TaxTMI 
TaxTMI 
2024 (8) TMI 1421
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....Act which is void-ab-initio since barred by limitation as per the applicable provisions of third proviso to Section 153B(1) of the Income Tax Act. 3. For that the Learned Commissioner of Income Tax (Appeals) ought to have cancelled the assessment u/s 153C of the Act that was made for an Assessment Year beyond the stipulated period of ten assessment years as laid down under the applicable provisions of Section 153A 1153C of the Act by appreciating that the date of recording satisfaction note in the case of the 'other person' by the Assessing Officer of the 'searched person' must be construed as the date of handing over of documents relating to the other person even where the Assessing Officer is one and the same for both the 'searched person' and the 'other person'. 4. For that the Learned Commissioner of Income Tax (Appeals) had erred in upholding the Assessment Order now passed u/s 153C of the Act in the absence of any incriminating material in the appellant's case where the assessment was already subjected to scrutiny assessment u/s 143(3) of the Act vide order passed on 29.03.2012, in violation of the CBDT Circular in F.No.27....
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....relating to assessee and has bearing on its total income. Therefore, notice u/s. 153C of the Act dated 31.12.2021, was issued and served on the assessee. The assessee has not filed its return of income, in response to notice u/s. 153C of the Act. 4. The case was selected for scrutiny and during the course of assessment proceedings, the Assessing Officer noticed that the appellant company, M/s. KSJ Infrastructure Pvt Ltd was incorporated on 21.02.2019 with ROC, Kolkata. During the financial year relevant to assessment year 2010-11, the appellant has issued 6,48,934 equity shares of face value of Rs. 10/- each with a premium of Rs. 975/- per share and received share premium of Rs. 63,25,34,760/-. The Assessing Officer, further noted that share premium received by the appellant has been invested in unquoted equity shares and loans and advances as shown in the balance sheet. Therefore, the Assessing Officer called upon the assessee to file necessary details including, the name and address of shareholders from whom the share premium was received and share holding pattern etc. The appellant company could not furnish necessary details, including name and address of the persons from who....
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....g a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such company shall be deemed to be not satisfactory, unless: (a) the person, being a resident in whose name such credit is recorded in the books of such company, also offers an explanation about the. nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer has been found to be satisfactory 5.10. In this case, the assessee has failed to even produce the details of the identity of persons, creditworthiness of the persons from whom the amount was received and could not explain the source of amount credited as share capital of the Rs. 63,90,24,100/- credited to the books of accounts leaving the genuineness of the transaction a big question mark As the source for Rs. 64,89,340/- and amount credited as share premium of Rs. 63,25,34,760/ - total of Rs. 63,90,24,100/- to the books of accounts of the assessee company is unexplained, it is liable to added to the total Income of the assessee u/s 68 of the....
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.... the decision of Delhi High Court in the case of RRJ Securities Ltd vs CIT [2016] 380 ITR 612 (Delhi). The relevant findings of the ld. CIT(A) are as under: "9.1 Ground 2 is raised agitating the reopening of assessment u/s 153C arguing that the sarne is bad in law. Section 153A lays down the provisions for the assessment of 'searched person' whereas Section 153C deals with the assessments of 'other person'. The assessments under this new scheme are to be done for six assessment years prior to the assessment year relevant to search year in relation to the total income of the assessee. Assessment of the other person has to be carried out by the AO of such other person, if AO of the searched and other person is not the same, consequent to handing over of the relevant material by the AO of the searched person to the AO of the other person. Since the Act does not provide any time limit for handing over of the material belonging/ pertaining to/ information relating to such other person by the AO of the searched person, hence the Act envisaged the limitations with regard to completion of assessments u/ s 153C with reference to the date of handing over of material.....
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....to in Section 153C and also in 153A will relate to A.Ys. 2014- 15 to 2019-20 9.4 However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation and the same is represented in the form of any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if- (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year); (ii) such income escaping assessment is represented in the form of asset; (iii) the income escaping assessment or part thereof relates to such year or years. 9.5 The amended provisions of section 153A of the Income-tax Act shall apply where search under section 132 of the Income-tax Act is initiated or....
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....he reasons enumerated in paras 9.4 to 9.7 above and hence cannot be acceded to. 9.9 In this case, the AO was satisfied that the material seized have bearing on the determination of total income of assessee and accordingly, invoked the provisions of Section 153C of the Act. The assessee did not dispute the seizure of the material or that the seized material belongs to the assessee. The AO duly recorded satisfaction note as per law on 31.12.2021 for invoking section 153C. It is not the case of the assessee also that the AO has not recorded satisfaction note duly. 9.10 Thus, I find no infirmity in the action of the AO in initiating the proceedings u/ s 153Cof the Act for the impugned AY. Thus, the grounds in this regard are dismissed." 7. The ld. CIT(A), had also discussed the additions made by the Assessing Officer towards share premium u/s. 68 of the Act, in light of grounds of appeal taken by the assessee and also certain judicial precedents including the decision of Hon'ble Apex Court in the case of PCIT vs Abhisar Buildwell (P) Ltd [2023] 454 ITR 212 and held that, seized material found during the course of search in the case of M/s. Jain Metal Rolling Mills ....
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....y a paper company, having no business activities but used as a medium to bring in unaccounted income. But for the search action, the connection between these parties would not have been detected. Any AO inspecting the financials of the assessee company alone would easily go astray by the list of allottees of shares. It is only the holistic approach on the details of all the allottee companies and the details of all the directors of the allottee companies and the subsequent events would reveal the real picture. As the assessee argues, the incriminating material in the present case is not the financials of the assessee company alone for the impugned AY, but the link to various affairs of the assessee company with several parties acted in tandem to whitewash the black money in the form of bringing it in the assessee company as share capital/ share premium via various paper companies. Thus, there is an effectual presence of incriminating material along with the statements recorded, which unearthed the whole gamut and modus operandi followed. Therefore, the Hon'ble Supreme Court decision in the case of Abhisar Buildwell P.Ltd. [2023] 149 taxmann.com 399 (SC) and the other decisions ....
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....wo separate categories observing as under: "11, We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of income Tax Vs. Nova Promoters and Finlease (P) Ltd. 2012) 342 ITR 169 (Delhi), Commissioner of Income Tax Vs. N.R. Portfolio Put. Ltd., 206 (2014) DLT 97 (DB) (Del) and Commissioner of Income Tax-I Vs. MAF Academy P. Ltd., 206 (2014) DLT 277 (DB) (Del), The aforesaid decisions mentioned above refer to the earlier decisions of Delhi High Court in Commissioner of Income Tax Vs. Sophia Finance Ltd., (1994] 205 ITR 98 (FB)(Delhi), CIT Vs. Divine Leasing and Finance Limited[2008] 299 ITR 268 (Delhi) and observations of the Supreme Court in CIT Vs. Lovely Exports P. Ltd. (2 008] 319 ITR (St.) 5 (SC). 12. The main submission of the learned counsel for the assessee is that once the assessee had been able to show that the shareholder companies were duly incorporated by the Registrar of Companies, their identity stood established, genuineness of the transactions stood established as payments were made through accounts payee cheques/ bank account; and mere deposit of cash in the bank accounts prior....
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....urpose of identification of subscriber company when there is material to show that the subscriber was a paper company and was not a genuine investor. 11.21 It is all the more relevant to refer to one more latest judgement of the Hon'ble Supreme Court in the case of M/s Principal Commissioner of Income-tax Vs NRA Iron & Steel (P.) Ltd. [2019] 103 taxmann.com 48 (C) which has held that where there was failure of assessee to establish creditworthiness of investor companies, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital/ premium received by assessee company, Merely because assessee company had filed all primary assessee to establish evidence, it could not be said that onus on creditworthiness of investor companies stood discharged. It is apposite to refer to the observations of the Hon'ble Supreme Court in its order as under: "13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - Assessee had filed all t....
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.... that the above details could not be furnished due to change in management of the companies is not acceptable. Al the above clearly prove that they are all just paper companies used to wash the black money in the form of share capital/premium. Having clearly depicted the modus operandi involved in bringing the unaccounted income into the assessee company, I find no infirmity in the action of the AO in adding the share capital and share premium. 11.23 For this proposition, reliance is also placed following case-laws: 11.23.1 Amount received by assessee from accommodation entry providers in garb of share application money, was to be added to its taxable income under section 68. CIT Vs Nova Promoters & Finlease (P) Ltd [Delhi High Court) [2012] 18 taxmann.com 217 (Delhi)/[2012] 206 Taxman 207 (Delhi)/[2012] 342 ITR 169 (Delhi)/[2012] 252 CTR 187 (Delhi) 11.23.2 Neither before AO nor before CIT(A), assessee could make share applicants available. Identity not established. Appeal dismissed. Amtrac Automobiles India Pvt Ltd Vs ACIT [ITAT Delhi] ITA No.2920/Del/09 11.23.3 Under section 68 it is not sufficient for assessee to merely disc....
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....that subscriber was a paper company and not a genuine investor. Navodaya Castle Pvt Ltd Vs CIT [Supreme Court] (2015] 56 taxmann.com 18 (SC)/[2015] 230 Taxman 268 (SC) 11.23.8 Merely furnishing PAN Numbers in routine way, does not explain the source or the creditworthiness of the party. The basis on which premium has been charged for the shares has not been explained. A perusal f the financial statements do not justify the quantum of share premium charged. Advance Powerlnfra Tech Ltd Vs DCIT [ITAT Kolkata] 2017-TIOL-1223-1TAT-KOL 11.23.9 Failure of the assessee to prove business model of the company and also to produce the directors of the share-subscribing companies, to establish genuineness of huge amount of premium on issue of shares is justified reason to treat the same as bogus for purpose of making addition u/s 68. ITO Vs Sohail Financials Ltd. [ITAT Delhi] ITA No.4867/Del/2011, 2018-TIOL-1874-ITAT-DEL 11.23.10 Where Assessing Officer made additions to assessee's income under section 68 in respect of amount received as share capital from several companies, in view of fact that all of these companies were maintained by ....
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.....) 11.24 Going by the above, it is clear that the assessing officer is thus left with no other choice than to treat these amounts as credits of share capital/premium as unexplained and add to the income of the assessee. In view of the Overwhelming reasons and case-laws laid down by various courts as above there is a clear case to assess these credits as unexplained u/s 68 and thus, the additions u/s 68 are upheld and the grounds of the assessee in this regard are dismissed. 11.25 However, while making the above addition, the AO has added the entire paid-up capital of Rs. 64,89,340 whereas the paid-up capital as at 31.03.2009 itself stood at Rs. 1,00,100 which cannot be added for the impugned AY. The AO, is therefore directed to restrict the addition on this account to Rs. 63,89,240. In view of the above, the related ground is partly allowed. In the result, the addition of share capital to the extent of Rs. 63,89,240 and addition of share premium of Rs. 63,25,34,760/- both under u/s 68 are upheld." 9. The Ld. Counsel for the assessee, Shri. B. Ramakrishna, FCA, submitted that the ld. CIT(A) erred in upholding initiation of proceedings u/s. 153C of the Act, on th....
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....nd consequently, for the purpose of second proviso to section 153C(1) of the Act, date should be construed as date of search, but not date of satisfaction note recorded by the Assessing Officer. The ld. CIT(A), after considering relevant facts has rightly rejected grounds taken by the assessee and also distinguished the case laws relied upon by the assessee in the case of Hon'ble Delhi High Court in the case of RRJ Securities Ltd vs CIT (Supra). Therefore, there is no merit in legal grounds taken by the assessee and same should be rejected. 12. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The appellant has raised a preliminary objection of jurisdiction of the Assessing Officer in initiating proceeding u/s. 153C of the Act, for the assessment year 2010-11, in light of second proviso to section 153A(1) of the Act, and proviso to section 153C(1) of the Act. As per second proviso to section 153A(1) of the Act, assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years pending on the date of initiation of ....
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....ction having regard to material found during the course of search, he cannot hand over books of accounts or other documents to the Assessing Officer of any other person. Thereafter, Assessing Officer of searched person should record satisfaction u/s. 153C of the Act for initiation of proceedings u/s. 153C of the Act, having regard to books of accounts and other documents received from the Assessing Officer of the searched person before issuing notice u/s. 153C of the Act. In the present case, the Assessing Officer of the searched person has recorded satisfaction note for proceeding u/s. 153C of the Act on 31.12.2021 with reference to books of accounts seized during the course of search proceedings, in the case of M/s. Jain Metal Rolling Mills and others. The Assessing Officer of any other person has also recorded satisfaction note for initiation of proceedings u/s. 153C of the Act, on 31.12.2021 and satisfied that the documents and books of accounts seized during the course of search proceedings in the case of M/s. Jain Metal Rolling Mills and others has information relating to the assessee and has bearing on its total income. From the satisfaction note recorded by the Assessing Of....
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....n the second proviso to section 153A(1) shall be construed as reference to the date of receiving the books of accounts or documents or assets by the Assessing Officer having jurisdiction over any such other person. Since, the Assessing Officer of the searched person cannot hand over the books of accounts and other documents to the Assessing Officer having jurisdiction over any other person, unless he records the satisfaction for proceedings u/s. 153C of the Act, in our considered view, for the purpose of second proviso to section 153A(1) of the Act, the date of receiving the books of accounts or other documents by the Assessing Officer having jurisdiction over such other person should be considered. In the present case, if you consider the date of satisfaction note recorded by the Assessing Officer dated 31.12.2021, the subject assessment year falls beyond the stipulated six assessment years and relevant four assessment years and thus, notice issued by the Assessing Officer u/s. 153C of the Act, dated 31.12.2021 and consequent assessment order passed u/s. 143(3) r.w.s. 153 of the Act, dated 31.03.2022 is barred by limitation and liable to be quashed. 15. The Ld. Counsel for the ....
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....o in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:...." "153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination o....
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....tion may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or re-assessment to the six assessment years will be examined with reference to such date." 9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not mer....
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....si Seeds Private Ltd. group of cases, certain documents were found from the resident of Shri M. Ramasami, Chairman-cum-Managing Director of that entity. The documents, inter-alia, contained Joint Development Agreement (JDA) dated 30.03.2007 between the assessee (land-owner) and another entity namely SMS Gardens (P) Ltd. (SGPL) (developer) for the construction of a residential complex on certain land owned by the assessee at Coimbatore. 6. Since the seized document belonged to the assessee, proceedings u/s 153C r.w.s. 153A was initiated against the assessee after recording of reasons and after obtaining due approval of prescribed authority. The case of the assessee was centralized vide Notification No.07/2013-14 dated 20.08.2013 and notice u/s 153C r.w.s. 153A was issued on 24.09.2013. In response, the assessee filed return of income on 01.04.2014. 7. It could be seen that jurisdiction over the case of Shri M. Ramasami as well as the assessee vested with same AO and a satisfaction note initiating proceedings u/s 153C in the case of assessee was recorded on 24.09.2013, a copy of which has been placed on record by the revenue. Therefore, to count the jurisdiction of ....
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....he total income of any other person then the books of account or documents or assets so seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub section (1) of section 153A. It has further been provided that in case of such other person, the reference to the date of initiation of the search u/s 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. 8. The provision of Sec.153A (1)(a) postulates issuance of notice in respect of each assessment....
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.... of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of ....