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TaxTMI 
TaxTMI 
TaxTMI 
2022 (9) TMI 460
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....f search & seizure proceedings on the matter though the addition was made on the basis of seized material where investment with huge premium in share capital by Kolkata based companies were found and those shares were subsequently found to be transferred to related parties of the assessee company at face value. 2. The Ld. CIT(A) ignored the fact that enquiry has been made by the AO during assessment proceedings by issuing commission u/s. 131(1)(d) of the I.T. Act to Investigation Wing of Kolkata to investigate the impugned share transaction of Rs.3.75 cr with 14 Kolkata based companies and enquiry confirmed the so called share transactions as bogus. The enquiry report of Investigation Wing was also confronted to the assessee-company for rebuttal but the assessee-company failed to square up the issue by any satisfactory explanation or by any documentary evidence. 3. The Ld. CIT(A) erred in deleting the addition made by AO of Rs. 1,57,169/-u/s 40A(3) of the I.T.Act holding the view that no incriminating material found during the course of search & seizure proceeding on this matter though the addition was made the basis of seized documents. 4. The Ld. CIT(A)....
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....commission to the DDIT, Kolkata to have examined the 14 companies. It was the submission that the Inspector of the DDIT, Kolkata had issued summons and also visited the companies and found that those companies were not available at the addresses given in their application forms. It was also further submitted that another peculiarity that had been found in the present case was that within one month of the shares having been allotted to the bogus share companies, the shares had been purchased by the HUFs of Shri D.D.Agarwal, Shri Trilochan Agarwal and Shri Ramesh Agarwal, who are the family members of the Directors of the assessee company. It was also submitted that the DDIT, Kolkata investigation reports received in response to the commission issued by the AO have also been served on the assessee but they had stated that "after more than 10 years of the transaction, it was difficult for the assessee to know the whereabouts of those share holders". It was further submitted by ld CIT DR that on appeal, the ld CIT(A) had quashed the assessment by following the decision of Hon'ble Delhi High Court in the case of CIT vs Kabul Chawla(2016) 380 ITR 573 (Del) to hold that there was no incri....
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....d be held that the intimation issued in response to the return filed by the assessee must be treated as an assessment. It was the submission that as the assessment has been completed meaning thereby that already there is a completed assessment for the assessment year 2010-2011 in assessee's case, the assessment u/s.153A should have been limited to the incriminating materials as also for the purpose of issuance of notice u/s.153A of the Act. It was the submission that what were found in the course of search were the books of account being ledger copy and this was not incriminating material which could give power to the Assessing officer to initiate proceedings u/s.15A of the Act. Ld AR placed reliance on the decision of Co-ordinate Benches of the Kolkata Tribunal in the case of Smt. Yamini Agarwal vs DCIT (2017) 83 taxmann.com 209 (Kol Trib), wherein, in paras 25 & 26, it has been held as follows: "25. We therefore hold that the scope of the proceedings u/s.l53A in respect of assessment year for which assessment have already been concluded and which do not abate u/s. 153 A of the Act, that the assessment will have to be confined to only incriminating material found as a res....
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.... prior to the date of search that have not abated, the scope of proceedings u/s. 153 A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.l53 A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No. 1 raised by the Assessee in both the appeals are accordingly allowed." 7. He further placed reliance on the decision of Co-ordinate Benches of Kolkata Tribunal in the case of Bishwanath Garodia vs DCIT (2016) 76 taxmann.com 81 (Kol.Trib), wherein, in paras 10 & 11, the Tribunal held as follows: "10. At the time of hearing before us, the Id. D.R. has contended that the processing of returns of income filed by the assessee as made by the Assessing Officer under section 143(1) could not be regarded as assessment and it is, therefore, not a case where the assessments for both the years under consideration could be said to have been completed. He has also contended ....
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....abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material. 11. Keeping in view the discussion made above, we hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and income relating thereto for both the years under consideration are beyond the scope of section 153A as the assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. The said additions made for both the years under consideration are, therefore, deleted allowing the relevant grounds of the assessee's appeals." 8. It was thus the submission that the decision of Hon'ble Delhi High Court in the case of Kabul Chawala (s....
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....hall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related 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....
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....ture (India) Pvt Ltd. (supra), it was submitted that the SLP has been admitted by the Hon'ble Supreme Court. 15. Ld CIT DR also placed before us the copy of the decision of Coordinate bench of this Tribunal in the case of Unicon Merchants Pvt Ltd vs JCIT in IT(ss) A Nos.23 & 24/CTK/2019 order dated 8.6.2022, wherein, in paras 20 & 21, it has been held as follows: "20. A perusal of the Annexure-A annexed to the satisfaction note, reproduced hereinabove, by the AO of the person searched shows that in the seized material SMLO-52, there is a ledger which contains the loan IT(SS)A Nos.23&24/CTK/2019 20 taken from IFCI Factors Ltd. to an extent of Rs.9,40,52,064/-. A further perusal of the said Annexure-A shows that out of this amount of Rs.9,40,52,064/- loan taken by the assessee from IFCI Factors, an amount of Rs.3.11 crores has been given as loan to Shri Vikash Gupta and his family members. Admittedly, the ledger account is part of the regular books of the assessee and the same cannot be treated as an incriminating material. However, the information that the loan has been given to Shri Vikash Gupta and his family members out of the said loan taken by the assessee company f....
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.... such. 21. One of the argument of the ld. Sr. Advocate is that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in the assessee's own case for the immediately preceding assessment years, however, a perusal of the said order does not show any of the facts being considered and in the absence of the facts being brought out, in IT(SS)A Nos.23&24/CTK/2019 22 view of the decision of the Hon'ble Madras High Court in the case of M/s Hi Tech Arai Limited, reported in 321 ITR 477 (Mad), we have decided the issue involved in the present case on the facts as available before us and, thus, the additional grounds filed in both the appeals by the assessee on 12.11.2019 are dismissed." 16. It was the submission that the ledger copy is showing the receipt of share application money coupled with the fact that the shares had been transferred to HUFs of the family members of the Directors of the assessee company within one month of its issuance showed that there was incriminating material which gave rise to the AO to issue notice u/s.153A of the Act and completing the assessment. 17. It was the alternate prayer of ld CIT DR that there are various ....
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.... favour of the Department as per the judgment of this Court in St. Francis Clay Decor Tiles's case (supra) and Promy Kuriakose's case (supra) though the second among them relates to a third person to the search as well; which cases would fall under Section 153C of the Act. We, therefore, answer the said question stating that for the issuance of a notice under Section 153A(l)(a), it is not necessary that the search on which it was founded should have necessarily yielded any incriminating material against the assessee or the person to whom such notice is issued. 8. Section 153A is a provision which deals with assessment in case of search or requisition. The activation of a search is not something which is regulated by any limit as to period of time. Even if returns are filed and regular assessments are concluded, search on premises could always be made, if the authority concerned is satisfied that action ought to proceed in that line. Once that is done, Section 153A(l)(a) authorises the issuance of notice calling for filing of returns. This has been noted even under the point decided above. Once a return is filed in answer to such a notice, the Explanation to Section....
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....a (380 ITR 573), and Kurele Paper Mills (P.) Ltd. (380 ITR 571) and Hon'ble Mumbai High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (374 ITR 645) while holding the decision in favour of Revenue. ii.) The Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora (52 taxmann.com 172) held that the Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. The observations of Hon'ble High Court in para-11 are reproduced as under: "10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect o....
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....uring search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A. The observations of the Hon'ble High Court in para-20 & 21 are reproduced as under: "20. On a plain reading of Section 153A, it is clear that once search is initiated under Section 132 or a requisition is made under Section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year following within six assessment years referred to in clause (b). It further treats the returns so filed as if such return were a return required to be furnished under Section 139. So that on a reading of Section 153A(1) it is categoric and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is true that as per the first proviso, the Assessing Officer is bound to ....
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....ay Agrawal, GM (Marketing) have resulted in additions, which have been upheld. It is not the case of the appellant- assessee that initiation of proceedings under Section 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellantassessee is that the addition, which is the subject matter of questions No. (ii) and (iii), was/is not justified in the assessment order under section 153A, as no incriminating material was found concerning the addition under Section 115JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the additions need not be restricted or limited to the incriminating material, which was found during the course of search. There cannot be multiple assessments, once Section 153A of the Act is applicable. Section 153A(1) postulates one assessment, computing the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed in the order under section 153A of the Act and the Section applies notwithstanding sections....
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.... section 40A(3) of the Act, ld AR submitted that what was found in the course of search was only the books of account of the assessee and as per the decision of the Hon'ble Delhi High Court in the case of Param Diary Ltd., 439 ITR 89 (Del), the books of account of the assessee by no stretch of imagination could be treated as incriminating material to form the basis for framing the assessment u/s.153C r.w.s 143(3) of the Act. Ld AR also referred to the decision of Hon'ble Delhi High Court in the case of Param Diary Ltd (supra) to submit that once the assessee does not receive notice u/s.143(2) of the Act within the stipulated period, the return filed by assessee has become final and no scrutiny proceedings are to be undertaken with respect of that return. Consequently, it should be deemed that the assessment in that case gets done under the provisions of section 143(1) of the Act when the intimation was issued and no notice u/s.143(2) of the Act is issued on the assessee. 19. We have considered the rival submissions. At the outset, what is understood is that in the course of search in the present case, the ledger account of the assessee in respect of share application money recei....
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....assessment for the relevant assessment year having been found in the course of search, the initiation of proceedings u./s.153A for the relevant assessment year is not permissible and consequently, same is liable to be quashed and we do so. 20. Coming to the findings of the ld CIT(A) that no incriminating material has been found in the course of search and consequently quashing of the assessment proceedings, the facts in the present case clearly show that the assessee has filed his return of income for the relevant assessment year and said return has also been processed u/s.143(1) of the Act. The time limit of issuance of notice u/s.143(2) of the Act as also for the purpose of reopening of the assessment has expired. Consequently, the intimation issued in the case of the assessee u/s.143(1) would have to be deemed to be completed assessment proceedings and in view of the decision of Hon'ble Delhi High Court in the case of Param Diary ltd (supra), wherein, the Hon'ble High Court which has followed its own decision in the case of Chintels India ltd., 397 ITR 416 (Del) has held that once the assessee does not receive notice u/s.143(2) within the stipulated period, such an assessee t....