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TMI Blog2024 (8) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... per the applicable provisions of third proviso to Section 153B(1) of the Income Tax Act. 3. For that the Learned Commissioner of Income Tax (Appeals) ought to have cancelled the assessment u/s 153C of the Act that was made for an Assessment Year beyond the stipulated period of ten assessment years as laid down under the applicable provisions of Section 153A 1153C of the Act by appreciating that the date of recording satisfaction note in the case of the 'other person' by the Assessing Officer of the 'searched person' must be construed as the date of handing over of documents relating to the other person even where the Assessing Officer is one and the same for both the 'searched person' and the 'other person'. 4. For that the Learned Commissioner of Income Tax (Appeals) had erred in upholding the Assessment Order now passed u/s 153C of the Act in the absence of any incriminating material in the appellant's case where the assessment was already subjected to scrutiny assessment u/s 143(3) of the Act vide order passed on 29.03.2012, in violation of the CBDT Circular in F.No.279/Misc./M-54/2023-1TJ dated 23.08.2023. 5. For that the Learned Commis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31.12.2021, was issued and served on the assessee. The assessee has not filed its return of income, in response to notice u/s. 153C of the Act. 4. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the appellant company, M/s. KSJ Infrastructure Pvt Ltd was incorporated on 21.02.2019 with ROC, Kolkata. During the financial year relevant to assessment year 2010-11, the appellant has issued 6,48,934 equity shares of face value of Rs. 10/- each with a premium of Rs. 975/- per share and received share premium of Rs. 63,25,34,760/-. The Assessing Officer, further noted that share premium received by the appellant has been invested in unquoted equity shares and loans and advances as shown in the balance sheet. Therefore, the Assessing Officer called upon the assessee to file necessary details including, the name and address of shareholders from whom the share premium was received and share holding pattern etc. The appellant company could not furnish necessary details, including name and address of the persons from whom share premium was collected, creditworthiness of the persons and genuineness of the transactions. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory, unless: (a) the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the. nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer has been found to be satisfactory 5.10. In this case, the assessee has failed to even produce the details of the identity of persons, creditworthiness of the persons from whom the amount was received and could not explain the source of amount credited as share capital of the Rs. 63,90,24,100/- credited to the books of accounts leaving the genuineness of the transaction a big question mark As the source for Rs. 64,89,340/- and amount credited as share premium of Rs. 63,25,34,760/ - total of Rs. 63,90,24,100/- to the books of accounts of the assessee company is unexplained, it is liable to added to the total Income of the assessee u/s 68 of the Act. 5.11. Further, the whole transaction from incorporation of the assessee company, sworn statement of Rajkumar Bhotika, IT reports, lack of details of unquoted shares everythi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of assessment u/s 153C arguing that the sarne is bad in law. Section 153A lays down the provisions for the assessment of 'searched person' whereas Section 153C deals with the assessments of 'other person'. The assessments under this new scheme are to be done for six assessment years prior to the assessment year relevant to search year in relation to the total income of the assessee. Assessment of the other person has to be carried out by the AO of such other person, if AO of the searched and other person is not the same, consequent to handing over of the relevant material by the AO of the searched person to the AO of the other person. Since the Act does not provide any time limit for handing over of the material belonging/ pertaining to/ information relating to such other person by the AO of the searched person, hence the Act envisaged the limitations with regard to completion of assessments u/ s 153C with reference to the date of handing over of material. 9.2 Since the new provisions of search assessments came into operation, a dispute arose with regard to the assessment years to be considered while issuing notice and completing assessments u/ s 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation and the same is represented in the form of any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if- (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year); (ii) such income escaping assessment is represented in the form of asset; (iii) the income escaping assessment or part thereof relates to such year or years. 9.5 The amended provisions of section 153A of the Income-tax Act shall apply where search under section 132 of the Income-tax Act is initiated or requisition under section 132A of the Income-tax Act is made on or after the 1st day of April, 2017.1n this connection, it is pertinent to reproduce Explanation 1 and Explanation 2 to the fourth proviso of section 153A(1) which read as below: Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee did not dispute the seizure of the material or that the seized material belongs to the assessee. The AO duly recorded satisfaction note as per law on 31.12.2021 for invoking section 153C. It is not the case of the assessee also that the AO has not recorded satisfaction note duly. 9.10 Thus, I find no infirmity in the action of the AO in initiating the proceedings u/ s 153Cof the Act for the impugned AY. Thus, the grounds in this regard are dismissed." 7. The ld. CIT(A), had also discussed the additions made by the Assessing Officer towards share premium u/s. 68 of the Act, in light of grounds of appeal taken by the assessee and also certain judicial precedents including the decision of Hon'ble Apex Court in the case of PCIT vs Abhisar Buildwell (P) Ltd [2023] 454 ITR 212 and held that, seized material found during the course of search in the case of M/s. Jain Metal Rolling Mills and others, has information relating to the assessee and has also bearing on total income of the assessee for the assessment year 2010-11 and thus, the Assessing Officer has rightly made addition towards share premium received by the assessee for allotment of equity shares u/s. 68 of the Act, becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is only the holistic approach on the details of all the allottee companies and the details of all the directors of the allottee companies and the subsequent events would reveal the real picture. As the assessee argues, the incriminating material in the present case is not the financials of the assessee company alone for the impugned AY, but the link to various affairs of the assessee company with several parties acted in tandem to whitewash the black money in the form of bringing it in the assessee company as share capital/ share premium via various paper companies. Thus, there is an effectual presence of incriminating material along with the statements recorded, which unearthed the whole gamut and modus operandi followed. Therefore, the Hon'ble Supreme Court decision in the case of Abhisar Buildwell P.Ltd. [2023] 149 taxmann.com 399 (SC) and the other decisions quoted by the assessee do not come to the rescue of the assessee. Hence, I find no infirmity in the action of the A.O in invoking the provisions of sec.153C of the Act. In view of the above, the ground is dismissed." 8. The ld. CIT(A), had also discussed the issue on merits in light of financials of the appellant comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el) and Commissioner of Income Tax-I Vs. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del), The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., (1994] 205 ITR 98 (FB)(Delhi), CIT Vs. Divine Leasing and Finance Limited[2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. (2 008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the shareholder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/ bank account; and mere deposit of cash in the bank accounts prior to issue of cheque/pay orders etc. would only raise suspicion and, it was for the Assessing Officer to conduct further investigation, but it did not follow that the money belonged to the assessee and was their unaccounted money, which had been channelized. 13. As we perceive, there are two sets of judgments and cases, but these judgments and cases proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that where there was failure of assessee to establish creditworthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital/ premium received by assessee company, Merely because assessee company had filed all primary assessee to establish evidence, it could not be said that onus on creditworthiness of investor companies stood discharged. It is apposite to refer to the observations of the Hon'ble Supreme Court in its order as under: "13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all the primary evidence, the onus on the Assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the Assessee Company -Respondent. Clearly the onus to establish the credit worthiness of the investor comparies was not disch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share premium. 11.23 For this proposition, reliance is also placed following case-laws: 11.23.1 Amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. CIT Vs Nova Promoters & Finlease (P) Ltd [Delhi High Court) [2012] 18 taxmann.com 217 (Delhi)/[2012] 206 Taxman 207 (Delhi)/[2012] 342 ITR 169 (Delhi)/[2012] 252 CTR 187 (Delhi) 11.23.2 Neither before AO nor before CIT(A), assessee could make share applicants available. Identity not established. Appeal dismissed. Amtrac Automobiles India Pvt Ltd Vs ACIT [ITAT Delhi] ITA No.2920/Del/09 11.23.3 Under section 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. CIT Vs Empire Builtech (P.) Ltd [Delhi High Court]) (2014] 43 taxmann.com 269 (Delhi)(2015] 228 Taxman 346 (Delhi) (MAG.)[2014] 366 ITR 110 (Delhi) 11.23.4 Where assessee, a private limited company, sold its shares to unrelated parties at a huge premium and thereupon within short span of time those shares were purchased back even at a loss, share transactions in qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .23.9 Failure of the assessee to prove business model of the company and also to produce the directors of the share-subscribing companies, to establish genuineness of huge amount of premium on issue of shares is justified reason to treat the same as bogus for purpose of making addition u/s 68. ITO Vs Sohail Financials Ltd. [ITAT Delhi] ITA No.4867/Del/2011, 2018-TIOL-1874-ITAT-DEL 11.23.10 Where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by one person who was engaged in providing accommodation entries through paper companies and all such companies were located at same address, impugned addition was justified. PCIT Vs NDR Promoters Pvt Ltd [Delhi High Court][2019] 102 taxmann.com 182 (Delhi)[2019] 261 Taxman 270 (Delhi)/(2019] 410 ITR 379 (Delhi), 2019-TIOL-172-HC-DEL-IT SLP dismissed against High Court ruling that where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. 1,00,100 which cannot be added for the impugned AY. The AO, is therefore directed to restrict the addition on this account to Rs. 63,89,240. In view of the above, the related ground is partly allowed. In the result, the addition of share capital to the extent of Rs. 63,89,240 and addition of share premium of Rs. 63,25,34,760/- both under u/s 68 are upheld." 9. The Ld. Counsel for the assessee, Shri. B. Ramakrishna, FCA, submitted that the ld. CIT(A) erred in upholding initiation of proceedings u/s. 153C of the Act, on the basis of satisfaction note recorded by the Assessing Officer of the searched person and Assessing Officer of any other person on 31.12.2021, without appreciating fact that if you consider said date, as per proviso to section 153C(1) of the Act, then impugned assessment year falls beyond the stipulated six assessment years and four relevant assessment years and thus, notice issued by the Assessing Officer u/s. 153C of the Act and consequent assessment order passed u/s. 143(3) r.w.s. 153C of the Act is bad in law, void ab initio and liable to be quashed. 10. The Ld. Counsel for the assessee, referring to dates and events submitted that the assessment for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant has raised a preliminary objection of jurisdiction of the Assessing Officer in initiating proceeding u/s. 153C of the Act, for the assessment year 2010-11, in light of second proviso to section 153A(1) of the Act, and proviso to section 153C(1) of the Act. As per second proviso to section 153A(1) of the Act, assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years pending on the date of initiation of the search u/s. 132 of the Act or making of requisition u/s. 132A of the Act, as the case may be shall abate. In other words, stipulated six assessment years and four relevant assessment years from the date of search, if pending as on the date of search conducted u/s. 132 of the Act shall abate, and the Assessing Officer shall have the power to assess or reassess the total income. 13. The provisions of section 153C of the Act deals with, assessment of any other person on the basis of search conducted u/s. 132 of the Act. In the present case, during the course of search, books of accounts and other documents relates to any other person was found which has informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of search proceedings, in the case of M/s. Jain Metal Rolling Mills and others. The Assessing Officer of any other person has also recorded satisfaction note for initiation of proceedings u/s. 153C of the Act, on 31.12.2021 and satisfied that the documents and books of accounts seized during the course of search proceedings in the case of M/s. Jain Metal Rolling Mills and others has information relating to the assessee and has bearing on its total income. From the satisfaction note recorded by the Assessing Officer of the searched person and any other person, it is undoubtedly clear that he has handed over books of accounts and other documents found during the course of search in the case of M/s. Jain Metal Rolling Mills to the Assessing Officer having jurisdiction over the appellant on 31.12.2021, which is evident from satisfaction note recorded by the Assessing Officer of the appellant u/s. 153C of the Act on 31.12.2021. If you consider the date of receiving books of accounts or documents as the date of satisfaction note recorded by the Assessing Officer of the searched person and the Assessing Officer of the appellant i.e., on 31.12.2021, then the subject assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er person should be considered. In the present case, if you consider the date of satisfaction note recorded by the Assessing Officer dated 31.12.2021, the subject assessment year falls beyond the stipulated six assessment years and relevant four assessment years and thus, notice issued by the Assessing Officer u/s. 153C of the Act, dated 31.12.2021 and consequent assessment order passed u/s. 143(3) r.w.s. 153 of the Act, dated 31.03.2022 is barred by limitation and liable to be quashed. 15. The Ld. Counsel for the assessee, has relied upon the decision of Hon'ble Supreme Court in the case of CIT vs Jasjit Singh [2023] 155 Taxmann.com 155, where the Hon'ble Supreme Court while upholding the decision of Hon'ble Delhi High Court in the case of CIT vs Jasjit Singh [2023] 155 Taxmann.com 154, held that in case of any other person, for the purpose of second proviso to section 153A(1) of the Act, shall be construed as reference to the date of receiving the books of accounts or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. The relevant findings of the Hon'ble Supreme Court are as under: "7. Sections 153A and Section 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person 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 referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to subsection (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or re-assessment to the six assessment years will be examined with reference to such date." 9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement. 10. This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response, the assessee filed return of income on 01.04.2014. 7. It could be seen that jurisdiction over the case of Shri M. Ramasami as well as the assessee vested with same AO and a satisfaction note initiating proceedings u/s 153C in the case of assessee was recorded on 24.09.2013, a copy of which has been placed on record by the revenue. Therefore, to count the jurisdiction of AO, this date i.e., 24.09.2013 assumes importance. The provisions of Sec.153C(1) provide as under: - 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. 8. The provision of Sec.153A (1)(a) postulates issuance of notice in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to previous year in which search is conducted. In the present case, the satisfaction note (as placed by revenue on record) has been recorded by Ld. AO on 24.09.2013 which falls in previous year 2013-14, the relevant assessment year for which is AY 2014-15. Therefore, considering the statutory mandate, the notice that could be issued to the assessee would be as under: - Year No. Previous Year Assessment Year 1. 2012-13 2013-14 2. 2011-12 2012-13 3. 2010-11 2011-12 3. 2009-10 2010-11 5. 2008-09 2009-10 6. 2007-08 2008-09 The year before us is AY 2007-08. Clearly, this year would be out of the purview of proceedings u/s 153C as per statutory mandate. This being so, the Ld. AO, in our considered opinion, had no jurisdiction to proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153C(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X
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