2022 (2) TMI 270 - AT - Income Tax

Assessment u/s 153A - assumption of jurisdiction u/s 153C the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened - Bogus share capital and Unaccounted commission - HELD THAT - It is seen that in this case, CIT(A) has held that there is no description or reference of any incriminating documents related to the assessee found or seized during the course of the search from the premises of the group concerns and all the transactions as specified in the documents on the basis of which satisfaction note had been recorded have duly been recorded in the books of accounts of the appellant company. Accordingly, by an order dated 4.10.2021, DR was directed to furnish a paper book sought to be relied by the Revenue consisting of documents which formed the basis for recording satisfaction by the AO. DR was directed to identify the documents which are incriminating and found or seized at the time of search and pertained to assessee. The case was accordingly adjourned to 22.11.2021 for final arguments on the matter. On the next final hearing on 22.11.2021, DR placed on record before us the paper book. Upon perusal thereof, it has been observed that all these documents are forming part of assessment records before the AO and have already been considered during the appellate proceedings before the Ld. CIT(A). After carefully considering the entirety of facts and principles of law enshrined by various courts including jurisdictional Delhi High Court in the case of Kabul Chawla 2015 (9) TMI 80 - DELHI HIGH COURT and Index Securities Pvt. Ltd 2017 (9) TMI 585 - DELHI HIGH COURT and Apex Court in the case of CIT v. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT we are inclined to agree with the view of the Ld. CIT(A)that since the assessment based on the original return of income filed under sec. 139 of the Act was not pending as on the date of search as such, the additions made by the Assessing Officer in the absence of any incriminating material found during the course of search belonging to the assessee for the assessment year under consideration is legally unsustainable. Revenue has not been able to rebut the findings recorded by the ld CIT(A). Hence, we uphold the order of the Ld. CIT(A) on various legal issues raised by the assessee. Revenue has not even challenged the finding of the CIT(A) of his appellate order fact that no incriminating documents has been seized . We find absolutely no justification for the AO to initiate proceedings against the assessee and as such the finding of the Ld CIT(A) cannot be held to be erroneous either on facts or in law. Thus, for the reasons stated above and as has been upheld by the Ld CIT(A) in his order which we fully agree, we do not find any merit in the appeal by the Revenue, which is hence dismissed.

Summary

Issues Involved:
1. Validity of the assessment order passed under section 153C of the Income Tax Act.
2. Deletion of additions made on account of bogus share capital.
3. Deletion of additions made on account of unaccounted commission paid.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 153C:
The primary issue was whether the Assessing Officer (AO) had the jurisdiction to initiate proceedings under section 153C of the Income Tax Act against the assessee. The assessee argued that the assessment order dated 31.03.2016 under section 153C/143(3) of the Act was passed without dropping the proceedings initiated vide notice dated 08.09.2015 under section 153A of the Act and without disposing of the objections filed by the assessee. Additionally, the absence of a satisfaction note recorded in the case of the searched person, namely M/s. Mapsa Logistics Pvt. Ltd. and M/s. Mapsa Infra Pvt. Ltd., made the assumption of jurisdiction to initiate proceedings under section 153C of the Act against the assessee illegal, invalid, and untenable. The Ld. CIT(A) quashed the assessment order, noting that there was no description or reference to any incriminating documents related to the assessee found or seized during the search from the premises of the group concerns. The Ld. CIT(A) held that the assessment framed under section 153C read with section 143(3) of the Act was not valid and the same was held as null and void.

2. Deletion of Additions on Account of Bogus Share Capital:
The AO made an addition of ?14,57,50,000 on account of bogus share capital. The assessee contended that all shareholders had confirmed their investments in the assessee company, were corporate entities duly assessed to tax, and had subscribed to share-capital by account payee cheques supported by necessary evidence. The AO did not discharge the onus cast upon him under the law by bringing any evidence or material to rebut the evidences furnished by the assessee. The Ld. CIT(A) deleted the addition, stating that no incriminating material was found during the search to justify the addition. The Tribunal upheld this view, noting that the assessee had discharged its onus by furnishing evidence, and the revenue failed to rebut the evidence provided by the assessee.

3. Deletion of Additions on Account of Unaccounted Commission Paid:
The AO made an addition of ?8,74,500 on account of unaccounted commission paid. The assessee argued that the AO did not bring any material to establish that the assessee had incurred such expenditure. The Ld. CIT(A) deleted the addition, and the Tribunal upheld this decision, stating that no incriminating material was found during the search to justify the addition. The Tribunal noted that the revenue failed to establish that any document or books of account belonging to or even pertaining to the assessee were incriminating.

Conclusion:
The Tribunal upheld the order of the Ld. CIT(A) quashing the assessment order under section 153C of the Act and deleting the additions made on account of bogus share capital and unaccounted commission paid. The Tribunal found no merit in the appeal filed by the Revenue, which was accordingly dismissed. The Tribunal also noted that even on merits, the assessee had discharged its onus by furnishing evidence, and the revenue failed to rebut the evidence provided by the assessee.