Tegh International, New Delhi V. ACIT, New Delhi

ITA 1462/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7663 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 19-05-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 11-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT GOEL; SAMBHAV GOEL
• Keywords: Bogus purchase; Search and seizure; Accommodation entries
• Section: 143(3); 142(1); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO.1462 & 1463/DEL/2014 A.YRS. : 2006-07 & 2007-08 M/S TEGH INTERNATIONAL A-14, WESTEND, NEW DELHI 110 021 (PANAAAFT1749D) VS. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-10, ARA CENTRE, JHANDEWALAN EXTN., NEW DELHI (ASSESSEE) (RESPONDENT) ASSESSEE BY : SH. AMIT GOEL, CA & SAMBHAV GOEL, CA DEPARTMENT BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 19-05-2016 DATE OF ORDER : 27-05-2016 ORDER PER H.S. SIDHU : JM THESE APPEALS ARE FILED BY THE ASSESSEE AGAINST TH E SEPARATE ORDER OF THE LD. CIT(A)-XXXII, NEW DELHI BOTH DATED 20.1.2014 RE LEVANT TO ASSESSMENT YEAR 2006-07 & 2007-08. SINCE THE ISSUES INVOLVED I N BOTH THE CASES ARE SAME AND IDENTICAL, HENCE, THE APPEALS WERE HEARD TOGETH ER AND DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF BREVITY, BY DEALING WI TH ASSESSMENT YEAR 2006-07. ITA NOS.1462-1463/DEL/2014 2 2. THE GROUNDS RAISED IN ITA NO. 1462/DEL/2014 FOR THE ASSESSMENT YEAR 2006-07 READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ADDITION OF RS. 1,66,62,715/- MADE BY THE AO ON ACC OUNT OF ALLEGED BOGUS PURCHASE IS BEYOND THE JURISDICTION OF PROVIS IONS OF SECTION 153A OF THE INCOME TAX ACT, 1961 AND CIT(A) ERRED I N NOT HOLDING SO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,66,62,715 /- MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSEE CRAVES LEAVE TO ADD ONE OR MORE GROUND OF APPEAL, OR TO ALTER / MODIFY THE EXISTING GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. THE AFORESAID GROUND ARE WITHOUT PREJUDICE TO EACH OTHER. 3. THE GROUNDS RAISED IN ITA NO. 1463/DEL/2014 FOR THE ASSESSMENT YEAR 2007-08 READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ADDITION OF RS. 1,89,64,850/- MADE BY THE AO ON ACC OUNT OF ALLEGED BOGUS PURCHASE IS BEYOND THE JURISDICTION OF PROVIS IONS OF SECTION ITA NOS.1462-1463/DEL/2014 3 153A OF THE INCOME TAX ACT, 1961 AND CIT(A) ERRED I N NOT HOLDING SO. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 1,89,64,850 /- MADE BY THE AO ON ACCOUNT OF ALLEGED BOGUS PURCHASES. THE ASSESSEE CRAVES LEAVE TO ADD ONE OR MORE GROUND OF APPEAL, OR TO ALTER / MODIFY THE EXISTING GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. THE AFORESAID GROUND ARE WITHOUT PREJUDICE TO EACH OTHER. ITA NO. 1462/DEL/2014 - ASSESSMENT YEAR (2006-07) 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FIRM IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF ARTIFICIAL JEWELLERY. ALTHOUGH THE ASSESSEE'S REGISTERED ADDRESS IS 3/4 SOUTH INDUSTRI AL AREA, KIRTI NAGAR, NEW DELHI, THE MAIN BUSINESS ACTIVITY OF THE FIRM IS CA RRIED OUT FROM 49, UDYOG VIHAR PH-IV, GURGAON. BESIDES, THE ASSESSEE FIRM IS ALSO USING PLOT NO. 110, SECTOR 8, MANESAR, GURGAON, HARYANA AS GODOWN FOR S TORING THE GOODS. A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) WAS CONDUCTED BY THE INVESTIGA TION WING OF THE DEPARTMENT IN M/S TEGH GROUP OF CASES ON 26.04.2010 AND SIMULT ANEOUSLY THE ASSESSEE'S BUSINESS PREMISES AT 49, UDYOG VIHAR, PHASE-IV, GUR GAON, HARYANA, WAS ALSO ITA NOS.1462-1463/DEL/2014 4 COVERED U/S 132(1) OF THE IT ACT, 1961. THE CASE OF THE ASSESSEE WAS CENTRALIZED U/S 127 OF THE IT ACT, 1961 VIDE ORDER F.NO.CIT- IX LITO(HQ)/127/2010-11/809 DATED 13.08.2010 AND THE JURISDICTION OVER THE ASSE SSEE'S CASE WAS ASSIGNED TO THE ASSESSING OFFICER, CENTRAL CIRCLE-10 NEW DELHI . THEREAFTER, A NOTICE U/S 153A OF THE IT ACT, 1961 DATED 13.04.2011 WAS ISSUE D AND SERVED UPON THE ASSESSEE, IN RESPONSE TO WHICH THE ASSESSEE FILED I TS RETURN ON 02.05.2011 DECLARING A TOTAL INCOME OF RS.6,29,87,718/-. SUBSE QUENTLY, NOTICES U/S 142(1) OF THE ACT ALONGWITH A DETAILED QUESTIONNAIRE AND U /S 143(2) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. IN RESPONSE TO THE SAME, THE ARS OF THE ASSESSEE ATTENDED THE ASSESSMENT PROCEEDINGS FROM T IME TO TIME AND FILED THE NECESSARY DETAILS, INFORMATION AND DOCUMENTS WHICH WERE EXAMINED BY THE ASSESSING OFFICER AND THE CASE WAS DISCUSSED. THERE UPON, THE ASSESSMENT WAS COMPLETED IN TERMS OF AN ORDER U/S 153A OF THE ACT READ WITH SECTION 143(3) OF THE ACT DATED 22.03.2013 AT A TOTAL INCOME OF RS.7, 96,50,433/- AS AGAINST THE RETURNED INCOME OF RS.6,29,87,718/- WHEREIN THE ASS ESSING OFFICER MADE AN ADDITION OF RS.1,66,62,715/- ON ACCOUNT OF BOGUS PU RCHASES MADE THROUGH ACCOMMODATION ENTRIES. 5. AGAINST THE AFORESAID ASSESSMENT ORDER DATED 22 .3.2013, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 20.1.2014 HAS PARTLY ALLOWED THE APPEAL OF THE ASSE SEEE. ITA NOS.1462-1463/DEL/2014 5 6. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. AT THE THRESHOLD, LD. COUNSEL OF THE ASSESSEE ST ATED THAT THE ISSUES IN DISPUTE RELATING TO UPHOLDING THE VALIDITY OF THE O RDER OF ASSESSMENT PASSED U/S. 153A ON 23.2.2012, IS SQUARELY COVERED IN FAVOR OF THE ASSESSEE BY THE DECISION DATED 28.8.2015 OF THE HONBLE DELHI HIGH COURT PAS SED IN THE CASE CIT(CENTRAL)-III VS. KABUL CHAWLA IN ITA NO. 707, 7 09, 713/DEL/2014 WHEREIN THE HONBLE HIGH COURT HAS HELD THAT IF THE ADDITIO NS ARE 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 THAT THE ADDITIONS HAVE NO RELATION WITH ANY INCRIMINATING M ATERIAL FOUND AND UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH AND AS SUCH ARE BAD IN LAW BEING BEYOND THE SCOPE OF JURISDICTI ON U/S. 153A OF THE I.T. ACT. IN SUPPORT OF HIS CONTENTION, HE FILED A PAPER BO OK CONTAINING PAGES 1 TO 111 OF COMPILATION OF FOLLOWING CASE LAWS BY WHICH THE ISSUE IN DISPUTE IS SQUARELY COVERED . - CIT VS. KABUL CHAWAL (DELHI HIGH COURT) (2015_ 6 1 TAXMANN.COM 412 (DELHI). - CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHA VA SHEVA) LTD. (2015) 58 TAXMANN.COM 78 (BOMBAY HIGH COURT) ITA NOS.1462-1463/DEL/2014 6 - CIT VS. LATA JAIN (DELHI HIGH COURT) ITA NO. 274/ 2016 & ORS. ORDER DATED 6.5.2016. - NEETA SAHA VS. ITO (ITAT, DELHI) - CIT VS. JMD COMPUTERS & COMMUNICATIONS PVT. LTD. (DELHI HIGH COURT) (2009) 20 DTR (DEL) 317 - CIT VS. BHOLANATH POLYFAB PVT. LTD. (GUJRAT HIGH COURT) (2013) 355 ITR 290 (GUJ) - CIT VS. NIKUNJ EXMP ENTERPRISES PVT. LTD. (BOMBA Y HIGH COURT.) 2013 (1) TMI 88 - PUNJAB METAL STORE VS. ITO (ITAT, DELHI) ITA NO . 1612/DEL/2015 (AY 2006-07) DATED 2.12.2015. - RADHEY SHAM & CO. VS. ITO (ITAT DELHI) ITA NO. 1429/DEL/2015 (AY 2006-07) DATED 30.11.2015. - UNIQUE METAL INDUSTRIES VS. ITO (ITAT DELHI) ITA NO. 1372/DEL/2015 (AY 2006-07) DATED 28.10.2015. 7.1 AT THE TIME OF HEARING, LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW AND STATED THAT THE PROVISION OF SECTION 153A HAS RIGHTLY BEEN APPLIED IN THE CASE OF THE ASSESSEE ON THE MATERIAL AVAILABLE WITH THEM. ITA NOS.1462-1463/DEL/2014 7 8. 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 IN THE SHAPE OF PAPER BOOK. WE FIND THAT THE ADDITIONS MADE BY THE AO ARE BEYOND T HE SCOPE OF SECTION 153A OF THE INCOME TAX ACT, 1961, BECAUSE NO INCRIMINATING MATERIAL OR EVIDENCE HAD BEEN FOUND DURING THE COURSE OF SEARCH SO AS TO DOU BT THE PURCHASES. IT WAS NOTICED THAT AS ON THE DATE OF SEARCH I.E. 26.4.201 0, NO ASSESSMENT PROCEEDINGS WERE PENDING FOR THE YEAR UNDER CONSIDERATION AND T HE AO WAS NOT JUSTIFIED IN DISTURBING THE CONCLUDED ASSESSMENT WITHOUT THERE B EING ANY INCRIMINATING MATERIAL BEING FOUND IN SEARCH. IN FACT, IN THE ENT IRE ASSESSMENT 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 INCRIMIN ATING MATERIAL FOR THE YEAR UNDER APPEAL. THEREFORE, IN OUR CONSIDERED OPINION , THE ACTION OF THE AO IS BASED UPON CONJECTURES AND SURMISES AND HENCE, THE ADDITIONS MADE ON THE ASSESSED BOGUS PURCHASES IS NOT SUSTAINABLE IN THE EYES OF LAW, BECAUSE THIS ISSUE IN DISPUTE IS NOW NO MORE RES-INTEGRA, IN VIE W OF THE DECISION DATED 28.8.2015 OF THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. KABUL CHAWLA PASSED IN ITA NO. 707, 709 AND 713/2014 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 ITA NOS.1462-1463/DEL/2014 8 AFOREMENTIONED ITA NOS. 707, 709 AND 713 OF 2014 OF DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUE D TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX 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 WILL HAVE TO B E 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 SEAR CH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INC OME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORD ERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE AS SESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE D ISCLOSED 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 INFORMATION AVAIL ABLE 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 RE LEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ITA NOS. 707 , 709 AND 713 OF 2014 OF ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONL Y ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REAS SESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATAB LE TO ABATED ITA NOS.1462-1463/DEL/2014 9 PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEAR CH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT 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 ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH 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 WI TH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON T HE 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 WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL A SSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005 -06 AND 2006-07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURIN G THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREAD Y ASSESSED. 9. RESPECTFULLY FOLLOWING THE PRECEDENT OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA, AS AFORE SAID, WE ALLOW THE APPEAL OF THE ASSESSEE, BECAUSE AO HAS COMPLETED THE ASSESSM ENT AND MADE THE ADDITION IN DISPUTE WITHOUT ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH AND SEIZURE OPERATION AND THE ADDITION IN THIS CASE W AS PURELY BASED ON THE MATERIAL ALREADY AVAILABLE ON RECORD. HENCE, THE ADDITION IN THE CASE IS DELETED AND THE GROUND RAISED BY THE ASSESSEE IN THE APPEAL IS ALLO WED. ITA NOS.1462-1463/DEL/2014 10 ITA NO. 1463/DEL/2014 - ASSESSMENT YEAR (2007-08) 10. FOLLOWING THE CONSISTENT VIEW IN ASSESSMENT YEA R 2006-07 IN APPEAL NO. 1462/DEL/2014, AS AFORESAID, THE OTHER APPEAL OF TH E ASSESSEE BEING ITA NO. 1463/DEL/2014 (AY 2007-08) STANDS ALLOWED. 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/05/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 27/05/2016 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