TaxTMI 
TaxTMI 
2022 (10) TMI 1316
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....ting the fact that the assessee had failed to prove the identity, creditworthiness & genuineness of the Kolkata based investor companies from whom share capital were received. 2. On the facts and circumstances of the case and in Law, the Ld. CIT(A), has erred in deleting the addition of Rs. 6,65,00,000/- made on account of unaccounted cash credit u/s 68 of the Income Tax Act without appreciating the fact that such accommodation entry in form of share Capital was arranged by the assessee from the Kolkata based entry providing companies, which was accepted by the directors of the entry providing companies before the Investigation Wing. 3. On the facts and circumstances of the case and in Law, the Ld. CIT(A), has erred in not appreciating the fact that incriminating data in the form of computer back-ups were found and seized during the course of search and the Assessing Officer has made a detailed analysis of the same and also correlated the same with the addition \s made in the assessment order. 4. On the facts and circumstances of the case and in Law, the Ld. CIT(A), has erred in holding that any addition made during the course of assessment proceedings u/....
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....l data of group concerns of Sumeet Industries Ltd, it was noticed that Sumeet Group has received huge funds in shape of share capital with huge premium / share application money. Certain companies of Sumeet Group have allotted share capital directly to Kolkata based paper companies with huge premium and within one year or less shares of these Kolkata based paper companies bought back at par value or below par value. As mentioned above, the assessee has received share capital of Rs.6,65,00,000/- from Kolkata based companies and Kolkata based companies have made investment in 665000 equity shares bearing face value of Rs.10/- each at a premium of Rs.90/ per share in FY 2008-09. These shares were transferred by Kolkata based companies to Sitaram Prints Pvt. Ltd., Somani Overseas Pvt. Ltd., National Poly Yarn Pvt. Ltd and Extreme Health Care Pvt. Ltd., group companies of Sumeet Industries Ltd, at a rate of Rs. 2/- per share but assessee has not proved identity, creditworthiness and genuineness of transactions of these companies. Accordingly, the assessee was asked to show cause vide letter dated 28.08.2017, as to why the amount of Rs. 6,65,00,000/- for F.Y 2008-09 relevant to assessmen....
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.... Income-Tax Act. Thus, AO noted that this is a common requirement for all corporate entities i.e. genuine as well as non-genuine entities, therefore, the identity of a company does not stand fully established by merely furnishing its PAN or ROC registration details and by submitting bank statements and Balance Sheets, the creditworthiness and genuineness of the transactions cannot be proved. Therefore, the share capital of Rs. 6,65,00,000/- as received by the assessee company was treated as unexplained cash credits u/s 68 of the Act and was added to the total income of the assessee. 7. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has deleted the addition made by the Assessing Officer. 8. Learned CIT-DR for the Revenue submitted before us written submission, which is reproduced below: "A search action u/s 132 of the Income Tax Act was carried out on 19.02.2015 in the case of Sumeet Industries Ltd. Group of Surat. During the Course of search action some incriminating documents were found, which are related to assessee. On the basis of the same the case was selected for scrutiny by issuing notice u....
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....st day of May, 2003 - [but on or before the 31st day of March, 2021], the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years -[and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, -so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made -[and for the relevant assessment year or years] : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years-[and for the relevant assessment year or years] : Provided further that assessment or reassessment, if any, relating to an....
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....ppeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the -[Principal Commissioner or] Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 5. Now, it is very important to mention here that Notice u/s 153A is only tool to start assessment proceeding for last six assessment years. During the assessment proceedings, the assessing officer has to exercise all procedures for framing independent assessment as per t....
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....ny' but it is a complete scrutiny so the assessing officer is binding to exercise all options which were laid down in the provisions of I.T. Act. So, the addition of Rs.6,65,00,000/- on account of bogus share capital made in the order u/s 143(3) r.w.s. 153Aof the Act. is valid addition and justifiable as per the I. T. Act. It is also equally important to mention here that during the course of assessment proceedings, the assessee was asked to show cause vide letter dated 28.08.2017 as to why the amount of Rs.6,65,00,000/- for F.Y. 2008-09 relevant to A.Y.2009-10 should not be treated as its unaccounted money in the form of bogus share premium added u/s 68 of the Act. The assessee submitted its reply on merit only not on any technical issue. The assessee furnished its reply explaining identity, creditworthiness and genuineness on creditors. On perusal of the submission furnished before Hon'ble Bench, it is clear that the assessee has not raised any technical issue during course of assessment proceeding before the A.O. It is first time before Hon'ble Bench, where the assessee pleading that the A.O. has no jurisdiction to make an assessment of income which is not based on m....
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....ent. We note that in case of unabated assessment, no addition should be made without the aid of incriminating material. In the assessment order, the assessing officer made addition based on the unaccounted job work receipts and no any incriminating material was used by the assessing officer to make addition on account of share capital/share premium. The issue of share capital and share premium have already been examoined by the assessing officer in the original assessment proceedings, therefore, since the Department has failed to demonstrate the incriminating material in the assessee`s case under consideration. Therefore, the assessee's case is covered by the judgment of Hon'ble High Court of Gujarat, in the case of PCIT Vs. Saumya Construction Pvt. Ltd. (2016) 387 ITR 529 (Guj), wherein, the Hon`ble Court held as follows: "5. Before adverting to the merits of the rival contentions, reference may be made to the decisions of different High Courts on which reliance has been placed by the learned counsel for the respective parties. The lead judgment in this regard is the decision of the Delhi High Court in the case of Anil Kumar Bhatia (supra), wherein the court held ....
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....furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income" of the aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the "total income" of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such ....
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....f the total income, it has been provided in the second proviso of sub Section (1) of section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is....
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....ar relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed in the order under Section 153A of the Act and the Section applies notwithstanding Sections 139, 147, 148, 149, 151 and 153 of the Act." 7. In Jai Steel (India), Jodhpur (supra), the Rajasthan High Court held thus : "15.A plain reading of the above provision would reveal that if a search or requisition is initiated after 31.05.2003, the AO is under an obligation to issue notice to such person, who has been subjected to search/requisition to furnish the return of income of six years immediately preceding the year of search. The AO is then required to assess or reassess total income of the said six years and, out of the six years, if any assessment or reassessment is pending on the date of initiation of the search, the same would abate i.e. pending proceedings qua the said assessment year shall not proceed thereafter and the assessment has to be made under Section 153A(1)(b) of the Act read with the first proviso thereunder. 16. Further provisions have been made contemplating a situation where an assessment made under sub-section (1....
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....e of making assessment of total income under Section 153A of the Act is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of Section 153A a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under Section 153A of the Act would be the assessment for the said year. 20. The necessary corollary of the above second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands....
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....Act, notice under Section 153A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or ....
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....e: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to 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. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provided in th....
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.... the case may be, may authorise any Deputy Director, Deputy Commissioner, Assistant Director, Assistant Commissioner or Income-tax Officer, or (B) such Deputy Director or Deputy Commissioner, as the case may be, may authorise any Assistant Director, Assistant Commissioner or Income-tax Officer, the officer so authorised in all cases being hereinafter referred to as the authorised officer to- (i) enter and search any building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the look of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in the building, place, vessel, vehicle or aircraft, if the authorized officer has reason to suspect that a such person has secreted about his person any such books of account, other documents, money bullion, jewellery or other valuable article or thing; (iii) seize any such books of accou....
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....section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force, or (b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not or would not produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or (c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922, or this Act b....
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.... possession reason to believe that such assets represent wholly or partly income or property which has not been or would not have been disclosed for the purposes of the Act by any person from whose possession or control such assets had been taken into custody by the officer or authority from whom these were requisitioned. 14. Essentially, therefore, both the provisions contemplate search and requisition where the assessee is not likely to disclose his income. It appears that the object of both the provisions is to unearth the income which the assessee has not or is not likely to disclose. 15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is m....
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....on strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pend....
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....be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much sub....