Prakash Pralhad Chhabria, Pune V. Deputy Commissioner of Income-tax,

ITA 609/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1650 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-08-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 05-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV GHEI
• Keywords: Business income; Search and seizure; Period of limitation; Time period of passing order
• Section: 143(3); 153A; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO . 609 /P U N/201 6 / ASSESSMENT YEAR : 20 06 - 07 PRAKASH PRALHAD CHHABRIA, PLOT NO. 9, MOHINI, ICS COLONY, GANESHKHIND ROAD, PUNE 411007 PAN : AALPC5166E ....... / APPELLANT / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 (2), PUNE / RESPONDENT ASSESSEE BY : S HRI NIKHIL PATHAK REVENUE BY : SHRI SANJEEV GHEI / DATE OF HEARING : 2 3 - 08 - 201 8 / DATE OF PRONOUNCEMENT : 31 - 0 8 - 201 8 / ORDER PER VIKAS AWASTHY, JM : TH IS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 11, PUNE DATED 29 - 01 - 2016 FOR THE ASSESSMENT YEAR 2006 - 07. 2 ITA NO . 609/PUN/2016, A.Y. 2006 - 07 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE : THE ASSESSEE IS MANAGING DIRECTOR OF FINOLEX INDUSTRIES LTD. A SEARCH AND SEIZURE ACTION WAS CARRIED OUT ON FINOLEX GROUP OF COMPANIES ON 18 - 11 - 2010. THE PREMISES OF THE ASSESSEE WERE ALSO COVERED BY THE SEARCH ACTION. THE ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME U/S. 139 O F THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) ON 29 - 07 - 20 0 6 FOR THE ASSESSMENT YEAR 2006 - 07 DECLARING TOTAL INCOME OF RS.2,80,13,810/ - . IN THE SAID RETURN OF INCOME THE ASSESSEE HAD DECLARED PROFIT ON SALE OF SHARES AS SHORT TERM CAPITAL GAIN . IN RESPONSE TO NOTICE U/S. 153A, THE ASSESSEE FILED RETURN OF INCOME ON 09 - 08 - 2011 DECLARING SAME INCOME. THE ASSESSING OFFICER TREATED SHORT TERM CAPITAL GAIN ON SALE OF SHARES AS B USINESS I NCOME . AGGRIEVED BY THE ASSESSMENT ORDER DATED 31 - 01 - 2013 PASSED U/S. 143(3) R.W.S. 153A OF THE ACT, THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENTIONS OF ASSESSEE AND CONF IRMED THE ASSESSMENT ORDER. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS). 3. SHRI NIKHIL PATHAK APPEARING ON BEHALF OF THE ASSESSEE GIVING THE CHRONOLOGY OF EVENTS SUBMITTED TH AT THE ASSESSEE HAD FILED ORIGINAL RETURN OF INCOME U/S. 139 ON 29 - 07 - 20 0 6 INTER ALIA DECLARING GAIN ON SALE OF SHARES AS SHORT TERM CAPITAL GAIN. THE DUE DATE FOR FILING RETURN OF INCOME FOR ASSESSMENT YEAR 2006 - 07 EXPIRED ON 31 - 07 - 2007. THE TIME LIMIT FOR COMPLETING ASSESSMENT FOR ASSESSMENT YEAR 2006 - 07 ENDED ON 3 ITA NO . 609/PUN/2016, A.Y. 2006 - 07 31 - 12 - 2008. SEARCH OPERATION WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 18 - 11 - 2010. THUS, IT IS A CASE OF NON - ABATED /COMPLETED ASSESSMENT. DURING SEARCH NO INCRIMINATING EVIDENCE WH ATSOEVER WAS FOUND TO SHOW THAT SALE OF SHARES BY THE ASSESSEE WAS IN THE ADVENTURE OF TRADE AND HENCE LIABLE TO BE TAXED UNDER THE HEAD B USINESS I NCOME . IN THE ABSENCE OF ANY INCRIMINATING MATERIAL THE ASSESSING OFFICER CANNOT CHANGE THE HEAD OF INCOME . THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RELIANCE ON THE DECISION OF CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MRS. BILKIS KADIR SHAIKH VS. INCOME TAX OFFICER IN ITA NOS. 472 TO 475/PUN/2012 FOR ASSESSMENT YEARS 2002 - 03 TO 2005 - 06 DECIDED ON 03 - 08 - 2018. 4. ON THE OTHER HAND SHRI SANJEEV GHEI REPRESENTING THE DEPARTMENT VEHEMENTLY DEFENDED THE IMPUGNED ORDER. THE LD. DR SUBMITTED THAT NO ASSESSMENT ORDER U/S. 143(3) WAS PASSED IN THE CASE OF ASSESSEE IN THE ASSESSMENT YEAR 2006 - 07. THUS , THE ASSESSMENT MADE U/S. 153A IS THE FIRST REGULAR ASSESSMENT FOR THE ASSESSMENT YEAR UNDER APPEAL. THE NUMBER OF TRANSACTIONS FOR SALE AND PURCHASE OF SHARES CARRIED OUT BY THE ASSESSEE INDICATE THAT THE ASSESSEE WAS VERY ACTIVE IN SELLING AND PURCHASI NG OF SHARES. THE MANNER IN WHICH TRADING OF SHARES WAS CARRIED OUT SUGGESTS THAT THE PROFIT FROM THE ACTIVITY OF SALE AND PURCHASE OF SHARES WAS IN THE NATURE OF BUSINESS AND NOT FOR THE PURPOSE OF INVESTMENT. 5. W E HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW . IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAD DISCLOSED INCOME FROM SALE OF SHARES 4 ITA NO . 609/PUN/2016, A.Y. 2006 - 07 IN HIS REGULAR RETURN OF INCOME AS SHORT TERM CAPITAL GAIN. THE LD. AR HAS POINTED THAT FOR ASSESSMENT YEARS 2004 - 05 AND 2005 - 06 THE ASSESSING OFFICER ACCEPTED THE CLAIM OF ASSESSEE IN TREATING THE INCOME FROM SALE OF SHARES AS SHORT TERM CAPITAL GAIN. 6. IN THE ASSESSMENT PROCEEDINGS ARISING OUT OF SEARCH , THE ASSESSING OFFICER CHANGED TH E HEAD OF INCOME IN RESPECT OF PROFIT FROM SALE OF SHARES FROM CAPITAL GAINS TO BUSINESS INCOME . A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THERE IS NO REFERENCE TO ANY INCRIMINATING MATERIAL SEIZED DURING SEARCH OPERATION WHICH COULD FORM BASIS FOR CHANGING THE HEAD OF INCOME FROM CAPITAL GAINS TO BUSINESS INCOME QUA PROFIT ARISING FROM SALE OF SHARES. THE C HRONOLOGY OF EVENTS AS POINTED BY THE LD. AR CLEARLY SHOWS THAT THE LIMITATION PERIOD FOR COMPLETING THE ASSESSMENT U/S. 143(3) HAD ALREADY EXP IRED ON 31 - 12 - 2008 I.E. WELL BEFORE THE DATE OF SEARCH ON 18 - 11 - 2010. THUS, THE INCOME RETURNED BY THE ASSESSEE WAS ACCEPTED BY THE DEPARTMENT. ONE OF THE REASON FOR UPHOLDING THE ACTION OF ASSESSING OFFICER BY COMMISSIONER OF INCOME TAX (APPEALS) IS; T HE RETURN OF INCOME FILED BY ASSESSEE U/S. 139 WAS PROCESSED U/S. 143(1) OF THE ACT. THUS, IT CANNOT BE SAID THAT THE ASSESSMENT ORDER WAS PASSED ON THE REGULAR RETURN OF INCOME IN THE ASSESSMENT YEAR UNDER APPEAL . THE REASON GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS NOT TENABLE. IN THE ABSENCE OF ANY INCRIMINATING MATERIAL NO ADDITION U/S. 153A IS LEGALLY SUSTAINABLE IS NO MORE RES INTEGRA. THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. KABUL CHAWLA REPORTED AS 38 0 ITR 573 HELD THAT COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY ASSESSING OFFICER IN ASSESSMENT PROCEEDINGS U/S. 153A ONLY ON THE BASIS OF 5 ITA NO . 609/PUN/2016, A.Y. 2006 - 07 INCRIMINATING MATERIAL FOUND DURING SEARCH. IN THE SAID CASE REGULAR ASSESSMENTS FOR SEARCH PERIOD WERE COMPLETED U/S. 143(1) . THUS, WHETHER THE ASSESSMENT IS COMPLETED U/S. 143(1) OR 143(3), ADDITIONS MADE IN PROCEEDINGS U/S. 153A WITHOUT INCRIMINATING MATERIAL ARE NOT LEGALLY SUSTAINABLE. 7. WE FURTHER OBSERVE THAT THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF MRS. BILKIS KADIR SHAIKH VS. INCOME TAX OFFICER (SUPRA) AFTER PLACING RELIANCE ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. DEEPAK KUMAR AGARWAL VIDE WRIT PETITION NO. 1709/2014 DECIDED ON 11 - 09 - 2017 WHEREIN THE RETURNS WERE PROCESSING U/S. 143(1) OBSERVED AS UNDER : REGARDING THE REGULAR ASSESSMENT, IT IS A FACT THAT THE SAME IS AN UNABATED ASSESSMENT IN THIS CASE. RELEVANT FACTS INCLUDE THAT THE ASSESSEE FILED THE RETURN U/S.139(1) OF THE ACT ON 22 - 11 - 2000. RETURN WAS PROCESSED U/S.143(1A) OF THE ACT. THE DUE DATE FOR ISSUE OF NOTICE U/S.143(2) EXPIRED IN NOVEMBER, 2003. CONSIDERING THE ABOVE FACTS AS WELL AS CONSIDERING THE DECISION OF HONBLE JURISDICTION HIGH COURT IN THE CASE OF CIT VS. DEEPAK KUMAR AGARWAL VIDE WRIT PETITION NO.1709/2014 AND OTHERS, DATED 11 - 09 - 2017 AND THE DECISION OF ITAT, PUNE IN THE CASE OF SHRI GAJENDRA PAWAR VIDE ITA NOS. 1009 - 1012/PN/15, THE TIME FOR ISSUE OF SAID STATUTORY NOTICE EXPIRED MUCH BEFORE THE SEA RCH ACTION U/S.132 OF THE ACT THAT TOOK PLACE ON 18 - 09 - 2007. IN THIS FACTUAL MATRIX OF THE CASE, THE ASSESSMENT IS UNDISPUTEDLY A NON - ABATED ASSESSMENT. THEREFORE, THE ADDITIONS, IF ANY HAVE TO BE MADE ONLY WITH THE SUPPORT OF ANY INCRIMINATING MATERIAL. C ONSIDERING THE SAME, WE ARE OF THE OPINION THAT THE ADDITIONS MADE BY THE AO BEING UNSUPPORTED BY INCRIMINATING MATERIAL ARE NOT SUSTAINABLE TECHNICALLY. ACCORDINGLY, THE GROUNDS OF APPEAL NO. 4. 5 AND 5.1 RAISED BY THE ASSESSEE HAVE TO BE ALLOWED ON TECHN ICAL GROUNDS. 6 ITA NO . 609/PUN/2016, A.Y. 2006 - 07 THUS, IN THE FACTS OF THE CASE AND THE DECISIONS DISCUSSED ABOVE WE FIND MERIT IN THE SUBMISSIONS OF LD. AR . THE FINDINGS OF COMMISSIONER OF INCOME TAX (APPEALS) ARE SET ASIDE AND THE APPEAL OF ASSESSEE IS ALLOWED. 8. IN THE RESULT, T HE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 31 ST DAY OF AUGUST, 201 8 . SD/ - SD/ - ( . /D. KARUNAKARA RAO ) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 31 ST AUGUST, 2018 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 11, PUNE 4. THE DGIT (INV.), PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / / // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE