9911796707
TMI Blog2018 (4) TMI 1559X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. These appeals will be disposed of hereunder in seriatum. Assessee's appeal in ITA No.911/Bang/2016 for A.Y. 2005-06. 2. Briefly stated, the facts of the case are as under :- 2.1 A search and seizure action under Section 132 of the Income Tax Act, 1961 (in short 'the Act') was conducted in the case of this assessee on 19-7-2010. Subsequently a notice under Section 153A of the Act dt.21-9-2010 was issued to the assessee and in response thereto, return of income was filed on 31-1-2012. The assessment was completed under Section 153A r.w.s. 143(3) of the Act vide order dt.28-3-2013, wherein the income of the assessee was determined at Rs. 7,49,56,900 in view of an addition of Rs. 1,83,50,000 as unexplained cash credit under Section 68 of the Act. The assessee's appeal was dismissed by the learned CIT (Appeals) vide the impugned order dt.14-3-2016. 3.1 Aggrieved by the order of the CIT (Appeals) - 11, Bangalore dt.14-3-2016 for Assessment Year 2005-06, the assessee has filed this appeal before the Tribunal, wherein it has raised the following grounds :- 1. " That the order of the authorities below in so far as it is against the appellant is against the law, fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The search and seizure operation purportedly u/s 132 of the Income Tax Act, 1961, was carried on in pursuance of warrant of authorization dt. 16-07-2010 in the case of M/s BMM Ispat Limited at No. 114, Danapur, Mariyammanahalli, Hospet. The search was conducted on 19-07-2010, 20-07-2010, 21-07-2010, 22-07-2010, 13-09-2010 and on 14-09-2010. During the course of search, documents listed in A/BMMIL/01, A1/BMMIL/01, A2/BMMIL/1, A3/BMMIL/01 were seized (panchanamas are found in PB pages 176 to 205). It may be noted that none of the documents so seized are incriminating in nature. All the documents are maintained during the regular course of business. As such, the search and subsequent proceedings are all not as per the law. Further, notice u/s 153A was issued on 21-09-2010 calling for filing the return of income. Assessee filed the return of income on 'without prejudice' basis on 31-01-2012 declaring total income of Rs. 5,66,06,899/- (PB page 3). The assessment u/s 143(3) r.w.s 153A was completed by making additions of Rs. 1,83,50,000/- u/s 68 towards alleged cash credit. As per the AO, the assessee has received 1,83,50,000/- as share capital from 13 parties listed in para 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in Lovely Exports. Hence even on merits there is no case for the department. Since the material sought by the assessee in the possession of the department inspite of request, the order suffers for non-adherence to principles of natural justice. Even on this basis the addition requires to be vacated. The assessee's written submissions before CIT-A are found in pages 17 to 31 and rely on the same. On the issue of approval granted u/s 153D, it is the contention of the assessee that the approval has been granted without application of mind and in a mechanical manner. In support of its contention, the following case laws are relied on: (1) Chhugamal Rajpal v. S.P. Chaliha & Ors - 79 ITR 603 - SC. (2) CIT v. Akil Gulamali Somji - 84 CCH 53 - Mum HC. (3) SmtShreelekha Damani v. DCIT - 173 TTJ 332 - Bombay ITAT. (4) AAA Paper Marketing Ltd. v ACIT - ITA 167/Lkw/2016 - Lucknow ITAT. The grounds on interest u/s 234A/B/C are consequential in nature." 3.3 Before us, apart from being heard the learned Standing Counsel for Revenue put forth written submissions which are extracted hereunder :- 1. " Search under section 132 of the Act was conducted in the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search, no assessments can be made without the aid of incriminating material seized from the assessee and relates to the impugned year is incorrect. On plain reading of section 153A of the Act, section does not contemplate either incriminating material found in the course of search or undisclosed income being unearthed in the course of search. As per the law laid down by the Supreme Court in the case of Calcutta Knitwear (2014) 362 ITR 673 (SC), section has to be read in plain and reading new words into the section is not permissible. If the contention of the assessee is to be accepted regarding incriminating material, the same would amount to rewriting of the section 153A of the Act. iv. The above position has also been clearly held by the jurisdictional High Court in the case of Canara Housing (2015) 274 CTR 122 and further being held by the High Court in the case of IBC knowledge Park (2016) 385 ITR 346. The same principle has been reiterated by Delhi High Court in the case of Anilkumar Bhatia (2013) 352 ITR 493. The same principle has been reiterated by various high courts including Kerala High Court in ST.Francis Clay Décor Tiles 385 ITR 624 and (2016) 73 Taxman.com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2.2 In this regard, the Hon'ble Karnataka High Court in the case of CIT v. Lancy Constructions in its order in ITA Nos.528 to 531 has held as under : "In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material is found, and merely on the basis of further investigating the books of accounts which have been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because a search is conducted in the premises of the assessee, would not entitle the revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assessee; on the basis of which assessment had been concluded cannot be reappreciated by the Assessing Officer merely because a search had been conducted in the premises of the assessee." 3.4.4 Further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. The explanation states, save as otherwise provided in Sections 153A, 153B and 153C, all other provisions of the Act shall apply to the assessment made under Section 153A. Section 153B speaks about time-limit for completion of assessment under Section 153A. 46. 153C is relevant for the purposes of this case. Sub-section (1) of Section 153C begins with a non obstante clause and it states that notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any valuable assets, seized or requisitioned, belongs to, or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in Section 153A, then, the books or account or documents or valuable assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or re- assess the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or would not have been disclosed for the purposes of this Act or any expense, deduction or allowance claimed under this Act which is found to be false. Section 158BA deals with assessment of undisclosed income as a result of search, while Section 158BB deals with computation of undisclosed income of the block period. Block period is defined in Section 158B(a) to mean the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A and also includes the period up to the date of commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made. The proviso is not relevant for the purpose of this case. 48. Section 158BD is relevant for the present case and it states that where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or whose books of account or other documents or any assets were requisitioned under Section 132A. then the books of account, other documents or va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luable assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to under sub-section(l) of Section 153A of the Act. In such a case, the Assessing Officer has to issue notice to assess or re-assess income of other person under Section 153A of the Act. Thus, the fact that search has been conducted would not justify issuance of notice under Section 153A. If it is only during a valid search when certain incriminating materials are detected, notice could be issued." 3.4.5 In the case on hand, the assessment for Assessment Year 2005-06 has been completed as the time limit for issue of notice had expired on 30-9-2006; before the date of search on 28-9-2010. Therefore, since no assessment was pending, there was no question of abatement of assessment. Respectfully, following the decisions of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P.) Ltd. (supra), we hold that for Assessment Year 2005-06 no assessment had abated and therefore the assessment under Section 143(3) r.w.s. 153A of the Act could have been made based only on incriminating documents / material foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess the income under Section 153C is nonexistent. It may further be noted that the company is no longer in existence and no notice can be issued on a non-existing company as held by the Hon'ble Supreme Court in the case of Marshall Sons & Co. (India) Ltd. v. Income Tax Officer in 233 ITR 809. There is neither undisclosed income nor income escaping assessment so as to warrant notice under Section 153C. Accordingly the proceedings be dropped in the interest of justice and render justice." 7.1.2 The assessment was completed under Section 153C r.w.s. 143(3) of the Act vide order dt.28-3-2013 for Assessment Year 2007-08, wherein the assessee's income was determined at NIL in view of the addition of Rs. 45,46,226 as per the original assessment order dt.18-12-2009 and fresh addition of Rs. 4,77,43,723 on account of unaccounted production. The assessee's appeal for Assessment Year 2007-08, was dismissed by the CIT (Appeals) - 11, Bangalore dt.14-3-2016. 8. Aggrieved by the order of the CIT (Appeals) -11, Bangalore dt.14-3-2016 for Assessment Year 2007-08, the assessee has filed this appeal, wherein it has raised the following grounds :- 1. " That the order of the authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice and no assessment proceeding can be held in the hands of non - existent company. Ignoring the reply filed by the assessee, the AO went on and completed the assessment in the name of HKT Mining Pvt. Ltd vide order dt.28-03-2013. The AO while took notice of the assessee's objections in para 2.2 page 2 of the assessment order rejected the contention of the assessee and framed the assessment in the name of HKT Mining Pvt Ltd, a non-existent company. The Ld.CIT-A who noted the arguments of the assessee in para 8.1 rejected and reiterated the stand of the AO. [PAN OF HKT MINING PVT LTD- AABCH3700J, PAN OF BMM ISPAT LTD - AACCB3556B, notice of demand is in the name of HKT Mining Pvt Ltd with PAN of HKT] In this case HKT Mining Pvt Ltd stood merged with BMM Ispat Limited wef 01-04-2007 vide order of Karnataka High Court dt.09-01-2009 vide para 18 (PB page 33) and as per the scheme para 7 (PB page 70) extracted hereunder: ' Legal Proceedings If any suit, appeal or any other proceedings of whatsoever nature (hereinafter called "Proceedings") by or against the Transferor Company be pending, the same shall not abate, be discontinued or in any way be prejudicially affecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the assessee's clarification. There is no such clandestine removal of goods as is alleged by the AO in the assessment order. Consequently the order suffers from non adherence to the principles of natural justice and hence the addition be deleted. Hence, the assessment u/s 153C of the Act is bad in law and unsustainable and requires to be quashed.' 9.21 Revenue's submissions. 1. " Search under section 132 of the Act was conducted in the case of the Bharat mines and minerals on 19/7/2010. Certain documents belonging to the assessee were found and seized. Proceedings under section 153C of the Act has been initiated after recording satisfaction required under section 150 3C of the Act. 2. The assessee company of M/s. HKT Mining Private Limited amalgamated with M/s. BMM Ispat Ltd. the assessee raised an objection regarding correctness of insulation of the proceedings on the nonexisting company. The Assessing Officer rejected the same and completed the assessment. The same has been upheld by the Appellate Commissioner. The order of assessment in the name of M/s. HKT Mining Private Limited is in accordance with law as the order of assessment and the period of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of assessment i.e. 28-3-2013 as all these events have occurred subsequent to the appointed date of merger 1-4-2007 as approved by the Hon'ble Karnataka High Court vide order dt.9-1-2009. Evidently, the Assessing Officer was aware of the merger / amalgamation as is clear from the details recorded by him at para 2.2 of the order of assessment, and inspite of this he proceeded to issue notices and frame the order of assessment in the name of M/s. HKT Mining Pvt. Ltd. under PAN - AABCH3700J; which entity had already ceased to exist consequent to the merger / amalgamation i.e. w.e.f. ;1.4.2007. 10.2 In this regard, the Hon'ble Karnataka High Court in the case of CIT v. Intel Technology India (P.) Ltd. 2016] 380 ITR 272 has held that framing an assessment against a non-existing entity is not a procedural irregularity, but a jurisdictional defect which goes to the root of the matter. While dismissing revenue's appeal, the Hon'ble Court held that the proceedings were initiated against a non-existing assessee company even after amalgamation with the successor company, and therefore the assessment was not valid and the revenue was not entitled to the benefit of Sec. 292B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is against the law, facts, circumstances, natural justice, without jurisdiction, bad in law and all other known principles of law. 2. That the total income computed and total tax computed is hereby disputed. 3. The proceedings of search and all other subsequent proceedings are bad in law, without jurisdiction and invalid. 4. The notice u/s 153A and subsequent proceedings are without jurisdiction and bad in law. 5. The order u/s 143(3) r.w.s 153A is bad in law, invalid, time barred and infructuous. 6. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 7. The CIT-Appeals erred in dismissing the ground on validity of search. 8. The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law. 9. The CIT-Appeals erred in refusing to rely on the decision of the Special Bench in All Cargo Global Logistics Limited on the issue of abatement of assessment. 10. The authorities below erred in making addition of Rs. 1,73,07,617/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch. 8. The AO erred in initiating proceedings u/s 153A and thereafter passing an order in the absence of any abatement as is envisaged in the law. 9. The CIT-Appeals erred in refusing to rely on the decision of the Special Bench in All Cargo Global Logistics Limited on the issue of abatement of assessment. 10. The authorities below erred in making addition of Rs. 19,06,35,900/- as unaccounted cash payments made to Mrs. Ambika Ghorpade and M/s KMIORE. 11. Without prejudice, the authorities below failed to telescope and offer relief to the assessee as is required in law. 12. The authorities below erred in relying on material and statements without furnishing the same to the assessee before passing the assessment order. 13. The authorities below erred in relying on statements without providing opportunity to cross examine. 14. The approval granted u/s 153D of the Act is not as per law. The appellant denies the liabilities of interest u/s 234C of the Act. Further prays that the interest if any should be levied only on returned income. 15. No opportunity has been given before levy of interest u/s 234C of the Act. 16. Without prejudice to the appellant's right of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A, 234B and 234C of the Act. 17. Without prejudice to the appellant's right of seeking waiver before appropriate authority, the appellant begs for consequential relief in the levy of interest u/s 234A, 234B and 234C of the Act. 18. For the above and other grounds and reasons which may be submitted during the course of hearing of the appeal, the assessee requests that the appeal be allowed as prayed and justice be rendered." 15.2 In the course of proceedings before us, both the assessee and revenue, apart from oral arguments, have also put forth written submissions which are extracted hereunder :- 15.3 Assessee's Submissions 'ITA No.779/Bang/2015 A.Y. 2008-09 - BMMIL. The assessee is a Public Limited Company. For the above assessment year, the assessee filed its return of income on 21-10-2008 declaring total income of Rs. 1,75,52,460/- (PB page 32). A notice u/s 153A was issued on 21-09-2010 calling for filing the return of income (PB page 34). Assessee filed the return of income on 'without prejudice' basis on 31-01-2012 declaring total income of Rs. 1,75,52,460/- (PB page 35). During the course of assessment proceedings, the AO issued several notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order consisting of Page 1 to 13 cannot be relied on. It may be seen that even the so called material is not complete and is only selective. Such scribbled and unintelligible material cannot be relied on for making the assessment. The AO has clearly erred in not issuing a show cause notice to the assessee and making addition solely based on surmise. Hence the said addition requires to be deleted. The notices issued u/s 142(1) of the Act dt. 06-03-2013 and on 11-03-2013 as mentioned supra are bad in law as it relates to several years and such issue of notice is not permitted under the law. Hence, the additions in the assessment order u/s 153A of the Act is bad in law and unsustainable. The Ld CIT-A has confirmed the above additions by summarizing the reasons given in the assessment order and has failed to appreciate the law on the issue as well as the arguments of the assessee. In this regard the assessee submits that the assessee had filed original return on 21-10-2008 (PB page 32) and the same was processed u/s 143(1) dated 05-03-2010 (PB page 33). The time for issue of notice u/s 143(2) expired on 30-09-2009. Since the time for issue of notice u/s 143(2) having expired it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings. The AO in para 2.28 page 23 mentions that a notice dated 7-1-2013 was served on the assessee on 11-1-2013 and the assessee has submitted the reply on 28-02-2013. These facts are incorrect. Neither any notice was given nor any reply has been filed by the assessee. Hence the addition is made without giving any opportunity and is against the principles of natural justice. In this regard the assessee relies on the decision of Supreme Court in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri & Anr - 26 ITR 1 (CLPB page 143). The perusal of the discussion by the AO does not bring out any fact that either there has been such purchases or any such payment. In fact the AO himself is confused and is in dilemma as to who has entered into such alleged transaction. The AO's dilemma is visible in the conclusion drawn in para 3.12 page 35 of assessment order running page 62 extracted as under: "The term 'BMM' includes M/s. Bharat Mines and Minerals, a partnership firm and M/s. BMM Ispat Ltd. Both these concerns have made purchases of iron ore. Therefore in the absence of the details of purchases made by the assessee as admitted in its books from M/s. KMIORE and Ambika Ghor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quential in nature." " ITA 781/Bang/15 - Asst. Year 2010-11 - BMMIL The assessee for the above assessment year filed its return of income on 23-09-2011 declaring book profit u/s 115JB of Rs. 49,90,10,625/- (PB page 93). A notice u/s 153A was issued on 21-09-2010 calling for filing the return of income (PB page 92). Assessee filed the return of income on 'without prejudice' basis on 31-01-2012 declaring book profit of Rs. 53,55,38,900/- (PB page 94). The assessee has submitted all the details sought for and clarified on the issues raised in the notices. Strangely, the AO has completed the assessment by computing the total income of Rs. 19,05,87,980/- after making additions of Rs. 15,27,27,045/-. However book profit of Rs. 53,55,38,900/- is considered for arriving at the tax liability since book profit was in excess of income declared under the normal provision of the Act. The assessee is dismayed by the additions especially when requisite opportunity was not given. The brief facts on the additions are hereunder:- (1) Addition of Rs. 15,27,27,045/- as unaccounted cash payments The AO has said that, for the reason stated in the assessment order for AY 2008-09 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2008-09. Statements of the Shri Dinesh Kumar Singhi, Mrs Ambika Ghorpade, Sri Kartikeya Ghorpade, Sri Bharat Ghorpade were recorded and the material found, the statements of each other were confronted and all the persons have admitted transaction outside the books and payment of consideration for iron ore in cash and receipt of the cash. The relevant statements have been extracted in the order of assessment in the case of the assessee for Assessment Year 2008-09 from page 11 to 23. iii. On analysis of the entire documents and the statements, it is clear that: - a. BMM group is carrying on the activity of extraction, excavation and processing of iron ore in the mines of KMIORE and AKG in the name of Mrs Snehalatha Singhi. b. The entire quantity of iron ore with and without permits is purchased by BMM group and the same has been admitted by sellers and the purchasers. c. Sellers have admitted cash payments reflected in the seized materials received from Shri Dinesh Kumar Singhi. d. Shri Dinesh Kumar Singhi has admitted cash payment of Rs. 1.40 crores for billing for April 2010 and Rs. 1.43 crores for billing in the month of March 2010. e. From the above documents it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara Housing, proceedings under section 153A of the Act is not confined only to the incriminating material found and seized in the case of the assessee. The material available with the Assessing Officer also can be used for the purpose of assessment under section 153A of the Act. The said fact has also not been disturbed in the judgement of IBC knowledge Park and the same is clear as per para- 54 of the judgement. v. The contention of the assessee that seized documents relied on by the assessee was found in the case of other person, the same cannot t be considered in the assessment under section 153A of the Act unless proceedings under section 153C are initiated is incorrect. vi. Search was conducted in the case of the assessee and proceedings were initiated under section 153A of the Act in the case of the assessee. The purpose of proceedings under section 153A of the Act is for assess or reassess the total income for the period referred to in the section. Section 153C of the Act contemplates assess or reassessment of the total income in the case of the other person contemplated in the section. In view of the assessments already being reopened and pending under section 153A of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The approval has been granted strictly in conformity with the provisions of the Act. Wherefore it is respectfully prayed that the appeal filed by the assessee may be rejected in the interest of justice and equity." 15.4.2 For Assessment Years 2009-10 & 2010-11, Standing Counsel for Revenue has reiterated and relied upon the submissions put forth for Assessment Year 2008-09 (supra), as the Assessing Officer has recorded the reasons for initiation of proceedings under Section 147 of the Act on almost similar grounds for these two assessment years 2009-10 & 2010- 11 as he had done for Assessment Year 2008-09. 16.1 Ground No.7 (For Asst. Years 2008-09 to 2010-11) - We have heard the rival contentions and perused and carefully considered the written submissions filed, the judicial pronouncements cited and the other material on record. On the issue of validity of search in Ground No.7 (supra), it was contended that the issue be decided in accordance with the decision of the Hon'ble Karnataka High Court in the case of C. Ramaiah Reddy v. Asstt. CIT 2011] 339 ITR 210 and that of the Hon'ble Apex Court in the case of Ess Dee Aluminium Ltd. v. DDIT. 16.2 We are, however, not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and consequently the assessment for this year does not abate and therefore reassessment, if any, is to be carried out on the basis of incriminating material found in the course of search. 17.2.2 In this regard, the Hon'ble Karnataka High Court in the case of Lancy Constructions (supra) has held as under : " In our view, if assessment is allowed to be reopened on the basis of search, in which no incriminating material is found, and merely on the basis of further investigating the books of accounts which have been already submitted by the assessee and accepted by the Assessing Officer at the time of regular assessment, the same would amount to the Revenue getting a second opportunity to reopen the concluded assessment, which is not permissible under the law. Merely because a search is conducted in the premises of the assessee, would not entitle the revenue to initiate the process of reassessment, for which there is a separate procedure prescribed in the statute. It is only when the conditions prescribed for reassessment are fulfilled that a concluded assessment can be reopened. The very same accounts which were submitted by the assessee; on the basis of which assessment had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. The explanation states, save as otherwise provided in Sections 153A, 153B and 153C, all other provisions of the Act shall apply to the assessment made under Section 153A. Section 153B speaks about time-limit for completion of assessment under Section 153A. 46. 153C is relevant for the purposes of this case. Sub-section (1) of Section 153C begins with a non obstante clause and it states that notwithstanding anything contained in Sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any valuable assets, seized or requisitioned, belongs to, or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to a person other than the person referred to in Section 153A, then, the books or account or documents or valuable assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account or other document or transaction represents wholly or partly income or property, which has not been or would not have been disclosed for the purposes of this Act or any expense, deduction or allowance claimed under this Act which is found to be false. Section 158BA deals with assessment of undisclosed income as a result of search, while Section 158BB deals with computation of undisclosed income of the block period. Block period is defined in Section 158B(a) to mean the period comprising previous years relevant to six assessment years preceding the previous year in which the search was conducted under Section 132 or any requisition was made under Section 132A and also includes the period up to the date of commencement of such search or date of such requisition in the previous year in which the said search was conducted or requisition was made. The proviso is not relevant for the purpose of this case. 48. Section 158BD is relevant for the present case and it states that where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 or whose books of account or other do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome of any other person, when the Assessing Officer is satisfied that the books of account or documents or valuable assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to under sub-section(l) of Section 153A of the Act. In such a case, the Assessing Officer has to issue notice to assess or re-assess income of other person under Section 153A of the Act. Thus, the fact that search has been conducted would not justify issuance of notice under Section 153A. If it is only during a valid search when certain incriminating materials are detected, notice could be issued." 17.2.4 In the case on hand, the assessment for Assessment Year 2008-09 has been completed as the time limit for issue of notice had expired on 31-10-2006; before the date of search on 28-9-2010. Therefore, since no assessment was pending, there was no question of abatement of assessment. Respectfully, following the decisions of the Hon'ble Karnataka High Court in the case of IBC Knowledge Park (P.) Ltd. (supra), we hold that for Assessment Year 2008-09 no assessment had abated and therefore the assessment under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment u/s.153A r.w.s. 143(3) of the Act could have been made only on the basis of incriminating material found and seized in the course of search of the assessee by following the decision of the Hon'ble jurisdictional High Court in the case of IBC Knowledge Park (P.) Ltd. (supra). This principle equally applies to these assessment years as well since no incriminating material was found and seized. Consequently, in the light of the record before us, we find that aforesaid additions / disallowances of Rs. 19,06,35,900 and Rs. 15,27,27,045 for Assessment Years 2009-10 & 2010-11 factually unsustainable and therefore delete the same. Consequently, Ground Nos.10 to 13 for Assessment Years 2009-10 & 2010-11 are allowed. 22. Ground Nos.15 to 18 - Charging of interest u/s.234A, 234B & 234C of the Act. In these grounds (supra), the assessee denies itself liable to be charged interest under Section 234A, 234B and 234C of the Act and that too without being afforded any opportunity before charging of the same. The charging of interest is consequential and mandatory and the Assessing Officer has no discretion in the matter. This view has been upheld by the Hon'ble Apex Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings of search and all other subsequent proceedings are bad in law, without jurisdiction and invalid. 4. The order u/s 143(3) r.w.s 153D is bad in law, invalid, time barred and infructuous. 5. The authorities below erred in not providing sufficient and adequate opportunity to the appellant as required under law, thereby violating the principles of natural justice, hence the order requires to be cancelled. 6. The CIT-Appeals erred in dismissing the ground on validity of search. 7. The authorities below erred in making addition of Rs. 12,95,46,334/- as unaccounted cash payments made to Mrs. Ambika Ghorpade and M/s KMIORE. 8. Without prejudice, the authorities below failed to telescope and offer relief to the assessee as is required in law. 9. The authorities below erred in refusing to set off brought forward business loss of Rs. 15,27,74,965/-. 10. The authorities below erred in relying on material and statements without fully furnishing the same to the assessee before passing the assessment order. 11. The authorities below erred in relying on statements without providing opportunity to examine/cross examine. 12. The approval granted u/s 153D of the Act is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order for AY 2008-09 in the assessee's own case, sum of Rs. 12,95,46,334/- has been added. The AO has issued a notice dated 20-3-2013 (PB pg 106-107), a consolidated notice for AY 10-11 and AY 11-12 proposing to make addition of Rs.Rs.3,21,53,235/- for AY 10-11 and Rs. 1,84,75,078 for AY 11-12 based on seized material A/BSG/01 seized from Bharat S Ghorpade. However though the proposal was made for Rs. 3,21,53,235/- he proceeded to make addition of Rs. 15,27,27,045 based on the reasons given in AY 08-09. Addition is made based on seized material A BSG/02 besides A/BSG/01 though no notice proposing to add based on A/BSG/02 has been given. In this regard the assessee relies on the decision of Supreme Court in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri & Anr - 26 ITR 1 (CLPB page 143). For the reasons and arguments mentioned supra in AY 08-09, AY 09-10 and AY 2010-11 in ITA 779 to 781/B/15 it is submitted that the addition may be deleted. Further, the AO has refused to set off brought forward business loss of Rs. 15,27,74,965/-. The same may be given to the assessee. On the issue of approval u/s 153D the assessee relies on the submissions given supra for A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mrs Snehalatha Singhi. b. The entire quantity of iron ore with and without permits is purchased by BMM group and the same has been admitted by sellers and the purchasers. c. Sellers have admitted cash payments reflected in the seized materials received from Shri Dinesh Kumar Singhi. d. Shri Dinesh Kumar Singhi has admitted cash payment of Rs. 1.40 crores for billing for April 2010 and Rs. 1.43 crores for billing in the month of March 2010. e. From the above documents it is clear that the entire sum of Rs. 64 crores has been paid by Sri Dinesh Kumar Singhi of BMM, as he has purchased the entire ore from the sellers KMIORE and AKG. f. In connection with the material found and seized in the case of Shri Bharat Ghorpade, Shri Dinesh Kumar Singhi has admitted recordings of transactions pertaining to the assessee. REPLY TO ASSESSEE SUBMISSIONS i. The contention of the assessee that the material indicating the purchase of iron ore "with permit" and "without permit" were not made available to the assessee and addition is based on surmise is incorrect. The above material has been confronted to the concerned persons and the same has been accepted by them. The relevant state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the assessee and proceedings were initiated under section 153A of the Act in the case of the assessee. The purpose of proceedings under section 153A of the Act is for assess or reassess the total income for the period referred to in the section. Section 153C of the Act contemplates assess or reassessment of the total income in the case of the other person contemplated in the section. In view of the assessments already being reopened and pending under section 153A of the Act, the parallel proceedings under section 153C of the Act is not contemplated under the Act. vii. Without prejudice to the above contention, the jurisdictional High Court in the case of Canara Housing has held that proceedings under section 153A of the Act is not confined to the seized material and the Assessing Officer is empowered to assess or reassess the total income on the basis of the material found in the course of any other proceedings or the material in possession of the Assessing Officer or any other material found in the course of search. In view of the above law laid down by the jurisdictional High Court in the case of Canara Housing, though the material found in the possession of the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. Ramaiah Reddy (supra) and the decision of the Hon'ble Apex Court in the case of Ess Dee Aluminium Ltd. (supra) wherein the Hon'ble Court has held as under :- "The petitioners have approached this Court only on the ground that under section 246A of the Income Tax Act, 1961, the Commissioner of Income Tax (Appeals) has no jurisdiction to examine the validity of the search operations carried out under Section 132 of the said Act. Learned Senior Counsel appearing for the petitioners has further submitted that the foundation of the assessment made hereunder in the search operations carried out against the petitioners. We are of the considered opinion that if the assessment order which is based on the search operations is under challenge, the validity of the search proceedings can also be gone into by the Commissioner of Income Tax (Appeals)." 28.2 However, in the light of the amendment in Finance Act, 2017 to Sec. 132 of the Act by which the Tribunal is precluded from examining this issue, we decline to get into the issue of validity of search action. The ITAT is a creation of statute and has to apply the law as laid down in the Act. In this view of the matter, this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee's aforesaid claim for set off of brought forward losses of earlier years amounting to Rs. 15,27,74,965 and restore the matter to the file of the Assessing Officer for fresh examination and consideration thereof, after affording the assessee adequate opportunity of being heard and to put forth submissions / details in this regard which shall be duly considered. We hold and direct accordingly. Consequently, Ground No.9 of assessee's appeal is allowed for statistical purposes. Revenue's Appeal in ITA No.1113/Bang/2015 for A.Y. 2011-12. 33. Grounds (i) and (ii) - Protective addition of unexplained Cash credits - Rs. 56.40 Crores. 33.1 In these grounds (supra), Revenue assails the order of the learned CIT (Appeals) in deleting the additions made protectively towards complained cash credits / unaccounted payments. 33.2 In the course of assessment proceedings, the assessee was required to show cause why the share application money of - (i) Rs. 27.40 Crores received from M/s. BPO Finance & Investment Pvt. Ltd., Kolkata and (ii) Rs. 29.00 Crores received from M/s. Panchmukhi Properties Pvt. Ltd. should not be treated as its unexplained income as the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanding Counsel for Revenue argued vehemently against the action of the learned CIT (Appeals) in deleting the protective addition of Rs. 56.40 Crores. In written submissions filed before us, the ld. Standing Counsel submitted as under :- "UNEXPLAINED CASH CREDIT IN THE FORM OF SHARE APPLICATION MONEY i. The above controversy has been in detail examined by the Assessing Officer in the course of assessment for Assessment Year 2010 - 11 in the case of Sri Dinesh Kumar Singhi. The share application money has been substantively assessed in the case of Shri Dinesh Kumar Singhi and Mrs Snehalatha Singhi. ii. The above issues have been disputed and contested by the above two individuals and hence Appellate Commissioner was not correct in deleting the same on the ground that the same has been considered on substantial basis in the hands of the about two individuals. iii. The above issue has been contested by the individuals in separate appeals and are part of this batch appeals before this Hon'ble Tribunal. Subject to result of the said appeals, it is prayed to confirm the additions in the hands of the assessee. iv. The written submissions made in the case of Shri Dinesh Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application money and the directors of the companies. The assessee failed to provide details of the companies and the directors. Summons issued to the assessee did not yield any result. Despite the assessee and his wife being 100% shareholders of the above two companies, the same was not revealed at any point of investigation. The post-search investigation revealed 100% shares being owned by the assessee and his wife. vii. The enquiries conducted by the revenue regarding genuiness of the about two companies has resulted as under: - (a) companies are not located in the address given (b) Companies were not existing at the registered address for mission to ROC. (c) No directors of the companies were available at the given address. (d) No books of accounts found at the address. (e) No director of the companies appeared during course of survey proceedings. (f) From the balance sheets obtained from the ROC about two companies revealed that companies do not have any fixed assets, no business activities for number of years and are involved only in fund transfer. viii. On the basis of the above material the companies BPO and the PPPL were considered as shell entities with no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril 2010 and the amounts received by way of cheque in the bank accounts of BMM Ispat Ltd on 13/4/2010. This clearly indicates that the assessee own cash has been routed back to family owned four companies through BPO and PPP L and other associate companies in the form of share application money. xii. The notices issued to BPO and PPPL and to the parties who have sold shares to the assessee and his wife were returned by postal authorities unserved. The above aspect would clearly demonstrate the dubious nature of the purchase of shares by the assessee and his wife. The assessee was issued show cause notice proposing to treat share application money paid into four companies belonging to the assessee's group to be treated as money introduced by the assessee. The assessee merely submitted that the entire transaction is taken place through cheque and at arms length price. xiii. The Assessing Officer considering the entire transaction treated 60% of share application money in BPO and PPPL as unaccounted investment by the assessee under section 69 of the Act. xiv. The Assessing Officer was correct in looking at the real transaction with respect to the share application money by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g issue: (1) Unexplained cash credit in the form of Share Application Money of Rs. 56,40,00,000/-. - the discussion by the AO is found in page 2 to 4 of the assessment order. It is the allegation of the AO that the share application money received from the following companies are not genuine: (a) BPO Finance and Investments Pvt Ltd - Rs. 27.40 crores (b) Panchamukhi Properties Pvt Ltd - Rs. 29 crores The AO in para 2.4 of the assessment order has relied on the reasons mentioned in the case of Dinesh Kumar Singhi and Snehalatha Singhi for AY 2010-11 & 2011-12 for making the said addition protectively in the hands of the assessee. The submissions made before CIT-A are found in PB pages 166 to 175N and the assessee relies on the same. Similar addition has also been made protectively in the case of BMM cements Ltd, Ranjithpura Infrastructure Pvt Ltd and Singhi Holdings Pvt Ltd. The assessee relies on the arguments given in the case of Singhi Holdings Pvt Ltd in ITA 1112/B/15 for AY 2010-11." 33.5.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. From the appraisal of the records b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his court passed in CIT v. ASK Brothers Ltd. [2011] 333 ITR 111 (Karn) wherein this court following the judgments of the Supreme Court in the case of CIT v. Lovely Exports P. Ltd. reported in [2008] 216 CTR (SC) 195; [2009] 319 ITR (St.) 5 (SC) and also in the case of CIT v. Steller Investment Ltd. [2001] 251 ITR 263 (SC) has ruled that it is not for the assessee to place material before the Assessing Officer in regard to the creditworthiness of the shareholders. If the company has given the addresses of the shareholders and their identity is not in dispute, whether they were capable of investing, the Assessing Officer shall investigate. It is not for the assessee -company to establish but it is for the Department to enquire with the investors about their capacity to invest the amount in the shares. Therefore, we are of the view that the substantial questions of law framed in this appeal are to be answered against the Revenue and in favour of the assessee. Accordingly this appeal is dismissed.' 33.5.4 Respectfully following the decision of the Hon'ble Apex Court in the case of Lovely Exports (P.) Ltd., (supra) which was followed by the jurisdictional High Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
