TaxTMI 
TaxTMI 
2019 (10) TMI 304
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....he 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 that the assessee had filed original return of income for AY ....
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....ent 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 Decor Tiles (2016) 70 taxmann.com 234 and E.N. Gopa Kumar vs CIT....
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....comes 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 such returns are furnished then the AO is competent to assess or reassess the 'total income' f....
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....he 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 the differentiation amongst specified six assessment years depending whether the proceedings have a....
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....nt 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 is whether an addition can justifiably be made in an assessment u/s 153A r.w.s. 143(3) of the Act f....
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....g 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 decision in CIT vs. S. Ajit Kumar in Civil Appeal No.10164 of 2010 upholding block assessment in light of section 158BB of the Act....
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.... 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 153A of the Act by making an addition towards share capital u/s 68 of the Act in the sum of Rs. 3,50,00,000/- on the plea that the assessments to be framed u/s 153A of the ....
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....nt 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. (Dewan Bahadur Seth Gopal Das Mohta vs The Union of India & Ors (SC) 26 ITR 722). Similarly, and more significantly, in the following judicial precedents, the ratio emerges that for retractions to be valid, ....
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....ditions 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 existence of an incriminating material is relevant for making an addition in section 153A assessment in respect of concluded assessments as on the date of search . Accordingly, he prayed for keeping the appeals in abeyance till matter attains finality from the Hon'ble Suprem....
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....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 leads to information on what has not been disclosed or is notlikely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Fu....
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....visions 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 with section 143, of the Income-tax Act, 1961-Search and seizure - Assessment in case of (in case of section 143(1) assessment)-Assessment year 2004-05- Whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and, thus, said assessment cannot be reopened in exercise of p....
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....g 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 under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise. The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which th....
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....der 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.com 215 (Kerala) in support of his contentions. We find that the decision of Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) had duly considered the decisions of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT vs Chetan Das Lachman Das reported in (2012) 211 Taxman 61 (Del HC) ; Madugula Venu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) ; Filatex India Ltd vs CIT reported in (2014) 229 Taxman 555 (Del HC) ; Jai Steel (India) vs A....
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....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 provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld DR in this regard deserves to be dismissed. 8.8. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the assessment framed u/s 143(1) of the Act for the Asst Year 2010-11, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating ma....
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....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-operated with filing of requisite details before the ld AO. 11. The break up of computation of total income of the assessee is as under:- 11.2. The assessee purchased 200000 equity shares of M/s Blue Circle Services Ltd during the year for Rs. 82,35,360/- and sold the same during the year for Rs. 43,89,516/-. Since the primary business of the assessee is dealing in shares, the loss incurred on sale of such shares of Rs. 38,45,844/- was claimed as business loss and the same was set off with other income of the assessee in the return of income. The assessee submitted that the transactions are evidenced by documents includin....
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....cordingly, 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 it formed part of the block assessment proceedings no more applicable after 01.06.2003. We therefore quash these two impugned assessments to be not sustainable in the eyes of law. The assessees' other identical substantive grounds challenging correctness of section 68 addition of unexplained share capital on merits are rendered infructuous. These two appeals are allowed." 11. As regards the ld. CIT, DR's reliance on the decision of the Hon'ble Delhi High Court in the case of CIT Vs Neeraj Jindal (supra) is concerned, we find that the said decision has no application in deciding the issue involved in the present appeal. In the case before the H....