TaxTMI 
TaxTMI 
TaxTMI 
2019 (4) TMI 1906
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.... of the assessee. With this background, we summarize and concise the grounds raised by the assessee as follows: (i). Ground Nos. 1 to 8 raised by the assessee are interlinked and common, which relate to addition made by assessing officer of Rs. 50 lakhs under section 68 of the Act, whereas no proceedings were pending before the assessing officer on the date of search and no incrementing material was found/unearthed by the search team (ii). Ground No.9 relates to the commission charged @ .5% on (such share application money of Rs. 50 lakhs), transaction at Rs. 25,000/- u/s.69C of the Act. 3. Now, we shall take summarize and concise ground raised by the assessee, which reads as follows: (i). Ground Nos. 1 to 8 raised by the assessee are interlinked and common, which relate to addition made by assessing officer of Rs. 50 lakhs under section 68 of the Act, whereas no proceedings were pending before the assessing officer on the date of search and no incrementing material was found/unearthed by the search team. 4. The facts of the case which can be stated quite shortly are as follows: The assessee is a Limited company engaged in textile business. It is one of the group companies ....
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.... to whether they were incriminating or not. Therefore, in absence of any incriminating material being found in connection to the assessee, the addition of Rs. 50,00,000/- in garb of unexplained cash credit u/s 68 of the Act, made by the ld AO in the impugned assessment order is wholly untenable in law and on facts of the case. (c) It was also specifically submitted by the assessee that in absence of any incriminating material or document found during the course of search, the Assessing Officer cannot make additions/disallowances in the assessments u/s 153A/143(3) of the Act for the unabated years, that is, assessments were completed before the date of search. Based on these submissions, the assessee prayed before the ld CIT(A) that additions made by assessing officer should be deleted. However, ld CIT(A) rejected the contention of the assessee and upheld the additions made by the Ld AO u/s 68 and 69C of the Act by stating that the assessee had raised objections only on technical grounds, that is, the additions were not based on incriminating materials. 6. Aggrieved by the order of ld CIT(A), the assessee is in appeal before us. 7. Before us, ld Counsel for the assessee begins ....
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.... 6) Mr. Keshav Kumar Bubna, the Director of the assessee company (BSL) and is the prima donna of the Bubna Group. He had admitted on oath that the assessee company was not having any business, earlier they were into textiles. (7)Company had issued shares (F.V.10+30 Premium) to two shares subscribing companies (SSCO), thus the premium of Rs. 30 is not based on commercial expediency, in which no prudent person/ company would invest. As on 31/03/2010 Banktesh Synthetic limited, the assessee co. had allotted shares to two (2) share subscribing companies with face value of Rs. 10 with Premium of Rs. 30 total Rs. 40 each per share. It is against the human probability that anyone will invest and Pay Rs. 10/- along with share premium of Rs. 30/- per share without having any future prospect of the earning by the company. It would be pertinent that assessee company BSL had discontinued its earlier business as mentioned by the director of assessee company Mr. Keshav Kumar Bubna (KKB), The current directors haven't been able to justify, why the shares were priced at high premium of Rs. 30/- per share, without corresponding valuation of the company, which was already experiencing dow....
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....hereafter, an assessment u/s 153A/143(3) of the Act was completed on 31.12.2017 assessing the total income at Rs. 56,23,550/-. In the Assessment Order, the Ld ACIT, Central Circle-3(2), Kolkata (AO) made addition u/s 68 of the Act on account of share capital, to the tune of Rs. 50,00,000/-. We note that on the basis of the search conducted on 29.05.2012, the assessee's assessment stood completed u/s 153A/ 143(3) of the Act, on 30.03.2015. We note that again, during the course of second search operation conducted on 02.03.2016, no documents pertaining to the assessee was found and/or seized, that is, there were no any incriminating material found or unearthed during the search. Therefore, in absence of any incriminating material being found in connection to the assessee, the addition of Rs. 50,00,000/- in garb of unexplained cash credit u/s 68 of the Act, made by the ld AO in the impugned assessment order is wholly untenable in law and on facts of the case. Thus, we note that in absence of any incriminating material or document found during the course of search, the Assessing Officer cannot make additions/disallowances in the assessments u/s 153A/143(3) of the Act for the unab....
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....isclose franchise income, addition made by Assessing Officer was unjustified - Whether SLP against said decision was to be dismissed - Held, yes [Para 2[ [In favour of assesse]. " We note that it is by now well settled that in absence of any incriminating material or document found in the course of search, the Assessing Officer cannot make additions/disallowances in the assessment u/s 153A/143(3) of the Act of the years for which assessments did not abate. It is submitted by ld counsel before us that the earlier assessment of the assessee for A.Y. 2010-11, was earlier made u/s 143(3)/153A of the Act. As such assessment for that year did not abate. The Investigation Wing of the Income Tax Department, Kolkata carried out search operations under Section 132 on the Bankatesh Group on 01.03.2016. In the course of search documents bearing identification mark BC/l to BC/6, BUL/1 to BUL/5 and AB/l were seized and impounded by the Investigating Authorities. From the said statement it shall be observed that none of documents seized by the Investigating Authorities pertained to the assessee, that is, there were no incriminating material. From the details placed on record it is crystal clear....
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....during the appellate proceedings. In this case there was a search operation u/s 132 on the assessee company. Thereafter notices u/s 153A were issued inter alia including for AYs 2007-08 & 2008-09, whose assessments had not abated on the date of search. In the assessments framed u/s 143(3)/153A for A.Y. 2007-08 & 2008-09, the AO made additions u/s 68 with regard to share capital raised by the assessee in those respective years. The AO observed that the assessee had inflated expenses by making bogus payments and these unaccounted monies were thereafter routed back into the company in form of share application monies. On appeal, the assessee challenged the validity of the assessment framed u/s 153A in absence of any incriminating material found in the course of search. The CIT(A) remanded the matter to the AO and required him to clarify as to whether the addition was made with reference to any incriminating material. After perusing the remand report, the CIT(A) observed that although no direct evidences were found in the course of search but the fact that evidences were found that assessee had inflated expenses could be treated as indirect evidences with regard to addition made on acc....
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....k accounts. These documentary evidences proved the identity of the share applicants, the genuineness of the transactions and creditworthiness of transaction with each share applicant. In the circumstances the impugned addition made by the AO was wholly untenable and deserves to be deleted. 13. We note that assessee`s issue under consideration is also covered by the judgment of the Coordinate Bench of ITAT, Kolkata in the case of M/s Garg brothers Pvt Ld & others, in ITA No. 2519, 2520 & 2521/Kol/2017, for A.Y.2009-10, order dated 18.04.2018, wherein a search and seizure operation under the provisions of section 132(1) of the Act was conducted on Banktesh Group on 29.05.2012 and subsequent dates. The assessee is part of the Banktesh Group. On similar facts, the Coordinate Bench of Kolkata, quashed the order of Pr.CIT under section 263 of the Act. The detailed findings of the coordinate Bench are given below: "51. We note that on 02.03.2016 another search and seizure operation was conducted on assessee (hereinafter termed as "second search"). Thereafter, impugned action of Pr. CIT started by issuance of a show-cause notice dated 04/09.11.2016 calling upon the assessee as to why th....
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....plication of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue'' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue "unless the view taken by the Assessing Officer ....
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....ted to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word `assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word `reassess' to completed assessment proceedings. vi.Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record the AO. vii.Completed assessment can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of property discovered in the course of search which were not produced or not already disclosed or made known in the course of original a....
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.... iv) CIT Vs.Deepak Kumar Aggarwal (2017) 398 ITR 586 v) Principal CIT Vs.DipakJashvantalaPanchal (2017) 397 ITR 253. vi) Principal VIT vs.Lalit Jain (2017) 384 ITR 543 vii) Pr.CIT vs. Dvangi Alias Rupa (2017 394 ITR 184 viii) Chintels India Ltd Vs. DCIT (2017) 397 ITR 416 ix) Smt. Anjli Pandit Vs. ACIT (2017) 157 DTR (Mum) (Tri.) 17 x) Pr.CITVs.MeetaGutgutia (2016)395 ITR 526. 55. In view of the aforesaid ratio decidendi of the Hon'ble High Court as well as Hon'ble Supreme Court's decisions cited above, since assessment for Assessment Year 2009-10 was not pending before the Assessing Officer on the date of search i.e. on 29.05.2012 (first search), no addition can be made by the Assessing Officer without the aid of incriminating material unearthed during the search conducted on 29.05.2012. Therefore, we have to examine whether there was any incriminating materials unearthed by the Department during search conducted on 29.05.2012 (first search). We have gone through the assessment order of Assessing Officer in all the counts before us and we find that the Assessing Officer has not made a whisper of any incriminating material which has been unearthed/seized during first ....
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....pital and premium to the tune of Rs. 10.40 crore. During the assessment proceeding, the assessee furnished the list of investors who subscribed in shares of the assessee company. The assessee furnished the supporting documents regarding share transactions of investor companies. But no detailed investigation was carried out at the time of assessment regarding genuineness of introduction of share capital. Meanwhile a search operation against Banktesh group was once again conducted on 02.03.2016 by DDIT(lnv.), Unit 2(2),Kol. During the course of search & post search investigation it was found that accommodation entries in the form of bogus share capital have been taken by different group of companies by the said Group with the help of different known accommodation entry operators. The allotment of shares made by the above assessee amounting to Rs. 10.40 crore. On 31.09.2009 is one of the transactions found as accommodation entry by the Investigation wing. The allottee companies were found to be bogus and non-existing. The statements of entry operators were also recorded during the search & seizure operation which confirmed the findings of the Investigation Wing. The entry operators ....
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....that in lieu of commission they provided accommodation entry in the form of share capital/premium to the Banktesh Group of Companies (ix) In view of the aforesaid facts, the Pr. CIT is of the view that assessment completed on 30.03.2015 may be erroneous in so far as it is prejudicial to the interest of the Revenue. 59. Further, we note that pursuant to the aforesaid SCN, the assessee's replied to the Pr. CIT, extracts of which has been reproduced by the Principal CIT in the impugned order before us. In the impugned order, we note that the Principal CIT has added only the list of shareholders to whom the shares were allotted. In other words, other than the factual contents given in the SCN issued by him (supra), only the list of shareholders are reproduced by the Principal CIT in his order. In the impugned order of Principal CIT, after reproducing certain extracts of the reply of the assessee and judicial precedents, we note that the Principal CIT without giving any factual finding or reasoning as to how the order of the AO can be held to be erroneous in so far as it is prejudicial to the interest of Revenue has simply without adducing any new facts other than what has been stat....
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....rch (first) on 29.05.2012. It is very important to take note of the Hon'ble Delhi High Court in Kabul Chawla case (supra) wherein on a similar situation laid the law as under: v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word `assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word `reassess' to completed assessment proceedings. 61. So from the aforesaid dictum of law laid by the Hon'ble High Court in the absence of any incriminating material unearthed during first search on 29.05.2012, we have no hesitations to hold that for A.Y 2009-10, the AO could have only reiterated the assessment intimated u/s 143(1) of the Act, because the time for issuance of scrutiny notice u/s 143(2) expired on 30.09.2010 and the assessment for this relevant assessment year, therefore, was not pending before the AO on the date of search on 29.05.2012 and, therefore, is an unabated assessment. Therefore, as per the law laid down by the Hon'ble High Court, the AO could not have disturbed the assessment already existing without the aid of incri....
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....lected by the investigation wing a year before i.e. on 30.03.2015 when the assessment order was framed by AO after the fallout of first search conducted on 29.05.2012. 64. From the facts narrated above, we note that it is not the case of the Principal CIT that Assessing Officer failed to take into consideration any incriminating material unearthed during first search on 29.05.2012 and has failed to make any investigation on it or make any additions / disallowances thereon. The case of the Principal CIT is simply that during second search on 02.03.2016, the investigation wing has found fault with the share capital raised by the assessee company for Assessment Year 200910. It should be noted that the Assessing Officer has framed assessment u/s 153A on 30.03.2015 as per the law laid down by the Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla (supra) and other High courts/Apex Court as stated above which according to us is the correct view or at the most can be definitely termed as a plausible view. Therefore, the view taken by the Assessing Officer cannot be held to be erroneous order and prejudicial to the interest of the revenue as held by the Hon'ble Supreme Court in....
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..... Having held that the scope of the proceedings u/s.153A in respect of assessment year for which assessment have already been concluded and which do not abate u/s.153A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search, the question to be decided is as to whether the proceedings u/s.143(1) of the Act can be said to be assessment proceedings concluded that have not abated u/s.153A of the Act" Section l53A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and acknowledgement or intimation issued u/s.143(1), the proceedings initiated by filing the return are closed, unless a notice u/s 143(2) of the Act is issued. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed under section 143(1) of the Act, thereby resultin....