TaxTMI 
TaxTMI 
2018 (11) TMI 894
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....is appeal is as to whether in the facts and circumstances of the case, the ld CITA was justified in confirming the addition made towards share capital in the sum of Rs. 3,50,00,000/- for the Asst Year 2010-11 in the assessment framed u/s 153A of the Act without having any incriminating material in that regard. 3. The brief facts of this issue is that the assessee is a company carrying on business of dealing in shares and loan transactions. The assessee filed its return of income for the Asst Year 2010-11 on 23.9.2010 declaring total income of Rs. 81,676/-. There was a search and seizure operation conducted u/s 132 of the Act at the residential, office premises,bank lockers etc of the Patni Group of cases on 8.3.2016. A search warrant was executed in the name of the assessee. Consequent to the search, notice u/s 153A of the Act was issued on the assessee for the Asst Year 2010-11. In response to the said notice, the assessee filed its return of income on 24.10.2016 declaring total income of Rs. 81,676/-. The assessee stated that the time limit for issuance of notice u/s 143(2) of the Act for the Asst Year 2010-11 in respect of the original return filed on 23.9.2010 had expired on....
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....ning the total income at Rs. 3,50,81,680/- after making an addition of Rs. 3,50,00,000/- u/s 68 of the Act on account of share capital. 4. The assessee stated no incriminating materials relating to the share capital or share premium were found during the course of search. The assessee filed all the details with regard to the share capital before the ld AO. It was pleaded that the assessee company had duly proved the necessary three ingredients i.e identity of the share subscribers, genuineness of transactions and creditworthiness of transactions within the meaning of section 68 of the Act and prayed for deletion of the addition made in the sum of Rs. 3,50,00,000/-. 5. The ld CITA however confirmed the addition on the validity of addition made towards share capital in the proceedings u/s 153A of the Act for the Asst Year 2010-11 by observing that the addition has been made on the basis of search proceedings by observing as under:- 05. FINDING & DECISION : 1. ........................................ The ld AO has very carefully analysed the information received from the investigation wing, and also the various statements given by the directors / main persons of t....
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....ese observations, he upheld the action of the ld AO on merits of the addition towards share capital u/s 68 of the Act as well. Aggrieved, the assessee is in appeal before us. 6. With regard to the preliminary argument of the ld AR that there was no incriminating material found during the course of search with regard to the issue of share capital and share premium, the ld DR argued that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported those words while rendering the decisions. He stated that the Hon'ble Courts are divided on this issue and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) wherein it was held that search assessments could be framed even without the existence of incriminating materials found in the course of search. He argued that the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initi....
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....2011. He reiterated the submissions made before the lower authorities with regard to framing of additions in section 153A assessments without any incriminating material found thereon. Reliance was placed on the following decisions in support of his contentions:- (a) CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC) (b) Decision of this tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 dated 9.12.2015 (c ) CIT vs Kabul Chawla reported in (2016) 380 ITR 573 ( Delhi HC) (d)CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 ( Bom) (e) Decision of Hon'ble Apex Court in the case of Kabul Chawla reported in 380 ITR (St.) 64 (SC) wherein SLP of the revenue was dismissed. 8. We have heard the rival submissions. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. At the outset, it is evident from the categorical findings of the ld CITA that there is ....
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.... R. Mahapatra] Under Secretary (Inv. II) We find that there is absolutely no corroborative evidence found in the course of search by the search team or material evidence brought on record by the ld AO or by the ld CITA in order to give credence to the statement recorded during search. Hence we hold that no addition could be made merely by placing reliance on the statement recorded during search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2010-11 was originally completed u/s 143(1) of the Act and the time limit for issuance of notice u/s 143(2) of the Act had expired and hence it falls under concluded proceeding , as on the date of search. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to such concluded year, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such pro....
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....had explained the aforesaid provisions as below:- "6.4 In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s. 132 of the Act :- (a) Notice u/s. 153A of the Act would be issued on the person on whom the warrant of authorization u/s. 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years. (b) In respect of the year of search, notice u/s. 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act. (c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. (d) Pursuant to the search u/s. 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act. 6.4.1 The concluded assessments for the p....
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....y 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 153A 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 Ld 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 complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of th....
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....rted in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that against the decision of the Hon'ble Delhi High Court in the case of Kabul Chawla reported 380 ITR 573 (Del) , the revenue preferred Special Leave Petition before the Hon'ble Supreme Court and the same was dismissed by the Hon'ble Apex Court which is reported in 380 ITR (St.) 4 (SC). Hence it could be safely concluded that the decision of Hon'ble Delhi HC in the case of Kabul Chawla supra would have to be considered on the impugned issue and in any case, the Hon'ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC) had held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. 8.6. We also find that the Hon'ble Jurisdictional High Court recently in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 had endorsed the aforesaid view of Hon'ble Delhi High Court in Kabul Chawla's case and also placed reliance on its own decision in the case of CIT vs Veerp....
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.... there was absolutely no incriminating material found during the course of search in the instant case with regard to the issue of share capital, share premium except understanding the discovery of modus operandi of raising bogus share capital based on the certain statements recorded from entry operators in some cases in West Bengal. Since the issue is addressed on preliminary ground of absence of incriminating materials, we refrain to give our findings on the merits of the addition u/s 68 of the Act for the Asst Year 2010-11. Accordingly the grounds raised by the assessee in this regard are allowed for the Asst Year 2010-11. IT(SS)A No. 60/Kol/2018 - Asst Year 2013-14 9. The preliminary issue involved in this appeal is as to whether in the facts and circumstances of the case, the ld CITA was justified in confirming the disallowance of trading loss on sale of shares of M/s Blue Circle in the sum of Rs. 38,45,844/- for the Asst Year 2013-14 in the assessment framed u/s 153A of the Act without having any incriminating material in that regard. 10. The brief facts of this issue is that the assessee is a company carrying on business of dealing in shares and loan transactions. Th....
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..../- ----------------- Rs. 8,23,238/- Less: Dividend exempt u/s 10(34) Rs. 21,000/- ----------------- Book Profits u/s 115JB of the Act Rs. 8,02,238/- ----------------- 11.1. The details of income and expenditure of the assessee are as under:- Income Revenue from Operations Sale of Equity Shares 43,89,516 Other Income Interest income on Non-Current Investment 4,03,210 Interest income on Others 49,21,406 ------------- 53,24,616 Net Gain / Loss on sale of Non Current Investment 2,74,620 Dividend Received 21,000 ------------- 56,20,236 ------------------ Total Revenue (A) 1,00,09,752 ------------------ Expenses Purchase of Equity Shares (Stock in Trade) 82,35,360 Salary and Bonus 6,38,457 Interest on Loan 1,18,356 Depreciation and amortizatio....