Smt. Sunita Gupta, New Delhi V. DCIT, New Delhi

CO 122/DEL/2017

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3692 (ITAT-DELHI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIT SINGH
• Keywords: Search and seizure; Deemed dividend
• Section: 153A; 263; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDIP SINGH , JM ITA NO. 4027/DEL/2014 : ASSTT. YEAR : 2005 - 06 DCIT, CENTRAL CIRCLE - 4, NEW DELHI VS SURUCHI SARAF, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AEEPG9091H CO NO.120/DEL/2017 : ASSTT. YEAR : 2005 - 06 SURUCHI SARAF, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI VS DCIT, CENTRAL CIRCLE - 4, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A EEPG9091H ITA NO. 4030/DEL/2014 : ASSTT. YEAR : 2005 - 06 DCIT, CENTRAL CIRCLE - 4, NEW DELHI VS SWATI SARAF, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AFUPG7627Q CO NO.121/DEL/2017 : ASSTT. YEAR : 2005 - 06 SWATI SARAF, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI V S DCIT, CENTRAL CIRCLE - 4, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AFUPG7627Q ITA NO. 4032 /DEL/2014 : ASSTT. YEAR : 2005 - 06 DCIT, CENTRAL CIRCLE - 4, NEW DELHI VS SUNITA GUPTA, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFPD3759C ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 2 CO NO.122 /DEL/2017 : ASSTT. YEAR : 2005 - 06 SUNITA GUPTA, E - 1A (E - 13), MAHARANI BAGH, NEW DELHI VS DCIT, CENTRAL CIRCLE - 4, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AAFPD3759C ASSESSEE BY : SH. R. S. SINGHVI, ADV. & SH. SATY AJIT GOEL, ADV. REVENUE BY : SH. SANJIT SINGH, CIT DR DATE OF HEARING : 16 .0 4 .201 8 DATE OF PRONOUNCE MENT : 17 .0 4 .201 8 ORDER PER BENCH : THE APPEALS BY THE DEPARTMENT AND THE CROSS OBJE CTIONS BY THE ASSESSEE S ARE DIRECTED AGAINST THE COMMON ORDERS DATED 14.02.2014 OF LD. CIT(A) - XXXIII, NEW DELHI. 2. COMMON GROUNDS RAISED BY THE ASSESSEE IN THESE CROSS OBJECTION READ AS UNDER: L(I). THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. C IT(A) WAS NOT JUSTIFIED IN UPHOLDING THE VALIDITY OF NOTICE U/S 153A EVEN THOUGH THERE WAS NO CASE OF ANY SEARCH U/S 132 OR ANY INCRIMINATING MATERIAL AND AS SUCH THE NOTICE U/S 153A IS ILLEGAL AND WITHOUT JURISDICTION. (II). THAT IN ABSENCE OF SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 AND NON - EXISTENCE OF ANY INCRIMINATING MATERIAL, THE NOTICE U/S 153A AND CONSEQUENTIAL ASSESSMENT PROCEEDINGS ARE AGAINST THE SCHEME OF THE ACT. ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 3 (III) THAT EVEN OTHERWISE, THE ASSESSMENT BEING BASED ON MATERIAL FOUND DURI NG SEARCH AT PREMISES OF THIRD PARTY AND IN ABSENCE OF RECORDING OF ANY SATISFACTION IN TERMS OF PROVISIONS OF SECTION 153C, THE ASSESSING OFFICER HAS FAILED TO SATISFY THE JURISDICTIONAL REQUIREMENT AND AS SUCH THE ENTIRE ASSESSMENT IS NULL AND VOID. 3. THAT IN ANY CASE, THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT IN ABSENCE OF ABATEMENT OF REGULAR ASSESSMENT PROCEEDINGS, IT IS NOT OPEN TO ASSUME JURISDICTION U/S 153A DEHORS ANY INCRIMINATING MATERIAL AS THE SAME IS IMPERMISSIBLE UNDER THE LAW AND AGAINS T THE OBJECT AND SPIRIT OF SECTION 153 A OF THE ACT. 4. THAT ORDERS OF LOWER AUTHORITIES ARE ILLEGAL AND WITHOUT JURISDICTION. 3. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT VIDE ORDER DATED 30.08.2017 IN CROSS OBJECTIONS NOS. 92 TO 96/DEL/2017 FOR THE ASSESSMENT YEAR 2005 - 06 IN THE CASE OF DIFFERENT ASSESSEES BELONGING TO THE SAME GROUP (COPY OF THE SAI D ORDER WAS FURNISHED WHICH IS PLACED ON RECORD). 4. IN HI S RIVAL SUBMISSIONS, THE LD. CIT DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 5. AFTER CONSIDERING THE SUBMISSIO NS OF BOTH THE PARTIES AND THE MATERIAL AVAILABLE ON THE RECORD, IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THE ITAT DELHI BENCH F , NEW DELHI IN CROSS OBJECTIONS NOS. 92 TO ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 4 96/DEL/2017 FILED BY THE ASSESSEE S BELONGING TO THE SAME GROUP TO WHICH PRESENT ASSESSEES BELONG FOR THE ASSESSMENT YEAR 2005 - 06 WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 10 TO 10.3 WHICH READS AS UNDER : 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IT IS UNDISPUTED THAT THE TRANSFER OF SHARES WAS DONE IN PURSUANCE TO A RESTRUCTURING OF THE FAMILY BUSINESS AND SCHEME OF RESTRUCTURING WAS DULY APPROVED BY THE HON'BLE DELHI HIGH COURT. THE ORDER U/S 394 OF THE COMPANIES ACT 19 56 WAS PASSED BY THE HON'BLE DELHI HIGH COURT ON 7.8.2003. IT IS ALSO UNDISPUTED THAT THE SHARES TRANSFERRED WERE AMONGST THE FAMILY MEMBERS OF THE FAMILY HELD COMPANIES AND NO SHARES WERE SOLD TO THE OUTSIDERS. IT IS ALSO UNDISPUTED THAT THE BUYERS/ASSESS EES ARE NOT AT LIBERTY TO TRANSFER THE SHARES SO ACQUIRED TO THIRD PARTIES OUTSIDE THE FAMILY CONCERN AND IN CASE THESE SHARES ARE REQUIRED TO BE TRANSFERRED, THE SELLERS WOULD HAVE A PRE - EMPTIVE RIGHT TO BUY BACK THE SAID SHARES. IT IS ALSO UNDISPUTED THA T THE MEMORANDUM OF UNDERSTANDING AS WELL AS THE SANCTION OF SCHEME OF MERGER RELATES BACK TO THE FY 2003 - 04. 10.1 FURTHER, A PERUSAL OF THE ASSESSMENT ORDERS REVEAL THAT WHILE MAKING THE IMPUGNED ADDITIONS, THE ASSESSING OFFICER HAS ONLY MENTIONED THE D ATE OF SEARCH BUT HAS NOT REFERRED TO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH WHICH COULD BE THE FOUNDATION OF THESE ADDITIONS. THERE IS NOT EVEN A WHISPER OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND AND RELIED UPON BY THE DEPARTME NT RELATING TO THESE ADDITIONS ON ACCOUNT OF PERCEIVED BENEFITS U/S 2(24)(IV) OF THE ACT. THERE ARE A PLETHORA OF DECISIONS IN WHICH THE HON'BLE HIGH COURTS HAVE HELD THAT THERE CAN BE NO VALID ASSESSMENT U/S 153A/153C OF THE ACT IN ABSENCE OF ANY INCRIMIN ATING MATERIAL. WE FIND THAT THE RELIANCE OF THE LD. AR ON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 5 IN THE CASE OF SHRI MAHESH KUMAR GUPTA (SUPRA) IS WELL PLACED AND SQUARELY COVERS ON THE ISSUE. IN THIS CASE, THE ITAT HAD CONCLUDED, BASED UPON THE MAT ERIAL AVAILABLE, THAT THE SEARCH AND SEIZURE OPERATIONS HAD NOT YIELDED ANY FRESH MATERIAL WARRANTING ADDITION U/S 153A OF THE ACT AND, THEREFORE, COULD NOT CLOTHE THE CIT(A) WITH THE AUTHORITY TO ADD THE AMOUNT ON THE BASIS OF A FRESH APPRAISAL OF THE EXI STING MATERIAL THAT FORMED PART OF THE ORIGINAL ASSESSMENT. HON'BLE DELHI HIGH COURT ADJUDICATED THE ISSUE IN PARA 4 AND 5 OF THE SAID JUDGMENT WHICH IS BEING REPRODUCED FOR A READY REFERENCE: - 4. THERE IS NO DISPUTE THAT THE SEARCH AND SEIZURE PROCEEDIN GS IN THIS CASE DID NOT RESULT IN ANYTHING, THEREFORE, MATERIAL EITHER IN THE FORM OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELATED TO THE ISSUE OF DEEMED DIVIDEND UNDER SECTION 2(22) OF THE ACT. THE AMOUNTS PAID WERE IN FACT ORIGINALLY DECLARED IN THE ASSES SMENT RETURNS OF THE ASSESSEE. THE CIT, THEREFORE, HAD OPPORTUNITY TO EXERCISE HIS POWERS AS IT WERE ON THE BASIS OF RETURNS AS FILED ORIGINALLY AND VALIDLY UNDER SECTION 263 OF THE ACT. 5. IN THE CIRCUMSTANCES IN THE ABSENCE OF ANY MATERIAL DISCLOSING T HAT THE ISSUE OF DEEMED DIVIDEND HAD BEEN WILFULLY DERIVED OR HAD BEEN DEEMED OR OTHERWISE WITHHELD FROM THE ASSESSMENT AN ADDITION UNDER SECTION 153A WAS WARRANTED - BASED ON THE PROPOSITION TAUGHT BY THIS COURT IN JUDGMENT DATED 28.08.2015 IN ITA 707/201 4 TITLED: CIT VS KABUL CHAWLA. THEREFORE, WE CONCUR WITH THE ITAT S OPINION IN THIS REGARD. THE SEARCH AND SEIZURE PROCEEDINGS IN SUCH CASES ARE UNDOUBTEDLY MEANT TO BRING TO TAX AMOUNT THAT ARE TO BE DETERMINED ON THE BASIS OF MATERIALS SEIZED IN THE COUR SE OF SUCH SEARCHES; PERMITTING ANYTHING OVER AND ABOVE THAT WOULD VIRTUALLY AMOUNT TO LETTING THE REVENUE HAVE A THIRD OR FOURTH OPINION AS IT WERE. SEARCHES - TO QUOTE THE VIEW OF ATTORNEY - GENERAL (NSW) VS QUIN (1990) HCA 21 IN ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 6 ANOTHER CONTEXT ARE NOT T HE KEY WHICH UNLOCKS THE TREASURY OF THE REVENUE S JURISDICTION IN REGARD TO MATTERS THAT HAD ATTRACTED ATTENTION IN THE REGULAR COURSE OF ASSESSMENT. 10.2 IN THE APPEALS BEFORE US, IT IS NOT THE CASE OF THE DEPARTMENT THAT ANY MATERIAL DISCLOSING THE ISSUE OF TRANSFER OF SHARES WAS WITHHELD FROM THE ASSESSMENT AND WAS FOUND AND SEIZED DURING THE COURSE OF SEARCH. IT IS ALSO NOT THE CASE OF THE DEPARTMENT THAT ANY OTHER INCRIMINATING MATERIAL WHICH COULD POINT OUT TO SUCH TRANSFER OF SHARES WAS UNEARTHE D DURING THE COURSE OF SEARCH AND WAS SUBSEQUENTLY RELIED UPON BY COMPLETING THE ASSESSMENT U/S 153A. IN SUCH A CIRCUMSTANCE, RESPECTFULLY APPLYING THE RATIO OF THE JUDGMENT IN THE CASE OF PR. CIT CENTRAL VS MAHESH KUMAR GUPTA (SUPRA) AS WELL AS OF CIT VS KABUL CHAWLA IN I.T.A. 707/2014 OF THE HON'BLE DELHI HIGH COURT, WE HOLD THAT PROCEEDINGS U/S 153A WERE AGAINST THE SCHEME OF THE ACT IN CASE OF ALL THE ASSESSEES. WE ALSO HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE VALIDITY OF THE PROCEED INGS U/S 153A. WE ARE OF THE CONSIDERED OPINION THAT IT WAS NOT OPEN FOR THE ASSESSING OFFICER TO ASSUME JURISDICTION U/S 153A DE HORS ANY INCRIMINATING MATERIAL. ACCORDINGLY, WE QUASH THE PROCEEDINGS U/S 153A IN CASE OF ALL THE FIVE ASSESSEES AND ACCORDIN GLY ALLOW THE C.O.S OF ALL THE FIVE ASSESSEES. 10.3 AS THE C.O.S OF THE ASSESSEES HAVE BEEN ALLOWED, THE DEPARTMENTAL APPEALS CHALLENGING THE DELETION OF THE IMPUGNED ADDITIONS BECOME IN FRUCTUOUS AND THE SAME ARE DISMISSED AS SUCH. 6. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 30.08.2017, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE DEPARTMENT . ACCORDINGLY, WE DO NOT SEE ANY MERIT IN ITA NO . 4991 /DE L/201 1 PROFORM INTERIORS PVT. LTD. 7 THE SE APPEALS FILED BY THE DEPARTMENT . T H E CROSS OBJECTIONS OF THE ASSESSEE ARE A LLOWED. 7 . IN THE RESULT, THE APPEAL S OF THE DEPARTMENT ARE DISMISSED AND CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED . (ORDER PRONOUNCED IN THE COURT ON 17 /0 4 /2018 ) SD/ - SD/ - ( KULDIP SINGH ) (N. K. SAINI) JUD ICIAL MEMBER ACCOUNTANT MEMBER DATED: 17 /0 4 /2018 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR