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TMI Blog2024 (7) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... t legally tenable. 2.1 The Ld. CIT(A) erred in appreciating that the assessing officer has clearly brought out in the assessment order that the assessee company brought back his unaccounted cash generated in the form of share capital / share premium by routing through shell companies managed by entry operators. The Ld.CIT(A) failed to appreciate that there was existence of an asset in the form of unaccounted cash, which have been converted as share capital through shell companies. 2.2 The Ld.CIT(A) erred in observing that the share capital cannot at any point of time be termed as asset but it is the liability in the assessee's case, without appreciating that the amount introduced as share capital is nothing but its own unaccounted money, hence there is no liability on the part of the assessee. 2.3 The Ld.CIT(A) failed to appreciate that search operation in the case of entry operators clearly revealed the modus operandi adopted by them and M/s. KAG India Pvt Ltd introduced share capital by issue of shares to shell companies managed by entry operators. Hence, the amount assessed is nothing but unaccounted asset in the form cash belonging to the assessee. 2.4 The Ld CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. In its reply, the assessee submitted that investment was received in normal course of business by way of share allotment on private basis. The money was received through banking channels. The necessary statutory forms, in this regard, were filed with ROC. The assessee also furnished copies of minute book for the period 01.04.2015 to 31.03.2020 in support of its submissions. 3.4 However not convinced, Ld. AO alleged that all these entities were paper companies providing accommodation entries. It was seen during the course of search that undisclosed sales proceeds were deposited by the assessee group in certain bank accounts which were not held in the name of the assessee company. The undisclosed sales were thus routed through operators back into the assessee company. The assessee failed to establish the genuineness of the receipt of share capital transactions and creditworthiness of the investments. Finally, the share allotment money of Rs. 1487.50 Lacs was added to the income of the assessee as unexplained cash credit u/s 68. Appellate Proceedings 4.1 During appellate proceedings, the assessee submitted that no incriminating material was found with respect to impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer shall assess or reassess the total income in respect of each assessment year failing within such six assessment years [and for the relevant assessment year or years] : Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years [and for the relevant assessment year or years] referred to in this [sub-section] pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: [Provided also that the Central Government may by rules made by it and published In the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total Income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [and for the relevant assessment year or years]:] [Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cally vested with AO for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted since no further conditions other than conducting of search u/s 132 on the assessee are prescribed for issue of notice. On the other hand, the jurisdiction to issue notice u/s 153A for the 'relevant assessment year or years', being the assessment years which fall beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted, is vested with the assessing officer only on fulfillment of conditions laid down in the fourth proviso to section 153A(1), which was inserted in the Act with effect from 01.04.2017 by the Finance Act 2017. This becomes very clear when the language employed in the fourth proviso is taken into consideration. The said proviso starts with the phrase that "no notice for assessment or reassessment shall be issued by the assessing officer for the relevant assessment year or years unless" followed the enumeration of the specific conditions which need to fulfilled in such cases. Unless the conditions laid down in clau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction could not be a borrowed satisfaction, but should be that of the AO himself. The Ld. AO could take the aid of reports and other official correspondence in arriving at the conclusion that all the conditions spelt out in the fourth proviso were fulfilled in the case of the assessee. Such conclusion must be that of the AO alone who is issuing the notice. Such conclusion must be reduced in writing to dispel any doubt about the existence of satisfaction of the AO and should not remain within the personal knowledge of the AO issuing the notice so that it is identifiable and known to all that the conditions precedent to issuing of notice u/s 153A(1) read with the Fourth Proviso existed prior to the issue of notice and that the AO issuing the notice was seized of their existence. The Ld. AO should be satisfied that he was empowered under the provisions of Section 153A read with Fourth Proviso to issue a notice to assess or reassess the income for 'relevant assessment year or years' and for this purpose he must record in writing as to why and how in his opinion and belief the conditions enumerated in the Fourth Proviso are in existence and are satisfied. Reasons for harbo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a ritualistic formality rather it sets in motion the process which can culminate into imposition of a civil liability and may even invite criminal prosecution for tax evasion on the assessee. It is the vested right of an assessee to examine whether the conditions precedent to issue of notice are satisfied or not so that he may, in a situation where according to his knowledge and belief the condition precedent to issue of notice are not satisfied, challenge the notice issued before appropriate judicial forum as regards its legal validity. This is possible only if the satisfaction is properly recorded by the AO before issuing notice u/s 153A read with Fourth Proviso and provides the same to the assessee to enable him to rebut the same. The only way that the assessee could know regarding fulfillment of required conditions would be only when such satisfaction is recorded by Ld. AO in writing. Issuance of such a notice without recording satisfaction would be arbitrary and capricious. 4.6 In this background, the legal grounds urged by the assessee were subjected to remand proceedings on 01-03-2023 and AO was directed to forward a copy of such satisfaction note to verify the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e undisclosed asset. This undisclosed asset has been introduced as share capital through shell/paper companies as unexplained credit in M/s. KAG India Pvt Ltd which are liable to be taxed as unexplained credit u/s 68 of the Act in the hands of the assessee, M/s.KAG India Pvt Ltd. The undisclosed income by the assessee in cash or kind or in any form, out of the undisclosed sources also constitute undisclosed asset of the business, I am satisfied that this is the undisclosed asset of the assessee M/s.KAG India Pvt Ltd and this will have a bearing in the assessment in the case of the assessee M/s.KAG India Pvt Ltd for AY:2012-13. Hence, the condition stipulated in 4 proviso to section 153A(1) r.w explanation 1 & 2 therein has been fully satisfied. Hence, this is a fit case for issue of notice u/s 153A of the Income Tax Act, 1961 for AY:2012-13." 4.8 After going through the same, Ld. CIT(A) observed that Ld. AO brought out in detail about the background of the introduction of Share Capital and share-premium, and treated the same as bogus. The issue in the case of the assessee was that the alleged unaccounted cash credit was represented in the form of Share Capital. However, the Share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oans and advances, deposits in bank accounts. In the present case, Ld. AO has doubted the share capital issued by the assessee during the year. The same is nothing but a liability for the assessee. Therefore, the jurisdictional requirement to make the impugned addition, in the present case, has not been satisfied by Ld. AO. The Ld. AO could go beyond 6 years only in a case where there was certain income which escaped assessment and the same was represented in the form of an asset. The same is missing in the present case. The Ld. CIT(A), in a very elaborate manner, has clinched the issue of jurisdiction and arrived at a conclusion that share capital would not come under the definition of asset since it represent liability of the assessee. Therefore, the satisfaction arrived at by Ld. AO to treat the share capital as an asset was an erroneous attempt and accordingly, the jurisdiction was not legally tenable. We concur with the same and accordingly, find no reason to interfere in the impugned order, in any manner. 6. Our view is duly supported by the decision of Gauhati High Court in the case of Goldstone Cements Ltd. (ITA No.10 of 2022 & ors. dated 29-09-2023) wherein the facts were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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