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2014 (5) TMI 545
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....C.O.No.183/M/2012 (Arising out of appeal ITA No.9199/M/2010) for AY 2002- 2003 on 9.8.2012 and the effective ground raised by the assessee in this cross objection reads as under: "On the facts and in the circumstances of the case, the Assessment Order passed under section 153A of the I.T. Act is bad in law as the assessment was not pending at the time of search and there is no nexus between following additions made and any information & material found during the search. 1. Addition u/s 68 of the I.T. Act, 1961 in respect of unexplained sundry creditors - Rs. 41,91,94,855/-. 2. Addition u/s 68 of the I.T. Act, 1961 in respect of unexplained share application money - Rs. 3,68,50,000/-" 3. Briefly stated relevant facts relating to the said legal issue are that the assessee filed the return of income for the AYs 2002-03; 2003-04; 2004-05 and 2005-06 as per the provisions of the section 139(1) of the Act and the assessments were completed u/s 143(3) r.w.s. 153A of the Act. Thus, the assessments for the said AYs have reached finality. There was a search and seizure action on the assessee on 10.11.2006 in the case of M/s. SKS Ispat Ltd Group, which is engaged in the business o....
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....used the orders of the Revenue Authorities as well as the judgments of the Hon'ble High Court of Rajasthan in the case of Jai Steel (India) (supra) and other decisions of the coordinate Bench of the ITAT Mumbai cited above. For the sake of completeness of the order, we find it relevant to import the relevant paras from the said coordinate Bench decision in the case of Shri Govind Agarwal (supra) which read as under: "Decision of the Tribunal: 9. We have heard both the parties on the legal issue relating to the sustainability or validity of the additions made in the assessments made u/s 153A read with section 143(3) of the Act in respect of completed assessments. 10. The stand of the Revenue is that the first proviso to section 153A empowers the AO to issue notice u/s 153A of the Act in respect of the 6 AYs prior to the assessment year in which the search took place. The relevance of the existence of incriminating material is not provided in the said provisions. As per the revenue there should not be any difference qua the completed assessments and the abated assessments for all six AYs in so far as the powers of the AO is concerned and he is empowered to issue notice u/s 1....
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....oks and certainly not based on either the unaccounted books of accounts of the assessee or books not produced to the AO earlier or the incriminating material gathered by the investigation wing of the revenue. Considering the legal propositions place before us by the assessee's counsel, we are of the opinion, such assessments or additions are unsustainable in law. 13. For the sake completeness of the assessee, we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs. ACIT - From Held portion: ....The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, inasmuch 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. ......From a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requ....
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....ur of assessee] Para 6.1 of the Order: The Special bench in the case of Alcargo Global Logistics Ltd. (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31.5.2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment....
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....53C of the Act. Further, also, the Coordinate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s 153A of the Act was upheld. However, this order has not considered the then existing decision of the Coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit from the Special Bench decision in the case of All Cargo Global Logistics Ltd (supra), which is relevant for the proposition that the assessment u/s 153A will be made on the basis of incriminating material such as books of accounts, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search. 15. We also find that the CIT(A) made a reference to the incriminating material, which yielded disclosure of some undisclosed income. But, on perusal of the documents, we find that the CIT(A) entered into an error zone and the disclosure is only Rs. 5 crores in ....
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....t no assessment or reassessment has abated in this case for the reason, that the date of search, the date of search which in the case on hand would be 25.3.2010, by virtue of First Proviso to section 153'C', i.e., the date of passing an order u/s 127 transferring the cases of the assessee to the present Assessing Officer no assessment or reassessment was pending. When no assessment has abated, the question of making any addition or making disallowance which are not based on only material found during the search is bad in law." 16. In these circumstances, we have no doubt about the absence of any seized material which are incriminating in nature to back the additions u/s 68 or 14A o the Act made in the assessment made u/s 153A of the Act for the AY under consideration. Regarding the DVO's report gathered during the search action, we find that the report suffers from certain deficiencies qua cost of construction of residential property and the land obtained thereto. The said report constitutes an opinion of the third party which cannot be used by the AO for making additions and such additions, if any, cannot be sustained legally. As such, we find that the AO has not used the said ....
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....e (ITA NO 3389&3390/M/2011) is allowed." 6. We have also examined the said para 7 from the order of the AO and the relevant lines read as under: "7. Unexplained sundry creditors: The assessee is engaged in the sale and purchase of Steel Coils / Sheet / Plates Structurals / Bars. The transaction recorded in Balance Sheet, P&L A/c were examined. On perusal of the P&L A/c, it is found that there is purchase of Rs. 84.50 Crore, sale of Rs. 72.52 Crs and closing stock of Rs. 13.28 Crs. Also on perusal of the Balance Sheet, it was found that there are sundry creditors of Rs. 34.83 Crs and unsecured loan of Rs. 1.30 Crs..........." 7. From the above it is clear that the basis for addition on account of 'sundry creditors (purchases) is merely the „financial statements' filed by the assessee. Similar is the case with regard to the addition on account of 'share application money' (Para 8.1 of the assessment order is relevant in this regard). Considering the stated position, there is no seized material or incriminating material to support the additions made by the AO on account of „unexplained sundry creditors' (purchases) and on account of „share application mon....