REYNOLD SHIRTING LTD, MUMBAI V. ASST CIT CEN CIR 38, MUMBAI

ITA 4332/MUM/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3512 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 12-11-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 25-06-2012
• Court: TRIBUNAL
• Department Lawyers: B B RAJENDRA PRASAD DR
• Keywords: Documents seized
• Section: 143(3); 142(1); 153A; 132

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.4332/MUM/2012 ASSESSMENT YEAR: 2008-09 M/S REYNOLD SHIRTING LIMITED, 1 ST FLOOR, D-WING, OBEROI GARDEN ESTATE, CHANDIVALI FARMS ROAD, CHANDIVALI, ANDHERI(E), MUMBAI-400072 / VS. ACIT, CC-38, AAYAKAR BHAVAN, GROUND FLOOR, M.K. ROAD, MUMBAI-400020 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO . AACCR7055H ITA NO.5389/MUM/2012 ASSESSMENT YEAR: 2008-09 ACIT, CC-38, AAYAKAR BHAVAN, GROUND FLOOR, M.K. ROAD, MUMBAI-400020 / VS. M/S REYNOLD SHIRTING LIMITED, 1 ST FLOOR, D-WING, OBEROI GARDEN ESTATE, CHANDIVALI FARMS ROAD, CHANDIVALI, ANDHERI(E), MUMBAI-400072 ( ! /ASSESSEE) ( ' / REVENUE) PAN. NO.AACCR7055H ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 2 ! / ASSESSEE BY SHRI VIJAY MEHTA ' / REVENUE BY SHRI B.B. RAJENDRA PRASAD - DR # '$ % ! & / DATE OF HEARING : 27/06/2016 % ! & / DATE OF ORDER: 28/06/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE AS WELL AS REVENUE IS IN CROSS APPEAL AGAINST THE IMPUGNED ORDER DATED 12/06/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI. THE ONLY EFFECTI VE GROUND AGITATED BY THE LD. COUNSEL FOR THE ASSESSEE IS THA T THE LD. FIRST APPELLATE AUTHORITY ERRED IN NOT HOLDING THAT THE ORDER PASSED U/S 143(3) R.W.S 153C OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) IS BAD IN LAW, ILLEGAL AND VO ID AB-INITIO THAT TO IN THE ABSENCE OF ANY MATERIAL SEIZED DURIN G SEARCH. THE REMAINING ISSUES/GROUNDS WERE NOT PRESSED BY TH E LD. COUNSEL FOR THE ASSESSEE, BEING ACADEMIC IN NATURE. 2. DURING HEARING OF THESE APPEALS, THE LD. COUNSE L FOR THE ASSESSEE, SHRI VIJAY MEHTA, CONTENDED THAT NO S EIZED MATERIAL WAS REFERRED TO BY THE LD. ASSESSING OFFIC ER FOR WHICH OUR ATTENTION WAS INVITED TO PARA -8 AND 8.4 OF THE ASSESSMENT ORDER. IT WAS ALSO PLEADED THAT EVEN THE RE IS NO FINDING IN THE IMPUGNED ORDER WITH RESPECT TO THE C LAIM OF THE ASSESSEE FOR WHICH OUR ATTENTION WAS INVITED TO PAG E-2, PARA 1.2 OF THE IMPUGNED ORDER. THE LD. COUNSEL PLACED R ELIANCE UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF GO PAL ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 3 AGRAWAL VS ACIT (ITA NOS, 7075 & 7076/MUM/2012), OR DER DATED 07/08/2015. ON THE OTHER HAND, THE LD. DR, SH RI B. B. RAJENDRA PRASAD, CONTENDED THAT YES THERE IS NO REF ERENCE TO THE SEIZED MATERIAL. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF GRAY AND FABRICS. A SE ARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CARRIED OUT I N THE CASE OF M/S BOMBAY RAYON FASHIONS LTD., MR. JANARDAN AGA RWAL (CHAIRMAN), MR. PRASHANT AGARWAL (MANAGING DIRECTOR ), MR. AMAN AGARWAL (EXECUTIVE VICE-CHAIRMAN), MR. UDAY MO GREY (EXECUTIVE DIRECTOR-CORPORATE) AND MR. ASHARAM MUND RA (EXECUTIVE DIRECTOR-FINANCE) ON 12/08/2009. THEREAF TER, NOTICE U/S 153C DATED 13/12/2010 WAS ISSUED TO THE ASSESSEE AFTER RECORDING THE REASONS. IN RESPONSE T O THE NOTICE, THE ASSESSEE FILED ITS RETURN DECLARING TOT AL INCOME AT RS.1,71,87,230/-, ON 21/02/2011. NOTICES U/S 143(2 ) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE SER VED UPON THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED THE PRO CEEDINGS. DURING THE ASSESSMENT YEAR 2008-09, THE ASSESSEE CO MPANY PURCHASED 99.75% SHARES OF ANOTHER COMPANY NAMELY M /S B.R. MACHINE TOOLS PVT. LTD. (HEREINAFTER IN SHORT BRMTPL) VIDE AGREEMENT DATED 02/04/2007, THUS, BECOMING THE HOLDING COMPANY. THE COMPANY ACQUIRED BY THE ASSESS EE DID NOT CARRY ON ANY BUSINESS DURING THE YEAR AS WELL A S IN THE NEXT TWO YEARS. THE ONLY INCOME, DURING THE YEAR OF THAT ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 4 COMPANY WAS PETTY SALES AND LONG TERM CAPITAL GAINS ON SALE OF LAND. IT WAS ALSO NOTICED THAT THE ASSESSEE COMP ANY HAD TAKEN LOAN AND ADVANCES OF RS. 2,80,00,000/- ON 01/02/2008 FROM BRMTPL. THE LD. ASSESSING OFFICER A SKED THE ASSESSEE AS TO WHY THIS AMOUNT SHOULD NOT BE TR EATED AS INCOME IN THE HANDS OF THE ASSESSEE AS PER PROVISIO NS OF SECTIONS 2(22)(E) OF THE ACT. IN REPLY, THE ASSESSE E CLAIMED AS UNDER:- DURING THE YEAR, THE COMPANY HAS RECEIVED AN ADVANCES OF RS.2.80 CRORES FROM B.R. MACHINE TOOLS PVT. LTD. AGAINST THE SALE OF PROPERTY AT SILVASA WHICH IS OWNED BY THE COMPANY. SILVASA PROPERTIES WERE WORTH MORE THAN RS.35 CRORES AND THE BALANCE PAYMENT WILL BE MADE WHEN THE DEAL WILL BE COMPLETED. NO INTEREST HAS BEEN PAID ON THE SAID ADVANCES BEIN G AGAINST THE SALE OF PROPERTY. THESE ADVANCES ARE RECEIVED FOR THE BUSINESS TRANSACTION, THE PROVISIO NS OF SEC.2(22)(E0 IS NOT APPLICABLE. NO INTEREST HAS BEEN PAID ON THESE ADVANCES AS THIS IS A BUSINESS TRANSACTION BEING RECEIVED FOR SALE OF PROPERTIES. THEREFORE, THE PROVISIONS OF SEC.2(22)( E) IS APPLICABLE. 2.2. THE CLAIM OF THE ASSESSEE IS THAT THE IMPUGNE D AMOUNT OF RS.2.08 CRORES WAS RECEIVED AS ADVANCE FR OM BRMPTL AGAINST SALE OF PROPERTY AT SILVASA, WHICH I S OWNED BY THE COMPANY. THE OBSERVATION MADE IN THE ORDER I S REPRODUCED HEREUNDER:- 8.4 ON PERUSAL OF THE ABOVE, IT IS NOTICED THAT T HE ASSESSEE COMPANY FULFILLS THE FOLLOWING CONDITIONS: - ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 5 BRMTPL IS NOT A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. THE ASSESSEE HOLDS MORE THAN 10% VOTING POWER IN BRMTPL. AN ADVANCE OR LOAN AMOUNTING TO RS. L6,67,00,000/ - IS GIVEN BY BRMTPL TO THE ASSESSEE COMPANY DURING THE YEAR. THE ACCUMULATED PROFITS OF BRMTPL WAS RS. 20,07,20,638/-. MONEY LENDING IS NOT AT ALL A PART OF BUSINESS OF BRMTPL - AS SEEN FROM ITS BALANCE SHEETS OF PREVIOU S 4 YEARS. 2.3. IT IS ALSO NOTED THAT EVEN IN THE IMPUGNED OR DER, THERE IS A FINDING (PARA 1.2) THAT IT WAS CLAIMED B Y THE ASSESSEE THAT HAVING CARRIED OUT SEARCH, THERE IS N O SPECIFIC EVIDENCE FOUND RELEVANT TO THIS ASSESSMENT AS PER S ECTION 153A, IT DOES NOT AUTHORIZE MAKING DENOVO ASSESSMEN T AND THE POWER PROVIDED TO THE LD. ASSESSING OFFICER U/S 153A IS CONFINED TO UNDISCLOSED INCOME UNEARTHED DURING SEA RCH. THE AFORESAID DECISION OF THE TRIBUNAL DATED 07/08/ 2015 IN GOPAL AGRAWAL VS ACIT (ITA NOS, 7075 & 7076/MUM/201 2), IS REPRODUCED HEREUNDER FOR READY REFERENCE:- THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSES SEE AGAINST SEPARATE IMPUGNED ORDERS DATED 16.10.2012 AND 17.10 .2012 PASSED BY CIT(A) -41, MUMBAI FOR THE QUANTUM OF ASS ESSMENT PASSED U/S 143(3) R.W.S. 153C FOR THE ASSESSMENT YE ARS 2007- 08 AND 2008-09 RESPECTIVELY. 2. THE PRELIMINARY GROUND RAISED IN BOTH THE APPEAL S BY WAY OF ADDITIONAL GROUNDS ARE THAT; THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN AFFIRMING THE ASSESSMENT ORDER PASS ED U/S 143(3) R.W.S. 153C, WITHOUT APPRECIATING THE FACT T HAT THERE ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 6 WAS NO INCRIMINATING DOCUMENTS SEIZED OR INFORMATIO N GATHERED DURING THE SEARCH, WHICH CAN LEAD TO ANY A DVERSE INFERENCE FOR MAKING THE ADDITION IN THE HANDS OF T HE ASSESSEE. 3. BEFORE US, THE LD. COUNSEL SHRI VIJAY MEHTA SUBM ITTED THAT IN BOTH THE YEARS, THE ASSESSMENTS STOOD FINALIZED AT THE TIME OF SEARCH, WHICH HERE IN THIS CASE SHOULD BE RECKONED FROM THE DATE OF ISSUANCE OF NOTICE U/S 153C. NO ASSESSMENT WAS PENDING AND, THESE ARE NON-ABATED ASSESSMENTS WITHI N THE MEANING OF SECOND PROVISO TO SECTION 153A. AFTER RE FERRING TO FOLLOWING DATES AND EVENTS :- AY 2007-08 AY 2008-09 RETURN OF INCOME FILED U/S 139(1) 29.10.2007 16.09. 2008 DATE OF SEARCH 12.08.2009 12.08.2009 RELEVANT DATE OF ISSUANCE OF NOTICE U/S 153C 17.08.2010 17.08.2009 LAST DATE OF ISSUANCE OF NOTICE U/S 143(2) 31.10.2008 30.09.2009 HE SUBMITTED THAT AT THE TIME OF ISSUANCE OF NOTICE U/S 153C, THERE WAS NO PENDING ASSESSMENT FOR THE ASSESSMENT YEAR 2007-08 & 2008-09 AND THEREFORE, THEY DO NOT GET AB ATED IN TERMS OF SECOND PROVISO TO SECTION 153A. IN SUCH A SITUATION, HE SUBMITTED THAT UNLESS ANY INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH, NO ADDITION CAN BE MAD E BY THE ASSESSING OFFICER OVER AND ABOVE THE INCOME ALREADY ASSESSED. HE SUBMITTED THAT IN THE CASE OF ANOTHER FAMILY MEM BER OF THE ASSESSEE, SHRI GOPAL AGARWAL THE TRIBUNAL IN ITA NO . 4823/MUM/2012 VIDE ORDER DATED 28.05.2014 HAS DECID ED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE. ON THE OTH ER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT IN THE ADDITIONAL GROUND RAISED BY THE ASSESSEE, THE MAIN ISSUE WHICH HAS BEEN CHALLENGED BEFORE US, IS THAT, IN ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF T HE SEARCH, THE ADDITIONS MADE BY THE ASSESSING OFFICER AND CON FIRMED BY THE CIT(A) ARE BAD IN LAW AS THE ASSESSMENTS FOR TH E IMPUGNED ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 7 ASSESSMENT YEARS WERE NOT ABATED AT THE TIME OF ISS UANCE OF NOTICE U/S 153C. HERE IN THIS CASE, ADMITTEDLY, SEA RCH TOOK PLACE ON 12.08.2009 AND NOTICE U/S 153C FOR ACQUIRI NG THE JURISDICTION FOR FORMING THE ASSESSMENTS FOR 6 ASSE SSMENT YEARS IN TERMS OF SECTION 153A, WAS ISSUED ON 17.08.2010. THUS, THE TIME LIMIT FOREXAMINING THE PENDING ASSESSMENT HAS TO BE RECKONED FROM THIS DATE. AS NOTED ABOVE, THE TIME L IMIT OF ISSUANCE OF NOTICE U/S 143(2) IN AYS 2007-08 & 2008 -09 HAD EXPIRED BEFORE THE DATE OF ISSUANCE OF NOTICE U/S 1 53C AND RETURN OF INCOME FILED BY THE ASSESSEE THUS STOOD F INALIZED AND SUCH AN ASSESSMENT DOES NOT GET ABATED IN TERMS OF SECOND PROVISO TO SECTION 153A. ONCE THAT IS SO, NO ADDITI ON OVER AND ABOVE RETURNED INCOME CAN BE MADE, UNLESS ANY INCRI MINATING DOCUMENT/MATERIAL OR INFORMATION IS UNEARTHED/GATHE RED AT THE TIME OF SEARCH. THIS PROPOSITION HAS NOW BEEN UPHEL D BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ALLCARGO G LOBAL LOGISTIC LTD VS CIT, REPORTED IN 374 ITR 645 (BOM). THUS, ON THIS PRELIMINARY GROUND ALONE, THE IMPUGNED ADDITIO NS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A ) STANDS DELETED. 5. IN THE RESULT, APPEALS OF ASSESSEE FOR BOTH THE YEARS ARE TREATED AS ALLOWED. CONSIDERING THE TOTALITY OF FACTS AND THE RATIO LAI D DOWN IN THE AFORESAID ORDER OF THE TRIBUNAL, THE ONLY IS SUE BEFORE US IS IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOU ND DURING SEARCH, THE ADDITIONS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY LD. COMMISSIONER OF INCOME TAX (APPEAL ) ARE WHETHER BAD IN LAW AS THE ASSESSMENT FOR THE IMPUGN ED ASSESSMENT YEAR WERE NOT AWAITED AT THE TIME OF ISS UANCE OF NOTICE U/S 153C OF THE ACT. THUS, UNLESS AND UNTIL ANY MATERIAL/DOCUMENT OR INFORMATION IS GATHERED/UNEART HED AT THE TIME OF SEARCH, WE FIND MERIT IN THE CONTENTION OF THE ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 8 ASSESSEE. OUR VIEW FINDS SUPPORT BY THE DECISION FR OM HONBLE JURISDICTIONAL HIGH COURT IN ALLCARGO GLOBAL LOGIST IC LTD. VS CIT 374 ITR 645 (BOM.), THUS, ON THIS PRELIMINARY G ROUND ALONE, THE ADDITIONS MADE BY THE ASSESSING OFFICER/ CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEAL) STAN DS DELETED. 3. OTHER ISSUES WERE NOT PRESSED BY THE LD. COUNSE L FOR THE ASSESSEE, BEING ACADEMIC IN NATURE. 4. IN THE LIGHT OF AFORESAID DECISION, THE APPEAL OF THE REVENUE HAS ALSO BECOME IN-FRUCTUOUS. FINALLY, THE APPEAL OF THE ASSESSEE IS DISPOSED OF IN TERMS INDICATED HEREINABOVE, WHEREAS, THE APPEAL OF THE REVENUE IS DISMISSES AS IN-FRUCTUOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 27/06/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER # $ MUMBAI; ( DATED : 28/06/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 # 1! ( *+ ) / THE CIT, MUMBAI. 4. 0 0 # 1! / CIT(A)- , MUMBAI 5. 3'4 .! , 0 *+& * 5 , # $ / DR, ITA NO.4332& 5389/MUM/2012 M/S REYNOLD SHIRTING LTD. 9 ITAT, MUMBAI 6. 6$ / GUARD FILE. / BY ORDER, /3+! .! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI