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TMI Blog2024 (7) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... treat the share capital as an asset was an erroneous attempt and accordingly, the jurisdiction was not legally tenable. We concur with the same and accordingly, find no reason to interfere in the impugned order, in any manner. Our view is duly supported by the decision of Goldstone Cements Ltd. [ 2023 (10) TMI 278 - GAUHATI HIGH COURT] wherein the facts were identical held AO could not assume jurisdiction to make addition of other items viz. liabilities etc. Such a scenario belies the claim of Ld. AO that while issuing notice u/s 153A, he was in possession of the jurisdictional fact i.e., undisclosed asset valued Rs. 50 Lacs or more had escaped assessment which constitute the key to open the lock and then reassess the income of the assessee for the 7th to 10th year. When AO fails to make any addition for the undisclosed asset then it tantamount to admission that there was no jurisdictional fact present before AO in the first place and the necessary corollary would be that AO wrongly assumed jurisdiction u/s 153A and therefore, he could not proceed further to make other items of additions / disallowance. Decided against revenue. - Hon ble Shri Manoj Kumar Aggarwal, AM And Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , satisfaction of the conditions mentioned in the fourth proviso to Sec.153A(1) was arrived before issue of notice u/s. 153A. 2.5 The Ld.CIT(A) failed to appreciate the substance over form (ie) unaccounted money (substance) introduced in the form of share capital. Hence, unaccounted cash is unambiguously within the meaning of asset. 3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. As is evident, the revenue is aggrieved by the finding of Ld. CIT(A) holding assumption of jurisdiction of Ld. AO to be not tenable. 2. The Ld. CIT-DR advanced arguments and referred to Explanation-2 to Sec.153A. The Ld. AR also advanced arguments to support the impugned order. The Ld. AR also submitted that there was no incriminating material found during search to support impugned additions. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee company was incorporated during FY 2008-09. The assessee is stated to be engaged in the busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ets. The unaccounted cash credit represented in the form of share capital was not an asset but a liability. It was appearing on liabilities side of the Balance Sheet. Therefore, in the absence of any underlying asset, the assessment was time barred and not sustainable in law. 4.2 The Ld. CIT(A) concurred that the search was conducted during February, 2021 and the impugned AY fall beyond six years as per the provisions of the Sec. 153A. As per the extant statutory provisions, no satisfaction is necessary to initiate proceedings u/s 153A up-to the period of six years. However, Ld. AO, upon arriving at a satisfaction that there exists an underlying asset as per Explanation-2 to Section 153A, would be entitled to initiate proceedings u/s 153A up-to a period of 10 Years. The extant statutory provisions provide as under: - Assessment in case of search or requisition. 153A [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April 2017. Explanation 1.--For the purposes of this sub-section, the expression relevant assessment year shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.--For the purposes of the fourth proviso, asset shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.] [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to demonstrate that he was satisfied regarding the fulfillment of those conditions before he could proceed with issue of notice u/s 153A. Though, the fourth proviso does not explicitly state that the assessing officer should be satisfied regarding the fulfillment of the conditions specified therein, such requirement of satisfaction of the assessing officer is implicit by necessary implication, having regard to restriction imposed on the powers of the assessing officer to issue notice unless the conditions specified therein are satisfied. Moreover, since the satisfaction of these conditions was a jurisdictional requirement, the same is required to be reduced in writing by the assessing officer in order to unambiguously demonstrate that he has assumed jurisdiction correctly as per the provisions of the Act and facts of the case. 4.3 It was further observed by Ld. CIT(A) that the satisfaction should be recorded in writing by AO with reference to books of accounts, other documents or evidences found and seized during the course of search. Notice u/s 153A for the relevant assessment year or years should be issued on concurrent fulfillment of certain conditions spelt out in Fourth Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other documents or evidence which reveal that the income of the searched person has escaped assessment but there are no undisclosed specified assets which confirm to condition that the income escaping assessment is represented by an undisclosed specified asset. In such a situation, the AO has no jurisdiction to issue a notice u/s 153A and a notice, if issued, would be void-ab-initio for patent lack of jurisdiction. To support the same, reference was made to certain judicial decisions. 4.5 Applying the above principle, it becomes clear that the Fourth Proviso to Section 153A understood in the proper context makes the intention of the Legislature evident. It clearly sets out the conditions when a notice under Section 153A read with Fourth Proviso can be issued for the 'relevant assessment year or years'. No statutory authority or Tribunal could assume jurisdiction in respect of subject matter which the statute does not confer on it and if by deciding erroneously the fact on which jurisdiction depends the court or tribunal exercises the jurisdiction, then the order is vitiated. By erroneously assuming existence of jurisdictional fact, no authority could confer upon itself juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -09 / AY: 2009-10, with a paid up capital of Rs. 1,00,000/- (10,000 shares of Rs. 10/- each - face value). The share capital was increased subsequently by two times. First 2,19,500 shares to the founders at a premium of Rs. 50/- per share and then to 17 entities 2,64,500 shares at a premium of Rs. 90/- per share (face value per share Rs. 10/-), 2. In the next FY:2009-10/ AY 2010-11, share capital was again increased and new shares of 2,01,800 were issued to another set of 16 shell companies at Rs. 100/- per shares at a premium of Rs. 90/- per share (Face value Rs. 10/-). During FY:2010-11/AY 2011-12 all the shell companies that subscribed to the shares in M/s.KAG India Pvt Ltd transferred their shares to the founders of M/s.KAG India Pvt Ltd. During FY:2011-12/AY:2012-13, the share capital was further increased to 12,00,000 shares of face value Rs. 10/- each. The new shares of 1,48,750 were issued to another set of 12 shell companies. The new shares were issued at Rs. 1000/- at a premium of Rs. 990/- each. 3. When the sworn statements of 'entry operators' were put to Shri. G.Muralidharan, Director and the main person in-charge of the affairs of the group. No credible reply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t legally tenable. The assessee contended that there was no underlying asset as per Explanation 2 to Section 153A of the Act that has escaped from assessment. In the assessment order, the only addition made by Ld. AO was addition of unexplained cash credit u/s 68 and therefore, Ld. AO without arriving at any valid satisfaction about the existence of any underlying asset which has escaped from assessment to the value of Rupees Fifty Lacs or more, had chosen to invoke the provisions of Sec. 153A for the AY beyond six years of relevant period which could not be upheld. Therefore, the legal ground as urged by the assessee was allowed and impugned additions were deleted. Aggrieved, the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it is quite clear the impugned AY fall beyond 6 years from relevant assessment year (AY 2021-22) from the end of the previous year (2020-21) in which the search was conducted on the assessee (26-02-2021). In such a situation, the Ld. AO would be subjected to further conditions as stipulated in fourth proviso to Sec.153A(1). These conditions are (a) that certain income has escaped assessment; (b) the fact of income esc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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