TaxTMI 
TaxTMI 
TaxTMI 
2022 (3) TMI 661
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.... account of share capital in order u/s 154 of IT. Act 1961 which was deleted by herself by following the decision of Hon'ble ITAT in case of associate company. 5. The addition made by A.O. u/s 68 in assessment framed u/s 143(3) r.w.s. 153A in absence of any incriminating material found during the course of search deleted in appeal and now restored by Hon'ble CIT(A) in order u/s 154 is unjustified, unwarranted and bad in law. 6. The learned CIT(A) erred in not considering the additional evidences placed in appellate proceedings while upholding the addition in order u/s 154. 7. The Hon'ble CIT(A) ought to have held that assessee has discharged its onus to explain share capital on the basis of legal evidence on record and thus addition confirmed by Hon'ble C1T(A) in order u/s 154 of IT. Act 1961 is unjustified and unsustainable. 8. The order passed by A.O. u/s 143(3) r.w.s. 153A of IT. Act 1961 is illegal, invalid and bad in law. 9. The learned A.O. erred in not setting off the addition made in the assessment framed at Rs. 22,69,397/- with the net loss assessed in assessment framed at Rs. 54,36,891/-. 10. The Hon'ble CIT(A) erred in upholding the action....
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.... dismissed by the ITAT vide its order dated 19.06,2019. In view of this, the ground no. 2 of assesssee's appeal is allowed. 5.2. Grounds No, 1,3 to 6:-Since Ground No. 2 is allowed above, other grounds become academic in nature and do not need adjudication as they all individually relate to issue of addition of Rs. 22,69,397/- u/s. 68. 5.3. Ground No. 7:- This ground is general in nature and infructutous. 6. In the result, the appeal of the assessee is allowed for statistical purposes." 2 APPELLATE DECISION GIVEN IN THE ABSENCE OF CRUCIAL FACTS:- The perusal of the appeal order passed on 31.10.2019 clearly showed that the crucial relevant facts relating to information received by AO in the form of New Information regarding non-verifiable nature of ultimate beneficiaries of two Mauritius based companies on the basis of enquiry through FTTR Division of CBDT, was not considered, which was basis of addition of Rs. 22,69,397/- u/s. 68 in the impugned order passed u/s. 143(3) r.w.s. 153A. Therefore, in the total absence of consideration of the New Information received through FTTR, the appellate decision taken vide order dated 31.10.2019 had mistake apparent from record as ....
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....der with Hon'ble C.I.T. (Appeal)-24, Mumbai. The said appeal was decided by Hon'ble CIT (Appeal)-24 in favour of the LRPL vide order dated 29/07/2016. A copy of the order is forming part of the paper book dated 12/11/2O18 as "Annexure 193-208 ". The department had gone in second appeal with Hon'ble I.T.A.T, Mumbai. The said appeal has been decided by Hon'ble I.T.A.T. Mumbai against the department. In other words, the department's appeal has been dismissed and therefore the order of CIT (Appeal}-24 in the case of LRPL has been confirmed. A copy of the order of Hon'ble IT.A.T. dated 19/O6/2019 in the case of LRPL for AY 2012-13 have been submitted to your Honour vide Appellant's submission dated 25/07/2019 as "Annexure 1" ). 4. Further , in the case of the said group company i.e. Luxora Realtors Pvt. Ltd (LRPL) , for the AY 2O13-14 vide order dated 09/03/2017, the than assessing officer (A.C.I.T.-15(2)-l, Mumbai) made addition of issued and paid up Share Capital (Including Share Premium) received from Aanya Properties (1) Ltd (a Mauritius based Company) holding the same as unexplained cash credit u/s.68 . While passing the order , the Assessing officer t....
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....ts made by M/s.Aanya Properties (2) Ltd and M/s. Access Investment India , the copy of which also submitted before your Honour vide Appellant's written submission dated 12/11/2018. 11. Without prejudice, your Honour's kind attention is drawn on para 6.3 of the Assessment order passed by Ld. D.C.I-T. for the year under appeal, wherein , the Ld. D.C.I.T. has categorically stared that the information received from revenue authority of Mauritius through Foreign Tax and Tax Research Division Ministry of Finance Government of India were partial in nature. Moreover, the information received stated that M/s. Aanya Properties (X) Ltd. had not booked any profit from FY 2006-07 (year of incorporation) till FY 2012-13 almost all its investment made through capital money raised from Its share holders i.e. M/s. Aanya Holdings Ltd- it was seen through the financial statements of Aanya properties (i) Ltd that the company did not have any self generating source of income- These information were not complete therefore the predecessor Assessing Officer of LRPL sent another letter dated 17/10/2016 to Mauritius Authority through FT and TR Division. The reply in this regard had riot been recei....
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....Honour will find the above In order and shall thank to kindly consider the above submissions in relation to your decision to proposed rectification of the Appellate order . 4. OBJECTION OF THE ASSESSEE DISMISSED:- After considering the submissions of assessee and the relevant facts of the case, the objections of assessee are dismissed as below:- 4.1 AO has, in the assessment order, in para 6 onwards, has discussed the relevant facts obtained / gathered in case of Luxora Realtors Pvt. ltd. and the same are reproduced elaborately in para 6.3 of the assessment order. There is elaborate mention of reference to FTTR Division of CBDT and the information gathered regarding Aanya Properties and Aanya Holdings Ltd. The information gathered regarding Ultimate Beneficial Owners (UBO) has also been discussed by AO in the assessment order elaborately. All these facts are crucial to decide the legality of order passed u/s. 143(3)/153A in case of assessee, wherein, prior to search conducted on 19.03.2015, assessment u/s. 143(3) was completed accepting the revised returned loss of Rs. 54,36,891/-. Since these crucial facts were not considered while passing the appeal order on 31.10.2019, whe....
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....fore, since original assessment order merges with 153A proceedings, assessing officer would have following jurisdictional powers:- 1) Assessment of income on the basis of incriminating documents found in the search and seizure action. 2) To adjudicate any additional issue, for which the specific information has been received by the AO subsequent to original assessment under Section143(3). With reference to point no. 1 above, it is absolutely clear that if any incriminating document is found in the search and seizure proceedings, the assessing officer has full powers to make addition on the basis of such incriminating documents. Therefore, there is no further deliberation on point number 1 here. With reference to the point number 2 above, it is very clear that there may be a situation, where subsequent to the original assessment under Section143(3), assessing officer may receive or obtain some additional information, which is not emanating from the search and seizure proceedings. Definitely there are unlimited sources, from which, the information relating to correct assessment of income of an assessee is available to assessing officer. Receipt of such information is not nece....
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....eedings as per 2nd Proviso is Purely for the Procedural Convenience to Frame Single Assessment Order:- In the light of above overall discussion and eventuality of a situation, where, certain information comes to the notice of assessing officer regarding escapement of income in a broad perspective, a harmonious interpretation of 2nd proviso of section 153A would be that once the search takes place under section 132, the pending assessments have been abated only for the limited purpose of convenience of framing a single order and for no other purpose. The word abate used in the statute is for a very limited / procedural purpose in the overall scheme of things and such interpretation alone gives a harmonious construction not only to the section 153A and its subsection and its various provisos but also to this section vis-a-vis the overall scheme of assessment and powers of assuming jurisdiction for assessment by assessing officer as per the other sections. Any other interpretation would lead to disharmony and absurd conclusions contrary to the spirit of taxing the correct income for a particular assessment year. 4.3.2 Therefore, in the light of above position of law, assessing off....
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....Finance Act, 2012 with effect from 01-04-2013. 5.4.3 Rigor of original section 68: Nature & Source: No Satisfactory Explanation in the Opinion of AO:- It would be relevant to hold here that the rigor of original section 68 itself casts the onus on assessee that the credits including the share capital which is a settled position of law as per the various Apex courts orders) must be satisfactorily explained by establishing the identity and creditworthiness of creditor and the genuineness of the entire transaction. Therefore, irrespective of the amendment introduced by Finance Act 2012, the original law itself was rigorous enough with regard to proving the genuineness of the transaction and the identity and the creditworthiness of the creditors. Therefore, when the assessing officer has reason to believe that the sources of assessee's capital introduced in the form of share capital are not satisfactorily proven by the assessee, the addition under section 68 can be lawfully made. In this case, the AO was not satisfied with the creditworthiness of Mauritius Companies itself and in this regard AO had asked assessee to prove sources of their funds. Thus the requirement of verifica....
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....ext, to verify the flow of money from the ultimate beneficiaries to these two companies is well within the powers of assessing officer as per the original section 68. In the absence of any substantive documents and evidences submitted by assessee before the assessing officer or in appeal proceedings to substantiate the creditworthiness of these two companies or to prove beyond doubt the genuineness of the transactions of share allotment and the premium paid by these two companies, addition under section 68 is very much valid. 4. Creditworthiness of Ultimate Beneficiaries Not Proved: Additional Documents do not substantiate creditworthiness of Ultimate Beneficiaries:- Further, the details filed by assessee in the appeal proceedings regarding financial status of the ultimate beneficiaries, as has already been up held in para- 5.1.5, above in this order, assessee has again failed to substantiate the creditworthiness of these ultimate beneficiaries or to prove the genuineness of the flow of funds and the sources. Again at the risk of repetition a reference is made here to para- 5 to 5.1.6 above in this order wherein the emptiness of the various documents filed as additional evidenc....
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....e other mistakes also in AO's order. ITAT also held that merely because of non-appearance of key management personnel of Aanya Properties (I) ltd., no adverse inference could be drawn against the receipt of preference share capital by doubting the veracity of the same. ITAT has not discussed the issue of identity, creditworthiness and genuineness of ^ company namely Aanya Properties (2) Ltd.. The entire discussion of ITAT order is regarding company named Aanya Properties (1) Ltd.. ITAT has not discussed real issue and argument of AO that creditworthiness of Investor company has not been proven as creditworthiness of ultimate beneficiaries is not proved. The findings of AO that the creditworthiness of Ultimate Beneficiaries was not proven, is not discussed in ITAT order relied upon by assessee. In view of above, assessee's reliance on ITAT's order is without any weight for deciding issue at hand in this appeal. 5.4.6 The Genuineness of credit in Books of Accounts to be proven on facts of each case, this is the crux of principle laid down in Lovely Exports by Delhi High Court in ITA No 953/2006. Also, in that case in internal para 13, Hon'ble High Court has refl....
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.... also produced before ITAT. He submitted that a catena of case laws from Hon'ble jurisdictional High Court and Hon'ble Supreme Court were referred therein. After consideration the same, ld.CIT(A) has categorically held that legal grounds relating to invalidity of jurisdiction of the AO is allowed in favour of the assessee. Now, ld.CIT(A) has clearly reviewed his earlier order and the same by no stretch of imagination can be said to be rectification of mistake. He further submitted that dehors incriminating material in case of unabated assessment, no addition can be done under the assessment framed u/s. 153A is well settled by Hon'ble Jurisdictional High Court as well as Hon'ble Supreme Court. Hence, even a review of the order of the ld.CIT(A) is not legally correct in this case not to speak of rectification of mistake apparent from the record. Ld. Counsel of the assessee made various submissions as to merits of the case that the issue is squarely covered in favour of the assessee. The submissions of ld.counsel of the assessee are summarized as under:- "Ground No.1 to 8 Addition u/s 68 at Rs. 22,69,400/- on account of Share Capital. A.O. Para 6 Page 2 to 8 CIT(A) Para4&5 ....
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....n remittance without inviting any adverse observation by Financial Institutions. On above factual position no addition in respect to share capital contribution can be made by holding the same as unexplained cash credit. E) The assesses has placed legal evidence on record in the course of regular assessment as well as in the fresh assessment proceedings u/s 153A of I.T. Act 1961 and fully discharged its onus to explain cash credit as envisaged u/s 68 of I.T. Act 1961. The assessee has discharged its onus to explain the contribution of share capital by placing legal evidence on record and established identity, creditworthiness and genuineness of share capital contribution received. Addition made by A.O. and upheld by CIT(A) is unjustified and unsustainable. (P- 44- 48)[Vol.-l] (P-123-128)[Vol.-l) F) The decision of Hon'ble CIT(A) 24 has been upheld by Hon'ble ITAT Mumbai Bench C vide judgment dated 19/06/2019 in ITA No.6202/Mum/2016. The issue in dispute is covered in favour of assessee by decision of coordinate bench in the case of associate company of assessee company. Addition made by A.O. and upheld by CIT(A) is thus unjustified and unsustainable. (P-1 to15)[VoI.-....
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....t same having been found in the course of search is contrary to settled position of law by the Hon'ble Jurisdictional High Court. Reliance on: i) Hon'ble Bombay High Court order in ITA No. 1251 of 2016 in the case of M/s. Caprihans India Ltd. vide order dated 04/01/2019. M) CIT(A) has not disputed the identity of the share holder and has also not found any fault in the legal documents being bank statement of share holder and Foreign Inward Remittance Certificate issued by bank. Conclusion of CIT(A) is contrary to the settled position of law in regard to onus to explain the share capital received by assessee company from non-resident. N) The assessee has not received any share application money from M/s. Aanya Properties (2) Ltd. During the year under consideration. Thus addition made by A.O. and confirmed by CIT(A) by invoking provisions of section 68 of IT. Act 1961 is bad in law. Reliance on: i) ITAT order Mumbai Bench, Mumbai in the case of Jagdish construction Ltd. Vide order dated 25/10/2018. II. No incriminating material. O) In the case of assessee regular assessment has been framed u/s 143(3) of IT. Act 1961 on 26/03/2014 accepting loss at Rs. 54,36,891....
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....abul Chawla iv) ITAT order in IT(SS) ANo.272/Ahd/2016 & 273/ Ahd/2016 in the case of M/s. Creative Trendz Pvt. Ltd. vide order dated 13/11/2020. v) (2016387ITR0529(Guj.) Pr. CIT vs. Saumya Construction P. Ltd. vi) ITAT order in ITA No.3429/Mum/2019 in the case of Shri Vijayrattan Balkrishan Mittal vide order dated 01/10/2019. vii) ITAT order in ITA No.08/Ahd/2Q17 in the case of The M/s. Samor Properties Pvt. Ltd. vide order dated 08/05/2019. III. No mistake apparent from record. X) A.O. has concluded that share capital contribution received from non-resident share holders M/s. Aanya Properties (2) Ltd. at Rs. 22,69,397/- is liable to be assessed u/s 68 of l.T. Act 1961. Y) CIT(A) in her order dated 31/10/2019 at para 5 considered the submission of assessee of more than 800 pages and concluded that in the case of assessee regular assessment is completed u/s 143(3) on 26/03/2014 before the date of search u/s 132(1) of l.T. Act 1961 on 19/03/2015 in which no addition is made u/s 68 of l.T. Act 1961. No incriminating material is found in the search and thus no addition u/s 68 of IT, Act 1961 can be made and thus addition made at Rs. 22,69,400/- was deleted by Hon'ble ....
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....akir Mohmed Haji Hasan reported at 247 ITR 290 (Guj.) for denial of set off of loss against income assessed. D)Decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan explained/distinguished in subsequent IT . : 5 of same court in the case of Radhe Developers India Ltd. reported at 329 ITR 0001 and Shilpa Dyeing & Printing Mill (P) Ltd. reported at 291 Taxman 279 (Guj.). Noting adverse can be drawn from the decision of Hon'ble Gujarat High Court in the case of Fakir Mohmed Haji Hasan. E) Recent Circular of Board No.11/2019 dated 19/06/2019 permits set-off of loss/depreciation against income assessed u/s 68 to 69C to assessment years prior to Asstt. Year 2017-18. F) Reliance on: i) 219 taxman 279 (Gujarat) CIT-II vs. Shilpa Dyeing & Printing Mills (P) Ltd. ii) (2007) 291 ITR 0258 (Madras) CIT vs. Chensing Ventures iii) ITAT order in ITA No.1972/Ahd/2012 in the case of M/s. K.R. Automobiles vide order dated 03/02/2014. iv) ITAT order in ITA No.1841/Del/2016 in the case of M/s. Godwin Resort & Hotel Pvt. Ltd. vide order dated 14/10/2019. The ratio laid down by aforesaid decisions squarely applies to the facts in the case of assesses. In vi....
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....n 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1)." "Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course ....
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....the assessment for present assessment year is non-abated. The earlier assessment order was already duly framed and subsequently pursuant to search fresh notice u/s. 153A was issued. The AO in the assessment order has clearly noted that during the course of search proceedings, it was found that assessee was generating cash by bogus invoices. There is not a whisper about anything found relating to share application money. The issue of share application money was taken up by the AO by mentioning that on perusal of the balance sheet of the assessee, he has found the same. AO further refers that an information was obtained from FT&TR division, Mauritius Revenue authority vide letter dated 14.03.2016. When this is juxtaposed with the date of earlier assessment order i.e. 26.3.2014 and the date of search i.e. 19.3.2015, it is abundantly clear that this is a non-abated asessment and the so called material arose much after search. Hence, there is not an iota of doubt that the material being referred by the AO for making the addition was not found and seized during search. Hence, the jurisdiction of the AO in making the assessment is not legally valid. Hence, the order passed by the ld.CIT(A....