ACIT, Central Circle - 1(2), Kolkata, Kolkata V. Shri Ratan Kumar Somani, Kolkata

ITSSA 129/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0024 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 06-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: RAKESH JAIN
• Keywords: Unexplained cash credit; Business income; Search and seizure
• Section: 143(3); 133A; 153A; 143(1); 250; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA (BEFORE SRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SRI S. S. GODARA, JUDICIAL MEMBER) I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), KOLKATA..............................APPELLANT SHRI RATAN KUMAR SOMANI............................RESPONDENT [PAN : AJWPS 3192 E] APPEARANCES BY: SHRI A.K. NAYAK, CIT, DR, APPEARED ON BEHALF OF THE APPELLANT SHRI RAKESH JAIN, FCA, APPEARING ON BEHALF OF THE RESPONDENT. DATE OF CONCLUDING THE HEARING : JANUARY 21, 2019 DATE OF PRONOUNCING THE ORDER : MARCH 20, 2019 ORDER PER J. SUDHAKAR REDDY, AM :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-20, KOLKATA, (HEREINAFTER THE LD. CIT(A)), PASSED U/S. 250 OF THE INCOME TAX ACT, 1961 (THE ACT), DT. 12/06/2017, FOR THE ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS IN THE BUSINESS OF INVESTMENT. HE FILED HIS ORIGINAL RETURN OF INCOME U/ 139 ON 30/07/2012 DECLARING TOTAL INCOME OF RS.8,05,084/- . IN THIS RETURN OF INCOME, THE ASSESSEE HAD CLAIMED EXEMPTION ON LONG-TERM CAPITAL GAIN EARNED ON PURCHASE AND SALE OF SHARES U/S 10(38) OF THE ACT TO THE TUNE OF RS.4,50,11,037/-. A SEARCH AND SEIZURE OPERATION U/S 132(1) OF THE ACT WAS CONDUCTED ON 17/03/2015 IN THE CASE OF INLAND GROUP, KOLKATA. IN RESPONSE, THE ASSESSEE FILED ITS RETURN OF INCOME ON 04.07.2016, DECLARING THE SAME INCOME THAT WAS DECLARED IN ITS ORIGINAL RETURN OF INCOME ON 30/07/2012 I.E. RS.8,05,084/-. 3. THE ASSESSING OFFICER PASSED AN ORDER U/S 153A R.W.S. 143(3) OF THE ACT DETERMINES THE TOTAL INCOME AT RS.4,58,16,121/-, INTER ALIA, MAKING AN ADDITION OF RS.4,50,11,037/- U/S 10(38) OF THE ACT AS UNEXPLAINED CASH CREDIT. HE REJECTED THE CLAIM OF EXEMPTION OF CAPITAL GAINS ON PURCHASE AND SALE OF SHARES ON THE GROUND THAT THE SAME IS NOT GENUINE. IN THE ASSESSMENT ORDER, THE LD. ASSESSING OFFICER REFERRED TO A REPORT OF THE INVESTIGATION WING OF KOLKATA AND THE STATEMENT RECORDED BY THE 2 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 INVESTIGATION WING FROM ONE SRI PRAKASH JAGODIA DURING THE COURSE OF SURVEY U/S 133A OF THE ACT. HE RELIED ON THE QUESTIONS AND ANSWERS RECORDED BY THE INVESTIGATION WING FROM SRI PRAKASH JAGODIA TO COME TO A CONCLUSION THAT THE PRICES OF THE SCRIP OF M/S QUEST FINANCIAL SERVICES LTD WAS RIGGED TO PROVIDE ENTRIES OF ACCOMMODATION AS PER REQUIREMENTS OF CLIENTS. DURING THE PROCEEDINGS, THE STATEMENT OF SRI NAVEEN SOMANI WAS RECORDED. IT IS STATED IN THE ASSESSMENT ORDER THAT SRI NAVEEN SOMANI WAS APPRISED OF THE STATEMENT RECORDED FROM SRI PRAKASH JAGODIA WHO WAS A DIRECTOR OF QUEST FINANCIAL SERVICES LTD. IN WHICH THE ASSESSEE HAD ADMITTEDLY EARNED CAPITAL GAINS. MR. NAVEEN SOMANI REPLIED THAT THE CONTRACT OF PURCHASE AND SALES WERE MADE IN REALMS OF RECOGNIZED STOCK EXCHANGE AND HENCE, WAS A GENUINE TRANSACTION. THIS STATEMENT OF MR. SOMANI THAT THE TRANSACTIONS ARE GENUINE WAS NOT ACCEPTED BY THE ASSESSING OFFICER. HE HELD THAT THE FUNDAMENTALS OF M/S QUEST FINANCIAL SERVICES LTD. DID NOT JUSTIFY THE BIG RISE IN SHARE PRICES. HE RELIED ON THE REPORT OF DIRECTOR OF INVESTIGATION, KOLKATA AND HELD THAT THE TRANSACTIONS WERE SHAM AND FABRICATED. HE REJECTED THE CONTENTION OF THE ASSESSEE THAT THE SAID TRANSACTIONS WERE GENUINE AS THE TRANSACTIONS WERE MADE THROUGH REGISTERED BROKERS AND ARE SUPPORTED BY CONTRACT NOTES AND THE SHARES WERE PURCHASED AND SOLD THROUGH DEMAT ACCOUNT AND THAT PAYMENTS WERE MADE THROUGH PROPER BANKING CHANNELS. THE PAYMENT OF SECURITY TRANSACTION TAX, SERVICE TAX, BROKERAGE CHARGES AND STAMP DUTY ON SUCH TRANSACTIONS HAVE ALSO BEEN REJECTED AS EVIDENCES TO PROVE THE GENUINENESS OF THE TRANSACTIONS. HE HELD THAT THE PRINCIPLES OF PREPONDERANCE OF HUMAN PROBABILITIES SHOULD BE APPLIED. HE HELD AS FOLLOWS: 5. ABOVE FACTS PROVE BEYOND DOUBT THE TRANSACTIONS WERE SHAM AND WERE DONE THROUGH STOCK EXCHANGE TO PROVIDE A PROPER VEIL OR COVERING. THAT GENUINENESS COULD VALIDLY BE TESTED ON THE GROUND OR PRINCIPLE OF PREPONDERANCE OF HUMAN PROBABILITIES, WHICH COULD THUS FORM A VALID GROUND OR PARAMETER FOR DETERMINING THE GENUINENESS, STANDS SINCE SETTLED BY THE APEX COURT IN SUMATI DAYAL VS. CIT [1995] 214 ITR 801 (SC), WHEREIN THE APEX COURT, IN DECLARING THE TRANSACTION AS NON-GENUINE, DISCARDED A HOST OF DOCUMENTARY EVIDENCES FILED OR RELIED. WHAT IS GENUINE SHOULD BE GENUINE IN ALL ASPECTS. INTENTION TRUMPS THE SUBSTANCE IN THE PRESENT CASE. THOSE DOCUMENTARY EVIDENCES ARE NOT BY THEMSELVES CONCLUSIVE. ANY PERSON BUYS THE STOCKS OF THE COMPANIES HAVING FUTURE PROSPECT AND GOODWILL IN THE MARKET WHICH WERE ENTIRELY WILL PREFER TO INVEST IN SUCH A PENNY STOCK RISKING HIS HARD EARNED MONEY LEAVING GENUINE AND BLUE CHIP COMPANIES AVAILABLE IN MARKET. IT IS ONLY POSSIBLE WHEN THE FINAL RESULT HAS BEEN ASSURED TO THE ASSESSEE BY THE OPERATORS INVOLVED IN THE SCAM. IT BECOMES OBVIOUS THAT THE ASSESSEE ENTERED INTO THE TRANSACTIONS IN A PREMEDITATED WAY JUST TO FULFIL HIS UNFAIR FISCAL NEEDS AND THEN USE THE PROVISIONS OF THE INCOME TAX ACT AS A TOOL TO EVADE TAX. 3 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 IT MAY BE NOTED THAT ORDER OF MERGER OF HONBLE HIGH COURT HAS NOT BEEN CHALLENGED BUT THE WAY OF PRICES OF THE SHARES HAVE BEEN MANIPULATED IS EXACTLY WHAT HAS BEEN INDICATED IN THE REPORT OF DIT INVESTIGATION. SO, THE ASSESSEE CONTENTION OF DISPUTING THE ORDER OF HONBLE HIGH COURT DOES NOT ARISE. DISCUSSIONS HELD ABOVE ARE FAIR ENOUGH TO PROVE BEYOND DOUBT THAT THE AFOREMENTIONED SHARE TRANSACTIONS WERE NOT GENUINE. ACCORDINGLY, THE EXEMPTION CLAIMED IN THE IMPUGNED CAPITAL GAIN IN REPORTED STOCK TRADING OF RS.4,50,11037/- IS DISALLOWED AND IS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS BUSINESS INCOME. 3.1 THUS THE ASSESSING OFFICER HELD THAT THE AFORESAID SHARE TRANSACTIONS ARE NOT GENUINE. ACCORDINGLY, THE EXEMPTION CLAIMED U/S 10(38) OF THE ACT WAS REJECTED. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL. THE LD. CIT(A) GAVE FINDING THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 2012-13 HAS NOT ABATED AND THAT NO INCRIMINATING MATERIAL WAS FOUND OR SEIZED IN THE COURSE OF SEARCH OPERATION AND UNDER THOSE CIRCUMSTANCES, NO ADDITIONS/DISALLOWANCES CAN BE MADE IN AN ASSESSMENT MADE U/S 153A R.W.S. 143(3) OF THE ACT. WHILE APPLYING ABOVE PROPOSITION, HE RELIED ON THE PROPOSITION OF LAW LAID DOWN IN THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PCIT VS. SALASAR STOCK BROKING LIMITED (TA NO.264 OF 2016) DT. 24.08.2016 AND THE JUDGMENT IN THE CASE OF CIT VS. VEEERPRABHU MARKETING LTD. [2016] 73 TAXMANN.COM 149 (CALCUTTA) . HE ALSO RELIED ON A NUMBER OF OTHER JUDGMENTS AND ULTIMATELY DELETED THE DISALLOWANCE MADE ON THE GROUND OF THAT NO INCRIMINATING DOCUMENTS/PAPERS WERE FOUND OR SEIZED DURING THE COURSE OF SEARCH BASED ON WHICH THE ADDITIONS WERE MADE IN AN UNABATED ASSESSMENT U/S 153 R.W.S. 143(3) OF THE ACT. 5. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5.1 THE LD. DEPARTMENTAL REPRESENTATIVE ARGUED THAT INCRIMINATING MATERIAL NEED NOT NECESSARILY BE FOUND DURING THE COURSE OF SEARCH IN THE CASE OF THE ASSESSEE AND THAT THE REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT COULD FORM INCRIMINATING MATERIAL FOR THE PURPOSE OF MAKING THE DISALLOWANCE IN QUESTION. HE REFERRED TO STATEMENT RECORDED BY THE INVESTIGATION DEPARTMENT DURING THE COURSE OF SURVEY U/S 133A CONDUCTED ON 07.08.2014 IN THE CASE OF QUEST FINANCIAL SERVICES LTD. AND PRAKASH JAJODIA AND ARGUED THAT THIS STATEMENT IS INCRIMINATING MATERIAL. ON A QUERY FROM THE BENCH, HE ADMITTED THE FACT THAT NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH U/S 132 IN THE CASE OF ASSESSEE BUT HE PLACED RELIANCE ON THE JUDGMENT OF THE 4 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 HONBLE KERALA HIGH COURT IN THE CASE OF E.N. GOPAKUMAR V. COMMISSIONER OF INCOME-TAX (CENTRAL) [2016] 75 TAXMANN.COM 215 (KERALA) AND THE JUDGMENT OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. ST. FRANCIS CLAY DECOR TILES (385 ITR 624) FOR THE PROPOSITION THAT INCRIMINATING MATERIAL NEED NOT TO BE FOUND DURING THE COURSE OF SEARCH FOR THE PURPOSE OF MAKING ADDITIONS/DISALLOWANCES IN ASSESSMENT FRAMED U/S 153A R.W.S. 143(3) OF THE ACT IN UNABATED ASSESSMENTS. HE DID NOT DISPUTE THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSMENT HAD NOT ABATED. HE FURTHER RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF COMMISSION OF CUSTOMS (IMPORT), MUMBAI VS. M/S. DILIP KUMAR AND COMPANY & ORS. IN CIVIL APPEAL NO.3327 OF 2007 AND ARGUED THAT THE LAW SHOULD BE STRICTLY INTERPRETED AND NO EXEMPTION CAN BE GRANTED TO THE ASSESSEE. HE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE PRICES OF THE SHARE OF QUEST FINANCIAL SERVICES LTD WERE RIGGED AND THAT HUMAN CONDUCT AND PROBABILITIES HAVE TO BE APPLIED. HE VEHEMENTLY ARGUED THAT THE TRANSACTIONS IN BOGUS. HE COULD NOT POINT OUT ANY EVIDENCE GATHERED BY THE ASSESSING OFFICER FOR MAKING THIS DISALLOWANCE AND ONLY RELIED THE REPORT OF THE INVESTIGATION WING AND ALLEGED STATEMENTS RECORDED BY THE INVESTIGATION WING. 5.2 THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THE UNDISPUTED FACT IS THAT NO DOCUMENT OR PAPER WAS FOUND, DURING THE COURSE OF SEARCH IN THE PREMISES OF THE ASSESSEE OR IN ANY OTHER PREMISES, WHICH CAN BE RELATED TO THE SAID EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(38) OF THE ACT. HE ARGUED THAT NO ADDITION CAN BE MADE IN AN ASSESSMENT FRAMED U/S 153A R.W.S. 143(3) OF THE ACT IN THE ABSENCE OF INCRIMINATING MATERIAL AS THE ASSESSMENT HAS NOT ABATED. HE RELIED ON THE FOLLOWING CASE LAWS: I) PR. CIT VS. KURELE PAPER MILLS P LTD., SLP(C) NO.34554 OF 2015 (SC) II) CIT VS. VEERPRABHU MARKETING LTD. (2016) 73 TAXMANN.149 (KOL) III) CIT VS. KABUL CHAWLA (2016) 380 ITR 573 (DEL) IV) PCIT VS. SALASAR STOCK BROLING LTD. (ITA NO.264 OF 2016) 5.3 HE SUBMITTED THAT A STATEMENT PURPORTEDLY RECORDED FROM ONE MR. PRAKASH JAJODIA DURING SURVEY OPERATION WAS WRONGLY RELIED UPON BY THE ASSESSING OFFICER 5 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 WITHOUT FURNISHING COPIES OF THE SAME TO THE ASSESSEE AND WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY OF CROSS-EXAMINATIONS. HE ARGUED THAT THE REPORT OF THE INVESTIGATION WING OF THE DEPARTMENT CAN BE A STARTING POINT FOR INVESTIGATION BY THE ASSESSING OFFICER BUT IT CANNOT BE RELIED UPON BLINDLY FOR MAKING THE ADDITIONS, THAT TOO WITHOUT GIVING COPY OF THE SAME TO THE ASSESSEE. IN ANY EVENT, THE LD. COUNSEL SUBMITS THAT ADDITION CANNOT BE MADE IN AN ASSESSMENT FRAMED U/S 153A R.W.S 143(3) OF THE ACT IN THE ABSENCE OF INCRIMINATING MATERIAL. EVEN OTHERWISE, HE SUBMITS THAT THE PURCHASE AND SALE OF SHARES WERE MADE THROUGH THE REGISTERED STOCK BROKERS ON THE PLATFORM OF RECOGNIZED STOCK EXCHANGE AT THE PREVAILING MARKET RATE AND THAT ALL EVIDENCES SUCH A CONTRACT NOTES, PASSBOOK COPIES, DEMAT ACCOUNT ETC. WERE FILED AS EVIDENCE OF GENUINENESS OF THE TRANSACTIONS AND THAT THE ASSESSEE HAD NO ROLE TO PLAY IN THE RISE OR FALL OF SHARE PRICES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS MADE GENERAL ALLEGATIONS BASED ON DIT(INVESTIGATION)S REPORT WITHOUT AN IOTA OF AN EVIDENCE. HE RELIED ON NUMBER OF CASE LAWS AND ARGUED THAT NO ADDITION CAN BE MADE ON MERE ALLEGATION AND WITHOUT ANY COGENT EVIDENCE. HE RELIED ON THE ORDER OF THE LD. CIT(A) AND PRAYED THAT THE SAME BE UPHELD. 6. WE HAVE HEARD RIVAL CONTENTIONS. ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, PERUSAL OF THE PAPERS ON RECORD, ORDERS OF THE AUTHORITIES BELOW AS WELL AS CASE LAW CITED, WE HOLD AS FOLLOWS. 6.1 THE UNDISPUTED FACT THAT EMERGES FROM THE ASSESSMENT ORDER AND A COPY OF THE PANCHANAMA IS THAT THERE IS NO INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH ON 17.03.2015 IN THE CASE OF INLAND GROUP, OF WHICH THE ASSESSEE IS A PART. THE ASSESSING OFFICER HAS MADE AN DISALLOWANCE OF CLAIM OF EXEMPTION U/S 10(38) OF THE ACT WITHOUT ANY EVIDENCE FOUND DURING THE SEARCH. A PERUSAL OF THE ASSESSMENT ORDER DEMONSTRATES THAT THE ENTIRE ADDITION WAS MADE BASED ON A REPORT FROM INVESTIGATION WING OF THE INCOME TAX DEPARTMENTS OF KOLKATA WHICH IS NOT BROUGHT ON RECORD BY THE ASSESSING OFFICER, NOR A COPY FURNISHED TO THE BENCH. THIS REPORT HAS BEEN REFERRED EXTENSIVELY IN THE ASSESSMENT ORDER. EXCEPT FOR EXTRACTING, IN THE ASSESSMENT ORDER, SOME OF THE QUESTIONS AND ANSWERS RECORDED BY THE INVESTIGATION WING, DURING THE COURSE OF SURVEY, FROM MR. PRAKASH JAJODIA, NO COPY OF THE STATEMENT HAS BEEN BROUGHT ON RECORD BY THE ASSESSING OFFICER. A COPY OF THE STATEMENT IS NOT GIVEN TO THE ASSESSEE OR THE BENCH. THE 6 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 ASSESSEE HAS CLAIMED THAT THE TRANSACTIONS WERE GENUINE AND WERE DONE ON THE PLATFORM OF THE RECOGNIZED STOCK EXCHANGE THROUGH REGISTERED STOCK BROKERS. VARIOUS EVIDENCES SUCH AS CONTRACT NOTES, DEMAT STATEMENTS, COPY OF BANK ACCOUNT, SECURITY TRANSACTION TAX PAYMENTS ETC. IN SUPPORT OF THE SAME WERE FILED. UNDER THESE CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT NO ADDITION CAN BE MADE IN THIS ASSESSMENT IN THE ABSENCE OF THE ASSESSING OFFICER FINDING INCRIMINATING MATERIAL DURING THE COURSE OF SEARCH IN AN ASSESSMENT MADE U/S 153A R.W.S 143(3) OF THE ACT AS THE ASSESSMENT, IN QUESTION, HAS NOT ABATED. THE ASSESSEE IN THIS CASE HAS ORIGINALLY FILED HIS RETURN OF INCOME ON 30/07/2012 AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT ON 07/02/2013. THE NOTICE U/S 143(2) OF THE ACT WAS TO HAVE BEEN ISSUED BEFORE ON 30/07/2013. THIS WAS NOT DONE. SEARCH AND SEIZURE OPERATION WAS CARRIED OUT ON 17.03.2015 WHICH IS MUCH LATER THAN 30/07/2013. HENCE THE ASSESSMENT FOR THE ASSESSMENT YEAR 2012-13 HAS NOT ABATED. ON THESE FACTS, THE LD. CIT(A) HELD AS FOLLOWS: I HAVE CONSIDERED THE FINDINGS OF THE A.O IN THE ASSESSMENT ORDER, DIFFERENT CASE LAWS BROUGHT ON RECORD AND APPEAL ORDERS PASSED BY MY PREDECESSORS ON THIS LEGAL ISSUE. I FIND FROM THE ASSESSMENT ORDER THAT DURING THE SEARCH AND SEIZURE OPERATIONS CONDUCTED U/S 132 OF THE ACT, INCRIMINATING DOCUMENTS/PAPERS WERE NOT SEIZED. AT LEAST, ADDITIONS MADE BY THE A.O IN THE ASSESSMENT ORDER PASSED U/S 153A/143(3) ARE NOT BASED ON ANY INCRIMINATING DOCUMENTS/PAPERS SEIZED DURING THE SEARCH OPERATION. IT WOULD ALSO NOT BE OUT OF CONTEXT TO MENTION HERE THAT IN THIS CASE, ON THE DATE OF SEARCH, NO ASSESSMENT FOR THIS YEAR WAS PENDING. THEREFORE, KEEPING IN VIEW THE RATIO DECIDED BY THE JURISDICTIONAL BENCH OF KOLKATA TRIBUNAL IN CASES REFERRED ABOVE AND THE RATIO DECIDED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VEER PRABHU MARKETING LTD. (SUPRA) IN THE LIGHT OF CBDTS DECISION OF NOT FILING SLP IN THIS CASE IN THE SUPREME COURT AND KEEPING IN VIEW THE APEX COURTS DECISION TO DISMISS SLP ON SIMILAR ISSUE IN THE CASE OF PR. CIT VS. KURELE PAPER MILLS PVT. LTD. ; SLP(C) NO.34554 OF 2015 DT. 07/12/2015, I AM OF THIS VIEW THAT IN ORDER TO MAINTAIN JUDICIAL CONTINUITY ON THIS ISSUE AND RESPECTFULLY FOLLOWING THE RATIO DECIDED BY THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF VEER PRABHU MARKETING LTD. (SUPRA), ASSESSEES APPEAL ON GROUNDS NO.2 & 3 IS ALLOWED ON TECHNICAL GROUND. 6.2 THIS DECISION OF THE LD. CIT(A) IS IN LINE WITH THE PROPOSITION OF LAW LAID DOWN IN THE FOLLOWING CASE LAWS: (I) CIT, KOLKATA-III VS. VEERPRABHU MARKETING LIMITED [2016] 73 TAXMANN.COM 149 (CALCUTTA): IN THIS CASE THE HONOURABLE CALCUTTA HIGH COURT EXPRESSED THE FOLLOWING VIEWS: WE ARE IN AGREEMENT WITH THE VIEWS OF THE KARNATAKA HIGH COURT THAT INCRIMINATING MATERIAL IS A PRE-REQUISITE BEFORE POWER COULD HAVE BEEN EXERCISED UNDER SECTION 153C READ WITH SECTION 153A. 7 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 IN THE CASE BEFORE US, THE ASSESSING OFFICER HAS MADE DISALLOWANCES OF THE EXPENDITURE, WHICH WERE ALREADY DISCLOSED, FOR ONE REASON OR THE OTHER. BUT SUCH DISALLOWANCES WERE NOT CONTEMPLATED BY THE PROVISIONS CONTAINED UNDER SECTION 153C READ WITH SECTION 153A. THE DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE UPHELD BY THE CIT(A) BUT THE LEARNED TRIBUNAL DELETED THOSE DISALLOWANCES. (II) PCIT-2, KOLKATA VS. SALASAR STOCK BROKING LIMITED (ITAT NO. 264 OF 2016) DATED 24.08.2016 : (CALCUTTA) IN THIS CASE, THE HONORABLE HIGH COURT OBSERVED THAT THE LD. ITAT, KOLKATA WAS OF THE OPINION THAT THE ASSESSING OFFICER HAD NO JURISDICTION U/S 153A OF THE I.T. ACT TO REOPEN THE CONCLUDED CASES WHEN THE SEARCH & SEIZURE DID NOT DISCLOSE ANY INCRIMINATING MATERIAL. IN TAKING THE AFORESAID VIEW, THE LD. ITAT RELIED UPON THE JUDGMENTS OF DELHI HIGH COURT IN THE CASE OF CIT(A) VS. KABUL CHAWLA IN ITA NO. 707/2014 DATED 28.08.2014 . THE COURT ALSO OBSERVED THAT MORE OR LESS AN IDENTICAL VIEW HAS BEEN TAKEN BY THIS BENCH IN ITA NO. 661/2008 IN THE CASE OF CIT VS. VEERPRABHU MARKETING LIMITED. CONSIDERING THE ABOVE FACTS, THE HONORABLE HIGH COURT DID NOT ADMIT THE APPEAL FILED BY THE DEPARTMENT. (III) THE A BENCH OF THE DELHI ITAT, IN THE CASE OF ANURAG DALMIA VS. DCIT IN ITA NOS. 5395 & 5396/DEL/2017; ASSESSMENT YEARS: 2006-07 & 2007-08, DT. 15/02/2018 HELD AS FOLLOWS:- 12. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE RELEVANT MATERIAL PLACED ON RECORD AND THE FINDING GIVEN IN THE IMPUGNED ORDER WITH RESPECT TO LEGAL ISSUE RAISED VIDE GROUND NO.5 BY THE ASSESSEE THAT THE ADDITIONS MADE IN THIS YEAR ARE BEYOND THE SCOPE OF ASSESSMENT U/S.153A, AS NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH FOR THE IMPUGNED ASSESSMENT YEAR; AND THE ASSESSMENT HAD ATTAINED FINALITY AND WAS NOT ABATED IN TERMS OF 2ND PROVISO TO SECTION 153A. AS STATED ABOVE, THE ORIGINAL RETURN OF INCOME WAS FILED IN JULY, 2006 AND SAID RETURN WAS DULY ACCEPTED AND PROCESSED U/S. 143(1) VIDE INTIMATION DATED 25.05.2007. SINCE NO NOTICE U/S. 143(2) WAS ISSUED THEREAFTER OR ANY OTHER PROCEEDINGS HAVE BEEN COMMENCED TO DISTURB SAID RETURN OF INCOME, ACCORDINGLY, IT HAD ATTAINED FINALITY MUCH PRIOR TO THE DATE OF SEARCH WHICH WAS ON 20.01.2012. HENCE IN TERMS OF 2ND PROVISO TO SECTION 153A THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 WAS NOT PENDING AND ACCORDINGLY, HAS TO BE RECKONED AS UNABATED ASSESSMENT. UNDER THE JURISDICTION OF HON'BLE DELHI HIGH COURT, THE LAW IS WELL SETTLED THAT IN CASE OF UNABATED ASSESSMENT, THE ADDITIONS WHICH CAN BE ROPED-IN, IN THE ASSESSMENTS FRAMED U/S.153A, WOULD ONLY BE WITH REGARD TO ANY INCRIMINATING MATERIAL OR EVIDENCE UNEARTHED OR FOUND DURING THE COURSE OF SEARCH. IF NO INCRIMINATING MATERIAL HAS BEEN FOUND DURING THE COURSE OF SEARCH, THEN NO ADDITION CAN BE MADE IN THE ASSESSMENT YEARS WHERE ASSESSMENTS HAD ATTAINED FINALITY. THE RELEVANT OBSERVATIONS AND THE RATIO LAID DOWN WOULD BE DISCUSSED IN THE LATER PART OF THIS ORDER. 6.3 THE HONBLE CALCUTTA HIGH COURT APPLIED THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KABUL CHAWLA CIT VS. KABUL 8 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 CHAWLA (2016) 380 ITR 573 (DEL) . THE HONBLE DELHI HIGH COURT AT PARA 37 & 38 HELD AS FOLLOWS: 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 AFOREMENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A (1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREVIOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND REASSESSMENTS PENDING ON THE DATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMPUTED 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 TAKES 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 YEARS. 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 BROUGHT TO TAX'. IV. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, 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 ASSESSMENT 'CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT HAS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL.' V. IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE COMPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MADE. THE WORD 'ASSESS' IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOSE PENDING ON THE DATE OF SEARCH) AND THE WORD 'REASSESS' TO COMPLETED ASSESSMENT PROCEEDINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTION 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT ON THE RECORD OF THE AO. VII. COMPLETED ASSESSMENTS CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153 A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF SEARCH OR REQUISITION OF DOCUMENTS OR UNDISCLOSED INCOME OR PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 38. THE PRESENT APPEALS CONCERN AYS, 2002-03, 2005-06 AND 2006-07.ON THE DATE OF THE SEARCH THE SAID ASSESSMENTS ALREADY STOOD COMPLETED. SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED DURING THE SEARCH, NO ADDITIONS COULD HAVE BEEN MADE TO THE INCOME ALREADY ASSESSED. 9 SHRI RATAN KR. SOMANI I.T(SS).A NO. 129/KOL/2017 ASSESSMENT YEAR: 2012-13 7. APPLYING THE PROPOSITIONS OF LAW LAID DOWN IN THE ABOVE CASE-LAWS AND ON THE FACTS OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE 20 TH DAY OF MARCH, 2019. SD/- SD/- [ S. S. GODARA] [ J. SUDHAKAR REDDY ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20.03.2019 (RS, SR.PS) COPY OF THE ORDER FORWARDED TO: 1. ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1(2), KOLKATA 2. SHRI RATAN KUMAR SOMANI, 143/1/1, COTTON STREET, KOLKATA. 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES