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TMI Blog2017 (6) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... (3) r.w.s 153A of the Act for A.Y 2005-06 dated 26.12.2011 is bad in law and thus the same is sustainable and deserve to be quashed and hence we quash the same. - ITA No. 6216/Del /2013 - - - Dated:- 7-4-2017 - SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER, AND SHRI L.P. SAHU, ACCOUNTANT MEMBER For The Appellant : Shri Sanjeev Bindal, Adv For Th eRespondent : Shri S.S. Rana, CIT DR ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER This appeal filed by the assessee is directed against the order of the CIT(A)-XXXI, New Delhi, dated 17/09/2013 for A.Y 2005-06. 2. The grounds raised by the assessee read as under: 1. The learned CIT(A) erred in law and on facts in confirming the addition of ₹ 2,95,00,000/- u/s 68 for the amounts received against allotment of share capital during the relevant previous year without considering the documentary evidences placed on record and without affording an opportunity to cross examine any third party whose statements was relied upon by the department against the appellant-company. Thus, the said addition so made must be deleted. 2. The learned CIT(A) erred in law and on facts in confirming the addition of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lying to the above, the ld. DR submitted that the additional ground, even if it is legal ground, cannot be admitted at this belated stage for consideration and adjudication. However, he could not controvert this factual position that the additional legal ground placed for admission and consideration by the assessee has been agitated on the basis of order of the Special Bench ITAT Delhi dated 6.7.2012 in the case of All Cargo Global Logistics Ltd Vs. DCIT [2013] 137 ITD 287 [Mum][SB]. 6. In rejoinder, the ld. AR submitted that the additional ground raised by the assessee is purely a legal ground arising out of facts and material already on record and does not require any further investigation beyond the record, therefore, in view of the ratio laid down in the case of NTPC Ltd [supra] additional ground No. 5 may kindly be admitted for hearing and adjudication. 7. On careful consideration of the above rival submissions, we observe that the assessee is seeking admission of Additional Ground No. 5 which reads as under: 5. The learned CIT(A) erred in law and on facts in confirming the additions made in the assessment order passed u/s 153A, which is bad in law and on facts becau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully perused the relevant material on record. At the very outset of the opening of the hearing, the ld. AR submitted that no incriminating material was found during the search and seizure operation held u/s 132(1) of the Act conducted by the DIT[INV]-II on 24.9.20009 in the case of M/s Mamram Group of cases including the assessee. The ld. AR further submitted that as per the observations of the A.O at last para at page 9, it is clearly discernible that the A.O observed that he knew that the facts which were gathered through post search and during the course of assessment proceedings regarding the subject of accommodation entries through the system or buy back of shares in the entire group of cases. The ld. AR vehemently pointed out that there was no incriminating material before the A.O which was unearthed or seized during search and seizure operation of the assessee on 24.9.2009, therefore, no addition could have been validly made on the assessment which already stood completed on the date of search and seizure operation as no assessment proceedings pertaining to A.Y 2005-06 i.e. A.Y under consideration were pending on the date of search. Therefore, no addition could have been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... changed its name as Shri Shyam Sunder Infrastructure Pvt. Ltd a per the company master data. The ld. AR, after placing the above facts on record, vehemently contended that the so called incriminating material as recorded and alleged by the A.O in the assessment order i.e. Annexure A-5 of Party Y-2 and Annexure A-1 of partly Y-2 has no relation in any manner with the present assessee company. Therefore, neither Annexure A-5 of Party Y-2 nor Annexure A-1 to party Y-2 can be taken as an incriminating material for validly framing assessment u/s 153A of the Act against the present assessee in the instant case. 15. The ld. AR further submitted that even as per the statement of Shri Mahesh Garg recorded on 09-11-2011 u/s 131 of the Act by the ACIT, CC-15, New Delhi, it is clearly discernible from the reply to question Nos. 7 wherein Shri Mahesh Garg replied that he personally knew Shri Ram Kishan Gupta and had, at many time, visited his place of residence as well as his office alongwith Shri Subhash Singhal and had collected money from his premises and in lieu of it, have repaid the sum in the form of cheque/demand draft. Replying to question No. 8, Shri Mahesh Garg stated that so far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the present assessee u/s 68 of the Act for A.Y 2005-06. 17. Replying to the above ld. DR, first of all, drew our attention to para 3.1 of the impugned first appellate order and submitted that it was immaterial whether the surrender is recorded in the minutes of the Board meeting/resolution and private dispute affairs between the present share holders and the previous ones, is a matter needed to be challenged before the appropriate Civil Courts. The ld. DR further submitted that Shri R.K. Gupta who had voluntarily surrendered in the hands of the assessee company was Managing Director of the appellant company for last five years. The ld. DR further submitted that Shri R.K. Gupta and his wife held almost entire share holding i.e. 96% on the date of search and he was also promoter of the M/s Mamram Group, Therefore, statement given by him u/s 132(4) of the Act has to be held as valid and indicates to utilize his statement was given by the A.O to the assessee by way of notice u/s 143(1) of the Act on 9.12.2011 and again by note sheet entry dated 2.12.2012. Therefore, facts being same for the reasons mentioned in the case of M/s Babushka Pvt. Ltd for A.Y 2005-06 the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular company or person and particular head of income and as such failure of the Revenue authorities, addition cannot be made without any basis for A.Y 2010-11 . 21. On careful consideration of the above noted rival submissions and on vigilant perusal of the relevant material placed on record, we observe that the main contention of the assessee-appellant posed for adjudication before us is that there was no incriminating material found during the course of search u/s 132 of the Act on the assessee group of companies on 24.9.2009. On the contrary, the ld. DR s contention is that besides the seized material, placed by the assessee as Annexure A-5 of Party Y-2 at pages 96 to 133 and Annexure A-1 of party Y-2 placed at pages 1 to 103, the statement of Shri Ram Kishan Gupta recorded during the course of search and seizure dated 24.9.2009 u/s 132(4) of the Act and subsequent statement of Shri Mahesh Garg recorded on 9.11.2011 u/s 131 of the Act during post search proceedings, there is incriminating material against the assessee, therefore, the legal ground No. 5 of the assessee cannot be allowed. 22. Further, in our view, the so called incriminating material at Annexure A-5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion/findings further gets strong support from the statement of Shri Mahesh Garg recorded on 9.11.2011 by the ACIT, CC-15, New Delhi during post search proceedings, wherein replying to question Nos 7 and 8 are relevant. For the sake of completeness, Question and answers are being reproduced as follows: Q.7: Have you provided accommodation entries to Sh. Ram Kishan Gupta, Sh. Sanjay Gupta, Smt. Kamla Garg, Smt. Renu Gupta, Sh. Surender Gupta or their companies? A.7: Yes, I personally know Sh. Ram Kishan Gupta and many a times I have visited his place of residence as well as his office along with Sh. Subhash Singhal and have collected money from his premises and in lieu of it I along with Sh. Subhash Singhal have repaid the sum in the form of cheque / demand draft. Q. 8: Can you provide the name of companies of Sh. Ram Kishan ji to whom cheques were issue by you / by your companies in lieu of cash? A.8: So far I remember it was M/s Mamram Limited and the other was M/s Ishu Finance and Investment Pvt. Ltd. 26. Therefore, from the above, it is clear that Shri Mahesh Garg, in his statement recorded by the AO on 9.11.2011 did not support the fact that accommodation ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entions, first of all, we find it appropriate to reproduce the relevant question and answer No. 30 of Shri Ram Kisah Gupta which was recorded during search and seizure operation on 24.9.2009, which reads as follows: Q. 30 Please refer to the above question in which you have sought time for giving details of bifurcation of additional income of ₹ 19,00,00,000/- and sought time to verify the documents. As you are aware of the contents of the books of accounts and documents which have been seized, you must be now in a position to give bifurcation. So please give the bifurcation now. A.30: As stated earlier, I have offered for taxation additional income of ₹ 19.00 cr. In the hands of myself, my family members and our business concerns for the FY 2009-10 relevant to AY 2010-11 to 20 account for discrepancies found during the course of search in respect of individuals and companies and also to account for any other discrepancies found during search and post-search proceedings. I am giving below detail of additional income in the hands of companies with which we are associated: Name of Company Amount (Rs.) Symphon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be made without any basis for A. Y. 2010-11.. 31. In view of above noted answer to Question No. 30 of Shri Ram Kishan Gupta in the statement recorded during search and seizure, it is amply clear that on evaluation of above statement the Tribunal in the case of Group company M.s Babhuska [supra] held that the surrender was not made on specific items by Shri Gupta and while allocation of the undisclosed income between the companies and other persons of the group, he has not mentioned and specified the heads of income as such. It was also held that in the absence of any such disclosure and relevant materials to establish the undisclosed income for A.Y 2010-11, addition cannot be made. After consideration of statement the Tribunal categorically held that since at the time of surrender and recording of statement u/s 132(4) of the Act, Shri Gupta was not asked to provide details of the nature of income which he was surrendering in the case of a particular company or person and particular head of income and as such failure of the Revenue authorities addition cannot be made for A.Y 2010-11. 32. Furthermore, the Tribunal also held that even during the assessment proceedings t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to be sent to the assessee if the AO accepts the return u/s 143(1)(a) of the Act. 36. In this context, the ld. AR submitted that since in the case of the assessee company no assessment was framed u/s 14393) of the Act for A.Y 2005-06, therefore, ratio laid down by the Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla [2016] 380 ITR 573 [Del] in the case of completed assessments, original assessment order can be interfered with by the AO while making assessment u/s 153A of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of documents was undisclosed income or property discovered in the course of search, which were not produced or not already disclosed or made known to the Revenue authorities in the course of original assessment. The ld. AR vehemently pointed out that so called incriminating material Annexure A-5 of party 2 and Annexure A-1 of party 2 does not belong to the assessee in any manner, therefore, same cannot be held as incriminating material against the assessee company for making addition u/s 68 of the Act for A.Y 2005-06. The ld. AR also contended that statement of Shri Ram Kishan Gupta r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch 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 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the present case, then we reach to a logical conclusion that the so called incriminating material Annexure A-5 and A-1 of party 2 as well as statement of Shri Ram Kishan gupta recorded during the course of search and seizure operation cannot be held as incriminating material unearthed during the course of search or undisclosed income or property discovered in the course of search and seizure operation which were not produced or not already disclosed or made known to the Revenue authorities during the course of original assessment proceedings. 40. At this stage, we respectfully point out that their Lordships have not made any discrimination regarding assessment completed u/s 143(3) of the Act and assessment completed u/s 143(1) of the Act and thus the ratio laid down in sub para (vii) regarding completed assessment would be applicable to the present case on all four corners and in view of the foregoing discussion, we reach to a fortified conclusion that there was no incriminating material before the AO for making addition u/s 68 of the Act in the hands of the assessee for A.Y 2005-06. Therefore, we hold that no addition could have been made in the assessment u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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