M/s. Yash Trading & Finance Limited, Maharashtra V. DCIT, Central Circle-1, Bhubaneswar

ITSSA 20/CTK/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3932 (ITAT-CUTTACK)
• Duration Of Justice: 5 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 14-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 05-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Search and seizure; Document seized; Valuation report; Documents seized
• Section: 68; 132; 139; 143(3); 153A; 14A; 143(1); 201; 143(2); 72; 153; 119; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BEFORE AND ARUN KHODPIA, ACCOUNTANT MEMBER M/s. Yash Trading & Finance Ltd., Bagri Niwas, 53/55, N.M.Path, Mumbai. (Appellant Per Bench These are of the CIT(A) Nos.0022/2015 0027/15-16 & 0028 respectively. 2. None represented on behalf of the assessee. However, a written submission M.K,Gautam, ld CIT DR appeared on behalf of the revenue. IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI GEORGE MATHAN, JUDICIAL AND ARUN KHODPIA, ACCOUNTANT MEMBER IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013 M/s. Yash Trading & Finance Ltd., Bagri Niwas, 53/55, N.M.Path, Mumbai. Vs. DCIT, Central Circle Bhubaneswar. PAN/GIR No.AAACY 0116 G (Appellant) .. ( Respondent Assessee by : None (written submission) Revenue by : Shri M.K.Gautam, CIT ( Date of Hearing : 15/6 Date of Pronouncement : 15/ O R D E R These are appeals filed by the assessee against the of the CIT(A)-3 Bhubaneswar all dated 3 rd October, 2016 in Appeal Nos.0022/2015-16, 0023/15-16, 0024/15-16, , 0025/15 16 & 0028-15-16 for the assessment years 2007 None represented on behalf of the assessee. However, a written has been sent by the assessee through email. Shri M.K,Gautam, ld CIT DR appeared on behalf of the revenue. Page1 | 15 IN THE INCOME TAX APPELLATE TRIBUNAL, JUDICIAL MEMBER AND ARUN KHODPIA, ACCOUNTANT MEMBER 15 to 21/CTK/2017 08 to 2013-14 DCIT, Central Circle-1, Bhubaneswar. Respondent) None (written submission) CIT (DR) 6/ 2022 /6/2022 ainst the separate orders October, 2016 in Appeal 16, , 0025/15-16, 0026/15-16, s 2007-08 to 2013-14, None represented on behalf of the assessee. However, a written has been sent by the assessee through email. Shri M.K,Gautam, ld CIT DR appeared on behalf of the revenue. IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page2 | 15 3. In the written submission, the assessee has submitted as follows: “ The appellant is a company registered under the Companies Act 1956 carrying on Securities Trading activity as permitted by the law. The appellant company is listed on the floor of the BSE. Before takeover of controlling stake of the said company the same was under control of Shri Uttam B Bagri. M/s Arth Tatwa Group of Bhubaneshwar purchased the controlling stake from Uttam Bagri group on the floor of stock exchange on 15/07/2011 relevant to FY 2011-12. Thereafter on 11/04/2012 there was a search and seizure action on M/s Arth Tatwa Group, Bhubaneshwar by the Investigation Wing. Pursuant to search action on M/s Arth Tatwa Group all cases pertaining to group were centralised. However the case of appellant company was not centralised at that time but later on covered u/s 153C of the Act by holding that during assessment proceedings of M/s Arth Tatwa Group the Ld AO stated to have found some incriminating document/material pertaining to appellant company for which he recorded satisfaction and issued notice u/s 153C of the IT Act 1961. Here it is pertinent to bring to your honour’s notice that no such satisfaction as mentioned in the assessment was recorded before issuing notice u/s 153C of the IT Act in the case of person searched. The Ld AO without bringing on record any valid satisfaction issued notice and completed the assessment without even bringing on record any discrepancy or incriminating material being found related to appellant company during the course of search action. It is pertinent to mention before your honour that had the Ld AO in possession of any incriminating material/evidence he is duty bound to discuss the same in the assessment order, issued show cause notice relevant to incriminating material, asked details/explanations, etc relating to seized incriminating material which he did not and disallowed legitimate expenses on adhoc basis that too without considering that the a/c’s of the company are subject to Audit under Companies act 1956 and also under scrutiny of BSE. The Ld AO summarily rejected our legitimate claim of expenses and made addition on estimated basis. Aggrieved by the said disallowance we filed an appeal before Hon’ble CIT(A) who gave partial relief. Aggrieved by the said order of Hon’ble CIT(A) we are in appeal before your honour. In the appeal filed before your honour the following two grounds have been raised: Ground No.1 is in respect of dismissal of ground of appeal by the Hon’ble CIT(A) holding that issue of notice u/s 153C is held to be valid even if no incriminating material is found pursuant to search action u/s 132 of the Act on M/s Arth Tatwa Group. In this connection in addition to submission made before Hon’ble CIT(A) we have to submit as under: 1.1. The appellant is a company having registered office at Mumbai. IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page3 | 15 1.2. The shares of the said company were listed on the BSE Ltd during that period however at present suspended. 1.3. The major shares of the company, were held by Uttam Bagri. In the year 2011-12 the Uttam Bagri sold these shares to Mr. Pradeep Sethi promoter of M/s. Artha Tatwa Group and thereafter obtained necessary permission from the regulatory body SEBI & BSE under Take Over Code. Pursuant to which Mr. Pradeep Sethi group became the major share holder of the company who holds 70% share capital of the company & represents M/s. Artha Tatwa Group. 1.4. There was a search and seizure action u/s.132 of the IT Act 1961 on M/s. Artha Tatwa Group on 11.04.2012 in which they might have found/seized some papers or documents pertaining to the activities of M/s. Artha Tatwa Group as stated by the Ld AO. However it seems from the assessment order that the Ld AO did not find any document/paper pertaining to the activity of the appellant company for the reason that had the Ld AO in possession of any documents he would have provided the copy to appellant or discussed the said papers in assessment order. The Ld AO allegedly concluded that there are certain incriminating documents/papers belonging to the impugned company & applied provisions of section 153C of the IT Act. 1.5. The Ld AO without in possession of any incriminating documents/materials allegedly recorded satisfaction about materials being found pursuant to search action u/s.132 on M/s. Artha Tatwa Group and issued notice u/s.153C of the IT Act, 1961. Here it is pertinent to mention before your honour that first of all there was not a single incriminating documents/papers/ records being found pertaining to activity of appellant company pursuant to search action on Artha Tatwa Group. Had there been so the Ld AO would have provided us the copy of such documents pursuant to recording of satisfaction neither discussed the same in assessment order nor made the addition on the basis of any incriminating material being found. The Ld AO without in possession of any incriminating documents assessed the income of the appellant in casual routine manner by making adhoc disallowances of expenses which were otherwise legitimate and exclusively incurred for the purposes of business. In view of all these facts the assessment made u/s 153C is bad in law and not sustainable as the same is not covered by the provisions of section 153C. Before dwelling upon the issue it is worthwhile to discuss the provisions of section 153C of the IT Act 1961 which reads as under: “153C Notwithstanding anything contained in section 139 , section 147, section 149 , section 151 and section 153 , where the Assessing Officer is satisfied that any, bullion , jewellery or other valuable article or thing or books of account or documents seized or IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page4 | 15 requisitioned belongs or belong to a person other than the person referred to in section 153A , then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person by the Finance Act, 2015, w.e.f. 1-6-2015.” On a plain reading of the said section 153A, it is evident that the Assessing Officer of the searched person must be satisfied that the documents seized during the course of search ‘belong’ to a person other than the one who was searched. It is only when the Assessing Officer of the searched person gets satisfied about this condition, he can handover such document to the officer of the assessee having jurisdiction over such other person. The said fact is substantiated by the following decisions of Hon’ble Delhi High Court in the case of Pepsi Co Foods Pvt Ltd.” A reading of the judgment of the Delhi High Court, your honour may observe that in para 6 of the order, the Hon'ble Court has summarized the steps to be taken before issue of notice under section 153C of the Act. The first step is that the Assessing Officer of the person, who is searched, must arrive at a clear satisfaction that the documents seized from him do not belong to searched person but to some other person. The second step is when such satisfaction is arrived at then the documents are to be handed over to the Assessing Officer of the person to whom the said documents belong. After analyzing the provisions of section 132(4A)(i) and 292C(1)(i) of the Act the Court reached to a conclusion that it is for the Assessing Officer to rebut the presumption provided in these sections and come to a conclusion or satisfaction that the documents in fact belong to somebody else. There must be some cogent material available with the Assessing Officer before he arrives at satisfaction that the seized document does not ‘belong’ to the searched person but to somebody else. The Hon'ble Court also emphasized that surmise and conjecture cannot take the place of satisfaction. A very important finding in this regard has been given by the Court at the end of para 7 in this judgment, which reads as under: “In our view, the Assessing Officer is required to arrive at a conclusive satisfaction that the document belongs to a person other than the searched person because such Assessing Officer has to rebut the normal presumptions which are suggested by the statute under Sections 132(4A)(i) and 292C(l)(i) of the said Act.” After referring to the satisfaction note as was recorded in that case, the Hon'ble High Court came to a conclusion at para 11, which reads as under: “11. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under Section 153C, there is nothing which would indicate as IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page5 | 15 to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word "satisfaction" or the words "I am satisfied" in the order or the note would not meet the requirement of the concept of satisfaction as used in Section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid, that going through the contents of the satisfaction note, we are unable to discern any "satisfaction" of the kind required under Section 153C of the said Act.” On perusal of the above and applying the proposition as laid down by the Hon'ble Delhi High Court in the facts of the present case, we see that there is nothing coming out of the satisfaction note that the seized documents belong to the assessee. Further, there is nothing which would indicate as to how the presumption which was to be raised against the person searched have been rebutted by the Assessing Officer. The satisfaction note does not at all display the reason or basis for the conclusion that the Assessing Officer is satisfied that these documents ‘belong’ to the assessee. Your honour will appreciate that our case is squarely covered by the aforesaid decision because in the appellant’s case the 3 steps prescribed by the Hon’ble Judges have not been complied with. The same view has been followed in the below mentioned decisions also: National Industrial Corpn Ltd v DCIT ITA No.2539/Del/2011 (Hon’ble Delhi ITAT) Smt Madhu Mangal v DCIT ITA No.489 & 523/CHD/2015 Megh Mani Organics Ltd v DCIT 129 TTJ 255 P.Shrinivas Naik v ACIT (2009) 117 ITD 201 (Banglore) Vijaybhai N. Chandrani vs ACIT (2011) 333 ITR 436 (Hon’ble Guj High Court0 1.6. Support is also taken from the following decisions which relates to assessment of income in pursuance of issue of notice u/s. 153A of the Act wherein no such incriminating documents have been found pursuant to search u/s. 132 of the Act the addition has been held to be invalid. CIT vs Continental Warehousing Corporation (Hon’ble Mumbai High Court) Special Bench decision in the case of Allcargo Global Logistics Ltd vs DCIT – 2012-TIOL-391-ITAT-MUM-SB which has later on been upheld by Jurisdictional Hon’ble Mumbai High Court. ACIT vs Shri Anil Mahavir Gupta (Hon’ble Mumbai ITAT) IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page6 | 15 Coordinate Bench decisions in the case of Pratibha Industries Ltd (supra) Gurinder Singh Bawa CIT v Kabul Chawla ITA No. 707/2014 and others CIT v Anilkumar Bhatia (2013) 352 ITR 493 Del Rajashthan High Court judgment in the case of Jai Steel (India) Ltd. The fact & decision of the said case is discussed hereunder: “In the aforesaid decision it has been held that completed assessment, such as the present one, assessment will be made only on the basis of books of accounts or other documents not produced in the original assessment but in the course of the search and undisclosed income or property discovered in the course of the search. None of these conditions are met by the revenue before issuing of the notice u/s. 153A of the Act or before making additions. Therefore, as per the Ld counsel, the impugned notice is invalid one and additions should be deleted. Fairly referring to the Delhi High Court judgment in the case of CIT vs Anil Kumar Bhatia vide ITA No. 1626/2010, dated 07/08/2012 (Del) = (2012-TIOL- 641-HC-DEL-IT), Ld Counsel mentioned that this issue regarding the addition to be made in a completed assessment where no incriminating material was found was left open. Para 23 of the said judgment is relevant in this regard. Further relying on the order of the ITAT, Jodhpur in the case of Dinesh Tabacco Industries vs DCIT vide ITA No. 184 & 185/JU/2011 dated 22/02/2013, Ld Counsel reiterated that the notice becomes invalid when there is no incriminating material. Similar view was repeated by the Ld Counsel by relying on the decision of the ITAT, Kolkata in the case of LMJ International Ltd vs DCIT 119 TTJ 214 (Kol). The said decision of the ITAT Kolkata is relevant for the proposition that where nothing incriminating was found in course of search relating to assessments, assessment for such years cannot be disturbed. He culled out many other decisions which are as under. a) Nikki Agarwal vs ACIT Central Circle 32 Mumbai ITA No. 879/8915/8916/8809 & Co No. 204 b) Anil P Khimani vs DCIT 2010 TIOL-177-ITAT-MUM c) Meghmani Organics Ltd vs DCIT [2010] 36 DTR 187 (Ahd) d) Suncity Allys Pvt Ltd vs ACIT [2009] 124 TTJ 674 (Jodh) e) ACIT vs PACL India Ltd [ITA No. 2637/Del/2010] = (2013-TIOL- 734-ITAT-DEL) f) Shri Deepen A Parekh vs ACIT [ITA No. 467/Mum/2011] IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page7 | 15 g) MGF Automobiles Ltd vs ACIT [ITA No. 4212 & 4213/Del/2011] = (2013-TIOL-747-ITAT-DEL) However in case of completed assessments AO is empowered to make additions only based on the incriminating materials and not otherwise Jai Steel (India) Ltd (supra), LMJ International Ltd (supra), Gurinder Singh Bawa (supra) etc. For making the routine additions which are normally done in regular assessments. The completed assessment need not be disturbed by invoking the provisions of section 153A of the Act if not for reiterating the returned or assessed income as the case may be. Judgment in the case of Jai Steel (India) Ltd (supra) supports the above legal proposition. As per the assessee, regarding the cases of abated assessments, considering the scheme of assessments u/s. 153A, per contra, even the routine additions are done in these assessments. We have heard the parties and their divergent stands on the legal issue and the validity of the instant assessment/reassessment with the routine additions u/s. 68 and section 14A of the Act based on the accounted transactions. The instant case for the AY 2002-03 deals with the case of disturbing the ‘completed assessment’. Earlier the assessment was completed u/s. 143(1) of the Act. Completeness of the summary assessment is considered and held in favour of the assessee vide many judgments cited above. In the assessment u/s. 153A the AO made (i) Addition u/s. 68 on account of artificially inflated investment in house duly disclosed in the balance sheet of the assessee Rs. 31,33,070/-; and (ii) disallowance u/s. 14A: Rs. 23,31,469/-. Admittedly, there is no incriminating material before the AO to support the above additions. The valuation report which is garnered by the authorities constitutes mere estimates and as per the provision of section 132 it is not required to obtain such report from the DVO. As such, for making aforesaid additions of Rs. 31,33,070/-, AO has not used even the said valuation report and the AO disallowed what is reported in the books. Similar is the case with the additions u/s. 14A of the Act. Therefore, undisputedly, the impugned quantum additions are made merely based on the entries in the accounted books and certainly not based on either the unaccounted books of accounts of the assessee or books not produced to the AO earlier or the incriminating material gathered by the investigation wing of the revenue. Considering the legal propositions placed before us by the assessee’s counsel, we are of the opinion, such assessments or additions are unsustainable in law.” IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page8 | 15 For the sake of completeness we insert here some of the extracts from relevant judgments and they are: A. [2013 36 taxmann.com 523 (Rajasthan) in the case of Jai Steel (India) vs ACIT from Held portion: ...The requirement of assessment or reassessment under the said section has to be read in the context of sections 132 or 132A, in as much as, in case nothing incriminating is found on account of such search or requisition, then question of reassessment of concluded assessments does not arise, which would require more reiteration and it is only in the context of the abated assessment under second proviso which is required to be assessed. ....From a plain reading of the provision along with the purpose and purport of the said provisions, which is intricately linked with search and requisition under sections 132 and 132A, it is apparent that: (a) the assessments or reassessments, which stands abated in terms of second proviso to section 153A, the Assessing Officer acts under his original jurisdiction for which assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. .....The argument of the assessee that the Assessing Officer is also free to disturb income, expenditure or deduction de hors the incriminating material, while making assessment under section 153A is also not borne out from the scheme of the said provision which as noticed above is essentially in context of search and/or requisition. Para 26 of the Judgment: The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years is merely reading the said provision in isolation and not in the context of the entire section. The words ‘assess’ or reassess have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word ‘assess’ has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings which would not abate as they are not pending on the date initiation of the search or IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page9 | 15 making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. B. [2012] 28 Taxmann.com 328 (Mumbai-Trib) in the case of Gurinder Singh Bava vs DCIT ...Whether since assessment under section 153A was passed by Assessing Officer on basis of material available in return of income and there was no reference to any incriminating material found during search and since no assessment was abated, assessment under section 153A was to be quashed being made without jurisdiction available under section 153A-Held, yes [Para 6.2] [In favour of assessee] Para 6.1 of the order: The Special bench in the case of Alcargo Global Logistics Ltd (supra), has held that provisions of section 153A come into operation if a search or requisition is initiated after 31/05/2003 and on satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income for six years immediately preceding the year of search. The Special Bench further held that in case assessment has abated, the AO retains the original jurisdiction as well as jurisdiction under section 153A for which assessment shall be made for each assessment year separately. Thus in case where assessment has abated the AO can make additions in the assessment, even if no incriminating material has been found. But in other cases the Special Bench held that the assessment under section 153A can be made on the basis of incriminating material which in the context of relevant provisions means books of account and other documents found in the course of search but not produced in the course of original assessment and undisclosed income or property disclosed during the course of search. In the present case, the assessment had been completed under summary scheme under section 143(1) and time limit for issue of notice under section 143(2) had expired on the date of search. Therefore, there was no assessment pending in this case and in such a case there was no question of abatement. Therefore, addition could be made only on the basis of incriminating material found during search. C. Alcargo Global Logistics Ltd v Deputy Commissioner of Income Tax Central Circle-44 [2012] 23 taxmann.com 103 (Mum) (SB) = (2012- TIOL-391-ITAT-MUM-SB) (a) In assessments that are abated the AO retains the original jurisdiction as well as jurisdiction conferred on him u/s. 153A will be IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page10 | 15 made on the basis of incriminating material which in the context of relevant provisions means- (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (ii) undisclosed income or property discovered in the course of search. Thus, in case of the completed assessments either u/s. 143(1) or 143(3), the above extracts are uniform in advocating against making additions in routine manner in the assessments made u/s. 153A of the Act when there is no incriminating material gathered in the search action. Statutory notice u/s. 153A of the Act can also be issued to reassessee the returned income or for making additions based on the incriminating material or unproduced books of account. Otherwise, additions made in routine matter as in the present appeal are not sustainable. Further, for the sake of completeness of the order, we have perused the orders/judgments relied upon by Ld DR for the revenue and found they are distinguishable on facts for one reason or other. To start with we have perused the judgment of Hon’ble Delhi High Court in the case Madugula Venu (supra) and find that though, explained the provisions in plain language, it does not dealt with the relevance or factum of incriminating material. Further the judgment of Andhra Pradesh High Court in the case of Gopal Lal Bhadruka (supra) is not on the notices issued u/s. 153A of the Act and the same is pronounced in the context of the notice u/s. 153C of the Act. Further also the coordinate Bench decision in the case of Scope (P) Ltd (supra) has granted relief to the assessee though the notice issued u/s. 153A of the Act was upheld. However this order has not considered the then existing decision of the coordinate Bench decision in the case of Pratibha Industries Ltd (supra) which is relevant for the proposition that the completed assessment may not be disturbed in the absence of any incriminating material specific to the assessee. In fact, all these judgments take spirit from the Special Bench decision in the case of Alcargo Global Logistics Ltd (supra) which is relevant for the proposition that the assessment u/s. 153A will be made on the basis of incriminating material such as books of accounts, other documents found in the search but not produced in the course of original assessment and undisclosed income or property discovered in the course of the search. We also find that the CIT(A) made a reference to the incriminating material, which yielded disclosure of some undisclosed income. But on perusal of the documents, we find that the CIT(A) entered into an error zone and the disclosure is only Rs. 5 Crores in this case and IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page11 | 15 the same relates to the lands deals. In principle this disclosure has nothing do with the impugned additions u/s. 68 or 14A of the Act. In the instant case, specific to the assessee, no incriminating material with the details was referred either in the assessment order or in the order of the CIT(A) for making the impugned additions. As per the cited judgment in the case of Jai Steels Ltd supra the assessment u/s. 153A is only for reassessment rather than making any additions in a routine manner without the strength of the incriminating materials. Similar view was taken up by the ITAT, Delhi ‘H’ Bnech in the case of V K Fiscal Services P Ltd vs DCIT vide ITA No. 5460 to 5465/Del/2012 (www.itatonline.org). Therefore following the aforesaid judicial pronouncements, facts of the case where there is no such incriminating material being found pursuant to search action it has been held that the proceedings have to be closed irrespective of the fact that assessing officer is bound to obtain the return from the assessee for six assessment years as per provisions of section 153A of the IT Act 1961. Since assessment u/s 153C is based on provisions of section 153A the assessment made on appellant company without there being any incriminating material being found from searched person pertaining/relating to appellant company the addition made on estimate basis is unjustified and even the assessment is invalid. In this respect reliance is placed on the following plethora of judicial pronouncements wherein the assessment made without incriminating material found from the possession of searched person is held to be invalid. Merigold Mechandise (P) Ltd v DCIT Central Circle Faridabad ITA No. 2666 & 2667 of 2013 (Delhi ITAT) ACIT v PACL India Ltd CIT A No. 2637 (Delhi) of 2010 dated 20/06/2013 Kusum Gupta v DCIT ITA No. 4873Delhi of 2009 dated 28/03/2013 SKS Ispat & Power Ltd v DCIT CC 45 ITA No. 8746 & 8747 G O No. 183 to 186/M/2012 order dated 07/05/2014 (Mumbai ITAT) Parivar Properties (P) Ltd vs DCIT Cental Circle 12 ITA No. 1011 to 1015 Delhi of 2013 (Delhi ITAT) Vijaybhai N Chandrani v ACIT 231 CTR 474 (Guj High Court) Without prejudice to the validity of assessment/decision of first ground of appeal we discuss the second ground of appeal on merit as under: IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page12 | 15 Second ground of appeal is in respect of direction by the Hon’ble CIT(A) to the Ld AO to restrict the disallowances of expenses to the extent of 10%. In this regard it is submitted before your honour that the Hon’ble CIT(A) without any valid reason directed the Ld AO to restrict the disallowance to the extent of 10% rather than allowing full expenses. In connection with impugned ground we have to submit as under: 1) The appellant is a company and the shares of the company are listed on BSE Ltd. 2) The accounts of the company are subject to Audit and auditors have not pointed out/reported any discrepancy in the accounts. 3) None of the expenses are personal in nature. In respect of all the expenses there is a voucher which is verified & checked by the Director and even the auditor before making disbursement. 4) All the expenses incurred pertains to the business being carried on by the company. 5) None of the expenses are excessive as compared to the income and almost all the expenses are related to business being carried on by the appellant company. 6) To prove that the disallowance is on assumption and in routine manner your attention is drawn to the nature of expenses. The Ld AO has made adhoc disallowance in respect of following expenses viz Salaries & Wages, Interest paid, Depreciation, Rent paid, ROC charges, STT paid, other expenses, etc which by no imagination can be disallowed as are purely and exclusively incurred for the purposes of business only. 7) A perusal of disallowances made it is clear that the Ld AO did not apply his mind and disallowed the expenses in routine and casual manner as can be seen from disallowance in respect of depreciation, ROC expenses, STT paid to Govt Treasury, etc. 8) Without prejudice to the above disallowance your honour’s attention is drawn to the assessment order of the predecessor Ld AO who has completed the scrutiny assessment u/s 143(3) of the Act after verifying the details in depth where in no disallowance has been made. Since no disallowance is made no disallowance/ addition should have been made while completing the assessment u/s 144 r.w.s 153C of the Act unless the Ld AO is in possession of any incriminating material. Disallowance/addition can be made only IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page13 | 15 when the Ld AO is in possession of incriminating material. Our view is supported by the decisions cited in next para. 9) Lastly we rely on the following decisions where in it is held that adhoc disallowance cannot be made in the hands of the company without there being an adverse evidence: CIT V Indo Saudi Services (Travel) (P) Ltd (2008) 219 CITR Mum 562 (Supra) CIT V Chandanlal Keshawlal & Co. (1960) 38 ITR 601 (SC) JK Woolen Mfrs v CIT (1969) 72 ITR 612 (SC) Alluminium Corp of India Ltd v CIT (1972) 86 ITR 11 (SC) Friends Clearing Agency (P) Ltd v CIT 237 CTR 464/332 ITR 269 CIT V SSP(P) Ltd [2011] 202 Taxman 386/14 taxmann.com 87 (Punj & Har) CIT, Faridabad vs SSP(P) Ltd [2011] 14 taxmann.com87( Punj & Har) From the aforesaid facts and submission your honour will appreciate & admit that the impugned notice issued u/s.153C of the IT Act,1961 and consequent assessment needs to be held as invalid alternatively on merit also without there being any adverse evidence the adhoc addition made to the returned income needs forthwith deletion. We hope your honour will find the above in order and oblige.” 4. It was the submission of the ld CIT DR that there was a search & seizure action on the premises of M/s. Arth Tatwa Group at Bhubaneswar on 11.4.2012. In the course of search, certain documents relating to the assessee are alleged to have been found. It is submitted by the assessee in its written submission that there was no satisfaction recorded in the case of the assessee for transferring the documents found in the course of search IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page14 | 15 by the AO of the person searched to the Assessing Officer of the assessee for the purpose of initiating proceedings u/s. 153C of the Act. To a specific query to ld CIT DR to produce the satisfaction note, he has submitted that he is unable to present the same at this point of time. However, ld CIT DR submitted that in para 2 of the assessment order, the AO has recorded that he has satisfaction and after that he has issued notice u/s.153C of the Act. As the ld CIT DR is unable to produce the copy of the satisfaction note in the case of the assessee by the AO of the person searched for the purpose of transfer of documents founds, to the AO of the assessee nor the satisfaction note by the AO of the assessee before initiating the proceedings u/.s.153C of the Act, the legal requirements having not been complied with and the foundation being not led, the assessment proceedings become invalidated. Consequently, the assessment order becomes null and void. Our view finds support from the decision of the Hon’ble Delhi High Court in the case of Pepsico India Holdings Pvt Ltd , 370 ITR 295 (Del) N.S.SoftWare, 403 ITR 259 (Del) and Pepsi Foods Pvt Ltd., 231 Taxman 58 (Del). Similar is the view expressed by the Hon’ble Jurisdictional High Court in the case of Sri Sai Cashews v. Chief Commissioner of Income Tax in Writ Petition (Civil) No. 2936 of 2018, decided on 23-08-20215. A perusal of the written submission also shows that there is allegation that there was no incriminating document found in the course of search. We are not going IT(ss)A Nos.15 to 21/CTK/2017 Assessment Years : 2007-08 to 2013-14 Page15 | 15 into the issue of incriminating materials found pursuant to search. Consequently, the appeals of the assessee stand allowed. 5. In the result, all the appeals filed by the assessee are allowed. Order dictated and pronounced in the open court on 15/6/2022. Sd/- sd/- (Arun Khodpia) (George Mathan) ACCOUNTANT MEMBER JUDICIAL MEMBER Cuttack; Dated 15 /06/2022 B.K.Parida, SPS (OS) Copy of the Order forwarded to : By order Sr.Pvt.secretary ITAT, Cuttack 1. The Appellant : M/s. Yash Trading & Finance Ltd., Bagri Niwas, 53/55, N.M.Path, Mumbai 2. The respondent: DCIT, Central Circle-1, Bhubaneswar. 3. The CIT(A)-3, Bhubaneswar 4. Pr.CIT-, Bhubaneswar 5. DR, ITAT, Cuttack 6. Guard file. //True Copy//