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TMI Blog2019 (2) TMI 2051X X X X Extracts X X X X X X X X Extracts X X X X ..... s and basis on which the Assessing Officer made the additions. Only addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A of the Act. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements - when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the assessee. The contents of the statements are also not brought out in detail in the assessment order. Only a general reference is made that there were certain statements recorded from various entry operators by the investigation wing. No addition can be made on such general observations. We also find that the assessee has not been given an opportunity to cross-examine any of these persons, based on whose statements, the revenue claims to have made these additions. Cross-examination a witness - The Hon ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 and was served upon the assessee on 15/05/2014. In response to the notice, the assessee filed revised return declaring the same income as in the original return of income. The Assessing Officer completed the assessment u/s 153A r.w.s. 143(3) of the Act on 31/03/2015 determining total income of the assessee at Rs.11,06,55,380/-. 4.1. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority granted part relief. He relied on the decisions of the Hon ble Calcutta High Court in the case of PCIT vs. Salasar Stock Broking Limited (ITA No.264 of 2016) dt. 24.08.2016 and the judgment in the case of CIT vs. Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta) and held that, incriminating material is a prerequisite for making additions in assessment u/s 153A/143(3) of the Act, wherever assessments have not abated. He pointed out that the Hon ble Jurisdictional High Court has concurred with the judgment of the Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla (2016) 380 ITR 0573 (Del). He further relied upon a number of decisions of the ITAT Kolkata Bench and deleted all the additions made in the assessment u/s 153A/143(3), which were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 53A/143(3) are not based on any incriminating documents/papers seized during the search operation. vi. That on the fact and in the circumstances of the case, the Ld. CIT(A) had erred in not adjudicating the appeal on merit. vii. That on the fact and in the circumstances of the case, the department craves to add more grounds or alter any ground at the time of appeal. 6. The ld. D/R, submitted that the incriminating material need not necessarily be found during the course of search and that the material which is gathered during the course of any proceedings under the Act, undertaken in connection with any other persons and the material gathered during post search operations can also be the basis on which additions can be made in an assessment made u/s 153A r.w.s. 143(3) of the Act. He submitted that in the case on hand the addition in question was made based on statements recorded from various entry operators during the course of search and seizure operations at their premises and also was based on a cash trail prepared by the Assessing Officer during the post search enquiry. The sum and substance of his submission is that the statements recorded during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to the assessee nor any opportunity was given to the assessee to cross-examine the directiors of the chain of companies whose bank accounts and statements recorded from directors which the ld. DR alleges, had formed basis of the addition. He submitted that the assessee was kept in dark and no material whatsoever allegedly collected by the Assessing Officer was confronted to the assessee. 7.1.1. He further argued that no evidence was brought on record by the Assessing Officer to prove that the alleged cash deposits in the bank account of third parties was in fact the assessee s money. Thus, he submits that the addition cannot be based on such material which is never confronted to the assessee. 7.2. On the issue of alleged statements from several entry operators being the basis of the addition in question, he submitted that the addition was not based on any of these statements by the Assessing Officer. He argued that the fact that all these alleged entry operators had retracted from the statements allegedly made by them, is not denied by the Assessing Officer. He further argued that the copies of the alleged statements were not confronted with the assessee nor any opport ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has failed to produce them in response to the show- cause notice. V) The findings that the investing companies which subscribed to the shares were borne on the file of the ROC and that the monies have come through a/c payee cheques is at best, neutral. Mere payment by cheques is not sacrosanct as would not make a non-genuine transaction as genuine. VI) Bonafide and genuineness of the transactions is the main issue and in this regard, the assessee company has failed miserably. VII) Scrutiny has revealed the camouflage adopted by the assessee and exposed the true nature of the transactions. VIII) Onus is on the assessee to prove the identity of share applicants, their creditworthiness and genuineness of the transactions appearing in its books of sale which is not proved in this case. In fact, genuineness of the transactions has not been established in spite of repeated opportunities. IX) There is enough material on record to doubt the veracity of the transactions. A perusal of the above demonstrates that the additions in question are not based on any incriminating material found during the course of search. The ld. DR could not controvert thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of search for the impugned Assessment Year; and the assessment had attained finality and was not abated in terms of 2nd Proviso to Section 153A. As stated above, the original return of income was filed in July, 2006 and said return was duly accepted and processed u/s. 143(1) vide intimation dated 25.05.2007. Since no notice u/s. 143(2) was issued thereafter or any other proceedings have been commenced to disturb said return of income, accordingly, it had attained finality much prior to the date of search which was on 20.01.2012. Hence in terms of 2nd Proviso to Section 153A the assessment for the Assessment Year 2006-07 was not pending and accordingly, has to be reckoned as unabated assessment. Under the jurisdiction of Hon'ble Delhi High Court, the law is well settled that in case of unabated assessment, the additions which can be roped-in, in the assessments framed u/s.153A, would only be with regard to any incriminating material or evidence unearthed or found during the course of search. If no incriminating material has been found during the course of search, then no addition can be made in the assessment years where assessments had attained finality. The relevant obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. This judgment of the Hon'ble Delhi High Court has been followed in several judgments not only by the Hon'ble Delhi High Court but also by other Hon'ble High Court like, Pr. CIT vs. Somaya Construction Pvt. Ltd. 387 ITR 529 (Guj), CIT vs. IBC Knowledge Park Pvt. Ltd. 385 ITR 346 (Kar) and CIT vs. Gurinder Singh Bawa reported in 386 ITR 483. In the latest judgment the Hon'ble Delhi High Court in Pr. CIT vs. Meeta Gutgutia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition against the judgment dated July 06,2015 of the Delhi High Court in I.T.A No 369 of 2015, whereby the High Court held that no substantial question of law arose since there was a factual finding that no incriminating evidence related to share capital issued was found during the course of search and that the assessing officer was not justified in invoking section 68 of the Act for the purpose of making additions on account of share capital 9. Applying the propositions of law laid down in the above case-law to the facts of the case on hand, we find that the only addition made is of share application received u/s 68 of the Act and addition of commission paid allegedly for the share application money and finally a disallowance u/s 14A of the Act. No incriminating material has been found during the course of search. The alleged statements recorded from entry operators have admittedly been retracted and the Assessing Officer has not based the additions on these statements. Even otherwise, when copies of the alleged statements recorded by the revenue officials have not been given to the assessee, no addition can be made based on such evidence which is not confronted to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the bank account of a third party was from the assessee company. No opportunity to cross-examine any these parties was provided to the assessee. Thus, none of these material gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Thus, we hold that the additions in question are not based on any incriminating material. The ld. CIT(A) on page 47 of his order held as follows:- I have considered the findings of the AO in the assessment order, different case laws was brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during the search seizure operations conducted u/s 132 of the IT Act, 1961, incriminating documents/papers were not seized. At least addition made by AO in the assessment order passed u/s 153A/143(3) are not based on any incriminating documents/ papers seized during the search operation. It would also not to be out of context to mention here that in this case, on the date of search, no assessment for this year was pending. Therefore, keeping in view the ratio decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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