TaxTMI 
TaxTMI 
2017 (11) TMI 122
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....orward losses of the earlier year to be carried forward and charging of interest under section 234A/234B of the I.T. Act. 4. The brief facts of the case are that the assessee is a company maintaining books of account on mercantile basis. The nature of business of assessee-company is manufacturing. A search and seizure operation was carried out at the various premises of M/s. Today Homes and Infrastructure Pvt. Ltd., and its group concerns and Associated Persons (hereinafter called as "Today Group of Cases") on 26th November, 2009 and finally concluded on 25th January, 2010. The assessee-company is one of the Associated/ Group concerns of Today Group of Cases. During the course of search and seizure operation at various premises of Today Group of Cases, many books of account or documents belonging to the assessee-company were found and seized and hence, the A.O. observed that pre-requisite condition to initiate proceedings under section 153C of the I.T. Act was fulfilled. The A.O. recorded necessary satisfaction for initiating the proceedings under section 153C of the I.T. Act. Notice under section 153C/1543A was issued to the assessee-company to file return of income within 15 day....
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....count. Various companies floated by Gambhir brothers who have transferred money are noted in the assessment order. The A.O. noted various facts which are apparent from the details mentioned in the assessment order that almost all these companies have been incorporated in the year 2005 to 2007 just before date/period entry taken by them from the entry operator. Many companies have been strike-off as per ROC record as they were defaulter in filing the annual returns with ROC. These are also defaulters in filing income tax returns as well. These companies have a common address. In order to find out the existence as well as details of business activity of these companies of Today group, a survey under section 133A of the Act was also conducted on 26.11.2009 at the Registered Office of these Companies. The persons available at these three Registered Offices have stated that neither books of account are maintained nor any business activities are carried out by these Companies from these premises. During survey, no Company was found to be running from these premises and no books of account and other record were found. The A.O. referred to statement of Shri Jagdish Prasad, Shri Harsh Talwa....
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....se of search action. 4.4. The assessee-company filed written reply before A.O. which is reproduced in the assessment order in which the assessee-company briefly explained that assessee-company is not at all aware of any person by name Mr. Chawla, the alleged mediator, or the Jain brothers mentioned in the show cause notice. It was submitted that no adverse/serious allegation can be levelled against the assessee-company on the basis of inference drawn from the documents seized from the control and possession of third party. It was explained that documents were purportedly found from Jain brothers etc. Assessee- company has nothing to do with these documents. They can explain seized papers. Even the full particulars of mediator Mr. Chawla has not been provided and brought on record. The assessee-company has already discharged the onus of establishing genuineness of the amount received from M/s. Double Star Builders Pvt. Ltd., It was also submitted that there is no evidence, whatsoever, has been brought on record and made available to assessee-company that any cash have been given by assessee-company in lieu of taking any accommodation entry. It was submitted that assessee-company ha....
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....accordingly, made the addition under section 68 of the I.T. Act, 1961 of Rs. 3.18 crores. The A.O. also noted that assessee-company did not file returns under section 153C within time, therefore, business loss claimed by the assessee-company to be carried forward under section 72(1) of Act were not allowed to be carried forward. 5. The assessee-company challenged the assessment order passed under section 153C of the I.T. Act as illegal and bad in law before the Ld. CIT(A). The assessee-company also challenged the addition of Rs. 3.18 crores against the loss of Rs. 24,64,664 declared by assessee-company. The assessee- company also challenged the disallowance of loss of Rs. 24,16,422 of current year and brought forward losses of earlier years to be carried forward before Ld. CIT(A). The assessee-company reiterated the same submissions as made before A.O. and written submissions of assessee-company are reproduced in the impugned order in which the assessee- company briefly explained that assessee-company proved identity of the investor, his creditworthiness and genuineness of the transaction. Therefore, no addition can be made. The department cannot ask assessee to prove source of th....
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....s disclosed these facts in detail in section "H" of the order of assessment. 3.5 In the instant case, cash has been routed through a series of entities beginning from Jain Brothers and ending in the group company of Today group in the form of series of cheques. There is clear evidence that cash was paid to Jain Brothers and in turn cheques were received from the Jain Brothers through a series of entities controlled by them. It is the assessee's own money earned through unaccounted transactions/ means that has been routed through a series of transactions in the light of the evidence on record, circumstances and totality of the context. A live connection of the records has been established between cheques/pay orders/bankers cheques issued by the Jain Brothers to the various companies of the Today group. A direct connection is seen between the transactions through banking channels on the one side and cash received from intermediaries on the other side. There are series of transactions spanning over a period of three years which are corroborated by the evidence found in the records seized in the case of Jain Brothers with the assessee group. 3.6 The Assessing Officer has brough....
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....2(1) of the Act, do not qualify for the claim. 4.5. The stand taken by the Assessing Officer is as per the provisions of the Act whereas the appellant has raised grounds against the same. The Assessing Officer has correctly not allowed the carry forward of loss claimed under section/72(1) of the Act. The case laws relied upon by the appellant are distinguishable on facts. The ground raised in appeal is dismissed." 6. The assessee moved an application for admission of additional ground of appeal which reads as under : "That the order dated 20-01-2014 passed u/s 250 (6) of the Income-tax Act. 1961 by the Ld Commissioner of Income- Tax (Appeals) XI, New Delhi is against law and facts on the file in as much as he was not justified to uphold the validity of issue of notice and consequent proceedings u/s 153C of the Income-tax Act, 196, notwithstanding the fact that the conditions precedent for initiating proceedings under the said Section were not satisfied, particularly considering the fact that no incriminating material/documents were found during the course of search" 7. On 28th September, 2017, we have heard Learned Counsel for the Assessee Shri Ashwanikumar, C.A. and Ld. CIT-....
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.... The A.O. did not doubted the documents filed by the assessee-company. The amount of the loan have been returned in subsequent assessment years 2008- 09 and 2009-10 through banking channel, copies of the confirmation of accounts are filed at pages 113 and 114 of the paper book. The assessee-company thus, proved the identity of the creditor, its creditworthiness and genuineness of the transaction in the matter. The Learned Counsel for the Assessee also relied upon the following decisions. 10.1. Decision of the Hon'ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment Pvt. Ltd., (2011) 330 ITR 298 (Del.) in which it was held that assessee need not to prove "source of the source". 10.2. Judgment of the Hon'ble Supreme Court in the case of CIT vs. Orissa Corporation (P.) Ltd., (1986) 159 ITR 78 (SC) in which it was held as under : "In this case the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were the income-tax assessees. Their index number was in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the ma....
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....tity of the creditors was established before any of the authorities below. It will have to be kept in mind that section 68 only sets up a presumption against the assessee whenever unexplained credits are found in the books of account of the assessee. It cannot but be again said that the presumption is rebuttable. In refuting the presumption raised, the initial burden is on the assessee. This burden, which is placed on the assessee, shifts as soon as the assessee establishes the authenticity of transactions as executed between the assessee and its creditors. It is no part of the assessee's burden to prove either the genuineness of the transactions executed between the creditors and the sub-creditors nor is it the burden of the assessee to prove the creditworthiness of the sub-creditor." 10.6. As regards the brought forward losses of earlier years, details are filed at page-58 of the paper book. The assessee filed original return of income on 30th October, 2007. Notice under section 153C was issued on 25th May, 2011 and the assessee filed return of income under such section on 11th July, 2011. Therefore, A.O. should not have denied brought forward losses to the assessee. 11. The Ld....
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....quisitioned belongs or belong 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 such other person and issue such other person notice and assess or reassess the income of such other person in accordance with the provisions 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 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.] [(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is ....
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....me Court in the case of CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) in which the Hon'ble Supreme Court held as under : "Held, dismissing the appeals, (i) that the Tribunal permitted the assessee to raise the additional ground on the ground that it was a jurisdictional issue taken up on the basis of facts already on record, that under section 153C of the Act, incriminating material which was seized had to pertain to the assessment years in question, and that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. The Tribunal found that the material disclosed in the satisfaction note belonged to assessment year 2004-05 or thereafter. The Tribunal rightly permitted this additional ground to be raised and correctly dealt with the ground on the merits as well. The High Court was right in affirming this view of the Tribunal. Decision of the Bombay High Court in CIT v. Sinhgad Technical Education Society [2015] 378 ITR 84 (Bom) affirmed. (ii) That the assessment order passed by the Assessing Officer covered eight assessment years. For six assessment years the assessment was under section 153C of the....
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....tice under section 153C and assessing or reassessing income of such other person, is that the money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned should belong to such person. If the requirement is not satisfied, recourse cannot be had to the provisions of section 153C. Held, allowing the petition, that admittedly, the three loose papers recovered during the search proceedings did not belong to the petitioner. It was not the case of the Revenue that the three documents were in the handwriting of the petitioner. In the circumstances, when the condition precedent for issuance of notice was not fulfilled action taken under section 153C of the Act stood vitiated." 12.5. The Hon'ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd., (2017) 397 ITR 246 (Bom.) held as under : "It is clear that before issuing notice under section 153C of the Income-tax Act, 1961, the primary condition that has to be fulfilled is that the money, bullion, documents, etc., seized should belong to such other person. If this condition is not satisfied, no proceedings could be taken under section 153C. The JC group was a partn....
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....section 153C was not attracted and its invocation was bad in law was not based just on interpretation of section 153C but after holding that the ingredients thereof were not satisfied in the present case. That was an exercise carried out by the Tribunal as the last fact finding authority. Therefore, the finding was a mixed one. There was no substantial question of law arising from such an order which alternatively considered the merits of the case as well. The deletion of the addition was justified." 12.6. The Hon'ble Madras High Court in the case of CIT vs. Late J. Chandrasekar (HUF) (2011) 338 ITR 61 (Mad.) held as under : "On the search conducted in the case of A and group on November 25, 2003, material pertaining to "on-money" payment paid to the assessee in respect of property purchased from the assessee were seized. Based on that, the Assessing Officer issued notice under section 153C of the Income-tax Act, 1961, and reworked the capital gains. The Commissioner (Appeals) and the Tribunal held that the notice under section 153C was not valid. On appeal to the High Court : Held, dismissing the appeals, that the Assessing Officer did not have the benefit of the seized mater....
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.... 12.8. In the present case, it is an admitted fact that no recovery has been made from the possession of the assessee- company. The department believed the third party documents recovered from Today Group of cases which are not supported by Gambhir Brothers, Jain Brothers or the alleged broker Mr. Chawla. The books of account of assessee-company were found during the course of search in which loans and advances received by the assessee-company are mentioned and disclosed to the Revenue prior to search. These books of account, therefore, could not be treated as incriminating material against the assessee-company. No evidence was found during the course of search that any money (cash credit) belongs to the assessee-company. No evidence was found during the course of search to the effect that Gambhir Brothers and Jain Brothers have made investments directly in the assessee-company. At the time of search, it was found that cash credits already appearing in the books of account and assessee-company returned the amount of the cash credits in subsequent years up-to A.Y. 2009-2010 through banking channel prior to the search. The material collected in the search at the most prove the modus....