Deputy Commissioner of Income-tax, V. Mr. Pesi Shroff, Mumbai

ITA 1624/PUN/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8567 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-07-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 10-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL; SHRI
• Assessee Lawyers: NILESH MORE
• Keywords: Gift; Business income; Search and seizure
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1624/PUN/2015 / ASSESSMENT YEAR : 2008-09 DCIT, CENTRAL CIRCLE-1(1), PUNE ....... / APPELLANT / V/S. MR. PESI SHROFF, 51, GOOLESTAN, 34, BHULABHAI DESAI ROAD, MUMBAI 400 036 PAN : AMWPS0749L / RESPONDENT ASSESSEE BY : SHRI MADHUR AGARWAL AND SHRI NILESH MORE REVENUE BY : SHRI VIVEK AGGARWAL AND SHRI PANKAJ GARG / DATE OF HEARING : 29-10-2018 / DATE OF PRONOUNCEMENT : 31-12-2018 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-11, PUNE DATED 28-09-2015 COMMON FOR VARIOUS ASSESSMENT YEARS. HOWEV ER, BY WAY OF THIS APPEAL, THE REVENUE HAS ASSAILED THE FINDINGS OF COMM ISSIONER OF INCOME TAX (APPEALS)- IN ASSESSMENT YEAR 2008-09 ONL Y BY RAISING FOLLOWING GROUNDS : 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N MADE ON ACCOUNT OF SALE OF AGRICULTURAL LAND IGNORING THE FACT THAT TH E SAID VENTURE OF THE 2 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF ASSESSEE FALLS IN THE CATEGORY OF BUSINESS AS DEFIN ED IN SEC.2(13) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N MADE ON ACCOUNT OF SALE OF AGRICULTURAL LAND OVERLOOKING THE ACTIVITIE S UNDERTAKEN BY THE ASSESSEE AND HIS PARTNERS IN CONVERTING THE SAID LA ND INTO A RESORT FOR COMMERCIAL USE AND EARNING INCOME BY CARRYING OUT B USINESS. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE ASSESSEES GROU ND BY HOLDING THAT RULE 8D WAS NOT APPLICABLE TO THE ASSESSEE FOR COMP UTING DISALLOWANCE U/S.14A OF THE INCOME TAX ACT, 1961. 4. THE ORDER OF THE LD. CIT(A) MAY BE VACATED AND T HE ASSESSING OFFICER BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 2. THE ASSESSEE HAS FILED APPLICATION UNDER RULE 27 OF THE IT(AT) RULES, 1963 ON THE GROUND THAT THE ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTION 153A WAS BEYOND JURISDICTION AS NO INCRIMINATING MATERIAL WAS FOUND WITH RESPECT TO THE ADDITIONS MADE. 3. SHRI NILESH MORE APPEARING ON BEHALF OF THE ASSESSEE S UBMITTED AT THE OUTSET THAT THE ADDITIONS MADE BY ASSESSING OFFICE R (IN SHORT AO) IN ASSESSMENT ORDER 27-03-2014 PASSED U/S.153A R .W.S. 143(3) OF THE ACT ARE NOT SUSTAINABLE AS NO INCRIMINATING MATERIAL W AS FOUND DURING THE COURSE OF SEARCH AND THE ASSESSMENT FOR ASS ESSMENT YEAR 2008-09 HAD NOT ABATED. THE LD. AR SUBMITTED THAT THE SEARCH AND SEIZURE ACTION WAS CARRIED OUT IN THE CASE OF POONAWALLA G ROUP ON 21-06-2011. THE ASSESSEE WAS ALSO COVERED IN THE SEAR CH. NOTICE UNDER SECTION 153A DATED 27-09-2012 WAS ISSUED TO THE ASSESS EE. THE ASSESSEE HAD FILED REGULAR RETURN OF INCOME FOR THE IMPUG NED ASSESSMENT YEAR ON 15-07-2009 DECLARING INCOME OF RS.1, 02,82,260/-. IN RESPONSE TO NOTICE U/S.153A, THE ASSESSEE FILED RETURN ON 04-12-2013 DECLARING THE SAME INCOME AS WAS RETURNED IN ORIGINAL RETURN OF INCOME. IN ASSESSMENT PROCEEDINGS, CONSEQUENT TO SEARCH 3 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF ACTION U/S.153A, THE AO MADE ADDITION OF RS.69,07,500/- ON A CCOUNT OF SALE OF LAND APART FROM DISALLOWANCE U/S.14A AMOUNTING TO RS.32,674/- AND PAYMENT OF SUBSCRIPTION FEES TOWARDS PEG ASUS TRUST, ETC. RS.2,95,200/-. 3.1 THE LD. AR SUBMITTED THAT DURING THE COURSE OF SEAR CH, NO INCRIMINATING MATERIAL WHATSOEVER WAS FOUND AND IT IS A CASE OF CONCLUDED ASSESSMENT. THE LD. AR SUBMITTED THAT THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GURINDER SINGH B AWA REPORTED AS 386 ITR 0483 (BOM.) HAS HELD THAT WHERE NO ASSESSMENT IS PENDING AT THE TIME OF INITIATION OF PROCEEDINGS U/S.153A NO ADDITION CAN BE MADE ON MERITS IN THE ABSENCE OF ANY INCRIMINATING MATERIAL. THE LD. AR SUBMITTED THAT THE CIT(A) IN PARA NO.9.12 OF TH E IMPUGNED ORDER HAS OBSERVED THAT THE ASSESSMENTS FOR ALL THE AS SESSMENT YEARS FROM 2008-09 TO 2011-12 EXCEPT FOR ASSESSMENT YEAR 20 12-13 WERE ACCEPTED U/S.143(1). THE LD. AR POINTED THAT THE SPECIAL BE NCH OF THE TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. VS. DCI T 18 ITR 106 (SB) HAS MADE NO DISTINCTION BETWEEN THE ASSESSMENT COMPLETED U/S.143(1) AND 143(3) OF THE ACT. THE LD. AR FURTHER SUBMIT TED THAT THE SPECIAL BENCH HAS CATEGORICALLY HELD THAT IT IS IN ASSE SSMENTS THAT ARE ABATED, THE AO RETAINS ORIGINAL JURISDICTION AS WELL AS J URISDICTION CONFERRED U/S.153A OF THE ACT. 4. IN SOFARAS THE ISSUE OF DISALLOWANCE U/S.14A R.W. RULE 8D IS CONCERNED, THE LD. AR SUBMITTED THAT THE PROVISIONS OF RULE 8D DOES NOT APPLY AS NO EXPENDITURE WAS INCURRED FOR EARNING EXEMPT INC OME. 4 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF 5. ON THE OTHER HAND, SHRI PANKAJ GARG REPRESENTING TH E DEPARTMENT VEHEMENTLY DEFENDED THE ASSESSMENT ORDER AND PRAYED FOR REVERSING THE FINDING OF CIT(A). THE LD. DR SUBMITTED THAT TH E ASSESSEE HAD SOLD THE LAND AFTER OBTAINING PERMISSION FOR CONSTRUCT ION OF RESORT AND HENCE, THE SALE OF LAND IS ADVENTURE IN THE NATURE OF TRADE. THE AO HAS RIGHTLY ASSESSED THE SAME AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVE S OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. IN THE PRESENT APPEAL, THE REVENUE HAS ASSAILED THE FINDINGS OF CIT(A) IN DELETING THE ADDITION MADE ON ACCOUNT OF SALE OF LAND BY TH E ASSESSEE AND DELETING THE DISALLOWANCE U/S.14A OF THE ACT. 7. IN THE PRESENT APPEAL BY THE DEPARTMENT, THE ASSES SEE HAS FILED AN APPLICATION UNDER RULE 27 OF THE ITAT RULES, 1963 RAISIN G OBJECTION THAT THE ADDITION MADE BY THE AO U/S.153A WAS BEYOND J URISDICTION AS NO INCRIMINATING MATERIAL WAS FOUND WITH RESPECT TO THE AD DITIONS MADE. IT IS AN UNDISPUTED FACT THAT THE ASSESSMENT FOR THE ASSESSM ENT YEAR 2008-09 WAS COMPLETED U/S.143(1). THUS, ON THE DATE OF SEARCH THE ASSESSMENT FOR A.Y. 2008-09 WAS NOT PENDING. IN SEA RCH PROCEEDINGS, NO INCRIMINATING MATERIAL WAS FOUND. HOWEVER, TH E ADDITION WAS MADE BY THE AO ON MERITS. THE SAID ADDITIONS WERE DELETED BY THE FIRST APPELLATE AUTHORITY AGAINST WHICH DEP ARTMENT IS IN APPEAL. BEFORE ADVERTING TO THE MERITS OF ADDITION, WE WILL FIRST DECIDE THE JURISDICTIONAL ISSUE. 5 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF 8. A PERUSAL OF THE ASSESSMENT ORDER DATED 27-03-2014 PASSED U/S.153A READ WITH SECTION 143(3) OF THE ACT REVEAL THAT T HERE IS NO REFERENCE TO ANY INCRIMINATING MATERIAL FOUND DURING THE COU RSE OF SEARCH LEADING TO THE ADDITIONS IN THE ASSESSMENT ORDER . THE ADDITIONS HAVE BEEN MADE ON THE RE-APPRECIATION OF THE MATERIAL ALR EADY ON RECORD. IT IS A WELL SETTLED LAW THAT WHERE NO ASSESSME NTS ARE PENDING AT THE TIME OF INITIATION OF PROCEEDINGS U/S.153A, NO ADDITION ON MERITS ARE UNSUSTAINABLE. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GURINDER SINGH BAWA (SUPRA) ON THE ISSUE OF ASSUMING J URISDICTION TO MAKE ADDITIONS IN PROCEEDINGS U/S.153A WITHOUT THERE B EING INCRIMINATING MATERIAL AND WITHOUT THERE BEING ANY PENDING ASSESSMENT HAS HELD AS UNDER : 6. MR. KOTANGALE, THE LEARNED COUNSEL FOR THE REVE NUE VERY FAIRLY STATES THAT THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN AICARGO GLOBAL LOGISTICS LTD. WAS A SUBJECT MATTER OF CHALL ENGE BEFORE THIS COURT AS A PART OF THE GROUP OF APPEALS DISPOSED OF AS CI T VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD., 374 ITR 645 UPHOLDING THE VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL IN AI CARGO GLOBAL LOGISTICS LTD. CONSEQUENTLY, ONCE AN ASSESSMENT HAS ATTAINED FINALITY FOR A PARTICULAR YEAR I.E. IT IS NOT PENDING THEN T HE SAME CANNOT BE SUBJECT TO TAX IN PROCEEDINGS UNDER SECTION 153A OF THE ACT. THIS OF COURSE WOULD NOT APPLY IF INCRIMINATING MATERIALS A RE GATHERED IN THE COURSE OF SEARCH OR DURING PROCEEDINGS UNDER SECTIO N 153A OF THE ACT WHICH ARE CONTRARY TO AND/OR NOT DISCLOSED DURING R EGULAR ASSESSMENT PROCEEDINGS. 7. IN VIEW OF THE ABOVE, ON ISSUE OF JURISDICTION ITSELF THE ISSUE STANDS CONCLUDED AGAINST THE REVENUE BY THE DECISIO N OF THIS COURT IN CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) L TD. (SUPRA). IN THE APPEAL BEFORE US, THE REVENUE HAS MADE NO GRIEVANCE WITH REGARD TO THE IMPUGNED ORDER OF THE TRIBUNAL HOLDING THAT IN LAW THE PROCEEDINGS UNDER SECTION 153A OF THE ACT ARE WITHOUT JURISDICT ION. THIS IN VIEW OF THE FACT THAT NO ASSESSMENT WERE PENDING, SO AS TO ABATE NOR ANY INCRIMINATING EVIDENCE WAS FOUND. THE GRIEVANCE OF T HE REVENUE IS ONLY WITH REGARD TO FINDING IN THE IMPUGNED ORDER ON THE MERITS OF THE INDIVIDUAL CLAIM REGARDING GIFTS AND DEEMED DIVIDEN D. HOWEVER ONCE IT IS NOT DISPUTED BY THE REVENUE THAT THE DECISION OF THIS COURT IN CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) L TD. (SUPRA) WOULD APPLY TO THE PRESENT FACTS AND ALSO THAT THERE ARE NO ASSESSMENTS PENDING ON THE TIME OF THE INITIATION OF PROCEEDING S UNDER SECTION 153A OF THE ACT. THE OCCASION TO CONSIDER THE ISSUES RAI SED ON MERITS IN THE PROPOSED QUESTIONS BECOMES ACADEMIC. 6 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF 9. THE LD. DR HAS NOT BEEN ABLE TO SHOW ANY MATERIAL ON RECORD TO CONTEND THAT THE ADDITIONS WERE BASED ON INCRIMINATING M ATERIAL FOUND DURING SEARCH ACTION. THUS, IN VIEW OF OUR ABOVE O BSERVATIONS, WE HOLD THAT THE ASSESSMENT ORDER DATED 27-03-2014 PASSED BY T HE AO IS WITHOUT JURISDICTION AND HENCE, VOID. 10. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON MONDAY, THE 31 ST DAY OF DECEMBER, 2018. SD/- SD/- (D. KARUNAKARA RAO) (VIKAS AWASTHY) ACCOUNTANT MEMBER JU DICIAL MEMBER / PUNE; / DATED : 31 ST DECEMBER, 2018 SATISH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)-11, PUNE 4. / THE CIT CENTRAL, PUNE 5. , , $ , / DR, ITAT, B BENCH, PUNE. 6. ' / GUARD FILE. // // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY, , / ITAT, PUNE 7 ITA NO. 1624/PUN/2015 MR/ PESI SHROFF DATE 1. DRAFT DICTATED ON 26-12-18 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 27-12-18 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER.