M/s Vichal Enterprises P Ltd, Nashik V. Deputy Commissioner of Income-Tax, Central Circle -1, Nashik

ITSSA 17/PUN/2022

AI Insights

The case involves two assessees, M/s. Vichal Enterprises Pvt. Ltd. and M/s. Variyan Realty, who filed appeals against the orders of the CIT(A), Pune, concerning assessments made under sections 153A and 153C of the Income Tax Act, 1961 for the assessment years 2013-2014 to 2015-2016. The primary legal issues revolved around the validity of the assessments initiated under these sections, which were challenged on the grounds of lack of incriminating evidence and improper procedural adherence. The Tribunal examined the legal precedents and statutory provisions applicable to search assessments, particularly focusing on the necessity of incriminating material for sustaining such assessments.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 137311 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 02-05-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-03-2022
• Other Referred Cases: PCIT vs. Abhisar Buildwell (P) Ltd., [2023] 149 taxmann.com 399 (SC), Income Tax Officer vs. Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 125 (SC), Mohd. Farhan A. Shaikh Vs. ACIT [2021] 434 ITR 1 (Bom.) (FB), Commissioner of Customs (Imports) Mumbai vs. M/s. Dilip Kumar And Co. & Ors. [2018] 9 SCC 1 (SC) (FB)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retrospective amendment
• Section: 143(3); 153A; 143(2); 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER I.T.(S.S.)A.Nos.15, 16 & 17/PUN./2022 Assessment Years 2013-2014, 2014-2015 and 2015-2016 M/s. Vichal Enterprises Pvt. Ltd., 37/39, Kantol Niwas, Modi Street Fort, Mumbai. Maharashtra. PIN 400 001 PAN AAACV3279R vs. The DCIT, Central Circle-1, 3 rd Floor, Kendriya Rajswa Bhawan, Gadkari Chowk, Old Agra Road, Nashik – 422 001. Maharashtra. (Appellant) (Respondent) I.T.(S.S.)A.Nos.18, 19 & 20/PUN./2022 Assessment Years 2013-2014, 2014-2015 and 2015-2016 M/s. Variyan Realty, Tulsi Villa, Near Akashwani Tower, B/h Prasad Mangalkaryalay Gangapur Road, Nashik – 422 005 Maharashtra. PAN AAJFV3936B vs. The DCIT, Central Circle-1, 3 rd Floor, Kendriya Rajswa Bhawan, Gadkari Chowk, Old Agra Road, Nashik – 422 001. Maharashtra. (Appellant) (Respondent) For Assessees : Shri Rakesh Joshi, And Shri Neelesh Khandelwal For Revenue : Shri M.G. Jasnani Date of Hearing : 03 & 18.05.2023 Date of Pronouncement : 22.05.2023 ORDER PER SATBEER SINGH GODARA, J.M. : The instant batch of six appeals pertains to two assessees’ namely M/s. Vichal Enterprises [“a private limited company”] and M/s. Variyan Reality [“a Firm]. Both of them have filed their three appeals each i.e., I.T.(S.S.)A.Nos.15 to 2 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 17/PUN./2022 and I.T.(S.S.)A.Nos.18 to 20/PUN./2022, for assessment years 2013-14 to 2015-16 against the CIT(A), Pune- 12, Pune's twin DINS & Orders Nos.ITBA/APL/S/250/2021- 22/1039243014(1), 1039243113(1), 1039243239(1) and Nos. ITBA/APL/S/250/2021-22/1039244771(1), 1039244793(1) and 1039244771(1), 1039244858(1), dated 31.01.2022, in proceedings u/s. 153A r.w.s. 143(3) and u/s. 153C r.w.s.143(3) of the Income Tax Act, 1961 (in short "the Act"), taxpayer-wise respectively, Heard the assessees as well as department through their learned representatives. Case files perused. 3. It emerges during the course of hearing at the outset that the first and foremost issue that arises for our apt adjudication in both these sets of cases involving sec.143(3) r.w.s. 153A r.w.s. 143(3) and sec.153C r.w.s. 143(2) assessments is that of validity thereof itself. Learned counsel’s case is that both the lower authorities have erred in law and on facts in initiating the former set of sec.143(3) r.w.s. 153A proceedings without any incriminating material found and seized in search in case of the former assessee and after recording an improper satisfaction in sec.143(3) r.w.s. 153C proceedings; taxpayer-wise, respectively. It is in this backdrop of facts that we proceed to deal with the instant twin legal issues first. 3 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 4. There is hardly any dispute between the parties that the former assessee M/s. Vichal Enterprises is a private limited company and the later taxpayer M/s. Variyan Reality is a Firm. There is further no quarrel that both of them had executed a joint development agreement dated 10.07.2012 [pages 39 to 50] wherein the former assessee contributed the corresponding project land whereas the latter entity M/s. Variyan Reality had to act as the developer. The relevant project’s name was “M/s. Varian Space”. We find from a perusal of the said joint venture agreement that in lieu of the land contribution, the former assessee before us was supposed to receive 40% and balance 60% of the gross revenue receipts would go to M/s. Variyan Reality. And also that both these assessee’s had to deposit all the receipts in a joint account first followed by its distribution @ 40% : 60% hereinabove [clause-7 page-41 in paper book] 4.1. It is in this backdrop of facts that the department had carried-out a search action in M/s. Thakkar group of cases dated 15.01.2015 which included the former assessee M/s. Vichal Enterprises as well. We find from a perusal of the case records that it had allegedly come across various incriminating documents indicating on-money receipts regarding sale of units in the above residential projects. The departmental authorities recorded sec.132(4) statements of S/Shri Chetan G Batavia and Kushal Chetan Batavia [director in M/s. Vichal Enterprises and 4 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. partner in M/s. Variyan Reality] during the course of search. All this culminated in initiation of sec.153A proceedings against M/s. Vichal Enterprises i.e., the searched assessee and Sec.153C action for the latter taxpayer M/s. Variyan Reality leading to on- money additions of Rs.41,04,600/-, Rs.1,06,38,358/-, Rs.1,96,41,370/- and Rs.52,10,654/-, Rs.52,39,392/- and Rs.27,29,010/-; respectively in their hands. The CIT(A) has partly restricted the same. This leaves both the assessees’ aggrieved. 5. We have given our thoughtful consideration to the vehement rival stands regarding legality of sec.153A assessments framed in case M/s. Vichal Enterprises Pvt. Ltd. There would be hardly any dispute that hon’ble apex court’s recent landmark decision in PCIT vs. Abhisar Buildwell (P) Ltd., [2023] 149 taxmann.com 399 (SC) has settled the law that an assessment u/sec.153A is not liable to be sustained in absence of any incriminating material found or seized during the course of search. Mr. Jasnani vehemently argued in light of the alleged incriminating material referred to in case of the latter assessee M/s. Variyan Realty that it is a clear-cut case of on-money payment receipts which has been rightly assessed in both these assessees’ hands at 40%-60% in light of the above joint development agreement’s terms. We find that Revenue has not filed even a single piece of such incriminating evidence that the former assessee M/s. Vichal Enterprises Pvt. Ltd., had, in any 5 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. way, actually received the on-money payments. Mr. Jasnani at this stage sought to buttress the point that once it had executed the revenue sharing agreement in lieu of the land contribution to the project, the necessary presumption which arises is that of actual receipt of the on-money payments only. 5.1. We find no merit in the Revenue’s former arguments once sec.292C of the Act confers presumption of correctness to contents of the actual evidence found during the course of a search or survey than mere inference drawn from the facts on record. We make it clear that there is not even an entry in any joint account which could support the impugned addition. This is indeed coupled with the fact that the latter assessee herein M/s. Variyan Realty had duly declared all the on-money payments for assessment in it’s post-search returns in sec.153C @ 8% thereof. Faced with the situation and in light of the clinching fact that there is no evidence at all to proceed against M/s. Vichal Enterprises Pvt. Ltd., i.e., the former assessee herein which could pinpoint or prove the actual receipt of on-money, we conclude that the impugned sec.153A assessments deserves to be quashed for this precise reason alone. These former assessee’s three appeals I.T.(S.S.)A.Nos.15 to 17/PUN./2022 involving sec.153A assessments succeed in very terms therefore. 5.2. The outcome would be hardly different in the latter assessee’s as many appeals I.T.(S.S.)A.Nos.18 to 20/PUN./2022 6 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. since we are dealing with validity of sec.153C assessments. Learned counsel has filed before us copy of the Assessing Officer’s relevant satisfaction note dated 29.08.2016 that the seized documents during the course of search hereinabove “belongs/pertains/ relates to M/s. Variyan Realty” as under : “On perusal of above discussion, facts and circumstances of case and settled position of law, it can be conclusively held that said seized documents belongs/pertains/ relates to M/s Varian realty and transaction mentioned in such documents have clear bearing on the determination of total income of assessee for various AYs 2009-10 to AY 2015-16. Hence, I am satisfied that it is a fit case for issuing notice within the meaning of section 153C for AY 2009-10 to AY 2015-16 and hence, notice u/s 153C for AY 2009-10 to AY 2015-16 is hereby issued.” 5.3. We invite Mr. Jasnani’s attention to the Assessing Officer’s above reproduced satisfaction that he had used the three clinching statutory expressions “belongs/pertains/relates”, simultaneously than specifying as to which one of them got attracted in fact the instant cases. We make it clear that we are dealing a search assessment wherein the relevant provisions have to be strictly construed in light of Commissioner of Customs (Imports) Mumbai vs. M/s. Dilip Kumar And Co. & Ors. [2018] 9 SCC 1 (SC) (FB). Mr. Jasnani thereafter has filed his detailed written submissions at the Revenue’s behest reading as under : 7 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 8 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 9 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 10 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 11 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. 5.4. We find no merit in Revenue’s foregoing stand. It is made clear that scheme of the relevant provision i.e., sec.153C; amended vide Finance Act, 2015 w.e.f. 01.06.2015 has already been held as having retrospective effect in hon’ble apex court’s yet another landmark decision in Income Tax Officer vs., Vikram Sujitkumar Bhatia [2023] 149 taxmann.com 125 (SC). Clauses 153C(1)(a) and (b) thereof sufficiently indicate that it is only the former category of “any money, bullion, jewellery or other valuable article or thing, seized or requisitioned” which could be held as “belongs to” any third person other than the searched assessee as against clause (b) stipulating “any books of account or documents, seized or requisitioned, pertain or pertains to, or any information contained therein, relates to the said other person”; as the case may be. Meaning thereby, that the legislature has nowhere prescribed that all these three expressions of “belongs to”, “pertains or pertain to” or “relates to” could be invoked in an interchangeable manner as it has been done at the Assessing Officer’s behest in the impugned satisfaction. We wish to observe that although not strictly relevant; but, somewhat similar issue had arisen before hon’ble jurisdictional high court in Mohd. Farhan A. Shaikh Vs. ACIT [2021] 434 ITR 1 (Bom.) (FB) in case of sec.271(1)(c) penalty proceedings wherein their lordships’ have rejected the Revenue’s arguments by holding that the corresponding limbs i.e., concealment or furnishing of inaccurate particulars of the taxable income have to be specifically 12 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. incorporated before any assessee is proceeded against there under. And that such a failure on the Assessing Officer part is a clear-cut case of non-application of mind not sustainable in law. The very same analogy would apply in the instant case as well once the learned Assessing Officer has simply treated all these three expressions interchangeable/at par. We take into consideration the foregoing principles of stricter interpretation to hold that the learned lower authorities have erred in law and on facts in recording an improper satisfaction for the purpose of framing these three sec.153C assessments. The same stand quashed as such an inherent defect in sec.153C satisfaction could not be rectified in second appellate proceedings. These latter assessee’s three appeals I.T.(S.S.)A.Nos.18 to 20/PUN./ 2022 are allowed in very terms. Ordered accordingly. 6. All other pleadings on merits in both these assessees’ respective cases stand rendered academic. 7. These twin assessees’ three appeals each i.e., I.T.(S.S.)A.Nos.15 to 17/PUN./2022 and I.T.(S.S.)A.Nos.18 to 20/PUN./2022 are allowed in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open Court on 22.05.2023. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 22 nd May, 2023 VBP/- 13 I.T.(S.S.)A.Nos.15 to 17 & 18 to 20/PUN./2022 M/s. Vichal Enterprises Pvt. Ltd., & M/s. Variyan Realty, Nashik. Copy to 1. The appellants concerned 2. The respondent 3. The Ld. CIT(A), Pune-12, Pune 4. The DGIT (Inv.) Pune. 5. D.R. ITAT, Pune “B” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.