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2022 (10) TMI 647
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....in respect of the assessments which were completed prior to the date of search, except based on some incriminating material unearthed during the search which was not already available to the Assessing Officer. While granting relief to the assessee, the Ld. CIT (Appeal) has failed to take note of the position that Hon'ble Supreme Court of India has admitted SLP against this proposition in the following matters - i. Principal Commissioner of Income Tax v. Gahoi Foods Ltd. 117 taxmann.com 118(SC)/272 Taxman 521(SC) dated 24.01.2020 ii. ii. Principal Commissioner of Income-tax, Central-4 v. Dhananjay International Ltd.,114 taxmann.com 351(SC)/270 Taxman 15(SC) dated 16.09.2019. 2. The Ld. CIT (Appeal) has erred in law and on facts in not carrying out her duty of adjudicating the grounds on merit, and dismissing them only on a technical. 3. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) erred in deleting the addition to Rs. 5,20,00,000/ made by the AO on account of unexplained share premium u/s 68 of the Income-tax Act, 1961. 4. Whether on the facts and circumstances of the case, and in law the Ld. CIT(A) er....
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....ls of the list of allotees filed by the assessee. These allotees are companies shown to be registered in Kolkata. The details their total income as per their ITR for the assessment year under consideration wherein these companies have shown to have subscribed for shares at exorbitantly high premiums was obtained and placed on record in the assessment order at page 3 para 5.1. The ld. AO observed that most of the companies that have shown to have invested in shares of the assessee company at exorbitant premium have shown insignificant incomes in the year of such investment. From the financial data ld. AO observed that the companies based in Kolkata do not seem to have the financial capacity for the investment in shares of the assessee company at huge premium that they have shown to have made. Moreover, most of the Kolkata companies have the same address, and on verification, it is observed that the directors of these companies are also directors in many other companies also based in Kolkata and simply provided accommodation entries of share application / premium thereon. 6. In order to ascertain the existence of the above-mentioned companies, during the course of search proceedin....
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.... premium were tabulated in the assessment order at page 7, para 5.4. 9. The ld. AO observed that most of the companies that have shown to have invested in shares of assessee company at exorbitant premium have shown insignificant Incomes in the year of such Investment. From the above financial data, the companies based in Delhi do not have the financial capacity for the investment in shares of assessee company that they have shown to have made. Moreover, most of the companies have the same / similar address, which is another Indicator of the fact that they are suitcase/paper companies without any actual existence. The fact that these companies have shown to have made share premium investment in the same tranche as other Kolkata based shell companies, it is apparent that the investment being shown by the Delhi based companies in assessee company is prima facie an arrangement to route the unaccounted money generated by the group concerns. via layering them in bank accounts and finally Introducing them as share premium in the group concerns through accommodation entry providing shell companies. 10. The three individuals shown to be residents of Delhi made investment in the assess....
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.... iii) Date wise list of share application money received by company for allotment of shares is enclosed. From the above statement, it is apparent that out of total share application money of Rs. 649.50 lacs, a sum of Rs. 129.50 lacs was received in FY 2009-10. Receipt of opening share application money of Rs. 129.50 lacs is verifiable from the previous year figure appearing in audited financial of year under consideration. Copy of bank statement of FY 2009-10 marking receipt of share application money is enclosed. iv) It is that share capital was allotted in AY 2012-13, copy of return of allotment is enclosed. v) During AY 2012-13, assessee company has received share capital of Rs. 520 lacs from 14 companies. is submitted that assessment proceeding AY 2012-13 has been completed u/s 143(3) wherein assessee has submitted copy of share application money, confirmation of shareholder, bank statement of shareholder, etc. of all these shareholders. After detailed examination, your predecessor has accepted the genuineness and creditworthiness of shareholders. All these documents are verifiable from the file of original assessment proceeding lying with your good self. Co....
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....he case of Delhi based companies during the assessment proceedings and the same were found to be non-existent. The relevant part of the enquiry report is placed on record. 13. The ld. AO further stated that although the assessee has submitted some confirmations but still the fact of the matter is that these companies and individuals are non-existent and do not have the credit worthiness to invest the same amount as share application money. For a transaction to be considered as bogus the assessee needs to prove all the three limbs of section 68 satisfactorily i.e. identity, genuineness and credit worthiness. Therefore, the said transactions are bogus and are to be treated as the assessee's unexplained income under the provisions of section 68 of the Income tax Act, 1961. The ld. AO further noted that here in this case none of the above limbs is established and hence the case is amply clear that the share premium received is actually an accommodation entry through routing of funds. However, the assessee's contention that the share application money of Rs. 129.50 lacs were pending allotment which is apparent from the balance sheet of the assessee company. Therefore, the sum....
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....te, either been repaid back (as is in the case of M/s Dishika Marketing Pvt. Ltd) or have been squared up by means of credit sales by M/s NM Agrofood Products Pvt. Ltd to these companies (as in the case of the other 5 companies mentioned above). In this regard the statement of Shri Manoj Kumar relied upon. 17. On the basis of evidences gathered during the search it is apparent that the companies are Kolkata based accommodation entry providing shell companies, and the unsecured loans shown to have been accepted by assessee is simply the case of routing its own unaccounted money after being laundered through the bank accounts of such accommodation entry providing shell companies. 18. Hence, the assessee company was issued show cause notice that why the amount of shown as unsecured loan shouldn't be considered as bogus and added back to the total income of the assessee. The assessee filed its reply vide letter dated 13.12.2019, the relevant part of which is reproduced hereunder: "That your another observation is that assessee company has accepted unsecured loan amounting Rs. 5,95,00,000/- from Kolkata based companies and accordingly your good self has show caused wh....
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....ent year. From the audited financial statement, it is apparent that these companies is having substantial turnover and they are engaged in full-fledged business activities. vi) Assessee company has approached present director of both these companies and they are sending the confirmation showing outstanding balance due to them. Confirmation will be submitted within 2-3 days' time." 19. The ld. AO stated that the reply of the assessee has been duly and carefully analysed and is not acceptable due to the following reasons: 1. The assessee has stated that all these companies are existent and has also submitted that their active profile status but same is not acceptable in light of findings of survey proceedings wherein the companies are found to be non-existent. 2. With regards to assessee's submission that the these amounts have been paid in subsequent years is not acceptable as there is no denial of the fact that the very source of these funds was bogus lacking identity and credit worthiness. 3. The assessee cannot at any time answer the fact that with such meagre income how a company or individual can lend such huge amounts of loan to t....
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.... i. Addition on account of share premium u/s 68 of the Act: Rs. 5,20,00,000/- ii. Addition for unsecured loans from Kolkata based companies u/s 68 of the Act: Rs. 5,95,00,000/ Addition on account of share premium The assessee company had allotted 324750 shares during the year having face value of Rs.10/- at a premium of Rs.190/- per share. Thus, the assessee received Rs.32,47,500/- on account of share capital and Rs.6,17,02,500/- on account of share premium totalling to Rs.6,49,50,000/-. During the course of search proceedings, consequential survey operations were conducted in Kolkata and Delhi and many of the companies to whom shares were claimed to be allotted, were found non-existent. Further, the AO has discussed at length in the assessment order that these companies disclosed very meagre income in their return of income. The status of many of these companies were found to be inactive in the ROC database. Based on these findings, the AO concluded that the investing companies did not have creditworthiness to invest in these companies and they were also found to be non-existent at the time of survey and enquiries which were simultaneously done with ....
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.... the Investigation Wing is considered as a relevant evidence, however in view of the above discussion that the surveys were not executed in respect of all the 14 companies for share premium and in the case of 6 companies for unsecured loans and also the fact being that they were conducted on wrong addresses as discussed above, the same cannot be regarded as incriminating material unearthed during the course of search & seizure u/s 132(1) of the Act in the case of the appellant. The decision of the Ld. CIT(A) is not acceptable on account of the following reasons 1. It is submitted that as per provisions of section 153A, the AO has to issue notices u/s 153A(1) of the Act for six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted. Further as per provisions of section 153A(1)(b), the AO has to assess or reassess the total income of such years. Therefore. in pursuance to these notices issued u/s 153A(1), the AO has to assess or reassess the total income for the relevant assessment years. Further, there is no mention in the section that these assessments should be based on incriminating material found d....
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....osses of company CML against its income - Thereafter a search took place in assessee's premises and certain incriminating material was seized, which was stated to be destroyed in a fire that took place at premises of revenue-Consequent to search, Assessing Officer framed assessments disallowing set off of losses of company CML and made additions - High Court by impugned order held that since Assessing Officer proceeded to frame assessments under section 153A relying on some information not unearthed during search, assessment orders so passed were not sustainable in law - Whether Special Leave Petition filed against impugned order was to be granted-Held, yes [Para 2] [In favour of revenue] (iv) The head note in the case of CIT Vs Dr. P. Sasikumar [2016] 73 taxmann.com 173 (Kerala) is as under: "I. Section 153A, read with sections 132 and 132A, of the Income-tax Act, 1961 -Search and seizure-Assessment in case of (Submission of returns for six years) -Assessment years 2002-03 to 2008-09- Whether any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A....
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....f (Scope of assessment) - Assessment year 2000 01 - Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment - Held, yes [Para 11] [In favour of revenue/Matter remanded] (vii) The head note in the case of DR. A. V. Sreekumar Vs CIT [2018] 90 taxmann.com 355 (Kerala) is as under: "Section 153A, read with sections 132 and 143 of the Income-tax Act, 1961 Search and seizure-Assessment in case of (Scope of) - Assessment years 1999 2000 and 2000-2001-Search was conducted at premises of assessee on basis of two documents received before search by Department through a Tax Evasion Petition allegedly filed by one of brokers involved in transaction pursuant to which notices under sections 153A and 143 were issued and assessment orders were passed for respective years making additions - Assessee contended that documents relied on to make additions, being not one seized in search conducted, proceedings under section 153A read with section 143 were non-est-However it was pursuant to search and enquiry conducted th....
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....retain the materials disclosing suppression, for long years; in the instant case a block period of 6 years. There is also no presumption insofar as the suppression having occurred only in the year in which the search was conducted. If at all, the presumption is otherwise insofar as the special procedure prescribed under Chapter XIV-B to assess undisclosed income for a block period, comprising of assessment years prior to the date of search, on the basis of the materials recovered at the search and other evidences available before the AO relatable to such material. At the risk of repetition, it has to be noticed that the block assessment prescribed under Chapter XIV-B also confers power on the AO to make assessment on the best of judgment." 3. In view of the above judicial pronouncements, it is humbly submitted that appeals of the department may please be allowed and these cases may be set aside to the file of the ld. CIT(A) for deciding appeals on merits. Without prejudice to the above, it is submitted that there was simultaneous survey operation in this case of many companies. The Ld. CIT(A) has observed that there is no credibility of unexecuted survey. In this ....
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....e also read the report of the officer conducted spot verification on the address available with the department as per PAN data base. The statement of the Manoj Kumar Gupta, a key person of the group was also recorded which is made part of the order by the ld. AO. Shri Manoj Kumar Gupta. He merely reiterated that transactions are already verified in the proceeding u/s. 143(3) of the Act. In that proceeding under taken the physical verification were not conducted of these entities. The correct address was not placed on record by the party. Thus, based on the material collected in search and simultaneously survey operation of these companies were conducted but offices could not be located. Thus, based on this observation the ld. DR submitted that the addition made by the ld. AO should sustain. As per provision of section 132 read with section 153A of the Income Tax Act, the AO has to assessee or reassess the income of last six years and total income refers to the sum total of income in respect of which a person is assessable. The total income will therefore, cover not only the income emanating from the declared source or any material omission before AO but from all sources including u....
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....e-filling portal on 22.08.2018. The AO completed the assessment under section 153A r.w.s. 143(3) of the Act vide order dated 31.12.2019 by making addition of Rs. 5,20,00,000/- under section 68 for share subscription by various shareholders and Rs. 5,95,00,000/- taken by the assessee as unsecured loans and the same was also added u/s. 68 of Act. The ld. AR of the assessee also filed a detailed paper book containing 273 pages wherein he has submitted all the relied upon evidence such as submission made before lower authorities, statement recorded and relied upon, inspectors report, Extract from the ROC website about the active status of the companies with whom the transactions are recorded extract of the bank transactions, confirmations, allotments of shares. He also submitted his averments n the written submission which reads as under: Facts: 1. The assessee company is engaged in the trading of agricultural commodities in Sriganganagar. It filed the return u/s 139(1) on 30.09.2012 declaring an income of Rs.1,33,69,670/- (PB 1). The assessment u/s 143(3) was made on 25.03.2015 at total income of Rs.1,34,11,740/- (PB 24-27). 2. A search was conducted on 08.0....
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....the basis on incriminating evidence found during the search. The assessments u/s 153A are not fresh assessments since the purpose of making the reassessment u/s 153A is subject to tax, hitherto undisclosed income unearthed during the course of search. The second proviso to section 153A(1) provides only for the abatement of pending assessments. Therefore, already completed assessments do not abate and they shall hold the field. It can be interfered by the AO while making the assessment u/s 153A only if some incriminating material is unearthed during the course of search or requisition of documents or undisclosed income or property is declared in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Thus, when no incriminating documents for the year under consideration were found, addition made by the AO in assessment proceedings u/s 153A is illegal and bad in law. For this purpose reliance is placed on the following case laws: PCIT vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC) Invocation of sec. 153A to reopen concluded assessments of AYS carlier to year of search was not justified in absence of in....
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....has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." CIT VS. Kabul Chawla (2016) 380 ITR 573 (Del) (HC) "Completed assessments can be interfered with by the AO while making the assessment under s. 1534 only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The present appeals concern asst. yrs. 2002-03, 2005-06 and 2006-07. On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." Principal CIT Vs. Dipak Jashvantlal Panchal [2017] 397 ITR 153 (Guj.) (HC) It was held this case that from the heading of section 153A, the intention of the Legislature is clear, viz, provide for assessment in case....
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....ttained finality for particular year, could not subject to proceedings u/s153A of the Act if no incriminating materials found in course of search during the proceedings u/s153A which were contrary to and were disclosed during regular assessment proceedings. CIT VS. SKS Ispat Power Ltd. [2017] ITR 584 (Bom.) (HC) The scope assessment 153A of Act limited the incriminating evidence found during the search and no further. DCIT Vs. Frost Falcon Distilleries Ltd. (2021) 207 DTR (Del.) (Trib.) In view of the fact that incriminating material was found during the search action relating share received by from three parties, impugned addition of said share capital sustainable. Jammu Metallic Oxides Private Limited Vs. DCIT 55 CCH 618(Jaipur)(Trib) Even if report of the investigation wing Kolkatta was considered as relevant evidence, the same could not be regarded as incriminating material unearth during the course of search and seizure as no such material is found from the assessee and therefore addition made by the AO u/s 153A was not sustainable and liable to be deleted when the assessment was completed u/s 143(3) and was not pending as ....
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....cisions of Kerala High Court and admission of SLP filed by the department on this issue by the Hon'ble Supreme Court. However, as stated in Point No.3 above, almost all the High Courts including Rajasthan High Court has taken a view that in the absence of any incriminating material found in search, the concluded assessment cannot be tinkered with. Therefore, the decisions of Kerala High Court cannot be applied on the assessee in preference to the decision of Rajasthan High Court. 5. So far as Ground No.2 of the department is concerned, the Ld. CIT(A) has not decided the merit of the case. This is for the reason that once this issue has been examined in the original assessment proceedings, in the absence of any incriminating material found in search, no addition can be made. Therefore, there is no error in the order of CIT(A). In any case, no addition on merit can be made as per the submission given before Ld. CIT(A) which is placed at PB 4A-14A. In view of above, order of Ld. CIT(A) be upheld by dismissing the ground of department. 27. In addition to the above written arguments the ld. AR of the assessee argued that this being the search period ass....
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....ion to paper book page no. 248 to 250G, being the extract of company master data of all these companies as appearing. All these shows the questioned company are active and compliant company. As regards the decision cited by the ld. DR and relied upon in the appeal memo where the SLP is either dismissed or not decided and in the absence of the clear finding the jurisdiction High Court decision should prevail and requested to decide the issue based on the ratio of judgment in favour of the assessee. The judgement cited by the ld. DR are all of Hon'ble Kerala High Court whereas on this issue not only the Hon'ble Rajasthan High, Delhi, Bombay and Gujarat can be seen and that all the High Courts are in favour of the view taken by the ld. CIT(A). Thus, the decision of the Hon'ble Kerala High Court thus, cannot bind the assessee case. 28. Against the arguments of the ld. DR, ld. AR of the assessee further submitted that the assessee has not refrained the AO in the earlier proceedings to do the physical enquiry and in that enquiry conducted now no adverse material placed on record by the revenue. As the selection of the parties are made as per the will and wishes of the team and not in ....
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....r 2012-13 was not pending on the date of search on 08.02.2018. The assessment was completed under section143(3) of the Income Tax Act, 1961. Thus, the assessment for the assessment year 2012-13 cannot be considered as abated by virtue of search conducted under section 132 on 08.02.2018. The assessing officer would reassess the total income of the assessee as per the provisions of section 153A in respect of assessment year 2012-13. As the assessee objected to the proposed addition on the ground that during the search no incriminating material indicating any undisclosed income for the year under consideration was found, which is also apparently clear from the assessment order itself. Further it was contended since there is no incriminating material found during the course of search and seizure action, therefore, the AO is not empowered to make any addition in the total income of the assessee. It is a settled position of law that there cannot be a review under the garb of reassessment proceeding under section 153A of the Act. Therefore, the proposed reassessment proceedings are absolutely in abuse of process of law, illegal and bad in law. The provisions of section 153A cannot be appl....
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....6 (Delhi) SLP filed before the Hon'ble Supreme Court was dismissed vide order dated 2nd July, 2018. 2. Jai Steel (India) vs. ACIT (2013) 219 Taxman 223 (Raj.) 3. Principal CIT Vs. Dipak Jashvantlal Panchal [2017] 397 ITR 153 (Guj.) 4. CIT Deepak Kumar Agarwal Ors. (2017) 158 DTR 100/ 251 Taxman 22 (Bom.) 5. CIT Gurinder Singh Bawa [2016] 386 ITR 483 (Bom.) (HC) 6. CIT VS. SKS Ispat Power Ltd. [2017] ITR 584 (Bom.) (HC) 7. DCIT Vs. Frost Falcon Distilleries Ltd. (2021) 207 DTR (Del.) (Trib.) 8. Jammu Metallic Oxides Private Limited Vs. DCIT 55 CCH 618(Jaipur)(Trib) 31. Thus, the ld. AR has submitted that the Hon'ble Jurisdictional High Court has held that the requirement of assessment or reassessment under section 153A has to be read in the context of section 132 or 132A of the IT Act, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of concluded assessment does not arise, which would require mere reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. The underlined pur....
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....9;s total income, the addition to the income that has already been assessed can be made only on the basis of incriminating material. In the absence of any incriminating material the completed assessment can only be reiterated. The provisions of section 132 read with section 153A of the Act stipulate two types of situations - one where the assessment of any assessment year falling within six assessment years is pending on the date of initiation of search under section 132 or making of requisition under section 132A of the Act. Therefore, the assessment under section 153A in respect of those assessment years which stand abated due to the reason of pending on the date of initiation of search or requisition shall be the original/first assessment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under : "37. ....
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....n 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. Conclusion 38. The present appeals concern AYS, 2002-03, 2005-06 and 2006-07.On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 33. Thus, the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments 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 search or requis....
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.... Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to be read together. Section 153A is indeed an extremely potent power which enables the Revenue to re open at least six years of assessments earlier to the year of search. It is not to be exercised lightly. It is only if during the course of search under Section 132 incriminating material justifying the re-opening of the assessments for six previous years is found that the invocation of Section 153A qua each of the AYS would be justified. 57. The question whether unearthing of incriminating material relating to any one of the AYS could justify the re-opening of the assessment for all the earlier AYS was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating m....
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...." 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT[2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpurv. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his origi....
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.... "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall 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 n....
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....16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first pr....
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....on 153A of the Act, in every czea where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jal Steel (India) v. Asst. CIT(supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under s....
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....rinder Singh Bawa(supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. the first place, the Ass....
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.... that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYS 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials since the....
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....by the AO on account of security deposits were rightly deleted by the Id. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under : "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable security deposits were concerned, the AO himself in his remand report accepted them as having been disclosed. This has been noticed by the CIT (A) in para 7.2.1 of his order for AY 2004-05. As regards non-refundable security deposit, the CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had t....
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....A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reas....
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....sment orders have been passed determining the assessee's total Income and such orders subsistig at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the tal income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessm....
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....ed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under: "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated. The principles of interpretation of taxing statutes do not permit the Court to interpret the Second Proviso to Section 153A in a manner that where the assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment....
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....joinder comments filed by the ld. AR dated 16.11.2021 on each of the issues raised by the appellant vide its grounds of appeal. I have also perused the supplementary remand report dated 25.11.2021 of the AO and the rejoinder comments dated 26.11.2021 of the ld. AR. I have also perused the case laws cited by the ld. AR. In view of the above, considering the remand report of the AO and the rejoinder comments of the appellant, the grounds of appeal raised by the appellant are adjudicated upon as under; 5. Ground No. 1 relates to an addition made by the AO on account of alleged unexplained expenses without any incriminating material found in search for which assessment proceedings were not pending as on the date of search. 5.1 The submissions of the appellant as per the statement of facts enclosed with Form No. 35 and reiterated during the appellate proceedings are summarized as under: Submission: The original return of income for the relevant assessment year was filed on 30.09.2012. The original assessment u/s 143(3) for the relevant assessment year had already been completed on 25.03.2015 (PB 24- 27). As on the date of search the assessment for AY ....
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....he search. Thus, when no incriminating documents for the year under consideration were found, the addition made by the AO in assessment proceedings u/s 153A is illegal and bad in law. Reliance in this regard is placed on the following case laws: PCIT vs. Meeta Gutgutia (2018) 257 Taxman 441 (SC) Invocation of sec. 153A to reopen concluded assessments of AYS earlier to year of search was not justified in absence of incriminating material found during search qua each earlier assessment year. SLP filed against said decision dismissed. Jai Steel (India) v. ACIT [Raj HC] (2013) 219 Taxman 223 (Raj) "The requirement of assessment or reassessment under the said section has to be read in the context of s. 132 or s. 132A, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. The underlying purpose of making assessment of total income under s. 153A is, therefore, to assess income which was not ....
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....come. Thus, while mandate sub-section section 153A Act, every where there was a search requisition, AO is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. CIT VS. Deepak Kumar Agarwal & Ors. (2017) 158 DTR 100/251 Taxman 22 (Bom.) (HC) No addition could have been made while completing assessment u/s 153A in the case of completed assessment if no incriminating material is recovered and no undisclosed income was determinable from the material found as a result of search. Once there is no incriminating material in support of the addition is brought on record by the revenue, then no addition u/s 68 could be made. CIT Vs. Gurinder Singh Bawa [2016] 386 ITR 483 (Bom.) (HC) In this case the assessee's return for the AY 2005-06 was processed u/s 143(1) of the Income-tax Act, 1961. A notice u/s 143(2) was not issued. A search was conducted u/s 132 and in proceedings u/s 153A,AO made additions for....
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....nterfered with by the AO while making the assessment under s. 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The present appeals concern asst. yrs. 2002-03, 2005-06 and 2006-07 On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." The sole basis of the AO for making the addition u/s 153A is the survey carried out at the addresses of these companies on 10.02.2018 in consequence to the search of the assessee where these companies are stated to be not found existing. The detailed discussion on this issue is made in the subsequent ground. However, this observation of the AO would not constitute any incriminating material/ document found in search so as to confirm any jurisdiction to the AO to make addition u/s 153A. Therefore the additions made without reference to any incriminating material found in....
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....ed sources u/s 68 of the Income tax Act, 1961. (v) The fact remains that during the course of search proceedings in the case of the appellant, surveys were authorized at the given addresses of M/s Ritesh Properties Pvt. Ltd, Rites Real Estate Pvt. Ltd, Rupali Trade & Holding Pvt. Ltd, Surbhika Vyapaar Pvt. Ltd at 4, Synanogue Street, Kolkata as well as at the given addresses of Waltair Investment Pvt. Ltd, Axiom Commodities Pvt. Ltd and Extent Vinimay Pvt. Ltd at 63, Radha Bazaar Street, Kolkata from whom the appellant company had obtained share premiums. The survey teams did not find existence of any of these companies at the given addresses. In view of the above, the AO has held that these companies have provided accommodation entries of share application/premium thereon. (vi) However, it is observed that out of the 14 companies as mentioned in the assessment order, surveys were conducted only on 7 companies to whom the shares have been allotted. It was alleged by the appellant that the survey was conducted at the wrong addresses of 6 companies out of the aforesaid 7 companies, though the correct name & addresses were available as per ROC Master Data and therefo....
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....s have been allotted to the share holders. (ix) It is observed that while passing the assessment order u/s 143(3) of the Act, the AO has accepted the share premium and unsecured loans received by the appellant as genuine transactions. Thus once when the AO has accepted the transactions as genuine then in the proceedings u/s 153A of the Act, the same cannot be treated as bogus until there is any material or evidence to prove the contrary. It is observed that the appellant has produced all the relevant documentary evidences in support of the aforesaid transactions which remained uncontroverted by the AO during the assessment proceedings u/s 153A of the Act. (x) There is no dispute that these transactions of share premium contribution and unsecured loans are duly recorded in the books of accounts and disclosed in the return of income, the original assessment u/s 143(3) of the Act being already completed and the assessment for the assessment year under consideration was not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure u/s 132 of the Act in the case of the assessee no material much less the incrim....
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....mand report has only referred to Annexure AS-27 as mentioned supra which is nothing but the index of the ledger account maintained by the appellant. Further the A.O. in his supplementary remand report has referred to Ann.AS-24. On perusal of the above, it is observed that it a ledger account of various Pvt. Ltd. Companies from which the appellant has obtained unsecured loans. Moreover, these ledger accounts pertain to FY 2012-13 i.e. for the AY 2013-14 and not to the year under consideration. Furthermore, these cannot be considered incriminating as they are part of books of accounts. (xii) In view of the above discussion, I find that the AO was not in possession of any documentary evidence or even statement of the person who have allegedly provided the accommodation entries to the appellant. On the contrary, the fact remains that the issue of share premium and unsecured loans was elaborately examined by the AO in the original assessment proceedings, in the case of the appellant for the year under consideration for which no adverse inference was drawn by the AO. (xiii) In search assessment, any undisclosed income, which can ultimately be added, is only to the exten....
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....e returns for six AYS immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall 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 153A 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 o....
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....rt in CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment u/s 153A and 153C of the Act. It was held that once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." (xvi) Recently Hon'ble Supreme Court vide order dated 02-07-2018 in Meeta Gutgutia Vs. Pr CIT (96 Taxmann.com 468) have held that Invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year. The head note of the judgment is as under: Section 153A....
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.... supra, it is observed that the aforesaid addition made by the AO u/s 143(3) r.w.s. 153A for the year under consideration is legally not tenable and hence is not liable to be sustained. Accordingly, the Ground of Appeal No. 1 is treated as allowed. 37. Therefore, in the assessment order there is no mention, reference or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The ld. DR has also relied upon the decision in the case of CIT vs. St Francis Clay Décor Tiles [ 2016] 70 taxmann.com 234 (Kerala) wherein it was held that AO has power to reassess the return of the assessee only from the undisclosed income declared in the statement during the course of search and where no undisclosed income is found then the AO cannot made any reassessment and in this case of hand the fact is that the assessee or its representatives have not disclosed any income in the statement. Thus, this judgment cited by ld. DR is also of no help. The DR has also relied upon the decision of Hon'ble Kerala High Court in the case of E.N. Gopalkumar vs. CIT (Central) (2016) 75 taxma....
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....Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred. 19. We, thus, find that the ITAT rightly perm....