ACIT, New Delhi V. Sh. Sharuk Passi, New Delhi

ITA 4290/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5681 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 03-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Search and seizure; Set aside
• Section: 153A; 14A; 153; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI G BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NOS. 4286 TO 4291/DEL/2016 [ASSESSMENT YEAR: 2006-07 TO 2011-12] THE A.C.I.T. VS. SHRI SHARUK PASSI CENTRAL CIRCLE 08 15, SUNDER NAGAR NEW DELHI NEW DELHI PAN: AAGPP 7030 F [APPELLANT] [RESPONDENT] DATE OF HEARING : 17.02.2020 DATE OF PRONOUNCEMENT : 18.02.2020 ASSESSEE BY : SHRI SALIL AGARWAL SHRI SHAILESH GUPTA, CA REVENUE BY : SHRI H.K. CHOUDHARY, CIT- DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THE ABOVE CAPTIONED APPEALS BY THE REVENUE FOR ASSESSMENT YEARS 2006-07 TO 2011-12 ARE PREFERRED AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A). SINCE THE ISSUES RAISED ARE COMMON IN ALL THESE 2 APPEALS, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE ROOTS FOR ASSESSMENT LIE IN THE SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT'] CONDUCTED ON PASCO GROUP OF CASES ON 17.02.2012. ACCORDINGLY, NOTICE U/S 153A OF THE ACT WAS ISSUED AND SERVED UPON THE ASSESSEE. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE SOME ENQUIRIES/QUERIES AND COMPLETED ASSESSMENT BY MAKING ADDITION ON ACCOUNT OF BOGUS EXPENSES OF REBATE /DISCOUNTS/INCENTIVES, INFLATED CLAIM OF TRANSPORTATION EXPENSES, BOGUS EXPENSES ON NEW VEHICLES, TRAVELLING EXPENSES, PERSONAL EXPENSES AND DISALLOWANCE U/S 14A OF THE ACT. IN ALL THE YEARS UNDER CONSIDERATION BEFORE US, ADDITIONS WERE MADE UNDER THE HEADS MENTIONED HEREINABOVE, THOUGH THE QUANTUM MAY DIFFER IN EVERY ASSESSMENT YEAR. 4. THE ASSESSEE VEHEMENTLY AGITATED THE MATTER BEFORE THE LD. CIT(A) AND CONTENDED THAT NONE OF THE ADDITIONS/DISALLOWANCES IS BASED UPON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH PROCEEDINGS. THEREFORE, THE RATIO LAIDDOWN BY THE HON'BLE HIGH 3 COURT OF DELHI IN THE CASE OF KABUL CHAWLA 380 ITR 573 SQUARELY APPLIES ON THE FACTS OF THE CASE IN HAND AND HENCE THE ASSESSMENT DESERVES TO BE SET ASIDE. 5. AFTER CONSIDERING THE FACTS AND SUBMISSIONS, THE LD. CIT(A) WAS CONVINCED THAT NONE OF THE ADDITIONS WERE BASED UPON ANY INCRIMINATING MATERIAL AND DRAWING SUPPORT FROM THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF KABUL CHAWLA [SUPRA] HELD THAT THE ADDITIONS MADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED AND ACCORDINGLY, DIRECTED THE ASSESSING OFFICER TO DELETE THE ADDITIONS. THE LD. CIT(A) FURTHER DELETED THE ADDITIONS ON MERITS OF THE CASE. 6. BEFORE US, THE LD. DR VEHEMENTLY SUBMITTED THAT THE BOOKS OF ACCOUNT WERE SEIZED DURING THE COURSE OF SEARCH PROCEEDINGS AND ON PERUSAL OF THE ENTRIES IN THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER FOUND THAT THE ENTRIES IN THE BOOKS OF ACCOUNT WERE NOT GENUINE AND THE SAME SHOULD BE TREATED AS INCRIMINATING MATERIAL FOUND AT THE TIME OF SEARCH. IT IS THE SAY OF THE LD. DR THAT IN SO FAR AS THE BOOKS OF ACCOUNT ARE CONCERNED, THE SAME ARE INCRIMINATING MATERIAL QUA THE ENTRIES THEREIN AND IT IS ONLY AFTER PERUSAL OF THE LEDGER ACCOUNT, THE ASSESSING OFFICER CAME TO KNOW THAT THE CHEQUES WHICH WERE ISSUED BY 4 THE ASSESSEE WERE BEARER CHEQUES, WHICH FACT WAS SUBSEQUENTLY CONFIRMED BY RESPECTIVE BANKS. THE LD. DR CONTINUED BY SAYING THAT THE ENTRIES WERE INCRIMINATING AND THEREFORE, THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF DELHI [SUPRA] DO NOT APPLY ON THE FACTS OF THE CASES IN HAND. 7. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ENTIRE ADDITIONS HAVE BEEN FRAMED ON THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN FACT, THE ASSESSING OFFICER, IN HIS ASSESSMENT ORDER, PROCEEDED BY OBSERVING FROM THE EXAMINATION OF BOOKS OF ACCOUNT OF THE ASSESSEE, IT IS OBSERVED THAT THE ASSESSEE HAS CLAIMED BUSINESS EXPENSES. 8. IN OUR CONSIDERED OPINION, AUDITED BOOKS OF ACCOUNT FOUND AT THE TIME OF SEARCH CANNOT BE TREATED AS INCRIMINATING MATERIAL. FURTHER, THE ALLEGATION THAT ON PERUSAL OF LEDGER ACCOUNT, IT WAS NOT KNOWN WHETHER THE PAYMENTS HAVE BEEN MADE BY BEARER CHEQUES OR ACCOUNT PAYEE CHEQUES, IS ALSO ILL-FOUNDED BECAUSE THE LEDGER EXTRACTS RELIED UPON BY THE ASSESSING OFFICER AND EMPHASIZED BY THE LD. DR CONTAIN ONLY ENTRIES IN RESPECT OF ACCOUNT PAYEE CHEQUES AND ON POST SEARCH 5 ENQUIRIES, BANKS HAVE SUBMITTED DETAILS IN RESPECT OF PAYMENTS MADE BY ACCOUNT PAYEE CHEQUES. 9. WE DO NOT FIND ANYTHING INCRIMINATING IN THESE ENTRIES. THE BEARER CHEQUES WERE ENCASHED BY SOME PERSONS WHO WERE HAVING TRANSACTIONS WITH THE PURCHASERS OF THE ASSESSEE AND THOSE PERSONS CLAIMED TO GET ADDITIONAL REBATE/DISCOUNT FROM THE ASSESSEE AND, THEREFORE, THEY MAY HAVE SHARED SOME DISCOUNT/REBATE FROM THE PARTIES TO WHOM IT WAS GIVEN BY THE ASSESSEE BY MAKING PAYMENTS THROUGH BEARER CHEQUES. THOUGH THE ASSESSING OFFICER HAS STATED THAT THE PERSONS WHO WERE ENCHASING CHEQUES WERE EMPLOYEES OF THE ASSESSEE BUT SURPRISINGLY, WHEN THOSE PERSONS WERE CROSS EXAMINED BY THE ASSESSEE, THEIR STATEMENTS WERE TOTALLY IGNORED BY THE ASSESSING OFFICER AND DURING THE COURSE OF CROSS EXAMINATION, THEY HAVE CATEGORICALLY STATED THAT THEY ARE NOT EMPLOYEES OF THE ASSESSEE AND ENCASHING CHEQUES BECAUSE THEY WERE ALSO GETTING SOME MONEY FROM THE PURCHASERS. 10. AS MENTIONED ELSEWHERE, THE HEADS UNDER WHICH THE ADDITIONS HAVE BEEN MADE ARE IDENTICAL IN ALL THE ASSESSMENT YEARS UNDER APPEAL. HOWEVER, IN ITA NO. 4288/DEL/2016 FOR ASSESSMENT YEAR 6 2008-09, THERE IS ONE ADDITION IN RESPECT OF CASH FOUND TO BE DEPOSITED IN THE BOOKS OF ACCOUNT AS UNDER: SR. NO. PARTICULARS TRANSACTION DATE TRANSACTION AMOUNT TRANSACTION INVOLVED BANK DIVISION 1 CASH DEPOSITED 04.04.2008 101134.00 PUNJAB & SIND (A/C CC-71) KUNDLI 2 CASH DEPOSITED 22.09.2008 362000.00 PUNJAB & SIND (A/C CC-71) KUNDLI 3 CASH DEPOSITED 04.04.2008 450000.00 PUNJAB & SIND (A/C CC-71) KUNDLI 4 CASH DEPOSITED 25.06.2008 200000.00 PUNJAB & SIND (A/C CC-71) KUNDLI 5 CASH DEPOSITED 21.11.2007 120000.00 PUNJAB & SIND (A/C CC-71) KUNDLI 6 CASH DEPOSITED 16.06.2008 105914.00 PUNJAB & SIND (A/C 1605) DELHI 7 CASH DEPOSITED 22.07.2008 148916.00 PUNJAB & SIND (A/C 1605) DELHI TOTAL 1487964.00 11. THE ASSESSING OFFICER MADE ADDITION OF RS. 1,20,000/- AS UNEXPLAINED CASH DEPOSIT. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT ALL THE ENTRIES ARE DULY REFLECTED IN THE REGULAR BOOKS OF ACCOUNT AND THERE IS NOTHING TO SUGGEST THAT THESE ENTRIES WERE DETECTED AS A RESULT OF SEARCH OUT OF SOME INCRIMINATING MATERIAL. THE ENTRIES OF DEPOSITS ARE DULY REFLECTED IN THE BOOKS OF ACCOUNT AND HENCE WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTION 153A OF THE ACT DO NOT APPLY ON SUCH ENTRIES. 7 12. CONSIDERING THE TOTALITY OF THE FACTS ON RECORD, WE ARE ALSO CONVINCED THAT NO ADDITION IS BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH AND, THEREFORE, THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF KABUL CHAWLA [SUPRA] SQUARELY APPLIES. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT READ AS UNDER: 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS 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 DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS 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 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 8 THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS 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 AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY 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 ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER 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 AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR 9 PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005-06 AND 2006-07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 13. IN LIGHT OF THE ABOVE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). ALL THE APPEALS FILED BY THE REVENUE ARE, ACCORDINGLY, DISMISSED ON THE POINT OF LAW. THEREFORE, WE DO NOT FIND IT NECESSARY TO DWELL INTO THE MERITS OF THE CASE. 14. IN THE RESULT, THE APPEALS OF THE REVENUE IN ITA NOS. 4286 TO 4291/DEL/2016 ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 18.02.2020. SD/- SD/- [SUCHITRA KAMBLE ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 FEBRUARY, 2020. 10 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT ASST. REGISTRAR 4. CIT(A) ITAT, NEW DELHI 5. DR DATE OF DICTATION 1 7 . 0 2 . 2 0 2 0 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 8 . 0 2 . 2 0 2 0 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER