AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (1) TMI 245
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....ble and hence, the asst. completed u/s. 153A was null and void. 1.2] The learned CIT(A) erred in holding that the name of the assessee was included in the warrant issued to search the premises at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 2 and therefore, the learned A.O. was justified in completing the asst. u/s. 153A on the basis of the said authorization. 1.3] The learned CIT(A) failed to appreciate that - a. The warrant issued to search the premises at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar - 2 did not belong to the assessee firm nor the assessee conducted it's business from the said address and therefore, there was no search on the assessee firm and the assessment initiated and completed u/s. 153A was bad in law. b. Conducting a search on the premises of the partner does not amount to conducting a search on the firm and thus, in this case, it cannot be held that the appellant firm was searched. c. The additional grounds raised by the appellant ought to have been admitted and allowed as it was shown by the appellant that the business premises of the firm wer....
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.... appellant firm was not valid at all." Subsequently, the assessee filed abridged grounds of appeal which read as under: "On the facts and in law, 1] The learned CIT(A) erred in holding that the search action u/s. 132 was conducted on the assessee firm and thus, the asst. order passed u/s 153A is valid in law. 1.1] The learned CIT(A) erred in holding that the name of the assessee was included in the warrant to search the premises at 111 / 112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar 2 and therefore, the assessee was searched and the asst. u/s 153A was valid. 2] The Learned CIT (A) failed to appreciate that the assessment for A.Y.2007-08 was a non abated assessment and since no incriminating evidence was found relating to the impugned addition of Rs. 2,60,00,000/- during the course of alleged search on the appellant firm, no addition could be made in 153A assessment. The entire addition of Rs. 2,60,00,000/- may kindly be deleted. 3] Based on the loose papers found in the search on Atul Chordia Group and the statement of Shri Atul Chordia, the learned CIT(A) erred in holding that in total, the appellant had pa....
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....is of addition. d. There were inconsistencies in the statement of Shri Atul Chordia and therefore, the reliance placed on his statement for making addition in the hands of the appellant firm was not justified at all. e. The appellant firm was not granted proper opportunity to cross examine Shri Atul Chordia and therefore, the reliance placed on his statement for making addition in the hands of the appellant firm was not valid at all. f. There was no concrete evidence that the appellant firm had paid Rs. 5,00,00,000/- as on money for purchase of the said property in this year and hence, the addition made of Rs. 5,00,00,000/- in this year was not justified at all." Subsequently, assessee filed abridged grounds of appeal for A.Y. 2010-11, as under:- The following grounds are without prejudice to each other On the facts and in law, 1] Based on the loose papers found in the search on Atul Chordia Group and the statement of Shri Atul Chordia, the learned CIT(A) erred in holding that in total, the appellant had paid on money of Rs. 7,60,00,0007- to M/s. Ashray Premises Pvt. Ltd. for purchase of the property named Deccan Paper Mill Property. ....
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.....60 crores was paid in A.Y. 2007-08 and balance amount of Rs. 5 crores was paid in A.Y. 2010-11. The Assessing Officer accordingly, made the addition in each of the assessment years. When the matter went before the CIT(A), the assessee had challenged both the additions on legality as well as on merit. However, the CIT(A) dismissed the ground of the assessee and confirmed the action of the Assessing Officer. 5. The learned AR vehemently contended that no search action was carried out in either of the premises of the assessee firm situated in Pune i.e. 2418, East Street, Thakkar House, 1st Wing, 2nd Floor, Camp Pune. There had been a search u/s. 132 at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 421 002 and for this our attention was drawn towards 1st para at page 2 of the assessment order. The place where search had taken place belongs to Khairari Group and was occupied by various concerns controlled by them. These places were the principal place of business of various other concerns. The assessee had nothing to do with this premises except that it is the office address of one of the company in which one of its partner is interested i.e. Konark P....
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....ed. On this basis, it was contended that for making assessment under section 153A, it is necessary that a search should have been validly initiated u/s. 132 after 31.05.2003. It should be conducted in a particular financial year so as to determine the six assessment years immediately preceding the assessment year relevant to financial in which search is conducted so as to assess or reassess the total income of such six assessment years. The provisions to section 153A(1)(b) will be redundant if a search is only initiated but not conducted against a person, as the initiation of search and conduct thereof are two distinct actions of two different Income Tax Authorities under the Act. A panchnama needs to be drawn in the name of the person against whom the provisions of section 153A are sought to be invoked and the absence of such panchnama shall firstly negate the facts and circumstances leading to the initiation of the search, secondly, disprove the fact of the conduct and conclusion of the search and, thirdly, also result in defeating the provisions of section 153A(1)(b). 153B(1)(a)& 153B(2) as the determination of the financial year in which the search was conducted will be impossi....
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....L 62 (Ahmedabad 'D' Bench of the Tribunal); CIT vs. Wipro Finance Ltd. 323 ITR 467 (Kar) and CIT vs. Kurban Hussain Ibrahimji Mithiborwala 82 ITR 821 (SC). Thus, on the basis of these decisions, it was submitted that since the assessment u/s 153A is based on a invalid notice issued u/s. 153A the same must therefore be quashed. 6. The learned AR before us submitted that the assessee has taken this ground before the CIT(A) but the CIT(A) dismissed the ground mentioning that this ground does not emanate from the order of the Assessing Officer as the assessee has not taken this issue before the Assessing Officer. It was contended that this ground is a legal ground and has to be admitted. The learned DR, on the other hand, relied on the order of the CIT(A) and submitted that there has been search carried out in assessee's case at 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar- 2, which is the address and the business place of partner of the assessee firm. The law nowhere mentions that in case of a partnership firm search can be carried out only at the address mentioned in the partnership deed and in this regard our attention was drawn towards the assessm....
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.... denied that the search warrant on the basis of which the search has been conducted at the premises 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar-2, contained the name of the assessee but this premises where the search has been conducted does not belong to the assessee firm nor the assessee firm was carrying on any business from the said place. The premises where the search was conducted relate to Konark Project Ltd., in which one of the assessee's partner is interested. But this is not the address of the assessee firm. The assessee's firm is constituted on 26.08.2005 vide partnership deed dated 26.08.2005 and subsequently amended vide deed dated 30.06.2006 and 3.11.2006. The address in the partnership deed dated 26.08.2005 and 30.06.2006 is 2418, East Street, Thakkar House, 1st Wing Camp, Pune and in the deed dated 3.11.2006, the address is 5th Avenue, Dhole Patil Road, Pune. These are the address of principal place of business of the assessee is constituted. It is also not denied that in Income Tax database i.e. PAN/TIN record the address of the assessee from 2.11.2006 is appearing as 5th Avenue, Dhole Patil Road, Pune. In the notice issued on 5.12.....
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....wing the search being conducted at the premises of the assessee. In our view, the Assessing Officer assumed the jurisdiction to issue notice u/s. 153A and made assessment in consequence of search action being taken u/s. 132 of the Income tax Act. Before deciding whether the Assessing Officer has validly assumed the jurisdiction u/s. 153A, it is necessary to analyze the provisions of section 132(1) as well as 153A. The provisions of section 153A, 153B and 132(1) are reproduced as under: "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section-15-1 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred Co in clause (b), in the prescribed form and verified in the prescribed manner ....
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....Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), From the reading of these provisions, it is clear that section 153A(a) of the Income tax Act authorized the Assessing Officer to issue notice in....
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....ssessee was carrying on the business from the same premises. The address mentioned in the notice issued u/s. 143(2) and the demand notice generated on line as well as the PAN/TIN, copies of which were filed before us, clearly prove that 111/112, Anil Complex, New Link Road, Near Regency Marriage Hall, Ulhasnagar-2., where the search was conducted is not the business address of the assessee. In view of these facts, we are of the opinion that the conditions stipulated u/s. 153A, for the issue of notice, are not satisfied. Until and unless the Assessing Officer assumes the valid jurisdiction u/s. 153A the assessment made in consequence of the notice issued u/s. 153A, in our view is invalid and void ab initio. We accordingly quash the assessment made by the Assessing Officer. 8. Before concluding, we would like to discuss the case law as has been relied on before us: J.M Trading Corporation vs. ACIT20SOT489 (MUM) In this case, premises owned by assesses were searched but these premises were not occupied by assesses but tenanted to someone else. It is held that search action was invalid and illegal, it is held (In para 24) that 'mere mentioning of name in the panchnama does....
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....ion under section 153A against assessee. /actual search shall have to be earned out necessarily before proceedings under section." CIT v/s Wioro Finance Ltd 323 ITR 467 (Kar) Herein it was held that the search is initiated not on date of signing the warrant of authorities but on the date initial search was conducted. Panchnama is a document prepared at the conclusion of search operation. It is a written record of what has been witnessed by panchas and it proves conduct of search.} CIT vs. Kurban Hussain Ibrahimji Mithiborwala 82 ITR 821 Wherein Hon'ble Supreme Court has held as below: It is well settled that the ITO's jurisdiction to reopen an assessment under s. 34 depends upon the issuance of a valid notice. If the notice issued by him is invalid for any reason the entire proceedings taken by him would become void for want of jurisdiction. In the notice issued under s. 34 the ITO sought to reopen the assessment of the assessee for the assessment year 1948-49 but in fact he reopened the assessment of the year 1949-50. Hence, in our opinion, the High Court was right in holding that the notice in question was invalid and as such t....
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....rovisions means - (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search." It is a fact that the assessment for the impugned assessment year has not been abetted and no incriminating material regarding the addition made by the Assessing Officer was found during the course of the search in the case of the assessee. The said decision has been confirmed by the Hon'ble Jurisdictional High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd.(supra). Respectfully following the said decision, we delete the addition of Rs. 2,60,00,000/- and allow ground no. 2 taken by the assessee. 11. Ground nos.3 & 4 for A.Y. 2007-08 and Ground nos. 1 & 2 for A.Y. 2010-11 relate to the sustenance of addition of Rs. 2,60,00,000/- and Rs. 5,00,00,000/- for A.Ys. 2007-08 and 2010-11 respectively. Both the parties agreed that since the facts involved relating to these additions are common the issue may be decided on merit on the basis of the facts for A.Y. 2007-08. The facts relating to these additions are that there had been a search in ....
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....nue, Dhole Patil Road, Pune. The assessee submitted the return for A.Y. 2007-08 on 02.08.2007 declaring a total loss of Rs. 4,687/- while no return had been filed for A.Y. 2010-11. During the course of search at Konark Group, no incriminating material relating to the assessee was found. The assessee vide agreement, dated 20.05.2006, duly registered with Ashray Premises Pvt. Ltd., transferred the development rights in respect of plot no.96B, 96C and 96D at Village Mundhwa, admeasuring 3,51,541 sq. ft. at Pune, for a consideration of Rs. 9,12,60,000/- The consideration thereof was paid in the following manner: "(a) Monetary consideration of Rs. 3,11,00,0007- to be paid as under: (i) Rs. 75,00,000/- vide cheque dtd 01-09-2005 of Rs. 55 lakhs & dtd 10-09- 2005 of Rs. 20 lakhs (ii)Rs.15 lakhs- after registered confirmation of deed with a consenting party latest by 15-06-2006. (iii) Rs. 2,21,00,0007- to be paid within two month after fulfillment of condition (ii) mentioned above. (b) 60,100 sq.ft built-up area (cost evaluated at Rs. 1,000/- per sq.ft)along with additional pro-rata 30 open & 30 covered car parking. The background of this pro....
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....recorded either, in the books of the said company or KLL or my books of accounts. Page A/o.23 is a Profit and Loss account for the period ending 3d August 2009 and the gross profit is Rs. 11,04,44,650/-. Page 15 to 19 and page no.22 have notings regarding the expenditure incurred for earning the said amount of Rs. 11,04,44,650/-. The total expenditure incurred is about Rs. 3 Crores, Therefore, the income earned by the said company in the capacity is Rs. 8.04 Crores which is pertaining to F.Y. 2009-10 in the hands of M/s.Ashray Premises Pvt Ltd over and above the regular income." On the basis of the statement of Shri Atul Chordia, the Assessing Officer was of the view that the assessee has paid an amount of Rs. 7,60,00,000/- in cash towards purchase of the said land. In view of the copy of ledger account of K.L.L. in the books of Ashray Premises Pvt. Ltd, the Assessing Officer was of the view that during A.Y. 2007-08, the partner of the assessee firm paid a sum of Rs. 2,60,00,000/- to the assessee while the seized paper shows a debit of Rs. 2,10,00,000/-. During the course of the search at the premises of one of the partners Shri Dilip Oswal, when the said transaction was a....
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....ts. Page No.23 is a Profit and Loss account for the period ending 3rd August 2009 and the gross profit is Rs. 11,04,44,650/-. Page 15 to 19 and page no.22 have notings regarding the expenditure incurred for earning the said amount of Rs. 11,04,44,650/-. The total expenditure incurred is about Rs. 3 Crores. Therefore,, the income earned by the said company in the capacity is Rs. 8.04 Crores which is pertaining to F.Y.2009-10 in the hands of M/v.Ashray Premises Pvt Ltd over and above the regular income. Even Shri Mahesh Khairari, partner of the assessee firm when confronted, also denied the involvement of cash component in the transaction. The Assessing Officer subsequently gave opportunity to the assessee to crossexamine Shri Atul Chordia on 19.12.2011 but on that date Shri Atul Chordia did not attend. He attended office of the AO only on 20.12.2011 and his statement was recorded. He confirmed that a sum of Rs. 2,10,00,000/- was received from Kantilal L Lunkad & Dilip Jain but no question in respect of the sum of Rs. 5 crore was asked. Ultimately, the Assessing Officer noted that income was declared under the name and style of Ashray Premises (AOP) consisting of Atul Chordia & Ka....
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.... as purchase of Deccan Paper Mill. This paper is a computerized sheet. Since the director of Ashray Premises Pvt. Ltd accepted that this paper belonged to them therefore, the natural inference will be that the amount mentioned in the paper represents the sales and purchase of Ashray Premises Pvt. Ltd. From the facts involved in this case, we noted that the assessee had entered into duly registered agreement, dated 20.05.2006, with Ashray Premises Pvt. Ltd., and transferred the development rights in respect of plot no.96B, 96C and 96D at Village Mundhwa, admeasuring 3,51,541 sq. ft. at Pune, for a consideration of Rs. 9,12,60,000/-. M/s. Ashray Premises Pvt. Ltd. got the development rights in the said property by virtue of an unregistered agreement, dated 27.04.2002, entered into on a stamp paper of Rs. 100 with Deccan Paper Mills Co. Ltd. by which it agreed to develop the said property by handing over saleable built-up area of 63,600 sq. ft consisting of Row houses/Bungalow/offices/shops along with additional prorate open/covered car parking. Subsequently, a fresh agreement dated 22.04.2004 was executed and registered between Deccan Paper Mills Co. Ltd. and Ashray Premises Pvt. Ltd....
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....nd 61,000 Sq.Ft. of built-up area was to be handed over to Deccan Paper Mill. For this we had paid deposit Rs. 90 Lakhs(Rs. 5 Lakhs per month for 18 Months) to Deccan Paper Mill. In the said reply, the Director has stated that the transactions in these pages are not recorded in the books of Ashray Premises Pvt. Ltd. but nowhere he had stated that the company Ashray Premises Pvt. Ltd. received a sum of Rs. 7,60,00,000 in cash from the assessee. The Assessing Officer calculated this by interpreting the entry appearing at page P26 [pg 197 of the paper-book]. In this page we noted that on 26.07.2006 a sum of Rs. 50 lacs has been credited to M.C.M.G. "being amount received from dilip jain 1.00 to mr. K.l.l-: 50 debited thu mcmg : icd a/c refund". Similarly on 23.09.2006 against the entry of 10,000,000/- the description is "M.C.M.G being amount received from mr. dilip jain on deccan paper retained by mr. K.LL as per inst. from kll : a/c for" and against the sum of Rs. 60,00,000/- credited on 22.10.2006, it has been mentioned "Mukesh Agarwal/Dilip Jain (6.25) Being account closed by mr lunkad and last payment received by mr lunkad". From these descriptions in this account, it is not cl....
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....cer is also not sure on the basis of the evidence found during the course of the search that the assessee has paid a sum of Rs. 7,60,00,000 i.e. Rs. 2,60,00,000/- in A.Y. 2007-08 and Rs. 5 crores in A.Y. 2010-11. There had been search in the case of the assessee but no cogent material or evidence have been found and brought to our notice which may prove that the assessee had paid of Rs. 7,60,00,000/- to Ashray Premises Pvt. Ltd. Even the payment of Rs. 2,10,00,000 has been assumed by the Assessing Officer appearing at page 26 relating to the said transaction has been debited only after the execution and registration of the agreement between the assessee and Ashray Premises Pvt Ltd. No seller will transfer his rights in favour of the buyer until and unless he has received the cash consideration, if any embedded there in. No addition can be sustained on the basis of assumption and presumptions, however, strong it may be. There is no material being brought on record for the A.Y. 2010-11 being found during the course of the search even in the case of Ashray Premises Pvt. Ltd. We, therefore, set aside the order of the CIT(A) in each of the assessment year and delete the addition of Rs. ....