DCIT CEN CIR 6(3), MUMBAI V. ASHOK JASRAJ JAIN, MUMBAI

ITA 5718/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6954 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 23-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: LPESH VORA
• Keywords: Search and seizure; Earning of tax free income
• Section: 153A; 14A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRIN.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.5718/MUM/2016 (ASSESSMENT YEAR:2010-11) DCIT, CENTRAL CIRCLE - 6(3) 19TH FLOOR, AIR INDIA BLDG. NARIMAN POINT MUMBAI 400021 VS. SHRI ASHOK JASRAJ JAIN 1303, VASTU SHILP GAMADIA ROAD MUMBAI 400 007 PAN AAOPJ2690M APPELLANT RESPONDENT APPELLANT BY: SHRI SAURABH KUMAR RAI RESPONDENT BY: SHRI LPESH VORA DATE OF HEARING: 14.05.2018 DATE OF PRONOUNCEMENT: 23.05.2018 O R D E R PER SAKTIJIT DEY, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-54, MUMBAI, DA TED 13.06.2016, FOR ASSESSMENT YEAR 2010-11. 2. THE ISSUE RAISED IN THE GROUNDS IS IN RELATION TO D ELETION OF DISALLOWANCE MADE BY THE ASSESSING OFFICER(AO) UNDE R SECTION 14A OF THE INCOME TAX ACT (HEREINAFTER THE ACT). 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, AN I NDIVIDUAL, FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR O N 30.09.2010 DECLARING TOTAL INCOME OF ` 1,00,13,819/-. THE RETURN OF INCOME FILED BY THE AS SESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 02 .05.2011 DETERMINING THE INCOME AT ` 1,00,69,147/-. SUBSEQUENTLY, ON 12.10.2011 A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE ACT WAS CONDUCTED IN THE CASE OF M/S. PIPAVAV DEFENCE AND OFFSHORE ENGINEERING CO. L TD. AND ITS GROUP CONCERNS AND RELATED PERSONS. AS A RESULT, ASSESSEE WAS ALSO COVERED UNDER THE SAID SEARCH AND SEIZURE OPERATION. IN PURSUANCE TO THE SEARCH AND ITA NO. 5718/MUM/2016 SHRI ASHOK JASRAJ JAIN 2 SEIZURE OPERATION THE AO INITIATED ASSESSMENT PROCE EDINGS UNDER SECTION 153A OF THE ACT BY ISSUING NOTICE UNDER THE SAID PR OVISION ON 21.08.2013 CALLING UPON THE ASSESSEE TO FILE HIS RETURN OF INC OME FOR THE IMPUGNED ASSESSMENT YEAR. IN RESPONSE TO THE SAID NOTICE ASS ESSEE FILED HIS RETURN OF INCOME ON 31.01.2013 DECLARING TOTAL INCOME AT ` 95,83,189/-. DURING THE ASSESSMENT PROCEEDINGS, ON VERIFYING THE AUDITED FI NANCIAL ACCOUNTS OF THE ASSESSEE AS WELL AS THE RETURN OF INCOME, THE AO FO UND THAT, THOUGH, THE ASSESSEE HAS MADE INVESTMENTS IN EXEMPT INCOME YIEL DING ASSETS, HOWEVER, IT HAS NOT DISALLOWED ANY EXPENDITURE UNDER SECTION 14 A OF THE ACT R.W. RULE 8D OF THE I.T. RULES. ACCORDINGLY, AFTER CALLING FO R AN EXPLANATION FROM THE ASSESSEE THE AO PROCEEDED TO COMPUTE THE DISALLOWAN CE UNDER SECTION 14A R.W. RULE 8D, WHICH WORKED OUT TO ` 40,00,555/-. 4. BEING AGGRIEVED BY THE DISALLOWANCE MADE UNDER SECT ION 14A OF THE ACT ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIALS ON RECORD AND FOUND THAT THE ORIGINAL ASS ESSMENT IN THE CASE OF ASSESSEE WAS COMPLETED UNDER SECTION 143(1) OF THE ACT ON 02.04.2011, I.E. BEFORE INITIATION OF SEARCH AND SEIZURE OPERATION O N 12.01.2011. HE ALSO TOOK NOTE OF THE FACT THAT THE TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) OF THE ACT HAS ALSO EXPIRED BEFORE THE DATE OF INITIATION OF SEARCH. THUS, ON THE DATE OF SEARCH ASSESSMENT PROCEEDINGS FOR THE IMPUGNED ASSESSMENT YEAR WAS NOT PENDING BEFORE THE AO, MEAN ING THEREBY THAT THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR WAS NOT ABATED AS ON THE DATE OF SEARCH. THUS, THE LEARNED CIT(A) HELD THAT SINCE THE DISALLOWANCE MADE UNDER SECTION 14A R.W. RULE 8D WAS NOT ON THE BASIS OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH AND SEIZURE OPERATION, IT COULD NOT HAVE BEEN MADE IN AN ASSESS MENT COMPLETED UNDER SECTION 153A OF THE ACT. ACCORDINGLY, HE DELETED TH E ADDITION. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE GROUNDS RAISED IN THE APPEAL. 6. THE LEARNED AUTHORIZED REPRESENTATIVE RELIED UPON T HE OBSERVATIONS OF THE LEARNED CIT(A). ITA NO. 5718/MUM/2016 SHRI ASHOK JASRAJ JAIN 3 7. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE, THE ASSESSEE HAS FILED ITS RETURN OF INCOME UNDER SECTION 139(1) OF THE ACT ON 30.09.201 0 AND THE SAID RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 02.05.2011. IT IS ALSO NOT DISPUTED THAT ON THE DATE OF SEARCH AND SEIZURE OPERATION ON 12.10.2011 NO ASSESSMENT PROCEEDINGS FOR THE IMPUGN ED ASSESSMENT YEAR WAS PENDING BEFORE THE AO. THUS, IT IS NOT A CASE O F ABATED ASSESSMENT PROCEEDING WHICH HAS TO BE COMPLETED UNDER SECTION 153A OF THE ACT. IT IS NEITHER DENIED NOR DISPUTED BY THE LEARNED D.R. THA T THE DISPUTED DISALLOWANCE UNDER SECTION 14A R.W. RULE 8D WAS NOT ON THE BASIS OF ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH AND SEIZURE OPERATION CARRIED OUT IN THE CASE OF THE ASSESSEE. RATHER, TH E AO ON THE BASIS OF THE AUDITED ACCOUNTS OF THE ASSESSEE HAS FOUND OUT THE INVESTMENTS MADE AND PROCEEDED TO MAKE THE DISALLOWANCE UNDER SECTION 14 A R.W. RULE 8D. IN CASE OF COMMISSIONER OF INCOME TAX VS CONTINENTAL W AREHOUSING CORPORATION (NHAVA SHEVA) LTD. (2015) 374 ITR 645, THE HON'BLE JURISDICTIONAL HIGH COURT HAS UPHELD THE DECISION O F THE ITAT, MUMBAI SPECIAL BENCH HOLDING THAT IN A CASE WHERE ASSESSME NT PROCEEDING WAS NOT PENDING ON THE DATE OF SEARCH AND SEIZURE OPERATION , THE AO IN A PROCEEDING UNDER SECTION 153A OF THE ACT RETAINS TH E POWER TO ASSESS OR REASSESS INCOME ON THE BASIS OF INCRIMINATING MATER IAL FOUND AS A RESULT OF SEARCH. IN THE PRESENT CASE THE DISALLOWANCE MADE U NDER SECTION 14A R.W. RULE 8D IS NOT ON THE BASIS OF ANY INCRIMINATING MA TERIAL FOUND AS A RESULT OF SEARCH. THAT BEING THE CASE, LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE/ADDITION MADE BY THE AO UNDER SECTION 14A R.W. RULE 8D. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MAY, 2018. SD/ - SD/ - (N.K. PRADHAN) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23 RD MAY, 2018 ITA NO. 5718/MUM/2016 SHRI ASHOK JASRAJ JAIN 4 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) -54, MUMBAI 4. THE PR. CIT, CENTRAL-3, MUMBAI 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.