Saumya Construction Pvt. Ltd., Ahmedabad V. The ACIT, Central Circle-1(3), Ahmedabad

ITSSA 3/AHD/2014

• Counselvise Citation: [2015] 122 COUNSELVISE.COM (IT) 0942 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 14-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 02-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANKARLAL MEENA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Business income; Search and seizure; Loose papers
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD , BEFORE SHRI PRAMOD KUMAR , ACCOUNTANT MEMBER , AND SHRI KUL BHARAT , JUDICIAL MEMBER . IT (SS) A. NO. 3 /AHD/201 4 (ASSESS MENT YEAR:200 6 - 0 7 ) SAUMYA CONSTRUCTION PVT. LTD. 1 ST FLOOR, ADITYA, NR. KHADAYATA COLONY ELLISBRIDGE, AHMEDABAD - 380006 APPELLANT VS. ACIT, CENTRAL CIRCLE - 1 ( 3 ), AHMEDABAD .. RESPONDENT [ PAN: AA FCS3523G ] / BY ASSES SEE : SHRI S. N. SOPARKAR , A.R. / BY REVENUE :SHRI SHANKARLAL MEENA, CIT. D.R. / DATE OF HEARING : 1 5 .0 7 .2015 / DATE OF PRONOUNCEMENT : 21 .08.2015 O R D E R PER PRAMOD KUMAR , A . M.: BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A)S ORDER DATED 29 TH NOVEM BER, 2013, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3 ) R.W.S. 153A(1)(B) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR 200 6 - 0 7 . IT (SS) A NO. 3 /AHD/20 1 4 ( SAUMYA CONSTRUCTION PVT. LTD. VS. AC IT) A.Y. 200 6 - 0 7 - 2 - 2. WHEN THIS APPEAL WAS CALLED OUT FOR HEARING, LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT, WITH THE BENEFIT OF FINDING JUDICIAL PRECEDENTS NON AVAILABLE, THIS APPEAL CAN BE DISPOSED OF ON THE SHORT LEGAL GROUND THAT WHEN NO INCRIMINATING MATERIAL IS FOUND DURING SEARCH OPERATIONS, ASSESSMENT FRAMED EARLIER CANNOT BE DISTURBED IN THE COURSE OF PROCEEDINGS UNDER SECTION 153A. IT IS SUBMITTED THAT IF THIS PLEA OF THE ASSESSEE IS UPHELD, ALL OTHER ISSUES RAISED IN THE APPEAL WILL BE RENDERED ACADEMIC. WE ARE THUS URGED TO TAKE UP THIS ISSUE FIRST. LEARNED DEPARTMENTAL REPRESENTATIVE LEAVES IT TO THE BENCH AS TO WHETHER THIS ISSUE CAN BE TAKEN UP FIRST, THOUGH HE HAS ARGUMENTS TO MAKE ON THIS ISSUE. IT IS IN THIS BACKDROP TH AT WE TAKE UP THIS ISSUE FIRST. 3. BRIEFLY STATED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. THE ASSESSEE WAS SUBJECTED TO A SEARCH AND SEIZURE OPERATION ON 7 TH OCTOBER 2009. ACCORDINGLY, IN VIEW OF PROVISIONS OF SECTION 153A(1) (B) OF THE INCOME TAX A CT, 1961, NOTICE UNDER SECTION 153A WAS ISSUED ON 4 TH AUGUST 2010. THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.3,44,00,130/ - . THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF PROPERTIES, TRADING IN FABRIC AN D EARNS BUSINESS INCOME AS ALSO INCOME FROM OTHER SOURCES. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDING, DETAILS, AS REQUISITIONED, WERE FILED FROM TIME TO TIME AND TAKEN TO RECORD. IN THE ASSESSMENT ORDER, THERE IS NO REFERENCE TO INCRIMINATING M ATERIAL FOUND DURING SEARCH OPERATIONS ON THE ASSESSEE. THE ONLY ADDITION MADE IN THE ASSESSMENT WAS FOR RS.11,05,51,000/ - IN RESPECT ON ON MONEY SAID TO HAVE BEEN PAID BY THE ASSESSEE TO ONE SHRI ROHIT MODI. THIS ADDITION IS NOT BASED ON ANY INCRIMINA TING MATERIAL FOUND DURING SEARCH ON THE ASSESSEE BUT ON THE BASIS OF STATEMENTS GIVEN BY ROHIT P. MODI AND KAMLESH MODI. THE ASSESSEE DID SEEK CROSS EXAMINATION OF THESE PERSONS BUT AS THESE WERE STATED TO HAVE GONE OUT OF STATION, THE CROSS EXAMINATION COULD NOT BE OFFERED OF THE ASSESSEE. THERE WAS NO INCRIMINATING MATERIAL FOUND DURING THE SEARCH WHICH WAS USED IN IT (SS) A NO. 3 /AHD/20 1 4 ( SAUMYA CONSTRUCTION PVT. LTD. VS. AC IT) A.Y. 200 6 - 0 7 - 3 - THE ASSESSMENT PROCEEDING FOR THE MAKING THE ADDITIONS IN IMPUGNED ASSESSMENT. AGGRIEVED BY THE ASSESSMENT SO FRAMED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER, ON THE JURISDICTIONAL ISSUE, BY OBSERVING AS UNDER: 4.4 IN THE INSTANT CASE, IT IS NOT DENIED THAT A SEARCH HAS TAKEN PLACE. IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE NOTICE ISSUED U/S 153A OF THE IT ACT, 1961, WAS VALID AND ASSESSMENT MADE THEREAFTER CANNOT BE HELD TO BE ILLEGAL ON THE GROUND THAT THERE NO INCRIMINATING MATERIAL IN RELATION TO THE DISALLOWANCE MADE WAS SURFACED IN THE COURSE OF SEARCH. 4.5 THE RELIANC E OF THE APPELLANT ON THE DECISION OF THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF MEGHMANI ORGANICS LTD. IS MISPLACED. IN THAT CASE THE AO HAD INITIATED PROCEEDINGS U/S 153C AND NOT U/S 153 A. IN THE CASE OF THE AO INVOKING THE PROVISIONS OF SECT ION 153C IT IS INCUMBENT ON HIM TO RECEIVE INFORMATION FROM THE AO OF THE PERSON WHO HAS BEEN SEARCHED THAT CERTAIN DOCUMENTS OR MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE OR THING HAVE BEEN FOUND FROM THE CUSTODY OF THE PERSON SEARCHED WHICH BELONG TO THE OTHER PERSON AND THEN THE AO OF SUCH OTHER PERSON WOULD INITIATE PROCEEDINGS U/S 153C IN THE CASE OF SUCH OTHER PERSON. IN THE CASE OF MEGHMANI ORGANICS LTD. THE GUJARAT HIGH COURT HELD THAT THE DOCUMENTS WHICH WAS REFERRED TO BY THE AO FOR INVOKING SE CTION 153C IN THE CASE OF MEGHMANI ORGANICS LTD. WERE DIARIES AND LOOSE PAPERS ON WHICH CERTAIN TRANSACTIONS OF THE APPELLANT HAD BEEN WRITTEN. BY NO STRETCH OF IMAGINATION COULD IT BE SAID THAT THESE DOCUMENTS 'BELONGED TO' MEGHMANI ORGANICS LTD. THUS IT WOULD BE SEEN THAT THE REQUIREMENTS OF SECTION 153A AND 153C ARE COMPLETELY DIFFERENT. ONCE THERE IS A SEARCH IN THE CASE OF THE ASSESSEE, ISSUE OF NOTICE U/S 153 A IS MANDATORY WHEREAS IN THE CASE OF 153C DOCUMENTS OR MONEY, BULLION, JEWELLERY OR VALUABLE ARTICLE OR THING HAVE BEEN FOUND FROM THE CUSTODY OF THE PERSON SEARCHED WHICH BELONG TO THE OTHER PERSON, BEFORE THE AO OF SUCH OTHER PERSON CAN INVOKE THE PROVISIONS OF SECTION 153C. MOST OF THE OTHER CASES RELIED BY THE AR OF THE APPELLANT ARE ALSO REL ATED TO SECTION 153C AND NOT 153A. ONLY A FEW CASES HAVE BEEN CITED IN RESPECT OF CASES WHERE SEARCH WAS CONDUCTED. THE DECISION IN THESE CASES IS THAT OF THE ITAT BENCHES. SUCH CASES CANNOT BE RELIED UPON AND ARE NOT GOOD LAW IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANIL KUMAR BHATIA DATED 7 TH AUGUST, 2012 (SUPRA). 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSI DERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. IT (SS) A NO. 3 /AHD/20 1 4 ( SAUMYA CONSTRUCTION PVT. LTD. VS. AC IT) A.Y. 200 6 - 0 7 - 4 - 6. WE HAVE NOTED THAT, AS LEARNED COUNSEL FAIRLY ACCEPTS, THE GRIEVANCE OF THE ASSESSE IS NOT AGAINST FRAMING OF THE ASSESSMENT UNDER SECTION 153A BUT IS CONFINED TO MAKING OF ANY ADDI TIONS OR DISALLOWANCES OTHER THAN ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATIONS. IN EFFECT THUS, ADDITIONS CANNOT BE MADE OTHER THAN ON THE BASIS OF INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATIONS. THAT PLEA STANDS APPROVED BY A COORDINATE BENCH OF THE TRIBUNAL, IN THE CASE OF SANJAY A G GARWAL VS. DCIT [(2014) 47 TAXMANN.COM 210 (DEL)], BY OBSERVING AS FOLLOWS: 12. THE NEXT JUDGMENT RELIED ON BY THE LD. AR IS ANIL KUMAR BHATIA (SUPRA). IN THAT CASE, THE HONBLE HIGH COURT HELD THAT EVEN IF ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ONE OR ANY OF THE SIX RELEVANT ASSESSMENT YEARS EITHER U/S143(1)(A) OR 143(3) PRIOR TO THE INITIATION OF SEARCH, STILL THE AO IS EMPOWERED TO REOPEN THOSE PROCEEDINGS U/S 153A WITHOUT ANY FETTERS AND REASSESS TOTAL INCOME TAKING NOTE OF UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. IT IS CLEAR THAT THE HON'BLE HIGH COURT DEALT WITH A SITUATION IN WHICH SOME INCRIMINATING MATER IAL WAS FOUND IN RESPECT OF A NON - PENDING ASSESSMENT. IT WAS IN THAT BACKGROUND THAT THE HON'BLE HIGH COURT HELD THAT SEC. 153A APPLIES IF INCRIMINATING MATERIAL IS FOUND EVEN IF ASSESSMENTS ARE COMPLETED. THE QUESTION AS TO WHETHER ANY ADDITION CAN BE MADE IN RESPECT OF COMPLETED ASSESSMENTS WHEN NO INCRIMI NATING MATERIAL WAS FOUND, W AS APPARENTLY LEFT OPEN. HOWEVER, WE FIND THAT THERE ARE SUFFICIENT IN DIRECT HINTS GIVEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA (SUPRA) ABOUT NOT MAKING OF ANY ADDITION IN RESPECT OF AN ASSESSMENT YEAR FOR WHICH THE ASSESSMENT IS ALREADY COMPLETED UNLESS SOME INCRIMINATING MATERIAL IS FOUND DURING THE COURSE OF SEARCH. THIS CAN BE SEEN FROM THE FOLLOWING OBSERVATIONS OF THE HON'BLE HIGH COURT : - '20. A QUESTION MAY ARISE AS TO HOW THIS IS SOUGHT TO BE ACHIEVED WHERE AN ASSESSMENT ORDER HAD ALREADY BEEN PASSED IN RESPECT OF ALL OR ANY OF THOSE SIX ASSESSMENT YEARS, EITHER UNDER SECTION 143(1)(A) OR SECTION 143(3) OF THE ACT. IF SUCH AN ORDER IS ALREADY IN EXISTENCE, HAVING OBVI O USLY BEEN PASSED PRIOR TO THE INITIATION OF THE SEARCH/REQUISITION, THE ASSESSING OFFICER IS EMPOWERED TO REOPEN THOSE PROCEEDINGS AND REASSESS THE TOTAL INCOME, TAKING NOTE OF THE UNDISCLOSED INCOME, IF ANY, UNEARTHED DURING THE SEARCH. ...' 13. THE ABOVE EXTRACTED OBSERVATIONS OF THE HON'BLE HIGH COURT, WHICH ARE THOUGH OBITER DICTA, MAKE THE POINT CLEAR THAT WHERE AN ASSESSMENT ORDER HAS ALREADY BEEN PASSED FOR A YEAR(S) WITHIN THE RELEVANT SIX ASSESSMENT YEARS, THEN ALSO THE A.O IS DUTY BOUND TO REOPEN THOSE PROCEEDINGS AND R EASSESS THE TOTAL INCOME BUT BY 'TAKING NOTE OF THE UNDISCLOSED INCOME IF ANY UN EARTHED DURING THE SEARCH'. THE EXPRESSION 'UNEARTHED DURING THE SEARCH' IS QUITE SIGNIFICANT TO DENOTE THAT IN RESPECT OF COMPLETED OR NON - IT (SS) A NO. 3 /AHD/20 1 4 ( SAUMYA CONSTRUCTION PVT. LTD. VS. AC IT) A.Y. 200 6 - 0 7 - 5 - PENDING ASSESSMENTS, THE ASSESSING OFFICER IS ALBEIT DUTY BOUND TO ASSESS OR REASSESS THE TOTAL INCOME BUT THERE IS A CAP ON THE SCOPE OF ADDITIONS IN SUCH ASSESSMENT, BEING THE ITEMS OF INCOME 'UNEARTHED DURING THE SEARCH'. IN OTHER WORDS, THE DETERMINATION OF 'TOTAL INCOME' IN RESPECT OF THE ASSESSMENT YEARS FOR WHICH THE ASSESSMENTS ARE ALREADY COMPLETED ON THE DATE OF SEARCH, SHALL NOT BE INFLUENCED BY THE ITEMS OF INCOME OTHER THAN THOSE BASED ON THE MATERIAL UNEARTHED DURING THE COURSE OF SEARCH. THERE IS NOT AND CANNOT BE ANY QUARREL OVER THE PROPOSITION THAT THE ASSESSING OFFICER HAS NO OPTION BUT TO DETERMINE THE TOTAL INCOME OF THE ASSESSEE IN RESPECT OF THE RELEVANT SIX ASSESSMENT YEARS. HOWEVER, THE SCOPE OF SUCH DETERMINATION OF TOTAL INCOME IS DIFFERENT IN RESPECT OF THE YEARS F OR WHICH THE ASSESSMENTS ARE PENDING VIS - VIS THE YEARS FOR WHICH ASSESSMENTS ARE NON - PENDING. IN RESPECT TO THE ASSESSMENT YEARS FOR WHICH THE ORIGINAL ASSESSMENTS HAVE ALREADY BEEN COMPLETED ON THE DATE OF SEARCH, THE TOTAL INCOME SHALL BE DETERMINED BY R ESTRICTING ADDITIONS ONLY TO THOSE WHICH FLOW FROM INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH. IF NO INCRIMINATING MATERIAL IS FOUND IN RESPECT OF SUCH COMPLETED ASSESSMENT, THEN THE TOTAL INCOME IN THE PROCEEDINGS U/S 153A SHALL BE COMPUTED BY CONSIDERING THE ORIGINALLY DETERMINED INCOME. IF SOME INCRIMINATING MATERIAL IS FOUND IN, RESPECT OF SUCH ASSESSMENT YEARS FOR WHICH THE ASSESSMENT IS NOT PENDING, THEN THE 'TOTAL INCOME' WOULD BE DETERMINED BY CONSIDERING THE ORIGINALLY DETERMINED INCO ME PLUS INCOME EMANATING FROM THE INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH, IN THE OTHER SCENARIO OF THE ASSESSMENTS PENDING ON THE DATE OF SEARCH WHICH WOULD ABATE IN TERMS OF SECOND PROVISO TO SEC. 153A(1), THE TOTAL INCOME SHALL BE COMPU TED AFRESH UNINFLUENCED BY THE FACT WHETHER OR NOT THERE IS ANY INCRIMINATING MATERIAL. IN FACT, THIS IS THE POSITION WHICH FOLLOWS 'WHEN WE READ THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN ANIL KUMAR BHATIA (SUPRA) IN JUXTAPOSITION TO THE SPECIAL BENC H ORDER IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD.(SUPRA). 14. SINCE THE SPECIAL BENCH HAS DECIDED THIS ISSUE IN THIS MANNER, IT IS NOT POSSIBLE FOR US TO DEVIATE FROM THE SAME. THERE HAS TO BE SOME CONSISTENCY IN THE VIEW TAKEN BY THE TRIBUNAL. ONCE A SPECIAL BENCH HAS DECIDED A PARTICULAR ISSUE IN A PARTICULAR MANNER, THEN, THAT BECOMES BINDING ON ALL THE DIVISION BENCHES ACROSS THE COUNTRY UNLESS THERE IS A CONTRARY JUDGMENT OF THE HON'BLE SUPREME COURT OR THAT OF SOME HIGH COURT. AS THE ID. DR FAIL ED TO POINT OUT ANY SPECIFIC AND DIRECT JUDGMENT RENDERED BY THE HON'BLE HIGH COURT ON THE ISSUE WHICH IS OBTAINING IN THE PRESENT APPEAL, WE ARE DISINCLINED TO DEVIATE FROM THE SPECIAL BENCH ORDER IN THE CASE OF ALL CARGO (SUPRA). WE, THEREFORE, HOLD IN P RINCIPLE THAT NO ADDITION CAN BE MADE FOR ANY ASSESSMENT YEAR U/S 153A, THE ASSESSMENT FOR WHICH IS NOT PENDING ON THE DATE OF SEARCH, UNLESS ANY INCRIMINATING MATERIAL IS FOUND IN THE COURSE OF SEARCH . 7. WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE M ATTER THAN THE VIEW SO TAKEN BY THE COORDINATE BENCH. RESPECTFULLY FOLLOWING THE SAME, AND HAVING NOTED THAT THE ADDITIONS OF RS.11,05,51,000/ - IS NOT BASED ON IT (SS) A NO. 3 /AHD/20 1 4 ( SAUMYA CONSTRUCTION PVT. LTD. VS. AC IT) A.Y. 200 6 - 0 7 - 6 - ANY INCRIMINATING MATERIAL FOUND DURING SEARCH OPERATIONS ON THE ASSESSEE, WE DELETE THE SAID A DDITION. 8. WE MAY ADD THAT THE IMPUGNED ADDITION WAS ALSO ASSAILED BEFORE US ON MERITS, INTER ALIA, ON THE GROUND THAT IT IS UNSUSTAINABLE IN LAW IN THE LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF DCIT VS. PRARTHANA CONSTRUCTIONS PVT. LTD. (ITA NO. 79 OF 2000; JUDGMENT DATED 25.3.2011) AND AS THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON THE BASIS OF WHOSE STATEMENTS THE IMPUGNED ADDITION WAS MADE. HOWEVER, IN VIEW OF OUR FINDINGS AS ABOVE, ALL THESE ISSUES ARE RENDERED ACADEMIC AND DO NOT CALL FOR ANY ADJUDICATION AT THIS STAGE. 9 . IN THE RESULT, THE APPEAL IS ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS THE 21 ST DAY OF AUGUST, 2015. SD/ - SD/ - ( KUL BHARAT ) ( PRAMOD KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 21 /08/2015 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO: - 1. / REVENUE 2. / ASSESSEE 3. / CONCERNED CIT 4. - / CIT (A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. BY ORDER/ , / ,