B.R. MACHINE TOOLS P.LTD, MUMBAI V. ASST CIT CEN CIR 38, MUMBAI

ITA 4175/MUM/2013

• Counselvise Citation: 417519914 RSA 2013
• Duration Of Justice: 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 24-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A C TEJPAL
• Assessee Lawyers: VIJAY MEHTA; ANUJ KISHMADWALA
• Keywords: Search and seizure; Validity of assessment
• Section: 68; 132; 15; 143(3); 153A

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI . . , ! ' #'' '$ , % ! & BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 4174 4177 / / 2013 A.Y. 2004-05 2007-2008 ITAS NO. : 4174 TO 4177/MUM/2013 (ASSESSMENT YEARS: 2004-05 TO 2007-2008) B.R. MACHINE TOOLS PVT. LTD., 1 ST FLOOR, D-WING, OBEROI GARDEN ESTATE, CHANDIVALI FARMS ROAD, CHANDIVALI, ANDHERI (E), MUMBAI -400 072 PAN: AAACB 5836 C VS ASST. COMMISSIONER OF INCOME TAX, CC-38, AAYAKAR BHAVAN, GROUND FLOOR, M.K. ROAD, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA AND SHRI ANUJ KISHMADWALA RESPONDENT BY : SHRI A.C. TEJPAL /DATE OF HEARING : 27-09-2013 / DATE OF PRONOUNCEMENT : 06-12-2013 * O R D E R #'' '$ , : PER VIVEK VARMA, JM: THE APPEALS ARE FILED BY THE ASSESSEE AGAINST THE ORDER S OF CIT(A) 41, MUMBAI, DATED 03.04.2013. SINCE THE ISSUES IN THE CAPTIONED YEARS ARE IDENTICAL, WE ARE DISPOSING OFF THE APPE ALS BY PASSING A CONSOLIDATED ORDER, PERTAINING TO THE CAPTIONED ASSESSMENT YEARS FOR THE SAKE OF CONVENIENCE AND BREVITY. ASSESSME NT YEAR 2004- 05 BEING THE FIRST YEAR IN THE BUNCH OF APPEALS, WE ARE TA KING UP THIS APPEAL AS THE LEAD YEAR AND THE OTHER THREE YEARS ARE FOLLOWED AS PER THE DECISION TAKEN IN THE ITA NO. 4174/MUM/2013 IN ASSE SSMENT YEAR 2004-05. B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 2 ITA NO.: 4174 OF 2013, AY 2004-05; ASSESSEES APPEAL : 2. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL, WH ICH IN EFFECT ARE CONCISE GROUNDS IN SUBSTITUTION TO ORIGINAL GROU NDS NO. 1 TO 9. THE ADDITIONAL GROUNDS AS PER LETTER DATED 25.11.2013 A RE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN AFFIRMING THE ACTION OF THE AO IN MAKING T HE FOLLOWING ADDITIONS UNDER SEC. 143(3) R.W.S. 153C OF THE ACT IN ABSENCE OF ANY INCRIMINATING SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH A ND THE ADDITIONS ARE BAD IN LAW: A) RS. 3,85,393/- BEING OTHER INCOME IN ADDITION TO 5% OF THE SALES B) RS. 17,46,853/- BEING UNSECURED LOANS U/S 68 OF THE IT ACT, 1961 C) RS. 19,00,334/- BEING LONG TERM CAPITAL GAINS ON SALE OF LAND D) RS. 2,40,000/- BEING CAPITALIZATION OF BUILDING E) RS. 7,44,400/- BEING CAPITALIZATION OF PLANT AND MACHINERY F) RS. 5,63,033/- BEING EXPENDITURE OF CAPITAL WORK IN PROGRESS ON LAND. 3. THE ASSESSEE IS A COMPANY ENGAGED IN MANUFACTURE OF MACHINE TOOLS. THE SHARES OF THE COMPANY WERE TAKEN OVER BY M /S BOMBAY RAYON FASHIONS LTD. (BRFL), A DIVISION OF RAYNOLDS SHIRTING LIMIT ED (RSL) VIDE AGREEMENT DATED 02.04.2007, WHEREIN RSL PURCHA SED 99.75% SHARES OF THE ASSESSEE COMPANY. 4. THE FACTS EMANATING FROM THE ASSESSMENT ORDER ARE T HAT THERE WAS A SEARCH AND SEIZURE OPERATION ON THE PREMISES OF B OMBAY RAYON FASHIONS LIMITED AND ITS DIRECTORS ON 12.08.2009. 5. SINCE THE SEARCH AND SEIZURE OPERATIONS WERE NOT CA RRIED ON THE ASSESSEE, THE AO EXERCISING JURISDICTION OVER THE ASSESSE E INITIATED PROCEEDINGS U/S 153C AND ISSUED NOTICES. THE ASSESSEE FILE D RETURN IN RESPONSE TO THE NOTICES AT THE INCOME FIGURE, WHICH WAS FILE D U/S 139(1). 6. AFTER DELIBERATIONS, THE ASSESSMENT WAS FRAMED U/S 143(3 ) READ WITH 153C ON 29.12.2011, WHEREIN THE AO MADE ADDITIONS/DISALLOWANCE, AS MENTIONED IN THE GOA. THE CIT(A) ALS O B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 3 SUSTAINED THE ADDITION MADE BY THE AO. IT IS SEEN FROM T HE GOA BEFORE THE CIT(A), THE ASSESSEE RAISED THE ISSUE OF VALIDITY OF ASSE SSMENT FRAMED U/S 143(3) READ WITH 153C. 7. THE CIT(A) IN HIS ORDER CONSIDERED THE ARGUMENTS OF TH E ASSESSEE WITH REGARD TO THE VALIDITY OF ASSESSMENT AND HELD, THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE HONBLE SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF ALL CAR GO GLOBAL LOGISTICS LTD. VS. DCIT (ITA NOS. 5018 TO 5022 & 5029/MUM/10) TO CONTE ND THAT IN THE ABSENCE OF ANY INCRIMINATING DOCUMENT, THE ISSUANCE OF NOTI CE U/S. 153C ITSELF WAS BAD IN LAW AND THE AO DID NOT GET ANY JURISDICTION AS T HERE WAS NO SEIZED MATERIAL. THE ASSESSEE HAS, HOWEVER, BEEN FAIR ENOUGH TO SUBM IT THAT IT WAS AWARE OF THE LATEST JUDGMENT POST THE ABOVE DECISION OF THE HONBLE SPECIAL BENCH DELIVERED BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. ANIL KUMAR BHATIA WHICH WAS CONTRARY TO THE FINDINGS IN THE JU DGMENT OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). 2.2 I HAVE CONSIDERED THE CONTENTIONS OF THE ASSES SEE. I FIND THAT SEARCH AND SEIZURE ACTION U/S. 132 OF THE LT. ACT, 1961 WA S CARRIED OUT IN THE CASE OF M/S. BOMBAY RAYON FASHIONS LTD. AND THE ASSOCIATED PERSONS OF THE GROUP. IN THE COURSE OF THE SEARCH, IT WAS FOUND, THAT THE AS SESSEE HAD EARNED LONG TERM CAPITAL GAINS FOR THE ASSESSMENT YEAR 2008-09 WHICH HAD NOT BEEN DISCLOSED BY IT AS NO RETURN OF INCOME WAS FILED. THE DOCUMEN TS RELATING TO THE TRANSACTIONS LEADING TO THE UNEARTHING OF THE ABOVE FACTS AND BELONGING TO THE COMPANY WERE SEIZED FROM THE PREMISES OF M/S. BOMBA Y RAYON FASHIONS LTD. THEREAFTER, NOTICE U/S. 153C WAS ISSUED TO THE ASSE SSEE AFTER RECORDING REASONS FOR THE SAME. THE RELIANCE PLACED BY THE AS SESSEE ON THE DECISION OF THE HONBLE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA), CANNOT BE ACCEPTED IN VIEW OF THE DECISION OF THE H ONBLE HIGH COURT OF ANDHRA PRADESH IN THE CASE OF GOPAL LAL BHADRUKA VS. DY. C OMMISSIONER OF INCOME-TAX REPORTED IN (2012) 346 ITR 106 (AP) IN WHICH IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT FOR THE PURPOSES OF SECTION 153A/15 3C, AO CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABL E DURING SEARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF UNDIS CLOSED INCOME OF ASSESSEE. IN THE CASE OF THE SAID ASSESSEE, THE HONBLE ITAT HYDERABAD BENCH A, HYDERABAD IN ITA NOS. 354 TO 357/HYD/2010 DATED 26. 11.2010, WHILE DECIDING THE FIRST CONTENTION OF THE LD. AR OF THE ASSESSEE THAT FOR THE PURPOSE OF COMPUTING THE INCOME U/S. 153A/153C OF THE I.T. ACT, THE ASSESSING OFFICER HAD TO CONFINE ONLY TO THE INCRIMINATING MATERIAL F OUND DURING THE COURSE OF SEARCH OPERATION HELD AS FOLLOWS :- IN OTHER WORDS, THE ASSESSING OFFICER IS NOT REQUIR ED TO CONFINE HIMSELF TO THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPERATIO N OR THE IN FORMATION WHICH IS RELATABLE TO THE SEARCH MATERIAL. IN OUR OPINION , THE ASSESSING OFFICER IS WELL WITHIN HIS POWERS TO COMPUTE THE TAXABLE INCOME ON THE BASIS OF THE MATERIAL ON RECORD EVEN THOUGH SUCH MATERIAL WAS NOT FOUND DURI NG THE COURSE OF SEARCH OPERATION. IN VIEW OF THE ABOVE, WE ARE UNABLE TO F IND ANY MERIT IN THE CONTENTION OF THE ASSESSEE THAT THE INCOME UNDER SE CTION 153A/153C HAS TO BE COMPUTED ONLY ON THE BASIS OF THE MATERIAL FOUND DU RING THE COURSE OF SEARCH OPERATION. IN OTHER WORDS, IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO CONFINE HIMSELF ONLY TO THE MATERIAL FOUND DURING T HE COURSE OF SEARCH OPERATION. THE ASSESSING OFFICER CAN ALSO PLACE RELIANCE ON AL L MATERIAL AVAILABLE EVEN THOUGH IT IS NOT FOUND DURING THE COURSE OF SEARCH OPERATIONS 2.3 IN THE APPEAL FILED BY THE APPELLANT IN THAT C ASE TO THE HONBLE ANDHRA PRADESH HIGH COURT, THE HONBLE HIGH COURT, IN PARA 17 OF ITS JUDGMENT UPHELD THE DECISION OF THE HONBLE HYDERABAD TRIBUNAL BY H OLDING AS FOLLOWS :- B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 4 17. BY VIRTUE OF SECTION 158B1 OF THE ACT, THE VA RIOUS PROVISIONS OF CHAPTER XIV-B OF THE ACT ARE MADE INAPPLICABLE TO PROCEEDIN GS UNDER SECTIONS 153A/153C OF THE ACT. THE EFFECT OF THIS IS THAT WH ILE THE PROVISIONS OF CHAPTER XIV-B OF THE ACT LIMIT THE INQUIRY BY THE A SSESSING OFFICER TO THOSE MATERIAL FOUND DURING THE SEARCH AND SEIZURE OPERATION, NO SUCH LIMITATION IS FOUND IN SO FAR AS SECTIONS 153A/153C OF THE ACT ARE CONCERNED. THEREFORE, IT FOLLOWS THAT FOR THE PURPO SES OF SECTIONS 153A/153C OF THE ACT THE ASSESSING OFFICER CAN TAKE INTO CONSIDERATION MATERIAL OTHER THAN WHAT WAS AVAILABLE DURING THE S EARCH AND SEIZURE OPERATION FOR MAKING AN ASSESSMENT OF THE UNDISCLOS ED INCOME OF THE ASSESSEE 2.4 TO MY KNOWLEDGE, THIS IS THE ONLY DECISION OF AN HONBLE HIGH COURT ON IDENTICAL ISSUE. THIS DECISION, BEING A DECISION OF A HIGH COURT, WILL BE REQUIRED TO BE FOLLOWED IN PREFERENCE TO THE DECISI ON OF THE SPECIAL BENCH OF THE HONBLE TRIBUNAL ON IDENTICAL ISSUE. IT IS A LSO IMPORTANT TO NOTE THAT THE HONBLE SPECIAL BENCH HAS NOT TAKEN INTO N OTE THE ABOVE DECISION OF THE HONBLE ANDHRA PRADESH HIGH COURT, POSSIBLY DUE TO THE REASON THAT THE SAID JUDGMENT WAS NOT BROUGHT TO IT S KIND NOTICE IN THE COURSE OF THE HEARING. IT IS WELL ESTABLISHED THAT THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHER WISDOM OF THE COUR T ABOVE. IN THE CASE OF PIYUSH C. MEHTA VS. THE ACIT 25(3), MUMBAI IN IT A NO. 1321/MUM/2009 DATED 11.04.20 12, IT HAS BEEN HELD B Y THE HONBLE MUMBAI TRIBUNAL AS FOLLOWS :- 18. THE QUESTION NOW IS AS TO WHETHER TO FOLLOW T HE DECISION OF THE HONBLE SPECIAL BENCH WHICH HAS TAKEN THE VIEW THAT AMENDME NT BY THE FINANCE ACT, 2010 TO THE PROVISIONS OF SEC. 40(A)(I A) OF THE ACT IS RETROSPECTIVE AND NOT RETROSPECTIVE FROM 1.4.2005 O R THE DECISION OF THE HONBLE CALCUTTA HIGH COURT TAKING A CONTRARY VIEW. ON THE ABOVE QUESTION, THE LEARNED COUNSEL FOR THE ASSESSEE BROU GHT TO OUR NOTICE THE DECISION OF THE ITAT DELHI IN THE CASE OF TEJ INTER NATIONAL (P) LTD. V. DY. CIT, (2000) 69 ITD 777 (DEL) 650, WHEREIN IT WAS HE LD THAT IN THE HIERARCHICAL JUDICIAL SYSTEM THAT WE HAVE IN INDIA, THE WISDOM OF THE COURT BELOW HAS TO YIELD TO THE HIGHER WISDOM OF TH E COURT ABOVE, AND THEREFORE, ONCE AN AUTHORITY HIGHER THAN THIS TRIBU NAL HAS EXPRESSED ITS ESTEEMED VIEWS ON A AN ISSUE, NORMALLY, THE DECISIO N OF THE HIGHER JUDICIAL AUTHORITY IS TO BE FOLLOWED. THE BENCH HAS FURTHER HELD THAT THE FACT THAT THE JUDGMENT OF THE HIGHER JUDICIAL FORUM IS FROM A NON JURISDICTIONAL HIGH COURT DOES NOT REALLY ALTER THI S POSITION,, AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V. GODAVARIDEVI SARAF 113 ITR 589(BOM) 2.5 IN THE CASE OF RAJAMAHENDRI SHIPPING & OIL FIE LD SERVICES LTD., IN ITA 352/VIZAG/2008 DATED 13.04.2012, THE HONBLE TRIBUN AL HAS HELD AS FOLLOWS: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE RECORD. WE FIND THAT THE HONBLE CALCUTTA HIGH COURT IN THE CA SE OF VIRGIN CREASIONS, (SUPRA), HAS PASSED A REASONED ORDER IN HOLDING THAT THE AMENDMENT BROUGHT OUT IN SEC. 40(A)(IA) IS RETROSPE CTIVE IN NATURE. THE BINDING NATURE OF THE DECISION OF SPECIAL BENCH WHE N A LONE DECISION OF NON-JURISDICTIONAL HIGH COURT IS AVAILABLE ON THE V ERY SAME ISSUE WAS EXAMINED IN THE THIRD MEMBER DECISION OF AHMEDABAD BENCH IN THE CASE OF KANEL OIL & EXPORT INDS. LTD (121 ITD 596). FOR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE RELEVANT OBSERVAT IONS MADE BY THE THIRD MEMBER: - 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS PRESENTE D BEFORE ME BY BOTH THE SIDES. IT ALL BOILS DOWN TO THIS, VIZ., WHETHER THE ORDER OF THE SPECIAL BENCH UPHOLDING THE LEVY OF INTEREST IN LIGHT OF SU B-SECTION (4) OF SECTION 115JA SHOULD BE FOLLOWED OR THE JUDGMENT OF THE BOM BAY HIGH COURT IN SNOWCEM INDIA LTD.S CASE (SUPRA), ALSO RENDERED I N THE CONTEXT OF B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 5 SECTION 115JA, HAS TO BE APPLIED. BOTH THE DECISION S ARE UNDER SECTION 115JA WITH WHICH WE ARE CONCERNED. ONE IS OF A SPEC IAL BENCH OF THE TRIBUNAL, AHMEDABAD AND THE OTHER IS OF A HIGH COUR T, THOUGH NOT THE JURISDICTIONAL HIGH COURT. A SIMPLE ANSWER WOULD BE THAT THE JUDGMENT OF A HIGH COURT, THOUGH NOT OF THE JURISDICTIONAL H IGH COURT, PREVAILS OVER AN ORDER OF THE SPECIAL BENCH EVEN THOUGH IT I S FROM THE JURISDICTIONAL BENCH (OF THE TRIBUNAL) ON THE BASIS OF THE VIEW THAT THE HIGH COURT IS ABOVE THE TRIBUNAL IN THE JUDICIAL HI ERARCHY. BUT THIS SIMPLE VIEW IS SUBJECT TO SOME EXCEPTIONS. IT CAN W ORK EFFICIENTLY WHEN THERE IS ONLY ONE JUDGMENT OF A HIGH COURT ON THE I SSUE AND NO CONTRARY VIEW HAS BEEN EXPRESSED BY ANY OTHER HIGH COURT. BU T WHEN THERE ARE SEVERAL DECISIONS OF NON-JURISDICTIONAL HIGH COURTS EXPRESSING CONTRARY VIEWS, IT HAS BEEN RECOGNIZED THAT THE TRIBUNAL IS FREE TO CHOOSE TO ADOPT THAT VIEW WHICH APPEALS TO IT. IN KISHIROOP CHEMICA LS CO. (P.) LTD. V. ITO (1991) 36 ITD 35(SB) (DELHI), IT WAS HELD BY THE SP ECIAL BENCH, DELHI THAT IF THERE WERE CONFLICTING DECISIONS OF THE HI GH COURTS, OTHER THAN THE JURISDICTIONAL HIGH COURT, THE BENCHES OF THE T RIBUNAL WERE FREE TO ADOPT THE VIEW WHICH TO THE BENCHES APPEAR TO BE BE TTER AND THAT IN CERTAIN CIRCUMSTANCES THE VIEW WHICH WAS FAVOURABLE TO THE TAXPAYER SHOULD BE ADOPTED. 8. THERE IS NO DISPUTE THAT THE DECISION RENDERED BY THE HONBLE CALCUTTA HIGH COURT IS THE LONE DECISION AVAILABLE ON THE IS SUE UNDER CONSIDERATION AS ON DATE. ACCORDINGLY, WE ARE INCLI NED TO FOLLOW THE SAME IN THE INSTANT CASE IN PREFERENCE TO THE DECIS ION RENDERED BY THE SPECIAL BENCH OF ITAT IN THE CASE OF BHARTI SHIPYAR D LTD, REFERRED (SUPRA). ACCORDINGLY, BY FOLLOWING THE DECISION OF HONBLE CALCUTTA HIGH COURT, WE HOLD THAT THE ASSESSEE HEREIN IS ENTITLED TO CLAIM DEDUCTION OF EXPENSES IF THE TDS DEDUCTED THERE ON IS REMITTED B EFORE THE DUE DATE FOR FILING THE RETURN OF INCOME 2.6 IN VIEW OF THE JUDGMENT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BHADRUKA (SUPRA), NO FAULT CA N BE FOUND WITH THE ACTION OF THE ASSESSING OFFICER OF CALLING FOR THE RETURNS OF THE ASSESSEE AS PROVIDED IN SECTION 153C OF THE I. T. ACT, 1961 AND COMPLETING THE ASSESSMENT DETERMINING THE TOTAL INCOME OF THE ASSE SSEE. I ALSO FIND THAT IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. , THE HONBLE SPECIAL BENCH OF THE MUMBAI TRIBUNAL HAS, IN PARA 48 OF ITS ORDER, HELD AS FOLLOWS :- THE PROVISION UNDER SECTION 153A IS APPLICABLE WHE RE A SEARCH OR REQUISITION IS INITIATED AFTER 31.05.2003. IN SUCH A CASE THE AO IS OBLIGED TO ISSUE NOTICE U/S. 153A IN RESPECT OF 6 P RECEDING YEARS, PRECEDING THE YEAR IN WHICH SEARCH ETC. HAS BEEN IN ITIATED. THEREAFTER HE HAS TO ASSESS OR REASSESS THE TOTAL INCOME OF TH ESE SIX YEARS. IT IS OBLIGATORY ON THE PART OF THE AO TO ASSESS OR REASS ESS TOTAL INCOME OF THE SIX YEARS AS PROVIDED IN SECTION 153A(1)(B) AND REITERATED IN THE 1ST PROVISO TO THIS SECTION IN VIEW OF THE PROVISIONS OF SECTION 153A AND THE D ECISION OF THE HONBLE SPECIAL BENCH IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD . AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA, THE ACTION OF THE ASSESSING OFFICER OF INITIATING PROCEEDINGS U/S. 15 3A OF THE I.T. ACT, 1961 IS AS PER LAW. GROUND NO. 1 OF THE APPEAL FILED BY THE AS SESSEE IS DISMISSED. 8. THE CIT(A), THEREFORE, DISMISSED THE LEGAL GROUND AND PRO CEEDED WITH THE GROUNDS ON MERITS. B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 6 9. SINCE THE GROUND OF APPEAL BEFORE THE ITAT, BEING DELIB ERATED HEREIN, PERTAINS TO LEGALITY AS WELL, WE, TAKE UP THE LEGAL ISS UE FIRST, BEFORE MOVING TO THE MERITS OF THE ADDITIONS MADE BY THE AO AND SUSTAINED BY THE CIT(A). 10. BEFORE THE REVENUE AUTHORITIES AND BEFORE US, THE AS SESSEE/AR PLEADED THAT ASSESSMENT UNDER CHAPTER XIV CAN ONLY B E MADE, IF THERE ARE ANY INCRIMINATING MATERIAL FOUND IN THE SEARCH, POINTING O UT CERTAIN INCOME, NOT DISCLOSED BEFORE THE REVENUE AUTHORITIE S. THE AR SUBMITTED THAT IN CASE OF THE ASSESSEE, THE ASSESSMENT FOR ASSESSMENT YEAR 2004-05 TO 2007-08 WERE FRAMED U/S 143(1) AND ON THE DATE OF SEARCH, I.E. 12.08.2009, NEITHER ANY NOTICE FOR REOPENING WAS THERE NOR ANY NOTICE TO VALIDATE THE ASSESSMENT PROCEEDINGS WAS IS SUED BY THE DEPARTMENT AND HENCE, THE SAME WERE COMPLETED AND FINALIZ ED AND HENCE THE ASSESSMENT FOR ASSESSMENT YEAR 2004-05 TO 2007-08 CANNOT BE REVIVED. BEFORE US, THE AR ACCEPTED THAT IN SO FAR AS APPLICABILITY OF CHAPTER XIV IS CONCERNED, THERE WOULD BE NO HINDRANCE. T HE AR FURTHER SUBMITTED THAT IN VIEW OF THE SPECIAL BENCH DECISIO N IN ALL CARGO GLOBAL LOGISTICS LTD. VS DCIT, ITAS NO. 5018 TO 5022/MUM/2010, NO ADDITION COULD BE MADE UNTIL AND UNLESS THERE ARE ANY INCRIMINATING MATERIAL. THE AR, TO DEFEND HIS ARGUMEN TS, RELIED ON A NUMBER OF DECISIONS. 11. THE AR SUBMITTED THAT JUST FOR THE SAKE OF MAKING A DDITIONS, THE AO CANNOT BE ALLOWED TO DO ROVING AND FISHING ENQUIRIES AND IT WAS EMPHATICALLY SUBMITTED THAT TO MAKE THE ADDITION, THE STA RTING POINT HAS TO BE INCRIMINATING MATERIAL. 12. ON THE BASIS OF HIS ARGUMENTS AND THE DECISIONS RELIED UPON, THE AR FINALLY CONCLUDED THAT SINCE THERE WAS NO INCRIMINATING M ATERIAL FOUND IN THE COURSE OF SEARCH ON THE NEW MANAGEMENT, AG AINST THE ASSESSEE, THE INITIATION OF PROCEEDINGS U/S 153C AGAINST TH E ASSESSEE, BASED ONLY ON THE NOTINGS AND RESULTS ARISING FROM THE B ALANCE SHEET B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 7 OF THE NEW MANAGEMENT, THE ADDITIONS MADE/DISALLOWANCE WER E LEGALLY INCORRECT. 13. THE DR IN RESPONSE TO THE SUBMISSIONS MADE BY AR, S UBMITTED THAT THE AO DID NOT DO ANY ROVING OR FISHING ENQUIRIES AND THE ADDITION HAVE BEEN BASED ON INCRIMINATING MATERIAL. THE DR PLACED RE LIANCE ON THE DECISION OF ITAT MUMBAI BENCH DECISION IN THE CASE OF A CIT VS PRATIBHA INDUSTRIES LTD., REPORTED IN 141 ITD 151 (MUM). H E ALSO SUBMITTED THAT INTIMATION U/S 143(1) CANNOT BE CONSTRUED TO BE ASSESSMENT AS IT DOES NOT FALL IN THE DEFINITION OF ASSESSMENT. 14. THE DR, THEREFORE, SUBMITTED THAT THE AO HAD CORRE CTLY INITIATED THE PROCEEDINGS AND HAD CORRECTLY MADE THE ADDITION. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND HAVE ALSO PERUSED THE XEROX COPIES OF PANCHNAMA AND OTHER DOCUMENTS RELIE D UPON BY THE AO, AS PLACED BEFORE US. 16. TO INVOKE THE JURISDICTION FOR ASSESSMENT IN CASE OF SEARCH OR REQUISITION THERE ARE TWO ASPECTS, THE SEARCHED PERSON ON WHOM NOTICE U/S 153A SHALL BE SERVED AND AS A CONSEQUENCE OF WHICH ASSESSMENT U/S 143(3)/153A SHALL BE MADE. THE OTHER ASPECT IS THAT IN THE COURSE OF SEARCH IF CERTAIN DOCUMENTS ARE FOUND, WHICH WOULD PERTA IN TO A THIRD PERSON, IN SUCH A SITUATION, THE AO HAVING JURISDICTION OVER THE SEARCHED PERSON SHALL RECORD REASONS AND HAND OVER TH E MATERIAL TO THE AO HAVING JURISDICTION OVER THE THIRD PERSON. IN THAT CASE, THE AO HAVING JURISDICTION OVER THE PERSON OTHER THEN THE PERS ON SEARCHED, SHALL INITIATE THE PROCEEDINGS BY THE ISSUE OF NOTICE U/S 15 3C. THE INSTANT CASE PERTAINS TO THIS ASPECT, I.E. PROCEEDINGS U/S 153C. 17. AS OBSERVED ABOVE, IN THE TWO ASPECTS, THERE ARE TWO DIFFERENT CIRCUMSTANCES AND STARTING POINTS, I.E. U/S 153A, THE START ING POINT IS SEARCH OR REQUISITION AND STARTING POINT FOR INITIATION OF PRO CEEDINGS U/S 153C, IS THE DISCOVERY OF INCOME FROM INCRIMINATING MATER IAL B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 8 PERTAINING TO THIRD PERSON, FOUND FROM THE PERSON SEARCHE D. ONCE THE AO IS SATISFIED ON DISCOVERY OF INCRIMINATING MATERIAL PERTAININ G TO THE THIRD PERSON, THE AO CAN PROCEED TO INITIATE PROCEEDINGS U/S 153C AND ACCORDINGLY, FRAME THE ASSESSMENT. 18. WHEN WE EXAMINE THE RELEVANT PROVISIONS OF LAW, THREE ASPECTS COME TO LIGHT: A) ISSUE OF NOTICE ON THE PERSON SEARCHED OR THE CORRE CTED PERSON B) FRAME AS ASSESSMENT ON THE ASSESSMENT YEAR WHICH IS PENDING ON THE DATE OF SEARCH C) ALL PROCEEDINGS WHICH ARE PENDING ON SUCH DATE SHALL ABATE. 19. IN THE CASE BEFORE US, SEARCH TOOK PLACE ON THE NE W MANAGEMENT AND ADMITTEDLY NO DOCUMENT AS SUCH WAS FOUND WHICH INDI CATED THAT THERE WAS CERTAIN INCOME BELONGING TO THE ASSESSEE, WHIC H HAD NOT BEEN DISCLOSED TO THE DEPARTMENT IN THE IMPUGNED ASSESS MENT YEARS. SINCE THE SEARCH WAS ON THE NEW MANAGEMENT, THE ASSE SSEE COMPANY BECAME THE PERSON OTHER THEN THE PERSON SEARCHED. IN THESE CIRCUMSTANCES, ISSUE OF NOTICE U/S 153C AND ASSESSMENT T O BE FRAMED UNDER THIS PROVISION IS IMPERATIVE, AS THE PROVISION IS NON OBSTANTE . IN THESE CIRCUMSTANCES, THE FOLLOWING HAVE TO BE TAKEN INTO C ONSIDERATION ARE A) WHETHER THERE IS ANY INCRIMINATING MATERIAL, INDICAT ING INCOME NOT DECLARED BEFORE THE REVENUE AUTHORITIES AND B) WHETHER THE ASSESSMENT IN ANY ASSESSMENT YEARS O R ANY ASSESSMENT YEAR IN WHICH NOTICE U/S 153C IS PENDING . IF THE ANSWER TO BOTH THESE QUESTIONS ARE IN THE NEGATI VE THEN THE ASSESSMENT TO BE FRAMED SHALL BE AS PER THE RATIO LAID DOWN IN THE CASE OF SPECIAL BENCH DECISION IN THE ALL CARGO AND DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA. 20. IT WOULD BE WORTH MENTIONING THAT EVEN IN THE CASE OF PRATIBHA INDUSTRIES (SUPRA) , AS QUOTED BY THE DR, THE RATIO LAID DOWN IS THE VALIDITY OF ISSUE OF NOTICE U/S 153A AND ASSESSMENT TO BE FRAMED U/S 143(3)/153A BUT IT HAS ALSO BEEN SPECIFIED THEREIN, THAT IF T HERE IS NO INCRIMINATING MATERIAL FOUND THE ASSESSMENT TO BE FRAMED SH ALL BE AT THE FIGURE WHICH STANDS FINALIZED. THIS DECISION CANNOT AID TH E DR, B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 9 BECAUSE, THE DECISION IS ON THE ISSUE OF FRAMING OF THE ASS ESSMENT UNDER SECTION 143(3)/153A, WHICH HAS BEEN ACCEPTED BY TH E AR. THE DECISION IN PRATIBHA INDUSTRIES, WAS ON THE ISSUE WHETHER THE ASSESSMENT FRAMED U/S 143(3)/153C IS LEGALLY CORRECT, IN C ASE, THERE IS NO INCRIMINATING MATERIAL AGAINST THE ASSESSEE. 21. SINCE THERE IS NO MATERIAL INDICATING INCOME NOT FORMING PART OF THE REGULAR ASSESSMENT, NO FURTHER ADDITION CAN BE MADE , AS HELD IN THE CASE OF PRATIBHA INDUSTRIES, THE ASSESSMENT UNDER S ECTION 143(3)/153C SHALL BE INCOME ASSESSED ORIGINALLY + ZERO = IN COME ASSESSED NOW. IN ANY CASE, SINCE THE ASSESSMENT HAS BEEN FINALIZED, 2 ND PROVISO, REGARDING ABATEMENT OF PROCEEDINGS, SHALL NOT BE TRIGGERED AS THERE IS NOTHING WHICH IS PENDING. 22. IN THESE CIRCUMSTANCES, WE HOLD THAT THE ADDITIONS M ADE U/S 153C ARE SUSTAINABLE. AS THERE ARE NO INDICATIONS OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SEARCH TO BE USED AGAINST THE ASSESSEE, THE SAME ARE DELETED, AS PER OUR OBSERVA TIONS IN PARA 21 ABOVE. 23. ON BOTH THE COUNTS, I.E. ON LEGALITY AS WELL AS ON MERITS , THE CASE DEVELOPED BY THE DEPARTMENT CANNOT BE SUSTAINED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.: 4175 OF 2013, AY 2005-06; ASSESSEES APPEAL : 25. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL, WH ICH ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN AFFIRMING THE ACTION OF THE AO IN MAKING THE FOLLOWING AD DITIONS UNDER SEC. 143(3) R.W.S. 153C OF THE ACT IN ABSENCE OF ANY INCRIM INATING SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND THE ADDITIONS A RE BAD IN LAW: A) RS. 4,53,382/- BEING OTHER INCOME IN ADDITION TO 5% OF THE SALES B) RS. 42,94,452/- BEING CAPITALIZATION OF BUILDING. 26. THE ABOVE ADDITIONAL GROUNDS ARE, IN EFFECT THE CONCISE GROUNDS OF APPEAL. SINCE THE BASIS OF ADDITIONAL GROUNDS HAS ALREADY BEEN B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 10 DECIDED BY US IN ITA NO. 4174/MUM/2013, WE SHALL FOLLOW THE SAME ORDER AND HOLD THAT THE ADDITIONS MADE U/S 153C ARE SU STAINABLE. AS THERE ARE NO INDICATIONS OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SEARCH TO BE USED AGAINST THE AS SESSEE, THE SAME ARE DELETED, AS PER OUR OBSERVATIONS IN PARA 21 ABOVE. 27. ON BOTH THE COUNTS, I.E. ON LEGALITY AS WELL AS ON MERITS , THE CASE DEVELOPED BY THE DEPARTMENT CANNOT BE SUSTAINED. 28. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.: 4176 OF 2013, AY 2006-07; ASSESSEES APPEAL : 28. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL, WH ICH ARE AS FOLLOWS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN AFFIRMING THE ACTION OF THE AO IN MAKING THE FO LLOWING ADDITIONS UNDER SEC. 143(3) R.W.S. 153C OF THE ACT IN ABSENCE OF ANY INCRIMINATING SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND THE AD DITIONS ARE BAD IN LAW: A) RS. 5,71,877/- BEING OTHER INCOME IN ADDITION TO 5% OF THE SALES B) RS. 8,32,973/- BEING CAPITALIZATION OF LAND 29. THE ABOVE ADDITIONAL GROUNDS ARE, IN EFFECT THE CONCISE GROUNDS OF APPEAL. SINCE THE BASIS OF ADDITIONAL GROUNDS HAS ALREADY BEEN DECIDED BY US IN ITA NO. 4174/MUM/2013, WE SHALL FOLLOW THE SAME ORDER AND HOLD THAT THE ADDITIONS MADE U/S 153C ARE SU STAINABLE. AS THERE ARE NO INDICATIONS OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SEARCH TO BE USED AGAINST THE AS SESSEE, THE SAME ARE DELETED, AS PER OUR OBSERVATIONS IN PARA 21 ABOVE. 23. ON BOTH THE COUNTS, I.E. ON LEGALITY AS WELL AS ON MERITS , THE CASE DEVELOPED BY THE DEPARTMENT CANNOT BE SUSTAINED. 24. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO.: 4177 OF 2013, AY 2007-08; ASSESSEES APPEAL : 31. THE ASSESSEE HAS FILED ADDITIONAL GROUNDS OF APPEAL, WH ICH ARE AS FOLLOWS: B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 11 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN AFFIRMING THE ACTION OF THE AO IN MAKING THE FO LLOWING ADDITIONS UNDER SEC. 143(3) R.W.S. 153C OF THE ACT IN ABSENCE OF ANY INCRIMINATING SEIZED MATERIAL FOUND DURING THE COURSE OF SEARCH AND THE AD DITIONS ARE BAD IN LAW: A) RS. 8,08,059/- BEING OTHER INCOME IN ADDITION TO 5% OF THE SALES B) RS. 5,25,981/- BEING PROFIT ON SALE OF ASSETS AS SHORT TERM CAPITAL GAINS C) RS. 83,90,796/- BEING EXPENDITURE OF CAPITAL WORK IN P ROGRESS ON LAND. D) RS. 10,42,492/- BEING CAPITALIZATION OF LAND. 32. THE ABOVE ADDITIONAL GROUNDS ARE, IN EFFECT THE CONCISE GROUNDS OF APPEAL. SINCE THE BASIS OF ADDITIONAL GROUNDS HAS ALREADY BEEN DECIDED BY US IN ITA NO. 4174/MUM/2013, WE SHALL FOLLOW THE SAME ORDER AND HOLD THAT THE ADDITIONS MADE U/S 153C ARE SU STAINABLE. AS THERE ARE NO INDICATIONS OF ANY INCRIMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SEARCH TO BE USED AGAINST THE AS SESSEE, THE SAME ARE DELETED, AS PER OUR OBSERVATIONS IN PARA 21 ABOVE. 33. ON BOTH THE COUNTS, I.E. ON LEGALITY AS WELL AS ON MERITS , THE CASE DEVELOPED BY THE DEPARTMENT CANNOT BE SUSTAINED. 34. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED. TO SUM -UP: ITA NO.: 4174 OF 2013, AY 2005-06; ASSESSEES APPEAL IS ALLOWED ITA NO.: 4175 OF 2013, AY 2005-06; ASSESSEES APPEAL IS ALLOWED ITA NO.: 4176 OF 2013, AY 2005-06; ASSESSEES APPEAL IS ALLOWED ITA NO.: 4177 OF 2013, AY 2005-06; ASSESSEES APPEAL IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DECEMBER, 2013. SD/- SD/- ( . . ) ( #'' '$ ) ! ! (P.M. JAGTAP) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 6 TH DECEMBER, 2013 B.R. MACHINE TOOLS PVT LTD ITAS 7174 TO 7177/MUM/2013 12 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) ' '# ( ) - 4 MUMBAI / THE CIT (A)-4, MUMBAI. 4) ' '# C-III, MUMBAI / THE CIT C-III, MUMBAI, 5) % &' ( , ' ( , )*+ / THE D.R. C BENCH, MUMBAI. 6) ', - COPY TO GUARD FILE. './ / BY ORDER / / TRUE COPY / / [ 0 / 1 *2 ' ( , )*+ DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *451 . . * CHAVAN, SR. PS