Income Tax Appellate Tribunal - Kolkata
Acit, Cc-3(2), Kolkata, Kolkata vs M/S. Shantinath Financial Services ... on 12 September, 2019
IT(SS)A No. 102/KOL/2017
Assessment Year: 2010-2011
M/s. Shantinath Financial Services Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'B' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri S.S. Viswanethra Ravi, Judicial Member
I.T .(S.S.)A. No. 102/KOL/2017
Assessment Year: 2010-2011
Assistant Commissioner of Income Tax,.... ................................Appellant
Central Ci rcle-3 (2), Kolkata,
Aayakar Bhawan Po orva, 5 t h Floor,
110, Shanti Pally, Ko lkata-700107
-Vs.-
M/s. Shantinath Financial Services Limited,............................Respondent
17, Crooked Lane, Ko lkata-700 069
[PAN:AANCS1453P]
Appearances by:
Shri Radhey Shyam, CIT, D.R , for the Appellant
Shri A.K. T ulsian, FCA, fo r the Responden t
Date of concluding th e hearing : Au gust 27, 2019
Date of pronouncing the order : September 12, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President (Kolkata Zone):-
This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-21, Kolkata dated 04.05.2017.
2. The relevant facts of the case giving rise to this appeal are as follow:-
The assessee is a Company, which belongs to "The SAFECHEM Industries Group". The return of income for the year under consideration was originally filed by it under section 139 of the Act on 04.10.2010 declaring total income of Rs.9,83,700/-. A search and 1 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited seizure action under section 132(1) was conducted in the case of the assessee on 17 t h & 18 t h December, 2014. Pursuant to the said action, notice under section 153A of the Act was issued by the Assessing Officer on 05.10.2015, in response to which the return of income for the year under consideration was filed by the assessee on 19.11.2015 declaring total income of Rs.9,83,698/-. During the year under consideration, the assessee-company had raised a share capital of Rs.11,80,000/- alongwith a share premium of Rs.2,83,20,000/- aggregating to Rs.2,95,00,000/-. As found during the course of search and seizure action, the assesee-company had raised the said share capital and share premium from seven companies. As per the information available with the Assessing Officer, some of the sai d companies were paper/jamakharchi companies maintained by certain entry operators having dummy Directors. The Assessing Officer also noted that as per the statements of the said entry operators and dummy directors recorded by the Investigation Wing, Kolkata, the amount of share capital and share premium was brought into the books of account of the assessee through the jamakharchi companies, routing assessee's unaccounted cash. In order to verify the share capital and share premium amount claimed to be received by the assessee during the year under consideration, notices under section 133(6) were issued by the Assessing Officer to the share subscriber companies. The said notices, however, could not be served or remained un-complied with. Even the summons issued by the Assessing Officer under section 131 failed to invoke any response from the share subscriber companies. When this position was confronted by the Assessing Officer to the assessee, the later submitted certain documents in the form of income-tax acknowledgements, audited accounts and Bank statements of the share subscriber companies in order to support and substantiate its claim of having received the share capital and share premium amount in question. The assessee, however, failed to produce the Directors of 2 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited the share subscriber companies for verification before the Assessing Officer. The Assessing Officer, therefore, held that there was failure on the part of the assessee to prove the creditworthiness of the concerned share subscriber companies as well as the genuineness of the relevant transactions involving share capital and share premium money and by relying on certain judicial pronouncements discussed in the assessment order, he made an addition of Rs.2,95,00,000/- to the total income of the assessee under section 68 by treating the share capital and share premium amount as unexplained cash credit.
3. The addition made by the Assessing Officer under section 68 in the assessment completed under section 153A/143(3) of the Act vide an order dated 30.12.2016 by treating the share capital and share premium amount received during the year under consideration as unexplained cash credit was challenged by the assessee in the appeal filed before the ld. CIT(Appeals). During the course of appellate proceedings before the ld. CIT(Appeals), a detailed written submission was filed by the assessee stating, inter alia, that the scope of unabated assessment completed by the Assessing Officer under section 153A/143(3) was limited to assess the undisclosed income only on the basis of incriminating material found during the course of search and in the absence of any such incriminatin g material found during the course of search, the addition made by the Assessing Officer under section 68 by treating the share capital and share premium amount as unexplained cash credit was unjustified. The ld. CIT(Appeals) found merit in this contention raised on behalf of the assessee and after extracting the entire written submission filed by the assessee in his impugned order, he deleted the addition made by the Assessing Officer under section 68 after recording his observations/findings as under:-
"5. I have considered the findings of the AO in the assessment order and the written submission as well as different case laws brought on record by the AR. The main 3 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited argument of the AR is that additions made by th e AO in the assessment order passed u] s 153A/143(3) are not based on any incriminating documents/papers seized during the search o peratio n. The AR h as bro ught o n record many case laws decided by the J urisdictio nal Kolkata bench of ITAT and Jurisdict ional C alcutta High Court on this issue. Calcutta High Court h as time and again reiterat ed it s view that the addition in case of the search assessments h as to be made on the basis of incriminating material. Some of the recent decisions of the Hon'ble Jurisdictional High Court are discussed h ereunder.
PCIT-2 . Kolkata Vs. Salasar Stock Broking Limited (ITAT No. 264 of 2016) dated 24.08.2016: (C alcut ta), In this case, the Honorable High Court observed that the Ld. IT AT, Kolkat a was of the o pinio n th at the assessing officer h ad no jurisdiction is] s 153A of the I.T . Act to reopen the co ncluded cases when the search & seizure did not disclose any incriminating material . In taking th e aforesaid view, the Ld. ITAT relied upon t he judgment s of Delhi High' Court in t he case of C IT(A) Vs. Kabul Chawla in ITA No. 707/2014 dated 28 .08.2014. T he Court also observed th at mo re or less an ident ical view has been taken by th is Bench in ITA No. 661/2008 in the case of C IT Vs. Veerprabhu Mark eting Limited. Considering th e above facts, th e Hono rable High Court did not admit the appeal filed by the Department.
"CIT.Kolkata-III Vs. Veerprabhu Mark eting Ltd.[20161 73 taxmann.com 149 (Calcutta) :
In th is case The Hono rable Calcutt a High C ourt expressed the following views:
"We are in agreement with the views of the Karnat aka High Court that incriminating material is a pre-req uisit e before power could have been exercised under section 153C read with sect ion 153A. In the case before us, the assessing officer h as made disallowances of th e expenditure, which were already disclosed, for one reaso n or the other. But such disallowances were not contemplated by th e pro visio ns cont ained under sectio n 153C read with section 153A. The disallowances made by the assessing officer were upheld by the CIT(A) but the learned Tribunal deleted those disallowances."
The Hon'ble Kolkat a High Court in the above cases relied on the following judgment s.
CIT Vs Kabul Chawla (2016) 380 ITR 0573( Del) 4 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited Search and seizure-New scheme of assessment in search cases-Search was carried out u/s 132 o n a leading real estate developer operating all o ver India and some of its group co mpanies-Search was also carried o ut in the premises of the assessee-Pursuant to the search a notice u/s 153A(1) was issued to assessee and th ereafter he filed returns-As on the date of the search, no assessment proceedings were pending for relevant AYs and for said AYs, assessments was already made u/s 143(1),assessee filed an application u/s 154 seeking rect ification of the assessment s o n the ground that the accumulated profits of the companies paying the dividend were less than the amount of loan o r advance given by them to the recipient companies-AO declined to rectify the assessment s-C IT also held that addition need not be restricted only to the seized material-ITAT on appeal however delet ed addition o n grounds th at the additions made fo r rel evant AY's u/s 2(22)(e) were not based on any incriminating materi al found during search operation and same was not sust ainable in l aw-Issue was whether the addit ions made to the income of the assessee fo r the said AYs u/s 2(22)(e) was not sust ainable because no incriminating material concerning such addit ions were found during the cou rse of search and further no assessments fo r such years we re pending on th e dat e of search-Held, present appeals concerned AYs,2002-0 3, 2005-06 and 2006-07-0n the dat e of the search the said assessments already stood completed-Since no incriminating material was unearthed during the search, no additio ns could h ave been made to the inco me al ready assessed-Question framed by the Court was answered in favour of th e assessee and against the Revenue- Revenue's appeal dismissed.
6. I furth er find th at In this regard th e Hon'ble ITAT Kolkata h as time and again reiterated it s view that the addit ions in case of t he search assessment s has to be made on the basis of incriminating material and any devi ation from the same would render the assessment order invalid. Some of the recent decision of the Hon'ble Jurisdictional Tribunal is discussed hereunder:
M/s Adh unik Gases Lt d. & Others vs. DC IT CC-XXX, IT(SS)A No. 47/Kol/2015, IT(SS)A No. 49/Kol/2015, IT(SS)A No . 50-2/Kol/2015, IT (SS)A No. 54/Kol/2015, IT(SS)A No . 55/Kol/2015, IT(SS)A No. 94- 96/Kol/2015 order dated 06.01.2017(ITAT Kolkata) In this case it is held that no addit ion u/s 68 of the I. T ax Act fo r the Share Capital can be made in absence of any incriminating material. The concl uding Para of th e Hon'ble ITAT's order is as under.5
IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited Having heard the rival submissions, perused th e mat erial available o n record, we are of th e view th at there is merit in th e submissions of the assessee as t he pro positions canvassed by the Ld. AR fo r the assessee are suppo rted by the Judgment s of jurisdictional !TAT and Hon'ble High Courts. Ld. AR h as pointed out that no incriminating document was found either during survey or during search procedure. Th e statement of Sh ri Naresh Kumar Chhaperia should not be relied on} because he is a double speaking person. The assessment proceedings were completed before the date of search . Besides, th e time limit to issue notice U/ S 143(2) was also expired. In o rder to initiate assessment proceedings u/s 153A, there should be a new or incriminating do cument. The assessment which is already completed u/s. 143(3)/143(1) should not be reopened. Therefore, considering the sch eme of section 132 and section 153A, we are of the view th at th ere should be some new document/incriminating document to invoke the pro visions of sect ion 153A. Ld. DR fo r t he revenue h ad pointed out that th ere is a direct nexus amo ng th e companies, which h as been est ablished by t he st atement of Mr. Naresh Kumar Chhapperia, which cannot be relied on, as h e was a do uble speaking person. Therefore, considering the factual positio n and the judgments cited by Id. AR, we are of the view th at the additions made by the Aa u/ s 153A and confirmed by the ld. CIT(A) needs to be delet ed. Therefo re, we delete the additio n."
Furthermo re, the decision of th e jurisdict ional tri bunal in the case of M/s T anuj Holdings Pvt Ltd Vs. DCIT CC-l(2 ), Kolkata vide ITAT No. 360 to 363jKol/2015 dated 20.01.2016 is import ant. The relevant portion of the order is reproduced as under:
We also find th at no incriminat ing materials were found during th e search in the respect of the issue of de emed dividend. Hence it cannot be the subject matter of addit ion in 153C proceedings in respect of complet ed assessment s. We hold that when an addition could not be made as per law in sectio n 153C proceedings, th en the said o rde r cannot be co nst rued as erro neous warranting revision jurisdiction u/s 263 o f the Act."
Shri. Manish Mundhra Vs. AC IT-CC-XXX in ITA-469- 470/Kol/2013 Dt. 16.12.2015 (ITAT Kolkat a);
We also are of the view th at in the light of the admitt ed fact that no incriminating material was found in the course of search the impugned addit ion could not h ave been made in the proceedings u/s 153A of the Act . The decisio n of the fTAT , Delhi Bench in the case of ACIT vs M/s. Delhi Hospital Supply Pvt. Lt d. (supra) followed the 6 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited decisio n of Hon'ble Delhi High Court in th e case of Kabul Chawla (supra) supports the plea of the assesee in this regard ..... "
ACIT-CC-XXVII Vs Kanchan Oil Industries Lt d. in ITA- 725/Kol/2011 Dt. 09.12.2015 (ITAT Kolkat a);
In view of the afo resaid findings and judicial prec edent relied upon, we hold that the denial of deduct ion i x] s 801B of the Act in the assessments framed u/s 153A of th e Act fo r the Asst Years 2003-04 and 2004-05 without any incriminating mat erials found during the course of search with respect to those assessment years is not warrant ed and held as not in accordance with law. Accordingly, the grounds raised by t he revenue in this regard fo r the assessment years 2003-04 and 2004-05 are dismissed.
We hold that the same decision would be applicable fo r the disallowance made by the Learned Aa u/ s 14A of the Act and accordingly no disallowance u/ s 14A of the Act could be made for th e Asst Year 2004-05 by the Learned AO in the assessment framed u/ s 153A of the Act in the absence of any incriminating materials found during the course of search wit h regard to the relevant assess ment year and with regard to the relevant issue.
With regard to the cl aim of deduction u/ s 80lB of the Act for the Asst Years 20 07-08 d 2008-09 are concerned} we find that the same is onl y consequential in nat ure and once the assessee has been granted deduction u/ s 80lB of the Act fo r th e initial assessment year i.e. Asst Year 2003- 04 the grant of deduction under the said section in respect of the same unit is o nly academic and hence the assessee is entitled for deduct ion u/ s 80lB of the Act for the Asst Years 2007-08 and 2008-09. Acco rdingly th e ground raised by the revenue in this regard for the assess ment years 2007-08 and 20 08-09 are dismissed.
Since the decisions are rendered by us on legal grounds, we refrain to give our decision on the merits of the issues."
Budhiya Marketing Pvt. Ltd. & Ors. Vs. AC IT in IT A Nos- 1545-1546/ Kol./2012 [repo rted in (2015) 44 CCH 03441dt. 10.07.2015 (ITAT Kolkat a) The issue wheth er th e addition in an assessment framed under section 153A can be made on th e basis of th e incriminating material found during the course of the search where the eassessment has not been abated, has not been considered or decided by this Tribunal. Therefo re, this decision, in our opinion wil l not assist th e 7 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited revenue while dispo sing of the plea of th e assessee that since no incriminat ing material is found during the course of the search relating to the sh are capit al and the sh are premium, therefore, no addition can be made while making an assessment under section 153A of the Inco me Tax Act . No contrary decision was brought to o ur knowledge by the l d. D.R. In view of the afo resaid discussion and the decision of the Hon'ble Special Bench, Bombay High Court, as well as Hon'ble Delhi High Court , we confirm the o rder of the CIT (Appeals) deleting th e addit ion made in each of the assessment years as we hold that the Assessing Officer was not co rrect in law in making the addit ion in the assessment made under section 153A read with sect ion 143(3) when no incriminating material was found during the course of the search in respect of the addit ion made by him. We acco rdingly partly allowed the C ross Object ions taken by the assessee."
ACIT Vs. Shant i Kumar Surana& Ors. in IT (SS)A Nos. 12 to 20 and CO Nos. 13 to 20 (reported in 44 C CH 241) order dt. 22 .06.2015(ITAT Kolkata) "In view of the fact s in entirety and the legal principles enunciated by Hon'ble Bombay High Court in the case of Continent al Warehousing Corporation (Nh avaSheva) Ltd., supra, of Hon'ble Al lahabad High Court in the case of Shaila Agarwal, supra and Mumbai Special Bench decision in the case of All Cargo Global Logist ics, supra, we are of the view th at there is no incriminating material found during the course of search in the present case for these assessment years, except the statement of one Sh ri Sambhu Kr More, as admitted by th e AO in his remand report dated 23.0 9.2011 and despit e number of oppo rtunit ies revenue could not produce any incriminating material before the Bench and the assessment s are already completed fo r these assessment years originally, the assessment s framed u/s. 153A of the Act is in valid and hence, quashed."
Trishul Hitech Indust ries Lt d Vs. DCIT -CC-XI. IT(SS)A84- 86/Kol/2011 dt. 24.0 9.2014 (ITAT Kolkat a);
Fro m th e above vario us discussions and precedence we are of the considered view that assessment in the impug ned assessment years have been co mplet ed u/s 143(3) of the Act. Hence the assessment for the co ncerned assessment year does not abate. Hence dehorse any incriminating material, AO cannot made any addition in th ese cases. Accordingly we hold that assessment u/s 153C of the Act in these cases deho rse any incriminating material is not sust ainable. Hence we set aside the orders of the authorities below and decide the issue in favour of assessee. Since we are quashing th e appeals on 8 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited jurisdiction we are not adjudicat ing the merits of the appeal as the same is now only of academic interest . "
DCIT Vs. Merlin Pro ject Lt d. IT(SS)A No-13 8/Kol/2011 Dt. 14.11.2013 (ITAT Kol kata);
"We h ave heard the rival submissions and perused the material available on record. The undisputed fact abo ut this case is that the original assessment in this c ase was completed under sect ion 143(3) in which deduct ion was allowed in entirety under sect io n 801B of the Act inter alia on the amount of int erest inco me. It is also undisputed that no incriminating material was found during the course o f search casting do ubt about th e allowability o r otherwise of such deduct ion under sect ion 80IB. This fact has been fairl y admitted by ld. D.R. during the course of proceedings before us as well.
The Mumbai Bench of the T ribunal in the case of AC IT vs. Prat ibha Indust ries (2013) 141 ITD 151 (Mum.) has held, inter alia, th at h aving done original assessment u/s 143(3), if no incriminating material is fo und during th e course of search, th en it is permissible to make any addit ion in the assessment under section 1 53A pursuant to search act ion. The Special Bench of the Tribunal in the case of All C argo Global Logistics Limited vs. DCIT (2012) 137 ITD 217 (SD)(Mum.) h as also held to t he same extent. In view of the fo regoing discussion, we are of the considered o pinio n th at no exception can be found to the view t aken by C IT(Appeals) for deciding this issue in assessee's favo ur.
Before parting with t his matter, we want t o make it clear that our decision is based in th e backdro p of the fact s that the deduct io n under sect ion 80IB could not have been tinkered with because no incriminating material was found during the co urse of search on t his issue whe n original assessment granting deduct ion on this iss ue was completed under sect ion 143(3). We have not expressed any opinion o n the merits of the case about the allow ability or otherwise of deduct io n under section 80 IB on interest income arising in the present fact s and circumst ances.
In the result, the appeal filed by the Revenue st ands dismissed."
LMJ International Lt d Vs. DCIT(2008) 119 TTJ (Kol) 214. (ITAT Kolkat a);
"Where nothing incriminating is found in the course of search relating to any assessment years, t he assessment s for such years cannot be disturbed; items of regular 9 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited assessment cannot be added back in th e pro ceedings under s. 153A/153C when no incriminating document s were found in respect of t he disallowed amounts in the search proceedings.
Furthermo re, The Ho n'ble Supreme Court has dismissed depart ment's special leave petit ion(SLP) against the judgment dt .06-07-2015 of the Delhi High Court in IT A No.369 of 2015 where the High Court held th at no subst antial questio n of law arose since th ere was factual findings th at no incriminating evidence relate to sh are capit al issued was fo und during the course of search . The AR h as filed a written submission on this issue wh ich is as under:
"Whether sect ion 68 could be invo ked where no incriminating evidence related to share capital found.
7-12-2015 : Their Lordships MADAN B LOKUR and S A BOBDE JJ dismissed the Department's special leave petition against the judgment dat ed J uly 6, 2015 of the Delhi High Court in ITA No.369 of 2015, whereby the High Court h eld that no substant ial question of law arose since there was a fact ual finding that no incriminating e vidence related to share capital issued was fo und during the course of search and that the Assessing Officer was not just ified in invoking section 68 of the Act for the purposes of making additions on account of sh are capit al Pr. CIT v Kurele Paper Mills P Ltd, SLP (C ) No.34554 of 2015".
7. The AR h as also brought on reco rd th e case l aw of CIT , Kolkata-III vs Veerprabhu Marketing Ltd [2016] 73 taxmann 149 Kolkat a In this case The Honorable Calcutt a High Court expressed the following views:
"We are in agreement with the views of the Karnatak a High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with sectio n 153A.
In th e case before us, the assessing officer h as made disallowances of the expenditure, wh ich were already disclosed, fo r one reason o r the o ther. But such disallowances were not contemplated by the provisions contained under sect ion 153C read with section 153A. Th e disallowances made by the assessing officer were upheld by th e CIT(A) but t he learned T ribunal delet ed those disallowances."
The Hon'ble Kolkata High Court in the above cases relied on the following judgment s.
CIT Vs Kabul Chawla (2016) 380 ITR 0573( Del) 10 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited Search and seizure-N ew scheme of assessment in search cases-Search was carried out u/s 132 on a leading real estate develo per o perating all over India and so me of its group companies-Search was also carried out in the premises of the assessee-Pursuant to the search a notice u/s 153A(1) was issued to assessee and th ereafter he filed returns-As on the date of the search, no assessment proceedings were pending fo r relevant AYs and fo r said AYs, assessments was already made u/s 1 43(1), assessee filed an applicatio n u/s 154 seeking rect ification of the assessment s on the ground th at the accumulated profits of the companies paying the dividend were less th an the amount of loan o r advance given by them to the recipient companies-AO declined to rectify the assessment s-C IT also held that additio n need not be rest rict ed only to the seized material-ITAT on appeal however deleted additio n on grounds that the addit ions made fo r relevant AY' s u/s 2(22)(e) were not based on any incriminating mat erial found during search operatio n and same was not sust ainable in l aw-Issue was whether th e addit ions made to the inco me of th e assessee for the said AYs u/s 2(22)(e) was not sustainable because no incriminating materi al concerning such addit ions were fo und during the cou rse of search and further no assessments for such years were pending o n the dat e of search-Held, present appeal s concerned AYs,2002-03, 2005-06 and 2006-07-0n the date of the search th e said assessments al ready stood completed-Since no incriminating material was unearthed during the search, no additio ns could have been made to the income al ready assessed-Question framed by the Court was answered in favour of the assessee and against the Revenue- Revenue's appeal dismissed.
It was also informed/brought on reco rd that the order passed by the Hon'bl e Calcutt a High Court has attai ned finalit y as th e CBDT in it's letter No.ADG(L&R)- IIjEZjPr.C IT(C)-1/Kol kata/1184/2016/729 dt .07/08-02- 2017 has intimated t hat the pro posal to file SLP in abo ve case has not been approved by the Board" .
Apart fro m above mentioned case l aws bro ught on record, the AR has also filed copies of appeal orders in different cases passed by my three esteemed predecesso rs on the same issue wherein they have discussed in length and arrived at conclusion that additions in search assessment s u/s 153A/153C canno t be made except on t he basis of the incriminating material found in the search .
reference
a) appeal n0.442/CC-3(1)/CIT(A)-21 j 14-1 5, dat e of order 05-12-2014, 11 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
b) appeal no.440/CC-3(1)/CIT(A)-21/ 14 -15, date of order 15-01-2015
c) appeal no.547 /CC-3(1)/CIT(A)-21/ 14-1 5, date of o rder 10-04-2015
d) appeal no.129 /C C-XVII/C IT(A)-Ij09-10, date of order 23-09-2010
e) appeal no .292/CC-Vl/CIT(A)-C-VI/ 11 -12, date of order 23-10-2013.
I have considered the findings of the AO in the assessment order, different case laws bro ught on reco rd and appeal orders passed by my predecesso rs on this legal issue. I find from the assessment order that during the search and seizure o perations co nducted u/s 132 of th e I.T . Act, 1961, incriminating documents/papers were not seized. At least , addit ions made by th e AO in the assessment order passed u/s 153A/ 143(3) are not based on any incriminating documents/papers seized during the search operation It would also not be out of context to-mention-here th at in this case, on the dat e of search, no assessment for this year was pending. T herefo re, keeping in view the rat io decided by th e Jurisdictional bench of Kolkata Trib unal in cases referred above and th e ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Market ing Ltd (supra) in the light of CBDT' s decision of not filing SLP in th is case in th e Supreme Court and keeping in view the Apex Court's decision to dismiss SLP on simil ar issue in the case of Pr. CIT -vs.- Kurele Paper Mil ls Pvt . Limited:
SLP(C ) No. 34554 of 2015 dated 07.12.201 5, I am of this view th at in order to maintain judicial continuity on this issue and respectfully following the rat io decided by the Hon'ble Calcutt a High Court in the case of Veer Prabhu Marketing Lt d (supra), assessee' s appeal on grounds no 1 is allowed on tech nical ground and as such I am not inclined to adjudicate appeal o n ground no 2 on merit".
4. Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds (as revised):
"(1) The ld. CIT(A)-21/Kolkata was not justified in allowing the appeal of the assessee on technical ground, without considering the relevant provision of section 153A which provides for assessing or reassessing the total income.
(2) The ld. CIT(A)-21/Kolkata was not justified in allowing the appeal of the assessee only on technical ground without considering the facts and circumstances of the case on merit and without 12 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited considering the material gathered by the Assessing Officer on assessment stage while making assessment order.
(3) The ld. CIT(A)-21/Kolkata, has failed to perform his statutory equivalent and coextensive power with that of the Assessing Officer as held in by the Hon'ble Supreme Court in the case of Kanpur Coal Syndicate (SC) 53 ITR 225.
5. The ld. D.R. vehemently assailed the impugned order of the ld. CIT(Appeals) giving relief to the assessee on the issue under consideration by deleting the addition made by the Assessing Officer under section 68 by treating the share capital and share premium amount received during the year under consideration as unexplained cash credit. In support of the Revenue's case on this issue, he furnished a written submission containing Revenue's arguments as under:-
"1. The language of section 153A makes it very clear that there is no explicit o r intended requirement of seizure of incriminating material during the search u/s 132(1) before issuing the notices u/s 153A. The jurisdict ion of section 153A is automatic fro m the moment a search is initiated. There is no requirement of examination of seized material or reco rding any satisfaction w.r.t availability of seized material befo re issue of notice u/s 153A. In my opinio n, the intention of legislature in allowing so could be th at the initiation of search itself is subject to recording of sat isfactio n u/s 132(1) by the PDIT(lnv) o n grounds that:
(i) Upo n issue of summons u/s 131(1), the assessee has failed to produce or wo uld not produce the books of accounts o r other documents so requisit ioned; or
(ii) The assessee is in possession of mo ney, bullion jewellery, article or thing which represents wholly o r partly inco me h as not been o r woul d not be disclosed fo r th e purposes of th e Act .
Hence a conjoint reading of section 153A and 132(1) would clearl y impl y th at a satisfaction to issue notice u/s 153A is already deemed to be import ed fro m the satisfaction recorded by PDIT(lnv) at the t ime of issuing warrants u/s 132(1). The existence of satisfact ion reco rded by PDIT (lnv) is liable to be challenged before co urts. Hence, until such sat isfaction for issue of warrant s u/s 132(1) are h eld invalid by any co urt , the satisfaction recorded by PDIT (lnv) shall continue to hold the 13 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited fort fo r purposes of 1 53A also and it is fo r this reason there is no further requirement of recording any belief or s atisfaction by AO fo r issue of notice u/s 153A.
As may be noted from the conditio ns of reco rding the satisfaction of PDIT (lnv), o ne of the conditions is regarding books or other document s which were no t pro duced or would not have been pro duced on issue of summo ns. Thereby implying that post search, while the AO is making assessment, it has to examine the co rrectness of income disclosed not onl y based on what material h as been gathered during search but also based on these books or documents which in the opinion of PDIT(lnv) would not have been produced upon issue of summons, whether or not such books of account s o r document s have bee n actually found during search. In fact , there are numerous instances when even the books of acco unts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfactio n by PDIT(lnv) in respect of inco me being fully o r partly not disclosed for the purposes of the Act . H ence, even if so me income/ entry is discl osed in books or audited accounts, th e AO is mandated to examine whether such income / entry was disclosed fully o r partly and/ or represent s its real nat ure and source for th e purposes of the Act . This int er alia woul d mean that even the entries disclosed in accounts which might represent income fully or partly wo uld in itself be an incriminating material fo r wh ich a search was initi ated. When the non-product ion o f books or other document s can give rise to a belief fo r initiating search u/s 132(1), then it may be counterproduct ive t o conclude that th e power of AO is rest ricted to assessment based only on incriminating material found in search, irrespective of any other item of income which might have remained fully or partly undisclosed for the purposes of the Act , based upon the entries already appearing in such books, if any.
1.2 It is the 'assessment of tot al income' wh ich is required to be made u/s 153A. The t otal income as defined u/s 2(45) woul d be the total income co mputed as per section 5 of the Act. The word 'assessment' cannot have a different meaning for di fferent purposes under the same Act , unless restricted by specific pro visions. The process of assessment for the purposes of the Act is wide enough to include every kind of enquiry/examination for discovery, quant ification and assessment of any income wholly o r partly fo r the purposes of the Act . Hence, the process of 'assessment of total income' u/s 153A can neith er be restrictive no r h ave a different connotation fo r assessment under section 1 53A vis a vis 143(3) or 147. As per the scheme under the Act, the satisfactio n recorded u/s 132(1) and the results of search are intended to be brought to a logical conclusion by initiat ing the proceedings 14 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited u/s 153A without any further act of the AO. Hence it is in the scheme of the Act th at aft er issuance of notice u/s 153A, the next actio n of the AO must follow the examination of all aspects for which a search h as been initiated. Hence, it cannot be said that the AO u/s 153A cannot pro ceed to examine the books of acco unts or documents, entries which were pro duced before h im subsequently, wherein might al so represe nt income wholly or partly, which has not been disclosed for the purposes of the Act. Hence, it may be contrary to the scheme of th e pro visions of 132(1) r/w 153A, if it were to be held that power of AO is restricted o nly to make assessment the evi dence found during search . Th e provisions of 153A not o nly require assessment of undisclosed inco me but tot al income also . The expression 'total income' would include th e inco me emanat ing from disclosed items, income emanating from partly o r wrongl y disclosed items as well as inco me emanating from undisclosed items. U/s 153A, no distinction is made fo r assessment of total income in the cases which were earlier completed u/ s 143(1), the cases which were earlier co mplet ed u/s 143(3)/147 or th e cases were no ret urn was filed prior to search. Thus, in all th e three catego ries, it is as per the sch eme of the Act th at the total income of the assessee as defined u/s 2(45) needs to be assessed fo r all the 6 AYs for which th e Aa is mandated to issue notice u/s 153A.
1.3 Further u/s 153A, there is a provision for abatement of pending assessment s whether or not any evidences were found for that year. There can al so be a sit uat ion wh ere neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The sectio n also envisages the issue of notice u/s 153A whether or not any evidences were found fo r that year. It is also implicit th at u/s 153A, the items of t otal inco me wh ich could be asse ssed u/s 153A in abat ed proceedings cannot be different for th e cases which could not be abated such as I) where no proceedings were pending; or ii) where earlier assessments were co mplet ed u/s 143(3)/147; or iii) where earlier assessment s were not made at all. The only caveat could be that before making any addit ion to the total income, the AO must bring on th e record how such items are falling into the cat egory of total inco me for the purposes of the Act. Thus, if it were to be held that no addit ion can be made without any incriminating mate rial in respect of the years covered by section 153A, then it would lead to an absurd consequence whereby the po wers granted to issue notices u/s 153A would be rendered otiose in cases which got abated for any particular AY. In the absence of any seized material, AO may not be able to pro ceed to make any assessment of any other item of total inco me implyi ng that the process of making assessment of total income as envisaged in section 153A fails in abated cases. However, a st atute can never be int erpreted in a manner to make it redundant.
15IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited 1.4 Section 153A does not say th at additio ns shoul d be strictly made on the basis of evidence found in the course of search o r on the basis of any o ther post-search mat erial or i nformat ion available with the AO though such assessment cannot be arbit rary. The pro visions sect ion of 147 and sect ion 153A, though h ave different conditions to assume" jurisdiction but both operate to make the assessment of tot al income only. The Memorandum explaining the provisions of Finance (No. 2 ) Bill of 2009 while inserting explanation 3 to section 147 reads as under:
"Some co urt s have held that the Assessing Officer h as to rest rict th e reassessment proceedings onl y to issues in respect of which the reaso ns have been recorded for reo peni ng the assessment . He is not empowered to touch upon any other issue for which no reasons h ave been recorded. The above interpret ation is co nt rary to the legislative intent.
Therefo re to articulate the legisl ative intent clearly, expl anation 3 h as been inserted in section 147 to provide th at assessing officer may examine, assess or reassess any issue relevant to income which comes to his no tice subsequently in the course of proceedings under this sect ion, notwithstanding that the reasons fo r such issue h as not been included in th e reasons recorded under sub-sect ion(2) of section 148".
Hence, even in absence of any explanat ion u/s 153A al so simil ar to the explanation 3 u/s 147, t he intentio n of the legislature and th e scheme of the Act fo r making as sessment u/s 153A where search u/s 132 is initiat ed, is same i.e. in order to make assessment o f total inco me, after having assumed the jurisdiction to assess total inco me, the po wers of AO sh all not remain rest ricted to mere tho se material which were seized during search but sh all also include the assessment of income based on any entry already recorded prior to search or any claim/ relief allowed prio r to search, which has been found to be erro neous during t he proceedings u/s 153A.
1.5 There is divergence of judicial o pinion on the question of whether assessment u s 153A can be restricted to only the incriminating material seized during the search o r wh ether the AO can also take view based on someth ing which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the judicial verdict s are as under:
(a) Allahabad High C ourt in Raj Kumar Arora 367 ITR 517 h as held that th ere is no requirement of incriminating mat erial fo r invoking pro visio ns of 153A.
(b) However, the same Delhi High Court in case of Dayawanti Gupt a Vs CIT 390 IT R 496(Del) in para 16 h as observed th at:16
IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited "Section 153A, which provides fo r an assessment in case of search, and was int ro duced by the Finance Act, 2003with effect from 1-6-2003, does not provide th at a search asses sment h as to be made strictl y on the basis of evidence found as a result of search or other documents and such other material s or informatio n as are avail able with the Assessing Officer and relat able to th e evidence found. The earlier section 15888 which is not applicable in case of a search conducted after 31- 5-2003, provided th at the co mputatio n of the undisclosed income can only be on the basis of the evidence found as a result of search or other documents and materials or informatio n as are available with th e Assessing Officer, pro vided they are related to the materials found. Sectio n 153A(1)(b) requires assessment or reassessment of tot al income of the six assessment years immediately preceding the assessment year relevant to the previo us year in wh ich the search took place. This, however, does not mean th at the assessment under section 153A can be arbit rary o r made without any relevance or nexus with the seized mate rial" .
(c) Filat ex India Ltd Vs CIT -IV 229 Taxman 555 (Delhi) Whether during assessment under section 1 53A, additions need not be rest ricted o r limited to incriminat ing material found during co urse of search and, hence, argument of assessee that addit ion under sectio n 115JB was not justified in order under section 153A as no incriminating material was fo und concerning said addit ion had to be reject ed - Held, yes.
(d) Sunny J acob jewel ers and wedding cent er Vs DC IT 362 ITR 664 (Ker) Whether there is no requirement under provisions of Act requiring depart ment to collect informat ion and evidence for each and every year for six previous years in order to initiat e proceedings under section 153A - Held, yes
(f) C IT Vs Anil Kumar Bhatia 352 IT R 493(Delhi) Whether even if assessment order h ad al ready been passed in respect of all o r any o f those six assessment years, either under section 143(1)(a) o r section 143(3) prior to initiation of search/requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total inco me t aking note of undisclosed income, if any, uneart hed during search - H eld, yes
(g) C IT-II Vs co ntinental warehousing co rporation 235 Taxman 568 (SC) The High Court by impugned o rder held th at no addition can be made in respect of assessment s which h ave become final if no 17 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited incriminating material is fo und during search o r during 153A proceeding - Wheth er Special Leave Petition filed against impugned order was t o be granted - Held, yes
(i) The dismissal of SLP by supreme court in case of PC IT vs Meeta G utgutia wh erein also the same views were expressed as in Kabul Ch awla, would also not lead to conclusion th at the question decided by Delhi High court against the revenue in Meeta Gut gutia is settled because the SLP has already been admitted by SC for hearing on the same question in several other cases such as Continent al warehousing, Best Infrastructure (supra).
Further, Supreme Co urt in Sinhgad T ech Edu Society 397 IT R 344(SC) held th at no notice u/s 153C could be invoked unless there was incriminat ing mat erial is also of no consequence as the provisions of section 153C has been amended w.e.f 1/4/2005 and that the decision of Sinhgad Tech Edu society was for period prio r t o 1/4/2005.
1.6 The sum and subst ance of all the decisions abo ve could onl y indicate th at the question of wheth er the AO has powers u/s 153A to assess total income as defined u/s 2(45) dehors the incriminating material also, h as not at all become final and th e same is yet pending final adjudication before the SC in SLPs admitted. Hence th e arguments made in preceding paragraphs can be pitched up to support the revenues' contention before courts.
2. Now next set of questions which are required to be answered are:
2.1 The 'incriminat ing mat erial' can be in any fo rm such as evidence in the nat ure of i) a document, content of any document; ii) an ent ry in books of account ; iii) an asset; iv) a statement given on o ath; v) absence of any fact cl aimed earlier but co ming to notice during search; vi) absence of books being found during search; or vii) absence of t he office/ business premises as claimed during returns filed or any other documents, etc. In short, any fact/ evidence which could suggest th at the document s/ t ransactions claimed o r submitted in any earlier proceedings were not genuine, being o nly a device/ make belief based o n non-existent facts or suppressed/ misrepresent ed fact s, would constit ute an incriminating material sufficient to make assessment fo r the purposes of the Act. A mere st atement u/s 132(4) is an evidence fo r making an assessment as al so h eld by apex court in B Kisho re Kumar Vs DCIT 234 Taxman 771 (SC ) as under:
High Court by impugned o rder held th at since assessee himself had st ated in sworn statement during search and sei zure about his undisclosed income, t ax was to be levied on basis of 18 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited admission without scrutinizing documents - Wh ether Special Leave Petition filed against impugned order was to be dismissed - Held, yes Hence even a stat ement u/s 132(4) sh all also const itute incriminating material to dislodge any earlier finding for th e purpose of making an assessment u/s 153A.
The requirement of incriminating material is not specificall y mentio ned in the Act. However, w.e.f. 1/4/2005 the provisions of section 153C have been amended so as to allow the invocat ion of proceedings u/s 153C if any document, an ent ry or an asset is found in relat ion or pertaining to a perso n other than the searched person, which h as a bearing on the assessment of total income as per th e pro visions of the I T Act . Hence the wo rd "incriminating", as used by the co urt s in context of sectio n 153C, needs to be applied in the co ntext of section 153A also which has to be seen as something wh ich can have a bearing on th e assessment of correct total income u/s 2(45) as per pro visio ns of the Act .
2.3 The expression 'h ave a bearing on det ermination' as used u/s 153C also h as a wide connotation which implies that th e nexus of the seized do cuments/ assets to income should only be a logical nexus to t he ultimate process of det ermination of total inco me and th at such evidence need not be in th e nature of direct hard evidence. Applying the same principles, th e incriminating material for th e purposes of section 153A also has to be necessaril y construed to be in th e nat ure of a prima facie evidence only (including a circumst antial evidence) and not as h ard evidence. The use of th e expression 'books of account s' u/s 153C again suggests th at even the ent ries recorded in the bo oks of accounts, which have not been correctl y recorded o r camouflaged wo uld also partake th e character of incriminating material , if the same has a bearing on the determinatio n of inco me which has not been already disclosed in the ret urn filed, if any. Hence, the ent ries in the regular books of accounts would also t rigger th e assessment u/s 153A/C, if th ere is some prima facie evidence th at the entry recorded therein is camoufl aged, or incorrect, wholly or partially, and such entries h ave a bearing on determinatio n of total income of such person. The definitio n under clause (ii) of 271AAB(c) also defines undisclosed inco me as " any i ncome based o n ent ry in boo ks of acco unts wholly or partly false and would not h ave been found to be so, h ad the search not been conducted". This clearly implies that any entry even reco rded in the books, which is found to be wholly o r partly false along with having a bearing on determinatio n of inco me based on evidence gathered during search, wo uld also be in the nature of incriminating material. Further, recently int roduced sect ion 270A, which is also applicable to search asstt . for AYs other than specified years, mandates to levy penalty even in cases 19 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited where th e expenses h ad been claimed in th e books without any evidence o r where the ent ries reco rded in t he books were found to be false. This also suppo rts the contention that mere recording of an entry in th e books of accounts does not t ake away its incriminating ch aracter, if such ent ry was without evidence o r h ad been falsely recorded in th e books of account s.
The same principle will also hold good for the documents submitted earlier in relatio n to ent ries recorded in the books but l ater found that the documents were not genuine or manipulated or camo uflaged. Supreme Co urt in Sinhgad Tech Edu Society or Delhi High Court in Kabul Ch awla never considered the implication of section 27 0A and 271 AAB as expl ained abo ve whil e considering as to what material would constitute incriminating for the purposes of assess ment of total income under section 153A/C. 2.4 The pro visions of section 153A/153C are not the normal assessment provisions like 143(3); rather t hey are curat ive pro visions to pl ug the mischief of evasion o f taxable income based on evidences found in pursuance to search. Hence, if on account of search, the fact s and circumstances suggest that any ent ry already appearing in book s or accepted in earlier assessments based on documents submitted at th at point of time, are camouflaged or manipulated or reflected to be in the nature or fro m a source which is diffe rent from the real nat ure o r so urce as appearing from the evi dences found during a subsequent search, then such material/ facts coming to fore now will definitely constit ute an incriminating mat erial. In consequence of the same the earlier reco rded ent ries/ earlier admitted documents and evidence sh all have no force as genuine evidence. If it were held not to be so, then th e purpose of 153A wo uld be defeated as it wo uld fail to prevent the mischief, which it sought to prevent just because the ent ries were already recoded in the books or so me documents had already been accept ed. Hence appl ying the Hayden's rul e of misch ief, the mere fact th at such entries are reco rded in the books of account s o r some fabricated or colourful document s h ave already been accept ed as co rrect, will not prevent such material o r ent ry from being incriminating, if the circumst ances suggest otherwise. The H ayden's rule of mischief h as been judicially accepted and applied by Calcutta High Court in Reckitt Colman of India Ltd. vs. ACIT (2001) 252 ITR 550 (Cal).
The incriminating material can be from th e search or even from subsequent surveys o r any other enquiries. Rec ently in CIT Chennai -vs.-Ajit S. Kumar 93 t axman.com 294(SC), the Court in th e context of section 158BB has upheld th e use of informatio n collected in a survey in case of connected person carried along with search in other perso n for the purpose of making asstt. u/s 158BB. Pro visions of 158BB are Pari material to section 153A.
20IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited The Delhi High court in PC IT Vs Kabul Chawla in para 37(iv) observed as under:
"iv. Although Section 153 A does not say that additions should be st rictly made on the basis of evidence fo und in the course of the search, o r other post -search material or informatio n available with the AO which can be related to the evidence found, it does not mean th at the asses sment "can be arbitrary or made without any rel evance or nexus with the seized material. Obviousl y, an assessment has to be made under this Section only o n the basis of seized material."
The Delhi High court has thus explained the underl ying principle that though the assessment may not be bas ed on seized evidence o nly but the additio n cannot be arbit rary. There can be no dispute on this proposition. It h as to be based on evidences found during search, or po st search or informatio n available with the AO which can be related to the evidence found. T hus, any entry already recorded in the books which is not t rue in it s nature or source and any informatio n even co ming to the AO post search sh all constitute incriminating mat erial fo r th e purpose of making an assessment u/s 153A.
3. There is a distinction between a mere change of opinion and a change of o pinion based on fresh facts. Th e l atter would impl y th at th e earlier conclusions of th e AO were misled by pl acing evidence on suppression or misrepresent ation of material facts. An order passed by the AO relying upon such make belief document s, suppressed o r misrepresent ed facts, which were later fo und to be not true, shall become void or voidable, as the case may be. Under such circumstances, t he acceptance of any claim, relief etc. in any earlier order shall also have no binding force in any subsequent proceedings and th e change of opinion would be permissible. Th e Courts have accepted th e principle th at any fraud pract iced on the co urt is always a gro und fo r vacating the judgment, as wh ere the court is deceived or misled as to material circumst ances, or its process is abused, resulting in the renditio n of a judgment, which would not h ave been given if the whole conduct of the case had been fair" .
The Madras High Co urt in case of L. Mohanam vs Moh amed Idris on 24 June, 2011 in O.S.A.No .310 of 2010 has observed as under:
19. In suppo rt of h is contention, the learned senio r counsel for the appellant/pl aintiff relied on the decision of the Hon'ble Supreme Court in Hamza Haji V. St ate of Kerala and another report ed in (2006) 7 SCC 416, wh erein it has been observed th at a decision obtained by playing a fraud on 21 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited Court is liable to be set aside on the basic principle that the party who secured such a decisio n by fraud cannot b e allowed to enjoy its fruit s. The learned senior counsel also relied o n the observation of the Hon'ble Supreme Court in State of Andh ra Pradesh and another Vs. T.Suryachandra Rao reported in (20 05) 6 SCC 149 to the effect that th e fraud vitiates every solemn Act and fraud and justice never dwell together. In A. V.Papayya Sastry and Others Vs. Govt .
Of Andh ra Pradesh and others repo rted in (2007) 4 S upreme Court C ases 221 also, th e Hon'ble Supreme Court has observed that fraud vitiates all judicial act s whether in rem or in personam and that a judgment , decree o r o rder obtained by fraud h as to be t reated as no n-est and nullity, whether by the Court of first instance or by the final Court and th at the same can be ch allenged in any Court , at any time, in appeal, revision, writ or even in collateral proceedings. In No rth Eastern Railway Administ ratio n, Gorakhpur Vs. Bhagwan Das (dead) By Lrs repo rted in (2008) 8 Supreme Court Cases 511, the Hon'ble Supre me Court h as again reit erat ed the point th at a judgment o r decree obtained by fraud either in the first court or in the highest Court , is a nul lity in the eye of law.
Section 44 of the Evidence Act also enables a part y otherwise bound by a previo us adjudicatio n to show that it was not final o r binding because it is vitiat ed by fraud. The pro vision therefore gives jurisdiction and autho rit y to a Court to consider and decide the question whether a prior adjudicatio n is vitiat ed by fraud.
Thus, the above pro positions of law abundantly make clear that th e AO also being a quasi- judicial authority, while functioning under the Act, shall also be bound by s imil ar principles of jurisprudence. Hence, fo r the purpose s of assessment of total income u/s 153A al so, any findings given in respect of any claim/ relief in earlier proceedings shall st and vacated by operation of legal principles (as hel d by the Apex court above), where it is fo und that in earlier proceedings the AO has been misled by suppression or misrepresent ation of material facts or by producing only make belief document s, which were not found to be genuine subsequently based on emergence of new fact s during enquiries. Hence th e view that the AO cannot rescind from accept ing the documents admitted earlier is not a gospel truth which can be applied in each and every circumst ance.
3.1 Furth er the Apex court in ITO Vs. Techspan Indi a (P.) Ltd. 92 taxmann.com 361 (SC) observed as under:
Whether before interfering with proposed re-opening of assessment on ground that same is based only on a ch ange of opinion, Court ought to verify wh ether assessment earlier 22 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited made has either expressly or by necessary implication expressed an o pinion on a matt er which is basis of alleged escapement of income that was t axable; if assessment o rder is non-speaking, cryptic or perfuncto ry in nature, it may be difficult to att ribute to Assessing Officer any o pinion on questions that are raised in pro posed re-assessment proceedings - Held, yes - Whether every at tempt to bring to tax income th at h as escaped assessment, cannot be absorbed by judicial intervent ion o n an assumed ch ange of opinion even in cases where o rder of assessment does not address itself to a given aspect so ught to be examined in re- assessment proceedings -
Held, yes In view of the above, appl ying the same principle in th e present cont ext also , it can be safely concl uded th at in th e absence of any categorical finding on the genuineness of a claim in an earlier assessment h aving being accept ed on make belief documents/evidences only, it cannot be said that the A.O. has expressed any opinion o n the correctness or otherwise of the it ems/entries disclosed in th e return of income al ready filed prio r to the search. T he judicial view is very clear wherein it h as been held that th e mere submissio n of so me documents proving identit y o r bank account , affidavits in cont rast to the other evidences suggesting the transaction to be suspicious cannot be accept ed to have est ablish ed the genuineness of transaction. Hence, if any earlier finding h as been fo und to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s 153A.
4. In this regard it is further pertinent to mentio n here that the expressio n 'incriminating material' is not found in the pro visions of the Act and it is onl y the Hon'ble Courts which had imported those words while rendering the decisions. As per the decisio n of th e Hon'ble Karnat aka High Court in the case of C anara Ho using Development Co. vs. D.C.I. T .
reported in (2014) 49 taxmann.com 98 (Kar Hc) and also as per the decisions of Kerala High Court in the case of St . Francis Clay Decor Tiles 2016, 70 taxmann. 234 Keral a, 22 . March, 2016 and E. N. Gopa Kumar vs. C .I. T.(Cent ral), 30 October, 2016 it was held that search assessments co uld be framed even witho ut the existence o f incriminating materials fo und in th e course of search .
5. The basic foundation fo r conducting the search i s governed by the provisions of section 132 of the Act which has to be read h armoniously with sectio n 153A of th e Act. There are three conditions based o n which a search act ion 23 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited could be initiated u/s. 132 of the Act on an assess ee. They are : -
Section 132(1) - If the concerned authority has in consequence of info rmation in h is possession, has reason to believe that -
where a person fails to pro duce the books of accounts and other documents in response to notice u/s. 142(1) o r summons issued u/s. 131 (1) of th e Act; or where a person fail s to comply with t he requirements of summons issued u/s. 131 (1) of th e Act;
or where a person is in possession of any money, bullion, jewel ry o r other valuable article or thing and such asset s represent s either who lly or partly income o f pro perty which has not been, o r woul d not be, disclosed fo r the purposes of the Act (hereinafter referred to as the undisclosed income or pro perty) ;
then th e officer, so authorized could conduct a search and proceed as per the requirements laid down in the said section. The afo resaid three primary conditions fo r invoking search proceedings cannot be given a go by while framing section 153A assessments and the instant case falls under section 132(1 )(c) of the Act . Once the search is conducted and notice u/s. 153A is issued the appellant has to file the return of "total income" whether there was any seized material or not. It shows that seized material o r undisclosed income is not the criteria fo r filing of return declaring total inco me. Wh at is required to file return of income for appell ant is that (1) th ere should be search and
(ii) 153A notice sho uld be issued. Once the notice is issued u/s. 153A and appellants file its return o f income for six years then the earlier ret urns became non est and the returns filed in response to notice u/s. 153A becomes the final return and the AO h as power to assess o r reassess the case for ent ire six years. The earlier assessment also becomes non est as th e earlier return filed by the appellant became non est.
6. The afo resaid view get st rength from Delhi High Court decisio n of Pr. Commissioner of Inco me Tax vs. Niraj Jindal dated February 9, 2 017 wherein it is held that once the assessing officer accepts the ret urns filed u/s. 153A the original ret urn filed u/s. 153A becomes non est which means there was no such return in th e eyes of law and action taken o ver such assessment also becomes no n est which shows that Section 153A empowers appellant to file its disclosed and undisclosed return both and simil arly it 24 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited empowers to the AO also to assess or reassess th e income accordingl y.
7. The decision of Pr. Commissioner of Inco me T ax vs. Niraj Jindal of Delhi High Court which has been affirmed by the Hon'ble Supreme Court, has also interpret ed the same and holds that once notice under sect ion 153A is issued and appellant files returns befo re the assessing office r, the eai1ierTeturn filed by the appellant beco mes non est . The aforesaid decisio n is in conso nance with t he interpret ation of clause (a) and (b) and proviso one of Section 153A( 1 ).
8. It is furth er to po int out that the provision of Section 153A are non obst ante clause which do es not h ave any conditions of seized material o r incriminating material for making assessment , filing of return o r conditions fo r issuance of notice u/s. 153A Wherever the search h as been conducted 153A has to be issued indiscriminately without any seized material and assessment of that ret urn is to be made. It h as been directive of Hon'ble Supreme Court that anyth ing should not be complied which is not examined.
"In interpreting a taxing statut e, equit able considerat ion are entirel y out of place. Nor can taxing stat utes be interpreted on any presumptio ns or assumptions. The co urt must look squarel y at the words of the st at ute and interpret them. It must int erpret a t axing statut e in the light of what is clearl y expressed; it cannot imply anything which is not expressed; it cannot impo rt provisions in t he st atutes so as to suppl y any assumed deficiency" .
The afo resaid view is held in the decisio ns of the Apex Court in the case of CST v. Modi Sugar Mills Lt d. [1961] 12 STC 182 (SC) ; AIR 1961 SC 1047 has observed t hat (page 190 of 12 STC). The same view h as been expressed by the Supreme Court in C IT v. Calcut ta Knitwears [2014] 362 ITR 673 (SC) has hel d th at the while interpreting fiscal st atute s, the court must not add or substitute the word in the provision.
Keeping in view of aforesaid fact it is submitted th at the matter may be decided in favour of revenue" .
6. The ld. Counsel for the assessee, on the other hand, fully supported the impugned order passed by the ld. CIT(Appeals) giving relief to the assessee on the issue under consideration by making the following submissions in writing:-
"1.1 A search & seizure o peration was co nducted u/s 132 of the Act on 17.12.2014 by the Investigation Wing, Kolkata at the business as well as resident ial premises of the "SAFECHEM Group" at Kolkat a and 25 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited other places. Assessment u/s 153A/143(3) was completed on 30.12.2016 determining total Income of Rs.3 ,04,83,700/- inter-alia making the following addit ion:
(i) Unexplained Cash credit u/s 68 of the I.T . Act -
Rs.2 ,95,OO,OOO/ -
The above additio ns made in this impugned o rder are part & parcel of the regul ar income tax return filed u/s 139(1) and the audited Balance sheet & profit & loss account . In t he inst ant case the above addit ions are not based on any incriminating seized material .
1.2 As per Section 153A, the assessments are classified in two categories, i.e. (i) Completed Assessment and (ii) Pending o r Abated Assessment . Completed Assessment refers t o the assessment wh ich are not pending as on the date of search and th e time limit for issuance of notice u/s 143(2) h as expired. Th us, the assessment for the year h as attained finality and any addition in the completed assessments can be made onl y on the basis of Incriminating material found during the course of search .
Pending or Abated Assessment refers to t he assessment which are pending as on the date of search and hence merges with the Block Assessment proceedings u/s 153A and assessment is made no rmally by the AO.
1.3 The instant case of the assessee falls in th e c atego ry of the Completed Assessment as no assessment for th e inst ant year was pending as on the date of search . The assessee file d th e o riginal return u/s 139 on 04.10.2010 declaring total income of Rs.9,83 ,700/- The return was processed u/s 143(1) of the I.T. Act . The perio d within which the stat utory notice u/s 143(2) could be issued by th e depart ment also expired on 3 0.09.2011, i.e. much before the search and seizure operation conducted on 17.12.2014. That means no proceedings was pending befo re the AO on the dat e of search. In the course of search no incriminating documents were found on the basis of which any addition could be made. The AO h as made the addit ions u/s 68 of the Act as t he Share holders did not comply the summons u/s 131 and assessee did not produce the Directors of the investor companies. The AO h as not referred any incriminating seized documents for making above additions/ disallowances. Th is fact is evident from the assessment order.
Brief fact s of the case are t abul ated hereunder;
04.10.2010 Date of filing of ret urn u/s 139
9,83,700/- Returned income
30.09.2011 Time limit for issuance of notice u/s
143(2)
17.12.2014 & Date on which search & seizure o peratio n
18.12.2014 was co nduct ed
Rs.3 ,04,83,700/- Assessed income u/s 153A/143(3) vide
order dat3ed 30.12.20 16
Total addition made u/s 153A/143(3)
26
IT(SS)A No. 102/KOL/2017
Assessment Year: 2010-2011
M/s. Shantinath Financial Services Limited Rs.2 ,95,00,000/- Additio n of sh are application money received u/s 68.
Rs.2 ,95,00,000/-
The inst ant appeal is against th e addition of the items of regular assessment in the assessment made under sec.153A of the Act wit hout having any incriminating material to that effect found and seized in the course of search & seizure o peration. The Ld. A O while exercising the powers conferred within him u} s 153A of the Act has fail ed to appreciat e th e legal position th at the addition in the case of search assessment s has to be made only o n th e basis of inc riminating material. The Ld. AO also can not st art doing a fresh assessment that had al ready been completed either u/s 1 43(3) or u/s 143(1) under the Act without h aving any incriminating material o n reco rd. In proceedings u/s 153Aj153C to reopen th e completed assessment is rest ricted o nly to the extent of incriminating docu ment s if any. Th e various High Courts including th e jurisdiction Calcutt a High Court and jurisdict ional IT AT have al ready held that issues forming part of the items of the regul ar assessment , is beyo nd the scope of the search assessment u/s.153A/153C and the AO has no jurisdictio n to make addit ions otherwise t han on the basis of t he incriminating mat erial found in the co urse of search .
1.4.2 In the inst ant case, the AO h as made th e additio n of Rs.2 ,95,00,000/- u/s 68 of the I.T. Act on account of share capital on the ground th at the share applicants did not company to summo ns u/s 131 of the Act and th e assessee did not produce the Directo rs of the investor companies. The AO also alleged that some applicant companies are jamak harchi companies. He also alleged th at as per the data base of the Investigation wing, Kolkata the co mpanie s namely M/s T ramel T reading Pvt Ltd and M/s Giltedge Vincom Pvt Ltd are also jamakh arch i companies maint ained by ent ry operato r Mr. Jivendra Mishra whose st atement was recorded.
In th e course of assessment all the supporting documents of the share applicants were filed to explain the ident ity, creditworthiness and genuineness of the transaction. The share applicants also filed reply against notice u/s 13 3(6) and confirmed th eir invest ment .
1.4.3 The Ld. DR during the co urse of hearing has alleged th at statement of the ent ry o perato rs was reco rded wh ich can be t reated as incriminating material in the case of the assessee.
In this regard, we wo uld like to submit that the st atement of alleged entry operator was not recorded co nsequence to search & seizure operation against t he assessee. The st atement was reco rded o n 26.09.2014 in connect ion to search & seizure operation of so me o ther group. The st atement was retracted vide an affidavit dated 14.10.2014 duly not arized before the Notary Public copy of which was pro vided to us by th e ld. D.R. during the course of earlier hearing before the Hon'ble Bench.
27IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited 1.4.4 Further, no survey h as been conducted no r any statement o f any operator has reco rded in consequence or parallel to the search of the assessee. The st atement as been alleged by the DR h as been recorded prio r to the search of the assessee in case of some group and the same has been referred by the department from the data b ase o f the depart ment available with the AO.
It is import ant to mentio n here that at the st age of assessment proceedings, neither the copy of the stat ement of the so -called ent ry operator was provided to the assessee to know the content s of the same nor any opport unity was given to th e assessee for any revertal . Also, no o ppo rtunit y was given to th e assessee fo r any cross examination of the entry operator before relying o n the st atement thereof.
1.4.5. Further these are pre search enquiries which h ave no evidentiary val ue in absence of any incriminating seized material. No value can be att ach ed to his st atement as he h as ret ract ed his statement submitted before the department (as evide nt fro m the affidavit given by the Ld. DR during the course of hearing).
His conduct neut ralizes his value as witness of the department . They are double speaking person. In course of search & s eizure operatio n no incriminating material or assets were found to link the share capit al raised by the assessee with the st atement of so called entry operator. The assessee was not pro vided opportunit y to cross examine the ent ry o perato rs. Therefo re, st atement obtained from the entry operator later on retracted by an affidavit has no evidentiary value & no subst ance and are irrelevant and cannot be treated as incriminating material fo r the purpo se of making th e addition in the hands of the assessee.
In the co urse of search, no incriminating document relating to the addit ion made u/s 68 in respect of share ital was found and seized. This fact is evident from the assessment o rder as the Ld AO is silent about any incriminat ing documents found in the course of search .
1.5 During the course of hearing befo re the Hon'ble Bench, th e Ld. OR has made a written submission before th e Hon'ble Bench with regard to the instant matt er. The Ld. DR in t he submission have made generalised allegatio ns which are compl etely irrelevant given the facts of the instant case. The Ld. DR in his submission has alleged that the term 'incriminating material' has not been defi ned under any pro visions of the act. He further relied on various case laws of different courts saying that additio ns u/s 153A can be made without having any incriminat ing mat erial o n record.
1.6 In this regard, we would like to submit that the submission made by the Ld. DR is completely irrelevant given the facts of the instant case. The DR in the submission filed have relied o n cert ain decisions out of which most of the decisions are irrelevant to the inst ant case. We woul d like to distinguish so me of those judgement s as under:
28IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
(i) First of all, th e Ld. DR relied on the decision of Hon'ble Delhi High Court in case of Mls Filatex India Ltd vs CIT (229 Taxman 555) and CIT vs Anil Kumar Bh atia (352 ITR 493) in which it has been h eld that addit ion u/s 153A can be made without having any incriminating material on record.
In this regard, we would like to submit t hat both th e decisio ns as relied by the OR are completely on different facts and has bee n considered and distinguished by the Hon'bl e High Court of Delhi while passing the decision of CIT -Vs.- Kabul Chawla (380 ITR 573). Therefo re, the decision of Kabul Chawl a (supra) supersedes the decisio ns relied by th e OR as above.
(ii) The Ld. dR also relied on the decision of Hon'ble Allahabad High Court in case of Raj Kumar Arora (in 367 IT R 517). In this regard, we would like to submit t hat th e abo ve mentioned decisio n of Raj Kumar Aro ra has been given by the Hon'ble Allah abad High Court by relying on th e decisio n of Hon'ble Delhi High Court in case of C IT vs Anil Kumar Bh atia (352 ITR 493). As mentioned above, The case of Anil Kumar Bh atia h as been considered and distinguished by the Hon'ble High Court of Delhi while passing the decisio n of CIT vs Kabul Chawl a (38 0 IT R 573). Therefo re, th e decision of Kabul Chawla (supra) supersedes the decisions relied by the DR as abo ve.
(iii) The Ld. OR furth er relied o n the decision of High Court of Keral a Sunny Jacob Jewellers and Wedding Center vs DCIT in 362 ITR 66 4;
In this regard, we would like to submit t hat the facts of the above mentio ned case are completely different from th e present case and thus h ave no relevance. In this case, there were incriminating material found against the assessee and thus the case was set aside to the file of the AO for considering the same after giving an o ppo rt unity to the assessee. But in our case, no such incriminating material has been found by the department as a result of search no r the addition has been made based on the incriminating document s. As such the reliance pl aced by t he Ld. OR in the instant case is co mpl etely irrelevant .
(iv) The Ld. DR also relied o n the decision of Hon'ble Delhi High Court in case of Smt . Dayawanti (390 ITR 496);
In this regard, we would like to submit t hat the facts of the above case are not relevant fo r the assessee case. In the abo ve case, statement s of family members were reco rded on th e b asis of which addit ion was made. Further, none of t he stat ements made were ret racted by them. Thus, the Hon'ble High Court held that the statement s so recorded consequent to search can be treated as incriminating material. However, in the current case, no such statement h as been recorded with regard to the search of the assessee group and the stat ements as relied by the revenue w ere from the data base of the department and were reco rded in case of so me other group not relevant to the assessee.
29IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited Further, the alleged statement was also retract ed b y the so called entry operator vide an affidavit dated 14.1 1.2014 filed as provided by the ld. DR during the course of hearing. As such, the case relied by the Ld. DR are completel y o n different footing and not reliable fo r the instant case.
(v) Further, the Ld. OR h as mentioned th at SLP h as been admitt ed by the Hon'ble Apex Court in case of Continent al Wareho using Corporation 235 Taxman 568.
In th is regard, we would like to submit th at mere accept ance o f SLP does not st ate that the case h as been decided in favo ur of the revenue.
(vi) The Ld. DR h as further relied on the decisio n of Hon'ble Apex Court in case of C IT vs S. Ajit Kumar in 404 IT R 526;
In this regard, we wo uld lik e to submit that in th e above case, H on'ble Apex court h ave h eld that mat erial found or stat eme nt recorded in a survey conducted simultaneousl y at th e premises of a connected person can be t reated as incriminating material fo r the purpo se of making the addit ion u/s 153A.
However, in o ur case, no such survey has been _conducted u/s 133A nor any documents have been fo und connected to us nor any statement has been recorded. As such, when there is no survey, neither any documents have been found related to the assessee no r any st atement h as been recorded uls 132(4), they cannot be t reated as incriminat ing mat erial for the purpose of making addit ion in the hands of the assessee. Therefo re, the reliance plac ed by the Ld. DR is irrelevant .
(vii) Apart fro m the from relied case laws, the Ld. DR h as also relied on various case laws which have no relevance with the case o f the assessee.
1.7 As submitted above th at the Ld. CIT DR pointed o ut th at the statement recorded is an incriminating material. In this regard, it is submitted that the statement so made and ret ract ed subsequently does not cont ain any / evidentiary value and in absence of any corrobo rative evidence or seized o r impounded document s cannot be treat ed as an incriminating material under any circ umstances. Therefo re, those stat ement s do not have any evidentiary val ue to place reliance o n them fo r the purpose of making th e addition in the hands of the assessee.
In this regard, we would like to rel y on the CBDT Inst ructio n: F. No.286/2/2003-IT(IN V.II) as under:
"Inst ances h ave co me to the notice of the Board wh ere assessees have claimed th at they have been fo rced to confess the undisclosed income during th e course of t he search & seizure and surve y operations. Such confessio ns, if not based upo n credible evidence, are lat er ret racted by the concerned assessees while filing returns of inco me. In t hese 30 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited circumst ances, such confessio ns during the course of search & seizure and survey operat ions do not serve any useful purpose. It is , therefo re, advised th at there should be focus and concent ration on collection of evidence of income which leads to informatio n on what has not been disclosed or is not likely t o be disclosed befo re the Income-t ax Depart ment. Similarly, while recording statement during the course of search & seizure and survey operations no att empt should be made to obt ain confession as to t he undisclosed inco me. Any action on th e cont rary sh all be viewed adversel y. Further, in respect of pending assessment proceedings also, Assessing Officers should rel y upon the evidences/materials gathered during th e course of search/survey o perat ions or thereafter while framing the relevant assessment orders".
1.7.1. In this regard, we rely on the following decisions o f the jurisdictional High Court and co ordinate bench as under:
(i) CIT Vs Eastern Co mmercial Enterprises (1994) 210 ITR 103 (Kol HC).
"We h ave considered the contest ing contentions of the parties. It is true that Sh ri Sukl a h as proved to be a shifty person as a wit ness. At the earlier st ages, he claimed all his sales to be genuine but before the Assessing Officer in the case of the assessee, he disowned the sales specifically made to the assessee. This st atement c an at the worst show that Sh ri Sukla is not a t rustworthy witness and little val ue can be attached to wh at he st ated either in his affidavits or in his examination by the Assessing Officer. His conduct neut ralises his value as a wit ness. A man indulging in double-speaking cannot be said by any means a truthful man at any stage and no Court can decide o n which occasion he was truthful . If Sh ri Sukla is neutralised as a witness wh at remains is acco unts, vouchers, ch allans, bank account s, etc. But we would observe here that which way lies the truth in Sh ri Suklas depositions, could h ave been revealed onl y if he was subject ed to a cross-examination by t he assessee. As a mat ter of fact the right to cross-examination a witness adverse to the assessee is an indispensable right and the o pportunit y of such cross- examination is one o f the cornerstones of natural justice. Here Sh ri Sukla is the wit ness of the Depart ment . T herefo re, the depart ment cannot cut sho rt the process of taking oral evidence by merel y h aving the examination-in-chief. It is the necessary requirement of the process of t aking evidence that the examination-in-chief is foll owed by cross-examination and re-examinatio n, if necessary".
(ii) Mls Adh unik G ases Lt d. v/s DC IT, IT(SS)A No. 47/ Kol/2015 ITAT(Kol) dt 06.01.20 17;
"9. Having heard t he rival submissions, perused the mat erial available on record, we are of th e view t hat there is merit in the submissio ns of the assessee, as th e pro positions canvassed by th e Id. AR for the assessee are support ed by th e judgments of jurisdict ional ITAT and Hon'ble H igh Courts. Ld. AR has pointed out that no 31 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited incriminating documents was fo und either during surveyo r during search procedure. The statement of Sh ri Naresh Kumar Chhapari a should not be relied on, because he is a double speaking perso n. The assessment proceedings were co mpleted before the date of search . Besides, the t ime limit to issue notice u/s.1 43(2) was also expired. In order to initiate assessment proceedings u/s.153A there should be a new or incriminating document . The assessment which is al ready completed u/s.143(3 )/143(l) should not be reo pened. Therefore, considering the scheme of Sect ion 132 and Section 153A, we are o f the view th at there sh ould be some new document/incrimi nating document to invoke the pro visions of Section 153A. Ld. DR fo r th e revenue had point ed out that th ere is a direct nexus among the cornpemes. which h as been est ablished by t he stat ement of Mr.N aresh Kumar Chhaparia, which cannot be relied o n, as he w as a double speaking person. Therefo re, considering th e fact ual position and the judgments cited by Id AR, we are of the view that the additions made by the AO u/s.153A and confirmed by t he Id CIT (A) needs to be deleted. Therefo re, we delete the addition.
10.In the result, appeal filed by the assessee on g round No.IT(SS)A No.47, 49, 50, 51, 52, 54, 55, 94, 95, 96/Ko1/2015 is allowed. "
(iii) DCIT vs M/s. Warren Tea Ltd. in IT (SS)A No. 72-78/Ko1/2015 dated 23.08.2017;
"6. Aggrieved by the assessment order passed by the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who has deleted the addition made by Assessing Officer. Th e key findings of the order of the Id. CJT(A) are narrat ed below:
(i) It was observed by th e CJT(A) th at in t he course of search/survey operation u/s 132/133A of the Act conducted on 27.01.2011 in the cases of suppliers, service providers and cont racto rs etc. of the assessee company, t he statements of th e persons concerned who controlled the business along with other famil y members etc. were recorded. These perso ns were Sh ri Ram A vtar Mitt al, Director o f M/s East ern Ro ad C arriers Pvt . Ltd. and M/s Aska Ro adways Pvt Ltd; Shri Pank aj 8agaria, Director of M/s Harshit Commercial Pvt . Lt d. M/s Janaki Commercial Pvt. Lt d; Shivam C ommercial Pvt . Ltd: TDS Commercial Pvt . Ltd (earlier known as Thakurdas Surek a Engg.
Corporation Pvt . Ltd.). Kalinga Commercial Pvt. Ltd: M/s 8asant Commerce Pvt . Lt d; M/s Omkara Merchants Pvt . Lid, and M/s Glamour Mercandise Pvt .Ltd: Smt . Neema Bagaria, Director of M/s Prachi Commercial Pvt. Lt d; and Smt . Pushpa Bagaria,· Sh ri Ajay Chokhan Director of M/s Glamour Merch andise Pvt. Lt d; Sh ri Ram G opal Drolia, father of Sh ri Saket Drolia (Pro prietor of M/s S.B. Commercial Company) and direct or of M/s Dholisati Business Pvt It et karta of Ram Go pal Drolia (H UF) h aving pro prieto rship concern M/s Durga Enterprises and Smt . Bela Drolia Direct or of M/s Gopal Timber Trading Co mpany: Shri Pawan Kumar Go eake, Directo r of M/s PM Traders etc. All these persons, in their stat ement reco rded Vis 132(4)/133A had stat ed that th rough th eir various business concern s 32 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited they h ad provided o nly the accommo dation ent ries to the assessee company. But lat er on they h ad retracted th eir statements on 02.02.2011 i.e. within seven days of init iation of search . However, the assessing officer made various additions based on their st atements/ like addition on account of t ransportation ch arges/ revenue expenses/ capit al expenses/ purch ase of organic manures etc. However. th e Id C IT(A) observed th at though the stat ement given by a person in the co urse of search/survey proceedings has evidentiary value but the said st atement sho uld be supported by the corrobo rating materials and evidences o r at least circumst antial evidences. In the absence of corroborating evidences the statement has no evt dent iery' value if ret racted lat er on. The Apex court has observed in Pullengo de Rubber Produce Co. Ltd. vs. State of Keral a, 91 ITR 18 (SC) th at an admission is an ext remely import ant piece of evidence but it cannot be said to be conclusive. It is open to the person who made the admission to show th at it was incorrect .
The CJT(A) further cit ed the following judgment s: . Based on the above reasoning the CJT(A) observed that th ough Initially all the parties who supplied goods/ mat erials or pro vided services or executed works in th e nature o f contract st ated th at they had provided acco mmodation ent ries to the assessee company wit hout doing act ual t ransactions but l ater on they all retracted thei r statement s on the ground th at th ey were pressurized to give such statement s and that t heir all business t ransactions with th e assessee company were actual business transactio ns. In suppo rt of their claim in the affidavit they all appeared befo re t he AD and produced their books of account bills/vouchers and bank statement s. Afte r verificat ion of such books of acco unt and primary documents nothing adverse was noted by the AO end. Therefore, he did not mention anyth ing about the books of account , bills/vouch ers and bank statement s produced by all of them before him. He did not reco rd the statement of any of t he persons appeared before him and h e did not ask any question abo ut their business transactions with the assessee company or purch ase made by th em to execut e the wo rks o f the assessee co mpany. Thus, it can be said th at all the persons successfully explained befo re the AO th at the admission of providing accommodatio n ent ries to the assessee company was not co rrect. Th e ret racted statement h as no evident iary val ue until and unless th e AO pro ves that the retraction was not co rrect and the st atement is subst antiated by th e corroborating evidences. Therefore, t he Id CIT(A) deleted the additions, which were done by the AO based o n the statement s.............. .
7. The Id Counsel for the Assessee has submitted, befo re us, that the date of search was 27 .01.2011 whereas the assessment s were already completed under sect ions 143(1)/143(3) o f the Act and th e date of issue of st atutory not ice u/s 143(2) h ad al ready elapsed on the date of search, in respect of the assessment years 2005-06, 2006-07, 2007- 08, 2008-09 and 2009-10, and no incriminating material was unearth by the search t eam, therefo re no addit ion can be made in those assessment years. Therefo re, in nut shell the Id. counsel submitted 33 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited that no any incriminating document s were found by th e Assessing Officer in unabated (Completed) assessments. The AO made additions based o n the stat ements recorded during search and seizure, which the assessee does not accept because t hese stat ements are no t support ed by any corroborative evidence. The assessee h as relied on the following judgmen~ and instruction of CBDT, whe rein it was hel d that addit ion can not be made merely based on the st atement s:
i). Taxmann - Instruct ion: F. No.286/2/2003-IT(INV.II) Inst ances h ave co me to the notice of th e Board where assessees hav e claimed that they h ave been fo rced to confess the undisclosed income during the coarse of t he seerdt & seizure and survey operat ions. Such confessio ns, if not based upon credible evidence, are lat er ret racted by the concerned assessees while filing returns of inco me. In t hese circumst ances, such confessio ns during the course of search & seizure and survey o perat ions do not serve any useful purpose. It is, therefo re, advised th at there should be focus and concent ration o n collection of evidence of income which leads to information on what as not been disclosed or is not likel y t o be disclosed befo re th e Income-t ax Depart ment. Similarly, while recording st atement during the course of search & seizure and survey o peratio ns no att empt should be made to obtain confession as to t he undisclosed income. Any action on the contrary shall be viewed adversel y. Further, in respect of pending assessment proceedings also, Assessing Officers shoul d rely upon th e evidences/materials gathered during the course o f search/survey operat ions o r thereafter while framing the relevant assessment orders .
8. Undisputedl y, since the search happened on 27.01.2011, the assessment s in respect to assessment years 2005-06 to 2009-10 were undisputedl y not pending before the AO, we note th at the st atement s recorded simultaneously of the persons wh ile search was going on at the Warren T ea Group premises i.e. Shri Pankaj 8 agaria, Sh ri Ramgopal Drolia, Shri Pawan Kumar goenk a, Sh ri Deepak lhunihunwala and Sh ri Ram Avt ar Mittal and statement s reco rded on behalf of M/s Asian Udyog and o n behalf of M/s. P. M T raders u/s 132(4) as well as survey u/s.133A h as been ret racte d within a span o f weeks time and they have sworn affidavit stating these facts before Notary Public and the same have been forwarded to the investigatio n wing. In the st atements in th e affidavit , t he deponent s have cl earl y stated th at th e statement s reco rded u/s.132(4) and during survey were made on coercion and undue pressure and thus the cont ents of the statements thus recorded u/s 132(4) and survey were vitiat ed and consequently lost it s evident iary value, if any. In the afo resaid backdrop, we note t hat these statements reco rded u/s.132(4) and survey could not be t reated as incriminating msteretstn the ... light of the affidavit s filed by the deponents retracting the said st atement recorded during search and moreo ver when the Assessing Officer has relied on the stat ements recorded u/s132(4) and st atement s recorded during survey, cannot be made the sole basis for additio ns because the said statements made by the Depo nents h as not been cross- examined by the assessee. If the Assessing Officer was relying on 34 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited statement s recorded under section 132(4) and statements reco rded during survey, then t he assessee should h ave been pro vided with an oppo rtunit y to cross-examine th e wit nesses and WIthout doing so, the statement s recorded u/s132( 4) and during survey is fragil e for violation of natural justice and cannot be the sole basis for making addit ions. When we discard the st atements reco rded u/s.132(4) and statement s reco rded during survey; th ere is no othe r relevant evidence o r material to corroborate the al legations made during the statement s recorded u/s.132(4) and during survey. When there is no material at all to suppo rt the impugned addit ions, the st atement s recorded u/s.132(4) and survey cannot be t reat ed as incriminating materials in the fact s and circumstances of the case. In th e light of the afo resaid facts and arcumstsnces. th erefo re, fo r Assessment Year 2005-06 and 2009-10 which were not pending on the d ate of search no additions can be made without incriminating mate rial s as h eld by the Hon1Jle Delhi High Court in the case of CfT; Cent ral-Ill Vs. Kabul Chawla which has been uphel d by the Honble Kolkat a High Court in ITA no.661 of 2008 CIT Vs. Veerprabhu Marketing Ltd . Therefore, it is an unabat ed assessment and the settled position of l aw is th at no addit ion can be made for unabated assessments without incriminating materials. The Hon'ble Delhi High Court in the ITA No . 707, 7 09 & 7013 of 2014 CIT Central -Ill vs. Kabul Chawla, wherein their lordships have held as under: .
11. In the light of the aforesaid ratio laid by the Hon'ble High Courts, wherein, the Hon1Jle High Court held th at in the absence of an y incriminating materials, th e concluded assessment need t o be reiterat ed and in the essessees cases before us fro m a perusal o f the above ch art , it is clear th at on the date o f search i.e. o n 27.01.2011, assessment s pert aining to A. Y. 2005-06, 2006-07, 2008-09 and 2 009- 10 were not pending before the AO and th e last date for issuance of Section 143(2) notice for scrut iny h ad elapsed. The refo re/ it can be safel y assumed that these assessments were not pending before the AO and as per the ratio l aid by the H on'ble High Court s these assessment s are concluded assessments/ which cannot be tinkered with and fresh additions cannot be made without direct nexus to the incriminating materials seized during search. Therefore/ no addition without incriminat ing mat erials ought to h ave been saddled o n th e assessee for A. Y. 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 and so we allow the appeal of th e assessee on the legal issue raised and direct deletio n of the addition/disallowances made in t hese assessment years.
(iv) DC IT vs M/s Yash Alloys Pvt . Ltd., In IT A NO. 689/Kol/2015 dated 14.09.2018;
''3. We have given our thoughtful consideration to rival content ions. Case file including a detailed compil ation of judicial precedents as well as document ary evidence has been perused. The Revenues sole argument during the course of hearing is that the A ssessing Officer had rightl y made th e impugned additional inco me addition of Rs.10 crores as per Shri K.P. Agarwalas st atement reco rded during the 35 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited search. It is st rongly emphasized th at the CJT(Appe als) has erred i n law as well as o n fact s in deleting th e impugned additional inco me in lower appell ate proceedings. We find no merit in the Revenues sole grievance. Two basic facts emerge fro m th e rival pleadings. First one is th at the Revenue h as based it s case on Shri K.P. Agarwal as search statement . Th e CJT(appeals) h as held that Sh ri Agarwala was never the authorized perso n to depose o r to offer any income at assessees behest. We reit erate t hat this assessee is a company.
It was very much imperat ive fo r the Revenues to place on record the correspo nding detail s to reverse this clinching finding. There is no such evidence o n reco rd. Equally significant is the latter t act: in our considered o pinion th at there is no incriminating material found o r seized during the course of search which could be taken as evidence for adding addit ional income sum of Rs. 10 acres. The CBDT s circular dated 10.03.2003 makes it very clear th at the an authorized officer during the course of search o r survey has to collect evidence rather than obtaining search statement s of undisclosed income. Vile find that there is no even a single such evidence in foregoing facts which could be t aken as th e rel evant mat erial for making the impugned addit ion. The C IT(Appeal s) h as discussed a catena of case law to this effect as well th at such an addit ion is not sustainable in absence of any incriminating material found o r seized during th e course of search or survey carrying presumptio n u/s 292C of the Act . We accordingl y see no reason to interfere with the CJT(Appeals) det ailed conclusion in deleting the impugned addition ot addit ional income amounting to Rs.10 crores. Th e Revenue fails in its sole substantive ground.
(v) C IT vs S. Khader Khan &. So ns, Hon'ble Madras High Court, in 300 ITR 157;
"What is more relevant, in the instant case/ is th at th e attent ion of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dat ed March 10/ 2003/ with regard to th e confession of additional income during the course of search and seizure and survey o perations. The said circular dated March 10, 2003 reads as follows:
'Inst ances have come to the notice of the Board whe re assessees have claimed that they h ave been fo rced to confess the undisclosed income during th e course of the search and seizure and survey operations . Such confessio ns, if not based upon credible evidence, are later ret racted by the concerned asses sees whil e filing returns of income. In these circumst ances/ on confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed o r is not likely t o be disclosed befo re the Income-t ax Depart ment. Similarly, while recording st atement during the course of search and seizure and survey o perations no att empt 36 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited should be made to obtain confession as to t he undisclosed income. Any action o n the cont rary sh all be viewed adversel y.
Further; in respect of pending/ assessment proceedi ngs also , the Assessing Officers should rely upon the evidences/materials gathered during the course-of search/survey o perations o r th ereafter while framing the relevant assessment orders. "
(vi) Saimed Innovat ion vs IT O, ITA N o. 2231/Kol/2016 dated 13.09.2017;
1.7.2 Th us, as per th e above discussion and case laws relied o n, the statement s of the so called ent ry operators as reli ed by the Ld. DR h as no evidentiary value and th us, th ey can in no way be t reated as an incriminating mat erial as evident from th e assessment o rder fo r the purpose of making th e additio n in the hands of the assessee. Further, the st atement s were recorded in some oth er case prio r to the search of the assessee and thus, they can in no way be t re ated as incriminating material for the purpose of making the addit ion.
1.8 Further, we would like to submit that our case is completel y covered in th e favour of the assessee by vario us decisions of vario us High courts & ITAT including the jurisdictional High court & ITAT and also by the decision of Hon'ble Apex Court.
1.8.1 We wo uld like t o place our reliance on the decision of Ho n'ble Supreme Court in case of PCIT Vs. Meet a Gutgutia, Hon'ble Supreme Court in 96 taxmann.com 468 dated 02.07 .2018, where in the Hon'ble Supreme Court has held as under:
''Section 153A of th e Income-t ax Act 1961 - Search and seizure (General principles) - Assessment years 2001-02 to 2003-04 and 2004- 05 - High Court in impugned o rder hel d that invocatio n of section 153A to re-o pen concl uded assessments of assessment years earlier to year of search was not justified in absence of incriminat ing material found during search qua each such earlier assessment year - Wh ether SLP against said decision was to be dismissed - Held, yes (Para 2) [In favour of assessee] II. Section 69 read with sectio ns 132 and 1 53A of th e Inco me-tax Act 1961 - Undisclosed invest ment (Franchise fees) - Assessment years 2001-02 to 2004-05 - During co urse of search, assessee made a disclosure on account of change in method of acco unting of franchise fee and undisclosed franchise fees for relevant year - On basis of said statement Assessing Officer opined that number of outlet s for which franchise fee was received h ad more o r less remained same in al l assessment years from 2001-02 to 2006-0 7 and estimated undisclosed income at a certain percentage of amo unt of disclosure made by assessee in her stat ement under sectio n 132(4) - High Court in impugned order held th at since no incriminating mat erial wa s unearthed to show t hat there was failure by assessee to disclose franchise inco me/ addition made by Assessing Office r was unjustified 37 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
- whether SLP against said decision was t o be dismissed - Held, yes [Para 2] [In favour of assessee]."
1.8.2 The appell ant further rely on th e judgment of the Hon'ble Delh i High court in th e case of PC IT Vs. Kurele Paper Mills Pvt . Ltd. (2016) 380 ITR 571(DEL) where it h as been hel d that in case of search assessment , addition u/s 68 is not just ified if no incriminating evidence relating to share capital found in the course of search. Th e relevant extracts of t he same is as under:
"SEARCH AND SEIZURE - ASSESSMENT IN SEARCH CASES - SHARE APPLICATION MONEY- NO INCRIMINAT IN G EVIDENCE RELATED TO SHARE CAPITAL ISSUED FOUND DURING COURSE OF SEARCH - DELETION OF ADDIT ION UNDER SECT ION 6 8- JUST IFIED INCOME TAX ACT, 1961, SS. 68, 153A.
Held dismissing the appeal,th at the order of Commissioner (Appeals) revealed that there was a fact ual finding that no incriminating evidence relat ed to share capital issue was found during course o f search as was manifest from the order o f AD. Consequently, it was held th at AO was not just ified in invoking section 68 fo r the purposes of making addition o n account of share capital . The re was noth ing to show that abo ve factual det ermination was perverse.
The judgment of the H orrble High co urt is reproduce d as under:
"1. The Revenue h as filed the appeal against an o rder dated Novembe r 14, 2014, passed by the Income -Tax Appellate T ribunal (' ITAT) in 3761/De1/2011 pert aining to the assessment year 2002-03. The question was wheth er the learned Co mmissioner of Income -tax (Appeals) h ad erred in law and o n the facts in delet ing th e addition of Rs. 89 lakhs made by the Assessing Officer under section 68 of the Income -T ax Act 1961 (the Act") on bogus share capital . But th e issue was whether there was any incriminating material wh atsoever found during the search to justify initiation of proceedi ngs under section 153A of the Act.
2. The court finds th at the order of the C ommissioner of Inco me-T ax (Appeals) reveals t hat there is a factual finding that "no incriminating evidence relat ed to share capit al issued was found during the course of search as is manifest from the order of the Assessing officer': Co nsequently; it was hel d that the Assessing Officer was not just ified in invoking sect ion 68 of the Act for the purpo ses of making additions n account of share capit al .
3. As far as the above facts are concerned, there i s nothing shown to the court to persuade and hold that the above fact ual determination is perverse. Consequently after co nsidering all the facts and circumst ances of th e case, the court is of the opinion that no subst antial quest ion of l aw arises in t he impugned order of the Income-l ax Appell ate Tribunal which requires examination.38
IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
4. The appeal is, accordingly dismissed."
The depart ment had filed special leave petition before the Hon'bIe Apex Court against th e abo ve judgment of t he Delhi High court . (Pr. CIT V KURULE PAPER MILLS P. L TD: 5.L.P (C) No-34554 of 2015[2016] 380 ITR (st) 64-Ed).
The Hon'ble Apex co urt dismissed the special leave petition fil ed by the department; The relevant Para as mentio ned in the ITR is reproduced as under. "Their Lo rdships Madan B.Lokur and SA. Bobde JJ dismissed the Departments special leave petition against the judgment dated Jul y 06,2015 of the Delhi High Court in I.T .A N o 369 of 2015, whereby the High Court held that no substantial question of law arose since there was a factual finding th at no incriminating evidence related to share capital issued was found during th e course of search and that th e assessing officer was not justified in invoking section 68 of the Act for th e purpose of making additions o n account of share capit al".
1.8.3 In this regard, further we wo uld lik e to place reliance on the decisio n of Hon'ble Jurisdictio nal ITAT, Bench 'A' in case of DCIT vs M/s MBL Infrast ructure Ltd., in IT (SS)A No . 65 ,66,67 &. 76/Kol/2016 dated 01.05 .2019 wherein it h as been held t hat in the proceedings u/s 153A, neither any fresh cl aim can be made by the as sessee which was not claimed at th e time of o riginal assessment proceedings no r any addit ion can be made by th e depart ment in absence of an y incriminating material on record. The relevant ext ract s of the decisio n is as under:
"11. We have heard t he arguments of both the Sides on this issue and also perused the relevant mat erial avail able on record. It is observed that th e claim of th e assessee for deduct ion under section 80lA to th e extent of Rs.5,46,96,2 37/- was disallowed in the original assessment proceedings and since the said assessment had become final before the search and seizure operation conduct ed on 28 .10.2010, there was no reason or occasio n to raise this issue in the proceedings under section 153A read with sectio n 143(3), especially wh en there was no incriminating material found during the course of search relating to this issue. As a mat ter of fact , in the return of i ncome filed on 30.09.2011 in respo nse to the notice issued under sectio n 153A pursuant to the search and seizure actio n, deduction under section 80IA was claimed by the assessee only to the ext ent o f Rs.3 ,36,24,913/- as allowed in the o riginal assessment and the addit ional claim of Rs.5,46,96 ,237/- fo r deduction under section 80IA was made by the assessee by way of revised co mputation of total income filed during the course of assessment procee dings under section 153A read wit h sectio n 143(3). The Assessing Officer declined to entert ain the said claim while the Id. C IT(Appeals) not onl y entertained the said claim but also allowed the same on merit. Keeping in view all t he fact s of th e case as discussed abo ve incl uding especially the fact th at the o riginal assessment proceedings resulting into disallowance of Rs.5 ,46,96,237/- under section 40(a)(ia) h ad 39 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited become final, we are of the view that the Id. CIT(Appeals) was not just ified in entertaining and allowing th e new claim made by the assessee on this issue and even the Id. Counsel fo r th e assessee has not disputed this posit ion. We accordingly reverse the impugned o rder of the Id. CJT(Appeal s) on this issue and allow the appeal of the Revenue.
14. We have heard th e arguments of both the sides on th is issue and also perused th e relevant material available on reco rd It is observed that th e return of income o riginally filed by the assessee o n 30.09.2008 claiming deduct ion of Rs.5 ,77,1 6,153/- under sectio n 80lA was accept ed by the Assessing Officer under section 143(1) and since no notice under sectio n 143(2) was issued by him t ill the expiry of the statuto ry time limit which ended on 30. 09.2008 the original assessment fo r th e year under considerat ion i.e. A. Y. 2008-0 9 had become final befo re the search and seizure operation conduct ed on 28.10.2010. As rightl y contended by the Id Counsel for th e assessee, there was thus no reason o r occasion t o raise this issue in the proceedings under section 153A read wit h section 143(3) and the disallowance made by the Assessing Officer to th e extent of Rs.4 ,49,85,993/- on account of assessee's claim for deduction under section 801A, which was allowed in the original assessment and that assessment had beco me final , was not sustainable, especially when there was no incriminating material found during the course of search, which could form the basis of the said disallowance. Even the Id D.R. h as not disput ed this position which is cle arly evident from th e record including the assessment order passed by th e Assessing Office r under sectio n 153A read with sectio n 143(3). We, therefore, find no infirmit y in the impugned order of the dl. CJT(Appe als) deleting the disallowance made by the Assessing Officer on this issue and upholding the same, we dismiss G rounds No. 1 & 2 of the revenue's appeal.
1.8.4 In this regard the Hon'ble jurisdictional Calcutt a High C ourt Kolkata has time and again reiterated it s view th at the additio ns i n case of the search assessment s have to be made on the basis o f incriminating material. Some of th e recent decision of the Hon'ble Jurisdictional High Court as well as other courts are discusse d hereunder for your honors ready reference;
(i) PC IT-2 , Kolkata Vs. Salasar Stock Brok ing Limited (ITAT No . 264 of 2016 dated 24.08.2 016: (Calcutta) In this case, th e Honorable High Court observed th at the Ld. ITAT, Kolkata was of the opinion th at the assessing officer h ad no jurisdiction u/s 153A of the LT. Act to reopen the co ncluded cases when the search & seizure did not disclose any incriminating material. In taking t he aforesaid view, th e Ld. ITAT relied upo n the judgments of Delhi High Court in the case of CIT(A) Vs. Kabld chawla in ITA No. 701/2014 dated 28.08.2014. Th e Court also observed that more o r less an identical view h as been tak en by this Bench in IT A No .
661/2008 in the case of Veerprabhu Mark eting Limited. Considering 40 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited the above facts, the Honorable High Court did not admit the appeal filed by the Department.
(ii) "CIT ,Kolkat a-III Vs. Veerprabhu Marketing Limited [20161 73 taxmann.com 149 (Calcutta) :
In this case The H onorabie C alcutt a H igh Court expressed the following views:
"We are in agreement with the views of t he Karnatak a High Court that incriminating materia! is a pre-requisite before power could have been exercised under section 1S3C read with section 153A. In the case befo re us, the assessing officer has made disallowances of th e expenditure, which were al ready disclosed, for one reason or the other. But such disallowances were not contemplated by the pro visions contained under sect ion 153C read with section 153A. Th e disallowances made by the assessing officer were upheld by the CIT{A) but the learned Tribunal deleted th ose disallowances.
(iii) CIT Vs Kabul Chawla (2016) 380 ITR 0573( Del);
Search and seizure-N ew scheme of assessment in search cases-Search was carried out u/s 132 on a leading real estate de veloper operating all over India and some of its group co mpanies-Search was also carried out in the premises of the assessee-Pursuant to the search a notice u/s 153A(1 ) was issued to assessee and thereafter h e filed returns. As on th e dat e of the search, no assessment proceedings were pending fo r rel evant A Ys and for said AYs, assessments was already made u/s 143(1), assessee filed an application u/s 154 seeking rectification of the assessments on the ground th at the accumulated profit s of the co mpanies paying the dividend were less than th e amount of loan or advance given by them t o the reci pient companies - AO declined to rectify the assessments-CIT also held that addition need not be restrict ed onl y to the seized material-ITAT on appeal however deleted addition on grounds th at the additions made for relevant A Ys u/s 2 (22)(e) were not based o n any incriminating material found during search operation and same was not sust ainable in l aw-Issue was wh ether the addit ions made to the income of the assessee fo r the said A Ys u/s 2(22)(e) was not sust ainable because no incriminating mat erial concerning such additions we re found during the course of search and further no assessment s fo r such years were pending on the date of search -Held, present appeals concerned A Ys,2002-03, 2005-06 and 2006-07-On the date of the search th e said assessment s al ready stood completed-Since no incriminating mat erial was unearthed during the search no addit ions could have been mad e to the income al ready assessed-Question framed by the Court was answered in favour of the assessee and against the Revenue- Revenues appeal dismissed.
(iv) Mridul Commodities Pvt. Ltd. Vs DC IT, Cent. Cir-XXI, Ko l. in (IT(SS) A Nos.14 & 15 /Kol/2015) dt.07.10.2 016.
41IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
(v) M/s. All Cargo G lobal Logistics Ltd. Vs DC IT, Cent. Circle - 44, Special Bench Mumbai (IT Appeal Nos.S018 to S022 & SOS9 (Mum) of 2010 dt.06.07.2012.
(vi) ACIT vs M/s PHPL Stock Broking Pvt . Ltd. in IT(SS)A No.12/Ko1/2017 dt. 2 1.08.2018;
(vii) DCIT vs M/s B.R. Infraprojects Pvt . Ltd. in IT(SS)A No.11/Ko1/2017 dt. 2 6.09.2018;
(viii) DC IT vs M/s Rosemarry Spo nge &. Ispat Pvt Ltd. in IT(SS) A No.7S &. 76/Kol/2017 dt. 30.11.2018.
1.9. Furth er, we woul d like to submit the Ld. CIT (A) h as given a ver y categorical finding t hat no incriminating material has been found during the course of search based on wh ich the addition has been made by the AO. The observation given by the Ld. CIT (A) is reproduced as under:
''I have co nsidered t he findings of the AO in the assessment order, different case laws was brought on reco rd and appeal orders passed by my predecessors on this legal issue. I find from the assessment order th at during the search & seizure o peratio ns conducted u/s 132 of the IT Ace 1961, incriminating documents/papers were not seized . At least addition made by AO in the assessment order passed u/s 153A/143(3) are not based o n any incriminating document s/ papers seized during th e search o peratio n. It would also not to be out of context to mentio n h ere that in this case/ on the dat e of search no assessment for this year was pending. Therefore/ k eeping in view the ratio decided by the jurisdictional bench of Kolkat a t ribunal in case referred abo ve and t he ratio decided by the Hon'ble C alcutta High Court in the case of Veer Prabhu Marketing Ltd (supra) in the light of CBDTs decision of not filing SLP in this case in the Supreme Court and keeping in view th e Apex co urt's decision to dismiss SLP o n the simil ar issue in the case of Pr C IT vs Kurele Paper Mills Pvt Lt d: SLP
(e) No. 34554 of 2015 dt .07.12.2015, I am o f this v iew that in o rder to maintain judicial continuit y on this issue and respectfully following the ratio decided by the Hon'ble Calcutt a High Court in the case o f Veer Prabhu Marketing Ltd (supra), assessee's appeal o n ground no 1 is allowed and as such I am not inclined to adjudic ate appeal on ground no. 2 on merit ."
1.10 Thus, we rely ful ly on the order of the Ld. CIT (A) and furth er in view of the above discussions made and case laws relied on it is, therefo re, prayed that all the above additions made u/s 153A cannot be sustained in the eyes of l aw in the re-assessment proceedings in the absence of any incriminating seized material/document . The submissio ns made by the Ld. DR h ave no relevance in th e instant case. Therefo re, it is prayed th at the additio ns so made may kindly be deleted" .
42IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
7. We have considered the rival submissions and also perused the relevant material available on record. In this case, a search and seizure action under section 132(1) of the Act was conducted on 17 t h & 18 t h December, 2014 and the addition made by the Assessing Officer in the unabated assessment completed in pursuance of the search under section 153A of the Act on account of share capital and share premium received during the year under consideration by treating the same as unexplained cash credit was deleted by the ld. CIT(Appeals) on the ground that the same was not based on an y incriminating material found during the course of search. It is true that when a search under section 132(1) is conducted, the Assessing Officer gets jurisdiction to issue notice under section 153A for the relevant years and complete the assessments for the said years. It is also true that there is no explicit mention in the language used in section 153A that the addition made under section 153A should be based on the incriminating material found during the course of search. The scope of assessment to be made under section 153A, however, is considered and defined in the various judicial pronouncements. In this regard, the assessments are classified in two categories, i.e. completed assessment and pending or abated assessment. It is held that if the assessment for the relevant year is pending as on the date of search and it is not completed, the same gets abated and the scope of assessment to be made under section 153A for the said year is wide, which includes assessment of income on the basis of incriminating material found during the course of search as well as the assessment of income, which is the subject matter of regular assessment. On the other hand, if the assessment for the relevant year is not pending as on the date of search, the same is to be regarded as completed assessment and the scope of assessment to be made under section 153A is limited to the assessment of undisclosed income on the basis of incriminating material found during the course of search. This legal position 43 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited clearly emanates from the various judicial pronouncements cited and relied upon by the assessee in the written submission filed before us. No doubt, there are certain judicial pronouncements cited by the ld. D.R. in his written submission, wherein a contrary view has been taken, which is in favour of the Revenue. However, a consistent view has been taken by the Hon'ble Calcutta High Court on this issue in several cases, which is in favour of the assessee. For instance, in the case of DCIT -vs.- Salasar Stock Broking Limited (supra), the decision of the Tribunal holding that the addition made by the Assessing Officer in the assessment completed under section 153A was beyond the scope in the absence of any incriminating material found during the course of search was upheld by the Hon'ble Calcutta High Court. It is noted by Their Lordships that the Tribunal while arriving at its decision had relied upon the judgment of the Hon'ble Delhi High Court in the case of Kabul Chowla (supra) and more or less an identical view had been taken by the Court even in the case of Veerprabhu Marketing Limited (supra). In the case of Kabul Chowla, search was conducted under section 132 of the Act. As on the date of search, no assessment proceeding was pending for the relevant assessment year and the addition made by the Assessing Officer in the assessment completed under section 153A pursuant to the search on account of deemed dividend under section 2(22)(e) was deleted by the Tribunal on the ground that the same were not based on any incriminating material found during the course of search. The decision of the Tribunal was upheld by the Hon'ble Delhi High Court by holding that the additions made to the income of the assessee for the relevant assessment years under section 2(22)(e) were not sustainable because no incriminating material concerning such additions was found during the course of search and further no assessments for the said years were pending on the date of search.
44IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited
8. In the case of S. Ajit Kumar (supra), relied upon by the ld. D.R., Hon'ble Supreme Court has held that the material found or statement recorded in the survey conducted simultaneously at the premises of a connected person can be treated as incriminating material for the purpose of making the addition under section 153A of the Act. In the present case, it is observed that no such survey had been conducted under section 133A simultaneously either at the premises of the assessee or of a connected person. The statements of the so-called entry operators and dummy Directors relied upon by the Assessing Officer for making the addition were thus not recorded in any proceedings such as survey conducted simultaneously or in connection with the search conducted in the case of the assessee and since the said statements were also retracted subsequently by the deponents, we find merit in the contention raised on behalf of the assessee that the same could not be treated as an incriminating material on the basis of which the addition made in the assessment under section 153A can be justified.
9. As regards the contention of the ld. D.R., that the process of assessment of total income under section 153A can neither be restricted nor have a different connotation, we find that the same is contrary to the law laid down by the various judicial pronouncements discussed above including the decision of Hon'ble Jurisdictional High Court. Although there are certain judicial pronouncements taking the view in favour of the Revenue on the issue under consideration, we find that the consistent view taken by the Hon'ble Jurisdictional High Court is in favour of the assessee and respectfully following this binding precedent, we hold that since the assessment for the year under consideration was not pending as on the date of search, there was no abatement and the addition made by the Assessing Officer in the unabated assessment completed under section 153A on account of share capital and share premium amount 45 IT(SS)A No. 102/KOL/2017 Assessment Year: 2010-2011 M/s. Shantinath Financial Services Limited by treating the same as unexplained cash credit was not sustainable as the same was not made on the basis of any incriminating material found during the course of search. We accordingly uphold the impugned order of the ld. CIT(Appeals) deleting the said addition made by the Assessing Officer and dismiss this appeal of the Revenue.
10. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on September 12, 2019.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 12 t h day of September, 2019
Order pronounced by
Sd/- Sd/-
(S.S.Godara) (P.M. Jagtap)
J.M. V.P.(KZ)
Copies to : (1) Assistant Commissioner of Income Tax,
Central Ci rcle-3 (2), Kolkata,
Aayakar Bhawan Po orva, 5 t h Floor,
110, Shanti Pally, Ko lkata-700107
(2 ) M/s. Shantinath Financial Services Limited, 17, Crooked Lane, Ko lkata-700 069 (3) Commissioner of Inco me T ax (Appeals)-21, Kolkata (4) Commissio ner of Income Tax, Kolkat a- , Kolkata;
(5) The Depart ment al Represent ative
(6) Guard File
By order
Assistant Registrar,
Income Tax Appellate Tribunal,
Kolkata Benches, Kolkata
Laha/Sr. P.S.
46