GPT Sons (P) Ltd, Kolkata V. DCIT, Cen.Cir.-3(1) , Kolkata

ITSSA 26/KOL/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4731 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 1 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 17-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 15-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Document seized; Question of law; Assessment record; Documents seized
• Section: 147; 132; 139; 143(3); 142(1); 153A; 133(6); 143(1); 143(2); 158BC; 153; 153C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri Rajpal Yadav, Vice-President(KZ) & Shri Rajesh Kumar, Accountant Member] I.T.(SS)A. Nos. 26 & 27/Kol/2021 Assessment Years : 2014-15 & 2013-14 GPT Sons (P) Ltd. (PAN: AADCG 9070 E) Vs. DCIT,C.C-3(1), Kolkata Appellant Respondent Date of Hearing 29.03.2022 Date of Pronouncement 18.04.2022 For the Appellant Shri A.K. Tibrewal, FCA Shri Amit Agrawal, Advocate For the Respondent Smt. Sucheta Chattopadhyay Roy, CITDR ORDER Per Shri Rajpal Yadav, Vice-President: The present two appeals are directed at the instance of assessee against the separate orders of Ld. CIT(A) dated 17.09.2021 passed in AYs. 2013-14 & 2014-15 respectively. 2. The assessee has taken 11 grounds of appeal in both the assessment years. However, the ld. Counsel for the assessee at the very outset submitted that solitary substantial ground of appeal involving in both the years is, whether additions can be made in the assessments passed u/s 153A without any incriminating material found during the course of search relating to these two assessment years. 3. The facts on all the vital points are common in both the assessment years. However for the facility of reference we are taking up the facts from AY 2013-14 i.e. IT(SS)A No. 27/Kol/2021. 4. The brief facts of the case are that the assessee has filed its return of income u/s 139 of the Income Tax Act, 1961 (hereinafter referred to as the Act) on 26.09.2013 2 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. and 29.11.2014 declaring total income at Rs. 38,11,850/- and Rs. 6,30,000/- in AY 2013-14 and 2014-15 respectively. The scrutiny assessments in both the years have been passed on 28.03.2016 and 26.12.2016 respectively. A search u/s 132 of the Act was conducted on 12.09.2017 and subsequent dates in GPT Group of cases. According to the AO the business premises of the assessee as well as residential premises of the directors were searched which led to discovery of incriminating materials, therefore, he issued notice u/s 153A of the Act in the case of assessee for both the years. The Ld. AO thereafter passed the assessment order on 30.12.2019 in both the years. The AO has determined the taxable income of the assessee at Rs. 3,41,07,970/- and Rs. 60,65,410/- in AYs. 2013-14 & 2014-15 respectively. 5. Appeal to the Ld. CIT(A) did not bring any relief to the assessee. 6. The ld. Counsel for the assessee took us through the finding of the AO from paragraph no. 4 onwards and submitted that the ld. AO has nowhere made reference to any seized material. He investigated the unsecured loan transaction by issuance of notice u/s 133(6) to the lender companies as if he was passing regular assessment order u/s 143(3) or 147 of the Act. According to ld. Counsel for the assessee this is not a searched year and he is not supposed to make additions in this manner. For buttressing his contention he placed reliance a large number of decisions whose copies have been placed on the record. The index of the case law paper book read as under: 3 IT(SS)A Nos. 26 & 27IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. 4 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. 7. On the other hand, the ld. CITDR contended that there were large number of documents found and seized during the course of search. After perusal of all these documents, the Ld. AO culled out specific points which were required to be investigated. Hence he has followed correct procedures. She relied upon the order of the revenue authorities. 8. We have duly considered rival contentions and gone through the record carefully. Before adverting to the facts and alleged seized material considered by the ld.AO for making the addition in the hands of the present assessees, we deem it appropriate to bear in mind the position of law propounded in various authoritative judgments expounding scope of section 153A of the Act. We are of the view that in this regard, there were large numbers of decisions. First we refer to the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla, 380 ITR 573 (Del). Hon'ble Delhi High Court after detailed analysis has summarized the following legal position: 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 5 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. 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." ITAT, Delhi Bench in the case of DIT Vs. Smt. Shivali Mahajan and others, rendered in ITA No.5585/Del/2015 has considered this aspect in its decision. Thereafter, the Tribunal has specifically held that serial no.(iv) of the above proposition, the Hon'ble Delhi High Court has specifically held that assessment under section 153A of the Act has to be specifically made on the basis of seized material. ITAT Delhi Bench was considering an aspect whether the evidence in the shape of books of accounts, money, bullion, jewellery found during the course of search relates to other person than the searched person, can that be considered while making assessment under section 153A of the Act. ITAT Delhi Bench has specifically held that material recovered from the premises of other person cannot be used in the hands of the searched person. For that purpose an assessment under section 153C or 147 is to be made. At this stage, in order to fortify ourselves, we would like to make reference to the following paragraphs of the ITAT Delhi Bench's order. It reads as under: “15. Thus, when during the course of search of an assessee any books, document or money, bullion, jewellery etc. is found which relates to a person other than the person searched, then the Assessing Officer of the person searched shall hand over such books of account, documents, or valuables to the Assessing Officer of such other person and thereafter, the Assessing Officer of such other person can proceed against such other person. However, in the case under appeal before us, admittedly, Section 153C is not invoked in the case of the assessee and the assessment is framed under Section 153A. We, respectfully following the above decisions of Hon'ble Jurisdictional High Court, hold that during the course of assessment under Section 153A, the incriminating material, if any, found during the course of search of the assessee only can be utilized and not the material found in the search of any other person." Order of the ITAT Delhi Bench in other cases viz. Asha Rani Lakhotia vs. ACIT and Subhag Khattar Vs. ACIT are on the same line. 6 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. Hon'ble Delhi High Court in the case of Subhag Khattar in Tax Appeal No.60 of 2017 has considered the following question of law: "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the additions made under Section 153A read with Section 143(3) of the Income Tax Act, 1961 in the circumstances of the case, were not justified and supportable in law?" After putting reliance upon its decision in the case of CIT Vs. Kabul Chawla (supra) has replied this question as under: "6. The Assessee went in appeal before the Commissioner of Income Tax (Appeals) who dismissed it by an order dated 27th November, 2014. A further appeal was filed by the Assessee before the ITAT. The ITAT, inter alia, found substance in the contention of the Assessee that the assessment under Section 153(A) of the Act, in the absence of any incriminating material found during the search on the premises of the Assessee was not sustainable in law. Reliance was placed on the decision of this Court in Commissioner of Income Tax v. Kabul Chawla, [2016] 380 ITR 573. 7. A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153A of the Act was misconceived since the so- called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not under Section 153A. This goes to the root of the matter." 9. Hon'ble Court has specifically observed for the purpose of section 153A that only seized material is required. However, if there is any other incriminating material belong to the assessee found at the premises of the some other person, then the assessment has to be made under other provisions and not under section 153A of the Act. 10. Hon'ble Gujrat High Court has also considered the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra). Hon'ble Gujarat High Court framed the following question of law in the case of Pr.CIT Vs. Saumya Construction (supra): "[A] Whether the order of Tribunal is right in law and on facts in deleting the addition made in assessment made u/s 153A of the Act? [B] Whether the Tribunal is right in law in holding that the addition should be based on the incriminating material found during the course of search under new procedure of assessment 7 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. u/s 153A which is different from earlier procedure u/s 158BC r.w.s. 158BB of the Act and by reading into the section, the words 'the incriminating material found during the course of search' which are not there in section 153A? [C] Whether the Tribunal erred in relying on the ITAT order in Sanjay Aggarwal v. DCIT (2014) 47 Taxmann.Com 210 (Del) which has interpreted undisclosed income unearthed during the search to imply incriminating material, as against the finding of the Delhi High Court in Filatex India Ltd. v. CIT- IV (2015) 229 Taxman 555 wherein it is held that during the assessment u/s 153A additions need not be restricted or limited to incriminating material found during the course of search?" 35. Hon'ble Court concurred with the decision of Hon'ble Delhi High Court. We deem it appropriate to take note of relevant part of the decision, which reads as under: "16. Section 153A bears the heading "Assessment in case of search or requisition". It is well settled as held by the Supreme Court in a catena of decisions that the heading of the section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153, the intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. 17. In the facts of the present case, a search came to be conducted on 07.10.2009 and the notice was issued to the assessee under section 153A of the Act for assessment year 2006-07 on 04.08.2010. In response to the notice, the assessee filed return of income on 18.11.2010. In terms of section 153B, the assessment was required to be completed within a period of two years from the end of the financial year in which the search came to be carried out, namely, on or before 31st March, 2012. Here, insofar as the impugned addition is concerned, the notice in respect thereof came to be issued on 19.12.2011 seeking an explanation from the assessee. The assessee gave its response by reply dated 21.12.2011 calling upon the Assessing Officer to provide copies of statements recorded on oath of Shri Rohit P. Modi and Smt. Pareshaben K. Modi during the search as well as the copies of the documents upon which the department placed reliance for the purpose of making the proposed addition as well as the copy of the explanation given by Shri Rohit P. Modi and Smt. Pareshaben K. Modi regarding the on-money received, copies of the assessment orders in case of said persons and also requested the Assessing Officer to permit him to cross-examine the said persons. The 8 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. Assessing Officer issued summons to the said persons, however, they were out of station and it was not known as to when they would return. In this backdrop, without affording any opportunity to the assessee to cross-examine the said persons, the Assessing Officer made the addition in question. 18. In this case, it is not the case of the appellant that any incriminating material in respect of the assessment year under consideration was found during the course of search. At the relevant time when the notice came to be issued under section 153A of the Act, the assessee filed its return of income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs.11,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as, the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, an assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur (supra). Besides, as rightly pointed out by the learned counsel for the respondent, the controversy involved in the present case stands concluded by the decision of this court in the case of Jayaben Ratilal Sorathia (supra) wherein it has been held that while it cannot be disputed that considering section 153A of the Act, the Assessing Officer can reopen and/or assess the return with respect to six preceding years; however, there must be some incriminating material available with the Assessing Officer with respect to the sale transactions in the particular assessment year. 20. For the foregoing reasons, it is not possible to state that the impugned order passed by the Tribunal suffers from any legal infirmity so as to give rise to a question of law, much less, a substantial question of law, warranting interference. The appeal, therefore, fails and is, accordingly, dismissed." 11. It is also pertinent to note that, in the case of Kabul Chawla (supra), the Hon’ble Delhi High Court in its concluding paragraph has observed that, on the date of the search, the assessments for assessment years 2002-03, 2005-06 and 2006-07 already stood completed and the returns in these years were accepted under Section 9 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. 143(1) of the Act and these acceptance of returns processed under Section 143(1) of the Act was construed by the Hon’ble Delhi Court as completion of assessments and this acceptance of return, according to the Hon’ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. 12. The position of law in other decisions referred by the ld. Counsel for the assessee is identical; particularly we have considered the judgment of Hon’ble Jurisdictional High Court in the case of PCIT vs. Salasar Stock Broking Pvt. Ltd. (supra). 13. In the light of the above let us examine the facts considered by the AO, we deem it appropriate to take note of the finding recorded by the AO from paragraph No. 4A in AY 2013-14. The relevant part is as under: 4.A. Cash and Jewellary found at Premises of the assessee and others are as under: In assessment proceedings, the assessee was asked to explain the ownership & source of cash/jewellery/other valuable found during the course of search and seizure operation. In reply, the assessee submitted that out of the total cash found Rs. 24,572/- belongs to the assessee which was withdrawn from bank for office expenses. 4.B. Bank Accounts: In course of search and seizure proceedings, in different premises as well as in different survey spots, different bank accounts were found and inventories. In course of assessment proceedings, different assessees were asked in this regard and reply of which is available in the assessment record of respective assessees. In the case of M/s GPT Sons Pvt. Ltd., assessee has submitted that the details of bank accounts inventories during the search & survey operation are disclosed in the regular books of accounts of respective persons of the GPT Group of cases in their assessment. 4.C. Books of Accounts and other incriminating documents: Sl No. Premises searched person Cash found/seized (Rs.) Jewellary & other valuable (Value in Rs.) 1 GPT CENTRE, JC-25, Sector-III, Salt Lake, Kolkata-700098 Found-7,99,380/- Seized-Nil Found-Nil Seized-Nil 2 Jeewansatya, DD-6, Sector-1, Salt Lake, Kolkata-700064 Found-12,10, 670/- Seized-Nil Found-Nil Seized-Nil 10 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. During the course of Search & Seizure operation, several documents were seized pertaining to the various concerns of the Group. These seized documents have been examined with respect to regular books of accounts maintained by the assessee and the assessee was confronted with the seized/impounded documents and was given opportunity to explain the contents of the documents. The assessee in its reply stated that out of all the seized/impounded documents have been incorporated in the return of the income filed u/s 139 & in response to notice u/s 153A. 5. Consequent upon the search operation, the cases of GPT Group of cases where authorization for search were executed were centralized with the Central Circle-3(1), Kolkata vide centralization order in File No. DGIT(Inv.)/Kol/Tech-2/28/2017-18/5508 dated 21.11.2017. Subsequently the case was transferred to this charge vide order dated 16.01.2018 passed u/s 127 of the Act by Ld. Pr. CIT-2, Kolkata in File No. Pr. CIT- 2/Kol/Centralization/GPT Group/2017-18/9146-51. Subsequently a notice dated 28.02.2018 under Section 153A of the Act was issued and served upon the assessee requesting thereby to file return of income for the year under consideration. In response to notice u/s 153A, the assessee filed return of income for the instant year on 19.06.2019 declaring total income at Rs. 38,11,850/-. Consequently, a notice u/s 143(2) of the Act was issued and duly served upon the assessee on 18.07.2019. 6. A notice u/s 142(1) of the Act dated 17.05.2019 along with a set of questionnaire on analysis of seized materials was duly served upon the assessee. In response, authorized representative of the assessee made submission and explained the queries put forth during the course of hearing. 7. During the assessment proceedings, it has been observed that the assessee has taken unsecured loan from different entities during the relevant AY. To verify the genuineness of the transaction, and identity and creditworthiness of lender companies, notice u/s 133(6) notice was issued to the lender companies. But, reply to notice u/s 133(6) was not received from M/s Tulsyan Marbles Pvt. Ltd. and M/s Riteswari Trading & Investments Pvt. Ltd. Therefore, a show cause notice was issued to the assessee on 27.12.2019 to comply by 30.12.2019. 14. The identical finding has been recorded in AY 2014-15. A perusal of the above finding would reveal that the ld. AO has made reference to unsecured loan from different entities. These unsecured loans are already shown as part of the accounts. These were subject to scrutiny in the scrutiny assessments passed on 28.03.2016 and 26.12.2016 in AY 2013-14 and 2014-15 respectively. We failed to note, which is the specific material available with the AO in these two years authorizing him to undertake assessment proceedings in these years u/s 153A of the Act. Therefore, in view of the position of law discussed above on the strength of Hon’ble Delhi High Court’s decision in the case of CIT vs. Kabul Chawla, Hon’ble Gujarat High Court in the case of CIT vs. Saumya Construction and on the basis of various decisions of the Hon’ble Jurisdictional High Court namely PCIT vs. Rashmi Infrastructure Pvt. Ltd., CIT vs. Veerprabhu Marketing Ltd., PCIT vs. Salasar Stock Broking Ltd., we are of 11 IT(SS)A Nos. 26 & 27/Kol/2021 AYs: 2014-15& 2013-14 GPT Sons (P) Ltd. the view that additions are not sustainable. We allow these grounds of appeal and delete the additions because they are added without any seized material available pertaining to these assessment years. 15. In the result, both the appeals of the assessee are allowed. Order is pronounced in the open court on 18 th April, 2022 Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President Dated: 18 th April, 2022 SB, Sr. PS Copy of the order forwarded to: 1. Appellant- GPT Sons (P) Ltd., JC-25, GPT Centre, Sector- III, Salt Lake City, Kolkata-700098 2. Respondent – DCIT, CC-3(1), Kolkata 3. The CIT(A)-21, Kolkata (sent through e-mail) 4. Pr. CIT- , Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail) True Copy By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata