Case Law Details
DCIT Vs NRVS Steels Ltd. (ITAT Raipur)
Conclusion: In absence of any incriminating material unearthed during the search from the premises of assessee for an unabated / completed assessment year, no addition under section 68 on account of undisclosed income was justified and AO could re-open the assessment in exercise of powers under sections 147/148, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148.
Held: Assessee was a Public Limited Company, engaged in manufacturing of Sponge Iron through processing Iron Ore, coal and dolomite. A search and seizure operation u/s 132 was carried out on various premises of the NR Group and its associates / concerns. Consequently, notice u/s 153A was issued for the AY 2008-09 to 2017-18. In response to the notice, assessee filed returned of income for the AY 2008-09 to 2017-18. During the course of assessment proceedings, AO found that assessee had received share application money / share premium in Assessment years 2008-09 to 2014-15 from various Kolkata based Investor Companies, aggregating to Rs.10,08,25,658/- including share capital and share premium. After considering assessee’s response, explanations and submissions, AO proceeded to make an addition of Rs.2,19,00,000/- for AY 2008-09, similar additions of Rs.2,25,00,000/- for the AY 2009-10 and 62,00,000/- for 2011-12 on account of undisclosed income u/s 68. It was held that as the year concerned was an unabated assessment years and also the documents surfaced during the search and seizure action were not in the nature of incriminating document / material, therefore, respectfully following the principle of law laid down by Hon’ble Apex Court in the case of Abhishar Buildwell, CIT(A) had rightly and judiciously decided the issue by vacating the addition of Rs.2.19 crore for the AY 2008-09 and 2009-10. In absence of any incriminating material unearthed during the search from the premises of assessee for an unabated / completed assessment year, but certain documents were seized which could not be termed as incriminating material, the revenue should be at liberty to undertake necessary legal recourse available in the aforesaid matters following the guiding principal laid down by Hon’ble Apex Court in the case of Abhishar Buildwell (supra) that, However, the completed/unabated assessments could be re-opened by the AO in exercise of powers under sections 147/148, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 and those powers were saved.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeals and cross objections are filed at the instance of department and the assessee respectively, for the assessment year 2008-09 and 2009-10, against the common order of Commissioner of Income Tax (Appeals)-3, Bhopal, (in short “Ld. CIT(A)”) dated 21.03.2002, which in turn arises from the common assessment order passed by Deputy Commissioner of Income Tax, Central-2, Raipur (in short “Ld. AO”), dated 30.12.2019 under Section 143(3) read with section 153A of the Act (in short “The Act”).
2. Since, all the aforesaid matters pertains to same assessee known as M/s NRVS Steels Ltd., Basna, having common, interconnected and inextricably interwoven issues involved therein, therefore, for the sake of convenience and brevity, both the aforesaid matter are taken up for adjudication under this common order.
3. For adjudication of the common issues involved in the present appeals, we are taking up IT(SS)A No.11/RPR/2022 as the lead case, wherein our decision rendered shall apply, mutatis mutandis to the other case.
4. The grounds of appeal raised by the revenue in IT(SS)A11/RPR/2022 are as under:
1. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition u/s 68 of the I.T. Act, 1961 of Rs.2,19,00,000/- for the A.Yr.2008-09 on account of share application money introduced by the Kolkata based paper companies, which has been made on the basis of clear finding by the AO and not substantiated by the assessee.
2. The order of the Id. CIT(A) is erroneous both in law and on facts.
3. Any other ground that may be adduced at the time of hearing.
4.1 At the very inception, it is noticed that assessee had submitted an application under rule 27 of the Income Tax Rules, 1963 with the registry of ITAT on 07.10.2022, assailing certain supportive and legal contentions. Ld. AR of the assessee further revised Ground No. 1 and 2 of the application under Rule 27 on 30.03.2023, and again on 20.05.2024 revised ground no. 2. However, subsequently, on 21.05.2024, Ld. AR had submitted an application seeking withdrawal of all the applications made under Rule 27 of the I.T. Rules, 1963, the copy of application for withdrawal of grounds raised under rule 27 is extracted hereunder, which in absence of any objections from the revenue are permitted to withdraw.
4.2 Coming to the grounds of appeal raised by the department wherein the ground no. 1 of the department is regarding deletion of addition u/s 68 of the IT Act for Rs.2,19,00,000/- for the AY 2008-09 by the Ld. CIT(A).
4.3 The brief facts of the issue are that the assessee is a Public Limited Company, engaged in manufacturing of Sponge Iron through processing Iron Ore, coal and dolomite. A search and seizure operation u/s 132 of the IT Act, 1961 was carried out on various premises of the NR Group and its associates / concerns on 24.10.2017. Consequently, notice u/s 153A of the Income Tax Act, 1961 was issued on 01.08.2017 for the AY 2008-09 to 2017-18. In response to the notice, assessee filed returned of income for the AY 2008-09 to 2017-18 on 07.12.2019/25.12.2019.
4.4 During the course of assessment proceedings, Ld. AO has found that the assessee has received share application money / share premium in Assessment years 2008-09 to 2014-15 from various Kolkata based Investor Companies, aggregating to Rs.10,08,25,658/- including share capital and share premium. After considering assessee’s response, explanations and submissions, Ld. AO proceeded to make an addition of Rs.2,19,00,000/- for AY 2008-09, similar additions of Rs.2,25,00,000/- for the AY 2009-10 and 62,00,000/- for 2011-12 on account of undisclosed income u/s 68 of the Act.
4.5 Being aggrieved with the aforesaid additions by the Ld. AO, assessee preferred an appeal before the Ld. CIT(A), wherein the assessee partly succeeded, however, the addition of Rs.2,19,00,000/- for the AY 2008-09 have been directed to be deleted. While vacating the additions Ld. CIT(A) had observed as under:
3.1.2 I have considered the facts of the case, material evidences on record, written submission filed by appellant and to the facts and findings of the AO inter alia material brought on record. The appellant through its written submission has vehemently challenged the arbitrary approach of the AO mainly on two major Counts:
(a) The Id AO erred in opening assessment proceedings for AYs 2008-09 to 2011-12, beyond six years, in absence of any undisclosed asset;
(b) The Id AO erred in making additions in non-abated assessment years and without having any incriminating/positive document on record;
(a) The ld. AO erred in opening assessment proceedings for AYs 2008-09 to 201112 beyond six years in absence of an undisclosed asset;
4.5 This issue has been assailed before the Hon’ble Jurisdictional High Court simultaneously by the assessee under a writ petition, in disposal of which the issue qua assumption of jurisdiction of Ld. AO u/s 153A in opening the assessment beyond the period of 06 years has been decided in favour of the revenue vide order dated 03.12.2020. Such judgment was not taken into consideration by the Ld. CIT(A), while passing the appellate order, therefore subsequently, when such a vital information was brought to the knowledge of Ld. CIT(A) by the assessee seeking rectification of mistake apparent on record, a rectification order u/s 154 of the Act was passed on dated 01.06.2023, consequently, the decision of Ld. CIT(A) vide his earlier order dated 21.03.2022 to the extent of this issue has got corrected / nullified. The issue, therefore, as already decided in favour of the revenue by the Hon’ble Jurisdictional High Court, thus, the same is no more res-integra to be discussed further.
4.6 The second issue has been dealt and deliberated by the Ld. CIT(A) with the following observations:
(b) The ld. AO erred in making additions in non-abated assessment years and without having any incriminating/positive document on record;
On perusal of the impugned seized loose paper i.e. page no 8, 9 & 10 found and seized from BS-11, it has been found that receipts of form for allotment and issue of equity shares from investor companies. These receipts are fully recorded in books of appellant and are the part of books of account of the appellant. Such document cannot be termed as incriminating document. Thus, such loose paper forming basis of addition cannot be constitute found as a result of search and seizure proceedings. However, no other reference of any other incriminating document has been mentioned in the assessment order. There are various judicial pronouncements wherein it has been held that no addition can be made in non-abated assessments in absence of incriminating material. Now, the two moot question which arises here are that (i) whether the year are abated or non-abated assessment years and (ii) whether the ld. AO can made addition in search assessment proceedings without having any incriminating material on record and that too in non-abated assessment years. In the instant case, search and seizure operations u/s 132 of the Act was carried out on 24.10.2017 and return of income for AY 2008-09 was filed on 23.09.2008 and time limit for issuing notice u/s 143(2) expired on 30.09.2009, return of income for AY 2009-10 was filed on 26.09.2009 and time limit for issuing notice u/s 143(2) expired on 30.09.2010 and return of income for AY 2011-12 was filed on 09.03.2012 and time limit for issuing notice u/s 143(2) expired on 30.09.2013. Therefore, no assessment or reassessment proceedings were pending as on date of search and therefore, AYs 2008-09, 2009-10 & 2011-12 are non-abated assessment years or completed assessment years. However, the (ii) issue has already been dealt with in depth by Hon’ble Apex court, various High courts and tribunal and it is now settled legal pronouncement that no addition can be made in absence of any incriminating material in non-abated assessment year. This proposition find support from the decision of Hon’ble Apex court in the Case of Meeta Gutgutia (2018) 96 taxmann.com 468 (SC) dt. 2-7-18 affirming the decision of Hon’ble Delhi High Court in the same case reported in 82 taxmann.com 287. Hon’ble Delhi High Court along with various judgments followed the legal view taken by the Hon’ble Court in the case of Kabul Chawla (2016) 380 ITR 573 (Del HC). In the facts and circumstances, the case of the appellant is squarely covered by the decision of Hon’ble Jurisdictional ITAT Raipur in the case of D.C.I.T. Central Cricle, Raipur vs Mahalaxmi Technocasr Ltd, Raipur (I.T.A. Nos. 256 to 259/RPR/2014) dated 25.10.2021 wherein various judicial pronouncements including judgment in the case of Meeta Gutgutia (supra) and Kabul Chawala (supra) have been followed. Relevant paras of this decision are reproduced here under:
“14. We have carefully considered the rival submissions and perused the materials placed on record and referred to in terms of Rule 18(6) of the Income Tax (Appellate Tribunal), Rules 1963.
14.1 Before we deal with additions on merits, it will be desirable to adjudicate the pertinent legal objection of overwhelming nature raised on behalf of the assessee which goes to the root of the matter and affects the very foundation of additions in dispute. The legal question that arises as per cross objection is whether while making assessment under s. 153A of the Act, the Revenue is entitled to interfere with an already concluded (and not abated) assessment passed either under s. 143(1) of the Act or under s. 143(3) of the Act and not pending at the time of search, in the absence of incriminating documents unearthed as a result of search? As a corollary, the scope and ambit of assessment proceedings in search cases under s. 153A of the Act is put under scanner.
14.2 In the first appeal, the CIT(A) dismissed the legal ground of jurisdiction by observing as under:
“8. I have carefully gone through the assessment order and submissions of the appellant. Where a search has been initiated u/s 132 of the Act, the A.O. is entitled to issue notice for six assessment years immediately preceding the year in which search has been initiated As such, the assessment for those six Assessment years stands reopened. Once Ihe assessment Is reopened, the A.O. has full powers to assess the income which has escaped, whether found as a result of search or otherwise, Accordingly, the additions made by the A.O are within the powers assigned to him u/s 153A and for this reason, this ground of appeal is hereby dismissed, “
14.3 We have examined the legal objection on jurisdiction to make additions dehors reference to any incriminating material found in the course of search, The issue is no longer res integra and answered in favour of the assessee by large number of judicial precedents. As consistently echoed by the Hon’ble Courts of different jurisdiction, the scope of search assessments under s. 153A of the Act in respect of concluded and unabated assessments is narrower in its sweep and restricts the right of the AO to examine the issue emanating from some incriminating material.
14.3.1 We shall first refer to the decision of Hon’ble Delhi High court in the case of Pr. CIT vs. Meeta Gutgutia (2017) 395 ITR 526 (Del). The Hon’ble Delhi High Court referred to the judgment in the case of CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del); Pr. CIT vs. Saumya Constructions Pvt. Ltd. (2016) 387 ITR 529 (Guj); Principal Commissioner of Income Tax-I vs. Devangi alias Rupa 2017- TIOL-319-HC-AHM-1T,• CIT vs. IBC Knowledge Park Pvt Ltd. (2016) 385 ITR 346 (Kar), Pr. CIT-2 vs. Salasar Stock Broking Ltd. 2016-TIOL-2099-HC-KOLIT and CIT vs. Gurinder Singh Bawa (2016) 386 ITR 483 (Bom), Reference is also made to another two decisions of Hon’ble Delhi Court in Pr. CIT vs. Mahesh Kumar Gupta 2016-TIOL-2994-HC-Del and the decision dated 7th February, 2017 in ITA Nos. 61/2017 and 62/2017 in the Pr. Commissioner of Income Tax-9 vs. Ram Avtar Verma where the decision in Kabul Chawla (supra) was followed. The ‘Hon’ble Delhi High Court made an exhaustive reference to the decisions noted above and held that invocation of Section 153A of the Act to reopen concluded assessments of earlier assessment years was not permissible in the absence of incriminating material found during search qua each such unabated assessment years. Eventually, the Hon’ble Delhi High court in Meeta Gutgutia (supra) held that additions based on appreciation of facts dehors incriminating material are not sustainable in law. The SLP of the Revenue against the aforesaid decision of the Hon’ble Delhi High court was dismissed by the Hon’ble Supreme Court in Pr. CIT vs. Meeta Gutgutia (2018) 96 taxmann.com 468 (SC).
14.3.2 Similar view that no additions could be made on the basis of material collected after search and in the absence of any incriminating evidence found or seized during search has been endorsed by the Hon’ble Gujarat High Court in Pr. CIT vs. Sunrise Finlease (P.) Ltd. (2018) 89 taxmann.com 1 (Guj.).
14.3.3 The Hon’ble Gujarat High Court in Pr. CIT vs Saumya Constructions Pvt. Ltd. (2016) 387 ITR 529 (Guj) also declined to agree with the plea on behalf of the Revenue that the new procedure provided under s. 153A of the Act is different from earlier procedure provided under s. 158BC r.w.s. 158BB of the Act and consequently, the plea of the Revenue that there is no condition in Section 153A of the Act that additions should he made strictly on the basis of evidence found during the search was not approved. The Hon’ble Gujarat High Court analysed the position of law and took note of several judicial precedents and concluded that completed assessments can be interfered with by the AO while making the assessment under s. 153/1 of the Act only on the basis of some incriminating material unearthed during the course of search or requisition of document etc. The Hon’ble Gujarat High Court noted that the trigger point for exercise of powers under s. 153A of the Act is a valid search under s. 132 of the Act or a requisition under s. 132A of the Act. Once a search or requisition is made, the mandate is cast upon the AO to issue notice under s.153A of the Act and complete the assessment of 6 assessment years. The Hon’ble Gujarat High Court took note of the fact that object of scheme legislated for assessment in search cases is to bring to tax the undisclosed income which is found in the course of or pursuant to search or requisition and therefore additions/disallowances must be linked with search/requisition. It was noted by the Hon’ble Court that additions made on the basis of some materials collected by the AO much subsequent to the search is not permissible.
14.3.4 Similar view has been expressed in catena of decisions viz; Pr. CIT vs. Deepak J. Panchal (Guj) 397 ITR 153 (Guj); Chetnaben J. shah vs. ITO Tax Appeal No. 1437 of 2007 judgment dated 14.07.2016; CIT vs. Continental Warehousing Corporation (2015) 374 ITR 645 (Bom.); Pr. CIT vs. Desai Construction Pvt Ltd. 387 ITR 552 (Guj.); Gurinder Singh Baba 386 ITR 483 (Bom); & CIT vs. Deepak Kumar Agarwal (2017) 398 ITR 586 (Bom.).
14.3.5 The Hon’ble Delhi High Court in Pr. CIT vs. Subhash Khattar ITA No. 60/2017 judgment dated 25.07.2017 also held against the Revenue in similar circumstances where search did not result in discovery of any incriminating material qua the assessee. It was observed by the Hon’ble Delhi High Court that entire case against the assessee was based on what was found during the search of the premises of other parties and thus, it is apparent on the face of it that notice to assessee under s. 153A of the Act was misconceived since the so-called incriminating material was not found during the search of assessee ‘s premises.
14.3.6 On the conspectus of aforesaid judgments of different courts, the position of law is loud and clear that additions/disallowances under s.153A of the Act towards unabated assessments are permissible only where incriminating materials are found in search showing unaccounted income.
14.4 In summation, in the light of the aforesaid overwhelming judicial precedents as laid down by the Hon’ble Bombay High Court, Delhi High Court & Gujarat High Court as also various benches of Tribunal, the correct legal position in respect of the assessments under s. 153A of the Act may he summarized as follows:
(i) the scope of assessment under s. 153A of the Act is limited to the incriminating evidence found during the search in so far as unabated assessments are concerned; the issues unconnected to incriminating material are insulated from examination in Ihe proceedings under S. 153,4 in respect of such concluded assessments & (ii) unless there is incriminating material qua each assessment years to which additions are sought to be made in respect of concluded assessments, the assessment under s. 153A of the Act by making additions/disallowances would be vitiated in law.
14.5 As discussed in length, the issue has been dynamic and a matter of legal interpretation. We are governed by the schematic interpretation given to provisions of Section 153A of the Act by different Hon’ble Courts. In the light of judicial fiat reading down the scope and spectrum of assessment under s. 153A of the Actin narrower compass, the position of law is explicitly clear. In the absence of any connection with the incriminating material unearthed in search proceedings of assessee, additions in respect of concluded assessment i.e. AYs. 2006-07 & 2009-10 in instant appeals, are not permissible in law. The burden of proof towards existence of undisclosed income discovered as a result of search is on the Revenue. No evidence has been referred to by AO or brought on record as claimed to be found at search of assessee to suggest existence of undisclosed income as perceived by the AO. The Revenue has failed to rebut the factual assertions made on behalf of the assessee towards non-discovery of incriminating material at the time of drastic action of search on assessee and reference thereto in assessment order. There is nothing on record that information contained in seized documents as per list of inventory in panchnama, were not recorded or reflected in the books of accounts. Hence, the action of the AO towards making additions in respect of concluded assessments towards undisclosed income is contrary to the judicial dicta. In consonance, we are of the view that various additions/disallowances made by the AO are clearly beyond the scope of authority vested under s. 153A of the Act without discharging the burden to show presence of any incriminating material or evidence deduced as a result of search in so far as completed assessments are concerned. Additions made in assessments framed under s. 153A of the Act in respect of captioned assessee pertaining to AYs. 2006-07 & 2009-10 are thus required to be struck down on this score itself However, the assessments/reassessments pending on the date of search i.e. AY 2010-11 & AY 2011-12 in question which stood abated by operation of law will continue to be governed by ordinary powers of assessment under s. 153A of the Act in accordance with law.
15. The legal ground of jurisdiction raised by the Assessee as per the cross objections, is thus allowed in respect of AY 2006-07 & 2009-10 in question. The additions made under S. 68 of the Act without showing incriminating documents are bad in law and thus requires to be struck down for AY 200607 & AY 2009-10.”
In the light of above judicial pronouncement of Hon’ble jurisdictional ITAT, the ld. AO was not justified in making additions in non-abated assessment year i.e. AYs 2008-09, 2009-10 & 201 1-12 and that too in absence of any incriminating material. Further, in the assessment order the ld. AO has not correlated the additions made with the incriminating seized material. Therefore, the additions made in the AYs 2008-09, 2009-10 & 2011-12 on account of unexplained cash credit u/s 68 of the Act, are not sustainable on this count also.
Accordingly, additions of Rs. 2,19,00,000/-, Rs. 2,25,00,000/- and Rs. 62,00,000/- in AYs 2008-09, 2009-10 & 2011-12 respectively are deleted. Therefore, appeal on these grounds is allowed.
4.7 Dissatisfied with the aforesaid decision of the Ld. CIT(A), now the department has challenged the findings of Ld. CIT(A) under this present appeal before us.
4.8 Since the addition on account of unexplained cash credit u/s 68 of the Act made by the Ld. AO was vacated by the Ld. CIT(A), considering that the year under consideration was an unabated assessment year and there was no incriminating material found during the search and seizure operation, it is also observed by Ld. CIT(A) that the material seized and considered as incriminating by the Ld. AO was also not corelated with the addition made, therefore, the addition u/s 68 was not sustainable. In order to substantiate that there was incriminating material unearthed during the search and seizure proceedings and the same was became the reasons for addition in the hands of assessee, admittedly for an unabated AY, a report on this aspect has been submitted by the Ld. AO dated 08.09.2023, the same is extracted hereunder for the sake of completeness of the facts:
M/S NRVS Steel Ltd (AAHCS4369L) AY 2008-09
Report on Ground of Appeal raised by the appellant M/S NRVS Steel Pvt. Ltd regarding Incriminating material / documents found during the course of search from premises of M/S NRVS Steels Ltd.
1. The assessee company is mainly engaged in the business of manufacturing activities of sponge iron under the flagship entity M/S. NRVS Steels Ltd., Raigarh. The head of the business group is Rajesh Agrawal, who is one of the director of the assessee company.
2. Search and seizure action u/s 132 of the IT Act, 1961 was conducted at the business premises of M/S NRVS Steels Pvt. Ltd Ltd. on 24/10/2017.
3. Consequently, notice u/s 153A of the Act dated 01.08.2019 was issued for filing of returns for the A.Yrs. 2008-09 to 2017-18. Subsequently, assessment order under section 153A read with section 143(3) of the Income Tax Act, 1961 was passed on 30/ 12/2019 for the A.Ys. 2009-10 to 2017-18 and under section 143(3) of the Act for A.Y. 2018-19.
4. The AO made addition of Rs.2,19,00,000/- in AY 2008-09 on account of bogus share capital/premium received from Kolkata based shell companies in books of assessee M/S NRVS Steels Ltd. This addition was made on the basis of incriminating material (Page 08,09 & 10 of BS-II, statement of investor company director, evasive reply of assessee company director, insignificant financials of investor companies etc.) found and seized during the course of search proceedings.
5. The assessee has raised following ground of appeal before Hon’ble ITAT in the cross objection for the AY 2008-09 as under:-
“On the facts and circumstances of the case and in law, the Id CIT(A) ought to have considered the legal issue raised that if there is no incriminating material /documents found during the course of search from premises of the assessee, qua the assessee, qua the year & qua the addition, for an unabated/concluded year which is not pending on the date of search (i.e. 24.10.2017) by applying Kabul Chawla (2015) (Del HC) & Meeta Gutgutia (2017) (Del HC); addition is liable to be deleted.”
Assessment Order
6. As per assessment order, the A.O. had made the addition of Rs.2,19,00,000/- for A.Y. .2008-09 on account of share capital/ premium received from Kolkata based shell/ paper companies on following findings:
7. A search and seizure action were carried out on 24/ 10/2017 at the business premise of the assessee company. It is found that during the block period from AY 2007-08 to 2013-14 totalling to Rs. 10,08,25,658/- from various Kolkata based shell companies. However, on verification it was found that the assessee company was in receipt of share application money consisting of capital and premium amounting to Rs.84,75,000/-, Rs.2,25,00,000/- and Rs.7,29,65,000/- falling within the assessment years 2008-09, 2009-10 and 2010-11 respectively. One of the shell company was also found to have acquired by the Director of the assessee company. The details of such investment in assessee company during the A.Y. 2008-09 from following investors are as under:-
| Sl No. | Name of the Company | Amount |
| 01 | Gloria Credit & Commerce Pvt Ltd | 4,00,000 |
| 02 | Patron Overseas Pvt Ltd | 53,00,000 |
| 03 | Sravasti Nidhi pvt Ltd | 34,00,000 |
| 04 | Sravasti Udyog Viniyog Pvt Ltd | 1,28,00,000 |
| 05 | Total | 2,19,00,000 |
In respect of these investor companies, it was noticed by the AO that they were involve in rotation of money through various bank accounts and these companies being managed by entry operator, an entry operator is the person who is in the business of giving accommodation entries in lieu of commission.
8. During the course of search documents related to transfer of share in lieu of Share Application money was seized, which were confronted with Sri Rajesh Kumar Agrawal (past director of the company) in his statement dtd. 11-05-2018 u/ s 131 (IA) as per page nos. 8,9 and 10 of BS-II, seized from the office premise of M/S Seleno Steels Ltd and M/S Balaji Induction Furnace Pvt Ltd., scanned copies of which are as under:-
–
9. The above seized documents showing the receipt of share capital and premium from the year 2007-08 to 2013-14 totalling to Rs.10,08,25,658/-various Kolkata based shell companies. As per the above seized materials, total share capital received during the F.Yr.2008-09 from various Kolkata based shell companies:-
| Sl. No. | Sl. No. | Name of the Investor Company | FY. | AY | Amount of share capital/Premium received |
| 1 | 01 | Gloria Credit & Cornmerce Pvt Ltd |
2007-08 | 2008-09 | 400000 |
| 02 | Patron Overseas Pvt, Ltd. | 2007-08 | 2008-09 | 5300000 | |
| 03 | Sravasti Nidhi Pvt. Ltd | 2007-08 | 2008-09 | 3400000 | |
| 04 | Sravasti Udyog Viniyog Pvt Ltd | 2007-08 | 2008-09 | 12800000 |
10. Enquiries were conducted by the Investigation Wing in the investor companies which revealed that such companies do not exist at the given address. Shri Rajesh Agrawal (Past Director in NRVS Steel Ltd) was confronted with the enquiry report to which he expressed answer. During the course of post search proceedings statement of Shri Rajesh Agrawal was recorded u/s 131 (IA) on 11.05.2018. In his statement he stated to have met Nandkishore Agrawal, the erstwhile director of Siddhi Vyapar Pvt Ltd from whom the company was purchased. But he failed to answer the details that how he met Nandkishore Agrawal, the erstwhile director of Siddhi Vyapar Pvt Ltd. The scanned copy of the relevant portion is reproduced below :-
11. He was again asked the reasons for receiving investments at high premium in spite of the fact of the return income and Turnover Company is fairly low. To this he replied that looking at the future prospects of his companies the investor companies invested. Shri Rajesh Agrawal in his statement sated that he has no record to support the justification, rationale and basis of share application and premium coming from Kolkata-based companies, to M/S Seleno Steels Ltd (earlier name of M/S NRVS Steel Ltd). On perusal of the return of Income and profit and loss account and balance sheet of last seven years, it is found that there was no business activity in these companies. The analysis of Balance Sheet and profit and loss account as under:-
From the statement, it was evident that the receipt of share capital money was through Kolkata based shell companies. Even though one of these shell companies were acquired by the Directors of Seleno Steel Ltd, but still the nature and character of these investor companies remained as that of shell companies. These facts fortify the fact and lay the evidence that the investor companies are bogus / paper companies and that the investment amount is nothing but unaccounted income of the assessee company which has been introduced in the books as share capital and premium. Such unaccounted income invested in the form of further investment and share capital has been applied towards acquiring assets in the form of further investment and working capital.
12. The conditions laid down in the 4th proviso to section 153A are found to be fulfilled. The Assessing Officer has in his possession evidence in the nature of statement u/ s 132(4) & 131(1A) of Rajesh Agrawal, whose replies were evasive which revealed that income in the nature of share capital & share premium received through shell companies and represented in the form of assets which are forming part of the balance sheet in the respective assessment years has escaped assessment, and which amounts to Rs.84,75,000/- failing within the AY 2008-09, i.e., exceeding Rs.50 Lakhs in the relevant assessment year. Accordingly notice u/ s 153A was issued for the A Y 2008-09.
13. The balance sheet of investor companies were examined for the past several years. Except the amount of Share Capital reserve & surplus, current liabilities, noncurrent and current assets, no business activities were found. The activities of the assessee company are to route out of capital to the assessee company. The analysis is as under:-
14. From the above indicate that the share capital have been introduced in the name of various Kolkata based paper companies are not genuine and not in existence in real. The above mentioned share holder company was exist only on paper. They do not have their PAN and file their return of income; their actual business was to provide accommodation entries. Further, the introduction of share capital of beneficiaries nonexistence and non- creditworthiness of share applicants, non-genuineness of share applicants, non-genuineness of transactions of share application money, it follows that the identity, creditworthiness or genuineness of the transaction is not established by merely showing that the transaction was through banking channels or by account payee instrument. It would be incorrect to state that the onus to prove the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases of payment is made through banking channels or by account payee instrument. It would be incorrect to state that the onus to proved the genuineness of the transaction and creditworthiness of the creditor stands discharged in all cases if payment is made through banking channels. Certificate of incorporation of company, payment by banking channel etc. cannot in all cases tantamount to satisfactory discharge of onus. It has elaborately established in the preceding paras that the assessee had failed to discharge its onus in proving the identity, creditworthiness and genuineness of the share applicants and hence the share application money introduced by the Kolkata based paper companies, credited in the books of assessee company is treated as undisclosed income charged to tax u/s 68 of the Act.
In above background, it is submitted that there is presence of sufficient incriminating evidences and other investigation during search, post search and assessment proceeding which justify the addition made by the AO wrt Rs. 2,19,00,000/- on account of bogus Share capital/ premium received by the assessee from paper entities in AY 2008-09.
“Incriminating material”
15. The assessee has raised ground of appeal before the Hon’ble ITAT in the cross appeal that for the AY 2008-09, there is no incriminating material / documents found during the course of search from premises of the assessee, hence addition is liable to be deleted.
16. Shri Rajesh Agrawal (director in NRVS Steel Ltd) stated in the statement recorded on 131 (IA) of the act that he has no record to support the justification, rationale and basis of share application and premium coming from Kolkata-based companies, to M/S Seleno Steels Ltd (earlier name of M/S NRVS Steel Ltd). The same has confronted with the specific reference of documents seized as page No. 8,9 & 10 of BS-II seized from the office premise of M/S Seleno Steels Ltd. From the above documents it was established that the assessee company has received share capital/ premium from Kolkata based shell companies during the F.Y. 2007-08. Hence, page No. No. 8,9 & 10 of BS-II seized from the office premises are incriminating documents as the details mentioned on them are not fully justified by the assessee.
17. In a recent judgment delivered on 24/04/2023, the Hon’ble Supreme Court in Civil Appeal No.6580 of 2021 in the case of Abhisar Buildwell P. Ltd., it has been held that:
“iii) in case any incriminating material is found/unearthed, even in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns;
18. Hon’ble Supreme Court has held that incriminating material is a prerequisite for the Revenue to assume jurisdiction to assess or reassess the ‘total income’ for the entire six years block assessment period in case of completed / unabated assessments. If incriminating material is found, then the Revenue has the power to reassess the assessee not only for the undisclosed income which is found during the search but also with regard to material that is otherwise available.
19. In the instant matter, the ground of appeal raised by assessee before the Hon’ble ITAT that there is no incriminating materials/documents found during the course of search from premise of assessee is not correct in light of discussion made in subsequent paras.
What constitutes incriminating material
20. What constitutes incriminating material has not been defined under the Income Tax Act nor has it been elaborated by the courts in the context of Income Tax Act. However, perusal of certain sections of Income Tax Act, will throw some light on what constitutes incriminating for purposes of section 153A of Income Tax Act.
21. The word “incriminating”, as used by courts in context of section 153A. needs to be understood in the context of events of misreporting and under reporting as defined u/s 270A for the purpose of levy of penalty in these sections. The provisions of section 153A/ 153C are not the normal assessment provisions like 143(3); rather they are curative provisions to plug the mischief of misreporting or under-reporting of taxable income based on evidence found in pursuance to search. Therefore, the situations/actions which can lead to levy of penalty under Income Tax Act, will necessarily constitute incriminating for purposes of 153A/C of Act also.
22. Section 270A(9) defines under reporting and misreporting as under:
270A(9):The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:-
(a) misrepresentation or suppression of acts;
(b) failure to record investments in the books of account; (c) claim of expenditure not substantiated by any evidence,
(d) recording of any false entry in the books of account;
(e) failure to record any receipt in books of account having a bearing on total income; and
(f) failure to report any international transaction or any transaction deemed to be an international transaction or any specified domestic transaction, to which the provisions of Chapter X apply.
23. Thus, if on account of search, the facts and circumstances suggest that any entry already appearing in books or accepted in earlier assessments based on documents submitted at that point of time, are camouflaged or manipulated or misrepresented or suppressed in value or reflected to be in the nature or from a source which is different from the real nature or source as appearing from the evidences found during a subsequent search resulting in misreporting as defined u/ s 270A(9), then such material/ facts coming to fore will definitely constitute an incriminating material.
24. Therefore, if during assessment, proceedings, the AO finds existence any of the above facts as mentioned u/ g 270A(9), the incidence of misreporting will be triggered thereby making the earlier recorded entries / earlier admitted documents and evidence itself to be incriminating in nature on account of such entries being hit by misreporting. Thus, the event of misreporting itself is incriminating. If it were held not to be so, then the purpose of 153A/ 153C would be defeated as it would fail to prevent the mischief of misreporting despite search having being carried, which it sought to prevent just because the entries were already recorded in the books or some documents had already been accepted. In short, any fact / evidence which could suggest that the documents / transactions claimed or submitted in any earlier proceedings were not genuine, being only a device / make belief based on nonexistent facts or suppressed / misrepresented facts, would also constitute an incriminating material sufficient to make assessment for the purposes of the Act.
In fact in this case only, due to the search operation and after considering the seized material, the assessee voluntarily offered amount of Rs. 1.29 Lacs and Rs. 2.69 lacs respectively as its undisclosed income for AY 2012-13 & AY 2013-14 respectively. This event of offering the amount and AO initiating penalty proceedings is itself incriminating which is a consequence of search action only wherein some incriminating evidences were found which led the assessee to disclose the income.
25. The next question how the existence of incriminating material has to be recognized emanating on account of search. One needs to appreciate that the ‘incriminating material’ can be in any form such as evidence in the nature of:
-
- a document, content of any document;
- an entry in books of account;
- an asset;
- a statement given on oath;
- absence of any fact claimed earlier but coming to notice during search;
- absence of books being noticed during search; or
- absence of the office/ business premises as claimed in returns or any other documents, etc filed earlier.
26. Thus, the incriminating material/ evidence can be documentary or testamentary or fixed to earth or a place or even the absence of any fact or asset at a claimed place can be itself be called incriminatory as it indicates that the earlier claim made in books of accounts/ returns etc. were false and contrary to real situation on ground.
27. In short, any fact / evidence which could suggest that the documents / transactions claimed or submitted in any earlier proceedings were not genuine, being only a device / make belief based on non-existent facts or suppressed / misrepresented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act.
28. Even a statement recorded during search & survey operation shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment under section 153A of the Act.
29. The apex court in PCIT Vs Best Infrastructure (India) P Ltd 94 com 115 (SC) has admitted an SLP by revenue against the order of High Court wherein the High Court had held that the statement offering income for one year would be incriminating for the year for which disclosure has been made and not the six years for the purpose of section 153A.
30. A mere statement u/ s 132(4) is an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under:
“High Court by impugned order held that since assessee himself had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents – Whether Special Leave Petition filed against impugned order was 10 he dismissed – Held, yes.”
31. In short, any fact / evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, or recorded unsubstantiated facts/ transactions being only a device/ make belief based on nonexistent facts or suppressed/ misrepresented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act.
32. During the course of search proceedings and during assessment proceedings, Shri Rajesh Agrawal (director in NRVS Steel Ltd) sated In the statement of recorded on 131(IA) of the act that he has no record to support the justification, rationale and basis of share application and premium coming from Kolkata-based companies, to M/S Seleno Steels Ltd (earlier name of M/s NRVS Steel Ltd). These facts in itself are incriminating.
33. In the instant case, share capital/ premium of Rs. 2,19,00,000/- received from Kolkata based companies, which is shell/ paper company as proved from the statement of the Shri Rajesh Agrawal and analysis of financial statement of these companies. The fact that assessee director Shri Rajesh Agrawal could not furnish all the documentary evidences related to such investment received and offered evasive reply in his statement. Absence of statutory documents (related to increase in Share capital/ premium as per Income Tax & Company Act) which were mandatorily supposed to be found at assessee premise during course of search proceedings, is nothing but incriminating. Thus, it may be seen that the statement of assessee director in light of statements of previous director Shri Rajesh Agrawal and analysis of financial statement of these companies itself becomes the incriminating material, in view of the above judicial pronouncements.
Conclusion
In view of all the facts circumstances of the case, the ground of appeal raised by the assessee company for the A.Y. 2008-09 at there is no incriminating material/documents found during search from the premise of the assessee is not acceptable as from the above discussion it is clear that the documents found in BS-II bearing page No. 08,09, & 10 and also the statement recorded of previous director of NRVS Steel Ltd Shri Rajesh Agrawal along with the dubious financials of investor companies are incriminating in nature-
1. The assessee received share capital/ premium from Kolkata based shell companies and the primary onus to establish the identity, creditworthiness and genuineness of the transactions in respect of the investor companies was not discharged by the assessee specially when the investigation by the department bringing sufficient evidences about the investor companies being shell/ bogus entities.
2. The assessee has raised grounds of appeal in the cross examination that there was no incriminating material. The phrase “incriminating material” is neither defined in sec 153A nor defined in the Income tax act and hence the implications of this term were required to be understood in the context of misreporting and / or under reporting along with intent and purpose of the provisions of Search & Seizure provisions under Income Tax Act, which clearly revealed the existence of incriminating material to initiate the proceeding u/ s 153A of I T Act in the present case.
3. The statements recorded during the search were the incriminating material, in light of B Kishore Kumar Vs DCIT 234 Taxman 771(SC), which provided appropriate jurisdiction for purpose of framing assessment u/ s 153A.
4. The AO have made additions of Rs.2,19,00,000/- for the A.Y. 2008-09 on account of share capital/ premium on the basis of incriminating material as discussed above. The assessee failed to allude to relevant facts on record, including in relation to –
(i) assessee not having discharged its primary onus of establishing the identity of the investor & their creditworthiness as well as genuineness of the transactions;
(ii) The legal documents related to increase in share capital/premium in assessee company as per requirements of income Tax/company Act not found during search
(iii) When the director of assessee Company during his statement Was asked to quantify the undisclosed income brought: into books through the share capital/premium in its books then Shri Sanjay Agrawal stated that He along with other directors oof his group companies voluntarily disclosed unexplained income to the tune of Rs. 15.01 crore during IDS 2016 in September 2016.
(iv) their being “incriminating material” which provided appropriate jurisdiction for purpose of framing assessment u/s 153A.
4.9 Based on aforesaid submissions, it was the contention of department that the ground of appeal raised by the assessee company for the AY 2008-09 before the First Appellate Authority, stating that the there is no incriminating material / document found during the search in the premises of the assessee is not acceptable as certain documents in BS-11 pertinent to page no. 8,9, 10 and also the statement of the previous director of NRVS Steel Limited, Shri Rajesh Agrawal recorded on oath, along with dubious financials of investors companies are incriminating in nature. It was the submission that the assessee company has received share capital / premium from Kolkata based shell Companies and, therefore, the primary onus to establish the identity, creditworthiness and genuineness of the transaction was on the assessee, which the assessee in present case has failed to discharge. It is further submitted by the revenue that the word “incriminating material” as used by the courts in context of section 153A/153C needs to be understood in the context of events of misreporting and under-reporting as define in section 270A(9) for the purpose of levy of penalty. The provisions of section 153A / 153C are not the normal assessment provisions like 143(3), rather they are curative provisions to plug the mischief of misreporting or underreporting of taxable income based on evidence found in pursuance to search. The phrase “incrementing material” is neither defined in section 153A nor defined in the income tax Act and hence the implication of this term is required to the understood in the context of misreporting and / or under reporting along with intent and purpose of the provisions of Search and Seizure under Income Tax Act, which clearly revealed, the existence of incriminating material to initiate the proceedings u/s 153A of the Act. It was the submission that the assessee was failed to allude the relevant facts on record including assessee’s failure in discharging of primary onus of establishing the identity of investor, their creditworthiness as well as genuineness of the transaction. It is further submitted that the legal documents related to increase in share capital / premium in the assessee company as per requirement of Income Tax Act / Companies Act were not found during search. The Director of the group company in his statement was asked to quantify the undisclosed income, then they have voluntarily disclosed unexplained income to the tune of Rs.15.01 crore during the IDS-2016 in September 2016. With such assertions, it was the submission of the department that there being incriminating material which provided appropriate jurisdiction for the purpose of framing assessment u/s 153A, therefore, the order of Ld. CIT(A) cannot be sustained on this issue that there was no incriminating material. Accordingly, it was the prayer of the Ld. CIT-DR that the order of Ld. CIT(A) shall be liable to set aside, and the addition made by the Ld. AO deserves to be restored.
4.10 Contradicting to the submission of the department, Ld. AR on behalf of the assessee had submitted that the so-called incriminating material relied upon by the Ld. AO marked as BS-11 at page n. 8, 9, 10 and various statutory reports or form which are already disclosed to the respective revenue departments also duly disclosed in the regular audited books of accounts of the assessee company for the relevant year. Further it is submitted that the forms which were furnished before the ROC in company law matters and nothing else, which had already been disclosed in the audited books of accounts, which are further declared in the original returned of income filed. It was the submission that for the AY 20122013 and 2013-14 scrutiny assessment are conducted and orders are passed u/s 143(3), accepting the balances of share capital / share premium in the books of the assessee. On this aspect, Ld. AR had drawn our attention to the submission of the assessee before the Ld. CIT(A), the same are extracted as under:
For the AY 08-09
1.10. It is submitted that the trigger point for exercise of powers u/s153A is a search u/s 132 or a requisition u/s 132A; that once, a search or requisition is made, the mandate is cast upon the AO to issue notice u/s153A and complete the assessment of 6 AYs (and for the relevant AY or years); that object of scheme legislated for assessment in search cases is to bring to tax the undisclosed income which is found during the course of or pursuant to search or requisition and therefore, additions/ disallowances must be linked with search/ requisition; that additions made on the basis of some materials collected by the AO much subsequent to the search is not permissible.
1.11. Sec153A bears the heading “Assessment in case of search or requisition It is well-settled as held by the Hon’ble SC in a catena of decisions that the heading of the sec can be regarded as a key to the interpretation of the operative portion of the sec and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the sec strengthens that meaning. From the heading of sec153A, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition.
1.12. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sec153A(1), in every case where there is a search or requisition, the AO is obliged to issue notice to such person to furnish returns of income for the 6 years preceding (and for the relevant AY or years) the AY relevant to the PY in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis 01 material collected during the search or requisition. In case no incriminating material is found, as held by Jai Steel (India) (2013) (Raj HC), the earlier assessment would have to be reiterated.
1.13. In case where pending assessments have abated the AO can pass assessment orders for each of the 6 years (and for the relevant AY or years) determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment u/s 147 has abated, needless to state that the scope and ambit of the assessment would include any order which the AO could have passed u/s147 as well as u/s153A.
1.14. It is submitted that as per the scheme under the Act, a return filed by the assessee is first processed by the AO u/s143(l)(a) in which total income is computed after making the specified adjustments. As per clause (b), lax and interest, if any, is computed on the basis of the total income computed under clause (a). Clauses (d) and (e) ofsec143(l) provide that an Intimation shall be sent to the assessee specifying the sum determined to be payable by, or the amount of refund due to, the assessee and the amount of refund due to the assessee in pursuance of the determination under clause (c) shall he granted to the assessee.
1.15. Processing of the return u/s 143(1) and the consequential issuing of Intimation is construed as passing of the assessment order except where a notice u/s143(2) is issued a scrutiny assessment u/s 143(3).
1.16. In a ease, where notice u/s143(2) is issued, the processing of return u/s 143(1) and the consequential issuance of Intimation does not amount to passing of the assessment order because the assessment order, in such circumstances, is passed after due scrutiny u/sc143(3). There can he only one assessment order for one year.
1.17. The crux of the matter is that where no notice u/s 143(2) is issued within the permissible maximum time, the issuance of Intimation on processing the return u/s 143(1), is construed as completion of assessment. However, where such notice is issued, the intimation issued u/s 143(l)(a) loses the character of an assessment order, which in that case, is passed u/s143(3) after thorough scrutiny.
1.18. To sum up, an assessment is termed as completed on the passing of an order u/s143(3), but, in a case, where a return has been filed by the assessee, which is processed u/s143(l), but no further notice u/s143(2) is issued and the same cannot be issued because of the time limit setting in, the Intimation sent to the assessee u/s143(l) is also treated as a completed assessment for this purpose.
1.19. That, the AYs having ‘non-completed’ or ‘pending’ assessments mean the years for which the assessments were pending on the date of search which are abated in terms of the express provisions of the second proviso to sec 153A. This will also embrace the years in respect of which the time limit for issuing notice u/s143(2) is still available with the AO as on the date of search.
1.20. Notice u/s153A for the AY 08-09 was issued on 19-11-19 for filing the ROI u/s153A (i.e., time given of 7 days from service of the notice u/s153A dt. 19-11-19 and in response to that, the ROI u/s 153Afor the AY 08-09 has been filed on 25-1219 declaring ‘total income ‘ of Rs.54,81,400/- same as was declared in the original ROI filed u/s139(1) on 23-9-08 (i.e., total income of Rs.54,81,400). However, the original ROI (i.e., filed u/s139(1) on 23-9-08) was duly processed u/s143(1).
1.21. Thereafter, notice u/s142(1) issued on 10-12-19 & 11-12-19. After filing ROI u/s153A on 25-12-19, replies/ explanation with supporting documents has been duly submitted before the ld. AO on the same day i.e., on 25-12-19 and thereafter, for making assessment u/s153A as per the amended provisions of sec153A w.e.f.1-4-17 , the Id AO has got approval u/s153D from the ld. Jt. CIT, Central (Circle), Raipur (CG) on 30-12-19 (as mentioned in the assessment order dt.30-12-19) and assessment u/s153A has also been completed on the same day i.e., on 30-12-19 and made addition of Rs.2,19,00,000 u/s68 on the count of unexplained share application money received from the 4 share applicant companies (i.e., list mentioned in Para 4.1, Pg.No.6 of the assessment order dt.30-12-19), treating it as undisclosed income.
1.22. It is submitted that during the course of search u/s132 on 24-10-17 on the assessee-Co, statement u/s132(4) has been recorded on 24-10-17 running into 24 pages (enclosed at Pg. No … …) from Shri Rajesh Agrawal, director of the assessee-Co and thereafter, further statement was recorded on u/s 132(4) on 5-12-17 revocation of Prohibitory Order, wherein he has not surrendered any kind of undisclosed income in any manner on behalf of the assessee Co for the alleged AY 09-10.
1.23 thereafter on 11.05.2018, statement u/s 131(1A) running into 14 pages enclosed at Pg no.———- has also been recorded by the ADIT(Inv.), Bilaspur in the Income Tax Officer at Bilaspur, from Shri Rajesh Agrawal S/o Shri Ram Niwas Agrawal Director of the assessee Co., wherein again, he has not surrendered admitted any kind of undisclosed income in any manner on behalf of the assessee Co. for the alleged AY 08-09.
1.24 and the Ld. AO only relying on the alleged piece of seized paper (i.e., BS- 11, Pg.no. 8,09, 10 as mentioned in Pg. No.8 to 11 in the assessment order dt. 30.12.2019 which is nothing but various statutory forms like, Form No.23 for allotment of shares, Form No.2 for allotment of shares; Form No.32 for appointment as director & cessation from directorship; Annual return-2002, AGM 24.12.02 & Balance sheet-2002, and thus, the alleged seized papers are various statutory returns & forms which had already disclosed to the revenue-deptt. and duly disclosed in the regular audited books of account of the assesse-Co. in the relevant year, more so, which has been submitted before the ROC in company law matters and nothing else, which had already been disclosed in the audited books of account of the assesse-Co; duly disclosed in the original ROI filed for the respective AY’s before the revenue-department; more so, it was regularly scrutinized u/s143(3) for consecutive 2 AY’s (i.e., for the AY 12-13 u/s 143(3) on dt. 9-2-15 by the ITO-1, Raigarh & for the AY 13-14 on dt. 29.2.2016 by the ITO-1, Raigarh) by the different revenue authorities on different dates )copy enclosed at Pg. No………………) and after due verification by the revenue authorities, the alleged assessment orders u/s143(3) has been passed; that the alleged seized documents (i.e., BS-11, Pg.No.8, 9, 10) in no course of search as wrongly alleged by the ld. AO; the ld. AO has made additions on the count of share capital / SAM treating it as unexplained, only on surmises and conjectures and without having brought any material/ evidence in support of his baseless/ vague contention; that no incriminating material/ documents found during the course of search relating to the alleged addition of theAY08-09 on the count of unexplained share application money qua for the AY 08-09;
1.25. that, it is not the case of revenue that the Director of the assessee-Co has surrendered any undisclosed income on the count of share application money/ share capital in his statement recorded on oath u/s132(4) on 24-10-17 and 5-12-17 and u/s131(lA) recorded on 11-5-18;
1.26. That the alleged cash trail/ layering of transaction by the ld. AO, none of the material gathered by the AO by way of bank account copies of various companies supposed to be a chain was given/ confronted to the assessee; that only a general statement has been made that the Inv. Wing had recorded some statements: that there is no evidence whatsoever that cash has been routed from the assessee-Co or that any cash was deposited by the assessee-Co; that there is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee-Co, that no opportunity to cross-examine an)’ these parties was provided to the assessee-Co; that, thus, none of these material gathered by the ld. AO can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act.
1.27. The Ld. AO in para no. 4.11 of the assessment order dt. 30.12.19 in Pg. No.25 to 29, described the procedures of search assessment u/s153A on or after 1.6.03, and heavily relied upon Filatex India Ltd. (2014) 49 taxmann.com 465 (Del.HC) dt.14.07.14 & Raj Kumar Arora (2014) 367 ITR 517 (All. HC) dt. 11.07.14 and contended that any addition or disallowances made u/s 153A is valid and lawful and cannot be restricted or limited to incriminating seized material etc etc and rejected the contention of the assesse Co (in last para of the Pg No 28 & 29 of the assessment order dt. 30.12.19).
1.28……….. ..Against the observation of the Ld. AO, it is submitted that these 2 cases of Hon’ble Del Hc & All HC, had duly been considered in Kabul Chawla (2015) (Del HC) and Meeta Gutgutia (2017) (Del HC) extensively and both these cases duly affirmed by the Hon’ble SC in Kabul Chawla (SC) 380 ITR (St.4) & Meeta Gutgutia (2018) (SC) dt. 2.7.18; and further in Vimal Kumar Rathi (2020) (SC) dt. 06.1.20; Caprihans India Ltd. (2020) (SC) dt. 30.09.2019; Sinhgad Technical Education Society (2017) (SC) dt. 29.08.17; Kurule Paper Mills (P) Ltd (2015) (SC) dt. 7.12.2015. the Hon’ble SC concluded that completed assessment could not be abated unless some incriminating evidence or material was found during search qua additions made by AO ; in other words, in search assessment u/s153A for an unabated assessment, in absence of any incriminating material / documents found during the course of search qua the alleged addition made by the AO, no addition can be made.
1.29. Again, the Id AO, in para No. 4.12 of the assessment order dt.30-12-19 in Pg.No.34, alleged that the identity, creditworthiness & genuineness of the transactions is not established and the assessee has failed to discharge its onus u/s68 and treated it as undisclosed income u/s68 and made the alleged addition 000, this action of the Id AO is not permissible in the eyes of law, and against this observation, it is submitted that,
1.30. – since, it is an undisputed fact that, no incriminating material/ documents has been found during the course of search from the premises of the assessee-Co on 24-10-17 which is related to the alleged addition of Rs.2,19,00,000/- for the AY08-09: and in absence of this, no addition is permissible in the assessment completed u/s153A for an unabated assessment it is an undisputed fact that the AY08-09 is an unabated assessment since no assessment was pending on the date of search, i.e., on 24-10-17; and hence, as per the second proviso of the sec153A(1), alleged addition is liable to be deleted.
1.31. It is submitted that search U/s132 has been conducted on 24-10-17 and assessment for the AY08-09 has been completed u/s153A on 30-12-19; that on the date of initiation of search (i.e., on 24-10-17), the impugned AY08-09, had already been concluded/ completed in the eyes of law, since, the ROI u/s139(l) was filed originally on 23-9-08 declaring total income at Rs.54,81,400 and such return was already processed u/s143(1)(a), and no notice U/s143(2) has been issued up to 309-09 that as on the date or initiation of search (i.e., on 24.10.17), no assessment was pending for the AY08-09 before the revenue, and thus, the normal assessment for the AY08-09 had already been reached to the finality and no incriminating material or document has been found during the course of search which is related to the alleged addition of Rs.2,19,00,000/- in respect of the alleged undisclosed income for the AY08-09; since the AY08-09 is an ‘unabated assessment’ on the date of initiation of search (i.e., on 24-10-17), as per the second proviso of sec153A(1) and in absence of any incriminating material/ documents found during the course of search for the alleged AY 08-09 for the alleged addition of Rs.2,19,00,000/- which is only based on presumption and surmises, general observation made by the ld. AO, presumption about modus operandi on the basis of disclosed transactions and audited balance sheet and replies & documents submitted by the assesse-Co etc., which is not permissible in the eyes of law in search assessments u/s153A for an unabated assessment in absence of any incriminating material/ documents found during the course of search qua the alleged addition, may kindly be deleted. This legal position for an unabated assessment in search cases u/s 153A has now been well settled by the Hon’ble SC again and again in the cases of Vimal Kumar Rathi (2020) (SC) dt.02.07.18; Sinhgad Technical Education Society (2017) (SC) dt.29.08.17; Kurule Paper Mills (P) Ltd. (2015) (SC) dt.7.12.15; Kabul Chawla (SC) 380 ITR (St.)4.
1.32. Same principle of law in search assessment u/s153A for an unabated assessment on the date of search, has been upheld in the decision of Hon’ble Jurisdictional MP HC in the case of Gahoi Dal & Oil Mills (2020) 117 taxmann.com 117 (MP HC) dt.12-7-19, wherein the legal issue/ legal question of law was as to-
“whether in absence of any incriminating documents seized during the course of search, the AO is justified in making the addition in non abated assessment orders u/s153A rws. 143(3) “
in that case, the factum of addition not being based on any incriminating material found during the search is not disputed; the Hon’ble MP HC has relied on Kabul Chawla (2015) (Del HC) and observed that-
“In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word ‘assess’ in sec153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word ‘reassess’ to completed assessment proceedings”
further observed that-
Completed assessments can be interfered with by the AO while making the assessment u/s153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment”;
and finally concluded that-
“On the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed”
and in para No. 10 & 1l, held as under:-
“10. In the given facts of present case as no incriminating documents during course of search are found, the order in appeal cannot he said to have suffered the illegality as would give rise to the proposed substantial que of law.
11. Consequently, appeals fail and are dismissed.
[as extracted from Gahoi Dal & Oil Mills (2020)117 taxmann.com 117 (MP TIC)]
1.33. It is submitted that it is well settled Law that the Judgments of the Hon’ble jurisdictional HC is binding on all the subordinate authorities and Courts. No preference could be given to the decisions of other HC as against the binding precedent or the Jurisdictional HC. In the cases of assessee, the Judgments of Hon’ble MP HC being the jurisdictional HC are binding on all the subordinate authorities as well as Tribunal.
1.34. Further in Meeta Gutgutia (2017) (Del HC), the Hon’ble Del HC considered its earlier decision in Kabul Chalwa (2015) (Del HC). Therefore, while dismissing the SLP of the Deptt in Meeta Gutgutia, the legal proposition propounded by the Hon ‘ble Del HC in Kabul Chawla have attained finality. That Hon’ble MP HC in Darshan Talkies (1996) (MP HC) in which it is held as under:
“The decision of the HC is binding and the pendency of a petition for special leave to appeal to the SC from such a decision cannot obliterate its impact. It is binding until it is reversed or overruled.”
1.35. It is submitted that TS Santanam v. Expenditure Tax Officer 87 ITR 582 (Mad TIC) while considering the Rule of Finality held “the essential principle as to the Rule of Finality of an assessment is that the AO cannot change his mood and try to reopen the closed state of affairs.
1.36. Thus. the Rule of Finality apply in this case clearly show that legal proposition decided by the Hon’ble jurisdictional MP HC in Gahoi Dal & Oil Mills (2020) 117 tax-mann.com 117 (MP HC) dt.12-7-19, has reached finality that:
“Completed assessment can be interfered with by AO while making the assessments u/s153.4 only on the basis of some incriminating material unearthed during the course of search which was not produced or not already disclosed or made known in the course of original assessment.
1.37. Since the alleged addition of Rs.2,19,00,000/- made by the ld. AO in the impugned assessment order u/s 153A are based on the items already disclosed in the original ROI filed, disclosed and entered in audited books of account, audited balance-sheet as on 31-3-08, to the Revenue Deptt. and such assessment have completed prior to the date of search i.e., on 24-10-17 and no assessment wav abated. therefore, in the absence of recovery of any incriminating material which is related to the alleged addition of Rs. 2,19,00,000/- for the AY 08-09, the ld. AO could not have made any addition against the assessee-Co.
4.11 Further, Ld. AR had submitted a written submission before us dated 02.06.2023, the same is also extracted as under:
–
–
4.12 Ld. AR further placed his reliance on the judgment of Supreme Court in the case of Abhisar Buildwell Taxmann.com SC dated 14.04.2023, wherein Hon’ble Apex Court has held that “In respect of completed assessments/unabated assessments no addition can be made by Assessing Officer in absence of any incriminating material found during course of search under section 132 or requisition under section 132A.” Detailed arguments, discussion therein and conclusion by the Hon’ble apex Court are extracted here under for better consideration of the law laid down and its interpretation qua the facts of present case:
11. As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the ‘total income’ in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years 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. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the ‘total income’ for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy.
12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law.
13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material.
14. In view of the above and for the reasons stated above, it is concluded as under:
(i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A;
(ii) all pending assessments/reassessments shall stand abated;
(iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and
(iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.
Civil Appeal Nos.7738-7739/2021, 7736-7737/2021, 7732-7735/2021 and 7740-7743/2021
15. Insofar as the aforesaid Civil Appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar Sahson, Allahabad are concerned, these appeals have been preferred against the impugned judgment and order dated 6-9-2016 passed in ITA Nos. 270/2014, 269/2014, 15/2015, 16/2015, 268/2014 and 17/2015, as also, against the order dated 21-9-2017 passed in the review applications.
It is required to be noted that the issue before the Allahabad High Court was, whether in case of completed/unabated assessments, the AO would have jurisdiction to re-open the assessments made under section 143(1)(a) or 143(3) of the Act, 1961 and to reassess the total income taking notice of undisclosed income even found during the search and seizure operation.
15.1 In view of the discussion hereinabove, once during search undisclosed income is found on unearthing the incriminating material during the search, the AO would assume jurisdiction to assess or reassess the total income even in case of completed/unabated assessments. Therefore, the impugned judgment(s) and order(s) passed by the High Court taking the view that the AO has the power to reassess the return of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to material that was available at the time of original assessment does not require any interference. Under the circumstances, the aforesaid appeals preferred by the assessee – M/s Kesarwani Zarda Bhandar, Sahson, Allahabad deserve to be dismissed and are accordingly dismissed. In the facts and circumstances of the case, no costs.
16. Insofar as the aforesaid appeals filed by the assessee – Dayawanti through legal heir against the impugned common judgment and order dated 27-10-2016 passed by the High Court of Delhi at New Delhi in ITA Nos. 357/2015, 358/2015, 565/2015 and 566/2015. The question before the High Court was, whether the Income-tax Appellate Tribunal was justified in upholding the addition made on the basis of the incriminating material during the course of search.
16.1 In view of the aforesaid discussion and the reasoning, all these appeals filed by the assessee – Dayawanti through legal heir fail and the same deserve to be dismissed and are accordingly dismissed. No costs.
4.13 Backed with the aforesaid submissions, it was the prayer by Ld. AR that since the year under consideration are undisputedly non-abated assessment years and there was no incriminating material unearthed during the search, therefore, in absence of any incriminating material following the ratio of law propounded by Hon’ble Apex Court in the case of M/s Abhishar Buildwell (supra), wherein the principal laid down by Hon’ble Delhi High Court in the case of Kabul Chawla (supra) and Hon’ble Gujarat High Court in the case of Pr. CIT vs. Saumya Constructions Pvt. Ltd. (P.) Ltd. [2017] 81 taxmann.com 292/[2016] 387 ITR 529 (Guj.) have been affirmed. Under such facts and circumstances, the order of Ld. CIT(A), wherein the addition on account of unexplained cash credit u/s 68 of the Act has been vacated, as no incriminating material was found during the search and in absence of any correlation between the addition made and the seized material, deserves to be upheld.
4.14 We have considered the rival submissions, perused the material available on record and the case laws relied upon by the parties. On a thoughtful consideration of the facts of the present case, wherein a search & seizure action u/s 132 of the Act was conducted on 24.10.2017 in the business and residential premises of N R Group along with the assessee in the present case. During the post search assessment proceedings Ld. AO had come across the facts that the assessee has received share application / premium from various companies which are Kolkata based and are paper / shell companies. It is observed and doubted that during the AY 2008-09 and AY 2009-10, assessee has received Rs.2.19 crores and 2.25 crores, respectively under the garb of share capital / premium. It is the observation of Ld. AO, that the shareholders / investors, who had invested the aforesaid amount in the assessee company, exist only on paper, they do not have their PAN and have not filed the returned of Income. It was the allegation that the investor companies are only provider of accommodation entries through introduction of share capital/ premium, these companies do not have any physical existence. Ld. AO further described the modus operandi of the shell investor companies and the transactions undertaken to bring in assessee’s own money through bogus accommodation entries by way of various layers of accommodation providers. To support the contention Ld. AO reproduced copies of certain documents i.e., Page no. 8, 9, & 11 of BS-11, which were seized from the office premises of M/s Seleno Steels Pvt. Ltd. and M/s Balaji Induction furnace Pvt. Ltd. Ld. AO also recorded statement of Shri Rajesh Agrawal on 11.05.2018 u/s 131(1A). Shri Rajesh Agrawal, who was the Director of M/s Seleno Steel Ltd. which has now become M/s NRVS Steel Ltd. i.e., the assessee in present case, has stated that he has no record to support the justification, rational and basis of share application & premium coming from Kolkata based companies to M/s Seleno Steel Pvt. Ltd. Ld. AO further provided the details of financials of the investor companies, emphasizing that the said companies have no business activity in last 7 years and even there returned of income (ROI) have shown very meagre / no income, the turnover of such companies are also noted to be negligible or zero, they are running at a very low profit or loss. It was the observation of Ld. AO that the identity, creditworthiness & genuineness of the transaction could not be established by the assessee, therefore, addition of Rs.2.19 crore and 2.25 crore was made for the AY 2008-09 & 2009-10 u/s 68 of the Act. On perusal of the assessment order, it is emanating that the assessee had received share capital/ premium from the investors based at Kolkata having NIL/ meagre income and the onus of identity / creditworthiness of the investors and genuineness of transaction could not be discharged by the assessee. Under this scenario, referring to the order of Ld. CIT(A), who had vacated the addition on the basis of no incriminating material found during the search for an unabated assessment year, the question before us is that, whether the document which were relied upon by the revenue i.e., page no. 8,9 & 10 of BS-11 falls under the realm of and constitutes incriminating material or not? The documents referred and treated as incriminating document by the Ld. AO are “E-Form”, “document No. 37”, “document no. 38”, filed with the ROC for allotment of equity share on various dates, Annual Return- 2002, Balance Sheet-2002. It is also not disputed that the entries in the said documents are duly recorded in the books of accounts of the assessee company. Herein, we may observe and agree with the observation of Ld. CIT(A) that the aforesaid loose papers are receipt of form for allotment and issue of equity share to investor companies and such documents cannot be termed as incriminating document. Our view is further supported by the Judgment of Hon’ble Guwahati High Court in the case of Commissioner of Income-tax v. Goldstone Cements Ltd. reported in [2023] 156 taxmann.com 529 (Gauhati), wherein Hon’ble High Court had categorically, under the similar facts and circumstances of the case, referring to the Annual Return form submitted with the ROC, observed that:
“Assessing Officer made additions under section 68 based on seized incriminating document and held that assessee received share application moneys and source of same could not be properly explained, since document was a shareholding pattern document prepared by way of secretarial compliance report, which was filed along with company’s annual return in Form MGT-7 with ROC and was therefore available in public domain, same would not constitute incriminating document to justify reopening of assessment of unabated/completed assessments under section 153A”
4.15 In view of aforesaid decision in the case of Goldstone Cements Ltd. (supra), it can be safely concluded that the acknowledgments of documents furnished before the ROC pertaining to allotment of share, annual return of the company and balance sheet of the company which are in public domain, much prior to the date of search, would not constitute incriminating material.
4.16 On a thoughtful consideration of the aforesaid facts of the present case, as the year concerned was an unabated assessment years and also the documents surfaced during the search and seizure action are not in the nature of incriminating document / material, therefore, respectfully following the principle of law laid down by Hon’ble Apex Court in the case of Abhishar Buildwell (supra), we are of the considered opinion that Ld. CIT(A) had rightly and judiciously decided the issue by vacating the addition of Rs.2.19 crore for the AY 2008-09, thus, we concur with the finding of Ld. CIT(A), which is not found to be suffering with any infirmity to be interfered with, we, therefore, approve the same.
4.17 Resultantly, the grounds of appeal raised by the department in IT(SS)A No.11/RPR/2022, stands dismissed.
5. Having similar facts, circumstances and decisions for the AY 2009-10 by the Ld. AO and Ld. CIT(A) under their common orders, thus, our decision rendered in IT(SS)A No.11/RPR/2022 shall apply mutatis mutandis on the issue in IT(SS)A No. 12/RPR/2022. Consequently, the grounds of appeal raised by the department in IT(SS)A No.12/RPR/2022, also stands
6. Before parting with, we may herein observe that in absence of any incriminating material unearthed during the search from the premises of assessee for an unabated / completed assessment year, but certain documents were seized which cannot be termed as incriminating material, the revenue shall be at liberty to undertake necessary legal recourse available in the aforesaid matters following the guiding principal laid down by Hon’ble Apex Court in the case of Abhishar Buildwell (supra) that, “However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.”
7. Now, we shall be dealing with the Cross Objections (CO) filed by the assessee arising out of the aforesaid appeals of the revenue.
8. CO No. 17/RPR/2022 filed by the assessee, the grounds of appeal raised are as under:
1. On the facts and circumstances of the case and in law, the Id CIT(A) has considered & adjudicated the legal issue raised for AY 08-09 that the Id AO was not having jurisdiction to reopen the assessment u/s 153A for AY 08-09 (i.e., extended period of 7th year to 10th year) in absence of any undisclosed asset of Rs. 50 lakhs or more in his possession, as per 4th proviso to sec. 153A, Expl.2, where search u/s 132 has been initiated on 24-10-17 which is after the amendment made by the Finance Act, 2017 wef 1-4-17; assessment made u/s 153A rws. 143(3) would be invalid, bad in law & non-est and is liable to be quashed.
2. On the facts and circumstances of the case and in law, the Id CIT(A) has considered & adjudicated the legal issue raised for AY 08-09 that if there is no incriminating material / documents found during the course of search from premises of the assessee, qua the assessee, qua the year & qua the addition, for an unabated/ concluded year which is not pending on the date of search (i.e., 24-10-17), by applying Kabul Chawla (2015) (Del HC) & Meeta Gutgutia (2017) (Del HC); addition is liable to be deleted.
3. On the facts and circumstances of the case and in law, the Id CIT(A) has erred in denying the legal issue raised that approval granted u/s 153D dt. 30-12-19 by the Jt. CIT is in mechanical & routine manner without application of mind by the Jt. CIT in a hasty manner, merely a formality, an empty ritual without considering the 4th proviso to sec 153A, Expl.2, where search u/s 132 has been initiated on 24.10.17 which is after the amendment made by the Finance Act, 2017 w.e.f. 1-4-17; in absence of a valid approval as mandated by law u/s 153D as per sec153B(1)(a); assessment made u/s 153A r.w.s. 143(3) would be invalid, bad in law & non-est and is liable to be quashed.
8.1 At the outset, it is noticed that the Cross Objections filed by the assessee are delayed by 09 days, in justification explaining the delay, it is submitted by the Ld. AR that it was occasioned on account of late receipt of the Form 36A from the assessee, which was sent from Raigarh to Raipur through courier on 27.09.2022, but the same was delivered at Raipur on 06.10.2022 and thereafter immediately the form was filed with the registry of ITAT on 07.10.2022. Being the delay found to be caused due late delivery of the post by courier agency, it may be considered to be on account of genuine reasons beyond the control of assessee, the application for condonation of delay, there has been accepted and the delay is condoned.
8.2 Ground No.1: Regarding jurisdiction of the Ld. AO to reopen the assessment u/s 153A
On this issue, Ld. AR had submitted a written submission dated 30.03.2023, withdrawing the said ground, the same is extracted as under:
It is very respectfully submitted that we have filed ‘Cross Objection’ in Form No. 36A for AY 08-09 on 7-10-22 vide CO No. 17/Rpr/2022, AY 08-09, in which we have raised Gr. No. 1 in respect of the issue of notice issued u/s 153A on 19-11-19 for AY 08-09, which was due to lack of information/ knowledge of the order dt.20-12-19 of the Hon’ble jurisdictional HC in the case of the assessee-Co; as per the order dt. 20-12-19 of the Hon’ble jurisdictional HC in which the Hon’ble jurisdictional HC has concluded that the notice issued u/s 153A dt. 19-11-19 for AY 08-09 is valid one; and hence, it is respectfully submitted that we withdraw the Gr. No.1 of the ‘Cross Objection’ in Form No. 36A for AY 08-09 filed before Your Honors Bench.
8.3 As the ground No. 1 of the CO has been requested to withdraw by the assessee the same is dismissed as withdrawn.
8.4 Ground No. 2: Regarding sustainability of addition if there is no incriminating material found during the course of search from the premises of assessee for an unabated/ concluded AY.
The legal issue raised by the assessee in ground no. 2, relying on judgment by Hon’ble Delhi High court in the cases Kabul Chawla (supra) and Meeta Gutgutia (supra), has already been discussed and deliberated at length while deciding the appeal of the department in IT(SS)A No. 11 & 12/RPR/2022, in the foregoing para’s of this order, wherein the issue is disposed off in terms of the ruling conferred upon by Hon’ble Apex Court in the case of Abhishar Buildwell (supra), therefore, ground no. 2 of the CO of the assessee is allowed in terms of our aforesaid observations.
8.5 Ground No. 3: Legal contentions raised regarding approval granted u/s 153D.
Since, we have already dismissed the appeal of department and allowed Ground no. 2 of the assessee’s CO, consequently, the addition made by the Ld. AO u/s 68 is entirely vacated, therefore, we refrain ourselves in adjudicating the issue regarding validity of order / approval u/s 153D, thus, this contention of the assessee is left open.
8.6 Resultantly, CO No. 17/RPR/2022 of the assessee for AY 2008-09 is partly allowed.
9. CO NO.18/RPR/2022 of the assessee for AY 2009-10, having identical issues, facts and circumstances, wherein delay in filing of the appeal has been condoned, and the same is also decided on similar lines, in terms of our observations for CO No.17/RPR/2022, thus, partly allowed.
10. In Combined result, both the aforesaid appeals of Department in ITA 11&12/RPR/2022 are rendered as dismissed, and the cross objection of the assessee stands partly allowed, in terms of our aforesaid observations.
Order pronounced in the open court on 16/08/2024.
Author Bio
