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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 ..... Shri S. Rifaur Rahman, Hon'ble Accountant Member And Shri Amarjit Singh, Hon'ble Judicial Member For the Assessee : Shri Rashmikant Modi & Shri KetkiRajeshirke. For the Department : Shri Neelam Shukla. ORDER PER BENCH 1. These appeals are filed by different assessees of same group against different orders of the Ld. Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter in short "Ld. CIT(A)"] for the Assessment Years 2008-09 to 2014-15. 2. Since the issues raised in all the appeals are identical, therefore, for the sake of convenience, these appeals are clubbed, heard and disposed off by this consolidated order. We are taking Appeal in the case of KamlaLandmarc Enterprises., in ITA. No. 1366/Mum/2019 for the A.Y. 2009-10 as the lead case. 3. Brief 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, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed loans. He also discussed the various modus operandi and chronological arrangement of transactions in his order (Para No. 6) and he also analyzed the parties from whom assessee has taken unsecured loans and he came to the conclusion that these parties are mere entry providers giving entries for purchase sales, unsecured loan advances, etc., and his comments on unsecured creditors are given in Para No. 6.2 of his order. During the assessment proceedings assessee was asked and show cause as to why the above unsecured loans should not be added back to the total income of the assessee and relevant interest paid should not be disallowed. Since there was no response from the assessee, the Assessing Officer proceeded to make the addition by observing that assessee has failed to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt prays that the Order of the CIT (A) confirming proceedings initiated by the AO under section 153A of the Act be set aside, quashed and be held as bad in law and/or the additions made in the order passed under section 143(3) r.w.s. 153A of the Act be deleted. WITHOUT PREJUDICE TO GROUND I: GROUND II: VIOLATION OF PRINCIPLES OF NATURAL JUSTICE: 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in confirming the action of the AO in not considering / ignoring the submissions of the Appellant and also CIT (A) himself not considering the said submissions in the proper perspective, thereby violating the principles of natural justice. 2. The CIT (A) further erred in confirming the actions of the AO of not providing the statement of the third 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: CONFIRM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rroborative evidence, addition cannot be made solely on the basis of some statements; d. There was no incriminating material found during the course of search action to Support the allegations of loans being bogus in nature; e. Having regard to the confirmation, statements and accounts of the loan creditors filed in the course of assessment, the additions made deserves to be deleted. 3. The Appellant prays that the disallowance on account of interest on loans availed treated as Bogus u/s 37 of the Act be deleted/appropriately reduced. WITHOUT PREJUDICE TO GROUND I & II: GROUND V: CONFIRMING THE ADDITION MADE BY THE AO OF NOTIONAL COMMISSION OF RS. 2.00,000/ 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in confining an addition 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 2. The Appellant prays that the AO be directed to delete the interest charged or appropriately reduce interest under section 234B and 234C of the Act. GROUND IX: GENERAL. The Appellant craves leave to add, alter, amend and/or delete, all or any of the foregoing grounds of appeal." 11. Before us, assessee has filed a chart highlighting the status of the appeal whether abated or non-abated in the case of group companies which is reproduced below: - KamlaLandmarc Enterprises 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(1) 143(3) Order Passed Date of issuing Notice u/s. 143(2) expires on Date of Search Remarks 2008-2009 1365/Mum/2019 29.09.2008 Yes 30.09.2009 10.12.2013 Non 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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry. 6. Labour charges and Professional Fees are also disallowed by the Assessing Officer on ad hoc basis. 7. CITA has upheld the addition made by the Assessing Officer in respect of loan borrowed u/s. 68. However, in respect of disallowance of interest and other expenses, CITA has taken cognizance of facts that expenses are included in valuation of work - in - progress and same are set aside to file of Assessing Officer, by stating that the disallowance of interest and other expenses to be deleted, if the same are included in work in progress. The order giving effect to the same is pending. 8. Year wise details of abated and non-abated assessment is submitted earlier before Hon. Coordinate bench. The same is available on records. A copy of which 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion can be made in respect of completed assessment u/s. 153A without incriminating materials found during the search. 15. Elaborate submission is given herewith about what is incriminating materials in our submission enclosed herewith. According to ratio laid down, observation made in various case laws relied upon in the submission. "Statement recorded u/s. 132(4) without having any incriminating materials found during search is not incriminating material itself". "Absence of basic documents about the loan at the time of search cannot be treated as incriminating material found." 16. The case of decision of Hon. Madras High Court in case of B. Kishore Kumar relied upon by learned D.R. is distinguished because during the search action loose sheets were 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht. In this regard he relied on the case of D.Krishnakumar (62 taxman 215). 14. We have heard the parties and perused the details, documents and submissions alongwith case laws relied upon by the Ld. AR as well as Ld.DR. The Ld. Representative of the assessee has argued that no incriminating materials were found during the search carried out on 10.12.2013 at the various premises of the Kamla Group, therefore, the assessment is not liable to be reopened in accordance with law. It is also argued that the period for issuing the notices u/s 143(2) of The Income Tax Act, 1961 expired by the time of search for the assessment years from 2009 - 2010 to 2012 - 2013 and no notices were issued u/s 143(2) for the aforesaid assessment years. It is also argued that the assessment order for A.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 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck assessment merely because any admission was made by the Assessee during search operation s. 25. (...) However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of conducting search under section 132 or making requisition under | 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, that on initiation of proceedings under section 153A, the assessments / 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 independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions and perused the records. Firstly issue in appeal is that in assessment framed under section 153(A) in case of the unabated assessment addition without reference to incriminating material is not sustainable. This issue has been clearly spelt out and affirmed by honourable jurisdictional High Court in the Catena of case laws including that of continental warehousing (supra). 40. The learned departmental representative and the learned CIT appeals have tried to distinguish this decision from Hon'ble Bombay High Court by referring to Hon'ble Delhi High Court decision in the case of Kabul Chawla (supra). 41. In this regard we are of the considered opinion that the decision from honourable jurisdictional High Court in Continental Warehousing (supra) is clear and unambiguous. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t apply here. The learned departmental representative has mentioned that honourable High Court has referred about assessments which have been finalized. 43. In our considered opinion, the honourable jurisdictional High Court has never mentioned that it is only assessment which has been completed under section 143(3) that addition under section 153(A) cannot be done without reference to incriminating seized material. Honourable jurisdictional High Court has clearly mentioned that it is those assessments which are unabated, that is not pending, to which the above said ratio will apply. Assessments which are not pending are not only those which have been completed under section 143(3) but also those for which the time for issuing notice under section 143(2) have already elapsed. In other words 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sustainable in the case of unabated assessment. We may gainfully refer to the said decision as under: 44. After hearing both the parties and perusing the facts on record, we observed that undisputably the assessment in the instant year has not abated on the date of search. We further find that the evidences were gathered after issuing notice under section 133(6) that assessee has carried out synchronized trades for obtaining bogus LTCG. In our opinion, the said information/data is collected after the date of search and does not constitute incriminating material found and seized during the course of search. Keeping in view the said facts and circumstances, we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating record 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was produced before us. In light of above said case laws the observation of learned CIT (A) that incriminating material need not be specific has no legs to stand. This very observation by the learned CIT (A) itself is an admission that no specific incriminating material has been seized and referred in the assessment order Hence, in all cases of unabated assessment the assessment fails on jurisdictional defect. Thus, ITA No. 6519/MUM/2019, 6520/MUM/2019, 6515/MUM/2019, 6516/MUM/2019, 6513/MUM/2019 & 6514/Mum/2019 are dismissed on account of jurisdictional defect. 49. As regards the issue of additions on merits for the bogus long-term capital gain, we note that the same is based upon the modus operandi of earning bogus long-term capital gain in general mentioned by the assessing officer. It is further more based upon 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 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransaction. The AO has not pointed out any deficiency in the documents or inherent weakness in the explanation or doubted genuineness of the transactions for want of any evidence. 51. From the above, it is evident that all the documentary evidence in support of the income has been maintained and furnished. No defect in the same has been refereed by the Revenue. 52. Further, it is undisputed that the assessee has asked for cross examination doing assessment proceeding itself. However, the same remained unresponded by the A.O. as well as ld. CIT(A). These information collected on the back of the assessee without opportunity to cross examine, cannot be a basis for addition. They have been held to be vitiating the assessment itself and rendering it a nullify. Here, the Hon'ble Supreme Court's decision in the case 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the transactions. f) SEBI's final order dt. 19.09.2017 relating to PAL is enclosed. SEBI after detailed investigation into the transactions in the shares of these companies held that the parties to the investigation including assessee and alleged exit providers are having no nexus or connection with the company, their directors, promoters etc. and there is no price or volume manipulation in these scripts. This also explains the genuineness of the transactions and discards the theory of manipulation or accommodation to take tax advantage illegally. 29. We have also noted the facts further that the assessee has received total amount of Rs. 14,16,80,449/- on account of sale of shares of PAL during the year, in the account with Axis Bank from Geojit, registered broker of BSE with whom the assessee is dealing 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is illegal and cannot sustain. The findings of investigation & modus operandi in other cases narrated by the AO and also CIT (A) nowhere prove any connection with the assessee nor the assessee's involvement or connection or collusion with the brokers, exit providers, accommodation providers or companies or directions etc. For making the addition, it is necessary to bring on record evidence to establish ingenuity in transactions or any connection of the assessee or its transaction with any of the alleged parties. The assessee has discharged his onus by establishing the identity of the payer, source of the credit and genuineness of the transactions. 30. We noted that the learned CIT Departmental Representative also relied on the decision of the Hon'ble Bombay High Court, Nagpur Bench in the case of Sanjay Bimalchand 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 accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on't have much income, that the entire TDS have been claimed as refund by them, that they have same IP address of filing return and same corresponding address. 57. We find that by simply referring to General findings of investigations wing at Kolkata entry operators providing bogus loans the revenue authorities cannot fasten liability of undisclosed income upon the assessee, unless the assessing officer makes enquiry of his own and rebuts the documentary evidences submitted by the assessee. The assessee has duly discharged its onus by submitting the loan confirmation, income tax details and bank statements and financial statement of the loan creditors. Without making enquiry of his own the Assessing Officer has rejected them which is totally unsustainable. In this regard we note that honourable Bombay High Court in 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, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the shares of the Assessee. The learned counsel relies on the judgment of the Division Bench of this Court in case of Commissioner of Income Tax vs. Gagandeep Infrastructure (P.) Ltd., reported in [2017] 80 Taxmann 272 (Bombay) and the order of the Apex Court in case of Commissioner of Income Tax vs. Lovely Exports (P.) Ltd., reported in [2008] 216 CTR 195 (SC). 4] We have considered the submissions. 5] The Assessing Officer added Rs. 95 lakhs as income under Section 68 of the Income Tax Act only on the ground that the parties to whom the share certificates were issued and who had paid the share money had not appeared before the Assessing Officer and the summons could not be served on the addresses given as they were not traced and in respect of some of the parties who had appeared, it was observed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that it was found that assessee has purchased 2 plots at Ambey Valley. That in order to ascertain the fair market value notice under section 133(6) was issued to the assistant sub- registrar Lonavala, to furnish the copies of sale deeds executed within the range of 3 months post and pre-of the registration made by the assessee. The assessing officer made some computation of his own and thereafter show caused the assessee as to why 90.28% more should not be added to the value already shown. In absence of any response from the assessee proceeded to add difference amount of Rs. 1,93,60,000/- u/s. 69 of the IT Act . 63. Upon assessee's appeal learned CIT (A) observed that this addition by the assessing officer is without any basis and the assessing officer has erred both in law and fact. That addition 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 basi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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