9911796707
TMI Blog2019 (8) TMI 990X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser and genuineness of the transaction, the burden is shifted on the AO to prove the contrary with some tangible material. AO has not conducted any independent inquiry except the Commission issued to Calcutta Wing which has resulted nothing but reported that the company was not found at the address which is otherwise not disputed by the Revenue as the assessment was completed and statement of the director of the said company was recorded by the Investigation Wing in earlier investigation proceedings. Therefore, the said report of the Commission issued by the AO is contrary to the earlier investigation report to dispute the identity and existence of the said company. Enhancement of assessment on the basis of the application made u/s 245C(1) before Settlement Commission - application for want of any conclusive proof or document disclosing undisclosed income offered by the assessee - HELD THAT:- There is no quarrel that the material and other information produced by the assessee before the Settlement Commission or any evidence recorded by the Settlement Commission in the proceedings before it can be used by the AO as well as other income tax authority for the purpose of assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaring total income of ₹ 10,33,768/-. The assessment u/s 143 (3) of the Act was completed on 30-09-2014 accepting the return of income of the assessee. Thereafter a search and seizure operation was conducted on 17-12-2014 on various premises of Sehgal Group to which the assessee belongs. The assessee filed her return of income in response to notice u/s 153 of the Act on 5-08-2016 declaring total income as declared in the original return of income. During the course of search and seizure action, certain books of account, documents and agreement to sell dated 10-10-2011 were found and seized. As per said agreement, the assessee with her husband has agreed to sell their properties as under:- Particulars Area Plot No 1, Nemi Sagar Colony, Jaipur 332.50 Sq. Yards Plot No. 272, Nemi Sagar Colony, Jaipur 385.00 Sq. Yards Plot No. 273, Nemi Sagar Colony, Jaipur 385.00 Sq. Yards Plot No. 276, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 277, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 278, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 279, Nemi Sagar Colony, Jaipur 400.00 Sq. Yards Plot No. 280, Nemi Sagar Colony, Jaipur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no incriminating material found during the course of search disclosing any undisclosed income on account of receipt of ₹ 8.00 crores by the assessee. The ld. DR has further submitted that company M/s. Makesworth Projects & Developers Pvt. Ltd. is a paper company and indulge in providing bogus accommodation entries. The statement of Shri Pramod Kumar Sharma, Director of M/s. Makesworth Projects & Developers Pvt. Ltd was recorded by the Investigation Wing, Calcutta on 10-11-2012 in which he stated that he was doing business on behalf of Shri Praveen Agarwal and he was only a dummy director in many of his companies. He has further stated that all these companies were indulged in providing accommodation entries. Therefore, the transaction in question claimed through the alleged agreement is nothing but a bogus accommodation entry received by the assessee in the form of advance which is nothing but assessee's own unaccounted income has been introduced/ received in the garb of advance for sale of these properties which was forfeited. Thus the entire claim of the assessee is nothing but to give a colour of forfeiture of advance of assessee's own unaccounted income. Tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Makesworth Projects & Developers Pvt. Ltd is provided from the agreement itself, assessment order dated 03-06-2014 passed u/s 143(3) of the Act and Company Master Data in ROC. The genuineness of the transaction is established as the payment is made through RTGS transfer and there was no finding or any record to show that prior to the said payment any cash was deposited in the bank. The assessee filed the confirmations as well as Board Resolution of M/s. Makesworth Projects & Developers Pvt. Ltd. The creditworthiness of the purchaser has been proved by filing the evidence which includes the return of income. The financial statements filed for the Assessment Year 2010-11 and 2011-12 show that the said company was having huge net worth and current assets to purchase the properties. Thus the assessee has explained the source of receipt of ₹ 8.00 crores and satisfied all the requirements of section 68 of the Act. The ld.AR has further contended that the AO relied on the statement of Shri Praveen Agarwal recorded by the Investigation Wing, Calcutta. However, said statement itself is not a conclusive proof to hold that transaction between the assessee and M/s. Makesworth Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on or before 31 Dec. 2011. The AO doubted the genuineness of the transactions and referred to the report of the Investigation Wing and then again referred to the statement of one Shri Pramod Kumar Sharma, Director of M/s. Makesworth Projects & Developers Pvt. Ltd, recorded on 10-11-2012. On the basis of the said report of the Investigation Wing, Calcutta, the AO held that the transaction of alleged sale of the properties to M/s. Makesworth Projects & Developers Pvt. Ltd is not genuine as the said company was found to be indulged in providing accommodation bogus entries. It is pertinent to note that the agreement sell dated 10-10-2011 was found during the course of search and part of the seized material marked as Exhibit-11, Annexure A. It is clear that the said agreement is not an afterthought manufactured document but it was found at the time of search and hence the existence of the agreement cannot be doubted. The agreement itself does not reveal any undisclosed income but it clearly states that the assessee and her husband agreed to sell these 09 number of plots situated at Nemi Sagar Nagar, Jaipur to M/s. Makesworth Projects & Developers Pvt. Ltd. for a consideration of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Calcutta Wing which has resulted nothing but reported that the company was not found at the address which is otherwise not disputed by the Revenue as the assessment was completed and statement of the director of the said company was recorded by the Investigation Wing in earlier investigation proceedings. Therefore, the said report of the Commission issued by the AO is contrary to the earlier investigation report to dispute the identity and existence of the said company. On query from the Bench whether the bank account in which this amount was deposited was declared in the return of income filed by the assessee. The ld.AR referred to the computation of income and details of interest income offered to tax which includes the interest in this amount and therefore, the said bank account was duly disclosed in the return of income. Once the transaction of the receipt of ₹ 8.00 crores is found to be as an advance towards the sale of the properties in question then as per provision of Section 51 of the Act, if the said amount is forfeited by the seller the same shall be deducted from the cost for which asset was acquired or written down value or fair market value as the case may be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and from business premises of the firms/companies of the group; notice under Section 153A of the Act was issued on 05.10.2004 for filing of return within 35 days of receipt of the notice, which was served on 12.10.2004; in compliance to this notice, return declaring income of 'NIL' was filed on 07.04.2005. In the return filed in response to the notice under Section 153A of the Act, the assessee, inter alia, claimed deduction of Sales Tax Incentive relying on decision in the case of Dy. CIT v. Reliance Industries Ltd. [2004] 88 ITD 273 (Mum.) (SB). The said claim was not made in the original return filed under Section 139(1) of the Act it was contended that such claim can be made in the return filed in response to notice under section 153A of the Act as it was over riding all proceedings earlier taken overall. The claim was not held to be admissible by all the authorities. When further appeal was filed, Hon'ble Rajasthan High Court while analysing the provision of sec. 132 r.w.s 153A held thus: 18. To consider the rival submissions made at the Bar in the context of the present case and the substantial question of law framed, the scope of 'assessment and reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee. 21. The argument raised by the counsel for the appellant to the effect that once a notice under Section 153A of the Act is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: 1) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original Jurisdiction, for which, assessments have to be made; 2) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and 3) in absence o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 49 Taxmann.com 172 wherein it was held thus: 8. We find it difficult to accept the above contention raised on behalf of the revenue. The object of inserting Sections 153A, 153B and 153C by Finance Act, 2003 by discarding the existing provisions relating to search cases contained in Chapter XIV B of the Income-tax Act, as stated in the Memorandum explaining the provisions in the Finance Bill 2003 (see 260 III{ (St) 191 at 219) was that under the existing provisions relating to search cases, often disputes were raised on the question, as to whether a particular income could be treated as 'undisclosed income' or whether a particular income could be said to be relatable to the material found during the course of search, etc. which led to prolonged litigation. To overcome that difficul0, the legislature by Finance Act 2003, decided to discard Chapter XIV B provisions and introduce Sections 153A, 153B and 153C in the IT Act. 9. What Section 153A contemplates is that, notwithstanding the regular provisions for assessment/ re-assessment contained in the IT Act, where search is conducted under Section 132 or requisition is made under Section 132A on or after 31 / 5 / 2003 in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29-12-2000. 12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised assessment/ reassessment were contrary to the facts unearthed during the course of 153A proceedings. The above quoted passage was also approved by Bombay High court in the case of Continental Warehousing Corporation (374 ITR 645, para 30 thereof) It appears that there is unanimity of view on the subject that when a search is initiated and an assessment is to be framed u/s 153A in respect of a year which was not pending on date of search and which does not abate, the same can be only on the basis of incriminating material. In absence of any incriminati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the search. The words 'evidence found as a result of search° would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4). However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing Officer to make a block assessment merely because any admission was made by the assessee during search operation. Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the act, the same was also applied in respect of assessment u/s 153A by Delhi High Court in case of Best Infrastructure (84 Taxmann.com 287) when it was held thus:- 38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th an opportunity of cross examination becomes necessary. If that be the case, a question remains to be answered as to why the income of Makesworth is assessed in its hands and not Mr. Pravin Agarwal. Thus a bald statement of a person stating to be controlling a company cannot be considered as sacrosanct till it is put to test by the person relying upon it and also by the person who is adversely affected by such statement. Neither the AO, nor investigation wing has put any question to Mr. Pravin Agarwal about the transaction of Makesworth with the appellant. In such a situation, no credence can be given to his statement to hold the sale agreement as bogus or sham. 8.2 Here it is useful to refer to two judgments of Hon,ble Supreme Court in the cases of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 (SC) and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). In Chhugamal Rajpal s case (supra) the ITO had initiated reassessment proceedings on the basis of a 'circular' issued from the office of the Commissioner, Bihar & Orissa, which stated that three persons named in that circular, were merely name-lenders and their transactions were bogus and proper investigation rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le her property, the AO questioned such decision by holding that she never intended to sale her business establishments but only property. In my opinion, a person is free to decide the way he wants to conduct his affairs. The AO is not to enter the shoe of a businessman and decide how he should conduct his affairs. He has just to decide whether any income is accruing from any transaction undertaken by him and not question the wisdom in doing business. The AO also questioned the wisdom of Makesworth in not claiming the advance given. The answer for same has to come from Makesworth itself and not the appellant. During the course of assessment proceedings, the appellant provided fresh confirmation as also its present whereabouts from authentic record and the broker who mediated the transaction. No exercise was done thereafter by AO. In the words of Hon'ble Supreme Court in the case of Sreelekha Banerjee (49 ITR 112) "Before the department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The department cannot be merely rejecting unreasonably a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions under section 69B, relying upon the statements of two farmers [e., two sellers of the land] in which, according to the department, they admitted of having received on-money in cash. However, it is required to be noted and it is an admitted position that the statements of those two farmers upon which reliance was placed by the department were not furnished/ given to the assessee to controvert the same. Not only that when a specific request was made before the Assessing Officer to permit them to cross examine the aforesaid two farmers, the same was rejected by the Assessing Officer. Under the circumstances, as rightly observed by the Tribunal, the Assessing Officer was not justified in making addition under section 69B solely relying upon the statements of those two farmers. Similar view is adopted by Bombay High Court in case of R.W. Promotions (61 Taxmann.com 54) where in it was observed thus: 11. We find that there has been a breach of principles of natural justice inasmuch as the Assessing Officer has in his order placed reliance upon the statements of representatives of M/s Inorbit and M/s Nupur to come to the conclusion that claim for expenditure made by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pravin Agarwal is to be discarded and if such statement is discarded, then the AO has no further material to hold that the transaction of appellant with Makesworth is bogus or sham so as to consider the same as unexplained. 8.5 I find that the appellant has demonstrated that the required ingredients to explain the cash credit as genuine. There is no doubt about the identity of Makesworth which is discernible from agreement itself entered into, its tax returns and assessment orders etc. The genuineness of transaction is also proved by the appellant by bringing on record the Sale agreement alongwith extension letters itself being found during search and receiving payment through banking channels and fresh confirmation during assessment proceedings. As against this, there is no contrary evidence. When a person is to sale his assets and to receive payment before selling the assets, the person need not question the worth of the person who wants to purchase. Only if he has worth, he will enter into a transaction of purchase. Why and in what circumstances, Makesworth decided to purchase the property can be answered by Makesworth only. Even going by balance sheet of Makesworth, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Year 2012-13, the assessee has following grounds:- ''1. Under the facts and circumstances of the case, the ld. CIT(A) has grossly erred in law as well as facts in making the addition of ₹ 5,00,000/- 2. Under the facts and circumstances of the case, the ld. CIT(A) has erred in law as well as facts in making addition of ₹ 5.00 lacs offered by the appellant before Settlement Commission ignoring that:- (i) The application before ITSC was filed along with the group for the purpose of settlement of the cases of the group. (ii) The offer in the application was conditional. (iii) No evidence of such undisclosed income was found in the search or enclosed with the application. (iv) The application was filed to get quietus to the disputes, the objective of approaching the ITSC was different than the assessment, it was settlement. (v) Only real income can be assessed to tax as per section 4 of the Act and not hypothetical income offered for settlement. (vi) The order of settlement u/s 245D(4) is not an assessment as held by Hon'ble Apex Court in Brijlal's case. (vii) Section 245HA of the Act does not hold that offer of additional income u/s 245C(1) is a conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... additional income is declared merely on the basis of estimates and therefore, it does not fulfill the conditions laid down as per provisions of Section 245C(1) of the Act. The ld. CIT(A) in the course of appellate proceedings noted that the assessee has offered additional income of ₹ 5.00 lacs for the Assessment Year 2012-13 and ₹ 10.00 lacs for the 2015-16. Accordingly, the ld. CIT(A) proposed to enhance the assessment by making the additions of respective amounts to the income based on the disclosure in the application made to the Settlement Commission u/s 245C(1) of the Act. The assessee objected to the said enhancement and contended that when the Settlement Commission itself has rejected the application for want of any incriminating material supporting the additional income then said additional income offered in the application u/s 245C(1) cannot be a basis for addition in assessment. The ld. CIT(A) did not accept the contention of the assessee and made addition of the respective amounts for two assessment years. For the Assessment Year 2012-13, a sum of ₹ 5.00 lacs was added to the income of the assessee. 3.4 Before us, the ld.AR of the assessee submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the proceedings before the Settlement Commission can be used by the AO or other Income Tax Authority for the purpose of assessment. 3.5 We have considered the rival submissions as well as the relevant material on record. The ld. CIT(A) has made the addition being enhancement of assessment in para 10.1 of the impugned order for the Assessment Year 2012-13 as under:- ''10.1 I do not agree with the contention that income offered in settlement application cannot be taxed as it is not evidence. In fact such application is drafted without any presence of income tax officials (thus there is no threat or coercion, to say the least). Disclosure made by the appellant is backed by a detailed note by the appellant regarding seizure of loose papers, documents (refer page 15 & 16 of settlement application). Such application is duly signed by the appellant, also certifying that all the conditions relating to tax payments are fulfilled. Such application is duly verified and signed by the appellant on 21-12-2016. Sums and substance of these observations is that such application has far more evidentiary value than mere statement recorded u/s 132(4) of the Act. Further facts contained in set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission while rejecting the application that application filed by the assessee does not fulfill the conditions as per provisions of section 245C(1) of the Act as additional income has been declared merely on the basis of estimates without any details of transactions resulting the additional income or any other material substantiating the additional income. The Settlement Commission while rejecting the application has also taken a note of the facts as stated in the statement of facts. There is no quarrel that the material and other information produced by the assessee before the Settlement Commission or any evidence recorded by the Settlement Commission in the proceedings before it can be used by the AO as well as other income tax authority for the purpose of assessment. However, when application filed by the assessee u/s 245C(1) itself fails for want of any material supporting the additional income disclosed then mere disclosure of income in the application u/s 245C(1) cannot be a basis of addition to the income of the assessee. What is provided u/s 245HA(3) is the evidence which may be in the shape of material, information or result of the enquiry held or evidence recorded by Set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made simply relying upon the declaration made in the application before the Settlement Commission under section 245D. The AO was in possession of the paper relating to the income but in absence of any material no addition can be made. The Hon'ble Gujarat High Court in the case of Commissioner vs. Maruti Fabrics 47 Taxmann.com 297 has held that whatever material is produced along with application by the assessee before Settlement Commission or result of inquiry held or evidence recorded by the Settlement Commission in course of proceedings before it can be used by the adjudicating authority as if same had been produced before such Central Excise Officer. Once application or proceedings before Settlement Commission fails, Central Excise Officer is required to adjudicate entire proceedings and show cause notice and Hon'ble Gujarat High Court has held as under: "Considering sub-section (2) of section 32L of the Act, in a case where an order is passed by the Settlement Commission under sub-section (1) of section 32L and thereafter adjudicating authority is required to adjudicate the case, the Central Excise Officer shall be entitled to use all the materials and other information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res some pendency of proceedings. The Central Excise application is allowed or rejected vide order under section 32F(1). This section is parallel to section 245D(1). Section 32L gives the powers and procedure of Central Excise Settlement Commission. This section is similar to section 245F of the Income Tax Act. Section 32L gives the powers of the Settlement Commission to send the case back to the Central Excise Officer. Section 32L reads as under: "32L(1) The Settlement Commission may, if it is of opinion that any person who made an application for settlement under section 32E has not co-operated with the Settlement Commission in the proceedings before it, send the case back to the Central Excise Officer having jurisdiction who shall thereupon dispose of the case in accordance with provisions of the Act as if no application under section 32E had been made. 32L(2) For the purpose of sub-section (1), the Central Excise Officer shall be entitled to use all the materials and other information produced by the assessee before the Settlement Commission in the course of the proceedings before it as if such materials, information, inquiry and evidence had been produced before such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar 2005-06 cannot be considered to have been admitted for the process of settlement under section 245D(1) of the Act. Consequently, the confidential information disclosed in the Annexure to the Settlement application could not have been used by the Assessing Officer against the assessee to make the impugned addition. Therefore, the addition to the income made by the Assessing Officer in assessment year 2005-06 which is based only on the disclosure made in the Annexure to the Settlement Commission is not valid in law. Consequently, the imposition of penalty on the basis of such invalid addition cannot be sustained. In view of the above conclusion, we do not wish to go into the other alternate argument of the learned counsel for the assessee regarding abatement of proceedings before Settlement Commission and use of confidential information disclosed by the assessee in such proceedings by the Assessing Officer in making assessment." 18. From the above decision of the Tribunal where they have discussed the section 245C(1) and section 245D(i) and 245HA by following observation: "20. The Finance Act, 2007 made changes to the provisions for settlement of cases contained in C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax authority before whom it was pending at the time of making the application for settlement and the income-tax autho-rity has to dispose of the case in accordance with the provisions of the Act as if no application for settlement had been made and for that purpose, it is entitled to use all the material and other information produced by the assessee before the Settlement Commission or the results of the inquiry held or evidence recorded by the Settlement Commission in the course of the proceedings before it." 19. We find from the above proposition of law by Hon'ble Gujarat High Court and Tribunal that simply relying upon the declaration made before the Settlement Commission no addition can be made. In this group case, the search was conducted in the business premises of Lodha Group and subsequent to search action assessee company along with other companies of Lodha Group filed a petition under section 245C(1) of the Act before Settlement Commission. The assessee has offered additional income of ₹ 5 lakhs towards the land brokerage income. This offer was made for maintainability of petition before Settlement Commission as stated in clause (i) and clause (ia) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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