M/s Times Finvest & Commerce Ltd., Chandigarh V. DCIT, Chandigarh

CO 30/CHANDI/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1735 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 08-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-10-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Search and seizure; Validity of assessment
• Section: 143(3); 153A; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.541 /CHD/2014 (ASSESSMENT YEAR : 2008-09) THE D.C.I.T., VS. M/S TIMES FINVEST & COMMERCE LTD., CENTRAL CIRCLE II, SCO 98-99, SUB CITY CENTRE, CHANDIGARH. SECTOR 34, CHANDIGARH. PAN: AAACB0713G AND C.O.NO.30/CHD/2014 ARISING OUT OF ITA NO. 541/CHD/2014 (ASSESSMENT YEAR : 2008-09) M/S TIMES FINVEST & COMMERCE LTD., VS. THE D.C.I.T., SCO 98-99, SUB CITY CENTRE, CENTRAL CIRCLE II, SECTOR 34, CHANDIGARH. CHANDIGARH. PAN: AAACB0713G APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK GOYAL DEPARTMENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 29.10.2015 DATE OF PRONOUNCEMENT : 08.12.2015 O R D E R PER RANO JAIN, A.M . : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME 2 TAX (APPEAL) (CENTRAL), GURGAON DATED 26.3.2014 THE ASSESSEE HAS FILED CROSS OBJECTIONS AGAINST THE SAM E. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE PREMISES OF MODERN GROUP OF CASES, IN WHICH THE ASSESSEE WAS AL SO COVERED AS ON 17.3.2010. FOR THE ASSESSMENT YEAR 2 008- 09, THE ASSESSEE HAD FILED RETURN UNDER SECTION 13 9(1) OF THE INCOME TAX ACT, 1961 (IN SHOT THE ACT) AS ON 30.6.2008 SHOWING TOTAL INCOME OF RS.2,14,810/-. I N RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT AF TER THE SEARCH, THE SAME INCOME WAS RETURNED BY THE ASSESSE E. AFTER MAKING ADDITION AMOUNTING TO RS.14,95,764/- INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT R EAD WITH RULE 8D OF THE INCOME TAX RULES, THE ASSESSMENT UND ER SECTION 153A OF THE ACT WAS COMPLETED AT AN INCOME OF RS.17,10,574/-. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE LEARNED CIT (APPEALS) AND APART FROM CHALLENGING THE MERITS OF THE CASE, ALSO RAISED A GROUND RELATING TO THE VALIDITY OF ASSESSMENT FRAMED UNDER SECTION 153A (1)(B) OF THE ACT AS ACCORDING TO THE ASSESSEE, NO INCRIMINATING MATERIA L WAS FOUND DURING THE COURSE OF SEARCH WHICH COULD WARRA NT SUCH AN ADDITION. RELIANCE WAS PLACED ON THE JUDGM ENT OF RAJASTHAN HIGH COURT IN THE CASE OF JAI STEEL (IND IA) VS. ACIT REPORTED IN (2013), 259 CTR 281, WHEREBY IT HA S BEEN HELD THAT IN THE ABSENCE OF ANY INCRIMINATING 3 MATERIAL FOUND DURING THE COURSE OF SEARCH, THE CAS ES WHERE NO PROCEEDINGS ARE ABATED BECAUSE OF THE SEAR CH CONDUCTED, NO ADDITION CAN BE MADE, WHICH IS NOT ON THE BASIS OF ANY MATERIAL FOUND DURING THE COURSE OF SE ARCH. DETAILED SUBMISSIONS WERE ALSO MADE AGAINST THE AC TION OF THE ASSESSING OFFICER MAKING DISALLOWANCE UNDER SECTION 14A OF THE ACT. THE LEARNED CIT (APPEALS) REJECTED THE CONTENTIONS OF THE ASSESSEE. HOWEVER, THE LEAR NED CIT (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE ON THE MERITS I.E. SHE DIRECTED THE ASSESSING OFFICER TO DELETE T HE ADDITION MADE UNDER SECTION 14A OF THE ACT WHILE LE GAL ISSUE WAS DECIDED AGAINST THE ASSESSEE. THE VIEW O F THE LEARNED CIT (APPEALS) WAS THAT THE ASSESSING OFFICE R IS EMPOWERED TO ASSESS OR REASSESS THE TOTAL INCOME FO R SIX FINANCIAL YEARS IMMEDIATELY PRECEDING ASSESSMENT YE AR RELATING TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED. THEREFORE, THE ASSESSING OFFICER IS BOU ND TO ISSUE NOTICE TO THE ASSESSEE FOR EACH ASSESSMENT YE ARS FALLING WITHIN SIX ASSESSMENT YEARS BEFORE THE DAT E OF SEARCH. 4. AGGRIEVED BY THE SAID ORDER, THE DEPARTMENT HAS COME UP IN APPEAL CHALLENGING THE ACTION OF THE LEA RNED CIT (APPEALS) IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT, WHI LE THE ASSESSEE HAS FILED CROSS OBJECTION CHALLENGING THE ACTION OF THE LEARNED CIT (APPEALS) IN DISMISSING THE GROU ND RELATING TO 153A. SINCE THE CROSS OBJECTION INVOLV ES THE 4 LEGAL ISSUE, WE ADJUDICATE IT FIRST. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE PROVISIONS OF SECTION 153A OF TH E ACT ARE VERY CLEAR THAT WHERE NOTICE UNDER THIS SECTION IS ISSUED AS A RESULT OF ANY SEARCH UNDER SECTION 132 OF THE ACT, THE ASSESSMENT OR RE-ASSESSMENT, IF ANY, RELAT ING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SI X YEARS REFERRED TO UNDER SECTION 153A OF THE ACT, PENDING ON THE DATE OF INITIATION OF SEARCH UNDER SECTION 132 OF T HE ACT, SHALL ABATE. THE MEANING OF PHRASE PENDING ON TH E DATE OF INITIATION OF SEARCH UNDER SECTION 132 OF THE A CT HAS TO BE ASSIGNED SIMPLE AND PLAIN MEANING. WHERE THE ASSESSMENT OR RE-ASSESSMENT IS FINALIZED, THERE ARE NO PENDING PROCEEDINGS TO BE ABATED AND RESTORED TO TH E FILE OF THE ASSESSING OFFICER. SINCE IN THE PRESENT CAS E, THE ASSESSMENT HAS BEEN COMPLETED AND NO PROCEEDINGS HA S BEEN ABATED, THE ADDITIONS OR DISALLOWANCES MADE BY THE ASSESSING OFFICER IN AN ORDER PASSED UNDER SECTION 153A OF THE ACT ARE TO BE CONFINED TO ANY MATERIAL FOUND DURING THE COURSE OF SEARCH ONLY. FOR THIS PROPOSITION, R ELIANCE WAS PLACED ON A JUDGMENT OF KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF LMJ INTERNATIONAL LTD. VS. DCIT, 119 TTJ 214 (KOL) AND HON'BLE JHARKHAND HIGH COURT IN THE CASE OF ABHEY KUMAR SHROFF VS. CIT, 290 ITR 114 (JHARKHAND). 6. BEFORE US, A COMPILATION OF THREE VERY RECENT JUDGMENTS WAS ALSO FILED FOR THE PROPOSITION THAT I N AN 5 ASSESSMENT PASSED UNDER SECTION 153A OF THE ACT, TH E ASSESSING OFFICER HAS TO RESTRICT HIMSELF IN MAKING DISALLOWANCE OR ADDITION ON THE BASIS OF MATERIAL UNEARTHED AT THE TIME OF SEARCH. THE JUDGMENTS REL IED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE : (I) MUMBAI HIGH COURT IN THE CASE OF CIT VS. M/S MURLI AGRO PRODUCTS LTD., ITA NO.36 OF 2009 DATED 29.10.2010 (MUM) (II) DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA, ITA NO.707/2014 (III) ANOTHER ORDER OF I.T.A.T., MUMBAI BENCH IN THE CASE OF GURINDER SINGH BAWA VS. DCIT, ITA NO.2075/MUM/2010, DATED 16.11.2012 7. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHO RITIES BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECO RD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ORIGI NAL ASSESSMENT PROCEEDINGS IN THIS CASE HAVE NOT BEEN A BATED IN VIEW OF THE FACT THAT THE ASSESSMENTS HAVE BEEN FINALIZED BEFORE THE DATE OF SEARCH THOUGH THE SAME HAS NOT BEEN MADE UNDER SECTION 143(3) OF THE ACT. THE TIME LIMIT FOR THE SAME HAS EXPIRED. THIS IS ALSO AN UN DISPUTED FACT THAT DURING THE COURSE OF SEARCH NO MATERIAL L EADING TO A DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS FOUND. THESE FACTS HAVE NOT BEEN CONTROVERTED BY BOTH THE PARTIES BEFORE US. NOW, THE QUESTION TO BE DECIDED BY US I S THAT 6 IN SUCH A SCENARIO WHETHER THE DISALLOWANCE CAN BE SUSTAINED OR NOT. THERE ARE A NUMBER OF JUDGMENTS WITH DIVERGENT VIEWS DELIVERED BY VARIOUS HIGH COURTS AS WELL AS DIFFERENCE BENCHES OF THE TRIBUNAL. HOWEVER, IT WAS AGREED BEFORE US BY BOTH THE PARTIES THAT TILL DATE , THERE IS NO JUDGMENT ON THIS ISSUE BY THE JURISDICTIONAL PUN JAB & HARYANA HIGH COURT. 9. UNDER THE PROVISIONS OF SECTION 153A OF THE ACT , WHERE SEARCH IS CONDUCTED UNDER SECTION 132 OF THE ACT, POWER IS GIVEN TO THE ASSESSING OFFICER TO ASSESS O R RE- ASSESS THE INCOME OF THE ASSESSEE FOR SIX ASSESSMEN T YEARS PRECEDING THE ASSESSMENT YEAR IN WHICH THE SE ARCH WAS CONDUCTED. THE PROVISION OF SECTION ALSO PROVI DES THAT THE ASSESSMENT OR RE-ASSESSMENT RELATING TO AN Y ASSESSMENT YEAR FALLING WITHIN THIS PERIOD OF SIX YEARS, IF ARE PENDING ON THE DATE OF SEARCH, THEY GET ABATED. THIS ISSUE WAS THERE BEFORE THE SPECIAL BENCH OF THE I.T .A.T. IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DC IT (2012) 23 TAXMANN.COM 103(MUM)(SB), WHEREBY THE BEN CH OBSERVED AS UNDER : '53................................WE ARE OF THE VIEW THAT FOR ANSWERING THIS QUESTION, GUIDANCE WILL HAVE TO BE SOUGHT FROM SECTION 132(1). IF ANY BOOKS OF ACCOUNT OR OTHER DOCUMENTS RELEVANT TO THE ASSESSMENT HAD NOT BEEN PRODUCED IN THE COURSE O F ORIGINAL ASSESSMENT AND FOUND IN THE COURSE OF SEARCH IN OUR HUMBLE OPINION SUCH BOOKS OF ACCOUNT OR OTHER DOCUM ENTS HAVE TO BE TAKEN INTO ACCOUNT WHILE MAKING ASSESSMENT OR REASSESSMENT OF TOTAL INCOME UNDER THE AFORESAID PR OVISION. SIMILAR POSITION WILL OBTAIN IN A CASE WHERE UNDISCL OSED INCOME 7 OR UNDISCLOSED PROPERTY HAS BEEN FOUND AS A CONSEQU ENCE OF SEARCH. IN OTHER WORDS, HARMONIOUS INTERPRETATION WILL PRODUCE THE FOLLOWING RESULTS: (A) INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, TH E JURISDICTION TO MAKE ORIGINAL ASSESSMENT AND ASSESS MENT U/S 153A MERGE INTO ONE AND ONLY ONE ASSESSMENT FOR EACH ASSESSMENT YEAR SHALL BE MADE SEPARATELY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTIN G OR BROUGHT ON THE RECORD OF THE AO, (B) IN RESPECT OF NO N-ABATED ASSESSMENTS, THE ASSESSMENT WILL BE MADE ON THE BAS IS OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS NOT PRODUCED IN THE C OURSE OF ORIGINAL ASSESSMENT BUT FOUND IN THE COURSE OF SEARC H, AND UNDISCLOSED INCOME OR UNDISCLOSED PROPERTY DISCOVERED IN THE COURSE OF SEARCH' 10. THIS ORDER OF THE SPECIAL BENCH OF THE I.T.A.T . WAS AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. (2015) 58 TAXMANN.COM 78 (BOM), WHEREBY IT HAS BEEN HELD IN VERY CLEAR TERMS THAT IN ASSESSMEN TS THAT ARE ABATED, THE ASSESSING OFFICER RETAINS THE ORIGI NAL JURISDICTION AS WELL AS JURISDICTION CONFERRED ON H IM UNDER SECTION 153A OF THE ACT FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH OF THE SIX ASSESSMENT YEARS SEPARATEL Y. HOWEVER, IN OTHER CASES, WHERE ASSESSMENTS ARE NOT ABATED IN ADDITION TO THE INCOME THAT HAS ALREADY B EEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A OF THE ACT WILL BE MADE ONLY ON THE BASIS OF INCRIMINATING MA TERIAL FOUND DURING THE COURSE OF SEARCH. 11. THE SITUATION SO EXPLAINED BY THE HON'BLE 8 BOMBAY HIGH COURT HAS ALSO BEEN RELIED UPON BY THE HON'BLE DELHI HIGH COURT IN THE VERY RECENT CASE OF KABUL CHAWLA (SUPRA), WHEREBY AFTER REFERRING TO VARIOUS JUDGMENTS OF THE HIGH COURTS AS WELL AS THE SPECIAL BENCH DECISION IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), THE LEGAL POSITION HAS BEEN EXPLAINED BY T HE COURT AS FOLLOWS : 37. ON A CONSPECTUS OF SECTION I53A(I) OF THE ACT, RE AD WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXP LAINED IN THE AFOREMENTIONED 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 (I) WILL HAVE TO BE MANDATOR ILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIO US YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLAC E. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DAT E OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH A YS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCI SE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT A Y IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER T O ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THER E WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EAC H 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 ADDITION S SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOU ND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATER IAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATE D 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. OBVIOUS LY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' 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 ABATE D 9 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 EAC H AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND A NY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIA L 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. 12. THE SAME PROPOSITION HAS BEEN LAID DOWN IN THE CASE OF MURLI AGRO PRODUCTS LTD. (SUPRA) BY THE HO N'BLE BOMBAY HIGH COURT, ON WHICH RELIANCE HAS BEEN PLACE D BY THE LEARNED COUNSEL FOR THE ASSESSEE AND ALSO IN TH E CASE OF SHRI GURINDER SINGH BAWA (SUPRA) BY THE MUMBAI BENCH OF THE I.T.A.T. IN VIEW OF THE ABOVE, WE HO LD THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND THE ASSESSMENT PROCEEDINGS HAVING NOT BEEN ABATED AT THE TIME OF SEARCH, THE ASSESSING OFFICER HAS NO JURISDICTION TO MAKE THE A DDITION UNDER SECTION 153A OF THE ACT. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 13. SINCE THE JURISDICTION OF THE ASSESSING OFFICE R ASSUMED UNDER SECTION 153A OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE HAVE BEEN HELD TO BE NOT AS PER LAW WHILE ADJUDICATING THE CROSS OBJECTION OF THE ASSESSEE, WE DO NOT FIND ANY NEED TO DECIDE THE APP EAL OF 10 THE DEPARTMENT ON MERITS. 14. THE APPEAL OF THE DEPARTMENT IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IN IT A NO.541/CHD/2014 IS DISMISSED AND CROSS OBJECTIONS F ILED BY THE ASSESSEE IN C.O.NO.30/CHD/2014 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 8 TH DAY OF DECEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACCOUNTANT MEMBER DATED : 8 TH DECEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/THE CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH