D.D. Builders Limited, Bhubaneswar V. Assistant Commissioner of Income Tax, Central Circle-2, Bhubaneswar

CO 5/CTK/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3108 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-08-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2022
• Assessment Year: 2010-2011
• Appeal Filed On: 09-02-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Bogus Share capital; Search and seizure; Document seized; Deemed dividend; Documents seized; Reassessment proceedings; Set aside
• Section: 147; 148; 263; 132; 40A(3); 139; 143(3); 153A; 143(1); 143(2); 192; 158BC; 153; 22; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER ACIT, Central Circle Bhubaneswar. PAN/GIR No. (Appellant D.D. Builders Limited, Plot No. 36-F, 1 Nagar, Bhubaneswar. PAN/GIR No. (Appellant Per Bench This is CIT(A)-2, Bhubaneswar for the assessment year IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER IT(ss)A No.07/CTK/2020 Assessment Year : 2010-2011 ACIT, Central Circle-2, Bhubaneswar. Vs. D.D. Builders Limited, Plot No. 36-F, 1 Nagar, Bhubaneswar. PAN/GIR No.AABCD 1433 E (Appellant) .. ( Respondent C.O.No.05/CTK/2021 (in IT(ss)A No.07/CTK/2020) Assessment Year : 2010-2011 D.D. Builders Limited, Plot F, 1 st floor, BJB Nagar, Bhubaneswar. Vs. ACIT, Central Circle Bhubaneswar PAN/GIR No.AABCD 1433 E (Appellant) .. ( Respondent Assessee by : Shri Kamal Kumar Agr Revenue by : Shri M.K.Gautam, CIT Date of Hearing : 25/8 Date of Pronouncement : 25/8 O R D E R an appeal filed by the revenue against the order of the ld 2, Bhubaneswar dated 10..9.2020 in Appeal for the assessment year 2010-2011. Page1 | 28 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER 20 2011 D.D. Builders Limited, Plot F, 1 st floor, BJB Nagar, Bhubaneswar. Respondent) .07/CTK/2020) 2011 ACIT, Central Circle-2, Bhubaneswar Respondent) rawalla, AR M.K.Gautam, CIT DR 8/2022 8/2022 against the order of the ld 10..9.2020 in Appeal No.0461/2019-2020 IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page2 | 28 2. The assessee has also filed cross objection in appeal of the revenue in IT(ss) A No.07/CTK./2020 for the assessment year 2010-2011. 3. Shri M.K.Gautam, ld CIT DR appeared for the revenue and Shri Kamal Kumar Agarwal, ld AR for the revenue. 4. The revenue has raised the following grounds of appeal: “1. That the Ld. CIT(A) erred in deleting the addition made by AO of Rs.3.75 cr. As unexplained cash credit due to bogus share capital holding the view that no incriminating material found during the course of search & seizure proceedings on the matter though the addition was made on the basis of seized material where investment with huge premium in share capital by Kolkata based companies were found and those shares were subsequently found to be transferred to related parties of the assessee company at face value. 2. The Ld. CIT(A) ignored the fact that enquiry has been made by the AO during assessment proceedings by issuing commission u/s. 131(1)(d) of the I.T. Act to Investigation Wing of Kolkata to investigate the impugned share transaction of Rs.3.75 cr with 14 Kolkata based companies and enquiry confirmed the so called share transactions as bogus. The enquiry report of Investigation Wing was also confronted to the assessee-company for rebuttal but the assessee-company failed to square up the issue by any satisfactory explanation or by any documentary evidence. 3. The Ld. CIT(A) erred in deleting the addition made by AO of Rs. 1,57,169/-u/s 40A(3) of the I.T.Act holding the view that no incriminating material found during the course of search & seizure proceeding on this matter though the addition was made the basis of seized documents. 4. The Ld. CIT(A) ignored the view taken by Hon'ble High Courts in the case of E.N. Gopikurrrar Vrs. CIT(2017) 300 ITR 131(Keraia) and CIT Vrs. Raj Kumar Arora (2014) 52 taxmann.com 172 (Allahabad) where in it has been held that even if there is no incriminating material, the AO is empowered to make additions in an assessment framed u/s 153A of the I.T. Act.” IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page3 | 28 5. It was submitted by ld CIT DR that the assessee is a company, which undertakes civil contracts, road works and associated works on behalf of the State Government. It was the submission that there was a search and seizure operation in the premises of the assessee on 8.5.2017. It was the submission that consequently, under the provisions of section 153A of the Act, assessments were liable to be processed u/s.153A of the Act for the assessment years 2012-13 and 2017-18. It was the submission that by the Finance Act, 2017. The Fourth proviso to section 153A had been introduced w.e.f. 1.4.2017. it was the submission that as per the Fourth proviso, if the Assessing officer has in his possession books of account and other documents or evidence which reveals that income represented in the form assets, which has escaped assessment amounts to or is likely to amount to Rs.50 lakhs or more for the relevant assessment year or in aggregate in the relevant assessment year, the Assessing Officer could reopen the assessment upto 10 years. It was the submission that in the course of search, the ledger was found which showed share capital received from various bogus share companies to the tune of Rs.3,75,00,000/-. Consequently, the Assessing Officer had issued notice for the assessment year 2010-2011 u/s.153A of the Act. It was submitted by ld CIT DR that there were 14 companies from whom, the assessee had received share application money. Out of 14 companies, 9 companies were not found at the addresses provided in their share application forms, one company had IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page4 | 28 refused to give reply and four companies gave replies which were incomplete. It was the submission that out of 14 companies, 9 companies which made share application money were Shell Companies. It was further submitted that the Assessing Officer in his order has also categorically mentioned that the 9 company names have been struck off from the Register of companies maintained by the Registrar of Companies. It was the submission that the Assessing Officer has also issued commission to the DDIT, Kolkata to have examined the 14 companies. It was the submission that the Inspector of the DDIT, Kolkata had issued summons and also visited the companies and found that those companies were not available at the addresses given in their application forms. It was also further submitted that another peculiarity that had been found in the present case was that within one month of the shares having been allotted to the bogus share companies, the shares had been purchased by the HUFs of Shri D.D.Agarwal, Shri Trilochan Agarwal and Shri Ramesh Agarwal, who are the family members of the Directors of the assessee company. It was also submitted that the DDIT, Kolkata investigation reports received in response to the commission issued by the AO have also been served on the assessee but they had stated that “after more than 10 years of the transaction, it was difficult for the assessee to know the whereabouts of those share holders”. It was further submitted by ld CIT DR that on appeal, the ld CIT(A) had quashed the assessment by following the decision of Hon’ble Delhi High IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page5 | 28 Court in the case of CIT vs Kabul Chawla(2016) 380 ITR 573 (Del) to hold that there was no incriminating material found in the course of search which could lead to the issuance of notice u/s.153A of the Act. On similar lines, he followed the decisions of Hon’ble Delhi High Court in the case of Pr CIT vs Kurele Paper Mills Pvt Ltd., (2016) 380 ITR 571 (Del), Pr. CITR vs Meeta Gutgutia (2017) 295 CTR 466(Del) as also the decision in the case of Pr. CIT vs Best Infrastructure (India) Pvt Ltd., 397 ITR 82 (Del). It was the submission by ld CIT DR that in respect of the said decisions, the ld CIT(A) has failed to appreciate that it was not just on requirement of incriminating materials that the Hon’ble Delhi High Court had quashed the assessment. It was the submission that the Hon’ble Delhi High Court has categorically held that when the assessment has been completed, more specifically that if completed assessment is already there, then for the purpose of invoking the provisions of section 153A, incriminating materials are required for making the addition. He read para 37 of the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (supra) to submit that seven conditions have been specified therein and it was not a blanket direction by the Hon’ble High Court that incriminating materials must be there, in absence of which, assessment u/s.153A is liable to be quashed. 6. In reply, ld AR submitted that the decision of ld CIT(A) is liable to be upheld insofar as no incriminating materials have been found in the course of search on the assessee. It was also submitted that what was found is a IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page6 | 28 ledger of the company in respect of the share application money received. The said ledger copy is nothing but the regular books of account of the assessee required to be maintained by the assessee. It was the further submission that the said ledger copy also categorically showed that the share application money to the extent of Rs.1,09,00,000/- had been received in the earlier assessment year being A.Y. 2009-2010 and the balance of Rs.2,66,00,000/- had been received during the assessment year 2010-2011. It was also submitted that the assessee had filed its return of income for the relevant assessment year and intimation u/s.143(1) had also been issued to the assessee. The time limit for issuance of notice u/s. 143(2) of the Act and completion of assessment u/s.143(3) of the Act as also the time limit for reopening the assessment are expired. Therefore, it should be held that the intimation issued in response to the return filed by the assessee must be treated as an assessment. It was the submission that as the assessment has been completed meaning thereby that already there is a completed assessment for the assessment year 2010-2011 in assessee’s case, the assessment u/s.153A should have been limited to the incriminating materials as also for the purpose of issuance of notice u/s.153A of the Act. It was the submission that what were found in the course of search were the books of account being ledger copy and this was not incriminating material which could give power to the Assessing officer to initiate proceedings u/s.15A of the Act. Ld AR placed reliance on the IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page7 | 28 decision of Co-ordinate Benches of the Kolkata Tribunal in the case of Smt. Yamini Agarwal vs DCIT (2017) 83 taxmann.com 209 (Kol Trib), wherein, in paras 25 & 26, it has been held as follows: “25. We therefore hold that the scope of the proceedings u/s.l53A in respect of assessment year for which assessment have already been concluded and which do not abate u/s. 153 A of the Act, that the assessment will have to be confined to only incriminating material found as a result of search. The next aspect to be considered is as to when returns of income filed u/s. 139 of the Act are shown to have been accepted without an intimation U/S.143(1) of the Act or without any notice issued u/s.l43(2) of the Act within the time limit contemplated by the proviso thereto, can be said to be assessment proceedings concluded that have not abated u/s. 153 A of the Act. Section 153A of the Act, uses the expressing "pending assessment or reassessment". When a return is filed and when neither an acknowledgement or intimation u/s.l43(l)of the Act is issued nor a notice u/s. 143(2) of the Act is issued within the time limit laid down in the proviso to Secc. 143(2) of the Act, the proceedings initiated by filing the return are closed. In the present case, the period for issuing the notice u/s 143(2) elapsed. Therefore the process has attained the finality which can jnly be assailed u/s 148 or 263 of the Act. It can thus be concluded that making of an addition in an assessment under section 153A of the Act, without the backing of incriminating material, is unsustainable even in a case where the original assessment on the date of search stood completed by absence of issue of intimation under section 143(1) of the Act or by not issuing notice U/S.143(2) of the Act within the time limit laid down in the proviso to Sec.l43(2) of the Act, results in an assessment proceedings and where such assessment proceedings arc completed prior to the date of search then they do not abate in terms of the Second Proviso to section 153A(1) of the Act. The decision of the ITAT Kolkata Bench rendered in the case of Shri Bishwanath Garodia (supra) on identical facts of the case as that of the Assessee in the present case, clearly supports our conclusions as above. 26. In the light of the discussion above, our conclusion is that in the present case, the issue dealt with by the AO in the assessment order IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page8 | 28 u/s. 153 A of the Act, could not and ought not to have been examined by the AO in the assessment proceedings u/s.l53A of the Act as the said issue stood concluded with the assessee's return of income being accepted prior to the date of search and no notice having been issued u/s. 143(2) of the Act within the time limit laid down in that section. Such assessment did not abate on the date of search which took place on 28.3.2008. In respect of assessments completed prior to the date of search that have not abated, the scope of proceedings u/s. 153 A of the Act has to be confined only to material found in the course of search. Since no material whatsoever was found in the course of search, the additions made by the AO in the order of assessment for both the Assessment years could not have been subject matter of proceedings u/.s.l53 A of the Act. Consequently, the said various additions made in the orders of Assessment ought not to have or could not be made by the AO. Gr.No. 1 raised by the Assessee in both the appeals are accordingly allowed.” 7. He further placed reliance on the decision of Co-ordinate Benches of Kolkata Tribunal in the case of Bishwanath Garodia vs DCIT (2016) 76 taxmann.com 81 (Kol.Trib), wherein, in paras 10 & 11, the Tribunal held as follows: “10. At the time of hearing before us, the Id. D.R. has contended that the processing of returns of income filed by the assessee as made by the Assessing Officer under section 143(1) could not be regarded as assessment and it is, therefore, not a case where the assessments for both the years under consideration could be said to have been completed. He has also contended that the conclusion of such alone is sufficient to give jurisdiction to the Assessing Officer to proceed against the assessee under section 153A of the Act. In support of this contention, he has relied on the unreported decision of the Hon'ble Delhi High Court in the case of Anil Kumar Bhalia (supra). In the said case, a question was posed by the Hon'ble Delhi High Court in paragraph no. 12 of its order as to whether the Assessing Officer was empowered to reopen the proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search where an assessment order had IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page9 | 28 already been passed in respect of all or any of those six assessment years either under section 143(1) or section 143(3) of the Act and such order was already in existence having been passed prior to the initiation of search/requisition. Although this question was not finally answered by the Hon'ble Delhi High Court in the case of Anil Kumar Bhatia (supra), it is quite clear from the said question raised by the Hon'ble Delhi High Court that there was no distinction made by Their Lordships in the assessments completed under section 143(1) and section 143(3) for determining the scope of the proceedings under section 153A. However, the said question arose specifically for the consideration of Mumbai Bench of this Tribunal in the case of Pratibha Industries Ltd. (supra) and after referring to the discussion made by the Hon'ble Delhi High Court in this context in the case of Anil Kumar Bhatia (supra), the Tribunal held that the only logical conclusion which could be traced out by harmonizing the legislative intendment and the judicial decision was that where the assessments had already become final prior to the date of search, the total income has to be determined under section 153A by clubbing together the income already determined in the original assessments and the income that is found to have escaped assessment on the basis of incriminating material found during the course of search. To arrive at this conclusion, reliance was placed by the Tribunal on the decision of Special Bench, Mumbai in the case of All Cargo Global Logistics Ltd. (supra), wherein it was held that even though all the six years shall become subject matter of assessment under section 153A as a result of search, the Assessing Officer shall get the free hand through abatement only on the proceedings that are pending. But in a case or in a circumstances where the proceedings have reached finality, assessment under section 143(3) read with section 153(3) has to be made as was originally made and in a case certain incriminating documents were found indicating undisclosed income, then addition shall only be restricted to those documents/incriminating material. 11. Keeping in view the discussion made above, we hold that the additions as finally made to the total income of the assessee on account of transactions reflected in the Bank account of the assessee with HSBC, Geneva, Switzerland and income relating thereto for both the years under consideration are beyond the scope of section 153A as the assessments for the said years had become final prior to the date of search and there was no incriminating material found during the course of search to support and substantiate the said addition. The said additions made for both the years under consideration are, therefore, deleted allowing the relevant grounds of the assessee’s appeals.” IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page10 | 28 8. It was thus the submission that the decision of Hon’ble Delhi High Court in the case of Kabul Chawala (supra) squarely applies to the facts in the assessee’s case as also the decision in the case of Kurele Paper Mills Pvt Ltd.,(supra) and Meeta Gutgutia (supra). 9. It was the further submission of ld AR that what has been found during the course of search was only books of account and part of which was ledger account of the share application money received by the assessee. The said ledger account did not reveal that income “represented in the form of asset” has escaped assessment. It was thus the submission that the extended period of 10 years taken by the AO for the purpose of issuance of notice u/s.153A for the relevant assessment year was also invalid. It was the submission that the order passed by the ld CIT(A) u/s.153A is liable to be upheld. 10. In reply, the submission of ld CIT DR in respect of second issue being the disallowance made by invoking the provisions of section 40A(3) of the Act was also deleted by the ld CIT(A) by holding that no incriminating material was found. It was also submitted that cash payment had been made in excess of the prescribed limit and same was liable to be disallowed u/s.40A(3) of the Act and the order of the ld CIT(A) was liable to be reversed. It was also submitted that the decision of Hon’ble Delhi High Court in the case of Kabul Chawla (supra) was on the peculiar set of facts as in that case insofar as the issue was deemed dividend had been added IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page11 | 28 in the hands of that assessee u/s.2(22)(e) of the Act for the relevant assessment year and no evidence in respect of said deemed dividend had been found during the course of search. Consequently, the Hon’ble High Court had in para 37 of its order explained the provisions of section 153A and the conditions under which the assessment could be reopened u/s.153A. Para 37 of the said order reads as follows: “37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page12 | 28 v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment.” 11. It was the specific submission that the Hon’ble Delhi High Court has categorically held in para 37(iv) that the additions should be strictly made on the basis of evidence found in the course of the search, or other post- search material or information available with the AO which can be related to be the evidence found. What was required is that an arbitrary and unjust addition should not be made without any relevance or nexus with the seized material. 12. It was also submitted that in para 37 (vii), the requirement was also that some evidences should have been recovered in the course of search and it was found in the course of search that after one month of the allotment of shares, the shares were purchased by HUFs of the family IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page13 | 28 members of the Directors of the assessee company. It was submitted that in the case of Meeta Gutgutia (supra), that in that case franchise income had been offered during the assessment year but then the Assessing Officer had proceeded to tax the same in the earlier assessment year also without any evidence and it was under those circumstances, the Hon’ble Court held that the provisions of section 153A could not be invoked in the absence of incriminating materials. 13. In respect of decision in the case of Kurele Paper Mills Pvt Ltd (supra), it was the submission that it was a single page order and the facts were not emanating from the said order. 14. In respect of the decision in the case of Best Infrastructure (India) Pvt Ltd. (supra), it was submitted that the SLP has been admitted by the Hon’ble Supreme Court. 15. Ld CIT DR also placed before us the copy of the decision of Co- ordinate bench of this Tribunal in the case of Unicon Merchants Pvt Ltd vs JCIT in IT(ss) A Nos.23 & 24/CTK/2019 order dated 8.6.2022, wherein, in paras 20 & 21, it has been held as follows: “20. A perusal of the Annexure-A annexed to the satisfaction note, reproduced hereinabove, by the AO of the person searched shows that in the seized material SMLO-52, there is a ledger which contains the loan IT(SS)A Nos.23&24/CTK/2019 20 taken from IFCI Factors Ltd. to an extent of Rs.9,40,52,064/-. A further perusal of the said Annexure-A shows that out of this amount of Rs.9,40,52,064/- loan taken by the assessee from IFCI Factors, an amount of Rs.3.11 IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page14 | 28 crores has been given as loan to Shri Vikash Gupta and his family members. Admittedly, the ledger account is part of the regular books of the assessee and the same cannot be treated as an incriminating material. However, the information that the loan has been given to Shri Vikash Gupta and his family members out of the said loan taken by the assessee company from IFCI Factors Ltd. has come out of the evidence found in the course of search. The evidence in relation to the impugned assessment years have been found in the course of search on Shivom Minerals Ltd. but relating to the assessee. When evidence relating to the assessee has been found and the same has been made available by the AO of the person searched to the AO of the person in respect of whom the evidence has been found then the AO of the person in respect of whom the evidence has been found would have to examine the same. Here, clearly evidence in the form of ledger and the transactions of giving the loan to Shri Vikash Gupta and his family members have been found and handed over to the AO of the assessee. Whether the said evidence is incriminating or not would have no bearing insofar as the AO of the searched person is concerned, but the evidence having been provided to the AO of the person in respect of whom the evidence has been found, it is the duty of such AO to examine and verify the same. Now, for the purpose of verification the only option available to the AO is to initiate the proceedings u/s.153C of the Act, for that relevant assessment years to which those evidence relate. That is exactly what the AO has done in the present case. Once the assessment is opened u/s.153C of the Act, the provisions of the regular assessments would come into play and such additions and disallowance as is possible under regular assessment would have to be done by the AO. Again that is what the present AO has done. This being so, clearly evidence in relation to the relevant assessment years having been found in the course of search conducted in the premises of M/s Shivom Minerals Ltd. and its group, that such evidence having been provided to the AO of the assessee to whom such evidences were related to, the proceedings initiated u/s.153C of the Act are valid insofar as such evidence relates to the assessment years to which the evidences were found. Once the proceedings u/s.153C of the Act are initiated rightly, the consequential assessment is a forlorn conclusion. In these circumstances, we find no error in the order of the AO and that of the ld.CIT(A) on this issue. In view of the above, the additional grounds filed by the assessee stand rejected. As no other grounds have been argued, therefore, the same are treated as not argued/pressed and are being dismissed as such. IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page15 | 28 21. One of the argument of the ld. Sr. Advocate is that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in the assessee’s own case for the immediately preceding assessment years, however, a perusal of the said order does not show any of the facts being considered and in the absence of the facts being brought out, in IT(SS)A Nos.23&24/CTK/2019 22 view of the decision of the Hon’ble Madras High Court in the case of M/s Hi Tech Arai Limited, reported in 321 ITR 477 (Mad), we have decided the issue involved in the present case on the facts as available before us and, thus, the additional grounds filed in both the appeals by the assessee on 12.11.2019 are dismissed.” 16. It was the submission that the ledger copy is showing the receipt of share application money coupled with the fact that the shares had been transferred to HUFs of the family members of the Directors of the assessee company within one month of its issuance showed that there was incriminating material which gave rise to the AO to issue notice u/s.153A of the Act and completing the assessment. 17. It was the alternate prayer of ld CIT DR that there are various decisions of the Hon’ble High courts, wherein, it has been held that the requirement of incriminating documents is not there and even in the absence of the incriminating documents, the AO is competent to issue notice u/s.153A and bring to tax the undisclosed income subject to the conditions that there was a search. He has filed written submission as follows: “ It is submitted that Section 153A (which is similarly worded to section 158BC of the Act), provides that where the A.O. is satisfied that any money, bullion, jewellery or other valuable article or thing or IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page16 | 28 any books of account or documents seized or requisitioned.........., he shall proceed against such person and issue such person a notice and assess or reassess undisclosed income of such other person. However, there is a distinction between the two provisions inasmuch as under section 158BC notice can be issued only where the money, bullion, jewellery or other valuable article or thing or any books of account or documents seized or requisitioned belong to such person, whereas under Section 158BC if the Assessing Officer is satisfied that any undisclosed income belongs to any person, in respect of whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he shall proceed to determine undisclosed income of such other person. It must be appreciated here that word "incriminating" has not been used in the Fourth Proviso inserted by Finance Act, 2017 w.e.f. 01.04.2017 to Section 153A of the Act. Hence same can't be imported into it. i.) The Hon'ble Kerala High Court in the case of E. N. Gopakumar vs. CIT (75 taxmann.com 215) held that assessment proceedings generated by issuance of a notice under section 153A(l)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis of which notice was issued under section 153A(l)(a) of the Act. The observations of the Hon'ble Kerala High Court in para-7, 8 and 9 are reproduced as under: "7. In so far as the issue as to whether it is necessary that incriminating materials should be unearthed in a search under Section 132 of the Act to sustain a notice issued under Section 153A(l)(a) is concerned, the issue stands covered in favour of the Department as per the judgment of this Court in St. Francis Clay Decor Tiles's case (supra) and Promy Kuriakose's case (supra) though the second among them relates to a third person to the search as well; which cases would fall under Section 153C of the Act. We, therefore, answer the said question stating that for the issuance of a notice under Section 153A(l)(a), it is not necessary that the search on which it was founded should have necessarily yielded any incriminating material against the assessee or the person to whom such notice is issued. IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page17 | 28 8. Section 153A is a provision which deals with assessment in case of search or requisition. The activation of a search is not something which is regulated by any limit as to period of time. Even if returns are filed and regular assessments are concluded, search on premises could always be made, if the authority concerned is satisfied that action ought to proceed in that line. Once that is done, Section 153A(l)(a) authorises the issuance of notice calling for filing of returns. This has been noted even under the point decided above. Once a return is filed in answer to such a notice, the Explanation to Section 153A provides, among other things, that all provisions of the Income Tax Act will apply to the assessment made under Section 153A of the Act. This is the manner in which the provisions in Sections 153A, 153B and 153C of the Act would regulate. Once that is done, it is well within the jurisdiction of the assessing authority to proceed with any lawful modes of assessment as prescribed in the Act. The Statute nowhere makes it conditional that the department has to unearth some incriminating material to conclude some method against the assessee in events where the assessment is triggered by a notice under Section 153A(l)(a) of the Act. This means that even when such notice is triggered following a search, the assessment proceedings can be concluded in any manner known to law, including under Section 143(3) or even Section 144 of the Act, if need be. Therefore, the assessment proceedings generated by the issuance of a notice under Section 153A (l)(a) of the Act can be concluded against the interest of the assessee including making additions even without any incriminating material being available against the assessee in the search under Section 132 of the Act on the basis of which the notice was issued under Section 153A(l)(a) of the Act. We answer this issue accordingly. 9. In the case in hand, the assessing authority had, upon receipt of the returns in answer to the notice under Section 153A(l)(a) of the Act, given an opportunity to the assessee to interact with the officer and thereafter he was required to place a cash flow statement. All that followed thereafter is the assessing authority carrying out an exercise of acting on the cash flow statement and concluding the assessment by determining the amounts on a meaningful and appropriate application of the cash flow statement by rearranging the entries thereof. That activity carried out by the assessing authority, though to a larger extent, was found IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page18 | 28 against by the CIT (Appeals), has found disapproval at the hands of the Tribunal which is the last fact finding authority. We see that the decision of the Appellate Tribunal cannot be critisised as unreasonable, perverse or unavailable on the face of record. Resultantly, these appeals fail". It may please be noted that the Hon'ble Kerala High Court has duly noted the contrary decision of Hon'ble Delhi High Court in the case of Kabul Chawla (380 ITR 573), and Kurele Paper Mills (P.) Ltd. (380 ITR 571) and Hon'ble Mumbai High Court in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (374 ITR 645) while holding the decision in favour of Revenue. ii.) The Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora (52 taxmann.com 172) held that the Assessing Officer has power to reassess returns of assessee not only for undisclosed income found during search operation but also with regard to material available at time of original assessment. The observations of Hon'ble High Court in para-11 are reproduced as under: "10. Under the block assessment proceeding under Chapter XIV-B only the undisclosed income found during the search and seizure operation were required to be assessed and the regular assessment proceedings were preserved. The introduction of Section 153A of the Act provides a departure from this proceeding. Under Section 153A of the Act, the Assessing Officer has been given the power to assess or reassess the total income of the assessment years in question in separate assessment orders. Consequently, there would be only one assessment order in respect of six assessment years in which total disclosed or undisclosed income would be brought to tax. Consequently, even though an assessment order has been passed under Section 143(1) (a) or under Section 143(3) of the Act, the Assessing Officer would be required to reopen these proceedings and reassess the total income taking notice of undisclosed income even found during the search and seizure operation. The fetter imposed upon the Assessing Officer under Sections 147 and 148 of the Act have been removed by the non obstante clause under Section 153A of the Act. Consequently, we are of the opinion that in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed, which IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page19 | 28 were subsisting when the search was made, the Assessing Officer would be competent to reopen the assessment proceeding already made and determine the total income of the assessee. The Assessing Officer, while exercising the power under Section 153A of the Act, would make assessment and compute the total income of the assessee including the undisclosed income, notwithstanding the assessee had filed the return before the date of search which stood processed under Section 143(l)(a) of the Act. 11. In the light of the aforesaid, the reasons given by the Tribunal that no material was found during the search cannot be sustained, since we have held that the Assessing Officer has the power to reassess the returns of the assessee not only for the undisclosed income, which was found during the search operation but also with regard to the material that was available at the time of the original assessment. We find that the Tribunal dismissed the appeal while relying upon the decision of a Coordinate Bench of the Tribunal in the case of Anil Kumar Bhatia (supra). We find that the said decision of the Coordinate Bench of the Tribunal was set aside by the Delhi High Court in CIT v. Anil Kumar Bhatia [2012] 24 taxmann.com 98/211 Taxman 453. We find that the Tribunal only dismissed the appeal on this legal issue and had not considered the matter on merits". iii.) The Hon'ble Kerala High Court in the case of CIT vs. St. Francis Clay Décor Tiles (70 taxmann.com 234) held that neither under section 132 or under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A. The observations of the Hon'ble High Court in para-20 & 21 are reproduced as under: "20. On a plain reading of Section 153A, it is clear that once search is initiated under Section 132 or a requisition is made under Section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year following within six assessment years referred to in clause (b). It further treats the returns so filed as if such return were a return required to be furnished under IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page20 | 28 Section 139. So that on a reading of Section 153A(1) it is categoric and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is true that as per the first proviso, the Assessing Officer is bound to assess or reassess the total income with respect to each assessment year following the six assessment years specified in sub-clauses (a) and (b) of Section 153A. However, even if no documents are unearthed or any statement made by the assessee during the course of search under section 132 and no materials are received for the afore-specified period of six years, the assessee is bound to file a return, is the scheme of the provision. Even though the second proviso to Section 153A speaks of abatement of assessment or reassessment pending on the date of the initiation of search within the period of six assessment years specified under the provision that will also not absolve the assessee from his liability to submit returns as provided under Section 153A(l)(a). This being the scheme of the provisions of the Act, the Appellate Tribunal ought to have considered the issue with specific reference to the facts involved in the case and as provided under Section 153A. 21. However, we find that the Tribunal without appreciating the facts and circumstances has proceeded purely on the basis that the cases at hand were covered under the Special Bench decision in All Cargo Logistics Ltd. (supra). In our view the course adopted by the Tribunal was not the proper one to decide the question with regard to the sustainability of the order passed by the First Appellate Authority. Therefore, we are of the considered opinion that the Tribunal has not adopted the right method to decide the issue with regard to the question framed in these appeals and therefore, it is only- necessary to remand the matter to the Tribunal for fresh consideration", iv.) The Hon'ble Delhi High Court in the case of Filatex India Ltd. vs. CIT (49 taxmann.com 465) held that during assessment under section 153A, additions need not be restricted or limited to mcriminating material, found during course of search. The observations of the Hon'ble High Court in para-2 are reproduced as under: IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page21 | 28 "2. On the first question, we note that the Assessing Officer, in the proceedings under section 153A of the Act, had made several additions, relying upon the incriminating material found in the course of search, which was conducted on 18th January, 2006 and subsequent dates. A perusal of the impugned order by the Tribunal would disclose that incriminating material including statement of Sanjay Agrawal, GM (Marketing) have resulted in additions, which have been upheld. It is not the case of the appellant- assessee that initiation of proceedings under Section 153A was bad or unwarranted in law as no incriminating material was found during the search. The contention raised by the appellant- assessee is that the addition, which is the subject matter of questions No. (ii) and (iii), was/is not justified in the assessment order under section 153A, as no incriminating material was found concerning the addition under Section 115JB of the Act. The said argument has no substance and has to be rejected. Under Section 153A of the Act, the additions need not be restricted or limited to the incriminating material, which was found during the course of search. There cannot be multiple assessments, once Section 153A of the Act is applicable. Section 153A(1) postulates one assessment, computing the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted or requisition was made. Total income is assessed or reassessed in the order under section 153A of the Act and the Section applies notwithstanding sections 139, 147, 148, 149, 151 and 153 of the Act". v.) The Hon'ble Allahabad High Court in the case of Savesh Kumar Agarwal vs. Union of India (35 taxmann.com 85) held in para-22 & 23 that the question which now called for consideration was whether on receipt of satisfaction note, even if the assessing authority receiving satisfaction note has already examined account books, and had not found anything adverse against the assessee and further seized goods had already been released in favour of the assessee, he was required to issue notice under section 153C of the Act to file returns for six years. In this case, the Department had taken a stand that even if the books of account were examined by the Assessing Officer of the petitioner and the bullion having found validly entered in the stock books was released under section 132B, IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page22 | 28 still the Assessing Officer could proceed under section 153A and assess the petitioner to find out the source of income. The observations of the Hon'ble High Court in para-24 & 25 are reproduced as under: "24. Where there is power to act in a particular manner, unless it is shown that power has been exercised without jurisdiction and lacks bona fide, the statutory notice given in exercise of such powers, may not be set aside by the court under article 226 of the Constitution of India. The argument that the second assessment for the same year and of the previous years will amount to duplication and will be needless exercise of power, overlooks the fact that such power actually exists and if there is any reason to believe, namely, the satisfaction of the assessing authority to examine the source of income, the court would not interfere to close such enquiry. 25. If there is power to do something under the Act, the action taken in the fiscal matters cannot be set aside in exercise of the writ jurisdiction on the ground that such power is to be exercised needlessly, without any purpose. The exercise of power in such case can only be challenged, if the power is being exercised with ulterior motive and mala fide intentions. It is not open for the petitioner to contend before the writ court that the exercise of power, which admittedly exists in the authority, will expose the petitioner to assessment for the same period on which assessing authority has already recorded satisfaction". 18. In respect of issue of section 40A(3) of the Act, ld AR submitted that what was found in the course of search was only the books of account of the assessee and as per the decision of the Hon’ble Delhi High Court in the case of Param Diary Ltd., 439 ITR 89 (Del), the books of account of the assessee by no stretch of imagination could be treated as incriminating material to form the basis for framing the assessment u/s.153C r.w.s 143(3) of the Act. Ld AR also referred to the decision of Hon’ble Delhi High Court in the case of Param Diary Ltd (supra) to submit that once the assessee does not receive notice u/s.143(2) of the Act within the stipulated period, IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page23 | 28 the return filed by assessee has become final and no scrutiny proceedings are to be undertaken with respect of that return. Consequently, it should be deemed that the assessment in that case gets done under the provisions of section 143(1) of the Act when the intimation was issued and no notice u/s.143(2) of the Act is issued on the assessee. 19. We have considered the rival submissions. At the outset, what is understood is that in the course of search in the present case, the ledger account of the assessee in respect of share application money received was noticed. The said ledger account is nothing but part of books of account and clearly being part of books of account, which is required to be maintained as per the provisions of the I.T.Act, it cannot be treated as incriminating material. The revenue has not been able to place any evidence before us to show that any material has been found that the assessee had suppressed the fact of the transfer of shares within one month of the issuance of shares to the said share applicants to the HUF of the family members of the Directors of the assessee company. This allegation of the revenue will not help to the revenue. This argument cannot be acceded to insofar as the assessee has nothing to do with what happens to the shares holding pattern once the shares are allotted to parties. Further the investment by HUFs categorically shows the purchase of the shares by them. It could never be hidden from the department especially when the value of the transaction was Rs.37.5 lakhs. In fact, the IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page24 | 28 transaction itself could not have been hidden when the transactions are made through banking channels. Further, respective HUFs are income tax assessee and they are also filing the return and they are also subject matter of assessment u/s.153A by the same Assessing Officer. And no adverse inference has been drawn there. The facts in the present case shows that by treating the share application money received by the assessee as unexplained cash credit, the revenue is not explaining as to what happens to the value of the shares, as the shares are out of the control of the assessee. The Shares have gone into the open market, it has intrinsic value. In short, if the share capital received by the assessee is treated as its income, it is in effect forcing the assessee to reduce its capital value and by maintaining the number of shares which stands allotted. Keeping this in mind when one see the assessment framed u/s.153A, what is noticed is that there is no evidence in any manner whatsoever which has been found in the course of search, which could even lead to presumption much less reveal that any income much less represented in the form of asset, has escaped assessment for the relevant assessment year, which could give power to the AO to extend the provisions of section 153A for a period of ten years. In the absence of such evidence, which could reveal escapement of income from the assessment for the relevant assessment year having been found in the course of search, the initiation of proceedings IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page25 | 28 u./s.153A for the relevant assessment year is not permissible and consequently, same is liable to be quashed and we do so. 20. Coming to the findings of the ld CIT(A) that no incriminating material has been found in the course of search and consequently quashing of the assessment proceedings, the facts in the present case clearly show that the assessee has filed his return of income for the relevant assessment year and said return has also been processed u/s.143(1) of the Act. The time limit of issuance of notice u/s.143(2) of the Act as also for the purpose of reopening of the assessment has expired. Consequently, the intimation issued in the case of the assessee u/s.143(1) would have to be deemed to be completed assessment proceedings and in view of the decision of Hon’ble Delhi High Court in the case of Param Diary ltd (supra), wherein, the Hon’ble High Court which has followed its own decision in the case of Chintels India ltd., 397 ITR 416 (Del) has held that once the assessee does not receive notice u/s.143(2) within the stipulated period, such an assessee take it that the return filed by him has became final and no scrutiny proceedings are to be undertaken with respect to that return, as also the decision of the Co-ordinate Bench of Kolkata Tribunal in the case of Bishwanath Garodia (supra) and in the case of Yamini Agarwal (supra). It would be worthwhile to mention here that the provisions of section 143(1) fall within the chapter –XIV of the Income tax Act being the procedure for assessment. Thus, the intimation/order received by the assessee IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page26 | 28 u/s.143(1) would have to be treated as an assessment. Thus, in the case of the assessee, the intimation having been issued u/s.143(1) of the Act, and in view of the principles laid down by the Hon’ble Delhi High Court in the case of Kabul Chawla (supra) and in the case of Meeta Gutgutia (supra) as no incriminating material has been found which could show escapement of income in the case of the assessee in the relevant assessment year, no assessment u/s.153A could be done on the assessee. A perusal of the decision of the Hon’ble Delhi High Court in the case of Kurele Paper Mills Pvt Ltd (supra) shows that this was also a case of share application money and in that case also no incriminating material was found and consequently, the Hon’ble Delhi High Court quashed said proceedings u/s.153A of the Act. In these circumstances, as the facts clearly reveal that no incriminating materials have been found in the course of search, which could lead to the AO to initiate the proceedings u/s.153A. Consequently, we are of the view that the findings of the ld CIT(A) on this issue is on right footing and does not call for any interference. 21. Coming to alternate prayer of ld CIT DR, it is an admitted fact that there are decisions to the contrary in respect of requirement of incriminating material for the purpose of doing assessment u/s.153A of the Act. Here, it must be mentioned that in the present case, we have quashed the proceedings u/s.153A, on the ground that no evidence of escapement of income for the relevant assessment year in excess of Rs.50,00,000/- has IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page27 | 28 been found in the course of search and consequently, the extended period of 10 years for invoking the provisions of section 153A is not available. The second issue is by holding the findings of ld CIT(A) in respect of non- availability of incriminating material found in the course of search for the purpose of invoking provisions of section 153A in the relevant assessment year. Therefore, the alternative prayer of the revenue is nothing but the arguments against the findings of the ld CIT(A) that no incriminating material has been found in the course of search for invoking section 153A. Thus, it cannot be treated as alternate argument but it is only an additional arguments by the revenue. 22. Coming to the issue that counter judgments are available in respect of incriminating material, we are bound by the proposition laid down by the Hon’ble Supreme Court in the case of Vegetable Products, 88 ITR 192 (SC), wherein, the Hon’ble Supreme Court has categorically held that when two views are possible, the view in favour of the assessee should be follows. 23. Coming to the issue of disallowance u/s.40A(3) of the Act, as we have already quashed the assessment u/s.153A on account of above two grounds, this issue would no more survives and this ground stands dismissed. 24. In the result, appeal of the revenue stands dismissed. IT(ss)A No.07/CTK/2020 Co.No.05/CKT/2021 Assessment Year : 2010-2011 Page28 | 28 25. In respect of cross objection filed by the assessee, at the time of hearing, ld AR did not wish to press the ground filed by the assessee. Consequently, cross objection stands dismissed as not pressed. Order dictated and pronounced in the open court on 25/8/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 25/8/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant /Assessee: D.D. Builders Limited, Plot No. 36-F, 1 st floor, BJB Nagar, Bhubaneswar 2. The Revenue: ACIT, Central Circle-2, Bhubaneswar 3. The CIT(A)-2, Bhubaneswar 4. Pr.CIT—2, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//