2022 (5) TMI 1341 - AT - Income Tax

Assessment u/s 153C - Uncertain investment in unquoted shares - chargeability of Income found as a consequence of Search - addition based on Protective or substantive basis - substantive addition has to be made at the hands of the SVP group entities - as alleged by the AO, the assessee did not furnish complete details and was non-cooperative. Based on seized material, the assessing officer found that a number of companies had advanced share application money to SVP Group concerns - Commissioner (Appeals) held that the amount declared to have been invested by the assessee has to be assessed at the hands of the real beneficiaries i.e. the five flagship companies of SVP Group. Thus, he directed the assessing officer to delete the additions made at the hands of the assessee on substantive basis and to make such additions on protective basis, since, the substantive addition has to be made at the hands of the SVP group entities - HELD THAT - As brought to our notice by the learned Departmental Representative that, in the meanwhile, the Tribunal has decided the appeals of SVP Group entities. A perusal of the aforesaid order of the co-ordinate Bench reveals that the Tribunal has granted partial relief while deciding the appeals. This being the factual position, to what extent the aforesaid decision of the Tribunal in case of SVP Group entities would influence the protective additions made at the hands of the assessee to make them substantive, needs to be examined. Therefore, due to the changed scenario because of the decision of the coordinate Bench in the case of SVP Group entities, referred to above, the issues arising in these appeals are restored back to the assessing officer for fresh adjudication. The assessing officer must analyze the order of the co-ordinate Bench in case of SVP Group entities (supra), to find out to what extent the substantive additions made at the hands of the SVP Group entities corresponding to the protective additions made at the hands of the present assessee have been reduced and accordingly proceed to make additions if warranted, on substantive basis at the hands of the present assessee. Needless to mention, before deciding the issues, assessing officer must extend reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.

Issues Involved:
1. Validity of orders under Section 143 read with Section 153A(b).
2. Invocation of Section 153A/153C based on material information.
3. Chargeability of income found as a consequence of search.
4. Doctrine of lifting the corporate veil and genuineness of investment in shares.
5. Confirmation and documents substantiating share application money.
6. Invocation of Section 40A(3) regarding purchase of shares.
7. Initiation of proceedings under Section 2711A read with Section 278B.
8. Directions under the Money Laundering Act and Serious Fraud Investigation office.
9. Deletion of addition under Section 68 by the CIT(A) and its implications.

Detailed Analysis:

1. Validity of Orders under Section 143 read with Section 153A(b):
The assessee challenged the upholding of orders under Section 143 read with Section 153A(b) on the grounds of procedural lapses, arguing that the provisions of Section 143(3) and Section 250 were not properly adhered to, specifically regarding the opportunity to be heard. The Tribunal noted that the assessee did not appear for hearings despite multiple opportunities, leading to an ex parte decision.

2. Invocation of Section 153A/153C Based on Material Information:
The assessee contended that the sine qua non for invoking Section 153A/153C, i.e., material information in possession under Section 132, was not met. The Tribunal observed that the search and seizure operation under Section 132(2) revealed material information justifying the initiation of proceedings under Section 153C.

3. Chargeability of Income Found as a Consequence of Search:
The assessee argued that no adverse material was found during the search to justify the chargeability of income. The Tribunal noted that the assessing officer found substantial evidence of unaccounted transactions and investments, leading to additions in various assessment years.

4. Doctrine of Lifting the Corporate Veil and Genuineness of Investment in Shares:
The CIT(A) applied the doctrine of lifting the corporate veil, concluding that the investment in shares by the assessee was not genuine. The Tribunal upheld this view, noting that the assessee acted as a conduit for transferring funds between various entities within the SVP Group.

5. Confirmation and Documents Substantiating Share Application Money:
The assessee provided confirmations and other documents to substantiate the share application money received. However, the CIT(A) found these documents unconvincing, and the Tribunal agreed, noting that the assessee failed to furnish complete details and was non-cooperative during the assessment proceedings.

6. Invocation of Section 40A(3) Regarding Purchase of Shares:
The CIT(A) invoked Section 40A(3) concerning the purchase of shares and other transactions without substantial material on record. The Tribunal found that the assessing officer had sufficient grounds based on seized material to invoke this provision.

7. Initiation of Proceedings under Section 2711A read with Section 278B:
The CIT(A) directed the initiation of proceedings under Section 2711A read with Section 278B without substantial material found during the search. The Tribunal noted that the assessing officer had grounds to initiate these proceedings based on the evidence of dubious transactions.

8. Directions under the Money Laundering Act and Serious Fraud Investigation Office:
The CIT(A) directed competent authorities under the Money Laundering Act and Serious Fraud Investigation Office, which the assessee argued was outside the scope of the Income Tax Act. The Tribunal upheld these directions, noting that the evidence warranted further investigation by these authorities.

9. Deletion of Addition under Section 68 by the CIT(A) and Its Implications:
The Revenue challenged the deletion of addition under Section 68 by the CIT(A), arguing that the assessee failed to satisfactorily explain the source of cash credits. The Tribunal noted that the CIT(A) directed the addition to be made on a protective basis in the hands of the assessee, with substantive additions to be made in the hands of the SVP Group entities. The Tribunal restored the issue to the assessing officer for fresh adjudication, considering the Tribunal's decision in related SVP Group entities' cases.

Conclusion:
The Tribunal allowed the appeals for statistical purposes, directing the assessing officer to re-examine the protective and substantive additions in light of the Tribunal's decision in related cases, ensuring a thorough and fair reassessment.

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