M/s. Shape Builders (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 2406/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6445 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA SINGH
• Section: 40A(3); 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER I.T.A. NO.2406/DEL/2014 A.Y. : 2006-07 M/S SHAPE BUILDERS (P) LTD., C/O M/S RRA TAXINDIA D-28, SOUTH EXTENSION, PART-I, NEW DELHI -49 (PAN: AAICS7743P) VS. DCIT, CENTRAL CIRCLE-4, NEW DELHI (ASSESSEE) (RESPONDENT) ASSESSEE BY : SH. TARUN KUMAR, ADV. DEPARTMENT BY : MS. MONA SINGH, CIT(DR) ORDER PER H.S. SIDHU : JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 24.12.2013 OF THE LD. CIT(A)-XXXIII, NEW DELHI RELEVANT TO ASS ESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF AO IN MAKING DISALLOWANCE OF A SUM OF RS. 14,19,644/- UND ER PROVISIONS OF THE SECTION 40A(3) OF THE INCOME TAX ACT, 1961. 2 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMST ANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRM ING THE ACTION OF LD. A.O. IN ASSUMING JURISDICTION TO PASS IMPUG NED ASSESSMENT ORDER UNDER SECTION 153A, MORE SO IN MAKING IMPUGNE D DISALLOWANCE WHICH OUGHT NOT TO HAVE BEEN MADE UNDE R THE LAW. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF AO IN MAKING THE IMPUGNED DISALLOWANCE AND FRAMING IMPUGNED ASSESSMENT ORDER IS CONTRARY TO LAW AND FACTS, VOID AB INITIO, BEYOND JURISDICTI ON AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUND S. 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTAN CES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSI NG THE ACTION OF LD. AO IN CHARGING INTEREST U/S 234B OF THE INCOME TAX ACT, 1961. 5. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODI FY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE PREJUDICE TO EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AN D SEIZURE OPERATION U/S. 132 OF THE I.T. ACT, 1961 WAS CARRIED OUT ON 21.01.2011 IN DS GROUP OF CASES. M/S DHARAMPAL SATYAPAL GROUP IS ENGAGED IN MANUFACTURIN G AND TRADING OF CHEWING TOBACCO AND PREMIUM PAN MASALA BESIDES OTHER BUSINE SSES. THE GROUP IS ALSO 3 INVOLVED IN FOOD PRODUCTS, PACKING, HOSPITALITY, RU BBER, STEEL AND EDUCATION BUSINESS. IN RESPONSE TO THE STATUTORY NOTICE U/S. 153A ISSUED ON 27.9.2012, THE ASSESSEE COMPANY FILED ITS RETURN OF THE INCOME ON 04.1.2012 DECLARING LOSS OF RS. 10,173/-. IN RESPONSE TO THE NOTICE AND A QUEST IONNAIRE, THE AR OF THE ASSESSEE ATTENDED THE HEARING AND FILED THE DETAILS . THE STATED MAIN OBJECTS OF THE ASSESSEE COMPANY ARE PURCHASE, SALE, EXCHANGE, LEASE, MORTGAGE, HIRE, LANDS OR IMMOVABLE OR MOVABLE PROPERTY AND REAL ESTATE P ROMOTION. DURING THE FY 2006-07, THE ASSESSEE COMPANY HAS MADE PURCHASES OF LAND AGGREGATING TO RS. 3,28,05,140/- FROM VARIOUS PERSONS. OUT OF THE SAID PAYMENT, AN AMOUNT OF RS. 18,50,000/- HAS BEEN PAID TO VARIOUS PERSONS IN CASH. SINCE, THE PAYMENTS IN CASH HAVE BEEN MADE IN EXCESS OF THE LIMIT PRESCRIB ED U/S. 40A(3) OF THE INCOME TAX ACT, THE EXPLANATION OF THE ASSESSEE WAS SOUGHT AND THE IN RESPONSE TO THE SAME, ASSESSEE FILED THE WRITTEN EXPLANATION ON 31. 12.2012. AFTER CONSIDERING THE SAME, AO OBSERVED THAT SINCE THE ASSESSEE MADE THE PAYMENTS AGGREGATING TO RS. 18,50,000/- TO VARIOUS PERSONS IN CASH DURIN G THE FY 2006-07, THEREFORE, UNDER THE PROVISIONS OF SECTION 40A(3) OF THE INCOM E TAX ACT, 1961, 20% OF THE SAID EXPENDITURE WHICH COMES TO RS. 3,70,000/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE COMPANY AND ASSESSMENT WAS C OMPLETED AN INCOME OF RS. 3,70,000/- VIDE HIS ORDER DATED 14.1.2013 PASSE D U/S. 153A OF THE I.T. ACT, 1961. 4 3. AGAINST THE AFORESAID ASSESSMENT ORDER DATED 14 .1.2013, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 24.12.2013 HAS DISMISSED THE APPEAL OF THE ASSESEEE . 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. 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 14.1.2013, 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 COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA REPORT ED (2016) 380 ITR 573 (DEL.) WHEREIN THE HONBLE HIGH COURT HAS HELD THA T IF THE ADDITIONS ARE MADE, BUT NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATION, 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 COPY OF ITAT, E BENCH, NEW DELHI DECISION DATED 8.8.2016 IN THE CASE OF M/S MANAS DW ELLERS PVT. LTD. VS. DCIT FOR THE AY 2006-07 PASSED IN ITA NO. 2405/DEL/2014 BY WHICH THE ISSUE IN DISPUTE IS SQUARELY COVERED. 5 6. AT THE TIME OF HEARING, LD. DR RELIED UPON THE O RDER 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. HENCE, THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. 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 TRANSACTIONS. IT WAS NOTICED THAT AS ON THE DATE OF SEARCH I.E. 21.1.201 1, 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 IS NOT SUSTAINABLE IN THE EYES OF LAW, BECAUSE THIS ISSUE IN DISPUTE IS NOW NO MORE RES- INTEGRA, IN VIEW OF THE DECISION DATED 28.8.2015 O F THE HONBLE DELHI HIGH 6 COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL.) WHEREIN THE HONBLE HIGH COURT O F 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 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 7 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 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. 8. 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 8 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. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24/03/2017. SD/- SD/- [L.P. SAHU] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 24/03/2017 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