KHALSA BRICKS MFG.CO., Jaipur V. DCIT, Jaipur

ITA 592/JPR/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5310 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 28-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEENA CIT DHK
• Keywords: Rejection of books of accounts; Revision of order; Search and seizure
• Section: 143(3); 153A; 139(5); 145; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH VH-VKJ-EHUK] YS[KK LNL; ,OA JH YFYR DQEKJ] U;KF; D LNL; DS LE{K BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO. 592, 593 & 594/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2003-04, 04-05 & 08-09 . M/S. KHALSA BRICKS MFG. CO., C/O M/S. RAVI & DEV, CHARTERED ACCOUNTANTS, C-68,LAL KOTHI SCHEME, JAIPUR. CUKE VS. DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO. AABFK 8210 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT /KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA (CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 09.05.2016. ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 13/05/2016. VKNS'K@ ORDER PER SHRI LALIET KUMAR, J.M. THESE ARE THREE APPEALS FILED BY THE ASSESSEE AGAIN ST THE SEPARATE ORDERS OF LD. CIT (APPEALS), CENTRAL, JAIPUR DATED 25.6.2014 AND 26.06.2014 FOR THE A.YS. 2003-04, 04-05 AND 08-09. GROUND NO. 1 IS COMMON IN ALL THE APPEALS WHICH READS AS UNDER :- ITA NO. 592, 593 & 594/JP/2014 : THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS), JAIPUR, CONFIRMING TO ASSESSMENT ORDER P ASSED BY DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JAIPU R, PASSED U/S 143(3) R.W. SEC. 153A OF THE INCOME TAX ACT, 1961, IS ILLEGAL, WITHOUT JURISDICTION AND VOID BECAUSE ADDITIONS WERE MADE I N THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND IN THE COURSE OF S EARCH. 2 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. ITA NO. 592/JP/2014 : 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 AND CONFIRMING A N AD-HOC TRADING ADDITION TO THE EXTENT OF RS. 21,447/-. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 26,563/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BHATTA EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT DUE TO NON-AVAIL ABILITY OF EXTERNAL EVIDENCES. ITA NO. 593/JP/2014 : 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 AND CONFIRMING A N AD-HOC TRADING ADDITION TO THE EXTENT OF RS. 53,418/-. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 12,129/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BHATTA EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT DUE TO NON-AVAIL ABILITY OF EXTERNAL EVIDENCES. ITA NO. 594/JP/2014 : 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSEE BY INVOKING PROVISIONS OF SECTION 145(3) OF THE INCOME TAX ACT, 1961 AND CONFIRMING A N AD-HOC TRADING ADDITION TO THE EXTENT OF RS. 36,780/-. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE DISALLOWANCE OF RS. 39,325/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BHATTA EXPENSES DEBITED TO PROFIT AND LOSS ACCOUNT DUE TO NON-AVAIL ABILITY OF EXTERNAL EVIDENCES. FIRSTLY, WE WILL DECIDE GROUND NO. 1 WHICH IS COMM ON IN ALL THE APPEALS. 3 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. 2. THE ORIGINAL RETURN WAS FILED BY THE ASSESSEE ON 28.11.2003 DECLARING INCOME OF RS. 1,15,990/-. SEARCH AND SEIZURE OPERATION WA S CARRIED AT THE BUSINESS PREMISES AND RESIDENTIAL PREMISES ON 28.01.2009. TH E AO OBSERVED THAT INCRIMINATING DOCUMENTS WERE GATHERED DURING THE CO URSE OF SEARCH OPERATION. NOTICE UNDER SECTION 153A WAS ISSUED ON 26.04.2010 AND IN RESPONSE THERETO A RETURN WAS FILED ON 12.05.2010 DECLARING INCOME OF RS. 1,15,990/- FOR A.Y. 2003-04, NIL INCOME FOR THE A.Y. 2004-05 AND NIL INCOME FOR THE A.Y. 2008-09. THE ASSESSMENTS UNDER SECTION 143(3) READ WITH SECTION 153A WERE COMPLETED ON 20.12.2010 AT A TOTAL INCOME OF RS. 21,497/- FOR A. Y. 2003-04, RS. 1,42,880/- FOR A.Y. 04-05 AND RS. 2,64,860/- FOR A.Y. 2008-09. TH E ASSESSEE HAS RAISED THE GROUND NO. 1 BEFORE THE LD. CIT (A) IN THE FOLLOWIN G TERMS :- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSMENT ORDER DATED 20.12.2010 PASSED BY THE AO UNDER SECTION 143(3) READ WITH SECTION 153A OF THE ACT, 1 961 IS BAD IN LAW, ILLEGAL WITHOUT JURISDICTION AND VOID. THE LD. CIT (A) AFTER DISCUSSING THE JUDGMENT REFER RED BY THE ASSESSEE BEFORE HIM HAS HELD THAT THE ASSESSMENT PROCEEDINGS INITIATED UNDER SECTION 153A WAS VALID IN LAW. FOR READY REFERENCE, WE REPRODUCE HEREIN BELOW THE RELEVANT PARA 4.2 AS UNDER :- 4.2. I HAVE CAREFULLY PERUSED THE ORDER OF THE AO AND SUBMISSIONS FILED BY THE AR. FIRST OF ALL, THE FACT S IN THE GROUNDS OF APPEAL ARE INCORRECT. THE HONBLE RAJASTHAN HIGH COURT HAS MADE THE FOLLO WING OBSERVATIONS IN THE ORDER OF JAI STEEL (INDIA) VS. ACIT : 4 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. THE PROVISIONS OF SEC. 153A TO 153C CANNOT BE INT ERPRETED TO BE A FURTHER INNINGS FOR THE AO AND/OR ASSESSEE BEY OND PROVISIONS OF SEC.139 (RETURN OF INCOME), 139(5) (R EVISED RETURN OF INCOME), 147 (INCOME ESCAPING ASSESSMENT) AND 26 3 (REVISION OF ORDER) OF THE ACT . THE WORDS ASSESS OR REASSESS HAVE BEEN USED AT MORE THAN ONE PLACE IN THE SECTION AND A HARMONIOUS CONSTRUCT ION OF THE ENTIRE PROVISION WOULD LEAD TO AN IRRESISTIBLE CONC LUSION THAT THE WORD ASSESSEE HAS BEEN USED IN THE CONTEXT OF ABAT ED PROCEEDINGS AND REASSESS HAS BEEN USED FOR COMPLE TED ASSESSMENT PROCEEDINGS, WHICH WOULD NOT ABATE AS TH EY ARE NOT PENDING ON THE DATE OF INITIATION OF THE SEARCH OR MAKING OF REQUISITION AND WHICH WOULD ALSO NECESSARILY SUPPOR T THE INTERPRETATION THAT FOR THE COMPLETED ASSESSMENTS, THE SAME CAN BE TINKERED ONLY BASED ON THE INCRIMINATING MATERIA L FOUND DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUM ENTS. IN SHORT, THE HON. HIGH COURT HAS OBSERVED THAT WHE N NO INCRIMINATING MATERIAL IS FOUND DURING THE COURSE O F SEARCH AND SEIZURE PROCEEDINGS AND ASSESSMENT PROCEEDINGS HAVE BEEN COMPLETED THEN THESE WOULD NOT ABATE AS THEY ARE NO T PENDING ON THE DATE OF INITIATION OF SEARCH. IT HAS SPECIF ICALLY OBSERVED THAT PROVISIONS OF SEC. 153A TO 153C CANNOT GO BEYO ND THE PROVISIONS OF SEC. 147. IT IS PERTINENT TO NOTE THA T THE HON. SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVER I STOCK BROKERS (P) LTD. (2007) 210 CTR (SC) 30 HAS DISTING UISHED BETWEEN CASES PROCESSED U/S 143(1) AND THE CASES ASSESSED 143(3) FOR THE PURPOSE OF INITIATION OF PROCEEDINGS U/S 147. THE HON. APEX COURT OBSERVED THAT UNDER THE SEC. 143(1) (A) WHAT WAS PERMISSIBLE WAS CORRECTION OF ERRORS APPARENT O N THE BASIS OF THE DOCUMENTS ACCOMPANYING THE RETURN AND THE AO HAD NO AUTHORITY TO MAKE ADJUSTMENT OR ADJUDICATE UPON ANY DEBATABLE ISSUE NOR COULD HE GO BEHIND THE DOCUMENTS AND RETU RNS FOR DISALLOWING DEDUCTIONS. IT WAS ALSO OBSERVED THAT T HE LEGISLATIVE INTENT IN SUBSTITUTING THE WORD ASSESSMENT BY USE OF THE WORD INTIMATION MADE IT AMPLY CLEAR THAT THESE TWO WER E DIFFERENT. THUS IT WAS HELD THAT IN A CASE WHERE NO ASSESSMENT ORDER WAS PASSED U/S 143(3) OR 144, THE AO, WHEN HE NOTICED T HAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, WAS EMPOW ERED TO REOPEN THE ASSESSMENT BY ISSUE OF NOTICE U/S 148. IN THE CASE OF THE APPELLANT IT CANNOT BE SAID THAT THE ASSESSMENT PROCEEDINGS HAD BEEN COMPLETED SINCE THE RE WAS ONLY AN INTIMATION U/S 143(1)(A) WHICH IS NOT THE S AME AS AN ASSESSMENT ORDER U/S 143(3). THEREFORE IN ABSENCE O F COMPLETED ASSESSMENT PROCEEDINGS THE PROCEEDINGS MADE AS 5 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. PER PROVISIONS OF SECTION 153A WERE VALID IN THE CA SE OF THE APPELLANT. AGAINST THE SAID FINDING FIND, THE LD. A/R HAS RAIS ED THE ABOVE SAID GROUND WHICH IS REPRODUCED HEREIN ABOVE. 3. NOW THE ASSESSEE IS BEFORE US. 3.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ASSESSMENTS IN THIS CASE HAVE ALREADY BEEN COMPLETED UNDER SECTION 143(1) OF THE IT ACT WHEREBY THE RETURNS FILED BY THE ASSE SSMENT WERE ACCEPTED. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASIS OF SOME INCRIMINATIN G MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UND ISCLOSED INCOME OR PROPERTY DISCLOSED IN THE COURSE OF SEARCH WHICH WERE NOT PR ODUCED OR DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. IN THE PRESENT CASE, ON THE DATE OF SEARCH THE ASSESSMENTS ALREADY STOOD COMPLETED AND NO ASSESSMENT HAS ABATED, THE AO CAN ONLY MAKE ADDITION ON THE BASIS OF EITHER IN CRIMINATING MATERIAL FOUND DURING THE SEARCH OR UNDISCLOSED INCOME/PROPERTY DISCLOSED DURING THE SEARCH. SINCE ASSESSMENT U/S 153A WAS PASSED BY THE AO ON THE BAS IS OF MATERIAL AVAILABLE IN THE RETURN OF INCOME AND THERE WAS NO REFERENCE TO ANY INCRIMINATING MATERIAL FOUND DURING SEARCH AND SINCE NO ASSESSMENT WAS ABATED, A SSESSMENT U/S 153A WAS TO BE QUASHED BEING MADE WITHOUT JURISDICTION AVAILABLE U /S 153A. THIS ISSUE IS ALREADY DECIDED BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF JADAU JEWELLERS & MANUFACTURERS (P) LTD. VS. ACIT IN ITA NO. 686/JP/2 014 DATED 14 TH DECEMBER, 2015 WHEREIN THE TRIBUNAL HAS ALLOWED THE APPEAL OF THE ASSESSEE AND ORDER PASSED U/S 6 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. 153A READ WITH SECTION 143(3) OF THE ACT HAS BEEN HELD TO BE VOID AB INITIO. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH OF THE TRIBUNAL, AS ALSO THE VARIOUS JUDICIAL PRONOUNCEMENTS REPORTED AS CIT VS. KABUL CHAWLA, 126 DTR 130 (DELH HC), CIT VS. CONTINENTAL WAREHOUSING CORPN (1 20 DTR 89 (BOM.HC), GURINDER SINGH BAWA VS. DCIT 150 ITD 40 (MUM. TRIB.), WE ALL OW THE GROUND OF THE ASSESSEE FOR ALL THE THREE ASSESSMENT YEARS. 4. GROUND NO. 2 RELATES TO REJECTION OF BOOKS OF AC COUNT AND TRADING ADDITION. AFTER CONSIDERING THE RIVAL SUBMISSION, WE FIND THA T ESTIMATED ADDITION IS MADE ONLY TO PROTECT THE INTEREST OF THE REVENUE. HONBLE RA JASTHAN HIGH COURT IN CASE OF CIT VS. GOTTON LIME KHANIZ UDYOG, 256 ITR 243 (RAJ.) HA S HELD THAT MERE REJECTION OF BOOKS OF ACCOUNTS BY RESORTING TO SECTION 145 NEED NOT NECESSARILY LEAD TO ADDITION TO THE RETURNED INCOME OR A DIFFERENT FIGURE OF INC OME. THE AO HAS ACCEPTED THE OPENING STOCK, PURCHASES, SALES AND THE CLOSING STO CK. THEREFORE, ALSO IN VIEW OF DECISION OF HONBLE RAJASTHAN HIGH COURT IN CASE OF MALANI RAM JEEVAN JAGANNATH VS. ACIT, 316 ITR 120 (RAJ.) WE ARE NOT INCLINED TO CONFIRM THE TRADING ADDITION. HENCE THIS GROUND IS ALLOWED. 5. GROUND NO. 3 RELATES TO DISALLOWANCE OUT OF BHAT TA EXPENSES. THE AO DISALLOWED 10% OF EXPENSES WHEREAS THE LD. CIT (A) ASSUMED THAT THE EXPENSES MAY INCLUDE PAYMENT IN EXCESS OF R. 20,000/- WHICH IS IN VIOLATION OF SECTION 40A(3). BOTH THE LOWER AUTHORITIES MADE THE DISALLOWANCE ON ASSUMPTIONS AND THEREFORE, IN THE ABSENCE OF ANY FINDING THAT THE EXPENSES ARE IN FLATED OR NON GENUINE, THE DISALLOWANCE SO MADE IS DELETED. 7 ITA NO. 592(3)/JP/2014 KHALSA BRICKS MFG. CO. VS. DCIT. 6. IN THE RESULT, APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/05/2016. SD/- SD/- VH-VKJ-EHUK YFYR DQEKJ (T.R. MEENA) (LALIET KUMAR) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 13/05/2016 DAS/ VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- M/S. KHALSA BRICKS MFG. CO., JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT, CENTRAL CIRCLE-2, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO.592, 593 & 594/JP/2014) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR