TMI Blog2022 (3) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 153A of the I.T. Act in case of unabated assessment. It is undisputed that the assessment for present assessment year is non-abated. The earlier assessment order was already duly framed and subsequently pursuant to search fresh notice u/s. 153A was issued. The AO in the assessment order has clearly noted that during the course of search proceedings, it was found that assessee was generating cash by bogus invoices. There is not a whisper about anything found relating to share application money. The issue of share application money was taken up by the AO by mentioning that on perusal of the balance sheet of the assessee, he has found the same. AO further refers that an information was obtained from FT TR division, Mauritius Revenue authority vide letter dated 14.03.2016. When this is juxtaposed with the date of earlier assessment order i.e. 26.3.2014 and the date of search i.e. 19.3.2015, it is abundantly clear that this is a non-abated asessment and the so called material arose much after search. Hence, there is not an iota of doubt that the material being referred by the AO for making the addition was not found and seized during search. Hence, the jurisdiction of the AO in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Hon'ble CIT(A) ought to have held that assessee has discharged its onus to explain share capital on the basis of legal evidence on record and thus addition confirmed by Hon'ble C1T(A) in order u/s 154 of IT. Act 1961 is unjustified and unsustainable. 8. The order passed by A.O. u/s 143(3) r.w.s. 153A of IT. Act 1961 is illegal, invalid and bad in law. 9. The learned A.O. erred in not setting off the addition made in the assessment framed at ₹ 22,69,397/- with the net loss assessed in assessment framed at ₹ 54,36,891/-. 10. The Hon'ble CIT(A) erred in upholding the action of A.O. in not setting off of income with loss determined in assessment framed without assigning any reasons. 11. The assessee denies liability to pay interest under section 234A, 234B and 234C of IT. Act 1961. Without prejudice, levy of interest under section 234A, 234B and 234C of IT. Act 1961 is unjustified, unwarranted and excessive. 12. Any other ground shall be prayed at the time of hearing. 3. At the outset, it is noted that the delay 74 days in filing the appeal. Ld. Counsel of the assessee submitted that the delay was owing to the Corona Virus pand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... N THE ABSENCE OF CRUCIAL FACTS:- The perusal of the appeal order passed on 31.10.2019 clearly showed that the crucial relevant facts relating to information received by AO in the form of New Information regarding non-verifiable nature of ultimate beneficiaries of two Mauritius based companies on the basis of enquiry through FTTR Division of CBDT, was not considered, which was basis of addition of ₹ 22,69,397/- u/s. 68 in the impugned order passed u/s. 143(3) r.w.s. 153A. Therefore, in the total absence of consideration of the New Information received through FTTR, the appellate decision taken vide order dated 31.10.2019 had mistake apparent from record as the apparent facts of the case were not discussed. As soon as the apparent mistake was noticed, a notice was issued to assessee filing its objections, if any. The copy of the letter dated 25.11.2019 is reproduced below for ready reference:- Sub: Rectification of the Appeal Order dated 31.10.2019 in ITA No. CIT(A)-48/I.T.-180/DCCC-2(1)/2017-18-regarding A.Y. 2011-12 against 143(3) /153A order dated 29.12.2017. With reference to the above appeal order, crucial and relevant facts related to informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the order of CIT (Appeal}-24 in the case of LRPL has been confirmed. A copy of the order of Hon'ble IT.A.T. dated 19/O6/2019 in the case of LRPL for AY 2012-13 have been submitted to your Honour vide Appellant's submission dated 25/07/2019 as Annexure 1 ). 4. Further , in the case of the said group company i.e. Luxora Realtors Pvt. Ltd (LRPL) , for the AY 2O13-14 vide order dated 09/03/2017, the than assessing officer (A.C.I.T.-15(2)-l, Mumbai) made addition of issued and paid up Share Capital (Including Share Premium) received from Aanya Properties (1) Ltd (a Mauritius based Company) holding the same as unexplained cash credit u/s.68 . While passing the order , the Assessing officer tried to find technical fault, (although they were not there) in the proceedings with Reserve Bank of India, F.I.P.B. etc. The Ld. D.C.I.T. also misinterpreted the partial information received from the office of Principal C.I.T.-15 which were in turn received from Mauritius Revenue Authority through FT TR division. 5. Subsequently due to search action the case of the said group company was also transferred to the Ld. D.C.I.T. 6. The Ld . D.C.I.T. mechanically followed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Foreign Tax and Tax Research Division Ministry of Finance Government of India were partial in nature. Moreover, the information received stated that M/s. Aanya Properties (X) Ltd. had not booked any profit from FY 2006-07 (year of incorporation) till FY 2012-13 almost all its investment made through capital money raised from Its share holders i.e. M/s. Aanya Holdings Ltd- it was seen through the financial statements of Aanya properties (i) Ltd that the company did not have any self generating source of income- These information were not complete therefore the predecessor Assessing Officer of LRPL sent another letter dated 17/10/2016 to Mauritius Authority through FT and TR Division. The reply in this regard had riot been received till the date of passing the date of Assessment Order under this Appeal. 12 In this connection the Appellant most humbly submits before your Honour that the Mauritius Report might be the opinion the Ld. D.C.I.T. partial in nature but the findings of the report nowhere give any negative clue On the contrary the findings of the Mauritius Report were very categorically stated that the funds were provided by Investors I.e. Aanya Properties (I) Ltd. thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant facts obtained / gathered in case of Luxora Realtors Pvt. ltd. and the same are reproduced elaborately in para 6.3 of the assessment order. There is elaborate mention of reference to FTTR Division of CBDT and the information gathered regarding Aanya Properties and Aanya Holdings Ltd. The information gathered regarding Ultimate Beneficial Owners (UBO) has also been discussed by AO in the assessment order elaborately. All these facts are crucial to decide the legality of order passed u/s. 143(3)/153A in case of assessee, wherein, prior to search conducted on 19.03.2015, assessment u/s. 143(3) was completed accepting the revised returned loss of ₹ 54,36,891/-. Since these crucial facts were not considered while passing the appeal order on 31.10.2019, wherein, ground No. 2 of assessee's appeal was allowed in view of incomplete facts of the case, nay, without consideration of relevant facts of the case, it is clearly a case of mistake apparent from record. Since the mistake is relating to the apparent facts of the case, which has automatically resulted in a particular decision, while disposing of ground No.2 of assessee's appeal, the mistake needs to be rectified a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... With reference to point no. 1 above, it is absolutely clear that if any incriminating document is found in the search and seizure proceedings, the assessing officer has full powers to make addition on the basis of such incriminating documents. Therefore, there is no further deliberation on point number 1 here. With reference to the point number 2 above, it is very clear that there may be a situation, where subsequent to the original assessment under Section143(3), assessing officer may receive or obtain some additional information, which is not emanating from the search and seizure proceedings. Definitely there are unlimited sources, from which, the information relating to correct assessment of income of an assessee is available to assessing officer. Receipt of such information is not necessarily limited to search and seizure operation under section 132 alone. 3. The Moot Question:- The moot question is that in a case, where assessment under Section143(3) has been completed and once search seizure proceedings are initiated and notice under section 153A is issued; Can or should assessing officer ignore any other information which comes to his notice relating to assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... once the search takes place under section 132, the pending assessments have been abated only for the limited purpose of convenience of framing a single order and for no other purpose. The word abate used in the statute is for a very limited / procedural purpose in the overall scheme of things and such interpretation alone gives a harmonious construction not only to the section 153A and its subsection and its various provisos but also to this section vis-a-vis the overall scheme of assessment and powers of assuming jurisdiction for assessment by assessing officer as per the other sections. Any other interpretation would lead to disharmony and absurd conclusions contrary to the spirit of taxing the correct income for a particular assessment year. 4.3.2 Therefore, in the light of above position of law, assessing officer had all the power to make addition under section 68 for the non-verifiable credits in the names of Ananya Properties (2) Ltd. and Access Investment India as neither the creditworthiness of the ultimate beneficiaries of these two investors nor the genuineness of the transactions could be effectively proved as per the information received from Mauritius Tax Authorit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious Apex courts orders) must be satisfactorily explained by establishing the identity and creditworthiness of creditor and the genuineness of the entire transaction. Therefore, irrespective of the amendment introduced by Finance Act 2012, the original law itself was rigorous enough with regard to proving the genuineness of the transaction and the identity and the creditworthiness of the creditors. Therefore, when the assessing officer has reason to believe that the sources of assessee's capital introduced in the form of share capital are not satisfactorily proven by the assessee, the addition under section 68 can be lawfully made. In this case, the AO was not satisfied with the creditworthiness of Mauritius Companies itself and in this regard AO had asked assessee to prove sources of their funds. Thus the requirement of verification of creditworthiness and genuineness of ultimate beneficiaries was in entrusted upon assessee by AO. As has already been brought out above in this order, assessing officer has nowhere invoked the proviso introduced by Finance Act, 2012 and, therefore, this ground of appeal of assessee is without any basis and is therefore rejected. 5.4.4 Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these two companies or to prove beyond doubt the genuineness of the transactions of share allotment and the premium paid by these two companies, addition under section 68 is very much valid. 4. Creditworthiness of Ultimate Beneficiaries Not Proved: Additional Documents do not substantiate creditworthiness of Ultimate Beneficiaries:- Further, the details filed by assessee in the appeal proceedings regarding financial status of the ultimate beneficiaries, as has already been up held in para- 5.1.5, above in this order, assessee has again failed to substantiate the creditworthiness of these ultimate beneficiaries or to prove the genuineness of the flow of funds and the sources. Again at the risk of repetition a reference is made here to para- 5 to 5.1.6 above in this order wherein the emptiness of the various documents filed as additional evidence has been exposed. It will not be an exaggeration to state that not a single paper filed as additional evidence substantiates the creditworthiness of these ultimate beneficiaries or substantiates the actual flow of fund from these persons to the two companies. There is not a single document for even one entity which could explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity, creditworthiness and genuineness of ^ company namely Aanya Properties (2) Ltd.. The entire discussion of ITAT order is regarding company named Aanya Properties (1) Ltd.. ITAT has not discussed real issue and argument of AO that creditworthiness of Investor company has not been proven as creditworthiness of ultimate beneficiaries is not proved. The findings of AO that the creditworthiness of Ultimate Beneficiaries was not proven, is not discussed in ITAT order relied upon by assessee. In view of above, assessee's reliance on ITAT's order is without any weight for deciding issue at hand in this appeal. 5.4.6 The Genuineness of credit in Books of Accounts to be proven on facts of each case, this is the crux of principle laid down in Lovely Exports by Delhi High Court in ITA No 953/2006. Also, in that case in internal para 13, Hon'ble High Court has reflected upon pernicious practice of conversions of unaccounted money through masquerade or channels of investment in share capital. The court has distinguished the nature of public limited company where money is raised through Public Issue and the legal regime for Private Placement of capitals by other compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed in favour of the assessee. Now, ld.CIT(A) has clearly reviewed his earlier order and the same by no stretch of imagination can be said to be rectification of mistake. He further submitted that dehors incriminating material in case of unabated assessment, no addition can be done under the assessment framed u/s. 153A is well settled by Hon ble Jurisdictional High Court as well as Hon ble Supreme Court. Hence, even a review of the order of the ld.CIT(A) is not legally correct in this case not to speak of rectification of mistake apparent from the record. Ld. Counsel of the assessee made various submissions as to merits of the case that the issue is squarely covered in favour of the assessee. The submissions of ld.counsel of the assessee are summarized as under:- Ground No.1 to 8 Addition u/s 68 at ₹ 22,69,400/- on account of Share Capital. A.O. Para 6 Page 2 to 8 CIT(A) Para4 5 Page 5 to 13 I. On Merits no addition u/s 68 can be made. A) A.O. at para 6.3 has discussed the reason for addition which is primarily because of add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual position no addition in respect to share capital contribution can be made by holding the same as unexplained cash credit. E) The assesses has placed legal evidence on record in the course of regular assessment as well as in the fresh assessment proceedings u/s 153A of I.T. Act 1961 and fully discharged its onus to explain cash credit as envisaged u/s 68 of I.T. Act 1961. The assessee has discharged its onus to explain the contribution of share capital by placing legal evidence on record and established identity, creditworthiness and genuineness of share capital contribution received. Addition made by A.O. and upheld by CIT(A) is unjustified and unsustainable. (P- 44- 48)[Vol.-l] (P-123-128)[Vol.-l) F) The decision of Hon'ble CIT(A) 24 has been upheld by Hon'ble ITAT Mumbai Bench C vide judgment dated 19/06/2019 in ITA No.6202/Mum/2016. The issue in dispute is covered in favour of assessee by decision of coordinate bench in the case of associate company of assessee company. Addition made by A.O. and upheld by CIT(A) is thus unjustified and unsustainable. (P-1 to15)[VoI.-ll] (5,6, 13,14) G) In the case of assessee share capital contribution receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is contrary to settled position of law by the Hon'ble Jurisdictional High Court. Reliance on: i) Hon'ble Bombay High Court order in ITA No. 1251 of 2016 in the case of M/s. Caprihans India Ltd. vide order dated 04/01/2019. M) CIT(A) has not disputed the identity of the share holder and has also not found any fault in the legal documents being bank statement of share holder and Foreign Inward Remittance Certificate issued by bank. Conclusion of CIT(A) is contrary to the settled position of law in regard to onus to explain the share capital received by assessee company from non-resident. N) The assessee has not received any share application money from M/s. Aanya Properties (2) Ltd. During the year under consideration. Thus addition made by A.O. and confirmed by CIT(A) by invoking provisions of section 68 of IT. Act 1961 is bad in law. Reliance on: i) ITAT order Mumbai Bench, Mumbai in the case of Jagdish construction Ltd. Vide order dated 25/10/2018. II. No incriminating material. O) In the case of assessee regular assessment has been framed u/s 143(3) of IT. Act 1961 on 26/03/2014 accepting loss at ₹ 54,36,891/- as shown in return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elhi) CIT vs. Kabul Chawla iv) ITAT order in IT(SS) ANo.272/Ahd/2016 273/ Ahd/2016 in the case of M/s. Creative Trendz Pvt. Ltd. vide order dated 13/11/2020. v) (2016387ITR0529(Guj.) Pr. CIT vs. Saumya Construction P. Ltd. vi) ITAT order in ITA No.3429/Mum/2019 in the case of Shri Vijayrattan Balkrishan Mittal vide order dated 01/10/2019. vii) ITAT order in ITA No.08/Ahd/2Q17 in the case of The M/s. Samor Properties Pvt. Ltd. vide order dated 08/05/2019. III. No mistake apparent from record. X) A.O. has concluded that share capital contribution received from non-resident share holders M/s. Aanya Properties (2) Ltd. at ₹ 22,69,397/- is liable to be assessed u/s 68 of l.T. Act 1961. Y) CIT(A) in her order dated 31/10/2019 at para 5 considered the submission of assessee of more than 800 pages and concluded that in the case of assessee regular assessment is completed u/s 143(3) on 26/03/2014 before the date of search u/s 132(1) of l.T. Act 1961 on 19/03/2015 in which no addition is made u/s 68 of l.T. Act 1961. No incriminating material is found in the search and thus no addition u/s 68 of IT, Act 1961 can be made and thus addition made at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year under consideration. The loss available wrth assessee for set-off is ₹ 54.36 lacs against income assessed if any. C)A.O. followed decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan reported at 247 ITR 290 (Guj.) for denial of set off of loss against income assessed. D)Decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan explained/distinguished in subsequent IT . : 5 of same court in the case of Radhe Developers India Ltd. reported at 329 ITR 0001 and Shilpa Dyeing Printing Mill (P) Ltd. reported at 291 Taxman 279 (Guj.). Noting adverse can be drawn from the decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan. E) Recent Circular of Board No.11/2019 dated 19/06/2019 permits set-off of loss/depreciation against income assessed u/s 68 to 69C to assessment years prior to Asstt. Year 2017-18. F) Reliance on: i) 219 taxman 279 (Gujarat) CIT-II vs. Shilpa Dyeing Printing Mills (P) Ltd. ii) (2007) 291 ITR 0258 (Madras) CIT vs. Chensing Ventures iii) ITAT order in ITA No.1972/Ahd/2012 in the case of M/s. K.R. Automobiles vide order dated 03/02/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment/r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d valid having regard to the provisions of section 153C of the Act. 9. From the above, it is abundantly clear that dehors incriminating material found during the search, no addition is sustainable u/s. 153A of the I.T. Act in case of unabated assessment. It is undisputed that the assessment for present assessment year is non-abated. The earlier assessment order was already duly framed and subsequently pursuant to search fresh notice u/s. 153A was issued. The AO in the assessment order has clearly noted that during the course of search proceedings, it was found that assessee was generating cash by bogus invoices. There is not a whisper about anything found relating to share application money. The issue of share application money was taken up by the AO by mentioning that on perusal of the balance sheet of the assessee, he has found the same. AO further refers that an information was obtained from FT TR division, Mauritius Revenue authority vide letter dated 14.03.2016. When this is juxtaposed with the date of earlier assessment order i.e. 26.3.2014 and the date of search i.e. 19.3.2015, it is abundantly clear that this is a non-abated asessment and the so called material arose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reducing the liability of the assessee or the deductor or the collector, the Assessing Officer shall make any refund which may be due to such assessee or the deductor or the collector. (6) Where any such amendment has the effect of enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee or the deductor or the collector, the Assessing Officer shall serve on the assessee or the deductor or the collector, as the case may be a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed to be issued under section 156 and the provisions of this Act shall apply accordingly. (7) Save as otherwise provided in section 155 or sub-section (4) of section 186 no amendment under this section shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed. (8) Without prejudice to the provisions of sub-section (7), where an application for amendment under this section is made by the assessee or by the deductor or by the collector on or after the 1st day of June, 2001 to an income-tax authority referred to in su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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