TaxTMI 
TaxTMI 
2022 (3) TMI 661
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....ng the addition of Rs. 22,69,397/- made by A.O. u/s 68 of IT. Act 1961 on 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 ....
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....roup case M/s. Luxora Realtors Ltd. for A.Y. 2012-13, the addition on the same issue was deleted by the CIT(A)-24 and further appeal by the department was 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.....
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.... Luxora Realtors Pvt. Ltd (LRPL) on account of share capital. 3. In the case of LRPL , the said issue was also covered in Assessment year 2O12- 13 wherein the similar addition was made. LRPL also preferred an appeal against this assessment order 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....
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....stment India. It clearly indicate that the Ld. D.C.I.T , not sought / received any Information about M/s. Aanya Properties (2) Ltd and M/s. Access Investment India. 10.The Appellant submitted all necessary documents to Ld. D.C.I.T prove the identity , capacity and genuineness of the such Investments 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....
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....d. The Ld. D.C.I.T. not sought / received any information about M/s. Aanya Properties (2) Ltd and IVI/S Access Investment India from whom the Appellant received share application money . The information received from Mauritius through FT & TR Division of CBDT related to M/s. Aanya Properties (I.) Ltd does not contain any thing adverse in nature. We hope Your 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 discu....
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....ment U/s. 143(3) and the New Information with the Assessing Officer Regarding non-verifiable Nature of Ultimate beneficiaries of Two Mauritius Based Companies: Inquiry through FTTR Division of CBDT:- The fact of assessee's case is that 143(3) assessment was done in this case on 26.03.2014. Thereafter, 153A proceedings were initiated in October, 2016 subsequent to certain seizure action under section 132 on 19.03.2015. Therefore, 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 th....
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.... fact provisions of subsection 2 to section 153A, very categorically mention about revival of the original assessment order, in the event of assessment under section 153 A is annuled. Thus only logical inference to be drawn is that in 153A proceedings, original assessment u/s. 143(3) are embedded and enjoined with assessment based on seized documents etc. Original assessment order u/s. 143(3) is only t , merged - it is alive and vibrant and does not lose its existence. 5. Abatement of Proceedings 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 interpretatio....
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....lenged that the amendment to section 68, introducing proviso to section 68, treating share capital money as unexplained cash credit, if assessee failed to prove the identity creditworthiness and genuineness of source of funds of the shareholders, is applicable from assessment year 2013-14 onwards and, therefore, same is not applicable for the impugned assessment year 2009-10. This ground of assessee's appeal is dismissed as assessing officer has nowhere invoked the amended provisions of section 68, wherein, the proviso introduced vide 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 wi....
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.... exclusively through investments received in the name of ultimate beneficiaries. 2. In view of such financial status, which makes their creditworthiness extremely doubtful, it is very logical for AO to further verify as to what were sources of funds with these two companies as they had no business of their own. To verify this linkage of the sources of funds of these companies, the original section 68 provides sufficient enabling powers to the assessing officer to verify the creditworthiness of these two parties up to the sources of funds from Ultimate Beneficiaries. In this context, 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: Additio....
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....he impugned assessment order on the basis of facts and findings contained in the assessment order of Luxora Realtors, the assessee has relied upon ITAT's decision deleting such addition in case of Luxora Realtors. However, the perusal of Hon'ble ITAT's order shows that such reliance is misplaced and does not support assessee in view of following:- ITAT has deleted the addition stating that AO has incorrectly mentioned stakes of foreign Investor Aanya Properties (I) Ltd. at 99% in assessee company, ITAT has also found mistake that Aanya Holding Ltd. was holding 100% shares of Aanya Properties (I) Ltd. ITAT found some 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 ....
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....ictional ground. Now, ld. Counsel submitted that ld.CIT(A) has passed order u/s 154 of the Act, which mandates only rectification of mistake apparent from record. In this order, ld.CIT(A) has held that his earlier order passed quashing the jurisdiction was wrong. Further, he has gone on the decide on the other issues on merits which in the earlier order, he has held to be academic as he has dismissed the validity of assumption of jurisdiction by the AO. Ld. Counsel of the assessee submitted that the ld.CIT(A) has passed the original order, after due consideration of the written submissions placed before him, which ran into 40 pages. A copy of the same in paper book has been 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 materi....
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....l. (P-50) [Voi.-l] vi) Copy of financial statements of Aanya Properties (2) Ltd. reflecting such investments made in assesse (P-54 - 83) [Vol.-l] (74) vii) Shareholding Pattern of Aanya Properties (2) Ltd. indicate that entire shareholding of Aanya Properties (2) Ltd. is with another Mauritius based company namely Aanya Holding Ltd. (AHL). (P-114) [Vol.-l] List of name and address of shareholders of Aanya Holding Ltd. who are the ultimate beneficiaries submitted. (P-115-117) [Vol.-l] viii) Form No. 2 for issue of share capital. (P-118-122) (Vol.-l] (122) D) The share capital contribution is in compliance with directives of Reserve Bank of India. Receipt of share capital contribution from non-resident share holder has been accepted on receipt of foreign 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 assessme....
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....andeep Infrastructure Pvt. Ltd. v) (2018) 400 ITR 0439 (Bom) PCIT vs. Paradise Inland Shipping Pvt. Ltd. vi) Supreme Court order in SLP (Civil) No (s). 12644/2018 in the case of M/s. Paradise Inland Shipping Pvt. Ltd. vide order dated.23/04/2018. K) Observation of CIT(A) at para 2 that new information was with A.O. as to ultimate beneficiary of two Mauritius based companies inquiry through FTTR Div. of CBDT. It is submitted that it was not in the case of assessee any inquiry or information was obtained but was in relation to another group company M/s. Luxora Realtors Pvt Ltd. Addition made u/s 68 of IT. Act 1961 in the case of said company has been deleted by CIT(A) in appellate proceedings and said appellate order has been upheld by Hon'ble ITAT Mumbai Bench in the case of associate company. Observation of A.O. and CIT(A) are thus unjustified. L) The addition made on the basis of subsequent information without 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 ca....
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....addition u/s 68 of I.T. Act 1961. Hon'ble CIT(A) vide order dated 31/10/2019 rightly deleted addition of assessee. U) The Hon'ble CIT(A) in order u/s 154 dated 13/12/2019 at para 5 page 8 has equated the assessment framed to that of abated assessment to uphold and to reject ground of appeal of the assessee at ground No.2 & 3 challenging addition in absence of any incriminating material to be not in accordance with law. V) It is settled position of law that completed assessment cannot be disturbed in absence of any incriminating material found during the course of search. Addition made by A.O. and upheld by CIT(A) in order u/s 154 not based on any incriminating material found in the course of search is without jurisdiction and is unjustified and unsustainable. W) Reliance on: i) (2015)374 ITR 0645 (Bom.) CIT vs. Continental Warehousing Corporation ii)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. iii) (2016) 380 VTR 0573 (Delhi) CIT vs. Kabul Chawla iv) ITAT order in IT(SS) ANo.272/Ahd/2016 & 273/ Ahd/2016 in the case of M/s. Creat....
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....fy the appeal. The above information was not collected in the case of assessee and is not related to share capital contribution of assessee. In any case there is nothing adverse in the said information which requires consideration (Refer page 4 of assessment order). CIT(A) has not recorded single finding on the basis of such report which requires adverse consideration. Thus entire premise of initiating proceedings u/s 154 are based on no adverse evidence. No mistake apparent of record which requires consideration. Order passed u/s 154 of IT. Act 1961 liable to quashed. Ground No.9 & 10: No set off allowed in respect to loss assessed with Addition made u/s 68 of IT. Act 1961. A.O. Para- 7 & 8 Page- 8 CIT(A) Para-5.5 Page-14 A)Issue covered in favour of assessee by decision of Hon'ble ITAT, Mumbai Bench in the case of assessee in ITA Nos.1293, 1294, 1295 & 1296/Mum/2019 vide order dated 21/04/2020. B)The A.O. has assessed loss at Rs. 54.36 lacs for the assessment year under consideration. The loss available wrth assessee for set-off is Rs. 54.36 lacs against income assessed if any. C)A.O. followed decision of Hon'ble Gujar....
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....ng. Hence, he opined that AO can assume valid jurisdiction. This view of ld.CIT(A) is completely alien to the jurisprudence from Hon'ble Bombay High court and Hon'ble Supreme Court in this regard. I may refer to settled position on assumption of jurisdiction without incriminating material found and seized in case of non-abated assessment as under:- The decision from honourable jurisdictional High Court in Continental Warehousing (supra) is clear and unambiguous. It was clearly held in that case that assessments which are not pending and which have attained finality, addition under section 153(A) cannot be done without reference to incriminating seized material. I may gainfully refer to the relevant order of the honourable High Court as under: "On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under I section 132/4 stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-20....
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....ent and addition under section 153 A without reference to incriminating seized material is not sustainable. The jurisprudence regarding jurisdictional defect in assessment under section 153A /153C without reference to incriminating seized material has also been expounded by honourable Supreme Court in the case of Commissioner of Income Tax vs. Singhad technical education Society in civil appeal No. 11080 of 2017 and others. In this regard the honourable Supreme Court in paragraph 18 of the said order observed that :- In this behalf it was noted by the ITAT that as per provisions of section 153C of the act, incriminating material which was seized had to pertains to assessment years in question and it is an undisputed fact that the documents which were seized did not establish any correlation, document-wise, with these for assessment years since this requirement under section 153C of the act is essential for assessment under the provision it becomes a jurisdictional defect. We find this reasoning to be logical and valid having regard to the provisions of section 153C of the Act." 9. From the above, it is abundantly clear that dehors incriminating material found during the se....
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....visions of this section, the authority concerned- (a) may make an amendment under sub-section (1) of its own motion, and (b) shall make such amendment for rectifying any such mistake which has been brought to its notice by the assessee or by the deductor or by the collector, and where the authority concerned is the Commissioner (Appeals), by the Assessing Officer also. (3) An amendment, which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee or the deductor or the collector, shall not be made under this section unless the authority concerned has given notice to the assessee or the deductor or the collector of its intention so to do and has allowed the assessee or the deductor or the collector a reasonable opportunity of being heard. (4) Where an amendment is made under this section, an order shall be passed in writing by the income-tax authority concerned. (5) Where any such amendment has the effect of reducing the assessment or otherwise reducing the liability of the assessee or the deductor or the collector, the Assessing Officer shall make any refund which may be due t....