9911796707
TMI Blog2022 (10) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to the date of search, except based on some incriminating material unearthed during the search which was not already available to the Assessing Officer. While granting relief to the assessee, the Ld. CIT (Appeal) has failed to take note of the position that Hon'ble Supreme Court of India has admitted SLP against this proposition in the following matters - i. Principal Commissioner of Income Tax v. Gahoi Foods Ltd. 117 taxmann.com 118(SC)/272 Taxman 521(SC) dated 24.01.2020 ii. ii. Principal Commissioner of Income-tax, Central-4 v. Dhananjay International Ltd.,114 taxmann.com 351(SC)/270 Taxman 15(SC) dated 16.09.2019. 2. The Ld. CIT (Appeal) has erred in law and on facts in not carrying out her duty of adjudicating the grounds on merit, and dismissing them only on a technical. 3. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition to Rs. 5,20,00,000/ made by the AO on account of unexplained share premium u/s 68 of the Income-tax Act, 1961. 4. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition to Rs. 5,95,00,000/ made by the AO on account of unexplai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Kolkata. The details their total income as per their ITR for the assessment year under consideration wherein these companies have shown to have subscribed for shares at exorbitantly high premiums was obtained and placed on record in the assessment order at page 3 para 5.1. The ld. AO observed that most of the companies that have shown to have invested in shares of the assessee company at exorbitant premium have shown insignificant incomes in the year of such investment. From the financial data ld. AO observed that the companies based in Kolkata do not seem to have the financial capacity for the investment in shares of the assessee company at huge premium that they have shown to have made. Moreover, most of the Kolkata companies have the same address, and on verification, it is observed that the directors of these companies are also directors in many other companies also based in Kolkata and simply provided accommodation entries of share application / premium thereon. 6. In order to ascertain the existence of the above-mentioned companies, during the course of search proceedings; surveys were authorized at the given addresses of M/s Ritesh Properties Pvt. Ltd, Rites Real Estate P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies that have shown to have invested in shares of assessee company at exorbitant premium have shown insignificant Incomes in the year of such Investment. From the above financial data, the companies based in Delhi do not have the financial capacity for the investment in shares of assessee company that they have shown to have made. Moreover, most of the companies have the same / similar address, which is another Indicator of the fact that they are suitcase/paper companies without any actual existence. The fact that these companies have shown to have made share premium investment in the same tranche as other Kolkata based shell companies, it is apparent that the investment being shown by the Delhi based companies in assessee company is prima facie an arrangement to route the unaccounted money generated by the group concerns. via layering them in bank accounts and finally Introducing them as share premium in the group concerns through accommodation entry providing shell companies. 10. The three individuals shown to be residents of Delhi made investment in the assessee company. The ld. AO observed that it is highly improbable that certain individuals would simply invest in a Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication money of Rs. 649.50 lacs, a sum of Rs. 129.50 lacs was received in FY 2009-10. Receipt of opening share application money of Rs. 129.50 lacs is verifiable from the previous year figure appearing in audited financial of year under consideration. Copy of bank statement of FY 2009-10 marking receipt of share application money is enclosed. iv) It is that share capital was allotted in AY 2012-13, copy of return of allotment is enclosed. v) During AY 2012-13, assessee company has received share capital of Rs. 520 lacs from 14 companies. is submitted that assessment proceeding AY 2012-13 has been completed u/s 143(3) wherein assessee has submitted copy of share application money, confirmation of shareholder, bank statement of shareholder, etc. of all these shareholders. After detailed examination, your predecessor has accepted the genuineness and creditworthiness of shareholders. All these documents are verifiable from the file of original assessment proceeding lying with your good self. Copy of assessment order is enclosed. We are also enclosing following supporting documents for further verification of receipt of share capital from these 14 companies: i) Active profile s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me confirmations but still the fact of the matter is that these companies and individuals are non-existent and do not have the credit worthiness to invest the same amount as share application money. For a transaction to be considered as bogus the assessee needs to prove all the three limbs of section 68 satisfactorily i.e. identity, genuineness and credit worthiness. Therefore, the said transactions are bogus and are to be treated as the assessee's unexplained income under the provisions of section 68 of the Income tax Act, 1961. The ld. AO further noted that here in this case none of the above limbs is established and hence the case is amply clear that the share premium received is actually an accommodation entry through routing of funds. However, the assessee's contention that the share application money of Rs. 129.50 lacs were pending allotment which is apparent from the balance sheet of the assessee company. Therefore, the sum was not credited in the year under consideration. Considering the facts as discussed above amount of Rs.5,20,00,000/- (6,49,50,000 1,29,50,000) considered as unexplained cash credits from undisclosed sources and added back to the total income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard the statement of Shri Manoj Kumar relied upon. 17. On the basis of evidences gathered during the search it is apparent that the companies are Kolkata based accommodation entry providing shell companies, and the unsecured loans shown to have been accepted by assessee is simply the case of routing its own unaccounted money after being laundered through the bank accounts of such accommodation entry providing shell companies. 18. Hence, the assessee company was issued show cause notice that why the amount of shown as unsecured loan shouldn't be considered as bogus and added back to the total income of the assessee. The assessee filed its reply vide letter dated 13.12.2019, the relevant part of which is reproduced hereunder: "That your another observation is that assessee company has accepted unsecured loan amounting Rs. 5,95,00,000/- from Kolkata based companies and accordingly your good self has show caused why this amount should not be added back to your total income of AY 2012-13 u/s 68 of the Act, in this connection we are to submit as under: i) Detail of these loan creditors are as under: Axisline Commodities Trade Private Limited 1,00,00,000 Dishika Marketing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em. Confirmation will be submitted within 2-3 days' time." 19. The ld. AO stated that the reply of the assessee has been duly and carefully analysed and is not acceptable due to the following reasons: 1. The assessee has stated that all these companies are existent and has also submitted that their active profile status but same is not acceptable in light of findings of survey proceedings wherein the companies are found to be non-existent. 2. With regards to assessee's submission that the these amounts have been paid in subsequent years is not acceptable as there is no denial of the fact that the very source of these funds was bogus lacking identity and credit worthiness. 3. The assessee cannot at any time answer the fact that with such meagre income how a company or individual can lend such huge amounts of loan to the assessee company. By no stretch of imagination can such amount of loan be justified by such non-existent companies. 4. The assessee also submitted few confirmations of certain companies but that doesn't in any way prove that the transactions were genuine. By barely furnishing the confirmation the assessee cannot get away from discharging his onus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,47,500/- on account of share capital and Rs.6,17,02,500/- on account of share premium totalling to Rs.6,49,50,000/-. During the course of search proceedings, consequential survey operations were conducted in Kolkata and Delhi and many of the companies to whom shares were claimed to be allotted, were found non-existent. Further, the AO has discussed at length in the assessment order that these companies disclosed very meagre income in their return of income. The status of many of these companies were found to be inactive in the ROC database. Based on these findings, the AO concluded that the investing companies did not have creditworthiness to invest in these companies and they were also found to be non-existent at the time of survey and enquiries which were simultaneously done with the search proceedings. As the share application of money of Rs.129.50 Lacs was pending allotment, therefore, the AO added Rs.5,20,00,000/- (6,49,50,000- 1,29,50,000) u/s 68 of the Act. Addition on account of unsecured loans During the course of assessment proceedings, it was noticed that the assessee has received unsecured loans from the following Kolkata based companies Axisline Commodities Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the appellant. The decision of the Ld. CIT(A) is not acceptable on account of the following reasons 1. It is submitted that as per provisions of section 153A, the AO has to issue notices u/s 153A(1) of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore. in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found during the course of search. 2. Judicial Pronouncements relied upon; (i) It would be appropriate to reproduce the head note in the case of CIT Vs ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala) a under: "Section 153A, read with section 132 and 132A of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 2002 03 to 2006-07 - Whether where there was a disclosure made by giving a statement during course of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders so passed were not sustainable in law - Whether Special Leave Petition filed against impugned order was to be granted-Held, yes [Para 2] [In favour of revenue] (iv) The head note in the case of CIT Vs Dr. P. Sasikumar [2016] 73 taxmann.com 173 (Kerala) is as under: "I. Section 153A, read with sections 132 and 132A, of the Income-tax Act, 1961 -Search and seizure-Assessment in case of (Submission of returns for six years) -Assessment years 2002-03 to 2008-09- Whether any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A Held, yes - Whether once search is initiated under section 132 or a requisition is made under section 132A, Assessing Officer is empowered to issue notice to person searched requiring him to furnish return of income in respect of each of following six assessment years as referred to in clause (b) of section 153A(1) Held, yes - Whether once aforesaid notice is issued, assessee has to furnish all details with respect to each assessment year since same is treated as a return filed under section 139 - Held, yes - Whether even if no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of) - Assessment years 1999 2000 and 2000-2001-Search was conducted at premises of assessee on basis of two documents received before search by Department through a Tax Evasion Petition allegedly filed by one of brokers involved in transaction pursuant to which notices under sections 153A and 143 were issued and assessment orders were passed for respective years making additions - Assessee contended that documents relied on to make additions, being not one seized in search conducted, proceedings under section 153A read with section 143 were non-est-However it was pursuant to search and enquiry conducted thereafter that it was revealed that assessee had rental income from a flat purchased at Bangalore which had been sold - Further, suppressed account maintained by assessee in which there was unaccounted consideration from purchaser also was unearthed and exact amount of income escaped from assessment was supported by ample evidence Whether therefore, no ground could be taken that other material which were already available with Department could not be relied on in proceedings - Held, yes [Paras 13, 21 and 22] [In favour of revenue]" (viii) In the case of Sunny Jacob Jewellers And ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment." 3. In view of the above judicial pronouncements, it is humbly submitted that appeals of the department may please be allowed and these cases may be set aside to the file of the ld. CIT(A) for deciding appeals on merits. Without prejudice to the above, it is submitted that there was simultaneous survey operation in this case of many companies. The Ld. CIT(A) has observed that there is no credibility of unexecuted survey. In this regard, it is submitted that the survey operations were conducted on the basis of the addresses provided by the investment companies in the departmental database and the department cannot be held liable for any in action on the part of any assessee to the advantage of some third party. Further, it is not in the hands of the department to execute a survey authorisation if the assessee concerned is not found to be existent at the address provided to the department. Hence, unexecuted survey authorisation should go against the investing companies and the appellant rather then treating it as in favour of the appellant. If the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies were conducted but offices could not be located. Thus, based on this observation the ld. DR submitted that the addition made by the ld. AO should sustain. As per provision of section 132 read with section 153A of the Income Tax Act, the AO has to assessee or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefore, cover not only the income emanating from the declared source or any material omission before AO but from all sources including undisclosed one or based on unplaced material before the assessing officer. The ld. DR further submitted that ld. CIT(A) has allowed the appeal of the assessee only on technical grounds and no incrementing material either discussed or looked into. He has not decided the appeal on merits of the case. Out of total 33 companies 21 are Kolkatta based and 12 located at Delhi and all these companies has no worth to invest in the assessee company. 24. As regards the addition of unsecured loans appearing in the books of the assessee company for all six parties all are based at Kolkatta. Their name, address, last three-year details of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies with whom the transactions are recorded extract of the bank transactions, confirmations, allotments of shares. He also submitted his averments n the written submission which reads as under: Facts: 1. The assessee company is engaged in the trading of agricultural commodities in Sriganganagar. It filed the return u/s 139(1) on 30.09.2012 declaring an income of Rs.1,33,69,670/- (PB 1). The assessment u/s 143(3) was made on 25.03.2015 at total income of Rs.1,34,11,740/- (PB 24-27). 2. A search was conducted on 08.02.2018 in the case of "NM Group, Sriganganagar" to which the assessee belongs. In response to notice u/s 153A assessee filed the return on 22.08.2018 declaring total income of Rs.1,33,83,690/-. 3. In search no incriminating document was found for the year under consideration. The AO, however, completed the assessment by making addition of Rs.5,20,00,000/- on account of unexplained share capital and Rs.5,95,00,000/- on account of unexplained unsecured loan u/s 68 of the IT Act, 1961. 4. Before Ld. CIT(A) assessee challenged the validity of the order passed u/s 153A of the Act and the addition made by AO u/s 68 of the Act. The Ld. CIT(A) vide letter dt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not already disclosed or made known in the course of original assessment. Thus, when no incriminating documents for the year under consideration were found, addition made by the AO in assessment proceedings u/s 153A is illegal and bad in law. For this purpose reliance is placed on the following case laws: PCIT vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC) Invocation of sec. 153A to reopen concluded assessments of AYS carlier to year of search was not justified in absence of incriminating material found during search qua cach carlier assessment year. SLP filed against said decision dismissed. Jai Steel (India) v. ACIT [Raj HIC] (2013) 219 Taxman 223 (Raj) "The requirement of assessment or reassessment under the said section has to be read in the context of s. 132 or s. 1324, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. The underlying purpose of making assessment of total income under s. 153A is, theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." Principal CIT Vs. Dipak Jashvantlal Panchal [2017] 397 ITR 153 (Guj.) (HC) It was held this case that from the heading of section 153A, the intention of the Legislature is clear, viz, provide for assessment in case of search and requisition, When the very purpose of the provision is make assessment case of search or requisition, goes without saying that the assessment has have relation the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz, incriminating material which reveals undisclosed income. Thus, while view of the mandate of sub-section (1) of section 153A of the Act, every case where there was search or requisition, the AO is obliged to issue notice to such person furnish returns of income for the six years preceding the assessment year relevant to the previous year which the search conducted or requisition is made, any addition or disallowance can made only on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation wing Kolkatta was considered as relevant evidence, the same could not be regarded as incriminating material unearth during the course of search and seizure as no such material is found from the assessee and therefore addition made by the AO u/s 153A was not sustainable and liable to be deleted when the assessment was completed u/s 143(3) and was not pending as on the date of search. 2. The sole basis of AO for making the addition u/s 153A is the survey carried out on 10.02.2018 at the addresses of companies from whom share capital and unsecured loan is received where these companies are stated to be found not existing. It is submitted that in respect of 14 companies from whom share capital was received, survey was conducted only on 7 companies. Even out of these 7 companies, the survey was conducted at the wrong address/ in the wrong name of 6 companies. In respect of 6 companies from whom unsecured loan was received, survey was conducted only on 3 companies and even in case of these 3 companies it was conducted at the wrong address. Therefore such erroneous survey results cannot be made basis of holding that these companies are non-existent more particularly when ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In any case, no addition on merit can be made as per the submission given before Ld. CIT(A) which is placed at PB 4A-14A. In view of above, order of Ld. CIT(A) be upheld by dismissing the ground of department. 27. In addition to the above written arguments the ld. AR of the assessee argued that this being the search period assessment, the addition can only be made based on the incrementing material placed on record which is missing in this case. Merely the survey conducted at some other party's places and they were not found on that address the whole transaction under taken in the normal course of business cannot be void on that reasons that the parties are not available at the address and that the transaction done in 2011-12 and survey of that party not found in 2018. The original assessment already completed and the copy of the assessment order placed on record. In that original quantum assessment, proceedings the ld. AO raised various queries which were replied based on the evidence called for and the same were accepted. The additions were made in that original quantum proceedings. Now in the search related assessment in the absence of any incrementing material no addition ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. DR, ld. AR of the assessee further submitted that the assessee has not refrained the AO in the earlier proceedings to do the physical enquiry and in that enquiry conducted now no adverse material placed on record by the revenue. As the selection of the parties are made as per the will and wishes of the team and not in all cases. The same is also not at the correct address as per the MCA's website. It is not duty of the assessee company to enforce the loan and share applicant company to change the address as per provision of section 139A(5)(d) to change the address on PAN data base. The law already takes care of such failure and on that the assessee should not be given any type of punishment. Not only that the transaction were done in 2011-2012 and physical enquiries were conducted in 2018 then over a period of time the company might have shifted their office and address. As regards the Swati Bajaj case is not related to the unsecured loan and share investment it is related to Bogus Long Term Capital gain scam. The fact of that case and this case are totally different. There is no admission either by the company nor the directors of the company about the transaction being n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income of the assessee. It is a settled position of law that there cannot be a review under the garb of reassessment proceeding under section 153A of the Act. Therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be applied in respect of assessment which has already been completed unless some incriminating material/information comes into the possession/knowledge of the AO during the course of search proceedings. Since the assessment for the assessment year 2012-13 was not pending as on the date of search and there is no incriminating material found or seized during the course of search, then the AO is bound to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality. Therefore, the addition over and above the assessed income cannot be made de hors the incriminating m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined purpose of making assessment of total income under section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The assessment or reassessment proceedings which have already been completed and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when search or requisition is made, there is no question of any abated assessment since no proceedings were pending. Therefore, the addition to the income that has already been assessed will be made on the basis of incriminating material only. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the Id. AR submitted that the AO has made the addition in the assessment under section 153A whereby the completed assessment has been disturbed without even referring to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under : "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYS will have to be computed by the AOS as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eted assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under : "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT) on bogus share capital. But, the issae was whether there was any Incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual findin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section 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. This, however, does not mean that the assessment under Section 153A 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 mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in iso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153 A 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 AO 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." v. 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 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. ¥ vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms." 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clandestine operations" and that a person indulging in such activities "can hardly be accepted to maintain meticulous books or records for long." These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." 35. Thus, the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Principal CIT vs. Meeta Gutgutia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under : "23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: "19. Under the provisions of Section 153A, as we have already noticed, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespective of the fact whether any incriminating material is found during the course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating. material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... minate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory provision must be so construed, if possible that absurdity and mischief may be avoided." 29. The argument of the counsel for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings as is evident from the discussion made in ground no 2 & 3 below where AO raised specific queries to verify the share application money/unsecured loan raised during the year and after considering the details furnished and necessary verification made, the same was accepted. A perusal of the assessment order framed u/s153A clearly indicates that the AO has not referred to a single piece of evidence found during the search in making the additions. It is a settled law that a completed assessment can be interfered by the AO only on the basis on incriminating evidence found during the search. The assessments u/s 153A are not fresh assessments since the purpose of making the reassessments under section 153A is subject to tax, hitherto undisclosed income unearthed during the course of the search. The second proviso to section 153A(1) provides only for the abatement of the pending assessments. Therefore, already completed assessments do not abate and they shall hold the field. It can be interfered by the AO while making the assessment u/s 153A only if some incriminating material is unearthed during the course of search or requisition of documents or undisclosed income or property is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etermining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under s. 153A would be the assessment for the said year. The necessary corollary of the second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. The argument raised by the counsel for the assessee to the effect that once notice under s. 153A is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. From a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under ss. 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of second proviso to s. 153A, the AO acts under his original jurisdiction, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e challenged the validity of the assessment made u/s 153A on the ground that no assessment in respect of the six assessment years was pending so as to have abated. The Tribunal accepted the assessee's submission and held that no incriminating material having been found during the course of the search, the entire proceedings u/s 153A were without jurisdiction and therefore, the addition made had to be deleted. On appeal before the Bombay High Court, dismissing the appeal of the Income-tax Department, it was held that once an assessment was not pending but had attained finality for a particular year, it could not be subject to the proceedings u/s153A of the Act if no incriminating materials were found in the course of the search or during the proceedings u/s153A which were contrary to and were not disclosed during the regular assessment proceedings. CIT VS. SKS Ispat and Power Ltd. [2017] 398 ITR 584 (Bom.) (HC) The scope of assessment u/s 153A of the Act is limited to the incriminating evidence found during the search and no further M/s Rajasthan Fort & Palace Pvt. Ltd. vs. DCIT ITA No. 597 to 599/JP/2017 order dated 24.01.2018 (Jaipur) (Trib.) In case of an unabated asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nducted at the business premises of the appellant on 08.02.2018. Various assets/books of accounts and documents were found and seized as per the annexures prepared during the course of Search. Subsequently notice u/s 153A was issued to the appellant for A.Y. 2012-13 to 2017-18 wherein the appellant was required to file returns for relevant assessment assessments were framed thereon. years. The appellant filed returns and assessment were framed thereon. (ii) On appeal, the appellant contended that the case of the appellant for the year under consideration was completed u/s 143(3) of the Act on 25.03.2015. Thus, the assessment proceedings for AY 2012-13 were not pending on the date of search. In search no incriminating material indicating any undisclosed income for the year under consideration was found and as there was no seized material based on which assessment had been completed by the AO in its case, assessment SO framed by the AO u/s 153A of the Act is illegal and bad in law. In support of his contention, the appellant placed reliance on the decisions of various High Courts and also of the Hon'ble Supreme Court as mentioned in his submissions mentioned supra. (iii) Afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng unsecured loans from, inter alia, M/s Axisline Commodities Pvt. Ltd, M/s Dishika Marketing Pvt. Ltd, M/s Pearl Tracom Pvt. Ltd, M/s Sarvayoni Vanijya Pvt. Ltd, M/s Vishveshwara Agencies Pvt. Ltd and M/s Snowblue Mercantile Pvt. Ltd. It is observed that during the search proceedings in the case of the appellant company, surveys were authorized on test check basis at the given addresses of M/s Pearl Tracom Pvt. Ltd, M/s Snowblue Merchantile Pvt. Ltd. and M/s Vishveshwara Agencies Pvt. Ltd. The survey teams did not find the existence of these companies at the given addresses. The AO has alleged that the companies are non-existent based on the surveys conducted on 10.02.2018. However the appellant has alleged that the surveys were conducted only on 3 companies out of 6 and even in case of the 3 companies it was conducted at the wrong address. Therefore such erroneous survey results cannot be made basis of holding that these companies are non-existent. (viii) On the contrary, it is observed that the issue of share premium as well as unsecured loans received from the aforesaid companies were considered by the AO during the course of original assessment proceedings u/s 143(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that these documents refer to the transaction of unsecured loans and they do not pertain to share premium received from alleged companies though the AO was specifically required to produce the incriminating document with reference to the unsecured loans and share premiums. Thus it is obvious that except the fact that the survey was carried out in the case of alleged companies which could not be executed, the AO has no other incriminating material to justify the addition so made by him. Infact no incriminating material was found or referred or is the basis of the addition made by the AO on account of share premium while framing the assessment u/s 153A of the Act for the year under consideration. The AO has solely relied upon the unexecuted survey u/s 133A of the Act and therefore even if the information/report of the Investigation Wing is considered as a relevant evidence, however in view of the above discussion that the surveys were not executed in respect of all the 14 companies for share premium and in the case of companies for unsecured loans and also the fact being that they were conducted on wrong addresses as discussed above, the same cannot be regarded as incriminatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n completed and the issue of addition to the income that has already been assessed can be made only on the basis of incriminating material, has been examined in detail by the various High Courts including the jurisdictional High Court in case of Jai Steel (India) Ltd. Vs. ACIT (88 DTR 1). The relevant part of the decision of the Rajasthan High Court in Jai Steel (India) Ltd. Jodhpur vs. ACIT (Supra) is reproduced herein as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." (xiv) Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with the AO while making the assessment under section 153A only on the basis of the of some incriminating material unearthed during course search or requisition of documents or undisclosed income property discovered in the course of search which not produced or already disclosed made known the course of original assessment." 38. The present appeals concern AYS, 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." Thus, the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. * PCIT vs. Meeta Gutgutia 152 DTR 153 Vijay Kumar D Agarwal V/s DCIT in IT(SSJA Nos 153, 154, 155 & 156/Ahd/2012 * Ratan Kumar Sharma vs. DCIT ITA 797 & 798 /Jaipur/2014 * Vikram Goyal vs. DCIT ITA 174/Jaipur/2017 etc. * Jadau Jewellers & Manufacturer PL Vs. ACIT (686/ Jaipur/2014) (xviii) Thus, the essential corollary of these decisions and also the decision relied upon by the appellant is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. (xix) The present appeal concerns AY 2012-13. On the date of the search, the said assessment already stood completed as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of share premiums and unsecured loans are without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2012-13 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erala High Court whereas on this issue not only the Hon'ble Rajasthan High, Delhi, Bombay and Gujarat can be seen and that all the High Courts are in favour of the view taken by the ld. CIT(A). Thus, the decision of the Hon'ble Kerala High Court thus cannot bind the assessee. The ld. DR has also relied upon the judgments which cited in these written submissions are also considered by us but at the same time are not applicable to the facts and circumstances of the present case. The ld. DR has specifically argued that even if no incriminating material unearthed during the search, yet while granting the relief to the assessee, the ld. CIT (A) has failed to take note of the fact that the SLP filed by the Department in the case of PCIT vs. Gahoi Foods Pvt. Ltd. 117 Taxmann.com 118 (SC) and in case of PCIT vs. Dhananjay * international Ltd. (2020) 114 Taxmann.com 351 (SC) are pending before the Hon'ble Supreme Court and has already been admitted. 38. On this issue we also have persuaded the judgment of the Hon'ble Supreme Cout in the case of Commissioner of Income-tax-III, Pune v. Sinhgad Technical Education Society 84 taxmann.com 290 (SC) and the relied upon comments of the apex co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the absence of any order by Hon'ble Supreme Court, the decision of Hon'ble Jurisdictional High Court in the case of Jai Steel Ltd. vs. ACIT, 88 DTR 1 (Raj.), PCIT vs. Smt. Daksha Jain, DB IT No. 125/2017 are binding on us. Further, we are also fortified with the decision in the case of CIT vs. Continental Warehousing Corporation (2015) 64 taxmann.com 34 (SC), PCIT vs. Devi Dass Garg (2020) 114 taxmann.com. 552 (SC). Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue and SLP filed by the revenue is not decided by Hon'ble Supreme Court. We based on the binding nature of judgment hold that the additions made by the AO while passing the assessment order under section 153A for the assessment year 2012-13 are not sustainable. We found force in the arguments of the ld. AR of the assessee and also convince with the findings of the ld. CIT(A) who has after considering the facts on record taken a considered view that the looking to the facts of the case on technical ground, he has considered the appeal of the assessee and before giving his findings he has called for the remand report also and the equal chance were give ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
