M/S CHYGH ESTATE P LTD,INDORE vs. THE DY CIT ,CENTRAL-2, INDORE

These two appeals have been preferred by the assessees against the orders of the Commissioner of Income Tax (Appeals)-3, Bhopal (‘CIT(A)’ in short) both dated 11.08.2021 arising in assessment orders both dated 05.12.2017 passed by the Assessing Officer (AO) under s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2010-11. Since in both the appeals facts and circumstances are common, therefore, for the sake of brevity, we would like to dispose of both appeals by way of a common order in ITA No.195/Ind/2021.

(M/s. SVM Builders Pvt. Ltd.)

“1a). That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the action of the AO of framing the Assessment Order under s. 147 r.w.s. 143(3) of the Act in a back date merely for escaping to give the effect of the Order of the Hon'ble ITAT in the appellant's case. 1b). That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the action of the AO in framing the Assessment Order under s. 147 r.w.s. 143(3) of the Act, purportedly on 05-12-2017, without giving effect to the Order of the Hon'ble ITAT pronounced on 26-10- 2017 in the Open Court, thereby resulting into multiple proceedings on the same issue for the same year.

& 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 3 - 2. That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the issuance of Notice under s.148 of the Act by the AO on the same issue and on the same ground which had already been considered by an Assessing Officer in the original assessment proceedings under S.153A, followed by adjudication thereof by the first Appellate Authority, was illegal, arbitrary, unjustified, unwarranted and bad-in-law.

3. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO for passing the Re- Assessment Order under s.147 of the Act on the sole premise that the original assessment proceedings under S.153A had got struck-off by the Order of the Hon'ble CIT(A), without considering the material fact that the original assessment proceedings under S.153A, so struck off, had got revived by the subsequent Order of the Hon'ble ITAT, which was passed much prior to the impugned Order of the Re- Assessment passed by the AO.

4. 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 for framing the re-assessment, with undue haste, without giving sufficient and effective opportunity of being heard to the appellant on the merits of the case.

5. 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 for re-determining the total income of the appellant company u/s. 147 r.w.s. 143(3) of the Income-Tax Act, 1961 at Rs.7,50,00,000/- as against the originally Re- Assessed Income of Rs.Nil thereby re-making an addition of Rs.7,50,00,000/-, which is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law. 6a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.7,50,00,000/- made by the AO in the appellant's income on account of share capital and share premium receipts made by the appellant company during the relevant previous year without considering and appreciating the material fact that the appellant company had discharged its initial onus of proving identity of the shareholders, genuineness of the transactions and although not required, creditworthiness of the shareholders as well, in the original assessment proceedings carried out under S.153A as well as in the appellate proceedings carried out in pursuance of such assessment proceedings.

6b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.7,50,00,000/- made by the AO in the appellant's income on account of share capital and share premium & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 4 - receipts made by the appellant company during the relevant previous year without considering the material fact that the AO has not made any fresh enquiry at her own but merely reiterated the findings of her predecessor in the earlier Order passed under S.153A of the Act. 6c) That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition of Rs.7,50,00,000/- without properly considering and appreciating the material fact that the AO has not made any single enquiry at her end on the new addresses of the share applicant companies furnished by the appellant before the Hon'ble CIT(A) in the quantum appeal preferred by it against the Assessment Order passed under S.153A r.w.s. 143(3) of the Act. 6d). 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 for making the impugned addition without first providing and confronting to the appellant with the material available on her record which allegedly established that the appellant received share application money of Rs.7,50,00,000/- through accommodation entries.”

3.1 The assessee company had furnished its original return of income under s.l39(3) of the Income-Tax Act, 1961 [hereinafter for the sake of brevity, referred to as 'the Act'] on 14-10-2010 & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 5 - vide acknowledgment no. 170930901141010 declaring a loss of Rs.1,19,663/-. For the previous year relevant to the assessment year under consideration, the assessee company has not carried out any business activity. A copy of the acknowledgement of income-tax return along with computation of total income for the assessment year under consideration, as filed under s.l39(3) of the Act.

3.2 Search and Seizure operations u/s. 132 of the Income-Tax Act, 1961 were carried out in the business premises of the assessee company as well as in the various business and residential premises of its associate/sister concerns and directors. The search was initiated on 21-09-2012. A copy of the Panchnama drawn, during the course of search operations, is being submitted.

3.3 In pursuance of the Search, on 25-03-2013, a Notice under s. 153A of the Income-Tax Act, 1961, was issued by the ld. DCIT- Central, Indore, whereby the assessee was required to furnish its Return of Total Income pertaining to the assessment year under consideration. In response to the Notice, the assessee furnished its Return of Total Income on 18-07-2014 declaring an income of Rs.Nil. The computation of total income is being submitted and same is part of paper book.

3.4 In response to the return so furnished, the case of the assessee was selected for scrutiny and Notices u/s. 143(2) & 142(1) along with questionnaires were issued from time to time. Xerox copies of the relevant Notices issued to the assessee, & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 6 - during the original assessment proceedings carried out under s.153A, are being submitted and same are parts of paper book.

3.5 In response to the notices, as aforesaid, the assessee, through its authorized representative, attended the hearing before the learned assessing officer from time to time and made written submissions and also furnished necessary documentary evidences. The assessee also produced its regular books of account and other necessary documents before the learned AO.

3.6 Thereafter, the then learned AO framed the assessment on 30-01-2015 under s. 153A r.w.s. 143(3) of the Act determining the total income of the assessee at Rs.7,50,00,000/- as against the Returned Income of Rs. Nil thereby making an addition of Rs. 7,50,00,000/-. The entire addition of Rs. 7,50,00,000/- was made by the learned AO, under s.68 of the Act, on account of share capital and share premium receipts, claimed to have been made by the assessee company, during the relevant previous year.

3.7 As against the aforesaid Original Order of Assessment under S.153A r.w.s. 143(3), the appellant preferred an appeal before the ld. CIT(A)-III, Indore and the ld. CIT(A)-III, Indore, vide her Order dated 21-03-2016, in Appeal No. IT-791/15- 16/365, disposed-off the appeal by deleting the entire addition of Rs.7,50,00,000/- so made by the AO by giving a finding that the assessment year under consideration being a non-abated year, no addition could have been made without having recourse to any incriminating document found during the search. At the & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 7 - same time, the ld. CIT(A), while adjudicating the Ground No. 1 raised by the appellant against the very invocation of the provisions of s. 153A of the Act in its case on the ground that no incriminating material was found during the course of the search, held that factually, no incriminating document was found during the search and therefore, following the decision of the Jurisdictional ITAT, as cited in the Appellate Order, allowed the Ground No. 1 so raised. The Order of the ld. CIT(A), setting aside the entire assessment proceedings, prompted the AO to infer that in the case of the appellant, no Assessment Proceedings at all were carried out under S.153A of the Act.

3.8 Against the Order of the ld. CIT(A), both, the assessee and the Revenue preferred cross appeals before the ITAT, Indore. The ITAT vide its Order dated 26-10-2017 in Appeal Nos. IT(SS)A 71/Ind/2016 & IT(SS)A 90/Ind/2016, disposed off the appeals of the assessee and the Department by upholding the action of the ld. CIT(A) in deleting the additions made on account of receipt of share application money without having recourse to any incriminating material.

3.9 However, at the same time, the ITAT also partially allowed the only Ground of Appeal raised by the Revenue by giving a specific finding at para (15) that the ld. CIT(A) was not correct and justified in holding that the assessment proceedings under S.153A of the Act were not valid on the basis that no incriminating material or document was found during the search. However, at para (17) of the Order, the ITAT & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 8 - confirmed the action of the Id. CIT(A) in deleting the addition made by the AO on account of receipt of share capital by the assessee by holding that during the course of the search, no incriminating material was found relating to the share capital and the addition was made without having recourse to any incriminating material. The effect of such Order remained that the ITAT on the one hand, upheld the assessment proceedings carried out under s. 153A of the Act and on the other hand, deleted the addition made by the learned AO without having recourse to any incriminating material. By this Order of the ITAT, the assessment proceedings under s. 153A which were held to be void-ab-initio, got revived, retrospectively, from the date on which such proceedings were initiated.

3.10 Meanwhile, after the Order of the ld. CIT(A), setting aside the entire assessment proceedings carried out under S.153A, a notice under s. 148 of the Act was issued by the ACIT (Central)-2, Indore to the appellant on 27-09-2016 for furnishing its return of income for A.Y. 2010-11 on the sole premises that in the case of the assessee, no assessment proceedings under any of the provisions of the Act were legally carried out and thus, certain income escaped to assessment.

3.11 In response to the notice under s. 148, the appellant, under protest, vide its letter dated 26-10-2016 requested the AO to treat the return already furnished under s. 153A as its return furnished in response to the notice issued under s. 148 of the Act. Through the same letter, the appellant intimated the AO that assessment proceedings in its case have already got & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 9 - completed under S.153A r.w.s. 143(3) of the Act and the additions so made in the assessment proceedings have also got deleted by the ld. CIT(A). Through a subsequent letter dated 09- 08-2017, the assessee requested the AO to provide the copy of reasons recorded before issuance of notice dated 27-09-2016. Copies of the aforesaid letters dated 26-10-2016 and 09-08- 2017 are being submitted and are part of paper book. Thereafter, the learned AO, vide her Notice dated 17-08-2017 issued under s. 142(1) of the Act, provided a copy of the statement containing the reasons for issuance of Notice under s.148 to the appellant.

3.12 Upon receipt of copy of reasons, the assessee, vide its counsel's letter dated 24-08-2017, raised its objection against the issuance of the notice under s.l42(1) of the Act and as also, against the very re-opening of the assessment.

3.13 The ld. AO, vide her Order dated 27-10-2017, disposed-off the objection of the assessee by justifying her action of issuance of notice under s.148 on the ground that as the assessment order passed under S.153A r.w.s. 143(3) had been quashed by the ld. CIT(A), there was no assessment order in existence for A.Y. 2010-11 as on the date of initiation of proceedings under s.147 of the Act.

3.14 After disposing-off the objection of the appellant, the AO again issued a Notice under s.l42(1) of the Act to which the assessee replied vide its counsel's letter dated 06-11-2017. A & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 10 - copy of the aforesaid Notice issued by the ld. AO and a copy of the reply letter of the assessee are being submitted.

3.15 Meanwhile, the assessee received the Order of the ITAT, passed in respect of the original assessment proceedings carried out under s.l53A and pronounced on 26-10-2017. Upon receipt of the Order, the counsel of the assessee approached the learned AO on 05-12-2017 and apprised her about the pronouncement of the order by the IT AT. As intimated to the counsel, the AO had not passed any Order by this date.

3.16 Subsequently, on 06-12-2017, the assessee, through its counsel's Utter, filed a copy of the Order of the ITAT and requested the ld. AO to drop the re-assessment proceedings so initiated under s. l47 of the Act, on the ground that the original assessment proceedings under S.153A got revived (since inception) by the Order of the ITAT and therefore, there could not have been any legal sanctity for carrying out the multiple reassessment proceedings for the same year and on the same issue. A copy of the letter dated 06-12-2017 filed by the assessee before the ld. AO.

3.17 However, without giving any heed to the request of the assessee to drop the re-assessment proceedings, the learned Assessing Officer abruptly completed the re-assessment u/s. 147 r.w.s. 143(3) of the Income-Tax Act, 1961, by passing an Order, purportedly on 05-12-2017, in complete disregard of the Order of the ITAT pronounced on 26-10-2017 in the Open Court. The Order was dispatched on 06-12-2017 and was served to the & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 11 - assessee on 07-12-2017. In the impugned Order, the AO repeated the action predecessor, in the original assessment proceedings, by re-making an addition of Rs. 7,50,00,000/- under s.68 of the Act on account of share capital and share premium amount received by the assessee company during the previous year under consideration which had already got deleted by two appellate authorities succeedingly.

4. Thereafter, Revenue and assessee preferred second appeal before the ITAT, Indore Bench. However, at the same time ITAT also partially allowed the appeal by giving a specific finding at para 15 of the ITAT order that learned CIT(A) was not correct and justified in holding that the assessment proceedings under S.153A of the Act were not valid on the basis that no incriminating material or document was found during the search. However, at para 17 of the Order, the ITAT confirmed the action of the ld.CIT(A) in deleting the addition made by the AO on account of receipt of share capital by the appellant by holding that during the course of the search, no incriminating material was found relating to the share capital and the addition was made without having recourse to any incriminating material. The effect of such Order remained that the ITAT on the one hand, upheld the assessment proceedings carried out under S.153A of the Act and on the other hand, deleted the addition made by the learned AO without having recourse to any incriminating material. By this Order of the ITAT, the assessment proceedings under S.153A which were held to be void-ab-initio, got revived, retrospectively, from the date on which such proceedings were initiated. & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 12 - 4.1 That, meanwhile, in consequence of the Order of the ld. CIT(A), setting aside the entire assessment proceedings carried out under S.153A, a notice under s. 148 of the Act was issued by the ld. AO, wherein, it is mentioned that the assessee company for the relevant assessment year was the receipt of share application money of Rs.7,50,00,000/-. It would be observed by AO that the reason for escapement of income amounting to Rs.7,50,00,000/- on account of share application money, as recorded by the learned AO, was the same which was already taken into consideration by the learned AO while making addition of Rs.7,50,00,000/- in the total income of the assessee company in the aforesaid assessment order passed under S.153A r.w.s. 143(3) of the Act. It is pertinent to mention here that assessment order has been quashed by the appellate authority on technical ground than there is no order in exist. The Ld. CIT(A) has quashed the assessment order dated 30/01/2015 passed u/s. 153A r.w.s. 143(3) vide order in appeal no. IT-791/15-16/3615 dated 21.03.2016. Meaning thereby, there is no assessment order for AY 2010-11 as on the date of initiation of proceedings u/s 147 of the Act.

4.2 However, ld. CIT(A) quashing the entire assessment proceedings under S.153A r.w.s. 143(3) of the Act got reversed by the Order of a higher judicial forum viz. the Income-Tax Appellate Tribunal, Indore passed on 26-10-2017. The Order so passed by the ITAT was duly pronounced in the Open Court on 26-10-2017 itself in which the ld. C1T (DR) representing the Department was also present. In such circumstances, there cannot be any denial that the order so passed by the ITAT, & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 13 - reversing the findings of the ld. CIT(A) setting aside the entire assessment proceedings, was not in the knowledge of the learned AO through the ld. CIT(DR) even after the expiry of a period of nearly 45 days before purportedly passing the impugned assessment order on 05-12-2017.

4.3 Immediately upon receipt of the hard copy of the Order, the ld. AR of assessee company approached the learned AO on 05-12-2017 and apprised her about the pronouncement of the Order of the ITAT. As intimated to the learned counsel, the ld. AO had not passed any Order by this date. Instead, the learned AO asked the counsel of the assessee to file a copy of the Order of the ITAT on the next day.

4.4 On 06-12-2017, the assessee, through its counsel's letter filed a physical signed copy of the Order of the ITAT and requested the ld. AO to drop the reassessment proceedings so initiated under s.147 of the Act, on the ground that the original assessment proceedings under S.153A of the Act got revived by the Order of the ITAT and therefore, there could not have been any legal sanctity for carrying out the reassessment proceedings for the same year and on the same issue. It was further submitted before the ld. AO that by this Order of the ITAT, the assessment proceedings under s. l53A which were held to be void-ab-initio, got revived, retrospectively, from the date on which such proceedings were initiated.

4.5 The learned Assessing Officer passed the re-assessment order u/s. 147 r.w.s. 143(3) of the Act by mentioning the date & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 14 - of order as that of 05-12-2017 i.e. immediately one day before the filing of the hard copy of the order of the ITAT by the assessee before her on 06-12-2017. The Order was dispatched on 06-12-2017 and was served to the assessee on 07-12-2017. In the impugned Order, the ld. AO repeated the action of her predecessor, in the original assessment proceedings, by making an addition of Rs.7,50,00,000/- under s.68 of the Act on account of share capital and share premium. It is pertinent to mention here that when Bench confronted learned Sr. D.R., he fairly conceded that when ITAT passed an order on that day proceedings were pending before the learned AO.

(M/s. Chugh Real Estate Pvt. Ltd.)

“1a). That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the action of the AO of framing the Assessment Order under s. 147 r.w.s. 143(3) of the Act in a back date merely for escaping to give the effect of the Order of the Hon'ble IT AT in the appellant's case. 1b). That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the action of the AO in framing the Assessment Order under s. 147 r.w.s. 143(3) of the Act, purportedly on 05-12-2017, without giving effect to the Order of the Hon'ble IT AT pronounced on 26-10- 2017 in the Open Court, thereby resulting into multiple proceedings on the same issue for the same year.

2. That, on the facts and in the circumstances in the case, the learned CIT(A) grossly erred, in law, in confirming the issuance of Notice under s.148 of the Act by the AO on the same issue and on the same ground which had already been considered by an Assessing Officer in the original assessment proceedings under S.153A, followed by adjudication thereof by the first Appellate Authority, was illegal, arbitrary, unjustified, unwarranted and bad-in-law.

3. That, the learned CIT(A) grossly erred, both on facts and in law, in confirming the action of the AO for passing the Re- & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 16 - Assessment Order under s.147 of the Act on the sole premise that the original assessment proceedings under S.153A had got struck-off by the Order of the Hon'ble CIT(A), without considering the material fact that the original assessment proceedings under S.153A, so strucked-off, had got revived by the subsequent Order of the Hon'ble ITAT, which was passed much prior to the impugned Order of the Re- Assessment passed by the AO.

5. 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 for re-determining the total income of the appellant company u/s. 147 r.w.s. 143(3) of the Income-Tax Act, 1961 at Rs.2,25,00,000/- as against the originally Re- Assessed Income of Rs.Nil thereby re-making an addition of Rs.2,25,00,000/-, which is quite unjustified, unwarranted, excessive, arbitrary and bad-in-law.

6a). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.2,25,00,000/- made by the AO in the appellant's income on account of share capital and share premium receipts made by the appellant company during the relevant previous year without considering and appreciating the material fact that the appellant company had discharged its initial onus of proving identity of the shareholders, genuineness of the transactions and although not required, creditworthiness of the shareholders as wellj in the original assessment proceedings carried out under S.153A as well as in the appellate proceedings carried out in pursuance of such assessment proceedings.

6b). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the addition of Rs.2,25,00,000/- made by the AO in the appellant's income on account of share capital and share premium receipts made by the appellant company during the relevant previous year without considering the material fact that the AO has not made any fresh enquiry at her own but merely reiterated the findings of her predecessor in the earlier Order passed under s. 1 53 A of the Act.

6c). That, without prejudice to the above, the learned CIT(A) grossly erred, both on facts and in law, in confirming the impugned addition of Rs.2,25,00,000/- without properly considering and appreciating the material fact that the AO has not made any single enquiry at her end on the new addresses & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 17 - of the share applicant companies furnished by the appellant before the Hon'ble CIT(A) in the quantum appeal preferred by it against the Assessment Order passed under S.153A r.w.s. 143(3) of the Act. 6d). 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 for making the impugned addition without first providing and confronting to the appellant with the material available on her record which allegedly established that the appellant received share application money of Rs.2,25,00,000/- through accommodation entries.”

This Order pronounced in Open Court on 27/07/2022

Sd/- Sd/- (BHAGIRATH MAL BIYANI) (MAHAVIR PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore: Dated 27/07/2022 S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore & 196/Ind/2021 [M/s. SVM Builders Pvt. Ltd. & Anr.] A.Y. 2010-11 - 18 - 1.Date of dictation on 19.07.2022 2.Date on which the typed draft is placed before the Dictating Member 20.07.2022 3.Date on which the approved draft comes to the Sr.P.S./P.S. 4.Date on which the fair order is placed before the Dictating Member for pronouncement 5.Date on which the fair order comes back to the Sr.P.S./P.S 6.Date on which the file goes to the Bench Clerk 7.Date on which the file goes to the Head Clerk 8.The date on which the file goes to the Asstt. Registrar for signature on the order 9.Date of Dispatch of the Order