AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 277
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.... The assessee is a resident corporate entity. For the assessment year under dispute, the assessee filed its return of income u/s. 139(1) of the Act, declaring total income at Rs. 5,29,260/-. The return so filed was processed u/s. 143(1) of the Act on 10.01.2012. 5. Subsequently, the Assessing Officer (AO) received information from the Investigation Wing that in course of investigation conducted by Investigation Directorate of Kolkata Unit in case of various other companies located at Kolkata, it was found that those companies, in reality, are shell companies and their bank accounts have been utilized for providing accommodation entries. It was further found that one of the beneficiaries of such accommodation entries is the present assessee. Based on such information, the A.O. reopened the assessment u/s. 147 of the Act, after recording reasons. In course of assessment proceeding, the A.O. observed that during a search and seizure operation carried out u/s. 132 of the Act by the Directorate of Investigation, Mumbai, it was found that the assessee had availed unsecured loan from various entities as under :- 1. JMD Sounds Ltd. 2. Kumaon Engg. Co. Pvt. Ltd. ....
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....l, the A.O. made total addition of Rs. 3,58,93,474/- and, accordingly, completed the assessment u/s. 143(3) r.w.s. 147 of the Act vide order dated 29.12.2018. 8. Against the assessment order so passed, the assessee preferred an appeal before the first appellate authority, inter alia, challenging the validity of reopening of assessment as well as contesting the additions on merits. 9. Insofar as the challenge to the validity of reopening of assessment, the first appellate authority did not find merit in contentions of the assessee. Accordingly, he upheld the validity of the proceeding. However, insofar as merits of additions made u/s. 68 of the Act, amounting to Rs. 3,58,51,974/-, the first appellate authority granted partial relief by sustaining the addition to the extent of Rs. 3,30,03,727/-. Insofar as the addition made on account of unexplained expenditure amounting to Rs. 4,41,500/-, the first appellate authority upheld the addition. 10. Before us, the ld. Counsel appearing for the assessee drew attention to the reasons recorded for reopening of assessment u/s. 147 of the Act. He submitted, as per the reasons recorded, the A.O. reopened the assessment to assess escaped....
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....ted, the reopening of assessment having been made based on tangible material coming through investigation carried out by the Investigation Wing, the validity of such proceeding cannot be questioned. He submitted, at the time of reopening of assessment, the A.O. is required to take a prima facie view with regard to the escapement of income. At that stage, A.O. is not required to conduct a full-blown enquiry to reach a conclusion regarding the escapement of income. As regards the contention of the assessee that notice u/s. 148 of the Act was issued prior to the receipt of approval u/s. 151 of the Act, the ld. DR submitted, competent authority must have granted the approval prior to issuance of notice u/s. 148 of the Act. However, it might have been communicated to the A.O. subsequently. Thus, he submitted, reopening of assessment u/s. 147 of the Act should not be declared as invalid. 13. We have considered rival submissions and perused materials on record. We have also applied our mind to the judicial precedents cited before us. At the outset, we proceed to examine whether the reasons recorded by the A.O. for reopening of the assessment have any live link to the subject matter of ....
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....d income for A.Y. 2011-12, nor the entities from whom the amount was allegedly received during the assessment year, as per the reasons recorded. In the assessment order, the A.O. has referred to totally different entities, such as: 1. JMD Sounds Ltd. 2. Kumaon Engg. Co. Pvt. Ltd. 3. Nextgen Infotel Pvt. Ltd. 4. Kasturi Towers Ltd. 5. Sulabh Resources Pvt. Ltd. 15. He has further observed that as per the investigation carried out by the Directorate of Investigation, Mumbai, the assessee allegedly had paid on-money in cash for purchase of Flat No. 36 in Sunshine Tower project of M/s. Sunshine Housing & Infrastructure Pvt. Ltd. The assessment order further reveals that the two additions made by the A.O., on account of unexplained expenditure cash credit of Rs. 3,54,51,974/- and the unexplained expenditure representing on-money paid of Rs. 4,41,500/-, have absolutely no nexus to the alleged income escaping assessment in terms of reasons recorded for reopening of the assessment u/s. 147 of the Act. 16. Even in course of hearing, the Department could not controvert the aforesaid factual position. Thus, the facts on record clearly reveal ....
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.... link between the reasons recorded and the subject matter of assessment and additions made. Therefore, we refrain from deliberating on these issues any further. Thus, in the ultimate conclusion, we held that the assessment order and the additions made are unsustainable in law, hence, deserves to be quashed. Accordingly, we do so. 18. In the result, the appeal is allowed. ITA Nos. 6613 to 6617/Mum/2024 (Assessment Years: 2012-13 to 2016-17) 19. Though multiple grounds have been raised by the assessee, however, the assessee has raised a preliminary legal issue, challenging the validity of the assessment orders passed u/s. 143(3) r.w.s. 153A of the Act and the additions made thereunder on the ground that the additions made are not based on any incriminating material found as a result of search and seizure operation conducted on the assessee. 20. Briefly, the facts relevant for deciding these issues are, for the aforesaid assessment years, the assessee had filed its return of income in regular course u/s. 139(1) of the Act. As revealed from the orders passed for the impugned assessment years, on 06.10.2017, a search and seizure operation u/s. 132 of the Act was carried o....
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....cured loan availed by the assessee as 'unexplained cash credit u/s. 68 of the Act' and computed notional interest allegedly paid by the assessee on such loan and added to the income. These additions were made across all the assessment years in dispute before us. 21. At the outset, ld. Counsel appearing for the assessee submitted that as on the date of search carried out on assessee, the assessment proceedings for none of the years were pending. Therefore, there are no abated assessments. Drawing our attention to the discussions made in the assessment orders, the ld. Counsel submitted, the A.O. has not referred to even a single incriminating material having any connection with the assessment /additions made. Simply referring to the balance sheet of the assessee and the statement recorded by the Investigation Wing from third parties, with whom the assessee has absolutely no connection, the A.O. has made the additions in assessments completed u/s. 153A of the Act. He submitted, neither the balance sheet nor the statement recorded from a third party in course of some other proceeding, cannot be treated as incriminating material found as a result of search and seizure operation condu....
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.... credit u/s. 68 of the Act, representing alleged bogus unsecured loans and payment of interest by the assessee on such loan. Therefore, the issue which arises for consideration is - whether these additions can be stated to have been made based on any incriminating material found as a result of search and seizure operation. Undoubtedly, the assessment order for the impugned assessment years have been passed u/s. 143(3) r.w.s. 153A of the Act. Thus, invoking of provision contended u/s. 153A of the Act, pre-supposes that the assessment is pursuant to search and seizure operation carried out in case of the assessee. It is fairly well settled proposition of law that in an unabated assessment proceeding u/s. 153A of the Act, any addition made has to be based on incriminating material found as a result of search and seizure operation. 25. As discussed earlier, facts on record reveal that the additions are primarily based on the balance sheet of the assessee and statements recorded in course of some other proceedings from some Kolkata based third party individuals. As far as balance sheet of the assessee is concerned, they are based on books of accounts of the assessee, already disclose....