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2024 (6) TMI 800
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....n the facts and in the circumstances of the case, the Order of assessment passed under Section 153A of the Act is wholly illegal and without jurisdiction as no search had been conducted under Section 132 of the Act in any of the business premises of the appellant - company. 4. That on the facts and in the circumstances of the case, the finding recorded in the assessment Orders that search and seizure operations were carried out under Section 132 of the Act in the case of the appellant -company, is perverse and wholly erroneous and therefore, the Order of assessment passed under Section 153A of the Act is without jurisdiction. 5. That the additions made in the assessment Order are not based on any corroborative and relevant incriminating material stated to have been unearthed during the course of any search by the Assessing Officer, though no search has taken place on the appellant and therefore, the Order of Assessment is wholly illegal and without jurisdiction in view of the judgment in the case of Commissioner of Income-tax (Central)-III v. Kabul Chawla [2016] 380 ITR 573 (Delhi)/[2015] 281 CTR 45 (Delhi). 6. That the learned CIT(A) has wrongly upheld a....
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....had furnished the copy of the warrant which was duly executed in the name of the assessee on 6.2.2018, in respect of the premises situated at SCO 80- 81, 4th Floor, Sector 17-C, Chandigarh; that the said warrant was found containing the name of the Assessee; that accordingly, it was found that the warrant of authentication u/s 132(1) of the Act had been executed in the name of the Assessee; and that, therefore, the A.O. was justified in initiating assessment proceedings u/s 153A of the Act. 7. Before us, on behalf of the Assessee, it has been contended that neither any search was conducted on the assessee company, nor any 'Panchnama' was prepared in its name; that the assessee company filed an application under the RTI Act, bearing Registration No. CCITC/R/E/20/0001 dated 7.1.2020, seeking information with regard to copy of last warrant, a copy whereof has been placed at Assessee's Paper Book ( 'ABP') ,pages 346-350. It has been contended that the said application of the assessee was transferred (APB 351-352) to the DGIT, ITO off ice of PCIT (Investigation), Ludhiana and the DCIT, Central Circle-2, Chandigarh (APB 354-356) and finally to the DCIT, Central Circle-2, Mohali (APB 3....
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....observing so, agreed with the action of the Assessing Officer and held that the Assessing Officer was justified in initiating assessment proceedings u/s 153A of the Act; that the ld. CIT(A) did not provide the assessee with the copy of the warrant, nor reproduced the same in the order; that since none of the Income Tax Authorities provided the assessee with the copy of the search warrant, the assessee company was suspicious that its name was not mentioned in the search warrant. 9. In the above situation, the Bench had called for the original search warrant from the Department, which was produced. The name of the assessee company was found mentioned in the search warrant. It is seen that a copy of the 'Panchnama' has been placed at APB 519-522. At APB 519, at item A, it is mentioned: 'Warrant in the case: M/s Kansal Singla and associates'; at item (B) , it has been stated that: 'Warrant to search (Details and Ownership of place of search): M/s Kansal Singla and Associates SCO 80-81, 4th Floor, Sector 21C, Chandigarh. So, the name of the assessee Company, is not mentioned in this 'Panchnama'. Also, this 'Panchnama' does not bear the signature of Shri T.N. Singla, Director of the a....
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..... 1, 2 taken by the assessee before the ld. CIT(A). The matter pertaining to Ground Nos. 3 and 4 has been effectively decided by us in the preceding paragraphs, where we have found that the search warrant did contain the name of the assessee company. Therefore, the grievance of the assessee by way of Ground Nos. 3 and 4 also does not contain any merit and, accordingly, Ground Nos. 3 and 4 are rejected. 14. According to Ground No.5, the additions made are not based on any incriminating material found during the search. In this regard, the ld. CIT(A) has held that the Assessing Officer was having jurisdiction to assess the income of the assessee on the basis of the material available at the time of the assessment and he was not to restrict the additions subject to the incriminating material found during the search. For holding so, the ld. CIT(A) has placed reliance on the decision of the Hon'ble Kerala High Court in the case of "CIT vs. KPUmmer", (citation not given) in the impugned order; the decision of the Hon'ble Allahabad High Court in the case of 'Rajkumar Arora', 367 ITR 517 (Allahabad) ; the decision of the Hon'ble Kerala High Court in the case of 'EN Gopakumar....
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.... officer cannot be sustained in the present case in the order passed under section 153A of the Act, in the absence of any incriminating material found during the course of search action, where there was no pending assessment which could be said to have abated on the date of search. 16. Reliance has been placed on the judgment of Hon'ble Apex Court in the case of 'PCIT vs M/s Abhisar Buildwell P. Ltd. ', CA No. 6580, dated 24.04.2023, wherein, the Hon'ble court held that "in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961." 17. Reliance has further been placed on the judgment of the Hon'ble High Court of Bombay, in 'Pr. CIT Vs. Sandeep Agarwal (HUF) ', dated 09/10/2023 (Bombay) , wherein it was held that - "We dismiss the appeal , holding that the only issue which arises for determina....
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.... appeal , it had been noted that in terms of the provisions of section 153A( l) (b) , the Assessing Officer was required to assess/reassess the total income for the year under consideration; that the CIT(A) observed that it has been held by the Hon'ble Kerala High Court in the case of 'CIT vs KP Ummer' that when a notice u/s 153A is issued, it enables the Department to carry out assessment/re-assessment with respect to 6 immediate prior years and this does not require any incriminating material recovered during search relating to those prior years in which there is no time left on the date of search for an assessment u/s 143 (3); that the CIT(A) observed that the same view has been up-held by the Hon'ble Allahabad High Court in the case of 'Rajkumar Arora'; that the CIT(A) observed that the Hon'ble Kerala High Court, in the case of 'EN Gopakumar vs CIT', (2016)75 taxman.com 215 and the Hon'ble Allahabad High Court, in the case of 'CIT vs Kesarwani Zarda Bhandar', (2016) , ITA No. 270/2014, had also held similarly; that the ld. CIT(A) observed that keeping in view of the provisions of the Act and the ratios of the decisions mentioned, it was observed that the Assessing O....
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....t and he was to restrict the additions subject to incriminating material found during the course of search. The ld. DR has contended that in this view of the matter, there being no merit therein, Ground Nos. 3 to 5 may be rejected. 23. We have heard the parties on Ground No. 5 raised before us. 24. This assessment was abated, as the search was conducted on 16.02.2018. The appellant brought to our notice that no incriminating material was found during the search and provisions of section 153A were not applicable in this case. As the search was conducted on 16.02.2018 and as per Section 153A the assessment for 2017-18 and 2018- 19 were abated and the Assessing Officer was competent to pass assessment order u/s 153A r.w.s. 143(3) of the Act for these years. Hence ground Nos. 2, 3, 4 and 5 are hereby rejected. 25. Concerning Ground No. 6, here again the addition was made by the AO without considering each credit separately on merit, while making addition of Rs. 3,70,000/-, holding that the purpose and utilization of funds which had not been explained by the assessee. 26. AO Observation - Page 10-11 of AO Order. 27. The Assessing Officer made addition of all the credit en....
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....the CIT(A) asked the appellant company to submit any other document nor pointed out any discrepancies in the documents submitted by the appellant company. The AO and CIT(A) simply ignored the documents submitted by the appellant to substantiate its claim and made addition of Rs. 3,70,000/- in the hands of the appellant company. 29.5 The appellant company filed written submission before CIT(A) in 2020, the CIT(A) had more than 2 years to examine the documents submitted by the assessee company and ask the assessee to submit any other document, if required. But neither the CIT(A) nor AO asked the assessee to submit any other documentary evidence in this regard. 29.6 The ld.CIT(A) has reproduced the entire written submission of the assessee company in its order, and on page 71, 72 and 77 of the CIT(A) order, the following facts were mentioned by the assessee in its submission which were reproduced by CIT(A) :- Page 71 of CIT(A)'s Order DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY AMOUNT (IN RS) PARTY AMOUNT (IN RS PARTY NAME ACCOUNT NO 25/05/2016 2,50,000/- VASHISHT KUMAR GOYAL (FRIEND OF DIREC....
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....the assessee company, therefore the assessee company has now submitted copy of computation and confirmation of Sh. Vashisht Kumar Goyal (Paperbook page 45, 48-49) as additional evidence. The submission of said documents are neither challenged nor disputed in the appeal by the department. Hence the addition of Rs. 3,70,000/- as advance received form Sh. Vashisht Kumar Goyal confirmed by ld.CIT(A) without considering the documents submitted by the assessee company should be deleted. Accordingly, ground of appeal No. 6 is accepted. 30. Ground No 7 relates to addition of Rs. 10,50,000/- made by the Assessing Officer and upheld by ld. CIT(A) on account of Income deposited in cash by the assessee without any justification. 31. AO Observation - Page 10-11 of AO's Order. 31.1 The AO made addition of all the credit entries in bank of Rs. 2,02,23,250/- (which includes cash deposit of Rs. 10,50,000/- by the company in its bank account) without considering each credit separately on merit and on the plea that purpose and utilization of funds not explained by assessee. 31.2 The ld. CIT(A) confirmed the addition of Rs. 10,50,000/- (Page 108-109, point 10 of CIT(A) 's Order) on account....
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....e in the assessment order nor considered the copy of account which was already placed on record, while making the addition on the dictate of third party ignoring the fact that it has been duly recorded by the assessee company in the Prof it and Loss account of the company as at 31.03.2017 (Paperbook Page 4) . The aforesaid documents submitted by the assessee were neither challenged nor disputed by the department in the appeal. Hence, any receipt already shown as income in the Prof it and Loss Account cannot be added u/s 68 of the Act, without any specific reasons or evidence. Therefore, the addition of Rs. 10,50,000/- is wrong and needs to be deleted as it includes an amount Rs. 2,50,000/- withdrawn and re-deposited by the company and Rs. 8,00,000/- which was already declared by the company as income in its Profit and Loss Account for AY 2017-18. Accordingly, Ground No. 7 stands accepted. 32. Ground No 8 relates to addition of Rs. 14,20,000/- u/s 68 of the Act. The assessee contended that the company submitted the cashflow statements, explanation of each debit and credit entry in the bank account of the assessee company along with the Balance Sheet, Affidavit, confirmations, ban....
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....ty and on borrowed satisfaction to declare the assessee company as a shell company and made addition of al l credit entries in the bank account of the assessee company as undisclosed income u/s 68 of the Income Tax Act, 1961, without even issuing any Show Cause Notice to the assessee company for treating it as a shell company. Also, the ld. Assessing Officer neither issued a Show Cause Notice nor mentioned a single word about shell company in any of the questionnaires sent by him on 14.08.2019 (page 21-22 of paperbook) , 07.10.2019 (page 25-28 of paperbook) and 05.12.2019 (page 35-37 of paperbook) . The Assessing Officer erroneously made an addition, disregarding the comprehensive evidence provided by the assessee to substantiate its claim regarding the lenders. It is crucial to note that the company extended funds in submitted details as identity, sources, bank A/c, etc of each creditor, and there is no entity, individual or otherwise, that can be deemed as a sham entity. Furthermore, al l the lenders executed the transfers from their active and operational bank accounts. Notably, within the same fiscal year, the assessee company repaid all lenders except Sh. Baldev Singh and adva....
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....es to draw such inference and consequences out of the same as per the provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had credit amounting to Rs 2,02,23,250/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs. 2,02,23,250/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisat....
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....rded in the assessment order in respect of the documentary evidence furnished by the appellant' in support of bank credits. The submissions and documents furnished by the appellant during the appellate proceedings were also forwarded to the AO for remand report. In the remand report also, the AO has not even discussed the documentary evidence furnished by the appellant in support bank credits let alone pointing out any defect in the same. In view of the above discussion and after making independent perusal of documents furnished by the appellant, it is noted that the assessment order is non speaking, mechanical in nature and has been passed without discussing merits of the documents. There is no direct or indirect evidence pointed out by the AO before making such additions. Therefore, after considering the merits of the case, analysis of credits as per the above table and strength of documentary evidence, it is observed that there is no justification in such addition made in the hands of the appellant u/s 68 of the Act. Therefore, the addition of Rs. 1,88,03,250/- is hereby deleted." 32.3 The assessee contended that the AO did not make any adverse findings in the re....
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....ed order, has observed that the assessee did not furnish any documentary evidence in support of the loss claimed. It is seen that as per the Computation of Income (paperbook page 10-11) , loss was of Rs. 50,231/-, whereas as per the Profit & Loss Account (paperbook page 4), the loss was of Rs. 3,92,340/-. The contention of the Id. Counsel for the assessee has been that the AO wrongly observed that bills and vouchers and books of account were not produced by the assessee and that the AO wrongly disallowed the loss at Rs. 50,231/- as per return of income. It has further been contended that the Id. CIT(A) went wrong in observing that no documentary evidence was fi led, whereas the aforementioned papers were fi led, as also ITR-V of the assessee company, for assessment year 2017-18 (paperbook page 9) and Balance Sheet of the assessee company as on 31.03.2017 (paperbook page 3-8) were also fi led. This has not been disputed before us. In the search conducted, at the business premises of M/s Kansal Singla & Associates, regular books of account along with bank statements of the assessee company were found, which fact stands duly mentioned at page 357 of the Appraisal Report (paperbook pag....
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....88,03,250/- credited in the bank account of the assessee company during the year under consideration. According to the Department, the ld. CIT(A) erred in not appreciating the fact that the amount of Rs. 1,88,03,250/- was to be considered as unexplained cash credit u/s 68 of the Act, since the assessee did not establish its genuineness during the assessment proceedings. The Department has contended that the ld. CIT(A) erred in holding that the identity and credit worthiness of the persons from whom the credits comprising the amount of Rs. 1,88,03,250/- were received, stood proved, whereas the genuineness of the transactions had not been established by the assessee, since the purpose of the credits had not been explained and thereby all the three limbs of the provisions of Section 68 of the Act did not stand proved by the assessee. 40. The Assessing Off icer himself has accepted the identification and source of depositor in the deviation report dated 24-12-2019. The AO sent the deviation note only after verifying the sources and merits of the documents submitted by the assessee company. However, on receipt of letter from DDIT, the AO made addition of the total credits in the bank....
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....ing business activities. There is no definition of shell company given under the provisions of Income Tax Act, 1961 or Companies Act, 1956/2013. Every case needs to be examined on merits as per the peculiar facts and circumstances to draw such inference and consequences out of the same as per the provisions of Income Tax Act. In order to decide the merit of addition made by the AO on account of unexplained bank credits u/s 68 of the Act, it is required to examine the source and nature of credits received by the appellant terms of conditions laid down in the provisions of section 68 of the Act. Thus, it required to examine the identity and creditworthiness of the persons from who's amounts have been received and genuineness of the transactions on merit considering each credit separately. The AO has not discussed each and cred separately on merits in the assessment order before drawing the inference that the credits were unexplained. During the assessment proceedings, it was observed by AO after going through the reply of the appellant dated 19.12.2019 in respect of particular of such persons from whom such credits were received that the appellant had cred amounting to Rs 3,22,01....
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....e. If the AO was not satisfied with the explanation of the AO in respect of source and nature of credits received, he should have recorded such dissatisfaction in the assessment order. However, no adverse finding has been recorded in the assessment order in respect of the documentary evidence furnished by the appellant in support of bank credits. The submissions and documents furnished by the appellant during the appellate proceedings were also forwarded to the AO for remand report. In the remand report also, the AO has not even discussed the documentary evidence furnished by the appellant in support bank credits let alone pointing out any defect in the same. In view of the above discussion and after making independent perusal of documents furnished by the appellant, it is noted that the assessment order is non speaking, mechanical in nature and has been passed without discussing merits of the documents. There is no direct or indirect evidence pointed out by the AO before making such additions. Therefore, after considering the merits of the case, analysis of credits as per the above table and strength of documentary evidence, it is observed that there is no justification i....