The Dy. Commissioner of Income Tax, Circle-2(3), Ahmedabad V. Friends Oil & Chemical Terminals Pvt. Ltd., Gandhidham-Kutch

ITSSA 181/AHD/2016

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3219 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 04-07-2022
• Assessment Year: 2007-2008
• Appeal Filed On: 26-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 131; 132; 153A; 14A; 143(1); 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Th e DCIT, Central Circle-2(3), Ah medabad (Appellant) Vs Friends Oil & Ch emical Ter minals Pv t. Ltd. Maitri Bh avan, Plot No. 18, Sector No. 8, Gnadhidh am- Ku tch-370 201 (Respond ent) PAN: AAA CF3 177A Asses see by : Shri K. C. Thaker, A. R. Revenue by : Shri Aarsi Pra sad, Sr. D. R. Date of hearing : 05-07 -2 022 Date of pronouncement : 12-08 -2 022 आदेश/ORDER PER BENCH:- This assessee’s appeal for A.Y. 2007-08, arises from order of the CIT(A)-12, Ahmedabad dated 28-03-2016, in proceedings under section 143(3) r.w.s. 153A(1)(b) of the Income Tax Act, 1961; in short “the Act”. IT(SS)A No. 181/Ahd/2016 Assessment Year 2007-08 I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 2 2. The Department has taken the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance u/s 14A of the Act of Rs. 11,32,886/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance of interest u/s 36(l)(iii) of the Act of Rs. 41,36,461/-. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance of excess depreciation on storage tank ofRs.4,05,541/-. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in law and/or on facts in deleting the disallowance u/s 80IA(4) of Rsl,66,27,495/-. 5. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 6. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The brief facts of the case are that the company is engaged in the business of hiring of tank terminals for liquid cargo and hiring of vehicles and equipments. The assessee filed original return of income on 30-10-2007 declaring total income of 14,65,863/-after claiming deduction under section 80IA(4) of the Act amounting to 1,66,27,495/-. The return of the assessee was processed under section 143(1) of the Act. Subsequently, search action u/s 132 of the Act were carried out in the case of Friends Group on 15-06-2011. Consequent to the search action, the AO for the impugned assessment year passed order u/s. 153A of the Act and made I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 3 various additions: disallowance of excess depreciation ( 4,05,541/-), disallowance under section 80IA(4) ( 1,66,27,495), disallowance under section 14A ( 11,32,886/-) and disallowance of interest expenses ( 41,36,461/-). In appeal, the learned CIT(A) has deleted the additions allowing the legal ground to the effect that the assessment in question was not pending on the date of search that took place on 15.06.2011 and therefore did not abate, and in the circumstances addition/s could be made only on the basis of incriminating material found/seized during the search. In the instant case it was submitted before the CIT(A) on behalf of the appellant-assessee that the additions are not based on any incriminating material found/seized during the search. Appellant-assessee relied upon then available judgments/decisions in the cases of Kabul Chawla [(2016) 380 ITR 573 (Del)], All Cargo Global [137 ITD 287 (Mum)(SB)], Saumya Construction [ITssA 3/Ahd-2014 (Ahd. Trib)] and Desai Construction [ITssA 12 & 13/Ahd-2012 (Ahd-Trib)]. After considering the facts and law at length the learned CIT(A) finally recorded his conclusion in the common order for the A. Yrs. 2006-07 to 2008-09, as under. "In view of the above, it is imperative that I follow the view already taken in earlier decision in M/s. Arvind V. Joshi & Co. as extracted above. It is not in dispute that the three assessment years under appeal remained 'unabated', as no proceedings were pending before the AO on the date of search i.e. on 15.06.2011. the learned DR present has also not pointed out any distinguishing facts or any incriminating seized document in support of any of the addition made by the AO for any of the years under reference. It is therefore held that the additions made by AO de hors the reference or foundation in incriminating seized material are not sustainable for any of the assessment year for any of the years under appeal and therefore, the I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 4 same are deleted. Ground No. 2 succeeds for all the years under appeal." 4. Before us, the Department placed reliance on the observations made in the assessment order. In response, the counsel for the assessee submitted that the above decision of Ld. CIT(Appeals) is further fortified by the judgements of the jurisdictional High Court of Gujarat in the case of Saumya Construction [2017] 81 taxmann.com 292 (Gujarat) and Desai Construction 387 ITR 552 (Gujarat) and subsequently in the case of Dipak J. Panchal (2017) 19 CCH 74 (Gujarat High Court). Accordingly, the counsel for the assessee submitted that in absence of any incriminating material found during the course of search, and in light of the judicial precedents cited above, the appeal of the Revenue is liable to be dismissed. 5. We have heard the rival contentions and perused the material on record. In the case of PCIT v. Meeta Gutgutia [2018] 96 taxmann.com 468 (SC), Supreme Court held that invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year. In the case of Pr. CIT v. Saumya Constructions 81 Taxman.com 292 (Gujarat), the Gujarat High Court held that under section 153A, an assessment has to be made in relation to search or acquisition, namely, in relation to material disclosed during search requisitioned. If no incriminating material was found during search, no addition can be made on basis of material collected after the search. The Delhi High Court in the case of Kabul Chabla (2015) 380 ITR 573 (Delhi I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 5 High Court) has held that completed assessment can be interfered by the Assessing Officer while making assessment u/s. 153A 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 ware not produced or not already disclosed or made in the course of original assessment. The SLP filed by the Revenue against the above decision of Delhi High Court was dismissed by the Hon'ble Supreme Court vide SLP(C)No.018651/2016.The Gujarat High Court in the case of Pr. CIT v. Sunrise Finlease 89 Taxman.com 1 (Gujarat) has held that where no incriminating evidence against assessee was found or seized during the course of search so as to attract provisions of section 153A proceedings, no additions could be made on the basis of statement of director of assessee company which were recorded under section 131 much later after search. The Gujarat High Court in the case of PCIT v. Dipak Jashvantlal Panchal [2017] 88 taxmann.com 611 (Gujarat) held that only undisclosed income and undisclosed assets detected during search can be brought to tax in assessment under section 153A of the Act. In the case of PCIT v. Desai Construction (P.) Ltd. [2017] 81 taxmann.com 271 (Gujarat), the Gujarat High Court held that in absence of any incriminating material found during search, Assessing Officer, in assessment under section 153A, would not be entitled to interfere with assessee's claim for deduction under section 80-IA, which was part of original assessment proceedings and such assessment had abated. The ITAT Rajkot Bench in the case of a Rajat Minerals v. DCIT 114 Taxman.com 536 (Ranchi-Trib) held that where no incriminating evidence against the assessee was found or seized during course of search, invocation of I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 6 provisions of section 153A and making additions/disallowances on basis of tax evasion petition found much after search was unjustified. The Delhi High Court in the case of Pr. CIT v. Jaypee financial services Ltd 127 Taxman.com 419 (Delhi), held that where AO during the course of post search proceedings under section 153A against assessee-share trader found certain evidences showing client code modification done by assessee which were not for genuine reasons and, accordingly, made addition on account of such client code modification, since impugned addition was not made by AO based on any incriminating material found during search against assessee and assessment was not pending on date of search, impugned addition was unjustified and same was to be deleted. 6. In the instant case, we observe that search was carried out on 15-06- 2011 and at time of search, it is not in dispute that no proceedings were pending before the Ld. Assessing Officer in respect of the captioned assessment year, and the assessment year 2007-08 was “unabated”. Before us, the Ld. DR has not pointed out any incriminating seized documents or material found during the course of search, on the basis of which the aforesaid additions have been made. Therefore, in view of the judicial precedents cited before us, which have consistently held that additions made by the Ld. Assessing Officer de hors any reference to or foundation in any incriminating material seized during the course of search action, are not sustainable. In view of the above, we are of the considered view that Ld. CIT(Appeals) has not erred in facts and in law in deleting the additions during the course of appellate proceedings. I.T(SS)A No. 181/Ahd/2016 A.Y. 2007-08 Page No DCIT vs. Friends Oil & Chemicals Terminals Pvt. Ltd. 7 7. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 12-08-2022 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 12/08/2022 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot