MEENA JOHAR, RISHIKESH V. DCIT, CENTRAL CIRCLE, DEHRADUN

ITA 7095/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 1154 (ITAT-DEHRADUN)
• Duration Of Justice: 3 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K CHATTERJEE SRDR
• Keywords: Salary income
• Section: 40A(3); 153A; 143(1); 143(2); 191; 139(1); 13; 153; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN BENCH: DEHRADUN (THROUGH VIDEO CONFERENCING) ASSSSSS BEFORE, SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.7092 & 7093/DEL/2017 (ASSESSMENT YEAR-2010-11 & 2012-13) MANAV JOHAR 104/38, DEHRADUN ROAD, RISHIKESH. PAN-ADPP J0682D VS. DCIT, CENTRAL CIRCLE, DEHRADUN (APPELLANT) (RESPONDENT) ITA NO.7098 & 7099/DEL/2017 (ASSESSMENT YEAR-2010-11 & 2012-13) MANSI JOHAR 104/38, DEHRADUN ROAD, RISHIKESH. PAN-AFNP J3808B VS. DCIT, CENTRAL CIRCLE, DEHRADUN (APPELLANT) (RESPONDENT) 2 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT ITA NO.7095 & 7097/DEL/2017 (ASSESSMENT YEAR-2010-11 & 2015-16) MEENA JOHAR, 104/38, DEHRADUN ROAD, RISHIKESH, PAN-ABRPJ 6975H VS. DCIT, CENTRAL CIRCLE, DEHRADUN (APPELLANT) (RESPONDENT) APPELLANT BY SH. GAUTAM JAIN, ADVOCATE RESPONDENT BY SH. S.K. CHATTERJEE, SR-DR DATE OF HEARING 09.10.2020 DATE OF PRONOUNCEMENT 27.11.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THE ABOVE SIX APPEALS FILED BY THE RES PECTIVE ASSESSEES ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 20.9 .2017 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- IV, K ANPUR {CIT (A)}. SINCE COMMON ISSUES HAVE BEEN RAISED IN ALL THESE A PPEALS, THEREFORE, THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER. 3 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT ITA NO. 7092/DEL/2017 A.Y. 2010-11: 2.0 ITA NO. 7092/DEL/2017 FOR A.Y. 2010-1 1 IN THE CASE OF SHRI MANAV JOHAR IS TAKEN AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF REAL ESTATE DURING THE YEAR UNDER CONSIDERATION AND DERI VED INCOME FROM SALARY, BUSINESS & PROFESSION, HOUSE PROPERTY, CAPI TAL GAIN AND OTHER SOURCES. THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING TOTAL INCOME AT RS. 22,13,440/- AND AGRICULTURAL IN COME OF RS. 46,92,034/-. THE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). A SEA RCH AND SEIZURE OPERATION WAS CONDUCTED U/S 132 OF THE ACT AT THE BU SINESS PREMISES AND THE RESIDENTIAL PREMISES OF THE MANJEE T JOHAR GROUP OF CASES ON 23.12.2014. IN RESPONSE TO THE NOTICE U/S 153A, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INC OME OF RS. 22,13,440/-. THEREAFTER, THE CASE WAS ASSESSED AT AN INCOME OF RS. 39,70,440/- AFTER MAKING DISALLOWANCE OF EXPENSES OF RS. 17,57,000/- U/S 40A(3) OF THE ACT VIDE ORDER PASSED U/S 153A/143(3) OF THE ACT. 4 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT 2.1 IN APPEAL, THE LD. CIT (A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER: THE PLAIN READING OF THE RULES 6DD OF THE IT RULES WOULD MAKE IT AMPLY CLEAR THAT THE APPELLANT CASE IS NOT COVER ED BY ANY OF THE CLAUSES STIPULATED RULE 6DD OF THE IT RULES. T HE LAW OF STATUE CLEARLY IMPLIES THAT IF LITERAL MEANING OF T HE LANGUAGE OF THE STATUE IS UNAMBIGUOUS THEN THE FULL EFFECT SHOU LD BE ACCORDED TO THE LANGUAGE OF STATUE. IN THE INSTANT CASE, CASH PAYMENT IS MADE FOR THE PURCHASE OF STOCK-IN-TRADE WHICH IS CLEARLY HIT BY THE PROVISIONS OF SECTION 40A (3) OF THE ACT. NO CLAUSES OF RULES 6DD IS APPLICABLE TO THE APPELLANT CASE. BUSINESS EXPEDIENCE WAS EARLIER COVERED BY THE RULE 6DD (J) OF THE I.T. ACT. HOWEVER, THIS HAS UNDER GONE THE AME NDMENT W.E.F. 01.04.2009 I.E. A.Y. 2009-10 ONWARDS. THE C ASES RELIED UPON BY THE LD. AR ARE ON THEIR OWN FOOTINGS AND DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE TO THE PRESENT CASE, BECAUSE THE CASE LAWS CITED BY APPELLANT ARE PRIOR TO THE AMENDMENT IN THE RULES 6DD OF THE I.T. RULES. MORE OVER, THE HONBLE APEX COURT IN THE VERY SAME CASE OF ATTAR S INGH GURMUKH SINGH V. ITO (1997) 191 ITR 667 (SC) HAVE CATEGORICALLY UPHELD THAT THE PAYMENTS FOR ACQUISIT IONS OF STOCK- IN-TRADE OR RAW MATERIALS ARE CLEARLY COVERED UNDER PROVISION OF SECTION 40A(3) OF THE I.T. ACT. IN VIEW OF THE ABO VE DISCUSSION ADDITION OF THE AO IS CONFIRMED AND APPEAL OF THE A PPELLANT ON THIS GROUND IS DISMISSED. 2.2 AGGRIEVED, THE ASSESSEE IS IN APPEAL B EFORE THIS TRIBUNAL AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1 THAT INITIATION OF PROCEEDINGS U/S 153A OF THE A CT AND, FRAMING OF ASSESSMENT U/S 153A/143(3) OF THE ACT WE RE WITHOUT JURISDICTION AND, DESERVED TO BE QUASHED AS SUCH SI NCE NO INCRIMINATING MATERIAL WAS FOUND AS A RESULT OF SEA RCH CONDUCTED ON THE APPELLANT. 5 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT 2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN SUSTA INING A DISALLOWANCE OF RS. 17,57,000/- BY INVOKING THE PRO VISIONS CONTAINED IN SECTION 40A(3) OF THE ACT. 2.1 THAT DISALLOWANCE MADE AND UPHELD OF RS. 17,57, 000/- IS WITHOUT JURISDICTION SINCE IT IS NOT BASED ON ANY I NCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH ON THE APPELLA NT AS HAS CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573. 2.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAS FAILED TO APPRECIATE THAT EXPENDITURE INCURRED FOR PURCHASE OF LAND COULD OT HAVE BEEN DISALLOWED BY INVOKING T HE PROVISIONS CONTAINED IN SECTION 40A(3) OF THE ACT. 2.3 THAT THE AFORESAID DISALLOWANCE MADE AND SUSTAI NED U/S 40A (3) OF THE ACT IS COVERED UNDER RULE 6DD AND AS SUCH, DISALLOWANCE MADE IS ARBITRARY AND UNTENABLE. 3.0 ALL THE AFORESAID GROUNDS ESSENTIAL LY RELATE TO THE VALIDITY OF DISALLOWANCE OF RS. 17,57,000/- BY INVOK ING THE PROVISIONS CONTAINED IN SECTION 40A (3) OF THE ACT. THE LD. AUTHORISED REPRESENTATIVE (AR) HAS CONTENDED THAT D ISALLOWANCE MADE AND UPHELD IS WITHOUT JURISDICTION SINCE IT IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH ON THE ASSESSEE. THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THAT NOT ICE ISSUED U/S 153A OF THE ACT, DISALLOWANCE MADE AND DISPUTED IN T HIS APPEAL AND THE IMPUGNED ASSESSMENT FRAMED U/S 153A/143(3) OF T HE ACT IS WITHOUT JURISDICTION SINCE DISALLOWANCE MADE BY THE A SSESSING OFFICER IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND AS A RESULT 6 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT OF SEARCH ON THE ASSESSEE. IT WAS SUBMITTED THAT I N THE INSTANT CASE, SEARCH UNDER SECTION 132 OF THE ACT WAS CONDUC TED ON 23.12.2014 AND NO PROCEEDINGS WERE PENDING ON THE D ATE OF SEARCH FOR THE INSTANT ASSESSMENT YEAR. IT WAS SUBMITTED TH AT THE ORIGINAL RETURN OF INCOME WAS FILED BY THE ASSESSEE ON 8.10.2 010 U/S 139(1) OF THE ACT AND NO NOTICE U/S 143(2) OF THE ACT WAS I SSUED TILL THE DATE OF SEARCH AND, AS SUCH, THE ASSESSMENT FOR THE INSTANT YEAR WAS NOT PENDING ON THE DATE OF SEARCH. THUS, THE AS SESSMENT MADE PRIOR TO SEARCH HAD NOT ABATED UNDER SECOND PROVISO TO SECTION 153A OF THE ACT AND, THEREFORE, THE DISALLOWANCE MA DE IS BEYOND THE SCOPE OF ASSESSMENT FRAMED U/S 153A/143(3) OF THE A CT. IT WAS SUBMITTED THAT AS A RESULT OF SEARCH ON THE ASSESSE E, NO INCRIMINATING MATERIAL HAS BEEN DETECTED AS A RESUL T OF SUCH SEARCH AND, THEREFORE, ADDITION MADE IS WITHOUT JURISDICTIO N. RELIANCE WAS PLACED ON THE JUDGMENTS OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT V. KABUL CHAWLA REPORTED IN 380 ITR 573 AND P R. CIT VS. MEETA GUTGUTIA REPORTED IN 395 ITR 526. RELIANCE WA S ALSO PLACED ON (I) CIT V. SINHGAD TECHNICAL EDUCATION SOCIETY 3 97 ITR 344 (SC); AND (II) PR. CIT INDEX SECURITIES (P) LTD. 157 DTR 20 (DEL). 7 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT 3.1 THE LD. AR ALSO SUBMITTED THAT IN ABSENCE OF ANY INCRIMINATING MATERIAL QUA THE ADDITION IN RESPECT OF NON-ABATED ASSESSMENT, NO ADDITION CAN BE VALIDLY MADE. IN THI S REGARD RELIANCE WAS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: I) ITA 406/2019 (DEL) DATED 23.07.2019 PR CIT VS. S MC POWER GENERATION II) ITA NO. 2083/DEL/2012, DATED 19.10.2016 RANJANA GARG VS. DCIT [THE APPEAL OF REVENUE DISMISSED BY HONBL E DELHI HIGH COURT IN ITA 257/2017 DATED 01.05.2017] III) ITA NO. 3332/DEL/2017 DATED 29.12.2017 M/S. BRAHMAPUTRA FINLEASE (P) LTD VS. DCIT IV) ITA NO. 1553 & 3173/MUM/2010 DATED 13.02.2015 JIGNESH P. SHAH VS. DCIT V) I.T.A.NO.513 & 514/VIZAG/2013 DATED 09.06.2017 Y .V. ANJANEYULU GUNTUR VS. DCIT VI) 387 ITR 529 (GUJ) PR CIT VS. SAUMYA CONSTRUCTIO N (P.) LTD. VII) ITA NO. 4593/DEL/2016 DATED 27.02.2018 ACIT VS . S P SINGLA CONSTRUCTION P. LTD 4.0 THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 8 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT 5.0 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MAD E BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFI CER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE A SSESSEE. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH FROM THE PREMISES OF TH E SEARCHED PARTY. THE DISALLOWANCE OF RS. 17,57,000/- HAS BEEN MADE BY OBSERVING AS UNDER: THE ASSESSEE DEALS IN TRADING OF PURCHASE AND SALE OF LAND AND BUILDING ETC. ON EXAMINATION OF PURCHASE ACCOU NT OF THE ASSESSEE IN THE YEAR UNDER CONSIDERATION IT IS NOTI CED THAT THE ASSESSEE HAS PURCHASE THE FOLLOWING LANDS IN CASH O N DIFFERENT DATES ARE AS FOLLOWS: S.NO. PARTICULARS DATE AMOUNT (IN RS.) NATURE OF PAYMENT 1 PURCHASE OF LAND 15.6.2009 5,14,000 CASH 2 PURCHASE OF LAND 13.8.2009 5,00,000 CASH 3 PURCHASE OF LAND 13.10.2009 30,000 CASH 4 PURCHASE OF LAND 01.12.2009 10,000 CASH 5 PURCHASE OF LAND 01.12.2009 7,03,000 CASH TOTAL 17,57,000 IN THIS REGARD THE ASSESSEE WAS ASKED TO EXPLAIN A S TO WHY HE EXPENSES INCURRED ON ACCOUNT OF PURCHASE OF MATERIA L IN CASH OF RS. 1757000/- MAY NOT BE DISALLOWED BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE I.T. ACT, 1961. IN COMPLIANCE OF THE SAME THE ASSESSEE HAS FILED HIS WRITTEN SUBM ISSION AND HAS CONTENDED THAT WE HAD TO MADE PURCHASE UNDER T HE COMPELLING CIRCUMSTANCES AND DUE TO BUSINESS EXIGEN CY AS 9 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT SELLER WAS NOT WILLING TO RECEIVE PAYMENT VIDE CHEQ UES SINCE SELLERS WERE STRANGER TO THE ASSESSEE THEREFORE THE Y INSISTED ON CASH PAYMENT. ASSESSEE WAS ALSO WILLING TO MAKE TH E PAYMENT BY ACCOUNT PAYEE CHEQUES AS IS EVIDENCED FROM THE F ACT FROM THE FOLLOWING TABLE THAT ASSESSEE HAD TO WITHDRAW A MOUNT FROM BANK JUST BEFORE THE DAYS FOR MAKING PAYMENT TO THE SELLER IN COMPELLING CONDITIONS:- SIR, IN CASE WE HAD NOT PAID TO THE SELLER IN CASH THEY WOULD HAVE NOT SOLD THEIR PROPERTY TO THE ASSESSEE WHICH WOULD HAVE RESULTED INTO BUSINESS LOSS TO THE ASSESSEE. SINCE THE TRANSACTION IS GENUINE AND MADE UNDER COMPULSION WH ICH ARISES OUT OF BUSINESS EXPEDIENCY WHICH IS ALSO SUP PORTED BY THE FOLLOWING JUDGMENT OF VARIOUS COURTS THAT SECTI ON 40A(3) OF THE INCOME TAX ACT, 1961 WILL NOT APPLY IN SUCH CAS ES THEREFORE WE REQUEST YOUR GOODSELF NOT TO DISALLOW THE CASH P URCHASE DURING THE YEAR UNDER CONSIDERATION FOR TRADING ASS ETS:- GURDASGARG V. CIT (A) (P&H) ITA NO. 413 OF 2014 D ATED 16.07.2015 THE EXPLANATION OF THE ASSESSEE HAS BEEN COSNIDERED WHICH IS NOT ACCEPTABLE BECAUSE THE ASSESSEE COULD NOT FURNI SH ANY JUSTIFICATION IN SUPPORT HIS/HER CLAIM. MOREOVER, THE CLAIM OF THE ASSESSEE DOES NOT FALL WITHIN THE PREVIEW OF RULE 6 DD OF I.T. RULE 1962. IN THIS CASE THE ASSESSEE HAS PURCHASE D MATERIAL (LAND AND BUILDING) IN CASH AND HAS VIOLATED THE PR OVISION OF SECTION 40A(3). THE PROVISION OF SECTION 40A(3) CL EARLY SAYS THAT WHERE THE ASSESSEE INCURS ANY EXPENDITURE IN RESPE CT OF WHICH A PAYMENT OR AGREEGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OTHERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR ACCOUNT PAYEE BANK DRAFT, EXCEEDS TWENTY THOUSAN D RUPEES, NO DEDUCTION SHALL BE ALLOWED IN RESPECT OF SUCH EX PENDITURE. THE ASSESSEE FAILED TO SUBSTNAITATE THAT HE HAS NOT PURCHASED MATERIAL IN CASH. HENCE THE EXPENSES OF RS. 17,57, 000/- CLAIMED IN THE TRADING AND PROFIT AND LOSS ACCOUNT IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5.1 FROM THE AFORESAID, IT IS APPARENT THAT THE DISALLOWANCE IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND AS A RESULT OF SEARCH 10 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT BUT EXAMINATION OF THE PURCHASE ACCOUNT OF THE ASSE SSEE FOR THE YEAR UNDER CONSIDERATION. THE HON'BLE DELHI HIGH C OURT IN THE CASE OF KABUL CHAWLA (SUPRA) HAS HELD THAT WHEN THE ASSESS MENT WHICH STANDS COMPLETED ON THE DATE OF SEARCH AND NO INCRI MINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH, NO ADDITION CAN BE MADE TO THE INCOME ALREADY ASSESSED. 5.2 THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. MEETA GUTGUTIA (SUPRA) OBSERVED AS UNDER: 69. WHAT WEIGHED WITH THE COURT IN THE ABOVE DECIS ION WAS THE HABITUAL CONCEALING OF INCOME AND INDULGING IN CLA NDESTINE OPERATIONS AND THAT A PERSON INDULGING IN SUCH ACT IVITIES CAN HARDLY BE ACCEPTED TO MAINTAIN METICULOUS BOOKS OR RECORDS FOR LONG. THESE FACTORS ARE ABSENT IN THE PRESENT CASE . THERE WAS NO JUSTIFICATION AT ALL FOR THE AO TO PROCEED ON SU RMISES AND ESTIMATES WITHOUT THERE BEING ANY INCRIMINATING MAT ERIAL QUA THE AY FOR WHICH HE SOUGHT TO MAKE ADDITIONS OF FRA NCHISEE COMMISSION. 70. THE ABOVE DISTINGUISHING FACTORS IN DAYAWANTI G UPTA (SUPRA), THEREFORE, DO NOT DETRACT FROM THE SETTLED LEGAL POSITION IN KABUL CHAWLA (SUPRA) WHICH HAS BEEN FOLLOWED NOT ONLY BY THIS COURT IN ITS SUBSEQUENT DECISIONS BUT ALSO BY SEVERAL OTHER HIGH COURT. 11 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT 71. FOR ALL OF THE AFOREMENTIONED REASONS, THE COUR T IS OF THE VIEW THAT THE ITAT WAS JUSTIFIED IN HOLDING THAT TH E INVOCATION OF SECTION 153A BY THE REVENUE FOR THE AYS 2000-01 TO 2003-04 WAS WITHOUT ANY LEGAL BASIS AS THERE WAS NO INCRIMI NATING MATERIAL QUA EACH OF THOSE AYS. CONCLUSION 72. TO CONCLUDE: I) QUESTION (I) IS ANSWERED IN THE NEGATIVE I.E., I N FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IT IS HELD THAT I N THE FACTS AND CIRCUMSTANCES, THE REVENUE WAS NOT JUSTIFIED IN INVOKING SECTION 153A OF THE ACT AGAINST THE ASSESSEE IN REL ATION TO AYS 2000-01 TO AYS 2003-04. 5.3 ALSO THE HONBLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. SMC POWER GENERATION IN ITA 406/2019 (DEL) DATE D 23.07.2019 HAS OBSERVED AS UNDER: 3. THE QUESTION SOUGHT TO BE RAISED BY THE REVENUE IS WHETHER THE ITAT WAS JUSTIFIED IN QUASHING THE ASSESSMENT O RDER FRAMED UNDER SECTION 153A OF THE INCOME TAX ACT, 1961 (ACT ) ON THE GROUND THAT THERE IS NO INCRIMINATING MATERIAL FOUN D QUA THE ADDITION MADE ON ACCOUNT OF SHARE APPLICATION MONEY IN THE COURSE OF THE SEARCH? 10. THE REQUIREMENT THAT THE INCRIMINATING MATERIAL TO HAVE THE CO-RELATION TO THE PARTICULAR ADDITION SOUGHT TO BE MADE IS A LOGIC THAT WILL HOLD GOOD NOT ONLY FOR SECTION 153 C OF T HE ACT BUT IN 12 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT RELATION TO SECTION 153A OF THE ACT AS WELL. CONSEQ UENTLY, THIS COURT DOES NOT FIND ANY ERROR HAVING BEEN COMMITTED BY THE ITAT IN ACCEPTING THE PLEA OF THE ASSESSEE THAT THE RE IS NO INCRIMINATING DOCUMENT WHICH WAS SEIZED IN THE COUR SE OF SEARCH RELATING TO THE ADDITION SOUGHT TO BE MADE O N ACCOUNT OF THE SHARE CAPITAL. THEREFORE, THE JURISDICTIONAL RE QUIREMENT OF SECTION 153 A OF THE ACT WAS NOT SATISFIED. 5.4 IN VIEW OF THE ABOVE, WE HOLD THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESS ING OFFICER IN ASSUMING JURISDICTION U/S 153A OF THE I.T. ACT. ACC ORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND AS UP HELD BY THE LD. CIT (A) IN THE 153A ASSESSMENT PROCEEDINGS BEIN G VOID AB INITIO ARE DELETED. 5.5 SINCE THE ASSESSEE SUCCEEDS ON THIS LEG AL GROUND, THE GROUNDS RAISED ON MERITS ARE NOT ADJUDICATED HAVING BECOME ACADEMIC IN NATURE. 13 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT ITA NOS. 7093/DEL/2017 A.Y. 2012-13, 7095/DEL/2017 A.Y. 2010- 11, ITA NO. 7098/DEL/2017 A.Y. 2010-11, ITA NO. 709 9/DEL/2017 AY. 2012-13: 6.0 WE FIND THAT IDENTICAL GROUNDS HAVE B EEN RAISED BY THE ASSESSEE IN ALL THESE APPEALS CHALLENGING THE DISAL LOWANCES MADE BY THE ASSESSING OFFICER WHICH HAS BEEN UPHELD BY THE L D. CIT (A). WE FIND THE GROUNDS RAISED BY THE ASSESSEES ARE IDENTI CAL TO THE GROUNDS RAISED IN THE CASE OF MANAV JOHAR IN ITA NO . 7092/DEL/2017 A.Y. 2010-11. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE BEEN AL LOWED IN PARA 5 ABOVE. FOLLOWING SIMILAR REASONING, THE GROUNDS RAIS ED BY THE ASSESSEE ARE ALLOWED. ITA NO. 7097/DEL/2017 A.Y. 2015-16: 7.0 GROUNDS 1 TO 1.2 RELATE TO DISALLWOANCE OF RS . 7,14,000/- BY INVOKING SECTION 40A (3) OF THE ACT. THE FINDING O F THE LD. CIT (A) ON THE ISSUE IN DISPUTE IS EXTRACTED AS UNDER: THE PLAIN READING OF THE RULES 6DD OF THE IT RULES WOULD MAKE IT AMPLY CLEAR THAT THE APPELLANT CASE IS NOT COVER ED BY ANY OF THE CLAUSES STIPULATED RULE 6DD OF THE IT RULES. T HE LAW OF STATUE CLEARLY IMPLIES THAT IF LITERAL MEANING OF T HE LANGUAGE OF THE STATUE IS UNAMBIGUOUS THEN THE FULL EFFECT SHOU LD BE 14 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT ACCORDED TO THE LANGUAGE OF STATUE. IN THE INSTANT CASE, CASH PAYMENT IS MADE FOR THE PURCHASE OF STOCK-IN-TRADE WHICH IS CLEARLY HIT BY THE PROVISIONS OF SECTION 40A(3) OF THE ACT. NO CLAUSES OF RULES 6DD IS APPLICABLE TO THE APPELLANT CASE. BUSINESS EXPEDIENCE WAS EARLIER COVERED BY THE RULE 6DD(J) OF THE I.T. ACT. HOWEVER, THIS HAS UNDER GONE THE AME NDMENT W.E.F. 01.04.2009 I.E. A.Y. 2009-10 ONWARDS. THE C ASES RELIED UPON BY THE LD. AR ARE ON THEIR OWN FOOTINGS AND DISTINGUISHABLE ON FACTS AND ARE NOT APPLICABLE TO THE PRESENT CASE, BECAUSE THE CASE LAWS CITED BY APPELLANT ARE PRIOR TO THE AMENDMENT IN THE RULES 6DD OF THE I.T.RULES. MOREO VER, THE HONBLE APEX COURT IN THE VERY SAME CASE OF ATTAR S INGH GURMUKH SINGH V. ITO (1997) 191 ITR 667 (SC) HAVE CATEGORICALLY UPHELD THAT THE PAYMENTS FOR ACQUISIT IONS OF STOCK- IN-TRADE OR RAW MATERIALS ARE CLEARLY COVERED UNDER PROVISION OF SECTION 40A(3) OF THE I.T. ACT. IN VIEW OF THE ABO VE DISCUSSION ADDITION OF THE AO IS CONFIRMED AND APPEAL OF THE A PPELLANT ON THIS GROUND IS DISMISSED. 8.0 THE LD. AR FOR THE ASSESSEE SUBMITTED TH AT THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT TH E ASSESSEE HAS PURCHASED LAND ON 28.08.2014 FOR RS.7,14,000/- IN C ASH IN VIOLATION OF SECTION 40A (3) IS COMPLETELY IMAGINAT IVE, BASELESS AND ABSOLUTELY NOT RELATED TO THE ASSESSEE BECAUSE NO S UCH TRADING ASSETS OF THAT AMOUNT WERE PURCHASED IN CASH BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. IN FACT, THE A SSESSEE HAD PURCHASED TRADING ASSETS DURING THE YEAR AMOUNTING TO RS. 3,833/- ONLY WHICH IS DULY APPEARING IN THE AUDITED BALANCE SHEET OF THE ASSESSEE FOR THE SAME YEAR AND APART FROM IT NO TRA DING ASSETS WERE 15 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT PURCHASED DURING THE YEAR. OUR ATTENTION WAS DRAWN T O COPY OF AUDITED BALANCE SHEET, PROFIT AND LOSS ACCOUNT WITH ALL SCHEDULES (PAGE 41-45 OF PAPER BOOK), CASH BOOK (PAGE 63-77 O F PAPER BOOK) AND PURCHASE ACCOUNT (PAGE 79 OF PAPER BOOK) IN SUP PORT BY THE LD. AR. 9.0 PER CONTRA, THE LD. SR. DR PLACED RELI ANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 10.0 WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFI CER AND THE LD. CIT (A) AND THE PAPER BOOK FILED ON BEHALF OF THE A SSESSEE. WE FIND, THE ASSESSEE IN ITS REPLY (PAGE 57 OF PAPER BOOK) A DDRESSED TO THE AO HAS STATED AS UNDER: PLEASE REFER TO THE QUERY RAISED BY YOUR GOODSELF DURING LAST HEARING IN THE ABOVE CITED CASE FOR THE CASH PURCHA SE OF TRADING ASSETS DURING THE A.Y.2015-16 AS IT VIOLATE THE PRO VISION OF SECTION 40A(3) THEREFORE LIABLE TO BE DISALLOWANCE AS EXPENSES. IN THIS REGARD WE WOULD LIKE TO SUBMIT THAT THERE W AS NO PURCHASE MADE FOR TRADING ASSETS OTHERWISE THAN ACC OUNT PAYEE CHEQUES THEREFORE SECTION 40A(3) IS NOT APPLICABLE IN OUR CASE AND THERE IS NO AMOUNT OF TRANSACTION OF RS. 7,14,0 00/- MADE IN CASH FOR TRADING ASSETS. 10.1 WE, THEREFORE, CONSIDER IT A PPROPRIATE TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR CONS IDERING THE ISSUE 16 ITA NOS.7092 & 7093/DEL/2017 ITA NOS. 7098 & 7099/DE/2017 ITA NOS. 7095 & 7097/DEL/2017 MANAV JOHAR & ORS VS. DCIT AFRESH WITH A DIRECTION TO DECIDE THE ISSUE AFTER GR ANTING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THUS, GROUN DS 1 TO 1.2 OF THE ASSESSEES APPEAL ARE ACCORDINGLY ALLOWED FOR S TATISTICAL PURPOSES. 11.0 IN THE FINAL RESULT, ITA NOS . 7092/DEL/2017, 7093/DEL/2017, 7095/DEL/2017, 7098/DEL/2017 AND 7099/DEL/2017 ARE ALLOWED AND ITA NO. 7097/DEL/2017 STANDS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 27 TH NOVEMBER, 2020. SD/- SD/ - (R.K.PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27/11/2020 *DRAGON COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT DEHRADUN