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TMI Blog2020 (3) TMI 962X X X X Extracts X X X X X X X X Extracts X X X X ..... I MAHAVIR SINGH, VP AND HON BLE SHRI MANOJ KUMAR AGGARWAL, AM Assessee by : Shri Vijay Mehta-Ld.AR Revenue by : Shri Rahul Raman-Ld. CIT- DR ORDER Manoj Kumar Aggarwal ( Accountant Member ) 1.1 The captioned appeals by assessee for Assessment Years [in short referred to as AY ] 2013-14 2014-15 and appeal by revenue for AY 2013-14 arises out of common order of Ld. Commissioner of Income-Tax (Appeals)-47, Mumbai, [in short referred to as CIT(A) ], Appeal Nos. CIT(A)-47/12766/2016-17 CIT(A)-47/12778/2016-17 dated 20/09/2019. First, we take up cross-appeals for AY 2013-14. Cross Appeals for AY 2013-14 1.2 The grounds raised by the assessee read as under: - 1. On the facts circumstances of the case the appellant prays that the order passed U/s 143(3) r.w.s. 153A of Income Tax Act,1961 (hereafter the Act ) by Deputy Commissioner of Income Tax, Central Circle 1(1), Mumbai being Learned Assessing Officer, ( hereafter Learned AO ) and confirmed by Learned Commissioner of Income Tax (Appeals) -47, Mumbai ( hereafter Learned CIT-A ) is bad in law as the provisions of Section 153A are not applicable for A.Y. 2013-14. In view of this the appellant prays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant prays that the order passed by the Learned AO and confirm by Learned CIT-A is against the principles of natural justice and ignoring the judicial process. The appellant prays that the order passed by the Learned AO and confirmed by Learned CIT-A may be cancelled. Without prejudice to ground no.l and 5: 6. On the facts circumstances of the case the appellant prays that the addition made by the Learned CIT-A U/s 68 of Income tax act, 1961 amounting to ₹ 6,87,00,000 ignoring the evidences, proof and material produced, is not justified and be deleted. 7. On the facts circumstances of the case the appellant prays that no addition can be made in the hands of the appellant firm in AY 2013-14 as the appellant had not started any activity during the period April 2012 to September 2012 which would yield income to the extent of ₹ 6,87,00,000/- being the amount taxed by the Learned AO and confirmed by Learned CIT-A U/s 68 of Income Tax Act, 1961. The appellant prays that the addition confirmed by Learned CIT-A amounting to ₹ 6,87,00,0007- is not justified be deleted. 8. On the facts circumstances of the case the Learned CIT-A erred in confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 14. On the facts circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken from Elgin Sales Promotion Limited amounting to ₹ 10,00,000/-. The Learned CIT-A has ignored the evidences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 15. On the facts circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken from Tristar Agencies Private Limited amounting to ₹ 87,00,000/-. The Learned CIT-A has ignored the evidences and the proof submitted before him in respect of the said loan. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 16. On the facts circumstances of the case the Learned CIT-A erred in confirming the provisions of section 68 of the Act in respect of loans taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT-A is not justified and be deleted. 23. On the facts circumstances of the case the Learned CIT-A has erred in confirming the disallowance in respect of interest paid to Elegance Trade Holdings Private Limited amounting to ₹ 12,81,533/- by invoking the provisions of Section 69C of the Act. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 24. On the facts circumstances of the case the Learned CIT-A has erred in confirming the disallowance in respect of interest paid to Elgin Sales Promotion Limited amounting to ₹ 69,699/- by invoking the provisions of Section 69C of the Act. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 25. On the facts circumstances of the case the Learned CIT-A has erred in confirming the disallowance in respect of interest paid to Tristar Agencies Private Limited amounting to ₹ 8,88,789/- by invoking the provisions of Section 69C of the Act. The appellant prays that the said addition confirmed by Learned CIT-A is not justified and be deleted. 26. On the facts circumstances of the case the Learned CIT- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating material? 5. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in partly allowing the appeal filed by the assessee and deleting the addition of ₹ 4,20,00,000/- being the addition made u/s 68 of the IT. Act 1961 though the creditworthiness of the parties from whom the share application money was received and genuineness of the said transaction were not proved. 6. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) was correct in partly allowing the appeal filed by the assessee and deleting the addition of ₹ 37,34,049/- being the addition made u/s. 69C of the I.T. Act, 1961 of interest expenses on unproven unsecured loans in consequence of deleting the additions made u/s. 68 of the I.T. Act, 1961 as above. 2.1 Facts on record would reveal that the assessee being resident firm stated to be engaged in construction activities was subjected to an assessment u/s 143(3) r.w.s. 153A on 29/12/2016 wherein the income of the assessee was determined at ₹ 1212.96 Lacs after certain addition u/s 68 for ₹ 1107 Lacs disallowance of interest for ₹ 104.95 Lacs as against returne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be served. All these facts were confronted to the assessee vide show-cause notice dated 24/11/2016 and the loans received by the assessee were proposed to be added to the income of the assessee as unexplained cash credit u/s 68. 2.5 In defense, the assessee vehemently opposed the action of Ld. AO vide submissions dated 07/12/2016, the contents of which have already been extracted in para 3.3. of the quantum assessment order. We have perused the assessee s submissions before Ld. AO during the course of assessment proceedings. 2.6 In the said submissions, the assessee, inter-alia, submitted the confirmation from lenders, their respective Income Tax Returns, audited financial statements, bank statements of lenders along-with affidavit from the directors of all the 18 entities stating that their respective entities had advanced loan to the assessee which was duly repaid by the assessee well before the date of search i.e. 28/01/2015. A chart giving complete details of 18 entities and documents submitted in support of the stated loans aggregating to ₹ 1107 Lacs was also placed on record It was submitted that all the entities had sufficient net worth to advance the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2012. Therefore, there was no possibility for the firm to earn the cash income of more than ₹ 11 Crores during this period and therefore treating the same as undisclosed income of the firm would be merely on the basis of assumptions and presumption. 2.12 Lastly, it was submitted that time limit for issuance of notice u/s 143(2) had already expired on 30/09/2014. Since no notice was issued to the assessee by that date, it was not the case of abated assessment. Therefore, in terms of Sec. 153A, Ld. AO could assessee such income only with respect to incriminating material found during the course of search operations. In the case of the assessee, no single piece of paper, evidence, proof, document etc. was found which would establish that the loan was not genuine. Therefore, the decision of Hon ble Bombay High Court in All Cargo Global Logistics Ltd. 364 ITR 645 was applicable to the factual matrix and the additions were unsustainable. 2.13 However, these arguments could not convince Ld.AO, who going by the investigation carried out by DDIT (Inv.) added the amount of ₹ 1107 Lacs in the hands of the assessee as unexplained cash credit u/s 68. The returned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed. As a natural corollary, the disallowance of interest of ₹ 67.61 Lacs relating to above loans was also confirmed. 3.4 The plea that no opportunity of cross-examination was provided to the assessee was disregarded in the light of confessional statement of Shri Navneet Singhania. 3.5 With respect to balance loans, it was noted that there was not even an iota of adverse inference on record and therefore, the additions could not be sustained as held by Ld. CIT(A) in the case of Shri Nitin B. Gajipara for AYs 2012-13 to 2015-16. The decision rendered in the case of Shri Nitin B. Gajipara has been extracted on page nos. 48 to 117 of the impugned order. Following the same, the balance additions as well consequential interest disallowance was deleted. The adjudication by Ld. CIT(A) has given rise to the cross-appeal before us. The assessee is aggrieved by additions as sustained by Ld. CIT(A) u/s 68 as well as consequential interest disallowance. The revenue is similarly aggrieved by deletion of part additions u/s 68 as well as deletion of consequential interest disallowance. 4. The Ld. Authorized Representative, at the outset, submitted that it is an admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / reassessment could not be disturbed if no material was unearthed during the course of search and seizure action. It has been submitted that an intimation u/s 143(1) could not be considered to be an assessment in the background of decision of Hon ble Apex Court rendered in ACIT V/s Rajesh Jhaveri Stock Brokers Pvt. Ltd. (291 ITR 500 23/05/2017) wherein it was observed that: - It is significant that the acknowledgement is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no . The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assess-ment under section 143(1)(a), the question of change of opinion, as contended, does not arise. Therefore, Ld.CIT-DR submitted that full additions were to be sustained in the hands of the assessee. 6. We have carefully heard the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al contentions and gone through the facts and circumstances of the case. Admittedly, a search under section 132 of the Act was carried out on the premises of the assessee on 27.02.2014. The assessee filed its return of income originally on 27.09.2009 for AY 2009-10 and assessment was completed under section 143(3) of the Act dated 30.11.2011 during which the assessee filed complete details in regard to share application money received from various parties during the financial year 2008-09 relevant to this AY 2009-10. On the date of the search on 27.02.2014, this assessment was unabated because no action was pending against this assessment. It is also a fact that during the course of search the shares certificates relating to these parties were not seized rather these are submitted by assessee before the investigation wing during inquiry proceedings carried out in lieu of search under section 132 of the Act vide letter dated 15.05.2014. These shares certificates were lying with the Secretary s Office for Demat. Now, the question arises the statement recorded under section 132 of the Act of Shri Pravin Kumar Aggarwal and Ram Pal Soni during the course of search, which were later on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in appeal, revision or rectification proceedings against final assessment shall not abate. It is only because the final assessments do not abate the appeal, revision or rectification pending against final assessments would not abate. Therefore, Hon'ble High Court rejected the arguments of the Revenue that on initiation of proceedings u/s. 153A of the Act, the reassessment final for assessment years covered u/s. 153A of the Act stands abated. Only the pending assessments get revived u/s. 153A of the Act. Hon'ble High Court further held that once assessment has attained finality, then the AO while passing independent assessment order u/s. 153A/143(3) of the Act could not disturb the assessment order which has attained finality unless the material gathered in the course of search u/s. 132/153A of the Act established that the finality attained in the assessment were contrary to the facts unearthed during the course of search. The relevant portion of the judgment reads as under: - 31. We, therefore, hold that the Special Bench's understanding of the legal provision is not perverse nor does it suffer from any error of law apparent on the face of the record. The Speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etation does not cause any absurd etc. results. There is no casus omissus and supplying any would be against the legislative intent and against the very rule in this behalf that it should be supplied for the purpose of achieving legislative intent. The submissions of the Ld. Counsels are manifold, the foremost being that the provision u/s 153A should be read in conjunction with the provision contained in section 132(1), the reason being that the latter deals with search and seizure and the former deals with assessment in case of search etc, thus, the two are inextricably linked with each other. Before proceeding further, we may now examine the provision contained in subsection (2) of section 153, which has been dealt with by Ld. Counsel. It provides that if any assessment made under subsection (1) is annulled in appeal etc., then the abated assessment revives. However, if such annulment is further nullified, the assessment again abates. The case of the Ld. Counsel is that this provision further shows that completed assessments stand on a different footing from the pending assessments because appeals etc. proceedings continue to remain in force in case of completed assessments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is shall and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is shall and, therefore, the AO has no option but to assess or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merge into one. If assessment made under subsection (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ]. 9. Proceeding further, Hon ble Bombay High Court had the occasion to consider identical argument raised by the revenue in the case law of CIT V/s Deepak Kumar Agarwal (398 ITR 586 11/09/2017) and negated the same by observing as under: - 20. At the outset, and since heavy reliance is placed by the Revenue on the Supreme Court judgment in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), it would be proper to note the facts in the same. 21. There, the Assistant Commissioner of Income Tax challenged the correctness of the decision rendered by a Division Bench of the Gujarat High Court. That Division Bench judgment allowed the Writ Petition/Special Civil Application of the assessee. 22. The respondent-assessee, a private limited company, filed its return of income for the assessment year 2001-2002 on October 30, 2001, declaring total loss of ₹ 2,70,85,105/-. That return was proposed under Section 143(1) of the IT Act accepting the loss returned by the respondent. A notice was issued under Section 148 of the IT Act on the ground that the claim of bad debts as expenditure was not acceptable. On 12th May, 2004, a return of income declaring the loss at the same fig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-assess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. Before us, such is not the position, and even if this judgment of the High Court had been brought to the notice of the Division Bench deciding the Continental Warehousing Corpn. and All Cargo Global Logistics (supra), there would not have been any difference. Similar view has been taken by Hon ble Delhi High Court in CIT Vs. Kabul Chawla [380 ITR 573]. Further, upon perusal of SLP No. 18560 of 2015 dated 12/10/2015 admitted by Hon ble Supreme Court against the decision of Hon ble Bombay High Court rendered in CIT Vs. Continental Warehousing Corporation [supra], we find that Hon ble Apex Court has only admitted Special Leave Petition (SLP) against the ruling of the Hon'ble Bombay High Court's finding that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceedings. However, it is seen that the Hon'ble Apex Court has not stayed or suspended the operation of the decision of the Hon'ble Bombay High Court in any manner and therefore, at the moment, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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