DCIT- CC- 6(4), MUMBAI V. SMT. DIVYA SAMEER GEHLAUT, MUMBAI

ITA 1428/MUM/2022

• Counselvise Citation: [2022] 103 COUNSELVISE.COM (IT) 9408 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 28-09-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 26-05-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Keywords: Document seized
• Section: 54; 132; 143(3); 153A; 143(1); 143(2); 64; 153C

Judgement Text

ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 1 IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI OM PRAKASH KANT, AM आयकर अपील सं/ I.T.A. No.1428/Mum/2022 (निर्धारण वर्ा / Assessment Year: 2013-14) Deputy Commissioner of Income Tax, Central Circle 6(4), Room No. 1925, 19 th Floor, Air India Building, Nariman Point, Mumbai-400021 बिधम/ Vs. Smt. Divya Sameer Gehlaut 17 th floor, Tower 1, Indianbulls Finance Centre, Senapati Bapat Marg, Elphinstone Road, Mumbai-400013 स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AJBPG2722R (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 29/09/2022 घोषणा की तारीख /Date of Pronouncement: 31/10/2022 आदेश / O R D E R PER ABY T. VARKEY, JM: 1. This is an appeal preferred by the Revenue against order of the Ld. CIT(A)- 54, Mumbai dated 21-10-2021 for A.Y. 2013-14. 2. The Grounds of appeal raised by the Revenue as under: “1. Whether, on the fads and in the circumstances of the case and in law, the learned CIT(A) has erred in holding that the additions / disallowances made in the assessment order is not sustainable as they are without reference to any incriminating material found during the search, without appreciating that the department has filed an SLP against the decision of the Hon 'ble High Court of Bombay in the case of Continental Warehousing Corporation Assessee by: Shri .Om Kandalkar Revenue by: Shri. T Sankar (DR) ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 2 (Nhava Sheva Limited reported in 374 ITR 645 (Bom), which has been admitted and directed to be listed by the Hon 'ble Supreme Court of India, vide order dated 12.10.2015 reported in J20I5] 64 taxmann.com 34 (SC) ? " (2) "Whether, on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in allowing the long term capital gain of Rs.13,84,87,515/- without appreciating the fact thai the assessee 's claim of deduction u/s.54 of the Income tax Act, 1961, is not tenable as per the facts stated in the assessment order. " (3) The appellant craves to leave, to add, to amend and / or to alter any of the ground of appeal, if need be.. The appellant craves leave to amend or alter any grounds or add a new ground, which may be necessary.” 3. Brief facts noted by the Ld. CIT(A) is that the assessee has filed its original return of income on 31.07.2013, declaring income at Rs.26,64,690/-. The return was revised on 30.03.2015, declaring net income at Rs.26,64,690/-. Subsequently, search action was carried out in the case of Indiabulls Group on 13.07.2016. Consequently, notice u/s 153C dated 13.10.2017 was issued and duly served. In response to this notice, the assessee e-filed return of income on 21.11.2017 declaring total income at Rs.36,64,690/-. After issuing notices and hearing the assessee, the AO framed the assessment order u/s. 143(3) r.w.s. 153C on 31.12.2018 wherein the AO assessed the total income at Rs.14,11,52,210/-. 4. Aggrieved by the action of the AO, the assessee preferred an appeal before the Ld. CIT(A) wherein the assessee had raised following grounds of appeal before Ld. CIT(A) which was as under: 1. On the facts and the circumstances of the appellant's case and in law the Ld. Assessing Officer's erred in issuing notice u/s. 153C despite the fact ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 3 that no satisfaction was recorded by the AO of the searched party and/or the AO of the appellant and therefore, the notice u/s. 153C and consequent order passed by the AO u/s. 143(3) r.w.s 153C is bad-in-law, illegal or otherwise void for want of jurisdiction. 2. On the facts and circumstances of the Appellant's case and in Law the Ld' Assessing officer erred in disallowing the deduction u/s 54 of the Income tax Act despite the fact that during the course of search no incriminating material or evidence was found relating to the issue of deduction u/s 54 and assessment for the assessment year under consideration has attained finality and no assessment or reassessment was pending as on date of search which took place on 13.07.2016. 3. On the facts and the circumstances of the appellant's case and in law the learned Assessing Officer erred in disallowing deduction u/s. 54 of the Act. 4. The assessee craves leave to alter, amend, modify or substitute any ground or grounds and to add any new ground/(s) as may be necessary. 5. The Ld. CIT(A) decided the legal issue raised by the assessee ( ground no 1 & 2) by holding in favor of assessee as under:- 6.3 The facts recorded in the assessment order and the submissions of the appellant have been carefully considered. In the case of the appellant, the original return of income was filed on 31.07.2013, declaring income at Rs. 26,64,690/-. The return was revised on 30.03.2015, declared net income at Rs. 26,64,690/-. The return was processed u/s 143(1} of the IT. Act. A search action u/s. 132 was carried out in the case of Indiabulls Group on 13.07.2016. Consequently, the assessment order u/s 153C has been passed by the AO on 30.12.2019. Thus, for A.Y. 2013-14, no assessment or re- assessment was pending as on the date of search carried out on 13.07.2016. Accordingly, A.Y. 2013-14 is an unabated assessment year as per second proviso to sub section (1) of section 153A of the Act. U The appellant has ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 4 submitted that in respect of disallowance under section 54 of the IT Act,no incriminating material was found during the course of search in the case of the Indiabulls Group. Therefore, the action of the AO in not allowing deduction u/s 54 of the Act is beyond the jurisdiction. In this regard, the appellant has relied upon the decision in the case of CIT vs. Murli Agro Products (Bombay High Court) in ITA No. 36 of 2009, All cargo Global Logistics Ltd. vs. DCIT (2012) 137 ITD 287 (SB) (Mum) and ACIT vs. Pratibha Industries Ltd. (2013)141 ITD 151 (Mum). In the present case of the appellant, for A.Y. 2013-14, assessment order has been passed under section 153C of the Act. The AO has not allowed deduction u/s 54 of the Act. The action of the AO is based on the details provided in the return of incomes and the entries in the regular books of accounts. There is no reference to any incriminating material found in search with reference to the disallowance made u/s 54 of the Act. It is also undisputed that the assessment is unabated. The law for assessment under section 153A in case of unabated assessment has been duly laid down by the Hon'ble Bombay High Court in the case of continental warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645 (Bom) as under:- "On a plain reading of section 153A, it becomes clear that on initiation of the proceedings under section 153A, it is only the assessment/reassessment proceedings that are pending on the date of conducting search under section 132 or making requisition under I section 132/4 stand abated and not the assessments / reassessments already finalised for those assessment years covered under section 53A By a Circular No. 8 of 2003, dated 19-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment / reassessment shall not abate. It is only because, the finalised assessments / reassessments do not abate, the appeal revision or rectification pending against finalised ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 5 assessment / reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments / reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1)." "Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment / reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order." The jurisprudence regarding jurisdictional defect in assessment under section 153A /153C without reference to incriminating seized material has also been expounded by Hon'ble Supreme Court in the case of CIT v/s Singhad technical education Society in Civil Appeal No.11080 of 2017 and others. In this regard the Hon'ble Supreme Court in paragraph 18 of the said order observed that:- "In this behalf it was noted by the ITAT that as per provisions of section 153C of the act,, incriminating material which was seized had to pertains to assessment years in question and it is an undisputed fact that the documents which were seized did not establish any correlation, document -wise, with these for assessment years since this requirement under section 153C of the act is essential for assessment under the provision it becomes a jurisdictional ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 6 defect We find this reasoning to be logical and valid having regard to the provisions of section 1S3C of the Act." In the case of the appellant, the return of income was processed u/s 143(1) of the Act. Assessments which are not pending are not only those which have been completed under section 143(3) but also those for which the time for issuing notice under section 143(2) have already elapsed. Thus, the assessment for the A.Y. 2013-14 had attained finality as on the date of search. It is a settled legal position that in case of assessments which have attained finality no addition under section 153C can be done without seized incrementing material. In the background of aforesaid discussion and precedents, the addition/disallowance made in the assessment orders passed by the assessing officer under section 153C without reference to any incriminating material found during the search is not sustainable.” 6. Aggrieved by the aforesaid action of the Ld. CIT(A), the Revenue is before us 7. We have heard both the parties and perused the records. We note that the assessee had filed her ROI for AY 2013-14 on 31.07.2013, declaring total income of Rs. 26,64,690/-. Later the case of assessee was scrutinized and the AO framed the original assessment u/s 143(3) of the Act on 28.03.2016 at Rs. 14,11,52,205/-. (Deduction claimed u/s 54 added back treated as tax of LTCG to the tune of Rs. 13,84,87,515/-) Particulars Amt. (Rs) Amt. (Rs) Total Income as per return of income Addition : deduction claimed u/s 54 Added back treated as taxable LTCG Total Income Assessed Rounded off to 26,64,690/- 13,84,87,515/- 14,11,52,205/- 14,11,52,205/- ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 7 8. Thereafter search operation u/s 132 of the Act was carried out against the IndiaBulls group on 13-07-2016. The AO issued notice u/s 153C of the Act dated 13-10-2017 [which means it was issued in AY 2018-19]. Notice under section 153C of the Act, has been issued because even though the assessee was not searched, but as a fall out of search in India Bulls on 13.07.2016 (AY 2017-18), the AO had initiated assessment/ re-assessment on “any other person” covered by section 153C of the Act. Therefore as per the first proviso to section 153C of the Act, the date of handing over the document seized which belongs/ relates/ pertain to the assessee would be reckoned for the purpose of section 153A of the Act for valid issuance of notice for six (6) assessment years; and since the notice u/s 153C has been issued on 13.10.2017 i.e. AY 2018-19 ( even though date of handing over the document the assessee’s AO by AO of searched party is not discernable) still it is presumed that the relevant A.Y. before us i.e. AY 2013-14 is the fifth (5 th ) year of assessment (as per 2 nd provision of section 153A of the Act). In such a scenario, it can be seen that since the original assessment for AY 2013-14 was over on 28.03.2016, the assessment was an un-abated assessment for the purpose of assessment u/s 153A/ 153C of the Act. In such a scenario, as per settled position of Law by Hon’ble Supreme court in Singhad Education (Supra) the AO could have legally made any addition only on the basis/aid of incriminating materials found against the assessee qua the AY 2013-14. Having noted the legal position, we find that the Ld. CIT(A) has given a finding of fact that the AO has made the addition of Rs. 14,11,52,210/- ( Deduction disallowed u/s 54 of the Act ) without any aid of any incriminating materials i.e. without any reference to any seized materials qua the assessee for AY 2013-14; and this finding of fact could not be controverted by the Ld. DR before us. In such scenario we note that Ld. CIT(A) has rightly followed the judicial precedent laid by the Jurisdictional High Court in the case of ITA NO. 1428/MUM/2022 Smt. Divya Sameer Gahlaut 8 the continental Warehousing Corporation (Nhava Sehva) Ltd. 374 ITR 645 as well as by the Hon’ble Supreme Court in the case of CIT v/s Singhad Technical Society in Civil Appeal No.11080 to delete the addition made by the AO. We confirm the impugned action of Ld CIT(A) and dismiss the appeal of Revenue. 9. In the result, the appeal of the Revenue stands dismissed. Order pronounced in the open court on this 31/10/2022. Sd/- Sd/- (OM PRAKASH KANT) (ABY T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 31/10/2022. Shubham Lohar, (Stenographer) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai