MANGAL PRABHAT LODHA, MUMBAI V. DCIT CEN CIR 7(3) (ERESTWHILE CEN CIR 4(2), MUMBAI

ITA 3454/MUM/2015

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2611 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SASI KUMAR
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) MANGALPRABHAT LODHA, 412, 4 TH FLOOR, 17 G, VARDHAMAN CHAMBER, CAWASJI PATEL ROAD, HORNIMAN CIRCLE, FORT, MUMBAI 400001 PAN: AABPL 6198F ... APPELLANT VS. THE DCIT, CENTRAL CIRCLE -7(3), ROOM NO.655, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI ANUJ KISHNADWALA RESPONDENT BY : SHRI T. SASI KUMAR DATE OF HEARING : 15/10/2015 DATE OF PRONOUNCEMENT : 30/10/2015 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL IS PREFERRED BY THE ASSES SEE AND IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 01/04/ 2015 OF CIT(A)-48, MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 2006-07, WHICH IN TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICE R DATED 30/3/2013 UNDER SECTION 153A R.W.S. 144(3) OF THE INCOME TAX ACT, 1961( IN SHORT THE ACT). 2 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER:- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT T HAT THE ADDITIONS FOR THIS YEAR HAS TO BE RESTRICTED ON THE BASIS OF EVIDENCE FOUND IN THE BOOKS AND DOCUMENTS FOUND DUR ING THE SEARCH AS PER THE DECISION OF THE ITAT MUMBAI , SPECIAL BENCH IN THE CASE OF 'ALL CARGO GLOBAL LOGISTICS LT D' [23 TAXMANN.COM 103 (MUM)SB], WHICH HAS NOW BEEN UPHELD BY THE BOMBAY HIGH COURT BY THEIR DECISION DELIVERED O N 21ST APRIL 2015, IN APPEAL NO ITX 1969 OF 2013. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN UPHOLDING THE ASSESSMENT O RDER AS THE PAN WAS NOT TRANSFERRED TO THE NEW JURISDICTION EVE N ON THE DATE OF THE ORDER. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF NOTIONAL RENT OF RS.75,600/- 2. BRIEFLY PUT THE RELEVANT FACTS ARE THAT ASSESSEE IS AN INDIVIDUAL, WHO ALONGWITH FAMILY MEMBERS AND OTHER FAMILY CONTR OLLED ENTITIES WAS SUBJECT TO A SEARCH ACTION BY THE DEPARTMENT UNDER SECTION 132 OF THE ACT ON 10/01/2011. PURSUANT TO THE SEARCH A NOTICE UNDER SECTION 153A OF THE ACT WAS ISSUED CALLING FOR A RETURN OF INCO ME, IN RESPONSE TO WHICH ASSESSEE FILED A RETURN OF INCOME DECLARING AN INCOME OF RS.8,98,619/- ON 26/12/2011, AS AGAINST AN INCOME OF RS.8,58,390/- ORIGINALLY FILED IN RETURN OF INCOME FILED UNDER SE CTION 139(1) OF THE ACT ON 19/4/2007. THE RETURN OF INCOME FILED BY THE ASS ESSEE WAS SUBJECT TO SCRUTINY ASSESSMENT UNDER SECTION 143(3) R.W. SECTI ON 153 A OF THE ACT, WHEREBY THE TOTAL INCOME HAS BEEN ASSESSED AT RS.9, 74,220/- THE DIFFERENCE BETWEEN THE RETURNED AND THE ASSESSED INCOME WAS PRIMARILY ON ACCOUNT OF AN ADDITION OF RS.75,600/- MADE BY THE 3 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) ASSESSING OFFICER ON ACCOUNT OF NOTIONAL RENT OF PR OPERTIES AT KARJAT AND NALASOPARA. 3. BEFORE ME, THE LD. REPRESENTATIVE FOR THE ASSESS EE CONTENDED THAT DURING THE COURSE OF SEARCH NO INCRIMINATING M ATERIAL WAS FOUND, WHICH WOULD SUGGEST THAT THE IMPUGNED NOTIONAL RENT OF RS.75,600/- WAS UNEXPLAINED. IT WAS FURTHER, POINTED OUT THAT IN THE CONTEXT OF THE ORIGINAL RETURN FILED UNDER SECTION 139(1) OF THE A CT ON 19/04/2007, AN ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMP LETED ON 19/12/2008 AND, THEREFORE, ON THE DATE OF SEARCH I .E. ON 10/01/2011, ASSESSMENT STOOD COMPLETED, AND IN ANY CASE AS ON T HE DATE OF SEARCH, THE ASSESSMENT FOR IMPUGNED ASSESSMENT OF 2006-07 W AS NOT PENDING. THE AFORESAID FACTUAL MATRIX HAS BEEN REFERRED TO BY THE LD. REPRESENTATIVE FOR THE ASSESSEE TO EXPLAIN THAT THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION DID NOT ABATE IN TERMS OF THE SECOND PROVISO TO SECTION 153A(1) OF THE ACT. ACCORDINGLY, IT IS SOUGHT TO BE CANVASSED THAT THE IMPUGNED ADDITION COULD NOT BE MADE IN THE IMPUGNED ASSESSMENT PROCEEDINGS UNLESS SOME INCRIMINATING MA TERIAL WAS FOUND DURING THE COURSE OF SEARCH IN CONNECTION WITH THE IMPUGNED ISSUE. IN SUPPORT OF THE SAID PROPOSITION, THE LD. REPRESENTA TIVE FOR THE ASSESSEE HAS RELIED UPON THE FOLLOWING DECISIONS:- (I) ALL CARGO GLOBAL LOGISTICS, 374 ITR 645 (BOM) (II) SUNCITY ALLOYS (P) LTD. VS. ACIT, 124 TTJ 674 (JOD) (III) ATHITHI N. PATEL, ITA NO.43/MUM/2010 ORDER DA TED 22/08/2012 4 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) (IV) SAF YEAST COMPANY PVT. LTD. VS. ACIT, ITA NO.1 074/PN/2007 ORDER DATED 03.10.2012 (V) B.R. MACHINE TOOLS PVT. LTD. VS. ACIT, ITA NO.4 174 TO 4177/MUM/2013 ORDER DATED 06.12.2013. (VI) GURINDER SINGH BAWA, ITA NO.2075/MUM/2010 ORD ER DATED 16/11/2012 (VII) RAKSHA CHHADWA VS. ACIT, ITA NO.8576& 8577/MU M/2010 FOR A.Y 2003-04 & 2005-06 ORDER DATED 17.10.2014 4. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE APPEARING FOR THE REVENUE HAS DEFENDED THE ACTION OF THE INCO ME TAX AUTHORITIES POINTED OUT THAT THE PROVISIONS OF SECTION 153A OF THE ACT EMPOWER THE ASSESSING OFFICER TO ASSESS OR RE-ASSESS THE TOTAL INCOME OF SIX ASSESSMENT YEARS IMMEDIATELY PRECEDING THE ASSESSME NT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUCH SEARCH WAS CONDU CTED. AS PER LD. DEPARTMENTAL REPRESENTATIVE THE ASSESSING OFFICER WAS DUTY BOUND TO ASSESS OR REASSESS TOTAL INCOME OF SUCH ASSESSMEN T YEARS AND, THEREFORE, THE IMPUGNED ADDITION WAS JUSTIFIABLY MA DE AS IT INVOLVES APPLICATION OF SECTION 23(1) OF THE ACT RELATING TO THE DETERMINATION OF ANNUAL VALUE OF THE PROPERTY. 5. AS THE AFORESAID DISCUSSION SHOWS THAT THE PERT INENT POINT RAISED BY THE ASSESSEE BEFORE ME IS THAT THE IMPUGNED ADDI TION HAS BEEN MADE IN THE ABSENCE OF REQUISITE JURISDICTION. IN ORDER TO APPRECIATE THE CONTROVERSY, IT IS PERTINENT TO OBSERVE THAT SE CTION 153A OF THE ACT POSTULATES THE ASSESSMENT IN CASES OF SEARCH OR REQ UISITION UNDER SECTION 132 OR UNDER SECTION 132A OF THE ACT RESPEC TIVELY. THE SAID 5 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) SECTION ENVISAGES THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTAL INCOME FOR SIX ASSESSMENT YEARS IMMEDIATELY P RECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH SEARCH WAS CONDUCTED. THE SECOND PROVISO TO SECTION 153A(1) O F THE ACT ALSO PRESCRIBES 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 THE ACT, WHICH IS PE NDING ON THE DATE OF INITIATION OF SEARCH OR MAKING OF REQUISITION AS TH E CASE MAY BE , SHALL ABATE. IN OTHER WORDS, IN SO FAR AS THE PENDING A SSESSMENTS ARE CONCERNED, THE COMPETENCE OF THE ASSESSING OFFICER TO MAKE THE ORIGINAL ASSESSMENT CONVERGES WITH THE ASSESSMENT T O BE MADE U/S.153A OF THE ACT, I.E. ONLY ONE ASSESSMENT SHALL BE MADE FOR SUCH ASSESSMENT YEARS BASED ON THE FINDINGS OF THE SEARC H AS WELL AS ANY OTHER MATERIAL EXISTING OR BROUGHT ON RECORD BY THE ASSESSING OFFICER. NOTABLY, THERE WOULD ASSESSMENTS IN THE PERIOD OF T HE SIX ASSESSMENT YEARS IDENTIFIED IN SECTION 153A(1) OF THE ACT, WHI CH WOULD HAVE BECOME FINAL (I.E. WHICH ARE NOT PENDING ON THE DA TE OF SEARCH); SUCH ASSESSMENTS DO NOT ABATE IN TERMS OF THE SECOND PRO VISO TO SEC.153A(1) OF THE ACT. THE SCOPE AND AMBIT OF SUCH AN ASSES SMENT IS THE CONTROVERSY BEFORE ME. IN THIS CONTEXT, IT WOULD BE PERTINENT TO REFER TO THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA-SHEVA) 58 TAXMANN.COM 78 (BOM) WHEREIN THE SCOPE OF AN ASSESSMENT UNDER S ECTION 153A OF THE ACT HAS BEEN CONSIDERED. ONE OF THE POINTS AD DRESSED BY THE HONBLE HIGH COURT WAS WHETHER THE SCOPE OF ASSESSM ENT UNDER SECTION 153A OF THE ACT ENVISAGES ADDITIONS, WHICH ARE OTHE RWISE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. AS PER 6 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) HONBLE HIGH COURT, NO ADDITION COULD BE MADE IN RE SPECT OF THE ASSESSMENT THAT HAD BECOME FINAL IN THE EVENT NO IN CRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. TH E HONBLE HIGH COURT ALSO NOTICED ITS EARLIER JUDGMENT IN THE CASE OF MU RALI AGRO-PRODUCTS LTD. (SUPRA) AND ELABORATELY CULLED OUT THE SCOPE AND AMBIT OF THE ASSESSMENT AND REASSESSMENT OF TOTAL INCOME UNDER S ECTION 153A(1) OF THE ACT READ WITH THE PROVISO THEREOF. THE HON BLE BOMBAY HIGH COURT IN CONTINENTAL WAREHOUSING CORPORATION (S UPRA) HAS RULED THAT AN UNABATED ASSESSMENT UNDER SECTION 153A(1) WO ULD NOT ENCOMPASS AN ADDITION, IF NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH, BECAUSE IN SUCH A CASE, THE ORIGINAL AS SESSMENT HAD BECOME FINAL. THIS PROPOSITION HAS BEEN CANVASSED BY THE L D. REPRESENTATIVE FOR THE ASSESSEE BEFORE ME IN ORDER TO ASSAIL THE ADDI TION OF RS.75,600/- MADE BY THE ASSESSING OFFICER. 5.1 MOREOVER, THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT(CENTRAL)-III VS. KABUL CHAWLA IN ITA 707/2014 D ATED 28/08/2015 HAS EXTENSIVELY CONSIDERED THE LEGAL POSITION AND SUMMA RIZED IT IN THE FOLLOWING 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 T HE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UN DER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATE LY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACES. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE D ATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. 7 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TA KE PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE TOTAL INCOME OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 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 AVAILABLE WITH THE A O WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE AS SESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WI TH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS S ECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESS MENT CAN BE MADE. THE WORD ASSESS IN SECTION 153A IS RELATABLE TO ABAT ED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD REASSE SS TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SE CTION 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 MATERIA L 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 THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION 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. 5.2 FACTUALLY SPEAKING, IN THE PRESENT CASE THE ASS ESSMENT FOR THE YEAR UNDER CONSIDERATION STOOD COMPLETED ON THE DAT E OF SEARCH. I HAVE PERUSED THE ASSESSMENT ORDER AND FIND THAT THERE IS NOTHING BROUGHT ON RECORD TO SUGGEST THAT ANY MATERIAL WAS FOUND DURIN G COURSE OF SEARCH IN RELATION TO THE IMPUGNED ADDITION. THE ENTIRE DISCUSSION ON THIS POINT IN PARA-3 OF THE ASSESSMENT ORDER DOES NOT R EFER TO ANY MATERIAL FOUND DURING THE COURSE OF SEARCH LEAVE ALONE ANY INCRIMINATING MATERIAL. THEREFORE, IN THIS FACTUAL BACKGROUND, I DO NOT FIND ANY 8 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) JUSTIFICATION FOR THE ASSESSING OFFICER TO MAKE THE IMPUGNED ADDITION IN AN ASSESSMENT FINALIZED UNDER SECTION 153A OF THE A CT IN THE ABSENCE OF INCRIMINATING MATERIAL HAVING NOT BEEN FOUND DURING THE COURSE OF SEARCH, QUA THE IMPUGNED ADDITION. 5.3 IN CONCLUSION, I, THEREFORE, HOLD THAT FOLLOWIN G THE RATIO OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CONTINENTAL WAREHOUSING CORPORATION (NHAVA-SHEVA) (SUPRA) AS AL SO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF KABU L CHAWLA (SUPRA), THE IMPUGNED ADDITION COULD NOT HAVE BEEN MADE IN RESPE CT OF AN UNABATABLE ASSESSMENT WHICH HAD OTHERWISE BECOME F INAL, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SEARCH, QUA THE IMPUGNED ADDITION. ACCORDINGLY, I SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO D ELETE THE ADDITION OF RS.75,600/- AS THE SAME IS PURPORTED TO BE BEYOND THE SCOPE AND AMBIT OF ASSESSMENT ENVISAGED UNDER SECTION 153A OF THE A CT. THUS, ON THIS ASPECT, THE ASSESSEE SUCCEEDS. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 30/10/2015. SD/- (G.S. PANNU) ACCOUN TANT MEMBER MUMBAI, DATED 30/10/2015 9 ITA NO. 3454/MUM/2015 (ASSESSMENT YEAR : 2006-07) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS