M/s Magnum International Ltd., New Delhi V. ACIT, New Delhi

ITA 4968/DEL/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4223 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 19-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Principle of natural justice; Deemed dividend
• Section: 143(3); 153A; 234B; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI ANADI N. MISHRA, ACCOUNTANT MEMBER ITA NO. 4968/DEL/2012 AY: 2004- 05 MAGNUM INTERNATIONAL LTD. VS. ACIT, (PRESENTLY KNOWN AS MAGNUM STEEL & POWER LTD. CENT. CIRCLE 16 312, ESSEL HOUSE, 10, ASAF ALI ROAD, NEW DELHI. NEW DELHI 110 002. PAN AAACM8549B (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAKESH GUPTA, A DV. SHRI SOMIL AGGARWAL, ADV. RESPONDENT BY : MS. D EEPIKA MITTAL, CIT(DR) PER ANADI N. MISHRA, ACCOUNTANT MEMBER ORDER THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 13.08.2012 PASSED BY THE LD.CIT(A)-XXXII, DELHI FOR ASSESSMEN T YEAR 2004-05 ON THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) ERRED IN HOLDING THAT THERE WAS NO INFIRMITY IN THE ACTION O F THE A.O. ASSUMING JURISDICTION AND PASSING ORDER U/S 153A/143 (3) OF THE INCOME-TAX ACT DESPITE THE FACT THAT THERE WAS NO UNDISCLOSED INCO ME AND NO MATERIALS FOUND DURING THE SEARCH SHOWING UNDISCLOSED INCOME: 2. THE LD. CIT(A) ERRED IN DECLINING TO JUSTIFY AND FA IRLY ADJUDICATE APPELLANTS CONTENTION THAT SINCE THERE WAS NO SEPARATE SEARCH WARRANT IN APPELLANTS CASE THE SEARCH OPERATION U/S 132 WAS ILLEGAL: ITA NO. 4968/DEL/2012 A.Y. 2004-05 2 3. THE LD. CIT(A) ERRED IN HOLDING THAT THERE WAS NO V IOLATION OF THE PRINCIPLES OF NATURAL JUSTICE BY THE AO IN COMPLETI NG THE ASSESSMENT WITHOUT GIVING ADEQUATE OPPORTUNITY AND ISSUING SHO W CAUSE REGARDING THE ADDITIONS MADE. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 19,82,660/- ON ACCOUNT OF DEEMED DIVIDEND U/S 2 (22) (2) OF THE I. T. ACT: 5. THE LD. CIT(A) ERRED IN IGNORING AND NOT CONSIDERIN G THE MATERIAL EVIDENCES TO THE EFFECT THAT THE AMOUNT WAS RECEIVE D AS SHARE APPLICATION MONEY AND WAS NOT LOAN OR ADVANCE: 6. THE LD. CIT(A) ERRED IN CONFIRMING THE INTEREST CHA RGED BY THE AO U/S 234A AND 234B OF THE ACT. 7. APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR RESCIND ANY OF THE GROUNDS OF APPEAL. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE IS C ONTESTING THE ACTION OF THE LD. ASSESSING OFFICER (AO) IN ASSUMING JURISDICTION U/S 153A OF I.T. ACT DESPITE THE FACT THAT NO MATERIALS WERE FOUND DURING THE SEARCH SHOW ING UNDISCLOSED INCOME. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY IS IN THE BUSINESS OF COMPUTER HARDWARE, COMPUTER SOFTWARE AND TRADING IN FOREIGN EXCHANGE CURRENCY. IN THIS CASE SEARCH AND SEIZURE OPERATION U/S 132 OF THE INCOME- TAX ACT WAS CONDUCTED ON 26.3.2010. SUBSEQUENT TO THE SEARCH, NOTICE U/S 153 A OF THE ACT WAS ISSUED ON 20.4.2011 ASKING THE APPELLANT TO FILE THE RETURN O F INCOME. ASSESSEE FILED A RETURN OF INCOME ON 8.9.2011 SHOWING TOTAL INCOME OF RS. 4 7,36,871/-. AO COMPLETED THE ASSESSMENT U/S 153A READ WITH SECTION 143(3) OF TH E I.T. ACT, 1961 AND ADDED AN AMOUNT OF RS. 19,82,660/- AS DEEMED DIVIDEND U/S 2( 22)(E) OF THE ACT IN ASSTT. YEAR 2004-05. AGGRIEVED WITH THE ORDER OF THE ASSESSING OFFICER, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) AND SUBMITTED THAT THE JURISDICTION ASSUMED BY THE AO U/S 153 IS NOT AS PER LAW VIDE ORDER DATED 13.8. 2012, LD. CIT(A) DISMISSED THIS GROUND OF APPEAL BY HOLDING THAT ASSESSMENT U/S 153 A IS MANDATORY EVEN WHERE NO ITA NO. 4968/DEL/2012 A.Y. 2004-05 3 INCRIMINATING MATERIAL IS FOUND IN THE COURSE OF SE ARCH U/S 132. THE ASSESEE IS IN APPEAL BEFORE US AGAINST ORDER OF LD. CIT(A) AND TH E FIRST GROUND OF APPEAL IS ON THIS ISSUE. 2.1. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE R ELEVANT RECORDS. AFTER PERUSING THE ORDER OF LD. CIT(A), WE FIND THAT THE RELEVANT DISCUSSION IS AT PARAGRAPH 2.2 OF ORDER DATED 13.8.2012 OF LD. CIT(A). THE LD . CIT(A) HAS NOT DISPUTED THE FACT CLAIMED BY THE ASSESEE THAT NO INCRIMINATING M ATERIAL WAS FOUND DURING SEARCH U/S 132 OF I.T. ACT SHOWING UNDISCLOSED INCOME. THE LD. AR OF THE ASSESEE PLACED RELIANCE ON ORDERS OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA 380 ITR 573 (DELHI). THE LD. CIT(DR) WHO APPEARED O N BEHALF OF REVENUE SUPPORTED THE ORDERS OF LOWER AUTHORITY ; BUT DID N OT DISPUTE THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND AGAINST THE ASSESS EE AT THE TIME OF SEARCH U/S 132 OF I.T. ACT SHOWING ANY UNDISCLOSED INCOME. THUS, T HE ADDITION OF RS. 19,82,660/- AS DEEMED DIVIDEND U/S 2(22)(E) OF I.T. ACT IS MADE BY ASSESSING OFFICER NOT ON THE BASIS OF ANY INCRIMINATING MATERIAL FOUND IN THE CO URSE OF SEARCH U/S 132 OF I.T. ACT. UNDER THESE FACTS AND CIRCUMSTANCES, WE FIND THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESEE AND AGAINST THE REVENUE BY THE DECISION DATED 28.8.2015 OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA 380 ITR 573 (DELHI) WHEREIN THE HONBLE JURISDICTIONAL HIGH COURT HELD 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 T HE AFOREMENTIONED ITA NOS. 707, 709 AND 713 OF 2014 OF DECISIONS, THE LEGAL PO SITION THAT EMERGES IS AS UNDER: ITA NO. 4968/DEL/2012 A.Y. 2004-05 4 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUE D TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIAT ELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO B E 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 TAK ES 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 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 A DDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE O F 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 THA T THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WI TH THE SEIZED MATERIAL. OBVIOUSLY AN ITA NOS. 707, 709 AND 713 OF 2014 OF A SSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIA L. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESS MENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABAT ED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REAS SESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERN ED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARAT ELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. ITA NO. 4968/DEL/2012 A.Y. 2004-05 5 VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WI TH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASI S OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR R EQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE 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 STO OD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEA RCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 2.2. WE FURTHER FIND THAT ISSUE IS ALSO COVERED B Y DECISION OF HONORABLE JURISDICTIONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX V/S. KURELE PAPER MILLS P. LTD. 380 ITR 571 (DELHI) . HONOURABLE SUPREME COURT HAS DISMISSED THE SPECIAL LEAVE PETITION FILE D BY THE DEPARTMENT AGAINST THIS DECISION OF HONOURABLE DELHI HIGH COURT. 2.3 RESPECTFULLY FOLLOWING THE BINDING PRECE DENTS OF THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. KABUL CHAWLA ( SUPRA) AND IN PRINCIPAL COMMISSIONER OF INCOME TAX V/S. KURELE PAPER MILLS P. LTD. ( SUPRA ) , WE ALLOW THE FIRST GROUND OF APPEAL AS ADDITION OF RS. 19,82,660/- AS DEEMED DIVIDEND U/S 2(22)(E) OF I.T. ACT IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND OR SEIZED DURING THE COURSE OF SEARCH; AND THE ADDITION IS BEYOND THE SCOPE O F PROVISIONS OF SECTION 153A OF THE ACT. HENCE, THE AFORESAID ADDITION OF RS. 19,8 2,660/- IS HEREBY DELETED. 2.4. AS THE ADDITION OF RS. 19,82,660/- ALREADY ST ANDS DELETED ; GROUNDS 2,3,4 AND 5 OF APPEAL ARE INFRUCTUOUS. HENCE THESE GROUNDS AR E NOT ADJUDICATED. 2.5. GROUND 6 OF APPEAL IS CONSEQUENTIAL IN NATURE. ITA NO. 4968/DEL/2012 A.Y. 2004-05 6 3. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLO WED. SD/- SD/- (H.S. SIDHU) (H.S. SIDHU) (H.S. SIDHU) (H.S. SIDHU) (A (A(A (ANADI NADI NADI NADI N. MISHRA) N. MISHRA) N. MISHRA) N. MISHRA) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCO UNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED: THE 5 TH AUGUST, 2016 *VEENA* COPY OF THE ORDER FORWARDED TO: 1. APPELLANT; 2. RESPONDENT; 3. PRINCIPAL CIT; 4. CIT(A); 5. DR; 6. GUARD FILE BY ORDER ASSTT. REGISTRAR