M/s. HBN Insurance Agencies (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 3784/DEL/2014

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 0728 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 08-03-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 27-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Keywords: Search and seizure; Set aside
• Section: 153A; 143(1); 143(2); 68; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI C BEN CH, NEW DELHI BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER SHRI N.K. BILLAIYA, ACCOUNTANT MEMBE R ITA NO. 3783/DEL/2014 [A.Y 2005-06] & ITA NO. 3784/DEL/2014 [A.Y 2006-07] M/S HBN INSURANCE AGENCIES VS. THE A.C.I.T B 53, B-1, COMMUNITY CENTRE CENTRAL CIRCLE -4 JANAKPURI, NEW DELHI NEW DELHI PAN: AABCH 4386 E (APPLICANT) (RESPONDENT) ASSESSEE BY : MS. GUNJAN JA IN, CA DEPARTMENT BY : SHRI A.K. SAROHA, CIT- DR DATE OF HEARING : 17.12.2019 DATE OF PRONOUNCEMENT : 23.12.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THE ABOVE TWO APPEALS BY THE ASSESSEE ARE PREFERRED AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX [APP EALS] - 33, NEW DELHI DATED 23.12.2013 PERTAINING TO ASSESSMENT YEA RS 2005-06 & 2006- 07. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS AND SINCE 2 THE FIRST APPELLATE AUTHORITY HAS DISPOSED THESE AP PEALS BY A COMMON ORDER AND BOTH THESE APPEALS WERE HEARD TOGETHER, T HESE ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE AND BREVITY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME TAX ACT, 1961 [HERE INAFTER REFERRED TO AS 'THE ACT' FOR SHORT] WAS CARRIED OUT AT VARIOUS PREMISES OF HBN GROUP ON 20.11.2009, WHICH INCLUDED PREMISES OF THE ASSES SEE ALSO. STATUTORY NOTICE WAS ISSUED AND SERVED UPON THE ASS ESSEE AND PURSUANT TO THE SAID NOTICE, THE ASSESSEE FILED ITS RETURN O F INCOME DECLARING TOTAL INCOME OF RS. 84,540/- FOR ASSESSMENT YEAR 20 05-06 AND RS. 25,680/- FOR ASSESSMENT YEAR 2006-07. THE ASSESSEE IS ENGAGED IN THE BUSINESS ACTIVITY OF PROVIDING ALL KINDS OF CONSULT ANCY SERVICES ON INSURANCE/RISK MANAGEMENT CONSULTANCY SERVICES. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT THE ASSESS EE COMPANY HAS UNDERGONE VOLUNTARY WINDING UP ON 16.08.2010 UNDER THE EASY EXIT SCHEME. SINCE NO ORDER OF WINDING UP WAS ISSUED BY THE APPROPRIATE 3 AUTHORITY AND NO SUCH ORDER WAS FILED, THE ASSESSIN G OFFICER PROCEEDED TO COMPLETE THE ASSESSMENT IN THE NAME OF THE ASSES SEE COMPANY. 4. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSEE WAS ASKED TO EXPLAIN THE SOURCE OF DEPOSIT S IN THE BANK ACCOUNT WITH AXIS BANK, NEW DELHI. ON RECEIVING NO PLAUSIBLE REPLY, THE ASSESSING OFFICER PROCEEDED BY EXAMINING THE BA NK DEPOSITS AND FOUND THAT DURING THE PERIOD 01.04.2004 TO 31.03.20 05, TOTAL DEPOSITS WERE TO THE TUNE OF RS. 12,16,399/-. SINCE GROSS R ECEIPTS FROM THE BUSINESS ACTIVITIES WERE SHOWN AT RS. 5,57,619/-, T HE ASSESSING OFFICER TREATED THE DIFFERENCE OF RS. 6,58,780/- AS UNEXPLA INED BANK DEPOSIT AND ACCORDINGLY, MADE THE ADDITIONS U/S 68 OF THE A CT. 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) AND VEHEMENTLY CONTENDED THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH CONDUCTED U/S 132 OF THE ACT AND ADDITIO NS MADE BY THE ASSESSING OFFICER HAVE NO REFERENCE TO ANY SUCH INC RIMINATING MATERIAL FOUND AT THE TIME OF SEARCH, HENCE THE ADDITIONS MA DE ARE BEYOND THE SCOPE OF SECTION 153A OF THE ACT. 4 6. THE CONTENTION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE LD. CIT(A). THE LD. CIT(A) WAS OF THE FIRM BELIEF THAT NEITHER DURING THE ASSESSMENT PROCEEDINGS NOR DURING THE APPELLATE PRO CEEDINGS, THE ASSESSEE HAS EXPLAINED THE SOURCE OF CASH DEPOSITS IN THE BANK ACCOUNT AND, ACCORDINGLY, CONFIRMED THE ASSESSMENT. 7. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REIT ERATED WHAT HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. IT IS TH E SAY OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ISSUES ARE SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE DECI SION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF KABUL CHAWLA 380 ITR 573. 8. PER CONTRA, THE LD. DR SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER. IT IS THE SAY OF THE LD. DR THAT DURING TH E COURSE OF SEARCH PROCEEDINGS, SEVERAL INCRIMINATING DOCUMENTS WERE F OUND WHICH INCLUDED THE BALANCE SHEET OF THE ASSESSEE COMPANY. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSMENT IS DEVOID OF ANY INCRIMINATING MATERIAL AND, THEREFORE, THERE IS NO ERROR IN THE F INDINGS OF THE LD. CIT(A). 5 9. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE OR DERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE COMPA NY FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR ON 23.12.2005 AND FOR ASSESSMENT YEAR 2006-607 ON 16.03.2008. RETURN FOR ASSESSMENT YEAR 2005-06 WAS PROCESSED U/S 143(1) VIDE INTIMATION DATED 27.03.20 06 AND FOR ASSESSMENT YEAR 2006-07 ON 12.03.2009. AS PER THE PROVISIONS OF SECTION 143(2) OF THE ACT, NOTICES COULD HAVE BEEN ISSUED BY 31.12.2006 FOR ASSESSMENT YEAR 2005-06 AND BY 31.03 .2009 FOR ASSESSMENT YEAR 2006-07. SINCE THE DATE OF SEARCH AND SEIZURE OPERATION IS 20.11.2009, IT CAN BE SAFELY CONCLUDED THAT SINCE NO NOTICE WAS ISSUED AND SERVED UPON THE ASSESSEE U/S 143(2) OF THE ACT, ASSESSMENT IS COMPLETE. 10. IN OUR CONSIDERED OPINION, THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET OF THE ASSESSEE COMPANY, BY ANY STRET CH OF IMAGINATION, CANNOT BE CONSIDERED AS INCRIMINATING MATERIAL. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE BANK ACCOUNTS WERE UNEARTHE D DURING THE SEARCH OPERATION. ON THESE FACTS, THE RATIO LAID D OWN BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF KABUL CHAWLA [SU PRA], SQUARELY APPLY WHEREIN THE HON'BLE HIGH COURT OF DELHI HELD AS UND ER: 6 '37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW E XPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT E MERGES 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 MAND ATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURN S 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 A YS WILL HAVE TO BE 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 SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REA SSESS THE 'TOTAL INCOME' OF THE. AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTH ER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UN DISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORM ATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE E VIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. 7 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 ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECT ION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PEND ING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASS ESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND TH E ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESS MENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUG HT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONL Y ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURI NG THECOURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSE D INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH W ERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT.' 11. THIS VIEW WAS FURTHER FORTIFIED BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MEETA GUTGUTIA 96 TAXM ANN.COM 468 WHEREIN IT WAS HELD AS UNDER: 8 57. THE QUESTION WHETHER UNEARTHING OF INCRIMINATI NG MATERIAL RELATING TO ANY ONE OF THE AYS COULD JUSTIFY THE RE -OPENING OF THE ASSESSMENT FOR ALL THE EARLIER AYS WAS CONSIDER ED BOTH IN CIT V. ANIL KUMAR BHATIA (SUPRA) AND CIT V. CHETAN DAS LACHMAN DAS (SUPRA). INCIDENTALLY, BOTH THESE DECISIONS WERE DISCUSSED THREADBARE IN THE DECISION OF THIS COURT IN KABUL CHAWLA (SUPRA). AS FAR AS CIT V. ANIL KUMAR BHATIA (SUPRA) WAS CONCERNED, THE COURT IN PARAGRAPH 24 OF THAT DECISI ON NOTED THAT 'WE ARE NOT CONCERNED WITH A CASE WHERE NO INC RIMINATING MATERIAL WAS FOUND DURING THE SEARCH CONDUCTED UNDE R SECTION 132 OF THE ACT. WE THEREFORE EXPRESS NO OPINION AS TO WHETHER SECTION 153A CAN BE INVOKED EVEN UNDER SUCH SITUATION'. THAT QUESTION WAS, THEREFORE, LEFT OPEN. AS FAR AS CIT V CHETAN DAS LACHMAN DAS (SUPRA) IS CONCERNED, IN PARA 11 OF THE DECISION IT WAS OBSERVED: '11. SECTION 153A (1) (B) PROVIDES FOR THE ASSESSME NT OR REASSESSMENT OF THE TOTAL INCOME OF THE SIX ASSESSM ENT YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE SEARCH TOOK PLACE. TO RE PEAT, THERE IS NO CONDITION IN THIS SECTION THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F THE SEARCH OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILA BLE WITH THE ASSESSING OFFICER WHICH CAN BE RELATED TO THE EVIDE NCE FOUND. THIS, HOWEVER, DOES NOT MEAN THAT THE ASSESSMENT UN DER SECTION 153A CAN BE ARBITRARY OR MADE WITHOUT ANY R ELEVANCE OR 9 NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESS MENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEI ZED MATERIAL.' 69. WHAT WEIGHED WITH THE COURT IN THE ABOVE DECISI ON WAS THE 'HABITUAL CONCEALING OF INCOME AND INDULGING IN CLA NDESTINE OPERATIONS' AND THAT A PERSON INDULGING IN SUCH ACT IVITIES 'CAN HARDLY BE ACCEPTED TO MAINTAIN METICULOUS BOOKS OR RECORDS FOR LONG.' THESE FACTORS ARE ABSENT IN THE PRESENT CASE . THERE WAS NO JUSTIFICATION AT ALL FOR THE AO TO PROCEED ON SU RMISES AND ESTIMATES WITHOUT THERE BEING ANY INCRIMINATING MAT ERIAL QUA THE AY FOR WHICH HE SOUGHT TO MAKE ADDITIONS OF FRANCHI SEE COMMISSION. 70. THE ABOVE DISTINGUISHING FACTORS IN DAYAWANTI G UPTA (SUPRA), THEREFORE, DO NOT DETRACT FROM THE SETTLED LEGAL PO SITION IN KABUL CHAWLA (SUPRA) WHICH HAS BEEN FOLLOWED NOT ON LY BY THIS COURT IN ITS SUBSEQUENT DECISIONS BUT ALSO BY SEVER AL OTHER HIGH COURTS. 71. FOR ALL OF THE AFOREMENTIONED REASONS, THE COUR T IS OF THE VIEW THAT THE ITAT WAS JUSTIFIED IN HOLDING THAT TH E INVOCATION OF SECTION 153A BY THE REVENUE FOR THE AYS 2000-01 TO 2003- 04 WAS WITHOUT ANY LEGAL BASIS AS THERE WAS NO INCR IMINATING MATERIAL QUA EACH OF THOSE AYS. 10 12. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY T HE HON'BLE HIGH COURT OF DELHI AND HON'BLE SUPREME COURT [SUPRA], W E ARE OF THE CONSIDERED VIEW THAT THE ASSESSMENT FRAMED U/S 153A OF THE ACT FOR BOTH THE ASSESSMENT YEARS UNDER APPEAL DESERVES TO BE SET ASIDE. WE, ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITIONS FROM BOTH THE ASSESSMENT YEARS. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE IN ITA NOS. 3783 & 3784/DEL/2016 ARE ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.12 .2019. SD/- SD/- [SUSHMA CHOWLA ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 RD DECEMBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 11 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER