9911796707
TMI Blog2024 (8) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... over such other person and said date is considered in the present case i.e. on 31.12.2021. The assessment year before us is beyond stipulated six assessment years and four relevant assessment years and thus, notice issued by the AO u/s. 153C of the Act, dated 31.12.2021 and consequent assessment order passed u/s. 143(3) r.w.s. 153 of the Act, dated 31.03.2022 is barred by limitation and liable to be quashed. Thus, we quash assessment order passed by the AO u/s. 143(3) r.w.s. 153C of the Act, dated 31.03.2022. Decided in favour of assessee. - Shri Manjunatha. G, Hon ble Accountant Member And Shri Manomohan Das, Hon ble Judicial Member For the Appellant : Shri. B. Rama Krishnan, FCA And Shri. Shrenik Chordia, CA For the Respondent : Shri. R. Clement Ramesh Kumar, CIT ORDER PER MANJUNATHA. G, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-18, Chennai, dated 26.09.2023 and pertains to assessment year 2010-11. 2. The assessee has raised the following grounds of appeal: 1. For that the Order of the Learned Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Tribunal deems fit. 3. The brief facts of the case are that, a search operation u/s. 132 of the Income-tax Act, 1961 (hereinafter referred to as the Act ) was conducted on 25.02.2020, in the case of M/s. Jain Metal Rolling Mills, M/s. Jain FGL Metal Indsutries, Shri. Kamlesh Jain, Shri. Shantilal Jain, Smt. Geetha Jain and Shri. Sanchit Jain. During the course of search and seizure operation u/s. 132 of the Act, loose sheets was seized vide Annexure ANN/MS/JMG/LS/S-1 and seized loose sheets has information relating to the assessee M/s. KSJ Infrastructure Pvt Ltd. The Assessing Officer of searched person, the DCIT, Central Circle -1(1), Chennai has recorded satisfaction note for proceedings u/s. 153C of the Act, dated 31.12.2021 and observed that, the seized material found during the course of search in the case of M/s. Jain Metal Rolling Mills and others has information relating to the appellant and has bearing on its total income. Further, the Assessing Officer of any other person as per 153C of the Act, i.e., the DCIT, Central Circle - 1(1), Chennai has recorded satisfaction note for proceedings u/s. 153C of the Act on 31.12.2021 and satisfied that the books of accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Association, had the authorised capital limits to issue of shares, if any modifications were made board's resolution or any other detail to substantiate the receipt of Share Capital by way of issue of shares and receipt of share Premium. d) During the assessment proceeding, the assessee was required to provide the detail of the investments made. The assessee was unable to even give the details of investment in unquoted shares which clearly indicates the whole transaction is bogus. It is very clear the share premium is the colourable device used to credit the unexplained income into the books of the accounts of the Company and the assessee Company could not explain the source for the Share Capital of Rs. 64,89,340 and share premium of Rs. 63,25,34,760/- credited to their books of account. As per Section 68 of the Income Tax Act, 1961: Any sum found credited in the books of the taxpayer, for which he offers no explanation about the nature and source thereof or the tax authorities are not satisfied by the explanation offered by the taxpayer, is termed as cash credit. In this part you can gain knowledge about various provisions relating to tax treatment of cash credit. Provided t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and consequent assessment order passed by the Assessing Officer is invalid, void ab initio and liable to be quashed. The appellant had also challenged additions made by the Assessing Officer towards share premium u/s. 68 of the Act, in absence of any incriminating material found as a result of search, on the ground that said assessment year is abated assessment/completed assessment and in absence of any incriminating material, additions cannot be made in assessment framed u/s. 153C of the Act. The appellant had also relied upon various judicial precedents in support of its arguments. 6. The ld. CIT(A), after considering relevant submissions of the assessee and taken note of provisions of section 153A r.w.s. 153C of the Act, opined that since the Assessing Officer of searched person u/s. 132 of the Act and the Assessing Officer of other persons as per section 153C of the Act is one and the same, date of search is to be reckoned with for arriving at the assessment years that can be dealt u/s. 153C of the Act, as there is no handing over involved, and not the satisfaction note date as taken by the assessee. The ld. CIT(A), had also distinguished case laws relied upon by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee for taking satisfaction date as material handing over date do not apply to the facts of the instant assessee, as the AO for the searched person and the other person is same no handing over required and so, search date only has to be reckoned with for arriving at the AYs to be dealt u/s 153C. 9.3 Further, it is also to be noted that the interpretation rendered in the judgment of RRJ Securities (supra) has been overcome by introducing amendment in Section 153C by the Finance Act 2017 with effect from 01.04.2017 by inserting the following: 'for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made'. This amendment is a procedural amendment and is effective from 1.4.2017. With this amendment, the six assessment years which are considered both under section 153A and l 53C in respect of the searched person and the other person are the same. In this case, the search took place 25.02.2020, which falls on the previous year relevant to the Assessment Year 2020-21. The amendment is also effective from 01.04.2017. Therefore, the six assessment years referred to in Section 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search is after 01.04.2017 i.e. after the amendment of sec.153A and 153C of the Act. Further, the income that has escaped assessment in the year beyond six assessment years but within ten assessment years is more than Rs. 50 lakh, as stipulated in the proviso to the section 153A(1), in the form of assets, as stipulated in Explanation 2. Therefore, the ten assessment years referred to in Section 153C and also in 153A will relate to A.Ys. 2010-11 to 2019-20. The above clearly demonstrates that the AO has correctly taken the AY 2010-11 also for the proceeding u/s 153C. 9.8 The assessee has taken date of handing over as 31.12.2021, i.e. the date of satisfaction note recorded by the AO; accordingly, the relevant AY is taken as AY 2022-23 and the ten AYs preceding such AY is arrived at AY 2012-13 to 2021-22. But, this is not the way in which counting of preceding AYs is to be carried out. The search date only can be taken for such counting as the AO for both the searched person and other person is one and the same. The above calculation has been demonstrated as wrong for the reasons enumerated in paras 9.4 to 9.7 above and hence cannot be acceded to. 9.9 In this case, the AO was sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d about the business activity of the assessee company, the CFO of Jain Meta] Rolling Mills, Shri Hemant Jain has deposed as follows: Sir, there are no employees employed in M/s. Ksj Infrastructure (P) Ltd., PAN of M/s. Ksj Infrastructure () Ltd., is AADCC5913E. There are no business activity in the company. The Income Tax returns were filed by Shri. Sunil having mobile number 9381001110. The books of accounts are maintained in Tally by one Shri Rahul and Ms.Nirmala, in this office, who are reporting to me. Sir I submit that all these companies M/ s.Ksj Infrastructure (P) Ltad., M/s.JackpotCommodeal Put Ltd and M/s.Salputri Dealer Pvt.Ltd were struck down by ROG and were subsequently revived during the year 2019. 10.2.13 The original assessment was passed based on the financials submitted by the assessee which portray Shri Raj Kumar Bhotika and Smt. Amita Joshi as the directors. It was only during the search, it was unearthed that Shri Raj Kumar Bhotika and Smt. Amita Joshi were only name lenders and the company is only a paper company, having no business activities but used as a medium to bring in unaccounted income. But for the search action, the connection between these parties w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company is also only the share capital/ premium that is shown in its balance sheet: and hence with all the cumulative of surrounding circumstantial evidences and preponderance of probabilities, the transaction is considered to be sham transaction that has aimed only to bring unaccounted money under the guise of investment and huge paper work has been set up and carried out only with a view to giving a colour of authenticity and genuineness by creating facade of legitimate transactions. 11.19 The Hon'ble High Court of Delhi in the case of Pr. Commissioner of Income-tax-6, New Delhi Vs NDR Promoters Pvt. Ltd in ITA 49/2018 in its order dated 17th January 2019 has observed as under: 10. Issue of bogus share capital in the form of accommodation entries has been subject matter of several decisions of this Court and we would like to refer to decision in Commissioner of Income Tax Vs. Navodaya Castles Pvt. Ltd. (2014] 367 ITR 306, wherein the earlier judgments were classified into two separate categories observing as under: 11, We have heard the Senior Standing counsel for the Revenue, who has relied upon decisions of the Delhi High Court in Commissioner of income Tax Vs. Nova P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tested not superficially but in depth having regard to the human probabilities and normal course of human conduct. 14. Certificate of incorporation, PAN number etc, are relevant for purpose of identification, but have their limitation when there is evidence and material to show that the subscriber was a paper company and not a genuine investor. The Hon'ble HC thus held that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus The reasoning given is contrary to human probabilities, for in the nature..... normal course of conduct, no one will make investment of such huge amounts without being concerned about the return and safety of such investment . 11.20 The Supreme Court dismissed SLP filed against the Delhi High Court ruling in the case of CIT Vs Navodaya Castles P Ltd 367 ITR 306 and held that certificate of incorporation, PAN, etc., are not sufficient for the purpose of identification of subscriber company when there is material to show that the subscriber was a paper company and was not a genuine investor. 11.21 It is all the more relevant to refer to one more latest judgement of the Hon'ble Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actions, The assessee has not discharged its onus. It is found that the assessee company has received the share premium from 45 investor companies, the details of which are given in para 11.3. It could be seen that Shri Raj Kumar Bhotika, one of the directors of the assessee company is the director in some of the investor companies. Same is the case with another Director, Smt. Amita Joshi. The assessee company could have easily produced all the necessary ingredients such as copy of the ledger account of the parties concerned, copy of their share applications, confirmation from the parties concerned, copy of the bank accounts concerned, valuation of shares, in respect of the investor companies including production of the principal officers, at least, where the directors are common in both the assessee company and the investor company. The assessee's contention that the above details could not be furnished due to change in management of the companies is not acceptable. Al the above clearly prove that they are all just paper companies used to wash the black money in the form of share capital/premium. Having clearly depicted the modus operandi involved in bringing the unaccounted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produce the directors and the principal officers of the six shareholder companies and also that as per the information and details collected by the Assessing Officer from the concerned bank, the Assessing Officer had observed that there were genuine concerns about identity, creditworthiness of shareholders of shareholders as well as genuineness of the transactions, Addition u/s 68 upheld. CIT Vs Navodaya Castle Pvt Ltd [Delhi High Court) [2014] 50 taxmann.com 110 (Delhi)/[2014] 226 Taxman 190 (Delhi) (MAG.)/[2014] 367 ITR 306 (Delhi) SLP dismissed against High Court ruling that certificate of incorporation, PAN etc., are not sufficient for purpose of identification of subscriber company when there is material to show that subscriber was a paper company and not a genuine investor. Navodaya Castle Pvt Ltd Vs CIT [Supreme Court] (2015] 56 taxmann.com 18 (SC)/[2015] 230 Taxman 268 (SC) 11.23.8 Merely furnishing PAN Numbers in routine way, does not explain the source or the creditworthiness of the party. The basis on which premium has been charged for the shares has not been explained. A perusal f the financial statements do not justify the quantum of share premium charged. Advance Powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. Vs PCIT (Bombay High Court) [2019] 108 taxmann. com 382 (Bombay) 11.23.13 Turnover of assessee was quite low as compared to funds of said Company and that said company invested in share capital of assesee at a huge premium of Rs. 90 per share. Funds of investee company were in form of reserves and surplus and share application money and application of funds was in loans and advances. Moreover, financials of investee company did not warrant that it deserved share premium of Rs. 90 per share. M.A. Projects (P) Ltd. Vs DCIT TAT Delhi] [2019] 109 taxmann. com 173 (Delhi - Trib.) 11.24 Going by the above, it is clear that the assessing officer is thus left with no other choice than to treat these amounts as credits of share capital/premium as unexplained and add to the income of the assessee. In view of the Overwhelming reasons and case-laws laid down by various courts as above there is a clear case to assess these credits as unexplained u/s 68 and thus, the additions u/s 68 are upheld and the grounds of the assessee in this regard are dismissed. 11.25 However, while making the above addition, the AO has added the entire paid-up capital of Rs. 64,89,340 whereas the paid-up ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and liable to be quashed. In this regard, he relied upon the decision of Hon ble Supreme Court in the case of CIT vs Jasjit Singh 458 ITR 437 (SC). 11. The ld. DR, Shri. R. Clement Ramesh Kumar, CIT, supporting the order of the ld. CIT(A) submitted that, in the instant case, the Assessing Officer of searched person and the Assessing Officer of any other person is one and the same and thus, the question of handing over books of accounts and relevant documents found during the course of search to the Assessing Officer of any other person does not arise and consequently, for the purpose of second proviso to section 153C(1) of the Act, date should be construed as date of search, but not date of satisfaction note recorded by the Assessing Officer. The ld. CIT(A), after considering relevant facts has rightly rejected grounds taken by the assessee and also distinguished the case laws relied upon by the assessee in the case of Hon ble Delhi High Court in the case of RRJ Securities Ltd vs CIT (Supra). Therefore, there is no merit in legal grounds taken by the assessee and same should be rejected. 12. We have heard both the parties, perused materials available on record and gone through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer of the searched person should record satisfaction as required u/s. 153C of the Act and hand over books of accounts and other documents to the Assessing Officer having jurisdiction over any other person. In other words, the Assessing Officer of the searched person should satisfy that documents found during the course of search u/s. 132 of the Act, is having information and has bearing on total income of any other person, and hand over books of accounts and documents to the Assessing Officer of any other person. Unless, he records satisfaction having regard to material found during the course of search, he cannot hand over books of accounts or other documents to the Assessing Officer of any other person. Thereafter, Assessing Officer of searched person should record satisfaction u/s. 153C of the Act for initiation of proceedings u/s. 153C of the Act, having regard to books of accounts and other documents received from the Assessing Officer of the searched person before issuing notice u/s. 153C of the Act. In the present case, the Assessing Officer of the searched person has recorded satisfaction note for proceeding u/s. 153C of the Act on 31.12.2021 with reference to bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of provisions of section 153C(1) of the Act, date of search should be considered, but not the date of receiving the books of accounts or other documents. In our considered view, the law does not make any distinction, in case the Assessing Officer of searched person and the Assessing Officer of any other person is one and the same. The law is clear in as much as the proviso to section 153C(1) of the Act, is very clear to the effect that in case of such other person, the reference to the date of initiation of search u/s. 132 of the Act, in the second proviso to section 153A(1) shall be construed as reference to the date of receiving the books of accounts or documents or assets by the Assessing Officer having jurisdiction over any such other person. Since, the Assessing Officer of the searched person cannot hand over the books of accounts and other documents to the Assessing Officer having jurisdiction over any other person, unless he records the satisfaction for proceedings u/s. 153C of the Act, in our considered view, for the purpose of second proviso to section 153A(1) of the Act, the date of receiving the books of accounts or other documents by the Assessing Officer hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such search is conducted or requisition is made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: . 153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Since, the jurisdictional conditions to issue the same was not fulfilled and it was barred by limitation. The relevant findings of the Tribunal are as under: 5. Since the assessee has raised a pertinent legal issue contesting the jurisdiction of Ld. AO, we take up the same first. It could be seen that pursuant to search action u/s 132 on 10.01.2013 in the case of M/s Rasi Seeds Private Ltd. group of cases, certain documents were found from the resident of Shri M. Ramasami, Chairman-cum-Managing Director of that entity. The documents, inter-alia, contained Joint Development Agreement (JDA) dated 30.03.2007 between the assessee (land-owner) and another entity namely SMS Gardens (P) Ltd. (SGPL) (developer) for the construction of a residential complex on certain land owned by the assessee at Coimbatore. 6. Since the seized document belonged to the assessee, proceedings u/s 153C r.w.s. 153A was initiated against the assessee after recording of reasons and after obtaining due approval of prescribed authority. The case of the assessee was centralized vide Notification No.07/2013-14 dated 20.08.2013 and notice u/s 153C r.w.s. 153A was issued on 24.09.2013. In response, the assessee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is conducted or requisition is made except in cases where any assessment or reassessment has abated. These provisions provide that in case of search on a person, if AO is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of any other person then the books of account or documents or assets so seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub section (1) of section 153A. It has further been provided that in case of such other person, the reference to the date of initiation of the search u/s 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrued as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the AO of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e., 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be the assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the sea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the second proviso to section 153A(1) of the Act, shall be construed as reference to the date of receiving the books of accounts or other documents by the Assessing Officer having jurisdiction over such other person and said date is considered in the present case i.e. on 31.12.2021. The assessment year before us is beyond stipulated six assessment years and four relevant assessment years and thus, notice issued by the Assessing Officer u/s. 153C of the Act, dated 31.12.2021 and consequent assessment order passed u/s. 143(3) r.w.s. 153 of the Act, dated 31.03.2022 is barred by limitation and liable to be quashed. Thus, we quash assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 153C of the Act, dated 31.03.2022. 18. The assessee has raised various other grounds challenging additions made by the Assessing Officer towards share premium in light of the decision of Hon ble Supreme Court in the case of PCIT vs Abhisar Buildwell (P) Ltd (Supra) and also on merits of additions towards share premium u/s. 68 of the Act. Since, we have quashed the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 153C of the Act, dated 31.03.2022 on preliminary issue of j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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