SH.KRISHAN KUMAR MITTAL, FEROZPUR V. DY COMMISSIONER OF INCOME TAX, JALANDHAR

ITA 637/ASR/2018

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5752 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SB
• Assessment Year: misc
• Appeal Filed On: 19-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASSESSMENT US ASSESSEES APPEAL WAS ALLOWED
• Keywords: Search and seizure; Principle of natural justice; Question of law; Deemed dividend
• Section: 147; 132; 143(3); 153A; 2(22)(e); 143(1); 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. MAHAVIR PRASAD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 637/Asr/2018 Assessment Year: 2015-16 Sh. Krishan Kumar Mittal H. No. 15-17, Street No. 4, Ferozepur Cantt., Punjab. [PAN: ABYPK 5307M] (Appellant) Vs. Deputy Commissioner of Income Tax, Central Circle-1, Jalandhar (Respendent) Appellant by Sh. Ashray Sarna, C. A. Respondent by Smt. Abha Rani Singh, CIT-DR Date of Hearing 07.12.2021 Date of Pronouncement 23.12.2021 ORDER Per Dr. M. L. Meena, AM: This appeal of the assessee is directed against the order of Ld. CIT(A)-5, Ludhiana dated 27.11.2018. 2. The assessee has raised the following grounds of appeal: “1. (a) That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming jurisdiction and framing the impugned assessment order u/s 153 2 I.T.A. No. 637/Asr/2018 A/143(3) of the Act is bad in law and against the facts and circumstances of the case and is not sustainable on various legal and factual grounds. (b) That in any case and in any view of the matter, additions made in the impugned order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search warranting impugned addition. 2. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 1,77,72,706/- as deemed dividend u/s 2(22)(e) of the Act without considering the submissions of the assessee and without observing the principles of natural justice. 3. That having regard to the facts and circumstances of the case, Hon’ble CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs. 1,77,72,706/- as deemed dividend u/s 2(22)(e) of the Act, without considering the fact that shareholding of assessee is less then 10%. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.” 3. Briefly the facts as per record are that a search was conducted at the the residential premises of the assessee and business premises of M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd., Ferozepur Cantt., M/s Bhagwati Lacto Foods Pvt. Ltd., the two companies in which the assessee’s latter became substantive shareholder. During the course of search, certain documents in the shape of typed balance-sheet/trial balances etc. in the computers installed at the respective premises of the companies, were found and seized. It is alleged that most of the figures of raising of funds per these documents did not tally with that audited balance 3 I.T.A. No. 637/Asr/2018 sheets of respective companies. Further while examining the assessee’s bank account 65004674938 with State Bank of Patiala, Ferozepur Cantt., appearing the books of account of M/s Shri Ram Shiv Kumar, the assessee’s proprietary concern, it was noticed that the assessee had received loan Rs.9.5 crore on 30.03.2015 vide two entries, from M/s Bhagwati Foods Pvt. Ltd., wherein he held 21.94% of the shareholding during relevant financial year. The assessee was confronted with the fact was asked to show cause as to why the amount of loan should not be taxed as deemed dividend as per provisions of section 2(22)(e) of the Act. 3.1 The assessing Officer mentioned that it is undisputed fact that no assessment u/s 143(3) or 147 was made earlier, meaning thereby that no detailed information on the transactions of the assessee were recorded. Since this is an undisputed fact that the assessee is substantial shareholder in the said company and had received a loan without any business purpose of the said company, hence, the provisions of sec. 2(22)(e) of the Act, are applicable and made addition against the amount of loan of Rs.9.5 crore holding as taxable dividend u/s 2(22)(e) of the Act. 4. The ld. CIT(A) appeal has confirmed the addition by observing as under: 4 I.T.A. No. 637/Asr/2018 “The facts of the case, the basis of addition made by the AO and the arguments of the AR during the appellate proceedings have been considered. The AR argued that the assessee received a sum of Rs. 9.5 crore from M/s. Bhagwati Lacto Foods Pvt. Ltd., out of which the amount of Rs. 4.5 crore was returned back on the same day and hence the total amount of Rs. 5 crore was due to Company on 31.03.2015. It was submitted that shareholding of the assessee in M/s. Bhagwati Lacto Foods Pvt. Ltd. was only 10,000 shares and as per AR, assessee's shareholding was merely 0.2163% i.e. far less than 10% requirement, as per provision of Section 2(22)(e) of the Act. The AR claimed that this shareholding was as per the revised Annual Return filed with ROC on 26.06.2018 wherein the total shareholding of the Company has been shown at 46,23,000 shares. In the remand report, the AO has mentioned that during the post search enquiry, details from the group companies including the 'shareholding pattern' was called and in the reply filed by M/s. Bhagwati Lacto Foods Pvt. Ltd., the assessee held 10,10,000 shares of the company M/s Bhagwati Lacto Foods Pvt. Ltd. as on 31.03,2015 out of the five shareholders and no share was held by M/s. Bhagwati Lacto Vegetarian Exports Pvt. Ltd.” 5. The appellant assessee being aggrieved by the impugned order, is in appeal before us. 6. The ld. Counsel for the assessee submitted that, in this case assessment has been completed u/s 153A r.w.s. 143(3) of the FT. Act 1961, consequent to Search operation u/s 132(1} of the Act, was conducted at the residential premises of the assessee on 11.02.2016 as evident from para 1 of page 1 of the Assessment Order. He argued that the AO has made addition on the basis of return of income and disclosed bank statements which were filed by assessee itself during assessment proceedings (Page 2 para 1 of the Assessment Order). The Ld. AR further argued that there was no incriminating material, much less, in respect of 5 I.T.A. No. 637/Asr/2018 the impugned addition and hence impugned addition has been made in the absence of any incriminating material unearthed from the search, which is not permissible in law. In support, he has filed a brief written synopsis to buttress its contentions as under: It is respectfully submitted that, in this case assessment has been completed u/s 153A r.w.s. 143(3) of the FT. Act 1961. consequent to Search operation u/s 132(1} of the Act, take at the residential premises of the assessee on 11.02.2016 as noted by Ld. AO at para 1 on page 1 of the impugned Assessment Order. It is respectfully submitted that Return of income for A.Y. 2015-16 was filed on 30.09.2015 at the Gross Total Income of Rs. 10,99,725/- which became final after being processed u/s 143(1) of the Act on 12.01.2016. The above situation is summarized as under: Search date 11.02.2016 Return filing date 30.09.2015 Return processed u/s 1.43(1) date 12.01.2016 Therefore, present case is a case where no proceedings for AY 2015-16 were pending on the date of search and hence the said assessment did not abate. Therefore, in this case the assessment has attained finality and has not abated and no incriminating material qua impugned addition was found as a result of search. 6 I.T.A. No. 637/Asr/2018 Sir, the addition has been made on the basis of return of income and disclosed bank statements which were filed by assessee itself during assessment proceedings. The fact that addition is made on basis of bank statement disclosed in return of income, which were filed by assessee itself is evident from the Assessment Order Page 2 para 1 which states as under: "............While Examining the assessee’s bank account no..........” Thus addition is not based on any incriminating material. Thus, there was no incriminating material, much less, in respect of the impugned addition and hence impugned addition has been made in the absence of any incriminating material unearthed from the search, which is not permissible in law and it is supported bv the as sense's group case and other following judicial decisions: - Smtt. Sanjana Mittal As. DOT ITA No. 487/Asr/20l8 dated 11.03.2019, wherein the jurisdictional bench of Hon’ble ITAT, Amritsar held that ".... ....no incriminating material has been found, no assessment proceedings were pending on the date of search proceedings, therefore, it was held by the bench that in a case, where no incriminating material is found during course of search proceedings; and the assessment proceedings remain un-abated as on the said date, no addition can be made validly in the hands of assessee” Smt. Manju Mittal Vs DCIT ITA No.l93/ASR/2019 dated 01.01.2020 wherein the Hon'ble Jurisdictional Bench held as under: 7 I.T.A. No. 637/Asr/2018 Search and seizure Assessment under s. 153A—Compulation of undisclosed income vis-a-vis absence of incriminating material Return filed by the assessee for the relevant assessment year has already been processed by the Revenue under s. 143(1) and it is not the case of the Revenue that the assessment proceedings were still alive as on the date of search operation From the orders passed by the authorities below there is nothing to suggest as to what incriminating material has been found during the search from the assessee's possession or premises, on the basis of which the additions have been made Additions not sustainable CIT vs. Kabul Chawla (2015) 281 CTR (Del) 45 : (2015) 126 DIR (Del) 130 : (2016) 380 ITR 573 (Del), Principal CIT vs. Meeta Gutguiia (2017) 295 CTR (Del) 466 : (2017) 152 DTR (Del) 153(2017) 395 ITR 526 (Del) and Smt. San/ana Mittal vs. Dy. ClT (2019) 199 TTJ (Asr) UO) 15 followed; Dy. CIT & Anr Vs. Zuari Estate Development & Investment Co. Ltd. 120151 279 CTR (SO 527; (2015) 124 DTR (SC) 222 : (2015) 373 ITR 661 (SC) distinguished Other Relevant Cases: COMMISSIONER OF INCOME TAX vs. KABUL CHAWLA HIGH COURT OF DELHI (2016) 380 ITR 0573 (Delhi) Search and seizure New scheme of assessment in search cases Search was carried out u/s 132 on a leading real estate developer operating all over India and some of its group companies Search was also carried out in the premises of the assessee— Pursuant to the search a notice ids I53A(1) was issued to assessee and thereafter he filed returns - As on the date of the search, no assessment proceedings were pending for relevant A Vs and for said A Vs, assessments was already made u/s 143(1). assessee filed an application ids 154 seeking rectification of the assessments on the ground that the accumulated profits of the companies paying 8 I.T.A. No. 637/Asr/2018 the dividend were less than the amount of loan or advance given by (hem to the recipient companies AO declined to rectify the assessments—CIT also held that addition need not be restricted only to the seized material - ITAT on appeal however deleted addition on grounds that the additions made for relevant AY's u/s 2(22)(e) were not based, on any incriminating material found during search operation and same was not sustainable in law- Issue was whether the additions made to the income of the assessee for the said AYs u/s 2(22)(e) was not sustainable because no incriminating material concerning such additions were found during the course of search and further no assessments for such years were pending on the date of search—Held, present appeals concerned AYs. 2002-03, 2005-06 and 2006-07 - On the date of the search the said assessments already stood completed—Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed - Question framed by the Court was answered in favour of the assessee and against the Revenue – Revenue’s appeal dismissed CIT-II, Thane vs. Continental Warehousing Corporation (Nhava Sheva) Ltd, [2015) 58 taxmann.com 78 (Bom HC) IT: So addition can be made in respect of assessments which have become final if no incriminating material is found during search. Parivar Properties (P.) Ltd. v. Deputy Commissioner of Income-tax, [2014] 41 taxmann.com 485 (Delhi - Trib.) Section I53A of the Income-tax Act 1961 - Search and seizure - Assessment in case of (Computation] Assessment rears 2003-04 to 2007-08 - Whether in course of proceedings under section 153/1 addition should he made only on basis of 9 I.T.A. No. 637/Asr/2018 material seized during course of search, particularly when no assessment was pending on date when search had taken place - Held, yes [Para 14] [In favour of assessee] M/s Marigold Merchandise (P) Ltd. vs. DCIT, (2014) 164 TTJ 0448 (Del) Search and seizure -Assessment u/s. 153A – Validity of—Pursuant to search and seizure operations conducted in assessee’s premises notice (2014) 164 TTJ 0448 (Del) u/s J53A was issued— Additions was made u s USA Assessee had claimed that in absence of any incriminating material found during course of search no addition can be made by AO as undisclosed income us 153A Held, it is settled law that no addition can be made unless some incriminating material in this behalf is found as result of search—It was not disputed that no incriminating material in behalf of purchase of these lands and sale of these lands was found as result of search – also purchases of agricultural land was accepted by department us part affixed asset' investment of assessee by assessment u/s 143 (3)—Assessee‘s appeal was allowed. It is submitted, at the cost of repetition, that there was no incriminating material found during search qua these additions made in the hands of the assessee. Therefore, in view of above submissions and judgments, jurisdiction assumed by Ld. AO u/s 153A/143(3) is bad in law and impugned assessment order may please be quashed on this ground alone.” 7. Per contra, the Ld. CIT(DR) stands by the impugned order. She argued that though the incriminating material was not recovered during the time search operation, however in law there is no necessity of any incriminating material while initiating proceedings u/s 153 of the Act as 10 I.T.A. No. 637/Asr/2018 various High Courts held that the addition can be made without any incriminating material qua the years covered by Sec.153A. The Ld. DR finally argued that the conclusion drawn by Delhi High Court in the case of CIT vs. Kabul Chawala (supra) is contrary to the principle laid by the same High Court in the case of Anil Kumar Bhatia (24 taxmann.com 98) and Chetan Das Lachman Das (25 taxmann.com 227) and thus, the decision of Kabul Chawla (supra) is not a good law because the issue relating to material not found during the search was considered to be open in Anil Kumar Bhatia (supra). 8. We have heard both the parties, perused the material available on record and the case laws cited at bar. It is not disputed that the assessee has filed its Income Tax Return 30.09.2015 for the relevant assessment year 2012-13 which has been processed u/s 143(1) of the act on dated 23.03.3013. Subsequently, a search operation u/s 132 was carried out at the residential premises of the assessee on 11.02.2016. Further, another peculiar fact is that alleged incriminating material i.e., back up data stored in various computers lying in the business premises of M/s Bhagwati Lacto Foods Pvt. Ltd., and the Laptop of Sh. Manjeet Singh, Accountant of the Company, in the form of typed balance sheet, bank statement which was 11 I.T.A. No. 637/Asr/2018 used against the assessee was already disclosed in its audited books of account the return of income filed with the Department. The ld. Counsel, contended that no documents or suspicious material of incriminating nature has been found or seized either from the premises of the assessee or the companies, wherein he become share holder. 9. It is seen that the assessee has claimed before the authorities below that where no assessment proceeding for the year under consideration is pending, in that eventuality, in the absence of any incriminating evidence found during the course of search and seizure proceedings, no addition/disallowance can be made qua unabated assessment for the said year, however the authorities below held that the Hon’ble Kerala High Court in the case of “E.N. Gopal Kumar vs. CIT(Central) (Supra)”, there is no condition that the Department has to unearth some incriminating material to conclude some method against the assessee in events where the assessment is triggered by a notice under Section 153(1)(a) of the Act. 10. The question of law involved in the instant case pertains to the issue that where no assessment proceeding for the year under consideration is pending, in that eventuality, in the absence of any incriminating material found during the course of search and seizure proceedings, whether the 12 I.T.A. No. 637/Asr/2018 addition can be made qua unabated assessment for the said year? An identical question on identical fact has been examined and adjudicated by Coordinate Bench, Amritsar in case of “Smt. Sanjana Mittal Vs. DCIT”, ITA No. 487/Asr/20l8 dated 11.03.2019, one of the assessee of the same search group wherein it was held that in a case, where no incriminating material is found during course of search proceedings; and the assessment proceedings remain un-abated as on the said date no addition can be made validly in the hands of assessee. While arriving at such decision the coordinate Bench has relied on the judgment of Hon’ble Delhi High Court rendered in the case of “CIT(Central-3) vs. Kabul Chawla (supra)”, wherein it is clearly held that if on the date of search, the assessment proceedings already stood completed and no incriminating material unearthed during the search, then no addition can be made to the income already assessed. The said dictum of the Hon’ble High Court was confirmed by the Hon’ble Apex Court vide order dated 2 nd July, 2018 in the case of Pr. Joint CIT vs. Meeta Gutgutia by dismissing the Department’s SLP filed against the judgment of Delhi High Court, wherein the same dictum has been laid down by the Hon'ble Court as laid down in the CIT vs. Kabul Chawla (supra), hence it cannot be said that law laid down by 13 I.T.A. No. 637/Asr/2018 Delhi High Court in Kabul Chawla case {supra} is not a good law as claimed by the Ld. CIT DR. 11. Since, the facts of the instant case are exactly identical to the facts of the Smt. Sanjana Mittal Vs. DCIT (Supra)”, hence the decision laid down by the jurisdictional bench in that case is applicable to the assessee case in matatus mutandis. Accordingly, we hold that in the absence of incriminating material, in the case of the appellant assessee, no addition can be made qua unabated assessment for the year under consideration. 12. In the above view, we accept the grievance of the assessee as genuine and we hereby delete the addition made by the AO. 13. In result, the appeal of the assessee is allowed. Order pronounced U/R 34(4) on 23.12.2021 Sd/- Sd/- (Mahavir Prasad) (Dr. M. L. Meena) Judicial Member Accountant Member Dated: 23/12/2021 *GP/Sr./P.S.* Copy of the order forwarded to: (1) The Appellant (2) The Respondent (3) The CIT 14 I.T.A. No. 637/Asr/2018 (4) The CIT (Appeals) (5) The DR, I.T.A.T. By Order