AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2010 (12) TMI 1207
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....ompany/firm on 16.9.2005. However, there was no search at the assessee's business premises. Survey was conducted u/s 133-A at the assessee's business premises. Thereafter, notice u/s 153C was issued and the assessee filed return of income accordingly, thereafter assessments were framed u/s 153C. The assessee M/s. Chirchind Hydro Power Ltd.,is a private Ltd co. incorporated on 04-08-2000. The assessee maintained the regular books of a/cs , which were audited u/s. 44AB of the IT Act and filed the returns u/s.139(1) of the IT Act. The search was conducted against the directors of the company, Shri Mahesh Agrawal , Smt. Veena Agrawal and Shri Gaurav Agrawal u/s.132(1) of the IT Act on 16-09-2005. The ld. assessing officer issued the notice u/s. 153C on 22- 03-2006 and required the assessee company to file the returns for the assessment yr 2002-03 within 30 days from the date of receipt of the notice. The assessee received the notice on 25-03-2006 and filed the returns on 01-06-2006 for the assessment year 2002-03 . However, the income was assessed by order dtd. 31-12- 2007 passed u/s. 153C/143(3) of the IT Act by making the addition of Rs. 1,10,000/- towards share application m....
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....ther contended that the provisions of sec. 153C are identical with the provisions of sec. 158BD, which read as under:- " Where the assessing officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other 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 [under section 158BC] against such other person and the provisions of this chapter shall apply accordingly ". 7. Ld. AR further submitted before the CIT(A) that the provisions of sec.158BD provide that the assessing officer making the assessment of the searched person has to satisfy himself that some undisclosed income found by him belongs to some person, other than the searched person and then he or the assessing officer having jurisdiction over such other person, (on receipt of record from the assessing officer of the searched person) has to issue the notice u/s. 158BD and has to assess th....
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....hed persons that there is some incriminating material and its belongs to the assessee. Infact, the perusal of the assessment order will clearly reflect that no incriminating material worth the name belonging to the assessee was found during the course of search. In the opening paragraph of the assessment order, the ld. assessing officer has observed that during the course of search (at the residence of Shri Mahesh Agarwal), the incriminating material relating to the assessee i.e. FDR's in the name of Chirchind Hydro Power were found . On perusal of the panchnama in the case of Mahesh Agrawal ,who is a director of the company and against whom the search proceedings were conducted , it may be seen that no such FDR was seized. Even if , otherwise held there was an FDR of Rs. 25,00,000/-, which was made from the bank a/c of the assessee from the centurion bank after obtaining the loan from M/s. Gwalior Tank & Vessels (in short 'GTV'). As evident from the copy of the bank a/c and the copy of a/c of the assessee in the books of M/s. GTV. 9. On the above facts, as per ld. AR it may be seen that there was no incriminating material belonging to the assessee, which was found d....
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.... that before invoking section 153C there has to be some material on record to come out of the presumption of sec. 292C and which is possible only after confronting the impugned material to the person-searched. But no such finding of presumption not being applicable has been given before invoking section 153C. I find some merit in this claim. Further I also find that the satisfactions recorded in March' 2006 for all the seven years were without application of mind as is evident from the fact that in all the other 12 cases, involving about 40 assessments, the assessing officer has recorded identical stereo type satisfactions by stating that during search actions carried out in December' 2003 in the cases of Santosh Kumar Sahu and Others incriminating documents pertaining to each of the years were found and seized whereas the fact is that in some of the years of some of those concerns were not in existence. However, these facts by themselves could not be regarded to be a sufficient ground to hold the invoking of section 153C was illegal. It is because of the reason that on a plain reading of sec. 153C, it does not transpire that recording of a satisfaction is a must. But at th....
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....lly omitted to mention that all the balance sheet were filed during the assessment proceedings, and they were already on record with the returns filed u/s. 139(1) . It will also be worth while to see that all the additions in all the assessment years have been made by the assessing officer on the basis of the balance sheet available before him. However, the ld. assessing officer made the additions without giving any opportunity and without inviting any objections from the assessee. The order has been passed by the assessing officer without providing adequate opportunity to the assessee and is against the principles of natural justice. It was requested to the CIT(A) that the order passed u/s. 153C/143(3) be kindly held as illegal and the same be kindly quashed. 12. With regard to the merit of the addition it was submitted that during the course of assessment ld. assessing officer found that there is receipt of share application money of Rs. 1,10,000/- . He observed that this share application money is unexplainable and therefore, he made the addition of Rs. 1,10,000/- u/s. 68 of the IT Act. 13. In this connection, it was submitted that the share capital has been contributed by....
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....bad. Rs.2,00,000/-by cheque Smt. M. Srivara AJFPM7881D -do- Rs. 2,00,000/- by cheq. Shri G.Balaiah - 5-143, shaboonagar Miryalguda, Nalgonda A.P Rs.40,000/-by cash Shri T. Madhan - Sagar Road,Miryalgu da Nalgonda ,A.P. Rs. 40,000/- by cash Shri Maddi Madhusud an Reddy - Ramagiri , Nalgonda Nalgonda , A.P. Rs. 30,000/- by cash ============ Rs. 11,30,000/- ========== In support of the same, the copies of share allotment certificates and the copy of bank passbook were enclosed. a. Share application Name PANo. Address Share application money contributed Mr.S. Ramkrishna Reddy ARKPS1310E Plot No. 28C, New M.L.A Colony, Banjara Hills, Hydrabad. Rs. 30,00,000/- by cheq. Smt. M. Srivara AJFPM7881D -do- Rs. 5,00,000/- by cheq. Smt. M.Rajitha Reddy AFJPM9642N -do- Rs. 55,000/- by cash Smt. M.Lakshmi Reddy - -do- Rs. 40,000/- by cash Mr. M. Arjun Reddy AJSPM0907B -do- Rs.40,000/- by cash N. Bhupal Reddy - -do- Rs. 35,000/- by cash N.Vrushasena Reddy - -do- Rs. 20,000/-by cash &n....
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....honourable supreme court in the case of CIT vs Steller Investment Ltd as reported on 251 ITR 263 S.C. have held that where the income tax assessee accepts the contribution of share capital no addition should be made in the hands of the company. Recently, the S.C has reaffirmed the above said principles by making the strong observations that even if there are the bogus share holders no addition can be made in the hands of the company. This principles has been laid down by the S.C. in the case of CIT vs Lovely Export (P) Ltd. as reported on (2008) 216 CTR S.C. 195. In view of the above, the share application money at Rs. 2,50,000/- be kindly accepted and the addition made towards the same be kindly removed. 20. In the assessment year 2005-06 the ld. assessing officer found from the balance sheet that the assessee had paid the amount of Rs. 28,00,000/- to the land lord towards purchase of land in the assessment year 2003-04 , which has been received back in the present assessment year 2005-06. He assumed that when the assessee return the land and received back the advance, he must have received some premium . He estimated the sale consideration of the land at Rs. 1 crore and since ....
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.... not be treated as income and can not be brought to tax. In this connection, the assessee relies upon the Supreme Court decision the in the case of CIT vs A. Raman & Co. reported at 67 ITR 11 S.C. A plea was also raised that unless there is some evidence to prove that some premium, howsoever small, has been given, the premium can not be estimated for the purposes of working of the capital gain even when section 52 was on the statue book till 01-04-88. In this connection, the ld. counsel also placed on record the decision of the Supreme Court in the case of K.P. Varghees vs CIT reported on 131 ITR 597 (SC). 21. In view of the above, it was pleaded that there is no justification to estimate the short term capital gain at Rs. 72,00,000/- and to make the addition towards the same. 22. In the assessment year 2006-07 ld. assessing officer found from the balance sheet that the share application money has increased from 15,70,000/- to Rs. 58,55,356/- during the accounting year and that there was the increase of Rs. 42,85,356/- . He treated the difference as unexplained share application money and accordingly, made the addition of Rs. 42,85,356/- in the hands of the assessee. In this ....
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....rt (P) Ltd. as reported on (2008) 216 CTR S.C. 195. In view of the above, the share application money at Rs. 42,85,356/- be kindly accepted and the addition made towards the same be kindly removed. 23. In case of Gwalior Tanks and vessels ltd. (in short 'GTV') it was submitted that no satisfaction has been said to have been recorded by the assessing officer in the case of any searched persons that there is some incriminating material and its belongs to the assessee. Infact, the perusal of the assessment order will clearly reflect that no incriminating material worth the name belonging to the assessee was found during the course of search. In the opening paragraph of the assessment order, the ld. assessing officer has observed that during the course of search (at the residence of Shri Mahesh Agarwal), the incriminating material relating to the assessee LPS-1 to LPS-4 , LPS-5, LPS-8, LPS-13 and LPS-15 were seized . On perusal of these documents , it will be seen that they are not at all incriminating at all. These seized papers are discussed below:- Seized papers P. No. Particulars of pages LPS-1 1-72 } Purchase deed of flats by Shri Mahesh L....
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....he order, as per learned counsel for the assessee, it may be seen that the assessing officer has observed that there are allegations against the assessee firm that the assessee was earning huge profits from contract works from year to year and that they are disclosing only nominal income by suppressing the profit from year to year by applying the following methods :- (i). The company is booking bogus purchases by taking bills of Iron & steels from selected dealers to inflate the cost of productions. The party from which bills are received are having huge balances outstanding for some time and in most of the cases, they are being paid through cheques but amounts are received back in cash. (ii) The company is making bogus payments to various labour contractors and is claiming bogus fabrication charges. These contractors are being paid through cheque and the amounts are received back in cash. (iii) Bogus expenses are claimed in respect of non existing fabrication contract firms created in the names of present and past employees of the concern and money paid to these fabrication units are received back in cash from the said employees. 25. It was contended that these allegat....
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....t order does not give any inkling about any such incriminating documents belonging to the assessee found during the course of search at the premises of the partners. 27. It was submitted before the Ld. Commissioner of Income Tax (Appeal) that there is absolutely no incriminating material belonging to the assessee found during the course of search at the premises of the searched person and there is no satisfaction or even the basis for satisfaction to issue a notice u/s. 153C and no satisfaction is recorded by the assessing officer before the issue of notice u/s. 153C and therefore, the notice issued u/s. 153C is illegal, invalid and untenable-in -law and therefore, it was pleaded that the assessment made on the basis of such illegal notice be kindly quashed. 28. It was also argued that the assessee was being assessed at Gwalior by ACIT-2, Gwalior. The ld. CIT, Gwalior issued the notice on 31-01-2006 to the assessee u/s. 127 of the IT Act as he intended to transfer the case from Gwalior to Bhopal on request from IT Authorities at Bhopal, The assessee strongly objected to the same and the matter of transfer of the case was dropped. However, after the change of incumbent of the ....
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.... a month before the completion of the assessment. The a/c books of the assessee for all the assessment years were available in the hard disc seized by the deptt. and were in their possession right from the date of search. The ld. assessing officer disbelieved the account books available in the said seized hard disc for no reasons as evident from the assessment order. He has rejected the print outs of the accounts books obtained from the hard disc seized by the dept. He has simply observed that the assessee is showing the less profits by inflating the expenses but he has not given any basis for such wild allegations. As per ld AR the account books cannot be rejected without giving proper reasons for the same and in absence of any defects in the account books, they are ought to be accepted. The assessee relies upon the M.P. High Court decision in the case of Sureshchandra vs CIT as reported on (2006) 201 CTR 153 M.P and Gohati High Court decisions in the case of Pyarelal Mittal vs ACIT as reported on (2007) 197 Taxation 186. It is requested, therefore, that the results shown by the account books be kindly accepted and all the additions made by the Assessing Officer be kindly removed.....
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....peal) that at Malanpur unit the gross loss appears because of improper accounting by the assessee . It was brought to you're the notice of the lower authorities that the assessee has shown the other income at Rs. 1,46,47,008/-, which was received from international Metro Civil Contractors . This income includes the rental of the factory premises at Malanpur at Rs. 70,00,000/- and the balance of Rs. 76,47,008/- towards the reimbursement of salary and wages and material made available by the assessee as per terms of the agreement dtd. 12-09-2001. 34. It was submitted that in view of the above, out of the other income at Rs. 1,46,47,008/-, Rs. 70,00,000/- are towards rent and balance are towards payment against salary, wages and material paid by the assessee. If this amount is included in the sales, the total sales will go up to Rs. 1,48,17,664/- . Against which, the assessee has claimed the material consumed and manufacturing expenses including wages at Rs. 1,32,74,168/- and decrease in stock of Rs. 12,52,829/-, it means that the assessee has earned the gross profit from the manufacturing section at Rs. 2,90,667/- from the Malanpur unit, which comes to Rs. 1.96%, which quite c....
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....67,46,360/- as against Rs. 1,50,845/- in the assessment year 01-02 and because of excess other income the assessee inflated his manufacturing expenses and salary and wages expenses by Rs. 46,80,719/- and Rs. 34,67,871/- respectively as compared to the last year just to set off the other income and accordingly, the ld. assessing officer disallowed Rs. 46,80,719/- out of manufacturing exps. and Rs. 34,67,871/- out of salary and wages . 38. In this connection, it was submitted that the assessee has received Rs. 1,67,46,360/- as other income from International Metro, which includes Rs. 70,00,000/- towards rent of the factory premises and Rs. 19,80,000/- towards rental for storage and balance Rs. 76,47,008/- towards reimbursement of salary and wages and material. The receipt of reimbursement at Rs. 76,47,008/- is almost equal to the difference pointed out by the assessing officer in the manufacturing expenses (Rs. 46,80,719/-) as salary and wages. (Rs. 34,67,971/-) totaling to Rs. 81,48,590/- . On the above facts, it may be seen that the assessee has not fabricated his accounts or has inflated their expenses under heads of manufacturing expenses or salary and wages. Infact, there is ....
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....idence that the training was imparted to any employee of the company. He presumed that the training might have been given to Mahesh Agrawal or his children and therefore, he disallowed the expenditure for management at Rs. 3,16,895/- . 42. In this connection, it was submitted that Ku. Smita Agrawal D/o. Mahesh Agrawal, joined the company in June' 2001. Looking to her interest in management, she was sent for studies at M/s. S.P. Jain Institute of Management at Mumbai. She gave an undertaking that she will serve the company for three years after completion of the training on the same salary as she was getting as a graduate. She completed her training in July'2002 and resigned the company. She got married and left the job in October'2003. As per requirement of the agreement, the efforts are being made to recover the amount of Rs. 3,16,895/- from Smita Agrawal. It was submitted that the company has incurred the expenditure solely for business purposes to have best training for their employees and such an expenditure is allowable deduction u/s. 37 of the IT Act and the expenditure can not be disallowed simply for the reason that the Smita Agrawal happens to be the daughte....
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....O issued notice u/s 153C on 30.8.2007 requiring the assessee to file returns for the assessment years 2000-01 to 2005-06 within a period of 30 days from the receipt of the said notice. The assessee filed returns on 16.11.2007 for all these assessment years. However, the return for assessment year 2006-07 was filed u/s 139(1) on 28.11.2006. The AO passed order u/s 153C/143(3) on 31.12.2007, whrein various additions were made in different years. 44. By the impugned order, the ld. CIT(A) annulled the assessment on the ground of no satisfaction having been recorded while issuing notice u/s 153C and framing ast u/s 153C read with section 153A, which section is in pari materia with the provisions of Section 158BD. There is no dispute to the well settled legal proposition that recording of satisfaction before issue of notice u/s 153C is mandatory and in case of failure of the Assessing Officer to record such satisfaction in the case of searched person showing that these are incriminating materials and belonged to the assessee will render the assessment so framed as nullity. In terms of decision of Hon'ble Supreme Court in the case of Manish Maheshwari (supra), the searched person h....
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....cuments, the records called for from the AO have been verified. On verification it is found that no satisfaction has been recorded by the Assessing Officer before the issue of notice u/s 153C. I also have gone through the material seized from the residence of Shri Mahesh Agrawal. The seized papers are named as LPs-1 to LPS-4, LPS-5, LPS-8, LPS-13 and LPS- 15 as incriminating documents. I minutely examined each and every paper and I find that none of these papers are incriminating. These papers are discussed below : Documents My observation LPS-1 to LPS-4 P1-71 in all four sets Registered purchased deeds of flat at Mumbai, which have been purchased by the director Shri Mahesh Agrawal. LPS-5 P1-44 MOU between appellant and his other associate M/s. Arun Excello, which is not incriminating at all. LPS-8 P1-34 Chart and copies of the bills in the name of Techno Pharma Exports raised by the appellant, which are Chart and copies of the bills in the name of Techno Pharma Exports raised by the appellant, which are LPS-13 a. Agency agreement between TPF & GTV b. Copies of cheques and covering letter from GTV Chennai & Bhopal as internal correspondence. c. ....
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....ial to give satisfaction to the AO that some incriminating material indicating some income has been found in the search action. In the instant case, no incriminating material belonging to the assessee has been found in the search. In fact, there was no material found during the course of search, which could have satisfied the AO to issue the notice u/s 153C and no satisfaction has been recorded. It may be appreciated that the notice u/s 153C is based on the material seized in the search and not in the survey proceedings. No doubt there are certain incriminating documents found during the survey proceedings, but the notice u/s 153C cannot be issued on the basis of the same. In view of these facts, I hold that the invoking of Section 153C against the assessee was bad in law and the notice issued u/s 153C was illegal. The proceedings u/s 153C is ab initio null and void. The assessment made in consequence to such notice u/s 153C for all the assessment years are hereby quashed and accordingly, the ground no.1 of the appeal is allowed." 45. Various additions made on merit in case of Chirchind Hydro Ltd.were partly by the learned Commissioner of Incometax (Appeals) after having the fol....
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....ion money at Rs. 36,90,000/- as detailed above. The assessee has given the some of the details of all the share holders and the applicants. All the big amounts are received through cheques. Most of the share holders and share applicants are income tax payers. However, I find that share capital of Rs. 1,10,000/- and share application money of Rs. 1,90,000/- is received through cash. Hence, it cannot be accepted as explained. Following the Suprement Court decisions in the case of Steller Investments (251) ITR 263 and Lovely exports (P) Ltd. 216 CTR 195, I delete the addition of Rs. 10,20,000/- towards share capital and Rs. 35,00,000/- towards share application money and I confirm the addition of Rs. 1,10,000/- towards share capital and Rs. 1,90,000/- towards share application money. Accordingly, the appellant gets the relief of Rs. 10,20,000/- and Rs. 35,00,000/-. In the result, ground no. 3 is partly allowed." 49. ITA No. 171/Ind/2008 Against the above order of CIT(A) the revenue has preferred this appeal on the following grounds :- "On the facts and in the circumstances of the case, the learned CIT(A) erred in : 1. Quashing the order passed u/s 153C/143(3) of the I.T. Act,....
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.... and in the circumstances of the case, the learned CIT(A) erred in : 1. Quashing the order passed u/s 153C/143(3) of the I.T. Act, 1961. 2. Deleting the addition of Rs. 72,00,000/- made by the A.O. on account of short term capital gain. 53. The learned Commissioner of Incometax (Appeals) quashed the assessment proceedings initiated by the Assessing Officer u/s 153C of the Act with the following observations :- "In this ground, the appellant has challenged the legality of the assessment made u/s 153C/143(3) of the IT Act. I have examined the legality of the assessment in the assmt. Year 2001-02 and have decided that the assessment made u/s 153C/143(3) is illegal. Following the said order, the order passed u/s 153C/143(3) from this year is also held as illegal for the same reasons and accordingly, the assessment is quashed." 54. The addition of Rs. 42,85,356/- made by the Assessing Officer on account of unexplained share capital was deleted by the learned Commissioner of Incometax (Appeals) after making the following observations :- " On the above facts, it is quite evident that all the share application money at Rs. 47,55,356/- has been provided by M/s GTV, who is ....
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....wed 1/4th portion of other purchases as in line with other firms of the concerns of the group. I have seen the copy of the notice issued u/s. 131 on 23-11-2007 to SRD steel, which is said to have been sent by the AO calling for confirmation of the sales made by him. I find that large number of suppliers have sent their confirmations for supplies made by them. Only four parties have failed to send their copies of accounts. There may be several reasons for not sending the copies. The assessment order is silent whether the notices were actually served on the suppliers. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u] s. 133(6) no adverse inference can be drawn simply for his. non attendance. It may be mentioned here that I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad & sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee produces excisable it....
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....one through the assessment order as well as the submissions of the AR. The AO has disallowed the fabrication expenses at Rs. 36,36,992/- out of total claim of Rs. 37,37,673/- at Malanpur unit and at Rs. 8,31,645/- out of total claim of Rs. 13,00,283/- at Mandideep unit. The AR has pointed out that the appellant has subcontracted all the labour work and has not paid single penny as the wages to the workers. Infact, the appellant paid the fabrication charges in place of wages as a matter of his working policy. Simply, because the bills are recorded in the last month of the year, it cannot be said that they are bogus particularly, because no engineering works can be done without laour work and because the payments to the sub contractors are made from time to time as evident from their copies of accounts on record. I hold that both the disallowances made by the Assessing Officer out of fabrication expenses at Malanpur and Mandideep units are unjustified. Accordingly, I remove both the additions of Rs. 36,36,992/- and of Rs. 8,31,645/-. In the result, ground no. 8 & 9 are allowed. 60. The AO has also made addition on account of foreign travel expenses incurred by the assessee, which ....
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....allowed 1/4th portion of other purchases as in line with other firms of the concerns of the group. I have seen the copy of the notice .issued u/s. 131 on 23-11-2007 to SRD steel, which is said to have been sent by the AO calling for confirmation of the sales made by him. I find that large number of suppliers have sent their confirmations for supplies made by them. Only three parties have failed to send their copies of accounts. There may be several reasons for not sending the copies. The assessment order is silent whether the notices were actually served on the suppliers. I am of the opinion that simply because some persons do not attend in compliance to the notice u/s 131 or u/s. 133(6) no adverse inference can be drawn simply for his non attendance. In view of the facts and circumstances of the case, I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad & sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. The assessee....
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....to Rs. 51,77,530/- was deleted by the ld. CIT(A) after having the following observations :- "I have gone through the assessment order as well as the written submissions of the AR. I find that the AO has not given any basis for the disallowance of 1/4th amount of the total purchases. The low G.P. cannot be a reason for treating the purchase as bogus. The appellant has filed the copies of account of the suppliers and they were also available before the AO. It reveals that all the payments are made through cheques to the suppliers and the material has been received through transport. There is absolutely no evidence to indicate that the appellant has received back the cash amount from the suppliers or that the purchased material has not reached the factory premises of the appellant. ON these facts, I find that there is no justification for the disallowance of Rs. 51,77,539/-. Accordingly, the disallowance of Rs. 51,77,530/- is directed to be removed. Accordingly, the appellant gets the relief of Rs. 51,77,530/-. In the result, the ground no.4 is allowed." 66. The addition was also made by the Assessing Officer on account of manufacturing expenses and salary and wages amounting to....
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....for his non attendance. In the given facts and circumstances, I am fortified by the decision of the honourable Supreme court in the case of Anees Ahemad & sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has rued the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. Regarding, the purchases from Surabhi enterprises, the assessee has filed many transport receipts. Whenever, the transport receipts are not available, the form No.75/49 the commercial tax-rules- stamped at different sales tax check post is filed. Merely, because some of the transport receipts are not traceable, it does not mean that the purchases are bogus particularly, when the payment has been made through cheques. The assessee produces excisable items and claims Cenvat credits. The charge of the assessing officer that the cheque payments made to the suppliers are received back in cash has no basis and he has not pointed out any defects in the account books and has made huge disallowance from purchases on very flimsy grounds and therefore, this disallowa....
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....sent by the AO calling for confirmation of the sales made by him. I find that large number of suppliers have sent their confirmations for supplies made by them. Only four parties have failed to send their copies of accounts. There may be several reasons for not sending the copies. The assessment order is silent whether the notices were actually served on the suppliers. I am of the opinion that simply because some person does not attend in compliance to the notice u/s 131 or u] s. 133(6) no adverse inference can be drawn simply for his non attendance. In the given facts and circumstances, I am fortified by the decision of the Hon'ble Supreme court in the case of Anees Ahemad & sons vs. CIT as reported in (2008) 297 ITR 441 SC. The AR has filed the copies of account of all the suppliers, which were also available before the assessing officer. I find that all the payments are made through cheques and the material has been received through transport LRs. I find that the doubt of the AO about the small amount of Transportation charges is misplaced because they are simply for loading and unloading. The JAR has filed the detailed chart showing transportation charges loading and ....
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....ejection of books of account. 3. deleting the addition of Rs. 6,43,50,293/- made by the Assessing Officer u/s 69C on account of unexplained bogus Purchase. 4. deleting the addition of Rs. 1,00,00,000/- made by the Assessing Officer u/s 69C on account of unexplained expenditure on extensive development work. 72. In the assessment year 2005-06, the addition was made by the Assessing Officer on account of unexplained bogus purchases u/s 69C amounting to Rs. 9,98,47,818/-, which has been deleted by the ld. CIT(A) after recording following observations :- "I have gone through the assmt. order as well as the written submissions of the appellant. I find that the assessing officer has treated the purchases made from the SRD Steel (P) Ltd as bogus. He also treated 1/4th portion of all other purchases from other parties also as bogus. He has given the reason that even after a notice u] s. 131 to M/ s. SRD steel and notice u/s. 133(6) to four other parties, nobody attended on their behalf and therefore, he disallowed all the purchases made from SRD steel and also disallowed 1/4th portion of other purchases as in line with other firms of the concerns of the group. I have seen the c....
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.... payments made by the assessee to M/s. Arun Fabricators have come back to the assessee in any form. In fact, the assessing officer has not brought any evidence on record to draw such an inference. On these facts, I don't find any justification for the assessing officer to disallow the 1/5th part at Rs. 1,87,67,570/- out of the payments at Rs. 9,38,37,859/- said to have been paid to M/s.Panchsheel Engg. Fact of the matter is no payment is made to M/s. Pachsheel Engg. and payment made to Arun Fabricators is also not Rs. 9,38,37,859/- but is Rs. 7,14,05,710/-. On the above facts, I find that there is no justification to sustain the addition of Rs. 1,87,67,570/- and accordingly, this addition is deleted. Consequently, assessee gets relief of Rs. 1,87,67,570/-. Thus, this ground is allowed." 74. Against the above order following grounds taken in I.T.(SS).A.No. 180/Ind/2008 - A.Y. - 2005-06 : On the facts and in the circumstances of the case, the ld. CIT(A) erred in - 1. Quashing the assessment proceedings u/s 153C. 2. partly allowing relief to the assessee on the ground of rejection of books of account. 3. deleting the addition of Rs. 9,98,47,818/- made by the Assessi....
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.... that the Assessing Officer assessing the search party, is satisfied that the jewellery or other valuable articles or things or books of accounts or documents or assets, seized or requisitioned, pertain to some person other than the person referred to in section 153A, then the books of accounts or the documents or assets seized or requisitioned, shall be handed over by the Assessing Officer of searched person to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against each of such persons and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A of the Act. The opening word of section 153C speaks that not-with-standing anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is "satisfied" that any money, jewellery or books of accounts or documents seized or requisitioned belongs to a person other than the person referred to in section 153A, meaning thereby the Assessing Officer is to record a satisfaction to the effect that such jewellery or document so seized does not belong to the searched person but to some....
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....ions of section 158BD of the Act with regard to the requirements of recording necessary satisfaction by the Assessing Officer of searched person, the law laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari (supra) shall apply with full force in case of initiation of proceedings u/s 153C. The assumption of jurisdiction and framing of assessment by the Assessing Officer u/s 153C without recording such satisfaction is void ab initio. Applying the proposition of law laid down by the Hon'ble Supreme Court, as discussed above, it is quite evident that recording of satisfaction before issue of notice u/s 153C is mandatory and in case where no such satisfaction has been recorded by the Assessing Officer in the case of searched person to the effect that some incriminating material so found belongs to some other person, the assessment framed u/s 153C will be liable to be quashed. However, detailed finding has been recorded by the learned Commissioner of Incometax (Appeals) after examining the assessment records of the concerned person/parties to the effect that no satisfaction has been recorded by the Assessing Officer of the searched person. This finding of the l....
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....s undertaken. As per the learned CIT DR , it is not only the Officer framing the assessment should be considered as Assessing Officer for recording satisfaction but the other Officers involved in the search and survey like ADIT/DDIT should also be considered. Our attention was also drawn to the provisions of sub- section (7A) of section 2 defining the Assessing Officer to mean Assistant Commissioner, Deputy Commissioner, Assistant Director, Deputy Director or the ITO, who is vested with the relevant jurisdiction by virtue of directions or orders issued under sub-section (1) or sub- section (2) of section 120 or any other provision of this Act and the Additional Commissioner or the Additional Director or Joint Commissioner or Joint Director, who is directed under clause (b) of sub-section (4) of that section to exercise or perform all or any of the powers and functions conferred on or assigned to an Assessing Officer. As per the learned CIT DR, under the new scheme of section 153A/C, there is no need to find out undisclosed income, but the assessment is made after the search is carried out to assess or reassess the income of the assessee for the immediately preceding six assessment ....
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....hould be given to the assessee whereas the appraisal note, as referred by the learned CIT DR, is a confidential document prepared by the department for their internal use and copy of which is not handed over to the assessee. Such appraisal report is a secret document prepared by the department and which is not open to the assessee, therefore, cannot be treated at par with the satisfaction note as contemplated u/s 153C of the Act with regard to the documents seized during the proceedings u/s 132, which is alleged to be belonging to a person other than the person referred to in section 153A of the Act. Reliance was also placed on the proposition laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari; 289 ITR 341(supra) and G.K. Drive Shaft; 259 ITR 19 and the decision of the jurisdictional Tribunal in the case of Rishi Construction; 10 ITJ 346 and Asnani Builders; 10 ITJ 81. We have deliberated upon the contentions of the learned CIT DR, Shri K.K. Singh and learned counsel for the assessee, Shri H.P. Verma, with regard to interpretation of recording of satisfaction while assuming jurisdiction u/s 153C of the Act. Even in the new scheme of framing of assessment....
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....discussion, we do not find any infirmity in the order of the learned Commissioner of Incometax (Appeals) who has quashed the assessment framed u/s 153C of the Act. Further, the detailed finding recorded by the learned Commissioner of Incometax (Appeals) with respect to recording of satisfaction has not been controverted by the department by bringing any positive material on record. We, therefore, do not find any infirmity in the order of the learned Commissioner of Income tax (Appeals) quashing the assessments framed u/s 153C of the Act in the cases of all these assesses. 83. So far as various additions were made by the Assessing Officer on merits, the same were partly deleted and partly confirmed by the learned Commissioner of Income tax (Appeals) after recording detailed finding, as narrated hereinabove. In respect of grounds filed by the revenue for deletion of addition by the learned Commissioner of Incometax (Appeals) on merits, the learned CIT DR relied on the order of the Assessing Officer. The findings recorded by the learned Commissioner of Incometax (Appeals) for partly deleting the additions on merits have not been controverted by the department, we, therefore, do not....