Swapnil Rathi, Indore V. Deputy Commissioner of Income Tax 2 (1), Indore

ITA 413/Ind/2018

AI Insights

The case involves an appeal by Shri Swapnil Rathi against the order of the Commissioner of Income Tax (Appeals)-I, Indore, for the Assessment Year 2009-10. The primary issues in the appeal were the validity of the reopening of the assessment under Section 147 of the Income Tax Act and the addition of Rs. 7,43,53,000 as unexplained investment under Section 68. The assessee contended that the reopening should have been under Section 153C, given the context of seized material related to the KETI Group of companies. The Tribunal, referencing a Supreme Court judgment, upheld the reopening under Section 147 and 148. However, regarding the addition of the unexplained investment, the Tribunal found that the assessee should be given another opportunity to present his case, leading to the remand of this issue to the AO.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 130903 (ITAT-INDORE)
• Duration Of Justice: 5 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 23-05-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 03-05-2018
• Other Referred Cases: M/s. Flexituff International Ltd. vs. DCIT 3(1), Pr. CIT vs. Abhisar Buildwell Pvt. Ltd., CIT vs. Pukhraj Telecome Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Non compliance; Assessment record
• Section: 147; 68; 148; 132; 142(1); 153A; 143(2); 153C

Judgement Text

Page 1 of 7 आयकर अपील य अ धकरण, इंदौर यायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 413/Ind/2018 (Assessment Year:2009-10) Shri Swapnil Rathi, 17BF, Scheme No.74C, Vilay Nagar, Indore Vs. DCIT-2(1) Indore (Appellant / Assessee) (Respondent/ Revenue) PAN: AFWPR 6790 K Assessee by Shri Pankaj Shah & Soumya Bumb, ARs Revenue by Shri P.K. Mishra, CIT-DR Date of Hearing 24.05.2023 Date of Pronouncement 19.07.2023 O R D E R Per Vijay Pal Rao, JM: This appeal by the assessee is directed against the order dated 16.02.2018 of Commissioner of Income Tax(Appeal)-I, Indore, for Assessment Year 2009-10. The assessee has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Commissioner of Income tax (Appeals)-I ("CIT(A)") erred in confirming the action of AO in passing the order under Section 147 of the Act. 2. The Appellant prays that the said order being illegal and under assumption of invalid jurisdiction under Section 147 of the Act be directed to be quashed. ITA No.413/Ind/2018 Swapnil Rathi Page 2 of 7 Page 2 of 7 GROUND-IT: Addition under Section 68 1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the addition made by the learned AO under Section 68 amounting to Rs. 74353000 towards unexplained investment based on alleged dumb documents without any corroborating material on record. 2. The learned CIT(A) and AO failed to appreciate that there is no evidence of receipt or investment of impugned amount during the year therefore the addition is purely on guess and assumptions 3. The Appellant prays that the addition be directed to be deleted.” 2. Ground No.1 is regarding validity of reopening of the assessment. Ld. AR of the assessee has submitted that the AO has reopened the assessment by recording the reasons in para 2 of the assessment order which shows that assessment was reopened on the basis of the seized material in the case of KETI Group of companies and accordingly appropriate proceedings in the case of the assesse ought to have been u/s 153C of the Act and not u/s 147 of the Act. In support of his contention he has relied upon the decision of the Coordinate Bench of this tribunal dated 04.10.2021 in case of M/s. Flexituff International Ltd. vs. DCIT 3(1), CO No.38 to 41/Ind/2019 ( arising out of ITA No.448 & 451 to 453/Ind/2018). Thus, the Ld. AR has submitted that the provisions of section 153C will prevail over the provision of section 147 and therefore, once the department comes to the conclusion that such documents belong to the assesse, proceeding u/s 153C r.w.s. 153A of the Act ought to have been initiated instead of section 147 & 148 of the Act. Accordingly, the ld. AR has submitted that reassessment framed by the AO u/s 147 r.w.s. 143(3) is not valid and liable to be quashed. 3. On the other hand, ld. DR has submitted that the AO has rightly initiated the proceedings u/s 147 & 148 of the Act as in the opinion of the AO the conditions as provided u/s 153C are not satisfied in the case of the assesse. Even otherwise provisions of section 153C would not prohibit the proceedings of section 147 & 148 of the Act. Though once the proceedings u/s 153C are initiated then the provisions of section 147 & 148 would not ITA No.413/Ind/2018 Swapnil Rathi Page 3 of 7 Page 3 of 7 be applicable. In the case in hand the AO had reason to belief that income assessing to tax as escaped assessment as some entries in the seized material reveals this fact. He has relied upon the order of the authorities below. 4. We have considered the rival submissions as well as relevant material on record. Ld. AR of the assessee has relied upon the decision of the coordinate bench of this Tribunal in support of his contention that the proceedings initiated by the AO are based on the seized material found during the search and seizure action in the case of KETI group of company, ought to have been u/s 153C of the Act instead of section 147 of the Act. At the outset, we note that this issue is now covered by the judgment of Hon’ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell Pvt. Ltd. 149 taxman.com 399(SC) as under: “v) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.” ITA No.413/Ind/2018 Swapnil Rathi Page 4 of 7 Page 4 of 7 5. Accordingly in view of the judgment of Hon’ble Supreme Court we do not find any error or illegality in the initiation of proceedings u/s 147 & 148 of the Act. Thus, ground no.1 of the assessee’s appeal is dismissed. 6. Ground no.2 is regarding addition made by the AO based on the ledger account found during the search and seizure action in the case of KETI group of companies. The AO made addition of Rs.7,43,53,000/- on the basis of ledger account found during the search as well as statement of the assessee recorded during the search and seizure action wherein the assessee has admitted some of the transactions recorded in the sized material being ledger account in the books of KETI construction Limited wherein credit balance of Rs.7,43,53,000/- for the period of 01.04.2008 to 31.03.2012 was found in the name of the assessee. The AO passed ex- parte assessment order u/s 147 as the assessee did not respond to the the notices issued by the AO i.e. u/s 148, 142(1) and 144 of the Act. On appeal the Ld. CIT(A) confirmed the addition made by the AO. 7. Before the Tribunal Ld. AR of the assessee has submitted that addition is made on the basis of dump document which has no evidentiary value. He has further contended even the alleged entry of Rs.7,43,53,000/- on 01.04.2008 is opening balance and cannot be an income for A.Y.2009-10. In support of his contention he has relied upon the judgment of Hon’ble jurisdictional High Court dated 21.01.2016 in case of CIT vs. Pukhraj Telecome Pvt. Ltd. in ITANo.82/2015. 8. On the other hand, Ld. DR has submitted that the assessee has admitted some of the entries in the ledger account found in tally during the search and seizure action. Once the assessee has admitted a part of the seized material which is ledger account, he cannot be allowed to deny some of the transaction recorded in the ledger account. He has further submitted that there was no response by the assessee to the notices issued by the AO and therefore, it is clear that the assessee was nothing to say in respect of these entries in the ledger account found during the ITA No.413/Ind/2018 Swapnil Rathi Page 5 of 7 Page 5 of 7 search and seizure action. He has relied upon the orders of the authorities below. 9. In rejoinder Ld. AR of the assessee has submitted that there were two separate ledger accounts found during the search and seizure action and the assessee has denied the entries in the ledger account which contains this amount of Rs.7,43,53,000/- as the same does not relate to the assessee. 10. We have considered the rival submissions as well as relevant material on record. At the outset, we note that the AO has recorded the facts of issuance of various notices to the assessee as under: “3. Non compliance of assessee and notice u/s 144:- A Notice u's 148 was issued on 29.03.2016 asking assessee to filed retum of income within 30 days. Notice was served speed post. However, no response was received from the assessee. Therefore another notice was issued on 16.05.2016 giving assessee another opportunity to comply with the notice u/s 143 dated 29.03.2016. The date of hearing fixed on 23.05.2016, In response to this notice the assessee vide its letter dated 26.05.2016 filed in the dak of DCFT- 2(1), Indore has submitted reply and enclosed the copy of acknowledgment filed originally on 04.03.2010 with computation of income for the A.Y. 2009-10. 4. Third Opportunity: Notice u/s 142(1) was issued on 25.05.2016, giving assessee third and last opportunity to comply with the notice u/s 143 and copy of reason was also supplied to assessee via this notice asking into furnish explanation/submission w.r.t. the reason recorded. The notice was served through EMS speed post to the assessee and hearing fixed on 02.06.2016. However again no body attended the proceeding nor any reply no response was received from the assesses. Notice u/s 143(2) was issued on 17.10.2016. The date of hearing was fixed on 10.11.216. Then a notice u/s 144 was issued asking assessee that due to his non compliance of notice u's 142(1) dated 25.05.2016 especially for point no.2 and other notices, why the assessment should not be proceeded u/s 144 as per best judgment of assessing officer. The date of hearing was fixed or 23.11.2016. ITA No.413/Ind/2018 Swapnil Rathi Page 6 of 7 Page 6 of 7 However, again no reply was received and nobody attended the proceedings in response to notice u/s 144 dated 18.11.2016 5. Assessee has given no response to these notice and no reply and submission was filed till date. As per reason recorded by verification of seized materials it was found that in the books of accounts, there is an account which exists in the name of "Swapnil Ji" later which has been admitted by the assessee Shri Swapnil Rathi that entries in the account are related with him. There is another account namely "Swapnil Ji Loan" in which an amount of Rs. 7,43,53,000/- is being reflected as loan as on 01.04.2008 whereas no any further details are found in this regard in such account. Further on going through the return of income as filed by the assessee Shri Swapnil Rathi for the A.Y. 2009-10, in which he has declared total income of Rs. 2,99,800/- nowhere the details regarding aforesaid loan amounting to Rs. 7,43,53,000/- are found. So in view of above facts, it is very much apparent that this amount for Rs. 7,43,53,000/- is nothing but assessee's unaccounted income which has not been shown in his return of income. Assessee had admitted that the above mentioned entries were related to him in his statement recorded during search action.” 11. Thus, it is clear that despite the various notices issued by the AO there was no response on behalf of the assessee to any of the notices. Therefore, the AO passed the best judgement assessment based on the material available with him. The assessee pleaded before the CIT(A) that his CA has suffered heart attack in June 2016 and due to which the case could not be represented before the AO. Though the assessee has taken plea that amount recorded in the ledger account is opening balance however, nothing has been produced before us to substantiate this contention. Therefore, in the facts and circumstances of the case when the assessment order was passed ex-parte and assessee has explained reason as his CA has suffered heart attack we are of the considered opinion that ITA No.413/Ind/2018 Swapnil Rathi Page 7 of 7 Page 7 of 7 assessee be given one more opportunity to explain and produced relevant record for verification and examined before the AO. Accordingly, we set aside the impugned order qua this issue and remand this issue to the record of the AO for fresh adjudication after giving an appropriate opportunity of hearing to the assessee. The Assessment record produced before us be return to the DR. 12. In the result, appeal of assessee is partly allowed for statistical purposes. Order pronounced in the open court on 19.07.2023. Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore, 19 .07.2023 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore