TaxTMI 
TaxTMI 
2019 (6) TMI 390
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....the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition of Rs. 1,40,69,990/- made by the AO u/s 68 of the Income Tax Act on account of unexplained share application money and unsecured loans allegedly obtained by the assessee from Denim Developers Ltd. 2. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the additions by observing that blind reliance was placed by the DDIT(Inv.), Kolkata on the investigations carried out previously and no independent enquiry to establish the lender company as a shell company was done by the DDIT(Inv.). 3. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the additions by observing that no statement of entry operator has been quoted by the AO or by the DDIT(Inv.) 4. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition despite the fact that the Director or Principal Officer of the alleged lender company was never produced before the Assessing Officer for examination and also ignoring the fact that that the assessee neithe....
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....the case and in law the order passed u/s 153C read with section 143(3) of the Income Tax Act 1961 is without jurisdiction and passed without recording the legally required satisfactions. 2. On the facts and in the circumstances of the case and in law the order passed u/s 153C read with section 143(3) of the Income Tax Act 1961 is bad in law, void-ab-initio, and deserves to be annulled as the assessment for the year under consideration was not abated as on the date of search and CIT(A) erred in holding that the contention of the assessee cannot be accepted in view SLPs admitted in various cases. The ld. CIT(A) further erred in holding that the additions are to be adjudicated on merits as per relevant ground of appeal hence the issue remains for academic discussion only. 3. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in not declaring the assessment order as bad in law and void ab initio. It is contended that the ld. AO passed the assessment order against the doctrine of "audialtermpartem" violating the principle of natural justice, therefore the assessment order ought to held as bad in law and deserves to be annulled." ....
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.... the genuineness of the transaction and an amount of Rs. 1,40,69,990/- towards unsecured loan and share application money from M/s Denim Developers Ltd. was brought to tax u/s 68 of the Act and assessment was completed vide order passed u/s 153C r/w 143(3) dated 29.12.2017 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has since deleted the addition on merit. However, in respect of certain legal issues raised by the assessee company, the same were not accepted in view of the SLP admitted in case of CIT vs. Kabul Chawla, M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd. Now the Revenue is in appeal against the deletion of the addition made by the Assessing Officer on merits and assessee in its cross objection has raised various grounds challenging legality of the order passed by the Assessing Officer u/s 153C read with 143(3) of the Act. Since the assessee has challenged the legality of the order passed by the Assessing Officer in its cross objection, we deem it appropriate firstly to examine the said grounds of appeal raised by the assessee in its cross objection. 5. In ground no. 1 of its cross-ob....
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....which shows that the share capital & loan received by the assessee during the year from M/s Denim Developers Ltd. are not genuine/bogus. 8. It was further submitted that nothing has been mentioned in satisfaction note prepared for the purpose 153C as regard unsecured loan and share capital from Denim Developers Ltd. The ld AO has prepared satisfaction note for the purpose of initiation of proceedings against the assessee on 13-10-2017 and from the perusal of the satisfaction note, it would be found that noting has been mention against the share capital and loan from M/s Denim Developers Ltd. This clearly establishes that the department has not found any incriminating document or material to show that unsecured loan and share capital from M/s Denim Developers Ltd was bogus. The ld AO made the addition against share capital and unsecured loan travelling beyond the scope of section 153C/153A of IT Act. 9. It was further submitted that on a conspectus of the provisions of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under: a. Once a search takes place under se....
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.... no incriminating material/information/evidences were unearthed during the course of search. The amounts of share capital and unsecured loan in question are duly recorded in the books of account of the assessee. The Ld. AO has failed to record any nexus of the transactions undertaken by the assessee with any incriminating documents seized during the course of search pertaining to any undisclosed income. There has to be incriminating material recovered during search qua the assessee in each of years for purposes of framing an assessment under section 153A. Therefore, in the absence of any incriminating material recovered during the search impugned additions made during the course of assessment/reassessment u/s 153A of the Act are without jurisdiction. 11. In support, the assessee submitted that under identical facts, the Co-ordinate Bench in case of M/s Kota Dal Mill vs. DCIT, Kota (ITA No. 997 & others dated 31.12.2018) has decided the matter in favour of the assessee and finding therein equally applies in the instant case. Further, reliance was placed on the decision of Hon'ble Delhi High Court in case of Pr. CIT (Central) vs T.S Pulses Pvt. Ltd (ITA No. 471/2017 dated 09th ....
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....he provisions of section 132 read with section 153A of the IT Act, the AO has to assess or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefore cover not only the income emanating from the declared source or any material omission before AO but from all sources including undisclosed ones or based on unplaced material before the AO. The ld. CIT D/R has thus submitted that the decisions in the case of M/s. All Cargo Global Logistics Ltd. as well as Kabul Chawla (supra) were challenged before the Hon'ble Supreme Court and the Hon'ble Supreme Court has admitted the SLP for examination of the issue. Hence the issue is still pending adjudication before the Hon'ble Supreme Court. He has relied upon the orders of the authorities below. 13. We have heard the rival contentions and perused the material available on record. In the present case, the assessment order has been passed u/s 153C r/w 143(3) of the Act. The legal position in this regard is that once the AO of the searched person is satisfied that the seized assets/documents belong to another person and the said assets/docu....
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.... is whether the proceedings for the impugned assessment year were abated on the date of the preparation of the satisfaction note or not and we find that the proceedings were not abated as the time limit for issuance of notice u/s 143(2) has already expired on 3.9.2014 and the original proceedings stand completed. In such a case, the AO would assume jurisdiction to reassess the income provided that the assets/documents represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed for the impugned assessment year. In this regard, we refer to the satisfaction note prepared by DCIT Central Circle, Kota dated 13.10.2017 which is reproduced verbatim as under: "A search action u/s 132 was carried out on Bhatia/Shubham Group Kota on 03.03.2016. During the course of search operation, certain incriminating documents/papers were seized and impounded, which validated the information gathered on tax evasion against the Shubham Group Kota. During the course of search, page number 239 to 259 (Annexure A-4) found and seized from Choudhary Hotel Premise, Near Aerodrome, Circle Kota which is a copy of sale deed of land executed on 15.04.2013 by....
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....ovable properties in previous years. Assessee Shri Ram J. Bhatia has admitted that he made un-accounted cash payment of Rs. 535/- lacs to Late Abdul Rehman and offered the same for taxation as his additional income for the relevant A.Y. 2014-15. Therefore, it will be most logical and legally permissible that M/s Resonant Wealth Consultancy Private Limited has made on money payments for other immovable properties. Some properties have been got registered in financial year 2014-15. Therefore, assessment of the assessee is required under section 153C of the Act for assessment year 2015-16. Details of which are attached in Annexure- "A" (Copy enclosed). Similarly, copies of page number 1 to 7 (Annexure A-2, party number 11) were seized which is details of advances received against flats by M/s Resonant Wealth Consultancy Private Limited. These documents contain details for the period beginning 1st April 2015 to 26th February 2016. Huge amount details have been maintained which required further verification. Those may result in undisclosed income of the Company. Therefore, assessment under section 153C is required for Assessment Year 2016-17. Page number 1 & 2....
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....d during the course of search and seizure under section 132 in case of the assessee. Thus, the additions which have been made by the AO in the present case has no linkage with the incriminating documents found and seized during the course of search. The assessment for the impugned assessment year was not pending on the date of recording of satisfaction by the AO and, therefore, would not abate by virtue of the second proviso to Section 153A of the Act and as held by the Courts that completed assessments can be interfered with by the AO while making the assessment under Section 153C only on the basis of some incriminating material unearthed during the course of search, therefore, in absence of any incriminating documents found during the course of search relating to unsecured loan and share application transaction with M/s Denim Developers Ltd and such transactions being duly recorded in the books of accounts, the additions made while passing the assessment order passed u/s 153C r/w 143(3) deserve to be deleted. 15. We find that similar view has been taken by the Co-ordinate Bench in case of M/s Kota Dal Mill (supra) wherein the Co-ordinate Bench has considered and discussed at l....
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....ate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assume jurisdiction to reassess provided that the assets/documents received by the AO represent or indicate any undisclosed income or possibility of any income that may have remained undisclosed in the relevant assessment years. This Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any in....
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....sis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.' 22. The aforesaid principles would be equally applicable to proceedings initiated under Section 153C of the Act as Section 153C(1) of the Act expressly provides that once the AO has received "money, bullion, jewellery or other valuable articles or thing or books of account or documents seized" from the AO of the searched person, he would proceed to assess or reassess the income of the person to whom such assets/books belong in accordance with Section 153A of the Act. 23. In the present case, the Assessee had claimed that the assessments for the concerned assessment years were not pending on the date of recording of satisfaction by the AO and, therefore, would not ab....
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....te of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee's income for that year." 17. In light of above discussions and in the entirety of facts and circumstances of the case and respectfully following the decisions referred supra, the addition made by the AO while pa....
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....a review under the garb of reassessment proceedings u/s 153A/153C of the Act and therefore the reassessment proceedings are absolutely in the abuse of the process of law, illegal and bad in law. The provisions of Section 153A of the Act cannot be applied in respect of assessment year in respect of which assessment has already been completed unless some incriminating material/information comes in the possession/knowledge of the assessing officer during the course of search proceedings. The assessment for AY 2014-15 was not pending as on the date of search, as shown in table below: Assessment Year Date of filing of return u/s 139(1) Time limit prescribed for issue of notice u/s 142(1)/143(2) Date of Search at Shubham Group Date of Satisfaction note 2014-15 17-11-2014 30-09-2015 03-03-2016 13-10-2017 Thus, the time limit prescribed for issue of notice u/s 142(1)/143(2) of IT Act for AY 2014-15 has expired before the search over Shubham Group which was held on 03/03/2016. Therefore, the assessment for AY 2014-15 was deemed completed. After the assessment completed for the above year, the department carried out search & seizure operations on 03.03.2016 o....
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....ur @ Rs. 55,00,000/- per Bigha and this land was sold to Shubham Group. In answer to question no. 6, he stated that out of Rs. 6.60 Crore, investment of Rs. 3.62 Crore was made in purchase of agriculture land and advance of Rs. 50,00,000/- was made for purchase of land. Here also he has not stated that unaccounted payment of Rs. 5.35 Crore was received from assessee. In answer to question no. 8 of statement dated 16-11-2015, he stated that registry of land was made in name of Smt Charanjeet Kaur as against name of Smt Navneet Kaur stated by him in his earlier statement. In answer no. 9, he stated that his father sold 17 bigha land as against 12 bigha stated by him in his earlier statement. Therefore, he has no where stated that the assessee i.e. M/s Resonant Wealth Consultancy Pvt. Ltd has paid unaccounted money to his father. Therefore, even the statement of Shri Wazidur Rahman cannot be termed as incriminating material in support of allegation of the AO that the assessee has made unaccounted payment of Rs. 5.35 Crore to Shri Abdul Rahman for purchases of land in Kota. 26. Further reliance was placed on Hon'ble Delhi High Court decision in case of CIT vs. Harjeev Aggarwal (2016....
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.... already stood completed. Therefore, in case of completed assessment, the addition can be made only on the basis of incriminating material/document found during the course of search while passing the order u/s 153C r/w 143(3) of the Act as we have discussed in detail in context of AY 2013-14. 29. Coming to the specifics of the additions made by the AO, it needs to be examined whether each of such additions are based on any incriminating documents found and seized during the course of search. Regarding addition made by the AO u/s 68 of the Act in respect of share capital, special deposit, debenture money received from M/s Denim Developers Ltd amounting to Rs. 8.84 crore, there is nothing on record which suggest that any documents were found and seized during the course of search. These transactions were duly recorded in the books of accounts of the assessee company and were duly disclosed and available with the Assessing Officer. It is not even the case of the Revenue that the addition have been made basis any document found and seized during the course of search. The addition have been made merely basis the report of the Investigation wing Kolkata which has been received on 1....
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....and which is available with the Assessing Officer before the date of search. 31. Regarding the statement of the legal heir namely Shri Wazidur Rahman which was recorded by the department on 22.06.2015 and 16.11.2015, it is the case of the department that in the said statement, Shri Wazidur Rahman has stated that the land belonged to his late father shri Abdul Rahman who has sold 17 bighas of land on 15.3.2013 to Subham Group @ Rs. 55 lacs per bigha for a total consideration of Rs. 9.35 Crores, however the sale consideration of only Rs. 4 crores was shown in the registered sale deed and the remaining amount of Rs. 5.35 crores was paid by the assessee company, a group company of Subham Group in cash outside the books of accounts. In its submissions, the assessee company has contended that there are contradictions in the two statements of Shri Wazidur Rahman recorded by the department on 22.6.2015 and 16.11.2015, nowhere he has stated that the assessee company has paid Rs. 5.35 crores to his late father and the fact that these statements were recorded much before the date of search and statements were not in consequence of the search over Shubham Group on 3.03.2016 cannot be ignore....
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....the above referred land belonged to his late father Abdul Rahman who had sold (17 Bighas of land) on 15.04.2013 to Shubham Group @ Rs. 55 lacs per Bigha for total consideration of Rs. 935/- lacs, however, the sale consideration of only Rs. 400/- lacs was shown in the registered sale deed and that the remaining amount was paid by M/s Resonant Wealth Consultancy Private Limited, a group of company of Shubham Group in case outside of books of account. He further revealed that his father has already expired on 29.11.2013. The sale deed for the aforesaid transaction had been executed under the ownership of company M/s Resonant Wealth Consultancy Private Limited through its Director. In view of above, it was clear that the Shubham Group through its group company M/s Resonant Wealth Consultancy Private Limited has invested unaccounted cash to the tune of Rs. 5.35 crores for acquisition of 17 Bighas of Land. Based on this information, the case was processed further and a search & seizure action was conducted u/s 132 of the Income Tax Act in the cases of the Shubham Group of Kota on 03.03.2016. During search action, Shri Ram J Bhatia of Shubham Group has also admitted to h....
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....he AO on merits has become infructious and are not adjudicated upon. 34. In the result, assessee's cross objection is allowed and revenue's appeal is dismissed. ITA No. 1371/JP/2019 & CO No. 3/JP/2019 35. Now, we take up the Revenue's appeal and cross objection of the assessee for AY 2016-17. The Revenue is in appeal against the deletion by the ld CIT(A) of the addition made by the Assessing Officer on merits and assessee in its cross objection has raised various grounds challenging the legality of the order passed by the Assessing Officer u/s 143(3) read with 153(B)(1)(b) of the Act. Since the assessee has challenged the legality of the order passed by the Assessing Officer in its cross objection, we deem it appropriate firstly to examine the said grounds of appeal raised by the assessee in its cross objection. 36. In Ground No. 2 of the assessee's cross objection, the assessee has challenged the validity of assessment order passed u/s 143(3) read with section 153B (1)(b) of the Act on the ground that notice u/s 143(2) was not issued within the stipulated time period as prescribed by the statute. 37. In this regard, ld. AR submitted that this is the year of search a....
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.... that where the notice u/s 143(2) had not been issued within prescribed time limit, assessment made u/s 143(3) read with section 153B (1)(b) being void ab initio would be null & void. Therefore, the assessment carried out by the Assessing Officer for the assessment year under consideration deserves to be quashed on the aforesaid ground. 39. Per contra, the ld. DR submitted that the appellant was issued notice u/s 143(2) after filing of return of income and the appellant duly attended assessment proceedings before the Assessing Officer. Accordingly, principle of natural justice have been duly complied with. Referring to the provisions of section 153A, it was submitted that there is no specific provision which requires that the assessment made u/s 153A has to be made after issuance of notice u/s 143(2) of the Act. Referring to the decision of the Hon'ble Supreme Court in case of Asstt. CIT v. Hotel Blue Moon relied upon by the AR, it was submitted that the said decision was rendered in the context of section 158BC and therefore, stand distinguishable in the instant case. It was further submitted that the other decisions relied upon by the ld AR were rendered in context....
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.... may rely in support of the return filed by him. 2.2.11 The reliance is placed on recent decision by Hon'ble High Court of Delhi in case of Ashok Chaddha V/s ITO reported in 337 ITR for holding this view. It may be mentioned that when the issue of requirement of notice under section 143(2) for an assessment under section 147 came up for consideration in the scenario of post amendment by Finance Act 2006 before Hon'ble High Court of Delhi recently in the case of CIT vs. Madhya Bharat Energy Corpn., ITA No. 950/08 decided on 11/07/2011 the Hon'ble High Court of Delhi has held that in the absence of any specific provision under Section 147 of the Act, the issuance of notice under Section 143 (2) cannot be held to be a mandatory requirement. 2.2.12 In view of above discussion, the issue raised in ground no. 1that the order u/s 153A r.w.s. 143(3) dated 29/12/2017 without issue of the statutory notice u/s 143(2) of the Income Tax Act, 1961 within the stipulated time and as such his impugned assessment order is not good in law and void ab-initio is dismissed." 40. We have heard the rival contentions and perused the material available on record. Undisputedly, the year ....
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....ssing Officer any evidence on which the assessee may rely in support of the return: Provided that no notice under this sub-section 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." 41. The very issuance of notice u/s 143(2) is thus beyond the limitation period and therefore, the consequent assessment order passed by the Assessing Officer suffers from the inherent jurisdictional infirmity which cannot be ignored or even cured by the Revenue as laid down by the Hon'ble Supreme Court in Hotel Blue Moon (supra) and reiterated by various High Courts and reference can be drawn to decision of Hon'ble Calcutta High Court in case of Oberio Hotels (supra) wherein it was held as under: "3. The Supreme Court judgment in Hotel Blue Moon has first to be referred to since such judgment still holds the field. In course of a block assessment when the Assessing Officer repudiated the return filed by the assessee but failed to issue any notice under Section 143(2) of the Act within the prescribed period of time, the Supreme Court held, at paragraph 15 of the judgment, inter alia, as follows:- ....
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....s notice under Section 143(2) of the Act. Section 143(3) of the Act contemplates an assessment undertaken by the Assessing Officer upon material being produced by the assessee on grounds which are indicated by the Assessing Officer in his notice under Section 143(2) of the Act in respect whereof the Assessing Officer may have misgivings or may disagree with the return filed by the assessee. Implicit in the wording of Section 143(3) of the Act is the indispensability of a notice under Section 143(2) thereof." 42. Further, we find that the assessee has not filed the return of income pursuant to notice u/s 153C of the Act and therefore, the provisions of section 153C are not applicable in the instant case. The ld CIT(A) has wrongly proceeded on the presumption that return has been filed under section 153A of the Act. Even in such cases, where the return is filed u/s 153A, in view of the decision of Hon'ble Supreme court in case of Hotel Blue Moon(supra), once the assessee has filed the return of income, the AO is required to issue notice u/s 143(2) where he wishes to make the assessment and not accept the return as so filed. In the instant case, the assessee has filed the return....