addl. CIT [2010] 133 TTJ 308 while considering similar issue held that the provisions of section 80IA(10) do not give arbitrary power to AO to fix the profits of assessee. AO has to specify as to why he feels that profits of assessee are being shown at higher f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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