M/S SHIVALIKA REALITIES P LTD,INDORE vs. ITO 5(1) , INDORE

The above captioned appeal for A.Y. 2008-09 and appeal for A.Y. 2009-10 of the appellant are directed against the common order M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . of the Ld. Commissioner of Income-Tax (Appeals) - II, (in short ‘Ld.CIT(A)’), Indore dated 27.11.2017 which are arising out of the order of ITO -5(1), Indore dated 28.03.2016. 2.Grounds of appeal raised by Assessee for AY 2008-09 in ITA- 94/IND/2018

1. That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred, both on facts and in law, in passing the Order without considering the written submissions made by the appellant on the legal ground and without giving any effective opportunity of being heard to the appellant on other grounds raised in the Appeal Memo before him. 2a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that the issuance of the notice under s.148 of the Act by the AO, itself, was bad-in-law and void ab initio. 2b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that having withdrawn the notice issued earlier under s.153C of the Act to the appellant, for the same assessment year, there was absolutely no justification for the AO to restart the assessment proceedings, earlier dropped, under the garb of the provisions of s.147 of the Act. 2c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that in the instant case, the Assessing Officer by himself had not formed any belief as regard to escapement of any income chargeable to tax in the hands of the appellant and instead, merely on the finding of some other Assessing Officer in some other case, for some other assessment year, had assumed the jurisdiction for issuance of notice under s.148 of the Act. 2d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not considering the material fact that in the case of some other assessee namely Shri Mohanlal Chugh, which has been made the very basis for issuance of notice under s.148 of the Act to the appellant, the findings were not to the effect of payment or any unexplained investment by the appellant but, on the contrary, the findings were relating to the alleged receipt of money by the above named Shri Mohanlal Chugh on behalf of the appellant company thereby making the very foundation of belief, and, consequently, the notice issued under s.148, as bad-in-law and void ab initio.

3. That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the additions of Rs.12,13,37,500/- made by the AO in the appellant’s income.

M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . 4a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, by passing a cryptic order, merely on guess work, surmises and conjectures, under the head unexplained investment, without considering and appreciating the material fact that all through, the allegation against the appellant company was unaccounted receipt of money and not unaccounted or unexplained investment. 4b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, on account of alleged unexplained investment, without considering the material fact that during the course of the assessment proceedings, the learned AO could not rebut the submission of the appellant that during the year under consideration, it had not made any investment at all and further, the AO also failed to give any finding that the alleged investment was made by the appellant company during the year under consideration. 4c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, without considering and appreciating the material fact that during the previous year under consideration, the appellant had neither made/ incurred any unexplained investment/ expenditure nor it had made any unaccounted receipts chargeable to tax. 5a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.1,50,00,000/- made by the AO in the appellant’s income, on account of alleged unexplained cash credit under s.68 of the Act in respect of certain unsecured loans appearing in the audited balance sheet of the appellant company for the relevant previous year, without considering and appreciating the material fact that such issue was not the subject matter of notice under s.148 of the Act and further, during the course of the assessment proceedings, there was no material before the AO from which he could have presumed that such cash credit represents the escaped income of the appellant. 5b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.1,50,00,000/- made by the AO in the appellant’s income, without invoking the provisions of s.68 of the Act and without considering and appreciating the material fact that the entire sum shown by the appellant was quite genuine having been received through banking channel from the persons whose identity and creditworthiness were beyond doubt.

3.Grounds of appeal raised by Assessee for AY 2009-10 in ITA- 95/IND/2018

1. That, on the facts and in the circumstances of the case, the learned CIT(A) grossly erred, both on facts and in law, in passing the Order without considering the written submissions made by the appellant on the legal ground and without giving any effective opportunity of being heard to the appellant on other grounds raised

in the Appeal Memo before him.

3. M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 .

2a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that the issuance of the notice under s.148 of the Act by the AO, itself, was bad-in-law and void ab initio. 2b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that having withdrawn the notice issued earlier under s.153C of the Act to the appellant, for the same assessment year, there was absolutely no justification for the AO to restart the assessment proceedings, earlier dropped, under the garb of the provisions of s.147 of the Act. 2c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO in issuing notice under s.148 of the Income-Tax Act, 1961 and framing the reassessment in the case of the appellant company without considering the material fact that in the instant case, the Assessing Officer by himself had not formed any belief as regard to escapement of any income chargeable to tax in the hands of the appellant and instead, merely on the finding of some other Assessing Officer in some other case, had assumed the jurisdiction for issuance of notice under s.148 of the Act. 2d). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in not considering the material fact that in the case of some other assessee namely Shri Mohanlal Chugh, which has been made the very basis for issuance of notice under s.148 of the Act to the appellant, the findings were not to the effect of payment or any unexplained investment by the appellant but, on the contrary, the findings were relating to the alleged receipt of money by the above named Shri Mohanlal Chugh on behalf of the appellant company thereby making the very foundation of belief, and, consequently, the notice issued under s.148, as bad-in-law and void ab initio. 3a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, by passing a cryptic order, merely on guess work, surmises and conjectures, under the head unexplained investment, without considering and appreciating the material fact that all through, the allegation against the appellant company was unaccounted receipt of money and not unaccounted or unexplained investment. 3b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, on account of alleged unexplained investment, without considering the material fact that during the course of the assessment proceedings, the learned AO could not rebut the submission of the appellant that during the year under consideration, it had not made any investment at all and further, the AO also failed to give any finding that the alleged investment was made by the appellant company during the year under consideration. 3c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.10,63,37,500/- made by the AO in the appellant’s income, without considering and appreciating the material fact that 4 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . during the previous year under consideration, the appellant had neither made/ incurred any unexplained investment/ expenditure nor it had made any unaccounted receipts chargeable to tax. 4. That, the appellant further craves leave to add, alter or amend the foregoing ground of appeal as and when considered necessary.

M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 .

by the appellant challenging the issuance of the notice u/s. 148.

14. Before us, the appellant company has made a written submission in the form of a Synopsis. The relevant portion of the appellant’s reply is being reproduced as under: “SUBMISSION[for Ground No. 2(a) & 2(c)] In this context, it is submitted as under:

1.00 FURNISHING OF ORIGINAL RETURNS OF INCOME BY THE APPELLANT In the instant case, the appellant had furnished its original return of income for the assessment years under consideration, i.e. A.Y. 2008-09 and A.Y. 2009- 10, quite voluntarily under the provisions of s.139 of the Income-Tax Act, 1961 on 10-12-2008 [kindly refer PB Page No. 1 for A.Y. 2008-09] and on 19- 0-2010 [kindly refer PB Page No. 1 for A.Y. 2009-10]. The returns so furnished were duly processed under s.143(1)(a) of the Act without making any adjustment in the returned income of the appellant.

FORMING OF BELIEF BY THE AO ON THE BASIS OF FINDING OF 2.00 SOME OTHER AO IN THE CASE OF THE SOME OTHER ASSESSEE That, the learned AO, merely on the basis of some finding of some other assessing officer in the case of some other assessee, for some other assessment year, without carrying out any independent enquiry by himself, formed a belief that the income of the appellant, for the assessment years under consideration, escaped to assessment.

2.01 REASON TO BELIEVE SHOULD BE THAT OF THE AO HIMSELF AND NOT A BORROWED SATISFACTION OF SOME OTHER OFFICER It is a settled law that the reason to believe recorded by the Assessing Officer should be that of his own and not a borrowed satisfaction of some other Officer. In the instant case, the action of the learned AO in issuing the notice under s.148, after the expiry of four years from the end of the relevant assessment year, merely by acting mechanically upon the findings given by some other AO in the case of some other assessee without applying his own mind,is unjustified, unwarranted, illegal and bad-in-law. For such proposition, reliance is placed on the following judicial pronouncements: i) CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33 (Del.HC)

M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . ii) CIT v. Multiplex Trading & Industrial Co Ltd (2015) 128 DTR 217 (Delhi)(HC) iii) Pr. CIT v G. Pharma India Ltd.[2017] 384 ITR 147 (Delhi) (HC) iv) CIT vs. Insecticides (India) Ltd. (2013) 357 ITR 300 (Del.)(HC) v) CIT v/s Meenakshi Oversea’s Pvt Ltd (2017) 395 ITR 677(Del) (HC) vi) CIT vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del.)(HC) vii) Sarthak Securities Co. (P.) Ltd. vs. ITO (2010) 329 ITR 110 viii) PCIT v. Manzil Dineshkumar Shah[2018] 95 Taxmann.com 46 (Guj) HC) ix) Amar Jewellers Ltd. v. Dy. CIT (2018) 254 Taxman 384 (Guj. )(HC) x) Deepraj Hospital (P) Ltd. v. ITO, 41/AGRA/2017, AY: 2010-11 Dtd:01/06/2018 (Agra)(Trib) xi) ITO v. Reliance Corporation (2017) 55 ITR 69 (SN) (Mum.) (Trib.)

3.00 ENTIRE REASONS FOR RE-OPENING ARE BASED ON ADDITIONS MADE BY SOME OTHER AO IN SOME OTHER ASSESSEE That, from the statement of reasons recorded by the learned AO [kindly refer PB Page No. 18 & 19 for A.Y. 2008-09], it would be observed by Your Honours that the entire premises of the learned AO for issuance of the notice under s.148 was hovering around the additions made by some other AO in the case of some other assessee on protective basis. It is submitted that nowhere from the statement of reasons, it is discernible that the learned AO, at his own end, made any effort to verify the veracity of the findings of the AO of Shri Mohanlal Chugh. It is not the claim of the learned AO that he himself made any independent enquiry, for the alleged escapement of income of the appellant company before forming any belief. 4.00 INFORMATION RECEIVED FROM EXTERNAL SOURCE WITHOUT ANY INDEPENDENT APPLICATION OF MIND BY THE LD. AO ARE VOID-AB-INITIO It is submitted that the reassessment proceedings so initiated by the learned AO merely on the basis of the information received from external source without any independent application of mind by the ld. AO are void-ab-initio. For such proposition, reliance is placed on the following decisions: - ITO Vs. M/s. Softline Creations (P) Ltd. (in - CIT Vs. Gangeshwari Metal Pvt. Ltd. (2014) 264 CTR 277 (Del HC) - M/s. Khatri Projects Pvt. Ltd. Vs. ITO (I.T.A. no. 4353/Del/2016) - M/s. Devansh Exports Vs. ACIT (I.T.A. No. 2178/Kol/2017) - Moti Adhesive P. Ltd. Vs. ITO (ITA No. 3133/Del/20I8) - CIT Vs. Oasis Hospitalities Pvt. Ltd. (2011) 333 ITR 119 (Del HC) - CIT Vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del HC) - Sarthak Securities Co. Ltd. Vs. ITO 329 ITR 110 (Delhi HC) - Deeparaj Hospital (P)Ltd. Vs. ITO, 41/Agra/2017 dt. 01.06.2018 (Agra Trib) - ITO Vs. Reliance Corporation (2017) 55 ITR 69 (SN) (Mum) (Trib) 12 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . - PCIT Vs. RMG Polyvinyl (I) Ltd. (2017) 83 taxmann.com 348 (Delhi HC) - PCIT Vs.Meenakshi Overseas(P)Ltd.(2017) 82 taxmann.com 300 (Delhi HC) - Gee Cee Cycle Balls Pvt. Ltd. Vs. ITO, ITA No. 867/DeL2013 dt. 30.10.2015 - CIT Vs. Goel Songs Golden Estate Pvt. Ltd. ITA No. 212 2012 dt 11.04.2012 - CIT Vs.Vrindavan Farms(P)Ltd. ITA No. 71, 72, 85 DeL2015 dt. 12.08.2015 - Dwarka Gems Ltd. ITA No. 71/ Jp/2017 (ITAT Jaipur) - Nirmala Agarwal Vs. ACIT (ITA No. 995 & 996 Jp/2016) (ITAT Jaipur) 5.00 WHAT COULD NOT HAVE BEEN DONE DIRECTLY WAS NOT PERMISSIBLE TO BE DONE OBLIQUELY It is submitted that the assessment in the case of the assessee for the relevant assessment years stood completed under section 143(1) of the Act and the time limit for issuing notice under section 143(2) of the Act stood expired as on the date of reopening of the assessment and that even if scrutiny assessment under section 143(3) of the Act was to be made, the same would not fulfill criteria laid down under section 142(2) of the Act since the AO had not conducted any such independent enquiry of his own but had merely relied on borrowed satisfaction. Therefore when none of the said material was independently examined by the AO so as to put such material to the assessee under section 142(3) or for that to even to sustain the addition under section 143(3) of the Act then how the same could have been utilized for reopening the assessment under section 148 of the Act in the assessee’s case. It is submitted that what could not have been done directly was not permissible to be done obliquely, meaning thereby, whatever is prohibited by law to be done could not have been legally effected by an indirect and circuitous contrivance. Reliance is placed on the following judicial pronouncements: i)CIT Vs. Kalvinator of India Ltd. (2002) 256 ITR 1 (Del)(FB) ii)Windson Electronics (P) Ltd.& Anr.Vs.UOI&Ors (2004) 269 ITR 481 (Cal) iii)Smt. Durgabati & Smt.Narmadabala Gupta Vs. CIT,(1956)30ITR 101(Pat); iv)Raja Yadvendra Datt Dube Vs. State of Uttar Pradesh(1964)54ITR506 (All) v) Babul Lath Vs. ACIT (2002) 83 ITD 691 (Mum)

6.00 REASONS RECORDED BY THE LEARNED AO WERE NOT REASONABLE AND THE SAME WERE VAGUE IN NATURE Without prejudice to the above, it is further submitted that as the third party material had no presumptive value with respect to Section 292C of the Act then the burden of proof lies with the Department which had not been discharged and thus the said third party departmental material / evidences first have to be proved to have some sort of live casual nexus with the undisclosed income of the appellant to sustain the addition under section 148 of the Act, especially when the scope of what constitutes a “ full and true” disclosure of material facts is also well settled Law where the assessee is only required to disclose the primary facts and nothing more. It is further submitted that the learned AO was required to show that there existed a reason to believe (based on credible and tangible material) that the appellant has failed 13 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . to fully and truly disclose the primary facts required for the purposes of assessing his case and such “reason to believe” for the purposes of reopening the assessment under section 147 of the Act r.w.s 148 of the Act cannot be based on surmises, conjectures or occasioned by a change in opinion but must be based on cogent material which establishes a live casual nexus between the information and inference so drawn by the learned AO. For such proposition, reliance is placed on the judgment of the Hon’ble Delhi High Court in the case of CIT-II Vs. Multiplex Trading and Industrial Co. Ltd. [2015] 63 taxmann.com 170(Delhi). It is submitted that the reasons recorded by the learned AO were not reasonable and the same were vague in nature to establish that the income of the appellant had escaped assessment for reopening the assessment under section 148 of the Act. Therefore, the reassessment proceedings in the assessee’s case were bad in law, void ab- initio and consequent addition were unwarranted, unsustainable and deserves to be quashed. In such circumstances, in view of the pronouncement of the various judicial authorities, the very initiation of notice under s. 148 deserves to be held as invalid and consequently, the impugned assessment order so passed also deserves to be strucked down.”

“SUBMISSION [for Ground No. 2(b)] 1.00 REASON FOR RE-OPENING IS FINDING OF LOOSE PAPERS DURING A SEARCH U/s. 132 IN THE PREMISES OF A THIRD PERSON In the instant case, according to the statement of reasons recorded by the learned AO before issuance of the Notices under s.148, the very reason for re- opening the case of the appellant company for the relevant assessment years is that a search and seizure operation under s.132 of the Act was carried out on a group of assessees namely ‘Satellite Group’ on 19-11-2009 and during the course of search in premises of M/s. Phoenix Devcons Pvt. Ltd., some loose papers inventorized as LPS A/3 were seized. On a perusal of the page No. 25, 20 & 21 of LPS A/3, the payment details made to Shri Mohanlal Chugh, one of the then directors of the appellant company, were found mentioned which were correlated with notings in the Diary BS-8 also seized from the premises of above named company. Further, as per the reasons, on a perusal of the details mentioned on page nos. 182, 184 & 186 of LPS A/3, some payments were made to Shri Mohanlal Chugh, Indore. 1.01 NOTICES U/s. 153C ISSUED TO THE APPELLANT On an earlier occasion, immediately after the aforesaid search, Notices under s.153C of the Act for the relevant assessment years were issued to the assessee company by the ld. ACIT-3(1), Indore on 14-11-2011 [kindly refer Paper Book (PB) Page No. 10 for A.Y. 2008-09]. In response to such Notices u/s. 153C, the appellant vide its letters dated 19-12-2011, intimated the AO that it had already furnished its returns under s.139 of the Act and also made a request that the returns so furnished under s.139 may be regarded as the returns furnished in compliance to the notices under s.153C. 1.02 WITHDRAWAL OF NOTICES ISSUED U/s. 153C M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . That, subsequently, the aforesaid Notices so issued u/s. 153C for the relevant assessment years were withdrawn by the ld. ACIT-3(1), Indore vide his Letters both dated 19-12-2011 [kindly refer PB Page No. 11 for A.Y. 2008-09] and the proceedings initiated under the provisions of s.153C in the case of the assessee company were eventually dropped. 2.00 RE-OPENING OF THE CASE OF APPELLANT BY ISSUANCE OF NOTICES U/s. 148 AND FRAMING OF ASSESSMENTS That, the case of the appellant company for the relevant assessment years was re-opened by issuing notices under s. 148 on 08-09-2014 for the A.Y. 2009-10 [kindly refer PB Page No. 19 for A.Y. 2009-10] and on 19-03-2015 for the A.Y. 2008-09 [kindly refer PB Page No. 12 for A.Y. 2008-09] and the assessments have been framed upon the appellant company under the provisions of s.147 of the Act. 3.00 PROCEEDINGS ONCE INITIATED UNDER S.153C OF THE ACT AND SUBSEQUENTLY DROPPED, THEREAFTER, ON THE SIMILAR GROUNDS, THE PROVISIONS OF S.147/148 CANNOT BE INVOKED In the above background, it would be observed that in pursuance of the loose papers seized during the search operations carried out under s.132 of the Act in the case of a third person, the correct course of action would have been to proceed against the appellant company under the provisions of s.153C of the Act. It is a settled law that the applicability of the provisions of s.153C of the Act would exclude the application of the provisions of s.147/148 of the Act. It would be appreciated by Your Honours that if the proceedings are initiated under s.153C of the Act and subsequently dropped, thereafter, on the similar grounds, the provisions of s.147/148 are not liable to be invoked. 3.01 On the similar issue, the Hon'ble Delhi High Court in the case of CIT Vs. Kalvinator of India Ltd. (2002) 256 ITR 1 (Del) observed at page no. 15 that “it is well settled principle of law that what cannot be done directly cannot be done indirectly”. 3.02 On the similar issue, the Hon’ble ITAT Mumbai in the case of Shri Mohan Thakur vs. ACIT 2020 (1) TMI 558 (ITAT Mumbai) has held that the proceedings under s.153C have been initiated and subsequently dropped, then, the notice under s.148 so issued was unjustifiable and the assessment order is not liable to be sustainable in the eyes of law. A copy of the judgment is being enclosed herewith for kind perusal and record of Your Honour, as Exhibit P-1. 3.03 Hon’ble ITAT Delhi Bench “A” in the case of Shri Adarsh Aggarwal Delhi Vs. ITO, Ward-61, Delhi in ITA No. 777/Delhi/19 for the A.Y. 2010-11 vide order dt. 14/01/2020 by following the decisions of Hon’ble ITAT Bench Visakhapatnam in the case of G. Koteswar Rao and the Hon’ble ITAT Amritsar Bench in the case of ITO Vs. Arun Kumar Kapoor (2011)140 TTJ 249 (Asr) held in para 8.2 as under: “8.2. Since Shri Naresh Sabharwal has retracted from the fact of taking any loan from assessee and genuineness of the agreement is itself in doubt which was found during the course of search and is not corroborated by any evidence or material on record, therefore, such photo copy of the agreement cannot be relied upon by the A.O. for the purpose of initiating the re-assessment proceedings in the case of the 15 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . assessee. It is an admitted fact that in the present case the agreement in question was found during the course of search in the case of Shri Naresh Sabharwal and proceedings under section 153A have been initiated against him. Therefore, the agreement in question have been transferred by A.O. of the person searched to the A.O. of the assessee for the purpose of taking remedial action in the matter. It is well settled Law that in the case of assessment made on assessee consequent to the search in another case, A.O. is bound to issue notice under section 153C and thereafter proceed to assess the income under section 153C and if A.O. had proceeded with re-assessment under section 147/148 of the I.T. Act and passed the Order under section 143(3)/148 of the I.T. Act, the same would be illegal and arbitrary and without jurisdiction. We rely upon the Order of ITAT, Visakhapatnam Bench in the case of G. Koteswara Rao (supra). In the case of ITO vs., Arun Kumar Kapoor [2011] 140 TTJ 249 (ASR-ITAT) [Paper Book at Page71], the ITAT, Amritsar Bench held as under : “On a perusal of section 153C, it would be clear that the provisions of this section are applicable which supersedes the applicability of provisions of sections 147 and 148. In the instant case, the documents were seized during the search under section 132 and the same were sent to the Assessing Officer of the assessee and, thus, the Commissioner (Appeals) has correctly observed that only the provision in which any assessment could be made against the assessee was section 153C, read with section 153A. It was also apparent from the record that the officer in the case of 'T' Ltd. had mentioned in his letter that the necessary action may be taken as per law under section 153C/148. Hence, notice issued under section 148 and proceedings under section 147 by the Assessing Officer were illegal and void ab initio. In view of the provisions of section 153C, section 147/148 stands ousted.

In the instant case, the procedure laid down under section 153C has not been followed by the Assessing Officer and, therefore, assessment has become invalid. The Commissioner (Appeals) was justified in following the ratio laid down by the Supreme court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in section 158BD is not followed, block assessment proceedings would be illegal. The Commissioner (Appeals) has correctly observed that the provisions of section 153C are exactly similar to the provisions of section 158BD in block assessment proceedings. Thus, considering the entire facts and the circumstances of the case, the Commissioner (Appeals) was fully justified in quashing the reassessment order.” 8.3. The other decisions relied upon by the Learned Counsel for the Assessee are on the same proposition. Considering the facts of the case in the light of above decisions, it is clear that loan agreement was found during the course of search in the case of Shri Naresh Sabharwal which is handed-over to the A.O. of the assessee and addition is made only on that basis. Therefore, there was no 16 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . justification for the A.O. to have been initiated proceedings under section 147/148 of the I.T. Act. The correct course of action would have been to proceed against the assessee under section 153C of the I.T. Act. Therefore, initiation of re-assessment proceedings under section 147/148 of the I.T. Act is wholly invalid, void and bad in Law. Since the correct procedure have not been adopted by the A.O. and there is no justification to initiate the re-assessment proceedings against the assessee, we set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stands deleted.” A copy of the aforesaid judgment is being enclosed herewith for kind perusal and record as Exhibit P-2. 3.04 Hon’ble ITAT Delhi in the case of Nawal Oils and Containers Pvt. Ltd. vs. ITO (2020) 58 CCH 218 (DelTrib) has held that once the assessment proceedings was initiated on the basis of incriminating material found in search of third party then provisions of s.153C were applicable which exclude application of section 147 & 148 and notice u/s. 148 and proceedings u/s. 147 are illegal and void ab initio. A copy of the judgment is being enclosed herewith for kind perusal and record of Your Honour, as Exhibit P-3. 3.05 Hon’ble ITAT Hyderabad in the case of Sri Suryadevara Avinash vs. DCIT 2019 (9) TMI 898 (ITAT Hyd.) has held that since the assessment proceedings were initiated mainly on the information found during the search proceedings and it was found that assessee is a party to the transactions and the same material was brought on record to complete the assessment u/s.147 of the Act, however, jurisdiction lies to initiate proceedings u/s.153C of the Act and not u/s.148 of the Act. The Hon’ble Bench quashed the assessment made by the AO u/s. 143(3) r.w.s.

2.02 Your Honours, this Hon’ble Bench, while passing the Order in the hands of the other party to the alleged transactions, i.e. in the case of Shri Nilesh Ajmera, held that Shri Nilesh Ajmera had paid only a sum of Rs.7,80,00,000/- to Shri Mohanlal Chugh/ the appellant company and out of which, a sum of Rs.2,30,00,000/- was paid through explained sources and only, a sum of Rs.5,50,00,000/- was paid in cash [kindly refer Last few lines at the internal page no. 43 of the Order placed at page no. 408 of the Additional Paper Book].

3.00 FINDINGS IN THE CASE OF SHRI NILESH AJMERA NOT BINDING UPON THE APPELLANT COMPANY Your Honours, it is respectfully submitted that although the findings given by this Hon’ble Bench in the case of Shri Nilesh Ajmera are not binding upon the appellant company but, even if for the sake of arguments, such findings are accepted by the appellant company, then, the quantum of estimated receipt of on-money in the hands of the appellant company could not have been to the extent of Rs.21,26,75,000/- but it would get restricted to sum of Rs.5,50,00,000/- only.

4.00 LOOSE PAPERS AND OTHER PAPERS FOUND AND SEIZED FROM THE PREMISES OF SOME OTHER PERSONS CANNOT BE TAKEN AS AN EVIDENCE UNDER SECTION 292C OF THE ACT Your Honours, first of all, the loose papers and other papers found and seized from the premises of some other persons cannot be taken as an evidence under s.292C of the Act against the appellant company. It is therefore, merely on the basis of findings given in the case of some other assessees, without conducting any independent enquiry in the appellant’s own case, no addition was warranted. 27 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . 5.00 ALLEGED RECEIPT OF RS.5,50,00,000/- COULD BE REGARDED ONLY AS A LIABILITY IN THE HANDS OF THE APPELLANT COMPANY AND NOT AS AN INCOME Your Honours, without admitting that the appellant company had received any sum of Rs.5,50,00,000/- in cash from Shri Nilesh Ajmera, as held by this Hon’ble Bench while adjudicating the appeals in the case of Shri Nilesh Ajmera, it is submitted that such an alleged receipt of Rs.5,50,00,000/- could be regarded only as a liability in the hands of the appellant company and not as an income inasmuch such sum was received by Shri Nilesh Ajmera from the various customers as on-money for booking of the flats in a building proposed to be constructed, on ratio basis, on the land owned by the appellant company. It is submitted that once the ratio agreement with Shri Nilesh Ajmera through his company, with the appellant company, came to an end, Shri Nilesh Ajmera handed over the entire project on as-is-where-is basis and the appellant company was given the responsibility of repaying the on-money collected by Shri Nilesh Ajmera from various customers for making bookings of the flats in the project. It is submitted that it is not the case of the AO that the appellant company had made any sales of any flats in the proposed project during the relevant previous year and therefore, by no stretch of imagination, any alleged on-money can be subjected to tax in the hands of the appellant company for the year under consideration.”

M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 .

i.e. ground no. 2(d) for both the assessment years is hereby Dismissed.

30. Now, in the light of the discussions made above, we would adjudicate the ground nos. 4(a), 4(b) & 4(c) for A.Y. 2008-09 and ground nos. 3(a), 3(b) & 3(c) for A.Y. 2009-10.

31. We find that in the instant appeals, the AO has made the addition of Rs. 10,63,37,500/- in each of the assessment years under appeal by giving a finding that the appellant had made certain cash payments against purchases/proposed purchases of land. We find that during the course of the assessment proceedings, the AO had outrightly rejected the claim of the appellant that during the financial years under consideration it 36 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . had neither purchased any land nor had made any payment as advance for purchases of any land. We find that in the assessment orders, the AO has given a patently wrong finding that certain lands had gone to the coffers of the appellant during the years under consideration. We find that the AO could not properly appreciate the facts of the present case in the proper perspective and could not understand the whole deal. The AO went also wrong when claiming that the appellant had purchased the land from Chughs and Ajmeras. However, it is a matter on record that Chughs family were the owners of the appellant company at the relevant time and the appellant company did not purchase any land from Chughs. On the contrary, we find that the case of the Revenue since the day one when search operations took in the case of the Satellite Group was that Shri Mohanlal Chugh on behalf of the appellant company sold the land of the appellant company and received the payment from Shri Nilesh Ajmera or his company. Thus, the findings given by the AO in his assessment orders are patently wrong which has culminated into an absolutely absurd and unwarranted addition in the hands of the appellant company.

32. We are of the view that for making any addition in the hands of any assessee on the allegation of unexplained investment, either u/s. 69 or 69B of the Act, the onus lies on the Revenue first to establish that the assessee had made any investment during the year under assessment and only after establishing such investment, based upon the explanation regarding the sources of such investments, any addition can be made. Thus, finding of some investments in the year of 37 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . assessment is a sine-qua-non for invoking the provisions of s. 69 or 69B of the Act. However, in this case, although the assessing officer has made the addition on the basis that the appellant had parted with certain sum for purchase of some land at Pipliyakumar, but, such purchases or investments have not been established by him and no material to this effect has been brought by him on records. On the contrary, from the Audited Financial Statements of the appellant company for A.Y. 2008-09 and A.Y. 2009-10, as filed in the respective paper books by the appellant, we find that in the balance sheets for both the years investments in land have been shown as opening balances at Rs. 55,06,895/- and in none of the years, any purchases of any land or any advances against purchase of any land has been shown. Even from a table giving the details of land holding by the appellant company, given in the assessment orders itself, we find that even according to the AO, most of the lands were purchased by the appellant during the financial year 2006-07 only. In other words, the subject lands had already been purchased by the appellant company in earlier years and the same were duly recorded in its books of account. We find that in order to establish the purchases of the land in earlier years, the appellant had furnished the copies of the purchase deeds at page no. 53 to 58 of the paper book filed for A.Y. 2008-09 and as per such purchase deeds, the appellant had purchased such land during the financial year 2006-07 only. Thus, we find that during the financial year relevant to assessment years under consideration, the appellant had not made any investment either towards the purchases or towards the making of advances for purchases of 38 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . the land at Pipliyakumar and therefore, the findings given by the AO in the assessment orders to the effect that the appellant had parted with certain sum for making the investments for purchases of land are not factually correct.

33. We have also gone through the relevant abstract of the common order of this Bench, passed in the case of Shri Nilesh Ajmera, dated 11.05.2016 in Appeal Nos. IT(SS)A 182 to 184/Ind/2013 and ITA No. 538/Ind/2013 for A.Y. 2007-08 to A.Y. 2010-11 as placed at page no. 391 to 420 of the paper book filled by the appellant for A.Y. 2008-09. We find that in such order, this Bench while adjudicating the assesee’s (Shri Nilesh Ajmera) ground nos. 2(a) & 2(b) has given a clear finding that Shri Nilesh Ajmera had paid a sum of Rs. 7,80,00,000/- to the appellant through its director Shri Mohanlal Chugh in form of cash/cheque. The relevant findings of this Bench, as given in the case of Shri Nilesh Ajmera, at internal page no. 43 & 44 of its Order, is reproduced as under: “ The assessee had paid only a sum of Rs. 7,80,00,000/- in form of cash/cheque, out of which a sum of Rs. 2,30,00,000/- was paid through explained sources i.e. through cheques of the companies and remaining Rs. 5,50,00,000/- was paid in form of cash. Again out of Rs. 5,50,00,000/- a sum of Rs. 4,87,58,350/- was made out of the on money received against booking of flats in the project Phoenix Green for which separate additions have already been made by the AO in the hands of M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. For remaining Rs. 62,41,650/- paid to Shri Mohan Chugh, the assessee has no concrete evidence or explanation. Finally the assessee could be said to have made unexplained investment to the extent of Rs. 73,41,650/- only [i.e. Rs. 11,00,000/- + Rs. 62,41,650/-] equally in two assessment years and to this extent only, addition is sustained. The remaining addition so made by the AO and confirmed by the CIT(A) is deleted.”

34. We thus find that in the case of Shri Nilesh Ajmera, the finding of this Bench was to the effect that the appellant had 39 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . received a sum of Rs. 5,50,00,000/- in cash from Shri Nilesh Ajmera and the finding was not to the effect of making of any payment by the appellant company to Shri Nilesh Ajmera or his company, as wrongly inferred and interpreted by the AO in the present appeals. Even otherwise, without going into the quantum of the unaccounted receipts in the hands of the appellant company from the order of this Bench passed in the case of Shri Nilesh Ajmera, it can safely be concluded that the total quantum of the payments by Shri Nilesh Ajmera to the appellant or to Shri Mohanlal Chugh was not to the extent of Rs. 21,26,75,000/- but, the same was restricted to a sum of Rs. 5,50,00,000/- only and again out of Rs. 5,50,00,000/-, a sum of Rs. 4,87,58,350/- was held to be in the form of on-money received by Shri Nilesh Ajmera from various customers against sale of various residential units in the residential project on the land owned by the appellant company. We find force in the contention of the appellant that since, the project had got aborted, the on-money so collected by the appellant through Shri Nilesh Ajmera had to be refunded and therefore, the same could not partake the character of any income in its hands. However, in any case, we find that in the present appeals, the question of quantification of income in the hands of the appellant has remained academic in the nature only for the reason that the AO has made the addition on altogether a different ground contrary to the facts on records. In our view, such an addition cannot be sustained in the eyes of the law.

35. We have also taken into consideration the arguments of the Ld.CIT(DR) that the mistake committed by the assessing officer in making the addition on the ground of unexplained investment in 40 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . place of unaccounted receipt, can be regarded as a curable defect as contemplated u/s. 292B of the Act. However, we find no substance in such an argument of the Ld.CIT(DR) for the reason that the mistake so committed by the AO is not a mistake or defect or omission as contemplated under the provisions of s. 292B of the Act. We find that the entire premises for making the addition of the AO is faulty and it cannot be said to be an ordinary mistake or defect or omission curable under s. 292B of the Act. In our view, the AO before making the addition on the allegation of making the unaccounted payment was duty bound to first bring on record the factum of investment by the appellant and if he was intended to make the addition on the basis of unaccounted receipts, then he ought to have given a clear finding to this effect in the assessment orders which in the present cases he utterly failed to do so. In our view, a judicial authority cannot altogether rewrite the assessment order passed by any revenue authority and it cannot base its decision on presumptions and assumptions but, would be required to restrict itself on the assessment orders, appellate orders of the authorities below and other records placed on record. We find that in this case, even the Ld.CIT(A) has not made any attempt to make the addition on the correct ground by exploring the possibilities of invoking the provisions of s. 251 of the Act.

36. We also do not find any merit in the contention of the ld. CIT(DR) that in the present case, if the addition could not be sustained in the hands of the appellant company, then, this Bench should make a direction for making the corresponding addition in the hands of Shri Mohanlal Chugh who made the 41 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . actual receipts of the funds. In our view, first of all, there is no maxim known to the law that for the mistakes committed by the AO of an assessee, the untaxed amount should be added in the hands of other assessee. Even otherwise, we find that the subject land in respect of which the payments were made by Shri Nilesh Ajmera are in the ownership of the appellant company and Shri Mohanlal Chugh was only one of the functionaries of the appellant company and therefore, any receipts by Shri Mohanlal Chugh from Shri Nilesh Ajmera has to be regarded only as the receipts of the appellant company and not that of Shri Mohanlal Chugh in his individual capacity.

37. In view of the findings given above, the additions of Rs.10,63,37,500/- made by the AO on the ground of unaccounted payment, for both the assessment years viz. A.Y. 2008-09 and A.Y. 2009-10 are hereby deleted. Consequently, the ground nos. 4(a), 4(b) and 4(c) of the appellant for A.Y. 2008- 09 and ground nos. 3(a), 3(b) and 3(c) of the appellant for A.Y. 2009-10 are Allowed.

38. Ground No. 3 for A.Y. 2008-09 – General Ground During the course of the hearing, the appellant company has not pressed this ground. Accordingly, the Ground No. 3 for A.Y. 2008-09 is Dismissed.

39. Ground No. 5(a) & 5(b) for A.Y. 2008-09 – UNEXPLAINED CASH CREDIT OF RS. 1,50,00,000/- 40. The brief facts relating to the issue are that during the course of the assessment proceedings for A.Y. 2008-09, the AO from the ITR of the appellant noticed that it had received certain 42 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . sum shown as unsecured loan aggregating to a sum of Rs. 1,50,00,000/- in its audited balance sheet. Accordingly, the AO issued a show cause notice on 18.03.2016 requiring the appellant as to show cause why the amount shown as unsecured loan be not added to income of the appellant u/s. 68 of the Act. According to the AO, the appellant did not furnish any explanation on this issue before him. Consequently, an addition of Rs. 1,50,00,000/- has been made by the AO in the income of the appellant for A.Y. 2008-09. Against such addition too, the appellant preferred appeal before the ld. CIT(A).

41. According to the CIT(A), even during the appellate proceedings, the appellant did not furnish any documentary evidences to establish the genuineness of the unsecured loans aggregating to a sum of Rs. 1,50,00,000/- shown in its return of income. Consequently, the CIT(A) confirmed the addition against which the appellant is in Appeal before us.

42. Before us, the appellant company has made a written submission in the form of a Synopsis. The relevant portion of the appellant’s reply is being reproduced as under: “SUBMISSION In this context, it is submitted as under: 1.00 ISSUE OF UNSECURED LOANS WAS NOT A SUBJECT MATTER AT THE TIME OF RE-OPENING THE CASE OF APPELLANT At the outset, it is submitted that the ld. AO has made an addition of Rs.1,50,00,000/- on account of alleged unexplained unsecured loans which was not an issue before the learned AO at the time of reopening the case of the appellant. In other words, the AO has made an addition in the appellant’s income on an issue which was not the subject matter of notice under s.148 of the Act and further, during the course of the assessment proceedings, there was no material before the AO from which he could have presumed that such cash credit represents the escaped income of the appellant. It shall be appreciated that the action of the AO in making an addition in the appellant’s 43 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . income on an issue which was not the subject matter for issuance of Notice under s. 148, is patently illegal, unwarranted and deserves to be knocked down on this legal count alone. 2.00 DETAILS OF UNSECURED LOANS Without prejudice to the above, on merits, it is submitted that during the previous year relevant to A.Y. 2008-09, the appellant company has received fresh unsecured loans aggregating to a sum of Rs.1,50,00,000/- from two persons namely Shri Nilesh Ajmera at Rs.1,00,00,000/- and M/s. Phoenix Devcons Pvt. Ltd. at Rs.50,00,000/-. The complete details as regard to the unsecured loans are given through a separate statement placed at Page No. 421 of our Additional Paper Book. 2.01 DOCUMENTARY EVIDENCES IN SUPPORT OF THE UNSECURED LOANS In order to establish the identity and creditworthiness of the loan creditors and as also, the genuineness of the loan transactions, the appellant company has furnished copies of confirmation letters duly signed by the loan creditors and copies of their income-tax returns for the A.Y. 2008-09. The copies of confirmation letters are placed at Page no. 422 & 423 of our Additional Paper Book and the copies of the income-tax returns of both the loan creditors are placed at page no. 424 to 428 of the Additional Paper Book. 2.02 IDENTITY & CREDITWORTHINESS OF THE LOAN CREDITORS AND GENUINENESS OF LOAN TRANSACTIONS It would be worthwhile to note that in the case of the above mentioned loan creditors, search and seizure operations under s.132 of the Act were carried out by the Income-tax Department and therefore, the identity of the loan creditors cannot be doubted at all. Further, the entire loans aggregating to a sum of Rs.1,50,00,000/- have been given by the loan creditors through banking channels out of their explained and disclosed sources only. Furthermore, in the case of both the loan creditors, assessments for the relevant assessment year have got made under the provisions of s.153A/143(3) of the Act wherein the concerning AO has duly verified the receipts and payments in the hands of the loan creditors. Thus, the creditworthiness of the loan creditors also gets proved. Further, the genuineness of the loan transactions is duly established from the fact that both the loan creditors have duly given their confirmation in writing for grant of loan by them to the appellant company. 2.03 GENUINENESS OF LOAN TRANSACTIONS The genuineness of the loan transactions is also established from the very vital fact that the loans aggregating to a sum of Rs.1,50,00,000/- have been by the loan creditors in pursuance of the ratio deal which was entered into by one of their group companies namely M/s. Phoenix Leisure & Lifestyle Pvt. Ltd. with the appellant company, as discussed in detail in the preceding paras. As has been stated in the preceding paras that this Hon’ble Bench, while passing the Order in the hands of the other party to the alleged transactions, i.e. in the case of Shri Nilesh Ajmera, held that Shri Nilesh Ajmera had paid only a sum of Rs.7,80,00,000/- to Shri Mohanlal Chugh / the appellant company and out of which, a sum of Rs.2,30,00,000/- was paid through explained sources 44 M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . [kindly refer Last few lines at the internal page no. 43 of the Order placed at page no. 408 of the Additional Paper Book]. It is submitted that out of the aforesaid sum of Rs.2,30,00,000/-, an amount of Rs.1,50,00,000/- has been given by Shri Nilesh Ajmera/ his company in the form of the subject unsecured loans only. In view of the above facts and circumstances of the case, it is submitted that the addition of Rs.1,50,00,000/- so made by the AO under s.68 of the Act deserves to be deleted in its entirety.”

The crux of the appellant’s submission it that the issue of 43. unsecured loans, on which the subject addition of Rs. 1,50,00,000/- has been made by the AO was not a subject matter at the time of re-opening the case of appellant. The appellant has agitated that at the time of reopening its case, the AO did not have any material from which he could have presumed that the credits in the form of unsecured loans represents the escaped income of the appellant. The appellant has further contended that without making addition on the sole issue, on which the case of the appellant was reopened, the AO was not justified in making the addition on an altogether different ground. Further, on merits of the case, the appellant has contended that it had now, furnished all the necessary details such as complete name, address and PAN of the creditors and as also, certain documentary evidences to establish the identity, creditworthiness & genuineness of the loan creditors such as confirmation letters, income-tax returns etc. in its paper book. The appellant submitted that in the case of the loan creditors, search and seizure operations under s.132 of the Act were carried out by the Income-tax Department and therefore, the identity of the loan creditors cannot be doubted at all. As per the appellant, the entire loans have been given by the loan creditors through M/s. Shivalika Realities Pvt. Ltd. & 94/Ind/2018 . banking channels out of their explained and disclosed sources only and in the case of both the loan creditors, assessments for the relevant assessment year have got made under the provisions of s.153A/143(3) of the Act wherein the concerning AO has duly verified the receipts and payments in the hands of the loan creditors, which proves the creditworthiness of the loan creditors. The appellant also submitted that the genuineness of the loan transactions gets established from the fact that the loans aggregating to a sum of Rs.1,50,00,000/- have been made by the loan creditors in pursuance of the ratio deal which was entered into by PDPL with the appellant company. The assessee submitted that this Bench, while passing the Order in the in the case of Shri Nilesh Ajmera, held that Shri Nilesh Ajmera had paid only a sum of Rs.7,80,00,000/- to Shri Mohanlal Chugh / the appellant company and out of which, a sum of Rs.2,30,00,000/- was paid through explained sources. It was submitted by the appellant that out of the aforesaid sum of Rs.2,30,00,000/-, an amount of Rs.1,50,00,000/- has been given by Shri Nilesh Ajmera/ his company in the form of the subject unsecured loans only.

The order pronounced as per Rule 34 of ITAT Rules, 1963 on 04.10.2021.