M/s. Primus Real Estates Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 5760/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6984 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 17-12-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P MEENA
• Assessee Lawyers: TARUN KUMAR S
• Keywords: Search and seizure
• Section: 40A(3); 153A; 132; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F : NEW DELHI BEFORE SHRI N.K. SAINI, AM & SMT. BEENA A. PILLAI, JM ITA NOS.5760 & 5761/DEL/2013 ASSESSMENT YEARS : 2007-08 & 2008-09 PRIMUS REAL ESTATES PVT. LTD., 910, ANSAL BHAWAN, KG MARG, NEW DELHI. PAN: AADCP7747B VS. DCIT, CENTRAL CIRCLE-14, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SOMIL AGRAWAL & SHRI TARUN KUMAR, ADVOCATES DEPARTMENT BY : S HRI O.P. MEENA, CIT, DR DATE OF HEARING : 1 7 .12 . 2015 DATE OF PRONOUNCEMENT : 19 . 02 .201 6 ORDER PER BEENA A. PILLAI, JM: THESE APPEALS BY THE ASSESSEE ARISE OUT OF THE ORDE RS PASSED BY THE CIT(A)-XXXIII, NEW DELHI ON 26.7.2013 IN REL ATION TO THE ASSESSMENT YEARS 2007-08 & 2008-09 ON THE FOLLOWING GROUNDS:- ITA NO.5760/DEL/2013 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN UPHOLDING THE VALIDITY OF ITA NO.5761 & 5760/DEL/2013 2 ORDER PASSED BY THE ASSESSING OFFICER U/S 153A ON 20.07.2012. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN PARTLY ALLOWING THE APP EAL AS HE OUGHT TO HAVE FULLY ALLOWED THE APPEAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN HOLDING THAT 'WHEREVER THE LAND IS SHOWN AS WORK IN PROGRESS, TO EXTENT OF DISALLOWANCE U/S 40A(3), WILL REDUCE. THIS VIEW IS IN CONFORMITY WITH THE DECISION OF HONBLE SUPREME COU RT IN CASE OF ATTAR SINGH. IN CASE WHERE LAND IS SHOWN AS INVESTMENT, HOWEVER, SUBSEQUENTLY IT IS CONVERTED INTO STOCK-IN-TRADE, T O THE EXTENT OF DISALLOWANCE U/S 40A (3) VALUE OF WORK-IN - PROGRESS WOULD REDUCE AT THE TIME OF CONVERSION.' 4. THE APPELLANT MAY KINDLY BE ALLOWED TO RAISE ANY ADDITIONAL GROUND IN THE COURSE OF HEARING OF THE A PPEAL. ITA NO.5761/DEL/2013 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN UPHOLDING THE VALIDITY OF ORDER PASSED BY THE ASSESSING OFFICER U/S 153A ON 20.07.2012. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN PARTLY ALLOWING THE APP EAL AS HE OUGHT TO HAVE FULLY ALLOWED THE APPEAL. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN HOLDING THAT 'WHEREVER THE LAND IS SHOWN AS WORK IN PROGRESS, TO EXTENT OF DISALLOWANCE U/S 40A(3), WILL REDUCE. THIS VIEW IS IN ITA NO.5761 & 5760/DEL/2013 3 CONFORMITY WITH THE DECISION OF HONBLE SUPREME COU RT IN CASE OF ATTAR SINGH. IN CASE WHERE LAND IS SHOWN AS INVESTMENT, HOWEVER, SUBSEQUENTLY IT IS CONVERTED INTO STOCK-IN-TRADE, T O THE EXTENT OF DISALLOWANCE U/S 40A (3) VALUE OF WORK-IN - PROGRESS WOULD REDUCE AT THE TIME OF CONVERSION.' 4. THE APPELLANT MAY KINDLY BE ALLOWED TO RAISE ANY ADDITIONAL GROUND IN THE COURSE OF HEARING OF THE A PPEAL. 2. THE BRIEF FACTS OF THE CASE AS RECORDED BY THE LD.AO ARE AS UNDER; 2.1. IT IS ENGAGED IN THE BUSINESS OF REAL ESTATE. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED U/S.132 OF THE ACT ON 23.03.2011 IN THE CASE OF GROUP. CONSEQUENT UPON SEARCH AND S EIZURE OPERATIONS UNDER SECTION 132 OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) ON THE AMTEK GROUP, THE ASSESSEE WAS COV ERED U/S.132(1) OF THE ACT. A NOTICE U/S.153A WAS ISSUED TO THE ASS ESSSEE ON 14.10.2011. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 24.11.2011. ACCOR DINGLY, THE ASSESSMENT UNDER SECTION 143 R.W.S. 153A OF THE ACT WAS COMPLETED VIDE ORDER DATED 20.07.2012 RS.30,94,214/- FOR ASSE SSMENT YEAR 2007-08 AND AT A TOTAL INCOME OF RS. RS.50,058/- FO R ASSESSMENT ITA NO.5761 & 5760/DEL/2013 4 YEAR 2008-09. THE ASSESSED INCOME IN BOTH THE ASSES SMENT YEARS WERE ON ACCOUNT OF ADDITION MADE UNDER SECTION 40A (3) OF THE ACT. 2.2. AGGRIEVED BY THE ORDER OF THE LD.AO, ASSESSEE PREFERRED APPEALS FOR BOTH THE ASSESSMENT YEARS BEFORE THE LD. CIT(A) . THE LD.CIT(A) CONFIRMED THE ADDITION VIDE ORDER DATED26.07.2013., WHILE CONFIRMING THE ADDITION, DIRECTED THE ASSESSING OFF ICER TO REDUCE THE AMOUNT OF ADDITION FROM THE CLOSING WORK-IN-PROGRES S. THE RELEVANT EXTRACT FROM THE ORDER OF THE LD.CIT(A) IS AS UNDER ; THEREFORE, IN MY VIEW DISALLOWANCE U/S 40A(3) IS P ROPER. NOW, COMING TO THE FACTS OF THE CASE, THERE IS SO SALE OF LAND OR ITS DEVELOPMENT. HENCE, INCOME HAS NOT ACCRUED TO T HE ASSESSEE. IN THAT CIRCUMSTANCES IF DISALLOWANCE IS MADE U/S 4 0A(3) & ADDED BACK TO THE INCOME, IF WOULD AMOUNT TO TAXING THE I NCOME WITHOUT ANY ACCRUAL. THEREFORE, IN MY VIEW, WHEREVER THE LA ND IS SHOWN AS WORK IN PROGRESS, TO THE EXTENT OF DISALLOWANCE U/S 40A(3), THE VALUE OF WORK IN PROGRESS WILL REDUCE. THIS VIEW IS IN CONFORMITY WITH THE DECISION OF HONBLE SUPREME COURT IN CASE OF ATTAR SINGH. IN CASE WHERE THE LAND IS SHOWN AS INVESTMENT, HOWE VER, SUBSEQUENTLY IT IS CONVERTED INTO STOCK-IN-TRADE, T O THE EXTENT OF DISALLOWANCE U/S 40A(3) VALUE OF WORK-IN-PROGRESS W OULD REDUCE AT THE TIME OF CONVERSION. 3. BEING AGGRIEVED BY THE ORDER OF CIT(A), THE ASSE SSEE IS IN APPEALS FOR BOTH THE ASSESSMENT YEARS CHALLENGING THE VERY JURISDICTION OF THE ASSESSING OFFICER TO MAKE THE ASSESSMENT UNDER SECTION 153A IN THE ABSENCE OF ANY SEIZED INCRIMINATING MATERIAL . ITA NO.5761 & 5760/DEL/2013 5 3.1. WE SHALL FIRST DEAL WITH THE VERY ROOT OF JURI SDICTION OF THE ASSESSMENT. THE LD. AR CONTENDED THAT THERE WAS NO SEIZED INCRIMINATING MATERIAL INDICATING THAT THERE WERE C ASH PAYMENTS, ATTRACTING THE DISALLOWANCES UNDER SECTION 40A(3) O F THE ACT. HE FURTHER SUBMITTED THAT THERE WAS NO ABATEMENT OF AS SESSMENT PROCEEDINGS, INASMUCH AS, THERE IS NO PENDING ASSES SMENT, AND WHEN THE NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED THE LIMITATION FOR ISSUANCE OF SUCH NOTICE HAD ALREADY EXPIRED. 3.2. THE LD.AR DREW OUR ATTENTION TO THE ASSESSMENT , WHERE THERE WAS NO WHISPER ABOUT ANY SEIZED INCRIMINATING MATER IAL. THEREFORE, HE SUBMITTED THAT THE ORDER OF ASSESSMENT MADE IS N ULL AND VOID IN THE LIGHT OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA, ITA NO. 707/2014, DAT ED 28 TH AUGUST, 2015. HE ALSO RELIED ON THE DECISIONS OF A COORDINATE BENCH OF ITAT, DELHI BENCH IN THE CASE OF M/S SARASWATI H OUSING & DEVELOPERS VS. ACIT, ITA NO. 5795/DEL/2011, AY 2006 -07, DATED 1 ST MARCH, 2013. 4. ON THE OTHER HAND, LD. CIT(DR) RELIED ON THE OR DERS OF THE LOWER AUTHORITIES. ITA NO.5761 & 5760/DEL/2013 6 5. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THERE WAS NO SEI ZED INCRIMINATING MATERIAL SUGGESTING ANY DISALLOWANCE UNDER THE PROV ISIONS OF SECTION 40A(3) OF THE ACT. A PERUSAL OF THE ASSESSM ENT ORDERS DOES NOT REVEAL THAT THE IMPUGNED ADDITIONS MADE IN RESP ECT OF BOTH THE ASSESSMENT YEARS, HAVE NEITHER BEEN BASED ON ANY IN CRIMINATING MATERIAL SEIZED, NOR THERE IS ANY WHISPER IN THE AS SESSMENT ORDERS. 5.1. NOW, THE LAW IS WELL SETTLED THAT, NO ASSESSME NTS CAN BE MADE UNDER SECTION 153A IN THE ABSENCE OF ANY SEIZED INC RIMINATING MATERIAL. THE HONBLE DELHI HIGH COURT AFTER REFERR ING TO THE VARIOUS PRECEDENTS ON THE SUBJECT I.E. CIT VS. CONTINENTAL WAREHOUSING CORPORATION (NHAVA SHEVA) LTD. [2015] 58 TAXMANN.C OM 78 (BOM.) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. MURLI AGRO PRODUCTS LTD., ITA NO. 36/2 009, DATED 29 TH OCTOBER, 2010, HAS SUMMARIZED THE LEGAL POSITION AS UNDER: SUMMARY OF THE LEGAL POSITION 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLA INED IN THE AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT E MERGES IS AS UNDER: ITA NO.5761 & 5760/DEL/2013 7 I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS F OR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE D ATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS W ILL HAVE TO BE COMPUTED BY THE AOS AS A FRESH EXERCISE. III THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS I N RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAKES PLACE. THE AO HAS THE POWER TO ASSESS AND REA SSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEARS. IN OTH ER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS IN WHICH BOTH THE DISCLOSED AND THE UN DISCLOSED INCOME WOULD BE BROUGHT TO TAX. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDIT IONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR OTHER POST-SEARCH MATERIAL OR INFORM ATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE E VIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEI ZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UN DER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE C OMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSM ENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECT ION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PE NDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETE D ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND TH E ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE ITA NO.5761 & 5760/DEL/2013 8 BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER M ATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 15 3 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UN EARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUM ENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE CO URSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCL OSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 6. RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY T HE HONBLE JURISDICTIONAL HIGH COURT IN THE ABOVE CASE, WE HOL D THAT THE ASSESSMENTS MADE UNDER SECTION 153A OF THE ACT IN T HE PRESENT CASE ARE ALSO INVALID AND IS THEREFORE WE HEREBY QU ASH AS SUCH. ACCORDINGLY, THE GROUNDS OF APPEAL FILED BY THE ASS ESSE FOR ASSESSMENT YEARS 2007-08 AND 2008-09 ARE ALLOWED. 9. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2007-08 AND 2008-09 STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.02.201 6 SD/- SD/- [ N.K. SAINI ] [ BEENA A. PILLAI ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 19.02.2016 DK COPY FORWARDED TO: ITA NO.5761 & 5760/DEL/2013 9 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. DATE 1. DRAFT DICTATED ON 29.12.2015 2. DRAFT PLACED BEFORE THE AUTHOR 3. DRAFT PLACED BEFORE THE OTHER MEMBER 30.12.2015 4. APPROVED DRAFT COMES TO THE SR.PS/PS 19.02.2016 5. FILE SENT TO THE BENCH CLERK 19.02.2016 6. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 7. DATE ON WHICH FILE GOES TO THE AR 8. DATE OF DISPATCH OF ORDER.