MAHAVIR BUILDERS, MUMBAI V. DCIT CEN CIR 33, MUMBAI

ITA 5824/MUM/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0838 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-05-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 17-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Assessee Lawyers: V CHANDRASHEKAR
• Keywords: Unexplained cash credit; Rectification of order; Search and seizure; Bonafide belief; Additional evidence; Condonation of delay
• Section: 143(3); 133A; 153A; 68; 132; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5824/M/2011 ASSESSMENT YEAR: 2005-06 M/S. MAHAVIR BUILDERS, G-1/2, MANGAL KUNJ, S.V. ROAD, OPP JAMBLI GULLY, JAIN TEMPLE, BORIVALI (WEST), MUMBAI 92. PAN: AAKFM 5577C VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 33, GR. FLOOR, AAYAKAR BHAVAN, CHURCHGATE, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI V. CHANDRASHEKAR, A.R. REVENUE BY : SHRI S.J. SINGH, D.R. DATE OF HEARING : 18.05.2015 DATE OF PRONOUNCEMENT : 31.07.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 01.11.2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2005-06. 2. THE APPEAL IS TIME BARRED BY 228 DAYS. THE ASSE SSEE HAS SUBMITTED AN APPLICATION FOR CONDONATION OF DELAY. IT HAS BEEN SUBMITTED IN THE SAID APPLICATION THAT THE ASSESSEE HAD MOVED AN APPLICAT ION TO THE LD. CIT(A) FOR RECTIFICATION OF MISTAKE UNDER SECTION 154 OF THE A CT AND THE ASSESSEE WAS AWAITING THE RECTIFICATION OF THE LD. CIT(A). THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT IN THE RECTIFICATION ORDER, THE GRIEVAN CE OF THE ASSESSEE WOULD BE ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 2 READDRESSED. HOWEVER, THE LD. CIT(A) VIDE ORDER DA TED 25.07.11 REJECTED THE RECTIFICATION APPLICATION OF THE ASSESSEE AND THE A SSESSEE THEREAFTER IMMEDIATELY FILED THE PRESENT APPEAL. 3. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN T HIS RESPECT THAT HE WAS UNDER BONAFIDE BELIEF PURSUING THE OTHER REMEDY BEF ORE THE LD. CIT(A), WE ALLOW THE APPLICATION FOR CONDONATION OF DELAY AND PROCEED TO DECIDE THE ISSUE ON MERITS. 4. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 0. THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED I N UPHOLDING THE ASSESSING OFFICER'S ORDER MADE U/S-143(3) R.W.S 153C NOT TO BE BAD IN LAW, WITHOUT JURISDICTION AND VOID AB-INITIO . 0. THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN UPHOLDING THE ASSESSING OFFICER'S ORDER OF TREATING LOAN OF R S.448,000 AS UNEXPLAINED CASH CREDIT, AS NO MATERIAL WAS FOUND D URING THE SEARCH FOR SUCH ADDITION AND UNDER THE FACTS & CIRCUMSTANC ES OF THE CASE. 0. THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN UPHOLDING THE ASSESSING OFFICER'S ORDER OF ADDING A SUM OF RS 448,000 BEING 'UNEXPLAINED CASH CREDIT U/S-68' ON THE BASIS THAT THE LENDER WAS NOT ASSESSED TO TAX, EVEN AFTER SUBMITTI NG THE SAME BEFORE COMMISSIONER OF INCOME TAX (APPEALS) AND UND ER THE FACTS & CIRCUMSTANCES OF THE CASE. RELIEFS PRAYED 1 THE APPELLANT PRAYS THAT IT MAY BE ALLOWED TO ADD , ALTER, AMEND THE ABOVE GROUNDS OF APPEAL AND TO MAKE DETAILED SUBMIS SIONS AT THE TIME OF APPEAL. 2. ON THE BASIS OF THE ABOVE GROUNDS OF APPEAL AND DETAILED SUBMISSIONS TO BE MADE AT THE TIME OF HEARING OF TH E APPEAL, THE APPELLANT PRAYS THE FOLLOWING: I. THAT ADDITION OF RS.448,000/- TOWARDS UNDISCLOSE D CASH CREDIT, MAY PLEASE BE DELETED. ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 3 5. A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT I N THE CASE OF SHRI PARKASH H SAVLA U/S. 132 OF THE INCOME TAX ACT ON 1 7.1.2008 ALONG WITH THAT A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT A T THE PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEARCH IN THE PREMIS ES OF SHRI PARKASH H SAVLA, INCRIMINATING DOCUMENTS RELATING TO THE ASSE SSEE WERE FOUND AND SEIZED. ON THE BASIS OF THE SAID INCRIMINATING MATE RIAL, THE PARTNER OF THE ASSESSEE FIRM HAD DECLARED ADDITIONAL INCOME OF RS. 6,85,04,767/- WHICH WAS BIFURCATED FOR A.Y. 2002-03 TO AY 2008-09IN REL ATION TO ASSESSEE COMPANY AND RELATED PERSONS. 6. THEREAFTER IN RESPONSE TO NOTICE U/S. 153C ISSUE D BY THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS AO), THE ASSESS EE FILED RETURN OF INCOME FOR AY 2005-06 ON 26.8.2009. THE AO THEREAFTER MADE FRESH ASSESSMENT U/S 143(3) READ WITH SECTION 153C OF THE ACT AND AS SESSED INTER ALIA ADDITIONAL INCOME OF THE ASSESSEE ON ACCOUNT OF UNS ECURED LOANS OF RS.448000/- IN RELATION TO THE YEAR UNDER CONSIDERA TION AS UNEXPLAINED CASH CREDITS U/S 68 OF THE ACT. 7. THE CIT(A) UPHELD THE ACTION OF THE AO FOR PASSI NG THE ASSESSMENT ORDER U/S. 153C OF THE INCOME TAX ACT AND CONFIRMED THE ABOVE STATED ADDITION MADE BY THE AO. THE ASSESSEE IS THUS IN APPEAL BEFORE US AGAINST TH E ACTION OF THE CIT(A) IN CONFIRMING OF ADDITIONS MADE BY THE AO U/S 68 OF T HE ACT IN ASSESSMENT PROCEEDINGS U/S 153C READ WITH 143(3) OF THE ACT. 8. THE LEARNED AR, BEFORE US, HAS CONTENDED THAT SI NCE NO INCRIMINATING MATERIAL RELATING TO THE ISSUE OF UNS ECURED LOANS IN QUESTION WAS FOUND DURING THE SEARCH AND SEIZURE OPERATION, THE ADDITION IN RESPECT OF UNSECURED LOAN MADE IN THE RE-ASSESSMENT U/S 153 C WAS NOT VALID. ON THE OTHER HAND, THE CONTENTION OF THE LEARNED DR HAS BEEN THAT IT WAS NOT A CASE WHERE NO INCRIMINATING MATERIAL WAS FOUN D AGAINST THE ASSESSEE ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 4 DURING THE SEARCH ACTION CARRIED OUT AT THE PREMISE S OF SHRI PARKASH H SAVLA. HE HAS STRESSED THAT NOT ONLY THE INCRIMINAT ING MATERIAL WAS FOUND DURING THE SEARCH ACTION BUT THE ASSESSEE HAD ALSO DECLARED THE ADDITIONAL INCOME IN CONSEQUENCE TO THE INCRIMINATING MATERIAL FOUND DURING THE SEARCH ACTION. HE THEREFORE HAS CONTENDED THAT THE ADDITION HAS RIGHTLY BEEN MADE BY THE AO FOR THE YEAR UNDER CONSIDERATIO N. 9. WE HAVE CONSIDERED THE RESPECTIVE SUBMISSIONS OF THE LD. REPRESENTATIVES OF THE PARTIES AND HAVE ALSO GONE T HROUGH THE RECORD. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ALL C ARGO GLOBAL LOGISTICS LTD. (SUPRA), HAS HELD THAT ASSESSMENT U/S. 153A C AN BE MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING THE SEARCH. IF NO INCRIMINATING MATERIAL IS FOUND DURING THE SEARCH ACTION, NO ADDI TIONS CAN BE MADE U/S 153A OR 153C OF THE ACT IN RESPECT OF ASSESSMENTS W HICH ALREADY HAVE ATTAINED FINALITY AND DO NOT STAND ABATED ON THE DA TE OF SEARCH. THE SAID DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL HAS N OW BEEN UPHELD BY THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT VIDE ORDER DATED 21.4.2015 PASSED IN ITA NO. 1969 OF 2013. HOWEVER THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BADRUKA VS. DC IT, 346 ITR 106 (AP) HAS HELD THAT THE AO CAN USE EVIDENCE OTHER T HAN THAT FOUND DURING THE COURSE OF SEARCH WHILE FRAMING THE ASSESSMENT U /S. 153A OF THE ACT. THE SAID JUDGMENT OF HONBLE ANDHRA PRADESH HIGH CO URT HAS BEEN DULY DISCUSSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN T HE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. (SUPRA). IN THE CASE OF GO PAL LAL BADRUKA VS. DCIT (SUPRA), INCRIMINATING EVIDENCE WAS FOUND IN RELATION TO EIGHT PLOTS OF LAND BUT NO EVIDENCE WAS FOUND IN RESPECT OF 24 PLOTS. SINCE INCRIMINATING MATERIAL WAS FOUND IN RESPECT OF EIGH T PLOTS, HONBLE COURT HELD THAT THE AO CAN ESTIMATE THE INCOME IN RESPECT OF ALL 32 PLOTS. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CH ETAN DASS LACHMAN ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 5 DASS [2012] 211 TAXMANN 61, IN PARA 11 OF THE ORDE R, HAS HELD THAT THERE IS NO CONDITION IN SECTION153A THAT ADDITIONS SHOUL D BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND DURING THE COURSE OF SEARCH OR OTHER POST SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND AND THAT THE SEIZED MATERIAL CAN BE RELIED UPON TO ALSO DRAW INFERENCE THAT THERE CAN BE SIMILAR TRANSACTIONS TH ROUGHOUT THE RELEVANT PERIOD. THE HONBLE DELHI HIGH COURT HAS FURTHER O BSERVED THAT THIS HOWEVER, DOES NOT MEAN THAT ASSESSMENT U/S 153 A CA N BE ARBITRARILY MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATE RIAL. 10. THE PROPOSITION OF LAW WHICH THUS EMERGES OUT I N THE LIGHT OF THE LAW LAID DOWN BY THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF GOPAL LAL BADRUKA (SUPRA) AND ALSO BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CHETAN DASS LACHMAN DASS IS THAT WHERE INCRIMINA TING MATERIAL IS FOUND DURING THE SEARCH ACTION, THE AO WHILE MAKING ASSES SMENT U/S. 153A CAN TAKE NOTE OF OTHER MATERIALS ON RECORD, WHICH ARE RELEVA NT AND CONNECTED TO THE MATERIAL FOUND DURING THE SEARCH AND INFERENCE CAN BE DRAWN RELATING TO OTHER TRANSACTIONS OF SIMILAR NATURE. HOWEVER, WHEN NO IN CRIMINATING EVIDENCE IS FOUND DURING SEARCH, IT IS NOT OPEN TO THE AO TO MA KE RE-ASSESSMENT OF CONCLUDED ASSESSMENT IN THE GARB OF INVOKING THE PR OVISIONS OF SECTION 153A. WHILE HOLDING SO, WE FIND SUPPORT FROM THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ALL CARGO GLOBAL LOGIST ICS LTD. (SUPRA) WHEREIN THE HONBLE BOMBAY HIGH COURT AFTER DULY CONSIDERIN G THE JUDGEMENT RELIED UPON BY THE REVENUE OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA [2012] 24 TAXMANN.COM 98/211 TAX MAN 453 (DELHI) HAS HELD THAT THE SCOPE OF INQUIRY, THOUGH NOT CONFINED , IS ESSENTIALLY REVOLVES AROUND THE SEARCH OR THE REQUISITION UNDER SECTION 132A AS THE CASE MAY BE. 11. ADMITTEDLY, THE INCRIMINATING DOCUMENTS WERE FO UND AGAINST THE ASSESSEE FIRM DURING THE SEARCH ACTION IN THE PREMI SES OF THE SHRI PRAKASH H. ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 6 SAWLA. THE PARTNER OF THE ASSESSEE HAD DECLARED ADD ITIONAL INCOME OF RS.6,85,04,767/-, A PART OF WHICH WAS ALSO IN RELAT ION TO UNSECURED LOANS FOR OTHER ASSESSMENT YEARS. UNDER THE CIRCUMSTANCES AS PER THE PROPOSITION OF LAW AS DISCUSSED ABOVE, THE AO WAS JUSTIFIED TO EXAMINE THE SIMILAR TYPE OF TRANSACTIONS RELATING TO UNSECURED LOAN IN CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THE AO THEREF ORE RIGHTLY MADE INQUIRIES IN RELATION TO THE IDENTICAL TRANSACTIONS OF UNSECU RED LOANS. THE LEGAL OBJECTION OF THE ASSESSEE IS THEREFORE REJECTED. 12. NOW COMING TO THE MERITS OF THE ADDITIONS. THE ASSESSEE, DURING THE APPELLATE PROCEEDINGS, BEFORE THE LD. CIT(A), HAD P RODUCED ADDITIONAL EVIDENCES RELATING TO THE CONFIRMATIONS AND CREDITW ORTHINESS OF THE CREDITORS IN RELATION TO THE TRANSACTION OF UNSECUR ED LOANS IN QUESTION. THE LD. CIT(A), HOWEVER, IN PARA 3.4 OF HIS ORDER HAS M ENTIONED THAT THE ASSESSEE HAD FAILED TO SUBMIT ANY COGENT DOCUMENTAR Y EVIDENCE BEFORE HIM TO PROVE THE IDENTITY, CREDITWORTHINESS AND GENUINE NESS OF TRANSACTION AND THAT NO ADDITIONAL EVIDENCE OR INFORMATION WAS SUBM ITTED BEFORE HIM BY THE ASSESSEE TO PROVE THE GENUINENESS OF TRANSACTIONS. HOWEVER, WE FIND IN THE RECTIFICATION ORDER DATED 2 5.07.11 OF THE LD. CIT(A) UNDER SECTION 154 OF THE ACT THAT THE LD. CIT(A) HA S MENTIONED THAT THE CONFIRMATIONS/ADDITIONAL EVIDENCE SUBMITTED BEFORE HIM WAS NOT ADMITTED BECAUSE IT WAS NOT COVERED UNDER RULE 46A OF THE I. T. RULES. IT HAS BEEN MENTIONED THAT THE APPLICATION OF THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE HAD BEEN REJECTED. THE RECTIFICATION APPL ICATION OF THE ASSESSEE WAS THEREFORE DISMISSED BY THE LD. CIT(A). HOWEVER, AS OBSERVED ABOVE, THE LD. CIT(A) WHILE DISPOSING OF THE APPEAL OF THE ASSESSE E HAD NEITHER DISCUSSED ABOUT THE ADDITIONAL EVIDENCES SUBMITTED BY THE ASS ESSEE NOR HAD REJECTED THE APPLICATION OF ADDITIONAL EVIDENCE BY WAY OF ANY SP EAKING ORDER. RATHER, THE ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 7 OBSERVATIONS MADE BY THE LD. CIT(A) ARE CONTRARY TO THAT ARE MENTIONED IN THE RECTIFICATION APPLICATION AS THE LD. CIT(A) HAS MEN TIONED THAT THE ASSESSEE HAD NOT PRODUCED ANY ADDITIONAL EVIDENCE TO PROVE THE G ENUINENESS OF TRANSACTIONS. THE LD. A.R. OF THE ASSESSEE HAS FURTHER SUBMITTED THAT EARLIER THE PAN OF THE CREDITOR WAS NOT AVAILABLE WITH THE ASSESSEE. HOWE VER, THE PAN OF THE CREDITOR AND THE CONFIRMATIONS ETC. WERE SUBMITTED BEFORE TH E LD. CIT(A). 13. IN OUR VIEW, WHILE REFUSING TO TAKE INTO CONSIDERAT ION THE RELEVANT DOCUMENTS WHICH WERE VERY MUCH NECESSARY FOR THE JU ST DECISION OF THE CASE, LD. CIT(A) FAILED TO EXERCISE HIS APPELLATE JURISDI CTION U/S 250 OF THE ACT. THE DUTY WAS ALSO CAST UPON THE LD. CIT(A) TO ADMIT AND CONSIDER THE EVIDENCE PRODUCED BEFORE HIM BY THE ASSESSEE. THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF SMT. PRABHAVATI S.SHAH V. CIT [(1998) 231 ITR 1 (BOM.)] HAS HELD THAT THE POWERS CONFERRED ON THE FIRST APPELLATE AU THORITY UNDER SUB-SECTION (4) OF SECTION 250 OF THE ACT, BEING A QUASI-JUDICIAL P OWER, IT IS INCUMBENT ON HIM TO EXERCISE THE SAME, IF THE FACTS AND CIRCUMSTANCE S JUSTIFY. EVEN OTHERWISE UNDER RULE 46A(4) OF THE INCOME TAX RULES, THE LD. CIT(A) HAS BEEN GIVEN POWER TO CALL FOR PRODUCTION OF ANY DOCUMENT OR THE EXAMINATION OF ANY WITNESSES TO ENABLE HIM TO DISPOSE OF THE APPEAL. T HERE IS NO DOUBT ABOUT THE LEGAL POSITION THAT IF ANY DOCUMENT FURNISHED BY TH E ASSESSEE BEFORE THE LD. CIT(A) IS IN THE NATURE OF CLINCHING EVIDENCE WHICH GOES TO THE ROOT OF THE CASE THEN IN THE INTEREST OF JUSTICE SUCH TYPES OF EVIDE NCE SHOULD NOT BE REJECTED. THE DOCUMENTS RELIED UPON BY THE ASSESSEE ARE VERY MUCH RELEVANT AND NECESSARY FOR THE JUST AND PROPER DECISION OF THE CASE, HENCE , WE SET ASIDE THE FINDINGS OF THE CIT(A) ON THIS ISSUE AND REMAND BACK THE MATTER TO THE FILE OF AO WITH A DIRECTION TO ADMIT THE ADDITIONAL EVIDENCES SOUGHT TO BE FURNISHED BY THE ASSESSEE, DECIDE THE ISSUES AFRESH AS PER LAW AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSESSEE OF BEING HEARD AND SUB MIT THE NECESSARY DOCUMENTS ETC. ITA NO.5824/M/2011 M/S. MAHAVIR BUILDERS 8 IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.2015. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 31.07.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.