TaxTMI 
TaxTMI 
2020 (3) TMI 962
X X X X Extracts X X X X
X X X X Extracts X X X X
...."the Act") by Deputy Commissioner of Income Tax, Central Circle 1(1), Mumbai being Learned Assessing Officer, ("hereafter Learned AO") and confirmed by Learned Commissioner of Income Tax (Appeals) -47, Mumbai (" hereafter Learned CIT-A") is bad in law as the provisions of Section 153A are not applicable for A.Y. 2013-14. In view of this the appellant prays that the order passed by Learned CIT-A by invoking the provisions of Section 153A and making total addition of Rs. 7,54,61,917/- in respect of nine parties being principal loan amounting to Rs. 6,87,00,000/- and interest on loan amounting to Rs. 67,61,917/- may be cancelled. 2. On the facts & circumstances of the case the appellant prays that, during the course of search no incrementing material is found or seized in connection with the loans taken by the appellant from various parties. The assessment for A.Y. 2013-14 was completed and no proceedings were pending as on date of search. Based on these facts the appellant prays that the order passed by Learned CIT-A by invoking the provisions of Section 153A and making total addition of Rs. 7,54,61,9177- in respect of nine parties being principal loan amounting to Rs. 6,87,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs. 6,87,00,000/- being the amount taxed by the Learned AO and confirmed by Learned CIT-A U/s 68 of Income Tax Act, 1961. The appellant prays that the addition confirmed by Learned CIT-A amounting to Rs. 6,87,00,0007- is not justified be deleted. 8. On the facts & circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken from Carelink Vyapar Private Limited amounting to Rs. 33,00,000/-. The Learned CIT-A has ignored the evidences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 9. On the facts & circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken from Chetna Suppliers Private Limited amounting to Rs. 80,00,000/-. The Learned CIT-A has ignored the evidences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 10. On the facts & circumstances of the case the Learned CIT-A erred in c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 16. On the facts & circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken from Welon Advisory Services Private Limited amounting to Rs. 81,00,000/-. The Learned CIT-A has ignored the evidences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 17. On the facts & circumstances of the case the appellant prays that the Learned CIT-A has erred in confirming the provisions of Section 69C of the Act in respect of gross interest payment of Rs. 67,61,917/-. The appellant prays that the addition confirmed by the Learned CIT-A is not justified be deleted. 18. On the facts & circumstances of the case the Learned CIT-A has erred in confirming the disallowance in respect of interest paid to Carelink Vyapar Private Limited amounting to Rs. 3,49,348/- by invoking the provisions of Section 69C of the Act. The appellant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respect of interest paid to Tristar Agencies Private Limited amounting to Rs. 8,88,789/- by invoking the provisions of Section 69C of the Act. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 26. On the facts & circumstances of the case the Learned CIT-A has erred in confirming the disallowance in respect of interest paid to Welon Advisory Services Private Limited amounting to Rs. 8,78,926/- by invoking the provisions of Section 69C of the Act. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 27. The Learned CIT-A has erred in confirming the levy of interest U/s 234B at INR. 1,12,38,734/-. The appellant denies the liability of payment of interest U/s 234B. On the facts & circumstances of the case the appellant submits that levy of interest U/s 234B at INR. 1,12,38,734/- is not justified and be deleted. 28. Without prejudice to ground number 27, appellant prays that interest U/s 234B may be calculated after considering the tax liability based on decision of appellate authority. Although the assessee has raised multiple grounds of appeal, but in su....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dent firm stated to be engaged in construction activities was subjected to an assessment u/s 143(3) r.w.s. 153A on 29/12/2016 wherein the income of the assessee was determined at Rs. 1212.96 Lacs after certain addition u/s 68 for Rs. 1107 Lacs & disallowance of interest for Rs. 104.95 Lacs as against returned income of Rs. 1 Lac e-filed by the assessee on 20/09/2013. 2.2 Pursuant to search operations conducted by DDIT(Inv.), Unit-IV(2), Thane on Balaji group of cases on 28/01/2015, the premises of the assessee situated at V-Time Square, Level-13, Plot No.3, Sector-15, Palm Beach Road, CBD Belapur, Navi Mumbai was also covered. Accordingly notice u/s. 153A was issued on 18/05/2016. In response, the assessee filed return of income on 13/06/2016 declaring total income of Rs. 1 Lacs which was similar to regular return filed by the assessee on 20/09/2013. The notices u/s 142(1) were issued in due course calling for requisite details and information. 2.3 During the course of search and seizure action, it was observed that assessee obtained unsecured loans from various corporate entities from as many as 18 entities. The statement of one Shri Nitin Gajipara, who was having a major sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee well before the date of search i.e. 28/01/2015. A chart giving complete details of 18 entities and documents submitted in support of the stated loans aggregating to Rs. 1107 Lacs was also placed on record It was submitted that all the entities had sufficient net worth to advance the loans to the assessee. The payments were though banking channels. The transactions were duly reflected in their respective audited financial statements. There was no immediate cash deposit in the bank accounts. The loans were already repaid by the assessee well before the date of search. On the strength of these documents and submissions, the assessee submitted that it had demonstrated the fulfilment of primary ingredients of Sec.68 and therefore, the proposed additions were not justified. 2.7 The assessee also submitted that the only evidence being relied upon by Ld. AO to make impugned additions in the hands of the assessee was the statement of Shri Nitin Singhania and apart from the said statement, there was no evidence on record to prove that the transactions were not genuine. Even if the statement was relied upon, there was no direct evidence of the allegation that the cheques were rece....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he factual matrix and the additions were unsustainable. 2.13 However, these arguments could not convince Ld.AO, who going by the investigation carried out by DDIT (Inv.) added the amount of Rs. 1107 Lacs in the hands of the assessee as unexplained cash credit u/s 68. The returned income and quantum of share premium held by all these entities have been extracted in para 3.5 & 3.10.2 of the quantum assessment order. Consequently, the interest of Rs. 104.95 Lacs paid by the assessee against aforesaid loans was also disallowed. 3.1 Aggrieved, the assessee contested the action of Ld. AO on legal grounds as well as on merits. On legal grounds, the assessee submitted that since no incriminating material was found and the assessment had not abated and therefore, the impugned additions were unsustainable. The assessee's submissions have been extracted on page nos. 22 to 37 at para 8.0 of the impugned order. Upon perusal, we find that the assessee's submission, in sum and substance, were the same as submitted before Ld.AO. The assessee, inter-alia, submitted paper books containing 843 pages and assailed the addition by reiterating that in the absence of any incriminating material, no a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 68 as well as consequential interest disallowance. The revenue is similarly aggrieved by deletion of part additions u/s 68 as well as deletion of consequential interest disallowance. 4. The Ld. Authorized Representative, at the outset, submitted that it is an admitted fact the no incriminating material was found during the course of search proceedings on assessee on 28/01/2015. The assessment for year under consideration was not pending on the date of search and the time limit for issue of scrutiny notice u/s 143(2) had already expired on 30/09/2014. Therefore, the binding case law of Hon'ble Bombay High Court rendered in CIT Vs. Continental Warehousing Corporation [2015 374 ITR 645] was squarely applicable to the fact of the case and therefore, no addition could be made in the hands of the assessee. For the submission that third-party statement post search proceedings could not be termed as incriminating material for the purpose of Sec.153A, reliance was placed on the decision of this Tribunal rendered in cross-appeals for AYs 2009-10 & 2010-11 in the case of PKSS Infrastructure Pvt. Ltd., ITA Nos.5680/Mum/2018 & ors., common order dated 29/11/2019. A copy of the same has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovision. Therefore, there being no assess-ment under section 143(1)(a), the question of change of opinion, as contended, does not arise. Therefore, Ld.CIT-DR submitted that full additions were to be sustained in the hands of the assessee. 6. We have carefully heard the arguments advanced by both the representatives. We have also perused relevant material on record including documents placed in the paper-book. We have deliberated on various judicial pronouncements as cited before us during the course of hearing. The report of Ld.AO qua material found during the course of search proceedings has been gone through and considered. Our adjudication to the subject matter of cross-appeal would be as given in succeeding paragraphs. 7. Upon perusal of impugned order, we find that Ld. CIT(A) has confirmed the additions by treating the third-party statement of Shri Navneet Singhania to be incriminating in nature and in the process, relied upon certain judicial pronouncements as enumerated in para 12.3 to 12.5 of the impugned order. These case laws are the decision of Hon'ble Apex Court in B.Kishore Kumar V/s CIT (234 Taxman 771), the decision of Hon'ble Kerala High Court in CIT V/s St....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Act vide letter dated 15.05.2014. These shares certificates were lying with the Secretary's Office for Demat. Now, the question arises the statement recorded under section 132 of the Act of Shri Pravin Kumar Aggarwal and Ram Pal Soni during the course of search, which were later on retracted by the respective persons, can be considered as incriminating material for the purpose of framing under section 153A of the Act. This has been answered by coordinate Bench of this Tribunal in the above cited two case laws namely; Agson Global Pvt. Ltd. Vs. ACIT in ITA No. 3741 to 3746/Del/2019 & Ors. dated 31.10.2019 & DCIT vs. Smt. Shivali Mahajan & Ors. in ITA No. 5585/Del/2015 vide order dated 19.03.2019. In both the judgments, the issues raised by the lower authorities that share certificates and the statement recorded during the course of search can be considered as incriminating material, has been answered and answered in favour of assessee that these two cannot be considered as incriminating material on standalone basis. Once, the assessment was completed and has not abated for relevant AY and there is no incriminating material found during the course of search, no assessment can be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... unearthed during the course of search. The relevant portion of the judgment reads as under: - "31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Special Bench in that regard held as under:- "The provision under section 153A is applicable where a search or requisition is initiated after 31.5.2003. In such a case the AO is obliged to issue notice u/s 153A in respect of 6 preceding years, preceding the year in which search etc. has been initiated. Thereafter he has to assess or reassess the total income of these six years. It is obligatory on the part of the AO to assess or reassess total income of the six years as provided in section 153A(1)(b) and reiterated in the 1st proviso to this section. The second proviso states that the assessment or reassessment pending on the date of initiation of the search or requisition shall abate. We find that there is no divergence of views in so far as the provision contained in section 153A till the 1st proviso. The divergence starts from the second proviso which states that pending assessment o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments and their fate depends upon subsequent orders in appeal. On consideration of the provision and the submissions, we find that this provision also makes it clear that the abatement of pending proceedings is not of such permanent nature that they cease to exist for all times to come. The interpretation of the Ld. Counsel, though not specifically stated, would be that on annulment of the assessment made u/s 153(1), the AO gets the jurisdiction to assess the total income which was vested in him earlier independent of the search and which came to an end due to initiation of the search. The provision contained in section 132 (1) empowers the officer to issue a warrant of search of the premises of a person where any one or more of conditions mentioned therein is or are satisfied, i.e. - a) summons or notice has been issued to produce books of account or other documents but such boo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under subsection (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....total loss of Rs. 2,70,85,105/-. That return was proposed under Section 143(1) of the IT Act accepting the loss returned by the respondent. A notice was issued under Section 148 of the IT Act on the ground that the claim of bad debts as expenditure was not acceptable. On 12th May, 2004, a return of income declaring the loss at the same figure as declared in the original return was filed by the respondent-assessee under protest. A copy of the reasons recorded was furnished by the Revenue on the request of the assessee sometime in November, 2004. The assessee raised various objections, both on jurisdiction and the merits of the subject matter recorded in the reasons. The Revenue disposed of these objections on 4th February, 2005 holding that the initiation of reassessment proceedings was valid and it had jurisdiction to undertake such an exercise. The notice under Section 148 of the IT Act dated 12th May, 2004 was challenged by the respondent-assessee. 23. That Writ Petition was allowed and hence, the Revenue was in Appeal. 24. Mr. Ahuja's argument overlooks this factual aspect and when he relies upon the observations of the Hon'ble Supreme Court, and partic....