M/s. Narayan Finance, Anand V. The ACIT.,Cent.Circle-2, Baroda

ITA 893/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1048 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-07-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDISH
• Keywords: Unexplained cash credit; Question of law; Tax effect
• Section: 143(3); 153A; 131; 132; 15; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 893/AHD/2013 (ASSESSMENT YEAR: 2007-08) M/S. NARAYAN FINANCE, 24, SARDARGUNJ, ANAND-388001 V/S THE ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, BARODA (APPELLANT) (RESPONDENT) ITA. NO: 900 & 901/AHD/2013 (ASSESSMENT YEAR: 2007-08 & 2010-2011) THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, BARODA V/S M/S. NARAYAN FINANCE, 24, SARDARGUNJ, ANAND-388001 (APPELLANT) (RESPONDENT) PAN: AAFFN 8387C APPELLANT BY : MS. URVASHI SHODHAN, A.R. RESPONDENT BY : SHRI JAGDISH, CIT/D.R. ( )/ ORDER DATE OF HEARING : 19 -07-201 6 DATE OF PRONOUNCEMENT : 21 -07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 2 1. ITA NO. 893/AHD/2013 AND ITA NOS. 900 & 901/AHD/201 3 ARE APPEALS BY THE ASSESSEE AND THE REVENUE PREFERRED AGAINST T HE ORDER OF LD. CIT(A)-IV, AHMEDABAD DATED 15.01.2013 PERTAINING TO A.Y. 2007-08 AND 2010-11 RESPECTIVELY. 2. ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 893/AHD/2013 FOR A.Y. 2007-08 ASSESSEES AP PEAL 3. THE GRIEVANCE OF THE ASSESSEE READS AS UNDER:- 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, AH MEDABAD HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O, IN M AKING ADDITIONS TO THE RETURNED INCOME/DISALLOWANCES OUT OF EXPENSES, HAVING NO REL EVANCE OR CONNECTION WITH THE INCRIMINATING MATERIAL SEIZED DURING THE SEARCH IN THE ASSESSMENT MADE U/S 153C R.W.S 143(3) OF THE I.T ACT. THE ADDITIONS/DISALLOWANCES MADE IN THE PRESENT ASSESSMENT ARE THUS ILLEGAL, UNJUSTIFIED AND UNWARRANTED. THE IMPU GNED ADDITIONS/DISALLOWANCES THUS, DESERVE TO BE DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN THE LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O IN MAKING ADDITION U/S 68 OF RS. 16,00,000/- TOWARDS ALLEGED UNEXPLAINED CREDIT RECEIVED FROM SHRI HIMESHBHAI PA TEL MERELY ON THE GROUND THAT THE SUMMONS ISSUED BY THE LD. AO U/S 131 OF THE ACT COU LD NOT BE SERVED ON THE ADDRESS GIVEN BY THE APPELLANT IGNORING THE FACT THAT PAN A ND CONFIRMATION HAD BEEN DULY FURNISHED. THE IMPUGNED ADDITION BEING ERRONEOUS IN FACTS AND BAD IN LAW IS PRAYED TO BE DELETED. 4. WITH GROUND NO. 1, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE ASSESSMENT MADE U/S. 153C R.W.S. 143(3) OF THE ACT. ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 3 5. THE LD. COUNSEL STRONGLY CONTENDED THAT THE A.O. HA S MADE THE ASSESSMENT UNDER THE IMPUGNED SECTIONS WITHOUT THER E BEING ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF T HE SEARCH FOR MAKING THE ADDITION OF RS. 16 LACS U/S. 68 OF THE A CT. IT IS THE SAY OF THE LD. COUNSEL THAT NO ASSESSMENT CAN BE MADE UNDE R THE IMPUGNED SECTIONS WITHOUT THERE BEING ANY INCRIMINATING MATE RIAL FOUND AT THE TIME OF SEARCH. 6. PER CONTRA, THE LD. D.R. COULD NOT BRING ANY DISTIN GUISHING FACT IN FAVOUR OF THE REVENUE. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE SUBMIS SIONS MADE BY THE LD. COUNSEL. 8. THE FACTS OF THE CASE ARE THAT A SEARCH ACTION U/S. 132 OF THE ACT WAS CARRIED OUT IN THE BARODA BUSHING AND INSULATORS GR OUP OF CASES ON 10.09.2009; CERTAIN DOCUMENTS/BOOKS RELATED TO THE ASSESSEE WERE FOUND WHICH WERE RELATED TO THE ASSESSEE AND ACCORD INGLY THE A.O. INITIATED PROCEEDINGS U/S. 153C OF THE ACT. 9. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS SHOWN TO HAVE OBTAINE D LOAN OF RS. 16,00,000/- FROM SHRI HIMESHBHAI PATEL. THE ASSESSE E WAS ASKED TO EXPLAIN THE SAME IN THE LIGHT OF THE PROVISIONS OF SECTION 68 OF THE ACT. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO PROCEEDED BY MAKING AN ADDITION OF RS. 48,00,00 0/-. ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 4 10. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) W HO CONFIRMED THE ADDITION TO THE TUNE OF RS. 16,00,000/-. HOWEVE R, THERE IS NOT EVEN A WHISPER OF ANY INCRIMINATING MATERIAL FOUND AT TH E TIME OF SEARCH TO MAKE THE IMPUGNED ADDITIONS. 11. IN OUR CONSIDERED OPINION, IF NO INCRIMINATING MATE RIAL IS FOUND THEN NO ASSESSMENT CAN BE MADE U/S. 153A OR U/S. 15 3C OF THE ACT. OUR VIEW IS FORTIFIED BY THE DECISION OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF CONTINENTAL WAREHOUSING CORPORATION 374 ITR 645 WHICH READS AS UNDER:- ONCE IT IS HELD THAT THE ASSESSMENT HAS ATTAINED F INALITY, THEN THE AO WHILE PASSING THE INDEPENDENT ASSESSMENT ORDER U/S. 153A R.W. S 143(3) OF THE IT. ACT COULD NOT HAVE DISTURBED THE ASSESSMENT/REASSESSMEN T ORDER WHICH HAS ATTAINED FINALITY, UNLESS THE MATERIALS GATHERED IN THE COUR SE OF THE PROCEEDINGS U/S. 153A OF THE INCOME TAX ACT ESTABLISH THAT THE RELIEFS GR ANTED UNDER THE FINALIZED ASSESSMENT/REASSESSMENT WERE CONTRARY TO THE FACTS UNEARTHED DURING THE COURSE OF 153A PROCEEDINGS. IF THERE IS NOTHING ON RECORD TO SUGGEST THAT ANY MATERIAL WAS UNEARTHED DURING THE SEARCH OR DURING THE 153A PROCEEDINGS, THE AO WHILE PASSING ORDER U/S. 153A R.W.S. 143(3) CANNOT DISTUR B THE ASSESSMENT ORDER.' 10.2. THE HON'BLE HIGH COURT HAD AN OCCASION T O CONSIDER THE FOLLOWING QUESTIONS OF LAW: '1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE HON'BLE ITAT IS CORRECT IN NARROWING DOWN THE SCOPE OF ASSESSMENT U /S. 153A IN RESPECT OF COMPLETED ASSESSMENTS BY HOLDING THAT ONLY UNDISCLO SED INCOME AND UNDISCLOSED ASSETS DETECTED DURING SEARCH COULD BE BROUGHT TO T AX? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT IS CORRECT IN LAW IN HOLDING THAT THE SCOPE OF SEC. 15 3A IS LIMITED TO ASSESSING ONLY SEARCH RELATED INCOME, THEREBY DENYING REVENUE THE OPPORTUNITY OF TAXING OTHER ESCAPED INCOME, THAT COMES TO THE NOTICE OF THE AO. ? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS RIGHT IN LIMITING THE SCOPE OF SEC. 153A ONLY T O UNDISCLOSED INCOME WHEN AS ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 5 PER THE SECTION THE AO HAS TO ASSESS THE TOTAL INCO ME OF THE SIX ASSESSMENT YEARS?'- AND THE HONBLE HIGH COURT OF BOMBAY FINALLY HELD A S UNDER:- WE, THEREFORE, DISMISS THE REVENUES APPEAL AND AN SWER THE SUBSTANTIAL QUESTION OF LAW AGAINST THE REVENUE AND IN FAVOUR OF ASSESSE E. 12. IN THE CASE OF KABUL CHAWLA 380 ITR 573 (DELHI) , T HE HONBLE HIGH COURT HAS SUMMARIZED THE LEGAL POSITION AS UND ER:- 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH THE PROVISOS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREM ENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF T HE ACT, NOTICE UNDER SECTION 153 A(L) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING T HE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DA TE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPU TED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAK ES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE 'TOTAL INCOME' OF THE AFOREMENTIONED SIX YEARS IN SEPARATE ASSESSMENT ORDERS FOR EACH OF THE SIX YEAR S. IN OTHER WORDS THERE WILL BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX AYS 'IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUG HT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITI ONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SE ARCH, OR OTHER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH THE AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMEN T 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATE RIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 6 V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMEN T CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PR OCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD REASSESS' TO COMPL ETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, T HE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EA CH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXIST ING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH B Y THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITIO N OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEAR CH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURS E OF ORIGINAL ASSESSMENT. 13. RESPECTFULLY FOLLOWING THE FINDINGS OF THE HONBLE HIGH COURT (SUPRA), WE HAVE NO HESITATION IN QUASHING THE ASSE SSMENT MADE U/S. 153C R.W.S. 143(3) OF THE ACT. GROUND NO. 1 IS ACCO RDINGLY ALLOWED. 14. SINCE, WE HAVE QUASHED THE ASSESSMENT ORDER; WE DO NOT FIND ANY REASON TO GO INTO THE MERITS OF THE CASE. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NOS. 900 & 901/AHD/2013 FOR A.YS. 2007-08 & 201 0-11 REVENUES APPEAL. 16. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E POINTED OUT THAT THE TAX EFFECT IN BOTH THESE APPEALS BY THE RE VENUE IS BELOW THE LIMIT PRESCRIBED BY THE CBDT BY ITS CIRCULAR NO. 23 /2015 DATED ITA NOS. 893 , 900 & 901/AHD/2013 . A.YS. 2007-0 8 & 2010-2011 7 10.12.2015 AND, THEREFORE, THESE APPEALS BY THE REV ENUE ARE NOT MAINTAINABLE. 17. THE LD. D.R. FAIRLY CONCEDED TO THIS. 18. WE HAVE CAREFULLY PERUSED THE APPEAL MEMO OF THESE APPEALS BY THE REVENUE, THE TAX EFFECT IN BOTH THESE APPEALS R EADS AS UNDER:- 2. THE TAX EFFECT IN BOTH THE ABOVE MENTIONED APPEA L IS CALCULATED AS BELOW- A.Y. 08/09 ADDITION DELETED RS. 25,15,447/-@ 30.9 0% RS. 7,77,273/- A.Y. 10/11 ADDITION DELETED RS. 17,00,000/-TAX@30. 90% RS. 5,25,300/- 19. THE CBDT VIDE CIRCULAR NO. 21 OF 2015 DATED 10.12.2 015 HAS FIXED THE MONETARY LIMITS FOR FILING APPEALS BY DEP ARTMENT BEFORE THE ITAT DIRECTING THE DEPARTMENT NOT TO FILE APPEALS W HERE THE TAX EFFECT DOES NOT EXCEED RS. 10 LACS. SINCE, THE TAX EFFECT IN THE AFOREMENTIONED APPEALS IS BELOW RS. 10 LACS, THESE APPEALS BY THE REVENUE ARE ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 21 - 07 - 2 016. SD/- SD/- (S.K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS)