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TMI Blog2022 (10) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... of either party of any undisclosed income. CIT(A) has after considering the details arguments of both the parties clearly taken a view that there is no incrementing material, no addition can be made for the assessment which are already completed after making the proper enquiries by the AO, and those assessment cannot be allowed to again reframed merely based on the search and that too without any fresh evidence. Merely the surveys conducted parties are not available after 8 years it is not the fault of the assessee and without any fresh material unearthed during search no fresh addition can be made on the issue which are already settled. Even, the ld. CIT(A) has based on the arguments of the assessee followed the jurisdictional High Court decision and Tribunals orders and even this co- ordinate bench decision is also binding on us in the absence of any contrary judgement. Appeal of the revenue is dismissed - ITA. No. 53/JP/2022 - - - Dated:- 24-8-2022 - Dr. S. Seethalakshmi, JM And Shri Rathod Kamlesh Jayantbhai, AM For the Assessee : Sh. P. C. Parwal (CA) For the Revenue : Sh. Sanjay Dhariwal (CIT) ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee was selected for scrutiny, accordingly, the assessment u/s 143(3) of the Income tax Act, 1961 was completed on 25.03.2015 and thus, the assessment was completed in this case as on the date of search and income was assessed at Rs. 1,34,11,740/-. After giving effect of Ld. CIT(A) in the first quantum proceeding, the income was reduced to Rs.1,33,83,700/. 4. A search was conducted on 08.02.2018 in the case of NM Group, Sriganganagar to which the assessee belongs. Various assets/books of account and documents were found and seized as per annexure prepared during the course of search. 4.1 Accordingly, notice u/s 153A of the IT Act, 1961 for this year was issued on 30.07.2018 and duly served upon the assessee. In compliance to the notice u/s 153A of the IT Act, 1961, return of income was e-filed on 22.08.2018, declaring total income of Rs. 1,33,83,690/- ( which was finally decided after appeal effect of first round ) for the year under consideration. The assessee company is carrying out business of Grain Merchants. Apart from this, the assessee has shown income from house property. 4.2 Accordingly, notice u/s 143(2) 142(1) of the Income tax, 1961 were issued alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. AO after going through the report and financial details of these companies based in Kolkata, stated that these companies have no real existence or identity, and that the investment being shown by them by means of share premium in M/s N M Agrofood Products Pvt. Ltd simply appears to be an arrangement to route the unaccounted money generated by the group concerns via layering them in bank accounts and finally introducing them by means of share premium in the group concerns through the Kolkata based shell companies. 7. During the course of post-search proceedings, Shri Manoj Kumar Gupta, main person of the group was asked to submit his explanation with regards to the genuineness of the share premium shown to have been received by assessee company from the above mentioned Kolkata based companies. In response, Shri Manoj Kumar submitted that this issue was previously considered during the course of assessment proceedings u/s 143(3) and that confirmations from all the share allotees were submitted by him during the course of assessment proceedings. The ld. AO stated that the statement of Shri Manoj Kumar was considered, but is not acceptable as mere submission of confirmation lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent money shouldn't be considered as bogus and added back to the total income of the assessee. 11. The assessee filed its reply vide letter dated 13.12.2019, where in the assessee contended that; That your good self has suspected transaction of allotment of share capital on account of the reason that share having face value of Rs. 10 has been issued at high premium of Rs. 190/- per share and also issued these shares mainly to Kolkatta Delhi based companies and accordingly show cause as to why this amount should not be added back to income in AY 2012-13 u/s 68 of the Act, in this connection we are to submit as under: i) In AY 2012-13, assessee company has allotted share capital of Rs. 32,47,500/ and also received share premium of Rs. 6,17,02,500/- totalling to Rs. 6,49,50,000/-. ii) Assessee company has allotted 3,24,750 shares during the year having face value of Rs. 10 at share premium of Rs. 190/- per share. Assessee company has allotted shares as on 26-03-12. Fair market value as on 26-03-12 as per book value method works out to as under: No. of Shares prior to allotment of new shares 10,000 Equity Shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on on MCA website. Active profile status also contains their e-mail address for correspondence and their current address. Their office google location can also be access from MCA website. Latest address along with e-mail address of all these companies are enclosed. ii) Audited financial statement of all these companies for AY 2012-13 subsequent year. From the audited financial statement, it is apparent that these companies is having substantial turnover and they are engaged in full-fledged business activities. iv) Assessee company has approached present director of both these companies and they are sending the confirmation showing outstanding balance due to them. Confirmation will be submitted within 2-3 days' time. 12. The ld. AO contended that the reply of the assessee has been duly and carefully analysed and is not acceptable due to the following reasons: i. The assessee has stated that all these companies are existent and has also submitted that their active profile status but same is not acceptable in light of findings of survey proceedings wherein the companies are found to be non-existent. ii. With regards to assessee submission that the share allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nies. The assessee company had shown to have huge amounts of outstanding unsecured loans from, interalia, M/s Axisline Commodities Pvt. Ltd, M/s Dishika Marketing Pvt. Ltd, M/s Pearl Tracom Pvt. Ltd, M/s Sarvayoni Vanijya Pvt. Ltd, M/s Vishveshwara Agencies Pvt. Ltd and M/s Snowblue Mercantile Pvt. Ltd. On search of the official MCA website database, it is learnt that no company exists with the name Axisline Commodities Pvt. Ltd. However, there exists a company named Axisline Commodities Trade Pvt. Ltd. The incorporation details of the aforesaid companies were retrieved from the MCA website and the financial details from the official System of the Income Tax Department. 15. On perusal of the details as extracted and tabulated in the assessment order the AO found that all the companies listed therein are Kolkata based companies. On perusal of the income of the companies, it is seen that none of the companies has creditworthiness to advance huge amounts of unsecured loans. In order to verify bonafides of the above-mentioned companies who have purportedly advanced loans to assessee company. During the search proceedings, surveys were authorised on test check basis at the given addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,00,000 Sarvayoni Vanijya Pvt. Ltd. 35,00,000 Snowblue Mercantile Pvt. Ltd. 90,00,000 Vishveshwara Agenciles Pvt. Ltd. 1,40,00,000 Total 5,95,00,000 ii) Assessment proceeding of assessee company for AY 2012-13 has been completed u/s 143(3) wherein all these unsecured loan creditors has been examined in depth and after detailed examination your predecessor has accepted the unsecured loan creditors as genuine. During the course of original assessment proceeding, assessee has submitted confirmation, bank statement and other documents of all these loan creditors, thus all these documents may be examined from file of original assessment proceeding. It is further submitted that your predecessor has also made independent enquiry by issuing notices u/s 133(6) to these loan creditors. iii) Copy of ledger account of all these companies from the date of receipt of loan to final repayment of loan or adjustment of loan account is enclosed. Actually assessee has received the advances towards commodity transaction from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transactions were genuine. By barely furnishing the confirmation the assessee cannot get away from discharging his onus of establishing the genuineness, identity and credit worthiness of the source company. 20. Although the assessee has submitted some confirmations but still the fact of the matter is that these companies and individuals are non-existent and do not have the credit worthiness to lend such huge amounts of loan to the assessee company. For a transaction to be considered as bogus the assessee needs to prove all the three limbs of section 68 satisfactorily i.e. identity, genuineness and credit worthiness. Therefore, the said transactions are bogus and are to be treated as the assessee's unexplained income under the provisions of section 68 of the Income tax Act, 1961 as in this case none of the above limbs is established. Hence the case is amply clear that the unsecured loan shown to have been received by the assessee company is actually an accommodation entry through routing of funds. Considering the facts as discussed above amount of Rs.5,95,00,000/- considered as unexplained cash credits from undisclosed sources and added back to the total income u/s 68 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs, it was noticed that the assessee has received unsecured loans from the following Kolkata based companies Axisline Commodities Trade Pvt. Ltd. Rs.1,00,00,000 Dishika Marketing Pvt. Ltd. Rs.90,00,000 Pearl Tradecom Pvt. Ltd. Rs.1,40,00,000 Sarvayoru Vanijya Pvt. Ltd. Rs.35,00,000 Snowblue Mercantile Pvt. Ltd. Rs.90,00,000 Vishveshwara Agencies Pvt. Ltd Rs.1,40,00,000 Total Rs.5,95,00,000 The AO has given the details of total income of the above 6 companies in the assessment order at page no-13. It is clear from these details that either these company did not file any return of income or they disclosed very marginal income which was not commensurate to the unsecured loans provided by these companies to the assessee company. It has been further held by the AO that survey proceedings were conducted at the time of search proceedings in case of Pearl Tradecom Pvt. Ltd, Snowblue Mercantile Pvt. Ltd. and V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on; (i) It would be appropriate to reproduce the head note in the case of CIT Vs ST. Francis Clay Decor Tiles [2016] 70 taxmann.com 234 (Kerala) a under: Section 153A, read with section 132 and 132A of the Income-tax Act, 1961 Search and seizure - Assessment in case of (Scope of) - Assessment years 2002 03 to 2006-07 - Whether where there was a disclosure made by giving a statement during course of search, Assessing Officer, by virtue of power conferred on him under section 1534 was competent to issue notice under said provision and require assessee firm to furnish returns as provided thereunder - Held, yes Whether neither under section 132 nor under section 1534, phraseology incriminating' is used by Parliament, therefore, any material which was 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 1534-Held, yes [Para 21] [Matter remanded/In favour of revenue] (ii) The head note in the case of E.N. Gopakumar Vs CIT [2016] 75 taxmann.com 215 (Kerala) is as under: Section 153A, read with section 132, of the Income-tax Act, 1961 - Search seizure-Assessment in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer is empowered to issue notice to person searched requiring him to furnish return of income in respect of each of following six assessment years as referred to in clause (b) of section 153A(1) Held, yes - Whether once aforesaid notice is issued, assessee has to furnish all details with respect to each assessment year since same is treated as a return filed under section 139 - Held, yes - Whether even if no documents are unearthed, nor any statement was made by assessee during course of search under section 132 or any material is received for afore specified period of six years, assessee is bound to file a return - Held, yes - Whether abatement of assessment or reassessment pending on date of initiation of search within period of six assessment years specified under section 1534 will also not absolve assessee from his liability to submit returns as provided under section 1534(1)(a)- Held, yes [Paras 5 6] [In favour of revenue] (v) The head note in the case of Canara Housing Development Co. Vs DCIT [2014] 49 taxmann.com 98 (Karnataka) is as under: Section 153A, read with section 263, of the Income-tax Act, 1961 - Search and seizure - Assessment in case of search or requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in which there was unaccounted consideration from purchaser also was unearthed and exact amount of income escaped from assessment was supported by ample evidence Whether therefore, no ground could be taken that other material which were already available with Department could not be relied on in proceedings - Held, yes [Paras 13, 21 and 22] [In favour of revenue] (viii) In the case of Sunny Jacob Jewellers And Wedding Centre v. DCIT [2014] 48 taxmann.com 347 (Kerala), it was held that: In the case of CIT v. Hotel Meriya [2010] 195 Taxman 459 (Ker.) it was held that none of the provisions under Chapter XIV-B mandates, for making block assessment there shall be evidence regarding the concealment of income for every year for the block period. Though technically one is not concerned with the block assessment, based on the information as stated above for six previous assessment years, under section 153A the Department can assess or reassess in accordance with the procedure contemplated. Therefore, there is no prohibition or embargo on the Department to consider this information for assessment or reassessments contemplated under section 153A. There is also no requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any in action on the part of any assessee to the advantage of some third party. Further, it is not in the hands of the department to execute a survey authorisation if the assessee concerned is not found to be existent at the address provided to the department. Hence, unexecuted survey authorisation should go against the investing companies and the appellant rather then treating it as in favour of the appellant. If the Ld. CIT(A) thought that survey was not conducted in 100% cases and proceedings were conducted in 50% cases, then proceedings in 50% cases were sufficient enough to be treated as incriminating material. Incriminating material does not mean that the material should be in the form of seized paper or seized soft copies. The phrase must be interpreted wide enough to treat the non-existing companies at the addresses provided to the Department as incriminating material, if survey is conducted simultaneously with the search operation. This will be as per the letter and spirit of the judgement of the Hon'ble Delhi High Court in the case of Kabul Chawla. There will be no scope of finding the 'material' used in common parlance to be found when the survey could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g material either discussed or looked into. He has not decided the appeal on merits of the case. Out of total 33 companies 21 are Kolkatta based and 12 located at Delhi and all these companies has no worth to invest in the assessee company. 24. As regards the addition of unsecured loans appearing in the books of the assessee company for all six parties all are based at Kolkatta. Their name, address, last three-year details of income were reproduced in the assessment order. The income of these companies are not sufficient to advance the money at substantial amount as claimed by the assessee. The survey of these companies was conducted on test check basis. Based on the financial information placed on record these companies capacity to advance loan is not established. At the address given as per PAN database these companies were not found at the address. All these facts on record very well establish that these companies identity and capacity is not proved. 25. The ld. DR further argued that when 50 % of the companies where surveyed how can the ld. CIT(A) not decide the merits of the case and allowed the appeal of the assessee on technical ground. Considering on these evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating document was found for the year under consideration. The AO, however, completed the assessment by making addition of Rs.5,20,00,000/- on account of unexplained share capital and Rs.5,95,00,000/- on account of unexplained unsecured loan u/s 68 of the IT Act, 1961. 4. Before Ld. CIT(A) assessee challenged the validity of the order passed u/s 153A of the Act and the addition made by AO u/s 68 of the Act. The Ld. CIT(A) vide letter dt. 16.09.2021 called for remand report. The remand report dt. 12.11.2021 submitted by AO to Ld. CIT(A) is at PB 16A-36A. The assessee's reply in response to remand report is at PB 37A-38A. Thereafter a supplementary remand report dt. 23.11.2021 (PB 39A-45A) was submitted by AO to Ld. CIT(A). The assessee's reply in response to this remand report is at PB 46A. 5. The Ld. CIT(A) after considering the fact that issue of share capital as well as unsecured loans was considered by the AO during the course of original assessment proceedings u/s 143(3) of the Act which was accepted as genuine and no incriminating material was found while framing the assessment u/s 153A of the Act held that the addition made by AO u/s 143(3) r.w.s. 153A is legall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be read in the context of s. 132 or s. 1324, in as much as in case nothing incriminating is found on account of such search or requisition, then the question of reassessment of the concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. The underlying purpose of making assessment of total income under s. 153A is, therefore, to assess income which was not disclosed or would not have been disclosed. The purpose of second proviso is also very clear, in as much as once an assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of s. 1534, a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under s. 1534 would be the assessment for the said year. The necessary corollary of the second proviso is that the assessment or reassessment proceedings, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isition, viz, incriminating material which reveals undisclosed income. Thus, while view of the mandate of sub-section (1) of section 153A of the Act, every case where there was search or requisition, the AO is obliged to issue notice to such person furnish returns of income for the six years preceding the assessment year relevant to the previous year which the search conducted or requisition is made, any addition or disallowance can made only on the basis of material collected during the search or requisition. CIT Deepak Kumar Agarwal Ors. (2017) 158 DTR 100/ 251 Taxman 22 (Bom.) (HC) No addition could have been made while completing assessment u/s 153A in the case of completed assessment if incriminating material recovered and no undisclosed income was determinable from material found as result search. Once there no incriminating material in support of the addition brought record by revenue, then no addition u/s 68 could be made. CIT Gurinder Singh Bawa [2016] 386 ITR 483 (Bom.) (HC) In this case assessee's return for AY 2005-06 was processed u/s 143(1) of the Income-tax Act, 1961. notice 143(2) was issued. search was conducted u/s 132 and in proceedings u/s 153A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was conducted only on 7 companies. Even out of these 7 companies, the survey was conducted at the wrong address/ in the wrong name of 6 companies. In respect of 6 companies from whom unsecured loan was received, survey was conducted only on 3 companies and even in case of these 3 companies it was conducted at the wrong address. Therefore such erroneous survey results cannot be made basis of holding that these companies are non-existent more particularly when assessee has filed all the evidences justifying the receipt of share capital and unsecured loan. Thus this observation of AO would not constitute any incriminating material/ document found in search so as to confirm any jurisdiction to the AO to make addition u/s 153A. 3. The department has relied on the decision of Hon'ble Supreme Court in case of PCIT Vs. Gahoi Foods (P) Ltd. 117 taxmann.com 118/ 272 Taxman 521 dt. 24.01.2020 and PCTT Vs. Dhananjay International Ltd. 114 taxmann.com 351/ 270 Taxman 15 dt. 16.09.2019 wherein the Ilon'ble Supreme Court has admitted the SLP filed by the department against the order of High Court where it is held that completed assessment can be interfered by the AO only on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in 2011-12 and survey of that party not found in 2018. The original assessment already completed and the copy of the assessment order placed on record. In that original quantum assessment, proceedings the ld. AO raised various queries which were replied based on the evidence called for and the same were accepted. The additions were made in that original quantum proceedings. Now in the search related assessment in the absence of any incrementing material no addition can be made on those completed assessments. The issue of share capital and unsecured loans have already been examined in the original assessment proceedings for this the ld. AR of the assessee drawn our attention to the order sheet entries enclosed at page 36 to 38 of various dates showing that the AO has made exhaustive inquiry on this issue and the assessee has given satisfactory reply on it. The fresh addition can only be made if the incrementing material unearthed during the search proceedings. Here in this case nothing found which shows that for this transaction the on-money transaction entered related to those transaction entered in books. As the assessment for the year under consideration is already not abated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the transaction were done in 2011-2012 and physical enquiries were conducted in 2018 then over a period of time the company might have shifted their office and address. As regards the Swati Bajaj case is not related to the unsecured loan and share investment it is related to Bogus Long Term Capital gain scam. The fact of that case and this case are totally different. There is no admission either by the company nor the directors of the company about the transaction being not genuine not only that no material is found in the search action so as to create doubt on these transactions. Considering these set of facts not only the case is covered on technical ground but even on merits the department has no case against the assessee company. In summary the ld. AR submitted that in the absence of final finding on the SLP filed by the department before the Hon ble Supreme Court so as to decide whether the statement of recorded is to be considered as incrementing material or not. In the absence of the any prevalent present finding the judicial decision prevalent as on today shall decide the issue. Presently the binding decision of jurisdictional and surrounding High Court decision should pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und to reassess the total income as it was assessed on the original return of income. Though the AO is legally bound to assess or reassess the total income of six years immediately preceding to the year of search, however, the assessments which are pending on the date of search gets abated and the assessments which were not pending on the date of search had attained the finality. Therefore, the addition over and above the assessed income cannot be made de hors the incriminating material found at the time of search while completing the assessment under section 153A of the Act. If there is no incriminating material then the original assessment made can be reiterated and no further addition is called for and an addition can only be made on the basis of undisclosed income derived from material/documents seized as a result of search. The completed assessment can be interfered or disturbed by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search and requisition of income disclosing undisclosed income not already disclosed or made known in the course of original assessment. Therefore, in the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment since no proceedings were pending. Therefore, the addition to the income that has already been assessed will be made on the basis of incriminating material only. In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. Thus the Id. AR submitted that the AO has made the addition in the assessment under section 153A whereby the completed assessment has been disturbed without even referring to any incriminating material found or seized during the course of search and seizure under section 132 of the Act. The only basis of addition is the inquiry made during course of the search of the parties with the whom the assessee has undertaken transaction were not found at the address and it has no connection with the search proceedings of the assessee. Therefore, in the absence of any incriminating material found or seized during the search of the assessee, no addition can be made in the assessment framed under section 153A of the Act. 32. Based on the arguments and the rival submissions as well as the relevant material on record it is not disputed that the assessment for the assessment year 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. I 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 additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT) on bogus share capital. But, the issae was whether there was any Incriminating material whatsoever found during the search to justify initiation of proceedings under Section 153A of the Act. 2. The Court finds that the order of the CIT(Appeals) reveals that there is a factual finding that no incriminating evidence related to share capital issued was found during the course of search as is manifest from the order of the AO. Consequently, it was held that the AO was not justified in invoking Section 68 of the Act for the purposes of making additions on account of share capital. 3. As far as the above facts are concerned, there is nothing shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination. The SLP filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section 153A can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. 58. In Kabul Chawla (supra), the Court discussed the decision in Filatex India Ltd. (supra) as well as the above two decisions and observed as under: 31. What distinguishes the decisions both in CITV. Chetan Das Lachman Das (supra), and Filatex India Ltd. v. CIT-IV (supra) in their application to the present case is that in both the said cases there was some material unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two. decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not borne out from the scheme of the said provision which was in the context of search and/or requisition. The Court also explained the purport of the words assess and reassess , which have been found at more than one place in Section 153A of the Act as under: 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess'-have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings (i.e. those pending on the date of search) and the word 'reassess' to completed 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. 61. It appears that a number of High Courts have concurred with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease to have effect if such order of annulment is set aside. Thus, any proceeding of assessment or reassessment falling within the six assessment years prior to the search or requisition stands abated and the total income of the assessee is required to be determined under section 153A of the Act. Similarly, sub-section (2) provides for revival of any assessment or reassessment which stood abated, if any proceeding or any order of assessment or reassessment made under section 153A of the Act is annulled in appeal or any other proceeding. 16. Section 153A bears the heading Assessment in case of search or requisition . It is well settled as held by the Supreme Court in a catena of decisions that the heading or the Section Can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court In the case of CITV. Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some family problems, various purchases and sales of Supari, Gutka and other items dealt by our firms is not entered and shown in the regular books of accounts maintained by our firms. 65. Therefore, there was a clear admission by the Assessees in Smt. Dayawanti Gupta (supra) there that they were not maintaining regular books of accounts and the transactions were not recorded therein. 66. Further, in answer to Question No. 11, the Assessee in Smt. Dayawanti Gupta (supra) was confronted with certain documents seized during the search. The answer was categorical and reads thus: Ans:- I hereby admit that these papers also contend details of various transactions include purchase/sales/manufacturing trading of Gutkha, Supari made in cash outside Books of accounts and these are actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes. 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above decision was the habitual concealing of income and indulging in clandestine operations and that a person indulging in such activities can hardly be accepted to maintain meticulous books or records for long. These factors are absent in the present case. There was no justification at all for the AO to proceed on surmises and estimates without there being any incriminating material qua the AY for which he sought to make additions of franchisee commission. 70. The above distinguishing factors in Smt. Dayawanti Gupta (supra), therefore, do not detract from the settled legal position in Kabul Chawla (supra) which has been followed not only by this Court in its subsequent decisions but also by several other High Courts. 71. For all of the aforementioned reasons, the Court is of the view that the ITAT was justified in holding that the invocation of Section 153A by the Revenue for the AYS 2000-01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYS. 34. The Hon'ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon'ble Jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utia was dismissed vide order dated 2nd July, 2018. There are series of decisions on this issue including the decision of Hon'ble Jurisdictional High Court in case of M/s. Jal Steel India vs. ACIT (supra) wherein the Hon'ble High Court has held in para 23 to 30 as under : 23. The reliance placed by the counsel for the appellant on the case of Anil Kumar Bhatia (supra) also does not help the case of the assessee. The relevant extract of the said judgment reads as under: 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature this Section is that the Assessing Officer is empowered to assess or reassess the total income of the aforesaid years. This is significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the 'total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub-Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition shall abate . Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of hose six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of search, the notice and consequential assessment under Section 153A have to be undertaken. 25. The argument of the learned counsel that the AO is also free to disturb income, expenditure or deduction de hors the incriminating. material, while making assessment under Section 153A of the Act is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. The provisions of Sections 153A to 153C cannot be interpreted to be a further innings for the AO and/or assessee beyond provisions of Sections 139 (return of income), 139(5) (revised return of income), 147 (income escaping assessment) and 263 (revision of orders) of the Act. 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el for the appellant if taken to its logical end would mean that even in cases where the appeal arising out of the completed assessment has been decided by the CIT(A), ITAT and the High Court, on a notice issued under Section 153A of the Act, the AO would have power to undo what has been concluded up to the High Court. Any interpretation which leads to such conclusion has to be repelled and/or avoided as held by the Hon'ble Supreme Court in the case of K.P. Varghese (supra). 30. Consequently, it is held that it is not open for the assessee to seek deduction or claim expenditure which has not been claimed in the original assessment, which assessment already stands completed, only because a assessment under Section 153A of the Act in pursuance of search or requisition is required to be made. 36. The addition made by the AO is neither based on any single loose paper found/seized nor any statement recorded during the course of search conducted in the case of the appellant which could be treated incriminating as is evident from the assessment order and the remand report of the AO. The Id. CIT (A) thus following the legal proposition on this issue, accepted the Contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 153A are not fresh assessments since the purpose of making the reassessments under section 153A is subject to tax, hitherto undisclosed income unearthed during the course of the search. The second proviso to section 153A(1) provides only for the abatement of the pending assessments. Therefore, already completed assessments do not abate and they shall hold the field. It can be interfered by the AO while making the assessment u/s 153A only if some incriminating material is unearthed during the course of search or requisition of documents or undisclosed income or property is declared in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The issuance of notices under section 153A(1) for all the six assessment years does not entail altogether a fresh exercise of making a fresh assessment. Only in case of pending assessments, the jurisdiction to make original assessment and assessment u/s 153A merges into one. In case of completed assessments, the assessment will be made on the basis of books of account or other documents not produced in the course of original assessment but found in the course of search, and und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any abatement since no proceedings are pending. The argument raised by the counsel for the assessee to the effect that once notice under s. 153A is issued, the assessments for six years are at large both for the AO and assessee has no warrant in law. 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 ss. 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of second proviso to s. 153A, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment reassessment can be made. Principal CIT Vs. Dipak Jashvantial Panchal [2017] 397 ITR 153(Guj.) (HC) It was held this case that from the heading section the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cular year, it could not be subject to the proceedings u/s153A of the Act if no incriminating materials were found in the course of the search or during the proceedings u/s153A which were contrary to and were not disclosed during the regular assessment proceedings. CIT VS. SKS Ispat and Power Ltd. [2017] 398 ITR 584 (Bom.) (HC) The scope of assessment u/s 153A of the Act is limited to the incriminating evidence found during the search and no further M/s Rajasthan Fort Palace Pvt. Ltd. vs. DCIT ITA No. 597 to 599/JP/2017 order dated 24.01.2018 (Jaipur) (Trib.) In case of an unabated assessment u/s 153A, no addition in absence of any incriminating material emerging during course of search and seizure proceedings conducted u/s 132 can be made in the hands of assessee. Jammu Metallic Oxides Pvt. Limited V. DCT 55 CCH 618 (JPTrib) (PB 251-252) Even if report of the investigation wing Kolkatta was considered as a relevant evidence, the same could not be regarded as incriminating material unearth during the course of search and seizure as no such material is found from the assessee and therefore addition made by the AO u/s 153A was not sustainable and liable to be d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the Act on 25.03.2015. Thus, the assessment proceedings for AY 2012-13 were not pending on the date of search. In search no incriminating material indicating any undisclosed income for the year under consideration was found and as there was no seized material based on which assessment had been completed by the AO in its case, assessment SO framed by the AO u/s 153A of the Act is illegal and bad in law. In support of his contention, the appellant placed reliance on the decisions of various High Courts and also of the Hon'ble Supreme Court as mentioned in his submissions mentioned supra. (iii) After careful consideration of the submissions of the appellant, it is observed that the sole basis of the addition made in the assessment framed u/s 153A of the Act is the survey conducted u/s 133A in case of certain Kolkata based companies from whom the appellant company has received the share application money as well as unsecured loans. (iv) It is observed that during the year, the appellant has received share application money from 14 Kolkata based companies amounting to Rs. 6,49,50,000/-. However, as the share application money of Rs. 129.50 lacs was pending allotment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resses. The AO has alleged that the companies are non-existent based on the surveys conducted on 10.02.2018. However the appellant has alleged that the surveys were conducted only on 3 companies out of 6 and even in case of the 3 companies it was conducted at the wrong address. Therefore such erroneous survey results cannot be made basis of holding that these companies are non-existent. (viii) On the contrary, it is observed that the issue of share premium as well as unsecured loans received from the aforesaid companies were considered by the AO during the course of original assessment proceedings u/s 143(3) of the Act. It is observed that during the course of original assessment proceedings, the complete details of share capital such as copy of share application money account, confirmation from all the share allotties unsecured loan creditors, bank statement of share holders etc. was produced before the AO which was examined and no adverse inference was drawn by the A.O. During the course of the assessment proceedings u/s 153A of the Act, the appellant had filed all the evidences justifying the receipt of share capital and unsecured loans. The share capital and loans have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition made by the AO on account of share premium while framing the assessment u/s 153A of the Act for the year under consideration. The AO has solely relied upon the unexecuted survey u/s 133A of the Act and therefore even if the information/report of the Investigation Wing is considered as a relevant evidence, however in view of the above discussion that the surveys were not executed in respect of all the 14 companies for share premium and in the case of companies for unsecured loans and also the fact being that they were conducted on wrong addresses as discussed above, the same cannot be regarded as incriminating material unearthed during the course of search seizure u/s 132(1) of the Act in the case of the appellant. The requirement for making the addition u/s 153A of the Act the AYrs where the assessment was not pending on the date of search and the proceedings are in the nature of re-assessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case hand, the AO himself has not claimed any incriminating material found during the search seizure operation in the case of the appellant in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) 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; (b) 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 (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. (xiv) Similar view is expressed by Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla 380 (Delhi HC). The Hon'ble High Court, while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed. Thus, the Hon'ble High Court has held that in the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as assess which is relatable to abated proceedings and the word reassess related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document 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. Infact the SLP filed against the said order has also been dismissed by the Hon'ble Supreme Court vide order dated 07.12.2015. (XV) In Kabul Chawla (supra), the Court also took note of the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search except based on some incriminating material unearthed during the search which was not already available to the AO. (xix) The present appeal concerns AY 2012-13. On the date of the search, the said assessment already stood completed as discussed supra and the additions made by the AO u/s 143(3) r.w.s. 153A on account of share premiums and unsecured loans are without any reference to the seized material. Since no proceedings under the Income Tax Act were pending for AY 2012-13 as on the date of search, and accordingly scope of examination of issues in the assessment u/s 153A was required to be restricted to the incriminating material, if any, found as a result of search. It is observed that the addition is neither based on any single loose paper found/seized nor on any statement recorded during the course of search conducted in the case of the appellant as is evident from the order of the AO. Therefore, in view of the aforesaid discussion and respectfully following the binding decision of the Hon'ble Jurisdictional High Court, decision of various other High Courts and the decision of Hon'ble Supreme Court as discussed supra, it is observed that the aforesaid add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material unearthed during the search, yet while granting the relief to the assessee, the ld. CIT (A) has failed to take note of the fact that the SLP filed by the Department in the case of PCIT vs. Gahoi Foods Pvt. Ltd. 117 Taxmann.com 118 (SC) and in case of PCIT vs. Dhananjay * international Ltd. (2020) 114 Taxmann.com 351 (SC) are pending before the Hon'ble Supreme Court and has already been admitted. 38. On this issue we also have persuaded the judgment of the Hon ble Supreme Cout in the case of Commissioner of Income-tax-III, Pune v. Sinhgad Technical Education Society 84 taxmann.com 290 (SC) and the relied upon comments of the apex court is reiterated here in below to which clearly holds and confirm the view of the Jurisdictional High Court and the view of this tribunal 18. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf , it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and SLP filed by the revenue is not decided by Hon'ble Supreme Court. We based on the binding nature of judgment hold that the additions made by the AO while passing the assessment order under section 153A for the assessment year 2012-13 are not sustainable. We found force in the arguments of the ld. AR of the assessee and also convince with the findings of the ld. CIT(A) who has after considering the facts on record taken a considered view that the looking to the facts of the case on technical ground, he has considered the appeal of the assessee and before giving his findings he has called for the remand report also and the equal chance were given to revenue place their case. The ld. DR appearing on the behalf of the revenue has merely relied on the investigation done at the time of search simultaneous survey conducted in the investor company. In all these processes we have not seen any reasons as to why and how the order of the ld. CIT(A) is not correct. There is no admission of either party of any undisclosed income. As the ld. CIT(A) has after considering the details arguments of both the parties clearly taken a view that there is no incrementing material, no addition ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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