TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 702
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..../- made towards unexplained investment u/s. 69B, being the difference in consideration between sale agreement and registered deed in respect of purchase of properties by the assessee. 2.1 The Ld.CIT(A) failed to appreciate that the assessee had not furnished complete details in response to notice u/s. 142(1) dated 23/12/2020 and subsequent reminder issued on 03.02.2021 during the course of assessment proceedings. 2.2 The Ld.CIT(A) failed to appreciate that the assessee had not claimed during the assessment proceedings that the entire consideration as per sale agreement was accounted for in the books of accounts. But before the CIT(A), it claimed so and explained the source for consideration as capital contribution from partners, secured loan from bank and machinery creditors. 2.3 The Ld.CIT(A) erred in failing to give opportunity to the assessing officer by calling remand report under Rule 46A. Hence, the assessing officer had lost his opportunity to examine the source for capital contribution of partners and valuation of machineries purchased as per the agreement. 3. The Ld.CIT(A) erred in holding that proceeding u/s. 153C initiated on the basis of impounded material d....
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....why additions towards difference between considerations as per sale agreement dated 01.04.2015 and two sale deeds cannot be assessed as unexplained investment u/s. 69B of the Act. In response, the assessee filed a copy of reconstitution deed of partnership dated 27.02.2018, along with one excel sheet containing a revised statement of income and depreciation schedule for assessment year 2019-20. 4. The Assessing Officer, on the basis of information furnished by the assessee and also coupled with evidences collected during the course of survey completed the assessment u/s. 144 r.w.s. 153C of the Act, on 23.04.2021 and determined total income of Rs. 5,34,00,000/-, by making additions towards difference between sale consideration as per agreement of sale and two registered sale deed u/s. 69B of the Act. The relevant findings of the Assessing Officer are as under: "5. In response, the assessee filed a copy of the 'reconstitution deed of partnership' dated 27.02.2018 wherein the old partners, (i) Mr. M. Karchikumar, (ii) Mr. D. Gopalakrishnan and (iii) Mrs. R. Visalalakshi retired and the following new partners : (i) Mr. Srinivasan Vishnu (ii) M/s. Extreme Commercials LLP and ....
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....assessee had also contested additions made by the Assessing Officer towards purported on-money payments for purchase of property u/s. 69B of the Act. The assessee has filed a detailed written submissions on the issue, which has been reproduced at Para 10 of Pages 9 to 16 of ld. CIT(A) order. The sum and substances of arguments of the assessee before the ld. CIT(A) are in two fold. The first and foremost argument of the assessee is on invalid proceedings initiated u/s. 153C of the Act, in light of survey conducted u/s. 133A of the Act. The assessee submitted that proceedings initiated u/s. 153C of the Act, is invalid and consequent assessment order passed by the Assessing Officer u/s. 144 r.w.s. 153C of the Act is void ab initio, because proceedings u/s. 153C of the Act can be initiated only when some materials of other person found during the course of searched person. Since, the Assessing Officer has recorded satisfaction note u/s. 153C of the Act, on the basis of material found during the course of survey u/s. 133A of the Act in the case of the assessee, notice issued u/s 153C and consequent assessment order passed by the Assessing Officer u/s. 144, and r.w.s.153C of the Act is i....
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....of section 153C are satisfied in the appellant's case in relation to the search carried out in Christy group of cases. It is clear from the satisfaction note drawn by the AO that the AO has relied on the documents impounded from the business premises of the appellant during the course of the survey at the appellant's premises for the purpose of invoking the provisions of sec 153C. Since the notice u/s 153C was issued based on the material impounded during the course of the survey in the appellant's own business premises and not based on books of account/documents seized in the case of the searched person ( Christy group of cases), such issue of notice is without jurisdiction and the consequential assessment order passed u/s 144 r.w.s 153C is unsustainable in law. On careful examination, the contentions of the appellant are found to be tenable and acceptable in facts of the case. In this connection, it would be appropriate to peruse the satisfaction note recorded by the AO to enable him to assume jurisdiction u/s 153C. The satisfaction note recorded by the AO is reproduced as under: During the course of survey at the premises of M/s.Hill Max Exports, a Partnersh....
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....e searched person should belong to the person in respect of whom the proceedings u/s 153C are sought to be invoked or books of account /documents seized during the course of search in the case of the searched person should pertain to or information contained therein should relate to the person in respect of whom the proceedings u/s 153C are sought to be invoked. The proceedings initiated u/s 153C without fulfilment of the said mandatory condition cannot be treated as lawfully initiated proceedings. 19. As already mentioned above based on the perusal of the satisfaction note recorded by the AO, there is no finding therein that any seized books of account/documents in the case of Christy group of cases pertain to or the information contained therein relate to the appellant. The satisfaction note drawn by the AO is based on the documents impounded during the course of survey conducted in the appellant's own business premises. Though the said survey was conducted in connection with the search in Christy group of cases, the material impounded during the course of such a survey does not meet the essential requirement that the books of account/documents seized during the course of ....
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....wn attention to the following facts available in the agreement of sale, registered sale deeds, the return of income filed for A Y 2016-17 u/s 139(1) and the audited balance sheet as on 31.03.2016 uploaded along with the tax audit report, in support of its contention: As per the sale agreement dated 01.04.2015, the appellant agreed to purchase Land to the extent of 5 acres, 30000 sq.ft Building and Machineries for aggregate sale consideration of Rs. 7,45,00,000/-. Subsequently, the appellant purchased Land to the extent of 3 acres vide registered sale deed No. 10389/2015 dated 24.08.2015 for a consideration of Rs,42,03,400/-. The appellant purchased Land to the extent of 2 acres as well as Building vide registered sale deed No.11276/2015 dated 24.08.2015 for an aggregate consideration of Rs. 1,77,96,600/-. Out of the said aggregate consideration, the consideration for Land of 2 acres amounted to Rs. 28,02,195/- and the consideration for the Building amounted to Rs. 1,49,94,300/-. The balance sale consideration of Rs. 5,25,00,000/- as per the sale agreement is towards the purchase of machineries. The said purchase of Land, Building and Machineries has been duly accounted in the....
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....nt. While coming to such erroneous conclusion, the AO has omitted to consider that the sale agreement provided for sale of movable property also represented by 'machineries' and that the same do not require execution of a sale deed for conveyance of the title to the buyer. In this connection, it is also pertinent to point out that the AO has erroneously observed that the two registered sale deeds dealt only with the transfer of Land of 5 acres, whereas they actually dealt with transfer of Land as well as Building (being immovable properties), the details of which have been shown in the table above. The fact that Building has also been transferred through registered sale deed is clearly evident from Page Nos. 12 and 13 of the registered sale deed No.11276/2015, which contain the 'schedule of the property'. 27. As can be seen from the discussion in the preceding paragraphs, the inference drawn by the AO that the appellant has paid on-money of Rs. 5,25,00,000/(erroneously mentioned as Rs. 5,34,00,000/- in the assessment order) is based solely on the misconception that a part of the sale consideration mentioned in the agreement of sale is not reflected in the registe....
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....e closing WDV of the Plant & Machinery and Building as shown in the table above are duly reflected therein in the following manner: Particulars of the asset Asset shown in balance sheet as on 31.03.2016 WDV shown in balance sheet as on 31.03.2016 Closing WDV of the asset in depreciation schedule in the return of income Plant and machinery Computer 1,424 5,16,56,401 Machinery 5,09,35,319 Vehicle 7,19,658 Total 5,16,56,401 Building Building 6,01,107 1,69,03,482 Factory Building 1,63,02,375 Total 1,69,03,482 30. A comparison of the additions made to Building and Plant & Machinery as shown in the tables above with the purchase of the said assets as per the agreement of sale dated 0 1.04.2015 is furnished in the table below: Particular s of the asset Purchase consideration as per agreement of sale Additions to the assets in the books of account Plant and Machinery 5,25,00,000 5,80,59,450 Building 1,49,94,300 1,75,43,040 31. As can be seen from the above, the Building and Machineries purchased through the agreement of sale dated 01.04.2015 have been duly recorded in the books of account, as the additions to the said assets sh....
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....rds unexplained investment u/s. 69B of the Act, being difference between consideration as per sale agreement and registered deed in respect of purchase of properties by the assessee. The CIT-DR, further submitted that the ld. CIT(A) failed to appreciate that the assessee neither furnished complete details in response to notice u/s. 142(1) of the Act, dated 23.12.2020 nor responded to reminder dated 03.02.2021. The ld. DR further submitted that, the Assessing Officer has passed ex-parte assessment order u/s. 144 of the Act, when the assessee has not filed any details and as per details available with the Assessing Officer, the assessee has paid on-money for purchase of property, which is clearly evident from satisfaction note recorded by the Assessing Officer, wherein, as per agreement of sale dated 01.04.2015, the assessee has paid consideration for purchase of property at Rs. 7,45,00,000/-, whereas as per two registered sale deed found during the course of survey, total consideration for purchase of property was at Rs. 2,20,00,000/-. Although, the Assessing Officer has made additions u/s. 69B of the Act, towards unexplained investment for purchase of property, but the ld. CIT(A) d....
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....n reflected in the return of income filed by the assesse, which is much before the date of survey u/s. 133 of the Act. The assessee had also explained source for purchase of property out of capital consideration from partners. Therefore, arguments of the ld. DR present for the revenue that, the ld. CIT(A) has admitted certain additional evidences in violation of Rule 46A of IT Rules, 1962, is devoid of merits because, the assessee neither filed any additional evidences nor the ld. CIT(A) has considered fresh evidences to arrive at a conclusion. Therefore, he submitted that there is no merit in appeal filed by the revenue and the same should be dismissed. 11. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered satisfaction note recorded by the Assessing Officer u/s. 153C of the Act dated 17.09.2020. Admittedly, the assessee's case was subjected to survey u/s. 133A of the Act, in consequent to search u/s. 132 of the Act conducted in the case of M/s. Christy Fried Gram Industries on 05.07.2018. It is an admitted fact that during the course of search u/s. 132 of the Act, in the case o....
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....sale agreement dated 01.04.2015 and two registered sale deeds dated 25.08.2015 which were found and impounded during the course of search in appellant's own case on 05.07.2018. Therefore, we are of the considered view that the satisfaction note recorded by the Assessing Officer u/s. 153C of the Act to assume jurisdiction to assess income of person other than the searched person based on material found during the course of survey in appellant's own case is invalid and unsustainable in law. In so far as arguments of the ld. DR that, the survey u/s. 133A of the Act in the case of the assessee is triggered in pursuant to search action u/s. 132 of the Act conducted in the case of M/s. Christy Fried Gram Industry does not alter the legal position that, proceedings u/s. 153C of the Act can be initiated only when the Assessing Officer of the searched person records a satisfaction that any money, bullion or other valuable article or thing seized or requisitioned, belongs to or any books of accounts or documents seized or requisitioned pertains to or any information contain therein relates to a person other than the person referred to in section 153A of the Act. Therefore, in our considered ....
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....he place where survey action took place. Further, order under Section 133A (3)(ia) of the Act dated 31stJuly, 2014 was also passed by the learned Assessing Officer on2nd August, 2014, which clearly shows that the documents were impounded during the course of survey. There is no order required to be passed under Section 133A of the Act if the documents are found and seized during the course of search. Thus, apparently, the addition has been made in the hands of the assessee on the basis of material found during the course of survey and not search. The factual report submitted by the learned Assessing Officer on 27th October, 2022 which also say so. Performa for recording satisfaction note under Section 153C of the Act dated 30th September, 2015 in column no.5 (b) of the Act which shows description of the seized material also says that the material is impounded during the course of survey. Inproforma, relevant details in Panchanama in column no. 5(d),the details of impounding order dated 2nd August, 2014 is mentioned. Further also it is clear that all the additions made in the hands of the assessee were arising out of the documents impounded during the course of survey under Section ....
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..... 11276/2015, dated 24.08.2015 for aggregate consideration of Rs. 1,77,96,600/-. Out of said aggregate consideration, the consideration for 2 acres of land was at Rs. 28,02,195/- and the balance consideration of Rs. 1,49,94,300/- is for building. Similarly, the assessee has purchased three acres of land vide registered sale deed no.10389/2015, dated 24.08.2015 for a consideration of Rs. 42,03,400/-. Thus, the total consideration paid for purchase of 5 acres of land and building annexed thereon was at Rs. 2,20,00,000/- as per two registered sale deeds found during the course of survey. The balance sale consideration of Rs. 5,25,00,000/- as per the sale agreement is towards purchase of plant and machinery. The assessee has accounted land and building and also plant and machinery in the books of accounts, which is evident from schedule of depreciation filed for the year ended 31.03.2016, where the assessee has clearly bifurcated consideration paid for land, building and plant & machinery. Therefore, from the above it is evident that the entire consideration as per agreement of sale dated 01.04.2015 amounting to Rs. 7,45,00,000/- has been accounted in the books of accounts, which is ev....
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....ired to be transferred through registered sale deed only. In so far movable property like plant and machinery, there is no requirement of registered sale deeds and accordingly, the assessee has paid consideration for purchase of property as per agreement of sale dated 01.04.2015 and also accounted purchase of plant and machinery in the books of accounts, which is evident from financial statement filed along with return of income filed for the assessment year 2016-17. The assessee had also explained source for purchase of property out of capital contribution from the partners, which is evident from financial statement filed along with return of income filed for the assessment year 2016-17 on 13.01.2017. The ld. CIT(A), based on return of income filed by the assessee u/s. 139 of the Act, dated 13.01.2017 has come to the conclusion that the assessee has accounted total consideration paid for purchase of property including land, building and plant & machinery as per agreement of sale dated 01.04.2015 amounting to Rs. 7,45,00,000/- and is also able to explain source for said purchase and thus, additions made by the Assessing Officer towards purported on-money payment for purchase of pro....
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....estment u/s. 69B of the Act. The Assessing Officer has failed to carry out basic verification of material available on record. In our considered view, he went on to make addition u/s. 69B of the Act only on the basis of agreement of sale and two registered sale deeds even though the assessee has duly accounted amount consideration paid for purchase of plant and machinery in the books of accounts and also explained source for the same. Since, the documents relied upon by the ld. CIT(A) were already before the Assessing Officer, in our considered view the question of providing an opportunity to the Assessing Officer by way of remand report as required under Rule 46A of IT Rules, 1962 does not arise and thus, we reject the ground taken by the revenue. 18. We further noted that, there is no merit in the contention of the revenue that the Assessing Officer lost an opportunity of examining the source of capital contribution of the partners and valuation of machineries as per sale agreement due to the omission to call for a remand report is not tenable. Since, the scope of the assessment u/s. 153C of the Act is strictly limited to the seized material in the case of the searched person, b....