PRAVIN MALKANI, MUMBAI V. DCIT CC 25, MUMBAI

ITA 3343/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3502 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 10-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 153A; 14A; 132; 15

Judgement Text

1 I.T.A. NO.3343 &3344 /MUM/2015 THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO. 3343 & 3344/MUM/2015 (ASSESSMENT YEARS : 2007-08 & 2008-09) PRAVIN MALKANI BINDIYA BUNGALOW,GANDHI DHAM ROAD JUHU, MUMBAI 49 VS DY.CIT, CENT.CIR.25, MUMBAI PAN : AAAPM8173C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MAYUR KISNADWALA REVENUE BY SHRI SUNIL KUMAR AGARWAL DATE OF HEARING : 17-08-2016 DATE OF PRONOUNCEMENT : 19-08-2016 O R D E R PER ASHWANI TANEJA, AM THESE APPEALS HAVE BEEN FILED BY THE SAME ASSESSEE AGAINST THE ORDERS OF COMMISSIONER OF INCOME-TAX (APPEALS) [HEREINAFTER C ALLED CIT(A)] FOR ASSESSMENT YEARS 20078-08 & 2008-09 AGAINST THE ASS ESSMENT ORDER DT 28-3- 2013 PASSED BY THE AO U/S 143(3) R.W.S. 153C OF TH E ACT. THE ISSUE INVOLVED IN THESE APPEALS IS IDENTICAL, THEREFORE, THESE APPEAL S WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2 I.T.A. NO.3343 &3344 /MUM/2015 3 . THE SOLITARY GROUND RAISED IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE U/S 14A. THE MAIN ARGUMENT OF THE LD. COUNSEL IS T HAT IN THIS CASE, THE IMPUGNED ASSESSMENTS HAVE BEEN FRAMED U/S 153C, AS A RESULT OF SEARCH OPERATION U/S 132 CARRIED OUT ON PATEL ENGG GROUP O F COMPANIES ON 11-04- 2007. IT WAS SUBMITTED THAT IN THIS CASE ORIGINAL RETURNS WERE FILED U/S 139(1) WHICH WERE ACCEPTED BY THE REVENUE AND ATTAINED FIN ALITY BEFORE RECEIPT OF NOTICE 153C. THUS, THE ASSESSMENT FOR THESE TWO YE ARS DID NOT ABATE. UNDER THESE CIRCUMSTANCES, NO DISALLOWANCE OR ADDITION CO ULD HAVE BEEN MADE BY AO IN ABSENCE OF ANY INCRIMINATING MATERIAL HAVING BEE N FOUND DURING THE COURSE OF SEARCH. THE AO MADE DISALLOWANCE U/S 14A WHICH WAS NOT CONNECTED TO ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH AND THUS, THE DISALLOWANCE WAS ILLEGAL AND WITHOUT JURISDICTION. THE LD. COUNSEL ALSO RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF WI FE OF THE ASSESSEE, VIZ. MRS. BABITA MALKANI AND COPY OF ORDER WAS PLACED BEFORE US WHEREIN THE TRIBUNAL HAD DELETED THE DISALLOWANCE ON IDENTICAL FACTS AND CIRCUMSTANCES. 4. DURING THE COURSE OF HEARING LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIE S AND ALSO THE COPY OF ORDER OF THE TRIBUNAL PLACED BEFORE US BY THE LD . COUNSEL. IT IS NOTED THAT UNDISPUTEDLY, NO INCRIMINATING MATERIAL WAS FOUND W ITH REGARD TO THE IMPUGNED DISALLOWANCE MADE U/S 14A. IT IS FURTHER NOTED THAT IN THE IDENTICAL FACTS & CIRCUMSTANCES, THIS ISSUE CAME UP BEFORE TH E TRIBUNAL IN THE CASE OF WIFE OF THE ASSESSEE, MR. BABITA MALKANI, IN ITA NO S.3345, 3348, 3349 & 3350/MUM/2015 AND VIDE ORDER DATED 30-11-2015, THE TRIBUNAL DECIDED THIS 3 I.T.A. NO.3343 &3344 /MUM/2015 ISSUE IN FAVOUR OF THE ASSESSEE WITH FOLLOWING OBSE RVATIONS: 9. AS THE AFORESAID DISCUSSION SHOWS, THE PERTINENT POINT RAISED BY THE ASSESSEE BEFORE ME IS THAT THE IMPUGNED ADDITION HAS BEEN MADE IN THE ABSENCE OF REQUISITE JURISDICTION. THE IMPUGNED ASSESSMENT HAS BEEN MADE BY INVOKING SECTION 153C OF THE ACT, WHIC H PRESCRIBES THAT THE ASSESSMENT IS TO BE MADE 'IN TH E MANNER PROVIDED IN SECTION 153A OF THE ACT. IN ORDER TO APPRECIATE THE CONTROVERSY, IT IS PERTINENT TO OBSERVE THAT SECTION 153A OF THE ACT POSTULATES THE ASSESSMENT I N CASES OF SEARCH OR REQUISITION UNDER SECTION 132 OR UNDER SECTION 132A OF THE ACT RESPECTIVELY. THE SAID SECT ION ENVISAGES THAT THE ASSESSING OFFICER SHALL ASSESS O R REASSESS THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH WAS CONDUCTED. THE SECOND PROVISO TO SECTION 153A(1) OF THE ACT ALSO PRESCRIB ES THAT ASSESSMENT OR RE-ASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YEAR FALLING WITHIN THE PERIOD OF SIX YE ARS REFERRED TO IN SUB-SECTION(1) OF SECTION 153A OF TH E ACT, WHICH IS PENDING ON THE DATE OF INITIATION OF SEARC H OR MAKING OF REQUISITION AS THE CASE MAY BE, SHALL ABA TE. IN OTHER WORDS, IN SO FAR AS THE PENDING ASSESSMENTS A RE CONCERNED, THE COMPETENCE OF THE ASSESSING OFFICER TO MAKE THE ORIGINAL ASSESSMENT CONVERGES WITH THE ASSESSMENT TO BE MADE U/S.153A OF THE ACT, I.E. ONL Y ONE ASSESSMENT SHALL BE MADE FOR SUCH ASSESSMENT YEARS BASED ON THE FINDINGS OF THE SEARCH AS WELL AS ANY OTHER MATERIAL EXISTING OR BROUGHT ON RECORD BY THE ASSES SING OFFICER. NOTABLY, THERE WOULD ASSESSMENTS IN THE PE RIOD OF THE SIX ASSESSMENT YEARS IDENTIFIED IN SECTION 153A (1) OF THE ACT, WHICH WOULD HAVE BECOME FINAL (I.E. WHICH ARE NOT PENDING ON THE DATE OF SEARCH); SUCH ASSESSMENTS DO NOT ABATE IN TERMS OF THE SECOND PROVISO TO SEC.153A(1) OF THE ACT. THE SCOPE AND AMBIT OF SUCH AN ASSESSMENT IS THE CONTROVERSY BEFORE ME. IN THIS CONTEXT, IT WOULD BE PERTINENT TO REFER TO THE JUDGMENT OF THE HON'BLE B OMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREH OUSING CORPORATION (NHAVA-SHEVA) 58 TAXMANN.COM 78 (BORN) WHEREIN THE SCOPE OF AN ASSESSMENT UNDER SECTION 15 3A 4 I.T.A. NO.3343 &3344 /MUM/2015 OF THE ACT HAS BEEN CONSIDERED. ONE OF THE POINTS ADDRESSED BY THE HON'BLE HIGH COURT WAS WHETHER THE SCOPE OF ASSESSMENT UNDER SECTION 153A OF THE A CT ENVISAGES ADDITIONS, WHICH ARE OTHERWISE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH. AS PER HON'BLE HIGH COURT, NO ADDITION COULD BE MADE I N RESPECT OF THE ASSESSMENT THAT HAD BECOME FINAL IN THE EVENT NO INCRIMINATING MATERIAL WAS FOUND DURING TH E COURSE OF SEARCH. THE HON'BLE HIGH COURT ALSO NOTIC ED ITS EARLIER JUDGMENT IN THE CASE OF MURALI AGRO-PRO DUCTS LTD. (SUPRA) AND ELABORATELY CULLED OUT THE SCOPE AND AMBIT OF THE ASSESSMENT AND REASSESSMENT OF TOTAL INCOME UNDER SECTION 153A(1) OF THE ACT READ WITH THE PROVISO THEREOF, AND RULED THAT AN UNABATED ASSESSMENT UNDER SECTION 153A(1) WOULD NOT ENCOMPASS AN ADDITION, IF NO INCRIMINATING MATERIAL IS FOUND DUR ING THE COURSE OF SEARCH, BECAUSE IN SUCH A CASE, THE ORIGI NAL ASSESSMENT HAD BECOME FINAL. THIS PROPOSITION HAS BEEN CANVASSED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE BEFORE ME IN ORDER TO ASSAIL THE DISALLOWA NCE OF RS.56,912/- MADE BY THE ASSESSING OFFICER BY INV OKING SECTION 14A OF THE ACT. 9.1 MOREOVER, THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT(CENTRAL)-ILL VS. KABUL CHAWLA IN IT A 707/2014 DATED 28/08/2015 HAS EXTENSIVELY CONSIDERED THE LEGAL POSITION AND SUMMARIZED IT IN THE FOLLOWI NG WORDS:- 'SUMMARY OF THE LEGAL POSITION 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISO THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT E MERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153A(1) WILL HAVE TO BE RNANDATORILY ISSUED TO THE PERSON -SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX A YS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN W HICH THE SEARCH TAKES PLACES. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH A YS WILL HA VE TO BE COMPUTED BY THE AOS AS AFRESH EXERCISE. 5 I.T.A. NO.3343 &3344 /MUM/2015 III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEAR CH TAKE PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORD ERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ON E ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX A YS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153A DOES NOT SAY THAT ADDITIO NS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST- SEARCH MATERIAL OR INFORMATION AVAILABL E WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT ' CAN BE ARBITRARY OR MADE WITH OUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOU SLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECT ION 153A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESS MENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UND ER 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 ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE ASSESSING OFFICER. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON TH E 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 ASSESSMENT.' 9.2 FACTUALLY SPEAKING, IN THE PRESENT CASE THE ASS ESSMENT ON THE DATE OF SEARCH STOOD COMPLETED IN AS MUCH AS THE DATE FOR ISSUANCE OF NOTICE UNDER SECTION 143(2) OF THE ACT IN RELATION TO RETURN ORIGINALLY FILED UNDER SECTION 139(1) ON 30/ 09/2008 HAD LAPSED. I HAVE PERUSED THE ASSESSMENT ORDER AND FIN D THAT THERE IS NOTHING BROUGHT ON RECORD TO SUGGEST THAT ANY MA TERIAL WAS FOUND DURING COURSE OF SEARCH WHICH WOULD TRIGGER T HE INVOKING OF SECTION 14A OF THE ACT. RATHER, THE ASSESSMENT O RDER REVEALS THAT THE DISALLOWANCE UNDER SECTION14A OF T HE ACT HAS BEEN RESORTED TO ON A MERE REAPPRAISAL OF THE EXIST ING MATERIAL AND IS DEHORS ANY INCRIMINATING MATERIAL FOUND IN THE C OURSE OF SEARCH. THE ENTIRE DISCUSSION ON THIS POINT IN PARAS-6&7 OF THE ASSESSMENT ORDER DOES NOT REFER TO ANY MATERIAL FOU ND DURING THE COURSE OF SEARCH, LEAVE ALONE ANY INCRIMINATING MATERIAL. 6 I.T.A. NO.3343 &3344 /MUM/2015 THEREFORE, IN THIS FACTUAL BACKGROUND. I DO NOT FIN D ANY JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE THE II*.NED ADDITION IN AN ASSESSMENT FINALIZED UNDER SECTION 153A OF THE ACT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL HAVING BEEN F OUND DURING THE COURSE OF SEARCH, QUA THE IMPUGNED DISALLOWANCE U/S. 14A OF THE ACT. 9.3 IN CONCLUSION, I, THEREFORE, HOLD THAT FOLLOWIN G THE RATIO OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN TH E CASE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA-SHEVA) ( SUPRA) AS ALSO THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT I N THE CASE OF KABUL CHAWLA (SUPRA), THE IMPUGNED ADDITION COULD N OT HAVE BEEN MADE IN RESPECT OF AN UNABATABLE ASSESSMENT WH ICH HAD OTHERWISE BECOME FINAL, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL HAVING NOT BEEN FOUND IN THE COURSE OF SEARCH, QUA THE IMPUGNED DISALLOWANCE U/S. 14A OF T HE ACT. ACCORDINGLY, I SET ASIDE THE ORDER OF THE CIT(A) AN D DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS.56,9 17/- AS THE SAME IS PURPORTED TO BE BEYOND THE SCOPE AND AMBIT OF AS SESSMENT ENVISAGED UNDER SECTION 153A OF THE ACT. THUS, ON T HIS ASPECT, THE ASSESSEE SUCCEEDS. 6. IT IS NOTED THAT THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITION HAS BEEN MADE IN THIS CASE BEFORE US IS IDENTICAL TO TH AT OF CASE OF MRS. BABITA MALKANI (SUPRA). NO DISTINCTION WHATSOEVER HAS BEEN MADE BY THE LD. DR IN THIS REGARD. IT IS FURTHER NOTED THAT THE TRIBUNAL HAS PROPERLY ANALYSED THE FACTS OF THE CASE AND LAW AVAILABLE ON THIS ISSUE IN DETAILE D MANNER. NO CONTRARY JUDGMENT HAS BEEN BROUGHT TO OUR NOTICE IN THIS REG ARD. UNDER THESE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, IT IS HELD THAT THE DISALLOWANCE MADE U/S 14A BY THE ASSESSING OFFI CER WAS BAD IN LAW IN ABSENCE OF ANY INCRIMINATING MATERIAL HAVING BEEN F OUND IN THE COURSE OF SEARCH QUA THE SAID DISALLOWANCE. THEREFORE, THE A PPEALS OF THE ASSESSEE ARE ALLOWED AND DISALLOWANCE MADE BY THE ASSESSING OFFI CER FOR BOTH THE YEARS IS 7 I.T.A. NO.3343 &3344 /MUM/2015 DIRECTED TO BE DELETED. 7. IN THE RESULT, APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE COURT ON THIS 19 TH DAY OF AUG., 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 19 TH AUG, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , H-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES