TaxTMI 
TaxTMI 
2022 (8) TMI 1611
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....ld first be relevant to cull out the basic facts of the case and effect of law in brief in respect of certain AY's. The assessee is a primarily engaged in the business of construction of residential/commercial projects in Mumbai and belongs to the Kamla Landmark Group whose main promoters / key persons are Shri Ramesh Jain, Shri Jitendra Jain, Shri Jitendra Jain, Shri Ketan Shah and Shri Sushi Mantri. Search under section (hereinafter referred to as "u/s.") 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was conducted against the Kamla Landmarc Group, on 10-12-2013 which triggered section 153A of the Act. Prior to the date of search, the income-tax assessment u/s 143(3) of the Act (scrutiny assessment) for AY 2008-09 was already completed and not pending before the AO on the date of search, so the assessment for AY 2008-09 did not abate consequent to the search on 10-12-2013. And also, since the returns of income for these assessment years (hereinafter in short 'AYs') AYs 2009-10, 2010-11, 2011-12 & 2012-13 were filed on 27-09-2009, 11-10-2010, 30-09-2011 & 29-09-2012 respectively, and undisputedly the time limit for issuance of notices u/s 143(2) of the Act ....
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....chases/sale, unsecured loans advances etc. After examining the financials and credentials of these loan creditors, the AO recorded his comments at Para 6.2 of the assessment order. The AO accordingly show caused the assessee as to why the unsecured loans procured/shown to have been taken from the twenty eight (28) lenders/accommodation entry providers should not be assessed as undisclosed income of the assessee u/s 68 of the Act and the interest paid on such bogus loans claimed as expenditure u/s 37 of the Act, be disallowed. In response, the assessee had sought for the copies of the statements of the key persons including Shri Jitendra Jain, which according to the AO, was provided to the assessee on 25-02- 2016. However since the AO did not receive any explanation on or before the specified due date i.e. 01-03-2016 proceeded to make the addition u/s 68 of the Act in the relevant AY 2008-09, since according to him, the assessee failed to prove the nature and the source of the credit entries in the books of account of the assessee. The AO also disallowed the interest paid on such unsecured loans u/s 37 of the Act, across all the AYs. The AO further made addition on account of notion....
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.... was further submitted that in the said 2 letters it had / requested the AO to provide the statements of the 3 parties relied upon by the AO to draw adverse inference and had also requested for cross-examination of the said parties, Accordingly, the assessee contended that there has been a violation of principles of natural justice. On the said submissions of the assessee, it is noted that the powers of the First Appellate Authority (FAA) are co-terminus with that of the AO and therefore, in the present appellate proceedings, the submissions made by the assessee vide the said letters dated 18.03.2016 which were allegedly not considered by the AO will be duly considered while dealing with the specific grounds of appeal in respect of the various specific additions made by the AO. Accordingly, Ground No II of the appeal of the assessee is partly allowed." 5. After examining the contentions set out by the assessee in these letters, the Ld. CIT (A) rejected the same and sustained the addition made u/s 68 of the Act on account of unsecured loans of Rs. 4,95,00,000/-. The Ld. CIT (A) accordingly also confirmed the disallowance of interest incurred on such loan of Rs. 47,07,12....
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....ating evidence to justify the additions made in the unabated AYs, particularly when the statement was not recorded on the basis of any incriminating material found in the course of search. For this, the Tribunal had relied on the decision of another coordinate Bench in the case of Smt. Kalpana M. Ruia Vs DCIT, CC 2(2) and the CBDT Circular F No. 286/2/2003-IT(Inv) dated 10-03-2003. After holding so, following the judgment of the Hon'ble Bombay High Court in the case of CIT Vs Continental Warehousing Corporation (Nhava Sheva) Ltd (374 ITR 645), this Tribunal deleted the additions made in the unabated AYs holding that they were made without referring to any incriminating material found in the course of search. The Ld. AR accordingly contended that this Tribunal was bound by judicial discipline to follow the ratio laid down in the second appellate order passed by the coordinate Bench of this Tribunal (supra) in their Group's case and thus urged that all the additions made in the unabated AYs of the assessee be deleted, since they were not based on any incriminating material found during the course of search. 9. Per contra, the Ld. CIT, DR appearing on behalf of the Revenue sup....
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....on facts and in law. As noted earlier, on the date of search i.e. 10-12-2013, income tax assessment for AY 2008-09 was unabated. We note that the provisions of Section 153A of the Act, forms part of Chapter XIV of the Act contain special provisions for completing assessments in case of search conducted u/s 132 of the Act or requisition made u/s 132A of the Act. These provisions can be invoked only in cases where the Income-tax Department has exercised its extra ordinary powers of conducting search and seizure operations after complying with stringent preconditions prescribed in Section 132 of the Act. We do not deny the Revenue's contention that, once a search u/s 132 is conducted against a person, then irrespective whether any incriminating material is found, the AO is required to proceed against such person for completing the assessments u/s 153A of the Act for the specified six assessment years. To this extent, there is no quarrel. However we find that Section 153A itself creates the fine distinction/differentiation amongst specified six assessment years depending whether prior to the date of search, the assessment proceedings are pending or not before the AO. We note that the r....
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....ent Year 2005-06, the respondent-assessee had filed his return of income declaring an income of Rs. 9.61 lakhs. The return of income as filed by the respondent- assessee was processed under Section 143(1) of the Act. Admittedly, no notice under Section 143(2) of the Act has been issued. Thereafter on 5 January 2007, a search was conducted on the respondent-assessee under Section 132 of the Act. Consequent thereto, proceedings under Section 153A of the Act were initiated. During the assessment proceedings for A.Y. 2005-06, the Assessing Officer added an amount of Rs. 93.72 lakhs (declared as gifts) as being covered by Section 68 of the Act and an amount of Rs. 43.67 lakhs (accumulated profits of the lendor) out of Rs. 1.5 crores received as loan from one K.P. Developers Pvt. Ltd. as deemed dividend under Section 2(22)(e) of the Act. Undisputedly, respondent-assessee was a shareholder in M/s K.P. Developers (P) Ltd. The aforesaid additions are reflected in an assessment order dated 31 December 2008 passed under Section 143(3) r/w 153A of the Act determining the respondent-assessee's total income at Rs. 1.47 crores. 4. In appeal, the CIT (A) held ....
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....pn. (Nhava Sheva) Ltd. (supra). In the appeal before us, the revenue has made no grievance with regard to the impugned order of the Tribunal holding that in law the proceedings under Section 153A of the Act are without jurisdiction. This in view of the fact that no assessment were pending, so as to abate nor any incriminating evidence was found. The grievance of the revenue is only with regard to finding in the impugned order on the merits of the individual claim regarding gifts and deemed dividend. However once it is not disputed by the revenue that the decision of this Court in Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra) would apply to the present facts and also that there are no assessments pending on the time of the initiation of proceedings under Section 153A of the Act. The occasion to consider the issues raised on merits in the proposed questions becomes academic. 11. Identical view was expressed by the Hon'ble jurisdictional Bombay High Court in the case of CIT Vs SKS Ispat & Power Ltd (398 ITR 584) wherein it was held as follows: "5. We have considered the arguments canvassed by the learned counsel for the respective parties. On perusal of se....
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....he unabated AYs, particularly when the statement was not recorded on the basis of any incriminating material found in the course of search. The Tribunal accordingly in absence of any incriminating material found in the course of search, deleted similar additions made by the same AO. The relevant findings of this Tribunal are as follows: "14. We have heard the parties and perused the details, documents and submissions alongwith case laws relied upon by the Ld. AR as well as Ld.DR. The Ld. Representative of the assessee has argued that no incriminating materials were found during the search carried out on 10.12.2013 at the various premises of the Kamla Group, therefore, the assessment is not liable to be reopened in accordance with law. It is also argued that the period for issuing the notices u/s 143(2) of The Income Tax Act, 1961 expired by the time of search for the assessment years from 2009 - 2010 to 2012 - 2013 and no notices were issued u/s 143(2) for the aforesaid assessment years. It is also argued that the assessment order for A.Y. 2008 - 2009 was passed u/s 143(3) of the Act as observed by the Assessing Officer while passing the assessment order u/s 143(3) r.w.s 1....
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....dence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation 25. (...) However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable t....
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....e assessment under Section 153A and 153C of the Act. The relevant extract of the order is reproduced as under: "On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under | section 132/4 stand abated and not the assessments / reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment / reassessment shall not abate. It is only because, the finalised assessments / reassessments do not abate, the appeal revision or rectification pending against finalised assessment / reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments / reassessments finalised for the assessment years covered under section 153A stand abated canno....
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....aterial for assessment u/s. 153A is not sustainable on the touchstone of above said Hon'ble Jurisdictional High Court decisions. Here, we also like to mention the decision of the Hon'ble ITAT in the case of Smt. Kalpana Mukesh Ruia Vs. DCIT, CC-2(2). The relevant finding as under: "39. We have carefully considered the submissions and perused the records. Firstly issue in appeal is that in assessment framed under section 153(A) in case of the unabated assessment addition without reference to incriminating material is not sustainable. This issue has been clearly spelt out and affirmed by honourable jurisdictional High Court in the Catena of case laws including that of continental warehousing (supra). 40. The learned departmental representative and the learned CIT appeals have tried to distinguish this decision from Hon'ble Bombay High Court by referring to Hon'ble Delhi High Court decision in the case of Kabul Chawla (supra). 41 .In this regard we are of the considered opinion that the decision from honourable jurisdictional High Court in Continental Warehousing (supra) is clear and unambiguous. It was clearly held in that case that assessments which ar....
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..... The appeal of the assessee for the A.Ys. 2008-2009 to 2012- 2013 are allowed." 14. We note that, the Ld. CIT, DR was unable to point out any change of fact or any change in the position of law. Having regard to the foregoing, the judicial discipline demands that we follow the decision rendered by this Tribunal (supra) on same set of facts and circumstances in the assessee's sister concern cases. Respectfully following the same, we are of the considered view that, the additions / disallowances made in the unabated AYs by the AO u/s 68 of the Act on account of unsecured loans, interest incurred thereon, and the alleged notional commission expense incurred for procurement of such loan, were not backed by any incriminating material found as a result of search, and therefore the AO is directed to delete the same. 15. Even in respect of the disallowances made out of several expenses viz., labour charges, professional fees, brokerage, compensation expenses etc., it is noted that the same was disallowed only on the premise that the details were not submitted before the AO or they were insufficient. The interest paid on partner's capital was partially disallowed on the ground that t....