The ACIT, Central Cirxle-2(4), Ahmedabad V. Shri Hiralal Dayaram Thakkar, Ahmedabad

ITA 78/AHD/2022

AI Insights

The case involves an appeal by the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad, which had deleted a penalty of Rs. 1,26,59,577 imposed on Shri Hiralal Dayaram Thakkar for claiming bogus expenses. The ITAT's decision to dismiss the Revenue's appeal was based on the fact that the initial quantum addition, which led to the imposition of the penalty, had been overturned in a prior ITAT order. The Tribunal referenced several judicial precedents to support its decision, emphasizing that no incriminating material was found during the search that could justify the additions made.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135593 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-04-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 31-03-2022
• Other Referred Cases: Pr.CIT Vs. Saumya Construction P. Ltd., CIT Vs. Murli Agro Products Ltd., Jayaben Ratilal Sorathia, N.K. Roadways P.Ltd. v. Income-tax Officer (OSD), Sirpur Paper Mill Ltd. -Vs- Commissioner of Wealth-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NISHITH JESUR
• Section: 132; 271(1)(c); 143(3); 80HHC; 153A; 153

Judgement Text

आयकर आयकरआयकर आयकर अपी अपीअपी अपीलीय लीयलीय लीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद यायपीठ यायपीठ यायपीठ यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ A” BENCH, AHMEDABAD BEFORE Ms SUCHITRA KAMBLE, JUDICIAL MEMBER, And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.78/AHD/2022 िनधा रण िनधा रणिनधा रण िनधा रण वष वष वष वष /Asstt. Year: 2009-2010 A.C.I.T, Central Circle-2(4), Ahmedabad. Vs. Shri Hiralal Dayaram Thakkar, B/12, Shreejibapa Complex, Vasna, Ahmedabad-380007. PAN: AANPT3721E (Applicant) (Respondent) Revenue by : Ms Bhavnasingh Gupta, Sr.D.R Assessee by : Shri Nishith Jesur, A.R सुनवाई क तारीख/Date of Hearing : 10/04/2023 घोषणा क तारीख /Date of Pronouncement: 21/04/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad dated 27/01/2022 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act"), relevant to the Assessment Year 2009-2010. ITA no.78/AHD/2022 A.Y. 2009-2010 2 2. The only issue raised by the Revenue is that the ld. CIT-A erred in deleting the penalty of Rs. 1,26,59,577/- under the provisions of section 271(1)(c) of the Act. 3. The briefly stated facts are that the assessee in the present case is an individual and has claimed the deduction of the expenses amounting to Rs. 3,72,45,001/- which was disallowed, treating them as bogus and added to the total income of the assessee in the assessment framed u/s 143(3) r.w.s. 263 of the Act. The AO in the assessment proceedings initiated the penalty on the addition made in assessment proceedings on account of bogus expenditure which came to be confirmed at Rs. 1,26,59,577/- being 100% of amount of tax sought to be evaded. On appeal, the Ld. CIT(A) was pleased to delete the penalty imposed by the AO under the provisions of section 271(1)(c) of the Act. 4. Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before us. Both the Ld. DR and the Ld. AR before us relied on the order of the authorities below as favourable to them. 5. We have heard the rival contentions of both the parties and perused the materials available on record. At the outset, we note that the quantum addition based on which the penalty was imposed by the AO has been deleted by the ITAT in the quantum proceeding in ITA No. 167/Ahd/2021 vide order dated 10/02/2023. The relevant extract of the order is reproduced as under: 3. We have perused the materials on record as well as the decision of the Co-ordinate Bench of this Tribunal wherein it has been held as follows: 8.1. We have given our thoughtful consideration to the facts of the case; perused material available on record and the Paper Book filed by the assessee. It is not disputed that in the Asst. Year 2009-10, assessment was completed under section 143(3) read with section 153A of the Act which was subject matter of appeal before the ld.CIT(A). After verifying the details, the ld.CIT(A) deleted additions made by the AO on the ground that no seized material was found during the course of search relating to the assessee. This issue is no more res integra as the Hon’ble jurisdictional High Court in the case of Pr.CIT Vs. Saumya Construction P. Ltd., 81 taxmann.com 292 (Guj) has held as follows: ITA no.78/AHD/2022 A.Y. 2009-2010 3 “18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 8.2. Respectfully following the above judgment of the jurisdictional High Court, we find that assessment order dated 30.3.2016 passed u/s.153A is confined only to the Returned Income, in other words, original assessment order is reiterated. As against this assessment order, the ld.Pr.CIT could not initiate revision proceedings under section 263 of the Act on the ground that order passed by the AO is erroneous and prejudicial to the interest of the Revenue since the basic assessment itself is invalid in law. This view is supported by Hon’ble Bombay High Court in the case of CIT Vs. Murli Agro Products Ltd., 49 taxmann.com 172 (Bom). The relevant paras of the judgment read as follows: “12. Once it is held that the assessment finalized on 29.12.2000 has attained finality, then the deduction allowed under section 80 HHC of the Income-tax Act as well as the loss computed under the assessment dated 29-12-2000 would attain finality. In such a case, the A.O. while passing the independent assessment order under Section 153A read with Section 143(3) of the IT. Act could not have disturbed the assessment/ reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under Section 153A of the Income-tax Act establish that the reliefs granted under the finalised ITA no.78/AHD/2022 A.Y. 2009-2010 4 assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. 13. In the present case, there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings which would show that the relief under Section 80HHC was erroneous. In such a case, the A.O. while passing the assessment order under Section 153A read with Section 143(3) could not have disturbed the assessment order finalised on 29.12.2000 relating to Section 80HHC deduction and consequently the C.I.T. could not have invoked jurisdiction under Section 263 of the Act.” 8.3. Respectfully following the Bombay High Court judgment, we hold that the Revision Order passed as against the invalid assessment order is nullity in law. 8.4. Furthermore, we observe that the Ld.DCIT vide his letter dated 9.3.2018 informed Pr.CIT to drop the proceedings based on the Tax Evasion Petition and categorically stated that ld.Audit Officer not even appreciated remarks in the report of DDIT(Inv) wherein he has mentioned that the AO may kindly derive his own satisfaction and draw his conclusion independently. This observation of DDIT(Inv) is sufficient to indicate that report given by him is not final and is subject to further investigation. But the ld.Audit Officer appears to have jumped into conclusion by substituting himself for the AO and has tried to suggest addition to the total income based on some conjectures and surmises. Further, as it can be seen from the order passed by the Inquiry Officer dated 21.6.2013 that there were no financial irregularities in “Swaminarayan Society”, and therefore the revision order passed by the Pr.CIT has no legs to stand. 8.5. Thus, we find that the ld.CIT has initiated Revision proceeding based on the Internal Audit Party report only, which is not maintainable in law following jurisdictional High Court in the case of N.K. Roadways P.Ltd. v. Income-tax Officer (OSD) reported in [2015] 63 taxmann.com 342 (Gujarat) wherein it was held that ‘where Assessing Officer had considered issue relating to taxability of interest in detail at the time of assessment, action of reopening solely at behest of audit party without any independent belief while recording reasons would surely make reassessment vulnerable’. Further it is settled Principle of law by the Three Judges Bench judgement of the Hon’ble Supreme Court in the case of Sirpur Paper Mill Ltd. -Vs- Commissioner of Wealth-tax reported in [1970] 77 ITR 6 (SC) that revision made by the Commissioner simply following direction of the Board, which may control exercise of power of officers of department in administrative matters, but not in quasi judicial matters. In case of judicial matters, the Commissioner should apply his mind and initiate proceedings in accordance with law and not merely carry out directions of the Board. Thus, any order passed pursuant to the directions of the Board is liable to be set aside as Commissioner has not applied his independent judgments in invoking revision proceedings. 8.5. Respectfully following the above judgments of jurisdictional High Court and judgment of Hon’ble Supreme Court cited (supra) we hold that revision order dated 28.03.2018 passed by the Pr.CIT [Central] for the asst. year 2009-10 is not in accordance with law and the same is hereby quashed. 8.6. We further found the Explanation (2)(a) to section 263(1) of the Act has been inserted w.e.f. 01-06-2015 only. The ld.Pr. CIT is legally not correct in invoking this provision and therefore the initiation of Revision Proceedings itself is invalid in law. For all the above reasons, we find that Revision Order passed by the Pr.CIT is not in accordance with law, and therefore, the same is hereby quashed. 4. Before us, no material has been placed on record by the Revenue to demonstrate that the decision of Tribunal on the Revision order as discussed above has been set aside/stayed or overruled by the higher Judicial Authorities. Before us, Revenue has not placed any material on record to point out any distinguishing feature in the facts of the ITA no.78/AHD/2022 A.Y. 2009-2010 5 case for the year under consideration and that of case referred above nor has placed any contrary binding decision in its support. 4.1. Respectfully following the same, the present appeal filed by the Revenue is also become infructuous. Thus the appeal filed by the Revenue is here dismissed. 6. Once, the quantum addition has been deleted by the order of the ITAT, the penalty-imposed u/s 271(1)(c) of the Act does not survive. Hence the ground of appeal of the revenue is hereby dismissed. 7. In the result, the appeal filed by the revenue is dismissed. Order pronounced in the Court on 21/04/2023 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 21/04/2023 Manish