ACIT CEN CIR 32, MUMBAI V. SHREE GLOBAL TRADEFIN LTD, MUMBAI

ITA 6673/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2946 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 15-04-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D V LAKHANI
• Keywords: Opportunity of being heard; Documents seized
• Section: 143(3); 153A; 14A; 115JB; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E B ENCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR ACCOUNTANT MEMBER / I .TA NOS. 6673 TO 6676/MUM/2012 ( / ASSESSMENT YEARS:2007-08 TO2010-11 THE ACIT, CENTRAL CIRCLE-32, MUMBAI / VS. M/S. SHREE GLOBAL TRADEFIN LTD., 35, ASHOK CHAMBERS, BROACH STREET, DEVJI RATANSEY MARG, MUMBAI-400 09 C.O. NOS. 190 TO 192/MUM/2015 (ARISING OUT OF I .TA NOS. 6673 TO 6675/MUM/2012 ( / ASSESSMENT YEARS:2007-08 TO2009-10 M/S. SHREE GLOBAL TRADEFIN LTD., 35, ASHOK CHAMBERS, BROACH STREET, DEVJI RATANSEY MARG, MUMBAI-400 09 / VS. THE ACIT, CENTRAL CIRCLE-32, MUMBAI ./ ./ PAN/GIR NO. AAACB 2975J ( / APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY: SHRI SUNIL KUMAR AGARWAL / ASSESSEE BY: SHRI D.V. LAKHANI / DATE OF HEARING :11.08.2016 ! / DATE OF PRONOUNCEMENT :14.09.2016 / O R D E R PER C.N. PRASAD, JM: ITA NOS.6673 TO 6676/M/2012. 2 ALL THESE APPEALS ARE FILED BY THE REVENUE AND THE CROSS OBJECTIONS ARE FILED BY THE ASSESSEE AGAINST THE OR DER OF THE LD. CIT(A)-41, MUMBAI DATED 1.8.2010 PERTAINING TO ASSE SSMENT YEARS 2007-08 TO 2010-11. IN ALL THE CROSS OBJECTIONS TH E ASSESSEE HAS TAKEN LEGAL GROUND AS UNDER: ON THE FACTS & CIRCUMSTANCES OF THE CASE THE LD. C IT(A) HAS ERRED IN CONCLUDING THAT THE ACTION OF THE ASSESSING OFFI CER IN INVOKING THE PROVISIONS OF SEC. 153C IS JUSTIFIED. THE APPE LLANT PRAYS THAT THE CONDITION OF SECTION 153C IS NOT SATISFIED AND THE ASSESSING OFFICER HAS WRONGLY INVOKED THE PROVISIONS OF SEC. 153C. 2. BRIEF FACTS ARE THAT THERE WAS A SEARCH & SEIZUR E ACTION U/S. 132 OF THE I.T. ACT ON 4.3.2010 IN THE CASE OF JOGIA PR OPERTIES (P) LTD. IN THE COURSE OF SEARCH CERTAIN DOCUMENTS WERE SAID TO HAVE BEEN FOUND BELONGING TO THE ASSESSEE AND THE ASSESSEES CASE W AS COVERED U/S. 153C OF THE ACT. THE ASSESSMENT U/S. 143(3) R.W. 1 53C WERE COMPLETED FOR THE ASSESSMENT YEARS 2007-08 TO 2009- 10. WHILE COMPLETING THE ASSESSMENTS, THE ASSESSING OFFICER M ADE DISALLOWANCE/ADDITION U/S. 14A OF THE ACT WHILE COM PUTING THE INCOME UNDER NORMAL PROVISIONS/BOOK PROFIT U/S. 115 JB OF THE ACT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) CONTENDING THAT THERE IS NO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH THEREFORE ASSESSMENT ITSELF IS BAD IN LAW. THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE LD. CIT(A) AND BY OBSERVING THAT IN THE COURSE OF SEARCH PROCEEDINGS CERTAIN DOCUMENTS PERTAINING TO THE ASSESSEE WERE RECOVERED FROM THE PREMISES OF M/S. JOGIA PROPERTIES PVT. LTD AND THU S IT CANNOT BE HELD THAT THERE IS NO INCRIMINATING MATERIALS NOT BELONG ING TO THE ASSESSEE ITA NOS.6673 TO 6676/M/2012. 3 WERE FOUND. AGAINST THIS DECISION OF THE LD. CIT(A ) THE ASSESSEE PREFERRED AN APPEAL BY WAY OF CROSS OBJECTION AND S UBMITS THAT THERE IS NO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARCH. THE ADDITIONS/DISALLOWANCE MADE IN THE ASSESSMENT ORDER ARE NOT BASED ON ANY INCRIMINATING MATERIAL FOUND IN THE COURSE O F SEARCH AND THEREFORE THE ASSESSMENTS ARE BAD IN LAW. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT NO T EVEN A WHISPER OF ANY INCRIMINATING MATERIAL SEIZED WAS ME NTIONED IN THE ASSESSMENT ORDER NOR ANY ADDITION/DISALLOWANCE WAS MADE BASED ON ANY DOCUMENTS SEIZED. HE SUBMITS THAT WHEN THERE IS NO INCRIMINATING MATERIAL FOUND, THE ASSESSMENTS CANNO T BE MADE U/S. 153C OF THE ACT BY MAKING REGULAR ADDITIONS/DISALLO WANCES. HE SUBMITS THAT THE ASSESSMENTS FOR THE ASSESSMENT YEA RS 2007-08 TO 2009-10 WERE NOT ABATED THEREFORE THESE ASSESSMENTS CANNOT BE MADE U/S. 153C WITHOUT THERE BEING ANY INCRIMINATIN G MATERIAL FOUND. FOR THIS PROPOSITION HE PLACED RELIANCE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ALL CARGO GLOBAL LOGISTICS LTD., (374 ITR 645) WHEREIN THE JURISDICT IONAL HIGH COURT AFFIRMED THE DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL IN ALL CARGO LOGISTICS VS DCIT REPORTED IN (2002) 18 ITR (TRIB) 106. THE SECOND SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE IS T HAT THERE IS NO SATISFACTION RECORDED BY THE ASSESSING OFFICER BEFO RE INITIATION OF PROCEEDINGS U/S. 153C OF THE ACT. THEREFORE HE SUB MITS THAT WHEN THE SATISFACTION ITSELF IS NOT VALID, THE ASSESSMEN TS MADE U/S. 153C ARE BAD IN LAW. ITA NOS.6673 TO 6676/M/2012. 4 5. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF THE AUTHORITIES BELOW. 6. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW AND CAREFULLY CONSIDERED THE SUBMISSIONS OF RIVAL PARTI ES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENTS U/S. 153C FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10, MADE ADDITION/ DISALLOWANCE U/S. 14A OF THE ACT. EXCEPT THIS DISALLOWANCE/ADDI TION NO OTHER DISALLOWANCE/ADDITIONS WERE MADE. ON A READING OF THE ASSESSMENT ORDER, WE DO NOT FIND ANY INCRIMINATING MATERIAL WH ATSOEVER FOUND IN THE COURSE OF SEARCH BASED ON WHICH THE ADDITIONS/D ISALLOWANCES HAVE BEEN MADE. ON A PERUSAL OF THE ASSESSMENT ORD ER, WE FIND THAT THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE MA DE DISALLOWANCE U/S. 14A IN THE NORMAL COMPUTATION, BUT NO SUCH DIS ALLOWANCE WAS MADE WHILE COMPUTING THE BOOK PROFIT U/S 115JB. TH EREFORE THE ASSESSING OFFICER MADE DISALLOWANCE U/S. 14A BASED ON THE RECORDS ALREADY AVAILABLE BUT NOT BASED ON ANY SEIZED MATER IAL IN THE COURSE OF SEARCH PROCEEDINGS. WE FURTHER FIND FROM THE ASS ESSMENT ORDER EXCEPT SAYING THAT DOCUMENTS BELONGING TO ASSESSEE WERE SEIZED DURING SEARCH NOWHERE IT WAS MENTIONED WHAT KIND OF DOCUMENTS SEIZED AND HOW THEY ARE INCRIMINATING MATERIALS REL EVANT FOR THE PURPOSE OF ASSESSMENT U/S. 153C OF THE ACT. 7. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ALL CARGO LOGISTICS LTD (SUPRA) WHILE AFFIRMING THE ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL HELD AS UNDER: 17 . ON THE OTHER HAND, WHILE CANVASSING THE LEAD A RGUMENTS, MR. DASTUR, LEARNED SENIOR COUNSEL APPEARING FOR THE AS SESSEE-ALL CARGO GLOBAL LOGISTICS LTD. WOULD SUBMIT THAT THE POWER UNDER SE CTION 153A OF THE INCOME- TAX ACT AND ITS AMBIT AND SCOPE HAS RIGHTLY BEEN IN TERPRETED IN THE IMPUGNED ITA NOS.6673 TO 6676/M/2012. 5 JUDGMENT. MR. DASTUR SUBMITS THAT THE TITLE OF THE SECTION ITSELF IS INDICATIVE OF THE OBJECT AND, NAMELY, ASSESSMENT IN CASE OF SEARC H OR REQUISITION. THIS SECTION CONTAINS A NON OBSTANTE CLAUSE SO AS TO NOT TO RESTRICT THE POWERS WHICH ARE CONFERRED BY VIRTUE OF SECTION 153A IN TH E ASSESSING OFFICER. HOWEVER, THE EXERCISE OF POWER UNDER THAT PROVISION IS WHERE SEARCH IS INITIATED UNDER SECTION 132 OR BOOKS OF ACCOUNT OR OTHER DOCUMENTS OR ASSETS ARE REQUISITIONED UNDER SECTION 132A OF THE ACT AFT ER MAY 31, 2003. THEN THE ASSESSING OFFICER SHALL ISSUE NOTICE TO SUCH PERSON REQUIRING HIM TO FURNISH WITHIN SUCH PERIOD AS MAY BE SPECIFIED IN THE NOTIC E, THE RETURN OF INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SIX ASSESSMENT YEARS REFERRED TO IN CLAUSE (B) OF SUB-SECTION (1) OF SECTION 153A AN D CLAUSE (B) POSTULATES ASSESSMENT OR REASSESSMENT OF THE TOTAL INCOME OF S IX YEARS IMMEDIATELY PRECEDING THE ASSESSMENT YEAR RELEVANT TO THE PREVI OUS YEAR IN WHICH SUCH SEARCH IS CONDUCTED OR REQUISITION IS MADE, THE FIR ST PROVISO MANDATES THAT THE ASSESSING OFFICER SHALL ASSESS OR REASSESS THE TOTA L INCOME IN RESPECT OF EACH ASSESSMENT YEAR FALLING WITHIN SUCH SIX ASSESSMENT YEARS, THE SECOND PROVISO, ACCORDING TO MR. DASTUR, IS IMPORTANT BECAUSE THE A SSESSMENT OR REASSESSMENT, IF ANY, RELATING TO ANY ASSESSMENT YE AR FALLING WITHIN THE PERIOD OF SIX ASSESSMENT YEARS REFERRED TO IN SUB-SECTION (J) PENDING ON THE DATE OF INITIATION OF THE SEARCH UNDER SECTION 132 OR MAKIN G OF REQUISITION UNDER SECTION 132A, AS THE CASE MAY BE, SHALL ABATE. EQUA LLY, SUB-SECTION (2) OF SECTION 153A DEALS WITH A SITUATION WHERE ANY PROCE EDING INITIATED OR ANY ORDER OF ASSESSMENT OR REASSESSMENT IS MADE UNDER S UB-SECTION. (1) BUT THAT HAS BEEN ANNULLED IN APPEAL OR ANY OTHER LEGAL PROC EEDING THEN NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION ( 1) OR SECTION 153, THE ASSESSMENT OR REASSESSMENT RELATING TO ANY ASSESSME NT YEAR WHICH HAS ABATED UNDER THE SECOND PROVISO TO SUB-SECTION (1), SHALL STAND REVIVED WITH EFFECT FROM THE DATE OF RECEIPT OF THE ORDER OF SUCH ANNUL MENT BY THE COMMISSIONER. FURTHER, THE PROVISO TO THIS SUB-SECTION SAYS THAT SUCH REVIVAL SHALL CEASE TO HAVE EFFECT IF THE ORDER OF ANNULMENT IS SET ASIDE. MR. DASTUR WOULD SUBMIT THAT THE REVENUE IS PROTECT ED COMPLETELY IN 18 THIS CASE. THE POWER IS OF DRASTIC NATURE AND HA S TO BE EXERCISED WITHIN THE CONSTITUTIONAL PARAMETERS. HOWEVER THOUGH THE SECON D PROVISO TO SUB SECTION (1) OF SECTION 153A WOULD NOT APPLY IN THE FIRST TH REE YEARS OF THIS CASE, YET AS FAR AS THE SECOND THREE PERIOD IS CONCERNED, THE AS SESSMENTS WERE PENDING. THE PROCEEDINGS IN RELATION THERETO ABATE. NOW, THE ENTIRE ASSESSMENT IN RELATION TO THE SECOND PHASE OF THREE YEARS CAN BE MADE BUT THE FOUNDATION FOR ALL THIS AND THE ACTION UNDER SECTION 153A IS A SEA RCH UNDER SECTION 132 OR REQUISITION OF BOOKS OF ACCOUNT AND OTHER ASSETS UN DER SECTION 132A, IN THE PRESENT CASE, THE NOTICE UNDER SECTION 153A S FOUND ED ON SEARCH, IF THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH THEN THE SPECIAL BENCH WAS RIGHT IN HOLDING THAT THE POWER UNDER SECTION 153A BEING NOT EXPECTED TO BE EXERCISED ROUTINELY, SHOULD BE EXERCISED IF THE SEA RCH REVEALS ANY INCRIMINATING MATERIAL. IF THAT IS NOT FOUND THEN I N RELATION TO THE SECOND PHASE OF THREE YEARS, THERE IS NO WARRANT FOR MAKING AN O RDER WITHIN THE MEANING OF THIS PROVISION, IN ANY EVENT, THE ISSUE STANDS CONC LUDED BY A DIVISION BENCH JUDGMENT OF THIS COURT RENDERED IN THE CAST CIT V. MURLI AGRO PRODUCTS LTD. IN INCOME TAX APPEAL NO. 36 OF 2009 DECIDED ON OCTOBER 29,2010. IT IS, THEREFORE, APPARENT THAT THE LAW LAID DOWN BY THIS COURT IS BINDING ON THE ITA NOS.6673 TO 6676/M/2012. 6 REVENUE. IF THAT IS BINDING THEN THE QUESTIONS OF L AW AND WITH REGARD TO THE APPLICABILITY OF SECTION 153A NEED TO BE ANSWERED A GAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 8. AS IT COULD BE SEEN FROM THE ABOVE, THE JURISDIC TIONAL HIGH COURT HELD THAT IF THERE IS NO INCRIMINATING MATERI AL FOUND DURING THE SEARCH, THEN THE SPECIAL BENCH WAS RIGHT IN HOLDING THAT THE POWER U/S. 153A BEING NOT ACCEPTED TO BE EXERCISED ROUTIN ELY, SHOULD BE EXERCISED IF THE SEARCH REVEALS ANY INCRIMINATING M ATERIAL. IF THERE IS NO INCRIMINATING MATERIAL, THERE IS NO WARRANT FOR MAKING AN ORDER WITHIN THE MEANING OF THIS SECTION IN RELATION TO T HE UNABATED ASSESSMENTS. IT WAS ALSO OBSERVED BY THE JURISDICT IONAL HIGH COURT THAT SIMILAR VIEW HAS BEEN TAKEN IN THE DECISION OF CIT VS MURALI AGRO PRODUCTS IN INCOME TAX APPEAL NO. 36 OF 2009 DATED 29.10.2010. THEREFORE, RESPECTFULLY FOLLOWING THE JURISDICTIONA L HIGH COURT DECISIONS (SUPRA), WE HOLD THAT THE ASSESSMENTS FRA MED U/S. 153C FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 ARE BAD IN LAW FOR THE REASON THAT NO INCRIMINATING MATERIALS HAVE BEEN FO UND IN THE COURSE OF SEARCH BASED ON WHICH THE ADDITIONS/DISALLOWANCE S HAVE BEEN MADE. THUS, WE QUASH THE ASSESSMENTS MADE U/S. 153 C FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 AS THEY ARE BAD IN LAW. 9. SINCE WE HAVE QUASHED THE ASSESSMENTS FOR THE AS SESSMENT YEARS 2007-08 TO 2009-10, THE REVENUES APPEALS FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 BECOME INFRUCTUOUS AND NEE D NOT ADJUDICATE. 10. COMING TO THE REVENUES APPEAL FOR THE ASSESSM ENT YEAR 2010- 11, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT T HE LD. CIT(A) RESTORED THE COMPUTATION OF DISALLOWANCE U/S. 14A U NDER NORMAL ITA NOS.6673 TO 6676/M/2012. 7 PROVISIONS OF THE ACT R.W. RULE 8D TO THE FILE OF T HE ASSESSING OFFICER. HOWEVER, COMING TO THE DISALLOWANCE U/S, 14A WHILE COMPUTING THE BOOK PROFIT, THE LD. CIT(A) SUSTAINED THE DISALLOWA NCE. THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT SINCE THE LD. CIT(A) RESTORED THE ISSUE OF COMPUTATION OF DISALLOWANCE U/S. 14A U NDER NORMAL PROVISIONS OF THE ACT TO THE FILE OF THE ASSESSING OFFICER, THE COMPUTATION OF DISALLOWANCE U/S. 14A WHILE COMPUTIN G THE BOOK PROFIT MAY ALSO BE RESTORED TO THE FILE OF THE ASSE SSING OFFICER FOR FRESH ADJUDICATION. TAKING NOTE OF THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE AND THE FACTS AND CIRCUMSTANCES IN TO CONSIDERATION, WE RESTORE THE ISSUE OF DISALLOWANCE U/S. 14A WHILE COMPUTING BOOK PROFITS U/S. 115JB OF THE ACT TO THE FILE OF THE AS SESSING OFFICER FOR FRESH ADJUDICATION IN ACCORDANCE WITH LAW AFTER PRO VIDING ADEQUATE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, CROSS OBJECTIONS FILED BY THE AS SESSEE ARE ALLOWED AND THE REVENUES APPEALS FOR THE ASSESSMENT YEARS 2007-08 TO 2009-10 ARE DISMISSED. REVENUES APPEAL FOR ASSES SMENT YEAR 2010-11 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH SEPTEMBER, 2016. SD/- SD/- (RAMIT KOCHAR) (C.N. PRASAD ) ' / ACCOUNTANT MEMBER $%' /JUDICIAL MEMBER MUMBAI; (' DATED 14 TH SEPTEMBER, 2016 . % . ./ RJ , SR. PS ITA NOS.6673 TO 6676/M/2012. 8 !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ) ( ) / THE CIT(A)- 4. ) / CIT 5. *+,%%-. , -.! , / DR, ITAT, MUMBAI 6. ,/01 / GUARD FILE. / BY ORDER, *% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI