TaxTMI 
TaxTMI 
2019 (8) TMI 990
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.... on 20-07-2012 declaring total income of Rs. 10,33,768/-. The assessment u/s 143 (3) of the Act was completed on 30-09-2014 accepting the return of income of the assessee. Thereafter a search and seizure operation was conducted on 17-12-2014 on various premises of Sehgal Group to which the assessee belongs. The assessee filed her return of income in response to notice u/s 153 of the Act on 5-08-2016 declaring total income as declared in the original return of income. During the course of search and seizure action, certain books of account, documents and agreement to sell dated 10-10-2011 were found and seized. As per said agreement, the assessee with her husband has agreed to sell their properties as under:- Particulars Area Plot No 1, Nemi Sagar Colony, Jaipur 332.50 Sq. Yards Plot No. 272, Nemi Sagar Colony, Jaipur 385.00 Sq. Yards Plot No. 273, Nemi Sagar Colony, Jaipur 385.00 Sq. Yards Plot No. 276, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 277, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 278, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 279, Nemi Sagar Colony, Jaipur 400.00 Sq.....
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.... the ld. CIT(A) has committed an error in holding that there was no incriminating material found during the course of search disclosing any undisclosed income on account of receipt of Rs. 8.00 crores by the assessee. The ld. DR has further submitted that company M/s. Makesworth Projects & Developers Pvt. Ltd. is a paper company and indulge in providing bogus accommodation entries. The statement of Shri Pramod Kumar Sharma, Director of M/s. Makesworth Projects & Developers Pvt. Ltd was recorded by the Investigation Wing, Calcutta on 10-11-2012 in which he stated that he was doing business on behalf of Shri Praveen Agarwal and he was only a dummy director in many of his companies. He has further stated that all these companies were indulged in providing accommodation entries. Therefore, the transaction in question claimed through the alleged agreement is nothing but a bogus accommodation entry received by the assessee in the form of advance which is nothing but assessee's own unaccounted income has been introduced/ received in the garb of advance for sale of these properties which was forfeited. Thus the entire claim of the assessee is nothing but to give a colour of forfeiture o....
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.... ingredients as provided u/s 68 of the Act. The identity of M/s. Makesworth Projects & Developers Pvt. Ltd is provided from the agreement itself, assessment order dated 03-06-2014 passed u/s 143(3) of the Act and Company Master Data in ROC. The genuineness of the transaction is established as the payment is made through RTGS transfer and there was no finding or any record to show that prior to the said payment any cash was deposited in the bank. The assessee filed the confirmations as well as Board Resolution of M/s. Makesworth Projects & Developers Pvt. Ltd. The creditworthiness of the purchaser has been proved by filing the evidence which includes the return of income. The financial statements filed for the Assessment Year 2010-11 and 2011-12 show that the said company was having huge net worth and current assets to purchase the properties. Thus the assessee has explained the source of receipt of Rs. 8.00 crores and satisfied all the requirements of section 68 of the Act. The ld.AR has further contended that the AO relied on the statement of Shri Praveen Agarwal recorded by the Investigation Wing, Calcutta. However, said statement itself is not a conclusive proof to hold that tra....
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....the assessee. The balance amount of Rs. 48.00 crores was to be paid on or before 31 Dec. 2011. The AO doubted the genuineness of the transactions and referred to the report of the Investigation Wing and then again referred to the statement of one Shri Pramod Kumar Sharma, Director of M/s. Makesworth Projects & Developers Pvt. Ltd, recorded on 10-11-2012. On the basis of the said report of the Investigation Wing, Calcutta, the AO held that the transaction of alleged sale of the properties to M/s. Makesworth Projects & Developers Pvt. Ltd is not genuine as the said company was found to be indulged in providing accommodation bogus entries. It is pertinent to note that the agreement sell dated 10-10-2011 was found during the course of search and part of the seized material marked as Exhibit-11, Annexure A. It is clear that the said agreement is not an afterthought manufactured document but it was found at the time of search and hence the existence of the agreement cannot be doubted. The agreement itself does not reveal any undisclosed income but it clearly states that the assessee and her husband agreed to sell these 09 number of plots situated at Nemi Sagar Nagar, Jaipur to M/s. Makes....
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....pendent inquiry except the Commission issued to Calcutta Wing which has resulted nothing but reported that the company was not found at the address which is otherwise not disputed by the Revenue as the assessment was completed and statement of the director of the said company was recorded by the Investigation Wing in earlier investigation proceedings. Therefore, the said report of the Commission issued by the AO is contrary to the earlier investigation report to dispute the identity and existence of the said company. On query from the Bench whether the bank account in which this amount was deposited was declared in the return of income filed by the assessee. The ld.AR referred to the computation of income and details of interest income offered to tax which includes the interest in this amount and therefore, the said bank account was duly disclosed in the return of income. Once the transaction of the receipt of Rs. 8.00 crores is found to be as an advance towards the sale of the properties in question then as per provision of Section 51 of the Act, if the said amount is forfeited by the seller the same shall be deducted from the cost for which asset was acquired or written down valu....
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....l incriminating documents were recovered from the residential premises of such partners/directors and from business premises of the firms/companies of the group; notice under Section 153A of the Act was issued on 05.10.2004 for filing of return within 35 days of receipt of the notice, which was served on 12.10.2004; in compliance to this notice, return declaring income of 'NIL' was filed on 07.04.2005. In the return filed in response to the notice under Section 153A of the Act, the assessee, inter alia, claimed deduction of Sales Tax Incentive relying on decision in the case of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273 (Mum.) (SB). The said claim was not made in the original return filed under Section 139(1) of the Act it was contended that such claim can be made in the return filed in response to notice under section 153A of the Act as it was over riding all proceedings earlier taken overall. The claim was not held to be admissible by all the authorities. When further appeal was filed, Hon'ble Rajasthan High Court while analysing the provision of sec. 132 r.w.s 153A held thus: 18. To consider the rival submissions made at the Bar in the context of ....
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....e been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee. 21. The argument raised by the counsel for the appellant to the effect that once a notice under Section 153A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: 1) 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; 2) regarding other cases, the....
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....not discussed herein. At the same time, useful reference can be made to the judgment of Hon'ble Bombay High Court in the case of Murali Agro Products Ltd. (2014) 49 Taxmann.com 172 wherein it was held thus: 8. We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 III{ (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as 'undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficul0, the legislature by Finance Act 2003, decided to discard Chapter XIV B provisions and introduce Sections 153A, 153B and 153C in the IT Act. 9. What Section 153A contemplates is that, notwithstanding the regular prov....
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....on 29-12-2000 and search was conducted thereafter on 3-12-2003. Therefore, in the facts of the present case, initiation of proceedings under Section 153A would not affect the assessment finalised on 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153A proceedings. The above quoted passage was also approved by Bombay High court in the case of Continental Warehousing Corporation (374 ITR 645, para 30 thereof) It appears that there is unanimity of view on the subject that when a search is initiated....
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....essment. Hon'ble Delhi High court in case of Harjeev Agarwal (70 Taxmann.com 95) held thus: A plain reading of section 158BB(1) does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words 'evidence found as a result of search° would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4). However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the act, the same was also applied in respect of assessment u/s 153A by Delhi High Court in cas....
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....kesworth. Whether the control is through shareholding or any relative holding such share is not forthcoming. Any person who, in the language of appellant, is a `rank outside? cannot come and say that he is controlling a company merely by stating so. For this purpose and to bring out the truth an opportunity of cross examination becomes necessary. If that be the case, a question remains to be answered as to why the income of Makesworth is assessed in its hands and not Mr. Pravin Agarwal. Thus a bald statement of a person stating to be controlling a company cannot be considered as sacrosanct till it is put to test by the person relying upon it and also by the person who is adversely affected by such statement. Neither the AO, nor investigation wing has put any question to Mr. Pravin Agarwal about the transaction of Makesworth with the appellant. In such a situation, no credence can be given to his statement to hold the sale agreement as bogus or sham. 8.2 Here it is useful to refer to two judgments of Hon,ble Supreme Court in the cases of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 (SC) and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). In Chhugamal Rajpa....
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....appellant with Makesworth cannot be considered as a final word to hold the same to be sham or bogus. 8.3 In view of above discussion, let me deal with the reasoning given by the AO to hold the agreement to sale as sham or bogus. When the appellant stated that she wanted to settle abroad and hence wanted to sale her property, the AO questioned such decision by holding that she never intended to sale her business establishments but only property. In my opinion, a person is free to decide the way he wants to conduct his affairs. The AO is not to enter the shoe of a businessman and decide how he should conduct his affairs. He has just to decide whether any income is accruing from any transaction undertaken by him and not question the wisdom in doing business. The AO also questioned the wisdom of Makesworth in not claiming the advance given. The answer for same has to come from Makesworth itself and not the appellant. During the course of assessment proceedings, the appellant provided fresh confirmation as also its present whereabouts from authentic record and the broker who mediated the transaction. No exercise was done thereafter by AO. In the words of Hon'ble Supreme Cou....
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.... Thus the observations of Rajasthan High Court in the case of Supertech Diamond Tools (supra) are more relevant and applicable to the facts. Hon,ble Gujarat High Court in case of Kanubhai Maganlal Patel (79 Taxmann.com 257) held that It emerges from the impugned orders and even the order passed by the Assessing Officer that the Assessing Officer made additions under section 69B, relying upon the statements of two farmers [e., two sellers of the land] in which, according to the department, they admitted of having received on-money in cash. However, it is required to be noted and it is an admitted position that the statements of those two farmers upon which reliance was placed by the department were not furnished/ given to the assessee to controvert the same. Not only that when a specific request was made before the Assessing Officer to permit them to cross examine the aforesaid two farmers, the same was rejected by the Assessing Officer. Under the circumstances, as rightly observed by the Tribunal, the Assessing Officer was not justified in making addition under section 69B solely relying upon the statements of those two farmers. Similar view is adopted by Bomb....
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..... Vasantlal (supra) the assessee is to be given an adequate opportunity of explaining the statement and if the appellant points out holes and lacuna in such statement then such statement could not have been continued to be accepted as sacrosanct without any further exercise on the part of AO. Hence it can be concluded that sole reliance of the AO on the statement of Mr. Pravin Agarwal is to be discarded and if such statement is discarded, then the AO has no further material to hold that the transaction of appellant with Makesworth is bogus or sham so as to consider the same as unexplained. 8.5 I find that the appellant has demonstrated that the required ingredients to explain the cash credit as genuine. There is no doubt about the identity of Makesworth which is discernible from agreement itself entered into, its tax returns and assessment orders etc. The genuineness of transaction is also proved by the appellant by bringing on record the Sale agreement alongwith extension letters itself being found during search and receiving payment through banking channels and fresh confirmation during assessment proceedings. As against this, there is no contrary evidence. ....
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....lied on various decisions including the Hon'ble Jurisdictional High Court in the case of Jai Steel (India) [2013] 36 Taxmann.com 523 as well as decision of Hon'ble Bombay High Court in the case of Murali Agro Products Ltd [2014] 49 Taxmann.com 172. In view of the facts of the case as discussed above, we do not find any error or illegality in the order of the ld. CIT(A) qua this issue. 3.1 In the cross appeal for the Assessment Year 2012-13, the assessee has following grounds:- ''1. Under the facts and circumstances of the case, the ld. CIT(A) has grossly erred in law as well as facts in making the addition of Rs. 5,00,000/- 2. Under the facts and circumstances of the case, the ld. CIT(A) has erred in law as well as facts in making addition of Rs. 5.00 lacs offered by the appellant before Settlement Commission ignoring that:- (i) The application before ITSC was filed along with the group for the purpose of settlement of the cases of the group. (ii) The offer in the application was conditional. (iii) No evidence of such undisclosed income was found in the search or enclosed with the application. (iv) The application was....
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.... 955470 92700 0 92700 2011-12 561970 4,00,000 961970 99083 0 99083 2012-13 1033770 5,00,000 1533770 154500 83430 237930 2013-14 1116150 5,00,000 1616150 154500 72615 227115 2014-15 1230570 6,00,000 1830570 185400 55620 241020 2015-16 893090 10,00,000 1893090 297988 73578 371566 Total 5883639 35,00,000 1034910 334269 1369179 The said application was rejected by the Settlement Commission while passing order u/s 245D(1) of the Act on the ground that additional income is declared merely on the basis of estimates and therefore, it does not fulfill the conditions laid down as per provisions of Section 245C(1) of the Act. The ld. CIT(A) in the course of appellate proceedings noted that the assessee has offered additional income of Rs. 5.00 lacs for the Assessment Year 2012-13 and Rs. 10.00 lacs for the 2015-16. Accordingly, the ld. CIT(A) proposed to enhance the assessment by making the additions of respective amounts to the income based on the disclosure in the application made to the Settlement Commission u/s 245C(1) of the Act. The assessee....
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....he ld. DR supported the order of the ld. CIT(A) and contended that there is no confidentiality clause either in the provision of Section 245C or 245D of the Act or in the Income Tax Rules relating to Settlement Commission. Regarding the provision of Section 245HA(3), the AO shall be entitled to use all the material and other informations produced by the assessee before the Settlement Commission or the results of the enquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it. Thus the ld. DR has supported that the material which is a part of the proceedings before the Settlement Commission can be used by the AO or other Income Tax Authority for the purpose of assessment. 3.5 We have considered the rival submissions as well as the relevant material on record. The ld. CIT(A) has made the addition being enhancement of assessment in para 10.1 of the impugned order for the Assessment Year 2012-13 as under:- ''10.1 I do not agree with the contention that income offered in settlement application cannot be taxed as it is not evidence. In fact such application is drafted without any presence of income tax officials (thus there is no ....
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....s regard, the A.R. fairly admitted that applicant is not in possession of any details of transactions from which the additional income is claimed to have arisen. In view of this position, we are in no position, even got to the prima facie findings that a full and true disclosure has been made. Accordingly, the Settlement Application filed by Smt. Renu Sehgal does not fulfill the conditions laid down as provision of section 245C(1). Accordingly, the application filed by this applicant i.e. Smt. Renu Sehgal is not allowed to be proceeded with.'' Thus it is a finding of the Settlement Commission while rejecting the application that application filed by the assessee does not fulfill the conditions as per provisions of section 245C(1) of the Act as additional income has been declared merely on the basis of estimates without any details of transactions resulting the additional income or any other material substantiating the additional income. The Settlement Commission while rejecting the application has also taken a note of the facts as stated in the statement of facts. There is no quarrel that the material and other information produced by the assessee before the Settlement ....
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....onfidential information disclosed in annexure to the settlement application before Income Tax Settlement Commission can never be the basis to make the addition. We find that in the instant case, the AO has reopened the assessment under section 147. Thereafter, AO has not brought any evidence or made any inquiry that assessee has earned additional income of Rs. 5 lakhs as brokerage income. In the instant case, after reopening the assessment order, the AO had not made any inquiry and not examined the material which was before him that how this income was declared by the assessee and addition has been made simply relying upon the declaration made in the application before the Settlement Commission under section 245D. The AO was in possession of the paper relating to the income but in absence of any material no addition can be made. The Hon'ble Gujarat High Court in the case of Commissioner vs. Maruti Fabrics 47 Taxmann.com 297 has held that whatever material is produced along with application by the assessee before Settlement Commission or result of inquiry held or evidence recorded by the Settlement Commission in course of proceedings before it can be used by the adjudicating authori....
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....ingly, dismissed by answering the proposed question of law No.1 against the Revenue." 14. Respectfully following the same, we hold that Hon'ble Gujarat High Court's judgment in the case of Maruti Fabrics pertains to Central Excise but if we compare central excise under section 32E of the Central Excise Act this section is parallel to section 245C of the Income Tax Act. One primary condition mentioned in section 32E for filing central excise settlement petition is "a show cause notice for recovery of duty issued by Central Excise Officer has been received". In Income Tax Act section 245C requires some pendency of proceedings. The Central Excise application is allowed or rejected vide order under section 32F(1). This section is parallel to section 245D(1). Section 32L gives the powers and procedure of Central Excise Settlement Commission. This section is similar to section 245F of the Income Tax Act. Section 32L gives the powers of the Settlement Commission to send the case back to the Central Excise Officer. Section 32L reads as under: "32L(1) The Settlement Commission may, if it is of opinion that any person who made an application for settlement under se....
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.... On this issue, we have already seen that in the order dated 30-11- 2007 under section 245D(4) of the Act, the Settlement Commission has clearly held that the assessee for assessment year 2005-06 does not satisfy the criteria of offering income on which at least an income-tax payable should exceed Rs. 1 lakh. The Settlement Commission has further held that when admitting the petition of the assessee for assessment year 2005-06, this aspect was overlooked and that they are rectifying the apparent error by excluding assessment year 2005- 06 of the assessee from the process of settlement. Thus, the case of the assessee for assessment year 2005-06 cannot be considered to have been admitted for the process of settlement under section 245D(1) of the Act. Consequently, the confidential information disclosed in the Annexure to the Settlement application could not have been used by the Assessing Officer against the assessee to make the impugned addition. Therefore, the addition to the income made by the Assessing Officer in assessment year 2005-06 which is based only on the disclosure made in the Annexure to the Settlement Commission is not valid in law. Consequently, the imposition o....
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....n 245C had been made. (3) For the purposes of sub-section (2), the Assessing Officer or as the case may be, other income-tax authority, shall be entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it, as if such material, information inquiry and evidence had been produced before the Assessing Officer or other income-tax authority or held or recorded by him in the course of the proceedings before him." 21. Thus, when a proceedings before the Settlement Commission abates, it reverts to the income-tax authority before whom it was pending at the time of making the application for settlement and the income-tax autho-rity has to dispose of the case in accordance with the provisions of the Act as if no application for settlement had been made and for that purpose, it is entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the pro....