TaxTMI 
TaxTMI 
2023 (4) TMI 991
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....nces of the case, the Ld. CIT(A) has erred in relying on various decisions of the Hon'ble Court including the decision of Hon'ble High Court of Gujarat in the case of Pr. CIT Vs Saumya Construction Pvt. Ltd., when the facts involved in this case are distinguishable for the reason that all the referred decisions cover the situation where assessment for a particular year was completed. However, in the instant case no assessment for A.Y.2010-11 was completed. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in holding that any addition during the assessment U/S.153A has to be confined to the incriminating material found during the course of search u/s.132(1) of the Act, even though, there is no such stipulation in sec. 153A I.T. the Act. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in not appreciating that sec.153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or reasses....
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....ed 20 lakh shares with face value of Rs. 10 each amounting to Rs. 2 crores. Apart from this amount of Rs. 2 crores received for the purpose of share allotment, the assessee company received a sum of Rs. 4,85,51,000/- as share application money. Thus, the total capital received by the assessee company for allotment of shares is Rs. 6,85,51,000/- as mentioned in the balance sheet during the assessment year 2010-11. The assessee was asked to substantiate the creditworthiness and identity of the investors. In response thereto, the assessee furnished a chart/list of people who had applied for shares of the assessee company and submitted before the Assessing Officer that the assessee company had issued 2,62,000 shares with face value of Rs. 10 each amounting to Rs. 26,20,000/- issued at a premium of Rs. 90 per share. The Assessing Officer sought for further details regarding the share capital received by the assessee amounting to Rs. 6,85,51,000/- and called for accounts of the investors, confirmation letters of the investors and proof of creditworthiness of such persons from whom the share application was received. The assessee furnished certain details before the Assessing Officer, how....
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....vestors pulled out of the Company incurring heavy loss by selling the Shares at one-twentieth the price on which acquired earlier." 4. The assessee filed appeal before the CIT(A) challenging the aforesaid additions made by the ld. Assessing Officer. The primary contention of the assessee before ld. CIT(A) was firstly that the assessee has been able to adequately demonstrate the identity, creditworthiness and genuineness of the transactions and hence no addition is called for u/s. 68 of the Act in respect of the aforesaid transaction. The second contention of the assessee was that this is a case of an unabated assessment year wherein the time limit for issuance of notice of assessment year had already expired before the date of search and hence no addition could be made to the income of the assessee de-hors any incriminating material found during the course of search. The submission of the assessee was that the material on the basis of which the additions were made were not unearthed during the course but were already a part of the assessment records in the form of balance sheet and other books of accounts maintained by the assessee. Therefore, since the additions were not made on....
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....g investigation and the addition to the total income vide letter No. CIT(A)-12/RR/Gipl/2019-20 dated September 13, 2019 was written to the DCIT, CC-1 to Report whether the impugned addition added on the basis of incriminating material found during the course of search. The AO's Report vide BRD/DCIT/CC-1 /APPEAL/GIPL/2019-20 dated 01/10/2019 was received on 07/10/2019 (and was provided to the appellant for comments if any). 28.9 In the Remand Report it has been stated that "In the instant case, the impugned of Rs.6,85,51,000/- was made on the issue of share application money received by the assessee company as corroborated as related to the balance sheet for the year under consideration. The assessee was unable to explain the source and credit worthiness of investors and supporting documents / evidences during course of assessment proceedings. Thus the said addition was made accordingly. However on verification of case records, it was noted that the above referred impugned addition regarding share application money was not based on incriminating material found during the course of search conducted." 28.10 Thus the assertion of the appellant that the addition, the subject m....
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....s including the leading case of Saumya Construction Pvt. Ltd., I still feel it appropriate that in view of the AO's Remand Report dated 01/10/2019 and that appellant's rejoinder dated 22/10/2019 the decision of the Kerala High Court in E N Gopakumar (order dated 3/10/2016 in ITA No. 31 of 2016) mentioned by the AO in his report should be narrated. The decision of the Kerala High Court in the case is in favour in the Revenue on the issue of assessment u/s 153A without there being incriminating material found during the course of search. The argument and the decision of the Kerala High Court are that "In so far as the issue as to whether it is necessary that incriminating materials should be unearthed in a search under section 132 to sustain a notice issued under section 153A(l)(a), it is opined 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 assesses or the person to whom such notice is issued. [Para 7], Once a return is filed in answer to such a notice, the Explanation to section 153A provides, among other things, that all provisions....
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....hat the AY 010-11 was not unabated as the case was selected for scrutiny through CASS and that assessment u/s. 143(3) was pending on the date of search. However, these facts are neither mentioned in the assessment order nor found to be evidenced in the assessment record as reported by the AO in his remand report. However, even if. it is so, mere list of shareholding cannot be incriminating by itself which other otherwise also would be very much part of books of account and audited annual report. While the AO attached a copy of seized page-20 of Annexure-165, no copy of notice u/s. 143(2) if issued was annexed with his report dated 16.06.20lTlNo proof of issue of notice u/s. 143(2) has .been found which could have commenced the assessment proceedings. The appellant in its rejoinder to the said report/of the AO has denied receipt of any notice u/s. 143(2) and knowledge of commencement of assessment proceedings. Thus, the earlier report dated 16.06.2017 by the AO lacks credibility and seriousness. However, even if the AY 2010-11 is conceded to be abated, it is seen that the appellant has discharged its onus u/s. 68 by establishing the identity and creditworthiness of the shareholders ....
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....e appeal proceedings on account of certain documents incomplete or missing, I find that those missing/incomplete documents, if at all, are not material for necessarily drawing adverse inference against the appellant because with the documentary evidences furnished for each of the share applicants, the primary onus of the appellant u/s 68 has been adequately discharged. It is also noted that most of the individual shareholders are family members and relatives of the directors of the Company/the Group. It is true that the subscription of shares of a new company at huge premium (of Rs.90 per share) defies commercial/investment prudence, but such proposition by itself cannot be the sole basis for addition of share application amount u/s. 68. It may be worth pointing out that over and above the evidences submitted before my predecessors which have been examined by the AO, the Id. ARs have also made submission in the background of various case laws such as Nova Promoters & Finlease (P) Ltd., Navodaya Castle (P) Ltd., Hindusthan Tea Trading Co. Ltd., Nipun Builders & Developers P. Ltd.., NR Portfolio Pvt. Ltd. & etc. including that of NRA Iron & Steel Pvt. Ltd. I also note that out of 37 ....
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....ceedings had already expired. We are of the considered view that the case of the assessee is clearly covered by the decision of the Jurisdictional High Court in the case of PCIT vs. Saumya Construction Pvt. Ltd. 387 ITR 529 (Gujarat High Court) and also by the case of CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) (Delhi High Court) which held that in case of unabated assessment year if no incriminating material is found during search, no addition can be made on the basis of material collected after search. The Gujarat High Court in the of PCIT v. Rameshbhai Jivraj Desai [2020] 121 taxmann.com 333 (Gujarat) held that where no incriminating material in respect of an earlier assessment year for which assessment had already attained finality was unearthed during course of proceedings under section 153A, Assessing Officer while completing assessment under said section could not disturb completed assessment of assessee in respect of such earlier assessment year. In the case of Sunrise Finlease (P.) Ltd. [2018] 89 taxmann.com 1 (Gujarat), the Gujarat High Court held that where no incriminating evidence against assessee was found or seized during course of search so as to attract ....