TaxTMI 
TaxTMI 
2018 (3) TMI 1672
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.... 68 of the Act which represented sale proceeds received against sale of shares done in the normal course of business. 3. That on the facts and in the circumstances of the case, the learned CIT(A) erred in facts and in law as unsustainable evidences/statements collected without the knowledge or intimation to the assessee were relied upon; no opportunity of cross examination was provided to the assessee which is in defiance of the settled principles of justice based on judicial judgment of the Apex Court in the case of Andaman Timber Industries vs CCE. 4. That the order of the learned CIT(A) being not based on the facts of the case of the appellant and being contrary to law, should hence be quashed and the appellant company be given such relief or reliefs as prayed for. 5. That the ld CIT(A) erred in relying upon the statement of third parties without providing copy of the said statement and without according opportunity of cross examination to the appellant although the impugned statements could not have been relied upon in proceedings u/s.153A of the Act when no incriminating document was found in the course of search. 6. That the appellant craves leave to amend, alter, mod....
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....PARSarwati Vincom Ltd.(Sh) 2000000 Axis Bank-411010200004541 08-05-2010 SCOPE, Alfha Properties P Ltd(SH) 5000000 AXIS BANK 910020019769310 12-11-2010 SCOPE, Astha Industeries P Ltd(SH) 2000000 Axis Bank-411010200004541 05-05-2010 Signet Vinimay Pvt Ltd 5000000 Axis Bank -411010200004541 09-06-2010 Signet Vinimay Pvt Ltd 2500000 Axis Bank *411010200004541 13-05-2010 Signet Vinimay Pvt Ltd 5000000 AXIS BANK 910020019769310 10-07-2010 Signet Vinimay Pvt Ltd 5000000 Axis Bank -411010200004541 29-04-2010 SIGNET, Country Wide Tradecom Pvt Ltd(Sh) 4200000 AXIS BANK 910020019769310 25-08-2010 SIGNET, Country Wide Tradecom Pvt Ltd(Sh) 1800000 Axis Bank -411010200004541 23-04-2010 SIGNET.Country Wide Tradecom Pvt Ltd(Sh) 2000000 AXIS BANK 910020019769310 17-07-2010 Srijan Vyapar Pvt Ltd. 5000000 AXIS BANK 910020019769310 29-12-2010 Srijan Vyapar Pvt Ltd. 3000000 Axis Bank -411010200004541 21-04-2010 Srijan Vyapar Pvt Ltd.(App-P) 5000000 Axis Bank -411010200004541 23-04-2010 Srijan Vyapar Pvt Ltd.(App-P) 500000 "1566000: AXIS BANK 910020019769310 11-02-2011 Srijan Vyapar, Caplin Marketing Pvt Ltd(Sh) Axis Bank-411010200004541 ....
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.... 2010-11. Page 85 of SGINDIA-01, list out the working of acquisition of the shares. Page 70-83 of the same document, list out various share entries obtained and bank transactions for the same. Page 69 is the bill for transfer of shares accompanied by share transfer form attached therewith. The share transfer forms are incomplete containing only the name of previous shareholders and signature of one of the Directors of the company. This is the common modus operandi of Kolkata based shell companies. Here, unaccounted cash is routed through several layers to reach the intended beneficiary. Finally, when the beneficiary so desires, shares of the company giving the entry are transferred to him at a discount. 7. It is observed by the Assessing Officer that this is explained at length by the statement of two such entry operators viz; Raj Kumar Tharad and Pradedp Garg, who are based in Kolkata and whose services have been availed by the assessee group for bringing back its unaccounted income into the books of the assessee group. Relevant part of the statement of those two persons are reproduced below: Raj Kumar Tharad: "Q.6 what work is done by Midas Capital Pvt. Ltd and uniworth Agen....
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....st, then we hand it over to people for depositing the cash in various accounts and then transferring it to my companies through cheques. We used to deposit the cheques in my companies for raising share capital. Finally, Raj kumar Tharad used to sell these companies to beneficiaries in lieu of commission. Q.10 Please explain to whom you have sold company of Midas Capital Pvt. Ltd and Uniworth Agencies Pvt. Ltd. and what was the modus operandi? Ans;-These companies were taken over by one Mr. Sunil Gupta of Cuttack, Odisha. The companies were transferred by way of share transfer to Sh. Sunil Gupta and his group companies. Sh. Sunil Gupta approached me in 2010 and handed me cash. This cash was handed over to several of my dummy concerns. The money after travelling through several of my companies controlled by my got deposited into the books of SGBL (India ) Ltd and other group companies controlled by Sunil Gupta. Q.11. please provide the details of money trail used to in depositing cash and routing it back to Companies like Midas Capital Pvt. Ltd and Uniworth Agencies Pvt. Ltd ? Ans: I will provide it later on. However, the cash was deposited in various concerns which after tra....
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.... one of the directors of Winall Vinimay Pvt Ltd., and Runicha Merchants Pvt Ltd. who are again shareholders and purchasers of shares of this assessee company. Statement of Sri Abhisej Basu, S/O. Sri Dulal Narayan Basu, aged about 49 years, resident of 2, Indralok, Sodepur, Nilachal Apartment, 3rd floor, Flat No. 3B, Kolkata-700110, u/s.131 of the I.T.Act, 1961 on 15.1.2014 at the office chamber of Dy.Director of Income tax (Inv) Unit-IV91), Kolkata, located at 5th floor, Aayakar Bhavan, Annexe Building, P-13, Chowringhee Square, Kolkata-69 at 11.30 AM. I do swear in the name of God that I shall speak the truth, the whole truth and nothing but the truth. Sd/-18.1.2014 Oath Administered by (Nayanjyoti Nath) DDIT,(Inv), U-IV, (1), Kolkata Q.1.Please identify yourself. Ans. I am Abhisit Basu, S/O. Sri Dulal Narayan Basu, aged about 49 years, resident of 2, Indralok, Sadepur, Nilachal Apartment 3rd floor, Flat No.3B, Kolkata-7000110. My PAN is AFVPB3003Q. Q.2.Do you know the consequences of giving false statement under oath? Ans. Yes, I know the consequence of giving false statements. Q.3.What is your source of income? Ans. Presently, I am an employee in the office....
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....ome. I have given the statement voluntarily without pressures, fear or coercion and with full satisfaction. In case I retract from this statement, I will be liable for prosecution in any court of under the provisions of Indian Penal code. B.4.0n this background assessee was required to furnish details of the alleged purchaser companies from whom money was claimed to have been received and credited in the bank account of the assessee. In response to the notice, assessee submitted copies of share application forms, ROC details and in some cases Income Tax particulars. It was found that all of these applicants are income tax assesses and have been filing their income tax return and returns as required by the Registrar of Companies. But on examination of their Profit and Loss account and Balance Sheet, it was found that all of these companies are almost identical. Following broad indications were found while analyzing these companies: 01. These are all Kolkata based companies. 02. All have huge capital in the accounts, invested by similar type of Kolkata based companies. 03. Most of the capitals of the companies were found to be invested in similar Kolkata based companies. 04....
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....sessee company M/s Midas Capita! Pvt Ltd. Detail discussion has been made in this order. iv. Winall Vinimay Pvt Ltd: Although this assessee was required to submit the its audit report and sources of investment, nothing specific was replied except the acknowledgement of IT return and corresponding part of the bank ledger indicating the transfer of money. This company was found by the investigation wing of the Kolkata as a paper company and involved in the business providing accommodation entry. C. On this background, assessee was required to produce the directors of all the share applicant companies as under: "Dated, Cuttack the 7th of November, 2016. To, The Managing Director, Midas Capital (P). Ltd Room No.1 G" t= Floor, 11 Pollock Street, Kolkata- 700001 Sir, Sub: Assessment u/s 153A/143(3) of the Income Tax Act, 1961 for the A. Yrs.2009-10 To 2015-16 - matter regarding. With reference to above you are intimated assessment u/s 153A of the income Tax Act, 1961 was initiated for the above assessment years subsequent to search u/s 132 of the Income Tax Act that was conducted on 04/08/2014 in your office and business premises at Cuttack and the residential premises ....
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....ged share capital of Rs. 10,57,45,300 was neither introduced nor raised during the assessment year 2014-15. Even the aforesaid capital was notintroduced in any of the assessment year starting from 2008-09 onwards. * The assessee company is a non backing finance company incorporated in the year 1995. As per the business requirement the capital was raised in different years. * But after 31.03.2007 there was no further introduction of capital. This fact will be clear from the following table. * MIDAS CAPITAL PVT LTD. * DETAILS OF CAPITAL INTRODUCTION 2014-15 17135300 88610000 105745300 0 2013-14 17135300 88610000 105745300 0 2012-13 17135300 88610000 105745300 0 2011-12 17135300 88610000 105745300 0 2010-11 17135300 88610000 105745300 0 2009-2010 17135300 88610000 105745300 0 2008-09 17135300 88610000 105745300 0 2007-08 17135300` 88610000 105745300 0 2006-07 17135300 88610000 105745300 0 2005-06 12755300 49190000 61945300 21100000 2004-05 10645300 30200000 40845300 36050000 2003-04 3435300 1360000 4795300 * From the aforesaid table is clear that the latest introduction of capital was during A. Y 2007-08. *....
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.... objections if any are invited from interested persons. * Even after takeover the original promoter director Mr. Ra; Kumar Fitkoriwalo appointed from 06.04.1995 is still continuing, as director in the company. PRAYER In view of the above particular facts, the certified copy of the entire statement may kindly be provided to the assessee for necessary rep/ay. More over a common subjective statement or a general rep/ay from assessee may not be relevant: for assessment proceeding U/s 153(A) hence any transaction based on any incrementing seized material may kindly be communicated to the assessee for necessary compliance." No specific reply was received from the assessee except submitting that the share application money was received from the Companies having genuine ROC details and the money has been both transferred and received through banking channel. No director of the share purchaser company was produced for examination. In the written submission, assessee mentioned citations of the Hon'ble Courts and Tribunals to substantiate his claim. D. In this background of facts and circumstances discussed above, it is reasonably concluded that the claimed transaction of cash cre....
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..... This view had been taken in the case o fCIT vis MIs Nipun Builders & Developers Pvt. Led. 30 Taxmann.com 292 (Delhi) [2013]. However, there was no compliance on the part of the assessee company in this respect too and certainly it did nothing worthwhile to discharge the onus to prove the creditworthiness of the share application money. It was, in the assessee's own interest to have actively participated and cooperated 'in the assessment proceedings and complied with the direction of the AO to produce the principal officers of the Subscribing companies. Mere furnishing of the bank statements of the share subscribers without any explanation for the deposits in the accounts may not meet the requirements of Section 68. The assessee is a private limited company. The sales consideration against share was received through private placement. Evidence is on records in the shape of Income tax returns and bank statements of some of the purchasers, submitted during the course of scrutiny assessment, to show that these companies had very meager and insignificant income. It is also on record that in most of the cases, the amounts were deposited in the account either on the same day or ....
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....s no explanation regarding the nature and source of the credit or the explanation offered is not satisfactory. Where an assessee fails to prove satisfactorily the source and nature of certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. This view was adopted in the case of A. Govindarajulu Mudaliar v. ClT (1958] 34 lTR 807. The assessee company was given opportunity to produce the Directors of the subscriber companies in order to examine them on oath. In the case of Sumati Dayal v. CIT [1995] Supp. (2) SCC 453 the Hon'ble Apex Court held that: " ... In all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act lies upon the assessee. But, in view of section 68 of the Act, where, any sum is found credited in the books of the assessee for any previous year the same may be charged to income tax as the income of the assessee of that previous year if the....
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....the assessing officer. The onus to prove genuineness of credits and identity/creditworthiness of such creditors rests on the appellant, which has not been discharged by the appellant. 8.4 Similar case had come up before Hon'ble High Court of Judicature at Bombay in Income Tax Appeal No. 18/2017 in the case of Sanjaya Jain, legal heir of Shantidevi Jain vrs PCIT, Nagpur. In this case the shares purchased as lower rate as Rs. 5.5 per share and Rs. 4/- per share were sold at astronomical sum of Rs. 486.55 and Rs. 485.65. Hon'ble High Court has disbelieved this transaction and has held that it is not genuine. The relevant portion is reproduced below: "On hearing the ld counsel for the assessee and on a perusal of the orders of the Income tax authorities, it appears that there is no scope for interference with the said orders in this appeal. By referring to the aforesaid facts, which are narrated in the earlier part of this order,, the authorities found that the assessee had made investment in two unknown companies of which the details were not known to her. It was held that the transaction of sale and purchase of shares of two penny stock companies, the merger the two compa....
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....tion of Rs. 15,00,000/- on the said findings as given in assessment year 2011-12. 14. Before us, the AR of the assessee has filed written submissions, which reads as under :- "The following combined submission is being made before Your Honours for the A.Ys 2011-12 and 2012- 13 as the issue involved in both the appeals is identical. The following submission is made against the assessment order dated 28.12.2016 for the A.Y. 2011-12 and 2012-13 passed by the AO u/s.153A of the i.T.Act, wherein, the AO has assessed an Income of Rs. 10,04,06,200/- and Rs. 36,90,640/- (under MAT provisions) respecrtively, as against returned income of Rs. 9,56,200/- and Rs. 21,90,640/- (under MAT provisions) for both the years. The addition of Rs. 9,94,00,000/- and Rs. 15,00,000/- for the said A.Y. 2011-12 and 2012-13 has been made by the Id. A.O. u/s 68 of the Act by alleging that the said sale proceeds credited in the books of the appellant company was unexplained and thus not genuine. In appeal before the Ld. Commissioner of Income Tax (Appeals) [CIT(A)] the Ld. CIT(A) has vide his Order dated 13/11/2017 upheld the said additions by the Ld. A.O. Before going on to the submission of the appell....
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....view of the same, the Assessee hereby makes the following submission before Your Honours setting out the facts and the reasons why the proceedings initiated u/s 153A of the Act is not as per law and hence the entire proceedings are liable to be quashed. SUBMISSIONS: 1. Stating the particular facts of the additions made by the assessee, it is stated that search conducted on the assessee on 6.8.2014 was conducted by the Inestigation Wing of the Department of Income Tax, Odisha at Cuttack in the case of Sajjan Kumar Gupta & Family at the residential premises located "Opp Radha Training College, Sahebjaa Bazar, Neem Chown, Cuttack". The names of eight individuals of the family were covered by the said Panchanama. The said panchanama dated 6.8.2014 was drawn in the following 11 names of the companies belonging to the Sajjan Kumar Group: i) SGBL Automobiles (P). Ltd (ii) SGBL Multiact (P) Ltd (iii SGBL Properties (P). Ltd (iv Diamond Plaza (P).Ltd (v E City Projects Lucknow P.td.Lucknow (vi Shree Chakanayan Agro (vii) Shree Chakanayan (vi TOrmadkealrian k Associates (LPi)n. (ix Kamadhenu Trading Co. (x) Midas Capital (P) Ltd (xi Sai Enclave Copy of the said....
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....d the assessment u/s 153A not being based on any incriminating material found during search, the said assessment proceedings were invalid and illegal. 2. Now at this juncture, before going on to the particular detailed facts of the additions, it is first relevant to discuss the scope of section 153A of the Act. 2.1 Firstly, before discussing specifically the Scope and Implication of the Section 153A of the Act, it would be of relevance to first make a reference to the provisions of section 153A and the observation of the Apex Court in a case, as under: The Section 153A of the Income Tax Act, 1961, reads as under: "*153A. Assessment in case of search or requisition. *(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 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 fa....
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.... and become well versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. " It would not be out of place to mention here that as per the provisions of Article 141 of the Constitution of India, 1949, the Law declared by Supreme Court shall be binding on all courts within the territory of India and accordingly, it is the law of land. 2.2 Going briefly into the history of the legislations in relation to search proceedings and assessments, it is stated that since the commencement of the Income Tax Act, 1961 there was no separate procedure for assessment of search cases. Prior to 31st May 1995 there were no special provisions for assessment of search cases. Assessments were governed by the regular provision of the I.T. Act as applic....
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....s conducted or requisition is made. Memorandum explaining the provisions of the Finance Bill 2012 states that under the existing provisions of search 153A of Act, it is mandatory to issue a notice for filing of tax returns for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A. 3. Now explaining the specific provisions of the section 153A of the Act, it is stated that from the plain reading of the relevant section it would suffice that Section 153A would be applicable where a search is initiated under section 132 or books of account or other documents or any assets are requisitioned under section 132A of the Act after 31st May, 2003. Therefore, before invoking the provisions of section 153A of the Act it would be necessary to comply with the provisions contained under section 132(1) of the Act. Once the warrant of authorization or requisition is issued and search is conducted, Panchanama is drawn, the completed assessments for all the relevant years would get reopened irrespective of whether any incriminating material is found or not in relation to a pa....
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.... termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The proceedings, which have already terminated are not liable for abatement unless statute expressly provides for such consequence thereof. 3.6 The word 'pending' occurring in the second proviso to section 153A of the Act, is also significant. It is qualified by the words 'on the date of initiation of the search', and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. In other words, Assessments which are not pending i.e. completed Assessments as on the date of search would hold their base and would not abate. 3.7 Thus what emerges is that only pending Assessments as on the date of search shall abate. The legislature is clear that any appeal, revision or rectification proceedings, if pending as on the date of search shall not abate. Accordingly, as far as completed assessments are concerned, they do not abate and pending appeals etc. in respect thereof continue to exist notwithstanding the fact that the search has been made. Thus a completed assessment becomes final unless some incriminating material is found in the cours....
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.... special provision that has been specially enacted to undertake search related assessments. A search u/s 132 of the Act, is authorized to unearth undisclosed assets or transactions resulting in income which are not recorded in the books of account of a person. Therefore, a search puts in motion the process of assessment of the undisclosed income of a tax payer which is not disclosed to the department before the date of search. Thus section 153 A is limited to the assessments of income which are discovery of search. 3.11 Therefore, proper construction would be that in respect of completed assessments, the assessment shall be made only if incriminating documents etc. are found. Therefore, the term "assess and reassess" appearing in section 153(l)(b) means that assessment shall be made in case of pending assessments and reassessments shall be made in respect of completed assessments where incriminating material is found. 4. Having understood the legal position as laid out by the law itself, we now move on to analyse the position as laid out by the following decisions: * Commissioner of Income Tax vs. Continental Warehousing Corporation, All Cargo Global Logistics Ltd.[2015) 374I....
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....he Income-tax Act, 1961, is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person in respect of whom search was conducted requiring, him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the power to assess and reassess the "total income " of the 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 assessment years 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 ....
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....tion was perverse. [The Supreme Court has dismissed the special leave petition filed by the Department against this judgment: [2016] 380ITR (St.) 64-Ed.] Pr. CIT-2 v. Salasar Stock Broking Ltd. (G.A. No. 1929 of 2016/ITAT No. 264 of 2016) dated 24/08/2016 Calcutta High Court. In the said case, the learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under Section 153 A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of CIT[A] vs. Kabul Chawla reported in 380 ITR 573. The aggrieved Revenue appealed before the Hon'ble High Court. The Hon'ble High Court dismissed the appeal by observing as under: "We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a prerequisite before power could have been exercised under sectionl53C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances we....
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.... 153A(I), the total income shall be computed afresh uninfluenced by the fact whether or not there is any incriminating material." * Suncity Alloys (P) Ltd. vs. ACIT [2009] 124 TTJ 674, Jodhpur Bench of the ITAT "Upon the perusal of second proviso below Section 153A, it is found clearly laid that assessment or reassessment referred to in Section 153A that are pending on the date of initiation of search or making requisition u/s 132A shall abate. The statute does not say that the assessment or reassessments that have already been made before the date as aforesaid shall also abate. It is also not correct that all the proceedings or returns filed shall also abate. In fact the assessing authority is the custodian of all such returns including the returns relatable to pending assessments that stand abated. Sub-section (2) of Section 153 A mandates that if any proceeding initiated or any order of assessment made u/s. (1) relating to any assessment year which has been abated under the second proviso to Section 153A shall stand revived from the date of receipt of the order of such annulment by the CIT. Thus the entire overthrow or destruction or termination of pending assessments be....
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....i Gupta vs. CIT [390 ITR 496 (Del)] (copy enclosed) wherein the High Court dealt with the issue whether an assessment u/s 153A can be made even if no incriminating material has been found during s. 132 search proceedings. In the said case it was held as under: " (i) that the assessment under section 153A was not arbitrary or made without any relevance or nexus with the various seized materials in the form of documents, agreements, invoices and statements in the form of accounts and calculations, since the assessment under the section could be made only on the basis of the seized material. The statements made under oath by the Assessee and her family members were part of the record and continued to be so. They were never reasonably explained and their probative value was undeniable. The occasion for making them arose because of the search and seizure that occurred and the seizure of various documents pointed to the undeclared income. (ii) That the inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the Assessees. Therefore, the additions were not baseless. The assessing authorities in such cases had to draw ....
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.... Revenue for the AYs 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs. " It would be further relevant to note at this juncture that the Hon'ble Supreme Court vide its recently pronounced decision on 3rd October, 2017 has stayed the operation of the judgement of the Delhi High Court in Dayawanti Gupta vs. CIT [390 ITR 496 (Del)] wherein the High Court dealt with the issue whether an assessment u/s 153A can be made even if no incriminating material has been found during s. 132 search proceedings. Copy of the decision of the Apex Court as recently pronounced on 3rd October, 2017 is enclosed herewith. * Thus, it stands as an undisputed fact that the decision in the case of Kabul Chawla [380 ITR 573 (Del)] holds good and the decision in the case of Dayawanti Gupta v. CIT [390 ITR 496 (Del)] has no operation in public domain. * Further reliance is placed on the judgment of the Hon'ble Pune Tribunal in the case of Sinhgad Technical Education Society vs. ACIT (2011) 57 DTR 0241. Facts: The seized incriminating material have to pertain to the AY in question and have co-relation, document-wise, with the AY. This requirement u/s....
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.... already held in the assessee's appeal as above that dehors incriminating material no assessment can be done u/s 153C of the Act for the assessment year for which assessments have already been completed. Inthese circumstances we do not find any infirmity in the order of the Id. CIT(A) and we uphold the same. 5. Thus from all the above decisions it emerges that it is the established position of law that in cases of search, while making assessments u/s 153A/153C of the Act, completed assessments can be interfered with by the A.O. only on the basis of some incriminating material unearthed during the course of search which were not produced or not already disclosed or made known in the course of original assessment. Issues original assessment which have no relation to the search cannot in any way form basis of assessment of any completed assessment. * Further in the case of Trishul Hi-Tech Industries vs DCIT (IT(SS).A.82,84-86/Kol/2011), it was held that, 12. Upon Assessee's appeal the Id. CIT(A) has deleted the addition by holding that the matter has attained the finality in the regular assessment. He also noted that no incriminating materials have been found during the sear....
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....s.97 & 98/Kol/2015) pronounced on 19-04- 2017 wherein the issue of whether the assessment is pending or concluded as on the date of search was discussed in detail and it was held that, "We therefore hold that the scope of the proceedings u/s. 153 A in respect of assessment year for which assessment have already been concluded and which do not abate u/s,153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s.139 of the Act are shown to have been accepted without an intimation u/s.143(1) of the Act or without any notice issued u/s.143(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and when neither an acknowledgement or intimation u/s,143(1)of the Act is issued nor a notice u/s,143(2) of the Act is issued within the time limit laid down in the proviso to Sec.143(2) of the Act, the proceedings initiated by filing the return ....
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....ion 143(2) of the Act which stipulates the time period for issuing of the notice u/s 143(2) of the Act read as follows: Provided that no notice under clause (ii) shall be served on the Assessee after the expiry of six months from the end of the financial year in which the return is furnished.] As such, the prescribed time limit to issue notice u/s 143(2) of the Act is six (6) months from the end of the financial year in which the return is furnished. Now, considering the above decision and the said proviso, the facts of the present case are discussed in para 9.3 below. 6.3 In the present case, no proceedings were pending for both the assessment years. In otherwords, assessment for A.Y. 2011-12 and A.Y. 2012-13 being the subject assessment years, stood concluded and thus unabated as on the date of search i.e. 6.8.2014. For the said AY 2011-12 and A.Y. 2012-13, the Assessee filed the return of income on 29-09-2011 and 27.9.2012 respectively.. Return for AY 2011-12 was processed on 13- 2-2012 and for A.Y. 2012-13 on 20.1.2014. Admittedly, no notice u/s 143(2) of the Act was issued to the Assessee company for making assessment u/s 143(3) of the Act within the time period as lai....
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....both the appeals are accordingly allowed. 27. 27. In view of the above conclusions, the other grounds of appeal raised by the Assessee on merits, do not require any consideration. 6.2 Proviso to section 143(2) of the Act which stipulates the time period for issuing of the notice u/s 143(2) of the Act read as follows: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.] As such, the prescribed time limit to issue notice u/s 143(2) of the Act is six (6) months from the end of the financial year in which the return is furnished. Now, considering this proviso, the facts of the present case are discussed in para 6.3 below. 6.3 In the present case, no proceedings were pending for both the assessment years. In other words, assessment for AY 2011- 12 and AY 2012-13, being the subject assessment years, stood concluded and thus unabated as on the date of search i.e 06-08- 2014. For AY 2011-12 and AY 2012-13, the assessee filed the return of income on 29-09-2011 and 27-09-2012 respectively. Return for AY 2011-12 was processed on 13-02-2012 and for AY 2012-13 on 2....
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....reasonable nexus with the assesse. The other seized materials on which notices were issued were duly substantiated by the assessee and therefore the same were not referred in the order at all. 8. Further note that the learned AO has relied on the statement of some alleged entry operators, Mr. Raj Kumar Tharad and Mr. Pradeep Garg. Mr. Raj Kumar Tharad had allegedly in the statement recorded u/s 132(4) of the Act stated that assessee is a jamakharchi company and he is one of the Director in this company. The full statement of these parties was never provided to the assessee for cross examination even after making a written request to the AO, refer page 75 of the paper book for AY 2011-12. Only the extract of the statement which is also produced in the assessment order was provided to the assessee. The relevant parts of the said alleged statements were simply quoted by the Id. A.O. at pages 4 and 5 of his order. 9.1. In connection to the above it is submitted that the asssessee company is totally unaware of any Mr. Raj Kumar Tharad and Mr. Pradeep Garg and the circumstances under which such statement may have been given by them. The statements were not recorded during any proce....
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....nt of the Apex Court in the case of Andaman Timber Industries vs Commissioner of Central Excise 2015 281 CTR 241 (SQ wherein it was held that, "Not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross examine the adjudicating authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply ....
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....g document is not sufficient to vest jurisdiction u/s 153A of the Act. Incriminating material reflecting some undisclosed income is necessary for the purpose of initiating any proceeding u/s 153A of the Act. Further, he has referred to some statements taken on oath by certain parties but the same too cannot be said to be incriminating documents as already discussed in the preceding paras. Further, as held in a number of judicial precedents, AO is not empowered to disturb the concluded assessments and frame fresh assessments de-hors any incriminating material found during the course of search. The power of the AO to frame assessment u/s 153A of the Act in respect of concluded assessments is limited to the extent of income escaping assessment coming to his knowledge during the course of search. In the given case, as would be clearly evident from the assessment order, the entire addition of Rs. 9,94,50,000/- in AY 2011-12 and Rs. 15,00,000/- was on account of sale proceeds received against sale of investments in shares. The entire sale proceeds were received through normal banking channels and were duly recorded in the regular books of accounts. As such, the addition was made by....
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....07-08 were also produced for verification. A copy of the same is enclosed at page 22-28 of the paper book for AY 2011-12. However, ignoring the entire submissions of the assessee, the AO passed the assessment orders for the said A.Y. 2011-12 and 2012-13 wherein he held that the credit of Rs. 9,94,50,.000/- and Rs. 15,00,000/- respectively shown as sales proceeds and credited in the books of the assessee was unexplained and thus added the same u/s.68 of the Act. 13. Aggrieved with the order of the learned AO, the assessee went in appeal before the learned CIT(A). The learned CIT(A) uphold the assessment order passed by the learned AO on the same grounds. In the appellate order, the learned CIT(A) has cited the following two judicial pronouncements wherein it was held that "It is not necessary that search on which it was founded should have necessarily yielded any incriminating material against assessee or the person to whom such notice u/s.l53A(l)(a), is issued. " 1. E.N. Gopikumar vs C7T(Central) (High Court of Kerala) pronounced on 03-10-2016. 2. CIT ,Central vs Raj Kumar Arora (High Court of Allahabad) pronounced on 11-07-2014. 13.1 In this regard, please note that the ....
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....ACIT vs Superb Developers I.T.A .No.-52/Del/2014 pronounced on 21- 04-2017 However, in all the above three cases, the Hon'ble Delhi Tribunal has held that invocation of Section 153A by the revenue was without any legal basis as there was no incriminating material found during the course of search. Hence, the judgement cited by the ld CIT(A) do not hold good in the present case by virtue of the judgement on an identical issue pronounced by the Hon'ble Supreme Court in favour of the assessee. 14 The learned CIT(A) had alleged in the appellate order that copy of the statement of Rajkumar Tharad and Pradeep Garg were provided to the assessee by the AO. However, the full statements of these parties were never provided to the assessee for cross examination even after making a written request to the AO. Only the extract of the statement which is also produced in the assessment order was provided to the assessee. Hence, the present case is denial of natural justice to the assessee. 14.1 Further, the learned CIT(A) has relied upon the judgment of High Court of Bombay in the case of Sanjay Bimalchand Jain vs PCIT wherein the issue involved was exemption claimed by the assessee u/s 10(3....
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....arch and the assessment was made on the basis of regular books of accounts. Further, the AO has relied on the alleged statements of some alleged entry brokers. These statements were not recorded or found during the course of any search proceedings on the Assessee. They do not form any incriminating material in the case of the Assessee. Also the opportunity to cross examine these persons was never given to the Assessee. As such, this is a case of denial of natural justice to the assessee and hence these statements cannot be used to the disadvantage of the assessee. The sale of investment in shares was duly recorded in the audited books and the same was also not disputed by the learned AO. As such, the entire proceedings u/s 153 A of the Act was not as per law and liable to be quashed. Based on the above detailed submission of the Assessee, it is thus humbly prayed before Your Honours to quash the Assessment Order passed u/s 153 A of the Act for both the subject assessment years de hors any incriminating material found during the course of search." 22. The DR, on the other hand, relied on the orders of Assessing Officer and CIT(A). 23. We have heard rival submissions and perused ....
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....ch on which it was founded should have necessarily yielded any incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a) Held, yes [Paras 7 and 8] [In favour of revenue). " (b) Commissioner of Income-tax Central, Kanpur v. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) : "Section 153A, read with section 143 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment year 2000-01 - Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment - Held, yes [Para 11] [In favour of revenue/Matter remanded]" 27. On the other hand, the AR of the assessee relied upon the following decisions: (i) (1) CIT ....
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....ial is a prerequisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed." 28. We find that none of the decision relied upon by either of the parties are of jurisdictional High Court. It is a well settled position of law that when there are conflicting decisions of High Courts none of which is the jurisdictional High Court, then the decision in favour of the assessee should be followed. For this, we derive support from the decision of Hon'ble supreme Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC). Therefore, we are of the considered view that in an assessment made u/s.153A of the Act for an assessment year for which assessment has not been abated, then the jurisdiction of ....