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TMI Blog2018 (11) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant : S.M. Surana, Advocate For The Respondent : Shri P.K. Srihari, CIT-DR ORDER Per Shri S. S. Godara: These two assessees have filed their instant appeals for Assessment Years 2011-12 2010-11 against Commissioner of Income Tax(A)-21, Kolkata s separate orders, both dated 02.07.2018, in case Nos.10771/DCIT,CC-3(3)/CIT(A)- 21/KOL/2017-18 10769/DCIT,CC-3(3)/CIT(A)-21/KOL/2017-18 respectively involving proceedings u/s 153A/143(3) of the Income Tax Act, 1961 (in short the Act ). 2. It is noticed at the outset that both these two appeals arise from the very search in question carried out in M/s. Patni Group of cases dated 08.03.2016. We have heard these two appeals together. The same are disposed of by the instant common adjudication. 3. A combined perusal of these files indicates that we do not need to dig much into the relevant issues raised herein. These two assessees identical grievance challenges correctness of both the lower authorities identical action treating their share capital sum(s) of ₹ 96,00,000/- and ₹ 28,08,500/- respectively to be unexplained cash credits u/s 68 of the Act in assessments in question framed on 30. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eto, as sustainable as well as E.N. Gopa Kumar vs. CIT [2016] 75 taxmann.com 215(Kerala), PCIT Delhi-2 vs. Best Infrastructure India Pvt. Ltd. (2018) 94 taxmann.com 115(SC) and M/s. Priyanka Chopra vs. DCIT (2018) 89 taxmann.com 288 (Mum. Trib.) are quoted in support. Mr. Shrihari accordingly seeks to validate the impugned assessment in these two assessees case. 6. We find that all these arguments already stand declined in the coordinate bench order in M/s. Bhansali Fincom (supra) as follows: 3. 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 2010-11 on 23.9.2010 declaring total income of ₹ 81,676/-. 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 the assessee for the Asst Year 2010-11. In response to the said notice, the assessee filed its return of income on 24.10.2016 declaring total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y pleaded not to disturb the originally assessed income, which is same as the returned income. The ld AO however did not heed to the contentions of the assessee and proceeded to frame the assessments u/s 153A of the Act by making an addition towards share capital u/s 68 of the Act in the sum of ₹ 3,50,00,000/- on the plea that the assessments to be framed u/s 153A of the Act clears all the decks and would enable the ld AO to assess or reassess the total income as per the provisions of the Act irrespective of incriminating materials found in the search. The ld AO completed the assessment u/s 153A / 143(3) of the Act on 29.12.2017 determining the total income at ₹ 3,50,81,680/- after making an addition of ₹ 3,50,00,000/- u/s 68 of the Act on account of share capital. 4. The assessee stated no incriminating materials relating to the share capital or share premium were found during the course of search. The assessee filed all the details with regard to the share capital before the ld AO. It was pleaded that the assessee company had duly proved the necessary three ingredients i.e identity of the share subscribers, genuineness of transactions and creditworthiness ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent Agency and the liability to pay tax arises from such settlement, he cannot question the settlement unless and until he can establish that his consent was improperly procured. (Dewan Bahadur Seth Gopal Das Mohta vs The Union of India Ors (SC) 26 ITR 722). Similarly, and more significantly, in the following judicial precedents, the ratio emerges that for retractions to be valid, the burden has been cast upon the person who is retracting from his statement or admission that coercion, threat or incentive was the reason for such statement which is being retracted. a. . 3. By making these observations, he upheld the action of the ld AO on merits of the addition towards share capital u/s 68 of the Act as well. Aggrieved, the assessee is in appeal before us. 6. With regard to the preliminary argument of the ld AR that there was no incriminating material found during the course of search with regard to the issue of share capital and share premium, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of Continental Warehousing. Both these SLPs were admitted on the main question as to whether the existence of an incriminating material is relevant for making an addition in section 153A assessment in respect of concluded assessments as on the date of search . Accordingly, he prayed for keeping the appeals in abeyance till matter attains finality from the Hon ble Supreme Court in this regard. 7. In response to this, the ld AR stated that the assessment for the Asst Year 2010-11 was originally completed u/s 143(1) of the Act as the case was not selected for scrutiny by issuance of notice u/s 143(2) of the Act on or before 30.9.2011. He reiterated the submissions made before the lower authorities with regard to framing of additions in section 153A assessments without any incriminating material found thereon. Reliance was placed on the following decisions in support of his contentions:- ( a) CIT vs Veerprabhu Marketing Ltd reported in (2016) 73 taxmann.com 149 (Cal HC) ( b) Decision of this tribunal in the case of ACIT vs Kanchan Oil Industries Ltd in ITA No. 725/Kol/2011 dated 9.12.2015 ( c ) CIT vs Kabul Chawla reported in (2016) 380 ITR 573 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is notlikely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- ( S. R. Mahapatra] Under Secretary (Inv. II) We find that there is absolutely no corroborative evidence found in the course of search by the search team or material evidence brought on record by the ld AO or by the ld CITA in order to give credence to the statement recorded during search. Hence we hold that no addition could be made merely by placing reliance on the statement recorded during search. The scheme of the act provides for abatement of pending proceedings as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed below:- Section 153A, read with section 143, of the Income-tax Act, 1961-Search and seizure - Assessment in case of (in case of section 143(1) assessment)-Assessment year 2004-05- Whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and, thus, said assessment cannot be reopened in exercise of power of section 153A-Held yes (Paras 10 and 12) (In favour of assessee). 8.2. 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- ITAT-KOL 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 :- 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. 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the Ld AOs as a fresh exercise. The Ld AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The Ld AO has the power to assess and reassess the 'total income' 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 . Although Section 153A 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 Ld AO which can be related to the evidence found, it does not mean that the assessment can be arbitra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his contentions. We find that the decision of Hon ble Delhi High Court in the case of CIT vs Kabul Chawla reported in (2016) 380 ITR 573 (Del) had duly considered the decisions of CIT vs Anil Kumar Bhatia reported in (2013) 352 ITR 493 (Del) ; CIT vs Chetan Das Lachman Das reported in (2012) 211 Taxman 61 (Del HC) ; Madugula Venu vs DIT reported in (2013) 215 Taxman 298 (Del HC) ; Canara Housing Development Co. vs DCIT reported in (2014) 49 taxmann.com 98 (Kar HC) ; Filatex India Ltd vs CIT reported in (2014) 229 Taxman 555 (Del HC) ; Jai Steel (India) vs ACIT reported in (2013) 219 Taxman 223 (Del HC) ; CIT vs Murli Agro Products Ltd reported in (2014) 49 taxmann.com 172 (Bom HC) ; CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd reported in (2015) 374 ITR 645 (Bom HC) and All Cargo Global Logistics Ltd vs DCIT reported in (2012) 137 ITD 287 (Mum ITAT) (SB). We also find that against the decision of the Hon ble Delhi High Court in the case of Kabul Chawla reported 380 ITR 573 (Del) , the revenue preferred Special Leave Petition before the Hon ble Supreme Court and the same was dismissed by the Hon ble Apex Court which is reported in 380 ITR (St.) 4 (SC). Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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. 8.8. In view of the aforesaid findings and respectfully following the judicial precedents relied upon hereinabove, we hold that the assessment 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 of the Act is hereby directed to be deleted. It is not in dispute that 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. Since the issue is addressed on preliminary ground of absence of incriminating materials, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite details before the ld AO. 11. The break up of computation of total income of the assessee is as under:- Income from Business or Profession - ₹ 5,31,144/- Income from Short Term Capital Gains without STT - ₹ 2,74,620/- Income from Other sources (exempt dividend- ₹ 21,000) - ₹ 0/- Total income under normal provisions of the Act ₹ 8,05,764/- Computation of book profits u/s 115JB of the Act Net Profit as per Profit and Loss Account - ₹ 7,84,421/- Add: Contingent Provision against standard assets 12,195 Expenses disallowed u/s 14A - 26,622 ₹ 38,817/- ₹ 8,23,238/- Less: Dividend exempt u/s 10(34) ₹ 21,000/- Book Profits u/s 115JB of the Act ₹ 8,02,238/- 11.1. The details of income and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pre-arranged 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, there is absol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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