TaxTMI 
TaxTMI 
2023 (7) TMI 120
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....act that none of conditions precedent existed and/or have been complied with and/or fulfilled by the Ld. A.O. (2) That the Ld. CIT(A) was wholly wrong in not considering the fact that proceeding initiated u/s 147 of the IT Act, 1961 is completely bad in law' and without jurisdiction as it is a search and seizure case and in the impugned case proceeding could have been initiated only u/s 153 A of the IT Act, 1961. (3) The Ld. CIT(A) erred in upholding the order of the Ld. A.O. as no evidence of escapement of income was found and there is no denying the fact that the impugned transaction was disclosed at the time of original assessment by the assessee while passing order u/s 143(3) of the IT Act, 1961 dated 31.03.2016, therefore as per the proviso (1) to 147 of the IT Act, 1961, the action of the Ld. A.O. in initiating the impugned proceeding is a mere change of opinion. (4) That the Ld. CIT(A) erred in not appreciating the fact that no incriminating material was ever available against the assessee. (5) That the Ld. CIT(A) estimated the net profit rate of 6% of the contract amount without any basis and is totally in contradiction to his own adm....
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....assessment under CASS and a notice under section 143(2) was issued and served upon the assessee. The ld. Assessing Officer has passed the assessment order on 30.03.2016 under section 143(3) of the Income Tax Act. The ld. Assessing Officer had determined the income of the assessee at Rs. 21,21,04,560/-. It emerges out from the record that thereafter the ld. Assessing Officer had issued notice under section 148 of the Income Tax Act and reopened the assessment. The reassessment order was passed under section 147 read with section 143(3) on 18.12.2017 determining the taxable income of the assessee at Rs. 21,92,45,159/-. In this re-assessment order, the ld. Assessing Officer has disallowed a sum of Rs. 71,40,599/- on the ground that excess depreciation was claimed by the assessee for this assessment year. The ld. Assessing Officer thereafter again issued notice under section 148 of the Income Tax Act on 26.03.2021. The ld. Assessing Officer has passed the impugned assessment order under section 147 read with section 143(3) of the Income Tax Act on 30.03.2022. The ld. Assessing Officer has observed that during the search conducted at the premises of the assessee on 20.09.2019, certain d....
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.... the grievance of the assessee basically in two-folds namely- (a) whether ld. Assessing Officer has jurisdiction to issue notice upon the assessee under section 148 for reopening of the assessment inspite of the fact that a search has been conducted upon the assessee under section 132 of the Income Tax Act; (b) whether ld. Assessing Officer was possessing any material, which can enable him to form a belief that income has escaped assessment. The answer to the second question would arise upon the finding of the first question. In case, it is held that ld. Assessing Officer was having jurisdiction to issue notice under section 148, inspite of procedure contemplated in section 153A of the Act, only then it is to be examined whether this notice fulfilled the conditions contemplated in section 147 of the Act or not. 8. Before proceeding further, we deem it pertinent to take note of the reasons recorded by the ld. Assessing Officer and the copy of which is available on pages no. 26 to 30, which read as under:- "1. The assessee company submitted its return of income for the Assessment year 2013-14 on 22/09/2013 declaring total income of Rs. 20,20,75,870/-.....
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....nv.), U-3(2), Kolkata on 22/01/2014 accepted to providing accommodation entries through entities controlled and managed by him and others, including M/s. Silverpoint Infratech Ltd. He had provided such accommodation entries to various beneficiaries in lieu of commission. Thus, M/s. Silverpoint Infratech Limited was instrumental in providing such accommodation entries. 3. It is noticed that during the Financial Year 2012-13, the assessee company M/s. ABCI Infrastructures Pvt Ltd had paid a sum of Rs. 63,11,55,000/- to the company M/s. Silverpoint Infratech Limited through banking transactions. In the Financial Year 2012-13, the turnover of the company M/s. Silverpoint Infratech Limited reached its peak and declined thereafter. Upon examination of the Audit Report of the company M/s. Silverpoint Infratech Limited, it is noticed that M/s Silverpoint Infratech Ltd was shown to be in the business of "Civil Contractors". 4. During the course of search proceeding, Shri Budhmal Baid, Managing Director of the assessee company, was confronted on the contents of seized document SD -ABCI - 03 in his statement recorded u/s 131(1A) of the Income Tax Act, 1961 on 24/09/2019. He ....
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....and examined for the relevant year. The company had shown a turnover of more than Rs. 250 crores under the claimed field of operations, i.e., "Civil Contractors", however, the major expenditure amounting to Rs. 249 crores has been made on purchases as shown in the ITR. Salaries and Wages amount to Rs. 14 lakhs only. There are no sub-contract expenses incurred as per the ITR of the company Silverpoint Infratech Limited. The tangible assets of the said company at the end of the relevant year were worth approx. Rs. 37 lakhs only and the expense of depreciation & amortization as per the P&L Account is approx. Rs. 4 lakhs only. In addition, it was also noticed that no expenditure was incurred towards rent on plant and Machinery. All these characteristics are contradictory to the nature of business of a Civil Contractor. From the above analysis done by me, I am satisfied that the company Silverpoint Infratech Limited did not do any actual work as a "Civil Contractor" and is merely a paper entity. 7. As a part of further investigation in the case, during the course of assessment proceeding u/s 153A in the case of M/s ABCI Infrastructure Private Limited, the assessee furnished bef....
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....to deflate its profit by taking accommodation entries, thereby evading tax. 9. Even though the assessee had filed a copy of annual report and audited P&L Account and balance sheet along with return of income where various information/material were disclosed. But the true nature of the transaction as discussed in the preceding paras was not disclosed by the assessee. The facts discussed in the preceding paras are such that the true colour of the transaction could not be discovered by the AO with any amount of due diligence at the time of assessment. It is only after the information in this regard was received from the investigation wing and further inquiry, examination and investigation were conducted by me that it came to light that the transaction discussed in the preceding paras was nothing but accommodation entry taken in the form of bogus sub-contract expenses. 9. The ld. Counsel for the assessee while impugning the findings of both the authorities took us through section 153A, 147 and 148 of the Income Tax Act. He contended that basically construction/ interpretation of sections 147 /148 is not in much dispute under the present question, but it is very much necessa....
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....itiated and for the relevant assessment year or year . At this juncture it may be brought to the attention of your good self that the expression "and relevant assessment year or years " was added by Finance Act, 2017 w.e.f. 01.04.2017. Prior to 01.04.2017 the Ld. AO could issue notices u/s 153A for only six years prior to the assessment year relevant to the previous year in which search was conducted. b. Under clause (b) of section 153A the Assessing Officer shall then assess, or reassess the total income of the Assessee for each of these 6 AYs and the relevant assessment year or years. Here also the expression "relevant period" was introduced only by Finance Act, 2017 w.e.f. 01.04.2017. Prior to 01.04.2017 the power to assess or reassess the income pursuant to search was restricted to six assessment years prior to the assessment year relevant to previous year in which search was conducted. However this power to assess or reassess income u/s 153A is not unfettered as brought out in the 2nd proviso to section 153A(1) wherein it is stated that assessment or reassessment relating to any assessment year falling within six assessment years and for the relevant assessment year o....
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....ssessee, section 153 A comes into play leading to :- (i) Automatic issuance of notices under section 153A for six assessment years prior to the assessment year relevant to the previous year in which search was conducted and (ii) if the Assessing Officer comes in possession of any such incriminating material (unearthed during the course of search) which evidences the fulfillment of the aforementioned conditions, it is only then that notice(s) u/s 153(1)(a) can be issued for the "relevant assessment years'' i.e., the period beyond six assessment years but not beyond ten assessment years prior to the assessment year relevant to the previous year in which search was conducted. Thus, applying the above principle to the facts of the instant case, it can be seen that since search and seizure operation was carried out in the assessee's premises on 20.09.2019, the Ld. A.O. is mandatorily required to issue notice only u/s 153A for the six assessment years i.e. AY 2014-15 to 2019-20 and for relevant years i.e. for AY 2011-12, 2012-13 and AY 2013-14 only if any such incriminating material was found during the course of search and seizure. Therefore, in t....
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....n "asset" has been inclusively defined to include Only the following assets namely: Immovable property being land and building or both; Shares and securities; Loans and advances; Deposits in bank account. From the perusal of the above definition of the Expression "Asset", the asset which are not included in the expression "Asset" as per the above Explanation 2, cannot be considered for the purpose of the Fourth Proviso to section 153 A( 1) of the Act. By specifically referring to the expression "Undisclosed Asset", the Legislature has impliedly excluded other items of income viz., liabilities/credits, unexplained expenditure etc. Hence from he above discussion, it is clear that section 153A of the Act can be invoked only if the Assessing Officer comes to a positive conclusion that he has in his possession documents or information revealing an Undisclosed asset of the assessee qua the assessment year (7th to 10th) which is valued Rs. 50 lakhs or more. In the instant case of the assessee, the impugned document based on which the Assessing Officer had issued notice u/s 148 of the Act, admittedly pertains to an item of expe....
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....ed, which provided the procedure how to compute undisclosed income for this block period of ten years. It is pertinent to observed that as far as regular assessment of the assessee is concerned, it has to continue parallely because in the block assessment, income was to be determined only on the basis of seized material found during the course of search, whereas the regular item of income under day-to-day business, which is available in the books of account of the assessee are to be determined under section 143(3)/147 of the Income Tax Act (as the case may be). 12. The Parliament vide Finance Act, 2003 (32 of 2003) has discontinued the block assessment provision contained in Chapter 14B (sections 158B to 158BH) and introduced a new Scheme under sections 153A, 153B, 153C etc. for the purpose of issue in hand. Section 153A is the relevant provision therefore, it is imperative upon us to take note of this provision. The relevant part of this section reads as under:- In this connection attention is sought to the provisions of section 153A (1) of the IT Act, 1961 which reads as under: "Assessment in case of search or requisition. 153A. [(I)] Notwithstanding....
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.... initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.-For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. 13. A perusal of this section would indicate that where a search has been conducted under section 132 of the Income Tax Act upon the assessee, then the assessment of the income has to be determined under section 153A of the Income Tax Act. Under Clause (a) of section 153A of the Income Tax Act, 1961, ld. Assessing Officer shall issue notices to the assessee requiring him to furnish within such period as may be specified in the notice, the return of ....
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.... place under Section 132 of the Act, notice under Section 153 A(l) 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 afresh 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 t....
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....roviso to section 153A. If we look forward to proviso no. 4 to this provision, then it would contemplate that the power to issue notice under section 153A for six assessment years stands on a different footing from the power to issue notice under section 153A for relevant assessment year. In other words, the original scheme is on different footing, whereas the new scheme introduced by way of a Finance Act, 2017 is different. The issuance of a notice for the relevant period is subject to the fulfilment of conditions and such conditions are - (a) the search must have been initiated under section 132 on or after 01.04.2017; (b) The ld. Assessing Officer must have in his possession books of account or other documents or evidences; (c) Such books of account or documents or evidence unearthed during the search should reveal that income represented in the form of an asset/assets has escaped assessment; (d) This undisclosed income in the form of an asset or assets that has escaped assessment amount to or likely to amount of 50 lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years. In other words, there mu....
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....ech Limited. It is to be appreciated that original assessment was scrutiny assessment passed on 30.03.2016. This ledger account must have been looked into or it is to be deemed as looked into as per the judgment of the Hon'ble Supreme Court in the case of CIT -vs.- Kelvinator India Limited reported in 320 ITR 561 (SC), wherein the Hon'ble Supreme Court has affirmed the decision of Full Bench of the Hon'ble Delhi High Court, which has laid down that if scrutiny assessment has been passed then it is to be assumed that all details have gone through. Once a search has been conducted after 01.04.2017, then upto ten assessment years notice under section 153A could only be issued and not 148. In the present case, since conditions stipulated in 4th proviso to section 153A could not be fulfilled, therefore, even no notice under section 153A could be issued. Presumably the ld. Assessing Officer was aware that notice under section 153A will not be sustainable and, therefore, did not issue. But alternatively there is no mechanism that notice under section 148 was to be issued. Thus the notice is invalid and void ab initio. On the strength of this show-cause notice if assessment is made, it des....
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.... having jurisdiction over the assessee has to satisfy two conditions before acquiring jurisdiction to issue such notice and thus the conditions are- (i) He must have reasons to believe that income chargeable to tax has escaped assessment; (ii)This belief should have a nexus with the information possessed by him. Since in the present case, earlier scrutiny assessment under section 143(3) was made, thereafter assessment was reopened by issuance of a notice under section 148 of the Income Tax Act and again a reassessment order was passed on 18.12.2017 under section 143(3) read with section 147. Therefore, proviso to this section would puts an embargo upon the powers of the ld. Assessing Officer to issue a notice upon the assessee unless he demonstrated that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In other words, the ld. Assessing Officer has to demonstrate how assessee has failed to disclose all material facts fully and truly which resulted the income escaped from taxation. 23. Though before us, ld. Counsel for the assessee has filed a very detailed submission on this point a....
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....n the last contract at 3.14%. This total profit is around Rs. 2,01,96,284/-. It has been assessed to income and once it has been assessed to income, then it is to be construed that this ledger account must have been gone through by the ld. Assessing Officer in two scrutiny assessments, then whereas the failure or omission at the end of the assessee to disclose all material facts fully and truly. 26. The next item of evidence referred by the ld. Assessing Officer is that statement of one Shri Sanjay Kumar Drolia, S/o. Shyam Sunder Drolia, who was a Director of M/s. Silverpoint Infratech Limited, was recorded on 25.06.2014 and in his statement, he submitted that this company provides bogus contract bills to many companies on commission basis. In subparagraph 3 of the reasons, this factum has been mentioned. Thereafter ld. Assessing Officer has referred this factum as on 06.09.2016. It is to be appreciated that the first date of statement i.e. 25.06.2014 is prior to scrutiny assessment passed in the case of the assessee under section 143(3) on 30.03.2016. If this information was possessed by the Revenue in 2014, then why, while assessing the income of the assessee from assignment o....
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....int Infratech Ltd but it is evident that there is back to back receipts of funds by the assessee from ( M/s Coastal Projects Ltd/ Ms Patel Engineering Ltd /M/s Horizon Infrastructure Ltd ) and payments to Silverpoint Infratech Pvt Ltd. (x) The assessee submits that the during the year under consideration, the assessee is engaged in the business of construction of various infrastructure projects in the form of development of roads, railways, etc (xi) Against the aggregate contract revenue of Rs. 65,87,75,909/- earned by the assessee , the assessee had subcontracted the entire contracts after keeping margin of Rs. 2.01,95,883/- (i.e. around 3% of the total contract revenue of Rs. 65,87,75,909/-) and thus, the Appellant had acted merely as a conduit / confirming party between the contract awarding parties (i.e. M/s Coastal Projects Ltd / M/s Patel Engineering Ltd / M/s Horizon Infrastructure Ltd) on One hand AND M/s Silverpoint Infratech Private Limited on the other hand. (xii) Further it is submitted that the AO had not averred or given any finding that the corresponding Revenue Earned by the Appellant from M/s Coastal Projects Ltd / M/s Patel Engineering L....
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....various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, and VA T registration of the sellers and their Income-tax return. In view of the above discussion in totality, the purchases made by the appellant from M/s. Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for f 19,39,60,866, is directed to be deleted The Income-tax Appellate Tribunal by its judgment dated May 16, 2014 relied on the self-same reasoning and dismissed the appeal of the Revenue. Likewise, the High Court by the impugned judgment dated July 5, 2017, affirmed the judgments of the Commissioner of Income-tax and the Income-tax Appellate Tribunal as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the Income-tax Appellate Tribunal. In these circumstances, the Review Petitions are dismissed." Further from a from a perusal of the statement of various persons as relied upon by the Assessing Officer (as per Par....
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....n the data-base of the Income Tax Department, these seven companies are branded as accommodation providers. How these sweeping statements could help the ld. Assessing Officer to doubt the case of the assessee. It is not ascertainable when this data-base was prepared, what is the foundation of the data-base, whether any opportunity to contest, such an observation has been granted or not, not only to the assessee but to those companies, who have been branded as an entry provider. This issue had ever travelled to independent adjudicating bodies like ITAT or Hon'ble High Courts, which would have upheld that these companies were indulged in providing accommodation entries. Therefore, whatever information has been referred by the ld. Assessing Officer, it is vague and incomplete and on the basis of this information, the assessment of the assessee cannot be reopened again. Therefore, we quash the reopening of assessment and accordingly assessment order also. 29. The next fold of dispute is whether any addition deserves to be made or not. We have discussed the facts in earlier paragraphs. In paragraph no. 24 of this order, we have noticed details of certain projects, which were received....
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....t known. The assessee was not given the copy of the statement. The assessee was not given an opportunity to cross examine those persons and how activities of the assessee are impacted by those statements has nowhere been demonstrated by the ld. Assessing Officer. He just made a general and sweeping remarks about some investigation carried out on the premises of M/s. Silverpoint Infratech Limited. The ld. Assessing Officer thereafter made reference to the Bank accounts of certain other seven companies and alleged that M/s. Silverpoint Infratech Limited has transmitted the money to these companies. He failed to establish a complete chain that money has ultimately percolated to the accounts of the assessee. This is inspite of the fact that earlier there was a scrutiny assessment, thereafter a reassessment and thereafter a search and one more round of assessment. Thus there is no evidence possessed by the Revenue to say that contracts assigned by the assessee is a bogus transaction. 33. As far as the finding of the ld. CIT(Appeals) is concerned, that income is to be re-determined out of these contracts on ad hoc basis. It is pertinent to note that assessee has been maintaining regul....