Sri SaiRameswar Solvents Pvt. Ltd, Jeypore V. ACIR, Central Circle-1, Bhubaneswar

ITSSA 24/CTK/2022

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0803 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 12-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-10-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 03-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 132; 40A(3); 153A

Judgement Text

आयकर अऩीऱीय अधधकरण, कटक न्यायऩीठ,कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK (THROUGH VIRTUAL HEARING) श्री जाजज माथन, न्याययक सदस्य एवं श्री राजेश क ु मार, ऱेखा सदस्य के समक्ष । BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER IT(SS)A N o.24/C TK /2022 (ननधाारण वषा / Asses s m ent Year : 2016-2 017) Sri Sai Rameswar Solvents Pvt Ltd At: Bhadryya Street, Jeypore, Koraput-764001 Vs ACIT, Central Circle-1, Bhubaneswar PAN No. :AAJCS 3201 K (अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent) ननधााररती की ओर से /Assessee by : Shri Sidhartha Ray, Senior Advocate and Shri K.K.Sahoo, Advocate राजस्व की ओर से /Revenue by : Shri Abani Kanta Nayak, CIT-DR स ु नवाई की तारीख / Date of Hearing : 13/10/2023 घोषणा की तारीख/Date of Pronouncement : 13/10/2023 आदेश / O R D E R Per Bench : This is an appeal filed by the assessee against the order of the ld. CIT(A)-2, Bhubaneswar, dated 12.02.2022, passed in I.T.Appeal No.0427/2018-19 for the assessment year 2016-2017. 2. Ld. AR has filed additional grounds in respect of the validity of approval u/s.153D of the Act as also in regard to limitation in respect of the assessment at the time of hearing. Ld. Senior Counsel and the advocate on record has withdrawn the said grounds. Consequently, the said grounds are not being adjudicate upon as admittedly these additional grounds have not been filed with the memo of filing for additional grounds or affidavit in support of the facts in respect of the additions grounds nor any documents in support of the additional grounds have been filed. IT(SS)A No.24/CTK/2022 2 3. Ld. Senior Counsel, on merits, drew our attention to the assessment order to submit that it was an assessment order u/s.153C r.w.s.143(3) of the Act. It was the submission that there was a search on the director’s of the assessee company and survey u/s.133A of the Act was conducted in the premises of the assessee on 12.02.2016. In the assessment framed u/s.143(3) the AO made addition in respect of certain expenses for which no proof had been produced, with regard to the payment to cultivators and hamalis in excess of Rs.20,000/- and consequently invoked the provisions of Section 40A(3) of the Act, so also in respect of miscellaneous expenses. Another addition in respect of difference in stock found during the survey and as per the tally package as also the submissions in the course of assessment had resulted into an addition, so also in respect of suppression of sales. It was the submission that these were not evidences found in the course of search. It was the submission that in fact, no incriminating material had been found in the course of search and consequently in view of the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd., reported in [2023] 454 ITR 212 (SC), in absence of any incriminating material found in the course of search u/s.132 of the Act or requisitioned u/s.132A of the Act, no addition can be made. It was the submission that admittedly these were the issues which were found in the course of survey. It was the submission that in view of the principles laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra), as the additions made in the assessment order were not out of any evidence IT(SS)A No.24/CTK/2022 3 found in the course of search much less incriminating material, the assessment is liable to be annulled. 4. In reply, ld. CIT-DR vehemently supported the order of the ld.AO and CIT(A). 5. We have considered the rival submissions. A perusal of the decision of the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra), more specifically in paras 11 to 14, clearly shows that in absence of any incriminating material found in the course of search u/s.132 of the Act or requisitioned u/s.132A of the Act, no addition can be made. The relevant observations of the Hon’ble Supreme Court in paras 11 to 14 read as under :- 11. As per the provisions of Section 153A, in case of a search under section 132 or requisition under section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the jurisdiction to assess or reassess the 'total income' for the entire six years period/block assessment period. The intention does not seem to be to re-open the completed/unabated assessments, unless any incriminating material is found with respect to concerned assessment year falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the Act, 1961, in case of a search under section 132 or requisition under section 132A and during the search any incriminating material is found, even in case of IT(SS)A No.24/CTK/2022 4 unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the 'total income' taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under section 153A and in case of unabated/completed assessment and in case no incriminating material is found during the search, the power of the Revenue to have the reassessment under sections 147/148 of the Act has to be saved, otherwise the Revenue would be left without remedy. 12. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under section 153A of the Act is linked with the search and requisition under sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and sub-section (2) of Section 153A would be redundant and/or rewriting the said provisions, which is not permissible under the law. 13. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in the case of Kabul Chawla (supra) and the Gujarat High Court in the case of Saumya Construction (supra) and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating material. 14. In view of the above and for the reasons stated above, it is concluded as under: IT(SS)A No.24/CTK/2022 5 (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 'total income' taking into consideration the 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. The Hon’ble Supreme Court in the above case has categorically held in sub-clause (iv) to para 14 that 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. A perusal of the assessment order in the present case clearly shows that in para 8 of the assessment order, the AO has categorically mentioned as under :- 8. During the course of assessment proceedings it was unearthed that the assessee company had made expenditure amounting to Rs.89,59,234/- during the year which paid in the mode of cash of Rs.20,000/- or above in a single day to a single party. Thus, the assessee was asked to explain why the total expenditure amounting to Rs.89,59,234/- will not be disallowed u/s.40A(3) of the IT(SS)A No.24/CTK/2022 6 IT Act and added to the total income. In response to the above question, the assessee has submitted a statement as under:- "For that the cash payments mentioned in the questionaire amounting to Rs.89,59,234/- comprises the expenses as under.- .' a. Expenses below or upto Rs.20,000/- Rs.25,833/- b. Payment to cultivators Rs.33,92,531/- c. Expenses towards Harnal i i.e labour charges Rs.50,81,870/- d. Expenses capitalised in books of account. Rs.3,45,000/- e. Other Mise. expenses Rs.1,14,000/- TOTAL Rs.89,59,234/- 7. Similarly, in regard to the difference in the stock in para 11, the AO has referred to the survey u/s.132A of the Act. This being so, as it is noticed that there is no incriminating material found in the course of search which has been used for the assessment, in view of the principles laid down by the Hon’ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. (supra), the assessment order is liable to be quashed and we do so. 8. However, before parting it must be specifically mentioned here that the in the case of Abhisar Buildwell (P) Ltd.,referred to supra, in sub- clause (iv) to para 14, directions have been given by the Hon’ble Supreme Court. In these circumstances, with identical directions, the assessment order passed u/s.153C r.w.s.143(3) of the Act, dated 29.12.2017 stands quashed. 8. In the result, appeal of the assessee is allowed. Order dictated and pronounced in the open court on 13/10/2023. Sd/- (राजेश क ु मार) (RAJESH KUMAR) Sd/- (जाजज माथन) (GEORGE MATHAN) ऱेखा सदस्य/ ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 13/10/2023 Prakash Kumar Mishra, Sr.P.S. IT(SS)A No.24/CTK/2022 7 आदेश की प्रनतलऱपऩ अग्रेपषत/Copy of the Order forwarded to : आदेशान ु सार/ BY ORDER, (Assistant Registrar) आयकर अऩीऱीय अधधकरण, कटक/ITAT, Cuttack 1. अऩीऱाथी / The Appellant- Sri Sai Rameswar Solvents Pvt Ltd At: Bhadryya Street, Jeypore, Koraput-764001 2. प्रत्यथी / The Respondent- ACIT, Central Circle-1, Bhubaneswar 3. आयकर आय ु क्त(अऩीऱ) / The CIT(A), 4. आयकर आय ु क्त / CIT 5. ववभागीय प्रयतयनधध, आयकर अऩीऱीय अधधकरण, कटक / DR, ITAT, Cuttack 6. गार्ज पाईऱ / Guard file. सत्यावऩत प्रयत //True Copy//