TMI Blog2022 (11) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... ready stood concluded in unabated assessments. Hence the decisions rendered by the Hon ble Jurisdictional Bombay High Court in the case of Continental warehousing Corporation (Nhava Sheva) Ltd [ 2015 (5) TMI 656 - BOMBAY HIGH COURT] and Gurinder Singh Bawa [ 2015 (10) TMI 1761 - BOMBAY HIGH COURT] in our view, shall squarely apply to the facts of the present case. Accordingly we hold that the AO, in the absence of any incriminating material found during the course of search relating to the impugned additions, was not justified in assessing them in AY 2012-13 to 2016-17. Bogus LTCG - Addition made u/s 68 in respect of Long term capital gains shown by the assessee - HELD THAT:- We notice that an identical case of allegations that the assessee has availed accommodation entries by way of capital gains in order to convert unaccounted money into accounted one, was examined in the case of Shyam Power [ 2014 (12) TMI 977 - BOMBAY HIGH COURT] and in the present case as noticed that the AO has simply relied upon the report of the investigation department and held that the long term capital gains declared by the assessee are not genuine. No other material was brought on record by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me merit in the submission of Ld A.R that the expenses in cash could have also been incurred in the earlier years. The contention of the assessee was that these expenses have been incurred out of savings available with all the family members, even though the assessee could not substantiate the said claim. Hence, on a conspectus of the matter, we are of the view that it can be presumed that the major expenses would have been incurred in the earlier years and a portion might have been incurred in the year relevant to AY 2018-19. Accordingly, in order to put this issue at rest, we estimate that the assessee would have spent 10% of the cash portion of expenses during the year relevant to AY 2018-19. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to restrict disallowance to 10% of the addition made by the AO. Unexplained expenditure - HELD THAT:- As all these expenses pertained to the period prior to 31.3.2017 and there is no evidence to show that these payments have been made after 1.4.2017. Hence, we are of the view that these addition cannot be made in A.Y. 2018-19. Accordingly, we set aside the order passed by the learned CIT(A) on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st take up the appeal filed by the assessee for A.Y. 2011-12, wherein the assessee has challenged the validity of reopening of assessment. The learned AR submitted that the original assessment for A.Y. 2011-12 was completed under section 143(3) of the Act on 16.11.2013. The Assessing Officer has reopened the assessment by issuing notice on 31.3.2018 i.e. after expiry of four year from the end of the assessment year. He submitted that, as per the first proviso to sec. 147 of the Act, the reopening after expiry of four years from the end of the assessment year could be made by the AO only, if the AO, inter alia, could show that there was failure on the part of the assessee to disclose fully and truly all material facts relating to the computation of income. He submitted that, in reasons for reopening of assessment, the Assessing Officer has not pointed out that there was failure on the part of the assessee to fully and truly disclose all material facts. Accordingly, the Ld A.R contended that the re-opening of assessment is not valid and hence the assessment order is liable to be quashed. 4. The learned AR further submitted that the AO has supplied reasons for reopening to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It reads as under:- REASON FOR RE-OPENING On appraisal of the records available, it is found that the M/s Ameet Enterprises (a proprietorship concern of the assessee) has booked purchases from the following hawala dealers: S.No. Name of the party A.Y. Amount (Rs) 1 Everite Corporation 2011-12 4,46,97,240 2 Supper Sales 2011-12 81,91,200 3 Emkay Engineers 2011-12 3,28,89,780 8,57,75,280 Thus, the assessee SHRI SANGEETKUMAR SAWARMAL HISARIA (PROP OF M/S AMEET ENTERPRISES) (PAN: AAAPH2931H) during the AY 2011-12 has availed accommodation entries in the form of bogus purchases from hawala dealers for a sum of Rs. 8,57,78,280/-. In the light of above facts and detailed findings, have reason to believe that Rs.8,57,75,280/- has escaped assessment within the meaning assigned in the provision of section 147 of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meet Enterprises), (PAN: AAAPH2931H) during the FY 2010-11 relevant to AY 2011-12, has availed accommodation entries, in the form of bogus purchase, from hawala dealers. Enquiries made by the AO: The statements and the detailed report of the investigation have been examined and the evidences vis-a vis the return of the assessee were also examined. Findings of the AO: From the above facts it is evident that the assessee has availed accommodation entries, in the form of bogus purchase, from hawala dealers, for a sum of 8,57,78,280/-. Basis of forming reason to believe and details of escapement of Income: In the light of above facts and detailed findings, I have Reason to believe that 28,57,78,280/- has escaped assessment within the meaning assigned in the provision of section 147 of the Act, since, the assessee clearly failed to disclose truly and fully all material facts for determination of income, hence, it is a fit case for issue of notice u/s.148 of the Income Tax Act, 1961. Accordingly, approval u/s 151(1) of the Income tax Act, 1961 is solicited for issuing notice u/s 148 of the Act. 9. Admittedly, there is huge variation in the wordings/sentences mentioned in conn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is that all these assessments under consideration shall not abate, since no assessment was pending on the date of search. It was further contended that in the cases of unabated/ finalized/completed assessments, the AO could have interfered with the issues already concluded only if the search team has found any incriminating material during the course of warranting such interference. It is the submission of Ld A.R that the search officials did not unearth any incriminating material warranting interference with the capital gains/capital loss declared by these assessees in all the years under consideration. In support of these legal contentions, the Ld A.R placed his reliance on the decision rendered by the jurisdictional Hon ble Bombay High Court in the cases of Continental Corporation (Nhava Sheva) Ltd (2015)(58 taxmann.com 78)(Bom) and Gurinder Singh Bawa (2017)(79 taxmann.com 398)(Bom). He also submitted that the legal proposition interpreted by the jurisdictional High Court has been followed by the Mumbai bench of Tribunal in the case of Smt Anjali Pandit vs. ACIT ITA No.3028 to 3032/Mum/2011 others), by its order dated 17.11.2016. 15. The provisions of sec.153A of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment or reassessment on the date of initiation of search shall abate. This means that an assessment or reassessment pending on the date of initiation of search shall cease to exist and no further action shall be taken thereon. The assessment shall now be made u/s 153A. The case of Ld. Counsel for the assessee is that necessary corollary to this provision is that completed assessment shall not abate. These assessments become final except in so far and to the extent as undisclosed income is found in the course of search. On the other hand, it has been argued by the Ld. Standing Counsel that abatement of pending assessment is only for the purpose of avoiding two assessments for the same year, one being regular assessment and the other being assessment u/s 153A. In other words these two assessments coalesce into one assessment. The second proviso does not conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to initiation of the search. 50. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such books of account or documents have not been produced, b) summons or notice has been or might be issued, he will not produce the books of account or other documents mentioned therein, or c) he is in possession of any money or bullion etc. which represents wholly or partly the income or property which has not been and which would not be disclosed for the purpose of assessment, called as undisclosed income or property. We find that the provision in section 132 (1) does not use the word incriminating document . Clauses (a) and (b) of section 132(1) employ the words books of account or other documents . For harmonious interpretation of this provision with provision contained in section 153A, all the three conditions on satisfaction of which a warrant of search can be issued will have to be taken into account. 51. Having held so, an assessment or reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the AO, (b) in respect of non-abated assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and undisclosed income or undisclosed property discovered in the course of search. 54. It may be mentioned here that Ld. Counsel for All Cargo Global Logistics Ltd. was questioned about the scope of pending assessments as it was his contention that all six assessments are to be made, if necessary, on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under Section 153A of the Act which are contrary to and/or not disclosed during regular assessment proceedings. 7. In view of the above, on issue of jurisdiction itself the issue stands concluded against the revenue by the decision of this Court in Continental Warehousing Corpn. (Nhava Sheva) Ltd. (supra). In the appeal before us, the revenue has made no grievance with regard to the impugned order of the Tribunal holding that in law the proceedings under Section 153A of the Act are without jurisdiction. This in view of the fact that no assessments were pending, so as to abate nor any incriminating evidence was found. The grievance of the revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However once it is not disputed by the revenue that the decision of this Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under Section 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . iv. Although Section 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same would be rendered academic in nature. 24. Since we have held that no addition could be made in AY 2012-13 to 2016-17 and deleted the additions made by the AO in these years, the appeals filed by the revenue for AY 2013-14, 2014-15 and 2016-17 shall become infructuous and accordingly dismissed. ASSESSMENT YEAR 2017-18:- 25. We shall first take up the appeal filed by the assessee for AY 2017-18. Following three issues are urged in this appeal:- (a) Addition made u/s 68 of the Act in respect of Long term capital gains shown by the assessee. (b) Addition made on the basis of information found in the application filed before Income tax Settlement Commission. (c) Charging of Education cess. 26. The first issue relates to the addition of sale consideration of Rs.4.85 crores received on sale of shares of M/s Shantanu Sheroy Aquakult Ltd. The AO noticed that the assessee has sold shares of above company, which is now known as 52 weeks Entertainment Pvt. Ltd. The assessee had declared long term capital gain on sale of the above said shares. The investigation wing reported this share as penny stock. Accordingly, based on the report of the investigation wing, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted. 4. Mr.Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of Rs.25,93,150/-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DMAT account, placed at pages 36 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But the Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for the purposes of faulting the Revenue in failing to discharge the basic onus. If the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PCIT vs. Ziauddin A Siddique (ITA No.2012 of 2017)(Bom) (c) PCIT vs. Smt Renu Agarwal (ITA No.44 of 2022)(Bom) (d) Shri Sohanraj Uttamchand vs. DCIT (ITA No.1787/Chny/2017) 31. In view of the above, in the facts and circumstances of the case, we hold that the tax authorities are not justified in disbelieving the long term capital gains declared by the assessee. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition relating to assessment of sale consideration of Rs.4.85 crores realised on sale of shares of Shantanu Sheorey Aqua. 32. The next issue contested by the assessee relates to the addition of Rs.25.50 lakhs made by the AO relying on the application filed before Income tax Settlement Commission. We notice that an identical issue has been examined by the co-ordinate bench in the case of A.T Trade Overseas P Ltd vs. DCIT (ITA No.325/Mum/2021 dated 23.03.2022) and it has been decided in favour of the assessee as under:- 8. Considered the rival submissions and material placed on record, we observed that subsequent to search action assessee has disclosed additional income before ITSC and as per the informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral Excise should be applied to cases abated under section 245HA of the Income Tax Act also. 16. Therefore, we are of the view that the judgment of Hon ble Gujarat High Court is applicable to the facts of the assessee s case. We find that Hon ble Gujarat High Court has held that if the petition filed before the Settlement Commission wherein assessee has made declaration but proves that assessee has neither earned such income nor any incriminating material was found during the search relating to undisclosed income then no addition can be made. 17. We have also gone through the judgment of ITAT, Mumbai in the case of Dolat Investment vs. Dy. Commissioner of Income Tax wherein the ITAT has specifically held in para 22 which reads as under: 22. The first issue is whether the case of the assessee for assessment year 2005-06 was admitted by the Settlement Commission under section 245D(1) of the Act? On this issue, we have already seen that in the order dated 30-11-2007 under section 245D(4) of the Act, the Settlement Commission has clearly held that the assessee for assessment year 2005- 06 does not satisfy the criteria of offering income on which at least an income-tax payable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n order under sub-section (4) of section 245D has not been passed within the time or period specified under sub-section (4A) of section 245D, the proceedings before the Settlement Commission shall abate on the specified date. Specified date would be (i) in respect of an application referred to in sub-section (2A) or sub-section (2D), on or before the 31st day of March, 2008; (ii) in respect of an application made on or after 1st day of June, 2007 within nine months from the end of the month in which the application was made. (2) Where a proceeding before the Settlement Commission abates, the Assessing Officer or as the case may be any other income-tax authority before whom the proceeding at the time of making the application was pending, shall dispose of the case in accordance with the provisions of this Act as if no application under section 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer or as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entical in this case, rollowing the above said decision, we direct the AO to delete this addition. 34. The next ground urged by the assessee relates to the claim for deduction of Education Cess. In view of the retrospective amendment brought in by Finance Act, 2022 holding that the education cess is not allowable as deduction, we hold that the claim of the assesee is not tenable. Accordingly, we reject this ground of the assessee. 35. We shall now take up the appeal filed by the revenue for AY 2017-18. The revenue is challenging the decision of Ld CIT(A) in deleting the addition of Rs.6.90 crores, being cash credits in the form of unsecured loans received by the assessee and also deleting the interest paid on the above said loans. 36. The assessee had received loans from a group company named M/s Anjani Towers P Ltd. The said Anjani Towers P Ltd had borrowed loans from certain other companies. The AO proceeded to enquire the genuineness of loans taken by M/s Anjani Towers P Ltd from 31 parties, by issuing notices u/s 133(6) of the Act. The Ld A.R submitted that 26 parties replied to the notices issued by the AO and five parties did not respond. After making certain discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st much before. Therefore, his statement had no evidentiary value. The Assessee has further clarified that, Shri Sandeep Hisaria in his statement on oath at the time of search had very clearly and categorically stated that, Anjani Towers Pvt.Ltd. was owned by friends and thus loan from them was a friendly loan to meet urgent business needs. He further clarified that Anjani Towers Pvt. Ltd. is in the business of finance and investment and giving loan and earning interest is one of its main activities. It has also been stated that there was two way movement of funds to and from Hisaria Group and these loans were squared up within a few months and with interest. It has been stated that there was even credit balance of some of the Hisaria Group entities with Anjani Towers Pvt.Ltd., at the time of search. The assessee has thus clarified that there is nothing wrong or unusual in loans given by Anjani Towers Pvt.Ltd. to the assessee group. The assessee has also clarified that, out of 31 parties who had given loan to Anjani Towers Pvt.Ltd., replies in respect of 26 parties has already been accepted by the AO and there is no reason why replies of other parties namely Bellary Investments T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... how did the assessee came to know about these parties. It is matter of record that their financial capacity etc., is fairly good as discussed in the foregoing paras. 7.34 Coming to other two companies, namely Tulsi Trimpex Pvt.Ltd., and Narayani Vyapar Pvt.Ltd., the assessee has clarified that, these companies belongs to Sona Alloys Ltd. group of Ahmedabad, headed by Shri Amit Jain and this group is engaged in manufacturing of iron steel and alloy steel and have considerable turnover. It has been further clarified that Sona Alloys Ltd group is also a regular customer of Hisaria Group over the last 7 years and coal is being supplied by Hisaria Group to them. Further, their financial capacity is also not in doubt as they have been doing considerable turnover and business, Thus, neither their identity nor capacity not genuineness of transaction appears to be in doubt. 7.35 In the light of above explanation I am of considered opinion that assessee has discharged its onus in respect of above mentioned two entities namely Bellary Investments Trading Pvt.Ltd., and Yashasvi Vyapar Vitt Pvt.Ltd. and they are treated as explained. In view, of the above facts the additions made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43. The first issue relates to the addition of Rs.1,01,94,974/-, being unexplained cash expenditure. During the course of search proceedings, it was noticed from the laptop of the assessee that he has spent a sum of Rs.1,28,58,221/- towards various expenses. When enquired, it was submitted that these expenses have been incurred on interior decoration of the flat of the assessee. It was noticed that a sum of Rs.26,07,978/- have been incurred by way of cheque and the said payments have been accounted for in the books of group concerns. The assessee submitted that the remaining expenses have been incurred out of savings made by all the family members. However, the AO rejected the said explanation. Accordingly, the AO held that the remaining amount is unexplained cash expenditure assessable to tax u/s 69C of the Act. The AO computed the remaining amount as Rs.1,01,94,974/- and assessed the same. The Ld CIT(A) also confirmed the same. 44. The Ld A.R submitted that the above expenditure has been met out of the savings available with all the family members. He further submitted that these expenses have not been incurred during the year relevant to AY 2018- 19. In this regard, he submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s pertained to the period prior to 31.3.2017 and there is no evidence to show that these payments have been made after 1.4.2017. Hence, we are of the view that these addition cannot be made in A.Y. 2018-19. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and direct the Assessing Officer to delete this addition. 49. The next issue relates to the addition of Rs. 40,75,000/- made by the Assessing Officer under section 68 of the Act as unexplained cash credit. The basis for making this addition is a statement sheet found during the course of search. The said sheet has been scanned at page No. 13 of the order passed by the learned CIT(A). The said sheet shows certain cash transaction entered in the years 2010-2014. When assessee was questioned about these transactions, he submitted that he was entitled to a commission income @ 2% on the turnover achieved by five concerns out of the parties introduced by the assessee. Accordingly, the Assessing Officer took the view that the assessee has received a sum of Rs. 40,75,000/- which is in the nature of unexplained cash credit and assessed the same. The learned CIT(A) also confirmed the same. 50. We have h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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