NATVAR PARIKH & COMPANY PVT.LTD., MUMBAI V. THE DY.C.I.T., CENTRAL CIRCLE 40, MUMBAI

ITA 2143/MUM/2009

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75364 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 08-01-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 06-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Search and seizure; Difference of opinion; Capital receipt; Retraction; Revised return; Change of opinion; Reassessment proceedings
• Section: 132; 139; 143(3); 153A; 139(5)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI . , , , BEFORE SHRI D. KARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUD ICIAL MEMBER . / ITA NO. 2143 /MUM./ 2009 ( / ASSESSMENT YEAR : 2003 04 ) . / ITA NO. 214 4 /MUM./ 2009 ( / ASSESSMENT YEAR : 20 04 05 ) . / ITA NO. 214 5 /MUM./ 2009 ( / ASSESSMENT YEAR : 2 0 05 06 ) NATVAR PARIKH & CO. PVT. LTD. 96, CHEMBUR MANKHURD LINK ROAD SIVAJI NAGAR, MUMBAI 400 043 .. / APP ELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 40, AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 02 0 .... / RESPONDENT ./ PERMANENT ACCOUNT NUMBER AAACN2937Q / ASSESSEE B Y : MR. S.N. INAMDAR A/W M R . ASHWIN DAMANIA / REVENUE BY : MR. PREET AM SINGH / DATE OF HEARING 0 8 .0 1 .201 4 / DATE OF ORDE R 22.01.2014 NATVAR PARIKH & CO. PVT. LTD. 2 / ORDER , / PER AMIT SHUKLA , J.M. THESE APPEALS PREFERRED BY THE ASSESSEE, ARE DIRECTED AGAINST THE IMPU GNED ORDER 6 TH FEBRUARY 2009, FOR THE ASSESSMENT YEAR 2003 04, ORDER DATED 7 TH FEBRUARY 2009 FOR THE ASSESSMENT YEAR 2004 05 AND 2005 06 , PASSED BY THE LEARNED COMMISSIONER (APPEALS) VII, MUMBAI, PASSED UNDER SECTION 153A(A) R/W SECTION 143(3) OF THE INCOM E TAX ACT, 1961 (FOR SHORT THE ACT ). SINCE THE GROUNDS RAISED BY A SSESSEE IN ALL THE YEARS UNDER APPEAL ARE COMMON, THEREFORE, AS A MATTER OF CONVENIENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED ORDER. HOWEVER, IN ORDER TO UNDERSTAND THE IMPLICATION, IT WOULD BE NECESSARY TO TAKE NOTE OF FACTS OF ONE APPEAL AND, ACCORDINGLY, WE ARE NARRATING THE FACTS , AS THEY APPEAR IN ITA NO. 2143/MUM./2009, FOR THE ASSESSMENT YEAR 2003 04. GROUND OF APPEAL FOR THE A.Y. 2003 04 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING ADDITION OF A SUM OF RS.27,75,000/ - ON ACCOUNT OF ENTRANCE FEE COLLECTED BY THE APPELLANT WHICH WERE CAPITAL RECEIPTS. 2(A) T HE LEARNED CIT(A) ERRED IN NOT FOLLOWING THE RATIO LAID DOWN BY THE BOMBAY HIGH COURT IN THE CASE OF CIT V. DINERS BUSINESS SERVICES P. LTD. [(2003) 263 ITR L(BOM)] ON THE GROUNDS THAT THE AMOUNT RECEIVED BY THE APPELLANT WAS NOT ONE TIME FEE AND THAT THE AMOUNT RECEIVED WAS A COMPOSITE AMOUNT INCLUDING THE ANNUAL FEE. (B) THE APPELLANT FURTHER SUBMITS THAT THE CIT(A) ERRED IN CONCLUDING THAT THE AMOUNT RECEIVED BY THE APPELLANT WAS A COMPOSITE AMOUNT CONTRA RY TO THE A CTUAL SITUATION WHERE THE APPELLANT R ECEIVES F ROM EACH MEMBER ENTRANCE FEES AND ANNUAL FEES SEPARATELY. NATVAR PARIKH & CO. PVT. LTD. 3 3. THE APPELLANT SUBMITS THAT WHILE DECIDING THE APPEAL AGAINST THE APPELLANT AND HOLDING THAT THE SUM OF RS.27,75,000/ - IS TAXABLE, THE LEARNED CIT(A) RELIED UPON CERTAIN CONCLUSION RE ACHED IN THE ORDER WHICH ARE CONTRARY TO FACTS AS ENUMERATED HEREUNDER: - (A) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT HAS NOT CHARGED UNIFORM ANNUAL FEES FROM ALL THE MEMBERS WHEREAS THE APPELLANT HAS IN FACT CHARGED UNIFORM ANNUAL FEES FRO M ALL THE MEMBERS. (B) THE LEARNED CIT(A) ERRED IN HOLDING THAT THE APPELLANT HAS ACCEPTED CONSOLIDATED SUBSCRIPTION FEES WHEREAS THE APPELLANT HAS ACTUALLY CHARGED ENTRANCE FEES AND ANNUAL FEE SEPARATELY. (C) THE LEARNED CIT(A) ERRED IN HOLDI NG THAT THE APPELLANT HAS ACCEPTED IN ASSESSMENT YEAR 2003 - 04 THAT THE ENTRANCE FEE IS TAXABLE INCOME WHEREAS IN FACT THE APPELLANT HAD FLIED A REVISED RETURN OF INCOME CONSIDERING THE ENTRANCE FEE AS A CAPITAL RECEIPT AND THE SAME HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE COMPLETING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT. 4. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN REJECTING THE RETRACTION BY THE APPELLANT OF THE EARLIER OFFER MADE BY IT WITH RE GARD TO TAXABILITY OF ENTRANCE FEES AND FAILED TO APPRECIATE THAT THE EARLIER OFFER WAS MADE UNDER UTTER STRESS AND BASED ON A WRONG UNDERSTANDING / INTERPRETATION OF THE PRINCIPLE GOVERNING THE TAXABILITY OF THE ENTRANCE FEES. HE OUGHT TO HAVE HELD THAT T HERE IS NO ESTOPPEL ON A POINT OF LAW & SUCH SO CALLED ADMISSION ARE NOT CONCLUSIVE. 5. THE APPELLANT SUBMITS THAT THE ORDER OF THE LD. CIT(A) HAS BEEN PASSED WITHOUT AFFORDING REASONABLE OPPORTUNITY TO THE APPELLANT TO REPRESENT ITS CASE. 6. THE APPEL LANT SUBMITS THAT THE ASSESSING OFFICER BE DIRECTED TO DELETE THE ADDITION MADE OF ` 27,75,500 ON ACCOUNT OF ENTRANCE FEES. 2 . BESIDES THE AFORESAID GROUNDS, THE ASSESSEE, VIDE LETTER DATED 22 ND NOVEMBER 2010, HAS ALSO RAISED FOLLOWING AS ADDITIONAL GROUND WHICH IS PURELY LEGAL IN NATURE: THE ASSESSMENT AND ASSUMPTION OF JURISDICTION UNDER SECTION 153A IS INVALID IN LAW IN RESPECT OF LEGAL ISSUES CONSIDERED AND CONCLUDED IN ORIGINAL ASSESSMENT PARTICULARLY WHEN NO MATERIAL WAS FOUND AS A RESULT OF SEARCH R EQUIRING ANY CHANGE OF OPINION. THEREFORE, IT BE HELD THAT THE ASSESSMENT IS NULL AND VOID BEING WITHOUT JURISDICTION. NATVAR PARIKH & CO. PVT. LTD. 4 3 . AFTER HEARING THE PARTIES, THE ADDITIONAL GROUND IN ALL THE THREE YEARS WERE ADMITTED AS THEY ARE PURELY LEGAL GROUND WHICH DOES NOT RE QUIRE ANY INVESTIGATION OF FACTS. 4 . FACTS IN BRIEF : THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF WAREHOUSING, CLEARING & FORWARDING AND TRANSPORTATION. BESIDES THIS, THE ASSESSEE COMPANY HAD ALSO STARTED THE BUSINESS OF RUNNING OF A CLUB CALLED ACR ES CLUB. IT HAS ENROLLED MEMBERS IN THE CLUB FOR WHICH ONE TIME MEMBERSHIP ENTRANCE FEE IS CHARGED. FOR THE ASSESSMENT YEAR 2003 04, THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 28 TH NOVEMBER 2003, UNDER SECTION 139(1) OF THE ACT, DECLARING LOSSES OF ` 2 3,38,967. LATER ON, REVISED RETURN OF INCOME WAS ALSO FILED ON 1 ST DECEMBER 2003, UNDER SECTION 139(5) , DECLARING TOTAL LOSS OF ` 50,99,960. SUCH A RETURN OF INCOME WAS SUBJECTED TO SCRUTINY AND NOTICE UNDER SECTION 143(2) DATED 7 TH APRIL 2004 WAS ISSUED A ND SERVED. IN PURSUANCE THEREOF, ASSESSMENT ORDER UNDER SECTION 143(3) WAS COMPLETED VIDE ORDER DATED 10 TH MARCH 2006 ON A TOTAL LOSS OF ` 50,99,597 , WHICH WAS ALLOWED TO BE CARRIED FORWARD. THE RELEVANT DATE FOR FILING OF THE RETURN OF INCOME AND COMPLETI ON OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2004 05 AND 2005 06 , ARE AS UNDER: A.Y. 2004 05 A.Y. 2005 06 DATE OF FILING OF THE RETURN OF INCOME 01.11.2004 DECLARING TOTAL LOSS OF ` ( ) 4 , 16 , 25 , 646 THE ORIGINAL RETURN OF INCOME FILED ON 31.10.2005, WH ICH WAS REVISED ON 05.12.2005 DECLARING TOTAL LOSS OF ` 3,95,37,344 DATE OF ORDER THE ASSESSMEN T ORDER PASSED U /S 143 (3) VIDE ORDER DATED 21 ST MARCH 2006 AT A LOSS OF ` 4,16,25,646 INTIMATION UNDER SECTION 143(1) WAS PROCESSED ON 21 ST NOVEMBER 2006 ON THE REVISED RETURN OF INCOME NATVAR PARIKH & CO. PVT. LTD. 5 5 . THE ASSESSING OFFICER, WHILE COMPLETING THE ORIGINAL ASSESSMENT S IN THE AFORESAID MANNER , IN ALL THE YEARS, HAS FOLLOWED THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN CIT V/S DINERS BUSINESS SERVICES PVT. LTD., [2003] 263 ITR 001 (BOM.), FOR ACCEPTING THE ASSESSEES CLAIM THAT ONE TIME MEMBERSHIP ENTRANCE FEE IS A CAPITAL RECEIPT. THUS, SUCH A RECEIPT WAS NOT SUBJECTED TO TAX. THESE ASSESSMENTS HAD ATTAINED FINALITY. 6 . THEREAFTER, A SEARCH AND SEIZURE ACTION UNDER SECTIO N 132(1) WAS CARRIED OUT BY THE INVESTIGATION WING, MUMBAI, IN ASSESSEES CASE ON 23 RD JANUARY 2007. CONSEQUENT TO THIS SEARCH AND SEIZURE ACTION, NOTICE UNDER SECTION 153A(A) WAS ISSUED FOR ALL THE YEARS UNDER APPEAL ON 6 TH AUGUST 2007. THE ASSESSEE, IN R ESPONSE TO THE SAID NOTICE, FILED ITS RETURN OF INCOME ON 3 RD SEPTEMBER 2007 ON THE SAME INCOME AS WERE SHOWN IN THE ORIGINAL RETURN OF INCOME / REVISED RETURN OF INCOME. DURING THE COURSE OF SEARCH AND SEIZURE ACTION, A STATEMENT ON OATH WAS RECORDED ON 2 4 TH JANUARY 2007 OF THE MANAGING DIRECTOR, MR. APURVA PARIKH. THE RELEVANT EXTRACT OF THE STATEMENT, PARTICULARLY ON THE ISSUE OF MEMBERSHIP FEE ARE AS UNDER: Q.14. IT IS OBSERVED FROM THE ACCOUNTS OF THE NATVAR PARIKH & CO. PVT. LTD. (ACES CLUB) THAT M EMBERSHIP FEES HAVE BEEN COLLECTED OF ` 15.43 CRORES FOR THE DIFFERENT F.Y. AS UNDER: FINANCIAL YEAR AMOUNT ( ` ) 2002 03 27,75,000 2003 04 4,29,70,978 2004 05 3,30,35,167 2005 06 3,84,64,802 1.4.2006 TO 23.1.2007 3,71,27,285 TOTAL: 15,43,73,232 NATVAR PARIKH & CO. PVT. LTD. 6 Y OU ARE REQUESTED TO EXPLAIN AS TO WHY THE ABOVE MEMBERSHIP FEES HAVE NOT BEEN OFFERED TO TAX AND CLAIMED AS EXEMPT. ANS14. WE WERE GIVEN TO UNDERSTAND THAT AS PER THE MUMBAI HIGH COURT JUDGMENT IN CASE OF DINERS CLUB INDIA PVT. LTD. SUCH MEMBERSHIP FEES A RE CAPITAL RECEIPT AND NOT CHARGEABLE TO TAX. OUR THIS CLAIM IS ALSO ACCEPTED BY THE ASSESSING OFFICER IN THE ASST. YEAR 2004 - 05. HOWEVER, WE HAVE REVIEWED THE FACTUAL POSITION PREVAILING IN OUR CASE AND THE CASE LAWS OF MUMBAI HIGH COURT. IN OUR CASE, THE MEMBERSHIP IS FOR A MAXIMUM PERIOD OF 25 YEARS ONLY AND THE MEMBERS DO NOT GET ANY VESTED RIGHT IN THE ASSETS OF THE CLUB. HAVING CONSIDERED THESE FACTS, WE HAVE BEEN NOW ADVISED THAT THE EXEMPTION CLAIMED IS LEGALLY NOT CORRECT. HOWEVER, THE MEMBERSHIP FEES RECEIVED ARE GENERALLY FOR A PERIOD OF 25 YEARS. HENCE, THE 1/25 TH PORTION THEREOF IS CHARGEABLE TO TAX IN EVERY YEAR. ACCORDINGLY, I OFFER TO TAX, THE INCOME ON ACCOUNT OF MEMBERSHIP FEES OF THE ACRES CLUB IN THE HANDS OF NATVAR PARIKH & CO. PVT. LT D. FOR THE DIFFERENT FINANCIAL YEARS AS UNDER: FINANCIAL YEAR AMOUNT (RS.) 2002 - 2003 1,11,000 2003 - 2004 18,29,839 2004 - 2005 31,51,246 2005 - 2006 46,89,838 1.4.2006 TO 23.1.2007 61,.74,929 TOTAL 1,59,56,852 THE TAX DUE FOR THE CURRENT F INANCIAL YEAR, IF ANY, AFTER SET OFF OF THE PAST LOSSES WILL BE PAID IN DUE COURSE. IT IS REQUESTED THAT DUE IMMUNITY FROM PENALTY MAY PLEASE BE GRANTED FOR THIS VOLUNTARY DISCLOSURE ON OUR PART. 7 . ACCORDINGLY, A T THE TIME OF SEARCH, THE ASSESSEE OFFERED 1 /25 TH PORTION OF THE MEMBERSHIP FEE AS CHARGEABLE TO TAX IN RESPECTIVE YEARS. LATER ON, VIDE LETTER DATED 30 TH MARCH 2007, THE ASSESSEE RETRACTED THE STATEMENT RECORDED UNDER SECTION 132(4) AND WITHDR EW HIS OFFER FOR TAXATION ON THE ONE TIME MEMBERSHIP FEE , ON THE GROUND THAT THE NATVAR PARIKH & CO. PVT. LTD. 7 ASSESSEES CLAIM WAS BASED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN DINERS BUSINESS SERVICES PVT. LTD. (SUPRA) AND HE HAS BEEN DULY ADVISED THAT SUCH A JUDGMENT IS APPLICABLE IN ASSESSEES CASE ALSO , WHEREIN THE HIGH COURT HAS CLEARLY STATED THAT ENTRANCE FEE RECEIVED FROM MEMBERS IS A CAPITAL RECEIPT. 8 . THE ASSESSING OFFICER, HOWEVER, BROUGHT THE SAID AMOUNT OF MEMBERSHIP FEE UNDER TAX BY HOLDING IT AS REVENUE RECEIPT AFTER OBSERVING AND HOLDING AS UNDER: 3.3 I HAVE CONSIDERED THE ASSESSE'S SUBMISSION IN THIS REGARD AND I AM OF THE VIEW THAT THE FACTS OBTAINING IN THE DINERS BUSINESS SERVICES PVT. LTD. AND THE ASSESSE'S CASE ARE DIFFERENT. IN THE CASE OF DINERS CLUB THE MEMBERSHIP FEES WAS A 'ONE TIME PAYMENT' H OWEVER IN THE PRESENT CASE IT IS TO BE PAID EVERY 'TWENTY FIVE YEAR'. THUS IN THE PRESENT CASE IT IS NOT A 'ONE TIME PAYMENT' BUT ONLY LIMITED TO A SPECIFIC PERIOD. SECONDLY IN THE PRESENT CASE MEMBERS DO NOT GET RIGHTS IN THE PROPERTIES OF THE CLUB BUT ON LY USE THE SERVICES PROVIDED BY THE CLUB. HENCE IT IS AN UNDISPUTABLE FACT THAT THE FEES RECEIVED BY MEMBERS IS IN THE NATURE OF REVENUE AND THUS HAS TO BE TAXABLE IN ENTIRETY DURING THE YEAR OF ITS RECEIPT AND NOT A PORTION OF IT. THE RECEIPT IS TO BE TAX ED IN ENTIRETY ALSO BECAUSE IT IS NOT TO BE REFUNDED TO THE MEMBERS AND HENCE ACCRUES AS INCOME IN THE YEAR OF REC E IPT. MOREOVER ONCE A STATEMENT IS GIVEN U/S 132(4) IT IS TO BE ABIDED BY AS THE SAME IS GIVEN UNDER OATH AND THE SECTION PER SE STATES THAT S TATEMENT RECORDED UNDER THE SAID SECTION SHALL BE USED IN EVIDENCE IN ANY PROCEEDINGS UNDER THE INDIAN INCOME TAX ACT. HENCE EVEN THE RETRACTION BY THE ASSESSEE HAS NO LEGAL VALIDITY. I THEREFORE ADD THE TOTAL AMOUNT I.E. RS.27,75,000/ - BEING THE ENTRANCE FEES RECEIVED DURING THIS YEAR TO THE TOTAL INCOME OF THE ASSESSEE. 9 . SIMILAR OBSERVATIONS WERE MADE IN THE ASSESSMENT YEAR 2004 05 AND 2005 06 ALSO. THE LEARNED COMMISSIONER (APPEALS) TOO CONFIRMED THE FINDINGS OF THE ASSESSING OFFICER AFTER DETAIL DISCU SSION. 10 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ADDITIONAL GROUND, AS RAISED BY THE ASSESSEE, GOES TO THE ROOT OF NATVAR PARIKH & CO. PVT. LTD. 8 THE ISSUE INVOLVED AS NO INCRIMINATING MATERIAL WHATSOEVER WAS FOUND DURING THE COURSE OF SEARCH , SO AS TO SUGGEST THAT ONE TIME MEMBERSHIP FEE IS REVENUE RECEIPT AND NOT CAPITAL RECEIPT, THEREFORE, IN VIEW OF THE SPECIAL BENCH DECISION THE TRIBUNAL, MUMBAI BENCH, IN ALL CARGO GLOBAL LOGISTICS V/S DIT, NO ADDITION CAN BE MADE. THE ASSESSING OFFICER HAS SOLELY RELIED UP ON THE STATEMENT RECORDED ON OATH UNDER SECTION 132(4) , WHICH CANNOT BE SAID TO BE INCRIMINATING MATERIAL BECAUSE THE ASSESSEE HAS FIRST CLARIFIED THAT ITS CLAIM WAS BASED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND, IN ANY CASE, SUCH EXPE NDITURE SHOULD BE DEFERRED FOR 25 YEARS. NO CORROBORATIVE EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH SO AS TO SUGGEST THAT THE MEMBERSHIP FEE IS ACTUALLY A REVENUE RECEIPT. THE ASSESSEE HAS RETRACTED THIS STATEMENT IMMEDIATELY AFTER THE SEARCH AND SEIZ URE ACTION, BASED ON THE LEGAL ADVICE THAT THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IS APPLICABLE AND HAS A BINDING PRECEDENCE . ONCE, THERE IS NO INCRIMINATING MATERIAL, THEN EVEN IF THE ASSESSMENT IS COMPLETED UNDER SECTION 153(A) R/W 143(3), NO ADDITION CAN BE MADE. HE ALSO STRONGLY RELIED UPON THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN JAI STEELS INDIA, JODHPUR V/S ACIT, [2013] 259 CTR (RAJ.) 281. ON MERITS ALSO, HE PLACED DETAIL SUBMISSIONS AS TO WHY SUCH A RECEIPT CANNOT BE HELD T O BE REVENUE IN NATURE. 11 . ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT DURING THE COURSE OF SEARCH, STATEMENT OF THE MANAGING DIRECTOR WAS RECORDED , WHO HAS CLEARLY ADMITTED THAT THE MEMBERSHIP FEE COLLECTED CAN BE TAXED AS REVE NUE RECEIPT THOUGH ON DEFERRED BASIS FOR THE PERIOD OF 25 YEARS. THIS ITSELF IS AN INCRIMINATING MATERIAL. BESIDES THIS, A DOCUMENT WAS FOUND WHEREIN IT WAS MENTIONED ABOUT NATVAR PARIKH & CO. PVT. LTD. 9 THE TYPE OF MEMBERSHIP , DURATION FOR WHICH MEMBERSHIP WAS OFFERED AND THE PRICE OF MEMBERSHIP SUBSCRIPTION. THIS MEANS THAT THERE WERE SOME MATERIAL FOUND RELATING TO MEMBERSHIP FEE , WHEREIN THE PERIOD OF MEMBERSHIP WAS GIVEN FOR 25 YEARS. ONCE THE MEMBERSHIP FEE IS FOR A SPECIFIC PERIOD I.E., FOR 25 YEARS, THEN THE DECISION OF THE HON'B LE JURISDICTIONAL HIGH COURT WILL NOT APPLY. THEREFORE, NOT ONLY THE ADDITION IS JUSTIFIED UNDER SECTION 153A, BUT ALSO THE ADDITION MADE BY THE ASSESSING OFFICER IS LEGALLY COVERED ON MERITS. ON THE MERITS OF THE ADDITION, HE STRONGLY RELIED UPON THE FIND INGS OF THE LEARNED COMMISSIONER (APPEALS) AND THE CASE LAWS RELIED UPON BY HIM. 12 . WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW WITH REFERENCE TO THE LEGAL ISSUE RAISED IN THE ADDITIONAL GROUND OF APPEAL AS WELL AS THE MATERIAL AVAILABLE ON RECORD. THE RETURNS OF INCOME FOR THE ASSESSMENT YEAR 2003 04 AND 2004 05 WERE FILED UNDER SECTION 139, WHICH WERE SUBJECT ED TO ASSESSMENT UNDER SECTION 143(3), WHEREAS, THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 06 WAS SUBJECT TO THE ASSESSMENT UNDER SECTION 143(1). ALL T HESE ASSESSMENTS WERE COMPLETED MUCH BEFORE THE DATE OF SEARCH. ON THE DATE OF ISSUANCE OF NOTICE UNDER SECTION 153A, NO ASSESSMENT WAS PENDING AND THE ASSESSMENT SO COMPLETED EARLIER HAD ATTAINED FINALITY. FRO M A PLAIN READING OF THE PROVISIONS OF SECTION 153A, IT IS EVIDENT THAT IF A SEARCH HAS BEEN INITIATED UNDER SECTION 132(1) OR REQUISITION HAS BEEN MADE UNDER SECTION 132A, THEN THE ASSESSING OFFICER IS OBLIGED TO ISSUE NOTICE UNDER SECTION 153A , REQUIRING SUCH PERSON TO FURNISH RETURN OF INCOME OF SIX YEARS IN THE PRESCRIBE D FORM FOR THE IMMEDIATELY PRECEDING THE YEAR OF SEARCH . T HE ASSESSING OFFICER IS LEGALLY REQUIRED TO ASSESS OR RE ASSESS THE TOTAL INCOME OF SIX NATVAR PARIKH & CO. PVT. LTD. 10 ASSESSMENT YEARS IMMEDIATELY PRECEDING T O THE YEAR OF SEARCH. THE SECOND PROVISO TO SECTION 153A PROVIDES THAT IF THE ASSESS MENT OR RE ASSESSMENT OF ANY OF THE ASSESSMENT YEAR , FALLING WITHIN THE PERIOD OF SIX YEARS IS PENDING ON THE DATE OF SEARCH, THEN THE SAME SHALL GET ABATED. IN THE PRESENT CASE, FOR THE YEARS UNDER APPEAL, THE ASSESSMENTS WERE NOT PENDING AND HAD ATTAINED FINALITY, THEREFORE, THE ASSESSMENTS COMPLETED IN THE IMPUGNED ASSESSMENT YEARS WILL NOT GET ABATED. ONCE THAT IS SO, THE LEGAL POSITION AS OF NOW IS THAT THE ADDITIONS OV ER AND ABOVE THE ASSESSED INCOME CANNOT BE MADE DEHORS THE INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH WHILE COMPLETING THE ASSESSMENT UNDER SECTION 153A. THIS, INTER ALIA, MEANS THAT IF THERE IS NO INCRIMINATING MATERIAL, THEN THE ORIGINAL ASSESSME NT MADE CAN BE REITERATED AND NO FURTHER ADDITION IS CALLED FOR . THIS HAS BEEN HELD SO BY THE TRIBUNAL, MUMBAI SPECIAL BENCH, IN ALL CARGO GLOBAL LOGISTICS (SUPRA) AND ALSO BY THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN JAI STEEL, JODHPUR (SUPRA). IN THE LATER DECISION, THE HIGH COURT HAS ANALYSED THE PROVISIONS OF SECTION 153A IN DETAIL. THE RELEVANT CONCLUSION OF THE HIGH COURT ARE AS UNDER: THE REQUIREMENT OF ASSESSMENT OR REASSESSMENT UNDER THE SAID SECTION HAS TO BE READ IN THE CONTEXT OF SE CTIONS 132 OR 132A OF THE ACT, INASMUCH AS, IN CASE NOTHING INCRIMINATING IS FOUND ON ACCOUNT OF SUCH SEARCH OR REQUISITION, THEN THE QUESTION OF REASSESSMENT OF THE CONCLUDED ASSESSMENTS DOES NOT ARISE, WHICH WOULD REQUIRE MORE REITERATION AND IT IS ONLY IN THE CONTEXT OF THE ABATED ASSESSMENT UNDER SECOND PROVISO WHICH IS REQUIRED TO BE ASSESSED. THE UNDERLINE PURPOSE OF MAKING ASSESSMENT OF TOTAL INCOME UNDER SECTION 153A OF THE ACT IS, THEREFORE, TO ASSESS INCOME WHICH WAS NOT DISCLOSED OR WOULD NOT H AVE BEEN DISCLOSED. THE PURPOSE OF SECOND PROVISO IS ALSO VERY CLEAR, INASMUCH AS, ONCE A ASSESSMENT OR REASSESSMENT IS 'PENDING' ON THE DATE OF INITIATION OF SEARCH OR REQUISITION AND IN TERMS OF SECTION 153A A RETURN IS FILED AND THE AO IS REQUIRED TO ASSESS THE SAME, THERE CANNOT BE TWO ASSESSMENT ORDERS DETERMINING THE TOTAL INCOME OF THE ASSESSEE FOR NATVAR PARIKH & CO. PVT. LTD. 11 THE SAID ASSESSMENT YEAR AND, THEREFORE, THE PROVISO PROVIDES FOR ABATEMENT OF SUCH PENDING ASSESSMENT AND REASSESSMENT PROCEEDINGS AND IT IS ONLY THE A SSESSMENT MADE UNDER SECTION 153A OF THE ACT WHICH WOULD BE THE ASSESSMENT FOR THE SAID YEAR. THE NECESSARY COROLLARY OF THE ABOVE SECOND PROVISO IS THAT THE ASSESSMENT OR REASSESSMENT PROCEEDINGS, WHICH HAVE ALREADY BEEN 'COMPLETED' AND ASSESSMENT ORDER S HAVE BEEN PASSED DETERMINING THE ASSESSEE'S TOTAL INCOME AND, SUCH ORDERS ARE SUBSISTING AT THE TIME WHEN THE SEARCH OR THE REQUISITION IS MADE, THERE IS NO QUESTION OF ANY ABATEMENT SINCE NO PROCEEDINGS ARE PENDING. FROM A PLAIN READING OF THE PROVIS ION ALONGWITH THE PURPOSE AND PURPORT OF THE SAID PROVISION, WHICH IS INTRICATELY LINKED WITH SEARCH AND REQUISITION UNDER SECTIONS 132 AND 132A OF THE ACT, IT IS APPARENT THAT: (A) THE ASSESSMENTS OR REASSESSMENTS, WHICH STAND ABATED IN TERMS OF II PROV ISO TO SECTION 153A OF THE ACT, THE AO ACTS UNDER HIS ORIGINAL JURISDICTION, FOR WHICH, ASSESSMENTS HAVE TO BE MADE; (B) REGARDING OTHER CASES, THE ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT WILL BE MADE ON THE BASIS OF INCRIMI NATING MATERIAL AND (C) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE ARGUMENT OF THE LEARNED COUNSEL THAT THE AO IS ALSO FREE TO DISTURB INCOME, EXPENDITU RE OR DEDUCTION DE HORS THE INCRIMINATING MATERIAL, WHILE MAKING ASSESSMENT UNDER SECTION 153A OF THE ACT IS ALSO NOT BORNE OUT FROM THE SCHEME OF THE SAID PROVISION WHICH AS NOTICED ABOVE IS ESSENTIALLY IN CONTEXT OF SEARCH AND/OR REQUISITION. THE PROVISI ONS OF SECTIONS 153A TO 153C CANNOT BE INTERPRETED TO BE A FURTHER INNINGS FOR THE AO AND/OR ASSESSEE BEYOND PROVISIONS OF SECTIONS 139 (RETURN OF INCOME), 139(5) (REVISED RETURN OF INCOME), 147 (INCOME ESCAPING ASSESSMENT) AND 263 (REVISION OF ORDERS) OF THE ACT. THUS, THE LAW AS ENVISAGED BY THE HIGH COURT IS THAT, IF NO INCRIMINATING MATERIAL HAS BEEN FOUND, THEN NO ADDITION CAN BE MADE IN THE ASSESSMENT COMPLETED UNDER SECTION 153A WHICH HAS NOT BEEN ABATED. NATVAR PARIKH & CO. PVT. LTD. 12 13 . NOW, IN THE PRESENT CASE, WE HAVE TO SEE WHETHER THE STATEMENT RECORDED UNDER SECTION 132(4) OR THE ANNEXURE B WHICH HAS BEEN REFERRED TO BY THE LEARNED DEPARTMENTAL REPRESENTATIVE CAN BE SAID TO BE INCRIMINATING MATERIAL . ON A PERUSAL OF THE ANSWER GIVEN TO QUESTION NO.14 OF THE STATEMENT ON OAT H RECORDED AT THE TIME OF SEARCH WHICH HAS BEEN REPRODUCED ABOVE, THE ASSESSEE HAS CLEARLY STATED THAT IT HAS CLAIMED THE MEMBERSHIP FEE AS CAPITAL RECEIPT BASED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND SUCH A CLAIM HAS ALSO BEEN ACCEPT ED BY THE ASSESSING OFFICER IN SCRUTINY PROCEEDINGS . AFTER HAVING SAID THAT THE ASSESSEE STATED THAT MEMBERSHIP IS FOR 25 YEARS, THEN 1/25 TH PORTION THEREOF CAN BE CHARGED TO TAX IN EVERY YEAR. NEITHER IN THE QUESTION NOR IN THE ANSWER THERETO , THERE IS AN Y REFERENCE TO ANY DOCUMENT OR SEIZED MATERIAL, MUCH LESS ANY INCRIMINATING MATERIAL TO SHOW THAT THE ASSESSEES CLAIM WHICH WAS ALLOWED BY THE DEPARTMENT HAS BEEN NE G ATED. OTHERWISE ALSO, THIS CLAIM IS P U RELY BASED ON LEGAL PRINCIPLE AS UPHELD BY THE HON' BLE JURISDICTIONAL HIGH COURT. THUS, THE STATEMENT AS SUCH CANNOT BE SAID TO BE INCRIMINATING MATERIAL SO AS TO INFER THAT ANY ADDITION IS WARRANTED ON THIS ISSUE WHILE COMPLETING THE ASSESSMENT UNDER SECTION 153A , WHEN THE EARLIER ASSESSMENTS HAVE ATTAINE D FINALITY AT THE TIME OF SEARCH. ANNEXURE B ALSO ONLY GIVES THE LIST OF CATEGORY OF THE MEMBERSHIP AND THE FEE CHARGED. THESE DETAILS ARE ALREADY PART OF THE RECORD AND THE BOOKS OF ACCOUNT WHICH , HAS BEEN SUBJECT MATTER OF SCRUTINY UNDER SECTION 143(3) E ARLIER. MOREOVER, THIS DOCUMENT DOES NOT SHOW THAT THE ASSESSEES CLAIM FOR CAPITAL RECEIPTS WILL AUTOMATICALLY BE INFERRED AS REVENUE RECEIPT. THE PERIOD OF MEMBERSHIP OF 25 YEARS ALSO IS A PART OF THE RECORD AND NO NEW INFORMATION OR MATERIAL CAN BE SAID TO HAVE COME INTO PICTURE AS A NATVAR PARIKH & CO. PVT. LTD. 13 RESULT OF SEARCH. THUS, NEITHER THE STATEMENT RECORDED UNDER SECTION 132(4) NOR THE DOCUMENT MENTIONED AT ANNEXUR E B CAN BE INFERRED AS INCRIMINATING MATERIAL FOR THE PURPOSE OF MAKING ADDITION UNDER SECTION 153A. THUS, RESP ECTFULLY FOLLOWING THE RATIO AND THE PRINCIPLE LAID DOWN BY THE HON'BLE RAJASTHAN HIGH COURT THAT ONCE THERE IS NO INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH, THEN NO ADDITION CAN BE MADE ON THE ASSESSMENTS WHICH ARE NOT PENDING AND HAVE ATTAINED F INALITY. ACCORDINGLY, ON THE LEGAL GROUND ITSELF, THE ADDITIONS MADE BY THE ASSESSING OFFICER IN ALL THE YEARS UNDER APPEAL I.E., A.Y. 2003 04, 2004 05 AND 2005 06 ARE CANCELLED. 14 . SINCE WE HAVE DECIDED THE ISSUE ON THE ADDITIONAL GROUND, THEREFORE, THE OTH ER GROUNDS RAISED ON MERITS ARE NOT ADJUDICATED UPON. STATISTICALLY SPEAKING, THE ASSESSEES APPEAL S ARE TREATED AS ALLOWED. 15 . 1 5 . IN THE RESULT, ASSESSEES APPEAL S ARE TREATED AS ALLOWED. 22 ND JANUARY 2014 ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JANUARY 2014 SD/ - . D. KARU NAKARA RAO ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBER MUMBAI, DATED : 22 ND JANUARY 2014 NATVAR PARIKH & CO. PVT. LTD. 14 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRA DEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MU MBAI