ACIT CEN CIR 32, MUMBAI V. GOVIND AGARWAL (HUF0, MUMBAI

ITA 875/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3851 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K SINHA
• Keywords: Gift; Search and seizure
• Section: 143(3); 153A; 14A; 68; 132

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI , , !' !' !' !' # $% # $% # $% # $% , ,, , & & & & ' ' ' ' BEFORE SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER . / ITA NO. 8917/MUM./2010 ( &) * '+* / ASSESSMENT YEAR : 200506 ) M/S. GOVIND AGARWAL (HUF) C/O M/S. RAVI & DEV, C.AS 377B, FIRST FLOOR JAGANNATH SHANKER SETH MARG CHIRA BAZAR, MUMBAI 400 002 .. ,- / APPELLANT ) V/S DY. COMMISSIONER OF INCOME TAX CIRCLE8(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AEIPA3109A . / ITA NO. 875/MUM./2011 ( &) * '+* / ASSESSMENT YEAR : 200506 ) DY. COMMISSIONER OF INCOME TAX CIRCLE8(1), AAYAKAR BHAVAN 101, M.K. ROAD, MUMBAI 400 020 .. ,- / APPELLANT ) V/S M/S. GOVIND AGARWAL (HUF) C/O M/S. RAVI & DEV, C.AS 377B, FIRST FLOOR JAGANNATH SHANKER SETH MARG CHIRA BAZAR, MUMBAI 400 002 .... ./,- / RESPONDENT , . / PERMANENT ACCOUNT NUMBER AEIPA3109A &) *1# 2 3 / ASSESSEE BY : MR. P.R. MAJITHIA A/W MR. B.R. MAJITHIA ' 2 3 / REVENUE BY : MR. D.K. SINHA )' 2 # / DATE OF HEARING 16.05.2013 $ 45+ 2 # / DATE OF ORDER 16.05.2013 M/S. GOVIND AGARWAL (HUF) 2 $ $ $ $ / ORDER # $% # $% # $% # $% , ,, , & & & & 6 6 6 6 / PER AMIT SHUKLA, J.M. THESE CROSS APPEALS ARE DIRECTED AGAINST THE IMPUGN ED ORDER DATED 25 TH NOVEMBER 2010, PASSED BY THE LEARNED COMMISSIONER (APPEALS)- XXXXI, MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASSED UNDER SECTION 143(3) R/W SECTION 153C OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) FOR THE ASSESSMENT YEAR 200506. WE FIRST TAKE UP ASSESSEES APPEAL IN ITA NO.8917/ MUM./2010, FOR THE ASSESSMENT YEAR 200506, VIDE WHICH, FOLLOWING GROUNDS HAVE BEEN RAISED: (I) IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THAT NO ADDITION COULD HAVE BEEN MADE WHILE COMPLETING THE ASSESSMENT MADE UNDER SECTION 153C AS THE ASSESS MENT FOR ASSESSMENT YEAR 200506, STOOD COMPLETED AND NO MATERIAL WAS FOUND AS A RESULT OF SEARCH SO AS TO MAKE ANY ADDITION ON ACCOUNT OF UNDISCLOSED INCOME; (II) IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED THE ADDITION OF ` 10,00,000 ON ACCOUNT OF GIFT RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER SECTION 68; AND (III) IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 1,01,300 UNDER SECTION 14A. 2. FACTS IN BRIEF : THE ASSESSEE IS A HUF AND WAS FILING REGULAR RET URN OF INCOME. FOR THE ASSESSMENT YEAR 200506, THE ASS ESSEE HAS FILED RETURN OF INCOME ON 29 TH AUGUST 2005, DECLARING TOTAL INCOME OF ` 22,46,980. SUCH A RETURN OF INCOME STOOD FINALLY AS SESSED AS NO NOTICE UNDER SECTION 143(2) WAS ISSUED WITHIN THE STATUTOR Y TIME. A SEARCH AND SEIZURE ACTION UNDER SECTION 132(1) WAS CARRIED ON 3 RD JANUARY 2008 IN CASE OF EVERSHINE GROUP. SINCE THE ASSESSEE WAS NOT DIRECTLY COVERED M/S. GOVIND AGARWAL (HUF) 3 UNDER THE SEARCH, A NOTICE UNDER SECTION 153C WAS I SSUED ON 27 TH NOVEMBER 2009. IN RESPONSE TO SUCH NOTICE, THE ASSE SSEE FILED RETURN OF INCOME DECLARING SAME INCOME OF ` 22,46,980, ON 7 TH DECEMBER 2009. AS AGAINST THE RETURN OF INCOME, THE ASSESSMENT WAS CO MPLETED AFTER MAKING ADDITION UNDER SECTION 68 ON ACCOUNT OF GIFT OF ` 10,00,000 AND DISALLOWANCE UNDER SECTION 14A AT ` 1,01,300. INSOFAR AS THE ADDITION OF ` 10,00,000 MADE UNDER SECTION 68 IS CONCERNED, THE L EARNED COMMISSIONER (APPEALS) CONFIRMED THE ADDITION AND WITH REGARD TO DISALLOWANCE UNDER SECTION 14A, THE LEARNED COMMISSIONER (APPEALS) DIR ECTED THE ASSESSING OFFICER TO ADOPT A REASONABLE BASIS FOR APPORTIONIN G THE EXPENDITURE WHICH CAN BE SAID TO BE ATTRIBUTABLE FOR EARNING OF EXEMP T INCOME AFTER FOLLOWING THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT I N GODREJ & BOYCE MFG. CO. LTD. V/S DCIT, [2010] 328 ITR 081 (BOM.). 3. BEFORE US, THE LEARNED COUNSEL RAISED A PRELIMINARY OBJECTION THAT ONCE THE RETURN OF INCOME FILED BY THE ASSESSEE HAS ATTAINED FINALITY AND NO ASSESSMENT WAS PENDING, SUCH AN ASSESSMENT CANNO T BE ABETED IN VIEW OF THE PROVISIONS OF SECTION 153A AND IN SUCH A SIT UATION, ONCE NO INCRIMINATING MATERIAL HAS BEEN FOUND, DURING THE C OURSE OF SEARCH, NO ADDITION CAN BE MADE OVER AND ABOVE THE RETURN OF I NCOME WHICH HAS ATTAINED FINALITY. IN SUPPORT OF HIS CONTENTIONS, H E RELIED UPON THE MUMBAI SPECIAL BENCH DECISION OF THE TRIBUNAL IN ALL CARGO GLOBAL LOGISTIC LTD. V/S DCIT, [2012] 137 ITR 287 (SB) (MUM.) AND THE COORD INATE BENCH DECISION OF THE TRIBUNAL, MUMBAI BENCH, IN GURINDER SINGH BAWA V/S DCIT, [2012] 28 TAXMAN.COM 328 (MUM.). COPY OF THESE CASE LAWS IS PLACED ON RECORD. THUS, HE SUBMITTED THAT NEITHER THE ADDITIO N OF ` 10,00,000 UNDER SECTION 68 CAN BE SUSTAINED NOR THE DISALLOWANCE OF ` 1,01,300, UNDER SECTION 14A. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT DURING THE COURSE OF STATEMENT UNDER SECTION 132(4), SPECIFIC QUESTION WAS ASKED REGARDING THE GIFT, THE REFORE, THE ADDITION CAN VERY WELL BE SAID TO HAVE BEEN MADE ON THE BASIS OF MATERIAL FOUND DURING M/S. GOVIND AGARWAL (HUF) 4 THE COURSE OF SEARCH. THUS, THE DECISION OF ALL CAR GO GLOBAL LOGISTIC LTD. (SUPRA) WILL NOT APPLY TO THE FACTS OF THE PRESENT CASE. 5. THE LEARNED COUNSEL, IN THE REJOINDER, SUBMITTED TH AT IN THE STATEMENT RECORDED UNDER SECTION 132(4), THE ASSESS EE GAVE A VERY SPECIFIC REPLY THAT THE GIFT WAS RECEIVED FROM ONE MR. RAHUL AGARWAL, S/O MR. B.R. AGARWAL, AND ALL THE DETAILS AND PARTICULA RS OF THE GIFT WERE DULY STATED. FURTHER, THE STATEMENT OF MR. B.R. AGARWAL, FATHER OF THE DONOR, WAS ALSO RECORDED WHO HAS ALSO CONFIRMED THE GIFT. THUS, IT CANNOT BE SAID THAT THERE WAS ANY INCRIMINATING MATERIAL. FURTHER, IN THE ENTIRE ASSESSMENT ORDER, THERE IS NO WHISPER ABOUT ANY SUC H SEIZED MATERIAL OR INCRIMINATING DOCUMENTS SO AS TO SUGGEST THAT THE G IFT RECEIVED BY THE ASSESSEE DURING THE RELEVANT ASSESSMENT YEAR WAS NO T GENUINE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THE PRELIMIN ARY ISSUE AS TO WHETHER THE ADDITION CAN BE MADE IN THE PRESENT CAS E ONCE THE ASSESSMENT FOR THE ASSESSMENT YEAR 200506 HAS ATTA INED FINALITY AND NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH. ON A PERUSAL OF THE RECORDS AND THE FINDINGS OF THE ASSESSING OF FICER AND THE LEARNED COMMISSIONER (APPEALS), WE FIND THAT THERE IS NO RE FERENCE TO ANY SEIZED MATERIAL OR ANY INCRIMINATING DOCUMENTS SO AS TO SU GGEST THAT ADDITION MADE IN THE ASSESSMENT ORDER ARE BASED ON ANY INCRI MINATING MATERIAL FOUND AT THE TIME OF SEARCH. ONCE THAT IS SO AND AL SO THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 200506 HAS ATTAINED FINALI TY BEFORE THE DATE OF SEARCH, THEN NO ADDITION CAN BE MADE UNDER SECTION 153A. THE MUMBAI SPECIAL BENCH DECISION OF THE TRIBUNAL IN ALL CARGO GLOBAL LOGISTIC LTD. (SUPRA), AFTER ANALYZING THE RELEVANT PROVISIONS OF THE ACT, CAME TO THE FOLLOWING CONCLUSION AND RATIO: (A) IN ASSESSMENT THAT ARE ABATED, THE ASSESSING OF FICER RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION CONFE RRED ON HIM UNDER SECTION 153A FOR WHICH ASSESSMENTS SHALL BE MADE FOR EACH O F THE SIX ASSESSMENT YEARS SEPARATELY. (B) IN OTHER CASES, IN ADDITION TO THE INCOME THAT HAS ALREADY BEEN ASSESSED, THE ASSESSMENT UNDER SECTION 153A WILL BE MADE ON THE BASIS OF INCRIMINATING MATERIAL WHICH IN THE CONTEXT OF RELE VANT PROVISIONS MEANS BOOKS OF ACCOUNT, OTHER DOCUMENTS, FOUND IN THE COU RSE OF SEARCH BUT NOT M/S. GOVIND AGARWAL (HUF) 5 PRODUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND U NDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH . 7. IN THIS CASE, THE QUESTION ANSWERED IN CLAUSE (B) W OULD BE APPLICABLE AS THE ADDITION IN THE ASSESSMENT ORDER PASSED UNDE R SECTION 153A, CAN BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FO UND IN THE COURSE OF SEARCH IN CASE WHERE THE ASSESSMENT HAS ALREADY BEE N FINALIZED. THUS, IN THIS CASE, NO ADDITION CAN BE MADE OVER AND ABOVE T HE RETURNED INCOME WHICH HAS BECOME FINAL PRIOR TO THE DATE OF SEARCH AND THERE IS NO MATERIAL FOUND AT THE TIME OF SEARCH. THE AFORESAID MUMBAI S PECIAL BENCH DECISION OF THE TRIBUNAL IN ALL CARGO GLOBAL LOGISTIC LTD. ( SUPRA) HAS ALSO BEEN REAFFIRMED AND APPLIED BY THE COORDINATE BENCH IN GURINDER SINGH BAWA (SUPRA). THE RELEVANT OBSERVATION OF THE TRIBUNAL I S REPRODUCED HEREIN BELOW: 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE R IVAL CONTENTIONS CAREFULLY. THE DISPUTE RAISED IS REGARDING LEGAL VA LIDITY OF ADDITION MADE BY AO UNDER SECTION 153A OF THE ACT. UNDER THE PROVISI ONS OF SECTION 153A, IN ALL CASES, WHERE SEARCH IS CONDUCTED UNDER SECTION 132 OF THE ACT, AO IS EMPOWERED TO ASSESS OR REASSESS TOTAL INCOME OF SIX ASSESSMENT YEARS PRECEDING THE ASSESSMENT YEAR IN WHICH SEARCH WAS C ONDUCTED. THE SECTION ALSO PROVIDES THAT ASSESSMENT OR REASSESSMENT RELAT ING TO ANY ASSESSMENT YEAR FALLING WITHIN PERIOD OF SIX ASSESSMENT YEAR I F PENDING ON THE DATE OF INITIATION OF SEARCH SHALL ABATE. THERE HAVE BEEN D IVERGENT VIEWS REGARDING SCOPE OF APPLICATION OF SECTION 153A IN CASES WHERE NO INCRIMINATING MATERIAL WAS FOUND INDICATING ANY UNDISCLOSED INCOM E. SOME OF THE TRIBUNAL BENCHES HAD TAKEN THE VIEW THAT IN CASE NO INCRIMINATING MATERIAL WAS FOUND AO HAD NO JURISDICTION TO MAKE ASSESSMENT OR REASSESSMENT UNDER SECTION 153A WHILE SOME OTHER BENCHES HELD TH AT JURISDICTION UNDER SECTION 153A WAS AUTOMATIC TO REASSESS SIX IMMEDIAT E PRECEDING ASSESSMENT YEARS IRRESPECTIVE OF THE FACT WHETHER A NY INCRIMINATING MATERIAL WAS FOUND OR NOT. ANOTHER ASPECT ON WHICH THERE HAD BEEN DIVERGENT VIEWS WAS WHETHER EVEN IF AO HAD JURISDIC TION UNDER SECTION 153A, ADDITION CAN BE MADE IN ASSESSMENT / REASSESS MENT ONLY WHEN SOME INCRIMINATING MATERIAL HAS BEEN FOUND. ALL THESE AS PECTS HAD BEEN REFERRED TO THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF ALC ARGO GLOBAL LOGISTICS LTD. AND ORDER OF SPECIAL BENCH DATED 6.7.2012 HAS BEEN REFERRED. 6.1 THE SPECIAL BENCH IN THE CASE OF ALCARGO GLOBAL LOGISTICS LTD. (SUPRA), HAS HELD THAT PROVISIONS OF SECTION 153A COME INTO OPERATION IF A SEARCH OR REQUISITION IS INITIATED AFTER 31.5.2003 AND ON SAT ISFACTION OF THIS CONDITION, THE AO IS UNDER OBLIGATION TO ISSUE NOTICE TO THE P ERSON REQUIRING HIM TO FURNISH THE RETURN OF INCOME FOR SIX YEARS IMMEDIAT ELY PRECEDING THE YEAR OF SEARCH. THE SPECIAL BENCH FURTHER HELD THAT IN CASE ASSESSMENT HAS ABATED, THE AO RETAINS THE ORIGINAL JURISDICTION AS WELL AS JURISDICTION UNDER SECTION 153A FOR WHICH ASSESSMENT SHALL BE MADE FOR EACH AS SESSMENT YEAR SEPARATELY. THUS IN CASE WHERE ASSESSMENT HAS ABATE D THE AO CAN MAKE ADDITIONS IN THE ASSESSMENT, EVEN IF NO INCRIMINATI NG MATERIAL HAS BEEN FOUND. BUT IN OTHER CASES THE SPECIAL BENCH HELD TH AT THE ASSESSMENT UNDER M/S. GOVIND AGARWAL (HUF) 6 SECTION 153A CAN BE MADE ON THE BASIS OF INCRIMINAT ING MATERIAL WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS BOOKS OF A CCOUNT AND OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH BUT NOT PRO DUCED IN THE COURSE OF ORIGINAL ASSESSMENT AND UNDISCLOSED INCOME OR PROPE RTY DISCLOSED DURING THE COURSE OF SEARCH. IN THE PRESENT CASE, THE ASSE SSMENT HAD BEEN COMPLETED UNDER SUMMARY SCHEME UNDER SECTION 143(1) AND TIME LIMIT FOR ISSUE OF NOTICE UNDER SECTION 143(2) HAD EXPIRED ON THE DATE OF SEARCH. THEREFORE, THERE WAS NO ASSESSMENT PENDING IN THIS CASE AND IN SUCH A CASE THERE WAS NO QUESTION OF ABATEMENT. THEREFORE, ADDI TION COULD BE MADE ONLY ON THE BASIS OF INCRIMINATING MATERIAL FOUND D URING SEARCH . THUS, ON THE FACTS OF THE CASE, WE HOLD THAT THE A DDITIONS MADE BY THE ASSESSING OFFICER WITH REGARD TO UNEXPLAINED GI FT OF ` 10,00,000, MADE UNDER SECTION 68 AND DISALLOWANCE OF ` 1,01,300 UNDER SECTION 14A, ARE BEYOND THE SCOPE OF SECTION 153A / 153C. CONSEQUENT LY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER ( APPEALS) AND ON THE PRELIMINARY GROUND ITSELF, BOTH THE ADDITIONS ARE D ELETED. THUS, THE ISSUES ARISING OUT OF THE GROUND ARE TREATED AS ALLOWED. 8. INSOFAR AS OTHER GROUNDS ARE CONCERNED, IN VIEW OF OUR AFORESAID FINDINGS, THE GROUNDS RAISED BY THE ASSESSEE ON MER ITS, HAVE BECOME PURELY ACADEMIC IN NATURE. 9. 1 #7 &) *1# 2 '# 8 ) # 9 : 8. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS A LLOWED. WE NOW TAKE UP REVENUES APPEAL IN ITA NO.875/MUM. /2011, FOR THE ASSESSMENT YEAR 200506. 10. IN THIS APPEAL, THE REVENUE HAS CHALLENGED THE DIRE CTION OF THE ASSESSING OFFICER FOR RECOMPUTING THE DISALLOWANCE UNDER SECTION 14A. 11. KEEPING IN VIEW THE FINDINGS GIVEN BY US IN ASSESSE ES APPEAL, VIDE PARA6 ABOVE, WE HOLD THAT SINCE THE ADDITION / DIS ALLOWANCE MADE UNDER SECTION 14A ITSELF IS BEYOND THE SCOPE OF SECTION 1 53A, THEREFORE, THE GROUND RAISED BY THE REVENUE HAS BECOME INFRUCTUOUS . THUS, THE GROUND RAISED BY THE REVENUE IS TREATED AS DISMISSED. M/S. GOVIND AGARWAL (HUF) 7 12. 1 #7 ' 2 '# 8 ) # 9 : 12. IN THE RESULT, REVENUES APPEAL IS TREATED AS D ISMISSED. $ 2 45+ ; <)7 16 TH MAY 2013 5 2 = : ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MAY 2013 SD/- RAJENDRA SINGH ACCOUNTANT MEMBER SD/- # # # # $% $% $% $% & & & & AMIT SHUKLA JUDICIAL MEMBER MUMBAI, <) <) <) <) DATED: 16 TH MAY 2013 $ 2 .&#> ?>+# / COPY OF THE ORDER FORWARDED TO : (1) &) *1# / THE ASSESSEE; (2) ' / THE REVENUE; (3) @ () / THE CIT(A); (4) @ / THE CIT, MUMBAI CITY CONCERNED; (5) >'C= .&#&) , , / THE DR, ITAT, MUMBAI; (6) =D* E / GUARD FILE. /># .&# / TRUE COPY $) / BY ORDER . . FG / PRADEEP J. CHOWDHURY '1H &) F' / SR. PRIVATE SECRETARY I / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI