TaxTMI 
TaxTMI 
2026 (9) TMI 1725
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....ssessee's appeal being ITA No.414/Del/2026 for AY 2010-11 as lead case to adjudicate the issues under consideration. 3. Brief facts of the case are, the case pertains to M/s AGM Properties Pvt. Ltd. (assessee herein), formerly known as M/s Automobile Components (India) Ltd., which was subjected to proceedings under section 153A of the Act following a search conducted on 16.09.2015 at the premises of Shri Nem Chand Gupta, who was listed as a director of the company. The assessee denied any search at its own premises and challenged the jurisdiction of the proceedings, asserting that the notices were invalid, The AO, however, maintained that the search was valid and linked to the assessee through its director. 4. During the assessment, it was revealed that the company had issued 7,26,975 equity shares at 10 each, with a premium of Rs. 390 per share, aggregating to Rs. 26.40 crore. Despite this large capital inflow, the company reported gross receipts of only Rs. 13.27 lakh, indicating negligible business activity. Further scrutiny showed that Rs. 26.04 crore was invested across 48 entities without any substantive documentation or explanation regarding the purpose or commercial r....
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....cts and circumstances of the case, the authorities have erred in law in upholding the addition of Rs. 27,07,90,000/- u/s 68 of IT Act on protective basis without providing any evidence whether substantive addition has been made in hands of beneficiary. 5. On the facts and circumstances of the case, the authorities have erred in law in upholding the addition of Rs. 1,02,23,800/- on protective basis treating the alleged commission received in providing entries to beneficiaries without bringing any corroborative evidence on record and without providing any evidence whether substantive addition has been made in hands of beneficiary." 8. At the time of hearing, ld. AR of the assessee submitted ground-wise submissions which are reproduced below:- "Ground No 1 On the validity of the assessment u/s 153A and the addition made thereby without bringing on record any incriminating material found in the course of the search. The search in the present case was on 16.09.2015 and therefore the assessment was unabated in accordance with the second proviso to section 153A of the Act. It is a settled proposition of law that in case of unabated assessment u/s 153A of the ....
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.... 132(4) of the Act, it is a settled law in view of the decisions of PCIT Vs Anand Kumar Jain (HUF) 432 ITR 384 (Del) where reliance is placed on CIT Vs Best Infrastructure (India) P Ltd 397 ITR 82 and CIT Vs Harjeev Aggarwal 290 CTR 263(Del), that it is not incriminating material on a stand-alone basis unless such statement is with reference to any other material discovered during search and seizure operation. The statement sought to be relied upon by the Department is the one recorded during the post-search enquiry, as the above deponent was not available at the time of the search and his statement was recorded late on. Kindly refer to para 3, page 5 of the assessment order. Therefore, without prejudice, it is not the case of the Department that the statement in question, u/s 132(4), was recorded during the search to characterize the same as the material fund during the search action. Ground No.2: Mechanical approval u/s 153D of the Act The respondent has raised this additional ground of cross objection supporting the order of Ld CIT(A) on the ground that the approval u/s 153D was mechanical and without application of mind. From the assessment orders for AY 2011-....
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....ance is placed on the decision of the Hon'ble Delhi High Court in the case of CIT Vs Usha Stud Agricultural Farm Ltd. 301 ITR 384 (Del). Justification of protective addition in the hands of the appellant company. For making protective additions in the hands of the appellant company, the Department has also taken a view that the appellant is treated as a conduit company for channeling funds to beneficiary companies. In view of these facts, the substantive addition is to be made in the hands of the beneficiary companies numbering 48, only 3 or 4 of them identified, but the composition of the substantive income to be added in the hands of each entity was still not identified, which shows that part of the action is pending. Having regard to the above facts the ld CIT(A) has erred in confirming the protective assessment framed by the AO although no corresponding substantive assessment with respect to the impugned issue was made and existed in the case of so called beneficiary companies It was submitted that the said action is against the judicially established principle that there cannot be a protective assessment/addition without there being a substantive assessment/a....
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....ovider, which action is not in accordance with the decisions cited hereinbefore. The above addition therefore needs to be quashed." 9. On the other hand, ld. DR of the Revenue brought to our notice page 15 of the assessment order and relied on the detailed findings of lower authorities. 10. Considered the rival submissions and material placed on record. We observed that the search was conducted on 17.09.2015, the present AY under consideration was unabated on the date of search. Therefore, any addition on escapement of income will depend only upon the incriminating material found during the search. In the given case, on exact facts on records, the coordinate bench had decided the similar issue in AY 2013-14 as under: "7. We have given our careful thought to the rival submissions and perused the material available on record. To recapitulate the facts, it is an admitted position that for AY 2013-14 the assessee had originally filed its return of income under section 139(1) of the Act on 15.11.2014 and assessment under section 143(1) of the Act was completed on 15.11.2013. The time limit for issuance of notice under section 143(2) of the Act was upto 30.09.2014 but not ....
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.... which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A 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 made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 15A merges into one. Only one assessment shall be made separately for each A Yon the basis of the findings of the search and any other material existing or brough....
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.... 2010-11 is allowed. 12. With regard to ITA No.415/Del/2026 for AY 2012-13, the assessee has submitted his arguments ground-wise as under :- "Ground Nos.1 to 4 Invalid Assumption of reassessment proceedings u/s 147/148 of IT Act From the reasons reproduced in para 2 at page 2-3 of the assessment order, the Ld AO had information in his possession that the appellant company has made investment of Rs. 23,60,77,927/- in M/s Hare Krishna Garments P Ltd("HKG"). As per the reason, the investment was in share capital of Rs. 42,58,400/-, share premium of Rs. 12,05,93,600/- and investment and deposits of Rs. 11,12,25,927/-. If the above information compared with the balance sheet for relevant AY 2012-13 of abovenamed company i.e. HKG which is available on MCA portal, public domain, the information contained in said balance sheet as on 31.03.2012 show clear non-application of mind which fact is evident from following particulars emerging therefrom: I. There is no increase in share capital/share premium in above named company from 01.04.2011 to 31.03.2012 (Kindly refer note no.2.1 & 2.2). II. The entire share capital/share premium which is carried over fr....
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....ince, that is the case, the entire evidences in form of bank statement/other details like books of account showing the transactions of appellant were available with him wherefrom the above information could have been cross checked by him. Since, as per Ld AO was not able to verify the investment in the balance sheet shown under non-current investment of Rs. 16,99,80,000/- there was all the more reason for him to verify either from the bank account of the appellant company which was available with as per assessment records or verify the same from the concern bank from where such investment was made. It is therefore a case where reassessment proceedings has been initiated based on vague and self-contradictory information in that case, the Ld AO was required to conduct further enquiry to garner information to make information actionable to bring the supporting material which is not done in present case. The Ld AO has not verified the facts to verify the correctness of information before triggering action u/s 147 of IT Act. The Hon'ble Delhi High Court in the case of Well Trans Logistics India Pvt. Ltd. Versus Addl. Commissioner of Income Tax & Ors 474 ITR 13....
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.... 265 (Del); * Pr CIT vs M/S SNG Developers Ltd 404 ITR 312 (Del) revenue's SLP dismissed in SLP (c) 42379/2017 Dt: 09.02.2018; * M/s SynfoniaTradelinks P Ltd vs ITO 435 ITR 642 (Del); * CIT vs Suren International Pvt Ltd 357 ITR 24 (Del); * Pr. CIT vs. RMG Polyvinyl (I) Ltd (2017) 396 ITR 5 (Del), * CIT vs. Atlas Cycle industries (1989) 180 ITR 319 (P&H); * Siemens Information System Ltd., vs. ACIT & Ors 293 ITR 548 (Bom.); * Ankita A. Choksey vs. ITO & Others (2019) 411 ITR 207 (Bom); Ground No.5 Merits of addition of Rs. 23,60,77,927/- The addition has been made by the Ld AO by treating the above amount as unexplained investment although the charging section was not invoked. It is a settled law that when an assessment order lacks clear references to the specific sections under which the addition is made, it raises doubts about the intention and rationale behind the additions. Such an order can no longer be considered a "speaking order and provides room to surmises. Such an order cannot be held to be valid in the eyes of law. In this regard, reliance is placed in the decision of Smt. Sudha Loyalka vs ....
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....al submissions and material placed on record. We observed that the assessee had raised legal issues on the validity of reopening of the assessment and without application of mind. Since this issue goes to the root of the matter, proceed to adjudicate the above legal grounds instead of remitting the issue back to the file of Ld CIT(A). We observed from the assessment order that the AO observed that the assessee had invested huge investments in Hare Krishna Garments Pvt Ltd and after issue of notice to the assessee, came to the conclusion that the assessee did not have resources to make such huge investments and accordingly proceeded to make the addition as unexplained investments. At the time of hearing, Ld AR of the assessee brought to our notice the financial statements of the above said company, we observed that the total share capital and other reserves are not matching with the reasons recorded by the AO. For the sake of brevity, the Balance Sheet of the Hare Krishna Garments is reproduced below:- 15. From the above, the total share capital and reserves are only Rs. 12.48 crores, whereas the AO have recorded reasons for reopening the assessment as Rs. 23.61 crores. Further i....