SIMPLEX PAPERS LTD, MUMBAI V. DCIT (OSD-1) CR- 7, MUMBAI

ITA 152/MUM/2013

• Counselvise Citation: 15219914 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 10-06-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 04-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KISHAN VYAS
• Assessee Lawyers: SATISH MODI
• Keywords: Gift; Search and seizure; Bad and doubtful debts
• Section: 132; 143(3); 153A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH. .. , ! , BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.152/MUM/2013, ' ' ' ' # # # # / ASSESSMENT YEAR-2005-06 SIMPLES PAPERS LTD. SIMPLEX MILLS COMPOUND, 30, KESHAVRAO KHADYE MARG, SANT GADGE MAHARAJ CHOWK, MAHALAXMI (E),MUMBAL -400 011 ' VS . DCIT (OSD-1) CENTRAL RANGE -7 MUMBAI PAN: AABCS6910M ( $% / APPELLANT) ( &'$% / RESPONDENT) ( ) / REVENUE BY :SHRI KISHAN VYAS '*+ '*+ '*+ '*+ ) ) ) ) / ASSESSEE BY :SHRI SATISH MODI ' ' ' ' ( (( ( +, +, +, +, / DATE OF HEARING : 10-06-2014 -.# ( +, / DATE OF PRONOUNCEMENT : 10-06-2014 ' ' ' ' , 1961 ( (( ( 254 )1( +/+ +/+ +/+ +/+ 0 0 0 0 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM ! ! ! ! ' ' ' ' : CHALLENGING THE ORDER DATED 15.10.2012 OF THE CIT(A )-40,MUMBAI,ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (APPEALS) ERRED IN UPHOLDING THE ADDITION MADE BY THE LEARNED ASSES SING OFFICER BY CONSIDERING RS. 4,35,279/- AS INCOME U/S 4 1(1) ON THE GROUND OF CESSATION OF LIA BILITY. THE HONBLE CIT (APPEALS) ERRED IN NOT CONSIDERING THE FACT THAT YOUR APPELLANT HAD DEBITED RS. 4,35,279/- AS EXPENDITURE AND IT WAS NOT INCOME. 2.THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PRE JUDICE TO ONE ANOTHER. 3.YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL. IT HAS ALSO RAISED FOLLOWING ADDITIONAL GROUND OF A PPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE ASSESSING OFFICER UNDER SECTION 153A O F THE ACT REGARDING THE ADDITION OF RS. 4,35,279/- MADE UNDER SECTION 41(1) OF THE ACT, WIT HOUT APPRECIATING THE FACT THAT THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR HAD BEEN COMPLETED U/S 143(3) OF THE ACT ON 13/12/2007 AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH REGARDING THE SAID SUM OF RS. 4,35,279/- HENCE ADDITION IN THE ORDER PASSED U/S 1 53A OF THE ACT IS NOT JUSTIFIED 2. ASSESSEE,ENGAGED IN THE BUSINESS OF MANUFACTURING O F PRINTING AND WRITING PAPER,FILED ITS RETURN OF INCOME ON 28.10.2010,DECLARING TOTAL INCOME OF R S.(-)2.97 CRORES.ASSESSING OFFICER(AO) FINALISED THE ASSESSMENT U/S.143(3) OF THE ACT,ON 1 5.12.2007,DETERMINING THE TOTAL INCOME AT RS. (-)2.19 CRORES.AN ACTION U/S.132 OF THE ACT WAS CAR RIED OUT THE BUSINESS PREMISES OF THE ASSESSEE ON 16.10.2008 AND CERTAIN PAPERS AND DOCUMENTS WERE SEIZED BY THE OFFICERS OF THE DEPARTMENT.AO ISSUED A NOTICE U/S.153 A OF THE ACT. IN RESPONSE TO THE NOTICE THE ASSESSEE FILED ITS RETURN OF INCOME ON 01.10.2009 DECLARING LOSS O F RS. 2.60 CRORES. DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD FIELD DETAILS OF BAD DEBTS.AFTER VERIFICATION OF THE DETAILS,HE HELD THA T THAT IN RESPECT OF M/S.AM ENGINEERING WORKS, THE ASSESSEE HAD WRONGLY CLAIMED THE AMOUNT OF BAD DEBTS,THAT AM ENGINEERING WORKSHAD FILED SUIT AGAINST THE ASSESSEE IN RESPECT OF THEIR DUES FROM THE ASSESSEE IN THE COURT,THAT THE CIVIL COURT, GONDIA HAD DECIDED THE CASE AGAINST THE ASSE SSEE,THAT THE ASSESSEE HAD FILED A CASE BEFORE THE HIGH COURT,THAT THE HIGH COURT HAD DIRECTED THE ASSESSEE TO DEPOSIT AN AMOUNT OF RS.9, 90,792/- IN THE COURT,THAT LATER ON BOTH THE PARTIE S REACHED TO A COMPROMISE,THAT AS PER THE COMPROMISE THE ASSESSEE COULD RETAIN 45% OF THE AMO UNT DEPOSITED AS PER THE DIRECTION OF THE COURT,THAT IT HAD RECEIVED BACK RS.4,35,279/-,THAT LIABILITY OF THE ASSESSEE TO THAT EXTENT HAD BEEN EXTINGUISHED.FINALLY,HE HELD THAT THERE WAS CESSATI ON OF LIABILITY AND THE AMOUNT OF RS.4,35,279/- WAS TO BE DISALLOWED AND WAS TO ADDED BACK TO THE T OTAL INCOME OF THE ASSESSEE. 3. AGGRIVED BY THE ORDER OF THE AO,THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). IT WAS ARGUED BEFORE HIM THAT M/S. A.M. ENGINEERING WORKS HAD FILED A SUIT AGAINST THE ASSESSEE FOR RECOVERY OF THEIR DUES WHI CH WERE ALLEGEDLY PAYABLE TO THEM FOR SOME REPAIRS CARRIED OUT BY THEM IN THE PAST, THAT THERE WERE NO PENDING DUES PAYABLE TO THEM,THAT AS PER THE DIRECTIONS OF THE HIGH COURT IN 1997, THE A PPELLANT HAD DEPOSITED RS.9,90,792/- IN THE COURT,THAT DURING THE YEAR, THE ASSESSEE MADE A COM PROMISE WITH THE PARTY,THAT THE ASSESSEE RECEIVED RS.5,26,618/- WITH INTEREST FROM THE COURT AND THE BALANCE AMOUNT OF RS.4,35,279/- WAS WRITTEN OFF,THAT THE AO WAS FACTUALLY INCORRECT IN STATING THAT THE APPELLANT HAD RECEIVED RS.4,35,279/-,THAT ACTUALLY THE ASSESSEE HAD RECEIV ED RS.5,26,618/- AND HAD WRITTEN OFF RS.4,35,279/-.AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ORDER OF THE AO,FAA HELD THAT THE CLAIM OF THE APPELLANT WAS NOT VERIFI ABLE,THAT THAT THE AMOUNT WAS NO MORE PAYABLE, THAT THE SAME HAD BEEN ACCOUNTED FOR IN THE PROFIT & LOSS ACCOUNT,THAT QUANTUM OF AMOUNT WAS DISALLOWABLE.HE DIRECTED THE AO TO VERIFY AND MAKE ADDITION OF THE EXACT AMOUNT. THE ASSESSEE HAD RAISED AN ADDITIONAL GROUND BEFORE THE FAA AND ARGUED THAT THE AO HAD MADE ADDITION DURING 153A PROCEEDINGS THAT WERE NOT BASE D ON THE FINDINGS MADE DURING SEARCH OR ON THE BASIS OF MATERIAL SEIZED DURING THE SEARCH.FOLL OWING HIS ORDER PASSED IN THE CASE OF SIMPLEX MILLS CO. LTD.HE DISMISSED THE ADDITIONAL GROUND RA ISED BY THE ASSESSEE. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR) STATED THAT ISSUE OF BAD DEBTS WAS EXAMINED BY THE AO DURING ORIGINAL ASSESSMENT,THAT NECESSARY DETAIL S WERE FILED BY THE ASSESSEE,THAT NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED BY THE D EPARTMENT DURING SEARCH AND SEIZURE PROCEEDINGS,THAT THE ADDITION MADE BY THE AO WAS RE SULT OF CHANGE OF OPNION,THAT NO ADDITION COULD BE MADE U/S.153A OF THE ACT IN ABSENCE OF SOM E DOCUMENTARY EVIDENCES,THAT FAA HAD NOT DEALT WITH THE ADDITIONAL GROUND PROPERLY.HE RELIED UPON THE CASE OF GURINDERSINGH BAWA (ITA2075/MUM/ /2010,AY.2005-06,DATED-16.11.2012.).H E FURTHER ARGUED THAT THE CASE OF THE ASSESSEE WAS ON STRONGER FOOTING THAN THE MATTER OF GURINDERSINGH BAWA,THAT IN THE CASE OF GURINDERSINGH BAWA ASSESSMENT WAS PASSED U/S.143 (1 ) OF THE ACT.DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ORDERS OF THE AO AND THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. UNDISPUTED FACTS OF THE CASE ARE THAT WHILE PASSING THE ORIGINAL ASSE SSMENT THE AO HAD CALLED FOR THE DETAILS OF BAD DEBTS,THAT THE ASSESSEE HAD FILED DETAILS BEFORE HI M ABOUT THE BAD DEBTS,THAT INCOME OF THE ASSESSEE WAS ASSESSED U/S.143(3)OF THE ACT AFTER CO NSIDERING THE DETAILS CALLED FOR AND CONSIDERED BY THE AO, THAT AN ADDITION OF RS. 4.35 LAKHS WAS M ADE BY THE AO WHILE COMPLETING THE ORDER U/S.143(3) R.W.S. 153A OF THE ACT,THAT NO DOCUMENTS /PAPERS WERE SEIZED DURING THE ACTION CARRIED OUT U/S. 132 OF THE ACT WITH REGARD TO TRANSACTION PERTAINING TO AM ENGINEERING WORKS. BEFORE PROCEEDING FURTHER WE WOULD LIKE TO TAKE UP THE ISSUE RAISED BY THE ASSESSEE IN FORM OF THE ADDITIONAL GROUND.AS THE ISSUE IS LEGAL IN NATURE A ND ARISING OUT OF THE ORDER OF THE FAA,WE ARE ADMITTING IT.WE FIND THAT SIMILAR ISSUE HAD ARISEN IN THE CASE OF GURINDERSINGH BAWA (SUPRA).IN THAT MATTER TRIBUNAL HAD DECIDED THE ISSUE AS UNDER : 6.WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RI VAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IS REGARDING LEGAL VALIDITY OF ADDITION MADE BY AO UNDER SECTION 153A OF THE ACT. UNDER THE PROVISIONS OF SECTION 153A, IN ALL CASES, WHERE SEA RCH IS CONDUCTED UNDER SECTION 132 OF THE ACT, AO IS EMPOWERED TO ASSESS OR REASSESS TOTAL INCOME OF SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR IN~ WHICH SEARCH WAS CONDUCTED. THE SECTION ALSO PROVIDES THAT ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSMENT YEAR FALLIN G WITHIN PERIOD OF SIX ASSESSMENT YEAR IF PENDING ON THE DATE OF INITIATION OF SEARCH SHALL A BATE. THERE HAVE BEEN DIVERGENT VIEWS REGARDING SCOPE OF APPLICATION OF SECTION 153A IN CASES WHERE NO INCRIMINATING MATERIAL WAS FOUND INDICATING ANY UNDISCLOSED INCOME. SOME OF THE TRIB UNAL BENCHES HAD TAKEN THE VIEW THAT IN CASE NO INCRIMINATING MATERIAL WAS FOUND AO HAD NO JURIS DICTION TO MAKE ASSESSMENT OR REASSESSMENT UNDER SECTION 153A WHILE SOME OTHER BENCHES HELD TH AT JURISDICTION UNDER SECTION 153A WAS AUTOMATIC TO REASSESS SIX IMMEDIATE PRECEDING ASSES SMENT YEARS IRRESPECTIVE OF THE FACT WHETHER ANY INCRIMINATING MATERIAL WAS FOUND OR NOT. ANOTHE R ASPECT ON WHICH THERE HAD BEEN DIVERGENT VIEWS WAS WHETHER EVEN IF AO HAD JURISDICTION UNDER SECTION 153A, ADDITION CAN BE MADE IN ASSESSMENT I REASSESSMENT ONLY WHEN SOME INCRIMINAT ING MATERIAL HAS BEEN FOUND. ALL THESE ASPECTS HAD BEEN REFERRED TO THE SPECIAL BENCH OF T HE TRIBUNAL IN CASE OF ALCARGO GLOBAL LOGISTICS LTD. AND ORDER OF SPECIAL BENCH DATED 6.7 .2012 HAS BEEN REFERRED. 6.1 THE SPECIAL BENCH IN THE CASE OF ALCARGO GLOBAL LOGISTICS LTD. (SUPRA), HAS HELD THAT PROVISIONS OF SECTION 153A COME INTO OPERATION IF A SEARCH OR REQUISITION IS INITIATED AFTER 31.5.2003 AND ON SATISFACTION OF THIS CONDITION, TH E AO IS UNDER OBLIGATION TO ISSUE NOTICE TO THE PERSON REQUIRING HIM TO FURNISH THE RETURN OF INCOM E FOR SIX YEARS IMMEDIATELY PRECEDING THE YEAR OF SEARCH. THE SPECIAL BENCH FURTHER HELD THAT IN C ASE ASSESSMENT HAS ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION UNDER SECTION 153A FOR WHICH ASSESSMENT SHALL BE MADE FOR EACH ASSESSMENT YEAR SEPARATELY. THUS IN C ASE WHERE ASSESSMENT HAS ABATED THE AO CAN MAKE ADDITIONS IN THE ASSESSMENT, EVEN IF NO INCRIM INATING MATERIAL HAS BEEN FOUND. BUT IN OTHER CASES THE SPECIAL BENCH HELD THAT THE ASSESSMENT UN DER SECTION 153A CAN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL WHICH IN THE CONTEXT OF RELE VANT PROVISIONS MEANS BOOKS OF ACCOUNT AND OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH BUT N OT PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND UNDISCLOSED INCOME OR PROPERTY DISCL OSED DURING THE COURSE OF SEARCH. IN THE PRESENT CASE, THE ASSESSMENT HAD BEEN COMPLETED UND ER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 14 3(2) HAD EXPIRED ON THE DATE OF SEARCH. THEREFORE, THERE WAS NO ASSESSMENT PENDING IN THIS CASE AND IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDITION COULD BE MADE ONL Y ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH. 6.2 IN THIS CASE, THE AO HAD MADE ASSESSMENT ON THE INFORMATION/MATERIAL AVAILABLE IN THE RETURN OF INCOME. THE INFORMATION REGARDING THE GIFT WAS A VAILABLE IN THE RETURN OF INCOME AS CAPITAL ACCOUNT HAD BEEN CREDITED BY THE ASSESSEE BY THE AM OUNT OF GIFT. SIMILAR WAS THE POSITION IN RELATION TO ADDITION UNDER SECTION 2(22)(E). THE AO HAD NOT REFERRED TO ANY INCRIMINATING MATERIAL FOUND DURING THE SEARCH BASED ON WHICH ADD ITION HAD BEEN MADE. THEREFORE FOLLOWING THE DECISION OF THE SPECIAL BENCH (SUPRA), WE HOLD THAT THE AO HAD NO JURISDICTION TO MAKE ADDITION UNDER SECTION 153A. THE ADDITION MADE IS T HEREFORE DELETED ON THIS LEGAL GROUND. ON MERIT ALSO WE DO NOT FIND ANY CASE TO SUSTAIN THE A DDITION. THE ADDITION MADE IS ON ACCOUNT OF GIFT WHICH IS NOTHING BUT LOAN TAKEN BY THE ASSESSEE WHI CH WAS CONVERTED INTO GIFT DURING THE YEAR. THUS SOURCE OF GIFT WAS LOAN WHICH THE AO HIMSELF H AS ADMITTED HAD BEEN TAKEN BY THE ASSESSEE IN THE YEAR PRIOR TO 2000. THEREFORE, ADDITION IF ANY COULD HAVE BEEN MADE IN THE YEAR OF LOAN. SIMILARLY, CLAIM OF THE ASSESSEE AND FINDING OF CIT (A) THAT THERE WAS NO ACCUMULATED PROFIT HAS NOT BEEN CONTROVERTED BEFORE US. WE AGREE WITH CIT( A) THAT CURRENT YEAR PROFIT HAS TO BE EXCLUDED. THEREFORE, THERE IS NO CASE FOR ANY ADDIT ION UNDER SECTION 2(22)(E). WE, THEREFORE, DISMISS THE APPEAL OF THE REVENUE AND ALLOW THE APP EAL FILED BY THE ASSESSEE. 7.IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THAT BY THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER WE ARE OF TH E OPINION THAT ASSESSMENT U/S.153A OF ACT MUST BE BASED ON DOCUMENTS/PAPERS SEIZED DURING THE PROCEEDINGS CARRIED OUT U/S.132 OF THE ACT. IN THE CASE UNDER CONSIDERATION NO INCRIMINATING DO CUMENT PERTAINING TO THE TRANSACTION WITH AM ENGINEERING WORKS WAS SEIZED.DURING THE ORIGINAL AS SESSMENT PROCEEDINGS AO WAS SATISFIED ABOUT THE GENUINENESS OF THE BAD DEBTS WRITTEN OFF. THEREFORE,THERE WAS NO JUSTIFICATION FOR MAKING AN ADDITION OF RS.4.35 LAKHS IN ABSENCE OF A NY NEW MATERIAL. AFTER CONSIDERING THE PECULIAR FACTS AND CIRCUMSTAN CES OF THE CASE BEFORE US,WE ARE OF THE OPINION THAT THE FAA WAS NOT JUSTIFIED IN REJECTING THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE AND IN CONFIRMING THE ADDITION MADE BY THE AO.THEREFORE,RE VERSING HIS ORDER WE DECIDE EFFECTIVE GROUND OF APPEAL AND THE ADDITIONAL GROUND OF APPEA L IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEA L FILED BY THE ASSESSEE STANDS ALLOWED. 1+2 1+2 1+2 1+2 '*+ '*+ '*+ '*+ 3 4 ( / 5 ( + 67 3 4 ( / 5 ( + 67 3 4 ( / 5 ( + 67 3 4 ( / 5 ( + 67. .. . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH ,JUNE,2014 0 ( -.# 8 9' 10 TWU , 201 4 . ( / : SD/- SD/- ( .. / I.P. BANSAL) ( ! ! ! ! / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 9' /DATE: 10.06 . 2014. SK 0 0 0 0 ( (( ( &+; &+; &+; &+; < ;#+ < ;#+ < ;#+ < ;#+ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / $% 2. RESPONDENT / &'$% 3. THE CONCERNED CIT(A)/ = > , 4. THE CONCERNED CIT / = > 5. DR E BENCH, ITAT, MUMBAI / ;?/ &+' , . . . 6. GUARD FILE/ / 1 ';+ ';+ ';+ ';+ &+ &+&+ &+ //TRUE COPY// 0' / BY ORDER, @ / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI