TaxTMI 
TaxTMI 
2022 (6) TMI 1392
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....aded that the ld. CIT(A) has erred in law as well as in facts in deleting the addition of Rs.4,43,07,359/- which was added by the Assessing Officer u/s 68 of the Act. 3. The brief facts as emerging out from the assessment order are that, a search and seizure operation was conducted in the residential premises of Mahendra Sethia Group of companies at Kolkata on 30/11/2012. According to the Assessing Officer, Shri Mahendra Setia is a Kolkata based entry operator who has been engaged in the activity of providing accommodation entry to different companies and has created numerous dummy companies where he has appointed his close associates and staffs as Directors. The Assessing Officer, further observed that under the search action taken u/s 132 of the Act, sixteen entities were covered. He narrated the details of these sixteen entities at page no. 2 of the impugned order. The name of the assessee appeared at Serial no. 12. Thereafter, the Assessing Officer has narrated the activities of Mahendra Sethia Group of companies. The Assessing Officer made an addition of Rs.4,43,07,359/- by observing as under:- "14. It is to be noted that, the assessee who had transactions mainly w....
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....ed in financial year 2007-08 (on 18.09.2007). with Shri Mahendra Sethia and Smt. Neeta Sethia (wife of Shri Mahendra Sethia), as Directors. In FY : 2010-11, the control and management of the company passed on to the present Directors, Shri Sharat Deorah and Shri Siddhartha Deorah who reside in Mumbai. After the control and management of the company changed hands, the registered address of the company was also changed. At the time of incorporation of the company, capital of Rs.4.49,00.000/- was raised and these were invested in shares of various companies. According to AO the parties which had purchased initial shares of the appellant company and the company in which the money raised through shares were invested, all belonged to Mahendra Sethia Group. As per the AO. during the FY: 2007-08 to FY: 2009-10 all major transactions were within the shell companies of the Mahendra Sethia Group. In FY: 2010-11, control and management of the company has changed hands. After the control and management of the company had changed hands, shares held by the appellant company since the time of its inception, i.e. since FY: 2007-08 were sold during current year and sale proceeds were invested in mut....
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....ing any doubts on either the source of capital raised or on investments in various shares and securities. Assessee has continued to hold these investments in the next several years. Small parts of these investments were sold in AY: 2009-10 and AY: 2010-11 but the majority of the investments continued with the appellant company and these have officially been sold in AY: 2011-12 and the sale proceeds have been either investedin mutual fund or given as loan and advances. As mentioned above, the assessment proceedings for AY: 2008-09 were reopened u/s.147 and nothing incriminating was found. Thereafter, proceedings u/s.153A has been initiated in all these years. But again AO has not found anything incriminating in AY: 2009-10 and AY: 2010-11 when part of these investments were sold. It is only in the AY: 2011-12 when substantial part of investments was sold that the AO expressed doubt on the sale transactions. In para 14 of the assessment order, AO expressed his doubt by saying that the assessee company is now holding real assets when in the previous years its investments portfolio was doubtful. However, there is no basis for the doubts expressed by the AO. It is not even remotely ment....
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....e-assessment. Completed assessment can be only interfered with by the AO while making the assessment u/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 course of search which were not produced or not already disclosed or made known in the course of original assessment. While delivering the judgment; the Hon'ble Delhi High Court followed the judgment of the Bombay High Court in CIT vs Continental Warehousing Corporation (NhavaSheva) Ltd. (2015) 374 ITR 645. These two judgments have been followed by various High Courts and Tribunals on this issue. The position as on today is that in respect of completed assessment any addition can be made under proceedings u/s.153A only if any incriminating documents are found. As mentioned above, no incriminating documents have been found during search against the assessee. Addition (disallowance) has been made on the basis of information available in the Audit Report/Return of Income. The views expressed by the Hon'ble Court in Kabul Chawla case (Supra) and Continental Warehousing Corporation (Supra) has been rei....
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....osed 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 made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi)Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of t....
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....f any other person." Order of the ITAT Delhi Bench in other cases viz. Asha Rani Lakhotia vs. ACIT and Subhag Khattar Vs. ACIT are on the same line. Hon'ble Delhi High Court in the case of Subhag Khattar in Tax Appeal No.60 of 2017 has considered the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section 153A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law? " After putting reliance upon its decision in the case of CIT Vs. Kabul Chawla (supra) has replied this question as under: "6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the IT AT. The IT AT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of t....
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....essment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search? " 35. Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: "16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which....
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....he on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to crossexamine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis....
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....the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed." 11. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon'ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006-07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon'ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon'ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. 12. The position of law in other decisions referred by the assessee is identical; particularly we have considered the judgment of Hon'ble High Court in the case of PCIT vs. Salasar St....
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....s 147 of the Act. During the course of re-assessment, the Assessing Officer had required the assessee to furnish details of share application money raised in financial year 2007-08. According to the assessee it has submitted the complete details and the Assessing Officer was satisfied. He framed the assessment order u/s 143(3)/147 of the Act and assessed the total income of the assessee at Rs.5,710/-. Thus, the capital was introduced for the first time in the accounting year relevant to assessment year 2008-09. It was accepted in that year. In the subsequent years, the assessee has utilized this capital in making investment in other corporate entities and ultimately in the mutual funds. Thus, according to the assessee, the capital in its hands was accepted. The Assessing Officer in Assessment Year 2011-12, when its utilization was examined, cannot doubt the availability of the funds for making investments in real assets. 17. On an analysis of the above details it is revealed that the Assessing Officer did not make any analytical investigation or recorded any specific findings. He has acted vaguely and recorded a general finding in a superficial manner touching upon large number ....