Kusum Banika, Kolkata V. DCIT, CC- VII, Kolkata

ITSSA 30/KOL/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0102 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 19-10-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-10-2022
• Assessment Year: 2009-2010
• Appeal Filed On: 04-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Search and seizure; Capital Gains
• Section: 132; 143(3); 153A; 2(22)(e); 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH KOLKATA आयकर अपीलीय अधीकरण, ᭠यायपीठ “B” कोलकाता, BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA Nos.28 to 31/Kol/2022 Assessment Years: 2005-06, 2008-09 to 2010-11 Kusum Banka Flat 98, 9 th Floor, Kusum Apartment, 11, Gurusaday Road, Kolkata-700019. (PAN: AEIPB7436B) Vs. Deputy Commissioner of Income-tax, Central Circle-VII, Kolkata. (Appellant) (Respondent) Present for: Appellant by : Shri Devesh Poddar, Advocate Respondent by : Shri Biswanath Das, CIT, DR Date of Hearing : 11.10.2022 Date of Pronouncement : 20.10.2022 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the separate orders of Ld. CIT(A)-20, Kolkata vide order Nos. ITBA/APLS / 250/ 2021-22/1040614324(1),ITBA/APL/S/250/2021-22/1040613843 (1), ITBA/APL/S/250/2021-22/1040615124(1) and ITBA/APL/S/ 250/2021-22/1040615583(1) dated 11.03.2022 passed against the assessment order by DCIT, CC-VII, Kolkata u/s.153A/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”) dated 28.03.2013 respectively. Since issues involved are common and facts are identical, we dispose of all these appeals by this consolidated order for the sake of convenience. 2. The issues involved in the set of four appeals are common which are in respect of addition u/s. 2(22)(e) of the Act against the IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 2 loan taken by the assessee from companies in which she has a substantial shareholding and in respect of disallowance of expenses against income from other sources. The year wise details of the issues involved are tabulated as under: Assessment year Assessment Addition U/s. 2(22)(e) Disallowance of expenses against income from other sources 2005-06 Unabated/completed assessment on date of search 15,61,240/- Ground No. 01 to 04 ----- 2008-09 Unabated/completed assessment on date of search 17,25,500/- Ground No. 01 to 03, 05 1,88,091/- Ground no. 04 2009-10 Assessment pending on date of search 1,30,000/- Ground Nos. - 01 to 04 ------- 2010-11 Assessment pending on date of search ----- 7,28,908/- Ground No. 01-02 3. Further, for AYs 2005-06 and 2008-09 assessee has submitted additional groundraising a legal issue and praying for its admission for adjudication since it goes to the root of initiation of assessment proceedings by placing reliance on the decision of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC). The additional ground raised by the assessee for the two assessment years i.e. 2005-06 and 2008-09 is as under: “1. For that search in case of the assessee was conducted on 28.09.2010 by when the assessment for the year under consideration had already been unabated. The additions made in the order of assessment do not refer to any seized incriminating found during the course of search proceedings. As such, this we are in unabated assessment year, no addition could be made during 153A/143(3) assessment proceedings in absence of any seized incriminating material pertaining to it. As such, the additions made by the Ld. AO and confirmed by Ld. CIT(A) are fit to be deleted following the various judicial decisions.” 4. Brief facts of the case are that a search and seizure operation was conducted at the residential and business premises of the assessee on 28.09.2010. Subsequent to the search operation, assessment IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 3 proceeding u/s. 153A of the Act were initiated for AYs 2005-06 to 2010- 11. Assessments were completed u/s. 153A read with section 143(3) of the Act by making additions u/s. 2(22)(e) of the Act and disallowing expenses claimed by the assessee against income from other sources. 5. At the outset, Ld. Counsel prayed to take up legal issue raised through the additional ground in respect of AY 2005-06 and 2008-09 and submitted that these two assessment years are the unabated years within the meaning of section 153A of the Act, which had attained finality considering the date of search as 28.09.2010. In the course of assessment proceedings for AYs. 2005-06 and 2008-09, Ld. AO found that assessee has received loan of Rs.15,61,240/- and Rs.17,25,500/- respectively from Naini Plywood Pvt. Ltd. Ld. AO also found from the perusal of Balance Sheet of the assessee and the company that assessee holds 41.16% of the total share of Naini Plywood Pvt. Ltd. and that the Balance Sheet of the said company has an accumulated profits of Rs.23,71,981/- as on 31.03.2005. 6. On these facts, Ld. AO noted that the case of assessee squarely fits into the requirement of the law prescribed u/s. 2(22)(e) of the Act and issued show cause notice on the assessee for furnishing her explanation. Not being satisfied with the submission of the assessee, Ld. AO completed the assessment by making the addition of Rs.15,61,240/- for AY 2005-06. In AY 2008-09 also Ld. AO made an addition of Rs.17,25,500/- u/s. 2(22)(e) of the Act on the same premises. Ld. AO also made a disallowance of Rs.1,88,091/- in respect of claim of bank interest in AY 2008-09 by observing that assessee had claimed this as an expense against the short term capital gain for which no satisfactory explanation was given by the assessee. He also noted that the income shown by the assessee establishes that loan funds of the assessee are invested in her share business. Further, substantial portion of her income is from share business including long term capital IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 4 gain and dividend income which are exempted. Thus, the expense claimed by the assessee against the exempted income cannot be allowed and made an addition of Rs.1,88,091/- to the total income. 7. The Ld. Counsel submitted that there was no incriminating material found during the course of search in respect of the additions/disallowance made by the Ld. AO. He contended that the scope of unabated assessment u/s. 153A of the Act in the two years under consideration is confined to assessment of undisclosed income of the assessee detected on the basis of incriminating material found during the course of search and since there was no incriminating material found during the course of search in respect of the impugned addition and disallowance, the same is not sustainable. 8. To buttress his contention, Ld. Counsel placed reliance on the decision of Hon’ble High Court of Delhi in the case of CIT Vs. Kabul Chawla 280 ITR 573 and in the case of PCIT Vs. Meeta Gutgutia 96 taxmann.com 468 wherein the SLP filed by the department on this issue was dismissed upholding the order of the Hon’ble High Court. He also placed reliance on the decision of Hon’ble High Court of Bombay in the case of PCIT Vs. Jignesh P. Saha 99 taxmann.com 111 which also dealt with the same issue. On these submissions of the Ld. Counsel, ld. CIT, DR placed reliance on the order of the authorities below. 9. We have heard the rival submissions in respect of the additional ground raised by the assessee and noted that it is now well settled that when the assessment originally completed for the relevant year has become final before the date of search, there is no abetment of the said assessment and the scope of assessment u/s. 153A which is made pursuant to search is limited to assessing the undisclosed income of the assessee as found/detected on the basis of incriminating material found during the course of search. In the decision of Kabul Chawla (supra) it was held as under: IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 5 ““Summary of legal position 37. On a conspectus of Section 153A(1) of the Act, read with provisions 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 re-assessments 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 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”. 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 AO which can be related to the evidence found, it does not men 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 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 the AO. vii. Completed assessment can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of property discovered in the course of search which were not produced or not already disclosed or made known in the course of original” 10. In the present case before us for the two assessment years i.e. 2005-06 and 2008-09, we note from the order of the Ld. AO that there is no reference to any incriminating material found during the course of search in respect of the addition made u/s. 2(22)(e) of the Act and the disallowance made in respect of expenses against income from other sources. We find ourselves in agreement with the contention of the Ld. Counsel that in the assessment which are unabated, no addition in an assessment u/s. 153A proceedings can be made in absence of any seized incriminating material relating to the addition/disallowance. IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 6 Since the addition/disallowance made by the Ld. AO are not based on any incriminating material found during the course of search, thus, addition and disallowance made by the Ld. AO, in our opinion are not sustainable, being outside the scope of section 153A of the Act. We, therefore, delete the said addition/disallowance and allow the appeal of the assessee for the assessment years 2005-06 and 2008-09 on the legal issue raised by the assessee vide additional ground. Since these two appeals have been disposed of at the threshold on the legal issue, grounds raised on the merits of the case are not adjudicated upon. Accordingly, the appeal for the two assessment years are allowed. 11. In respect of AYs 2009-10 and 2010-11, the addition/disallowance made by the Ld. AO are of similar nature as made in AYs 2005-06 and 2008-09 narrated above. These two assessment years are abated considering the date of search on 28.09.2010 and are, therefore, dealt on the merits of the case. 12. On the issue relating to the addition of Rs.1,30,000/- made on account of loan taken by the assessee u/s. 2(22)(e), ld. Counsel contended that assessee although a director and a shareholder holding 22.25% of shares in the company had provided personal guarantee to the lender bank of the company Naini Plywood Pvt. Ltd., therefore, the loan received by the assessee from the company is against the consideration of providing personal guarantee by the assessee to the lender bank of the company and cannot be added as income in the hands of the assessee. On a specific query by the Bench on the contention made by the Ld. Counsel to demonstrate the provisions of law wherein such an aspect is dealt in, he made reference to the provisions of section 2(22)(e) but failed to point out any specific provision which excludes the impugned transaction of loan received by the director and shareholder on a consideration provided to the IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 7 company by way of personal guarantee. He fairly accepted the position of law on the addition so made by the Ld. AO. In respect of disallowance of Rs.7,28,908/- made in AY 2010-11 of expenses against income from other sources, ld. Counsel fairly accepted that major income of the assessee is from share trading which includes long term capital gains and dividend income which are exempt. Considering the facts of the case and the position of laws in terms of section 2(22)(e) of the Act and the fair acceptance of the Ld. Counsel on the two issues involved in the two assessment years i.e. 2009-10 and 2010-11, we uphold the addition/disallowance made by the Ld. AO and dismiss the grounds raised by the assessee on these two issues in the two assessment years. Accordingly, appeal of the assessee for AYs 2009-10 and 2010-11 are dismissed. 13. In the result, appeals of the assessee for AYs. 2005-06 and 2008- 09 are allowed and that for AYs. 2009-10 and 2010-11 are dismissed. Order is pronounced in the open court on 20 th October, 2022. Sd/- Sd/- (RAJPAL YADAV) (GIRISH AGRAWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 20.10.2022 JD, Sr. P.S. Copy to: 1. The Appellant: 2. The Respondent:. 3. CIT(A)-20, Kolkata. 4. CIT, Kolkata 5. The DR, ITAT, Kolkata Bench, Kolkata //True Copy// [ By Order Assistant Registrar ITAT, Kolkata Benches, Kolkata IT(SS)A Nos.28- 31/Kol/2022 Kusum Banka, A.Ys: 2005-06, 2008-09 to 2010-11 8 1. Date of dictation- 19/10/2022 2. Date on which the typed draft order is placed before the Dictating Member and Other member 20/10/2022 3. Date on which the approved order comes to the Sr. P.S./P.S. - /10/2022 4. Date on which the file goes to the Bench Clerk /10/2022 5. Date on which the file goes to the O.S. .................................. 6. Date of Dispatch of the Order......................