VISHAL JAYENDRA JHAVERI, MUMBAI V. ACIT CEN CIR 33, MUMBAI

CO 285/MUM/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1313 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 13-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G M DOSSDR
• Keywords: Search and seizure; Audit objection; Period of limitation; Validity of assessment; Time period of passing order; Revised return; Reason to believe
• Section: 143(3); 142(1); 153A; 139(5); 147; 148; 132; 144; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NOS.2146 & 2147/MUM/2012 ASSESSMENT YEARS: 2005-06 AND 2006-07 ACIT, CC.33, ROOM NO.32(2), GROUND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MARINE LINES, MUMBAI-400020 / VS. SHRI VISHAL JAYENDRA JHAVERI 29, NIDHI KHOTACHI WADI, 1 ST FLOOR, S.V.P. ROAD, MUMBAI-400004 ( / REVENUE) ( !' # /ASSESSEE) PAN. NO. ACPPJ9859F CROSS OBJECTION NO.284 & 285/MUM/2013 (ARISING OUT OF ITA NOS.2146 & 2147/MUM/2012) ASSESSMENT YEARS: 2005-06 AND 2006-07 SHRI VISHAL JAYENDRA JHAVERI 29, NIDHI KHOTACHI WADI, 1 ST FLOOR, S.V.P. ROAD, MUMBAI-400004 / VS. ACIT, CC.33, ROOM NO.32(2), GROUND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MARINE LINES, MUMBAI- 400020 ( !' # /ASSESSEE) ( / REVENUE) PAN. NO.ACPPJ9859F / REVENUE BY SHRI G.M. DOSS-DR !' # / ASSESSEE BY SHRI DHARMESH SHAH VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 2 $ % & # ' / DATE OF HEARING : 24/09/2015 & # ' / DATE OF ORDER: 16/10/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH THESE APPEALS ARE BY THE REVENUE AND CROSS OBJECTIONS BY THE ASSESSEE CHALLENGING THE IMPUGNED ORDERS BOTH DATED 11/01/2012 OF THE LD. FIRST APPELLATE AU THORITY, MUMBAI. 2. THE GROUND RAISED IN THESE APPEALS PERTAINS TO DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDIT ION MADE ON ACCOUNT OF LOW NET PROFIT REWORKED OUT AT 0.14% WHE N THE ESTIMATION MADE BY THE ASSESSING OFFICER WAS BASED ON COMPARABLE CASES AND FURTHER ADMISSION OF ADDITION AL EVIDENCE CONTRAVENING RULE 46A OF INCOME TAX RULES 1962 (HEREINAFTER THE RULES). 2.1. DURING HEARING OF THESE APPEALS, SHRI G.M.DOS S, LD. DR, ADVANCED HIS ARGUMENTS, WHICH ARE IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, SHRI DHARMESH SHA H, LD. COUNSEL FOR THE ASSESSEE EXPLAINED THAT THE IMPUGNE D ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL, ON IDENTIC AL FACTS, IN THE CASE OF FATHER AND UNCLE OF THE ASSESSEE. OUR ATTENTION WAS INVITED TO PAGE 77, 78, 80, 90 AND 95 OF THE PA PER BOOK BY PLACING RELIANCE UPON THE DECISION IN CONTINENTA L WAREHOUSING CORPORATION AND ALL CARGO GLOBAL LOGIST IC LTD. 374 ITR 645 (BOM). RELIANCE WAS ALSO PLACED UPON TH E VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 3 DECISION IN THE CASE OF ACIT VS SHRI JAYENDRA P. JH AVERI (ITA NO.2141 TO 2144/MUM/2012) (ASSESSMENT YEARS 2003-04 TO 2006-07), ORDER DATED 20/02/2014, ITA NO.2139, 2140 , 2159 AND 2160/MUM/2012, IN THE CASE OF ACIT VS YOGIN P. JHAVERI, ORDER DATED 15/09/2014 IN THE CASES OF REL ATIVES OF THE ASSESSEE (FATHER AND UNCLE), WHICH ARE EXACTLY IDENTICAL ON FACTS. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION OF THE ORDER DATED 20/02/2014 (ITA NO.2141 TO 2144/MUM/2012) FOR READY REFERENCE:- THESE FOUR APPEALS BY THE REVENUE ARISE OUT OF THE COMMON ORDER OF THE CIT(A)- 41, MUMBAI, DATED 11.01.2012 P ERTAINING TO A.YS. 2003-04, 2004-05, 2005-06 & 2006-07. THE CROS S- OBJECTIONS ARE BY THE ASSESSEE AGAINST THE VERY SAM E ORDER OF THE CIT(A). AS COMMON ISSUES ARE INVOLVED IN THESE APPE ALS AND CROSS-OBJECTIONS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT I N THE CASE OF THE ASSESSEE ON 14.08.2008 U/S. 132 OF THE INCOME T AX ACT. PURSUANT THERETO, THE AO ISSUED NOTICE U/S. 153A TO THE ASSESSEE TO FILE THE RETURN OF INCOME FOR SIX YEARS SUBSEQUE NT TO THE SEARCH. IN RESPONSE TO THE NOTICE, THE ASSESSEE FIL ED RETURN OF VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 4 INCOME BEFORE THE AO. THE AO, THEREAFTER, ISSUED NO TICE U/S. 143(2) AND 142(1) OF THE I.T. ACT ALONG WITH QUESTI ONNAIRE FOR SUBMISSION OF DETAILS. THE ASSESSEE SUBMITTED BEFOR E THE AO THAT BOOKS OF ACCOUNT AND OTHER DETAILS WERE DESTROYED I N THE FLOOD IN THE YEAR 2005 AND, THEREFORE, THE SAME COULD NOT BE PRODUCED. SINCE THE ASSESSEE FAILED TO PRODUCE THE BOOKS OF A CCOUNTS, THE AO PASSED THE ORDER U/S. 144 R.W.S. 153A OF THE I.T . ACT. THE AO ESTIMATED THE NET PROFIT OF THE ASSESSEES PROPRIET ARY CONCERN, M/S. J. P. EXPORTS @ 0.99% ON THE BASIS OF NET PROF IT RATIO OF CERTAIN OTHER PERSONS WHO WERE ENGAGED IN A SIMILAR BUSINESS AS THAT OF THE ASSESSEE AND THUS MADE THE ADDITIONS AC CORDINGLY TO THE TOTAL INCOME OF THE ASSESSEE. THE AO FURTHER DI SALLOWED THE DEDUCTIONS UNDER CHAPTER VI CLAIMED BY THE ASSESSEE AND ALSO DECLINED TO GIVE CREDIT OF TAX PAID FOR WANT OF PRO OF. 3. THE CIT(A) UPHELD THE ACTION OF THE AO FOR PASSI NG THE ORDER U/S. 144 R.W.S 153A OF THE INCOME TAX ACT. HOWEVER HE DIRECTED THE AO TO RE-COMPUTE THE NET PROFIT OF THE ASSESSEE BY ADOPTING THE NET PROFIT OF 0.14% AND DELETED THE BALANCE ADD ITION OUT OF THAT WAS MADE BY THE AO. HE FURTHER DIRECTED THE AO TO LOOK INTO THE RECORD AND ALLOW THE CREDIT OF TAX PAID AS PER LAW. 4. THE REVENUE THUS IS IN APPEAL BEFORE US, AGAINST THE ACTION OF THE CIT(A) IN DIRECTING THE AO TO REWORK THE NET PR OFIT OF THE ASSESSEE AT THE LOWER RATE OF 0.14% AS AGAINST THE 0.99% ESTIMATED BY THE AO. WHEREAS THE ASSESSEE HAS FILED THE CROSS OBJECTIONS AGAINST THE ACTION OF THE CIT(A) IN UPHO LDING OF ASSESSMENT PROCEEDINGS MADE BY THE AO UNDER SECTION 153A OF THE ACT. VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 5 5. THE LEARNED REPRESENTATIVE OF THE ASSESSEE, AT T HE OUTSET HAS SUBMITTED, AS ADMITTED BY THE LEARNED DR ALSO, THAT THE QUESTION AS TO VALIDITY OF ASSESSMENT U/S 153A BE ADJUDICATE D FIRST BECAUSE IF THE SAME IS DECIDED IN FAVOUR OF THE ASS ESSEE, THEN THE CONSEQUENTIAL COMPUTATION OF NET PROFITS WILL NOT S URVIVE. HENCE THE ISSUE OF VALIDITY OF ASSESSMENT U/S 153A RAISED BY THE ASSESSEE IN HIS CROSS OBJECTIONS IS TAKEN FIRST FOR ADJUDICATION. 6. THE CONTENTION OF THE LEARNED AR HAS BEEN THAT S INCE NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH AND SEIZURE OPERATION, THE RE-ASSESSMENT MADE BY THE AO U/S 153 A WAS NOT VALID. HE HAS FURTHER SUBMITTED THAT SINCE THE LIMI TATION PERIOD FOR ISSUING NOTICE U/S 143(2) OF THE ACT HAD ALREAD Y BEEN EXPIRED AND AS SUCH THE ASSESSMENTS IN RELATION TO ABOVE ME NTIONED ASSESSMENT YEARS HAD ATTAINED FINALITY. THERE WAS A S SUCH NO ABATEMENT OF ANY PENDING ASSESSMENT PROCEEDINGS. TH E REASSESSMENT COULD HAVE BEEN MADE ONLY IF THERE WER E FOUND ANY INCRIMINATING MATERIAL AGAINST THE ASSESSEE. 7. ON THE OTHER HAND, THE CONTENTION SH. S.D. SHRIV ASTVA, THE LEARNED DR, HAS BEEN THAT IN THIS CASE NO BOOKS OF ACCOUNTS WERE FOUND DURING SEARCH OPERATION CARRIED U/S 132 OF TH E ACT. THE EXPLANATION OF THE ASSESSEE THAT THE BOOKS OF ACCOU NTS WERE DESTROYED IN FLOODS WAS NOT PLAUSIBLE. THE ABSENCE OF THE BOOKS OF ACCOUNTS, ITSELF, WAS THE INCRIMINATING EVIDENCE AGAINST THE ASSESSEE NECESSITATING INITIATION OF ASSESSMENT PRO CEEDINGS U/S 153A OF THE ACT. HIS FURTHER CONTENTION HAS BEEN TH AT THE EARLIER THE RETURN FILED BY THE ASSESSEE IN THIS CASE WAS P ROCESSED BY THE AO U/S 143(1) OF THE ACT WHICH AMOUNTS TO JUST THE INTIMATION VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 6 AND CANNOT BE SAID TO BE AN ASSESSMENT AS PER THE L AW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI 291 ITR 500. APART FROM THAT, BOTH THE REPRESENTATIVES OF THE PARTIES HAVE RELIED UPON VARIOUS CASE LAWS WHICH WE WILL AL SO DISCUSS ALONG WITH THE RELEVANT POINTS OF ARGUMENTS. 8. THE LEARNED DR HAS ALSO FILED WRITTEN SUBMISSIO NS. TO STRESS HIS POINT THAT THE RETURN PROCESSED U/S. 143(1) CAN NOT BE SAID TO BE AN ASSESSMENT BUT A MERE INTIMATION, HE HAS RELI ED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF R AJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 ( SC). HIS CONTENTION HAS BEEN THAT IN THE CASE IN HAND THE AS SESSMENT WAS NOT DONE ORIGINALLY U/S. 143(3) HENCE THE ESTIMATIO N IN QUESTION HAS BEEN RIGHTLY MADE U/S. 153A OF THE ACT BY THE A O. HE HAS FURTHER CONTENDED THAT THE PRINCIPAL LAID DOWN BY T HE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLO BAL LOGISTICS LTD. 137 ITD 287 CAN BE APPLIED TO THE CASE WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT AND NOT TO THE CASE WHERE THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR. SO FAR SO THE RELIANCE PLACED BY HIM IN THE CASE OF RAJES H JHAVERI STOCK BROKERS P. LTD. (SUPRA) IS CONCERNED, WE MAY OBSER VE THAT THE ISSUE BEFORE THE HONBLE SUPREME COURT IN THAT CASE WAS REGARDING THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. THE HONBLE SUPREME COURT HELD THAT THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF ADANI EXPORTS V. DEPUTY CIT, (1999) 240 ITR 224 (GUJ) WA S NOT APPLICABLE IN THAT CASE. IN THE CASE OF ADANI EXPO RTS (SUPRA), VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 7 WHERE THE ASSESSMENT WAS MADE U/S. 143(3) OF THE AC T, AND THEAO DID NOT HOLD ANY BELIEF THAT INCOME HAD ESCAP ED ASSESSMENT ON ACCOUNT OF ERRONEOUS COMPUTATION, THE RE- OPENING U/S. 147 MADE MERELY ON THE BASIS OF AUDIT OBJECTIONS WAS HELD TO BE BAD IN LAW BY THE HONBLE HIGH COURT . IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA), THE HONBLE SUPREME COURT WHILE INTERPRETING THE PROVISIONS OF SECTION 143(1) AND SECTION 143(3) (AS WERE IN FORCE DURING THE RELEVANT TIME PERIOD) HAS HELD THAT IN CASE OF ASSESSMENT MA DE U/S. 143(3), THE ASSESSMENT IS MADE BY THE AO BY APPLYIN G HIS MIND WHEREAS IN CASE OF PROCESSING OF RETURN U/S. 143(1) OF THE ACT, THERE IS NO APPLICATION OF MIND BY THE AO AND AS SU CH, IF A NEW MATERIAL COMES INTO THE KNOWLEDGE OF THE AO AND THE REQUIREMENTS OF SECTION 147 OF THE ACT ARE FULFILLE D, THE AO IS FREE TO INITIATE PROCEEDINGS U/S. 147 AND THE FAILURE TO TAKE STEPS U/S. 143(3) WILL NOT RENDER THE AO POWERLESS TO INITIATE RE-ASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION U/S. 143(1) HAD BE EN ISSUED. SO THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) RELATES TO THE POWER S OF THE AO FOR RE-OPENING OF ASSESSMENT U/S. 147IN RELATION TO THE ASSESSMENT PROCEEDINGS CONDUCTED UNDER SECTION 143(1) VIZ-A-VI Z U/S 143(3) OF THE ACT. (AS WERE IN FORCE DURING THE RELEVANT P ERIOD, SINCE SECTION 143 HAS BEEN FURTHER AMENDED VIDE FINANCE A CT 2008 W.E.F 01.04.2008.) IT IS TO BE NOTED THAT POWERS OF THE AO TO RE- OPEN AN ASSESSMENT U/S. 147 IS SUBJECT TO LIMITATIO N OF TIME PERIOD AS PRESCRIBED U/S. 149 OF THE ACT. SO THE RE ASONABLE CONCLUSION WILL BE THAT WHETHER THE RETURN WAS PROC ESSED U/S. VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 8 143(1) OR U/S. 143(3), IF THE AO HAS A REASON TO BE LIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, HE CAN RE- OPEN THE ASSESSMENT U/S. 147 BY ISSUING NOTICE U/S. 148 BUT WITHIN THE TIME LIMIT AS PRESCRIBED U/S. 149 OF THE ACT. 10. SO FAR SO, THE QUESTION AS TO THE PROCESSING OF RETURN U/S. 143(1) VIZ-A-VIZ ASSESSMENT MADE U/S. 143(3) IS CON CERNED, IT MAY FURTHER BE OBSERVED THAT AFTER PROCESSING OF RE TURN U/S. 143(1) THE SAME CAN BE ASSESSED U/S. 143(3) BY ISSU E OF NOTICE U/S. 143(2) SUBJECT TO ITS ISSUANCE WITHIN THE LIMI TATION PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH RETURN IS FURNISHED AS PER THE PROVISO TO CLAUSE (II) OF SECT ION 143(2) [AS WAS EXISTING AT THE TIME OF RELEVANT ASSESSMENT YEA R]. ONCE THE LIMITATION PERIOD AS PRESCRIBED VIDE PROVISO TO CLA USE (II) OF SUB SECTION (2) OF SECTION 143 IS EXPIRED, IT IS NOT OP EN TO THE AO TO ASSESS THE INCOME U/S. 143(3) OF THE ACT AND THE RE TURN FILED BY THE ASSESSEE U/S. 139 IS DEEMED TO BE ACCEPTED, WHI CH HOWEVER, CAN BE RE-OPENED U/S. 147 OF THE ACT SUBJECT TO THE FULFILLMENT OF INGREDIENTS OF SECTION 147 AND WITHIN THE TIME PERI OD AS PRESCRIBED U/S. 149 OF THE ACT, AS DISCUSSED IN THE PRECEDING PARA. SO UNDER SUCH CIRCUMSTANCES IF THE RETURN IS PROCESSED U/S. 143(1) AND NOT U/S. 143(3) AND AFTER THE PRESCRIBED PERIOD OF LIMITATION, THE SAME CANNOT BE ASSESSED U/S. 143(3) THOUGH IT MAY BE INTERPRETED AS MERE INTIMATION ASSESSMENT OR OTHERWISE, BUT THE SAME SHALL BE DEEMED TO BE ACCEPTED BY THE AO AND IT WILL NOT HAVE ANY DIFFERENT COLOUR OTHER THAN THE R ETURN WHICH IS PROCESSED U/S. 143(3) OF THE ACT. THE ONLY DISTINGU ISHING FEATURE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF RAJESH VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 9 JHAVERI STOCK BROKERS P. LTD. (SUPRA), WOULD BE TH AT IF TO A SET OF FACTS AND CIRCUMSTANCES, THE AO HAS APPLIED HIS MIN D AND HE WAS OF THE BELIEF THAT THERE WAS NO ESCAPEMENT OF INCOM E THEN FOR INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT, HE IS PRECLUDED, ON THE BASIS OF SAME FACTS AND CIRCUMSTANCES, TO SA Y THAT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS E SCAPED ASSESSMENT. WHEREAS IN CASE OF RETURNS PROCESSED U/ S. 143(1), SINCE THE AO DOES NOT APPLY HIS MIND, SUCH A DEFENS E IS NOT AVAILABLE TO THE ASSESSEE. HOWEVER, THAT PROPOSITIO N OF LAW DOES NOT HELP THE REVENUE IN THE PRESENT CASE WHICH IS A CASE OF ASSESSMENT/RE-ASSESSMENT U/S. 153A OF THE ACT. 11. ADMITTEDLY, IN THE CASE IN HAND, THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT BUT THE SAME HAS ATTAINED FI NALITY DUE TO THE EXPIRY OF LIMITATION PERIOD OF TWELVE MONTHS FR OM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED. HENCE, THE ASSESSMENT IS DEEMED TO BE COMPLETED AND NOT PENDING ON THE DA TE OF SEARCH ON 14.08.2008. ADMITTEDLY, NO INCRIMINATING MATERIAL WAS FOUND FROM THE PREMISES OF THE ASSESSEE DURING THE SEARCH U/S. 132 OF THE ACT. THE SPECIAL BENCH OF THE TRIBUNAL I N THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), HAS HELD THAT ASSESSMENT U/S. 153A CAN BE MADE ON THE BASIS OF IN CRIMINATING MATERIAL FOUND DURING THE SEARCH. THE HONBLE RAJAS THAN HIGH COURT IN THE CASE OF JAI STEEL (INDIA) V. ACIT (2 013) 259 CTR 281 HAS HELD THAT IN CASE NOTHING INCRIMINATING IS FOUN D ON ACCOUNT OF SEARCH OR REQUISITION, THE QUESTION OF REASSESSM ENT OF THE CONCLUDED ASSESSMENT DOES NOT ARISE. UNDER SUCH CIR CUMSTANCES, IT IS NOT OPEN TO THE ASSESSEE TO SEEK DEDUCTION OR CLAIM VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 10 EXPENDITURE WHICH HAS NOT BEEN CLAIMED IN THE ORIGI NAL AND ALREADY CONCLUDED ASSESSMENT, IN THE CASE OF ASSESS MENT U/S. 153A IN PURSUANCE OF SEARCH ACTION. HONBLE HIGH CO URT REJECTED THE ARGUMENT OF THE LEARNED COUNSEL FOR ASSESSEE TO THE EFFECT THAT ONCE THE NOTICE U/S. 153A IS ISSUED, THE ASSES SMENTS FOR SIX YEARS ARE AT LARGE BOTH FOR THE AO AND THE ASSESSEE . IT HAS BEEN FURTHER HELD BY THE HONBLE HIGH COURT THAT THE PRO VISIONS OF SECTION 153A TO 153C CANNOT BE INTERPRETED TO BE FU RTHER INNINGS TO THE AO AND/OR ASSESSEE BEYOND THE PROVISIONS OF SECTION 139(RETURN OF INCOME), 139(5) (REVISED RETURN OF IN COME), 147 (INCOME ESCAPING ASSESSMENT) AND 263( REVISION OF O RDERS) OF THE ACT. THE HONBLE HIGH COURT HAS FURTHER OBSERVED TH AT THE WORDS ASSESS OR RE-ASSESS HAVE BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCTION OF THE EN TIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE WORD ASSESS HAS BEEN USED IN THE CONTEXT OF ABATED PRO CEEDINGS AND REASSESS HAS BEEN USED FOR COMPLETED ASSESSMENT P ROCEEDINGS, WHICH WOULD NOT ABATE AS THEY ARE NOT PENDING ON TH E DATE OF INITIATION OF THE SEARCH OR MAKING OF REQUISITION A ND WHICH WOULD ALSO NECESSARILY SUPPORT THE INTERPRETATION THAT FO R THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONL Y ON THE BASIS OF THE INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF SEARCH OR REQUISITION OF DOCUMENTS. THE HONBLE HIG H COURT WHILE REPRODUCING THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF K P VARGHESE V. ITO (1981) 24 CTR 358 THAT IT IS RECOGNIZED RULE OF CONSTRUCTION THAT A STATUTORY PROVISO MUST BE SO CONSTRUED, IF POSSIBLE , THAT VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 11 ABSURDITY AND MISCHIEF MAY BE AVOIDED HAS OBSERVED THAT IF THE ARGUMENT OF THE COUNSEL FOR THE ASSESSEE WAS TO BE ACCEPTED, IT WOULD MEAN THAT EVEN IN CASE WHERE THE APPEAL ARISE S OUT OF THE COMPLETED ASSESSMENT HAS BEEN DECIDED BY THE CIT(A) OR TRIBUNAL AND THE HIGH COURT, ON A NOTICE ISSUES U/S . 153A OF THE ACT, THE AO WOULD HAVE POWER TO UNDO WHAT HAS BEEN CONCLUDED BY THE HIGH COURT. ANY INTERPRETATION WHICH LEADS T O SUCH CONCLUSION HAS TO BE REPELLED AND/OR AVOIDED AS HEL D BY THE HONBLE SUPREME COURT IN THE CASE OF K P VARGHESE ( SUPRA). ALMOST SIMILAR PROPOSITION OF LAW HAS BEEN LAID DOW N BY THE CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF M/S DEEPA RESTAURANT & BAR P. LTD. IN ITA NO.1336/M/2012 DEC IDED ON 05.02.2014 (ONE OF US BEING THE PARTY OF THE SAID O RDER) WHEREIN, IT HAS BEEN OBSERVED THAT WHERE THE SCRUTINY ASSESS MENT ORDER U/S. 143(3) OF THE ACT WAS SET ASIDE BY THE HIGHER AUTHORITIES THAT, ITSELF, CANNOT BE A GROUND FOR RE-OPENING THE ASSESSMENT U/S. 147 OF THE ACT ON THE PLEA THAT SINCE SCRUTINY ASSESSMENT HAS BEEN ANNULLED ON THE LEGALITY OF NOTICE U/S. 14 3(2) OF THE ACT AND THE CASE HAS NOT BEEN HEARD AT ANY OF THE STAGE HENCE, THERE WAS A REASON TO BELIEVE THAT THE INCOME ASSESSED IN THIS CASE HAS ESCAPED ASSESSMENT. THE CO-ORDINATE BENCH IN THE AB OVE SAID CASE HAS FURTHER HELD THAT SUCH AN ACTION CANNOT BE ALLOWED UNDER THE LAW AS IT MAY AMOUNT TO DEFEATING ONE OF THE STATUTORY PROVISIONS IN THE GRAB OF ACTING UNDER OT HER PROVISIONS OF THE STATUTE. ONCE ASSESSMENT U/S. 143(3) HAD BEE N ANNULLED BY HIGHER AUTHORITIES ON THE GROUND OF LEGALITY OF NOTICE U/S. 143(2) OF THE ACT, RE-OPENING U/S. 147 ON THAT VERY GROUND WOULD VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 12 MEAN NOTHING ELSE BUT THE ABUSE OF PROCESS OF LAW. HENCE, THE CONTENTION OF THE LEARNED DR THAT AS THE RETURN WAS PROCESSED U/S. 143(1) AND IT WAS A MERE INTIMATION HENCE, THE AO HAD REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T AND IT WAS OPEN TO THE AO TO RE-ASSESS THE INCOME U/S. 153 A, EVEN WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION, IS NOT TENABLE. 12. THE LEARNED DR HAS FURTHER RELIED ON THE JUDGM ENT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF G OPAL LAL BADRUKA VS. DCIT, 346 ITR 106 (AP) TO STRESS THE P OINT THAT THE AO CAN USE EVIDENCE OTHER THAN THAT FOUND DURING TH E COURSE OF SEARCH WHILE FRAMING THE ASSESSMENT U/S. 153A OF TH E ACT. THE SAID JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT HAS BEEN DULY DISCUSSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), HOLDING THAT THE SAME WAS DISTINGUISHABLE ON THE FACTS. IN THE CASE OF G OPAL LAL BADRUKA VS. DCIT (SUPRA), INCRIMINATING EVIDENCE W AS FOUND IN RELATION TO EIGHT PLOTS OF LAND BUT NO EVIDENCE WAS FOUND IN RESPECT OF 24 PLOTS. SINCE INCRIMINATING MATERIAL W AS FOUND IN RESPECT OF EIGHT PLOTS, HONBLE COURT HELD THAT THE AO CAN ESTIMATE THE INCOME IN RESPECT OF ALL 32 PLOTS. THE FACT WAS THAT INCRIMINATING MATERIAL WAS FOUND IN THAT CASE. THE OTHER JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CHETAN DASS LACHMAN DASS [2012] 211 TA XMANN 61, STRONGLY RELIED UPON BY THE LEARNED DR, IS ALSO OF NO HELP TO THE REVENUE BUT TO THE ASSESSEE ONLY. IN THE SAID CASE THE HONBLE DELHI HIGH COURT, IN PARA 11 OF THE ORDER, THOUGH H AS HELD THAT VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 13 THERE IS NO CONDITION IN SECTION153A THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND DURING THE COURSE OF SEARCH OR OTHER POST SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FO UND AND THAT THE SEIZED MATERIAL CAN BE RELIED UPON TO ALSO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS THROUGHOUT T HE RELEVANT PERIOD, YET, AT THE SAME TIME IT HAS BEEN FURTHER O BSERVED THAT THIS HOWEVER, DOES NOT MEAN THAT ASSESSMENT U/S 153 A CAN BE ARBITRARILY MADE WITHOUT ANY RELEVANCE OR NEXUS WIT H THE SEIZED MATERIAL. THE PROPOSITION OF LAW WHICH EMERGES OUT IN THE LIG HT OF THE LAW LAID DOWN BY THE RAJASTHAN HIGH COURT IN THE CASE O F JAI STEEL (INDIA) (SUPRA), HONBLE GUJARAT HIGH COURT IN THE CASE OF GOPAL LAL BADRUKA (SUPRA) AND ALSO BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHETAN DASS LACHMAN DASS IS THAT WHER E INCRIMINATING MATERIAL IS FOUND DURING THE SEARCH A CTION, THE AO WHILE MAKING ASSESSMENT U/S. 153A CAN TAKE NOTE OF OTHER MATERIALS ON RECORD, WHICH ARE RELEVANT AND CONNECT ED TO THE MATERIAL FOUND DURING THE SEARCH AND INFERENCE CAN BE DRAWN RELATING TO OTHER TRANSACTIONS OF SIMILAR NATURE. H OWEVER, WHEN NO INCRIMINATING EVIDENCE IS FOUND DURING SEARCH, I T IS NOT OPEN TO THE AO TO MAKE RE-ASSESSMENT OF CONCLUDED ASSESS MENT IN THE GARB OF INVOKING THE PROVISIONS OF SECTION 153A. AS OBSERVED ABOVE, SUCH AN ACTION WILL DEFEAT THE OTHER RELEVAN T PROVISIONS OF THE ACT AND ALSO THE RIGHTS OF THE ASSESSEE ACCRUED THEREIN. 13. THE NEXT ARGUMENT OF THE LEARNED DR HAS BEEN TH AT SINCE IN THE CASE IN HAND, NO BOOKS OF ACCOUNT WERE FOUND DU RING THE VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 14 SEARCH ACTION THAT ITSELF IS THE INCRIMINATING MATE RIAL AGAINST THE ASSESSEE, IN OUR VIEW HAS NO FORCE OF LAW. THOUGH T HE REVENUE MAY NOT BE SATISFIED WITH THE EXPLANATION OF THE AS SESSEE THAT THE BOOKS OF ACCOUNT WERE LOST IN FLOODS, STILL THE ASSESSMENT OR ADDITION CANNOT BE MADE ON THIS GROUND. SUCH AN INF ERENCE OF CONCEALMENT OF INCOME CANNOT BE MADE JUST ON MERE ASSUMPTIONS, PRESUMPTIONS OR SUSPICION. THE COORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF JITENDRA KUMAR JAIN V. DCIT ITA NOS. 5951- 5953/M/2011 DECIDED ON 16.01.2014 (INCID ENTALLY CONSTITUTED BY BOTH OF US) HAS HELD THAT SUCH AN AS SUMPTION CANNOT BE SAID TO BE HAVING ANY VALUE OF EVIDENCE I N EYES OF LAW AND EVEN THE ASSESSEE CANNOT BE CALLED TO DISAPPROV E SUCH TYPE OF ASSUMPTIONS AND PRESUMPTIONS BASED ON MERE SUSPI CIONS. THE REVENUE HAS TO STAND ON ITS OWN LEGS TO BRING INCRI MINATING EVIDENCE AGAINST THE ASSESSEE. IT IS NOT OPEN TO TH E REVENUE TO RELY ON THE WEAKNESS OF THE EVIDENCE PRODUCED BY TH E ASSESSEE TO MAKE ANY ADVERSE PRESUMPTION OR CONCLUSION OF HI S INDULGING IN ANY ILLEGAL ACTIVITY, WITHOUT BEING THERE ANY DI RECT OR EVEN CIRCUMSTANTIAL EVIDENCE ON RECORD AGAINST HIM. 14. THE NEXT LIMB OF ARGUMENT OF THE LEARNED DR, WH ILE RELYING UPON THE AUTHORITY OF HONBLE SUPREME COURT IN THE CASE OF PADMA SUNDER RAO 255 ITR 147 (SC), HAS BEEN THAT THE COURT SHOULD NOT PLACE RELIANCE ON THE DECISIONS WITHOUT DISCUSSING AS TO HOW THE FACTUAL SITUATION FITS TO THE FACTUAL SI TUATION OF THE DECISION ON WHICH RELIANCE IS PLACED. HIS CONTENTIO N IS THAT ONE ADDITIONAL OR DIFFERENT FACT MAY MAKE A WORLD OF DI FFERENCE BETWEEN CONCLUSIONS IN TWO CASES. THERE IS NO DOUBT ABOUT THE VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 15 ABOVE SAID PROPOSITION OF LAW LAID DOWN BY THE HON BLE SUPREME COURT. THE COURT MUST OBSERVE THE FACTS AND CIRCUMS TANCES OF THE CASE UNDER WHICH A CERTAIN PROPOSITION OF LAW IS LA ID DOWN BY THE HONBLE SUPREME COURT AND THEN TO COMPARE THE SAME WITH THE FACTS AND CIRCUMSTANCES OF THE CASE UNDER ADJUDICAT ION BEFORE IT. HOWEVER, THIS PROPOSITION OF LAW, PUT BY THE LEARNE D DR, IN OUR VIEW, IS OF NO HELP TO THE REVENUE BUT TO THE ASSES SEE ONLY. AS OBSERVED ABOVE, THE VARIOUS CASE LAWS RELIED UPON B Y THE LEARNED DR ARE QUITE DISTINGUISHABLE ON THEIR OWN FACTS WHE REAS, THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF JAI ST EEL (INDIA) (SUPRA), DECIDED BY HONBLE RAJASTHAN HIGH COURT BE TTER FITS INTO THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. 15. IN VIEW OF OUR ABOVE OBSERVATIONS, IT IS ACCORD INGLY, HELD THAT THE REASSESSMENTS MADE BY THE AO UNDER SECTION 153A , WITHOUT ANY INCRIMINATING MATERIAL BEING FOUND DURING THE S EARCH ACTION CONDUCTED U/S. 132 OF THE ACT, WERE NOT IN ACCORDAN CE WITH LAW AND THE SAME ARE HEREBY SET ASIDE AND THE CONSEQUEN TIAL RESULT IS THAT THE RETURN/ORIGINAL ASSESSMENTS WHICH HAVE ACQUIRED FINALITY ARE TO BE REITERATED. SINCE THE CROSS-OBJE CTIONS OF THE ASSESSEE HAVE BEEN ALLOWED, THE DISPUTE RELATING TO THE ADDITIONS MADE IN CONSEQUENCE OF THE REASSESSMENTS MADE U/S. 153A DOES NOT SURVIVE. IN THE RESULT THE CROSS-OBJECTIONS FIL ED BY THE ASSESSEE ARE ALLOWED AND THE APPEALS FILED BY THE R EVENUE ARE HEREBY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH FEBRUARY 2014. VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 16 2.3. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, FACTUAL FINDING/CONCLU SION RECORDED IN THE ORDER OF THE TRIBUNAL (REPRODUCED HEREINABOVE), MATERIAL AVAILABLE ON RECORD, ASSERTI ONS MADE BY THE LD. RESPECTIVE COUNSEL, IF KEPT IN JUXTAPOSITIO N AND ANALYZED, WE NOTE THAT A SEARCH AND SEIZURE OPERATI ON WAS CARRIED ON 14/08/2008 U/S 132 OF THE ACT. THE ASSES SING OFFICER DULY CONSIDERED THE QUESTIONNAIRE AND THE S UBMISSIONS MADE BY THE ASSESSEE ALONG WITH THE BOOKS OF ACCOUN TS. IN THE ABSENCE OF BOOKS OF ACCOUNTS, THE ASSESSMENT OR DER WAS FRAMED U/S 144 R.W.S 153C OF THE INCOME TAX ACT, 1961(HEREINAFTER THE ACT) AND ESTIMATED THE NET PRO FIT OF THE ASSESSEE PROPRIETARY CONCERN M/S J. P. EXPORTS, WHI CH WORKS OUT TO 0.99% RESULTING INTO THE ADDITION REFLECTED IN THE ASSESSMENT ORDER. 2.4. ON APPEAL, BEFORE THE LD. COMMISSIONER OF INC OME TAX (APPEALS), THE MATTER WERE EXAMINED IN DETAIL A ND FOUND THAT COMPARISON CANNOT BE MADE WITH THE CASE OF THE ASSESSEE AS COMPARABLE CASES SUBMITTED BY THE ASSESSEE WERE CONSIDERED WHICH GIVES THE NET PROFIT AT THE RATE O F 0.08% AND FINALLY GIVES THE AVERAGE OF 0.14%. THE ASSESSING O FFICER WAS DIRECTED TO RECOMPUTE THE NET PROFIT OF THE ASSESSE E TO COMPUTE THE NET PROFIT ADOPTING THE RATE OF 0.14% A ND THE BALANCE ADDITION MADE BY THE ASSESSING OFFICER WAS DELETED. WE FIND THAT ALL THESE IDENTICAL FACTS HAVE BEEN DU LY CONSIDERED BY THE TRIBUNAL IN THE AFORESAID CASE. EVEN, IN THE CASE OF ACIT VS YOGIN P. JHAVERI, (ON ORDER DATED 1 5/09/2014 VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 17 WHICH IS THE CASE OF RELATIVE OF THE ASSESSEE) A DE TAILED DELIBERATION WAS MADE AND FINALLY DECIDED IN FAVOUR OF THE ASSESSEE, THUS, FOLLOWING THE ORDER OF THE COORDINA TE BENCH, WE FIND NO MERIT IN THE APPEAL OF THE REVENUE. EVEN OT HERWISE, THE CASE OF THE ASSESSEE FIND SUPPORT FROM THE RATI O LAID DOWN IN SHRI YOGIN P JHAVERI (ITA NO.2139, 2140,2159 AND 2160/MUM/2012) ORDER DATED 15/09/2014 AND FURTHER F ROM HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF MU RLI AGRO PRODUCTS LTD. (ITA NO.36 OF 2009) ORDER DATED 29/10 /2010, DECISION FROM HONBLE RAJASTHAN HIGH COURT IN JAI S TEEL (INDIA) VS ACIT 259 CTR 281 (RAJASTHAN), ACIT VS JI GNESH P SHAH (ITA NO.1553 AND 3173/MUM/2010) ORDER DATED 13/02/2015, SANJAY KOHLI VS ACIT (ITA NO.3831/MUM/2 012) ORDER DATED 14/01/2015 AND ALSO FROM HONBLE BOMBAY HIGH COURT IN CIT VS ALL CARGO GLOBAL LOGISTICS LTD. (37 4 ITR 647) ORDER DATED 21/04/2015 HOLDING THAT FINALIZED ASSESSMENT/REASSESSMENT SHALL NOT ABATE AND ONLY UNDISCLOSED INCOME/UNDISCLOSED ASSET DETECTED DURIN G SEARCH COULD BE BROUGHT TO TAX IN RESPECT OF THOSE YEARS A S PROVIDED U/S 153A OF THE INCOME TAX ACT, 1961. RESPECTFULLY, FOLLOWING THE AFOREMENTIONED CASES FROM COORDINATE BENCHES AN D ALSO FROM HONBLE HIGH COURTS INCLUDING FROM HONBLE JUR ISDICTIONAL HIGH COURT, MORE SPECIFICALLY, WHEN NO INCRIMINATIN G MATERIAL WAS FOUND DURING SEARCH ACTION U/S 132 OF THE ACT, THE ADDITIONS, MADE BY THE ASSESSING OFFICER, WERE MERE LY ON THE BASIS OF COMPARABLE CASES AND THE NET PROFIT ADDITI ONS, MADE U/S 153A WERE WITHOUT ANY INCRIMINATING MATERIAL, T HEREFORE, WE FIND NO MERIT IN THE APPEALS OF THE REVENUE. VISTTAL JAYENDRA JHAVERI ITA NO.2146 & 2147/MUM/2012 & C.O. NO.284 & 285/MUM/2013 18 2.5. SO FAR AS, THE CROSS OBJECTIONS RAISED BY T HE ASSESSEE THAT THE COMMISSIONER OF INCOME TAX (APPEA LS) OUGHT TO HAVE APPRECIATED THAT THE ASSESSING OFFICE R FAILED TO RECORD SATISFACTION BEFORE FRAMING THE ASSESSMENT W ITHOUT INCRIMINATING MATERIAL IS ALREADY REPLIED WHILE DIS POSING OF THE APPEALS OF THE REVENUE. THE CROSS OBJECTIONS ARE TH US HAVING MERITS, THEREFORE, ALLOWED. FINALLY, THE APPEALS OF THE REVENUE ARE DISMISSED A ND THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/09/2015. SD/ - (RAMIT KOCHAR) SD/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ) DATED : 16/10/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,-. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. 1 1 $ 2# ( +, ) / THE CIT, MUMBAI. 4. 1 1 $ 2# / CIT(A)- , MUMBAI 5. 45 /# , 1 +,' + 6 , $ % / DR, ITAT, MUMBAI 6. 7! % / GUARD FILE. / BY ORDER, 04,# /# //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI