M/s. Corus Vinitrade Pvt. Ltd., Kolkata V. ACIT, CC-3(1), Kolkata, Kolkata

ITSSA 111/KOL/2022

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0114 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 06-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 30-08-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 27-11-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Non compliance; Assessment record; Documents seized; Set aside
• Section: 131; 132; 143(3); 43; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER IT(SS)A No.111/Kol/2022 Assessment Year: 2011-12 Corus Vintrade Pvt. Ltd. C/o Salarpuria Jajodia & Co., 7, C. R. Avenue, 3 rd Floor, Kolkata- 700072. (PAN: AADCC9981E) Vs. ACIT, Central Circle-3(1), Kolkata. (Appellant) (Respondent) Present for: Appellant by : Shri S. Jhajharia, AR Respondent by : Shri Abhijit Kundu, CIT, DR Date of Hearing : 31.08.2023 Date of Pronouncement : 07.11.2023 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), Kolkata-21 vide order no. ITBA/APL/S/250/2022- 23/1047242490(1) dated 11.11.2022 passed against the assessment order by ACIT, Central Circle-3(1), Kolkata u/s. 153C/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 23.12.2016, for AY 2011-12. 2. Grounds raised by the assessee are reproduced as under: “1. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in passing an ex-parte order and in view of the facts and in the circumstances the impugned order may kindly be set aside to Ld. CIT(A) in the interest of justice for fresh adjudication and it may be held accordingly. 2. Without prejudice to Ground No. 1 above, the Ld. AO was wholly unjustified in confirming the action so made by AO merely on his biased belief and without even appreciating the facts so narrated in Statement of Facts so filed along with Form 35 and in view of the facts and in the circumstances it may be held accordingly. 2 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 3. Without prejudice to Grounds No.1 & 2 above, the Ld. CIT(A) failed to appreciate the fact that the impugned addition of Rs. 43,00,000/- was made by AO on the alleged ground of non compliance of shareholder in response to summon U/S 131 and in view of the facts and in the circumstances mere failure on the part of the shareholder cannot cause such addition and such share capital being a genuine transaction. The AO's action and Ld. CIT(A)'s confirmation of AO's action is completely bad in law and in view of the facts and in the circumstances it may be held accordingly. 4. Without prejudice to Grounds No.1, 2 & 3 above and even otherwise since all 3 ingredients of see 68 along with proviso to sec. 68 were duly satisfied and hence impugned addition is liable to be deleted and it may be held accordingly. 5. Without prejudice to Grounds No.1, 2, 3 & 4 above since satisfaction so required by sec. 153C not being recorded as to impugned assessment year the entire proceedings and consequent assessment order so passed is bad in law and it may be held accordingly. 6. Without prejudice to Grounds No.1, 2, 3, 4 & 5 above, the impugned assessment order passed earlier was unabated and there being no incriminating material the impugned order U/S 153C I 143(3) is liable to be quashed/cancelled and it may be held accordingly. 7. For that your petitioner craves the right to put additional grounds and/or to alter! Amend/modify the present grounds at the time of hearing.” 3. In the course of hearing, additional grounds have been filed along with an application for permission to raise them for their admission. The said additional grounds were admitted for consideration on merit by order sheet dated 18.05.2023. In the same order sheet entry, directions were given by the Bench to the Department to submit copy of satisfaction recorded by the Ld. AO of the searched person, if any, available on record. Direction was also given to make available copies of documents referred as page nos. 3 to 10 in the impugned assessment order on the strength of which additions have been made by the Ld. AO. This direction was given pursuant to the additional grounds which were admitted for their consideration on merit. The relevant extract of the order sheet entry dated 18.05.2023 is reproduced as under: “The present appeal is directed at the instance of assessee against the order of 1d. Commissioner of Income Tax (Appeals), Kolkata-21 dated 11.11.2022 passed for A.Y. 2011-12. 3 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 2. The assessee has filed an application for permission to raise additional grounds of appeal. In these additional grounds of appeal, assessee intends to plead following issues:- "1. For that in view of the facts and in the circumstances, the order passed u/s. 153C/143 (3) is bad in law and in view of the facts and in the circumstances it may be held accordingly. 2. Without prejudice to additional ground no. 1 above, there being no incriminating material and the assessment for A.Y. 2011-12 having remained unabated, the AO could not have made any addition in such respect following judicial precedents in such respect and in view of the facts and in the circumstances it may be held accordingly. 3. Without prejudice to Additional Grounds No. 1 & 2 above, since the impugned assessment was unabated the order so passed u/s 153C/143(3) is not in accordance with judgment of Apex Court in CIT - vs.- Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) as well as jurisdictional High Court in PCIT -vs.- Salasar Stock Broking Limited (ITA 264/2016 dated 24.08.2016) and hence such order is bad in law and it may be held accordingly". 3. After going through these grounds, we are of the view that the issues pleaded in these grounds would go to the root of the cause and ultimately affect the taxability of the assessee, therefore, following the judgment of the Hon'ble Supreme Court in the case of NTPC Limited -vs.- CIT (1998) 229 ITR 383, we admit these grounds of appeal for consideration on merit. 4. The ld. Counsel for the assessee submitted that no incriminating material was found during the course of search and, therefore, additions made in an assessment under section 153C read with 143 (3) are not tenable. It is pertinent to observe that on the last hearing, the Department was directed to produce the assessment record. A perusal of the assessment order would indicate that a search & seizure operation was conducted on the residential and business premises of M/s. Gagan Group on 03.03.2015. Proceeding against the assessee was initiated under section 153C vide a notice dated 22.01.2016. A perusal of the order-sheet would indicate that the Assessing Officer has commenced the proceeding on the basis of some information from ld. Assessing Officer of the searched person. However, it is to be appreciated that section 153C contemplates that before taking cognizance under section 153C, there should be a satisfaction recorded by the ld. Assessing Officer of the searched person indicating that during the assessment proceeding of the searched person, some material belonging/pertaining to the assessee found during the course of search, which exhibits the escapement of income of the assessee. On the strength of this notice, the ld. Assessing Officer of the assessee before us could initiate the proceeding under section 153C but the satisfaction of the ld. Assessing Officer of the searched person is not available in the record. Therefore, we adjourn the hearing to 26th July, 2023 and direct the Department to submit copy of the satisfaction recorded by the ld. Assessing Officer of the searched person, if any, available on the record. It is also pertinent to observe that in the order-sheet entry, the ld. Assessing Officer made a reference to document pages no. 3 to 10. On the strength of these documents, he construed the escapement of the income of the assessee, if copies of these documents are available in the record, they be produced before the Tribunal. Copy of this order-sheet be supplied to both the parties.” 4 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 4. Brief facts of the case are that a search and seizure operation was conducted on the residential and business premises of M/s. Gagan Group on 03.03.2015. A proceeding against the assessee was initiated by issuing a notice u/s. 153C dated 22.01.2016. In the impugned assessment order, ld. AO had noted that reference of the assessee was found in certain incriminating documents seized during the course of search and seizure operation carried out in the case of Gagan Group. While making the addition, Ld. AO in para 4 has stated that “ it is observed during the course of assessment proceeding that assessee in the year raised share application money which was converted into next year capital from the following persons: (a) Navneet Kumar Agrawal (b) Srishti Apartments Pvt. Ltd.” 4.1. Ld. AO issued summons u/s. 131 to verify the genuineness of the transactions with these two persons. In the case of Navneet Kumar Agrawal, documents were produced and were examined and considered by the Ld. AO. However, in the case of Shristi Apartment Pvt. Ltd., Ld. AO noted that documents were not produced and thus, completed the assessment by making an addition of Rs. 43 lakhs for capital raised by the assessee from this investor company. Aggrieved, assessee went in appeal before the Ld. CIT(A). 5. From the perusal of the order of Ld. CIT(A), we find that there is no factual discussion about the transaction of the addition made by Ld. AO for which the assessee is in appeal before him. No effort has been made to dig out the correct state of facts and details so as to justify the decision taken for the transaction. The entire order contains reference to several judicial precedents without linking them with the impugned transaction and analysing as to how they are relevant for the purpose of sustaining the addition and dismissing the 5 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 appeal. The appeal of the assessee was dismissed against which the assessee is now in appeal before the Tribunal. It is noted that the year under consideration is an unabated year which is not in dispute. 5.1. Further, it is to be appreciated that section 153C contemplates that before taking cognizance of any action under this section, there should be a satisfaction recorded by the Ld. AO of the searched person indicating that during the assessment proceeding of the searched person, some material pertaining to the assessee was found during the course of search and which has bearing on the total income of the assessee, who is the other person as referred in the said section. 5.2. In response to the direction given by the Coordinate Bench as per the order sheet entry extracted above, Ld. CIT, DR submitted copies of page nos. 1 to 10 with ID mark as “SO/1” which had been referred by the Ld. AO in his assessment order. From the perusal of these 10 pages, it is evident that there is no reference of the assessee on these ten pages. Seven pages out of these ten pages are letter heads of some other persons which have been stricken off and kept blank, two other pages are extracts of the minutes of board meeting of some other company which do not have any reference to the assessee and there is one page where there are several stamping made of stamps of various concerns/companies without any date or signature or depicting any kind of transaction. 5.3. We also note that there is no satisfaction note which has been supplied by the department along with this submission which was directed to be made available to ascertain availability of satisfaction recorded by the AO of the searched person. On a specific question by the Bench to the Ld. CIT, DR to this effect, it was submitted that this is at best what Ld. AO could supply pursuant to the direction given by the Coordinate Bench. Assessment records were also furnished and 6 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 perusal of the same reveals that there is no such satisfaction note available therein. 5.4. We further note that Ld. AO has made the addition without reference to any incriminating material but rather it is based on his observation made by him during the course of assessment proceeding. We thus find that the primary requirement of undertaking proceedings u/s. 153C have not been complied with i.e. there being no satisfaction note on record by the AO of the search person. Further, there is no reference to any incriminating material specific to the addition which has been made in the hands of the assessee. Since the impugned assessment year is unabated year, the assessment order passed is not in accordance with the provisions of section 153C read with section 153A of the Act and does not meet the findings given by the Hon’ble Supreme Court in its judgment in CIT Vs. Singhad Technical Education Society [2017] 397 ITR 344 (SC) as well as by the Hon’ble jurisdictional High Court of Calcutta in the case of PCIT Vs. Salasar Stock Broking Ltd. in ITA No. 264/2016 dated 24.08.2016. 6. Recently Hon’ble Supreme Court has given its decision in the case of Abhisar Buildwell (P) Ltd., which is also squarely applies. A perusal of the facts of the present case clearly show that in the assessment order passed admittedly, no incriminating material has been referred to, which has been found in the course of search belonging/pertaining to the assessee. Hon’ble Supreme Court in para 14 in its judgment has categorically held as follows :- “14. In view of the above and for the reasons stated above, it is concluded as under: (i) that in case of search under section 132 or requisition under section 132A, the AO assumes the jurisdiction for block assessment under section 153A; (ii) all pending assessments/reassessments shall stand abated; (iii) in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the taking into consideration the 7 IT(SS)A No.111/Kol/2022 Corus Vintrade Pvt. Ltd., AY 2011-12 incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and (iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs.” 6.1. Considering the facts on record and the judicial precedents as well as the provision contained in section 153C read with section 153A, the impugned assessment order is bad in law and is accordingly quashed. Additional grounds raised by the assessee are allowed and, therefore, all the other grounds are not adjudicated upon, being rendered academic in nature. 7. In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 07 November, 2023 Sd/- Sd/- (Sanjay Garg) (Girish Agrawal) Judicial Member Accountant Member Dated: 07 November, 2023 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(A), Kolkata-21. 4. CIT 5. DR, ITAT, Kolkata Bench, Kolkata //True Copy// By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata