ACIT Cen Cir- Aurangabad., Aurangabad V. M/s. Shah Himmatlal Manilan & Co, Jalna

ITA 843/PUN/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84945 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-12-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 30-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Income from undisclosed sources; Loose papers; Document seized; Principle of natural justice; Block assessment; Documents seized
• Section: 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NOS.842 TO 844/PN/2012 (A.YS. 2003-04 TO 2005-06) ACIT, CENTRAL CIRCLE, AURANGABAD APPELLANT VS. M/S. SHAH HIMMATLAL MANILAL & CO., 2-7-5, CHANDAN NIWAS, NEHRU ROAD, JALNA. PAN: AADCS7822C RESPONDENT CO NOS.31 TO 33/PN/2013 (A.YS. 2003-04 TO 2005-06) M/S. SHAH HIMMATLAL MANILAL & CO., 2-7-5, CHANDAN NIWAS, NEHRU ROAD, JALNA. PAN: AADCS7822C OBJECTOR VS. ACIT, CENTRAL CIRCLE, AURANGABAD RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI RAJESH DAMOR DATE OF HEARING : 22.07.2014 DATE OF PRONOUNCEMENT : 28.08.2014 ORDER PER SHAILENDRA KUMAR YADAV : THREE APPEALS FILED BY THE REVENUE PERTAIN TO THE S AME ASSESSEE ON ALMOST SIMILAR GROUNDS ARISING OUT OF C ONSOLIDATED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), AURANGABAD. ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO THE ASSESSEE ALSO HAS FILED THE CROSS APPEALS. FOR THE SAKE OF CONVENIENCE, ALL THESE APPEALS ARE BEING DISPOSED O F BY THIS COMMON ORDER. 2. IN ITA NO.842/PN/2012, THE REVENUE HAS FILED THE APPEAL ON THE FOLLOWING GROUNDS. (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F' 15,59,749/- MADE ON ACCOUNT OF UNDISCLOSED INCOME E ARNED FROM BEEDI BUSINESS, WHICH WAS BASED ON INCRIMINATI NG DOCUMENTS SEIZED DURING SEARCH FROM THE PREMISES OF SHRI FINAL SHAH, ONE OF THE PARTNERS OF THE FIRM, (2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN RELYING ON THE INTE RIM ORDER OF THE ARBITRATOR WITHOUT APPRECIATING THAT THE MATTER HAS NOT ATTAINED FINALITY THE OUTCOME OF WHICH MAY BE DIFFE RENT FROM THE DECISION OF THE INTERIM ORDER OF THE ARBITRATOR . (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT THE DOCUMENTS SEIZED WERE NOT RELIABLE EVIDENCE CONTRARY TO THE FACT THAT THE OWNERSHIP AND CONTENTS OF THE INCRIMINATORY DOCUMEN TS HAVE BEEN ADMITTED BY THE PARTNER SHRI FINAL SHAH. (4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN NOT CONSIDERING THE STATEMENTS OF SHRI FINAL SHAH RECORDED UNDER SECTION 132(4) OF THE ACT DURING THE COURSE OF SEARCH, WHICH IS A VALID PIECE OF EVIDENCE. (5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE DECISION OF THE LEARNED CIT(A) IS PERVERSE SINC E THE DECISION IS RENDERED BY NOT TAKING INTO CONSIDERATI ON THE ENTIRE DOCUMENTARY EVIDENCE ON RECORD. (6) ANY OTHER GROUND WHICH MAY BE CONSIDERED NECESS ARY AT THE TIME OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM MAINLY ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF BIDIES AND GUTKHA. A SEARCH ACTION U/S 132 OF THE I.T. AC T HAS BEEN ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO CONDUCTED IN THE CASE OF THE ASSESSEE FIRM ON 25.02 .2007. THE ASSESSING OFFICER HAS ISSUED NOTICES U/S 153A OF TH E ACT ASKING THE ASSESSEE TO FILE THE RETURNS OF INCOME. THE DETAIL S OF INCOME RETURNED, ADDITION MADE AND INCOME ASSESSED FOR THE YEARS UNDER CONSIDERATION ARE AS UNDER:- ASSESSMENT YEAR DATE OF FILING ORIGINAL RETURN INCOME ORIGINALLY RETURNED RS. ADDITION IN THE ASSESSMENT U/S 153A RS. INCOME ASSESSED U/S 153A RS. 2003 - 04 28/11/2003 7,48,073 42,44,216 49,92,289 2004 - 05 31/08/2004 9,29,550 61,91,223 71,20,773 2005-06 28/10/2005 8,68,780 31,58,538 40,27,318 4. THE MATTER WAS CARRIED BEFORE FIRST APPELLATE AU THORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAISED ON BEHA LF OF ASSESSEE. ON PRELIMINARY ISSUE AS WELL AS ON MERIT, THE CIT(A ) HAVING CONSIDERED THE SUBMISSIONS ON BEHALF OF ASSESSEE HA S OBSERVED THAT THE PARTNERSHIP FIRM M/S. SHAH HIMMATLAL MANIL AL & CO HAS BEEN DISSOLVED BY THE ORDER OF DISTRICT COURT, JALN A ON 19.07.2006 WHO HAS APPOINTED SHRI VIJAY R. SHAH AS SOLE RECEIV ER. THE HON'BLE MUMBAI HIGH COURT, AURANGABAD BENCH HAS APP OINTED HON'BLE JUSTICE SHRI S.C. MALTE AS THE ARBITRATOR W .E.F. 01.08.2006. THE ARBITRATOR HON'BLE JUSTICE SHRI S.C. MALTE HAS PASSED AN ORDER ON 31.10.2006 AND HAS APPOINTED TWO RECEIVERS I.E. SHRI VIJAYKUMAR SHAH AND SHRI PINALKUMAR SHAH. THE STAN D OF THE ASSESSEE HAS BEEN THAT THE PARTNERSHIP FIRM M/S SHA H HIMATLAL MANILAL & CO. HAS BEEN DISSOLVED AND WAS NOT IN EXI STENCE ON THE DATE OF SEARCH. IT WAS FURTHER CLAIMED THAT THE SE ARCH WARRANT AND PANCHNAMA WAS IN THE NAME OF THE ASSESSEE FIRM SHOW ING OFFICE ADDRESS AT HIMCO HOUSE WHEREAS THE SAID ADDRESS WAS OF SHAH HIMATLAL MANILAL & CO. TOBACCO PRODUCTS PVT.LTD. TH E ADDRESS OF THE ASSESSEE FIRM WAS CHANDAN NIWAS, NEHRU ROAD, JA LNA AND THIS PREMISES WAS NOT SUBJECTED TO SUCH PROCEEDING AND H ENCE THE ENTIRE PROCEEDINGS U/S.153A OF THE ACT INCLUDING TH E ASSESSMENTS PASSED BY THE ASSESSING OFFICER WAS WITHOUT JURISDI CTION AND VOID- ABINITIO. THE NOTICES HAVE BEEN ISSUED U/S.153A OF THE ACT IN THE ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO NAME OF THE FIRM M/S SHAH HIMATLAL MANILAL & CO. WH ICH DID NOT EXIST ON THE DATE OF SEARCH. THEREFORE, THE SAID N OTICES ISSUED AND ALSO SEARCH WARRANT ISSUED ON NON-EXISTENT FIRM IS BAD IN LAW. THE ASSESSING OFFICER HAS MADE ADDITIONS ON THE BASIS O F DOCUMENTS FOUND AT THE PREMISES OF ONE OF THE PARTNERS OF THE DISSOLVED FIRM AND NOT FROM THE PREMISES OF THE ASSESSEE FIRM AND HENCE ORDERS PASSED U/S.153A OF THE ACT IS NOT JUSTIFIED AND BAD IN LAW. THE FIRM HAS BEEN DISSOLVED PRIOR TO SEARCH PROCEEDINGS AND THE COURT RECEIVER WAS APPOINTED FOR THE CUSTODY AND MANAGEME NT OF THE AFFAIRS OF THE DISSOLVED FIRM AS DISCUSSED ABOVE. THE ASSESSING OFFICER THEREFORE, SHOULD HAVE ISSUED NOTICES U/S.1 53A OF THE ACT AND THE INFORMATION SHOULD HAVE BEEN CALLED FOR FRO M THE COURT RECEIVER. THE ASSESSING OFFICER HAS THEREFORE INCOR RECTLY ISSUED NOTICES IN THE NAMES OF EX-PARTNERS AND REQUIRED IN FORMATION FROM THEM. 4. IN APPEAL, THE CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON VALIDITY POINT. THE ASSESSEE HAS RELIED ON THE FOLLOWING CASE LAWS. (A) CIT VS. RAKESH KUMAR, MUKESH KUMAR L/H OF LATE MOHAR SINGH (2009) 313 ITR 305 (P & H) WHEREIN IT W AS HELD THAT SEARCH WARRANT IN THE NAME OF A DEAD PERS ON SEARCH WARRANT BEING ISSUED IN THE NAME OF A DEAD PERSON AND PANCHNAMA ALSO PREPARED IN THE NAME OF DEAD PERSON, THE SEARCH AND THE AUTHORIZATION WERE INVALID AND VOID AB INITIO AND THEREFORE BLOCK ASSE SSMENT U/S.158BC R.W.S. 144 IN PURSUANCE THEREOF IS ALSO INVALID SEARCH WARRANT IN THE NAME OF A DEAD PERS ON BEING AGAINST THE LAW OF NATURAL JUSTICE, NO VALID ASSESSMENT COULD BE BASED UPON IT. (B) MOHAN LAL ARORA VS. DCIT ITAT DELHI B THIRD MEMBE R BENCH (2006) 8 SOT 158 (DEL)(TM), WHEREIN IT WAS HE LD THAT THE ASSESSEE ALONG WITH HIS BROTHERS WIFE AND TWO OTHERS FORMING PARTNERSHIP WHICH STOOD DISSOLVED ON 1 ST APRIL, 1994, AFTER WHICH ASSESSEE CONTINUED THE BUS INESS AS SOLE PROPRIETOR SEARCH IN PREMISES OF ASSESSEE AND ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO HIS BROTHER A ON 13 TH AUG, 1995, REVEALED CERTAIN PAPERS CONTAINING NOTINGS IN HANDWRITING OF A RELAT ING TO TRANSACTIONS PERTAINING TO ERSTWHILE FIRM ADDITIO NS IN BLOCK ASSESSMENT MADE U/S.158BC(C) IN THE HANDS OF ASSESSEE ON THE BASIS OF SAID PAPERS NOT JUSTIFIE D SINCE THE ENTRIES PERTAINED TO THE ERSTWHILE FIRM, BLOCK ASSESSMENT COULD BE MADE ON THE SAID FIRM ONLY DESP ITE DISSOLUTION IN ACCORDANCE WITH SECTION 158BC R.W.S. 189(1). 5. IN THIS REGARD THE LEARNED AUTHORIZED REPRESENTA TIVE HAS SUBMITTED THAT IN SUCH A SITUATION, THE ASSESSMENT CANNOT BE MADE AGAINST THE DISSOLVED FIRM UNDER THE PROVISION S OF SECTION 153A OF THE ACT AND AT THE MOST IT COULD HAVE BEEN DONE UNDER THE PROVISIONS OF SECTION 153C OF THE ACT. ON THE OTHE R HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED T HE ORDER OF AUTHORITIES BELOW AND SUBMITTED THAT SEARCH WARRANT HAS BEEN ISSUED IN THE NAME OF M/S. SHAH HIMMATLAL MANILAL & CO. HAVING ADDRESS AT HIMCO HOUSE, NEHRU ROAD, JALNA. THE ADD RESS OF THE ASSESSEE HAS BEEN CHANGED ON 21.02.2007 I.E. PRIOR TO ONLY 4 DAYS OF THE SEARCH. THE SAID CLAIM OF CHANGE OF ADDRESS HAS NOT BEEN INFORMED BY THE ASSESSEE TO THE DEPARTMENT PRIOR TO SEARCH ACTION AND HENCE THE DEPARTMENT HAS MENTIONED THE SAID ADD RESS AVAILABLE TO IT. FURTHER, THE INCRIMINATING PAPERS AND DOCUMENTS HAVE BEEN FOUND AT THE PREMISES OF SHRI PINALKUMAR SHAH WHO IS EX-PARTNER OF THE DISSOLVED FIRM. THE SEARCH AT TH E ADDRESS OF THE PARTNERS CAN BE REGARDED AS SEARCH IN THE CASE OF F IRM. SIMILARLY, SEARCH IN THE PREMISES OF DIRECTORS IS TO BE REGARD ED AS SEARCH IN THE CASE OF THE COMPANY. IT HAS BEEN PROVIDED IN S ECTION 189(1) THAT THE ASSESSING OFFICER CAN MAKE THE ASSESSMENT OF THE TOTAL INCOME OF THE FIRM EVEN AFTER DISSOLUTION OF THE FI RM, AS IF, NO SUCH DISSOLUTION HAS TAKEN PLACE AND ALL THE PROVISIONS OF THE INCOME TAX ACT SHALL BECOME APPLICABLE. THEREFORE, THE OR DER OF CIT(A) SHOULD BE UPHELD, INTER ALIA, HE HAS HELD THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 153A IS VALID. ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO 6. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND IT UNDISPUTED THAT THE PARTNERSHIP FIRM M/S. SHAH HIMMATLAL MANILAL & CO HAS BEEN DISSOLVED BY THE OR DER OF DISTRICT COURT, JALNA ON 19.07.2006 WHO HAS APPOINTED SHRI V IJAY R. SHAH AS SOLE RECEIVER. THE HON'BLE MUMBAI HIGH COURT, A URANGABAD BENCH HAS APPOINTED HON'BLE JUSTICE SHRI S.C. MALTE AS THE ARBITRATOR W.E.F. 01.08.2006, IN TURN, HON'BLE JUST ICE SHRI S.C. MALTE HAS PASSED AN ORDER ON 31.10.2006, INTER ALIA , APPOINTED TWO RECEIVERS I.E. SHRI VIJAYKUMAR SHAH AND SHRI PINALK UMAR SHAH. THE ASSESSEE FIRM HAS CHANGED THE ADDRESS FROM HIMC O HOUSE, NEHRU ROAD, JALNA TO CHANDAN NIWAS, NEHRU ROAD, JAL NA. THE ASSESSEE HAS NOT INFORMED ITS ADDRESS TO THE DEPART MENT, SO THE ASSESSMENT CANNOT BE ANNULLED ON THIS GROUND ALONE. COMING TO NEXT POINT, WE FIND THAT THE ASSESSEE FIRM HAS BEEN DISSOLVED AND WAS NOT IN EXISTENCE ON THE DATE OF SEARCH. IN RES PONSE TO QUESTION NO.2, P.N. SHAH HAS STATED THAT SHAH HIMMATLAL MANI LAL CO. TOBACCO PRODUCTS P. LTD. JALNA HAVING FIVE DIRECTOR S AS ON DATE AND HE WAS ONE OF THE DIRECTORS. THE SAID COMPANY WAS ENGAGED IN MANUFACTURING OF BIDI WITH BRAND NAME HIMMATLAL BI DI GAI CHAP BIDI. FURTHER, IN THE SAME CONTINUATION, THE SAID P.N. SHAH STATED THAT M/S. SHAH HIMMATLAL MANILAL & CO., JALN A HAD SIX PARTNERS WHICH WAS TRADING IN TOBACCO AND TENDU LEA VES AND HIS SHARE WAS 1/6 TH . IN RESPONSE TO A LETTER NO.ABD/ACIT(C)/ HIMMATLAL MANILAL CO/2008-0-/401, DATED 19.09.2008 ALONG WITH NOTICE U/S.142(1) OF THE ACT DATED NIL, VIJAYKUMAR R. SHAH HAS SUBMITTED THAT THE ABOVE SAID ASSESSEE FIRM SHAH HI MMATLAL MANILAL & CO. DID NOT EXIST ON THE DATE OF SEARCH. ACCORDINGLY, NO SEARCH WARRANT COULD BE ISSUED ON DISSOLVED FIRM AN D THE SAME IS VOID. THE SAME STAND WAS TAKEN BY THE ASSESSEE BEF ORE THE CIT(A). WE ALSO FIND THAT A NOTICE IN LOCAL DAILY NEWSPAPER DAINIK PARSHWABHUMI IN MARATHI DATED 12.10.2005 HAS BEEN PUBLISHED ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO WITH REGARD TO THE DISSOLUTION OF THE SAID FIRM W.E .F. 10.10.2005. THE ENGLISH TRANSLATION OF PUBLIC NOTICE READS AS U NDER: PUBLIC NOTICE I, PINALKUMAR NATWARLAL SHAH - KARTA OF NATWARLAL CHANDULAL SHAH - JOINT HINDU FAMILY RESIDING AT FLA T NO. 5, AMIT APARTMENT, SARDAR PATEL ROAD, AT AND POST TQ. & DIST. JALNA - WAS PARTNER OF M/S. SHAH HIMATLAL MANILAL & CO., 2- 8-41, HIMCO HOUSE, NEHRU ROAD, JALNA - REGISTERED W ITH JOINT REGISTRAR OF FIRMS AURANGABAD - AT SR.NO. 51/ 1967. THE SAID PARTNERSHIP FIRM WAS DISSOLVED ON 30-10-2005 A ND I HAVE ISSUED LEGAL NOTICE OF DISSOLUTION TO ALL CONCERNED . SIMULTANEOUSLY I HAVE CANCELLED THE GENERAL POWER O F ATTORNEY REGISTERED WITH SUB-REGISTRAR, JALNA AT SR .NO. 1363 DT. 20-03-1991 TO THE EXTENT OF MY RIGHT. HENCE I HEREBY INFORM PUBLIC IN GENERAL AND/OR ALL CONCERNED THAT :- FROM THE ISSUE OF SAID NOTICE ADVERTISED FROM THIS DATE THE SAID PARTNERSHIP FIRM NAMED AS M/S. SHAH HIMATL AL MANILAL & CO. JALNA AND ALSO CONCERNED TO THE SAID FIRM, UNLESS OTHERWISE WITHOUT MY CONSENT AND MY SIGNATUR E SHOULD NOT DO ANY TRANSACTION/S, AND IF AT ALL DONE ANY FINANCIAL AS WELL AS TRANSACTIONS OF ANY NATURE I W ILL NOT BE HELD RESPONSIBLE. HENCE ALL CONCERNED SHOULD TAKE NOTE OF THE SAME. DT. 10-10-2005 SIGNATURE [ PINALKUMAR NATWARLAL SHAH ] KARTA OF H.U.F. NATWARLAL CHANDULAL SHAH PARTNER OF M/S. SHAH HIMATLAL MANILAL & CO. JALNA 7. WE ALSO FIND THAT THE ASSESSEE HAS FILED RETURN OF INCOME FOR A.Y. 2006-07 BECAUSE IT HAD WORKED FOR SOME PART OF THE YEAR PREVIOUS TO THE RELEVANT ASSESSMENT YEAR 2006-07, W HEREIN IN COLUMN NO.5 I.E. DATE OF BIRTH HAS BEEN MENTIONED A S DISSOLVED FIRM. SO, IT WAS IMPLIEDLY IN THE KNOWLEDGE OF REV ENUE DEPARTMENT THAT THE SAID FIRM IS DISSOLVED AT RELEVANT POINT O F TIME. WE FIND ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO THAT DELHI A OF THE TRIBUNAL IN THE CASE OF IMPSA T (P) LTD. VS. ITO (2004) 91 ITD 354 (DEL) HAS HELD THAT ASSESSMENT ON A COMPANY WHICH HAS BEEN DISSOLVED AND STRUCK OFF THE REGISTE R OF COMPANIES U/S.560 OF THE COMPANIES ACT, 1956, IS INVALID, EVE N THOUGH THE COMPANY PARTICIPATED IN ASSESSMENT PROCEEDINGS. EV EN THE CASE BEFORE US, THE ASSESSEE FIRM WAS DISSOLVED AT RELEV ANT POINT OF TIME WHICH IS EVIDENT FROM THE ORDER OF DISTRICT COURT, JALNA AND THE SUBSEQUENT PROCEEDINGS, APPOINTMENT OF ARBITRATOR B Y THE JURISDICTIONAL HIGH COURT AND THE INTERIM AWARD PAS SED BY THE SAID ARBITRATOR AS DISCUSSED ABOVE. SO, THE FIRM WAS DI SSOLVED AND NOT IN EXISTENCE AS ON DATE OF SEARCH. WE ALSO FIND TH AT THE HONBLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF CIT V S. RAKESH KUMAR, MUKESH KUMAR L/H OF LATE MOHAR SINGH (SUPRA) HAS HELD THAT SEARCH WARRANT BEING ISSUED IN THE NAME OF A D EAD PERSON AND PANCHNAMA ALSO PREPARED IN THE NAME OF DEAD PERSON, THE SEARCH AND THE AUTHORIZATION WERE HELD AS INVALID AND VOID AB INITIO AND THEREFORE BLOCK ASSESSMENT U/S.158BC R.W.S. 144 IN PURSUANCE THEREOF IS ALSO HELD AS INVALID. THE RATIO OF RAKE SH KUMAR, MUKESH KUMAR L/H OF LATE MOHAR SINGH (SUPRA) SUPPORTS THE ARGUMENT OF THE LEARNED AUTHORIZED REPRESENTATIVE THAT SEARCH C ANNOT BE CONDUCTED ON NON-EXISTENCE DISSOLVED FIRM. THE ITA T PUNE BENCH IN THE CASE OF ACIT & ANOTHER VS. CHILKA VYANKATESH SIDRAM & OTHERS REPORTED IN (2010) 122 TTD 293 (PUNE) HELD T HAT ASSESSEE CANNOT CHALLENGE THE VALIDITY OF SEARCH ACTION. IT HAS BEEN HELD THAT ITAT EXAMINE THE VALIDITY OF SEARCH ACTION, HO WEVER, THIS CASE DISTINGUISHABLE IN CASE BEFORE US. THE CONTENTION OF ASSESSEE IS THAT SEARCH CANNOT BE CONDUCTED ON FIRM WHICH IS DI SSOLVED AND HENCE ASSESSMENT COMPLETED U/S 153A OF THE ACT IS I LLEGAL. THE VALIDITY OF SEARCH ACTION OF ENTIRE GROUP IS NOT BE ING CHALLENGED. THE ISSUE RAISED BY ASSESSEE IS THAT ONE FIRM HAS B EEN DISSOLVED IT CANNOT BE SUBJECTED TO SEARCH ACTION AND HENCE THE CONSEQUENT ASSESSMENT COMPLETED U/S 153A OF THE ACT IS NULL AN D VOID. WE ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO ALSO FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HEMENDRA RANCHHODDAS MERCHANT V. DIT (INVESTIGATION ) & OTHERS REPORTED IN (2013) 351 ITR 206 (BOM) WHEREIN ASSESS EE HAD FILED A WRIT BEFORE THE HONBLE HIGH COURT CHALLENGING THE SEARCH ACTION. THE ASSESSEE AND HIS WIFE HAD FLOATED A FIRM VIZ. M /S SRIRAM WAREHOUSING CORPORATION ON 1 ST NOVEMBER, 1992 LATER ON FIRM WAS DISSOLVED W.E.F. 31 ST MARCH, 2004. THEREAFTER, SEARCH WAS CARRIED OUT ON ASSESSEE AND HIS WIFE. THE ASSESSEE CHALLEN GED THE SEARCH ACTION AND CONSEQUENT ASSESSMENT ORDER U/S 153A OF THE ACT ON THE GROUND THAT SEARCH WARRANT WAS NOT ISSUED IN HI S NAME AND SAME WAS ISSUED IN THE NAME OF DISSOLVED FIRM. THE HONBLE HIGH COURT REJECTED THE CONTENTION OF ASSESSEE ON THE GR OUND THAT SEARCH WARRANT WAS ISSUED IN THE NAME OF ASSESSEE A ND HIS WIFE AND THEREFORE CONSEQUENT ASSESSMENT COMPLETED U/S 1 53A OF THE ACT WAS JUSTIFIED. THE HONBLE HIGH COURT FURTHER NOTED THAT SEARCH WAS CONDUCTED ON VARIOUS CONCERNS OF ASSESSE E GROUP AND DEPARTMENT HAS ALSO MUCH INFORMATION THAT ASSESSEE AND HIS GROUP CONCERN HAS GENERATED SUBSTANTIAL UNACCOUNTED INCOME. ACCORDINGLY, THE HONBLE HIGH COURT UPHELD THE VALI DITY OF SEARCH ACTION ON THE ASSESSEE AND IT HAS BEEN NOTED THAT W ARRANT WAS ALSO ISSUED IN THE NAME OF ASSESSEE. NOW, THE FACTS IN THE CASE OF HEMENDRA RANCHHODDAS MERCHANT (SUPRA) ARE DISTINGUI SHABLE. IN THE CASE BEFORE US, CONTENTION OF ASSESSEE IS THAT SEARCH CANNOT BE CONDUCTED ON FIRM WHICH IS DISSOLVED AND HENCE ASSE SSMENT COMPLETED U/S 153A OF THE ACT IS ILLEGAL. THE VALI DITY OF SEARCH ACTION ON THE ENTIRE GROUP IS NOT BEING CHALLENGED BY THE ASSESSEE. THE ASSESSEE CONTENTION IS THAT ONCE FIRM HAS BEEN DISSOLVED IT CANNOT BE SUBJECTED TO SEARCH ACTION AND HENCE CONS EQUENT ASSESSMENT COMPLETED U/S 153A OF THE ACT IS NULL AN D VOID AND THIS ISSUE WAS NOT A SUBJECT-MATTER BEFORE THE HON BLE HIGH COURT IN THE CASE OF HEMENDRA RANCHHODDAS MERCHANT (SUPRA ). THE MAIN PLEA OF THE ASSESSEE IS THAT ONCE FIRM IS DISS OLVED ITS ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO ASSESSMENT COULD NOT BE COMPLETED U/S 153A OF THE A CT AND ACCORDINGLY, THE DECISION OF HEMENDRA RANCHHODDAS M ERCHANT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESE NT CASE. IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT THE ASSESSMENTS ON D ISSOLVED FIRM ARE NOT JUSTIFIED AND THE SAME ARE ANNULLED. 8. WITHOUT BEING PREJUDICE TO ABOVE, COMING ON MERI T, WE FIND THAT THE ASSESSING OFFICER HAS MADE ADDITION OF RS. 42,44,216/-, RS.61,91,223/- & RS.31,58,538/- IN A.YS. 2003-04, 2 004-05 & 2005-06 RESPECTIVELY, BEING UNACCOUNTED BUSINESS IN COME FROM TRADING IN BIDIS. THE MATTER WAS CARRIED BEFORE FIR ST APPELLATE AUTHORITY, WHEREIN THE VARIOUS CONTENTIONS WERE RAI SED ON BEHALF OF ASSESSEE AND THE CIT(A) HAVING CALLED FOR REMAND RE PORT, HAS GRANTED RELIEF TO THE ASSESSEE ON MERIT. THE SAME HAS BEEN OPPOSED BEFORE US ON BEHALF OF REVENUE, INTER ALIA, SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED INCOME EARNED FROM BEEDI BUSINESS, WHIC H WAS BASED ON INCRIMINATING DOCUMENTS SEIZED DURING SEARCH FRO M THE PREMISES OF SHRI FINAL SHAH, ONE OF THE PARTNERS OF THE FIRM. THE CIT(A) WAS NOT JUSTIFIED IN RELYING ON THE INTERIM ORDER OF THE ARBITRATOR WITHOUT APPRECIATING THAT THE MATTER HAS NOT ATTAINED FINALITY THE OUTCOME OF WHICH MAY BE DIFFERENT FROM THE DECISION OF THE INTERIM ORDER OF THE ARBITRATOR. THE CIT(A) HA S ERRED IN HOLDING THAT THE DOCUMENTS SEIZED WERE NOT RELIABLE EV IDENCE CONTRARY TO THE FACT THAT THE OWNERSHIP AND CONTENTS OF THE INC RIMINATORY DOCUMENTS HAVE BEEN ADMITTED BY THE PARTNER SHRI FI NAL SHAH. THE CIT(A) WAS NOT JUSTIFIED IN NOT CONSIDERING THE STATEMENTS OF SHRI FINAL SHAH RECORDED UNDER SECTION 132(4) OF TH E ACT DURING THE COURSE OF SEARCH. ON THE OTHER HAND, THE LEARN ED AUTHORIZED REPRESENTATIVE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND SUBMITTED THAT THE ORDER OF CIT(A) BE UP HELD. ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO 8.1 AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND M ATERIAL ON RECORD, WE FIND THAT THERE WAS A DISPUTE AND COURT CASES AMONGST THE TWO GROUPS OF THE PARTNERS, ONE GROUP WAS LED B Y SHRI VIJAYKUMAR R. SHAH AND ANOTHER GROUP WAS LED BY SHR I PINALKUMAR SHAH. THE SAID DISPUTE EXISTED MUCH PRI OR TO THE DATE OF SEARCH. THE GROUP OF SHRI PINALKUMAR SHAH ON THE BASIS OF PAPERS AVAILABLE WITH HIM HAS CLAIMED THAT THE SAID PAPERS HAVE BEEN WRITTEN BY THE ACCOUNTANT OF THE FIRM M/S SHAH HIMATLAL MANILAL & CO. AND THE CONTENTS OF THE SAID PAPERS R EVEALED THAT SHRI VIJAYKUMAR AND OTHERS HAVE SUPPRESSED THE PROF IT TO THE EXTENT OF RS.42,44,216/-, RS.61,91,223/- & RS.31,58 ,538/- IN A.YS.2003-04, 2004-05 & 2005-06 RESPECTIVELY BEING ALLEGED UNACCOUNTED BUSINESS INCOME FROM TRADING IN BIDIS. THE SAID PAPERS WERE ALSO FILED BY SHRI PINALKUMAR SHAH & OT HERS WITH THE COURT AND ARBITRATOR APPOINTED BY THE COURT PRIOR T O SEARCH. THE SAID PAPERS HAVE BEEN FOUND WITH SHRI PINALKUMAR SH AH IN THE COURSE OF SEARCH ACTION, INTER ALIA, HE IN HIS STAT EMENT, REITERATED HIS CLAIM OF SUPPRESSION OF PROFIT TO THE EXTENT OF ABOVE SAID AMOUNT IN ABOVE SAID YEARS BEING ALLEGED UNACCOUNTE D BUSINESS INCOME FROM TRADING IN BIDIS. IN VIEW OF THE ABOVE FACTS SHRI VIJAYKUMAR SHAH HAS CLAIMED THAT THE SAID PAPE RS FOUND AND STATEMENT RECORDED DURING THE SEARCH ACTION OF SHRI PINALKUMAR SHAH IS SELF SERVING AND HAD NO EVIDENTIARY VALUE, PARTICULARLY IN VIEW OF DISPUTES AND COURT CASES BETWEEN THE TWO GR OUPS OF THE PARTNERS. IN VIEW OF THE ABOVE FACTS SHRI VIJAYKUM AR SHAH HAS CLAIMED THAT THE AUTHENTICITY AND TRUTH IN RESPECT OF THE ALLEGED PAPERS IN POSSESSION OF SHRI PINALKUMAR SHAH HAS NO T BEEN VERIFIED AND ESTABLISHED BY THE ASSESSING OFFICER W HICH WAS MUST FOR MAKING ADDITIONS IN QUESTION IN THE CASE OF THE ASSESSEE FIRM, PARTICULARLY IN VIEW OF THE FACT THAT DURING THE LA ST MORE THAN 20 YEARS THE ASSESSEE FIRM HAS NOT CARRIED OUT THE BUS INESS OF TRADING IN BIDIS AND ALSO IN VIEW OF THE FACT THAT NO OTHER CORROBORATIVE ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO EVIDENCE IN SUPPORT OF ALLEGED SUPPRESSED PROFIT HA S BEEN FOUND IN THE COURSE OF SEARCH PROCEEDINGS OR POST SEARCH PRO CEEDINGS. WE FIND THAT DURING THE COURSE OF ARBITRATION PROCEEDI NGS BEFORE THE HON'BLE ARBITRATOR, CROSS EXAMINATION OF SHRI PINAL KUMAR SHAH HAS BEEN CARRIED OUT BY THE ADVOCATE AT THE RELEVAN T POINT OF TIME. IN THE SAID CROSS EXAMINATION, SHRI PINALKUMAR SHAH HAS STATED THAT HE DOES NOT KNOW THE ACCOUNTANT OF THE FIRM AT THE TIME WHEN HE GOT THE SAID LOOSE SHEETS CONTAINING ALLEGED SUP PRESSED INCOME. HE FURTHER STATED THAT HE DOES NOT KNOW WHO THE ACC OUNTANT OF THE FIRM WAS DURING THE YEARS 2002 TO 2004. HE ALSO ST ATED THAT HE DID NOT ENQUIRE THE FACT THAT IN WHOSE HANDWRITING THE SAID LOOSE PAPERS HAVE BEEN WRITTEN. THE ASSESSEE HAS FILED T HE COPIES OF LOOSE PAPERS FOUND AT ANNEXURE-6, BUNDLE NO.2, PAGE NO.L TO 76 WHICH WERE CLAIMED TO BE STATEMENT DATED 08.09.2006 , FILED BY MR. PINAL N. SHAH BEFORE THE SOLE ARBITRATOR SHRI S.C. MALTE I.E. FILED MUCH PRIOR TO THE DATE OF SEARCH. IN THE SAID CLAI M, THE CLAIMANTS HAVE CLAIMED THAT THE LOOSE PAPERS AT PAGE NOS.1, 2 & 3 ARE IN RESPECT OF SUPPRESSED INCOME OF THE PARTNERSHIP FIR M WHICH HAS BEEN SIPHONED BY THE RESPONDENTS. ON PAGE NOS.L, 2 & 3, TABULAR CHART WITH FOLLOWING COLUMNS HAS BEEN FOUND TO BE H ANDWRITTEN. MONTH & CIRCLED NO. BIDI RECEIPTS OTHER EXPENSES NET BALANCE FEB, 2002 140 5,63,160 32,323 5,95,433 MARCH, 2002 ----------- --------------- DEC , 2004 100 4,44,000 7,840 73,865 8.2 NOTHING HAS BEEN FOUND WRITTEN ON THE ABOVE PAP ERS EXCEPT ABOVE NOTINGS ON SEIZED DOCUMENTS. NO NAME OF THE CONCERNED TO WHICH THESE PAPERS RELATES HAS BEEN WRITTEN ON THE SAID PAPERS. IN THE COURSE OF ARBITRATION PROCEEDINGS, THE CLAIMANT S COULD NOT STATE AS TO WHO IS THE AUTHOR OF THE SAID PAPERS AND IN W HOSE HANDWRITING THE SAID PAPERS WERE WRITTEN. THEREFOR E, THESE PAPERS ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO ON THEIR OWN DO NOT ESTABLISH THAT THE NET INCOME A PPEARING IN THE SAID PAPERS AS SUPPRESSED INCOME OF SHAH HIMATLAL M ANILAL & CO. (R.F.) I.E. THE ASSESSEE. THE CLAIM OF THE CLAIMAN TS INCLUDING SHRI PINALKUMAR SHAH THAT AS PER THE SAID PAPERS, THE AS SESSEE FIRM HAS SUPPRESSED INCOME HAS NOT BEEN PROVED BY WAY OF CORROBORATIVE EVIDENCE BY THE SAID CLAIMANTS. IN V IEW OF THE ABOVE FACTS AND ESPECIALLY CONSIDERING THE DISPUTES BETWE EN THE PARTNERS, THE STATEMENT GIVEN BY SHRI PINALKUMAR SHAH DURING THE COURSE OF SEARCH HAS NO CREDIBLE EVIDENTIARY VALUE AS HIS CLA IM ABOUT SUPPRESSED INCOME HAS NOT BEEN ESTABLISHED WITH REL IABLE EVIDENCE. EVEN THE HON'BLE ARBITRATOR IN HIS INTERIM ORDER HA S STATED THAT IT IS NECESSARY TO EXAMINE SHRI PINAL KUMAR HIMSELF TO VERIFY WHO THE AUTHOR OF THE SAID LOOSE SHEETS IS. THE ARBITRATOR FURTHER OBSERVED THAT IT WOULD BE VERY DIFFICULT TO FASTEN HUGE LIAB ILITY OF CRORES OF RUPEES ON THE BASIS OF THESE LOOSE SHEETS. IN VIEW OF THE ABOVE DISCUSSION AND PARTICULARLY IN VIEW OF REPLIES GIVE N BY SHRI PINAL KUMAR SHAH IN CROSS EXAMINATION CONDUCTED DURING AR BITRATION PROCEEDINGS AND ALSO IN VIEW OF THE OPINION GIVEN I N THE INTERIM ORDER BY THE ARBITRATOR SHRI S.C. MAKE, RETIRED JUS TICE APPOINTED BY THE HON'BLE BOMBAY HIGH COURT, AURANGABAD BENCH AS AN ARBITRATOR, THE CIT(A) WAS JUSTIFIED IN HOLDING THA T THE ADDITION COULD NOT BE MADE ON THE BASIS OF PAPERS AVAILABLE WITH SHRI PINAL KUMAR SHAH AND HIS STATEMENT RECORDED IN SEARCH PRO CEEDINGS. THE INTERIM ORDER PASSED BY ARBITRATOR APPOINTED BY JURISDICTIONAL HIGH COURT IS A JUDICIAL ORDER AND OTHER JUDICIAL F ORUMS INCLUDING THE ASSESSING OFFICER OR THE CIT(A) SHOULD NOT DIST URB THE SAME BECAUSE THE SAME IS AGAINST THE SETTLED JUDICIAL NO RMS. ONCE THE INCOME TAX DEPARTMENT HAS COME TO KNOW ABOUT THE EX ISTENCE OF JUDICIAL ORDER AS OUTCOME OF JUDICIAL PROCEEDINGS T HAT TOO STARTED PRIOR TO SEARCH, THE SAME SHOULD NOT BE DISTURBED W ITHOUT DUE PROCESS OF LAW. ITA NOS.842 TO 844 OF 12 AND CO NOS 31 TO 33 OF 13 SHAH HIMMATLAL MANILAL & CO 8.3 IN VIEW OF ABOVE LEGAL AND FACTUAL DISCUSSION, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITIONS OF RS .42,44,216/-, RS.61,91,223/- & RS.31,58,538/- IN A.YS. 2003-04, 2 004-05 & 2005-06 RESPECTIVELY BASED ON UNRELIABLE EVIDENCE A ND MATERIAL, HENCE THE SAME WERE RIGHTLY DELETED BY THE CIT(A). WE UPHOLD THE SAME. 9. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED WHEREAS CORRESPONDING CROSS OBJECTIONS FILED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADA V) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 28 TH AUGUST, 2014 GCVSR COPY TO:- 1) ASSESSEE 2) THE DEPARTMENT 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, ITAT, PUNE.