TaxTMI 
TaxTMI 
2020 (1) TMI 859
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....n/19 -Do- 2012-13 -Do- -Do- -Do- 45/Ran/19 -Do- 2013-14 -Do- -Do- -Do- 46/Ran/19 -Do- 2014-15 -Do- -Do- -Do- 47/Ran/19 -Do- 2015-16 -Do- -Do- 143(3) of the Act 48/Ran/19 M/s. K.D.S. Contractors Pvt. Ltd. 2009-10 30.11.2018 -Do- 153A r.w.s. 143(3) of the Act 49/Ran/19 -Do- 2010-11 -Do- -Do- -Do- 50/Ran/19 -Do- 2011-12 -Do- -Do- -Do- 51/Ran/19 -Do- 2012-13 -Do- -Do- -Do- 52/Ran/19 -Do- 2013-14 -Do- -Do- -Do- 53/Ran/19 -Do- 2014-15 -Do- -Do- -Do- 54/Ran/19 -Do- 2015-16 -Do- -Do- 143(3) of the Act 2. The captioned appeals concern AYs. 2009-10 to 2015-16 in the case of captioned assessees who are stated to be having transactions with Padam Kumar Jain Group. In view of the simultaneous search conducted on both the assessees and issues being interlinked and similar, all the captioned appeals of both assessees have been heard together and are being disposed of by common order. 3. For the sake of convenience and to begin with, we shall first take up the appeal concerning M/s. Rajat....
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....minating material found during the course of search operation. As such, the addition being made U/s 153A which stands originally accepted is unjustified, illegal and fit to be deleted. 6. For that Ld. CIT(A) was not justified in confirming the addition of Rs. 4,84,70,106/- U/s 69 being unexplained investment. For the year under consideration the assessee purchases fixed assets details of which was completely reflected in the audited books. The source of the payment stands explained as was made through banking channel and bills as available was also produced before the Ld. AO making the assessment. Moreover, we would like to mention that the depreciation claimed against the fixed assets was also allowed, as such, the authorities below were not justified in sustaining this addition in absence of any incriminating material found during the search operation. The addition made is fit to be deleted. 7. For that Ld. CIT(A) was not justified in confirming the addition of Rs. 11,05,71,212/-being disallowance of expenses claimed. The authorities below confirmed the disallowance to the tune of 100% for the expenses claimed under Picking expenses. Screening expenses,....
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.... has been passed back dated with a simple objective to avoid the submissions of the assessee. We pray that the above legal ground of the assessee may kindly be admitted as an additional ground and be adjudicated upon since the same goes to the very root of the assessment and involves a legal finding. Reliance is placed upon the decision of Hon'ble Apex Court in the case of NTPC Vs. CIT 229 ITR 383." 6. The prayer for admission of additional grounds noted above which are not set forth in memorandum of appeal are being admitted for adjudication in terms of Rule 11 of Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional grounds are legal in nature for which relevant facts are stated to be emanating from existing records. 7. Turning to the facts, a search and seizure operation under s.132(1) of the Act was carried out in the business and residential premises of Padam Kumar Jain Group of cases at Ranchi, Chaibasa, Barbil, Chennai etc. on 03.07.2014 and subsequent dates. A search and seizure operation was also carried out at the transit/branch office/site office of the assessee and his group consisting of M/s. Rajat Mineral....
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....nt found or seized at all for AYs. 2012-13 to 2015-16, the unabated and concluded assessments should not be disturbed. It was submitted that the assessee has merely traded through Padam Kumar Jain Group of companies in the course of mining business and has no other association. The AO however proceeded on the premise that discovery of any incriminating document is not a sin qua non to make assessments under s.153A of the Act. The AO observed that issue of warrant of search and search under s.132 of the Act is sufficient for initiation of proceedings under s.153A of the Act and only condition for initiation of proceedings under s.153A of the Act is occurrence of search under s.132 of the Act. It was further observed that Section 153A of the Act does not provide that assessment/re-assessment should be based on 'incriminating material' alone and the AO is empowered to assess or re-assess the 'total income' of the six financial years covered under search regardless of presence of incriminating material. The AO also took extensive note of Tax Evasion Petition dated 21.11.2016 received in the course of assessment by him alleging incriminating information against the assessee. The AO proc....
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....6. This is also incidentally the date on which the compliance was also parallelly sought by the AO with reference to a detailed questionnaire dated 21.11.2016 as appearing at page no.16 of the paper book. The assessee was directed by the questionnaire to submit its reply in a span of hardly 5 days. Statedly, the assessee did submit its reply to the said questionnaire dated 21.11.2016 but however on 29.11.2016 instead of 28.11.2016 i.e. after a delay of one day. The learned counsel paused here to submit that the assessment order was purportedly passed without waiting for the compliance even till the end of the appointed day. This act of AO frustrated whatever little opportunity was provided for compliance to assessee. Agitating the issue, the learned counsel pointed out that instant appeals pertain to search matters where substantial complexities are ordinarily involved. The AO was making assessments in as many as 28 cases pertaining to assessee group for which the AO purportedly passed orders (in all 28 cases on the same very date) without waiting for the compliance from the captioned assessees so enjoined with onerous burden to respond in all cases in mere 5 days, till even the....
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....in toto is implausible, if the date of order on 28.11.2016 is to be believed as sacrosanct. It was thus contended that the date of assessment order is 'antedated' as the circumstances clearly suggests. 10.4 Continuing further, the learned counsel contended that approval of the JCIT on the same day within a span of few hours/minutes clearly underline total non-applicability of mind and a mechanical step by the senior authority in abdication of its statutory responsibilities, even if, the date of order i.e. 28.11.2016 is momentarily taken as sacrosanct. The learned counsel made a reference to the decision of the co-ordinate bench in Geetarani Panda vs. ACIT IT(SS)A No. 01/CTK/2017 order dated 05.07.2018; Rishav Buildwell Pvt. Ltd. & Ors. vs. DCIT ITA No.2122/Del/2010 order dated 04th July, 2019; AAA Paper Marketing Pvt. Ltd. vs. DCIT ITA No. 167/LKW/2016 dated 28.04.2017 and Indra Bansal & Ors. vs. ACIT ITA Nos. 514-516/Jodh/2015 for the unequivocal proposition that the approval given by the Joint Commissioner in an utmost hasty manner and in a mechanical manner does not tantamount to approval contemplated under s.153D of the Act. The learned counsel accordingly submitted that the....
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....he AO that the reply of the assessee in response to questionnaire was considered, are not in sync with date of the assessment. The assessment order is thus clearly antedated. The approval of the JCIT is thus also antedated. To provide room for the aforesaid contention, the learned counsel further pointed out that the assessment order was served on the assessee by speed post on 14.12.2016 which clearly shows that the assessment order was dispatched some time in 2nd week of December. An inexplicable delay of about 10 days in dispatch of the assessment order so hurriedly framed within a few hours (in as many as 28 cases) with approval of JCIT also on same day again indicate that assessment orders in captioned appeals are antedated and thus such antedated assessment orders are required to be stuck down as void at the threshold. 10.6 The learned counsel for the assessee next pointed out that he does not require to independently argue Ground No.2 of the additional ground which is merely an extension of the first additional ground. 10.7 Adverting to main grounds of appeal, the learned counsel for the assessee raised yet another legal contention of invalidity of additions/disallow....
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..... The learned counsel submitted that the identification marks noted in these documents are in the style of KDS-1 to KDS-6. The remand report, on the other hand, mainly talks of TEP received by the AO in the course of assessment proceedings on 21.11.2016 wherein incriminating nature of information has been allegedly received by the AO. Neither the assessment order nor the remand report makes any reference to documents found as per the 'list of inventory'. It was submitted that in the course of search, business documents executed in ordinary course will be naturally found but that would not mean that such documents are 'incriminating' in nature per se. In the above factual scenario, the learned counsel submitted that AYs. 2009-10, 2010-11, 2011-12 & 2012-13 (for both the appellants) stood completed/time barred at the time of initiation of search on 03.07.2014 and thus could not be disturbed by making further additions/disallowances de hors reference to any incriminating material found or seized in the course of search. 10.7.3 Building up the contention on legal principles, the learned counsel submitted that assessment of income under s.143(3) r.w.s. 153A of the Act must have nexus....
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....AO/CIT(A) in making adjustments of routine nature in the course of search assessment under s.153A of the Act is impermissible and without sanction of law in view of several decisions of Hon'ble High Court of different jurisdiction including Kabul Chawla (supra); & Pr.CIT vs. Meeta Gutgutia (supra). 10.7.4 The learned counsel pointed out that the AO has inter alia invoked Section 68 of the Act for certain additions. Section 68 of the Act necessarily enjoins presence of entries in the books of accounts. Such additions in the spheres of Section 68 of the Act is not permissible in the absence of evidence in contradicting bonafides of credits as found in the course of search. The learned counsel contented that the action of the Revenue in making additions under s.68 of the Act (on account of sundry creditors/bogus liability) on the basis of regular books of account, disallowance of various expenditures, additions towards investment in fixed assets shown in the balance sheet under s.69 of the Act (in the alleged absence of satisfactory explanation towards nature and source investment) is totally uncalled for as per the schematic interpretation of scheme of assessment under s.153A of t....
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....cedents in the case of Canara Housing Development Co. vs. DCIT (2011) 49 taxmann.com 98 (Kar); Filatex India Ltd. vs. CIT (2014) 49 taxmann.com 465 (Del.); CIT vs. Rajkumar Arora (2014) 52 taxmann.com 172 (All.) & Pr.CIT (Central) vs. Kesarvani Zarda Bhandar, Lucknow ITA No. 270 of 2014 (All.) judgment dated 06.09.2016 to buttress the aforesaid contention on behalf of the Revenue. The learned CIT.DR accordingly contented that no merit in the claim of the assessee could be drawn that additions/disallowance in unabated assessments are unsustainable in the absence of incriminating material. It was thus submitted that the preliminary legal grounds raised on behalf of the assessee are totally devoid of any legitimacy. 13. We have carefully considered the rival submissions and legal grounds raised. Before we deal with additions on merits, it will be desirable to adjudicate wide ranging legal objections of overwhelming nature raised on behalf of the assessee which goes to the root of the matter. Broad contours of the appeal of the assessee hinges around following pertaining legal issues emanating in the case: (i) Whether the AO was justified in passing the assessment order hurriedly....
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....lf (appointed date of hearing) after taking necessary approval of Joint Commissioner under s.153D of the Act (involving 28 cases including 14 captioned appeals). In this context, it is the case of the assessee that firstly; the AO ought to have waited at least till the closure of the date of compliance i.e. 28.11.2016 and he could have passed only after that date; secondly, it is difficult to fathom that the AO would be able to prepare 28 draft orders in a span of 2-3 hours involving complex issues in search matters; and thirdly, it is yet more difficult to fathom that the superior authority could plausibly go through the assessment records and the draft assessment orders and grant an informed approval with objective application of mind to such draft orders in search matters (involving contentious and complex legal and factual issues) on the same day in a further squeezed time available to the JCIT. In short, it is the case of the assessee that the time available at the disposal of the AO is hardly 5-6 hours of the day after the lapse of the appointed time on the date of hearing. In this very short period, apart from all other routine work carried out, the AO has purportedly drafte....
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.... of the Act casts onerous responsibility on the superior authority to look into the draft assessment framed by the subordinate officer with some degree of objectivity. Apparently, the whole exercise of the AO in claiming to have prepared assessment orders in as many as 28 cases within a short time available (after 11:30 a.m.) and approval thereon by the JCIT and closure of the assessment on the same day is not judicially palatable. As also observed earlier, the AO has prepared the draft assessment order without even waiting for completion of that date of hearing is gross sub-version of the quasi-judicial process and such ipse-dixit conduct deserves to be deprecated. The superior authority performing the solemn duty to supervise the action of the AO claimed to have approved such large staked search matter in a spur of moment does not inspire any confidence in such hawkish supervisory process. When sequence of events are integrated and collated, the plea of the assessee that the whole exercise of the aforesaid revenue authorities are antedated cannot be refuted to be without any substance. The stand of the assessee that the assessment order in all probability is antedated to avoid....
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..... No reference to the assessment records also being sent together with the draft assessment orders is found in the order sheet. Communication/approval letter from JCIT is not placed before us by either side to examine this aspect. Considering these facts, the JCIT has presumably given approval while remaining oblivious of the assessment records. Notwithstanding aforesaid, the JCIT was expected to enquire into reply of the assessee in response to the questionnaire dated 21.11.2016 which was crucial and of utmost significance in the context of the allegations made by AO. JCIT however has summarily endorsed the action of the AO presuming no substance in replies allegedly filed without looking at it nor he could have seen such non-existent reply on 28.11.2016. Apparently, the approval granted by the JCIT, if any, suffers from inherent lack of application of mind on the draft assessment order and consideration of relevant assessment records. The purported approval so granted by the JCIT has been clearly reduced to an empty ritual rendering such approval to be invalid in the eyes of law. We also cannot loose sight of the fact that no minimal enquiry into the issues of substantial natu....
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....ermissible unless the entries are found to be credited in the books maintained by the assessee. Once the entries are found to be entered in the books of assessee, the addition under s.68 of the Act could not be made in unabated assessments in the absence of any contradictions emerging from incriminating documents unearthed in the course of search. No such reference has been made in the assessment order. The additions under s.68 of the Act has been made on the basis of credits appearing in financial statement annexed to TEP only which petition was received at a much later stage in the course of assessment post search. It was pointed out that a reference was, however, made to certain documents in the 'remand proceedings' before the CIT(A) at belated stage. The AO is not entitled to make radical changes in basis of assessment in the remand proceedings at belated stage. Without prejudice, a reference was made to the incriminating documents 'CMB-24' in the remand report is admittedly seized from the possession of other searched person namely 'Core Minerals' at Barbil. Seized documents marked as 'AK-01' was admittedly seized from 'Padam Kumar Jain'. Document marked (CMB-1) was seized ....
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.... in respect of concluded and unabated assessment is thus narrower in its sweep as held in long line of judicial precedents of different jurisdictions. 15.3.1 We shall first refer to the decision of Hon'ble Delhi High court in the case of Pr.CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Del). The Hon'ble Delhi High Court referred to the judgment in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del); Pr.CIT vs. Saumya Constructions Pvt. Ltd. (2016) 387 ITR 529 (Guj); Principal Commissioner of Income Tax-1 vs. Devangi alias Rupa 2017-TIOL-319 HC-AHM-IT; CIT vs. IBC Knowledge Park Pvt. Ltd. (2016) 385 ITR 346 (Kar); Pr. CIT-2 vs. Salasar Stock Broking Ltd. 2016-TIOL-2099-HC KOL-IT and CIT vs. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom), Reference was also made to another two decisions of Hon'ble Delhi Court in Pr. CIT vs. Mahesh Kumar Gupta 2016-TIOL-2994-HC-Del and the decision dated 7th February, 2017 in ITA Nos. 61/2017 and 62/2017 in the Pr, Commissioner of Income Tax-9 vs. Ram Avtar Verma where the decision in Kabul Chawla (supra) was followed. The Hon'ble Delhi High Court made an exhaustive reference to the decisions noted above and held that invocation of Section 153A....
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....eted assessments can be interfered with by the AO while making the assessment under s.153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents etc. The Hon'ble Gujarat High Court noted that the trigger point for exercise of powers under s.153A of the Act is a search under s.132 of the Act or a requisition under s.132A of the Act. Once a search or requisition is made, the mandate is cast upon the AO to issue notice under s.153A of the Act and complete the assessment of 6 assessment years. The Hon'ble Gujarat High Court took note of the fact that object of scheme legislated for assessment in search cases is to bring to tax the undisclosed income which is found during the course of or pursuant to search or requisition and therefore additions/disallowances must be linked with search/requisition. It was noted by the Hon'ble Court that additions made on the basis of some materials collected by the AO much subsequent to the search is not permissible. 15.3.4 Similar view has been expressed in catena of decisions viz; Pr.CIT vs. Deepak J. Panchal (Guj) 397 ITR 153 (Guj); Chetnaben J. shah vs. ITO Tax Appeal No. 143....
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....he decision of Hon'ble Allahabad High Court in case of Rajkumar Arora (supra). 15.5 In summation, in the light of the aforesaid overwhelming legal precedents as laid down by the Hon'ble Bombay High Court, Delhi High Court & Gujarat High Court as also various benches of Tribunal, the correct legal position in respect of the assessments under s.153A of the Act may be summarized as follows: (i) the scope of assessment under s.153A of the Act is limited to the incriminating evidence found during the search and no further in so far as unabated assessments are concerned; & (ii) unless there is incriminating material qua each assessment years to which additions are sought to be made in respect of concluded assessments, the assessment under s.153A of the Act by making additions/disallowances would be vitiated in law. 15.6 As discussed in length, the issue has been dynamic and a matter of legal interpretation. We are governed by the schematic interpretation given to provisions of Section 153A of the Act by different Hon'ble Courts. In the light of judicial fiat reading down the scope and spectrum of assessment under s.153A of the Act in narrower compass, the position of law is explici....
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....s for the purposes of making various additions/disallowances. Additions/disallowances made in assessments framed under s.153A of the Act in respect of captioned assessees pertaining to AYs. 2009-10 to 2012-13 are thus required to be quashed on this score too. The assessments/re-assessments pending on the date of search i.e. AY 2013-14 to 2015-16 which stood abated by operation of law will however be governed by normal assessment powers under s.153A of the Act. 16. We shall now advert to the correctness of various additions made in AYs. 2013-14 to 2015-16 on merits. 16.1 Notwithstanding the view expressed in para 14 (supra) that the assessment order is predated and therefore no maintainable coupled with the observations that the assessment orders are not maintainable also on the ground that the approval of the JCIT is mechanical and perfunctory and further observations in para 15 (supra) that the additions/disallowances made in each unabated assessments for AY 2009 10 to 2012-13 are also not maintainable otherwise due to failure of the Revenue to discharge its burden towards presence of incriminating material as result of search on assessee, we are however also inclined to dea....
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.... Act. Having regard to the decision of Hon'ble Gujarat High Court in the case of CIT vs. Daisy Packers Pvt. Ltd. 220 Taxman 331 (Guj.); CIT vs. Ankitech Private Ltd. (2012) 340 ITR 14 (Del.) and CIT vs. Madhur Housing And Development Company in Civil Appeal No. 3961 of 2013 & Ors. judgment dated 05.10.2017, the additions under the deeming fiction of Section 2(22)(e) of the Act requires to be deleted on this first parameter itself i.e. the assessee not being shareholders of the lender company cannot be taxed under s. 2(22)(e) of the Act. 16.5 We also observe here that there is a considerable force in the alternative argument raised on behalf of the assessee that while considering accumulated profits of the company for the purposes of additions under s.2(22)(e) of the Act for the assessment years in question, the payment made by the lender company which stood disallowed in the earlier years is required to be adjusted and consequently, accumulated profits of the lender company would stand reduced to the extent of disallowances carried out by the AO in the earlier assessment years. When a loan by a company to a shareholder in the manner set out in section 2(22)(e) is treated as a de....