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TMI Blog2022 (9) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... give power to the AO to extend the provisions of section 153A for a period of ten years. In the absence of such evidence, which could reveal escapement of income from the assessment for the relevant assessment year having been found in the course of search, the initiation of proceedings u./s.153A for the relevant assessment year is not permissible and consequently, same is liable to be quashed and we do so. Findings of the CIT(A) that no incriminating material has been found in the course of search and consequently quashing of the assessment proceedings, the facts in the present case clearly show that the assessee has filed his return of income for the relevant assessment year and said return has also been processed u/s.143(1) - The time limit of issuance of notice u/s.143(2) of the Act as also for the purpose of reopening of the assessment has expired. Consequently, the intimation issued in the case of the assessee u/s.143(1) would have to be deemed to be completed assessment proceedings and in view of the decision of Param Diary ltd [ 2021 (2) TMI 764 - DELHI HIGH COURT] wherein as followed its own decision in the case of Chintels India ltd., [ 2017 (7) TMI 746 - DELHI HIGH C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Shri M.K.Gautam, CIT DR ORDER PER BENCH This is an appeal filed by the revenue against the order of the ld CIT(A)-2, Bhubaneswar dated 10..9.2020 in Appeal No.0461/2019-2020 for the assessment year 2010-2011. 2. The assessee has also filed cross objection in appeal of the revenue in IT(ss) A No.07/CTK./2020 for the assessment year 2010-2011. 3. Shri M.K.Gautam, ld CIT DR appeared for the revenue and Shri Kamal Kumar Agarwal, ld AR for the revenue. 4. The revenue has raised the following grounds of appeal: 1. That the Ld. CIT(A) erred in deleting the addition made by AO of Rs.3.75 cr. As unexplained cash credit due to bogus share capital holding the view that no incriminating material found during the course of search seizure proceedings on the matter though the addition was made on the basis of seized material where investment with huge premium in share capital by Kolkata based companies were found and those shares were subsequently found to be transferred to related parties of the assessee company at face value. 2. The Ld. CIT(A) ignored the fact that enquiry has been made by the AO during assessment proceedings by issuing commission u/s. 131(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act. It was submitted by ld CIT DR that there were 14 companies from whom, the assessee had received share application money. Out of 14 companies, 9 companies were not found at the addresses provided in their share application forms, one company had refused to give reply and four companies gave replies which were incomplete. It was the submission that out of 14 companies, 9 companies which made share application money were Shell Companies. It was further submitted that the Assessing Officer in his order has also categorically mentioned that the 9 company names have been struck off from the Register of companies maintained by the Registrar of Companies. It was the submission that the Assessing Officer has also issued commission to the DDIT, Kolkata to have examined the 14 companies. It was the submission that the Inspector of the DDIT, Kolkata had issued summons and also visited the companies and found that those companies were not available at the addresses given in their application forms. It was also further submitted that another peculiarity that had been found in the present case was that within one month of the shares having been allotted to the bogus share companies, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee required to be maintained by the assessee. It was the further submission that the said ledger copy also categorically showed that the share application money to the extent of Rs.1,09,00,000/- had been received in the earlier assessment year being A.Y. 2009-2010 and the balance of Rs.2,66,00,000/- had been received during the assessment year 2010-2011. It was also submitted that the assessee had filed its return of income for the relevant assessment year and intimation u/s.143(1) had also been issued to the assessee. The time limit for issuance of notice u/s. 143(2) of the Act and completion of assessment u/s.143(3) of the Act as also the time limit for reopening the assessment are expired. Therefore, it should be held that the intimation issued in response to the return filed by the assessee must be treated as an assessment. It was the submission that as the assessment has been completed meaning thereby that already there is a completed assessment for the assessment year 2010-2011 in assessee s case, the assessment u/s.153A should have been limited to the incriminating materials as also for the purpose of issuance of notice u/s.153A of the Act. It was the submission t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order u/s. 153 A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.l53A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s. 143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s. 153 A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.l53 A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision was that where the assessments had already become final prior to the date of search, the total income has to be determined under section 153A by clubbing together the income already determined in the original assessments and the income that is found to have escaped assessment on the basis of incriminating material found during the course of search. To arrive at this conclusion, reliance was placed by the Tribunal on the decision of Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd. (supra), wherein it was held that even though all the six years shall become subject matter of assessment under section 153A as a result of search, the Assessing Officer shall get the free hand through abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material. 11. Keeping in view the discussion made above, we hold that the additions as finally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 153A and the conditions under which the assessment could be reopened u/s.153A. Para 37 of the said order reads as follows: 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that in the case of Meeta Gutgutia (supra), that in that case franchise income had been offered during the assessment year but then the Assessing Officer had proceeded to tax the same in the earlier assessment year also without any evidence and it was under those circumstances, the Hon ble Court held that the provisions of section 153A could not be invoked in the absence of incriminating materials. 13. In respect of decision in the case of Kurele Paper Mills Pvt Ltd (supra), it was the submission that it was a single page order and the facts were not emanating from the said order. 14. In respect of the decision in the case of Best Infrastructure (India) Pvt Ltd. (supra), it was submitted that the SLP has been admitted by the Hon ble Supreme Court. 15. Ld CIT DR also placed before us the copy of the decision of Coordinate bench of this Tribunal in the case of Unicon Merchants Pvt Ltd vs JCIT in IT(ss) A Nos.23 24/CTK/2019 order dated 8.6.2022, wherein, in paras 20 21, it has been held as follows: 20. A perusal of the Annexure-A annexed to the satisfaction note, reproduced hereinabove, by the AO of the person searched shows that in the seized material SMLO-52, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g been provided to the AO of the assessee to whom such evidences were related to, the proceedings initiated u/s.153C of the Act are valid insofar as such evidence relates to the assessment years to which the evidences were found. Once the proceedings u/s.153C of the Act are initiated rightly, the consequential assessment is a forlorn conclusion. In these circumstances, we find no error in the order of the AO and that of the ld.CIT(A) on this issue. In view of the above, the additional grounds filed by the assessee stand rejected. As no other grounds have been argued, therefore, the same are treated as not argued/pressed and are being dismissed as such. 21. One of the argument of the ld. Sr. Advocate is that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in the assessee s own case for the immediately preceding assessment years, however, a perusal of the said order does not show any of the facts being considered and in the absence of the facts being brought out, in IT(SS)A Nos.23 24/CTK/2019 22 view of the decision of the Hon ble Madras High Court in the case of M/s Hi Tech Arai Limited, reported in 321 ITR 477 (Mad), we have decided the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a notice under section 153A(l)(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(l)(a) of the Act. The observations of the Hon'ble Kerala High Court in para-7, 8 and 9 are reproduced as under: 7. In so far as the issue as to whether it is necessary that incriminating materials should be unearthed in a search under Section 132 of the Act to sustain a notice issued under Section 153A(l)(a) is concerned, the issue stands covered in favour of the Department as per the judgment of this Court in St. Francis Clay Decor Tiles's case (supra) and Promy Kuriakose's case (supra) though the second among them relates to a third person to the search as well; which cases would fall under Section 153C of the Act. We, therefore, answer the said question stating that for the issuance of a notice under Section 153A(l)(a), it is not necessary that the search on which it was founded should have necessarily yielded any incriminating material against the assessee or the person to whom such notice is issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the cash flow statement by rearranging the entries thereof. That activity carried out by the assessing authority, though to a larger extent, was found against by the CIT (Appeals), has found disapproval at the hands of the Tribunal which is the last fact finding authority. We see that the decision of the Appellate Tribunal cannot be critisised as unreasonable, perverse or unavailable on the face of record. Resultantly, these appeals fail . It may please be noted that the Hon'ble Kerala High Court has duly noted the contrary decision of Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573), and Kurele Paper Mills (P.) Ltd. (380 ITR 571) and Hon'ble Mumbai High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (374 ITR 645) while holding the decision in favour of Revenue. ii.) The Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora (52 taxmann.com 172) held that the Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. The observations of Hon'ble High Court in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 Taxman 453. We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits . iii.) The Hon'ble Kerala High Court in the case of CIT vs. St. Francis Clay D cor Tiles (70 taxmann.com 234) held that neither under section 132 or under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A. The observations of the Hon'ble High Court in para-20 21 are reproduced as under: 20. On a plain reading of Section 153A, it is clear that once search is initiated under Section 132 or a requisition is made under Section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year following within six assessment years referred to in clause (b). It furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limited to mcriminating material, found during course of search. The observations of the Hon'ble High Court in para-2 are reproduced as under: 2. On the first question, we note that the Assessing Officer, in the proceedings under section 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18th January, 2006 and subsequent dates. A perusal of the impugned order by the Tribunal would disclose that incriminating material including statement of Sanjay Agrawal, GM (Marketing) have resulted in additions, which have been upheld. It is not the case of the appellant- assessee that initiation of proceedings under Section 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellantassessee is that the addition, which is the subject matter of questions No. (ii) and (iii), was/is not justified in the assessment order under section 153A, as no incriminating material was found concerning the addition under Section 115JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t jurisdiction on the ground that such power is to be exercised needlessly, without any purpose. The exercise of power in such case can only be challenged, if the power is being exercised with ulterior motive and mala fide intentions. It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction . 18. In respect of issue of section 40A(3) of the Act, ld AR submitted that what was found in the course of search was only the books of account of the assessee and as per the decision of the Hon ble Delhi High Court in the case of Param Diary Ltd., 439 ITR 89 (Del), the books of account of the assessee by no stretch of imagination could be treated as incriminating material to form the basis for framing the assessment u/s.153C r.w.s 143(3) of the Act. Ld AR also referred to the decision of Hon ble Delhi High Court in the case of Param Diary Ltd (supra) to submit that once the assessee does not receive notice u/s.143(2) of the Act within the stipulated period, the return filed by assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his in mind when one see the assessment framed u/s.153A, what is noticed is that there is no evidence in any manner whatsoever which has been found in the course of search, which could even lead to presumption much less reveal that any income much less represented in the form of asset, has escaped assessment for the relevant assessment year, which could give power to the AO to extend the provisions of section 153A for a period of ten years. In the absence of such evidence, which could reveal escapement of income from the assessment for the relevant assessment year having been found in the course of search, the initiation of proceedings u./s.153A for the relevant assessment year is not permissible and consequently, same is liable to be quashed and we do so. 20. Coming to the findings of the ld CIT(A) that no incriminating material has been found in the course of search and consequently quashing of the assessment proceedings, the facts in the present case clearly show that the assessee has filed his return of income for the relevant assessment year and said return has also been processed u/s.143(1) of the Act. The time limit of issuance of notice u/s.143(2) of the Act as also for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be mentioned that in the present case, we have quashed the proceedings u/s.153A, on the ground that no evidence of escapement of income for the relevant assessment year in excess of Rs.50,00,000/- has been found in the course of search and consequently, the extended period of 10 years for invoking the provisions of section 153A is not available. The second issue is by holding the findings of ld CIT(A) in respect of nonavailability of incriminating material found in the course of search for the purpose of invoking provisions of section 153A in the relevant assessment year. Therefore, the alternative prayer of the revenue is nothing but the arguments against the findings of the ld CIT(A) that no incriminating material has been found in the course of search for invoking section 153A. Thus, it cannot be treated as alternate argument but it is only an additional arguments by the revenue. 22. Coming to the issue that counter judgments are available in respect of incriminating material, we are bound by the proposition laid down by the Hon ble Supreme Court in the case of Vegetable Products, 88 ITR 192 (SC), wherein, the Hon ble Supreme Court has categorically held that when two view ..... X X X X Extracts X X X X X X X X Extracts X X X X
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