M/s T.S. Pulses Pvt. Ltd., Delhi V. DCIT, New Delhi

CO 63/DEL/2014

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 2697 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 09-01-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-11-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 24-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Section: 143(3); 142(1); 153A; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO.5196/DEL/2013 A.Y. : 2006-07 DCIT, CENTRAL CIRCLE-5, NEW DELHI , ROOM NO. 361, 3 RD FLOOR ARA CENTRE, E-2, JHANDEWALAN EXTENSION, NEW DELHI VS. M/S T.S. PULSES PVT. LTD. 2744, NAYA BAZAR, DELHI 110 006 (PAN: AAACT6037B) (ASSESSEE) (RESPONDENT) AND C.O. NO. 63/DEL/2014 (IN ITA NO. 5196/DEL/2013) A.Y. : 2006-07 M/S T.S. PULSES PVT. LTD. 2744, NAYA BAZAR, DELHI 110 006 (PAN: AAACT6037B) VS. DCIT, CENTRAL CIRCLE-5, NEW DELHI , ROOM NO. 361, 3 RD FLOOR ARA CENTRE, E-2, JHANDEWALAN EXTENSION, NEW DELHI (ASSESSEE) (RESPONDENT) REVENUE BY : SH. S.S. RANA, CIT(DR) ASSESSEE BY : SH. GAUTAM JAIN, ADV. ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THE APPEAL AND ASSESSEE HAS FILED THE CROSS OBJECTION AGAINST THE ORDER DATED 28.6.2013 OF THE LD. CIT(A)-XXXI, NEW DELHI RELEVANT TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED IN THE REVENUE S APPEAL RE AD AS UNDER:- 2 1. THE ORDER OF THE LD. CIT(A) IS NOT CORRECT IN L AW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE L D. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 25,433/- MADE BY AO U/S. 35D OF THE I.T. ACT, 1961 ON ACCOUNT OF PRELIMINARY EXPENSES. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS. 9, 659/- MADE BY AO U/S. 14A OF THE I.T. ACT, 1961. 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS . 7,46,762/- MADE BY AO U/S. 36(1)(III) OF I.T. ACT, 1961. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE TH E LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF RS . 2,41,50,000/- MADE BY AO ON ACCOUNT OF SHARE CAPITA L. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY / A LL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. 3. THE GROUNDS RAISED IN THE ASSESSEES CROSS OBJE CTION READ AS UNDER:- 1. THAT NOTICE U/S. 153C OF THE ACT HAS BEEN ISSUED WITHOUT SATISFYING THE STATUTORY PRECONDITIONS CONT AINED IN THE ACT THEREFORE THE ASSUMPTION OF JURISDICTION TO IN ITIATE PROCEEDINGS U/S. 153C OF THE ACT AND FRAME ASSESSME NT U/S. 3 153C/143(3) OF THE ACT WAS NOT IN ACCORDANCE WITH L AW AND THUS, BE HELD TO INVALID. 1.1 THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE TH AT SINCE NO MONEY, BULLION JEWELLERY OR OTHER VALUABLE ARTIC LE OR THING OR BOOKS OF ACCOUNTS OR DOCUMENTS BELONGING TO THE APPELLANT WERE SEIZED AS A RESULT OF SEARCH ON GEE ISPAT GROU P OF CASES THE ASSUMPTION OF JURISDICTION U/S. 153C OF THE ACT WAS ILLEGAL, INVALID AND UNSUSTAINABLE. IT IS, THEREFORE, PRAYED THAT, IT BE HELD THAT, A SSUMPTION OF JURISDICTION TO INITIATE PROCEEDINGS U/S. 153C O F THE ACT AND FRAME ASSESSMENT U/S. 153C/143(3) OF THE ACT WAS NO T IN ACCORDANCE WITH LAW AND THUS, BE HELD TO INVALID. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE CASE OF THE ASSESSEE COMPANY WAS CENTRALIZED CONSEQUENT UPON AN ACTION U NDER SECTION 132 OF THE INCOME TAX ACT, 1961 ON 7.1.2010. NOTICE UNDER SECTION 153C WAS ISSUED ON 19.7.2011. RETURN DECLARING INCOME OF RS . 75,742/- WAS FILED ON 29.9.2011. THEREAFTER, A QUESTIONNAIRE WAS ISSU ED ON 19.10.2011 UNDER SECTION 142(1) ALONGWITH NOTICE UNDER SECTION 143(2) OF THE I.T. ACT, 1961. THE AUTHORISED REPRESENTATIVE OF THE A SSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS AND FURNISHED THE INFORMATI ON FROM TIME TO TIME BEFORE THE AO. THEREAFTER THE CASE WAS ASSESSED AT AN INCOME OF RS. 2,50,07,600/- AFTER MAKING CERTAIN DISALLOWANC ES VIDE HIS ORDER DATED 22.12.2011 PASSED U/S. 153C/143(3) OF THE I.T. AC T, 1961. 4 5. AGAINST THE AFORESAID ASSESSMENT ORDER DATED 22. 12.2011, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 28.6.2013 HAS ALLOWED THE APPEAL OF THE ASSE SEEE. 6. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), REVE NUE IS IN APPEAL AND ASSESSEE IS IN CROSS OBJECTION BEFORE THE TRIB UNAL. 7. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE HA S STATED THAT THE CROSS OBJECTION FILED BY THE ASSESSEE HAS INVOLVED THE LEGAL ISSUE AND THEREFORE, THE SAME MAY BE FIRST DECIDED. HENCE, WE FIRST DEAL WITH THE ASSESSEES CROSS OBJECTION AND ADJUDICATE UPON THE LEGAL ISSUE. 8. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE ST ATED THAT THE ISSUES IN DISPUTE RELATING TO UPHOLDING THE VALIDITY OF TH E ORDER OF ASSESSMENT PASSED U/S. 153C/143(3) OF THE I.T. ACT, 1961 ON 2 2.12.2011, IS SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION DA TED 28.8.2015 OF THE HONBLE DELHI HIGH COURT PASSED IN THE CASE COMMISS IONER OF INCOME TAX VS. KABUL CHAWLA REPORTED (2016) 380 ITR 573 (DEL.) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IF THE ADDITIONS A RE MADE, BUT NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING SEARCH O PERATION, THEN THESE ADDITIONS ARE NOT SUSTAINABLE IN THE EYES OF LAW. HE FURTHER STATED IN THE PRESENT CASE THE AO HAS MADE THE ADDITION IN DISPUT E IN A PROCEEDING UNDER SECTION 153C, WITHOUT THERE BEING ANY INCRIMI NATING MATERIAL FOUND DURING THE COURSE OF THE SEARCH IN RESPECT OF SUCH ADDITION. HE FURTHER STATED THAT THE ADDITIONS HAVE NO RELATION WITH AN Y INCRIMINATING MATERIAL FOUND AND UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF 5 SEARCH AND AS SUCH ARE BAD IN LAW BEING BEYOND THE SCOPE OF JURISDICTION U/S. 153C OF THE I.T. ACT. IN SUPPORT OF HIS CONT ENTION, HE RELIED UPON THE FOLLOWING ORDERS/JUDGMENTS OF THE HONBLE HIGH COUR T AND THE ITAT. I) DECISION OF THE DELHI BENCH IN THE CASE OF JASJ IT SINGH VS. ACIT IN ITA NO. 1436/DEL/2012 AY 2009-10 DATED 5.11 .2010 AFFIRMED BY THE HONBLE DELHI HIGH COURT IN ITA NO. 337/2015 DATED 11.8.2015 CIT VS. JASJIT SINGH. II) DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. KABUL CHAWLA REPORTED IN 234 TAXMAN 300 (DEL.) (380 ITR 573). III) DELHI HIGH COURT DECISION IN THE CASE OF CIT VS. RRJ SECURITIES LTD. REPORTED IN 62 TAXMANN.COM 391 (DEL.) (380 ITR 612) IN VIEW OF THE ABOVE, HE REQUESTED THAT THE ASSE SSMENT ORDER PASSED BY THE AO, IS BAD IN LAW AND IS LIABLE TO B E QUASHED. 9. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND STATED THAT THE PROVISION OF SECTION 153C HAS RIGHTLY BEEN APPLIED IN THE CASE OF THE ASSESSEE ON THE MATERIAL AVAILABLE WITH THEM. HE RELIED UPON THE FOLLOWING JUDGMENTS OF THE HON BLE HIGH COURT AND HENCE, REQUESTED THAT THE APPEAL OF THE ASSESSEE M AY BE DISMISSED. - SSP AVIATION LTD. VS. DCIT (20 TAXMANN.COM 214) - FILATEX INDIA LTD. VS. CIT (2014) 49 TAXMANN.COM 465 (DELHI) 6 - CIT VS. ANIL KUMAR BHATIA (24 TAXMANN.COM 98) 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES AND THE CASES REFERRED BY THE LD. COUNSEL OF THE ASSESSEE AND THE LD. DR. WE FIND THAT THE ADDITIONS MADE BY THE AO ARE BEYOND T HE SCOPE OF SECTION 153C OF THE INCOME TAX ACT, 1961, BECAUSE NO INCRIM INATING MATERIAL OR EVIDENCE HAD BEEN FOUND DURING THE COURSE OF SEARCH SO AS TO DOUBT THE TRANSACTIONS. IT WAS NOTED THAT IN THE ENTIRE ASSE SSMENT ORDER, THE AO HAS NOT REFERRED TO ANY SEIZED MATERIAL OR OTHER M ATERIAL FOR THE YEAR UNDER CONSIDERATION HAVING BEING FOUND DURING THE COURSE OF SEARCH IN THE CASE OF ASSESSEE, LEAVE ALONE THE QUESTION OF ANY INCRIMINATING MATERIAL FOR THE YEAR UNDER APPEAL. WE ALSO FIND T HAT THE CASE LAWS CITED BY THE LD. CIT(DR) ARE NOT RELEVANT TO THE PRESENT CASE. THEREFORE, IN OUR CONSIDERED OPINION, THE ACTION OF THE AO IS BASED U PON CONJECTURES AND SURMISES AND HENCE, THE ADDITIONS MADE IS NOT SUST AINABLE IN THE EYES OF LAW, BECAUSE THIS ISSUE IN DISPUTE IS NOW NO MORE R ES-INTEGRA, IN VIEW OF THE DECISION DATED 28.8.2015 OF THE HONBLE DELHI H IGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL.) WHEREIN THE HONBLE HIGH COURT OF DELHI HAS HELD HAS UNDER:- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLA INED IN THE AFOREMENTIONED ITA NOS. 707, 709 AND 713 OF 2014 OF DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: 7 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR S IX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS W ILL 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 TH ERE 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 A DDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATI ON 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. OBVIOU SLY AN ITA NOS. 8 707, 709 AND 713 OF 2014 OF ASSESSMENT HAS TO BE MA DE 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 ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECT ION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASS ESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERN ED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSES SMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FIN DINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT O N THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WI TH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONL Y 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 W ERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005 -06 AND 2006- 07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS A LREADY STOOD 9 COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEA RTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 11. RESPECTFULLY FOLLOWING THE PRECEDENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA, AS AFORESAID, WE QUASH THE ASSESSMENT MADE U/S. 143(3) R.W.S. 153C OF THE I.T. ACT AND DECIDE THE LEGAL ISSUE IN FAVOUR OF THE ASSESSEE AND ACCOR DINGLY, ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE. 12. AS REGARDS, THE REVENUES APPEAL IS CONCERNED, SINCE WE HAVE ALREADY QUASHED THE ASSESSMENT WHILE DEALING WITH ASSESSEES CROSS OBJECTION, AS AFORESAID, HENCE, THE REVENUES APPEA L HAS BECOME INFRUCTUOUS AND AS SUCH THE SAME IS DISMISSED. 13. IN THE RESULT, THE ASSESSEES CROSS OBJECTIO N STANDS ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09/01/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 09/01/2017 DRAGON NS SRBHATNAGAR COPY FORWARDED TO: - 1. ASSESSEE - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES