TaxTMI 
TaxTMI 
2018 (10) TMI 50
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....ion of proceedings u/s 153A of the Act and, framing of assessment u/s 153A/143(3) of the Act since no incriminating material was found as a result of search conducted on the appellant and therefore, both the notice issued and, assessment framed were without jurisdiction and, deserved to be quashed as such. 1.1 That addition made and upheld of Rs. 87,00,000/- is without jurisdiction since it is not based on any material found as a result of search on the appellant, as has been also held by the judgment of Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla reported in 380 1TR 573. 2. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in sustaining an addition made by learned Deputy Commissioner of Income of Rs. 87,00,000/- on account of following sums received from the share applicant as share capital and erroneously held as unexplained cash credits under section 68 of the Act particularly when no incriminating material either in the shape of unexplained cash or investment or document had been detected as a result of search on the appellant company or even gathered in the instant assessment proceedings: Sr. No. ....
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..... That both the authorities below have framed the impugned order without granting sufficient proper opportunity to the appellant company and therefore the same are contrary to principle of natural justice and hence vitiated. 4. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the levy of interest under section 234A, u/s 234B, u/s 234C and u/s 234D of the Act which are not leviable on the facts and circumstances of the case of the appellant company. It is therefore, prayed that, it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) be quashed and, further addition so upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant company be allowed." 4. The only grievance of the assessee in this appeal vide Ground Nos. 1 to 3 relates to the sustenance of addition of Rs. 87,00,000/- on account of share application money, treating the same as unexplained cash credit u/s 68 of the Income Tax Act, 1961 (hereinafter referred to as the Act) in the absence of incriminating material ....
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....hat during the course of search operation to verify the existence of those companies, their creditworthiness and the genuineness of the share investment transactions, the department authorized survey u/s 133A of the Act on the premises of certain shareholder companies at Kolkata and Howrah but it was found that those companies were not existing at the given address and/or merely existing on paper having no office as such and therefore, the survey operation could not be carried out and even thereafter, during post search period further spot verifications were carried out by the Investigation Wing and then also it was confirmed that the above mentioned companies were not existing at the given addresses and the others were mainly operational on paper just to provide entries in the form of share capital/share application money and loans/advances and that the said companies were neither engaged in any regular business or trade nor had creditworthiness to forward such substantial amount of fund as share application/share capital money which were shown by the assessee as share capital/share application money receipts. The AO also pointed out that during the course of search proceeding, st....
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....10 contains record of 30 lakhs in the name of Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written." 8. The AO observed that Sh. Sampat Sharma whose statement was recorded during the course of search, denied to know about the companies registered at Kolkata who invested in assessee company and M/s Brahmaputra Finlease Pvt. Ltd. on high premium which proved that this group had been using Sh. Sampat Sharma and Smt. Kavita Sharma as dummy directors in the above two companies which were the associated companies of this group, to bring back their unaccounted/undisclosed income in the guise of share capital/share application money receipts. He also pointed out that Sh. Sampat Sharma in his statement had also admitted that the share application money receipts had been routed back to main Brahmaputra companies viz. Brahmaputra Infrastructure Ltd., Brahmaputra Infra Project Ltd. and others in the form of share capital/share application money/advances etc. The AO also observed that ADIT(Investigation), Unit-III(3), Kolkata vide his letter F.No. ACIT(Inv.)/Kol./10-11/7879 dated 28.02.2011 ha....
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....essee also appeared during the assessment proceedings, the AO had given the questionnaire which were responded. She also observed that the assessee had been given ample opportunity from time to time to prove its case. The ld. CIT(A), therefore, did not accept the grounds raised by the assessee on the validity of the notices u/s 153A/143(2)/142(1) of the Act. She also did not accept this contention of the assessee that the opportunity of being heard had not been afforded to it by the AO, by observing that the assessment record as well as remand report of the AO dated 01.02.2017 revealed that the opportunity of being heard had been offered via issue of notices, questionnaires and subsequent hearings and that the replies of the assessee were considered by the AO and rejected thereafter. 11. As regards to the merit of the case, the ld. CIT(A) observed that the AO informed the assessee about the findings of the Investigation Wing of the department during the search and post search enquiries whereby informations and evidences were found to reveal that most of the companies which were shown as contributing to the share capital in Brahmaputra Group of companies including the assessee we....
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....el." 13. On the basis of the aforesaid modus operandi and the extensive enquiries carried out by the DIT(Inv.), New Delhi, the ld. CIT(A) observed in para 4.5.6 of the impugned order as under: "(i) In the search and post search enquiry by the Investigation wing of the Department, on spot verification, statement on oath of Directors of Bharmaputra group of companies as well as Charted Accountant firms and authorized representative were carried out to track the undisclosed and unexplained source of share capital. (ii) The enquiries conducted during post search investigations as well as assessment proceedings, reveals the extensive use of accommodation entries. (iii) It was found that the modus operand! adopted by the entry operators is that these entry providers issue cheques in the form of share capital from the paper companies against cash paid to them by the appellant. (iv) This fact is further corroborated by the Investigations which proved that the companies from where share capital is being provided, are neither engaged in any business activity nor have sufficient funds to contribute towards share capital." 14. The ld. CIT(A) also obser....
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.... incorporation, PAN number, IT returns etc. were relevant for the purpose of identification, but had their limitation when there was evidence and material to show that the subscriber was a paper company and not a genuine investor and that at best these were self-serving statements in documents. According to the ld. CIT(A), the taxing authorities are not required to put on blinkers while looking at the documents produced before them but has to look into the surrounding circumstances to find out the reality to the recitals made in those documents. The ld. CIT(A) accordingly confirmed the addition made by the AO. 17. Now the assessee is in appeal. The ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the original return of income was filed on 28.10.2006 alongwith audited financial statements and tax audit report. A reference was made to page nos. 1 to 253 of the assessee's paper book. It was further submitted that the assessment u/s 143(3) of the Act was framed vide order dated 28.11.2008 by making the additions and thereafter a search was carried out on 28.09.2010 on Brahmaputra Group and the notice u/s 153A of the....
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....e case of M/s Brahmaputra Realtors (P) Ltd. Vs DCIT for the assessment year 2007-08 and also in the case of M/s Brahmaputra Holdings (P) Ltd. Vs DCIT in ITA No. 3330/Del/2017 for the assessment year 2007-08 vide order dated 29.05.2018 (copies of the said orders were furnished which are placed on record). It was contended that the aforesaid companies also belonged to the same group to which the assessee belongs and the search was also conducted simultaneously and that the AO relied the aforesaid referred to documents while making the impugned additions. Therefore, the issue now stands covered vide aforesaid referred to orders in the case of different companies belonging to the same group. 19. It was further submitted that the assessment u/s 143(3) of the Act vide order dated 09.10.2017 for the assessment year 2007-08 was also a non-abated assessment and that for the assessment year 2008-09, the assessee filed the return of income on 29.09.2008 which was processed u/s 143(1) of the Act and the time to issue the notice u/s 143(2) of the Act for the regular assessment u/s 143(3) of the Act has already expired much before the initiation of the search proceedings and issuing of the no....
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....vant findings in paras 3 to 7, which read as under: "3. Assailing the impugned order, the ld. AR, Shri Gautam Jain, Advocate submitted that the order of assessment made u/s. 153C in the instant case is not legally valid, as the same is not based on any incriminating material detected as a result of search on the searched person, viz., Brahmaputra group of cases. It was submitted that no proceedings were pending either on the date of search or on the date of issuance of notice u/s. 153C of the Act and the ld. CIT(A) has not considered this submission raised before him by way of ground No. 3. It is also the contention of the assessee that the documents alleged to have been referred to by the Assessing Officer in the assessment order have been used by the Assessing Officer in multiple cases of the group including the assessee without pointing out as to how the said documents were incriminating to the assessee or the same belong to the assessee. It is further submitted that two such cases of the group are Brahmaputra Finlease (P) Ltd. for A.Y. 2007-07 and M/s. Brahmaputra Realtors (P) Ltd. (A.Y. 2007-08) where also similar additions were made on the basis of the very same docu....
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.... this page recording is made in the name of "Shri Shyam Trexim & Fincom (P) Ltd." against which Rs. 50 lakhs is written; ii) Page No. 1 of Annexure A-7-on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lal Aggarwal dated 31.5.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made; iii) The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008; iv) Page 1 of Annexure A-10-it contains a hand written extracted of cash book containing entry of Rs. 5 lakhs in the name of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggaral. The entries are for the date 28.05.2008, the date of writing of this page; and v) Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name of Mr. A. Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. These documents led the Assessing Officer to doubt share capital ....
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.... mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008. iv. Page 1 of Annexure A-10 - it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page. v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Sudarshan Casting P. Ltd. is also written. During the course of search and post search investigation, the assessees of this group have not been able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted / undisclosed income in the guise of share capital/ share application money." 4.11 We find that the Item No. (i) contains recording in the name of "Shri Shyam Trexim & Fincom Pvt. Ltd". The Assessing Officer has....
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....on'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during the course of search." In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. In the result, we hold that addition of share capital in the year under consideration has been made without relying on any incriminating material found during the course of search. 4.20 In view of the above finding, both the conditions as completed assessment and no incriminating material, have been satisfied in the case, thus, no addition could have been made in the instant assessment year in view of the finding of the Hon'ble Delhi High Court in the case of Kabul Chawla (supra). The grounds No. 1 and 1.1 of appeal are accordingly allowed." 7. The above decision of Tribunal was also followed by coordinate Bench in another group case, namely M/s. Brahmaputra Realtors (P) Ltd. vs. DCIT (ITA No. 3406/Del.....
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.... such, the authorities below are justified in making addition and sustaining the same. 5. At the outset, learned AR submitted that the five documents relied upon by the learned AO in this matter were also relied upon by the revenue in the case of another group company i.e. M/s Brahmputra Finlease P. Ltd. ITA No.3332/Del/2017 and a coordinate bench of this Tribunal by order dated 29.12.2017 discussed the matter at length and found that the revenue failed to bring on record any cogent reasons to connect these documents with the additions of share capital and inasmuch as no material, much less incriminating, supporting the addition is available on record, the addition cannot be sustained and since as the documents neither belong to nor pertain to the assessee thereon by applying the principle laid down by the Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla, 380 ITR 573, the bench held that no addition could be sustained. 6. We have perused the record. The assessment order reads that the Ld. AO placed reliance on five documents and also the statement of one Shri Sampath Sharma, Director, to reach the conclusion that the assessee obtained accommodation entr....
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....eized by party BA-5 i. Page No. 23 of Annexure A- 6 (a diary relating to F.Y. 2009-10)- on the back side\of this page recording is made in the name of "Shri Shyam Trexim & Fincom P. Ltd." against which Rs. 50 lakhs is written. ii. Page No. 1 of Annexure A- 7 - on this page a recording of funds mentioning debit as well as credit of Rs. 25 lakhs in the name of Murari Lai Aggarwal dated 31.05.2008 and further comments of the payment of same amount by cash to Murari Lal Aggarwal (MLA) is made ITA No. 3332/Del/2017 iii. The back side of the above page 1 of Annexure A-7 mentions that Sarat Aggarwal was paid with cash of Rs. 30 lakhs bring back equal amount in other form. The date of noting is 04.06.2008. iv. Page 1 of Annexure A-10 - it contains a hand written extract of cash book containing entry of Rs. 5 lakhs in the main of M.L. Aggarwal. It also shows as debit of Rs. 3 lakhs in the name of Sarat Aggarwal. The entries are for the date 28.05.2008, the date of writing of this page. v. Page No. 4 of above Annexure A-10 contains record of 30 lakhs in the name Mr. A Singhal and M.L. Aggarwala dividing into Rs. 25 lakhs and 5 lakhs respectively. On this page the name of Su....
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....ssment order, there is no mention that any incriminating material is found in hard disk etc. Thus, this contention of Ld. CIT(A) is also rejected. 8. Further, in respect of relevance and reliability of the statement of Shri Sampath Sharma, Director, the Tribunal observed as follows: 4.19 We find that in the case of best infrastructure (India) private limited (supra), despite the admission of accommodation entry in statements under section 132(4) of the Act, the court held that the statement do not constitute as incriminating material. In the instant case, neither is there any statement of any accommodation entry operator claiming that any entry was not provided nor any director has admitted that assessee obtained accommodation entry. Thus, the case of the assessee is on better footing then the case of Best Infrastructure (I) P. Ltd (supra). In such facts and circumstances, respectfully following the decision of the Hon'ble Delhi High Court in the case of best infrastructure (India) private limited (supra), we do not have any hesitation to hold that the statement under section 132(4) of Sh. Sampat Sharma cannot be treated as incriminating material found during ....
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....search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending....
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.... material found during the course of search. We do not agree with the contention of the Ld. CIT (DR) that these materials like blank shares transfer forms etc could be termed as found during the course of search at the premises of the assessee. The survey proceedings carried out at the premises of the Chartered Accountants, ML Aggarwal are separate from the search proceedings carried out at the premises of the assessee. There is no concept of group of assessee in Income-tax assessments. Each assessee is treated separately. If any material is found during the course of search from the premises of one assessee, it can be used against another assessee either under section 153C or under section 148 of the Act depending on material belonging to or pertaining to that another assessee but it cannot be termed as material found during the course of the search of another assessee for making addition under section 153A of the Act. If any material impounded during the course the survey at the premises of one assessee and found to be belonging to or related to another assessee, then action may be taken in terms of section 148 of the Act depending on the material found but that material cannot b....
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....en able to explain the above entries satisfactorily. Though these entries are to be dealt with in relevant cases but this also proves the fact that this group is engaged in bring back their unaccounted/undisclosed income in the guise of share capital/share application money." 4.11 We find that the Item No. (i) contains recording in the name of "Shri Shyam Trexim & Fincom Pvt. Ltd". The Assessing Officer has nowhere brought on record how the said recording on the page relates to the addition in question of share capital. The Ld. CIT(DR) also could not explain as how the said recording was related to the addition in question made in respect of alleged unexplained share capital. She only stated that said recording on the page reflected accommodation entry obtained by the 'Brahmaputra Group' and but no documentary evidence regarding the claim that the document was incriminating qua the addition, are filed. In respect of the Items No. (ii) to (v), the Ld. counsel has submitted that additions in respect of the amounts mentioned in the document has been made in the case of another company namely "M/s Brahmaputra Infrastructure Ltd" in assessment year 2009-10. This fact was not co....
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....additions made under Section 68 of the Income Tax Act, 1961, on account of the statements made by the assessee's Directors in the course of search under Section 132 of the Act were not justified ?" 4.15 In the said case, a search was conducted in case of Mr. Tarun Goyal and Best Group Companies. During the course of search, Sh Tarun Goel admitted of having provided accommodation entry to the best group companies. The Director of the Best group of companies, Sh Anu Aggarwal also surrendered Rs. 8 crore during the course of search against share capital and share premium. Another Director, Sh. Harjit Singh in his statement also concurred with the statement of Sh. Anu Aggarwal. In the case, the learned CIT-(A) held that evidence does not mean only documentary evidence and the statement under section 132(4) of the Act is an important evidence collected as a result of search and seizure operation and thus, the addition of share capital was based on evidence gathered during the search. However, the Tribunal held that no incriminating material for each of the assessment year other than the year of search, to justify the assumption of jurisdiction under section 153A of the Act. The....
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....statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the Assessee during search operation. 4.17 The Hon'ble High Court in the above case further noted that the statement recorded under section 132(4) of the Act may be used for making the assessment but only to the extent it is relatable to the incriminating evidence/material unearthed or found during the course of search. The Hon'ble High Court also cited the decision of CIT Vs. Sh. Ramdas Motor Transport, (1999) 238 ITR 177 of Hon'ble Andhra Pradesh High Court, where it is explained that in case no unaccounted documents or incriminating material is found, the powers under section 132(4) of the Act cannot be invoked. 4.18 Further, as far as the decision of the Hon'ble Supreme Court in the case of Video Master (supra), is concerned, we agree with the argument of the Ld. counsel that in said case certain other materials like loose papers and vouchers were found which corroborated the statement and in those circumstances it was held that it cou....