TaxTMI 
TaxTMI 
2019 (4) TMI 1736
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....ng of AO that amount of Rs. 79,20,000/- given by M/s. Bhatia Corporation Pvt. Ltd. in business expediency to assessee for investment in share capital of its group company M/s. Bhatia Colonizers Pvt. Ltd. is in the nature of loan or advance, thereby confirming the addition of same u/s 2(22)(e) of the IT Act. 3) The assessee craves to amend, alter and modify any of the grounds of appeal. 4) The appropriate cost be awarded to the assessee. Ground No. 1 is regarding validity of addition made by the AO in the assessment framed under section 153A of the IT Act without any incriminating material found or seized during the course of search indicating the alleged addition. 2. The ld. A/R of the assessee has submitted that since the assessment was not pending as on date of search and there is no incriminating material found and seized disclosing any income on account of deemed dividend, the addition made by the AO is not sustainable in law. He has submitted that assessee filed the original return of income on 20.12.2013. The time limit for service of notice u/s 143(2) for the relevant AY was upto 30.09.2014. No notice was issued to the ....
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.... DCIT vs. M/s. A.M. Exports In ITA No. 561/JP/2018 dated 07.01.2019. Thus the ld. A/R has submitted that in the proceedings under section 153A the AO can reassess the income in respect to 6 preceding years, however, there must be some incriminating material available with the AO for making addition to the returned income. The addition made de hors the incriminating material is not sustainable in law. Since no incriminating material was unearthed during the search, no addition could have been made to the income already assessed. 3. On the other hand, the ld. D/R has submitted that as per provisions of section 153A, the AO has to issue notice under section 153A(1) of the IT Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. Further, the AO has to assess or reassess the total income of such years. The provisions of section 153A do not mention about any incriminating material for the purpose of assessment or reassessment of the income for these six years. The ld. D/R has pointed out that in a case where the assessee has not filed any return of income....
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....on of incriminating material found during the course of search will not absolve the assessee from the tax liability on such income. 4. Having considered the rival submissions as well as the relevant material on record, we note that the assessment for the year under consideration was not pending as on the date of search carried out on 3rd March, 2016. Therefore, the question arises whether the AO could make the addition in the proceedings under section 153A in the absence of any incriminating material found or seized during the course of search. An identical issue has been considered by us in the connecting appeal in case of Smt. Reema Harish Bhatia for the assessment year 2012-13 in ITA No. 1284/JP/2018 vide even date order in para 9 as under :- "9. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the assessee filed the return of income under section 139 on 29.12.2012 which was processed under section 143(1) of the IT Act. Subsequently, a search and seizure operation was carried out on 03.03.2016. It is also not in dispute that as on date of search on 03.03.2016 the assessme....
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.... undisclosed income nor any disclosure made by the assessee in the statement in respect of the deemed dividend in question. The decision of Hon'ble Delhi High Court as well as the decision of Hon'ble Jurisdictional High Court were finally taken up to the Hon'ble Supreme Court in case of PCIT vs. Meeta Gutgutia, 257 Taxman 441 (SC) and the SLP filed by the revenue was dismissed. This Tribunal in case of DCIT vs. A.M. Exports (supra) after considering all the relevant decisions relied upon by either of the parties have discussed this issue in para 8 as under :- "8. We have considered the rival submissions as well as relevant material on record. The first aspect involved in the matter is sustainability of the addition made by the Assessing Officer without any incriminating material found or seized during the course of search and seizure action. There is no dispute that the original return of income filed by the assessee U/s 139(1) of the Act on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1) and it was not abated due to the search and seizure action U/s 132 of the Act on 03/4/20....
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.... and question No. 39 of assessee's statement recorded U/s 132(4) dated 04/4/2013 and question No. 77 of statement recorded U/s 132(4) on 05/4/2013 and question No. 12 and reply of the statement of the assessee recorded U/s 131 of the Act in post search investigation by the ADIT as under: (i) Interlink saving & finance Pvt. Ltd. 57 Adarsh Nagar, Rishikesh, dehradun, Uttranchal. (ii) Parmatma Developers Pvt. Ltd., 101, Balaram Dey Street, Gr Floor, Kolkata (iii) Rameshwar Finvest Pvt. Ltd., 101 Balaram Dey Street, Kolkata (iv) Sri Ram Tie Up Pvt. Ltd., 2, Banarashi Ghosh, 2nd Bye Lane, Kolkata (v) ________________________do _________________________ (vi) Tara Vinimay Pvt. Ltd., 101, Balaram Dey Street, G. Floor, Kolkata (vii) Victor Project Pvt. Ltd., 2 Mullick Street, Ist Floor, Kolkata (viii) Yatan Traders Pvt. Ltd., 62/1, Hriday Krishna Banerjee Lane, Howrah. In reply to the question No. 34, the assessee has clearly stated that the transaction of loan from all the parties were taken on interest in the F.Y. 2009-10 and these were repaid in the F.Y. 2011-12. Thereafter a specific quest....
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....ed during the course of search and seizure action, therefore, the statement of the assessee recorded during the search and post search enquiry has to be read together and the outcome of the said statement is that the assessee has never admitted any bogus transaction except the misunderstanding due to continuous grilling by the Investigation Wing and due to mentally exhausted, the assessee given some inconsistent reply to question No. 77 which was subsequently clarified in question No. 12 of the statement recorded by the investigation Wing in the post search enquiry U/s 131 of the Act. Even otherwise, all these statements are only regarding one transaction of loan that cannot be applied to the entire transactions of loan taken from 12 parties. Therefore, except the statement of the assessee to question No. 77, which was subsequently clarified in question No. 12, there was nothing in the shape of any material or document much less incriminating material with the Assessing Officer to make the addition to the total income of the assessee. If the statement of the assessee is read in toto then there will be no admission regarding any of the loan transactions being an accommodation entry.....
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....d, 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 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 153 A 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. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Thus, the Hon'ble High Court has ruled that the Assessing Officer while making the assessment U/s 153A of the Act can make the addition only on the basis of some incriminating material unearthed during the course....
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.... above two decisions and observed as under: "31. What distinguishes the decisions both in CIT v. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was n....
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....tire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul....
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....O while making the assessment under Section 153 A 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." 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla(supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explai....
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....rly, subsection (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is "well settled as held by the Supreme Court in a catena of decisions that the heading or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-se....
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....pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CIT v. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years ; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla (supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd.(supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed th....
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....re that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: "Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In resp....
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....g any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the 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. Conclusion 72. To conclude: (i) Question (i) is answered in the negative i.e., in favour of the Assessee and against the Revenue. It is held that in the facts and circumstances, the Revenue was not justified in invoking Section 153A of the Act against the Assessee in relation to AYs 2000-01 to AYs 2003-04? (ii) Question (ii) is answered in the affirmative i.e., in favour of the Assessee and against the Revenue. It is held that with reference to AY 2004-05, the ITAT was correct in confirming t....
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....tia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under:- "19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income woul....
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.... same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have....
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....ut from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily ....
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....that: (a) The assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) Regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and just In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or 13 D.B. INCOME TAX APPEAL NO.53/2011 Jai Steel (India), Jodhpur vs. Assistant Commissioner of income Tax, Jodhpur (Along with other 16 similar matters) reassessment can be made." 7.5 Similar view point was expressed by the Hon'ble Delhi High court in the case of Kabul Chawla vs. ACIT 380 ITR 573 (Del HC). The relevant observation of Hon'ble court could be seen in para 37 & 38 of order, same is reproduced below: Para 37. On a conspectus of Section 153A (1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the ....
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....of original assessment. Conclusion 38. The present appeals concern AYs, 2002-03, 2005-06 and 2006-07.0n the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. 7.6 The issue of additions made by the AO while framing the assessment u/s 143(3)/153A, if no incriminating material is found during the course of search was considered by Hon'ble Gujarat High court in the case of Soumya construction PL Vs CIT 387 ITR 529. In its order dated 14/03/2016 Hon'ble court has categorically stated that, in cases of completed assessment, if no incriminating material is found then no additions can be made in the assessment framed u/s 153A of the act. The relevant para no. 18 8s 19 of the court order can be referred to. Similar view of also taken in the following judgments, including by Hon'ble Jaipur ITAT Hon'ble ITAT Jaipur in many cases: a. Continental warehousing Corporation 374 ITR 645 b. PCIT vs. Meeta Gutgutia 152 DTR 153 c. Vijay Kumar D Agarwal V/s DCI....
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.... the shares of the same company. Therefore, the amount received from the company was converted into the investment and the ownership of the investment is with the assessee. The assessee took the benefit of acquiring the shares of the same company by utilizing the fund of the company taken for this purpose. Though the ld. A/R has vehemently contended that this investment was for the business consideration of the same company as the renewal of the loan was sanctioned by the bank subject to infusion of more capital and to satisfy the said conditions, the director, promoter of the company have taken the money from the company to infuse to share capital of the said company, therefore, the amount was utilized for the business of the company and not for personal use of the assessee. However, even if the amount was utilized for increase of the share capital, the ownership of the shares have now transferred to the assessee without paying anything from the assessee's own fund. We further note that in the ledger account as well as in the balance sheet the assessee is showing this amount under current liabilities and also paying the interest @ 12%. Therefore, when....
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....the order of ld. CIT (A) qua this issue. 8. In the result, the appeal of the assessee for A.Y. 2013-14 is allowed and for 2016-17 is dismissed. Order is pronounced in the open court on 25/04/2019. ============= Document 1 पà¥à¤°. 34 मैं आपसे आपकी à¤à¤¾à¤—ीदारी फरà¥à¤® à¤. à¤à¤®. à¤à¤•à¥à¤¸à¤ªà¥‹à¤Ÿà¤°à¥à¤¸ बà¥à¤• में निमà¥à¤¨à¤²à¤¿à¤–ित अनसिकà¥à¤¯à¥‹à¤°à¥à¤¡ लोन कà¥à¤°à¥‡à¤¡à¤¿à¤Ÿà¤°à¥à¤¸ के लेजर दिखा रहा हूà¤- Document 2 उपरोकà¥à¤¤ सà¤à¥€ Transactions की पà¥à¤°à¤®à¤¾à¤£ सà¥à¤ªà¤·à¥à¤Ÿ करें ? उतà¥à¤¤à¤°â€” उपरोकà¥à¤¤ खा....
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....¤·à¥‹à¤‚ की बात मà¥à¤à¥‡ जबानीतौर पर याद नहीं है। यह फरà¥à¤® दà¥à¤µà¤¾à¤°à¤¾ पेश की गई खातों में गणना कर निकालना होगा जो शà¥à¤°à¥€à¤®à¤¾à¤¨à¥ के कारà¥à¤¯à¤¾à¤²à¤¯ में हाजरी देने आऊंगा जब गणना कर बताऊंगा । पà¥à¤°. 39 आपकी फरà¥à¤® A.M. Exports का Dipnarayan Vyapaar Pvt. Ltd. के साथ कà¥à¤¯à¤¾ समà¥à¤¬à¤¨à¥à¤§ है, सà¥à¤ªà¤·à¥à¤Ÿ करें? उतà¥à....
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....ˆà¤¸à¤°à¥à¤¸ दीपनारायण वà¥à¤¯à¤¾à¤ªà¤¾à¤° पà¥à¤°à¤¾.लि. को चैक दिया था जिसका मà¥à¤à¥‡ इस साल में कैश पà¥à¤°à¤¾à¤ªà¥à¤¤ हो गया जिसे मैंने इस वितà¥à¤¤ वरà¥à¤· की अघोषित आय के रूप में विà¤à¤¾à¤— को समरà¥à¤ªà¤¿à¤¤ कर दिया।†कृपया तलाशी à¤à¤µà¤‚ जबà¥à¤¤à¥€ की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ के दौरान आपके सशपथ दरà¥à¤œ बयान कà¤....
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....à¥à¤¤ की थी, सà¥à¤ªà¤·à¥à¤Ÿ करें। उतà¥à¤¤à¤°- मैंने आपके दà¥à¤µà¤¾à¤°à¤¾ दिखाये गये à¤à¤¨à¥‡à¤•à¥à¤¸à¤° AS Exibit5 के पेज संखà¥à¤¯à¤¾ 37 à¤à¤µà¤‚ तलाशी à¤à¤µà¤‚ जबà¥à¤¤à¥€ की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ के दौरान दरà¥à¤œ मेरे बयानों को अचà¥à¤›à¥€ तरह से पढ़कर समठलिया है। मैं यहां यह कहना चाहता हूं कि तलाशी à¤à¤µà¤‚ जबà¥à¤¤à¥€ की कà....