TaxTMI 
TaxTMI 
2020 (12) TMI 350
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....llowing grounds:- "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee's ground of appeal for quashing the order made u/s 153A when first proviso to section 153A clearly mandates AO to assess or re-assess total income or each year falling within section 153A(l)(a)? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that no addition which is not based on any incriminating material found during the course of search on the assessee's premises could be made u/s 153A in this case? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,18,35,125/- on bogus exempt long term capital gains on sale of shares of Chandni textiles & Engineering Ltd when the purchases were not through stock exchange, were off-market preferential allotment, the prices of scrip were raised exponentially and entire transaction was shown to be a non-genuine transaction? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made of Rs. 12,....
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....of the reassessment proceeding under Section 143(3) r.w.s. 153A of the Act on prural grounds. Since maintainability of the reassessment proceeding has been raised by the assessee, at the threshold of the matter, we would like to address the same. The short fact involved in the particular case is that the assessee engaged in the activity of purchase and sale of shares, also having income from other sources, claimed exempt long term capital gain under Section 10(38) of the Act to the tune of Rs. 12,18,35,125/-. Such gain has been derived from sale of shares of Chandni Textiles & Engineering Ltd. The assessee was allotted shares from company management on 03.11.2009 for a total consideration of Rs. 1,60,00,000/- which was held for a period of 15 months and finally sold during the period commencing from 29.01.2011 to 04.02.2011 for Rs. 13,78,35,125/- resulting into capital gain of Rs. 12,18,35,125/-. In fact a search was carried out at the premises of H. N. Safal Group and at the premises of one Shri Shrish C Shah (hereinafter refer to Shri Shah), well known as accommodation entry providers. Since the assessee belongs to the H. N. Safal Group consequential assessment proceedin....
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....arch/survey at the premises of Shirish C. Shah, never referred any single incriminating material found during the course of search at appellant's premises as also pointed out by the Ld. AR. Further that it is an admitted position that the appellant had already filed her original return of income on 20th September, 2011 and the time limit for issuance of notice under Section 143(2) in this facts and circumstances of the case had already expired on 30th September 2012. The assessment indeed remained unabated. On the basis of the such fact the Ld. AR contended that in the absence of any incriminating material the completed assessment cannot be reassessed. In support of his argument the Ld. Senior Counsel relied upon the judgment passed by the Hon'ble Delhi High Court in the matter of Commissioner of Income Tax (Central)-III vs. Kabul Chawla reported in [2015] 61 taxmann.com 412 (Delhi). He further relied upon the judgment passed by the Hon'ble Jurisdictional High Court in the matter of CIT vs. Saumya Construction Pvt. Ltd. in Tax Appeal No. 24 of 2016 dated 14th March 2016. On the contrary the Ld. DR submitted that such funds were routed to the beneficiaries in the guise of share capi....
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....rch is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 3lst day of May, 2003, the Assessing Officer shall- (a) 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; (b) 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: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six as....
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....in terms of said second proviso, the assessment therein under Section 153A will be made on the basis of incriminating material found in the course of search and undisclosed income or property discovered in course of search. In the absence of any incriminating material the completed assessment cannot be reassessed to make addition. 8. In this regard, we have considered the judgment relied upon by the Ld. AR in support of his case passed by the Hon'ble Delhi High Court in the case of CIT (Central)-III vs. Kabul Chawla reported in [2015] 61 taxmann.com 412 (Delhi) relevant portion whereof is as follows:- "On a conspectus of section 153A(1), read with the provisos thereto, and in the light of the law explained in various decisions, the legal position that emerges is as under: Once a search takes place under section 132, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income f....
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....riminating material was unearthed during the search, no additions could have been made to the income already assessed. (Para 38] The revenue's appeals are accordingly dismissed. [Para 40] "" 9. While discussing with the power to be exercised by the AO in the absence of any incriminating material found during the course of search the Hon'ble Court in the said judgment further discussed the following:- "34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under; "26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in ....
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....s pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisit....
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.... relied upon the judgment passed by the jurisdictional High Court in the case of PCIT vs. Sunrise Finlease Pvt. Ltd. reported in 89 taxmann.com 1 (Guj.) and the judgment passed by the Honb'ble Tribunal, Calcutta Bench in the case of Krishna Kumar Singhania vs. DCIT, reported in 88 taxmann.com 259(2017)(Kol Trib.). 13. We have further considered the said judgment passed by the jurisdictional High Court in the case of PCIT vs. Sunrise Finlease Pvt. Ltd. reported in 89 taxmann.com 1. The relevant portion whereof is as follows:- "Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Condition precedent) - Assessment year 2007-08 - Whether where no incriminating evidence against assessee was found during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of material collected after search - Held, yes - Whether since no incriminating evidence against assessee was found or seized during course of search so as to attract provisions of section 153A proceedings, no additions could be made on basis of statement of director of assessee company which was recorded." Thus it appears from the....
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....ceed on the assessee herein in terms of section 153C. In this regard, one would like to place reliance on the recent decision of the Delhi High Court in the case of CIT v. Pinaki Misra & Sangeeta Misra [2017] 392 ITR 347, wherein it was held that, no addition could be made on the basis of evidence gathered from extraneous source and on the basis of statement or document received subsequent to search. Hence, the said materials cannot be used in section 153A against the assessee. This opinion is given without going into the merits and veracity of the said seized documents implicating the assessee herein. [Para 10] Hence now the only issue which is left to be addressed is the preliminary issue of whether the addition could be framed under section 153A in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search, the scheme of the Act provides for abatement of pending proceedings as on the date of search. It was not in dispute that the assessment for the assessment year 2009-10 was not selected for scrutiny and the time limit for issuance of notice under section 143(2) had expired and hence it false under concluded pro....
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....und in the course of search from the premises of the assessee. Since the issue is addressed on preliminary ground of absence of incriminating materials, one refrains to give findings on the merits of the additions for the assessment year 2009-10. Accordingly, the preliminary ground raised by the assessee in this regard is allowed. [Para 10.8]" 15. The Ld. Tribunal thus has been pleased to observe that in the absence of any incriminating material found from the premises of the assessee during the course of search, addition made by the AO under Section 153A of the Act in unwarranted and the same deserve to be deleted. 16. After taking into consideration the entire facts we find that the addition has been made based upon the search carried out at the premises of Shirish C. Shah and documents found during such search. Thus, such documents as relied upon by the Ld. AO found from the premises of Shri Shah and not from the assessee are the dumb documents and addition on such basis in the garb of Section 153A is not sustainable in the eye of law. We further note that the loose papers or statement recorded during the course of search/survey at Shri Shah as only relied upon; no refe....
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....vived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment failing within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub- section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provisio....
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....Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K, Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other....
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....r of income-tax-1 v. Jayaben Ratiiai Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed." It is observed that in case before Hon'ble Gujarat High court, facts of the case were as under: "During the course of assessment proceedings, it was noticed that the assessee had paid Rs. 11,05,51,000/- to one Shri Rohit Modi in respect of the land situated at Shilaj, Taluka Daskroi (known as Tapovan land) (which was transacted by The Sandesh Ltd. as confirming party, M/s Saumya Construction Pvt. Ltd- as third party and Aryaman Co-operat....