ACIT CC 38, MUMBAI V. B.R. MACHINE TOOLS P.LTD, MUMBAI

ITA 5118/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9195 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 17-03-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 11-07-2013
• Court: TRIBUNAL
• Assessee Lawyers: S J SINGH SHRI DHARMESH SHAH
• Section: 143(3); 153A; 32; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 5118 /MUM/201 3 ASSESSMENT YEAR: - 2004 - 05 ITA NO. 5119/MUM/2013 ASSESSMENT YEAR: - 2006 - 07 ITA NO. 5120/MUM/2013 ASSESSMENT YEAR: - 2007 - 08 ACIT, CENT. CIR. 38, R. NO. 32(1), GROUND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS.` M/S B.R. MACHINE TOOLS PVT. LTD. D - 1 ST FLOOR, OBEROI GARDEN ESTATE, CHANDIVALI FARMS ROAD, ANDHERI (EAST) MUMBAI 400 072. APPELLANT RESPONDENT ORDER PER BENCH, THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGAINST THE THREE SEPARATE ORDERS OF CIT ( A) ALL DATED 3.4.2013 FOR A.Y. 2004 - 05, 2006 - 07 AND 2007 - 08 RESPECTIVELY. THE REVENUE HAS RAISED COMMON GROUNDS IN ALL THESE APPEALS EXCEPT THE DIFFERENCE OF THE AMOUNT. THE GROUND S RAISED FOR A.Y. 2004 - 05 ARE AS UNDER: - REVENUE BY SHRI S.J. SINGH ASSESSEE BY SHRI DHARMESH SHAH DATE OF HEARING 17 .03.2015 DATE OF PRONOUNCEMENT 25 .03.2015 M/S B.R. MACHINE TOOLS PVT. LTD. 2 | P A G E (1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING ONLY 5% OF LABOUR CHARGES, AS INCOME WHEN ASSESSEE DID NOT HAVE ANY PROOF AT ALL TO SHOW THAT IT HAS INCURRED ANY EXPENSES ON EARNING SUCH RECEIPTS, ESPECIALLY WHEN SUCH LABOUR CHARGE RECEIPTS IS NOT THE MAIN BUSINESS OF THE ASSESSEE (2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN ESTIMATING 5% INCOME ON LABOUR CHARGES RECEIPTS WHEN INCOME FROM SUCH ACTIVITY IS NO MAIN BUSINESS OF THE ASSESSEE AND THUS ESTIMATION CANNOT BE MADE ON SUCH OTHER INCOME. (3) WHETHER ON THE FACTS IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT TREATING RS. 6,75, 000/ - AS INCOME OF THE ASSESSEE WHEN ASSESSEE HAS NOTHING AT ALL TO PROVE THAT THE MONEY REPRESENTED ADVANCED FOR LAND AND THAT THIS IS AN EXISTING LIABILITY. 2. A SEARCH & SEIZURE ACTIO N U/S 1 32 OF THE INCOME TAX ACT WAS CARRIED OUT IN THE CASE OF M/S BOMBAY RAYON FASHIONS LIMITED, ITS CHAIRMAN, MANAGING DIRECTOR, EXECUTIVE VICE CHAIRMAN AND EXECUTIVE DIRECTOR ON 12.08.2009. DURING THE COURSE OF SEARCH A LONG TERM CAPITAL GAIN WAS DISCL OSED IN THE HANDS OF THE ASSESSEE COMPANY FOR THE A.Y. 2008 - 09 IN RESPECT OF SALE TRANSACTION OF LAND NOT RELEVANT TO THE A.Y. UNDER CONSIDERATION. CONSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S 153C TO THE ASSESSEE AND COMPLETED THE ASSESSMENT U /S 143(3) R.W.S 153C INCLUDING THE A.YS UNDER CONSIDERATION ON 29.12.2011 WHEREBY INTER ALIA THE ADDITION OF 5% OF THE SALE BEING ICOME, UNSSERCURED LOAN U/S 68 OF THE INCOME TAX ACT OF RS. 17,46,853/ - , LONG TERM CAPITAL GAIN ON SALE OF LAND OF RS. 19,00, 334/ - , CAPITALIZATION OF LAND OF RS. 2,40,000/ - , CAPITALIZATION OF PLANT AND MACHINERY OF RS. 7,44,400/ - AND EXPENDITURE OF CAPITAL WORK IN PRO GRESS ON LAND OF RS. 5,63,033/ - ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. ON APPEAL, THE CIT(A) HAS GRANTED PART RELIEF ON MERITS BY DELETING CERTAIN ADDITIONS MADE BY ASSESSING OFFICER. HOWEVER, THE LEGAL OBJECTION M/S B.R. MACHINE TOOLS PVT. LTD. 3 | P A G E RAISED BY ASSESSEE THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE SEARCH INDICATING ANY UNDISCLOSED INCOME OF THE ASSESSEE FOR THE YEARS UNDE R CONSIDERATION AND THE ASSESSMENT U/S 143( 3) WAS ALREADY COMPLETED THEN T HE ASSESSING OFFICER CANNOT MAKE ADDITION WHILE FRA MING ASSESSMENT U/S 143(3) R.W. S 153C. THUS BOTH ASSESSEE AS WELL AS REVENUE CHALLENGED THE IMPUGNED ORDER OF CIT(A)|. 4. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THE ISSUE OF SUSTAINABILITY OF THE ADDITION MADE BY THE ASSESSING OFFICER WAS RAISED BY THE ASSESSEE IN ITS APPEAL IN ITA NO. 4174 TO 4177 OF 20 13 HAS BEEN CONSIDERED AND DECIDED BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL VIDE ORDER DATED 6.12.2013 IN PARA 15 TO 24 AS UNDER: - 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND HAVE PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND HAVE ALSO P ERUSED THE XEROX COPIES OF PANCHNAMA AND OTHER DOCUMENTS RELIED UPON BY THE AO, AS PLACED BEFORE US. 16. TO INVOKE THE JURISDICTION FOR ASSESSMENT IN CASE OF SEARCH OR REQUISITION THERE ARE TWO ASPECTS, THE SEARCHED PERSON ON WHOM NOTICE U/S 153A SHALL BE SERVED AND AS A CONSEQUENCE OF WHICH ASSESSMENT U/S 143(3)/153A SHALL BE MADE. THE OTHER ASPECT IS THAT IN THE COURSE OF SEARCH IF CERTAIN DOCUMENTS ARE FOUND, WHICH WOULD PERTAIN TO A THIRD PERSON, IN SUCH A SITUATION, THE AO HAVING JURISDICTION OVER THE SEARCHED PERSON SHALL RECORD REASONS AND HAND OVER THE MATERIAL TO THE AO HAVING JURISDICTION OVER THE THIRD PERSON. IN THAT CASE, THE AO HAVING JURISDICTION OVER THE PERSON OTHER THEN THE PERSON SEARCHED, SHALL INITIATE THE PROCEEDINGS BY THE ISSUE OF NOTICE U/S 153C. THE INSTANT CASE PERTAINS TO THIS ASPECT, I.E. PROCEEDINGS U/S 153C. 17. AS OBSERVED ABOVE, IN THE TWO ASPECTS, THERE ARE TWO DIFFERENT CIRCUMSTANCES AND STARTING POINTS, I.E. U/S 153A, THE STARTING POINT IS SEARCH OR REQUISITION AND ST ARTING POINT FOR INITIATION OF PROCEEDINGS U/S 153C, IS THE DISCOVERY OF INCOME FROM INCRIMINATING MATERIAL PERTAINING TO THIRD PERSON, FOUND FROM THE PERSON SEARCHED. ONCE THE AO IS SATISFIED ON DISCOVERY OF INCRIMINATING MATERIAL PERTAINING TO THE THIRD PERSON, THE AO CAN PROCEED TO INITIATE PROCEEDINGS U/S 153C AND ACCORDINGLY, FRAME THE ASSESSMENT. M/S B.R. MACHINE TOOLS PVT. LTD. 4 | P A G E 18. WHEN WE EXAMINE THE RELEVANT PROVISIONS OF LAW, THREE ASPECTS COME TO LIGHT: A) ISSUE OF NOTICE ON THE PERSON SEARCHED OR THE CORRECTED PERSON B) FRAM E AS ASSESSMENT ON THE ASSESSMENT YEAR WHICH IS PENDING ON THE DATE OF SEARCH C) ALL PROCEEDINGS WHICH ARE PENDING ON SUCH DATE SHALL ABATE. 19. IN THE CASE BEFORE US, SEARCH TOOK PLACE ON THE NEW MANAGEMENT AND ADMITTEDLY NO DOCUMENT AS SUCH WAS FOUND WHICH INDICATED THAT THERE WAS CERTAIN INCOME BELONGING TO THE ASSESSEE, WHICH HAD NOT BEEN DISCLOSED TO THE DEPARTMENT IN THE IMPUGNED ASSESSMENT YEARS. SINCE THE SEARCH WAS ON THE NEW MANAGEMENT, THE ASSESSEE COMPANY BECAME THE PERSON OTHER THEN THE PERS ON SEARCHED. IN THESE CIRCUMSTANCES, ISSUE OF NOTICE U/S 153C AND ASSESSMENT TO BE FRAMED UNDER THIS PROVISION IS IMPERATIVE, AS THE PROVISION IS NON OBSTANTE. IN THESE CIRCUMSTANCES, THE FOLLOWING HAVE TO BE TAKEN INTO CONSIDERATION ARE: - A) WHETHER THER E IS ANY INCRIMINATING MATERIAL, INDICATING INCOME NOT DECLARED BEFORE THE REVENUE AUTHORITIES AND B) WHETHER THE ASSESSMENT IN ANY ASSESSMENT YEARS OR ANY ASSESSMENT YEAR IN WHICH NOTICE U/S 153C IS PENDING. IF THE ANSWER TO BOTH THESE QUESTIONS ARE IN THE NEGATIVE THEN THE ASSESSMENT TO BE FRAMED SHALL BE AS PER THE RATIO LAID DOWN IN THE CASE OF SPECIAL BENCH DECISION IN THE ALL CARGO AND DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA. 20. IT WOULD BE WORTH MENTIONING THAT EVEN IN THE CASE OF PRATI BHA INDUSTRIES (SUPRA), AS QUOTED BY THE DR, THE RATIO LAID DOWN IS THE VALIDITY OF ISSUE OF NOTICE U/S 153A AND ASSESSMENT TO BE FRAMED U/S 143(3)/153A BUT IT HAS ALSO BEEN SPECIFIED THEREIN, THAT IF THERE IS NO INCRIMINATING MATERIAL FOUND THE ASSESSMENT TO BE FRAMED SHALL BE AT THE FIGURE WHICH STANDS FINALIZED. THIS DECISION CANNOT AID THE DR, BECAUSE, THE DECISION IS ON THE ISSUE OF FRAMING OF THE ASSESSMENT UNDER SECTION 143(3)/153A, WHICH HAS BEEN ACCEPTED BY THE AR. THE DECISION IN PRATIBHA INDUSTRI ES, WAS ON THE ISSUE WHETHER THE ASSESSMENT FRAMED U/S 143(3)/153C IS LEGALLY CORRECT, IN CASE, THERE IS NO INCRIMINATING MATERIAL AGAINST THE ASSESSEE. 21. SINCE THERE IS NO MATERIAL INDICATING INCOME NOT FORMING PART OF THE REGULAR ASSESSMENT, NO FURTHE R ADDITION CAN BE MADE, AS HELD IN THE CASE OF PRATIBHA INDUSTRIES, THE ASSESSMENT UNDER SECTION 143(3)/153C SHALL BE INCOME ASSESSED ORIGINALLY + ZERO = INCOME ASSESSED NOW. IN ANY CASE, SINCE THE ASSESSMENT HAS BEEN FINALIZED, 2ND PROVISO, REGARDING AB ATEMENT OF PROCEEDINGS, SHALL NOT BE TRIGGERED AS THERE IS NOTHING WHICH IS PENDING. 22. IN THESE CIRCUMSTANCES, WE HOLD THAT THE ADDITIONS MADE U/S 153C ARE SUSTAINABLE. AS THERE ARE NO INDICATIONS OF ANY INCRIMINATING MATERIAL HAVING M/S B.R. MACHINE TOOLS PVT. LTD. 5 | P A G E BEEN FOUND IN THE COURSE OF SEARCH TO BE USED AGAINST THE ASSESSEE, THE SAME ARE DELETED, AS PER OUR OBSERVATIONS IN PARA 21 ABOVE. 23. ON BOTH THE COUNTS, I.E. ON LEGALITY AS WELL AS ON MERITS, THE CASE DEVELOPED BY THE DEPARTMENT CANNOT BE SUSTAINED. 24. IN THE RESULT, T HE APPEAL FILED BY THE ASSESSEE IS ALLOWED. 5. THE FACTS FOR ALL ASSESSMENT YEARS UNDER CONSIDERATION ARE IDENTICAL AND THE ISSUE DECIDED BY THIS TRIBUNAL IN APPEALS FILED BY THE ASSESSEE GOES TO THE ROOT OF THE MATTER. THERFORE, FOLLOWING THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE, THE APPEALS FILED BY THE REVENUE WOULD NOT SURVIVE. ACCORDINGLY, IN VIEW OF THE LEGAL ISSUE DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE, THE GROUND RAISED BY THE REVENUE ARE DISMISSED. 6 . IN THE RESULT, THE APPEAL S FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUCNED IN THE OPEN COURT ON THIS 25 TH DAY OF MARCH 2015 SD/ - SD/ - ( N.K. BILLAIYA ) (VIJAY PAL RAO) ( ACCOUNTANT MEMBER ) (JUDICIAL MEMBER ) MUMBAI DATED 25 .03.2015 SKS SR. P.S, M/S B.R. MACHINE TOOLS PVT. LTD. 6 | P A G E COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI