M/s Basant Projects Ltd., New Delhi V. DCIT, New Delhi

CO 202/DEL/2013

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4116 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-04-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K JAIN
• Assessee Lawyers: RAVI JAIN
• Keywords: Unexplained cash credit; Search and seizure
• Section: 143(3); 153A; 143(2); 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 3125/DEL/2013 AY: 20 04-05 DCIT, VS M/S BASANT PROJECTS LTD., CENTRAL CIRCLE-I, B-4, VIKAS APARTMENT, NEW DELHI. 34/1, EAST PUNJABI BAGH, NEW DELHI-26 (PAN: AABCB8143M) C.O. NO. 202/DEL/2013 (IN ITA NO. 3125/DEL/2013) AY: 20 04-05 BASANT PROJECTS LTD., VS DCIT, CC-I, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVI JAIN, CIT DR RESPONDENT BY : SHRI A.K. JAIN, CA DATE OF HEARING: 27.04.2016 DATE OF PRONOUNCEMENT: ORDER PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE DEPAR TMENT AGAINST THE ORDER DATED 11.03.2013 PASSED BY THE LD . CIT(A)-III, NEW DELHI FOR ASSESSMENT YEAR 2004-05 WHEREAS THE C O HAS BEEN FILED BY THE ASSESSEE. 2. THE FACTS OF THE CASE, IN BRIEF, ARE THAT A SEAR CH AND SEIZURE ACTION WAS CARRIED ON ASSESSEE'S PREMISES ON 20.08. 2009 WHICH I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 2 IS A PART OF UNITY GROUP OF COMPANIES. THE OTHER COMPANIES/CONCERNS WHICH WERE ALSO SEARCHED ALONG W ITH THE ASSESSEE ARE AS UNDER:- 3. DURING THE COURSE OF THE PROCEEDING UNDER SECTIO N 153A IN THE ASSESSEES CASE, THE AO FOUND THAT THE ASSESSEE HAD INCREASED THE SHARE CAPITAL/SHARE APPLICATION MONEY BY RS. 1052.2 4 LACS FROM 84 DIFFERENT ENTITIES. THE AO HAS MADE ENQUIRIES FROM 33 ENTITIES BY SENDING THE NOTICES UNDER SECTION 133(6)/131 OF THE ACT FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 AND 2007 -08. S . NO. NAME OF THE APPELLANT 1 . NORTH DELHI PROJECTS LTD. 2. UNITY BUILDWELL PROJECTS LTD. 3. UNITY PROJECTS P. LTD. 4. UNITY TOWNSHIP P. LTD. 5. PRESTIGE BUILDWELL P. LTD. 6. SANKALP AGENCIES P. LTD. 7. AGGARWAL TOWER P. LTD. 8. AGARWAL ENTERTAINMENT P. LTD. U \ 9. NEW HORIZON BUILDWELL P. LTD. 10. FUN CITY DEVELOPERS P. LTD. 11. MITTASO PROJECTS P. LTD. 12. AGGARWAL PLAZA P. LTD. I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 3 4. FOR THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2004-05, THE AO ISSUED NOTICES TO 21 ENTITIES. 5. OUT OF 21 ENTITIES, 19 ENTITIES FILED THEIR WRIT TEN CONFIRMATIONS AND OTHER RELATED DOCUMENTS ETC. HOWE VER, REMAINING 2 ENTITIES NAMELY VIKAS PARAFINS PVT. LTD . AND RAF STEEL PVT. LTD., WHO HAD INVESTED RS. 10,00,000/- A ND 20,00,000/- RESPECTIVELY, DID NOT COMPLY WITH THE N OTICES ISSUED UNDER SECTION 131. ACCORDINGLY RS 30,00,000 INVESTE D BY THEM WERE TREATED AS UNEXPLAINED CREDIT AND ADDITION WAS MADE TO ASSESSEE'S INCOME BY THE AO. 6. IN THE APPEAL BEFORE THE LD. FIRST APPELLATE AUT HORITY, THE ASSESSEE CHALLENGED THE ASSESSMENT FRAMED U/S 153A ON THE GROUND THAT NO INCRIMINATING DOCUMENTS WERE FOUND R ELATING TO IT AND, THEREFORE, NO ADDITION COULD BE MADE. THE ADD ITION WAS CHALLENGED ON MERITS ALSO. THE LD. CIT (A) REJECTE D THE ASSESSEES LEGAL GROUND RELATING TO THE VALIDITY OF PROCEEDING S U/S 153A BUT ALLOWED THE ASSESSEES APPEAL ON MERITS AND DELETED THE ENTIRE ADDITION. 7. NOW THE DEPARTMENT HAS FILED AN APPEAL AND HAS R AISED THE FOLLOWING GROUNDS:- I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 4 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 30,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF UNEXPLAINED CASH CREDITS U/S 68 OF THE INCOME TA X ACT 1961, UNDER THE HEAD SHARE APPLICATION MONEY RECEIV ED BY THE ASSESSEE FROM DIFFERENT ENTITIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCE OF THE CASE, T HE C1T(A) HAS ERRED, IN NOT APPRECIATING IN OBSERVATIO N OF THE ASSESSING OFFICER ON FACTS OF THE CASE THAT THE ASSESSEE FAILED TO PROVE THE CREDITWORTHINESS OF TH E SHARES APPLICANTS AS WELL AS GENUINENESS OF THE TRANSACTION WITHIN THE MEANING OF SECTION 68 OF THE ACT. 3. THE ORDER OF THE CIT (A) IS ERRONEOUS AND IS NOT TE NABLE ON FACTS AND IN LAW. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING T HE COURSE OF THE HEARING OF THE APPEAL. 8. IN THE CO, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE PROCEEDINGS INIT IATED UNDER SECTION 153A OF I.T. ACT, WHICH IS BAD IN LAW IN THE ABSENCE MY INCRIMINATING MATERIAL BELONGING TO THE ASSESSEE BEING FOUND DURING THE COURSE OF SEARCH. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE VALIDATE OF IMPU GNED ASSESSMENT ORDER DATED 30.12.2011 U/S 153A OF I.T. ACT AS FRAMED BY THE ASSESSING OFFICER IN RESPECT OF CL OSED ASSESSMENT FOR WHICH NO INCRIMINATING MATERIAL SEIZ ED DURING THE COURSE OF SEARCH AND SEIZURE ACTION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS IN CONFIRMING THE ACTION AND PROCE DURE I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 5 FOLLOWED BY THE ASSESSING OFFICER DURING THE PROCEE DING U/S 153A OF THE I.T. ACT, WHICH IS INVALID IN EYES OF LAW BEING BASED ON INCORRECT POSTULATE THAT SEARCH ASSESSMENT U/S 153A IS DE NOVO IN NATURE WHEREAS TH E SAME IS TO BE BASED AND CONFINED TO INCRIMINATING MATERIAL UNEARTHED DURING SEARCH OPERATIONS. 9. BEFORE PROCEEDING WITH THE GROUNDS OF APPEAL OF THE DEPARTMENT, WE DEEM IT APPROPRIATE TO FIRST ADDRESS AND ADJUDICATE ON THE CO OF THE ASSESSEE AS THE LEGAL I SSUE RAISED BY THE ASSESSEE IS GERMANE TO THE ENTIRE ASSESSMENT PR OCEEDINGS. 10. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE ADDITION OF RS. 30 LACS HAS BEEN MADE ON ACCOUNT OF ANY INCRIMINATING MATER IAL FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS . IT WAS FURTHER SUBMITTED BY THE LD. AR THAT AS PER THE SEC OND PROVISO OF SECTION 153 A ONLY THE ASSESSMENTS WHICH WERE PENDI NG ON THE DATE OF INITIATION OF SEARCH U/S 132 OF THE ACT WIL L ABATE AND THE ASSESSMENT PROCEEDINGS WHICH HAVE BECOME FINAL AS O N THE DATE WILL NOT STAND ABATED. IT WAS FURTHER SUBMITTED THA T NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH TO SHOW THAT THE ENTRIES WERE NOT GENUINE. LD. AR ALSO DREW OUR ATTENTION TO THE DECISION OF THE HONBLE HIGH COUR T OF DELHI IN I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 6 CIT CENTRAL-III VS. KABUL CHAWLA IN ITA NOS. 707/20 14, 709/2014 AND 713/2014. 11. LD. DR ON THE OTHER HAND SUPPORTED THE ORD ER OF THE AO. 12. WE HAVE CAREFULLY CONSIDERED THE MATERIAL PL ACED BEFORE US AND THE ISSUE INVOLVED. SECTION 153A OF THE ACT PRO VIDES THAT WHERE A SEARCH IS INITIATED U/S 132 OF THE ACT, THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME OF THE SIX ASS ESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH IS CONDUCTED OR R EQUISITION IS MADE. THE FIRST PROVISO STATES THAT THE AO SHALL ASSESS OR REASSESS THE TOTAL INCOME IN RESPECT OF EACH ASSESS MENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS . THE SECOND PROVISO STATES THAT THE ASSESSMENT OR REASSESSMENT RELATING TO THE SAID SIX ASSESSMENT YEARS PENDING ON THE DATE OF INITIAT ION OF THE SEARCH U/S 132 SHALL ABATE. IT IS SEEN THAT IN ASSE SSEES CASE SEARCH ACTION WAS INITIATED AND ASSESSMENTS U/S 153 A WERE FRAMED FOR SIX ASSESSMENT YEARS MAKING VARIOUS ADDI TIONS. IT IS ASSESSEES CLAIM THAT THE ADDITION OF RS. 30 LACS W AS NOT TENABLE AS THE REGULAR RETURN HAD BEEN FILED AND THE ORIGIN AL ASSESSMENT HAD ALREADY BEEN COMPLETED U/S 143(3) OF THE ACT. I T IS ALSO THE ASSESSEES CONTENTION THAT NO MATERIAL HAS BEEN FOU ND DURING THE I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 7 SEARCH TO JUSTIFY THE ADDITION. IN OUR CONSIDERED O PINION SECTION 153A DOES NOT AUTHORISE THE MAKING OF A DE NOVO ASSESSMENT IN THIS PARTICULAR ASSESSMENT YEAR. WHILE UNDER THE FI RST PROVISO, THE AO IS EMPOWERED TO FRAME ASSESSMENT FOR SIX YEA RS, UNDER THE SECOND PROVISO ONLY ASSESSMENTS WHICH ARE PENDI NG ON THE DATE OF INITIATION OF SEARCH ABATE. THE EFFECT IS T HAT COMPLETED ASSESSMENTS DO NOT ABATE. THE ASSESSMENTS CAN BE SA ID TO BE PENDING ONLY IF THE AO IS STATUTORILY REQUIRED TO D O SOMETHING FURTHER. IF THE SECTION 143(2) NOTICE HAS BEEN ISSU ED, THE ASSESSMENT CAN BE SAID TO BE PENDING. HOWEVER, ASSE SSMENT ALREADY COMPLETED U/S 143(3) CANNOT BE SAID TO BE P ENDING. THE POWER GIVEN BY THE FIRST PROVISO TO ASSESS INCOME F OR SIX ASSESSMENT YEARS HAS TO BE CONFINED TO THE UNDISCLO SED INCOME UNEARTHED DURING SEARCH AND CANNOT INCLUDE ITEMS WH ICH WERE ALREADY BEFORE THE AO DURING THE COURSE OF THE ORIG INAL ASSESSMENT PROCEEDINGS . 13. IT WILL BE RELEVANT AT THIS STAGE TO REPROD UCE PARA 37 OF THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT CENTRAL III VS. KABUL CHAWLA (SUPRA) WHICH LAYS D OWN THE ENTIRE LAW WITH REGARD TO SECTION 153A AS UNDER :- I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 8 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 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. I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 9 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 FINDING 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. 14. IT IS UNDISPUTED IN THE PRESENT CASE THAT THE O RIGINAL ASSESSMENT PROCEEDINGS HAD ALREADY BEEN COMPLETED U /S 143(3) PRIOR TO THE DATE OF THE SEARCH. IT IS EQUALLY UND ISPUTED THAT THE IMPUGNED ADDITIONS WERE MADE BY THE ASSESSING OFFIC ER WITHOUT THERE BEING ANY FINDING THAT THE ADDITIONS RELATED TO ANY SEIZED MATERIAL. THE LD. CIT(A) HAS GIVEN A CATEGORICAL F INDING IN PARA I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 10 10.1 OF HIS ORDER THAT IN RESPECT OF THE ENTITIES W HO HAD SUBSCRIBED TO THE SHARES, THE ASSESSING OFFICER HAD ASKED FOR VARIOUS DETAILS WHICH WERE FILED BY THE ASSESSEE TO PROVE THE IDENTITY AND CREDITWORTHINESS OF THE SHARE SUBSCRIB ERS, AT THE TIME OF THE ORIGINAL 143(3) PROCEEDINGS. THE LD. CIT (A ) HAS ALSO MENTIONED THAT THE ASSESSING OFFICER IN 143(3) PROC EEDINGS, AFTER CONSIDERING ALL THE EVIDENCES/DOCUMENT, ACCEPTED TH E CREDITWORTHINESS, IDENTITY AND GENUINENESS OF THE T RANSACTIONS AND THAT NO ADDITIONS WERE MADE ON ACCOUNT OF UNEXP LAINED CREDIT U/S 68 OF THE ACT. IN THE SUBSEQUENT ASSESS MENT ORDER U/S 153A/143(3), THE ADDITIONS HAVE BEEN MADE WITHOUT A NY REFERENCE TO ANY INCRIMINATING MATERIAL AND THEREFORE FOLLOWI NG THE RATIO LAID DOWN BY THE HON'BLE DELHI HIGH COURT IN CIT CENTRAL -III VS KABUL CHAWLA (SUPRA), WE ALLOW THE CO OF THE ASSESSEE AND QUASH THE ASSESSMENT ORDER PASSED U/S 143(3)/153A. 15. IN VIEW OF OUR FINDINGS IN THE CO, THE APPEAL O F THE DEPARTMENT IS DISMISSED. 16. IN THE FINAL RESULT, THE APPEAL OF THE DEPARTME NT IS DISMISSED AND CO OF THE ASSESSEE IS ALLOWED. I.T.A. 3125/DEL/2013 ASSESSMENT YEAR 2004-05 11 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2016. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVA STAVA) VICE PRESIDENT JUDICIAL MEMBER DATED: THE 29 TH OF JUNE 2016 GS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER ASSTT. REGISTRAR