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TMI Blog2016 (10) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of unabated assessments, the legislature had conferred powers on the ld AO to just follow the assessments already concluded unless there is an incriminating material found in the search to disturb the said concluded assessment. In our considered opinion, this would be the correct understanding of the provisions of section 153A of the Act , as otherwise, the necessity of bifurcation of abated and unabated assessments in section 153A of the Act would become redundant and would lose its relevance. Hence the arguments advanced by the ld DR in this regard deserves to be dismissed. In view of the aforesaid findings we hold that the additions towards share application monies in the sums of 20,00,000/- and 72,00,000/- for the Asst Years 2008-09 and 2009-10 respectively , which were unabated / concluded assessments, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search. Hence we hold that the ld AO ought to have only followed the old assessed income either u/s 143(3) or 143(1) of the Act for the relevant years. Since the issues are addressed on preliminary ground of absence of incriminating materials, we refrain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Chirimerr, who is a well known entry operator. There was one case of M/s AMR Construction Ltd. where search was conducted by the Hyderabad Investigation Unit, during which Safeco project Ltd. had accepted that they had not carried any actual sub-contract work for M/s. AMR Construction and had only provided bogus entries. In the F. Y. 2010- 11 too, M/s. Rahee industries Ltd. had debited certain expenses by way of commission payments to M/s. Hooghly Alloy & Steel Co. Pvt. Ltd. However, Hooghly Alloys is actually engaged in the business of manufacturing of sponge iron and it is likely that they had not provided any technical service to Rahee Industries Ltd. The group was further alleged to have been routing their unaccounted income back into the business in the form of share capital and share premium in its books of accounts. The ld AO observed that in respect of share application money received in the sums of ₹ 20,00,000/- from Shambav Distributors Pvt Ltd, the assessee could not prove the identity of the subscribers and genuineness of transactions and accordingly proceeded to add the same as unexplained cash credit u/s 68 of the Act for the Asst Year 2008-09. Similarly in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide his letter dated 19.9.2013 asked the assessee the following details :- "Please give full details of shareholders fund including those of any increase year - wise from A.Y. 2006-07 to 2012-13." In response to this, the assessee drew the attention of the ld CITA to the compliance letter dated 5.3.2014. It was stated that the omission to supply the so-called address and PAN details were not pointed out to the assessee by the ld AO during the course of next hearing on 10.3.2014. The assessee submitted the income tax return acknowledgements of M/s Shambav Distributors Pvt Ltd , M.s Digamvari Agency Pvt Ltd and M/s Wig Wam Finance & Investment Pvt ltd along with their statement of accounts to establish the identity and genuineness of shareholders. The ld CITA observed that the assessee submitted only the balance sheet and profit and loss account of the share subscribers but did not file the copies of the bank statements of either of the subscribers or its own bank statements. It was submitted before the ld CITA that since the matter is very old, the copies of bank statements of the share subscribers could not be produced. 6. The ld AO in his remand report in Proceedings No. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d CITA considered the remand report of the ld AO and examined the balance sheet and the summary of his observations are tabulated hereinbelow:- As on 31.3.2009 Shambav Dist Digamvari Wig Wam Share capital 52,95,000 20,46,000 1,62,66,500 Share premium 4,67,55,000 4,67,04,000 8,31,01,500 Sale of shares 16,00,000 Interest income 95,278 8,37,818 Miscellaneous income 6,940 Returned income 5,690 1,530 25,480 The entire share capital and share premium was invested in the equity shares of other private limited companies including the assessee company. He concluded that the subscribing companies are mere paper companies and based on these observations, he dismissed the claim of the assessee. Aggrieved, the assessee is in appeal before us on the following grounds :- "1. (a) That on the facts and in the circumstances of the case, Ld. CIT(A) is wrong and unjustified in upholding the addition of ₹ 20,00,000/- U/s 68 of Income Tax Act, 1961 without proper appreciation of the ratio of judgement of ITAT, Special Bench, Mumbai in All Cargo Global Logistics Ltd. - Vs - DCIT (ITA No. 5018 to 5022 & 5059/M/2010) and misreading the facts of the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA in his order. He argued that the entire addition has been made only because in the appraisal report, the investigation wing had made some wild allegations about the assessee group about the generation of unaccounted income. Hence it could be safely concluded that the ld AO had made the additions only to satisfy what has been stated in the appraisal report without having any independent application of mind on his part and without bringing any materials on record in support of the addition and bring evidences in support of the wild allegations made in the appraisal report. He argued that even on merits, the assessee had proved the necessary ingredients of section 68 of the Act and hence the addition deserves to be deleted. 9. In response to this, the ld DR argued that the expression 'incriminating material' is not found in the provisions of the Act and it is only the Hon'ble Courts which had imported those words while rendering the decisions. He stated that the Hon'ble Courts are divided on this issue and placed reliance on the decision of the Hon'ble Karnataka High Court in the case of Canara Housing Development Co vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) wherein i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2008-09 was originally completed u/s 143(3) of the Act and hence it falls under concluded proceeding , as on the date of search. The assessment for the Asst Year 2009-10 was completed u/s 143(1) of the Act. Once the return is processed u/s 143(1) of the Act and no notice u/s 143(2) of the Act has been issued, then it becomes a completed / concluded proceeding. Thereafter if a search happens, then that asst year where 143(1) was made, would fall under the ambit of concluded assessment as admittedly no proceeding was pending on the date of search to get abated. Hence the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to those concluded years, the statute do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.2 We find that the Co-ordinate Bench of this tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 dated 9.12.2015 reported in 2016-TIOL-167-ITATKOL had explained the aforesaid provisions as below:- "6.4. In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s 132 of the Act :- a) Notice u/s 153A of the Act would be issued on the person on whom the warrant of authorization u/s 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s 153A of the Act for those six assessment years. b) In respect of the year of search, notice u/s 143(2) of the Act would be issued and assessment thereon would be completed u/s 143(3) of the Act. c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. d) Pursuant to the search u/s 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39; 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Kabul Chawla supra is the latest one on the impugned issue which had considered the decisions that were quoted by the ld DR and distinguished the same. 10.5. We find that the ld AO had also clearly admitted in his remand report that there was no incriminating materials found in the course of search with regard to the concluded assessment years for making share capital addition as could be seen above. For the sake of convenience, the relevant portion of the remand report is reiterated hereinbelow:- Therefore, in case of reassessment revisit of the same issues can be made even if no incriminating materials are found on that issue. 10.6. We find that the provisions of section 132 of the Act relied upon by the ld DR would be relevant only for the purpose of conducting the search action and initiating proceedings u/s 153A of the Act. Once the proceedings u/s 153A of the Act are initiated, which are special proceedings, the legislature in its wisdom bifurcates differential treatments for abated assessments and unabated assessments. At the cost of repetition, we state that in respect of abated assessments (i.e pending proceedings on the date of search) , fresh assessments are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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