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TMI Blog2024 (6) TMI 800X X X X Extracts X X X X X X X X Extracts X X X X ..... become a matter of writ petition as the First Appellate Forum; and that the with the questions and issues raised in the writ petition the jurisdiction of the First Appellate Authority having not been invoked with the appeals preferred by the writ petitioners. As observed, the name of the assessee company has been mentioned in the search warrant, which was produced in the original by the Department before us. Therefore, this puts this entire controversy at rest and the Assessee s objection in this regard is found to be unjustified and it is, accordingly, rejected, while rejecting Ground No. 2. Additions made are not based on any incriminating material found during the search - This assessment was abated, as the search was conducted on 16.02.2018. The appellant brought to our notice that no incriminating material was found during the search and provisions of section 153A were not applicable in this case. As the search was conducted on 16.02.2018 and as per Section 153A the assessment for 2017-18 and 2018- 19 were abated and the Assessing Officer was competent to pass assessment order u/s 153A r.w.s. 143(3) of the Act for these years. Hence ground Nos. 2, 3, 4 and 5 are hereby reject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come in the Prof it and Loss Account cannot be added u/s 68 of the Act, without any specific reasons or evidence. Therefore, the addition of Rs. 10,50,000/- is wrong and needs to be deleted as it includes an amount Rs. 2,50,000/- withdrawn and re-deposited by the company and Rs. 8,00,000/- which was already declared by the company as income in its Profit and Loss Account for AY 2017-18. Accordingly, Ground No. 7 stands accepted. Addition u/s 68 - assessee contended that the AO did not make any adverse findings in the remand report and the entire investigation / proceedings of the AO revolves around stating the assessee company as shell company on the dictat of third party - AO made addition of all the credit entries in the bank account of the company ignoring all the proofs and documentary evidences submitted by the assessee during the assessment proceeding. However, same documents were submitted before the ld. CIT(A) during the appellate proceedings and the ld. CIT(A) granted relief of Rs. 1,88,03,250/- to the assessee after verification of all the documents and confirmed addition of Rs. 14,20,000/- without asking assessee for any other evidence or document during appellate procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and in the circumstances of the case, the finding recorded in the assessment Orders that search and seizure operations were carried out under Section 132 of the Act in the case of the appellant -company, is perverse and wholly erroneous and therefore, the Order of assessment passed under Section 153A of the Act is without jurisdiction. 5. That the additions made in the assessment Order are not based on any corroborative and relevant incriminating material stated to have been unearthed during the course of any search by the Assessing Officer, though no search has taken place on the appellant and therefore, the Order of Assessment is wholly illegal and without jurisdiction in view of the judgment in the case of Commissioner of Income-tax (Central)-III v. Kabul Chawla [2016] 380 ITR 573 (Delhi)/[2015] 281 CTR 45 (Delhi). 6. That the learned CIT(A) has wrongly upheld addition of Rs. 3,70,000/- received from Sh. Vashisht Kumar Goyal without any justification. 7. That the learned CIT(A) has wrongly upheld addition of Rs. 10,50,000/- on account of Income deposited in cash by the appellant without any justification. 8. That the learned CIT(A) has wrongly upheld addition of Rs. 14,20,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, the A.O. was justified in initiating assessment proceedings u/s 153A of the Act. 7. Before us, on behalf of the Assessee, it has been contended that neither any search was conducted on the assessee company, nor any Panchnama was prepared in its name; that the assessee company filed an application under the RTI Act, bearing Registration No. CCITC/R/E/20/0001 dated 7.1.2020, seeking information with regard to copy of last warrant, a copy whereof has been placed at Assessee s Paper Book ( ABP ) ,pages 346-350. It has been contended that the said application of the assessee was transferred (APB 351-352) to the DGIT, ITO off ice of PCIT (Investigation), Ludhiana and the DCIT, Central Circle-2, Chandigarh (APB 354-356) and finally to the DCIT, Central Circle-2, Mohali (APB 357) ; that none of the Income Tax Authorities provided the assessee company with the copy of the said warrant; that the ACIT, Central Circle-2, Chandigarh vide order (APB 360- 361), dated 5.2.2.020, passed u/s 7(5) of the RTI Act, denied the assessee company with a copy of the search warrant. 8. It has been contended that the assessment u/s 153A of the Act was completed against the provisions of the law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us that its name was not mentioned in the search warrant. 9. In the above situation, the Bench had called for the original search warrant from the Department, which was produced. The name of the assessee company was found mentioned in the search warrant. It is seen that a copy of the Panchnama has been placed at APB 519-522. At APB 519, at item A, it is mentioned: Warrant in the case: M/s Kansal Singla and associates ; at item (B) , it has been stated that: Warrant to search (Details and Ownership of place of search): M/s Kansal Singla and Associates SCO 80-81, 4th Floor, Sector 21C, Chandigarh. So, the name of the assessee Company, is not mentioned in this Panchnama . Also, this Panchnama does not bear the signature of Shri T.N. Singla, Director of the assessee Company, who is stated to have been present at the place of search at the time of the search. 10. On this issue, the submissions on behalf of the Department, as contained in the oral arguments addressed by the ld. CIT (DR) and the written submissions dated 5.6.2023 are that providing of the copy of the warrant is not a right of the searched persons; that u/s 96 of the CrPC read with section 76 of the Evidence Act, a certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de are not based on any incriminating material found during the search. In this regard, the ld. CIT(A) has held that the Assessing Officer was having jurisdiction to assess the income of the assessee on the basis of the material available at the time of the assessment and he was not to restrict the additions subject to the incriminating material found during the search. For holding so, the ld. CIT(A) has placed reliance on the decision of the Hon'ble Kerala High Court in the case of CIT vs. KPUmmer , (citation not given) in the impugned order; the decision of the Hon'ble Allahabad High Court in the case of Rajkumar Arora , 367 ITR 517 (Allahabad) ; the decision of the Hon'ble Kerala High Court in the case of EN Gopakumar vs. CIT , (2016) 75 taxman.com 215 and the decision of the Hon'ble Allahabad High Court in the case of CIT vs. Kesarvani Zarda Bhandar , ITA No.270/2014. The ld. Counsel for the Assessee, on this issue, has contended that the A.O. issued notice u/s 153A of the Act on 09.03.2019, against which, the company filed return and challenged the initiation of proceedings u/s 153A vide letter dated 03.05.2019 (APB-1); and that the additions made by the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. 17. Reliance has further been placed on the judgment of the Hon'ble High Court of Bombay, in Pr. CIT Vs. Sandeep Agarwal (HUF) , dated 09/10/2023 (Bombay) , wherein it was held that - We dismiss the appeal , holding that the only issue which arises for determination will have to be answered against the Revenue and favouring the assessee given the decisions of the Hon'ble Supreme Court in Abhisar Build well (P. ) Ltd. , (supra) and U.K. Paints (Overseas) , (supra) . The Clarification issued in both these judgments is, however, issued in these matters as well in the context of reassessment proceedings under Sections 147 and 148 of the IT Act. However, as noted above, al l contentions of al l par ties are kept open in this context. 18. It has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng search relating to those prior years in which there is no time left on the date of search for an assessment u/s 143 (3); that the CIT(A) observed that the same view has been up-held by the Hon'ble Allahabad High Court in the case of Rajkumar Arora ; that the CIT(A) observed that the Hon ble Kerala High Court, in the case of EN Gopakumar vs CIT , (2016)75 taxman.com 215 and the Hon'ble Allahabad High Court, in the case of CIT vs Kesarwani Zarda Bhandar , (2016) , ITA No. 270/2014, had also held similarly; that the ld. CIT(A) observed that keeping in view of the provisions of the Act and the ratios of the decisions mentioned, it was observed that the Assessing Officer was having jurisdiction to assess the income of the assessee on the basis of material available at the time of assessment and was not to restrict the additions subject to incriminating material found during the course of search and that it was in the manner that Additional Grounds of appeal No. 3 5 were dismissed by the ld. CIT(A) . It has been contended that in view of the decisions in Kabul Chawla (supra), Meeta Gutgutia (supra), Sandeep Agarwal (HUF) (supra) and Ahhisar Build well (supra) , Ground No. 5 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch was conducted on 16.02.2018 and as per Section 153A the assessment for 2017-18 and 2018- 19 were abated and the Assessing Officer was competent to pass assessment order u/s 153A r.w.s. 143(3) of the Act for these years. Hence ground Nos. 2, 3, 4 and 5 are hereby rejected. 25. Concerning Ground No. 6, here again the addition was made by the AO without considering each credit separately on merit, while making addition of Rs. 3,70,000/-, holding that the purpose and utilization of funds which had not been explained by the assessee. 26. AO Observation - Page 10-11 of AO Order. 27. The Assessing Officer made addition of all the credit entries in bank of Rs. 2,02,23,250/-without considering each credit separately on merit and on the plea that purpose and utilization of funds not explained by assessee. 27.1 Documents submitted before AO were also submitted before the CIT(A) vide reply dated 21.03.2020 (Paper book page 46, 47, 50-51) :- 1. Bank Account statements of Sh. Vashist Kumar Goyal for A.Y.2017-18 (Paperbook Page 50-51) 2. ITR-V of Sh. Vashist Kumar Goyal for A.Y.2017-18 (Paperbook Page 47) 3. Copy of account of Sh. Vashisht Kumar Goyal in the books of M/s TJR Properties Privat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this regard. 29.6 The ld.CIT(A) has reproduced the entire written submission of the assessee company in its order, and on page 71, 72 and 77 of the CIT(A) order, the following facts were mentioned by the assessee in its submission which were reproduced by CIT(A) :- Page 71 of CIT(A) s Order DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDIT WORTHINESS OF THE PARTY AMOUNT (IN RS) PARTY AMOUNT (IN RS PARTY NAME ACCOUNT NO 25/05/2016 2,50,000/- VASHISHT KUMAR GOYAL (FRIEND OF DIRECTOR) UNSECURED LOAN RECEIVED FROM VASHISHT KUMAR GOYAL BANK ACCOUNT, ITR, LEDGER ACCOUNT Page 72 of CIT(A) s Order DATE RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDITWORTHINESS OF THE PARTY AMOUNT (IN RS) PARTY NAME ACCOUNT NO 07/11/2016 1, 1,20,000/- VASHISHT KUMAR GOYAL (FRIEND OF DIRECTOR) UNSECURED LOAN RECEIVED FROM VASHISHT KUMAR GOYAL BANK ACCOUNT, ITR, LEDGER ACCOUNT Page 77 of CIT(A) s Order DATE `RECEIPT INWARD (CR) REMARKS PROOF OF IDENTITY, GENUINES AND CREDITWORTHINESS OF THE PARTY AMOUNT (IN RS) PARTY NAME ACCOUNT NO 25/05/2016 2,50,000/- VASHISHT KUMAR GOYAL (FRIEND OF DIRECTOR) UNSECURED LOAN RECEIVED FROM VASHISHT KUMAR GOYAL BANK ACCOUNT, ITR, LEDG ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- by the company in its bank account) without considering each credit separately on merit and on the plea that purpose and utilization of funds not explained by assessee. 31.2 The ld. CIT(A) confirmed the addition of Rs. 10,50,000/- (Page 108-109, point 10 of CIT(A) s Order) on account of cash deposit made by the assessee company by mentioning that - However, no evidence/details giving the particulars of person from whom such cash was received, nature of transaction with them have been furnished. Therefore, cash source deposits and of Rs. 10,50,000/-remain unexplained. The assessee company submitted copy of income account along with copy of cash account, bank account statement, prof it and loss account and copy of hire charges account in the books of the company for AY 2017-18 before the ld. CIT(A) and AO which were not considered by any of the authorities before confirming the addition of Rs. 10,50,000/-. No explanation or documentary evidence, whatsoever was ever asked by ld. CIT(A) or AO either by way of Show Cause Notice or during the personal hearing, before confirming the addition. 31.3 It was submitted that the ld. CIT(A) while confirming the addition made by AO, wrongly m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lates to addition of Rs. 14,20,000/- u/s 68 of the Act. The assessee contended that the company submitted the cashflow statements, explanation of each debit and credit entry in the bank account of the assessee company along with the Balance Sheet, Affidavit, confirmations, bank statements, ITRs, Balance sheets, copy of accounts etc. but instead of considering each credit entry separately, the Assessing Officer with a vitiated mind and on the dictate of third party, made additions of al l the credit entries in the bank account of the assessee company without considering the nature, source, credibility and genuinity of each credit transaction received in the bank account of the assessee company during the year. 32.1 The Assessing Officer after being fully satisfied with the genuinity of company and sources of credit entries in bank account, sent a detailed note on the comparison of assessee company with shell companies and explanation of the credit entries as mentioned in points above, (deviation note) to the Deputy Director of Investigation (ADIT) , Mohali on 26.12.2019 vide letter (deviation note) note no. 1733, dated 24.12.2019, at the fag end of assessment proceedings being satis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ividual or otherwise, that can be deemed as a sham entity. Furthermore, al l the lenders executed the transfers from their active and operational bank accounts. Notably, within the same fiscal year, the assessee company repaid all lenders except Sh. Baldev Singh and advance received from Dharma Wires Private Limited was repaid in the subsequent year. The CIT(A) in his order has mentioned as under : It was further explained that the AO has used statement of Sh. Jagdish Rai Gupta selectively in parts by drawing wrong inference that M/S TJR was a shell company. It was submitted that M/s TJR Properties was having land which was purchased during F.Y. 2007-18 for Rs. 1,73,00,000/- and sold during A.Y. 2012-13 for Rs. 5,00,05,000/-by executing registered sale deed on 30.11.2011 and after paying stamp duty. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during FY. 2016-17 for purchase of a plot to build flat /apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, M/s TJR was having income generating apparatus and was undertaking business activities and was not a shell company. 9.3 Facts and material available on record have been considered in detail. Sh. TN Singla and Sh. Jagdish Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it amounting to Rs 2,02,23,250/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs. 2,02,23,250/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisation of such credits The appellant submitted during the appellate proceedings that it had received credits of Rs. 2,02,23,250/- in its bank account maintained with Bank of Maharashtra and furnished documentary evidence in support of identity and creditworthiness of such persons a genuineness of transaction which have been also furnished during the assessment proceedings. The AO was again directed during appellate proceedings vide letter no. 295 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of transaction. In the remand report dated 15.07.2022(supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of transactions except by stating that appellant is a shell company and doesn't have any profit generating apparatus. It was further stated that one of the group companies, i. e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stification in such addition made in the hands of the appellant u/s 68 of the Act. Therefore, the addition of Rs. 1,88,03,250/- is hereby deleted. 32.3 The assessee contended that the AO did not make any adverse findings in the remand report and the entire investigation / proceedings of the AO revolves around stating the assessee company as shell company on the dictat of third party. The AO made addition of all the credit entries in the bank account of the company amounting to Rs. 2,02,23,250/- ignoring all the proofs and documentary evidences submitted by the assessee during the assessment proceeding. However, same documents were submitted before the ld. CIT(A) during the appellate proceedings and the ld. CIT(A) granted relief of Rs. 1,88,03,250/- to the assessee after verification of all the documents and confirmed addition of Rs. 14,20,000/- without asking assessee for any other evidence or document during appellate proceeding for three years as no Show Cause Notice was issued or query was raised by the ld. CIT(A) . Accordingly, ground of appeal No. 8 is accepted. 33. Ground No 9 10 : Ground No. 9 pertains to disallowance of loss of Rs. 50,231/- and Ground No. 10 is relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iates, regular books of account along with bank statements of the assessee company were found, which fact stands duly mentioned at page 357 of the Appraisal Report (paperbook page 116) . Copies of al l these books of account were taken on CD by the Department, as per Panchnama (paperbook page 276-279) . The books of account were examined by the AO before sending the Deviation Note dated 24.12.2019 to Investigation Wing. This is evident from the contents of the AO's letter dated 24.12.2019 (paperbook page 297-299) . The Dictat by the ADIT (Investigation) , on which, however, the AO acted, is available at paperbook page 300-302. 35.4 Further, the books of account were also submitted by the assessee before the AO during the remand proceedings, on 16.02.2022, as available at paper book page 52. 36. We found that the very basis of the disallowance made is unsustainable in law and we hold so. Accordingly, the additions of Rs. 50,231/- and Rs. 5,62,672/- are deleted, found to be based on no material , whatsoever and in direct opposition to the documentary evidence furnished by the assessee. Accordingly, Ground Nos. 9 and 10 are also accepted. 37. In the result, the appeal is partly al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted by the assessee company. However, on receipt of letter from DDIT, the AO made addition of the total credits in the bank account of the company and declared a genuine company as shell company without issuing any show cause notice. The complete verification was also done by CITA and found that ingredients of section 68 were, satisfied and hence the CIT(A) granted relief of Rs. 2,77,01,650/- to the assessee company. 41. Further, the CIT(A) in his order has mentioned that : It was further explained that the AO has used statement of Sh. Jagdish Rai Gupta selectively in parts by drawing wrong inference that M/S TJR was a shell company. It was submitted that M/s TJR Properties was having land which was purchased during F.Y 2007-18 for Rs. 1,73,00,000/- and sold during A.Y. 2012-13 for Rs. 5,00,05,000/-by executing registered sale deed on 30.11.2011 and after paying stamp duty. Further, M/s TJR paid earnest money of Rs. 1,50,00,000/- during F.Y. 2016-17 for purchase of a plot to build flat /apartment and paid TDS of Rs. 1,50,000/- @1%. Thus, M/s TJR was having income generating apparatus and was undertaking business activities and was not a shell company. 9.3 Facts and material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular of such persons from whom such credits were received that the appellant had cred amounting to Rs 3,22,01,650/- in its bank account and the appellant could not explain purpose of such credits. Thus, the addition of Rs. 3,22,01,650/- was made by the AO on the ground that the appellant has failed to explain the purpose and utilisation of such credits The appellant submitted during the appellate proceedings that it had received credits of Rs. 3,22,01,650/- in its bank account maintained with Bank of Maharashtra and furnished documentary evidence in support of identity and creditworthiness of such persons a genuineness of transaction which have been also furnished during the assessment proceedings. The AO was again directed during appellate proceedings vide letter no. 295 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of transaction. In the remand report dated 15.07.2022(supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of transactions except by stating that appellant is a shell company and doesn't have any profit g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table and strength of documentary evidence, it is observed that there is no justification in such addition made in the hands of the appellant u/s 68 of the Act. Therefore, the addition of Rs. 1,88,03,250/- is hereby deleted. 42. Further, the CIT(A) in his order on page 103-104 has mentioned that - The AO was again directed during appellate proceedings vide letter no. 293 dated 12.08.2021 to examine such credits on merit in respect of identity and creditworthiness of such persons and genuineness of such transaction. In the remand report dated 05.09.2022 (supra), the AO did not bring on record any adverse findings in respect of identity and creditworthiness of such persons and genuineness of such transaction, except by stating that appellant company is a shell company and does not have any prof it generating apparatus. 43. The assessee contends that the AO did not make any adverse findings in the remand report and the entire investigation / proceedings of the AO revolves around stating the appellant company as shell company on the dictate of third party. The AO wrongly made addition of all the credit entries in the bank account of the company amounting to Rs. 2,02,23,250/- ignoring a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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