Loading judgment…
Facts
A search and seizure operation was conducted on the assessee company and its director. The assessee's return for AY 2013-14 was pending scrutiny when the search took place. Subsequently, the Assessing Officer completed the assessment under Section 143(3) after the date of search, despite the pending assessment being abated under the second proviso to Section 153A.
Held
The Tribunal held that the assessment order passed under Section 143(3) after the date of search was non-est because the pending assessment had abated as per the second proviso to Section 153A. Consequently, all subsequent proceedings based on this order were also considered non-est.
Key Issues
Whether an assessment completed under Section 143(3) after the date of search, when the original assessment was pending and abated under Section 153A(1) second proviso, is valid.
Sections Cited
153A, 143(3), 132, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, GUWAHATI BENCH, GUWAHATI
O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER:
This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”) by the Ld. Commissioner of Income Tax (Appeals), Ld. Commissioner of Income Tax (Appeals) National Faceless Appeal Centre (NFAC), Delhi [hereafter “the Ld. CIT(A)] dated 22.08.2025, DIN & order No. “1. That the Ld. CIT(A) erred on facts and in law in having 1. dismissed the appeal by assuming that the relevant assessment year 2013-14 was not addressed by the Hon'ble Settlement Commission in its order u/s.245D(4) of the Income Tax Act, 1961, on the ground that the relevant assessment year is already under appeal before the Ld. CIT(A).
2. That, on the facts and in the circumstances of the case, the Ld. CIT(A) erred in not appreciating the fact that the assessment of the relevant assessment year, pending on the date of search, had already abated.
3. That, the Ld. CIT(A) further erred in not having considered that the assessment completed u/s.143(3) of the Act on 15/03/2016 for the relevant AY 2013-14, pursuant to the date of search i.e. 20/01/2016, is bad in law.
That, on the facts and in the circumstances of the case, the Ld. CIT(A) wrongly assumed that the order of the Hon'ble Income Tax Settlement Commission dated 26/12/2017 states that the share capital addition of Rs.2,93,00,000/- for the AY 2013-14 was not addressed by the Commission since the same year was already under appeal before the CIT(A), without appreciating that the relevant assessment year was already admitted vide order u/s.245D(2C) of the Act dated 20/01/2017 as it was held therein that the relevant assessment year pending on the date of initiation of search had already abated.
5. That, therefore, as the order of Ld. C.LT.(A) suffers from Ge illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for.
That, the appellant craves leave to amend, alter, modify, Ge substitute, add to, abridge and/or rescind any or all of the above grounds.”
2. During the course of hearing, the assessee has raised additional grounds of appeal as under:
1. That the impugned assessment made by the AO pursuant to return which was filed before the date of search which abated in terms of second proviso to section 153A of the Act the AO erred in completing the assessment on the abated return and the Ld. CIT(A) erred in adjudicating the order and upholding the same.
2. That the impugned order passed ws.143(3) of the Act being bereft of jurisdiction cannot survive the test of law and should accordingly he quashed."
The Ld. DR objected for raising additional grounds of appeal. During the course of hearing before us, the Ld. counsel for the assessee justifying the reasons for raising additional grounds and submitted that M/s Amplex Projects Private Limited it is a legal in nature which can be raised any point of time and relying on the judgment of National Thermal Power Corporation Vs. CIT (1998) 229 ITR 383. Considering the submission on both the sides, we also gone through the additional grounds raised by the assessee and we find that the additional grounds raised by the assessee are legal in nature which can be raised at any point of time as held by the National Thermal Power Corporation Ltd. cited supra in which it has been held that- “the view that the Tribunal is confined only to issues arising out of appeal before the CIT(A) takes too narrow a view of the powers of the Tribunal. Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings such a question should be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.”
4. On going through the judgement of the Hon'ble Apex Court, we accept the additional grounds raised by the assessee and adjudicating as under:
Briefly stated that facts are that the assessee filed original return of income on 29.09.2013 declaring income of Rs. 59,15,980/- under Section 139(1) of the Act. The case of the assessee was selected for scrutiny and notice under Section 143(2) of the Act issued upon the assessee on 09.09.2014. Subsequently, other statutory notices were issued to the assessee. The assessee submitted reply, after considering the entire reply of the assessee the total income was assessed at Rs. 3,52,15,976/- and assessment was completed under Section 143(3) of the Act on 15.03.2016. A search and seizure operation under Section 132 of the Act was conducted on 20.01.2016 at the residence of the Sanjit Kumar Saha and the assessee company, M/s Amplex Projects Pvt. Ltd. Accordingly, notice under Section 153A of the Act was issued to the assessee for the assessment year 2010-11 to A.Y. 2015-16 including the
6. Aggrieved from the order of the Assessing Officer dated 15.03.2016 passed under Section 143(3) of the Act, the assessee filed appeal before the Ld. CIT(A)(NFAC) on 01.04.2016, the appeal was dismissed and the Ld. CIT(A) (NFAC) passed order on 03.09.2025.
Aggrieved from the above order the assessee is in appeal before the ITAT.
The Ld. Counsel has filed a written synopsis, which is the part of arguments are as under:
“Facts of the case: The assessee company is engaged in the business of infrastructural projects construction. The return of income for the AY 2013-14 was filed om 29/09/2013 declaring total income of Rs 59,15,980 Subsequently, the case was selected for scrutiny and notices a/s 143(2) and 142(1) were issued and served on the appellant. In the meantime, a search and seizure operation u/s.132 of the Act was conducted on 20/01/2016 at the residence of Sanjit Kumar Saha and the assessee company, M/s. Amplex Projects Pvt. Ltd. Pursuant to search, proceeding u/s 153A of the Act was initiated against the assessee and notice u/s.153A of the Act for the AYs 2010-11 10 2015-16 were issued and served on the assessee, copies of which are enclosed at pgs 1-6 of the Additional P/b. It is pertinent to note at this juncture that sec. 153A of the Act contemplates issue of notice for years preceding the search but not for the year of search or requisition and thus no return is required to be filed for the year of search u's 153A of the Act. The second proviso contemplates that if any of the aforesaid six assessments is pending on the date of initiation of the search or requisition. the same shall abate. Therefore, the assessment for the relevant assessment year 2013-14, pending on the date of search Le.20/01/2016, stands abated on the date of search. However, inspite of such a provision, assessment for the relevant assessment year was completed u/s.143(3) of the Act pursuant to search 20/01/2016/ on 15/03/2016 making addition of a sum of Rs.2,93,00,000/-on account of unexplained cash credit u/s.68 of the Act.
M/s Amplex Projects Private Limited It is pertinent to note here that even if the jurisdiction of the AO to pass an assessment order after the initiation of search ceases, the Learned AO, in the instant case has completed (15/03/2016) the assessment u/s 143(3) of the Act pursuant to the date of search (20/01/2016), which is bad in law an terms of the second proviso to section 153A of the Act. Therefore, being aggrieved with the impugned order passed (15/03/2016) ws.143(3) of the Act after the date of search, the assessee preferred an appeal before the LACII(A) It was explained that the impugned assessment completed u/s.143(3) of the Act is bad in law. Inspite of the above, without appreciating the fact that the consequential appellate proceedings, in pursuance to the assessment order passed after the date of initiation of search, is also bad in law, the 14.CIT(A), passed the appellate order on 03/09/2025 thereby upholding the impugned addition of Rs 2,93,00,000/-made in the assessment completed us. 143(3) of the Act. Being aggrieved by the order of the Ld. CIT(A), the assessee seeks the kind justice of the Hon'ble Income Tax Appellate Tribunal and has filed an appeal in this regard The following submissions are, therefore, given by the appellant for your kind consideration: SUBMISSION OF THE APPELLANT: Additional Grounds: 1. That the impugned assessment made by the AD pursuant to return which was filed before the date of search which abated in terms of second proviso to section 153A of the Act the AD erred in completing the assessment on the abated return and the LCIA) erred in adjudicating the order and upholding the same.
That the impugned order passed ws.143(3) of the Act being bereft of jurisdiction cannot survive the test of law and should accordingly he quashed." As stated supra, the appellant filed its return of income for the relevant A.Y. 2013-14 on 29/09/2013 declaring total income of Rs 59,15,980/- Subsequently, search operation was conducted u/s.132 of the Act on 20/01/2016 at the residence of Sanjit Kumar Saha and the assessee company. Pursuant to search, the assessment was completed u/s.143(3) of the Act for the relevant AY 2013-14 on 15/03/2016 making addition of a sum of Rs.2,93,00,000/- on account of unexplained cash credit u/s 68 of the Act. Subsequently, proceeding w/s.153A of the Act was initiated against the assessee and notices 153A of the Act were issued and served on the assessee for the AYs 2010-11 to 2015-16. Copies enclosed at pg 1-6 of the Additional P/b. At the juncture, would be of relevance to quote secund proviso to sec. 153A of the income Tas Act, 1961, reproduced as sunder: Section 153A of the Income Tax Act, 1961, reads as under M/s Amplex Projects Private Limited **153 A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in section 139 section 147 section 148. section 149, section 131 and section 153, in the case of a person where a search initiated under section 132 or books of account other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year failing within six assessment years referred to in clause (b), in the prescribed form und verified in the prescribed manner and setting forth such other particulars as muay be prescribed and the provisions of this Act shall so far as may be apply accordingly as if such return were a return required to be furnished under section 139 (b) assess or reassess the total income of six assessment years immediately preceding the assessment your relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years **referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 1324, as the case may be, shall abate. **(2) If any proceeding initiated or any order of assessment or reassessment made sonder sub-section (1) has been annuled in appeal or any other legal proceeding then notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1) shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner Provided that such revival shall cease to have effect, if such order of annulment is set aside Explanation For the removal of doubts, it is hereby declared that (i) save as otherwise provided in this section 1538 and section 153C all other provisions of this Act shall apply to the assessment made under this section. (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates us applicable to such assessment year. Thus, what follows from the shove is that an assessment 153A is different from regular assessment. The section comes into play only when a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A after 31.5.2003. Further, from a perusal of the foregoing provision it can be seen that if the AO is allowed to assess/reassess the total income for all six assessment years as per first proviso to section 153A, in contradiction of the M/s Amplex Projects Private Limited secund proviso, particularly when there is no incriminating material etc., then the same will not only multiply assessment proceedings but will multiply even the appellate proceedings. Obviously this can never be the intention of the Legislature. Again, the provision of section 153A starts with not obstinate clause with reference to sections 139, 147, 148, 149, 151 and 153. Sec. 153A of the Act contemplates issue of notice for 6 years preceding the search but not for the year of search or requisition and thus no return is required to be filed for the year of search us. 153A of the Act Only regular return u/s 139 to be filed First proviso is reiteration of the provision containing clause (b) of section 153A (1) of the Act that the AO shall assess or reassess the total income of each of the six assessment years. The second proviso contemplates that if any of the aforesaid six assessments is pending on the date of initiation of the search or requisition, the same shall abate, Explaining the second proviso of the section, it is stated that the second proviso provides that if on the date of initiation of search or requisition u/s 132 or u/s132A, any assessment/reassessment proceeding relating to any A.Y. falling within the period of six assessment years. is initiated and the same is pending, then the pending proceedings of the regular assessment shall stand abated and the fresh assessment of the same can be done u/s 153A of the Act. This proviso is enacted specifically to avoid two parallel proceedings of assessment of a particular year of the same person, i.e., one as regular assessment and another as assessment u's 153A of the Act The word 'abatement is referable to something, which is pending alive, or is subject to deduction The abatement refers to suspension or termination of the proceedings either of the main action, or the proceedings ancillary or collateral to it. The proceedings, which have already terminated are not able for abatement unless statute expressly provides for such consequence thereof. The word "pending' occurring in the second proviso to section 153A of the Act, is also significant It is qualified by the words "on the date of initiation of the search", and makes it abundantly clear that only such assessment or reassessment proceedings are liable to abate. In other words, Assessments which are not pending 1.e. completed assessments as on the date of search would hold their base and would not abate. Thus, what emerges is that only pending Assessments as on the date of search shall abate. The legislature is clear that any appeal, revision or rectification proceedings, if pending as on the date of search shall abate. On the contrary, as far as completed assessments are concerned, they do not abate and pending appeals etc in respect thereof continue to exist notwithstanding the fact that the search has been made. Thus a completed assessment becomes final unless some incriminating material is found in the course of search. Otherwise the AO will be empowered to undo what has already been completed and has become final. Now, applying the above to the facts of the present case it is inferred that the return filed u/s.139(1) of the Act for the relevant assessment year stands abated on the date of search ie. on 20/01/2016 in terms of the second proviso to section 153A of the Act (reproduced as above) Hence, the assessment
M/s Amplex Projects Private Limited completed (15/03/2016) u/s.143(3) of the Act for the relevant AY 2013-14 after the date of search (20/01/2016) is also bad in law as per the second proviso to section 153A of the Act. Consequently, it follows from the above that the appeal filed and the appellate order passed in this connection is also bad in law. The above view has been taken up by the hon ble Kolkata Tribunal in the case of Himatsingka Seide Ltd. v. Deputy Commissioner of Income-tax reported in (2024) 160 taxmann.com 601. In the said case, similar to the case of the assessee, a search and seizure operation u/s. 132 of the Act was conducted in "Himatsingka Group" on 22-9- 2011. Pursuant to the search operations, notices u/s, 153A of the Act were issued on the assessee on 15-5-2012. At the time of search, assessment proceedings u/s. 143(3) of the Act for the impugned assessment year ie. AY 2008-09 was in progress before the Ld. AO, Addl. CIT, Range-II, Bengaluru. According to the second proviso to section 153A(1) of the Act, the pending assessment proceedings before the Addl. CIT, Range-II, Bengaluru stood abated However, the said AO completed the assessment and passed an order u/s. 143(3) of the Act on 3-1-2012. On appeal before the Hon'ble Tribunal, it was held as under "As already noted above, second proviso to section 153A(1) provides for abatement of pending assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years on the date of initiation of search u/s. 132 of the Act. The impugned assessment year is a year which falls within the period of six assessment years considering the date of search as 22-9-2011. Admittedly, the assessment proceedings u/s. 143(3) were pending at the time of initiation of search. Thus, the proceedings u/s. 143(3) got abated. There was no occasion for the AO at Bengaluru to pass assessment order in terms of the second proviso to sec. 153A(1) and, therefore, is non-est. Since the assessment order passed by the AO u/s. 143(3) is held to be non-est, the instant appeal by the revenue is infructuous. Accordingly, the appeal vide by the revenue is dismissed as infructuous." The above ratio has also been taken up by the hon'ble Supreme Court in the case of Principal Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P.) Ltd. reported in 149 taxmann.com 399 (SC). Relevant extract of the judgment reproduced as under "As per the provisions of section 153A, in case of a search under section 132 or requisition under section 132A. the Assessing Officer gets the jurisdiction to assess or reassess the 'total income in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to section 153A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 1324, as the case may be, shall abate. As per sub-section (2) of section 1534, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or M/s Amplex Projects Private Limited any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the Assessing Officer would assume the jurisdiction to assess or reassess the 'total income for the entire six years period block assessment period. The Intention does not seem to be to reopen the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within lait xix years preceding the search Therefore, on true interpretation of section 153A. in care of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of unabated/ completed assessment the Assessing Officer would have the jurisdiction to assess or reassess the 'tonal income" taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns if any furnished by the assessee as well as the undisclosed income However in care sharing the search no incriminating material o found in case of completed unabated assessment the only remedy available to the revenue would he to initiate the reassessment proceedings under section 147/148, subject to fulfilment of the conditions mentioned in section 147/148, as in such a situation, the revenue cannot be left with no remedy Therefore, even in case of block assessment under section 1554 and in case of unabated completed assessment and in case no incriminating material is found during the search the power of the revenue to have the reassessment under section 147 148 has to be saved, otherwise the revenue would be left without remedy (Para 11) If the submission on behalf of the revenue that in case of search even where mu incriminating material is found during the course of search even in case of unabated completed assessment, the Assessing Officer can assess or reassess the income total income taking into consideration the other material is accepted in that case there will be neo assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A is linked with the search and requisition under sections 132 and 132A The object of section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition Therefore, only in a case where the undisclosed income is found on the basis of incriminating material the Assessing Officer would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment As per the second proviso to section 153A, only pending assessment/reassessment shall stand abated and the Assessing Officer would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of section 1534 would be redundant and/or rewriting the said provisions, which is not permissible under the law (Para 12) …………………… M/s Amplex Projects Private Limited In view of the above and for the reasons stated above, it is concluded as under: (i) in case of search under section 132 or requisition under section 1324, the Assessing Officer assumes the jurisdiction for block assessment under section 1534. (ii) all pending assessments/reassessments shall stand abated; (iii) in cate any incriminating material is found/unearthed, even in case of unabated completed assessments, the Assessing Officer would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material available with the Assessing Officer including the income declared in the returns and (iv) in case no incriminating material is unearthed daring the search, the Assessing Officer cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed unabated assessments, no addition can be made by the Assessing Officer in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A However, the completed/unabated assessments can be reopened by the Assessing Officer in exercise of powers under section 14/148 subject to fulfilment of the conditions as envisaged mentioned under section 147/148 and those powers are saved.” …………… As such, taking into consideration the above, it is inferred that the order passed us. 143(3) of the Act on15/03/2016) for the relevant AY 2013-14, after the date of search (20/01/2016) is without jurisdiction, illegal and bad in law. Again, even otherwise also, if we consider the merits of the case, it may be seen that during the relevant assessment year, the assessee has received share application money to the tune of Rs. 1,71,00,000/-only Reference is invited here to the chart giving details of share application money received by the assessee, enclosed at pg. 50 of the P/N It would be relevant to note here that the share applicant companies from whom the assessee received share application money during the relevant assessment year complied with the issuance of notice u/s.131 of the Act by filing copies of PAN, ITR Acknowledgment, audited accounts, relevant extract of bank statement, declaration confirming the source of fund etc. Copies of the same are enclosed at pgs.78 to 191 of the P/b. In this connection, from a perusal of the Balance Sheets of the sand share applicant companies, it may be seen that the alleged share applicant companies possessed sufficient own funds to subscribe to share capital of the assessee company during the relevant assessment year. Therefore, clearly, the identity and creditworthiness of the share applicants and the genuineness of the transactions is fully explained and established. Under such circumstances, no addition can be made u/s. 68 of the Act as unexplained cash credit. In support of the above, reliance is being placed on the following judicial pronouncements M/s Amplex Projects Private Limited The Hon'ble Delhi High Court in case of Commissioner of Income-tax v. Lovely Exports P. Ltd reported in [299 ITR 268] held that "In the case of a company the following are the propositions of law under section.
The assessee has to prima facie prove (1) the identity of the creditor/subscriber: (2) the genuineness of the transaction namely, whether it has been transmitted through banking or other indisputable channels (3) the creditworthiness or financial strength of the creditor/subscriber (4) (if relevant details of the address or PAN identity of the creditor subscriber are furnished to the Department along with copies of the shareholders' register, share application forms, share transfer register, etc., it would constitute acceptable proof or acceptable explanation by the assessee. SLP filed by the Revenue against the aforesaid judgment was dismissed by the Supreme Court (216 CTR 195) and it was held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, hut it cannot be regarded as undisclosed income of assessee company CIT vs Steller Investment Ltd (1991) 192 ITR 287 (Del) "It is evident that even if it be assumed that the subscribers to the increased share capital were not genuine, nevertheless, under no circumstances, can the amount of share capital be regarded as undisclosed income of the assessee. It may be that there are some bogus shareholders in whose names share had been issued and the money may have been provided by some other persons. If the assessment of the persons, who are alleged to have really advanced the money is sought to be reopened, that would have made some sense but we fail to understand as to how this amount of increased share capital can be assessed in the hands of the company itself 5. In our opinion, no question of law arises and the petition is, therefore, dismissed" Aggrieved by the above judgment, Department went in appeal before the Hon'ble Supreme Court wherein dismissing the said appeal reported in (2001) 251 ITR 0263, it was held, "We have read the question which the High Court answered against the Revenue. We are in agreement with the High Court Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs.". The Hon'ble Delhi High Court in the case of CIT vs Oasis Hospitalities Pvt Ltd and others reported in [333 ITR 119] held as follows "The initial burden is upon the assessee to explain the nature and source of the share application money received by the assessee In order to discharge this burden, the assessee is required to prove (u the identity of the share-holder, (ii) the genuineness of the transaction and (c) the creditworthiness of the shareholders. In case the investor shareholder is an individual. some documents will have to be filed or the shareholder will have to be produced before the Assessing Officer to prove his identity If the creditor/subscriber is a M/s Amplex Projects Private Limited company, then the details in the form of registered address or PAN identity, etc can be furnished. When the money is received by cheque and is transmitted through banking or other indisputable channels, the genuineness of the transaction would be proved. Other documents showing the genuineness of the transaction could be copies of the shareholders register, share application forms, share transfer register, etc As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. Once these documents are produced, the assessee would have satisfactorily discharged the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinise the same and in case he nurtures any doubt about the veracity of these documents, to probe the matter further However, to discredit the documents produced by the assessee on the aspects there have to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion On appeal Held dismissing the appeal that the addition was rightly deleted by the Commissioner (Appeals) und the Tribunal. Requisite documents were furnished showing the existence of the shareholders from accounts and even their Income- tax details. From bank accounts of these shareholders. I was found that they had deposited certain cash and the source thereof was questionable. The Assessing Officer should have made further probe which he failed to do. Moreover, the remedy with the Department lay in reopening the case of the investors and the addition could not be made in the hands of the assessee." The Hon'ble Bombay High Court in the case of CIT vs Gagandeep Infrastructure Pvt Limited reported in [2017] 394 ITR 680 (Bom) held that “Held (1) that the three essential tests laid down by the courts, namely, the genuineness of the transactions, identity and the capacity of the investors of the share application money along with the premium, had all been examined by the Appellate Tribunal and on facts found satisfied. If the Department took the view that the amount of share application money had been received from bogus shareholders, then it was for the assessing authority to proceed by reopening the assessment of such shareholders and assessing them to tax. It did not entitle the Department to add the money received to the assessee's income as unexplained cash credit." The Hon'ble Delhi High Court in the case of C.I.T. vs. Dwarkadhish Investment P Ltd. reported in [2011] 330 ITR 0298, relevant portions of which is reproduced as under: "In any matter, the onus of proof is not a static one Though in section 68 of the Income-tax Act 1961 the initial burden of proof lies on the assessee yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke section 68. One must not M/s Amplex Projects Private Limited lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source"." As such, taking into consideration the above judicial pronouncements, it clearly follows that the alleged share applicant companies by filing the aforementioned documents has duly established their identity and creditworthiness as well as the genuineness of the share transactions. As such, the allegation made by the Ld. AO that the assessee has introduced its own funds is nothing but a figment of his imagination based on suspicion. However, it is an undisputed fact as held by the Hon'ble Apex Court in the following cases that suspicion however strong cannot take the place of evidence Uma Charan Shaw & Bros. Co. v. CIT. [37 ITR 271 (SC)] Omar Salay Mohammad Sait v CIT 137 ITR 151(SC)] Apart from the above, it may be noted at this juncture that share application money to the tune of Rs.1,22,00,000/- was received by the assessee during preceding financial years and not during the relevant financial year. Reference is invited here to the chart giving details of share application money received by the assessee as enclosed at pg. 50 of the P/b. From a perusal of the above chart it may be seen that share application money from 7 share applicant companies were received during the FYs 2010-2011 & 2011-12 Reference at this juncture is invited to pg.76 of the Pb forming part of audited accounts of the FY 2010-11 containing details of share application money received by the assessee company, which shows application money were received from the alleged share applicant companies vi M/s Rakshak Vincom Pvt. Ltd., M/s. Safalta Infraprojects Pvt. Ltd., M/s Vaibhav Vanijya Pvt. Ltd. & Mis.Ajitnath Commsales Pvt. Ltd. during that year. Again, reference is invited to p2.70 of the P/b forming part of audited accounts of the FY 2011-12 containing details of share application money received by the assessee company, which shows application money were received from the alleged share applicant companies viz. Mis. Mangal Murti Sales Pvt. Ltd., M/s. Vanaspati Vincom Pvt. Ltd., Mis. Image Commosales Pvt. Ltd. & McAjituath Commsales Pvt. Ltd. during that year. Therefore, clearly, no addition can be made u/s.68 of the Act during the relevant assessment year for share capital raised during preceding financial years to the tune of Rs.1,22,00,000/- At this juncture, it would be of relevance to quote sec 68 of the Act which reads as follows: "68. Cash credits-Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not in the opinion of the Assessing Officer, satisfactory the sum so credited may be charged to income-tax at the income of the assessee of that previous year. A bare reading of Section 68 of the Income-tax Act, 1961, suggests that for a sum so credited to be charged to income-tax as the income of the assessee of that previous year by the A.O the following have to be present M/s Amplex Projects Private Limited (i) there has to be credit of amounts in the books maintained by the assessee (ii) such credit has to be a sum of money during the previous year, and (iii) either (a) the assessee offers no explanation about the nature and source of such credits found in the books or (b) the explanation offered by the assessee, in the option of the Assessing Officer, is not satisfactory It is only then that the sum so credited may be charged to income-tax as the income of the assessee of that previous year. It thus follows from the above that no addition can be made in the hands of the assessee on account of share capital raised during previous assessment years, by invoking sec 68 of the Act Further, as regards the reliance placed by the Ld. CIT(A) on the order of the Hon'ble Income Tax Settlement Commission, dated 26/12/2017, in upholding the addition for the relevant assessment year, it is submitted that it is an undisputed fact that in the instant case regular assessment u/s 143(3) of the Act was pending on the date of search u's 132 of the Act (20/01/2016) and therefore, the assessment order passed by the Lid.AO (15/03/2016) w/s.143(3) of the Act pursuant to the date of search, was non-est. Hence, the entire appellate proceeding initiated against the impugned assessment order is also bad in law. Therefore, clearly, the order of the Hon'ble Settlement Commission, which is in non-consonance with law as far as this issue is concerned, is non-est.”
The Ld. DR relied on the order of lower authorities and submitted that this issue was not raised during the course of appellate proceedings before the ld. CIT (A).
Considering the rival submissions and perusing the entire materials available on record and order of authorities below. There is undisputed fact that there was a search conducted on 20.01.2016 under Section 132 of the Act in the case of the assessee and the assessee had filed return under Section 139(1) of the Act on 29.09.2013 noted supra and notice under Section 143(2) was also issued to the assessee on 09.09.2014 i.e. the assessment was pending on the date of search, the Assessing Officer passed order under Section 143(3) of the Act on 15.03.2016 and the Assessing Officer also issued notice under Section 153A of the Act from A.Y. 2010-11 to A.Y. 2015-16 including the M/s Amplex Projects Private Limited impugned assessment year to assess/re-assess the income of the assessee for last six years pursuant to search conducted under Section 132 of the Act which is placed at additional paper book at page no. 1-6. The 153A notice for the impugned AY is placed at page No. 3 of the additional paper book. Considering the grounds raised by the assessee as per the second proviso to section 153A(1) of the Act provides for abatement of pending assessment/reassessment, if any, relating to any assessment year filed within the period of 6 assessment years and the date of initiation of search under Section 132 of the Act, the impugned assessment year is a year which falls within the period of 6 assessment years considering the date of search on 20.01.2016. Admittedly, the assessment proceedings, under Section 143(3) was pending at the time of initiation of search thus, the proceedings under Section 143(3) of the Act got abated, there was no occasion for the Assessing Officer to pass assessment order in terms of second proviso to section 153A(1) of the Act and therefore, order u/s 143(3) is non-est. The said assessment order passed by the Assessing Officer under Section 143(3) of the Act is held to be non-est. For the sake of convenience, we are reproducing section 153A of the Act which is as under:
**153 A. Assessment in case of search or requisition. (1) Notwithstanding anything contained in section 139 section 147 section 148. section 149, section 131 and section 153, in the case of a person where a search initiated under section 132 or books of account other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year failing within six assessment years referred to in clause (b), in the prescribed form und verified in the prescribed manner and setting forth such other particulars as muay be prescribed and the provisions of this Act shall so far as may be apply accordingly as if such return were a return required to be furnished under section 139 (b) assess or reassess the total income of six assessment years immediately preceding the assessment your relevant to the previous year in which such search is conducted or requisition is made:
M/s Amplex Projects Private Limited Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years **referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 1324, as the case may be, shall abate. Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless— (a)the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b)the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c)the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.—For the purposes of this sub-section, the expression "relevant assessment year" shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.—For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2)If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside.
M/s Amplex Projects Private Limited Explanation.—For the removal of doubts, it is hereby declared that,—(i)save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;(ii)in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.”
After going through of the above section it is clear that the pending assessment is abated assessment and AO had no jurisdiction to complete the assessment u/s 143(3) of the Act. In the order of settlement commission at page no. 30 P.B. page No. 42 has also observed that for AY 2013-14 was pending on the date of initiation of search had already abated. The case law relied upon by the Ld. Counsel noted in his written submission support the case of the assessee we also rely on the judgment of Hon'ble Apex Court in the case of PCIT, Central Vs. Abhishar Buildwell Pvt. Ltd. reported in (2023) 149 taxman.com 399 (SC). Respectfully following the above judgments and view taken by us, we hold that the assessment order passed under Section 143(3) of the Act dated 15.03.2016 is non-est. Once we have held that order passed by the Assessing Officer under Section 143(3) of the Act is non-est then the entire proceedings subsequently on the basis of the said order are also non-est.
In the result, appeal of the assessee is allowed in above terms.