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TMI Blog2019 (6) TMI 390X X X X Extracts X X X X X X X X Extracts X X X X ..... our of assessee. We find that similar view has been taken by the Co-ordinate Bench in case of M/s Kota Dal Mill [ 2019 (1) TMI 344 - ITAT JAIPUR] wherein the Co-ordinate Bench has considered and discussed at length various decisions laying the legal proposition that in absence of any incriminating material, no addition can be made in cases where the assessment has not got abated on the date of search. Validity of assessment order passed u/s 143(3) r.w.s. 153B (1)(b) on the ground that notice u/s 143(2) was not issued within the stipulated time - HELD THAT:- Provisions of Section 292BB of the Act does not support the case of the Revenue as in the present case, the very issuance of notice u/s 143(2) is beyond the prescribed period of time whereas the section 292BB talks about the situations where the notice has either not been served upon the assessee or not been served in time or not have been served in a proper manner. In the present case, the matter is not about the service of the notice in time to the assessee rather the matter is very issuance of notice u/s 143(2) beyond the prescribed time period. Therefore, section 292BB cannot come to the rescue of the Revenue in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expressed its inability in producing the lender nor produced the lender for examination before the Assessing Officer. 5. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition merely by observing that the assessee has cooperated in assessment by showing his willingness to produce the Director of lender/investor company when the Director or Principal Officer of the lender/investor company was never produced. 6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the additions by observing that the appellant cannot be fastened upon the burden to produce the lender before the AO and in not considering the decision of the Hon'ble Supreme Court in Navodaya Castles (P) Ltd. vs. CIT(2015) 56 taxmann.com 18(SC) when there were genuine concerns of the genuineness of the transactions. 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in deleting the addition by observing that the identity, creditworthiness and genuineness of the transaction was established by the assessee without even considering the financial statement of the alleged lende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income from business of financial services. The assessee company e-filed its original return of income u/s 139 on 05.02.2014 for the assessment year 2013-14. Subsequently, a search and seizure operation u/s 132 was carried out on Bhatia/Shubham Group Kota on 03.03.2016. During the course of search operation, certain incriminating documents/papers were seized which was claimed by the Revenue as belonging to the assessee company, the case of the assessee company was thereafter centralized, satisfaction note was prepared and notice u/s 153C was issued on 13.10.2017 which was duly served on the assessee. In response to the notice u/s 153C, the assessee filed its return of income on 05.02.2014 declaring total income at Rs. Nil. Subsequently, the notice u/s 143(2) was issued on 03.11.2017. During the course of assessment proceedings, the Assessing Officer observed that from the examination of the financial statement as well as from the books of accounts of the assessee company, it is seen that during the financial years 2012-13 to 2015-16, assessee company has received huge sums in the form of share application money, special deposit, debenture issuing receipts and unsecured loans fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ally required satisfaction by the Assessing Officer and the order so passed u/s 153C r/w 243(3) without jurisdiction. During the course of hearing, the said ground was not pressed by the ld. AR. Hence the same is dismissed as not pressed. 6. In Ground No. 2 of its cross objection, the assessee has raised the ground stating that the order passed u/s 153C read with section 143(3) deserve to be annulled as the assessment for the year under consideration was not abated as on the date of search and no addition can be made in absence of any incriminating material found during the course of search. Further, the ld. CIT(A) erred in holding that the legal contentions so raised cannot be accepted in view of the SLP admitted in various cases and holding that the grounds so raised are academic in nature. 7. In this regard, the ld. AR submitted that completed assessment cannot be reviewed without having incriminating material. It was submitted that it is a settled proposition of law that there cannot be a review under the garb of reassessment proceedings u/s 153A/153C of the Act and therefore the reassessment proceedings are absolutely in the abuse of the process of law, illegal and bad in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. b. The Assessing Officer is legally required to assess or re-assess the total income of six assessment years immediately preceding to the year of search. The second proviso to section 153A provides that if the assessment or re- assessment of any of the assessment year, falling within the period of six years is pending on the date of search, then the same shall get abated. In the present case, for the AY 2013-14, the assessment was not pending and had attained finality, therefore, the assessment completed in the impugned assessment year will not get abated. Once that is so, the legal position is that the additions over and above the assessed income cannot be made dehors the incriminating material found at the time of search while completing the assessment under section 153A/153C. This, inter-alia, means that if there is no incriminating material, then the original assessment made can be reiterated and no further addition is called for otherwise the addition can only be made on the basis of undisclosed income derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious other decisions. 12. Per contra, the ld. CIT DR submitted that the additions made to the total income of the assessee relate to the unexplained cash credit in the books of account introduced in the garb of unsecured loans and share capital which in fact is the re-routing of the assessee's undisclosed income. It has been gathered from the investigation directorate that various investigations were carried out by the Investigation wing in the past which revealed that the Directors of M/s Denim Developers Ltd are simply dummy directors and this company was managed by entry operators and is a mere shell company not having any physical presence and place of business except having a mailing address. Such information was received prior to the initiation of proceedings under section 153C and accordingly, during the course of assessment proceedings under section 153C, the AO conducted further enquiry also through the Investigation wing about the genuineness of the transaction of unsecured loans, and share capital. The assessee was duly confronted with the results of all these enquiries and information shared by the Investigation Wing. In these circumstances it cannot be a case of add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to proceed in accordance with provisions of Section 153A of the Act. Section 153A requires that where a search has been initiated under Section 132 of the Act, the AO is required to issue notice requiring the assessee to furnish returns of income in respect of six assessment years relevant to the six previous years preceding the previous year in which the search is conducted. By virtue of second proviso to Section 153A, the assessment/reassessment pending on the date of initiation of search shall abate. In the context of proceedings under Section 153C of the Act, the reference to the date of initiation of the search in the second proviso to Section 153A has to be construed as the date on which the AO receives the documents or assets from the AO of the searched person. Thus, by virtue of second proviso to Section 153A of the Act as it applies to proceedings under Section 153C of the Act, the assessment/reassessment pending on the date on which the assets/documents are received by the AO would abate. In respect of such assessments which have abated, the AO would have the jurisdiction to proceed and make an assessment. However, in respect of concluded assessments, the AO would assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch action u/s 132 of IT Act on Shubham Group of Kota, incriminating documents were seized vide page Nos. 239 to 259 of Annexure A-4 by Party-11 from Choudhary Hotel Premises. Near Aerodrome Circle, Kota which is a copy of Sale Deed of land executed on 15.04.2013 by Late Abdul Rehman in favour of M/s Resonant Wealth Consultancy Private Limited, wherein consideration of ₹ 400/- lacs is registered. The ADIT (Inv.) Kota has also concluded in his appraisal report that as per information received from FIU-IND in the name of Abdul Rehman R/o 1634, Iqbal Chowk/ Hathi Chowk, Sakat Pure, Kota, and in the course of enquiry initiated in respect of such information, statement of Shri Vazirdur Rehman, Legal heir of Late Abdul Rehman was recorded u/s 131(1A) of I.T. Act, 1961 on 22.06.2015 & 16.11.2015, wherein he admitted on oath that his father had received cash of ₹ 535/- lacs over and above the registered consideration of ₹ 400/- lacs from M/s Resonant Wealth Consultancy Private Limited. During search action, Shri Ram J Bhatia, Key person of Shubham group, was asked about source of cash payment of ₹ 535/-lacs made to Late Abdul Rehman. In response, he has admitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined from books of accounts of M/s Resonant Wealth Consultancy Private Limited. These transactions pertain to financial year 2015-16. The date of birth of Company is 01.02.2012 as per CBN PAN based query- ITD. (Copy enclosed) Hence, M/s Resonant Wealth Consultancy Private Limited, become liable to be governed u/s 153C of the Income tax Act, 1961 and hence notice u/s 153C is required to be issued in this case for A.Ys 2012-13, 2013-14, 2014-15, 2015-16 & notice u/s 143(2) for A.Y 2016-17." 14. On perusal of the satisfaction note, we find that it talks about copy of sale deed dated 15.04.2013 pertaining to financial year 2013-14 relevant to assessment year 2014-15 found and seized during the course of search relating to purchase of land and payment of on-money amounting to ₹ 5.35 crores by the asssessee company which has not been offered to tax. Thus, the documents found and seized during the course of search at Subham Group relate to purchase of land and payment of on-money by the assessee company. Further, certain documents have been seized relating to advances against flats pertaining to financial year 2015-16 relevant to AY 2016-17. The additions which have been made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... got abated on the date of search. In the said decision, the Co-ordinate Bench has also considered the decision of Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla 380 ITR 573 (Del), another decision of the Delhi High Court in case of Pr. CIT vs. Meeta Gutgutia 395 ITR 526 and also the decision of Rajasthan High Court in case of Jai Steel (India) ACIT 259 CTR (Raj.) 281. We therefore find that though the said decision has been rendered in context of section 153A, the legal proposition so laid down shall equally apply in case of assumption of jurisdiction and the scope of the additions made u/s 153C of the Act and thus support the case of the assessee company as also held by the Hon'ble Delhi High Court in case of Pr. CIT (Central) vs T.S Pulses Pvt. Ltd (supra) wherein it was held as under:- "2. The Central question raised by the Revenue in this appeal is regarding the assumption of jurisdiction and the scope of the additions under section 153C of the Act. In the absence of any incriminating material qua the Assessee, the applicability of the decision of this Court in CIT vs. Kabul Chawla (2015) 380 ITR 573 is not in doubt." 16. The decision of Hon'ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- '37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (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. ii. 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 AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The 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". iv Although Section 153 A does not say that add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot the date of search. 24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Since we have deleted the additions as aforesaid, the ground no. 3 in assessee's cross-objection and various grounds raised by the Revenue wherein it has challenged the deletion of additions made by the AO on merits has become infructious and are not adjudicated upon. 19. In the result, assessee's cross objection is allowed and revenue's appeal is dismissed. ITA No. 1370/JP/2019 & CO No. 2/JP/2019 20. Now, we take up the Revenue's appeal and cross objection of the assessee for AY 2014-15. The Revenue is in appeal against the deletion by the ld CIT(A) of the addition made by the Assessing Officer on merits and assessee in its cross objection has raised various grounds challenging legality of the order passed by the Assessing Officer u/s 153C read with 143(3) of the Act. Since the assessee has challenged the legality of the order passed by the Assessing Officer in its cross objection, we deem it appropriate firstly to examine the said grounds of appeal raised by the assessee in its cross objection. 21. In ground no. 1 of its cross-objection, the assessee company has raised the ground relating to non-recording of legally required satisfaction by the Assessing Officer and the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counted money for purchase of land or disallowance u/s 40A(3) can be made. 24. It was further submitted by the ld. AR that from the perusal of the satisfaction note, it is to be noted that there is nothing which has been mentioned against the share capital, special deposits and debenture money received from M/s Denim Developers Ltd during the financial year relevant to assessment year 2014-15. This clearly establishes that the department has not found any incriminating document or material to show that share capital, special deposit, debenture money received from M/s Denim Developers Ltd was bogus and therefore the Assessing Officer by making the addition has travelled beyond the scope of section 153C/153A of I.T. Act. It was further submitted that the department has not seized any incriminating document on search over Shubham Group to show that the assessee has paid unaccounted money for purchases of land from Shri Abdul Rahman. Regarding copy of the sale deed found during the course of search of the land executed on 15.04.2013 by Late Abdul Rahman in favour of the assessee wherein the consideration of ₹ 4 crore is mentioned, it was submitted that the said amount has alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Commissioner of Income Tax, Delhi vs. Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82. Further regarding the disallowance made u/s 40A(3), it was submitted that no document was found during the course of search in support of addition of ₹ 3,00,000/- made by ld. AO by applying provisions of section 40A(3). It was accordingly submitted that in absence of any incriminating document found during the course of search, the addition cannot be made in the hands of the assessee and the same may therefore be directed to be deleted. 27. The ld. DR is heard who has reiterated the submission has made earlier in the context of A.Y 2013-14 in relation to transactions with M/s Denim Developers Ltd. It was further submitted by the ld DR that unlike the earlier year, the satisfaction note prepared by the Assessing Officer for the year under consideration clearly mentioned above the sale deed executed by the assessee on 15.04.2013 by virtue of which the assessee has purchased the land from Late Shri Abdul Rahman and further based on statement of the legal heir of seller of the land, it has been confirmed that there is on-money payment of ₹ 5.35 crore by the assessee. It was acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be regarded as incriminating material unearthed during the course of search and seizure under section 132 in case of the assessee. Thus, the addition which has been made by the AO has no linkage with any incriminating document found and seized during the course of search. The assessment for the impugned assessment year was not pending on the date of recording of satisfaction by the AO and would not abate by virtue of proviso to section 153A and therefore, in absence of any incriminating document found during the course of search relating to share capital, special deposit, debenture money received from M/s Denim Developers Ltd and such transactions being duly recorded in the books of accounts by the asssessee company, the additions made in the hands of the assessee u/s 68 is hereby directed to be deleted. 30. Regarding copy of the sale deed executed on 15.04.2013 by Late Shri Abdul Rahman in favour of the assessee for a consideration of ₹ 4 crores and which has been found during the course of search, as per submissions of the assessee company available at APB Page 101- 102 wherein it has been stated that the documents as per Exhibit 4 Annexure AS-04 Page no 239-261 relates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceed in its contention that these statements recorded u/s 131(IA) cannot be held as incriminating documents found during the course of search on the Subham Group as what has been found during the course of search is the copy of the sale deed for the purchase of land and as we have noted above, the transaction of purchase of land as per stated sale consideration of ₹ 4 crores as per the said sale deed has been duly recorded in the books of accounts of the assessee company and thus the sale deed though found and seized during the course of search cannot be held as incriminating document as the same stand already disclosed in the books of accounts of the assessee company. Further, these two statements were recorded u/s 131(IA) of Shri Vazidur Rahman, the legal heir of late Shri Abdul Rahman on 22.6.2015 and 16.11.2015 much before the date of search on 3.03.2016 and in fact, basis such statement and information in possession of the Department, the search proceedings were initiated u/s 132 on the Subham Group. The same is the admitted position of the Revenue as is clear from para 18 of the assessment order where the AO has held as under: "18. Unexplained payments for land purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted income for the Financial Year 2013-14 which he had voluntarily offered for taxation as his additional income for AY 2014-15." Thus, these statements of Shri Vazirdur Rehman were in fact form part of the information in possession of the department much before the date of search and have formed the basis on which the search action was taken on the Subham Group on 3.3.2016. The said statements may be considered as a relevant evidence, however the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 in case of the assessee. Therefore, it cannot be said that these statements were in the nature of incriminating documents found and recorded during the course of search. Further, even where the Revenue has tried to establish nexus of these statements with the copy of sale deed for purchase of land found and seized during the course of search, the sale deed cannot be held as incriminating document found during the course of search as the transaction so reported in the sale deed and the consideration stated therein for the purchase of land has already been recorded in the books of accounts before the date of search. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, whereas the assessee filed its return of income u/s 139(1) on 25.08.2016. In accordance with the provisions of section 143(2), the notice could have been served on the assessee upto 6 months from the end of the financial year in which the return was filed which has expired on 30.09.2017 however the notice u/s 143(2) actually been issued on 30.10.2017. It was accordingly submitted that the assessment carried out u/s 143(3) read with section 153B (1)(b) of the Act being barred by the limitation suffered from the palpable infirmity and thus void ab initio. It was submitted that the question of limitation is a jurisdictional matter and where the proceedings are initiated beyond the period of limitation, the proceedings would be without jurisdiction and therefore, assessment order passed by the Assessing Officer also would be a nullity and non-est in the eye of law. 38. In support, reliance was placed on the Hon'ble Supreme Court of India decision in case of Asstt. CIT v. Hotel Blue Moon [2010] 321 ITR 362/188 Taxman 113 (SC) wherein an identical issue regarding limitation, mandatory nature of the provision u/s 143(2) being applicable to block assessment proceedings arose for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- "2.2.8 It is also to be noted that Section 153A provides for the procedure for assessment in case of search or requisition. Sub section (1) starts with non-obstante clause stating that it was "notwithstanding" anything contained in sections 147, 148 and 149, etc. Clause (a) thereof provides for issuance of notice to the person searched under Section 132 or where documents etc are requisitioned under Section 132(A), to furnish a return of income. This clause nowhere prescribes for issuance of notice under Section 143(2). 2.2.9 The appellant sought to contend that the words, "so far as may be applicable" made it mandatory for issuance of notice under Section 143(2) since the return filed in response to notice under Section 153A was to be treated as one under Section 139. The words "so far as may be" in clause (a) of sub section (1) of Section 153A could not be interpreted that the issue of notice under Section 143(2) was mandatory in case of assessment under Section 153A. The use of the words, "so far as may be" cannot be stretched to the extent of mandatory issue of notice under Section 143(2). As is noted, a specific notice was required to be issued under Clause (a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been issued. The assessee filed its return of income u/s 139(1) on 25.08.2016 declaring total income of ₹ 14,69,383/- (loss) and thereafter, the notice dated 30.10.2017 was issued u/s 143(2) to the assessee company. The very fact of the issuance of notice u/s 143(2) on 30.10.2017 has not been disputed by the Revenue and is also confirmed by the ld. CIT(A) which at para 2.2 of his order has stated as under:- "2.2 The challenge of the Appellant in this ground is regarding the validity of the assessment on technical ground that the notice issued u/s 143(2) of the Act is barred by limitation, therefore the entire assessment proceeding is void-ab-initio resulting whole proceedings bad in law. I have perused the assessment order, submission made by applicant and documents submitted in the form of paper book. On examination of documents it reveals that the notice u/s 143(2) of the Act was issued by the AO on 30.10.2017 which is verifiable from copy of notice, date of issue of notice mentioned in the assessment order and noting made in order sheet." Therefore, it is a case where the return of income has been filed u/s 139(1) of the Act and the normal time limit for issuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(2). However, if an assessment is to be completed under section 143(3) read with section 158 BC, notice under section 143(2) should be issued within one year from the date of filing of block return. Omission on the part of the assessing authority to issue notice under section 143(2) cannot be a procedural irregularity and the same is not curable and, therefore, the requirement of notice under section 143(2) cannot be dispensed with …" 4. It is evident that the dictum of the Supreme Court in Hotel Blue Moon is that a notice under Section 143(2) is mandatory if the return as filed is not accepted and an assessment order is to be made at variance with the return filed by the assessee. It is also evident that the issue is not limited to block assessment but would apply to every case where a notice under Section 143(2) of the Act is necessary." "9. In the light of the above discussion, particularly taking into consideration the law laid down by the Supreme Court in Hotel Blue Moon (supra), it is inescapable that the issuance of a notice under Section 143(2) of the Act is mandatory if the Assessing Officer seeks not to accept any part of the return as furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t order is concerned. However, no such relaxation has been provided in terms of issuance of notice u/s 143(2) of the Act. The relevant provisions read as under:- "153B. (1) Notwithstanding anything contained in section 153, the Assessing Officer shall make an order of assessment or reassessment,- (a) in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b) of sub-section (1) of section 153A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed; (b) in respect of the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A, within a period of twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or for requisition under section 132A was executed: Provided that in case of other person referred to in section 153C, the period of limitation for making the assessment or reassessment shall be the period as referred ..... 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