M/s RPA Developers, Ludhiana V. DCIT, CC-III, Ludhiana

ITA 1022/CHANDI/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5213 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-09-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PANKAJ BHALLA
• Keywords: Business expenditure; Audit objection; Period of limitation; Proportionate interest; Time period of passing order; Revised return; Reason to believe
• Section: 143(3); 153A; 139(5); 147; 148; 132; 15; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NOS. 1022 TO 1026/CHD/2017 / ASSESSMENT YEAR S: 2008-09, 2009-10, 2011-12 TO 20 13-14 M/S RPA DEVELOPERS, B-IX/55, 1STFLOOR, GUR MANDI, LUDHIANA THE DCIT, CENTRAL CIRCLE III, LUDHIANA ./ PAN NO: AAKFR2156C / APPELLANT / RESPONDENT ! / ASSESSEE BY : SH. PANKAJ BHALLA, CA ' ! / REVENUE BY : SMT. ANITA SINHA, CIT DR ALONGWITH SH. BHUPINDER SINGH, CONCERNED DCIT. # $ % / DATE OF HEARING : 27.09.2018 &'() % / DATE OF PRONOUNCEMENT : 16.10.2018 (*/ ORDER PER BENCH THE CAPTIONED APPEALS HAVE BEEN PREFERRED BY THE A SSESSEE AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS)-5, LUDHIANA [HEREINAFTER REFERRED TO A S CIT(A)], DATED 26.04.2017 (IN ITA NOS. 1022 & 1023/CHD/2017) 16.5. 2017 (IN ITA NOS. 1024 TO 1026/CHD/2017) . 2. AS THE FACTS, CIRCUMSTANCES AND ISSUES RAISED IN ALL THE APPEALS ARE IDENTICAL, THEREFORE, THESE HAVE BEEN H EARD TOGETHER AND ARE BEING DECIDED BY THE COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 2 ITA NO. 1022/CHD/2017 IS TAKEN AS LEAD CASE FOR NARRATION OF FACTS. ITA NO. 1022/CHD/2017 (A.Y.2008-09) 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THAT THE LD. CIT(A)-5, LUDHIANA HAS WRONGLY PASSED THE ORDER U/S 250(6) OF THE INCOME-TAX ACT, 1961 AGAINST LAW & FACTS OF THE CASE. 2. THAT THE ASSESSMENT FRAMED U/S 153C OF THE ACT BY THE DCIT, CENTRAL CIRCLE-III, LUDHIANA IS WITHOUT JURISDICTION. 3. THAT THE ASSESSMENT FRAMED U/S 153C OF THE ACT IN ABSENCE OF ANY SATISFACTION NOTE IS NULL AND VOID. 4. THAT THE ASSESSMENT FRAMED U/S 153C OF THE ACT WITHOUT ANY REFERENCE TO INDISCRIMINATING OF SEIZED MATERIAL IS NULLITY. 5. THAT THE LD. CIT(A)-5, LUDHIANA FAILED TO APPRECIA TE THAT THE LD. ASSESSING OFFICER ERRED IN LAW AND FACT OF THE CASE IN DISALLOWING INTEREST OF RS. 4,70,846/- CLAIMED U/S 36(1)(III) OF THE ACT WITHOUT ANY BASE O R REASON THEREOF. 6. THAT THE LD. CIT(A)-5, LUDHIANA FAILED TO APPRECIA TE THAT THE LD. ALSO ERRED IN LAW & FACT OF THE CASE I N NOT ALLOWING TO CARRY FORWARD BUSINESS LOSS TO THE TUNE O F RS. 4,70,846/- CONTRAVENING PROVISIONS OF SECTION 72 OF THE ACT, WITHOUT ANY BASE AND REASON THEREOF. 7. THAT THE ORDER PASSED BY LD. CIT(A)-5 IS IN CONTRAVENTION TO EXPRESSED PROVISIONS OF SECTION 3 O F THE INCOME TAX ACT. 8. THAT THE LD. CIT(A) FAILED TO APPRECIATE THAT WHA T IS RELEVANT FOR THE PURPOSE OF SECTION 3 OF THE ACT IS D ATE OF SET UP AND NOT THE DATE OF COMMENCEMENT OF BUSINESS. 9. THAT THE APPELLANT CRAVES, LEAVE TO VARY, ALTER OR ADD ANY; GROUNDS OF APPEAL. ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 3 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT A SEARCH ACTION U/S 132(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') WAS CONDUCTED AT THE PREMISES OF ANOTHER ASSESSEE I.E PALACE JEWELLER GROUP. DURING THE COURSE OF SEARCH ACTION, CERTAIN DOCUMENTS BELONGING TO THE ASSESSEE WERE ALSO FOUND AND SEIZE D. THEREAFTER, PROCEEDING U/S 153C WERE INITIATED AGAINST THE ASSE SSEE AND ACCORDINGLY NOTICE U/S 153C OF THE ACT WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAID NOTICE U/S 153C O F THE ACT, THE ASSESSEE FILED WRITTEN REPLY STATING THEREIN THAT T HE RETURN FILED U/S 139(1) ON 31.7.2008 MAY BE TREATED AS FILED IN RESP ONSE TO NOTICE U/S 153C OF THE INCOME-TAX ACT, 1961 . THEREAFTER, THE ASSESSING OFFICER UNDER SECTION 153C OF THE ACT, MADE THE IM PUGNED ADDITIONS ON ACCOUNT OF DISALLOWANCE OF LOSS CLAIME D AND INTEREST EXPENSES CLAIMED. 5. IN APPEAL, THE LD. CIT(A) CONFIRMED THE ADDITIO N MADE BY THE ASSESSING OFFICER. 6. BEING AGGRIEVED OF THE ORDER OF THE CIT(A) ON TH IS ISSUE, THE ASSESSEE, THUS HAS COME UP ON APPEAL BEFORE US. 7. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE IMPUGNED ADDITIONS HAVE NOT BEEN MADE BY THE AS SESSING OFFICER ON THE BASIS OF ANY ALLEGED INCRIMINATING M ATERIAL FOND DURING THE COURSE OF SEARCH AT THE PREMISES OF PALA CE JEWELLERS GROUP. THAT THE ORIGINAL ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAD ALREADY ATT AINED FINALITY AS ON THE DATE OF SEARCH/ISSUE OF NOTICE TO THE ASS ESSEE AND THAT EVEN THE LIMITATION PERIOD FOR ISSUANCE OF NOTICE U /S 143(2) OF THE ACT FOR INITIATION OF SCRUTINY ASSESSMENT PROCEEDIN GS HAD EXPIRED. ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 4 HE, THEREFORE, HAS CONTENDED THAT NO ADDITIONS WERE WARRANTED ON ANY ISSUE OTHER THAN BASED ON ANY INCRIMINATING MAT ERIAL FOUND AND SEIZED DURING SEARCH ACTION ON THE BASIS OF WHI CH THE ASSESSMENT WAS OPENED/CARRIED OUT IN THE CASE OF TH E ASSESSEE U/S 153C OF THE ACT. HE, IN THIS RESPECT, HAS RELIED UP ON THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ALL C ARGO GLOBAL LOGISTICS LTD. 120 DTR 89 AND OF THE DELHI HIGH CO URT IN THE CASE OF CIT VS. KABUL CHAWLA 234 TAXMAN 300 ( DELHI) A ND IN PRINCIPAL CIT VS. MEETA GUTGUTIA PROP M/S FERNS N PETALS, ITA 306/2017 AND OTHERS DECIDED VIDE ORDER DATED 25.5.2 017. 8. THE LD. DR ON THE OTHER HAND HAS SUBMITTED THAT ORIGINAL ASSESSMENT PROCEEDINGS WERE NOT COMPLETED U/S 143(3 ) OF THE ACT RATHER THE RETURNS FILED BY THE ASSESSEE WERE PROCE SSED U/S 143(1) OF THE ACT AND UNDER THE CIRCUMSTANCES, THE ASSESSI NG OFFICER WAS EMPOWERED TO EXAMINE AND LOOK INTO THE ISSUE AS THE SAME WERE NOT LOOKED INTO WHILE PROCESSING THE RETURN U/S 143(1) OF THE ACT. HE, THEREFORE, HAS RELIED UPON FINDINGS OF THE CIT(APPE ALS). HOWEVER, THE LD. DR HAS BEEN FAIR ENOUGH TO ADMIT THAT THE A DDITIONS IN THIS CASE HAVE NOT BEEN MADE ON THE BASIS OF ANY INCRIMI NATING MATERIAL FOUND DURING THE SEARCH ACTION AT THE PREMISES OF P ALACE JEWELLERS GROUP AS REFERRED TO BY THE ASSESSING OFFICER ON TH E BASIS OF WHICH ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE U/S 153C WERE INITIATED. HE HAS ALSO NOT DISPUTED THAT THE ORIGIN AL ASSESSMENTS FOR THE ASSESSMENT YEAR UNDER CONSIDERATION STOOD COMPL ETED AND NOT ABATED AS ON THE DATE OF SEARCH I.E. 31.10.2012 AND ON THE DATE OF SUBSEQUENT ISSUE OF NOTICE U/S 153C OF THE ACT ON 0 9.09.2014. ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 5 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE RELATING TO THE VALIDITY OF AS SESSMENT MADE UNDER SECTION 153A WITHOUT HAVING ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION U/S 132 OF THE ACT I N CASE OF COMPLETED ASSESSMENTS, EVEN WHERE THE ORIGINAL RETU RN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT, HAS COME INTO CONSIDERATION BEFORE THE CO-ORDINATE MUMBAI BENCH O F THE TRIBUNAL IN THE CASE OF THE ACIT CENT. CIR. 33, MUMBAI VS. SHRI JAYENDRA P. JHAVERI ITA NOS.2141, 2142, 2143 & 2144/M/2012 & C O NOS.248, 249, 250 & 251/M/2013 DECIDED ON 20.02.2014 (ONE OF US BEING PARTY TO THAT ORDER). THE TRIBUNAL HAS DISCUSSED TH E ISSUE IN DETAIL AND HAS MADE THE FOLLOWING OBSERVATIONS: 8. THE LEARNED DR HAS ALSO FILED WRITTEN SUBMISSIO NS. TO STRESS HIS POINT THAT THE RETURN PROCESSED U/S. 143 (1) CANNOT BE SAID TO BE AN ASSESSMENT BUT A MERE INTIM ATION, HE HAS RELIED UPON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD . (2007) 291 ITR 500 (SC). HIS CONTENTION HAS BEEN THAT IN T HE CASE IN HAND THE ASSESSMENT WAS NOT DONE ORIGINALLY U/S. 143(3) HENCE THE ESTIMATION IN QUESTION HAS BEEN RI GHTLY MADE U/S. 153A OF THE ACT BY THE AO. HE HAS FURTHER CONTENDED THAT THE PRINCIPAL LAID DOWN BY THE SPECI AL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLO BAL LOGISTICS LTD. 137 ITD 287 CAN BE APPLIED TO THE C ASE WHERE THE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 14 3(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 RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) IS CONCERNED , WE MAY OBSERVE THAT THE ISSUE BEFORE THE HONBLE SUPRE ME COURT IN THAT CASE WAS REGARDING THE REOPENING OF T HE 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 EX PORTS V. DEPUTY CIT, (1999) 240 ITR 224 (GUJ) WAS NOT APPLI CABLE IN THAT CASE. IN THE CASE OF ADANI EXPORTS (SUPRA ), WHERE THE ASSESSMENT WAS MADE U/S. 143(3) OF THE ACT, AND THE AO DID NOT HOLD ANY BELIEF THAT INCOME HAD ESCAPED 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 ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 6 COURT. IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA), THE HONBLE SUPREME COURT WHILE INTERPRETI NG THE PROVISIONS OF SECTION 143(1) AND SECTION 143(3) (AS WERE IN FORCE DURING THE RELEVANT TIME PERIOD) HAS HELD THA T IN CASE OF ASSESSMENT MADE U/S. 143(3), THE ASSESSMENT IS M ADE BY THE AO BY APPLYING 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 SUCH, 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 FA ILURE TO TAKE STEPS U/S. 143(3) WILL NOT RENDER THE AO POWER LESS TO INITIATE RE-ASSESSMENT PROCEEDINGS EVEN WHEN INTIMA TION U/S. 143(1) HAD BEEN ISSUED. SO THE PROPOSITION OF LAW LAID DOWN IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P . LTD. (SUPRA) RELATES TO THE POWERS OF THE AO FOR RE-OPEN ING 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 REL EVANT PERIOD, SINCE SECTION 143 HAS BEEN FURTHER AMENDED VIDE FINANCE ACT 2008 W.E.F 01.04.2008.) IT IS TO BE NOT ED THAT POWERS OF THE AO TO RE-OPEN AN ASSESSMENT U/S. 147 IS SUBJECT TO LIMITATION OF TIME PERIOD AS PRESCRIBED U/S. 149 OF THE ACT. SO THE REASONABLE CONCLUSION WILL BE TH AT WHETHER THE RETURN WAS PROCESSED U/S. 143(1) OR U/S . 143(3), IF THE AO HAS A REASON TO BELIEVE 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) I S CONCERNED, IT MAY FURTHER BE OBSERVED THAT AFTER PR OCESSING OF RETURN U/S. 143(1) THE SAME CAN BE ASSESSED U/S. 143(3) BY ISSUE OF NOTICE U/S. 143(2) SUBJECT TO ITS ISSUA NCE WITHIN THE LIMITATION PERIOD OF 12 MONTHS FROM THE END OF THE MONTH IN WHICH RETURN IS FURNISHED AS PER THE PROVI SO TO CLAUSE (II) OF SECTION 143(2) [AS WAS EXISTING AT T HE TIME OF RELEVANT ASSESSMENT YEAR]. ONCE THE LIMITATION PERI OD AS PRESCRIBED VIDE PROVISO TO CLAUSE (II) OF SUB SECTI ON (2) OF SECTION 143 IS EXPIRED, IT IS NOT OPEN TO THE AO TO ASSESS THE INCOME U/S. 143(3) OF THE ACT AND THE RETURN FI LED BY THE ASSESSEE U/S. 139 IS DEEMED TO BE ACCEPTED, WHI CH HOWEVER, CAN BE RE-OPENED U/S. 147 OF THE ACT SUBJE CT TO THE FULFILLMENT OF INGREDIENTS OF SECTION 147 AND W ITHIN THE TIME PERIOD AS PRESCRIBED U/S. 149 OF THE ACT, AS D ISCUSSED 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 INTERPRETE D AS MERE INTIMATION ASSESSMENT OR OTHERWISE, BUT THE SA ME SHALL BE DEEMED TO BE ACCEPTED BY THE AO AND IT WIL L NOT HAVE ANY DIFFERENT COLOUR OTHER THAN THE RETURN WHI CH 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 JHAVERI STOCK BROKERS P. LTD. (SUPRA), WOULD BE ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 7 THAT IF TO A SET OF FACTS AND CIRCUMSTANCES, THE AO HAS APPLIED HIS MIND AND HE WAS OF THE BELIEF THAT THER E WAS NO ESCAPEMENT OF INCOME THEN FOR INVOKING THE PROVI SIONS OF SECTION 147 OF THE ACT, HE IS PRECLUDED, ON THE BASIS OF SAME FACTS AND CIRCUMSTANCES, TO SAY THAT HE HAS RE ASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. WHEREAS IN CASE OF RETURNS PROCESSED U/ S. 143(1), SINCE THE AO DOES NOT APPLY HIS MIND, SUCH A DEFENSE IS NOT AVAILABLE TO THE ASSESSEE. HOWEVER, THAT PROPOSITION 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 A TTAINED FINALITY DUE TO THE EXPIRY OF LIMITATION PERIOD OF TWELVE MONTHS FROM THE END OF THE MONTH IN WHICH THE RETUR N WAS FILED. HENCE, THE ASSESSMENT IS DEEMED TO BE COMPL ETED AND NOT PENDING ON THE DATE OF SEARCH ON 14.08.2008 . ADMITTEDLY, NO INCRIMINATING MATERIAL WAS FOUND FRO M THE PREMISES OF THE ASSESSEE DURING THE SEARCH U/S. 132 OF THE ACT. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD.(SUPRA), HAS HELD THAT ASSESSMENT U/S. 153A CAN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE SEARCH. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JAI ST EEL (INDIA) V. ACIT (2013) 259 CTR 281 HAS HELD THAT I N CASE NOTHING INCRIMINATING IS FOUND ON ACCOUNT OF SEARCH OR REQUISITION, THE QUESTION OF REASSESSMENT OF THE CO NCLUDED ASSESSMENT DOES NOT ARISE. UNDER SUCH CIRCUMSTANCES , IT IS NOT OPEN TO THE ASSESSEE TO SEEK DEDUCTION OR CLAIM 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 HI GH COURT REJECTED THE ARGUMENT OF THE LEARNED COUNSEL FOR ASSESSEE TO THE EFFECT THAT ONCE THE NOTICE U/S. 15 3A IS ISSUED, THE ASSESSMENTS FOR SIX YEARS ARE AT LARGE BOTH FOR THE AO AND THE ASSESSEE. IT HAS BEEN FURTHER HELD B Y THE HONBLE HIGH COURT THAT THE PROVISIONS OF SECTION 1 53A TO 153C CANNOT BE INTERPRETED TO BE FURTHER 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 O F ORDERS) OF THE ACT. THE HONBLE HIGH COURT HAS FURT HER OBSERVED THAT THE WORDS ASSESS OR RE-ASSESS HAV E BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCTION OF THE ENTIRE PROVISION WOU LD LEAD TO AN IRRESISTIBLE CONCLUSION THAT THE WORD ASSESS HAS BEEN USED IN THE CONTEXT OF ABATED PROCEEDINGS AND REASSESS HAS BEEN USED FOR COMPLETED ASSESSMENT PROCEEDINGS, WHICH WOULD NOT ABATE AS THEY ARE NOT PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING OF REQUISITION AND WHICH WOULD ALSO NECESSARILY SUPPOR T THE INTERPRETATION THAT FOR THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONLY ON THE BASIS OF THE INCRI MINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR REQUI SITION OF ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 8 DOCUMENTS. THE HONBLE HIGH 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 ABS URDITY AND MISCHIEF MAY BE AVOIDED HAS OBSERVED THAT IF T HE ARGUMENT OF THE COUNSEL FOR THE ASSESSEE WAS TO BE ACCEPTED, IT WOULD MEAN THAT EVEN IN CASE WHERE THE APPEAL ARISES OUT OF THE COMPLETED ASSESSMENT HAS B EEN DECIDED BY THE CIT(A) OR TRIBUNAL AND THE HIGH COUR T, ON A NOTICE ISSUES U/S. 153A OF THE ACT, THE AO WOULD HA VE POWER TO UNDO WHAT HAS BEEN CONCLUDED BY THE HIGH C OURT. ANY INTERPRETATION WHICH LEADS TO SUCH CONCLUSION H AS TO BE REPELLED AND/OR AVOIDED AS HELD 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 BENCH OF T HE TRIBUNAL IN THE CASE OF M/S DEEPA RESTAURANT & BAR P. LTD. IN ITA NO.1336/M/2012 DECIDED ON 05.02.2014 ( ONE OF US BEING THE PARTY OF THE SAID ORDER) WHEREIN, I T HAS BEEN OBSERVED THAT WHERE THE SCRUTINY ASSESSMENT OR DER 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 LEGALI TY OF NOTICE U/S. 143(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 E SCAPED ASSESSMENT. THE CO-ORDINATE BENCH IN THE ABOVE SAID CASE HAS FURTHER HELD THAT SUCH AN ACTION CANNOT BE ALLO WED 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 BEEN ANNULLED BY HIGHER AUTHORITIES ON THE GROUND O F LEGALITY OF NOTICE U/S. 143(2) OF THE ACT, RE-OPENI NG U/S. 147 ON THAT VERY GROUND WOULD MEAN NOTHING ELSE BUT THE ABUSE OF PROCESS OF LAW. HENCE, THE CONTENTION OF T HE LEARNED DR THAT AS THE RETURN WAS PROCESSED U/S. 14 3(1) AND IT WAS A MERE INTIMATION HENCE, THE AO HAD REAS ON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND IT W AS OPEN TO THE AO TO REASSESS THE INCOME U/S. 153A, EV EN WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION, IS NOT TENABLE. 12. THE LEARNED DR HAS FURTHER RELIED ON THE JUDGME NT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE O F GOPAL LAL BADRUKA VS. DCIT, 346 ITR 106 (AP) TO S TRESS THE POINT THAT THE AO CAN USE EVIDENCE OTHER THAN T HAT FOUND DURING THE COURSE OF SEARCH WHILE FRAMING THE ASSESSMENT U/S. 153A OF THE ACT. THE SAID JUDGMENT OF HONBLE ANDHRA PRADESH HIGH COURT HAS BEEN DULY DISCUSSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), HOLDI NG THAT THE SAME WAS DISTINGUISHABLE ON THE FACTS. IN THE C ASE OF GOPAL LAL BADRUKA VS. DCIT (SUPRA), INCRIMINATING ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 9 EVIDENCE WAS FOUND IN RELATION TO EIGHT PLOTS OF LA ND BUT NO EVIDENCE WAS FOUND IN RESPECT OF 24 PLOTS. SINCE INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF EIGH T PLOTS, HONBLE COURT HELD THAT THE AO CAN ESTIMATE THE INC OME IN RESPECT OF ALL 32 PLOTS. THE FACT WAS THAT INCRIMIN ATING 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 [201 2] 211 TAXMANN 61, STRONGLY RELIED UPON BY THE LEARNED DR, IS ALSO OF NO HELP TO THE REVENUE BUT TO THE ASSESS EE ONLY. IN THE SAID CASE THE HONBLE DELHI HIGH COURT, IN P ARA 11 OF THE ORDER, THOUGH HAS HELD THAT THERE IS NO CONDITI ON 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 FOUND A ND THAT THE SEIZED MATERIAL CAN BE RELIED UPON TO ALSO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS TH ROUGHOUT THE RELEVANT PERIOD, YET, AT THE SAME TIME IT HAS B EEN FURTHER OBSERVED THAT THIS HOWEVER, DOES NOT MEAN T HAT ASSESSMENT U/S 153 A CAN BE ARBITRARILY MADE WITHOU T ANY RELEVANCE OR NEXUS WITH 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 OF JAI STEEL (INDIA) (SUPRA), HONBLE GUJARA T HIGH COURT IN THE CASE OF GOPAL LAL BADRUKA (SUPRA) AN D ALSO BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHE TAN DASS LACHMAN DASS IS THAT WHERE INCRIMINATING MATE RIAL IS FOUND DURING THE SEARCH ACTION, THE AO WHILE MAK ING ASSESSMENT U/S. 153A CAN TAKE NOTE OF OTHER MATERIA LS ON RECORD, WHICH ARE RELEVANT AND CONNECTED TO THE MAT ERIAL 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 SEAR CH, IT IS NOT OPEN TO THE AO TO MAKE RE-ASSESSMENT OF CONC LUDED ASSESSMENT IN THE GARB OF INVOKING THE PROVISIONS O F SECTION 153A. AS OBSERVED ABOVE, SUCH AN ACTION WIL L DEFEAT THE OTHER RELEVANT PROVISIONS OF THE ACT AND ALSO THE RIGHTS OF THE ASSESSEE ACCRUED THEREIN. 10. THE ABOVE DECISION HAS ALSO BEEN FOLLOWED BY ANOTHER CO- ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ATUL BAROT (HUF) VS. DCIT IN ITA NO.2889/M/2011 & ORS. DECIDED ON 26.02 .2014. WE AGREE WITH THE VIEW TAKEN BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI JAYENDRA P JHAVERI (SUPRA). F URTHER, THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY TH E DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS KABU L CHAWLA (2016) ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 10 380 ITR 573 (DEL) FOLLOWED BY THE HON'BLE GUJRAT HI GH COURT IN THE CASE OF PCIT VS RSA DIGI PRINTS 2017 (9) TMI 530. R ELIANCE IN THIS RESPECT CAN ALSO BE PLACED UPON DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS CONTINENTAL WAREHOUSING CORPORATION (2015) 374 ITR 645 (BOM.), DECISION OF HON'BLE CALC UTTA HIGH COURT IN THE CASE OF PCIT VS SALASOR STOCK BROKING LTD. 2 016 (8) TMI 1131 AND DECISION OF HON'BLE DELHI HIGH COURT IN TH E CASE OF PRINCIPAL CIT VS. MEETA GUTGUTIA PROP M/S FERNS N PETALS, ITA 306/2017 AND OTHERS DECIDED VIDE ORDER DATED 25.5.2 017 WHEREIN THE HON'BLE HIGH COURTS HAVE BEEN UNANIMOUS TO HOLD THAT IN RELATION TO THE ASSESSMENTS WHICH HAVE ALREADY BEEN CONCLUDED, THE AO IS PRECLUDED FROM MAKING ADDITIONS ON ANY OT HER ISSUE EXCEPT RELATING OR CONCERNING TO THE INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION. THE ASSESSING OFFICER CAN NOT DISTURB THE ASSESSMENT ORDER OR REASSESSMENT ORDER WHICH HAS AT TAINED FINALITY, UNLESS THE MATERIAL GATHERED IN THE COURS E OF PROCEEDINGS U/S 153A OF THE ACT ESTABLISHES THAT RELIEF GRANTED UNDER THE FINAL ASSESSMENT/REASSESSMENT WAS CONTRARY TO THE FACT UN EARTHED DURING THE COURSE OF 153A PROCEEDINGS. 11. SINCE THE VERY INITIATION OF ASSESSMENT PROCEED INGS U/S 153C IN CASE OF A PERSON OTHER THAN THE SEARCHED PE RSON ARE BASED ON THE INCRIMINATING MATERIAL/DOCUMENTS FOUND IN THE PREMISES OF THE SEARCHED PERSON RELATABLE TO THAT OTHER PERSON HENCE, THE ABOVE PROPOSITION OF LAW CAN BE WELL APPLIED IN RELATION TO THE SAID OTHER PERSON ALSO IN WHOSE CASE ASSESSMENT PROCEEDINGS ARE INITIATED/CARRIED O UT U/S 153C OF THE ACT, I.E. THE ASSESSEE BEFORE US. IN V IEW OF THIS, AFORESAID CASE LAWS CAN BE WELL APPLIED TO THE CASE OF THE ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 11 ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION O N THE PART OF THE LOWER AUTHORITIES FOR MAKING THE IMPUGN ED ADDITION IN THE ALREADY CONCLUDED ASSESSMENTS IN THE CASE OF TH E ASSESSEE WHEN NO ADDITIONS HAVE BEEN MADE BY THE ASSESSING O FFICER ON THE BASIS OF ALLEGED INCRIMINATING MATERIAL FOUND D URING THE SEARCH ACTION AT THE PREMISES OF THIRD PARTY. 12. IN VIEW OF THIS, THE APPEAL OF THE ASSESSEE IN ITA NO. 1022/CHD/2014 IS HEREBY ALLOWED ITA NOS.1023 TO 1025/CHD/2017: 13. AS THE FACTS, CIRCUMSTANCES AND ISSUES RAISED I N ALL THE APPEALS ARE IDENTICAL, THEREFORE, OUR FINDINGS AND DECISION IN ITA NO.1022/CHD/2017 WOULD APPLY WITH EQUAL FORCE TO OT HER APPEALS ALSO. ACCORDINGLY, THESE APPEALS OF THE ASSESSEES ARE ALSO ALLOWED. 14. IN THE RESULT, THE APPEALS OF THE ASSESSEES ARE HEREBY ALLOWED. ITA NO. 1026/CHD/2017 A.Y. 2013-14 15. SO FAR AS THE ASSESSMENT YEAR 2013-14 IS CONCER NED, THE ORIGINAL ASSESSMENT IN THIS CASE STOOD ABATED AS ON THE DATE OF ISSUANCE OF NOTICE TO THE ASSESSEE U/S 153 OF THE A CT. THE SOLE GROUND TAKEN IN THIS APPEALS IS RELATING TO DISALLO WANCE OF INTEREST U/S 36(1) (III) OF THE ACT. 16. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSIN G OFFICER NOTICED THAT THE ASSESSEE PAID INTEREST ON UNSECURE D LOANS @ 12% AND ON THE OTHER HAND INTEREST FREE ADVANCES WERE G IVEN BY THE ASSESSEE FIRM TO SHRI NAVEEN BHATIA. THE ASSESSEE W AS ASKED TO ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 12 EXPLAIN WHY PROPORTIONATE INTEREST MAY NOT BE DIS ALLOWED IN RESPECT OF THE AFORESAID INTEREST FREE ADVANCES GIV EN BY THE ASSESSEE. THE ASSESSEE EXPLAINED THAT THE LOANS WER E GIVEN FOR BUSINESS PURPOSES. FURTHER THAT EVEN OTHERWISE THE ASSESSEE WAS POSSESSED OF SUFFICIENT OWN / INTEREST FREE FUNDS T O MAKE THE AFORESAID ADVANCES. THE ASSESSEE FIRM HAD CAPITAL T O THE EXTENT OF RS. 34,61,814/- AND FURTHER THE ASSESSEE HAD RECEIV ED ADVANCES FROM CUSTOMERS OF RS. 18,75,000/-. THE ASSESSEE HA D NEITHER PAID ANY INTEREST ON THE PARTNERS CAPITAL NOR TO THE CU STOMERS FROM WHOM THE ADVANCES HAVE BEEN RECEIVED. THAT SINCE T HE AMOUNT OF CAPITAL AND THE ADVANCES RECEIVED FROM CUSTOMER WA S MUCH MORE THAN THE ADVANCES GIVEN TO SHRI NAVEEN BHATIA OF RS . 5 LACS, HENCE NO DISALLOWANCE U/S 36(1)(III) WAS ATTRACTED. THE A SSESSING OFFICER, HOWEVER, OBSERVED THAT ON THE AMOUNT WHICH WAS PAYA BLE TO SHRI NAVEEN BHATIA, THE ASSESSEE HAD PAID INTEREST TO HI M AND ON THE OTHER HAND, WHEN THE MONEY WAS GIVEN TO HIM, NO INT EREST WAS CHARGED FROM HIM. HE, THEREFORE, MADE THE IMPUGNED DISALLOWANCE U/S 36(I)(III) IN RESPECT OF INTEREST ADVANCED OF R S. 5 LACS GIVEN BY THE ASSESSEE TO SHRI NAVEEN BHATIA. THE LD. CIT(A) CONFIRMED THE AFORESAID ADDITION. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HA VE GONE THROUGH THE RECORD. THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUND S TO MAKE THE AFORESAID ADVANCE OF RS. 5 LACS TO SHRI NAVEEN BHAT IA. SO FAR AS THE ARGUMENT THAT THE ASSESSEE HAD PAID INTEREST TO SHR I NAVEEN BHATIA, THE LD. COUNSEL FOR THE ASSESSEE HAS EXPLAI NED THAT PRIOR TO MAKING OF THE AFORESAID ADVANCES, CERTAIN AMOUNT W AS OUTSTANDING ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 13 OF SHRI NAVEEN BHATIA AGAINST THE ASSESSEE UPON WHI CH INTEREST WAS PAID. HOWEVER, AFTER SQUARING OFF THE AMOUNT, CERTA IN ADVANCES WERE MADE BY THE ASSESSEE TO SHRI NAVEEN BHATIA OUT OF HIS OWN INTEREST FREE FUNDS OUT OF BUSINESS EXPEDIENCY. 18. WE FIND THAT THOUGH THE ASSESSEE HAS CLAIMED T HAT ADVANCES WERE OUT PAID OUT OF THE BUSINESS EXPEDIENCY, HOWEV ER, CONSIDERING THAT THE ASSESSEE HAS HIS OWN SUFFICIENT FUNDS TO MEET THE AFORESAID ADVANCES, WE FIND THAT THE ISSUE IS SQUAR ELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'B LE SUPREME COURT IN THE CASE OF HERO CYCLES P. LTD VS. CIT, 379 ITR 347 (SC), AND OF THE HON'BLE BOMBAY HIGH COURT ON IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. 313 ITR 340, W HEREIN, THE HON'BLE COURTS HAVE HELD THAT WHERE THE OWN FUNDS O F THE ASSESSEE ARE SUFFICIENT TO MEET THE INTEREST FREE ADVANCES GIVEN DURING THE YEAR, THEN THE PRESUMPTION WOULD A RISE THAT SUCH ADVANCES OR INVESTMENTS HAVE BEEN MADE OUT OF THE OWN FUNDS OF THE ASSESSEE. IT IS THE PREROGATIVE OF TH E ASSESSEE EITHER TO ADVANCE INTEREST FREE OR INTERNET BEARING ADVA NCES. THE DISALLOWANCE U/S 36(1)(III) IS ATTRACTED WHEN THE ASSESSEE USES INTEREST BEARING FUNDS IN RESPECT OF WHICH INTERES T IS CLAIMED AS BUSINESS EXPENDITURE FOR MAKING INTEREST FREE ADVA NCES FOR NON- BUSINESS PURPOSES. HOWEVER, AS PER THE PROPOSITION OF LAW LAID DOWN BY THE HON'BLE COURTS, IN THE CASE OF HERO CYC LES P. LTD VS. CIT (SUPRA) AND VARIOUS OTHER CASE LAWS WHEREIN, IT HAS BEEN HELD BY THE HIGHER COURTS THAT IF THE ASSESSEE HAS AVAILABILITY OF OWN SUFFICIENT FUNDS TO MAKE THE INVESTMENT, THE N THE PRESUMPTION WOULD BE THAT INVESTMENT HAS BEEN MADE FROM OWN ITA NOS. 1022 TO 1026/CHD/2017- M/S RPA DEVELOPERS, LUDHIANA 14 FUNDS AND NO DISALLOWANCE U/S 36(1)(III)WOULD BE AT TRACTED UNDER THOSE CIRCUMSTANCES. IN VIEW OF THIS, THE APPEAL OF THE ASSESSEE IS HERE BY ALLOWED. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE E ARE HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.10.2018 SD/ - S D/ - ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 16.10.2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR