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TMI Blog2022 (3) TMI 1618X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case are, search and seizure action u/s. 132 of Income-tax Act, 1961 (in short "Act") was conducted in the case of KamlaLandmarc Group and its Directors / Partners on 10.12.2013. The premises of the assessee also searched by virtue of the above search proceedings. Accordingly, notice was issued u/s. 153A of the Act asking the assessee to file its Income tax return for the relevant year. In response, assessee filed its Income Tax Return u/s. 153A of the Act on 18.10.2015 declaring total income of Rs..13,13,960/-. Further, notice u/s. 143(2) was issued and served on the assessee, the original return for the A.Y. 2009-10 was filed on 26.09.2009 declaring same total income as declared in return of income filed u/s. 153A of the Act. The above said original return was processed u/s. 143(1) of the Act. 4. Kamla Landmarc Group is primarily engaged in the business of construction of residential / commercial projects in Mumbai. The Directors/Partners of various entities under Kamla Landmarc Group are Shri Ramesh Jain, Shri Jitendra Jain, Shri Jinendra Jain, Shri Ketan Shah and ShirSushi Mantri. During the course of the search, Directors/Partners of the group were confronted wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o prove the genuineness of the transaction as well as identity and the creditworthiness of the lenders. He also observed that it has been categorically accepted in the statement taken on oath of Shri Jitendra Jain (Director of Kamla Landmarc Group) that loans taken and interest paid thereon are bogus and mere accommodation entries. Accordingly, Assessing Officer proceeded to make the addition u/s. 68 of the Act and disallowed the interest under section 37 of the Act. Further Assessing Officer made disallowance of commission expenses to the extent of Rs..2 Lakhs and also ad hoc disallowance @30% on labor charges and professions fee paid during the year. 7. Aggrieved assessee preferred an appeal before the Ld.CIT (A) and filed detailed submissions objecting to the above additions as well as made submissions that the statement recorded u/s 132(4) were not provided to the assessee, it was provided only during the assessment proceedings only on 25.02.2016, thereafter, Shri Jitendra Jain retracted statement on 18.03.2016. It was submitted before Ld CIT (A) that upon retraction whether the above additions can be made? 8. Ld.CIT (A) considered the submissions of the assessee and rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d parties, based on which the search was conducted and also not providing the opportunity of cross examining the said parties to the appellant. 3. The Appellant prays that the Order of the AO, confirmed by the CIT (A) be set aside and be held as void-ab-initio and bad in law and the additions made therein be deleted for want of natural justice. WITHOUT PREJUDICE TO GROUND I &II: GROUND III: CONFIRMING ADDITION MADE BY THE AO OF UNSECURED LOAN OF RS. 1,00,00,000/U/S. 68 OF THE ACT 1. On the facts and in the circumstances of the case and in law, the CIT (A) has erred in confirming the Order of the AO making addition of unsecured loan, treating the same as bogus in nature solely on the basis of statements of a Partner of the Firm, recorded during the course of search action and third party statements and further erred in making aggregate addition far beyond the quantum purportedly offered in the said statements. 2. The CIT (A) has failed to correctly appreciate and ought to have held that no addition can be confirmed as; a. The statements of the Partner of the Firm were retracted during the course of assessment proceedings immediately after the same were made availab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of notional commission on the alleged ground that the Appellant must have incurred commission expenses on the unsecured loans held to be in the nature of accommodation entries. 2. The CIT (A) failed to appreciate and ought to have held that the statements of the Partner which were relied upon for making an addition of notional commission were retracted during the course of assessment proceedings. 3. Without prejudice to 1 to 2 above, the CIT (A) has erred in confirming the actions of the AO in relying upon the general statement of the Partner at Question-21 of the statement recorded on oath on December 13, 2013 ignoring the reply given by the Partner in response to Question-6 of the statement recorded on oath on December 30, 2013 mentioning that there are no brokers involved in these transactions. 4. The Appellant prays that the addition on account of notional commission be deleted. WITHOUT PREJUDICE TO GROUND I & II: 4 GROUND VI: CONFIRMING THE DISALLOWANCE MADE BY THE AO OF PROFESSIONAL FEES OF RS.1,20,439/ 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in confirming the ad hoc addition of professional fees on the alleged gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Abated Assessments 2009-2010 1366/Mum/2019 26.09.2009 No 30.09.2010 10.12.2013 Non Abated Assessments 2010-2011 1367/Mum/2019 13.10.2010 No 30.09.2011 10.12.2013 Non Abated Assessments 2011-2012 1368/Mum/2019 29.09.2011 No 30.09.2012 10.12.2013 Non Abated Assessments 2012-2013 1369/Mum/2019 29.09.2012 No 30.09.2013 10.12.2013 Non Abated Assessments 2013-2014 1370/Mum/2019 Not filed No 30.09.2014 10,12.2013 Abated Assessments 2014-2015 1371/Mum/2019 13.01.2016 No 30.09,2015 10.12.2013 Abated Assessments KamlaLandmarc Developers Before H Bench, ITAT Mumbai for the clarification matter heard on 18.06.2021 Assessment Year ITA No: Return of Income filed u/s. 139(l) 143(3) Order Passed Date of issuing Notice u/s. 143(2) expires on Date of Search Remarks 2008-2009 712/Mum/2019 30.09.2008 Yes 30.09.2009 10.12.2013 Non Abated Assessments 2009-2010 713/Mum/2019 29.09.2009 No 30.09.2010 10.12.2013 Non Abated Assessments 2010-2011 714/Mum/2019 13.10.2010 No 30.09.2011 10.12.2013 Non Abated Assessments 2011 -2012 715/Mum/2019 29.09.2011 No 30.09.2012 10.12.2013 Non Abated Assessments 2012-2013 716/Mum/201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is enclosed. 9. The order of CITA is passed ex-parte. However, the CITA has taken cognizance of various documents filed during the course of assessment proceedings but not considered by the Assessing Officer while completing assessment proceedings. The document submitted by the Appellant to prove identity, creditworthiness and genuineness of loan borrowed considered but not accepted by CITA. 10. The retraction of the said statement was, filed during course of assessment proceedings but the same was not considered by the Assessing Officer and considered but not accepted by Hon. CITA. 11. In the Assessment Order as well as CITA Order, there is no finding about any incriminating materials found during the search. However, Hon. CITA has upheld the addition of loan borrowed by Assessing Officer u/s. 68, despite no incriminating materials were found in case of non-abated assessment, only on the grounds that: i. The statement recorded u/s. 132 (4), in the absence of any incriminating materials found, is itself incriminating. ii. Absence of various documents about the loan borrowed like loan agreements, terms of agreement, security offered etc. is also incriminating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere found, noting on telephone diaries were found during the search and statement u/s. 132(4) was considered for making the addition u/s. 153A and incriminating materials were found. 17. Without prejudice to the above, it was also submitted that the documents to prove the initial onus about identity, genuineness and credit worthiness were filed during the assessment proceedings. Neither Assessing Officer nor Hon. CIT (A) made any preliminary inquiry to verify authencity of documents filed and treated loan taken as bogus based on statements of the persons indulged in activities of providing bogus loans and statement of Jitendra Jain recorded u/s. 132(4). Copies of statement of the persons indulged in providing accommodation entries were not given. The opportunity to cross examine those persons even though requested for was denied. We rely on case of Hon. Bombay High Court in case of Gangan Deep Infrastructure Private Limited and Green Infra wherein addition u/s. 68 were deleted once primary onus cast upon on assessee is discharged and also rely on case of Hon. Apex Court in case of Lovely Exports, wherein it is decided once preliminary onus discharged by the assessee, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2008 - 2009 was passed u/s 143(3) of the Act as observed by the Assessing Officer while passing the assessment order u/s 143(3) r.w.s 153A dated 18.03.2016 for AY 2008-09, therefore, the assessment in relation to the assessment years 2008-2009 to 2012-2013 are non-abated assessments and are not liable to be sustainable. It is specifically argued that the statement recorded u/s 132(4) of the Act itself cannot be treated as incriminating evidence. In support of these contention, the Ld. Representative of the assessee has placed reliance upon the decision in the case of Commissioner of Income Tax v. Harjeev Aggarwal [(2016) 290 CTR 263]. The Ld.DR raised the contention that the statement recorded u/s 132(4) in itself is an incriminating material and also argued that in the absence of supporting documentary evidences for the unsecured loans borrowed are also considered as incriminating facts and therefore, the additions are rightly made by the Assessing Officer in respect of loan borrowed from the parties who were allegedly indulged in providing accommodation entries and upheld by the Ld.CIT (A) for the aforesaid year for which the assessment is non-abated. 15. The Ld. AR responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded." 16. We also took into notice of the CBDT Circular F No. 286/2/2003- IT(Inv) dated 10.03.2003 addressed to all the Chief Commissioners of income Tax (Cadre Contra) and Directors Generals of Income Inv, relied by the Ld. Representative of the assessee wherein the emphasis was given to collection of incriminating materials rather than obtaining confession of additional income during the course of search and seizure proceedings. No doub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents / reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment / reassessment proceedings which stood abated as per section 153A(1). "Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment / reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order." 17. Ld. Representative of the assessee also relied upon the case titled as All Cargo Global Logistic [374 ITR 645 (2015) (BOM)], wherein the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous. It was clearly held in that case that assessments which are not pending and which have attained finality, addition under section 153(A) cannot be done without reference to incriminating seized material. We may gainfully refer to the relevant order of the honourable High Court as under: "On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under I section 132/4 stand abated and not the assessments/reassessments already finalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/ reassessments would not abate. Therefore, the argument of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the references is to those assessments in whose case assessment under section 143 (3) cannot now be done. It is not at all the case of the revenue that in the appeals which have been claimed as unabated here there was time for assessment under section 143(3). In this view of the matter, in our considered opinion, the submission of the learned counsel of the assessee succeeds that addition in the case of unabated assessment without reference to incriminating seized material for assessment u/s. 153(A) is not sustainable on the touchstone of above said honourable jurisdictional High Court decision. Therefore, the learned CIT appeals and the learned departmental representative plea in trying to distinguish the same by reference to Hon'ble Delhi High Court decision and honourable Supreme Court decision in the case of Rajesh Jhaveri (supra) doesn't succeed. 44. It may not be out of place here to mention that it is specifically provided in section 153A "that assessment or reassessment if any relating to any relevant assessment year or years referred to in this subsection pending on the date of initiation of search under section 132 or making of requisition under section 132 a as the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment. The case of the assessee is squarely covered by the decision of Hon'ble Bombay High Court decision in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein the Hon'ble Bombay High Court held as under: - "a) Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A) was justified in deleting the addition of Rs..3,91,55,000/- under section 68 of the Act in respect of share application money and addition of Rs. 11,24,964/- under section 14A made by the Assessing Officer, as it was not based on incriminating material found during the course of search. d) Whether on the facts and circumstances of the case and in law, the Ld. CIT (A) was justified in deleting the addition of Rs..3,91,55,000/- under section 68 of the Act in respect of share application money and addition of Rs. 11,24,964/- under section 14A made by the assessing officer without appreciating the fact that the decision of continental warehousing corporation & the decision in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statements obtained upon survey. Furthermore it is based upon Assessing Officer's analysis of the impugned companies financials wherein the assessing officer is of the opinion that the increase in value is unjustified. Furthermore assessing officer has referred to general SEBI action in case of bogus long-term entry operators. However none of the brokers or the persons or the companies dealt in these appeals have been referred in the above said SEBI enquiry noted by the AO in his order. As regards the merits of additions based upon the statement obtained from Survey from 3rd parties the same is not at all sustainable without any corroborative material. This position was expounded by the honourable Supreme Court in the case of S. Kader Khan (supra). That there is no material incrementing available in this regard is clearly evident from the observation of the assessing officer in the order itself. The assessing officer mentions that what is real was not recorded in the books of accounts at any place. He mentions in the assessment order that no book entries to the real transactions either in the books of assessee or in the books of this entry operators are there. This clearly sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Andaman Timber Industries (supra) is germane and supports this proposition. 53. In this regard we also place reliance upon the co-ordinate bench decision in the case of Shri Vijayrattan Balkrishan Mittal (supra), wherein similar addition was deleted by following adjudication: 28. We also noted that as per provisions of section 68 of the Act, where any sum is found credited in the books in any previous year and assessee offers no explanation about the nature and source thereof or the explanation offered is not satisfactory to the AO, the sum credited may be charged to tax under Sec. 68 of the Act. The assessee is required to prove: (i) the identity of the creditor (ii) Source of the credit and (iii) genuineness of the transaction to the satisfaction of the AO. To prove the identity of the creditor, the nature of transactions, source of payments and the genuineness of the transactions of sale of shares of PAL, the assessee has submitted following documents/ evidences: - a) To prove the identity of creditor and nature of transaction the assessee submitted copy of Contract note on sale by Geojit on BSE platform. The contract notes shows the quantity, rate, time stamp, value, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from last more than 10 years. The assessee has been regular investor in shares & securities and his portfolio comprises of various shares and the aggregate value of investments for 5 years have been as under: - AY (as on date) Total investment in shares-Amount (in Rs. ) 31.03.2011 3,77,21,394 31.03.2012 3,33,40,018 31.03.2013 2,66,87,649 31.03.2014 2,91,24,876 31.03.2015 2,58,84,431 Copies of Balance Sheet of the assessee for the above mentioned years showing the investments made in shares were submitted to the AO vide submission dated 15.03.17 as well as before CIT (A) and even now before us. This adds to the bonafide of the assessee's transactions. In view of the above facts and circumstances of the case, we have to go through the expression of "nature and source" and has to understand the requirement of identification of the source and its genuineness. Sec. 68 of the Act places the burden of proof on the tax payer, to explain the nature of source of any credit but not the source of the source. Hence when an assessee gives evidences of identity of the payer, source of the credit, evidences of the transactions to prove the genuineness, the assessee is said to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... malchand Jain vs. Pr. CIT (2018) 89 taxmann.com 196 (Bom), wherein the decision on the impugned issue was discussed. Hon'ble High Court has considered the facts of Sanjay Bimaichand Jain supra from where we find that (i) in that case, the broker company through which the shares were sold did not respond to AO's letter regarding the names and address and bank account of the person who purchased the shares sold by the assessee (ii) Moreover, at the time of acquisition of shares of both the companies by the assessee, the payments were made in cash (iii) The address of both the companies were interestingly the same (iv) The authorized signatory at both the companies were also the same person (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon'ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the decision of Hon'ble Bombay High Court (supra) is factually distinguishable." 54. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of CIT Vs. Orchid industries p ltd in ITA No 1433 of 2014 vide order dt. 5/7/2017 has similarly held as under :- "1] The Revenue has filed the appeal on following questions; 6.3 Whether on the facts and in the circumstances of the case and in law, orders of the Tribunal was perverse in deleting the addition of Rs. 95,00,000/- made u/s. 68 of the Act, relying only on the documentary evidence produced by the Respondent Company while ignoring the key factor that these entities were not traceable at their given addresses. 6.4 Whether on the facts and in the circumstances of the case and in law, the Tribunal erred in not appreciating the observations made by the Delhi High Court in Nova Promoters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances. 6.5 The Tribunal ought to have taken note of the fact that the assessee was not able to produce even a single party before the AO despite agreeing before the CIT (A) that it will produce all parties before the AO during remand proceedings." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that just before issuance of cheques, the amount was deposited in their account. 6] The Tribunal has considered that the Assessee has produced on record the documents to establish the genuineness of the party such as PAN of all the creditors along with the confirmation, their bank statements showing payment of share application money. It was also observed by the Tribunal that the Assessee has also produced the entire record regarding issuance of shares i.e. allotment of shares to these parties, their share application forms, allotment letters and share certificates, so also the books of account. The balance sheet and profit and loss account of these persons discloses that these persons had sufficient funds in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidences, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd, (supra) would be applicable in the facts and circumstances of the present case. 7] Considering the above, no substantial question of law arises. The appeal stands dismissed. However, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is simply based on some comparables collected from the office of the Asst Sub-Registrar and has been applied on presumption that assessee would have paid the same market value. The addition of undisclosed investment under section 69 cannot be made purely on possibility of higher payment on the basis of comparables of higher market value. That hence the addition is without any basis. The learned CIT (A) has further noted that provisions of section 56 would have been applicable as purchase value is lower than stamp duty value. However since provisions of section 56 have come to the statute with effect from 01.04.2014. The substantive law would not be applicable for assessment year 2012-13. 64. Against this order revenue is in appeal before us. As we already observed the additions for assessment year in this case is without reference to any incriminating material found during search. Since the assessment has been done under section 153 A in case of an unabated assessment as we have already held hereinabove the addition is not sustainable de horse any incriminating material. Hence this addition is not at all sustainable. 65. Furthermore the order of learned CIT (A) is reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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