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Income Tax Appellate Tribunal, GUWAHATI BENCH AT KOLKATA
Before: SRI RAJPAL YADAV(KZ) & DR. MANISH BORAD
order : March 3rd, 2022 ORDER Per Manish Borad, Accountant Member: Both these appeals filed by the Revenue pertaining to the Assessment Years (in short “AY”) 2011-12 & 2013-14 are directed against separate orders passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax I.T.A. Nos.: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. (Appeals)-1, Guwahati [in short ld. “CIT(A)”] dated 22.11.2019 arising out of the assessment orders framed u/s 153A/153D/143(3) of the Act dated 28.12.2018.
The Revenue is in appeal before this Tribunal raising the following grounds:
Assessment Year: 2011-12: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. The Ld. CIT (A) has erred in Law and in facts in deleting the additions of Rs. 2,04,00,000/- made u/s 68 when the assessee has failed to bring on record any evidence to prove the credit worthiness and genuineness of the transaction of the creditors M/s. Seema Holding Pvt Ltd and others and Inspector’s enquiry report also suggests non-existence of creditor company M/s Seema Holdings Pvt Ltd & others.
3. That the Ld. CIT (A) was not justified in deleting the addition stating that in absence of any incriminating seized documents the addition made by the AO in the impugned order is deleted.
4. The Appellant craves the leave to add/modify/alter any of the ground during the course of hearing /pendency of appeal.” Assessment Year: 2013-14: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. The Ld. CIT (A) has erred in Law and in facts in deleting the additions of Rs. 3,06,00,000/- made u/s 68 when the assessee has failed to bring on record any evidence to prove the credit worthiness and genuineness of the transaction of the creditors M/s. Excellence Commerce Pvt Ltd and Inspector’s enquiry report also suggests non- existence of creditor company M/s Excellence Commerce Pvt Ltd.
3. That the Ld. CIT (A) was not justified in deleting the addition stating that in absence of any incriminating seized documents the addition made by the AO in the impugned order is deleted. Page 2 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd.
4. The Appellant craves the leave to add/modify/alter any of the ground during the course of hearing /pendency of appeal.”
3. From perusal of the above grounds, we notice that the common issue raised by the Revenue is against the deletion of addition of Rs. 2.04 Cr and Rs. 3.06 Cr for AY 2011-12 & AY 2013- 14 which were made by ld. AO for want of sufficient evidence to prove the creditworthiness and genuineness of the transaction of the credits received from M/s. Seema Holding Pvt. Ltd. and M/s. Excellence Commerce Pvt. Ltd. for AY 2011-12 & AY 2013-14 respectively. Since the issues raised are common and pertain to the same assessee, we will take the issues on the basis of the facts for AY 2011-12 and our decision for AY 2011-12 shall apply with full force on the common issue raised for AY 2013-14.
4. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of manufacturing of cement. The assessee company is a part of Mittal Group and was subjected to search and seizure operation u/s 132 of the Act carried out on 31.08.2016. The regular return of income filed u/s 139(1) of the Act on 27.09.2011 and subsequent to search carried out on 31.08.2016 notice u/s 153A of the Act was issued followed by serving of notices u/s 143(2) & 142(1) of the Act. During the course of search proceedings, the alleged director of the assessee company Mr. Madan Lal Mittal in reply to a question admitted the routing of unaccounted cash to the regular books of accounts of M/s. Pawan Cement Company by way of raising capital with the help of Kolkata based jama-kharchi entry operators and companies in lieu of cash commission. The statement given by Mr. Madan Lal Mittal on 31.08.2016 was Page 3 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. retracted within 4 days i.e. on 05.09.2016. An affidavit dated 01.09.2016 was filed retracting the statement given during the course of search stating that the statement given on 31.08.2016 was neither voluntary nor correct and the same is hereby retracted from so far as it pertains to the transaction relating to the share capital and share premium of the company. However, during the course of assessment proceedings ld. AO again referred to the retracted statement and asked the assessee to explain the share capital and share premium received by the assessee during the year. Though the details were filed by the assessee, however ld. AO was not satisfied and without referring to any incriminating material found during the course of search which could indicate or rather prove that the share capital and share premium received by the assessee are bogus or are in the nature of accommodation entry held the credit from M/s. Seema Holding Pvt. Ltd. and others totalling to Rs. 2.04 Cr as unexplained cash credit u/s 68 of the Act.
5. When the matter travelled before ld. CIT(A) he on observing that the addition made by ld. AO is only on the basis of the statement given during the course of search on 31.08.2016 which stands retracted by the assessee by filing an affidavit on 05.09.2016 and there being no incriminating material found during the course of search which ld. AO has referred to in the assessment order, came to a conclusion that since for AY 2011-12 the return of income stood filed and the assessments were not pending and for such completed assessments additions cannot be made without referring to any incriminating material, placed .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. reliance on the plethora of judicial pronouncements available on this issue and deleted the alleged addition.
6. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R vehemently argued supporting the order of ld. AO and again harped upon the statement given under oath by the assessee during the course of search wherein he has stated to have taken accommodation entries in the form of bogus share capital and share premium.
7. On the other hand, ld. Counsel for the assessee vehemently argued supporting the finding of ld. CIT(A) as well as placing reliance on plethora of decisions/judgments referred in the impugned order dealing with same issue and identical facts.
8. We have heard rival contentions and perused the records placed before us. The issue in dispute before us has been raised by the Revenue challenging the finding of ld. CIT(A) deleting the addition made by ld. AO u/s 68 of the Act. We observe that the assessee company is regularly filing income tax returns. For AY 2011-12 return was filed u/s 139(1) of the Act on 27.09.2011. No notice was issued u/s 143(2) of the Act within the statutory time limit. Search was conducted in the case of the assessee company on 31.08.2016. Undisputedly as on the date of search, AY 2011- 12 comes under the category of completed assessment and the addition in such completed assessments can only be made if any incriminating material giving rise to addition is found during the course of search and ld. AO refers to such incriminating material. In the case before us, we notice that the assessee company has been receiving share capital and share premium in the past also Page 5 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. and during the year also. During the course of search a person namely Mr. Madan Lal Mittal gave a statement on oath on 31.08.2016 accepting that the assessee company takes accommodation entry in the form of bogus share capital and share premium. Immediately after the date of search this person i.e. Mr. Madan Lal Mittal by an affidavit dated 01.09.2016 files a retraction statement before the Revenue authorities on 05.09.2016 thereby stating that the said statement was neither voluntary nor correct and in the said retraction statement which has been captured by ld. CIT(A) in the impugned order from page 38 to 47 contains the reasons of retraction about the statement given for the alleged bogus share capital and share premium thereby stating that the share capital and share premium received by the assessee were genuine. Now, apart from this statement dated 31.08.2016 which was retracted on 05.09.2016, ld. AO while concluding the assessment proceedings and making the addition in the hands of the assessee has not referred to any incriminating material whatsoever pertaining to the alleged share capital and share premium found during the course of search. There was no document found by the search team which could indicate that the assessee has given cash in lieu of the accommodation entry nor any document of alleged share applicants were found which could prove that the share capital and share premium received by the assessee are bogus. Thus, it remains an uncontroverted fact that the alleged addition has been made by ld. AO purely on the basis of a statement given during the course of search which too has been retracted. Such type of issue has come up for adjudication before Hon'ble Courts time and again and even in some cases it .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. has been held that even if the statement has not been retracted then also the addition cannot be made merely on the basis of the statement without the support of any incriminating material found during the course of search. The case of the assessee is on a strong footing since in this case within 4 days the assessee has retracted the statement given during the course of search. It is also not in dispute that original return of income was filed on the due date for AY 2011-12 and no assessment proceedings were pending as on the date of search and the year under appeal was a completed assessment and therefore, ld. AO was not justified to make additions.
9. We find that recently this Tribunal in the case of Aditya Himatsingka vs. DCIT in I.T.(S.S.)A. No. 27/Kol/2022 order dated 09.09.2022 dealing with same issue and identical facts has held as follows: “9. We have heard rival contentions and perused the records placed before us as well as the case laws cited by Ld. Counsel for the assessee. First we take up Ground Nos. 1 to 3 challenging the legality of the assessment proceedings carried out subsequent to search u/s 132 of the Act. (i) It is an admitted fact that no incriminating documents or material were found in course of the search and no addition has been made in the assessment made pursuant thereto on such account. Only two additions have been made in the assessment under section 153A of the Act in respect of the said alleged bank account at the HSBC and the disallowance of Rs. 587 under Section 14A of the Act. It was submitted that the disallowance under section 14A of the Act is on the basis of a legal interpretation of the said section and is not as a result of any incriminating documents found in course of the search which would warrant such disallowance. (ii) Only other addition in the assessment is the sum of Rs. 4,73,20,709 being the bank balance of the said two companies. For Gingest Marketing Ltd it amounts to Rs. 4,52,40,074 and Masonic Page 7 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. Limited amounts to Rs. 20,80,685. Admittedly the said addition has been made without reference to any incriminating material or documents found as a result of the search. The said documents relating to the alleged bank account at HSBC Switzerland were in the possession of the Department prior to the search and the appellant was confronted with them in the course of search proceedings. (iii) AO has alleged that during the Search & Seizure operations, assessee accepted the existence of a/c but stated it was in the name of M/s Masonic Ltd., in which his NRI son, Mr. Amitabh Himatsingka held 600 class-B non- voting equity shares. In the same statement, the Assessee had clarified and subsequently asserted, through filing of affidavits, that he was neither a director nor a shareholder in the said companies. (iv) As no incriminating material or documents whatsoever was found during the course of search under section 132 of the Act and since the time limit for issuing notice u/s 143(2) of the Act for A.Y. 2006-07 stood expired as on the date of search i.e., 22/09/2011, the said assessment falls under the category of completed assessment and additions could be made in such completed assessments only if they are supported with any incriminating material found during the course of search. Therefore, the Assessing Officer has no jurisdiction whatsoever to frame assessment under section 153A/143(3) of the Act with reference to the issue for which no incriminating evidence or documents was found. It is by now well settled in law that in case of unabated assessments, only when any incriminating material or evidence is gathered in the course of search that the assessment can be framed u/s 153A of the Act in respect of income assessable with reference to such material. The assessment was completed under section 143(3) of the Act and no proceedings were pending when the search was conducted against the appellant. Assessment u/s 153A can be conducted only where any proceedings were pending at the time of search and got abated and/or any incriminating material or documents were found in the course of search. From the facts of the case it is clear that the assessment u/s 153A/143(3) was framed with reference to unverified and unsubstantiated information allegedly gathered by the Income Tax Department from some unnamed and unspecified authorities whose identity has never been disclosed to the appellant till date. No documents, details or papers even remotely connected with the alleged bank account were found from the appellant’s premises or were in the possession of the appellant. In absence of any incriminating details found in the course of search and the fact that the assessment for A.Y. 2006-07 had not Page 8 of 24 I.T.A. Nos.: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. abated, no addition or disallowance was permissible in the assessments framed u/s 153A of the Act.
10. This is now well settled by the judgments of various High Courts and Co-ordinate Benches of the Tribunal. It can also be seen from pages 16 to 26 of the order of the CIT(A) set out from the written submissions filed by the Appellant before him. In addition to the above, we may also refer to the following orders : a) In the context of Section 153C of the Act which is para materia to Section 153A of the Act the Hon'ble Apex court in the case of CIT v. Sinhgad Technical Education Society 397 ITR 344 in the context of section 153C of the Act has held as under: "18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act." b) Similar view was taken by the Hon'ble Calcutta High Court in the case of Veerprabhu Marketing Ltd, dated 04108/2016. In this case the question of law was framed as follows: "1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is justified in not holding that all assessments were made under section 143(1) of the I. T. Act; therefore, disallowance as per law were not earlier made. As per Section 153(c) of the I. T. Act assessment is to be made afresh and Income to be assessed or reassessed. The meaning of reassessment is that there is no need to resort to Section 147 of the I. T. Act and to consider the disallowance in the assessment to be made under section 153 of the I.T. Act? 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is correct in misinterpreting the CBDT's Circular NO.7 as the same applies to assessments made u/s.143(3), 144 or 147 of the I. T. Act where appeals or rectification application will not abate? 2. Whether on the facts and in the· circumstances of the case, the Income Tax Appellate Tribunal is correct in law for the fact that the Page 9 of 24 I.T.A. Nos.: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. decision of Jharkhand High Court (2901TR 114) has not been properly interpreted as the same does not deal with a situation where assessment are made u/s. 143(1) of the I. T. Act and there is no proposition laid down that disallowance which required to be made if the return was selected for regular assessment u/s. 143(3) or u/s. 147 of the I. T,. Act could not be made u/s. 153A of the I. T. Act? While disposing appeal the Hon'ble High Court held: We are in agreement with the views expressed by the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section 153C read with section 153A. In the case before us, the assessing officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 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. We find no infirmity in the aforesaid act of the learned Tribunal. The appeal is, therefore, dismissed. No Special Leave Petition was filed in the Supreme Court by the Revenue against the aforesaid decision of the Hon'ble Calcutta High Court. c) In the case of Pr. CIT vs. Salasar Stock Broking Ltd ITAT No. 264 of 2016, the Hon’ble Calcutta High Court took the same view and held: "Subject matter of challenge is a judgment and order dated 18th December, 2015 by which the learned Tribunal dismissed an appeal preferred by the Revenue registered as and allowed a cross-objection registered as CO-30/Kol/2013 both pertaining to the assessment year 2005-06. The learned Tribunal was of the opinion that the Assessing Officer had no jurisdiction under section 153A of the Income Tax Act to reopen the concluded cases when the search and seizure did not disclose any incriminating material. In taking the aforesaid view, the learned Tribunal relied upon a judgement of Delhi High Court in the case of Kabul Chawla in ITA No. 78.7/2014 dated 28th August, 2014. The aggrieved Revenue has come up in appeal. Mr. Bagaria, learned Advocate appearing for the assessee, submitted that more or less an identical view was taken by this Bench in ITA .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. 66112008, [CIT vs. Veerprabhu Marketing Ltd] wherein the following views were expressed ¬ "We are in· agreement with the views expressed by the Karnataka High Court that incriminating material is a pre-requisite before power could have been exercised under section153C read with section 153A. In the case before us, the assessing. officer has made disallowances of the expenditure, which were already disclosed, for one reason or the other. But such disallowances were not contemplated by the provisions contained under section 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" In that view of the matter, we are unable to admit the appeal. The appeal is, therefore, dismissed." d) In the case of PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, KOLKATA VERSUS M/S. RASHMI INFRASTRUCTURE PVT. LTD., 2020 (2) TMI 1463 the Hon'ble Calcutta High Court took the same view and held: ''The question is whether the assessee had unexplained cash credit in their books which could be charged to income tax in the previous year in question? We find on scrutiny of paragraphs 10 and 10.2 of the order of the tribunal that questions of fact and evidence were discussed and adjudicated upon by it. We set out paragraphs 10 and 10.2 of the impugned order of the tribunal is as follows: "10. Coming to the alleged cash 'trail, none of the material gathered by the Assessing Officer by way of bank account copies of various companies supposed to be part of the chain of companies was not confronted to the assessee. The alleged statements that were recorded from directors of these companies which formed this alleged chain were also not brought on record. Only a general statement has been made. There is no evidence whatsoever that cash has been routed from the assessee company to any of these chain of companies. There is no evidence that any cash was deposited by the assessee company. Moreover, there is no material whatsoever brought on record to demonstrate that the alleged cash deposit made in the bank account of a third party was from the assessee company. No opportunity to cross examine any these parties was provided to the assessee. The bank statements based on which the cash trail was I.T.A. Nos.: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. prepared are part of the disclosed documents and cannot be held as incriminating material. 10.2. Thus, none of these materials gathered by the Assessing Officer can be categorized as incriminating material found during the course of search or found during the course of any other operation under the Act. Thus, we hold that the additions in question are not based on any incriminating material. The Id. CIT(A) on page 38 of his order held as follows: " I have considered the findings of the AO in the assessment order, different case laws was brought on record and appeal orders passed by my predecessors on this legal issue. I find from the assessment order that during the search & seizure operations conducted u/s 132 of the IT Act, 1961, incriminating documents/papers were not seized. At least addition made by AO in the assessment order passed u/s 153A1143(3) are not based of any incriminating documents/papers seized during the search operation. It would also not to be out of context to mention here that in this case, on the date of search, no assessment for this year was pending. Therefore, keeping in view the ratio decided by the jurisdictional bench of Kolkata tribunal in case referred above and the ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd. (Supra) in the light of CBDT's decision of not filing SLP in this 'case in the Supreme Court and keeping in view the Apex Court's decision to dismiss SLP on the similar issue in the case of Pr CIT vs Kurele Paper Mills Pvt. Ltd: SLP (C) No. 34554 of 2015 dt. 07.12.2015, I am of this view that in order to maintain judicial continuity on this issue and respectfully following the ratio decided by the Hon'ble Calcutta High Court in the case of Veer Prabhu Marketing Ltd (Supra), assessee's appeal on ground no 1 is allowed and as such I am not inclined to adjudicate appeal on ground no. 2 on merit. " The tribunal is the final fact finding authority. A plausible adjudication on facts has been made. We cannot reopen the facts any more in this jurisdiction. No questions of law far less any substantial question of law is involved. For those reasons, the appeal (ITAT NO.99 of 2019) and the connected application (GA No.1211 of 2019) are dismissed." e) In the case of M/s Shree Sai Builders, 43, R.R. Archade, Zone-II, M.P. Nagar, Bhopal -vs- ACIT (Central)-II, Bhopal in I.T.(SS).A. No. 245 to 249/Ind/2017 & for Assessment Years : Page 12 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. 2008-09 to 2011-12 & 2013-14 to 2014-15 Income Tax Appellate Tribunal, Indore Bench, Indore by its order dated 30.05.2019 held as follows : 8. We have heard rival contentions and perused the records placed before us and gone through the decision referred and relied by the Ld. Counsel for the assessee. For Assessment Year 2008-09 assessee has raised two grounds of appeal
. Ground No.1 challenges the addition on the ground that no incriminating material was found during the course of search and addition has been made merely on the basis of information called during the course of assessment proceedings. Through Ground No.2 the impugned addition of Rs.2,24,326/- is challenged with regard to disallowance of interest paid on loan holding that the loan funds were not utilized for the business purposes.
9. We find that the Co-ordinate Bench while adjudicating similar issue in the case of Sainath Coloniers V ACIT (2019) 35 ITJ 77 (Trib. Indore) following the judgment of Hon’ble High Court of Delhi in the case of CIT V/s Kabul Chawla (2016) 380 ITR 573 (Del) observed as follows: “We therefore in the given facts and circumstances of the case and respectfully following the judgments referred and relied by the Ld. Counsel for the assessee are of the considered view that no addition/disallowance was called for Assessment Year 2008-09 to 2010-11 as no incriminating material was found during the course of search at the premises of the assessee as the time limit of issuance of notice u/s 143(2) of the Act stood expired much before the date of conducting search u/s 132 of the Act”.
10. Examining facts of the instant appeal in the light of decision of Coordinate Bench, we find that the assessee filed regular return of income u/s 139 of the Act for Assessment Year on 30.09.2008. Assessee’s case was not selected for scrutiny, as notice u/s 143(2) of the Act was not issued to the assessee on or before 30.09.2009. Search was conducted on 29.1.2014. Impugned addition at Rs.2,24,326/- is purely based on information called during the course of search proceedings. In this situation the assessment for Assessment Year 2008-09 is to be treated as non-abated assessments for which additions could be made only on the basis of incriminating material found during the course of search. Therefore, in the given facts and circumstances of the case and respectfully following the decision of the co-ordinate bench referred above, we direct the Ld. A.O to delete the disallowance of Rs.2,24,326/- and .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. accordingly allow Ground No.1 and consequentially Ground No. 2 of the assessee’s appeal for 2008-09 raised in IT(SS)No.245/Ind/2017. f) In the case of Sreedeb Commodities Pvt. Ltd., 158, Lenin Sarani, Kolkata 700013 -vs- DCIT, Central Circle-2(1), Kolkata in I.T.(SS).A. Nos. 15/Kol/2022 for Assessment Year : 2007-08 Income Tax Appellate Tribunal “A” Bench, Kolkata by its order dated 26.07.2022 held as follows : “8. We have duly considered rival contentions and gone through the record carefully. Before adverting to the facts and alleged seized material considered by the ld.AO for making the addition in the hands of the present assessees, we deem it appropriate to bear in mind the position of law propounded in various authoritative judgments expounding scope of section 153A of the Act. We are of the view that in this regard, there were large numbers of decisions. First, we refer to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla, 380 ITR 573 (Del). Hon'ble Delhi High Court after detailed analysis has summarized the following legal position:
37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. (iii) The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to I.T(SS).A. No. 15/Kol/2022 Assessment Year: 2007-08 Sreedeb Commodities Pvt. Ltd. 5 assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". (iv) Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the Page 14 of 24 I.T.A. Nos.: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. (vii)Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." ITAT Delhi Bench in the case of DIT Vs. Smt. Shivali Mahajan and others, rendered in has considered this aspect in its decision. Thereafter, the Tribunal has specifically held that serial no.(iv) of the above proposition, the Hon'ble Delhi High Court has specifically held that assessment under section 153 A of the Act has to be specifically made on the basis of seized I.T(SS).A. No. 15/Kol/2022 Assessment Year: 2007-08 Sreedeb Commodities Pvt. Ltd. 6 material. ITAT Delhi Bench was considering an aspect whether the evidence in the shape of books of accounts, money, bullion, jewellery found during the course of search relates to other person than the searched person, can that be considered while making assessment under section 153A of the Act. ITAT Delhi Bench has specifically held that material recovered from the premises of other person cannot be used in the hands of the searched person. For that purpose an assessment under section 153C or 147 is to be made. At this stage, in order to fortify ourselves, we would like to make reference to the following paragraphs of the ITAT Delhi Bench's order. It reads as under: .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. “15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We, respectfully following the above decisions of Hon'ble Jurisdictional High Court, hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person." Hon'ble Delhi High Court in the case of Subhag Khattar in Tax Appeal No.60 of 2017 has considered the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section 153A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law?" After putting reliance upon its decision in the case of CIT Vs. Kabul Chawla (supra) has replied this question as under: "6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the IT AT. The IT AT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in I.T(SS).A. No. 15/Kol/2022 Assessment Year: 2007-08 Sreedeb Commodities Pvt. Ltd. 7 the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016] 380ITR 573.
A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153A of the Act was misconceived since the so- called incriminating material was not found during the search of the Page 16 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not wider Section 153A. This goes to the root of the matter."
Hon'ble Court has specifically observed for the purpose of section 153A that only seized material is required. However, if there is any other incriminating material belong to the assessee found at the premises of the some other person, then the assessment has to be made under other provisions and not under section 153 A of the Act.
Hon'ble Gujarat High Court has also considered the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra). Hon'ble Gujarat High Court framed the following question of law in the case of Pr.CIT Vs. Saumya Construction (supra): "[A] Whether the order of Tribunal is right in law and on facts in deleting the addition made in assessment made u/s 153A of the Act? [B] Whether the Tribunal is right in law in holding that the addition should be based on the incriminating material found during the course of search under new procedure of assessment u/s 153A which is different from earlier procedure u/s 158BC r.w.s. 158BB of the Act and by reading into the section, the words 'the incriminating material found during the course of search' which are not there in section 153A? [C] Whether the Tribunal erred in relying on the ITAT order in Sanjay Aggarwal v. DCIT (2014) 47 Taxmann.Com 210 (Del) which has interpreted undisclosed income unearthed during the search to imply incriminating material, as against the finding of the Delhi High Court in Filatex India Ltd. v. CIT- IV (2015) 229 Taxman 555 wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search?"
Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: "16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From Page 17 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act.
In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as Page 18 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question.
In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.l 1,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made.
On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in Page 19 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year.
For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed."
11. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon’ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006- 07 already stood completed and the returns in these years were accepted under Section 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon’ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon’ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. Though, it is not necessary to recite and recapitulate this proposition in other judgments, suffice to say that in the following judgments, unanimous view is taken by Hon’ble High Court as well as ITAT on this point. They concur with the Hon’ble High Court. Just for reference, we note the citations as under:- Sl. No. Particulars 1. CIT vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi) 2. PCIT –vs.- Kurele Paper Mills (P) Ltd. [2017] 81 taxmann.com 82 (Delhi) .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd.
PCIT –vs.- Rashmi Infrastructure Pvt. Ltd. ITAT 99 of 2019, GA No. 1211 of 2019 (Calcutta HC) 4. CIT –vs.- Veerprabhu Marketing Ltd. [2016] 73 taxmann.com 149 (Calcutta) 5. PCIT –vs.- Salasar Stock Broking Ltd. ITAT No. 264 of 2016, GA No. 1929 of 2016 (Calcutta HC) 6. M/s. Mani Square Ltd. –vs.- ACIT [IT(SS)A Nos. 58/KOL/2019 & others 7. ACIT –vs.- Majestic Commercial (P) Ltd. [2020] 116 taxmann.com 412 (Kolkata Trib.) 8. PCIT –vs.- Anand Kumar Jain & Others [ITA 23/2021 & others (Delhi High Court) 9. DCIT –vs.- Bhavya Merchandise (P) Ltd. [2020] 121 taxmann.com 112 (Kolkata Trib.) 10. Sarva Priya Holdings Pvt. Ltd. –vs.- DCIT [IT(SS)A Nos. 97 & 98/KOL/2014 11. Purulia Metal Casting –vs.- DCIT [ITA No. 1217/KOL/2019) 12. DCIT –vs.- Shri Ram Realcon Pvt. Ltd. [IT(SS)A No. 14 & 15/KOL/2017 13. Vikram Financial Services Ltd. –vs.- DCIT [IT(SS)A No. 81/KOL/2010 14. DCIT –vs.- M/s. Bohra G. & NN Brothers Pvt. Ltd. [IT(SS)A No. 89/KOL/2017 14. A perusal of the above finding would indicate that the Assessing Officer has nowhere made reference to any seized material in the assessment order. The Assessing Officer has been examining the matter as if he is passing a regular assessment order u/s 143(3) or 147 of the Act. Under the scheme of assessment as propounded in the various judgments of the Hon’ble High Courts referred above, an addition can only be made if some incriminating material regarding receipt of bogus share application money was found during the course of search. The Assessing Officer did not make reference to this effect. The ld. CIT(A) is on the same line. The ld. CIT(A) has discussed the issue on merits but did not address whether the issue can be examined in an assessment framed u/s 153A of the Act or not. The judgment of the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) is very specific which has been discussed above. The time limit to issue notice u/s 143(2) of the Act has expired long back. Hence, it is an unabated assessment year and this assessment can be tinkered with only if incriminating material pertaining to this year has been found during the course of search. In view of the above Page 21 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. discussion and respectfully following the judgments of various Hon’ble High Courts and Co-ordinate Benches, we allow the preliminary ground of the appeal and delete the additions made in the assessment order dt. 30/03/2015 passed u/s 153A r.w.s. 143(3) of the Act.
In view of the facts of this case and the settled legal position as discussed above, we hold that the addition of INR 4,52,40,074/- in respect of Gingest Marketing Limited and INR 20,80,685/- in respect of Masonic Limited and the dis-allowance of INR 587/- u/s 14A of the Act are wrong and are directed to be deleted. Since we have already quashed the assessment proceedings carried out u/s 153A r.w.s. 143(3) of the Act dt. 30/03/2015, as bad in law, and all the additions made therein stands deleted, renders the remaining grounds infructuous. In view of our finding as above, we do not deem it necessary to decide other grounds of appeal
12. In the result, the appeal is partly allowed.”
10. Similar view under identical facts and dealing with the same issue was again taken by this Tribunal in the case of ACIT vs. Pritam Beria in I.T.(S.S.)A. Nos. 35 & 36/KOL/2022 for Assessment Years 2014-15 & 2015-16 order dated 20.02.2023.
11. We, therefore, under the given facts and circumstances of the case and respectfully following the ratio laid down by the Hon'ble Courts referred herein above fail to find any infirmity in the finding of ld. CIT(A) who has rightly deleted the alleged addition observing that no incriminating material or document related to the addition of share capital and share premium as made by ld. AO were found during the course of search and the assessment year in question is a completed and unabated year. Thus, all the grounds raised by the Revenue for AY 2011-12 are dismissed.
12. Now, we take up the Revenue’s appeal for AY 2013-14 and find that the facts are almost identical to that of AY 2011-12 except for the change in figure i.e. addition for AY 2013-14 is at Rs. 3.06 Page 22 of 24 .: 72 & 73/GTY/2020 Assessment Years: 2011-12 & 2013-14 Pawan Cement Company Pvt. Ltd. Cr made u/s 68 of the Act. No incriminating material was found during the course of search relating to the alleged addition. Since the facts of the case are similar to that of AY 2011-12 and AY 2013- 14 also comes under the category of completed assessment as on the date of search, therefore, the addition could have been made only on the basis of any incriminating material found during the course of search and therefore, since no such incriminating material was found, ld. CIT(A) has rightly deleted the addition referring to the judicial pronouncements as referred herein above. We thus, taking a consistent view, apply our decision for AY 2011- 12 mutatis mutandis on AY 2013-14 and confirm the finding of ld. CIT(A). Thus all the grounds raised by the Revenue for AY 2013- 14 are dismissed.