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TMI Blog2018 (11) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... framed u/s 143(1) of the Act for the Asst Year 2010-11, which was unabated / concluded assessment, on the date of search, deserves to be undisturbed in the absence of any incriminating material found in the course of search and accordingly the addition made on account of share capital and share premium u/s 68 is hereby directed to be deleted - there was absolutely no incriminating material found during the course of search in the instant case with regard to the issue of share capital, share premium except understanding the discovery of modus-operandi of raising bogus share capital based on the certain statements recorded from entry operators in some cases in West Bengal. - Decided in favour of assessee Trading loss on sale of shares - Held that:- As given for the Asst Year 2010-11 with regard to disturbing the concluded assessments in the absence of incriminating materials found during search, we hold that the disallowance of trading loss on sale of shares of ₹ 38,45,844/- made by the ld CITA in the assessment framed u/s 153A of the Act cannot be made as per law. Hence the disallowance made thereon in the impugned assessment is hereby directed to be deleted for want of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 81,676/-. The assessee stated that the time limit for issuance of notice u/s 143(2) of the Act for the Asst Year 2010-11 in respect of the original return filed on 23.9.2010 had expired on 30.9.2011 and hence as on the date of search, the year under consideration (i.e Asst Year 2010-11) would fall under the category of unabated assessment and hence the income assessed originally thereon could not be disturbed unless there is any incriminating material found in the course of search relatable to such assessment year. Infact the assessee had specifically objected before the ld AO that there is absolutely no incriminating materials found during the course of search for the Asst Year 2010-11 and hence the concluded assessment could not be disturbed in the assessment proposed to be completed u/s 153A of the Act. After making this preliminary objection, the assessee however co-operated with filing of requisite details before the ld AO. 3.1. The assessee company received the following payments against share application during the financial year 2009-10 relevant to Asst Year 2010-11 as under:- M/s Shreyans Vyapar P ltd - Rs 25,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of transactions within the meaning of section 68 of the Act and prayed for deletion of the addition made in the sum of ₹ 3,50,00,000/-. 5. The ld CITA however confirmed the addition on the validity of addition made towards share capital in the proceedings u/s 153A of the Act for the Asst Year 2010-11 by observing that the addition has been made on the basis of search proceedings by observing as under:- 05. FINDING DECISION : 1. . The ld AO has very carefully analysed the information received from the investigation wing, and also the various statements given by the directors / main persons of the different companies who have purportedly purchased the shares of the appellant company and also paid huge premium. I also agree with the Ld.AO that the findings of the assessment were based on incriminating documents as the entire modus operandi of the activities of the assessee company was located on the basis of the search action, and therefore the findings of the Ld. AO are also based on incriminating details found during the course of the search operation. Therefore none of the judicial precedents relied upon by the appellant in so far as stating that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 it was held that search assessments could be framed even without the existence of incriminating materials found in the course of search. He argued that the basic foundation for conducting the search is governed by the provisions of section 132 of the Act which has to be read harmoniously with section 153A of the Act. There are three conditions based on which a search action could be initiated u/s 132 of the Act on an assessee. They are :- Section 132(1) - If the concerned authority has in consequence of information in his possession, has reason to believe that - (a) where a person fails to produce the books of accounts and other documents in response to notice u/s 142(1) or summons issued u/s 131(1) of the Act ; or (b) where a person fails to comply with the requirements of summons issued u/s 131(1) of the Act ; or (c) where a person is in possession of any money, bullion, jewellery or other valuable article or thing and such assets represents either wholly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... va Sheva) Ltd and All Cargo Global Logistics Ltd reported in (2015) 374 ITR 645 ( Bom) (e) Decision of Hon ble Apex Court in the case of Kabul Chawla reported in 380 ITR (St.) 64 (SC) wherein SLP of the revenue was dismissed. 8. We have heard the rival submissions. We find it would be necessary 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. At the outset, it is evident from the categorical findings of the ld CITA that there is absolutely no incriminating materials found during the course of search regarding the share capital and share premium received by the assessee company during the year under appeal except the fact that the modus operandi of raising of such capital was discovered in the search action. We find that the ld CITA was only harping on the admission made by certain parties at the time of search without corroborating the same with material evidences found during the course of search. In this regard, the instructions issued by the Central Board of Direct Taxes (CBDT in short) in F.No. 286/2/2003-IT(I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 143(1) of the Act and the time limit for issuance of notice u/s 143(2) of the Act had expired and hence it falls under concluded proceeding , as on the date of search. We hold that 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 such concluded year, the statute does not confer any power on the ld AO to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceeding was not pending on the date of search to get itself abated. The provisions of section 153A of the Act are reproduced hereunder for the sake of convenience :- [Assessment in case of search or requisition 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment 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 total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act. 6.4.1 The concluded assessments for the purpose of section 153A of the Act shall be - (i) assessment years where assessments are already completed u/s. 143(1) and time limit for issuance of notice u/s. 143(2) of the Act has expired or; (ii) assessment years where assessments are already completed u/s. 143(3) of the Act ; unless they are reopened u/s. 147 of the Act for some other purpose in both the scenarios stated above. 6.4.2 The scheme of assessment proceedings contemplated u/s. 153A of the Act are totally different and distinct from the proceedings contemplated u/s. 147 of the Act and these procedures of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized 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 complete 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 Ld AO. (vii) Completed assessments can be interfered with by the Ld AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any case, the Hon ble Supreme Court in the case of CIT vs Vegetable Products Ltd reported in 88 ITR 192 (SC) had held that if two reasonable constructions of a taxing provision are possible, that construction which favours the assessee must be adopted. 8.6. We also find that the Hon ble Jurisdictional High Court recently in the case of Principal CIT vs M/s Salasar Stock Broking Ltd in G.A.No. 1929 of 2016 ITAT No. 264 of 2016 dated 24.8.2016 had endorsed the aforesaid view of Hon ble Delhi High Court in Kabul Chawla s case and also placed reliance on its own decision in the case of CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC). Infact the decision rendered by the Hon ble Jurisdictional High Court was in the context of Section 153A assessment and the decision of Veerprabhu Marketing supra was in the context of section 153C proceedings. In view of the decision of the Hon ble Jurisdictional High Court , we are not inclined to accept the argument of the ld DR to keep these appeals in abeyance till the finality is reached from the Hon ble Supreme Court. 8.7. We find that the provisions of section 132 of the Act relied upon by the ld DR would be rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e allowed for the Asst Year 2010-11. IT(SS)A No. 60/Kol/2018 Asst Year 2013-14 9. The preliminary issue involved in this appeal is as to whether in the facts and circumstances of the case, the ld CITA was justified in confirming the disallowance of trading loss on sale of shares of M/s Blue Circle in the sum of ₹ 38,45,844/- for the Asst Year 2013-14 in the assessment framed u/s 153A of the Act without having any incriminating material in that regard. 10. The brief facts of this issue is that the assessee is a company carrying on business of dealing in shares and loan transactions. The assessee filed its return of income for the Asst Year 2013-14 on 19.9.2013 declaring total income of ₹ 8,05,764/-. This return was processed u/s 143(1) of the Act on 31.10.2013 determining refund of ₹ 2,38,073/- including interest u/s 244A of the Act to the tune of ₹ 25,500/- . There was a search and seizure operation conducted u/s 132 of the Act at the residential, office premises,bank lockers etc of the Patni Group of cases on 8.3.2016. A search warrant was executed in the name of the assessee. Consequent to the search, notice u/s 153A of the Act was issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ----------------- Book Profits u/s 115JB of the Act ₹ 8,02,238/- ----------------- 11.1. The details of income and expenditure of the assessee are as under:- Income Revenue from Operations Sale of Equity Shares 43,89,516 Other Income Interest income on Non-Current Investment 4,03,210 Interest income on Others 49,21,406 ------------- 53,24,616 Net Gain / Loss on sale of Non Current Investment 2,74,620 Dividend Received 21,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uly suffered levies and duties like brokerage, service tax, securities transaction tax (STT) etc. The assessee specifically objected that the statements recorded from third parties cannot be relied upon in the proceedings u/s 153A of the Act. Moreover, it was pointed out that the said statements have been subsequently retracted. However, the ld AO observed that the statement in question has evidentiary value and held that the assessee could not submit any explanation and the modus operandi of the assessee company to prove that the bogus loss is booked for reducing the taxable income with sole motive to avoid tax. He further held that on analysis of the transactions reveal that they were made in a pre-arranged manner. The ld AO sought to treat the shares of M/s Blue Circle Services Ltd as a penny stock and accordingly the loss on sale of shares of ₹ 38,45,844/- was a prearranged one and hence disallowed the same in the assessment framed u/s 153A of the Act on 31.12.2017 for the Asst Year 2013-14. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us for the Asst Year 2013-14. 12. We have heard the rival submissions. At the outset ..... X X X X Extracts X X X X X X X X Extracts X X X X
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