SHRIMATI SANJANA MITTAL, FEROZPUR CANTT V. DEPUTY COMMISSIONER OF INCOME TAX,CENTRAL CIRCLE-2, JALANDHAR

ITA 487/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6240 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 04-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAVANI SHANKAR
• Keywords: Search and seizure; Document seized; Principle of natural justice; Deemed dividend; Documents seized
• Section: 153A; 2(22)(e); 132

Judgement Text

P A G E | 1 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SHRI. N.K. SAINI, VICE PRESIDENT AND SHRI. RAVISH SOOD, JUDICIAL MEMBER ITA NO. 487/ASR/2018 (ASSESSMENT YEAR: 2014-15) SMT. SANJANA MITTAL H.NO. 15-17M, STREET NO. 4, FEROZPUR CANTT. PAN AJWPM1931B VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 JALANDHAR. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI. ASHRAY SARNA, A.R REVENUE BY: SHRI BHAVANI SHANKAR, D.R DATE OF HEARING: 11.01.2019 DATE OF PRONOUNCEMENT: 11 .03.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER PASSED BY THE CIT(APPEALS)-5, LUDHIANA, DATED 27.07.2018, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASS ED BY THE A.O UNDER SEC. 153A R.W.S.143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT I.T. ACT), DATED 29.12.2017 FOR A.Y. 2014-15. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FO LLOWING GROUNDS OF APPEAL : 1. (A) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, HONBLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDICTION AND FRAMING THE IMPUGNED ASSE SSMENT ORDER U/S 153A/143(3) OF THE ACT IS BAD IN LAW AND AGAINST TH E FACTS AND CIRCUMSTANCES OF THE CASE AND IS NOT SUSTAINABLE ON VARIOUS LEGAL AND FACTUAL GROUNDS. (B) THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ADDITIONS MADE IN THE IMPUGNED ORDER ARE BEYOND JURISDICTION AND ILLEGAL ALSO FOR THE REASON THAT THESE COULD NOT HAVE BEEN MADE SINCE NO INCRIMINATING MAT ERIAL HAS BEEN FOUND AS A RESULT OF SEARCH WARRANTING IMPUGNED ADDITION. 2. (A) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, HONBLE CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING THE ACTION OF LD. AO IN P A G E | 2 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 MAKING ADDITION OF RS. 1,00,000/- AS DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSE SSEE AND WITHOUT OBSERVING THE PRINCIPLES OF NATURAL JUSTICE (B) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, HONBLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. A.O IN MAKING ADDITION U/S 2(22)(E) OF THE ACT WITHOUT CON SIDERING THE FACT THAT PAYMENT IS MADE OUT OF THE RUNNING ACCOUNT OF ASSES SEE IN THE BOOKS OF M/S BHAGWATI LACTO VEGETARIAN EXPORTS PVT. LTD. (C) THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES O F THE CASE, HONBLE CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. A.O IN MAKING ADDITION U/S 2(22)(E) OF THE ACT WITHOUT CON SIDERING THE FACT THAT THE ALLEGED TRANSACTION IS PURELY A COMMERCIAL TRANSACT ION IN THE NATURE OF COMMISSION PAID TO THE ASSESSEE. 3. THAT THE APPELLANT CRAVES TO LEAVE TO ADD, MODIFY, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND AL L THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. BRIEFLY STATED, SEARCH AND SEIZURE PROCEEDINGS U NDER SECTION 132(1) OF THE I.T ACT, WERE CARRIED OUT AT THE RESI DENTIAL PREMISES OF THE ASSESSEE ON 11.02.2016. APART THEREFROM, SEARCH OPE RATIONS WERE ALSO CARRIED OUT IN THE CASE OF OTHER CONCERNS/PERSONS O F BHAGWATI GROUP, FEROZEPUR. NOTICE UNDER SECTION 153A OF THE I.T ACT WAS ISSUED TO THE ASSESSEE ON 13.06.2017. IN COMPLIANCE, THE ASSESSEE FILED HER RETURN OF INCOME ON 09.07.2017, DISCLOSING TOTAL INCOME A T RS. 4,57,530/-. 3. DURING THE COURSE OF THE SEARCH AND SEIZURE PROC EEDINGS CARRIED OUT AT THE BUSINESS PREMISES OF M/S BHAGWATI LACTO VEGETARIAN EXPORTS PVT. LTD., FEROZEPUR CANTT. AND M/S BHAGWAT I LACTO FOODS PVT. LTD., CERTAIN INCRIMINATING DOCUMENTS IN THE S HAPE OF TYPED BALANCE SHEETS/TRIAL BALANCES ETC. IN THE COMPUTERS INSTALLED AT THE RESPECTIVE PREMISES OF THE AFOREMENTIONED CONCERNS WERE FOUND AND SEIZED. ON A PERUSAL OF THE SEIZED DOCUMENTS, IT WA S OBSERVED THAT MOST OF THE FIGURES OF RAISING OF FUNDS AS PER THE SEIZED DOCUMENTS DID NOT TALLY WITH THE AUDITED BALANCE SHEETS OF THE SAID RESPECTIVE COMPANIES. FURTHER, IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE WAS A SUBSTANTIVE SHAREHOLDER IN THE AFOREMENTIONED COM PANIES. IT WAS NOTICED BY THE A.O THAT THE ASSESSEE HAD RAISED A F RESH LOAN OF RS. P A G E | 3 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 1,00,000/- FROM M/S BHAGWATI LACTO VEGETARIAN EXPOR TS PVT. LTD. IN THE BACKDROP OF THE AFORESAID FACTS THE A.O CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE AFORESAID LOAN OF RS. 1,00,00 0/- MAY NOT BE ASSESSED AS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T ACT IN HER HANDS. THE EXPLANATION TENDER ED BY THE ASSESSEE IN HER ATTEMPT TO PERSUADE THE A.O TO CONCLUDE THAT NO ADDITION UNDER SECTION 2(22)(E) WAS CALLED FOR IN HER HANDS, HOWEV ER DID NOT FIND FAVOUR WITH HIM. THE A.O HOLDING A CONVICTION THAT THE ASSESSEE HAS RECEIVED A LOAN FROM A COMPANY IN WHICH SHE HAD SUB STANTIAL INTEREST, THUS MADE AN ADDITION OF RS. 1,00,000/- UNDER SECTI ON 2(22)(E) OF THE IT ACT. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). HOWEVER, THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTIONS ADVANCED BY THE ASSESSEE UPHELD THE ADD ITION OF RS. 1,00,000/- MADE BY THE A.O UNDER SECTION 2(22)(E) O F THE I.T ACT. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF T HE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE, AT THE VERY OUTSET ON THE HEARING OF THE APPEAL SUBMITTED THAT AS NO INCR IMINATING MATERIAL PERTAINING TO THE ASSESSEE WAS FOUND DURING THE COU RSE OF SEARCH AND SEIZURE PROCEEDINGS, THEREFORE, NO ADDITION UNDER S ECTION 2(22)(E) WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. IT WAS AVE RRED BY THE LD. A.R THAT ON THE DATE WHEN THE SEARCH AND SEIZURE PROCEE DINGS WERE CONDUCTED NO ASSESSMENT PROCEEDINGS WERE PENDING IN THE CASE OF THE ASSESSEE. IN SUM AND SUBSTANCE, IT WAS THE CLAIM OF THE LD. A.R THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND DUR ING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS, NO ADDITION COULD H AVE BEEN MADE IN RESPECT OF THE UNABATED ASSESSMENT IN THE HANDS OF THE ASSESSEE. IN SUPPORT OF THE AFORESAID CONTENTION THE LEARNED A.R PLACED RELIANCE ON P A G E | 4 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL) . APART THEREFROM, SUPPORT WAS ALSO DRAWN BY HIM FROM THE ORDER OF THE ITAT, DELHI IN THE CASE OF JACKSON LTD., VS. ACIT (ITA NO. 6432/DEL/2014) , DATED 27.09.2018. IN THE BACKDROP OF HIS AFORESAID DELIBERATIONS, IT WAS SUBMITTED BY THE LD. A.R THAT THE ADDITION OF RS. 1,00,000/- MADE BY THE A.O COULD NOT BE SUSTAINED AND WAS LIABLE TO BE VACATED. 6. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTA TIVE (FOR SHORT D.R) RELIED UPON THE ORDERS OF THE LOWER AUTHORITIE S. IT WAS SUBMITTED BY THE LEARNED D.R THAT THE LOWER AUTHORITIES AFTER NECESSARY DELIBERATIONS HAD RIGHTLY MADE AN ADDITION OF RS. 1 ,00,000/- IN THE HANDS OF THE ASSESSEE. 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIE S AND THE MATERIAL AVAILABLE ON THE RECORD. THE LD. D.R ON A SPECIFIC QUERY BY THE BENCH, HAD CATEGORICALLY STATED THAT THE LOAN OF RS.1,00,0 00/- THAT WAS RAISED BY THE ASSESSEE FROM M/S BHAGWATI LACTO VEGETARIAN EXPORTS PVT. LTD., FEROZEPUR WAS DULY RECORDED IN THE LATTERS AU DITED BALANCE SHEET FOR THE YEAR UNDER CONSIDERATION AND THE ADD ITION OF RS. 1 LAC TOWARDS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF TH E IT ACT WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING TH E COURSE OF THE SEARCH & SEIZURE PROCEEDINGS. 8. WE FIND FROM THE PERUSAL OF THE ORDER PASSED BY THE LD. CIT(A) THAT THE ASSESSEE WAS A DEBTOR OF THE AFOREMENTIO NED COMPANY VIZ. M/S BHAGWATI LACTO VEGETARIAN EXPORTS PVT. LTD., FE ROZPUR IN THE FINANCIAL YEAR 2012-13. RATHER, A PERUSAL OF THE LE DGER ACCOUNT OF THE ASSESSEE AS APPEARING IN THE BOOKS OF ACCOUNTS OF THE AFORESAID COMPANY VIZ., M/S BHAGWATI LACTO VEGETARIAN EXPORTS PVT. LTD., FEROZPUR REVEALS THAT SHE HAD RECEIVED AN AMOUNT OF RS. 1,00,000/-, P A G E | 5 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 VIDE CHEQUE NO. 367197 DRAWN ON CC A/C NO. 65041938 456 OF THE COMPANY WITH STATE BANK OF PATIALA, FEROZPUR CANTT. APART THEREFROM, A PERUSAL OF THE ORDER PASSED BY THE A.O FORTIFIES THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH AND SEIZURE PROCEEDINGS. 9. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDER CONSIDERATION, AND FIND THAT OUR INDULGENCE IN THE PRESENT APPEAL HAS BEEN SOUGHT FOR ADJUDICATING AS TO WHETHER IN THE CASE OF THE A SSESSEE WHERE THE ASSESSMENT PROCEEDINGS HAD NOT ABATED AT THE TIME W HEN THE SEARCH AND SEIZURE PROCEEDINGS WERE CONDUCTED, ANY ADDITIO N COULD VALIDLY BE MADE IN THE ABSENCE OF ANY INCRIMINATING MATERIAL F OUND DURING THE COURSE OF THE SEARCH AND SEIZURE PROCEEDINGS. ADMIT TEDLY, IN THE CASE BEFORE US NO INCRIMINATING MATERIAL WAS FOUND DURIN G THE COURSE OF THE SEARCH AND SEIZURE PROCEEDINGS CONDUCTED UNDER SECTION 132 OF THE I.T. ACT ON 11.02.2016. APART THEREFROM, THE FA CT THAT THE ASSESSMENT PROCEEDINGS IN THE CASE OF THE ASSESSEE WERE NOT ABATED AT THE TIME WHEN THE SEARCH AND SEIZURE PROCEEDINGS WE RE CONDUCTED HAS ALSO NOT BEEN CONTROVERTED BY THE LEARNED D.R IN TH E COURSE OF THE PROCEEDINGS BEFORE US. 10. WE HAVE DELIBERATED AT LENGTH ON THE ISSUE UNDE R CONSIDERATION, AND ARE OF THE CONSIDERED VIEW THAT IN A CASE WHERE NO ASSESSMENT PROCEEDINGS ARE PENDING ON THE DATE OF THE SEARCH A ND SEIZURE PROCEEDINGS, THE ASSESSMENT UNDER SECTION 153A CAN BE CARRIED OUT ONLY ON THE BASIS OF SEIZED MATERIAL. IN A CASE, WH ERE NO INCRIMINATING MATERIAL IS UNEARTHED DURING THE COURSE OF SEARCH P ROCEEDINGS AND THE ASSESSMENT PROCEEDINGS REMAIN UNABATED AS ON THE SA ID DATE, NO ADDITIONS CAN BE VALIDLY MADE IN THE HANDS OF THE A SSESSEE. OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. KABUL CHAWLA (2016) 38 0 ITR 573 (DEL) . P A G E | 6 ITA NO. 487/ASR/2018 AY 2014-15 SANJANA MITTAL. VS. DCIT, CENTRAL CIRCLE-2 APART THEREFROM, A SIMILAR VIEW HAD ALSO BEEN TAKEN BY THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. MURLI A GRO PRODUCT (ITA NO. 36/2009) (BOM) AND COMMISSIONER OF INCOME-TAX VS. CONTINENTAL WAREHOUSING CORPORATION (2015) 374 ITR 645 (BOM) . IN THE AFOREMENTIONED CASES, IT HAS BEEN OBSERVED BY THE H IGH COURT THAT AS ON THE DATE OF THE INITIATION OF SEARCH AND SEIZURE PROCEEDINGS UNDER SECTION 132 OF THE IT ACT, AS NO PROCEEDINGS FOR TH E YEAR UNDER CONSIDERATION WERE PENDING, THEREFORE, IN THE ABSEN CE OF ANY INCRIMINATING EVIDENCE FOUND DURING THE COURSE OF S EARCH AND SEIZURE PROCEEDINGS NO ADDITION/DISALLOWANCE COULD HAVE BEE N MADE IN RESPECT OF THE UNABATED ASSESSMENT OF THE ASSESSEE FOR THE SAID YEAR. IN THE BACKDROP OF THE AFORESAID SETTLED POSITION O F THE LAW, WE ARE OF THE CONSIDERED VIEW THAT AS ON THE DATE OF THE SEAR CH AND SEIZURE PROCEEDINGS NO ASSESSMENT PROCEEDINGS WERE PENDING IN THE CASE OF THE ASSESSEE, THEREFORE, IN THE ABSENCE OF ANY INCR IMINATING MATERIAL HAVING BEEN FOUND IN THE COURSE OF SUCH PROCEEDINGS NO ADDITION COULD HAVE BEEN VALIDLY MADE IN THE HANDS OF THE ASSESSEE . WE THUS NOT BEING ABLE TO PERSUADE OURSELVES TO SUBSCRIBE TO TH E VIEW TAKEN BY THE CIT(A) WHO HAD UPHELD THE ORDER OF THE A.O, THUS SE T ASIDE HIS ORDER AND VACATE THE ADDITION OF RS.1,00,000/- THAT WAS S USTAINED BY HIM. 11. THE APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRONOUNCED IN THE OPEN COURT ON 11/03/2019 SD/- SD/- ( N.K. SAINI) (RAVISH SOOD) VICE PRESIDENT JUDICIAL ME MBER PLACE : CHANDIGARH; DATED 11.03.2019