ITO (Central), Kolhapur V. Vilson Particle Board Industries Ltd., Kolhapur

ITA 450/PUN/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7220 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-01-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Income from undisclosed sources; Document seized; Principle of natural justice; Period of limitation; Documents seized
• Section: 40A(3); 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 31 1 /P U N/201 3 / ASSESSMENT YEAR: 20 07 - 08 VILSONS PARTICLE BOARD INDUSTRIES LTD., 1220/47, E - WARD, OPP JAGDALE HALL, RAJARAMPURI 1 ST LANE, KOLHAPUR 416008 . / APPELLANT PAN: AAACV9484A VS. THE INCOME T AX OFFICER (CENTRAL), / KOLHAPUR . / RESPONDENT . / ITA NO. 450 /P U N/201 3 / ASSESSMENT YEAR: 20 07 - 08 THE INCOME TAX OFFICER (CENTRAL), KOLHAPUR . / APPELLANT VS. VILSONS PARTICLE BOARD INDU STRIES LTD., 1220/47, E - WARD, OPP JAGDALE HALL, RAJARAMPURI 1 ST LANE, KOLHAPUR 416008 . / RESPONDENT PAN: AAACV9484A ASSESSEE BY : S HRI NIKHIL PATHAK REVENUE BY : SHRI SANDEEP GARG, CIT ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 2 / DATE OF HEARING : 11 . 0 1 .201 7 / DATE OF PRONOUNCEMENT: 20 . 0 1 .201 7 / ORDER PER SUSHMA CHOWLA, JM: THE CROSS APPEAL S FILED BY THE ASSESSEE AND THE REVENUE ARE AGAINST ORDER OF CIT( A ) , KOLHAPUR , DATED 2 7 . 11 .201 2 RELATING TO ASSESSMENT YEAR 20 0 7 - 08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A(B) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2. THE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAK E OF CONVENIENCE. 3. THE ASSESSEE IN ITA NO. 31 1/P U N/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE ASST. U/S 143(3) R.W.S 153A(B) PASSED BY THE LEARNED A.O. WAS NULL AND VOID. 2] THE LE ARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE REFERENCE U/S 142(2A) 2] THE LE ARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE REFERENCE U/S 142(2A) FOR SPECIAL AUDIT WAS AN ILLEGAL ONE AS THE A.O HAD NOT GIVEN AN OPPORTUNITY OF HEARING TO THE ASSESSEE AS REQUIRED UNDER PROVISO TO SECTION 142(2A) AND CONSEQUENTLY, THE ASST. ORDER PAS SED IS BARRED BY LIMITATION. 2.1] THE LEARNED CIT(A) FURTHER FAILED TO APPRECIATE THAT THE REFERENCE TO SPECIAL AUDITOR WAS INVALID IN LAW AND THEREFORE, THE ASST. ORDER PASSED WAS TIME BARRED. 2.2] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE LE ARNED A.O. HAD GIVEN PROPER OPPORTUNITY TO THE APPELLANT BEFORE MAKING A REFERENCE FOR SPECIAL AUDIT AND HENCE, THE CONTENTION OF THE ASSESSEE THAT THE REFERENCE MADE WAS ILLEGAL IS NOT CORRECT. ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 3 2.3] THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT EV EN IF, NO OPPORTUNITY WAS GIVEN BY THE LEARNED A.O. TO THE APPELLANT BEFORE MAKING A REFERENCE FOR SPECIAL AUDIT, SUCH AN ACT WOULD NOT RESULT IN THE ASST. ORDER BEING NULL AND VOID WITHOUT APPRECIATING THAT IT WOULD RESULT IN NULLITY AND HENCE, THE ASST. ORDER WAS INVALID IN LAW. 2.4] THE LEARNED CIT(A) FURTHER ERRED IN HOLDING THAT THE A.O. DID NOT COMMIT ANY IRREGULARITY IN PASSING THE ORDER EXTENDING THE TIME LIMIT FOR COMPLETION OF SPECIAL AUDIT AFTER THE EXPIRY OF THE INITIAL PERIOD AND HENCE, THE A SST. ORDER PASSED BY THE LEARNED A.O. WAS NOT BARRED BY LIMITATION. 2.5] THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE LEARNED A.O. HAD PASSED THE ORDER EXTENDING THE TIME LIMIT FOR COMPLETION OF SPECIAL AUDIT AFTER THE EXPIRY OF THE INITIAL PER IOD GRANTED AND THEREFORE, SUCH EXTENSION WAS NOT VALID IN LAW AND ACCORDINGLY, THE ASST. ORDER PASSED BY THE LEARNED A.O. IS BARRED BY LIMITATION. 3] THE LEARNED CIT(A) ERRED IN CONFIRMING CERTAIN ADDITIONS MADE BY THE A.O. IN THE HANDS OF THE ASSESSEE COMPANY WITHOUT APPRECIATING THAT THE INCOME ACTUALLY BELONGED TO SHRI V. L. PATEL (IND.) AND HENCE, THERE WAS NO REASON TO MAKE ANY ADDITION ON THE BASIS OF THE SEIZED DIARIES FOUND DURING SEARCH IN THE HANDS OF THE ASSESSEE COMPANY. 3.1] THE LEARNED C IT(A) ERRED IN HOLDING THAT THE VARIOUS NOTINGS IN THE SEIZED DIARIES PERTAINED TO THE ASSESSEE COMPANY WITHOUT APPRECIATING THAT THE LEARNED A. O . IN THE ASST. ORDER HAD HELD THAT THE SEIZED DIARIES CONTAINING TRANSACTIONS OF THE ENTIRE GROUP AND HENCE, TH ERE WAS NO REASON TO TAX THE ENTIRE UNDISCLOSED INCOME ON THE BASIS OF THE DIARIES IN THE HANDS OF THE ASSESSEE COMPANY. ASSESSEE COMPANY. 3.2] THE LEARNED CIT(A) ERRED IN HOLDING THAT AS THE ASSESSEE GROUP HAD NOT EXPLAINED THE NATURE AND CONTENTS OF THE SEIZED DIARIES, THE CONCLUSION ARRIVED BY THE LEARNED A.O. THAT THE INCOME ON THE BASIS OF THE SEIZED DIARIES PERTAINED TO THE ASSESSEE COMPANY WAS JUSTIFIED AND THERE WAS NO MERIT IN THE CONTENTION OF THE ASSESSEE COMPANY THAT THE SAID INCOME BELONGED TO SHRI V. L. PATE L (INDI). 3.3] WHILE HOLDING THAT THE INCOME FROM THE NOTINGS IN THE SEIZED DIARIES BELONGED TO THE ASSESSEE, THE LEARNED CIT(A) ERRED IN RELYING UPON ONLY A FEW NOTINGS WHICH ACCORDING TO HIM INDICATED TRANSACTIONS OF THE ASSESSEE COMPANY WITHOUT APPRECI ATING THAT THE NOTINGS IN GENERAL DID NOT PERTAIN TO THE ASSESSEE COMPANY. 3.4] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THESE DIARIES ON THE BASIS OF WHICH THE ADDITIONS ARE MADE WERE FOUND WITH SHRI MOHAN PATEL AND THEREFORE, THERE WAS NO REASON TO TAX THE ENTIRE INCOME ON THE BASIS OF THESE DIARIES IN THE HANDS OF THE ASSESSEE COMPANY. 3.5] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THERE WERE VARIOUS NOTINGS RECORDED IN THE DIARIES WHICH CLEARLY INDICATED THAT THE TRANSACTIONS RECORDED T HEREIN DID NOT PERTAIN TO THE ASSESSEE COMPANY AND HENCE, HE WAS NOT JUSTIFIED IN TAXING THE UNDISCLOSED INCOME ON THE BASIS OF THE DIARIES IN THE HANDS OF THE ASSESSEE COMPANY. ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 4 4] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CLAIM OF THE ASSESSEE TH AT THE INCOME BE COMPUTED BY APPLYING A NET PROFIT RATE OF 15% ON THE TOTAL CREDITS WAS NOT THE CORRECT METHOD FOR DETERMINING THE UNDISCLOSED INCOME AND THE METHOD ADOPTED BY THE LEARNED A.O. WAS THE CORRECT ONE. 4.1] THE LEARNED CIT(A) FAILED TO APPRE CIATE THAT THE INCOME WAS OFFERED TO TAX BY ESTIMATING THE NET PROFIT @ 15% ON TOTAL SALES WHICH WAS MORE THAN REASONABLE AND HENCE, THERE WAS NO REASON TO MAKE ANY FURTHER ADDITION OVER AND ABOVE THE INCOME OFFERED. 4.2] THE LEARNED CIT(A) ERRED IN HOL DING THAT THE METHODOLOGY ADOPTED BY THE LEARNED A.O. OF DETERMINING THE INCOME ON ASSET BASIS OR INCOME BASIS WAS CORRECT AND THE HIGHER INCOME OUT OF THE TWO METHODS SHOULD HAVE BEEN CONSIDERED AS AN UNDISCLOSED INCOME OF THE ASSESSEE COMPANY. 5] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE FOLLOWING EXPENSES WHILE COMPUTING THE INCOME ON INCOME METHOD A . DISALLOWANCE U/S 40A(3) RS.59,15,661/ - B . DISALLOWANCE OF CONSTRUCTION EXPENSES RS. 3,42,146/ - 6] THE LEARNED CIT(A) ERRED IN C ONFIRMING THE DISALLOWANCE OF RS.59,15,661/ - U/S 40A(3) BY HOLDING THAT THE ASSESSEE HAD INCURRED CASH EXPENDITURE IN EXCESS OF RS.20,000/ - MOUNTING TO RS.2,95,78,306/ - . 6.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U /S 40A(3) WAS NOT JUSTIFIED IN RESPECT OF THE EXPENSES NOTED IN THE SEIZED DOCUMENTS FOR THE FOLLOWING REASONS - A . ITAT PUNE IN THE CASE OF DHANVARSHA BUILDERS AND DEVELOPERS PVT. LTD. [102 ITD 375] HAS HELD THAT THE PROVISIONS OF SECTION 40A(3) DO NOT APP LY TO UNACCOUNTED PAYMENTS AS THESE EXPENSES ARE NOT RECORDED IN THE REGULAR BOOKS AND ACCORDINGLY, IN THIS CASE, THE PROVISIONS OF SECTION 40A(3) COULD NOT BE INVOKED. B . AS IT WAS NOT SHOWN BY THE A.O. THAT THE INDIVIDUAL CASH PAYMENTS FOR PURCHASES AT ON E TIME TO ONE PARTY EXCEEDED RS.20,000/ - ,THE DISALLOWANCE U/S 40A(3) COULD NOT BE MADE IN VIEW OF ITAT PUNE DECISION IN THE CASE OF SHARMA ASSOCIATES V. ACIT [55 ITD 171 (TM)]. C . THE ABOVE ITAT PUNE DECISIONS WERE BINDING ON THE A.O. IN VIEW OF BOMBAY H.C. DECISION IN THE CASE OF BANK OF BARODA V. H. C. SHRIVATSAVA AND ANOTHER [256 ITR 385]. D . THE ADDITION U/S 40A(3) COULD NOT BE MADE ON PRESUMPTION AND SURMISES THAT THE, INDIVIDUAL CASH PAYMENTS NOTED IN THE SEIZED DOCUMENTS TO EACH PARTY EXCEEDED RS.20,00 0/ - ON EACH OCCASION. 6.2] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE PROVISIONS OF SECTION 40A(3) WERE NOT APPLICABLE TO THE PAYMENTS MADE VIA BANKER'S CHEQUES AND HENCE, THERE WAS NO REASON TO MAKE ANY DISALLOWANCE IN RESPECT OF SUCH PAYMEN TS. 6.3] THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THAT THE DISALLOWANCE U/S 40A(3) WAS NOT APPLICABLE IN RESPECT OF THE PURCHASES MADE BY THE ASSESSEE BY WAY OF BARTER EXCHANGE. ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 5 6.4] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U/S 40A(3) WAS MADE ON THE BASIS OF THE REPORT SUBMITTED BY THE SPECIAL AUDITOR WHEREIN HE' HAD COMBINED VARIOUS ENTRIES WHICH WERE INDIVIDUALLY LESS THAN RS.20,000/ - EACH AND THEREFORE, SUCH DISALLOWANCE ON ACCOUNT OF GROUPED ENTRIES SHOULD HAVE BEEN DELETED . 6.5] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE DISALLOWANCE U/S 40A(3) WAS MADE ON THE BASIS OF THE REPORT SUBMITTED BY THE SPECIAL AUDITOR EVEN IN THE CIRCUMSTANCES WHERE PAYMENTS HAVE NOT EXCEEDED RS.20000/ - AND THEREFORE, SUCH DISALLOWANCE ON ACCOUNT OF ENTRIES WHICH ARE NOT EXCEEDING RS.20000/ - SHOULD HAVE BEEN DELETED. 7] THE LEARNED CIT(A) ERRED IN HOLDING THAT THE CONSTRUCTION EXPENSES OF RS.3,42,146/ - RECORDED IN THE SEIZED DIARIES WERE NOT ALLOWABLE AS A DEDUCTION WHILE COMPUTING THE I NCOME ON INCOME METHOD WITHOUT APPRECIATING THAT SUCH EXPENSES INDICATED GENUINE BUSINESS EXPENDITURE AND THERE WAS NO REASON TO DISALLOW THE SAID AMOUNT. 8] THE LEARNED CIT(A) ERRED IN CONFIRMING THAT THE ASSESSEE HAD WITHDRAWN AMOUNTS FOR INVESTMENTS A MOUNTING TO RS.16,42,200/ - AND HENCE, THE SAME WERE INVESTMENTS WHILE COMPUTING THE INCOME ON ASSET METHOD WITHOUT APPRECIATING THAT SOME OF THE EXPENSES CONSIDERED THEREIN WERE GENUINE BUSINESS EXPENSES AND THE SAME OUGHT TO HAVE BEEN REDUCED. 9] THE L EARNED CIT(A) ERRED IN HOLDING THAT THE CONSTRUCTION EXPENSES OF RS.8,97,731/ - RECORDED IN THE SEIZED DIARIES WERE INVESTMENTS WHILE COMPUTING THE INCOME ON ASSET METHOD WITHOUT APPRECIATING THAT SUCH EXPENSES INDICATED GENUINE BUSINESS EXPENDITURE AND THE RE WAS NO REASON TO CONSIDER THE SAME AS INVESTMENTS. REASON TO CONSIDER THE SAME AS INVESTMENTS. 10] THE LEARNED CIT(A) ERRED IN PASSING THE ORDER WITHOUT APPRECIATING THE CORRECT FACTS OF THE CASE. 4 . THE REVENUE IN ITA NO. 450 /PN/201 3 HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - 1 . CONSIDERING THE FACTS AND LEGAL ASPECT OF THE CASE, THE CIT (A) ERRED TO HOLD THAT THE ASSESSEE COMPANY IS ENTITLED TO CLAIM THE BENEFIT OF DEDUCTION ALLOWED U/S.80IB(3) OF THE INCOME - TAX ACT, 1961, IN RESPECT OF ITS UNACCOUNTED INCOME TOO. 2 . FOLLOWING ROOFING EXPENSE S WERE DISALLOWED IN ASSESSMENT WHILE COMPUTING INCOME ON PROFITS BASIS. A.Y. 2005 06 RS.1,28,894/ - A.Y.2006 07 RS.1,88,79,242/ - A.Y.2007 - 08 RS.1,20,69,729/ - CONSIDERING THE FACTS AND LEGAL ASPECT OF THE CASE, THE CIT (A) ERRED IN CONTRADICT ING HIS OWN FINDINGS THAT COMPUTATION OF TOTAL INCOME OF THE ASSESSEE COMPANY MADE ON INCOME BASIS, AS WELL AS, ON THE BASIS OF ACCRETION TO NET ASSET BASIS HAS BEEN HELD APPROPRIATE. ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 6 3 . IN ASSESSMENT, ON EXAMINATION OF SEIZED DIARIES, IT WAS CONCLUDED THA T FRESH ADVANCES WERE MADE TO VARIOUS PERSONS RELEVANT TO ASSESSMENT YEARS UNDER CONSIDERATION ARE DETAILED HEREUNDER: A.Y.2005 06 RS.2,54,00,000/ - A.Y.2006 - 07 RS.1,96,47,800/ - A.Y.2007 08 RS.30,66,720/ - CONSIDERING THE FACTS AND LEGAL ASPECT OF TH E CASE, THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT, WHILE COMPUTING THE INCOME OF THE ASSESSEE ON INCOME BASIS, THE AO HAS ALREADY CONSIDERED THE EXPENDITURE IN QUESTION AND ASSESSED THE INCOME ONLY ON INCOME BASIS. 4 . ON ACCOUNT OF HAWALA ENTRIES AN ADDITION MADE OF RS.53,27,500/ - FOR ASSESSMENT YEAR 2005 - 06 IS CHALLENGED IN APPEAL. CONSIDERING THE FACTS AND LEGAL ASPECT OF THE CASE, THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT, WHILE COMPUTING THE INCOME OF THE ASSESSEE ON INCOME BASIS, THE AO HAS ALREADY CONSIDERED THE HAWALA ENTRIES IN QUESTION AND ASSESSED THE INCOME ONLY ON INCOME BASIS. 5 . CONSIDERING THE FACTS AND LEGAL ASPECT OF THE CASE, THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT, THE AO HAS RIGHTLY MADE AN ADDITION ON ACCO UNT OF SEED MONEY, BECAUSE, IN ABSENCE OF SEED MONEY ANY BUSINESS CANNOT BE RUN. 6 . THE FOLLOWING ADDITIONS ON ACCOUNT OF CLOSING CASH BALANCES WERE MADE IN ASSESSMENT A.Y.2005 06 RS.8,94,114/ - A.Y.2005 06 RS.8,94,114/ - A.Y.2006 - 07 RS.34,67,654/ - A.Y.2007 08 RS.26,66,064/ - CO NSIDERING THE FACTS AND LEGAL ASPECT OF THE CASE, THE CIT (A) ERRED IN NOT APPRECIATING THE FACT THAT, AO HAS RIGHTLY MADE AN ADDITION ON ACCOUNT OF ACTUAL CASH FOUND DURING SEARCH OPERATIONS CONSIDERING THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE AND THIS NOTHING TO DO WITH MATERIAL SEIZED DURING THE COURSE OF SEARCH. 7 . ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING NETTING OFF OF DEBIT SUSPENSE ENTRIES WITH THE CREDIT SUSPENSE ENTRIES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT RECONCILE THE SAME DURING ASSESSMENT. 8 . THE APPELLANT PRAYS THAT THE ORDER OF THE LEARNED CIT(A) BE VACATED AND THAT OF THE AOS BE RESTORED. 5. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE AT THE OUTSET POINTE D OUT THAT THE ASSESSMENT IN THE CASE WAS MADE PURSUANT TO SEARCH PROCEEDINGS UNDER SECTION 132 OF THE ACT CONDUCTED ON 23.08.2006 . HE FURTHER POINTED OUT THAT THE INSTANT ASSESSMENT YEAR WAS THE YEAR OF SEARCH AND ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 7 ASSESSMENT WAS COMPLETED UNDER SECTION 1 43(3) OF THE ACT. HE REFERRED TO THE PROVISIONS OF SECTION 153B(1)(A) OF THE ACT AND POINTED OUT THAT FOR EARLIER SIX YEARS BEFORE THE SEARCH, PERIOD OF 21 MONTHS FROM THE END OF THE FINANCIAL YEAR IN WHICH LAST AUTHORIZATION OF SEARCH WAS EXECUTED, IS PR OVIDED FOR COMPLETING ASSESSMENT. SINCE THE SEARCH WAS DATED 23.08.2006, WHERE THE FINANCIAL YEAR ENDS ON MARCH, 2007, THE PERIOD OF 21 MONTHS ENDS ON DECEMBER, 2008 . HE FURTHER REFERRED TO THE PROVISIONS OF SECTION 153B(1)(B) OF THE ACT AND POINTED OUT THAT THE PERIOD OF 21 MONTHS AS IN CLAUSE (A) IS ALSO PROVIDED FOR COMPLETING ASSESSMENT OF THE SEARCH YEAR. HE REFERRED TO THE ORDER OF ASSESSING OFFICER AND POINTED OUT THAT THE ASSESSMENT WAS COMPLETED AFTER MAKING REFERENCE FOR SPECIAL AUDIT UNDER SEC TION 142(2A) OF THE ACT IN JUNE, 2009. HOWEVER, THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NOS.309 & 310/PN/2013, IN ITA NOS.448 & 449/PN/2013, RELATING TO ASSESSMENT YEARS 2005 - 06 & 2006 - 07 AND IN ITA NO.447/PN/2013, RELATING TO ASSESSMENT YEAR 2004 - 05, VIDE ORDER DATED 21.12.2016 HAD HELD THAT SINCE NO ASSESSMENT YEAR 2004 - 05, VIDE ORDER DATED 21.12.2016 HAD HELD THAT SINCE NO NOTICE AT THE PRE - DECISIONAL STAGE WAS GIVEN BY THE ASSESSING OFFICER TO THE ASSESSEE BEFORE MAKING REFERENCE UNDER SECTION 142(2A) OF THE ACT, THEN THE SAID PROCEEDINGS WERE VITIATED. ONCE THE PROCEEDING S OF SPECIAL AUDIT ARE HELD TO BE VITIATED, THEN THE TIME PERIOD OF 21 MONTHS EXPIRES IN DECEMBER, 2008 AND THE ASSESSMENT ORDER PASSED IN JUNE, 2009 IS TIME BARRED AND HENCE, IS TO BE CANCELLED. 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. HOWEVER, HE ADMITTED THAT THE TRIBUNAL HAD DECIDED THE ISSUE ON PROVISIONS OF SECTION 142(2A) OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. IN THE FACTS OF THE PRESENT CASE, WHERE SEARCH UNDER SECTION 132 OF THE ACT WAS CARRIED OUT AT THE ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 8 PREMISES OF ASSESSEE ON 23.08.2006 AND THIS BEING THE YEAR OF SEARCH, THE PROVISIONS OF SECTION 153B(1)(B) OF THE ACT ARE APPLICABLE. SECTION 153B(1)(A)&(B) OF THE ACT R EADS AS UNDER: - 153B. (1) NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 153 , THE ASSESSING OFFICER SHALL MAKE AN ORDER OF ASSESSMENT OR REASSESSMENT, (A) IN RESP ECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) OF SUB - SECTION (1) OF SECTION 153A , WITHIN A PERIOD OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE LAST OF THE AUTHORISATIONS FOR SEARCH UNDER SECTION 132 OR FOR REQUISITION UNDER SECTION 132A WAS EXECUTED; (B) IN RESPECT OF THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SEARCH IS CONDUCTED UNDER SECTION 132 OR REQUISITION IS MADE UNDER SECTION 132A , WITHIN A PERIOD OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE LAST OF THE AUTHOR ISATIONS FOR SEARCH UNDER SECTION 132 OR FOR REQUISITION UNDER SECTION 13 2A WAS EXECUTED: ....... 8. AS PER CLAUSE (A) TO SECTION 153B(1) OF THE ACT, THE TIME LIMIT FOR COMPLETION OF ASSESSMENT FOR SEARCH CASES IS PROVIDED. AS PER CLAUSE (A), IN RESPECT OF EACH OF THE ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS PRIO R TO THE YEAR OF OF THE ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS PRIO R TO THE YEAR OF SEARCH, THE ASSESSMENT HAD TO BE COMPLETED WITHIN PERIOD OF 21 MONTHS FROM THE END OF FINANCIAL YEAR IN WHICH THE LAST OF THE AUTHORIZATION FOR SEARCH UNDER SECTION 132 OF THE ACT OR FOR REQUISITION UNDER SECTION 132A OF THE ACT WAS EXECUT ED. CLAUSE (B) DEALS WITH ASSESSMENT PROCEEDINGS RELATING TO SEARCH YEAR I.E. THE YEAR IN WHICH THE SEARCH WAS CONDUCTED UNDER SECTION 132 OF THE ACT OR REQUISITION WAS MADE UNDER SECTION 132A OF THE ACT AND IT IS PROVIDED THAT ASSESSMENT HAS TO BE COMPLE TED WITHIN PERIOD OF 21 MONTHS FROM THE END OF FINANCIAL YEAR IN WHICH THE LAST OF THE AUTHORIZATION FOR SEARCH UNDER SECTION 132 OF THE ACT OR REQUISITION UNDER SECTION 132A OF THE ACT. SO, FOR BOTH THE LIMBS I.E. FOR ASSESSMENT YEARS FALLING WITHIN PERI OD OF SIX ASSESSMENT YEARS UNDER SECTION 153A OF THE ACT AND FOR COMPLETING ASSESSMENT OF THE SEARCH YEAR , IDENTICAL TIME LIMIT FOR COMPLETION OF ASSESSMENT IS PROVIDED. WE HAVE ALREADY ADJUDICATED THE APPEALS RELATING TO SIX ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 9 ASSESSMENT YEARS PRIOR TO THE YEAR OF SEARCH VIDE ORDER DATED 21.12.2016. THE ISSUE IN THE SAID APPEALS WAS WHETHER WHERE NO NOTICE WAS GIVEN FOR CONDUCTING SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT BY THE ASSESSING OFFICER AT PRE - DECISIONAL STAGE, THEN THE PROCEEDINGS FOR FAILU RE TO FOLLOW PRINCIPLES OF NATURAL JUSTICE AND RULE OF AUDI ALTERAM PARTEM AND NON - COMPLIANCE OF PRINCIPLES OF NATURAL JUSTICE, VITIATES THE PROCEEDINGS AND THE ASSESSMENT ORDER PASSED CONSEQUENT TO THE RECEIPT OF SPECIAL AUDIT WAS BEYOND THE PERIOD OF LIM ITATION AND HENCE, THE SAME WAS INVALID AND BAD IN LAW. THE ISSUE HAS BEEN DECIDED FOLLOWING THE RATIO LAID DOWN BY THE APEX COURT IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (2008) 300 ITR 403 (SC) AND IT HAS BEEN HELD AS UNDER: - 41. APPLYING THE PRINCIP LES LAID DOWN BY THE APEX COURT IN SAHARA INDIA (FIRM) VS. CIT AND ANOTHER (SUPRA), WE HOLD THAT WHERE NO SHOW CAUSE NOTICE WAS GIVEN TO THE ASSESSEE BEFORE MAKING THE ORDER PROPOSING CONDUCT OF SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT, IN THE PRESEN T CASE AND THE CIT HAVING APPROVED THE SAID PROPOSAL THOUGH AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE IS VITIATED BECAUSE OF NON - COMPLIANCE WITH THE PRINCIPLES OF NATURAL JUSTICE. ACCORDINGLY, THE ASSESSMENT ORDER PASSED IN THE FACTS OF PRESENT CASE IS BEYOND THE PERIOD OF LIMITATION AND HENCE, THE SAME IS INVALID AND BAD IN LAW. LIMITATION AND HENCE, THE SAME IS INVALID AND BAD IN LAW. 42. ANOTHER POINT RAISED BY BOTH THE AUTHORITIES WAS IN RESPECT OF EXTENSION GRANTED. WE ARE NOT GOING INTO THE SAID FACTUAL ASPECTS, IN VIEW OF OUR HOLDING THAT THE INITIAL ORDER AT THE PRE - DECISIONAL STAGE PASSED BY THE ASSESSING OFFICER WITHOUT SHOW CAUSING THE ASSESSEE AS TO WHETHER ANY SPECIAL AUDIT SHOULD BE CONDUCTED IN HIS CASE UNDER SECTION 142(2A) OF THE ACT IS BAD IN LAW. HENCE, CONSEQUENTIAL ORDERS OF EXT ENSION, IF ANY BECOME OF NO CONSEQUENCE. SINCE, WE HAVE DECIDED THE JURISDICTIONAL ISSUE ON MERITS, THE OTHER GROUNDS OF APPEAL BECOMES ACADEMIC. 9. THE APPEAL FOR INSTANT ASSESSMENT YEAR RELATES TO THE YEAR OF SEARCH, WHEREIN ALSO SPECIAL AUDIT UNDER S ECTION 142(2A) OF THE ACT WAS PROPOSED TO BE CARRIED OUT BY THE ASSESSING OFFICER. HOWEVER, NO NOTICE WAS GIVEN TO THE ASSESSEE AT THE PRE - DECISIONAL STAGE AND FOLLOWING THE PRINCIPLE LAID DOWN IN ASSESSEES OWN CASE IN EARLIER YEARS, WE HOLD THAT IN THE ABSENCE OF SHOW CAUSE NOTICE GIVEN BEFORE MAKING THE ORDER PROPOSING CONDUCT OF SPECIAL AUDIT UNDER SECTION 142(2A) OF THE ACT AND THE CIT HAVING APPROVED THE SAID PROPOSAL, THOUGH AFTER GIVING OPPORTUNITY OF HEARING TO THE ASSESSEE, IS VITIATED BECAUSE OF NON - ITA NO . 31 1 / P U N /201 3 ITA NO. 450 /P U N/201 3 VILSONS PARTICLE BOARD INDUSTRIES LTD. 10 COMPLIANCE TO THE PRINCIPLES OF NATURAL JUSTICE. CONSEQUENTLY, THE ASSESSMENT ORDER PASSED WAS BEYOND THE PERIOD OF LIMITATION AND HENCE, THE SAME IS INVALID AND BAD IN LAW. ACCORDINGLY, WE HOLD SO. THE PRELIMINARY ISSUE RAISED BY THE ASSESSEE IS T HUS, ALLOWED AND THE ISSUE ON MERITS BECOMES ACADEMIC. THE APPEAL OF THE REVENUE ON MERITS IS DISMISSED BEING INFRUCTUOUS. 1 0 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 20 TH DAY OF JANUARY, 2017 SD/ - SD/ - ( ANIL CHATURVEDI ) ( SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; D ATED : 20 TH JAN UARY , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE C I T (A), KOLHAPUR ; 4. / THE C I T - I/ II, KOLHAPUR / CIT (CENTRAL), PUNE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRET ARY , / ITAT, PUNE