M/S. PUNJAB IRON & STEEL COMPANY LIMITED, JALANDHAR V. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1, JALANDHAR

ITA 75/ASR/2023

AI Insights

The case involves Punjab Iron & Steel Co. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) and the subsequent assessment order that added Rs. 8,00,000 as unexplained unsecured loan under section 68 of the Income Tax Act, 1961. The Tribunal's decision was influenced by the Supreme Court's ruling that no addition can be made without incriminating material found during the search. The Tribunal found that the Assessing Officer did not fulfill his statutory duty to verify the facts and did not summon the depositor, Mrs. Vinod Khanna, for examination, which led to the quashing of the assessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114661 (ITAT-AMRITSAR)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2023
• Other Referred Cases: PCIT, central-3 vs. Abhisar Buildwell Private Limited, CIT Trichur vs. St. Francis Clay Decor Tiles, E.N. Gopakumar vs. Commissioner of Income-tax (Central), Assistant Commissioner of Income-tax vs. Sunshine Infraestate (P.) Ltd., Aravali Trading Co. vs. ITO, CIT vs. Dataware private Limited, Munnalal Murlidhar vs. CIT
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Assessment record; Onus to prove; Set aside
• Section: 147; 68; 37; 132; 143(3); 153A; 143(2); 153; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 75/Asr/2023 Assessment Year: 2008-09 M/s Punjab Iron & Steel Co. Ltd., 3, G. T. Road, Vill. Birring, Jalandhar 144010, Punjab [PAN: AAACP 9849B] Vs. Deputy Commissioner of Income Tax, Central Circle-1, Jalandhar (Appellant) (Respondent) Appellant by : None Respondent by: Sh. S. R. Kaushik, CIT DR Date of Hearing: 25.07.2023 Date of Pronouncement: 03.08.2023 ORDER Per Dr. M. L. Meena, AM: This appeal has been filed by the by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana dated 21.12.2022 in respect of Assessment Year: 2008-09. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 2 2. The assessee has raised the following grounds of appeal: “1. That the learned Commissioner of Income Tax (A),fell into grave error holding that assessee failed to provide the information regarding Vinod Khanna. 2. That the learned Commissioner of Income Tax (A) fell in grave error by justifying the denial of the request of the Assessee to the Assessing Officer to summon Mrs. Vinod Khanna even after assessment in remand. 3. That the learned Commissioner of Income Tax (A) fell in grave error by confirming the addition of Rs. 8,00,000/- made u/s 68 of the Income Tax Act 1961. He further fell in grave error by not considering the request of the assessee to summon Mrs. Vinod Khanna. 4. That the ld. Commissioner of Income Tax (1) feel in grave error by relying upon certain judicial pronouncements without confronting the appellant with those decision. 5. That all the grounds of appeal are without prejudice and are mutually exclusive to each other. 6. That the appellant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the rime of hearing.” 3. None appeared for the assesse. However, he has reiterated the submission made before the ld. CIT(A) through written submission with the paper book comprising of 87 pages. The adjournment application filed by the assesse reads as under: “The appeal under reference is fixed for 25.07.2023. Due to some health issue, I have been advised rest by the doctor. Hence, it will not be possible for me to attend the hearing on fixed date. It is prayed that a short adjournment may please be given as per your convenience. Medical certificate is enclosed.” ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 3 4. The Medical certificate was not reliable evidence because primarily, it was not issued by designated govt. or recognized institution specifying the illness to form bonafide cause for seeking many adjournments in case of limited issue being pending old matter, in the 2 nd round of appeal. Therefore, the adjourned application is rejected and it was decided to hear the appeal on merits after considering the material on record and the submission of the ld. DR. 5. In the 2nd round of appeal, the Ld. CIT(A) adjudicated the appeal of the assesse, in compliance to the observation of the Tribunal, Amritsar Bench, Amritsar vide para 6 of its order dated 18.12.2019 in ITA No. 516/Asr/2018 for Assessment Year 2008-09, as under: “6. In the light of above facts and circumstances and relying on aforesaid decision, we direct the ld. CIT (A) to admit the additional evidence filed by the assessee and decide all the issue involved afresh. The issue is therefore, set- aside to the file of the CIT (A) to decide the same after examining additional evidence and any other material which may be filed by the assessee before him in support of his claim. The CIT (A) may decide the issue after making such enquiries as necessary as deemed fit and required further evidence as required in the interest of justice in accordance with law and facts of the case. Accordingly, entire assessment is set-aside to the file of the CIT (A) for fresh consideration after affording proper opportunity of being heard. Nevertheless, to say that the assessee will cooperate in the enquiry in appellate proceedings and furnish required before CIT (A).” ARGUMENTS OF THE AR ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 4 3. Accordingly, the present appeal was re-instituted in compliance to the order of the Ld. Tribunal Bench, Amritsar vide its order dated 18.12.2019. The proceedings in this case have been attended by Sh. Nirmal Mahajan, CA, and the AR filed an application for admission of additional evidence under Rule 46A and the same is reproduced below: “Sub: Application under Rule 46A of the Income Tax Rules 1962 In ITA No. 261/IT/CIT(A)-1/LDH/2014-15 In the case of Punjab Iron and Steel Company Ltd. PAN AAACP9849B Assessment year 2008-09 The assessee is a Limited Company and during the year was not doing any business but was having huge liabilities of the banks and financial institutions. A search was conducted at the premises of the assessee in the year 2011. Notice u/s 153A was issued for the year even though there was no document available for the year under reference and the assessee complied with the same and filed the return. There were few cash credits in the name of 3 persons and assessee was asked to get the same verified. In compliance to the same, the assessee vide submissions dated 14.03.2014 clarified that all the 3 creditors are assessable with AO u/s 153A or 153C and same can be verified from AO’s record. However, the Assessing Officer for the reasons best known to him accepted the 2 cash creditors but did not accept the amount received from Mrs. Vinod Khanna. He even did not revert back to the assessee asking that he is not accepting the same unless assessee filed confirmation. As the assessee was prevented from filing the confirmation from Mrs. Vinod Khanna, it may be allowed to file confirmation from Mrs. Vinod Khanna at this stage. We are filing a sworn affidavit, copy of PAN card, copy of ledger account of assessee duly confirmed-by Mrs. Vinod Khanna. The assessee having been prevented by sufficient cause from filing the documents is prayed that the documents from page 1 to 3 may be admitted as additional (Evidence to confirm the contention against the additions made by the AO. It is prayed that the above said documents may please be admitted as additional evidence to give justice to the assessee. An affidavit duly signed by the assessee is enclosed.” ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 5 REPORT OF THE ASSESSING OFFICER 3.1 During the course of appellate proceedings, the above application for admission of additional evidence under Rule 46A along with documents were sent to the AO for comments. In response, the AO submitted report as under: “Sub:- Appeal No 10276/Set-aside/CIT(A)-5/Ldh/265)/2019-20 in the case of M/s Punjab Iron and Steel Co. Ltd, 3, GT Road, Village Birring, Jalandhar for the A.Y.- 2008-09-reg Kindly refer to your office letter No. 138 dated 31.05.2021 on the subject cited above wherein your good office has authorized u/s 250(4) of the Income Tax Act, 1961 to conduct necessary inquiry to verify the genuineness of the claim made in the additional evidence filed before the CIT(A)-5, Ludhiana, in the case of captioned assessee. 2. In this connection, it is submitted that search u/s 132 of the Act was conducted on 03.08.2011 at the business premises of the assessee. Notice u/s 153A of the Act dated 24.01.2013 was issued to the assessee. In response thereto, the assessee filed its return of income for A Y 2008-09 on 30.12.2013 declaring NIL income. The case was assessed u/s 153A r.w.s. 143(3) of the Act dated 24.03.2014 at an income of Rs.8,00,000/- by making addition on account of unexplained unsecured loan of Rs.8,00,000/-, received from Mrs. Vinod Khanna, u/s 68 of the Act. 3. Aggrieved from the assessment order, the assessee filed appeal before the Ld. CIT(A)-5, Ludhiana. During the course of appellate proceedings, the assessee filed additional evidence u/s 46A of the Act. The appeal of the assessee was dismissed vide order dated 28.04.2014 and admission of additional evidence filed was rejected. The assessee filed appeal before Hon'ble ITAT against said appellate order, which directed to admit the additional evidence and set aside the appeal to the file of Ld. CIT(A). 4. In compliance to the authorization u/s 250(4) of the Act accorded by your good office, a notice was issued to the assessee on 15.11.2021 with the request to file copy of bank statement and ITR of Mrs. Vinod Khanna so as to explain the genuineness/creditworthiness of having advanced loan of Rs.8 lakhs. The assessee in its reply dated 22.11.2021 (copy enclosed) has stated that Mrs. Vinod Khanna has shown her inability to provide the desired information. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 6 5 In this connection, it is submitted that the onus to prove the genuineness and creditworthiness of lender lies upon the assessee. Despite being giving sufficient opportunity, it has failed to discharge its onus. It is assessee’s duty to produce the bank account so as to prove the genuineness of loan raised. Therefore, it is requested that the appeal of the assessee on this account deserves to be dismissed." REJOINDER OF THE AR 3.2 A copy of above report was provided to the appellant for comments. In i, the AR submitted rejoinder as under: Sub: written submission in the case of Punjab Iron and Steel Company Ltd. PAN AAACP9849B Assessment year 2008-09 in Appeal reference No. CIT(A), Ludhiana-5/10276/2019-20 During the course of last hearing, we were provided with the remand report of the n the remand report it is submitted as under The Assessing Officer has failed to do his duty and make the proper enquiry. The assessee had time and again requested the AO during the assessment proceedings that the depositor Ms. Vinod Khanna is being assessed with you and facts can be verified from your record. This request was made in submissions dated 14.03.2014, copy provided to you with submissions dated 25.08.2018. A request was also made that in case AO is not satisfied, a further opportunity may be given. Neither the AO verified the facts from its own record nor it gave any further opportunity to the assessee and addition of Rs. 8,00,000/- was made. The assessee submitted the documents before you vide submissions dated 25.08.2018 and again submitted the same during proceedings after case being set aside by the Hon'ble ITAT to you for re-consideration. The matter was sent by you under s. 250(4) to the AO for making enquiry. AO kept the matter pending with him for a long period without making any enquiry and verifying the facts from its record as the AO was Assessing officer of the depositor Ms Vinod Khanna also for the year under reference. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 7 The AO passed the buck to the assessee to provide the documents and the assessee replied that he is unable to provide the documents sought for as the matter is very old. However, a request was made to the AO to summon Ms. Vinod Khanna using powers under the statute and verify the information. AO instead of using his statutory powers and summoning Vinod Khanna or verifying the facts from its record being her assessing Officer sent a negative report. It is trite that assessee should not suffer for the failure of the AO to fulfill its statutory duties. Here, the AO completely failed to perform its functions and in a casual manner passed on the liability to the assessee. Had the assessee been able to collect the information from the depositor, he would have filed the same before your honour during appellate proceedings and would not have made request to you and to the AO to use statutory powers and collect information from the depositor. Here the AO has failed to produce any document justifying that he has tried to verify the facts from the assessment record of the depositor or have issued any summons or letter to the depositor Ms. Vinod Khanna. AO is totally silent on that. Even after requisition u/s 250(4), the AO issued letter to the assessee only and not further efforts were made by him. The assessee has proved the existence of the depositor, filed her PAN No. and affidavit and copy of bank account in which the amount has been received by the assessee. Assessee having complied with its onus, should not be punished for failure of the AO. Reliance is being placed on: Aravali Trading Co. vs. ITO 8 DTR 199 (Raj): "20. This principle is fully applicable to the present case. The fact that the explanation furnished by the aforementioned four creditors about the source wherefrom they acquired the money was not acceptable by the revenue could not provide necessary nexus for drawing inference that the amount admitted to be deposited by these four persons belonged to the assessee. The assessee having discharged his burden by proving the existence of the depositors and the depositors owing their deposits, he was not further required to prove source of source." Here in this case also assessee has proved the identity of the depositor and she has owned the deposit by filing affidavit and the AO has not verified the affidavit ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 8 by summoning the depositor and it shows has accepted the affidavit. Hence addition cannot be made. CIT vs. Dataware private Limited ITAT No. 263 of 2011 GA No. 2856 of 2011 High Court of Calcutta: "After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing Officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether transaction has been accepted by the Assessing Officer of the creditor but instead of adopting such course, the Assessing Officer himself could not enter into the return of the creditor and brand the same as unworthy of credence. So long it is not established that the return submitted by the creditor has been rejected by the Assessing Officer, the Assessing Officer of the assessee is bound to accept the same as genuine when the identity of the creditor and the genuineness of transaction through account payee cheque has been established." Here the AO of the assessee and that of the depositor were same and request was made to the AO during assessment that facts can be verified from the record of the depositor available with the AO. However, the AO neither verified the facts from the record nor conveyed about the same to the assessee and made the addition. Even during remand report in-spite of request of the assessee, AO failed to summon the depositor. Hence addition on this account is unjustified. Munnalal Murlidhar vs. CIT 79 ITR 540 (Allahabad).: "5. It does not appear from the record that the ITO had considered the petition of the assessee and passed an order thereon. As Lord Shaw had said, "of things that do not appear and of things that do not exist, the reckoning in law is the same.” It may be presumed, therefore, that no order was passed by the ITO on the application of the assesses for summoning the parties concerned. A week thereafter, i.e., on 30th October 1954 the impugned assessment was made by the ITO in complete disregard of the explanation of the assessee and its prayer for production of evidence in support of such explanation." The Hon'ble Court further held: 7. The remark loses its significance in view of the fact that the ITO did not accede to the request made by the assessee to summon the party concerned for examination under s. 37 of the Act. In E.M.C Works (P) Ltd., vs ITO (1963) 49 ITR 650 (All) this Court observed that it is the duty of the ITO to assist the assessee by exercising his powers under s. 37 of ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 9 the Act and enable it to produce evidence in support of the return made by it. The Court also remarked that the 7 assessee’s application requesting the officer to exercise his powers in such circumstances under 8. 37 should not be rejected summarily. In the present case, the ITO failed to act up to this salutary principle. 9. In our opinion, the assessee has been materially prejudiced on account of the failure on the part of the ITO to call and examine the evidence which was offered by the assessee to explain the nature and source of the sum of Rs. 17000." Here also the assessee has been prejudiced twice. Once during assessment when it asked to verify the facts from assessment record of depositor, AO failed and secondly during remand proceedings also assessee requested for the same but AO failed to honour request of the assessee. Keeping in view the above facts and submissions, it is prayed that justice may be done to the assessee and the addition deleted." OBSERVATIONS & DECISION 4. In the light of the above submissions and report of the AO, the set-aside r is adjudicated as under: - 4.1 Grounds of Appeal Nos. 1, 2 & 3: These grounds of appeal relate to action u/s 153A where the assessee has challenged the addition made by the AO being not on based on any incriminating material. The assessee has also challenged the addition u/s 153A by claiming that no documents were found at the premises of the assessee during the course of search. The AR during the course of appellate proceedings has not furnished any fresh submissions on the issue. Hence, it is assumed that the AR has no more submissions to file beyond the documents already filed during the original appeal proceedings. It is worthwhile to mention here that the issue raised by the AR is under consideration of Hon'ble Supreme Court and SLP on the same has been admitted vide Diary No. 37848/2015 against the decision of Hon'ble Bombay High Court In HA No. 1669 of 2013 dated 08.05.2015.-Without prejudice to the- above, it is seen that there are a plethora of judgments of Hon'ble Courts where a different view has been formed. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 10 It has been held by the Hon'ble High Court of Kerala in the case of CIT Trichur vs. St. Francis Clay Decor Tiles reported in [2016] 70 taxmann.com 234 (Kerala), as under: “20. On a plain reading of Section 153 A, it is clear that once search is initiated under Section 132 or a requisition is made under Section 132A after the 31st day of May 2003, the Assessing Officer is empowered to issue notice to such person requiring him to furnish return of income in respect of each assessment year following within six assessment years referred to in clause (b). It further treats the returns so filed as if such return were a return required to be furnished under Section 139. So that on a reading of Section 153A(1) it is categoric and clear that once a notice is issued and the Assessing Officer has required the assessee to furnish return for a period of six assessment years as contemplated under clause (b) then the assessee has to furnish all details with respect to each assessment year since the same is treated as a return filed under section 139. It is true that as per the first proviso, the Assessing Officer is bound to assess or reassess the total income with respect to each assessment year following the six assessment years specified in sub-clauses (a) and (b) of Section 153A. However, even if no documents are unearthed or any statement made by the assessee during the course of search under section 132 and no materials are received for the afore-specified period of six years, the assessee is bound to file a return, is the scheme of the provision. Even though the second proviso to Section 153 A speaks of abatement of assessment or reassessment pending on the date of the initiation of search within the period of six assessment years specified under the provision that will also not absolve the assessee from his liability to submit returns as provided under Section 153A(1X&). This being the scheme of the provisions of the Act, the Appellate Tribunal ought to have considered the issue with specific reference to the facts involved in the case and as provided under Section 153 A.” Further, the judgment of Hon'ble High Court of Kerala in the case of E.N. Gopakumar vs. Commissioner of Income-tax (Central) reported at [2016] 75 taxmann.com 215 (Kerala) has held as under: “Section 153 A, read with section 132, of the Income-tax Act, 1961 - Search & seizure - Assessment in case of (Scope of) - Whether for issuance of a notice under section 153A(l)(a), it is not necessary that search on which it was founded should have necessarily yielded any ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 11 incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A(l)(a) can be concluded against interest of assessee including making additions even without any incriminating mater * a l being available against assessee in search under section 132 on basis of which notice was issued under section 153A(l)(a) - Held, yes [Paras 7 and 8]” It is further been held in the case of Canara Housing Development Co. vs. CIT reported in [2014] 49 taxmann.com 98 (Kar.) that “the condition precedent for application of Section 153A is that there should be a search under section 132. Initiation of proceedings under section 153A is not dependent on any undisclosed income being unearthed during such search". Further, it has been held by the Ld. ITAT Allahabad Bench 'DB 1 (Third Member) In the case of Assistant Commissioner of Income-tax vs. Sunshine Infraestate (P.) Ltd. reported In [2022] 139 taxmann.com 60 (Allahabad - Trib.) (TM), as under: “Whether where section 153 A gets triggered in case of search, assessments have to be made mandatorily by Assessing Officer - Held, yes - Whether since section 153A contains non obstante clause qua section 147 consequential requirement of issuing notice under section 143(2) before making assessment under section 147, would also not be warranted for completing assessment under section 153A - Held, yes - Whether thus, issuance of notice under section 143(2) is not a mandatory jurisdictional requirement for making assessment under section 153 A so as to render assessment order null and void in its absence - Held, yes [Paras 6.2 and 6.6] II. Whether there would be no legal impediment in making an addition, otherwise than on basis of any incriminating material found during search, in an assessment under section 153A for relevant year whose assessment was not pending on date of search - Held, yes [Para 7.16]” From the above judgments following issues can be crystallized: (a) Once notice u/s 153A is issued, the assessee is required to furnish return for six assessment years ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 12 (b) The Assessing Officer is bound to assess or reassess the total income with respect to each assessment year (c) Even if, no documents or material is unearthed for the aforesaid period of six years, the assessee is still bound to file the return (d) Even though, section 153A speaks to abatement of assessment or reassessment proceedings that will not absolve the assessee from his liability to submit the return as required u/s 153A. (e) Neither under section 132 nor under section 153A phraseology 'incriminating' is used by Parliament, therefore, any material unearthed during search operation or any statements made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A. The view held by the above judgments makes it pretty clear that there is no prerequisite of incriminating material to be found during the search for initiating nt proceedings u/s 153A. Hence, the above grounds of appeal are dismissed. 6. We have heard the Ld. DR, perused the material on record, impugned order, and written submission. Admittedly, the addition was made by the AO in absence of any incriminating material. In Ground of Appeal Nos. 1, 2 & 3 before the Ld. CIT(A), the assessee has challenged the addition made by the AO without reference to any incriminating material and that assessee has objection to the addition made u/s 153A of the Act as no documents were found at the premises of the assessee during the course of search. Thus, in the present case the notice u/s 153A was issued for the year under consideration even though there was no incriminating document available with the department. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 13 7. The law is settled, by Apex Court, in its recent judgment, in the case of “PCIT, central-3 vs, Abhisar Buildwell Private Limited, [2023] 149 Texmann.com 399, where the Hon’ble Apex Court has laid down the principle that no addition can be made by the AO, in the absence of any incriminating document found during the course of search under section 132 of the Act, 1961. Meaning thereby, in the case of search under section 132 read with section 153A, no addition could be made without having any incriminating documents found during the course of search. 8. In view of the principle laid down by the Honorable Supreme Court of India, in the recent judgement, in the case of “PCIT, central-3 vs, Abhisar Buildwell Private Limited, (Supra) no addition could be made in the absence of any incriminating document found during the course of search under section 132 of the act, 1961. Accordingly, we hold the Assessment Order as invalid and void ab initio. 9. In the above view, we hold the decision of the learned CIT appeal as infirm and bad in law. As such, impugned order is quashed. ITA No. 75/Asr/2023 Punjab Iron & Steel Co. Ltd. v. Dy.CIT 14 10. In the result, the appeal of the assesse is allowed. Order pronounced in the open court on 03.08.2023 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr.PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. True Copy By Order