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TMI Blog2018 (3) TMI 1672X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year 2012-13 were unexplained cash credit of the assessee. Thus, there is not reference to any search material by the Assessing Officer based on which such additions were made in the hands of the assessee. Therefore, we set aside the orders of lower authorities and delete the addition of ₹ 9,94,50,000/- for the assessment year 2011-12 and ₹ 15,00,000/- for the assessment year 2012-13, respectively and allow the grounds of appeal of the assessee. - IT(SS)A Nos.04 & 05/CTK/2018 Stay Application Nos.10 & 11/CTK/2018 (Arising out of IT(SS)A No.04 & 05/CTK/2018) - - - Dated:- 23-3-2018 - Shri N.S.Saini and Pavan Kumar Gadale, JJ. Assessee by : Shri S.K.Tulsiyan, AR Revenue by : Shri Piyush Kolhe, CITDR ORDER Shri N.S.Saini, These are appeals filed by the assessee against the separate orders of the CIT(A)-2, Bhubaneswar both dated 13.11.2017. 2. The assessee has taken the following common grounds of appeal: 1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) has erred in law and on facts in upholding the assessment made u/s. 153A of the Act in spite of the fact that no incriminating documents whatso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponse to the same, the assessee filed return of income on 19.2.2016 disclosing the same income as that of original return filed on 29.9.2011 and 27.9.2012 for the assessment years 2011-12 and 2012-13. Accordingly, notice u/s.142(1) and notice u/s 143(2) of the Income Tax Act were issued and duly served on the assessee. On examination of the seized tally accounts of the assessee, the AO found that following amounts have been credited in the bank account of the assessee. On further examination, the Assessing officer found that the assessee had investments in a number of Kolkata based companies and the same were sold to some other Kolkata based companies and money had been received in the bank accounts of the assessee. The investments in share capital were acquired by the assessee out of capital introduction by a number of Kolkata based companies as under: A.Y. 2011-12 2012-13. AXIX BANK DATE NAME OF THE CREDITING COMPANY AMOUNT(Rs.) AXIS BANK 910020019769310 07-12-2010 RUNICHA MERCHANTS PVT LTD (A-R) 3000000 Axis Bank-411 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd. 5000000 AXIS BANK 910020019769310 29-12-2010 Srijan Vyapar Pvt Ltd. 3000000 Axis Bank -411010200004541 21-04-2010 Srijan Vyapar Pvt Ltd.(App-P) 5000000 Axis Bank -411010200004541 23-04-2010 Srijan Vyapar Pvt Ltd.(App-P) 500000 1566000: AXIS BANK 910020019769310 11-02-2011 Srijan Vyapar, Caplin Marketing Pvt Ltd(Sh) Axis Bank-411010200004541 26-04-2010 SRIJAN, Tantia Agrochemicals Pvt Ltd(Sh) 5000000 AXIS BANK 910020019769310 : 14-08-2010 WEST LINE, Economy Advisory Services Pvt Ltd(Sh) 5000000 Axis Bank -411010200004541 17-06-2010 Winall Vinimay Pvt Ltd (A-R) 1500000 Axis Bank -411010200004541 24-06-2010 Winali Vinimay Pvt Ltd (A-R) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact is that the shares to previous share holders were issued at face value 10 and premium ₹ 90. However, the new shareholders purchased the shares of Midas Capital at net value ₹ 5 per share. Thus, the assessee group was able to get control of Midas Capital Pvt. Ltd by infusing just ₹ 55 lakhs, the assessee group got investment of ₹ 10 crores. On page 101 of the said SGINDIA-01, the new shareholders of Midas Capital Pvt. Ltd have been listed. This amount was used to bring unsecured loan in the group companies. The statement of entry operator is annexed below, wherein he detailed the modus operandi as to how the unaccounted cash is laundered and brought back into the books of accounts as share capital. 6. The transactions have been made in FY 2010-11. Page 85 of SGINDIA-01, list out the working of acquisition of the shares. Page 70-83 of the same document, list out various share entries obtained and bank transactions for the same. Page 69 is the bill for transfer of shares accompanied by share transfer form attached therewith. The share transfer forms are incomplete containing only the name of previous shareholders and signature of one of the Directors o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... encies Pvt. Ltd ? Ans; I will provide it later on. However, the cash was deposited in various concerns which after travelling several layers reached companies like Signet Vinimay Pvt. Ltd, Scope Vyapaar Pvt. Ltd., Sankalp vincom Pvt. Ltd., etc. Subsequently, the money was transferred to Midas Capital Pvt. Ltd and Uniworth Agencies Pvt. Ltd. Pradeep Garg: Q.6 what work is done by Midas Capital Pvt. Ltd and uniworth Agencies Pvt.Ltd. Ans. Sir, actually they all are Jamakharchi Companies. I have signed all the papers as per direction of Raj KumarTharad. Q.8 Please explain the source of funds used for raising share capital in your companies ? Ans. Source of fund for enhancing share capital is unaccounted money of beneficiaries, we used to get cash from beneficiaries first, then we hand it over to people for depositing the cash in various accounts and then transferring it to my companies through cheques. We used to deposit the cheques in my companies for raising share capital. Finally, Raj kumar Tharad used to sell these companies to beneficiaries in lieu of commission. Q.10 Please explain to whom you have sold company of Midas Capital Pvt. Ltd and Uniworth Agenci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Midas Capital Pvt Ltd with premium was found to be sold the same to one of the group companies of the assessee at discount. Later on this company was claimed to be purchaser of the share capital investment of this assessee company at the purchase value. The same is clear from a look at the above reproduced data tables. SIGNET VINIMAY PRIVATE LIMITED CIN; U51109WB2008PTC127514 23/1, Principal Khudiram BHose Road, Kolkata-700006 Name of shareholder Type of share No.of share Per share Abhijiet Basu Equity 5000 10/- Pradip Dey Equity 5000 10/- Apex Commotrade P.Ltd. Equity 300 10/- SKM Travele Pvt Ltd. Equity 300 10/- Total: 10600 Mr Abhiset Basu was one of the directors of the assessee M/s. Midas Capital Pvt Ltd. Apart from this, he was also one of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Shri Raj Kumar Tharad including Balance Sheet Profit and loss account, Bank opening forms, Bank KYC documents, Cheques, RTGS/NEFT forms and other necessary documents. Q.13. Have you ever resigned from any company/concerns? Ans. No, I have not resigned from any companies/concerns. Q.14. What was the source of fund of these concerns? And what was the motive for formation of these companies/concerns? Ans. I can t explain the source of funds of all these concerns. However, Sri Raj Kumar Tharad, being the accommodation entry operator can explain the motives for the same. Q.15. Are you aware of the business activities of the companies in which you are one of the directors? Ans. So far my knowledge goes all the concerns or companies do not have any actual business activity and are used only for providing, accommodation entries to various beneficiaries. However, Shri Raj Kumar Tharad being the accommodation entry operator will be explains the activities for the same. Q.16. Do you want to add/edot/alter/delete/modify any portion of the statement deposed above? Ans. I have gone through the above statement and confirm that the same has been identified completely and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f investment, nothing specific was replied except the acknowledgement of IT return and corresponding part of the bank ledger indicating the transfer of money. This company was found by the investigation wing of the Kolkata as a paper company and involved in the business providing accommodation entry. ii. Srijan Vyapar Pvt Ltd: No reply was submitted by this company to the letter u/s 133(6). On examination of bank account it was found that this company is engaged in financial transaction with other paper companies like Winall Vinimay Pvt Ltd and Concord Commotrade Pvt. Ltd, who have made investment in SGBL group of companies. Both of these companies have been found by the investigation wing of the Kolkata as engaged in accommodation entry business. iii. Signet Vinimay Pvt Ltd: Although this assessee was required to submit the its audit report and sources of investment, nothing specific was replied except the acknowledgement of IT return and corresponding part of the bank ledger indicating the transfer of money. The Director of this company Mr. Abhset Basu was found by the investigation wing of the Kolkata as a involved in the business providing accommodation entry. Mr Basu was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of your group and it has been noticed that P IL Account, Balance Sheet and Bank account of all of your claimed share holders were analyzed and found that no business is being run by them. They are only involved in receiving investment from certain similar companies and making investment as share capital in other companies. There is no normal business rationale involved in such transactions. In the above context you are requested to show cause as to why the sales proceeds claimed to have been received from the sales of shares should not be treated as not genuine and thus are unexplained. Your case is fixed for hearing on 11/11/2016 and you are requested to appear along with your explanation on above and all the books of account and documents in support of your return of income. You are also requested to bring the directors of the purchaser companies for examination at this end. Your sincere co-operation is highly solicited in this regard. D: Submission of the Assessee: Your honor has been pleased to issue the above cited notice directing the assessee company to furnish various details specified in the notice. In response to the same the humble submission of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed herewith for your kind perusal. .Since there was no fresh introduction of capital from 01.04.2007 onwards the required details relating to issue of share capital may not be relevant for present assessment proceeding. B. ALLEGED SJA].IjJJIENT Your honour, the facts stated in the 50 called statement of Raj Kumar Tharad and Pradeep Garg are baseless and beyond imagination. These are not at all correct. More over both the persons namely Raj Kumar Tharad and Pradeep Grag are stranger to the company namely Midas Capital Pvt: Ltd. Both Mr. Tharad and Garg are neither any stake holder/Share holder nor director in the assessee company. We fail to understand under what capacity they have given statement relating to transaction of the company. We request your honour to provide a certified copy of entire statement recorded from Mr. Tharad and Garg, So as to enable the assessee to file its replay. Also we request your honour to provide an opportunity of confrontation with Mr. Tharad and Garg for necessary cross examination by the assessee. Neither Sunil Gupta has. ever seen both Mr. Tharad and Garg nor any cash was given to them. However a brief deta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and creditworthiness of the person from whom the monies were taken and the genuineness of the transaction. Whenever a sum is credited in the books of the assessee, the onus lies on the assessee company to prove these three criteria. As to how the onus can be discharged would depend on the facts and circumstances of each case. It is expected of both the sides - The assessee and the assessing authority to adopt a reasonable approach. This view had been taken in the case of CIT v MI5 Nipun Builders . Developers Pvt. Ltd. 30 Taxmann.com 292 (Delhi)[2013]. The assessee was a private limited company, which cannot issue shares in the same manner in which a public limited company does. It has to generally depend on persons known to its directors or shareholders directly or indirectly to buy its shares. Once the monies are received and shares are issued, it is not as if the share- subscribers and the assessee-company lose touch with each other and become incommunicado. Calls due on the shares have to be paid; if dividends are declared, the warrants have to be sent to the shareholders. It is continuing relationship. The entire transaction is pre-arranged and the assessee company is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he undersigned during the assessment proceeding for reasons best known to the assessee company. Thus, it cannot be said that there was strong indication that the socalled purchasers of share were mere paper entities and did not have the requisite capacity to advance the impugned amounts. The fact that the companies which subscribed to the shares were borne on the file of the ROC is again a neutral fact. Every company incorporated under the Companies Act, 1956 has to comply with statutory formalities. That these companies were complying with such formalities does not add any credibility or evidentiary value. In any case, it does not ipso facto prove that the Transactions are genuine. The mere fact that the transactions were entered into by way of account payee cheques is also not conclusive and cannot be held to be sacrosanct. The transactions though apparent were held to be not real one. May be the money came by way of bank cheques and paid through the process of banking transaction but that itself is of no consequence. The same view had been adopted in the case of: the Hon ble Delhi High Court has cited the case of ClT Vs Durqa Prasad More (1971) 82 ITR 540 and stated that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e there is prima facie, evidence against the assessee viz the receipt of money, and if he fails to rebut, the said evidence being unrebutted, can be used against him by holding that it was a receipt of an income. 11. After going through the decisions of Hon ble Courts and Tribunals as furnished by the assessee, the Assessing Officer observed the said citations are not applicable in the facts and circumstances of the present assessee. The Assessing Officer, therefore, in the light of the facts of the case and aforesaid exposition of the legal position, with regard to the identity and creditworthiness and genuineness of the transactions, was of the opinion that the credit of ₹ 9,94,50,000/- for the assessment year 2011-12 and ₹ 15,00,000/- for the assessment year 2012-13 shown as advance and credited in the books of the assessee company is unexplained and added to the returned income of the assessee u/s.68 of the Act. 12. On appeal, the CIT(A) confirmed the addition by observing as under: 8.3 I have carefully examined the assessment order and submissions of the appellant. I find that an amount of ₹ 9,94,50,000/- was received from the persons mentioned on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther it was an adventure in the nature of trade. It was held by all the authorities that the motive of the investment and rather it was an adventure in the nature of trade. It was held by all the authorities that the motive of the investment made by the assessee was not to derive income but to earn profit. Both the brokers, i.e. the broker through whom the assessee purchased the shares and the broker through whom the shares were sold, were located at Kolkata and the assessee did not have an inkling as to what was going on in the whole transaction except paying a sum of ₹ 65,000/- in cash for the purchase of shares of the two penny stock companies. The authorities found that though the shares were purchased by the assessee at ₹ 5.50 Ps per share and ₹ 4/- per share from the two companies in the year 2003, the assessee was able to sell the shares just within a years' time at ₹ 486.55 Ps and ₹ 485.65 Ps per share. The broker through whom the shares were sold by the assessee did not respond to the assessing officer's letter seeking the names, addresses and the bank accounts of the persons that had purchased the shares sold by the assessee. The auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of utmost relevance to firstly lay down in brief, the facts of the case of the appellant relevant to the said case: FACTS OF THE CASE: 1. The Assessee is a Private limited company incorporated in the year 1995 having registered office at Pollock Street, Kolkata-7000001. 2. For AY 2011-12, the Assessee has filed the Income tax return u/s 139(1) on 29-09-2012 declaring the income of ₹ 9,56,200/- and for A.Y. 2012-13, the return was filed on 27.9.2012 declaring the income of ₹ 2,95,840/-. 3. Subsequently on 6thAugust 2014, there was a search seizure proceeding u/s.132 in case of directors family by IT investigation department of Odisha. In course of the said proceeding, one premises in Cuttack namely Sai Bhawan, Sati Choura Chowk, Cuttack-753008, was also covered and the name of the Assessee company was noted along with other 10 names in the panchanama. In the said search premises, certain tally accounts of the regular accounts of the Assessee Company were found. All these accounts were very much the regular accounts of the Assessee, all duly recorded and disclosed as such in the Regular Returns of the Assessee Company. 4. Basing upon the said panchana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sai Enclave Copy of the said Panchnamas are enclosed at pages 29-42 of the Paperbook for AY 2011-12.. In the said search premises, certain tally accounts all forming part of the regular accounts of the Assessee Company were found. All these accounts were very much the regular books of accounts of the Assessee, all duly recorded and disclosed as such in the Regular books of accounts and covered in the Returns filed u/s 139(1) of the Act. 1.2 As seen from above, along with other names, the name of the Assessee company also appeared on the said Panchnama. Based purely upon the said Panchanama, in the absence of any incriminating material, notice u/s 153A of the Act was initiated for the A.Y. 11-12 and 12-13, both of which were completed assessment years and no proceedings were pending. Notice dated 10.9.2015 u/s.153A of the Act was issued to the assessee. Please note that there was no search proceedings conducted at the registered office of assessee company at Room No.1, G, 1st floor, 11, Pollack St. Kolkata-700001, West Bengal. The assessee company has no other office. Thus, on no basis whatsoever, in an automatic manner, with an absolute predetermined and prejudiced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 ; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made : Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years : Provided further that assessment or reassessment, if any, relating to any assessment year 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. **(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erned by the regular provision of the I.T. Act as applicable to relevant assessment year as prevailing then. Assessments were used to be reopened having recourse to the provision of section 147 of the Act. However a provisional order u/s 132(5) used to be passed for release of seized assets. 2.3 Thereafter, with effect from 1st June 1995, scheme of block assessment in section 158BC and 158BD as per chapter XIVB of the Act was introduced. The main purpose of introducing block assessment scheme was early finalization of search assessment and reduction in multiplicity of proceedings. In this scheme, the assessment was to be made on the basis of seized documents only. There was no scope for disturbing regular assessments. Although there were some analogizes and differences of opinion in some of the provisions of the scheme, however, within the span of about eight years most of the analogizes and disputes were settled by various judgments of Hon ble Courts and Tribunals but after settling of most of the issues, the Government of India withdrew this scheme in respect of searches made from 1st June 2003 and inserted new sections 153A, 153B, 153C and 153D in Chapter XIV for post search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y incriminating material is found or not in relation to a particular assessment year. 35.1 It is clearly inscribed in the law that an assessment u/s 153A is different from regular assessment. The section comes into play only when a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A after 31.5.2003. Also to be highlighted that it is during the course of search itself, such generally incriminating documents or papers etc. or unaccounted assets are found. 3.2 If the AO is allowed to assess / reassess the total income for all six assessment years as per first proviso to section 153A, in contradiction of the second proviso, particularly when there is no incriminating material etc., then the same will not only multiply assessment proceedings but will multiply even the appellate proceedings. Obviously this can never be the intention of the Legislature. 3.3 The provision of section 153A starts with nonobstante clause with reference to sections 139, 147, 148, 149, 151 and 153. Sec. 153A contemplates issue of notice for 6 years preceding the search but not for the year of search or requisition and thus no return is required to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecomes final unless some incriminating material is found in the course of search. Otherwise the AO will be empowered to undo what has already been completed and has become final. 3.8 It is important here to note that all reassessment such as under section 147, 263 etc. have to be made within well-defined limits subject to satisfaction of preconditions and, therefore, similar limitation may have to be read in the instant provision. Therefore, making any Assessment which is already completed will also require the satisfaction of pre-conditions as contemplated in section 153A, its first proviso, its second proviso read with section 132. The Assessment u/s 153A deals with search cases and therefore, the concept of undisclosed income u/s 132(1)(c) will come into play. 3.9 The second proviso to section 153A is intended to avoid two assessments for the same year. Section 153A does not authorize the making of a de novo assessment. An assessment u/s 153A is not meant to unsettle the income shown in the regular return in respect of which the assessment is complete. Section 153 A does not lead to a whole exercise of assessment to be made afresh in respect of completed assessments. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinental Warehousing Corporation, All Cargo Global Logistics Ltd.[2015) 374ITR 645 (Bom) Under section 153A of the Income-tax Act, 1961, which enables carrying out of search or exercise of power of requisition, assessment in furtherance thereof is contemplated. There is a mandate to issue notices under section 153(1)(a) and assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made. Thus, the crucial words search and requisition appear in the substantive provision and the provisos. That would throw light on the issue of applicability of the provision. True it is that the assessment which has to be made in pursuance of the notice is in relation to the six years. An order will have to be made in that regard. While making the order, the income or the return of income filed for all these assessment years is to be taken into account. A reference will have to be made to the income disclosed therein. However, the scone of enquiry though not confined essentially revolves around the search or the requisition under section 132A as the case may be. The provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer which can he related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance nr nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material. (v) In the 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 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word reassess to completed assessment proceedings. (vi) In so far 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 assessment year on the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed. Smt. Sunita Bai Versus Dy. Commissioner of Income Tax Central Circle-1, Belgaum2015 (3) TMI397 - ITATPANAJI - TMI where an assessment order has already been passed for a year or years within the relevant six assessment years, then the AO is duty bound to reopen those proceedings and reassess the total income but by taking note of the undisclosed income if any, unearthed during the search. The expression unearthed during the search is quite significant to denote that in respect of completed or nonpending assessment, the AO albeit duty bound to assess or reassess the total income but if there is scope for additions in such assessment, on the basis of income unearthed during the search , he can make the addition. In other words, the determination of total in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnulment by the CIT. Thus the entire overthrow or destruction or termination of pending assessments before the assessing authority who can take original cognizance is only to avoid two parallel proceedings of assessment of a particular year of the same person, i.e., one as regular assessment and another as assessment u/s 153A of the Act and not the whole exercise of assessment to be made afresh in respect of completed assessments. ACIT vs M/s Delhi Hospital Supply Pvt Ltd (ITA 3996/Del/2011) 7. Keeping in view of the aforesaid findings given by the Ld. CIT(A), we are of the considered view that Ld. CIT(A) has rightly held that in the absence of any material found during the search, as a result, no disallowance / additions can be made in the assessment u/s. 153A of the I.T. Act. Even otherwise, we find force in the Ld. Counsel s submissions that the issue in dispute is also covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT(Central)-III vs. Kabul Chawla in ITA No. 707, 709, 713/Del/2014 wherein the Hon'ble High Court has held that if the additions are made, but not based on any incriminating material found during search operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessees. Therefore, the additions were not baseless. The assessing authorities in such cases had to draw inferences, because of the nature of the materials, since they could be scanty. The element of guess work had to have some reasonable nexus with the statements recorded and documents seized. The differences of opinion between the Commissioner (Appeals) on the one hand and the Assessing Officer and the Appellate Tribunal on the other hand could not be the sole basis for disagreement with what was essentially a factual surmise that was logical and plausible. The findings of the Appellate Tribunal did not reveal any fundamental error calling for interference. Now coming back to the case under reference it is stated that in the said case, after discussing elaborately the case of CIT vs. Kabul Chawla [380 ITR 573 (Del)] as well as several other cases as referred therein, the distinguishing features of the case of Dayawanti Gupta v. CIT [390 ITR 496 (Del)] were spelt out as under: There was a clear admission by the Assessee in Dayawanti Gupta (supra) that they were not maintaining regular books of accounts and the transactions were not recorded therein. there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material have to pertain to the AY in question and have co-relation, document-wise, with the AY. This requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in S. 153A. Kamleshbhai Dharamshibhai Patel 31 TM.com 50 (Guj) approved. SSP Aviation 20 TM.com 214 (Del) distinguished The Bom HC in the said case quoted in 378 ITR 84 on March 25, 2015 held as under:. In terms of section 153C of the Income-tax Act, 1961, the Assessing Officer should be satisfied that any money, bullion, jewellery or other valuable articles or thing or books of account or documents seized or requisitioned belong or belongs to a person other than the person referred to in section 153A of the Act and he can hand over the seized documents to the Assessing Officer having jurisdiction over that person. Held, dismissing the appeals, that the reasons assigned by the Assessing Officer in the satisfaction note were silent about the assessment year in which specific incri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attained the finality in the regular assessment. He also noted that no incriminating materials have been found during the search. The Id. CIT(A) has also referred to the decision of ITAT, Kolkata in the case of LMJ International 119 TTJ 214. Against the above order the Revenue is in appeal before us. 13. We have heard both the counsel and carefully perused the records. We have already held in the Assessee s appeal as above that dehors incriminating material no assessment can be done u/s 153C of the Act for the assessment year for which assessments have already been completed. In these circumstances we do not find any infirmity in the order of the ld.CIT(A) and we uphold the same. 5. Thus from all the above decisions it emerges that it is the established position of law that in cases of search, while making assessments u/s 153A/153C of the Act, completed assessments can be interfered with by the A.O. 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 assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is issued within the time limit laid down in the proviso to Sec.143(2) of the Act, the proceedings initiated by filing the return are closed. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can only be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice u/s. 143(2) of the Act within the time limit laid down in the proviso to Sec. 143(2) of the Act, results in an assessment proceedings and where such assessment proceedings are completed prior to the date of search then they do not abate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above. 26. In the light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no notice u/s 143(2) of the Act was issued to the Assessee company for making assessment u/s 143(3) of the Act within the time period as laid down in section 143(2) of the Act which was 30-09-2012 for AY 2011-12 and 30.9.2013 for 2012-13. The search was conducted on 06-08-2014. As such, assessment for both the assessment yers stood concluded and thus unabated as on the date of search and was not pending as on that date. 7. Next, analysing the documents whose reference is made by the ld. A.O. in his Assessment Order, it is seen that in the course of the assessment proceedings the Ld. Assessing officer issued a notice to the Assessee company wherein reference to two pages of the seized material, SGINDIA-24, SGINDIA-26. However, the said documents were routine in nature and were duly explained in course of assessment proceedings. These documents did not contain any incriminating information and on being satisfied, no addition was made with reference to the said documents. In the assessment order, the Ld. assessing officer had referred to some pages 69-83 and 85 of seized material i e SGINDIA-1 .However, at no point of time during assessment, the assessee was asked to explain th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee filed the return of income on 29-09-2011 and 27-09-2012 respectively. Return for AY 2011-12 was processed on 13-02-2012 and for AY 2012-13 on 20-01- 2014 Admittedly no notice u/s 143(2) of the Act was issued to the assessee company for making assessment u/s 143(3) of the Act within the time period as laid down in section 143(2) of the Act, which was 30-09-2012 for AY 2011-12 and 30-09-2013 for AY 2012-13. The search was conducted on 06-08-2014. As such, assessment for both the relevant years stood concluded and thus unabated as on the date of search and was not pending as on that date. 7 Next analysing the documents whose reference is made by the Id. A.O. in his Assessment Order, it is seen that during the course of the assessment proceeding the Ld. Assessing officer issued 5 (Five) no of notices on various dates in which there was reference of only few seized material such as SG1ND1A-9, SGINDIA-24, SGINDIA-26. However the said documents were routine in nature and were duly explained in course of assessment proceeding. These documents did not contain any incriminating information and on being satisfied, no addition was made with reference to the said document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Raj Kumar Tharad and Mr. Pradeep Garg and the circumstances under which such statement may have been given by them. The statements were not recorded during any proceedings initiated on the Assessee. The said statements were not found or recorded in the course of search and as such, cannot be termed as an incriminating material in the present case. 8.2. At no point of time during the relevant years under consideration, Mr. Raj Kumar Tharad was a director of the assessee company. To substantiate, please find enclosed the relevant extract of the ITR filed for each of the years covered under assessment i.e. AY 2010-11 to AY 2015-16 at page 97-106 of the paper book for AY 2011-12. 8.3. Further, Raj Kumar Tharad and Pradeep Garg in their statement had stated that the assessee company was taken over by Mr. Sunil Gupta by way of share transfer to himself and his group companies. The money for the same was allegedly provided by Shri Sunil Gupta and the same after travelling through several companies got deposited in the books of SGBL (India) Ltd. and other group companies controlled by Shri Sunil Gupta. However, here please note that when asked about the details of money trail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that crossexamination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. In the present case, no opportunity was provided to the assessee to cross examine the persons who had given the alleged statements against the assessee. As such, this is a case of violation of principles of natural justice because of which the assessee has been adversely affected. 9. Further, in the assessment order, the learned AO had referred to the statement recorded from Mr. Abhiset Basu by Investigation Wing of Kolkata in some other proceeding. The said statement was never referred to by the AO in any of the notices issued by him. The said statement was not found or recorded in the course of search and as such, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of investments in shares. The entire sale proceeds were received through normal banking channels and were duly recorded in the regular books of accounts. As such, the addition was made by the learned AO on items of regular assessment. No incriminating material was found in course of search in any of the subject assessment years. 11. Without prejudice to the above, coming to the facts of the case, please note that the AO while analysing the investments of the assessee stated that it had been found that all the investments of the assessee company in Kolkata based companies were finally sold to following companies on various dates in the F.Y.s 2010-11 and 2011- 12: i) Signet Vinimay Pvt. Ltd. ii) Scope Vyapor Pvt. Ltd. iii) Sankalp Vincom Pvt. Ltd. iv) Winall Vinimay Pvt. Ltd. v) Srijan Vyapar Pvt Ltd vi) Westline vii) Yogiraj In connection to the above, the Ld. A.O. observed that the sale proceeds were invested in sister companies of the group as loans/advances and in fixed deposits in Banks. In this regard, it was duly submitted before the ld. A.O. that the share capital of ₹ 10,57,45,300/- was raised in different years upto A.Y.2007-08 and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.s 2005-06, 2006-07 and 2007-08 were also produced for verification. A copy of the same is enclosed at page 22-28 of the paper book for AY 2011-12. However, ignoring the entire submissions of the assessee, the AO passed the assessment orders for the said A.Y. 2011-12 and 2012-13 wherein he held that the credit of ₹ 9,94,50,.000/- and ₹ 15,00,000/- respectively shown as sales proceeds and credited in the books of the assessee was unexplained and thus added the same u/s.68 of the Act. 13. Aggrieved with the order of the learned AO, the assessee went in appeal before the learned CIT(A). The learned CIT(A) uphold the assessment order passed by the learned AO on the same grounds. In the appellate order, the learned CIT(A) has cited the following two judicial pronouncements wherein it was held that It is not necessary that search on which it was founded should have necessarily yielded any incriminating material against assessee or the person to whom such notice u/s.l53A(l)(a), is issued. 1. E.N. Gopikumar vs C7T(Central) (High Court of Kerala) pronounced on 03-10-2016. 2. CIT ,Central vs Raj Kumar Arora (High Court of Allahabad) pronounced on 11-07-2014. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.No.3407/Del./2017 pronounced on 21.11.2017 3. ACIT vs Superb Developers I.T.A .No.-52/Del/2014 pronounced on 21- 04-2017 However, in all the above three cases, the Hon ble Delhi Tribunal has held that invocation of Section 153A by the revenue was without any legal basis as there was no incriminating material found during the course of search. Hence, the judgement cited by the ld CIT(A) do not hold good in the present case by virtue of the judgement on an identical issue pronounced by the Hon ble Supreme Court in favour of the assessee. 14 The learned CIT(A) had alleged in the appellate order that copy of the statement of Rajkumar Tharad and Pradeep Garg were provided to the assessee by the AO. However, the full statements of these parties were never provided to the assessee for cross examination even after making a written request to the AO. Only the extract of the statement which is also produced in the assessment order was provided to the assessee. Hence, the present case is denial of natural justice to the assessee. 14.1 Further, the learned CIT(A) has relied upon the judgment of High Court of Bombay in the case of Sanjay Bimalchand Jain vs PCIT wherein the issue i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r no incriminating material was found during the course of search and the assessment was made on the basis of regular books of accounts. Further, the AO has relied on the alleged statements of some alleged entry brokers. These statements were not recorded or found during the course of any search proceedings on the Assessee. They do not form any incriminating material in the case of the Assessee. Also the opportunity to cross examine these persons was never given to the Assessee. As such, this is a case of denial of natural justice to the assessee and hence these statements cannot be used to the disadvantage of the assessee. The sale of investment in shares was duly recorded in the audited books and the same was also not disputed by the learned AO. As such, the entire proceedings u/s 153 A of the Act was not as per law and liable to be quashed. Based on the above detailed submission of the Assessee, it is thus humbly prayed before Your Honours to quash the Assessment Order passed u/s 153 A of the Act for both the subject assessment years de hors any incriminating material found during the course of search. 22. The DR, on the other hand, relied on the orders of Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Scope of) - Whether for issuance of a notice under section 153A(1)(a), it is not necessary that search on which it was founded should have necessarily yielded any incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(1)(a) Held, yes [Paras 7 and 8] [In favour of revenue). (b) Commissioner of Income-tax Central, Kanpur v. Raj Kumar Arora [2014] 52 taxmann.com 172 (Allahabad) : Section 153A, read with section 143 of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Scope of assessment) - Assessment year 2000-01 - Whether Assessing Officer has power to reassess returns of assessee not only for undisclosed income, which was found during search operation but also with regard to material that was available at time of original assessment - Held, yes [Para 11] [In favour of revenue/Matter reman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der :- We are in agreement with the views expressed by the Kamataka High Court that incriminating material is a prerequisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contained under section 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances. In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed. 28. We find that none of the decision relied upon by either of the parties are of jurisdictional High Court. It is a well settled position of law that when there are conflicting decisions of High Courts none of which is the jurisdictional High Court, then the decision in favour of the assessee should be followed. For this, we derive support from the decision of Hon'ble supreme Court in the case of CIT vs. Vegetable Products Ltd. 88 ITR 192 (SC). Therefore, we are of the considered view that in an assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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