TaxTMI 
TaxTMI 
2019 (10) TMI 304
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....ision of Ld. CIT(A) of allowing ground no. 1 & 2 of the assessee's appeal is not as per the provision of section 153A in which it is provided that once the return is filed in answer to notice u/s 153A, explanation to section 153A provides among other things, that all provisions of the act will apply to the assessment made u/s 153A of the Act as per which the assessee proceedings u/s 153A(1) can be concluded assessing the total income of the assessee including making addition without any incriminating material being available against the assessee for any particular year. 3. That on the facts and circumstances of the case, the decision of Ld. CIT(A) allowing ground no1 & 2 of the assessee's appeal without examining the entire facts of the case in which on the basis of material found during search and seizure operation, trail of cash transactions from bank accounts was made establishing that assessee has received Rs. 80,78,400/- from two companies in form of share capital / premium liable to be treated as unexplained income in the hand of the assessee and such material is very well in the nature of incriminating material." 3. Brief facts of the case as noted by the AO is t....
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....'ble jurisdictional High Court had concurred with the judgement of Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla (2016) 380 ITR 573 (Del). He further relied upon the decision of this Tribunal and deleted the addition of Rs. 80,78,400/- made in the assessment u/s 153A / 143(3) of the Act on the ground that same was not based on any incriminating material found during the course of search and seizure proceedings and as the assessment for this assessment year was not abated. Aggrieved by this order, the Revenue is now in appeal before us. 4. The Ld. CIT, DR assailing the decision of Ld. CIT(A) submitted that the Ld. CIT(A) erred in deleting the addition simply by relying on the decision of Hon'ble Delhi High Court in Kabul Chawla (Supra). He argued that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported these words while rendering the decisions. Relying on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co. vs. DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) and also the decisions of the Kerala High Court in the case of St. Francis Clay Dec....
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....s the case for entire six years. According to him even the earlier assessments becomes non-est as the earlier return filed by the appellant became non est. According to ld. CIT, DR, the view so canvassed by him is supported by the decision of the Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax vs Neeraj Jindal (393 ITR 1) which was affirmed by the Hon'ble Supreme Court. 6. The ld. CIT, DR further submitted Section 153A was materially different from Section 153C of the Act. According to him, Section 153C envisaged the following conditions: a. any money, bullion, jewellery or other valuable articles or thing, seized or requisitioned, belongs to; or b. any books of accounts or documents, seized or requisitioned pertains or pertain to or any information contained therein, related to Whereas to invoke jurisdiction under Section 153A of the Act, the AO does not require to prove that the conditions as prescribed in Section 153C are satisfied. According to him, once the search is conducted against an assessee u/s 132, then the AO is required to issue notice for six assessment years, as if, such returns are required to be furnished u/s 139; and....
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....anner proved that the assessee was the actual beneficiary of so-called cash trail identified by the AO. The ld. AR thus claimed that the addition made by the AO was unsustainable on facts and in law. 9. We have given our thoughtful consideration to the facts and circumstances of the case and perused the material placed on record as well as the case laws cited by both the parties. We find that the provisions contained in Section 153A falling in Chapter XIV of the Act are special provisions for completing assessments in case of search or requisitions. These provisions can only be invoked in cases where the Income-tax Department has invoked and exercised its special powers for conducting search and seizure operations after complying with stringent pre-conditions prescribed in Section 132 of the Act. We do not deny the ld. CIT, DR's contention that once a search u/s 132 is conducted against a person then irrespective whether any incriminating material is found, the AO is required proceed against such person for completing the assessments u/s 153A of the Act for the specified six assessment years. To this extent, there is no quarrel. However we find that Section 153A itself creates t....
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....ee. On the other hand, we note that in the impugned order, the AO himself admitted that the appellant had furnished details of share application monies received in response to requisition issued u/s 142(1). Subsequent to furnishing such information, the AO carried out enquiry for completion of unabated assessment. It is noted that the AO made the addition of Rs. 80,78,400/- by observing that there was a nexus between the cash trail identified by his office and the subscription received by the assessee in form of share capital. The AO further observed that the assessee was unable to satisfy him regarding the genuineness of the transaction and creditworthiness of the share subscribers and he therefore assessed the sum of Rs. 80,78,400/- u/s 68 of the Act. Thus, from the assessment order it is clear that none of the material referred to by the AO for justifying the impugned addition can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. The ld. CIT, DR was also unable to controvert the aforesaid factual position. On these given facts the legal position which is to be decided in the first instance ....
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....-1 along with PG/1 to PG/8 in the relevant assessment order dated 30.12.2017. It is stated that the said incriminating material was nothing but their regular books of account maintained by all searched assessees containing details of their respective share capital. Mr. Surana thereafter contends that no regular assessment stipulated u/s 153A second proviso was pending qua these two Assessment Year as on the date of search. Learned coordinate bench's decisions in M/s Consistent Vyapaar Pvt. Ltd. in ITA No.65 & 66/Kol/2018 dated 14.09.2018 and ITA No.59&60/Kol/2018 in M/s. Bhansali Fincom Pvt. Ltd. dated 10.10.2018 (supra) are also quoted during the course of hearing that the impugned proceedings in the absence of any incriminating material found or seized during the course of search deserved to be quashed. 5. Ld. CIT-DR has filed written submissions in support of both the lower authorities' action taking recourse to section 153A proceedings. His case is that the search in question conducted in M/s. Patni Group of cases led to the department finding these two assessees to have bogus share capital entries added as unexplained cash credit in issue. Hon'ble apex court's decisio....
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....d AO. 3.1. The assessee company received the following payments against share application during the financial year 2009-10 relevant to Asst Year 2010-11 as under:- M/s Shreyans Vyapar P ltd - Rs. 25,00,000/- M/s Nucore Exports P Ltd - Rs. 40,00,000/- M/s Raj Kavira Mercantile P Ltd - Rs. 10,00,000/- M/s Rup Tradecom P Ltd - Rs. 25,00,000/- M/s Corbel Supplier P Ltd - Rs. 50,00,000/- M/s Cube Trafin P Ltd - Rs. 25,00,000/- M/s Bakliwal Finvest P Ltd - Rs. 25,00,000/- M/s Aakansha Advisory Services P Ltd - Rs. 40,00,000/- M/s Lucky Dealers P Ltd - Rs. 10,00,000/- M/s RNG Finlease P Ltd - Rs. 25,00,000/- M/s Rose Securities P Ltd - Rs. 25,00,000/- M/s Amazing Vinimay P Ltd - Rs. 50,00,000/- ---------------------- Rs. 3,50,00,000/- 3.2. It was argued that admittedly no incriminating materials were found for Asst year 2010-11 in the course of search with regard to share capital and accordingly pleaded not to disturb the originally assessed income, which is same as the returned income. The ld AO however did not heed to the contentions of the assessee and proceeded to frame the assessments u/s....
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....rejected. (Underlining provided by us) 2. The Ld. AO has relied on the statements issued by the Directors of the Companies with which the assessee-company had transactions during the relevant assessment year. The Ld. AO has also afforded adequate chance to the appellant to cross-examine these persons. I am not inclined to give any credence to the retraction of the statements by the parties, as these have been made by a well thought out strategy, so that the proceedings can be nullified. It is to be observed that these statements were given voluntarily and had been recorded independently before the Officers of the Wing. In my considered view, mere retraction before any Magistrate would not be binding on the Taxing Authority. Hon'ble Courts have held that any addition based on the statement or admission by the assessee / related party is quite justified (Hara Singh & Co. vs CIT (HP) 230 ITR 169) . It has to be mentioned herein that where a petitioner enters into a voluntary settlement with any Government Agency and the liability to pay tax arises from such settlement, he cannot question the settlement unless and until he can establish that his consent was improperly procured....
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....urposes of the Act (hereinafter referred to as the undisclosed income or property) ; then the officer , so authorized could conduct a search and proceed as per the requirements laid down in the said section. He argued that the aforesaid three primary conditions for invoking search proceedings cannot be given a go by while framing section 153A assessments and the instant case falls under section 132(1)(c ) of the Act. The provisions of section 153A of the Act use the expression 'assess or reassess total income' and hence the search assessment could be framed u/s 153A of the Act irrespective of any incriminating materials. 6.1. Apart from the above, the ld DR vehemently argued that the Hon'ble Supreme Court had admitted the Special Leave Petition filed by the revenue in the case of Dayawanthi Gupta against the decision rendered by the Hon'ble Delhi High Court in the case of Dayawanthi Gupta reported in 390 ITR 486 (Del). He also submitted that SLP is admitted by the Hon'ble Supreme Court against the decision rendered by the Hon'ble Bombay High Court in the case of Continental Warehousing. Both these SLPs were admitted on the main question as to whether the ....
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....d be relevant to be looked into wherein it is mentioned that while recording statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. For the sake of convenience and clarity, the relevant instructions dated 10.3.2003 issued by CBDT is reproduced hereunder:- To All Chief Commissioners of Income tax (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search & seizure and survey operation - regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search& seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which l....
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....of May, 2003, the Assessing Officer shall- 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 falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:" 8.1. We find that the Co-ordinate Bench of Delhi Tribunal in the case of Dy. CIT v. Aggarwal Entertainment (P.) Ltd reported in [2016] 72 taxmann.com 340 (Delhi - Trib.) had addressed this aspect. The relevant headnotes is reproduced below:- "Section 153A, read wit....
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....Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessment operate in different fields and have different purposes to be fulfilled altogether. 6.4.3 The expression 'assess or reassess' stated in section 153A(1)(b) has to be understood as below:- 'assess' means assessments to be framed in respect of abated assessment years irrespective of the fact whether there are any incriminating materials found during the course of search with respect to relevant assessment years ; 'reassess' means assessments to be framed in respect of concluded assessment years where incriminating materials were found during the course of search in respect of the relevant assessment year." 8.3. We also find that recently the Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) held as under:- '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: Once a search takes place unde....
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.... the course of original assessment." 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. 8.4. We find that the decision relied upon by the ld DR in the case of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) does not in any manner advance the case of the revenue as admittedly the Hon'ble Delhi High Court in para 24 of its order had held as under:- "24. We are not concerned with a case where no incriminating material was found during the search conducted under section 132 of the Act. We, therefore, express no opinion as to whether Section 153A can be invoked even in such a situation. That question is therefore left open." Hence the heavy reliance placed by the Ld CITA in his order on the decision and by the ld DR before us does not advance the case of the revenue. 8.5. The ld DR also relied on the recent decision of the Hon'ble Kerala High Court in the case of E.N.Gopakumar vs CIT reported in (2016) 75 taxmann.c....
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.... to keep these appeals in abeyance till the finality is reached from the Hon'ble Supreme Court. 8.7. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are to be framed by the ld AO u/s 153A of the Act which would have a bearing on the determination of total income by considering all the aspects, wherein the existence of incriminating materials does not have any relevance. However, in respect of unabated assessments, the legislature had conferred powers on the ld AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the pro....
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....roup of cases on 8.3.2016. A search warrant was executed in the name of the assessee. Consequent to the search, notice u/s 153A of the Act was issued on the assessee for the Asst Year 2013-14. In response to the said notice, the assessee filed its return of income on 24.10.2016 declaring total income of Rs. 8,05,764/-. The assessee stated that the time limit for issuance of notice u/s 143(2) of the Act for the Asst Year 2013-14 in respect of the original return filed on 19.9.2013 had expired on 30.9.2014 and hence as on the date of search, the year under consideration (i.e Asst Year 2013-14) would fall under the category of unabated assessment and hence the income assessed originally thereon could not be disturbed unless there is any incriminating material found in the course of search relatable to such assessment year. Infact the assessee had specifically objected before the ld AO that there is absolutely no incriminating materials found during the course of search for the Asst Year 2013-14 and hence the concluded assessment could not be disturbed in the assessment proposed to be completed u/s 153A of the Act. After making this preliminary objection, the assessee however co-operat....
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....d assessments in the absence of incriminating materials found during search, we hold that the disallowance of trading loss on sale of shares of Rs. 38,45,844/- made by the ld CITA in the assessment framed u/s 153A of the Act cannot be made as per law. Hence the disallowance made thereon in the impugned assessment is hereby directed to be deleted for want of incriminating materials. Since the relief is granted to the assessee on the preliminary ground of want of incriminating materials , we refrain to give our finding on merits of the addition for the Asst Year 2013-14 and hence the adjudication of other grounds on merits does not arise. Accordingly, the grounds raised by the assessee are allowed for Asst Year 2013-14." 7. We adopt the above detailed reasoning mutatis mutandis to hold that both the lower authorities have heard in law in initiating section 153A proceedings against these two assessees since no regular assessment was pending against them u/s 153A(1) 2nd Proviso of the Act. Their returns filed within due date(s) already form part of record before us whereas the search took place on 08.03.2016. We make it clear that section 158BB of the Act does not apply since ....
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....ever settled legal proposition that the observations of the Hon'ble High Court must be read in the context of the facts and the issues before the Hon'ble High Court for consideration. The Hon'ble Supreme Court in the case of CIT Vs Sun Engineering Works (P) Ltd (198 ITR 297) has observed as follows: "It is neither desirable nor permissible to pick out a word or a sentence from the judgment of the Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by the Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before the Court. A decision of the Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of the Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by the Court, to support their proceedings." 12. We find that the specific issue in the present appeal is squarely a....