M/s. Kailash Dwellers (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 2460/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7298 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 21-06-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 40A(3); 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : D NEW DELHI BEFORE SH. G.D. AGARWAL, VICE PRESIDENT AND SH. I.C. SUDHIR , JUDICIAL MEMBER ITA NO. 2460 /DEL/ 2014 ASSESSMENT YEAR: 2007 - 08 M/S. KAILASH DWELLERS (P) LTD., C/O - M/S. RRA TAXINDIA, D - 28, SOUTH EXTENSION, PART - I, NEW DELHI VS. DCIT, CENTRAL CIRCLE - 4, NEW DELHI PAN : AACCK5224F (APPELLANT) (RESPONDENT) APPELLANT BY SH. SOMIL AGARWAL, ADV. RESPONDENT BY SH. SANJAY KUMAR, CIT(DR) DATE OF HEARING 21.06.2016 DATE OF PRONOUNCEMENT 31.08.2016 ORDER PER I.C. SUDHIR , J . M. : THE PRESENT APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), DATED 24.12.2013, ON THE FOLLOWING GROUNDS OF APPEAL: I. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. A.O. IN MAKING DISALLOWANCE OF A SUM OF RS. 13,68,000/ - UNDER PROVISIONS OF THE SECTION 40A(3) OF INCOME TAX ACT, 1961 . II. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDICTION TO PASS IMPUGNED ASSESSMENT ORDER UNDER SECTION 153A, MORE SO IN MAKING IMPUGNED DISALLOWANCE WHICH OUGHT NOT TO HAVE BEEN MADE UNDER THE LAW. 2 ITA NO. 2460/DEL/2014 AY: 2007 - 08 III. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. A.O IN MAKING THE IMPUGNED DISALLOWANCE AND FRAMING THE IMPUGNED ASSESSMENT ORDER IS CONTRARY TO LAW AND FACTS, VOID AB INITIO, BEYOND JURISDICTION AND THE SAME IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. IV. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT REVERSING THE ACTION OF LD. AO IN CHARGING IN TEREST U/S 234B OF THE INCOME TAX ACT, 1961. THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EAC H OTHER. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY THE PARTIES IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILABLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE ISSUE INVOLVED IN THE GROUNDS NO. 1 TO 3 IS ON THE VALIDITY OF DISALLOWANCE OF RS. 13,68,000/ - UNDER SECTION 40A(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) IN THE ASSESSMENT FRAMED UNDER SECTION 153A OF THE ACT WITHOUT ASSUMING THE JURISDICTION TO PASS THE AMOUNT ASSESSMENT ORDER. FURTHER, THE ISSUE IS REGARDING CHARGING OF INT EREST UNDER SECTION 234B OF THE ACT RAISED IN GROUND NO. 4, WHICH IS CONSEQUENTIAL IN NATURE. 4 . THE RELEVANT FACTS ARE THAT SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CARRIED OUT ON 21.01.2011 IN M/S. DHARAMPAL SATYAPAL GROUP, A LEADI NG BUSINESS GROUP IN MANUFACTURING AND TRADING OF CHEWING TOBACCO AND PREMIUM PAN MASALA BESIDES OTHER BUSINESS . IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING LOSS OF RS. 45,721/ - . IT WAS STATED THAT THE MAIN OBJECTS OF THE ASSESSEE COMPANY ARE THE 3 ITA NO. 2460/DEL/2014 AY: 2007 - 08 PURCHASE, SALES, EXCHANGE, LEASE, MORTGAGE, HIRE, LANDS OR IMMOVABLE OR MOVABLE PROPERTY & REAL ESTATE PROMOTION. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD MADE PURC HASE OF LA ND AGGREGATING TO RS. 92,25,493/ - FROM VARIOUS PERSON. OUT OF THE SAID PAYMENT, AN AMOUNT OF RS. 68,40,000/ - WAS PAID TO VARIOUS PERSONS IN CASH. THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND THUS DISALLOWANCE UNDER SE CTION 40A(3) OF THE ACT @ 20% ON THE SAID AMOUNT RESULTING INTO RS. 13,68,000/ - WAS MADE. LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHELD THIS DISALLOWANCE. 4.1 BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) , ASSESSEE HAD ALSO RAISED THE VALIDITY OF EXECUTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER SECTION 153A OF THE ACT FOR MAKING THE ADDITIONS AND THE ASSESSMENT UNDER THE SAID PROVISIONS BUT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DID NOT AGREE AND THUS THE ISSUE WAS ALSO DECIDED AGAINST THE ASSESSEE. 5. IN SUPPORT OF THE LEGAL ISSUE REGARDING THE VALIDITY OF ASSUMING THE JURISDICTION AND MAKING DISALLOWANCE IN THE ASSESSMENT FRAMED UNDER SECTION 153A OF THE ACT, LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT IN THE PRESENT CA SE, THE ORIGINAL RETURN OF INCOME UNDER SECTION 139(A) OF THE ACT WAS FILED VIDE ACKNOWLEDGMENT DATED 13.10.2007 AND THE SAME WAS ADOPTED AS AN ORIGINAL RETURN OF INCOME FURNISHED IN RESPONSE TO THE NOTICE UNDER SECTION 153A OF THE ACT. HE CONTENDED THAT N EI THER THE ASSESSMENT WAS PENDING ON THE 4 ITA NO. 2460/DEL/2014 AY: 2007 - 08 DATE OF SEARCH, NOR ANY INCRIMINATING DOCUMENT WAS FOUND DURING THE SEARCH, HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN ASSUMING THE JURISDICTION TO FRAME THE ASSESSMENT IN QUESTION UNDER SECTION 153A OF THE AC T. IN SUPPORT , HE PLACED RELIANCE ON THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF COMMISSIONER OF INCOME TAX (CENTRAL) - III VS. KABUL CHAWLA, ITA NO. 707, 709 & 713 OF 2014, DATED 28 TH AUGUST, 2015. 6. LEARNED COMMISSIONER OF INCOME TAX(DEPARTMENTAL REPRESENTATIVE) TRIED TO JUSTIFIED THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING GONE THROUGH THE ABOVE CITED DECISION OF HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF KABUL CHAWLA (SUPRA), WE F IND THAT IN THIS CASE THE HON BLE HIGH COURT HAS BEEN PLEASED TO SUMMARIZE THE APPLICABILITY OF THE PROVISIONS OF SECTION 153A OF THE ACT. AS PER THE SAID DECISION, THE ADDITION IN THE ASSESSMENT UNDER SECTION 153A OF THE ACT CAN ONLY BE MADE ON THE BASIS OF INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SEARCH , WHEN THERE IS NO ABATEMENT OF ASSESSMENT AS ON THE DATE OF SEARCH. WHEN WE APPLY THE RATIO LAID DOWN IN THIS DECISION ON THE FACTS OF THE PRESENT CASE, WE FIND THAT IT IS SQUARELY APPLICABLE IN THE PRESENT CASE AS UNDISPUTEDLY NO INCRIMINATING MATERIAL WAS FOUND DU RING THE COURSE OF SEARCH AND ON THE DATE OF SEARCH, NO ASSESSMENT WAS PENDING ON THE BASIS OF RETURN OF INCOME ORIGINALLY FILED , LEADING TO THE DISALLOWANCE IN QUESTION. WE , THUS , RE SP ECTFULLY FOLLOWING THE DECISION OF HON BLE HIGH COURT IN THE CASE OF KABUL CHAWLA 5 ITA NO. 2460/DEL/2014 AY: 2007 - 08 (SUPRA) HOLD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING THE ADDITION BY WAY OF DISALLOWANCE OF RS. 13,68,000/ - UNDER SECTION 40A(B) OF THE ACT AFTER ASSUMING THE JURISDICTION UNDER SECTION 153A OF THE ACT. THE ACTION OF THE ASSESSING OFFICER IN THIS REGARD IS THUS HELD AS NULL AND VOID. THE APPEAL OF THE ASSESSEE SUCCEEDS ON THE ISSUE RAISED IN GROUNDS NO. 1 TO 3 OF THE APPEAL. THUS, GROUNDS ARE ALLOWED. IN VIEW O F THE FINDING S OF GROUND NOS. 1 TO 3, THE ISSUE RAISED REGARDING THE VALIDITY OF CHARGING OF INTEREST UNDER SECTION 234B OF THE ACT IN GROUND NO. 4 , HAS BECOME INFRUCTUOUS. ACCORDINGLY, T HIS GROUND NO. 4 IS DISPOSED OF F . 8. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST , 2016 . SD/ - SD/ - ( G.D. AGARWAL ) ( I.C. SUDHIR ) VICE PRESIDENT JUDICIAL MEMBER DATED: 3 1 ST AUGUST , 2016 . RK / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI