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TMI Blog2024 (8) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... iction 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... uch other relief as this Hon'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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Memorandum of Association and Articles of 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 provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3C of the Act and thus, the notice issued by the Assessing Officer 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. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the satisfaction _note date as taken by the assessee. The decisions cited 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted on 25.02.2020 where the relevant previous year is 2019- 20. The relevant assessment year is 2020-21. The date 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /JMG/LS/S-5 on 25.02.2020, which were maintained by Jain Metal Group. These are all the incriminating material in this case. When questioned 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , future projects that would go to enhance an increase, the intrinsic worth of the company. The company clearly has not made any kind of profit. The net worth of 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 observi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfied in such Cases is, creditworthiness of creditors/shareholder creditors/ shareholder, creditworthiness of and genuineness of the transaction. These three requirements have to be 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts to the Assessee's income." 11.22 As discussed earlier, mere filing of 'return of allottees' with incomplete balance sheets would not suffice to prove the identity, creditworthiness and genuineness of the transactions, 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 comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ddition on account of alleged share capital u/s 68, where the assessee company has failed to show genuineness of its shareholders. Rick Lunsford Trade & Investment Ltd Vs CIT [Supreme Court] 2016-TIOL-207-SC-IT 11.23.7 It was accepted that the assessee was unable to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney received from various investors, since assessee failed to produce them despite various opportunity granted to it and, moreover there was no evidence on record establishing genuine investments on their part in shares of assessee-company, impugned addition was to be confirmed. Royal Rich Developers (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted six assessment years and four relevant assessment years, the notice issued by the Assessing Officer u/s. 153C of the Act, is outside the scope of section 153C of the Act and thus, consequent assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 153C of the Act, dated 31.03.2022 is beyond limitation 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and second proviso coupled with provisions of section 153C(1) and proviso provided therein, it is undoubtedly clear that, in a case where search is conducted u/s. 132 of the Act, any incriminating material found relates to any other person and has a bearing on total income of such other person, then the Assessing 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The arguments for the ld. DR for the revenue that, since the Assessing Officer of the searched person and the Assessing Officer of any other person is one and the same, and thus, question of handing over books of accounts and other documents to the Assessing Officer of any other person does not arise and thus, for the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other per- son (person other than the one searched). 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 sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of NSR Corp vs DCIT in ITA No. 144/Chny/2018, where the Tribunal under identical set of facts by following the decision of Hon'ble Delhi High Court in the case of CIT vs RRJ Securities Ltd (Supra) held that, issuance of notice u/s. 153C of the Act, for the assessment year beyond the stipulated six assessment years and four relevant assessment years could not be sustained. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search 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 requisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... date of the search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed 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 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case has, therefore, been rendered merely academic in nature." 17. In this view of the matter and by considering facts and circumstances of this case, and also by following the decision of Hon'ble Supreme Court in the case of CIT vs Jasjit Singh (Supra), we are of the considered view that for the purpose of proviso to section 153C(1) of the Act, 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) 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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