Quli Qutub Shah Medical and General Stores, Hyderabad V. ACIT,Central Circle - 7, Hyd., Hyderabad

ITA 307/HYD/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98842 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 27-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AYS
• Keywords: Search and seizure; Loose papers; Documents seized
• Section: 143(3); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 3 0 5 /HYD/20 14 200 4 - 0 5 QULI QUTUB SHAH MEDICAL AND GENERAL STORES, HYDERABAD [PAN: AAAFQ0792M] ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-7, HYDERABAD 30 6/HYD/20 14 200 5 - 0 6 307/HYD/2014 200 6 - 0 7 308/HYD/2014 200 7 - 0 8 309/HYD/2014 200 8 - 0 9 310/HYD/2014 200 9 - 1 0 311/HYD/2014 20 1 0 - 11 FO R ASSESSEE : MR. MOHD. AFZAL , AR FOR REVENUE : MR. B. KURMI NAIDU, DR DATE OF HEARING : 1 6 - 1 2 - 201 5 DATE OF PRONOUNCEMENT : 18 - 1 2 - 2015 O R D E R PER BENCH : THESE ARE THE APPEALS FILED BY THE ASSESSEE DIRECTE D AGAINST THE ORDERS OF THE LD. COMMISSIONER OF INCOME TAX (A PPEALS), GUNTUR DATED 29-11-2013 FOR THE AYS. 2004-05, 2005- 06, 2006-07, 2007-08, 2008-09, 2009-10 & 2010-11. SINCE THE COM MON ISSUE IS INVOLVED IN ALL THESE APPEAL, WE DISPOSE OF THES E APPEALS VIDE THIS CONSOLIDATED ORDER. FOR THE SAKE OF CLARITY AND CO NVENIENCE, THE FACTS RELEVANT TO AY. 2004-05 IN ITA NO. 305/HYD/20 14 ARE STATED HEREIN. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 2 -: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS AGAINST LAW, AND PROBABILITIES OF CASE . 2. THE LEARNED COMMISSIONER OF INCOME TAX OUGHT TO HAVE HELD AS THERE IS NO MATERIAL FOUND DURING THE COURS E OF SEARCH, AT THE PREMISES OF SRI M. PRAKASH REDDY, BELONGING TO THE ASSESSEE, THAT THE ASSESSEES CASE CANNOT BE COVERE D U/S. 153C, THEREFORE, OUGHT TO HAVE HELD THE ASSESSMENT MADE U/S. 143(3) R.W.S. 153C AS INVALID/IRREGULAR. 3. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN DETERMINING THE GP RATE AT 22% AS AGAINST THE ESTIM ATION OF GP RATE BY ASSESSING OFFICER AT 27.29%, AGAIN WITHO UT ANY BASIS OF COMPARABLE CASES. 4. THE ASSESSING OFFICER ERRED IN SUSTAINING THE AD DITION OF RS. 6,91,280/- AS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER AT RS. 10,97,600/-. 5. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR MO DIFY THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIM E OF HEARING OF THE APPEAL, IF IT IS CONSIDERED NECESSAR Y. 2. THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS O F DEALING IN PHARMACEUTICALS. THE ORIGINAL RETURN OF INCOME WAS FILED ON 13-01-2005 DISCLOSING INCOME OF RS. 66,900/-. CONS EQUENT UPON THE SEARCH AND SEIZURE OPERATION U/S. 132 OF THE IN COME TAX ACT [ACT], CONDUCTED IN THE CASE OF ONE MR. M. PRAKASH REDDY AND OTHERS ON 12-08-2009, IT WAS STATED THAT THE DOCUME NTS BELONGING TO THE ASSESSEE WERE FOUND AND SEIZED. SUBSEQUENTLY , THE SURVEY OPERATIONS WERE CONDUCTED IN THE ASSESSEES CASE U/ S. 133A OF THE ACT AND SUBSEQUENTLY, THE APPELLANT WAS ISSUED NOTI CES U/S. 153C OF THE ACT CALLING UPON THE ASSESSEE FIRM TO FILE T HE RETURN OF INCOME. IN RESPONSE TO THIS, THE ASSESSEE-FIRM FIL ED THE SAME RETURN OF INCOME, AS ORIGINALLY FILED DISCLOSING IN COME OF RS. 66,900/-. AGAINST THE SAID RETURN OF INCOME, THE A SSESSMENT WAS I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 3 -: COMPLETED U/S. 143(3) R.W.S. 153C OF THE ACT VIDE O RDER DT. 23-12- 2011 AT A TOTAL INCOME OF RS. 11,64,500/-. WHILE D OING SO, THE LD. ASSESSING OFFICER (AO) ESTIMATED THE GROSS PROFIT @ 27.29% ON THE TURNOVER OF RS. 1,37,08,014/- ON THE GROUND THAT DU RING THE COURSE OF SURVEY OPERATIONS, IT WAS FOUND THAT NO B OOKS OF ACCOUNT WERE FOUND AND FURTHER, THE AO OBSERVED THAT EVEN I N RESPONSE TO THE SUMMONS ISSUED FOR PRODUCTION OF BOOKS FOR EXAM INATION, NO BOOKS OF ACCOUNT WERE PRODUCED BY STATING THAT THE BOOKS WERE LOST WHILE SHIFTING THE OFFICE PREMISES AND THEREFO RE, THE AO PRESUMED THAT NO BOOKS WERE MAINTAINED AND PROCEEDE D WITH THE ESTIMATION OF THE GROSS PROFIT ON THE DISCLOSED TUR NOVER. 3. BEING AGGRIEVED BY THIS ASSESSMENT ORDER, ASSESS EE PREFERRED APPEALS BEFORE THE CIT(A) BEFORE WHOM IT WAS INTER ALIA CONTENDED THAT THE PROCEEDINGS U/S. 153C ARE NOT VALID AS NO INCRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEARCH AND SEIZUR E OPERATION CONDUCTED IN THE BUSINESS PREMISES OF MR. M. PRAKAS H REDDY AND OTHERS ON 12-08-2009. THIS GROUND WAS DISPOSED OF BY THE LD. CIT(A) BY HOLDING THAT NO GROUNDS OF APPEAL WAS RAI SED BEFORE HIM CHALLENGING THE VALIDITY OF NOTICE U/S. 153C. BEIN G AGGRIEVED BY THIS ORDER, THE APPELLANT IS BEFORE US WITH THE PRE SENT APPEAL. 4. LD. COUNSEL FOR THE APPELLANT ARGUED BEFORE US T HAT NO INCRIMINATING DOCUMENTS RELATING THE APPELLANT WERE FOUND AS A RESULT OF SEARCH AND SEIZURE PROCEEDINGS IN THE CAS E OF MR. M. PRAKASH REDDY. IN THE ABSENCE OF SUCH INCRIMINATIN G MATERIAL DOCUMENTS, NOTICES U/S. 153C OF THE ACT ARE NOT VAL ID IN THE EYE OF LAW AND IN SUPPORT OF THIS LEGAL PROPOSITION, HE RE LIED ON THE FOLLOWING DECISIONS: I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 4 -: I. M/S. SPECTRUM PEARLS & EXPORTS PVT LTD VS. DEPT. OF INCOME TAX (ITAT, HYDERABAD) ITA NO. 2107/HYD/2011; II. ACIT-CC-4, HYDERABAD VS NARENDRA KUMAR GUPTA (ITAT, HYDERABAD), ITA NO. 843 TO 848/HYD/2010; III. ACIT VS. GANBHIR SILK MILLS (AHD TRIB) 006 ITR (TRB ) 376; IV. CIT VS. LATE J. CHANDRASEKAR (HUF) (MAD-HC) (2011) 338 ITR 0061; V. P. SRINIVAS NAYAK VS. ACIT (BANG-TRIB) (2008) 306 I TR 0411; 5. ON THE OTHER HAND, LD. SR.DR RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ISSUE THAT COMES UP FOR CO NSIDERATION IN THESE APPEALS IS WHETHER THE ASSESSMENT MADE PURSUA NT TO THE NOTICES U/S. 153C OF THE ACT ARE VALID IN THE EYE O F LAW? FROM THE MERE PERUSAL OF THE ASSESSMENT ORDER, IT IS CLEAR T HAT THOUGH THE AO GAVE FINDING THAT THE DOCUMENTS PERTAINING TO TH E APPELLANT ARE FOUND AS A RESULT OF SEARCH AND SEIZURE OPERATIONS IN THE CASE OF MR. M. PRAKASH REDDY AND OTHERS ON 12-08-2009 ON A SPECIFIC QUERY FROM THE BENCH, THE LD. SR.DR COULD NOT PRODU CE ANY MATERIAL IN SUPPORT OF THIS OBSERVATION MADE BY THE AO. THEREFORE, THIS IS NOTHING BUT A BALD STATEMENT. THAT APART, IT IS DISCERNIBLE FROM THE ASSESSMENT ORDER THAT THE AO PROCEEDED WIT H THE ESTIMATION OF THE GROSS PROFIT ON THE DISCLOSED TUR NOVER. THERE WAS NO REFERENCE TO ANY SEIZED MATERIAL BY THE AO, BASE D ON WHICH, THE I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 5 -: AO HAD COME TO A CONCLUSION THAT PROFITS DISCLOSED BY THE APPELLANT ARE SUPPRESSED IN THE RETURNS OF INCOME R EGULARLY FILED BY THE ASSESSEE. SUBSECTION (1) OF SECTION 153C, WHICH IS RELEVANT F OR OUR PURPOSE READS AS UNDER: '(1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151, AND SECTION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHE R THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCO UNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSO N AND ISSUE SUCH OTHER PERSON NOTICE AND ASSETS OR REASSESS INCOME O F SUCH OTHER PERSON IN ACCORDANCE WITH THE PROVISIONS OF SECTION 153A: PROVIDED THAT IN CASE OF SUCH OTHER PERSON, THE REF ERENCE TO THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKIN G OF REQUISITION UNDER SECTION 132A IN THE SECOND PROVISO TO SUB-SEC TION (1) OF SECTION 153A SHALL BE CONSTRUED AS REFERENCE TO THE DATE OF RECEIVING THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSESS SEIZED OR REQUISI TIONED BY THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON.' 7. THE ABOVE PROVISIONS HAVE COME UP FOR INTERPRETA TION BEFORE HON'BLE GUJARAT HIGH COURT IN THE CASE OF VIJAYBHAI CHANDRANI, WHEREIN IT WAS HELD AS UNDER: 'ON A PLAIN READING OF THE AFORESAID PROVISIONS IT IS APPARENT THAT SECTIONS 153A, 153B AND 153C LAY DOWN A SCHEME FOR ASSESSMENT IN CASE OF SEARCH AND REQUISITION. SECTION 153A DEALS WITH PROCEDURE FOR ISSUANCE OF NOTICE AND ASSESSMENT OR REASSESSMENT I N CASE OF THE PERSON WHERE A SEARCH IS INITIATED UNDER SECTION 13 2 OR BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS ARE REQUISITIONE D UNDER SECTION 132A AFTER THE 31ST DAY OF MAY, 2003. SECTION 153B LAYS DOWN THE TIME LIMIT FOR COMPLETION OF ASSESSMENT UNDER SECTI ON 153A. SECTION 153C WHICH IS SIMILARLY WORDED TO SECTION 158 BD OF THE ACT, PROVIDES THAT WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A HE SHAL L PROCEED AGAINST I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 6 -: EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON. HOWEVER, T HERE IS A DISTINCTION BETWEEN THE TWO PROVISIONS INASMUCH AS UNDER SECTION 153C NOTICE CAN BE ISSUED ONLY WHERE THE MONEY, BUL LION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED BELONG TO SUCH OTHER PERSON, WHERE AS UNDER SECTION 158BD IF THE ASSESSING OFFICER IS SATISFIED THAT AN Y UNDISCLOSED INCOME BELONGS TO ANY PERSON, OTHER THAN THE PERSON WITH RESPECT TO WHOM SEARCH WAS MADE UNDER SECTION 132 OR WHOSE BOO KS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS WERE REQUISITIONED UND ER SECTION 132A, HE SHALL PROCEED AGAINST SUCH OTHER PERSON UNDER SE CTION 158BC. THUS A CONDITION PRECEDENT FOR ISSUING NOTICE UNDER SECTION 153C AND ASSESSING OR REASSESSING INCOME OF SUCH OTHER PERSO N, IS THAT THE MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZED OR REQUISITIONED SHOULD BELONG TO SUCH PERSON. IF THE SAID REQUIREMENT IS NOT SATISFIED, R ESORT CANNOT BE HAD TO THE PROVISIONS OF SECTION 153C OF THE ACT. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGH T OF THE AFORESAID STATUTORY SCHEME, IT IS AN ADMITTED POSITION AS EME RGING FROM THE RECORD OF THE CASE, THAT THE DOCUMENTS IN QUESTION, NAMELY THE THREE LOOSE PAPERS RECOVERED DURING THE SEARCH PROCEEDING S DO NOT BELONG TO THE PETITIONER. IT MAY BE THAT THERE IS A REFERENCE TO THE PETITIONER INASMUCH AS HIS NAME IS REFLECTED IN THE LIST UNDER THE HEADING 'SAMUTKARSH MEMBERS DETAILS' AND CERTAIN DETAILS AR E GIVEN UNDER DIFFERENT COLUMNS AGAINST THE NAME OF THE PETITIONE R ALONG WITH OTHER MEMBERS, HOWEVER, IT IS NOBODY'S CASE THAT THE SAID DOCUMENTS BELONG TO THE PETITIONER. IT IS NOT EVEN THE CASE OF REVEN UE THAT THE SAID THREE DOCUMENTS ARE IN THE HANDWRITING OF THE PETITIONER. IN THE CIRCUMSTANCES, WHEN THE CONDITION PRECEDENT FOR ISS UANCE OF NOTICE IS NOT FULFILLED ANY ACTION TAKEN UNDER SECTION 153C O F THE ACT STANDS VITIATED.' 8. WE FIND THAT IN THE PRESENT CASE ALSO ADMITTEDLY , NO DOCUMENTS BELONGING TO APPELLANT WERE FOUND AS A RE SULT OF SEARCH AND SEIZURE OPERATIONS CONDUCTED IN THE PREMISES OF MR. M. PRAKASH REDDY AND OTHERS ON 12-08-2009. IN THE LIG HT OF THIS FACTUAL SITUATION, THE VERY FOUNDATION FOR INITIATI NG THE PROVISIONS OF SECTION 153C BY THE AO IS MISSING AND THEREFORE, CO NSEQUENTIAL ACTIONS AND THE ORDERS MUST ALSO FAIL. THEREFORE, WE HEREBY QUASH I.T.A. NOS. 305 TO 311/HYD/14 QULI QUTUB SHAH MEDICAL AND GENERAL STORES :- 7 -: THE ASSESSMENTS FRAMED PURSUANT TO THE NOTICE U/S. 153C OF THE ACT. 9. IN THE RESULT, ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015 SD/- SD/- (D. MANMOHAN) (INTURI RAMA RAO) VICE PRESIDENT ACCOUNTANT MEMBE R HYDERABAD, DATED 18 TH DECEMBER, 2015 TNMM COPY TO : 1. QULI QUTUB SHAH MEDICAL AND GENERAL STORES, 15-6 - 110, OSMANIA GENERAL HOSPITAL CAMPUS, AFZAL GUNJ, HYDERABAD. C/O. MOHD. AFZAL, ADVOCATE, 11-5-465, SHERSONS RESIDENCY, FLAT NO. 402, CRIMINAL COURT R OAD, RED HILLS, HYDERABAD. 2. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -7, AAYAKAR BHAVAN, HYDERABAD. 3 . CIT ( APPEAL S ) , GUNTUR. 4. THE CIT-CENTRAL, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.