M/s Essence International Pvt. Ltd, Indore V. The DCIT, Indore

ITSSA 93/IND/2012

• Counselvise Citation: [2016] 122 COUNSELVISE.COM (IT) 2231 (ITAT-INDORE)
• Duration Of Justice: 4 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-07-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV VARSHNEY
• Keywords: Bogus Share capital; Search and seizure; Accommodation entries
• Section: 143(3); 153A; 147; 68; 132

Judgement Text

M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JM & SHRI N.S. SAINI, AM IT(SS)A NO.93/IND/2012 A.Y. 2005-06 M/S ESSENCE INTERNATIONAL PVT. LTD. INDORE PAN AABCE 3198J ::: APPELLANT VS DY. COMMR. OF INCOME TAX 1(1) INDORE ::: RESPONDENT APPELLANT BY SHRI PRAKASH JAIN RESPONDENT BY SHRI RAJEEV VARSHNEY DATE OF HEARING 13.7.2016 DATE OF PRONOUNCEMENT 13 .7.2016 O R D E R THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A)-I, INDORE, DATED 31.1.20 12. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 2 IN COMPLETING ASSESSMENT U/S 153A/143(3) WITHOUT APPRECIATING THE FACT THAT NO INCRIMINATING DOCUMENT WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED R ETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 28.12.2007. THE ASSESSEE HAD SHOWN RECEIPT OF SHARE APPLICATION MONEY OF RS. 15 LACS FROM AGRAWAL ROAD CAR RIER PVT. LTD., WHICH WAS ACCEPTED BY THE ASSESSING OFFICE R IN THE SAID ORDER. THEREAFTER A SEARCH U/S 132 OF THE AC T WAS CONDUCTED AT THE BUSINESS/OFFICE PREMISES OF THE ASSE SSEE ON 5.2.2008. IN THE ASSESSMENT FRAMED IN PURSUANCE TO THIS SEARCH U/S 153A READ WITH SECTION 153(7) THE ASSESSING OFFICER MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED SHARE CAPITAL OF RS.15 LACS SHOWN IN THE NAM E OF AGRAWAL ROAD CARRIERS PVT. LTD. ON APPEAL, THE LEARN ED CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFI CER. M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 3 4. THE ASSESSEE CHALLENGED THE LEGALITY OF ISSUANCE OF NOTICE U/S 153A OF THE ACT AND THE CONSEQUENT FRAMING OF ASSESSMENT U/S 153A/143(3) BEFORE THE LEARNED CIT(A). THE LEARNED CIT(A) HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THOUGH REGULAR ASSESSMENT WAS MADE U/S 143(3) OF THE ACT BUT AS NO VI EW WAS FORMED ON THE ISSUE OF SHARE CAPITAL SHOWN IN THE NAME OF AGRAWAL ROAD CARRIERS PVT. LTD., THE ASSESSING OFFICER WAS JUSTIFIED IN ISSUING NOTICE U/S 153A AND CONSEQUENTLY FRAMING THE ASSESSMENT U/S 153A READ WITH SECTION 143(3) OF THE ACT. 5. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE AR GUED THAT IT HAS BEEN HELD IN VARIOUS DECISIONS OF THE HON' BLE HIGH COURT THAT WHEN NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, NO ADDITION COULD BE MAD E. HE RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (D EL) M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 4 AND CIT VS CONTINENTAL WARE HOUSING (2015) 374 ITR 645 (MUM). HE ALSO RELIED UPON THE DECISION OF THE INDO RE BENCH OF THE TRIBUNAL IN THE CASE OF DCIT VS. KALANI BROTHERS (INDORE) PVT. LTD. (2016) 27 ITJ 286 (TRI. INDORE) AND ANANT STEEL PVT. LTD. (2016) 28 ITJ 47(TRI INDORE ). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS ARE THAT IN THE RETURN OF INCOME FILE D FOR THE ASSESSMENT YEAR 2005-06 THE ASSESSEE HAS SHOWN SHARE CAPITAL OF RS.15 LACS RECEIVED FROM AGRAWAL ROAD CARRIERS PVT. LTD. THE ASSESSMENT WAS THEREAFTER FRAMED U/S 143(3) OF THE ACT ON 28.12.2007 ACCEPTING THE RE TURN OF INCOME. THEREAFTER A SEARCH AND SEIZURE OPERATION WAS CONDUCTED U/S 132 OF THE ACT IN THE CASE OF MADHYA BHAR AT (INTERNATIONAL) PVT. LTD., INDORE, ON 2.5.2008 AND INCRIMINATING DOCUMENTS OF THE ASSESSEE COMPANY WERE ALSO SEIZED. WHILE FRAMING THE ASSESSMENT U/S 153A RE AD M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 5 WITH SECTION 153C AND 143(3) THE ASSESSING OFFICER H AS OBSERVED AS UNDER :- I HAVE PERUSED THE CHRONOLOGICAL PROCEEDINGS OF THE ORIGINAL ASSESSMENT. THE ASSESSEE HAS SUBMITTED COPIES OF SHARE APPLICATION MONEY SUBMITTED BY THE SUBSCRIBER. CONFIRMATIONS OBTAINED FROM THE SUBSCRIBERS ARE ALSO FOUND PLACED ON RECORD. ON GOI NG THROUGH THE DETAILS OF THE SUBSCRIBERS NAME OF ONE OF THE SUBSCRIBERS HAS BEEN FOUND TO BE OF A COMPANY WHO IS KNOWN TO BE INVOLVED IN THE PRACTICE OF PROVIDING ACCOMMODATION ENTRIES. THE SAID COMPANY, NAMED AGRAWAL ROAD CARRIER, INDORE HAS PROVIDED ACCOMMODATION ENTRIES TO NOT ONLY THIS ASSESSEE BUT MANY MORE ASSESSMENT FILES AT THE DISPOSAL OF SEVERAL ASSESSING OFFICERS REFLECT THE CREDIT IN TH E NAME OF THE SAID COMPANY. IT IS WELL KNOWN NAME IN THE CIRCLES OF THE ASSESSING OFFICERS ON THE ISSUE OF M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 6 CREDIT, MAY BE IN THE CATEGORY OF SHARE APPLICATION OR UNSECURED LOAN. THE MODUS OPERANDI ADOPTED BY THIS PERSON IS THAT IT ROTATES ENTRIES FROM ONE PERSON T O ANOTHER WHEN IT IS A QUESTION OF UNSECURED LOAN. ON THE OTHER HAND IT SHOWS INVESTMENT IN SHARES OF OTH ER COMPANIES. AS REGARDS SOURCE THIS COMPANY USUALLY SHOWS RECEIPT OF SHARE APPLICATION OR SHARE PREMIUM OR IN THE ALTERNATIVE IT SHOWS CREDIT FROM THE PERS ONS WHOSE CREDITWORTHINESS ALWAYS REMAINS IN DARK. IN THE INSTANT CASE A CREDIT OF RS.15,00,000/- HAS BEE N SHOWN ON ACCOUNT OF SHARE APPLICATION MONEY IN THE NAME OF AGRAWAL ROAD CARRIERS. A CONFIRMATION HAS BEEN FILED IN SUPPORT OF THE SAID CREDIT. FROM THIS CONFIRMATION THE CREDITWORTHINESS OF THE SUBSCRIBER CANNOT BE ADJUDGED. ACCORDINGLY, THE ASSESSEE HAS FAILED TO ESTABLISH THE GENUINENESS OF THE CREDIT F OR WANT OF PROOF OF CREDITWORTHINESS OF THE SUBSCRIBER . M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 7 AS SUCH THE ABOVE AMOUNT OF RS.15,00,000/- IS ASSESSED U/S 68 OF THE INCOME TAX ACT. I AM SATISFI ED THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF ABOVE INCOME. HENCE PENALTY U/S 271(1)(C) IS SIMULTANEOUSLY INITIATED. A READING OF THE ABOVE ORDER OF THE ASSESSING OFFICER SHOWS THAT HE HAS NOT REFERRED TO ANY SEIZED MATERIAL DURING THE COURSE OF SEARCH WHILE MAKING THE ADDITION OF RS.15 LACS ON ACCOUNT OF SHARE CAPITAL RECEIVED BY THE ASSESSEE FROM AGRAWAL ROAD CARRIERS. A READING OF THE ABOVE ORDER SHOWS THAT THE ASSESSING OFFICER IS TRYIN G TO MAKE INQUIRIES WHICH ARE MADE WHILE MAKING THE ASSESSMENT U/S 143(3) OF THE ACT DURING THE COURSE O F REGULAR ASSESSMENT WHETHER THE SHARE APPLICANTS HAD THE CREDIT WORTHINESS TO ADVANCE THE SUM OF MONEY TO THE ASSESSEE, THE IDENTITY OF THE SHARE APPLICANTS ARE ESTABLISHED AND WHETHER THE TRANSACTIONS ARE GENUINE. M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 8 THUS, IN OUR CONSIDERED VIEW, AN ASSESSMENT U/S 143(3 ) WAS ALREADY FRAMED IN THE CASE OF THE ASSESSEE ON 27.12.2007 AND THE SHARE APPLICATION SHOWN THEREIN AT RS.15 LACS FROM AGRAWAL ROAD CARRIER WAS ALREADY ACCEPTED. THEREFORE, THE ADDITION ON THIS COUNT CANNOT BE MADE IN AN ASSESSMENT FRAMED U/S 153C READ WITH SECTION 143(3) OF THE ACT WITHOUT ANY SEARCH MATERIAL REFERRED TO AND BROUGHT ON RECORD BY THE ASSESSING OFFICER. WE FIND THAT THE HON'BLE DELHI HIGH COURT I N THE CASE OF KABUL CHAWLA (SUPRA) TAKING NOTE OF QUESTION POSED IN THE CASE OF ANIL KUMAR BHATIA WHICH READS AS UNDER :- '21. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OB VIOUSLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSES SING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INC OME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SE ARCH. FOR THIS PURPOSE, THE FETTERS IMPOSED UPON THE ASSESSING OFFICER BY THE S TRICT PROCEDURE TO ASSUME JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTIONS 147 AND 148, HAVE BEEN M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 9 REMOVED BY THE NON OBSTANTE CLAUSE WITH WHICH SUB S ECTION (1) OF SECTION 153A OPENS.' THE HON'BLE HIGH COURT OF DELHI HELD AS UNDER :- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, REA D WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTI ONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I . ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF TH E 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 IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES P LACE. II . ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHA LL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E COMPUTED BY THE AOS AS A FRESH EXERCISE. III . THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RE SPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT A Y 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 A O WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSES SMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MAD E UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V . IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPL ETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T 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 'REASSE SS' TO COMPLETED M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 10 ASSESSMENT PROCEEDINGS CEEDINGS. VI . INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE J URISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY F OR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL 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 R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH WHICH WERE NO T PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN I N THE COURSE OF ORIGINAL ASSESSMENT. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE HON 'BLE DELHI HIGH COURT, WE HOLD THAT THE ASSESSMENT MADE U/S 153C READ WITH SECTION 143(3) OF THE ACT ON 30.12.2010 IS BAD IN LAW. HENCE, WE SET ASIDE THE OR DERS OF THE AUTHORITIES BELOW. THE GROUNDS OF THE ASSESSE E ARE ACCORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN OPEN COURT ON 13 TH JULY, 2016 SD/- SD/- (D.T. GARASIA) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER JULY, 2016 M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 11 DN/- M/S ESSENCE INTERNATIONAL LTD. IT(SS) NO. 93/IND/2012 12